Philadelphia and Wilmington partner Andy Kassner and associate Joe Argentina published an article in The Legal Intelligencer titled, “Developer Authorized to Reject Settlement Agreement with HOA.” The article discusses a recent Bankruptcy Court decision that held a state court settlement agreement between a debtor and a homeowner’s association could be rejected in the debtor’s bankruptcy case, and some of the implications of that rejection.
Andy and Joe explain how the court reasoned that the debtor was permitted to reject the settlement under the “business judgment” standard. Turning to the issue of specific performance, the court concluded that because relevant state law provided for a alternate remedies of money damages and specific performance, the HOA’s “claim” for specific performance was subject to discharge in the bankruptcy. The article also discusses how Bankruptcy Courts in the Eastern District of Pennsylvania have reached a different conclusion. Andy and Joe note that the ability to reject contracts is important in bankruptcy and this decision demonstrates that “careful analysis must be given to what agreements are subject to rejection and the consequences of rejection for both sides.”