Post-footstar balancing: Toward better constructions of § 365(c)(1) 8c beyond

American Bankruptcy Law Journal

Volumn 84, Issue 4, 2010, Pages 405-482

  Mackey, Thomas ^a  

^a GEORGETOWN UNIVERSITY LAW CENTER   (United States)

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EID: 79551600169     PISSN: 00279048     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (406)

1. The transcendence is only partial, partly because Footstar's explanation of "Debtor or Debtor in Possession", although flawless in what it does explain, could have explained more
2. see infra Part II-C3).
3. Footstar's transcendence of the actual test vs. hypothetical test dilemma may also be only partial because of some unaddressed possible additional "purposivist problems" that the test introduces while it solves a textualist problem involved in construing "trustee" in § 365(c)(1) as DIP
4. (see infra Part II-D).
5. Nonetheless, despite these imperfections, Footstar was a clear step forward in the construction of § 365(c)(1)
6. (see infra Part II-A).
7. The converse situation where the contractor or lessor is DIP, though it can involve many of the same issues, is thus beyond the scope of this paper. In addition, because the vast majority of cases analysed involve executory contracts, not unexpired leases, focus will be further narrowed to executory contracts even though many times the same points could be made about unexpired leases
8. See, e.g., Rudolph J. Di Massa & Matthew E. Hoffman, Column: Code to Code, Assumption and Assignment of IP License Agreements in Bankruptcy: Circuit Split Continues, 27 AM. BANKR. INST. J. (2) AT 20, March 2008.
9. Di Massa and Hoffman refer to the Second Circuit opinion Jn re Adelphia Commc'ns Corp., 359 B.R. 65 (Bankr. S.D.N.Y. 2007) and the Tenth Circuit opinion In re Aerobox Composite Structures, LLC, 373 B.R. 135 (Bankr. D. N.M. 2007)
10. ("[t]he Adelphia and Aerobox opinions represent movement toward adoption of the 'actual test,' as modified by Footstar, by courts in the Second and Tenth Circuits, where the circuit courts have yet to opine as to the split of authority").
11. See infra Part I.
12. See infra Part II-A.
13. See id.
14. See infra Part I.
15. Id.
16. Id.
17. See infra Parts I, III-IV.
18. See infra Parts II-A&B-IV.
19. See infra Parts II-C&D-IV.
20. See infra Parts I-IV.
21. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
22. U.S. CONST, art. 1, § 8, cl. 4.
23. See, e.g., In the Matter of West Electronics, 852 F.2d 79 (3d Cir. 1988)
24. RCI Tech. Corp. v. Sunterra Corp. (In re Sunterra Corp.), 361 F.3d 257 (4th Cir. 2004)
25. In re Catapult Entertainment. Inc., 165 F. 3d 747 (9th Cir. 1999).
26. E.g., Summit Inv. & Dev. Corp. v. Leroux, 69 F. 3d 608 (1st Cir. 1995)
27. Institut Pasteur v. Cambridge Biotech. Corp., 104 F.3d 489 (1st Cir.), cert, den., 521 U.S. 1120 (1997)
28. Bonneville Power Admin, v. Mirant Corp. (In re Mirant Corp.), 440 F.3d 238, 240 (5th Cir. 2006)
29. Cajun Elec. Members Comm. v. Mabey (In re Cajun Elec. Power Coop., Inc.), 230 B.R. 693, 705 (Bankr. M.D. La. 1999)
30. In re Lil' Things, Inc., 220 B.R. 583,587 (Bankr. N.D. Tex. 1998)
31. Texaco Inc. v. La. Land & Exploration Co., 136 B.R. 658, 669 (Bankr. M.D. La. 1992).
32. See David R. Kuney, Restructuring Lhlemmafor the High Technology Licensee: Will "Plain Meaning" Bring Order to the Chaotic Bankruptcy Law for Assumption and Assignment of Technology Licenses?, 44 GONZ. L. REV. 123, 149 (2009)
33. (stating that, where DIP is not allowed even to assume the executory contract, DIP could be compelled into "purchasing the licensor's consent-perhaps at a price that [DIP] cannot afford to pay, or liquidating").
34. See. e.g., Jennifer Ying, Comment, The Plain Meaning of Section 365(c): The Tension Between Bankruptcy and Patent Law in Patent Licensing, 158 U. PA. L. REV. 1225, 1275 (2010)
35. (stating that "if poor policy choices produce undesirable results, it is up to Congress, not the courts, to amend the statute. Only Congress can modify a statutory provision to achieve a preferable policy outcome." (internal citations omitted)).
36. See 11 U.S.C. § 365(c)(1).
37. Section 365(c)(1) states that the "trustee" may not "assume or assign" an executory contract if "applicable law excuses a party, other than the debtor" from accepting performance from or rendering it to an entity other than the debtor or DIP, and the non-debtor contracting party does not consent to assumption or assignment.
38. Cf. Kuney, supra note 18 (making this point in the situation where the contract is an intellectual property license).
39. See. e.g., In the Matter of West Electronics, 852 F.2d 79 (3d Cir. 1988)
40. RCI Tech. Corp. v. Sunterra Corp. (In re Sunterra Corp.), 361 F.3d 257 (4th Cir. 2004)
41. In re Catapult Entertainment. Inc., 165 F. 3d 747 (9th Cir. 1999).
42. 852 F.2d 79 (3d Cir. 1988).
43. Id. at 83.
44. See 11 U.S.C. § 362.
45. In the Matter of West Electronics, 852 F.2d 79, 80 (3d Cir. 1988).
46. See id. at 82.
47. See id.
48. Allentotvn Ambassadors, Inc. v. Hortheast American Baseball. LLC (In re Allentown Ambassadors, Inc.), 361 B.R. 422 (Bankr. E.D. Pa. 2007).
49. See id. at 429-433.
50. The Ambassadors, the DIP, was a former member of a baseball league (Old NE League). The defendants were the league itself (Northeast American Baseball, or NAB), other teams in the league (Team Members), and league commissioner Miles Wolff. Old NE League existed from 1995 through 1999. In 1999, it merged with the Northern League to become the Combined League, which split apart in 2002. In 2002, Old NE League, which had become the Eastern Division of the Combined League, reconstituted itself as NAB, the New NE League. In May 2004, DIP declared bankruptcy and "went dark" (i.e. the Ambassadors did not play in 2004). Later that season, NAB folded, but the Canadian American League was formed in October 2004 with Miles Wolff as commissioner and containing all of the teams in New NE League except DIP. DIP claims disparate treatment by the Northern League, New NE League, and Canadian American League in reference to its first request to "go dark", its requests for financial assistance, and its exclusion from the Canadian American League. DIP's main claim is that Team Members exerted control over intangible property rights of the estate in violation of § 362(a)(3), i.e. that the control violated the automatic stay, by dissolving the NE League and starting the Canadian American League that did not include DIP. These rights included management rights in the NAB limited liability company (LLC) purportedly terminated upon bankruptcy pursuant to an ipso facto provision of the NAB operating agreement. DIP began an adversary proceeding in September 2004. The initial complaint included five counts making various allegations. In the second amended complaint, DIP changed course with three different allegations: Count 1-violation of automatic stay against all defendants; Count 2-breach of fiduciary duty against former NAB Commissioner Wolff and former NAB President Moushon; and Count 3-breach of contract against all defendants. Because DIP did not file a third amended complaint as required by court order, the court dismissed Count 3. In addition, by stipulation, the parties dismissed the claim against Moushon.
51. Allentoum Ambassadors. Inc. v. Northeast American Baseball. LLC (In re Allentown Ambassadors, Inc.), 361 B.R. 422, 441 (Bankr. E.D. Pa. 2007).
52. Id. at 462.
53. Id. at 448 (emphasis in original).
54. Id.
55. Id. at 449.
56. In re ANC Rental Corp., 277 B.R. 226 (Bankr. D. Del. 2002), affd, 57 Fd. Appx. 912 (3d Cir. 2003)
57. In re IT Group. Inc. Co., 302 B.R. 483 (D. Dela. 2003)
58. In re DeLuca. 194 B.R. 65 (Bankr. E.D. Va. 1996)
59. In re Anumelli. 148 B.R. 443, 448 (Bankr. D. Md. 1992), affd, 4 F.3d 984 (4th Cir. 1993).
60. Alfentoum Ambassadors, Inc. v. 'Hprtheast American Baseball, LLC (In re Allentown Ambassadors, Inc), 361 B.R. 422, 441 (Bankr. E.D. Pa. 2007).
61. Id. at 427.
62. Id. at 441.
63. Id. at 448-49.
64. Id.
65. Id. at 454.
66. Id. at 448.
67. 165 F 3d 747, 750 (9th Cir. 1999).
68. See 11 U.S.C. § 365(c)(1).
69. In re Catapult Entertainment, Inc., 165 F 3d 747, 754 (9th Cir. 1999).
70. In re Footstar. Inc., 323 B.R. 566, 573-74 (Bankr. S.D.N.Y. 2005).
71. Id.
72. See, e.g., Summit Inv. & Dev. Corp. v. Leroux, 69 F. 3d 608 (1st Cir. 1995)
73. Institut Pasteur v. Cambridge Biotech. Corp., 104 F.3d 489 (1st Cir. ), cert, den, 521 U.S. 1120 (1997)
74. Bonneville Power Admin, v. Mirant Corp. (Jn re Mirant Corp.), 440 F.3d 238, 240 (5th Cir. 2006).
75. See, e.g., Institut Pasteur v. Cambridge Biotech. Corp., 104 F.3d 489, 493 (1st Cir.), cert, den., 521 U.S. 1120(1997).
76. See. eg., Summit Inv.&Dev. Corp. v. Leroux, 69 F. 3d 608,612-13 (1st Cir. 1995)
77. Institut Pasteur v. Cambridge Biotech. Corp., 104 F.3d 489, 493 (1st Cir. ), cert, den., 521 U.S. 1120 (1997).
78. See 11 USC §§ 365(e)(1), (e)(2)(A), and (f)(1).
79. See id.
80. Bonneville Power Admin v. Mirant Corp. (In re Mirant Corp.), 440 F.3d 238, 240 (5th Cir. 2006).
81. See id.
82. Id. at 241 (citing 41 USC § 15).
83. Id. at 251 (opining that "[b]oth the text of the Anti-Assignment Act and the text of § 365(eX2XA) require a case-by-case inquiry into the application of the Act to the executory contract or lease at issue in the bankruptcy proceeding").
84. E.g., Kuney, supra note 18, at 138. Reasonableness of withholding consent by the non-debtor contracting party may be included as a requirement, in the applicable law referenced in § 365(c)(1), needed to be met for that party to withhold consent.
85. See, e.g., In re Wills Motors, Inc., 133 B.R. 303, 308 (Bankr. S.D.N.Y.)
86. affd sub nam., SAAB Cars, USA, Inc. v. Wills Motors, Inc., 134 B.R. 124 (S.D.N.Y. 1991)
87. which states that Conn. Gen. Stat. Ann. § 42-133cc(10) allows automobile dealers to withhold consent to assignment of their franchises if withholding consent would not be unreasonable. The reasonableness limit in In re Wills Motors is provided by applicable nonbankruptcy law, i.e. the Connecticut statute, not the Code. Section 365(c)(1)(B) simply creates consent by the non-debtor as the second condition for § 365(cXO to apply
88. Because there was a follow-up case (Footstar II) to Footstar I that restated many of the key points of the first case without adding anything material that is pertinent to the § 365(c)(1) analysis, Footstar II is best viewed for the purposes of this article's § 365(c)(1) analysis as a reinforcing echo of Footstar I. Thus, because the important novel analysis for this article's purposes occurred in Footstar 7. Footstar I will be referred to simply as Footstar (or In re Footstar). Had there been no Footstar II, Judge Hardin's entire analysis would hold as is (we just would not hear the reinforcing echo).
89. In re Footstar, Inc., 323 B.R. 566, 568 (Bankr. S.D.N.Y. 2005)
90. the executory contract was a set of agreements including a "Master Agreement", which provided that each Kmart shoe department would be operated by Shoemart, 51% of which was owned by Footstar, and "Sub-Agreements" that gave Shoemart the exclusive right to operate footwear departments in each Kmart).
91. Id.
92. The opinion stated: some ninety-five percent or more of the debtors' current revenues are generated from sales of discount family footwear at over 1,500 shoe departments located in Kmart stores.. .[Executory contract] [a]ssumption is critical to the debtors' ability to reorganize. The debtors assert that assumption will enable them to confirm a plan providing for one hundred percent payment to creditors with equity unimpaired. Failure to assume will likely result in liquidation of the debtors and only partial recovery for creditors.
93. Id.
94. Id. at 573-74.
95. Id.
96. Id.
97. Id. at 571 (emphasis added).
98. Id. at 574. (emphases in original) (quoting the Committee on the Judiciary report on a proposed bill to amend the Bankruptcy Code, the Bankruptcy Technical Correction Act of 1980. H.R. REP. No. 1195, 96th Cong., 2d Sess. (1980))
99. Id.
100. Id. at 576.
101. See 11 U.S.C. § 1107(a).
102. In re Footstar, Inc., 323 B.R. 563, 577 (Bankr. S.D.N.Y. 2005)
103. See U. S. Brass & Copper Co. v. Caphn (In re Century Brass Products, Inc.). 22 F.3d 37 (2d Cir. 1994).
104. See 11 U.S.C. §§ 1101, 1107.
105. In re Footstar, Inc., 323 B.R. 566, 573 (Bankr. S.D.N.Y. 2005).
106. See, eg. id at 570 (opining that the statute can and should be construed such that it is in harmony with the objective of § 365(c)(1) and the overall objectives of the Code "without construing 'or' to mean 'and'").
107. Id. at 571.
108. Id.
109. Id. at 572-73.
110. Id. at 573.
111. Id.
112. In re Footstar, Inc., 373 B.R. 566, 785 (Bankr. S.D.N.Y. 2005).
113. Id.
114. Id. at 791.
115. In re Adelphia Cvmmc'ns Corp. 359 B.R. 65 (Bankr. S.D.N.Y. 2007)
116. Id. at 69-70. Each of the 14 objecting LFAs had a franchise agreement with one of the DIPs
117. Id. at 69.
118. Id. at 70
119. See id. at 72
120. Id. at 69
121. In re Adelphia Commc'ns Corp. 359 B.R. 69 (Bankr. S.D.N.Y. 2007).
122. See id. at 73, 74-78.
123. Id. at 72 n. 13.
124. In re Aerobox Composite Structures, LLC, 373 B.R. 135 (Bankr. D.N.M. 2007).
125. Id. at 142.
126. Id. at 135.
127. Id.
128. Id. at 138
129. Institut Pasteur v. Cambridge Biotech Corp., 104 F.3d 489, 493 (1st Or.), cert, den., 521 U.S. 1120 (1997).
130. In re Aerobox Composite Structures, LLC. 373 B.R. 135, 141 (2007).
131. HLRB v. Bildisco & Bildisco, 465 U.S. 513, 528 (1984).
132. In re Footstar, Inc., 323 B.R. 566, 571 (Bankr. S.D.N.Y. 2005).
133. See In re Aerobox Composite Structures, LLC, 373 B.R. 135 (Bankr. D.N.M. 2007).
134. Id. at 140.
135. Id. at 142.
136. See Kuney, supra note 18.
137. See supra Parts II-A and II-B1b.
138. See Kuney, supra note 18, at 154 (stating that "[w]hat makes Judge Hardin's decision a potential turning point in the law in this area is that his decision is grounded in the 'plain meaning' of the statute thus offering a possible counter-balance to the 'plain meaning' approach of the hypothetical test"). Moreover, Kuney notes that Footstar "also concluded that its view was consistent with the plain meaning of all of the words in section 365(c)(1)". Id.
139. Id.
140. Id.
141. Id. at 154-55
142. Id. Moreover, Kuney stated that "the basic objective of Section 365(c)(1) - to protect the contract counterparty from unlawful assignment of the contract" is not implicated when the DIP seeks to assume, but not assign, the contract and that "the [Footstar] court found that [its] view still protected the rights of the counter-party because it fully protects the counter-party from having to accept performance from a party other than the debtor in possession."
143. Id. at 155. The supreme importance Kuney finds in avoiding these consequences-an avoidance which is not unique to Footstar, for the pre-Footstar actual test avoids them as well-is most likely due to the facts that the consequences are so contrary to the purposes of Chapter 11, unbalanced, and unfair to DIP (internal citation and quotations omitted)
144. 3-365 Collier on Bankruptcy ¶ 365-06 [d][2] (16th Ed. [2009].
145. In re Footstar, Inc., 323 B.R. 566, 568-69 (Bankr. S.D.X.Y.) ("As correctly stated by the debtors: The standard to be applied by a court in determining whether an executory contract or unexpired lease should be assumed is the business judgment test, which is premised upon the debtor's business judgment that assumption would be beneficial to its estate."), (internal citation omitted).
146. It would be more precise not to say that debtor in possession stands in the shoes of the debtor, but rather to note that debtor in possession is the debtor "in possession" of additional trustee-like functions, rights, powers, and duties.
147. 3-365 Cottier on Bankruptcy ¶ 365.06 (16th Ed. [2009]).
148. Nonetheless, like Footstar, this treatise refers to DIP correctly, i.e. DIP is implicitly seen as trusteelike, the virtual functional equivalent of trustee, but not as strictly equivalent to trustee: "[Section 1107(a) gives the debtor] the rights and powers of a chapter 11 trustee. He is required to perform the functions and duties of the chapter 11 trustee (except the investigative duties). He is also subject to any limitations on a chapter 11 trustee, and to such limitations and conditions as the court prescribes." 7-1107 Collier on Bankruptcy ¶ 1107.LH (16th Ed. [2009])(citing H.R. Rep. No. 595, 95th Cong., 1st Sess. 404 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 116 (1978)).
149. Collier on Bankruptcy states that the Code anticipates concern from the contract counterparty regarding DIP'S future performance: Of course, there must be some concern that the debtor in possession, perhaps a less financially sound entity, would be unable to perform under the contract and that, therefore, the nondebtor party should be able to terminate the contract. This concern, however, is addressed by the rules in section 365 that require the debtor in possession to cure prior defaults and provide adequate assurance of future performance before it can assume the executory contract.. .If the debtor in possession is in fact in such severe financial distress that it would not be able to perform the contract, that would be a reason to oppose assumption of the contract. If the debtor in possession can meet the burden of providing assurance, there is little reason to prevent performance.
150. Id. at 395.06 [d][3]. However, as I noted in the text of my article, this burden of providing adequate assurance of future performance would only be required if DIP already defaulted.
151. Note that the Uniform Commercial Code (U.C.C.) § 2-609(1) provides, in the context of a contract for sale, that when "reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return." Perhaps bankruptcy filing itself provides "reasonable grounds for insecurity" in the context of an executory contract, although I go on to argue otherwise if DIP's prepetition performance on the contract has been satisfactory.
152. Adequate assurance of future performance could be provided either automatically via a new Code provision or at the option of the non-debtor contracting party via a different new Code provision.
153. See 11 USC § 365(b)(1)(C).
154. See 11 USC § 365(f)(2)(B).
155. 69 F. 3d 608 (1st Cir. 1995).
156. Id.
157. The contract counterparty did not bargain just for an exchange of performance obligations, but also for the DIP-to-be's management to ensure compliance with these obligations. Thus, if the trustee becomes responsible for the debtor's end of the performance, that is a clear material change in this personal contract that the contract counterparty should not have to explain to the court, even if the trustee states that DIP will continue to perform as DIP did pre-petition, because all issues pertaining to performance that may arise would then be the responsibility of trustee and contract counterparty, not DIP and contract counterparty. In essence, after trustee appointment, the contractee is no longer DIP, even if the debtor continues to perform precisely as DIP did pre-appointment. Transference of the ultimate managerial responsibility for the contract to the trustee is a material change in the bargained-for-contract. There may be any of a number of reasons why the contract counterparty would not want to contract for the same service with trustee. In addition, post-appointment of trustee, it is the trustee-not the debtor-who manages the acceptance of performance from the contract counterparty under the contract. Thus, because the contractee, the performer under the contract, and the recipient of performance from contract counterparty under the contract were all material to the personally bargained-for-contract, a change in managerial control of this executory contract from DIP to trustee is a change in the personal nature of the contract. If applicable law allows for an excuse from accepting trustee performance or rendering performance to trustee under § 365(c)(1)(A), the contract counterparty has the choice under § 365(c)(1)(B) to withhold consent to the contract assignment without having to explain to the court why he or she is not getting the benefit of his or her bargain.
158. See In re Footstar, Inc., 323 B.R. 566, 568 (Bankr. S.D.N.Y. 2005).
159. There are far less compelling, important, and influential opinions that are much longer. Moreover, the opinion would have been even more compelling, important, and influential, if extensions and elaborations of points were made.
160. See 11 USC § 365(f(2).
161. See 11 USC §§ 365 (b) and (c).
162. Although, granted, the presence of "only if" in § 365(b) or § 365(c) would also have made these two provisions logically contradictory, the presence of "if" in these two sections, in itself, makes them appear to be just two of possibly many salient logical hurdles to § 365(f)(2)(A), which is a necessary condition for § 365(f)(1).
163. See In re Footstar, Inc., 323 B.R. 566, 576 (Bankr. S.D.N.Y. 2005) ("The rationale for the [Footstar] Decision is that the substantive limitation in Section 365(c)(1) by its terms becomes operative only 'if the non-debtor is excused by applicable law from further contractual relations with an entity 'other than' the debtor, and assumption by a debtor without assignment does not involve an entity other than the debtor.");
164. id. ("The fundamental defect in Kmart's theory of the case (and that of the three circuit courts that have adopted the 'hypothetical test') is that it focuses solely on the introductory language of Section 365(c) 'the trustee may not assume or assign' [sic] and ignores the fact that the prohibition applies only if the substantive limitation in section (1)(A) excuses performance by the non-debtor");
165. id. ("[T]he limitation prescribed in § 365(c)(1) exists only if a counterparty to a contract is excused by applicable law from accepting performance from or rendering performance to 'an entity other than the debtor or debtor in possession'");
166. id at 577 ("The statute bars assumption or assignment but only 'if the non-debtor would be excused from continuing performance with an entity 'other than the debtor or debtor in possession"), (emphases in original).
167. See 11 U.S.C. §§ 365(c)(1) and (f)(2).
168. See 11 U.S.C. §§ 365 (b)(1), (c), and (f)(2).
169. See 11 U.S.C. § 365(d)(2).
170. See 11 U.S.C. §§ 365 (b), (c), and (f)(1)&(2).
171. See 11 U.S.C. §§ 365 (b), (c), and (f)(1).
172. Put differently, § 365(f)(1) provides the default free assignability notwithstanding applicable non-bankruptcy law, with carved out exceptions in § 365(b), which could suffice to prevent assumption, and § 365(c), which could suffice to prevent assignment. But because these two exceptions are the only ones stated in § 365(f)(1), one of the two exceptions is necessary to block DIP or trustee from default assignment via § 365(f)(1), assuming the § 365(f)(2) assignment requirements are met.
173. See 11 U.S.C. §§ 365 (b), (c), and (f)(1).
174. See id.
175. See 11 U.S.C. §§ 365 (c)(1) and (f)(1).
176. In this article, Footstar et al. refers to Footstar and the cases and commentary which were persuaded by its reasoning regarding DIP assumption of executory contracts without the intention to assign the contracts.
177. See 11 U.S.C. § 365(c)(1)(A).
178. Id.
179. Id.
180. Brett W. King, Assuming and Assigning Executory Contracts: A History of Indeterminate "Applicable Law' 70 AM. BANKR. L. J. 95, 122 (1996) (quoting In re Cardinal Indus., Inc., 116 B.R. 964 (Bankr. S.D. Ohio 1990)).
181. Cf., id. at 122-23 (1994).
182. See supra Parts II A & B.
183. See 11 U.S.C. § 365(c)(1).
184. See In re Footstar, Inc., 323 B.R. 566, 573 (Bankr. S.D.N.Y. 2005).
185. See id. at 571.
186. Id.
187. Unless somehow the contract can ride through the bankruptcy, never assumed or rejected, although whether this is a possible additional option is not discussed in Footstar. Even if a ride through were possible, that would not make DIP assumption without intention of assignment impossible.
188. See 11 USC § 365(c)(1)(A).
189. See In re Footstar, Inc., 323 B.R. 566, 574 (Bankr. S.D.N.Y. 2005)
190. (citing H.L.R.B. v. Bildisco and Bildisco, 465 U.S. 513, 528 (1984))
191. Id. at 573.
192. In In re Aerobox Composite Structures, LLC. 373 B.R. 135, 142 (Bankr. D. N.M. 2007)
193. where the DIP licensee had yet to seek assumption, the non-debtor licensor sought to preclude assumption as a matter of law under § 365(c)(1) because patent law excused the licensor to consenting to assignment and the licensor did withhold this consent. It is nonetheless worth noting that nowhere in Aerobox is it stated that the licensor argued that pre-assumption performance obligations under the license should be suspended while the court decides whether the license must be rejected or the automatic stay lifted, although, granted, the motion for the court either to compel rejection or to lift the stay seeks to go further in effecting a termination of the license and all associated performance obligations.
194. Id. at 138.
195. See supra Parts II A & B.
196. Id.
197. Id.
198. Id.
199. Footstar, Inc., 323 B.R. 566, 574-75 (Bankr. S.D.N.Y. 2005)
200. (opining, based on an analysis of § 365(c)(1)(A) as drafted in 1978, a 1980 proposed bill to amend the Code along with the 1980 Committee of the Judiciary's report that provided a proposal to replace "trustee" with "entity other than debtor or debtor in possession" in § 365(c)(1)(A), and 1984 and 1986 amendments to this provision, that the "legislative history does no more than confirm the conclusion which is compelled by both the plain meaning of the statute as it is written and its logic and purpose").
201. This also demands a willingness to second-guess one's own work periodically as one proceeds through the analysis. Part of being disinterested involves a willingness is change one's opinion in light of knowledge and analysis of additional facts from the case, law, and extralegal sources such as legislative history. Such a change of mind may entail much more work as one may have to redirect one's analysis and, if it occurs later in the process of applying a statutory construction, rewrite some or all of one's opinion. The willingness to do this indicates not only disinterestedness, but also appropriate humility, for, given the complexity and divergence of opinion on issues pertaining to constructions of § 365(c)(1), one should not demand from oneself to get it entirely right after the initial analysis. Some self-correction shows diligent commitment ultimately to getting it right, which is more than many of the judges and commentators who have found themselves mired in the actual test vs. hypothetical test impasse can say.
202. See FED R. EVID. 403 (stating that "although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.")
203. See 11 U.S.C. §§ 365(c)(1) and 365(f)(1).
204. I thus believe that judges should examine and evaluate a large set of interpretative tools, some clearly linked to the text, others extratextual but clearly linked to policies that are related to, if not the reasons for, the text. The judge is trusted to use his or her research and analytical skills to weigh these tools in deciding which to use as well as how to use those that are chosen when writing his or her opinions. Neither the enacted text nor likely purposes for the text take general precedence over the other: the letters of the Code and the likely spirits that animate it-giving it its reason for existing-carry varying degrees of weight depending on the clarity of the text, the consistency and amount of extratextual sources, and many other variables. Ultimately, in trying to determine the best combination of interpretative tools to use and how to use them, the wise bankruptcy judge is aiming for the perfect balance while knowing full well that only an unknown approximation of that perfection can be achieved. In aiming for this perfect balance, the wise judge is not deceiving himself or herself as to its unattainability, but rather knowingly moving, with probability, toward an approximation of that perfection which is much better than it would be if the judge was less ambitious. Our federal judges-including our bankruptcy judges- wield considerable power on very important matters; we would therefore prefer that they not settle for performing mediocre work. Thus, just as students who aim for a 100% on an extremely difficult exam they nonetheless know they have no chance of getting a 100 on may generally be much more likely to achieve a 90 on the exam than students who aim for the 90, the judge who aims for the unattainable perfect balance in statutory construction is more likely to approximate that balance closely than one who sets his or her sights, seemingly sensibly, on an attainable construction. Aim somewhat beyond your grasp and you may be more likely to attain something that approximates the limits of your reach.
205. See, e.g., Morrell E. Mullins, Sr., Tools, Hot Rules: The Heuristic Mature of Statutory Interpretation, 30 J. LEGIS. 1, 26-27 (2003).
206. Supreme Court Justice Antonin Scalia and scholar John Manning are leading contemporary pure objective textualists, i.e. they do not combine their objective textualism with other approaches to statu-tory construction.
207. Subjective textualism" as I have defined it here is thus akin to "originalism" in that both advocate the search for what the drafters of legislation, a constitution, or a treaty actually meant in what they actually stated, except that "subjective textualists" do not necessarily put any more weight on what the drafters of an original text meant with the initial draft than what those who amended that draft meant in composing the amendment(s).
208. John Manning describes Henry Hart and Albert Sacks as the most influential adherents of an approach to statutory construction that very closely resembles "objective purposivism" as I have defined it. The only possible distinction is that I view "objective purposivism" (as well as, by the way, "objective textualism") as taking the best approach that fits the present case. Thus, unlike my "subjective purposivism," my "objective purposivism" is not discovery of an actual past, but construction by a hypothetical knowledgeable reader who seeks to create the best policy-informed case decision that the text, extratex-tual sources, and the record of the particular present case will allow. Hart and Sacks are described as more backward-looking hypothetical reconstructionists than present and forward-looking constructionists: As Hart and Sacks took pains to demonstrate in their influential Legal Process materials, one can ...plausibly cast purposivism as an objective framework that aspires to reconstruct the policy that a hypothetical "reasonable legislator" would have adopted in the context of the legislation, and not the search for a specific policy that Congress actually intended to adopt, (emphases added).
209. John F. Manning, Exchange, What Divides Textualists from Purposivists"!, 106 COLUM. L. REV. 70, 76 (2006).
210. In Footstar, Judge Hardin nicely complements a simple, but effective plain meaning objective textualism with a subjective purposivism that traces the evolution of § 365(c)(1) and what appears to be a relatively small amount of associated commentary (although that commentary converges with his textual-ism).
211. See In re Footstar, Inc., 323 B.R. 566, 574 (Bankr. S.D.N.Y. 2005).
212. Subjective purposivism can face challenges posed by a large number of different techniques in analyzing pertinent statutory history. Although this can give the judge many different tools to find Congressional purpose when finding this purpose might clarify the meaning of an ambiguous statute, it also poses the formidable, but surmountable risk that two or more different techniques may lead to divergent findings regarding purpose. The judge must decide how to weigh the different techniques in determining purpose as well as consider the possibility that there was no singular Congressional purpose regarding a statute. In the latter case, a weighing must follow a weighing: after the efficacy of different techniques is assessed in determining Congress' different purposes in drafting a statute, the purposes must themselves be weighed. When Congress has multiple purposes, some may carry far more weight than others. In addition, the purposes for revising statutes can vary over time. Yet another challenge for subjective purposivism is that policy context may not clarify the meaning intended by a statute where it appears clear that Congress did not draft something consistent with, for instance, legislative history. One scholar notes in discussing the concepts "strict construction" and "literal construction," often associated with textualism, which he criticizes by arguing that we almost automatically fill in gaps and "correct" absurd statements by looking at context for what was meant, thus making us subjective purposivists by nature: It is obvious enough that a literalism which leads to absurdity should be rejected and does not constitute strict construction. As Judge Posner has written for the Seventh Circuit Court of Appeals, "even strict constructionists reject literal interpretation when the result would be senseless." Ordinary conventions of communication customarily prevent us from insisting on attributing a literal, but ridiculous "meaning" to flawed messages. When someone's literal words in an everyday setting seem to make no sense, we almost automatically try to make corrections, usually on the basis of context. If I tell my wife that I have put my dirty clothes in the dishwasher, she probably assumes that I misspoke and meant to say "washing machine."
213. Mullins, supra note 166, at 24. (internal citations omitted).
214. It may be almost as probable that Mullins' wife would think he meant to say "dishes" instead of "clothes." The word "my" before "dirty" makes that interpretation possible, but less probable, because the couple may be far more likely to share dishes than clothes and, if so, one would expect Mullins to have used the word "the" instead of "my" if he meant to tell her he is doing the dishes, not his laundry. Nonetheless, if the conversation occurred on cleaning day when the dishes and laundry were both being done, the ambiguity would persist to some degree even after looking at the context of the conversation, because both dishes and laundry may be referenced therein. Thus, context may not always clarify a literalism that leads to an absurdity. This strongly suggests that, although we may be inclined to infer meaning from context, our inferences may not necessarily be reliable and subjective purposivism does not carry any more weight than the other three approaches to statutory construction just because we naturally tend to fill in gaps and "correct" absurd statements. This gap-filling and "correction" may help us think we understand, which is reassuring as well as likely to make us conduct less work in trying to understand others' statements, given that we, like the rest of the universe, like to minimize energy, and thus we would rather not work too hard if we do not have to in understanding the meaning in these statements.
215. The interpretative tools I would consider to be potentially legitimate sources of authority for statutory interpretation are very broad and thus in this sense my theory of statutory interpretation could be termed "dynamic" because this breadth could be viewed as " expanding" beyond what others may view as potentially legitimate sources of authority.
216. Nicholas S. Zeppos, The Use of Authority in Statutory Analysis: An Empirical Analysis, 70 TEX. L. REV. 1073, 1075 (1992)).
217. However, because I argue for the prudent selective use of a tool depending on the record and how § 365(c)(1) and other law relate to each other in each case, the expansion is almost invariably followed by a constriction because when the judge examines his or her set of tools, the judge is thinking of how each particular tool, as well as tools used in combination, might help as well as how the tools(s) might hurt, if used in constructing § 365(c)(1) and other statutes, such as those in the possibly applicable nonbankruptcy law in § 365(c)(1)(A). Thus, the expansion, tempered by skepticism, in my theory enhances the probability of prudent tool selection.
218. For instance, John Manning overstates his case considerably when he states that "modern textualists understand that the meaning of statutory language (like all language) depends wholly on context." (emphasis added).
219. See Manning, supra note 169, at 75.
220. I think it would be more accurate to say that "the meaning of statutory language (like all language) is heavily influenced by context." People in radically different contexts can often make very similar constructions. The differences between the way our minds construct the texts may say different things about our minds and their interaction with context, but if these differences were too great, we would not only disagree on the meaning of statutes more sharply and more often, but we would also more often not even comprehend where another is coming from in his or her interpretation of statutes. Given the highly structured and systematic nature of statutes, incapacity to understand at least generally another scholar's or judge's statutory construction is much rarer than misinterpretations in other forms of communication when those interpretations are radically different than one's own.
221. See id. at 74.
222. See id.
223. See id.
224. Id. at 92 (arguing that "when interpreters disregard clear contextual clues about semantic detail, it becomes surpassingly difficult for legislative actors to agree reliably upon terms that give half a loaf).
225. Id. at 96.
226. Jonathan R. Siegal, The Inexorable Radicalization of Textualism, 158 U. PA. L. REV. 117, 173-74 (2009)
227. (inferring that Manning holds this belief, because, he reports, Manning stated that even if the legislative result appears absurd, a court cannot discount the possibility that this result is in fact the product of an "unrecorded compromise[ ]" or some other artifact of a complex legislative process).
228. See generally Manning, supra note 169.
229. See In re Footstar, Inc., 323 B.R. 566, 572 (Bankr. S.D.N.Y. 2005).
230. If the text is ambiguous or contradictory, the chances of a meaningful convergent purposivist inquiry decreases. Thus, my belief that such convergence would be rare is not inconsistent with my belief, stated at the bottom on page 443 of this article, that convergent constructions from divergent perspectives, created by a combination of objective and subjective textualist and purposivist approaches to statutory construction, would not be uncommon. However, consistent with both beliefs, I also think that if one or more approaches is ambiguous or contradictory, the probability that the remainder will be consistent and clear is lowered considerably. These are questions worthy of empirical testing, however, although I would be surprised if ambiguity or inconsistency in one approach does not reduce the likelihood of consis-tency and clarity across the remaining approaches.
231. See Thomas F. Waldron & Neil M. Berman, Principled Principles of Statutory Interpretation: A fudiaal Perspective After Two Tears of BAPCPA, 81 AM. BANKR. L.J. 195 (2007).
232. Although most of the confusingly drafted provisions in BAPCPA affected consumer bankruptcies
233. see generally Jean Braucher, A Guide to Interpretation of the 2005 Bankruptcy Law, 16 AM. BANKR. INST. L. REV. 349 (2008)
234. some affected corporate bankruptcies (e.g., the addition of subsection b3 to § 1102 requires the creditors' committee to provide "access to information" to creditors who were not appointed to the committee but nonetheless hold claims of the kind represented by the committee, without specifying what information must be accessible. Although the point of adding this subsection appears to be to protect the interests of the non-committee members, the coherence and feasibility of implementing this provision has been questioned. In addition to the coherence problem related to the undefined scope of information access, there are possible problems, apparently unforeseen by Congress, which could be created for the outside committee creditors receiving the information and the committee providing it. If the information is public, the outside committee creditors' capacity to trade could be compromised. If the outside committee creditors are competitors of many members of the committee, those members' interests would also be compromised by disclosure of certain kinds of information, perhaps to the point that the committee would disclose less information in contraindication of the apparent purpose of § 1102(b)(3)).
235. See Margaret Howard, Keynote Address, Southern Illinois Law Journal Bankruptcy Symposium entitled, "Shredding the Safety Net: A Critical Examination of the Bankruptcy Abuse and Prevention Act of 2005," The Law of Unintended Consequences 455 (2007), at http.//www.law.siu.edu/research/ 31springpdf/Howardjt.pdf).
236. See Manning, supra note 169, at 83.
237. Id.
238. See also WILLIAM N. ESKRIDGE JR., DYNAMIC STATUTORY INTERPRETATION 38 (1994)
239. (stating that the search for the simple plain meaning advocated by "the simplest version of textualism" is frustrated by ambiguities some of which were successfully pursued by the drafters of a statute so that they can effectively delegate to courts and/or agencies the authority of dealing with difficult issues or use highly generalized words that need fleshing out). Most people would probably view deliberate ambiguity as Congress' abdication of its policy-making responsibilities in drafting statutes, but if a statute is almost entirely clear, better that a minute portion of it is vague than wrong. Unfortunately, however, § 365, much of the BAPCPA and other statutes are not near-paragons of clarity which would excuse them of some vagueness. The other issue is time: the Code and many other statutes are enormously complex, and Congress and its staff are very busy and thus it is not fair to expect from them even the semblance of precision, so Congress may knowingly leave some portions ambiguous for the sake of enacting what is otherwise an improvement in the law. Unfortunately again, however, the BAPCPA was not otherwise an improvement in the law. However, there may also be many situations where a statute is left in very general terms, because Congress wisely recognizes that the facts in this particular area of law should play a large role in determining how the statute is applied. That is not always true, though, which means that the degree to which a situation should be driven by the record may sometimes, but not always, be inversely proportionate to the degree of specificity needed in the wording of a statutory provision. When there is this inverse relationship, that relationship in turn would help judges determine the relative weight they should place on facts in the record as opposed to (a) pertinent statutory provision(s).
240. WILLIAM POPKIN, STATUTES IN COURT 249-50 (1999). (internal citation omitted).
241. Stephen Breyer, The 1991 Justice Lester W. Roth Lecture: On The Uses of Legislative History In Interpreting Statutes, 65 S. Cal. L. Rev. 845 (1992)
242. Id. at 9. (emphases added).
243. See 11 USC § 365(c)(1).
244. See generally Howard, supra nte 182.
245. Waldron & Berman, supra note 182.
246. Id. at 213.
247. Id. at 195 (Thomas G. Waldron was a United States Bankruptcy Judge for the Southern District of Ohio; Neil M. Berman was Judge Waldron's law clerk).
248. Cf., Bernard W. Bell R-E-S-P-E-C-T: Respecting Legislative Judgments in Interpretative Theory, 78 N.C. L. REV. 1254, 1267-69 (2000).
249. New textualists have expressed concern about the unreliability of legislative history as an expression of Congress's actual desires, noting that legislative minorities can manipulate legislative history in ways that frustrate the majority will. New textualists posit that members concentrate on the text of statutes and that legislative majorities express their policy preferences in that text. In contrast, legislators never formally vote to approve legislative history, which assumes a lower profile than text. By relying on legislative history, courts give effect to policies that were not formally considered by all legislators and may even not have come to the attention of many legislators... Thus, clever legislators - or, even worse, clever staff members or lobbyists - can insert their own policy prescriptions in committee reports, even if these policies would never garner support from a majority of legislators. Likewise, new textualists disdain congressional floor statements. New textualists note that few legislators even hear floor statements because few of them attend floor debates. Moreover, the Congressional Record, the official record of floor debates, can be manipulated. Members can revise their remarks to include statements that they never made and that other members would not have heard even if they had attended the floor debate. In short, legislative history provides a vehicle that legislative minorities can use to create law without risking defeat by majority vote in the House or the Senate or veto by the President, (internal quotations and citations omitted).
250. Cf., id. at 1318: the mere potential for abuse or manipulation of legislative history does not warrant rejection of it altogether. Courts can easily disregard particular legislative history that is misleading or the product of manipulation. The new textualist position - to reject legislative history in favor of statutory text - should be adopted only if legislative history is in fact routinely misleading, but new textualists have not established that legislative history is demonstrably misleading.
251. See, e.g., id. at 1289-90: New textualists' skepticism about group choice - their doubt about the coherence of rationales for legislative action - derives from modern public choice theory. Public choice theory argues that group choice is not rational. In particular, public choice theorists argue [that] legislative choices are the fortuitous result of the order in which legislative proposals are voted on or merely the result of manipulation by agenda setters. If public choice theorists are correct, they provide good reason to be skeptical about the use of legislative history. Accordingly, several of those who attack the use of legislative history challenge its use based on public choice theory's lessons about group choice. Whether public choice theory is an ultimately sound political theory, it surely lacks the imprimatur of the Framers' intent. In fact, new textualists' concerns about minority dominance of legislatures stand in striking contrast to the Framers' concerns. While the Framers focused on preventing legislative majorities from oppressing minorities, new textualists focus on preventing legislative committees, legislative minorities, and interest groups from enshrining policies in legislative history that the majority of legislators might not support. The fears of new textualists reflect both public choice theory and concerns about the atomiza-tion and specialization within Congress resulting from the position of committees in the legislative process. In short, originalism does not help new textualists. The intent of the Framers regarding legislative history cannot be readily discerned or easily transposed to the contemporary American legal system. Moreover, the existence of Framers' intent alone would not justify judicial interference in internal legislative processes, (internal quotations and citations omitted);
252. Cf., Zeppos, supra note 171, at 1085-86: The textualist critique of originalism is based partially on the application of economic theory to legislative behavior. Building on public choice theory, textualism rejects the very focus of originalism-the intent of the enacting legislature-as a totally incoherent concept. There can be no collective legislative intent because legislative outcomes do not reflect majoritarian desires. Rather, they are entirely random or fortuitous, largely dependent on who controls the legislative agenda. Legislators, as rational self-maximizers, vote strategically and engage in logrolling, further complicating judicial inquiry into the legislature's intent. The economic model of legislative behavior undermines originalism in another respect. Legislators tend to enact laws that maximize their chances for re-election. Well-organized, focused special interest groups are inevitably able to offer the legislator the most in terms of re-election support. These groups, in turn, receive statutory "goodies" for their support. Often these rent-seeking statutes are not passed for public purpose but to give the interest group an economic advantage in the market. When the court uses originalism and fulfills the legislature's intent, it may actually be benefitting a special interest group, (original citations omitted).
253. The naïvete of politically conservative textualist fidelity to texts created via legislative processes that these textualists see as self-serving rather than providing proper legislative statesmanlike public service is reflected in the fact that the distrust of the legislative processes that leads textualists to be wary of the use of legislative history should lead them to be distrustful of the texts themselves. Public choice theory, if true, would lead the conscientious judge to resign from the bench and work towards changing legislative processes. A conscientious judge who believed in the textualist cliches that admonish against "legislating from the bench" and "if a text is poorly worded or does not appear to represent Congressional purpose, the remedy is with Congress," and also believed in public choice theory as described above, would have to resign and try to change Congress because public choice theory makes not just the legislative process, but legislation itself, appear arbitrary, if not self-serving or even corrupt. Thus, the text itself would not be worthy of faithful interpretation. The irony is that public choice theory-if correct-would provide a foundation for liberal, if not radical, change in the legislature, not conservative fidelity to the legislative text.
254. Trying to be disinterested paradoxically itself reflects an interest in attaining relative lack of a priori-i.e. before one examines the record, law, and, if pertinent, extralegal sources-interest in any particular outcome.
255. Peter C. Schank, The Only Game in Town: Contemporary Interpretative Theory, Statutory Construction, and Legislative Histories, 82 LAW LIBR. J. 419, 426 (1990).
256. Mullins, supra note 166, at 41.
257. I say most studies, because some research, particularly certain types of post-modern research in the humanities and social sciences, is subjective and participatory.
258. Jonathan T. Molot, The Rise & Fall of Textualism, 106 COLUM. L. REV. 1, 4-5 (2006)
259. [S]cholars should focus less on the alleged differences between textualism's adherents and nonadherents, and more on overlooked differences within textualism. As important as whether an interpreter is a textualist is whether he is a moderate textualist, who merely accords textualist and purposivist tools different weight, or an aggressive textualist, who tends to try to exclude statutory purposes from his inquiry. Textualists should stop treating one another as allies in an ongoing battle with purposivism. That battle is largely over. It is time for the textualist movement to turn its criticism inward, to reject the extremism in its midst, and to embrace moderation and modesty;
260. Manning, supra note 169, at 87-88 ((responding to Molot's article quoted immediately above):
261. [P]urposivists are far less willing than textualists to adhere to the conventional social meaning of a given statutory provision when contrary indications of purpose cut strongly against such meaning. But that does not alter the fact that the first impulse of even the strongest purposivist is to try to read the statute in light of the accepted semantic import of the text, (internal citations omitted).
262. See generally Molot, supra note 201.
263. NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984).
264. Id. at 526-27, 533.
265. Id. at 527.
266. Id at 533.
267. Harvey R. Miller et al. The Future of Labor Through the Prism of Bankruptcy: The State of the Unions in Reorganization and Restructuring Cases, 15 AM. BANKR. INST. L. REV. 465, 477 (2007).
268. 11 U.S.C. § 1113(a).
269. Miller et al., supra note 207, at 482-83.
270. Wheeling-Pittsburgh Steel Corp. v. United Steelworkers of Am., AFL-CIO-CLC, 791 F.2d 1074, 1088 (3d Cir. 1986).
271. Miller et al., supra note 207, at 485.
272. See, e.g., Matthew Elster, Note, Just How Necessary is "Necessary"? The Question of Interpretation in U U.S.C. § 1113(b)(1)(A), 35 J. LEGIS. 170 (2009).
273. Elster precedes his argument with an introductory quote from a well-known and highly influential 1819 Supreme Court opinion that is still good law today: The word "necessary"... has not a fixed character peculiar to itself. It admits of all degrees of comparison, and is often connected with other words which increase or diminish the impression the mind receives of the urgency it imports. A thing may be necessary, very necessary, absolutely or indispensably necessary. To no mind would the same idea be conveyed by these several phrases.
274. M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 414 (1819).
275. However, what made M'Culloch a good decision was not its objective textualist treatment of "necessary"-which is flawed-but rather its objective purposivism where, inter alia, it pointed to the salutary effects of viewing the Constitution as conferring to Congress, in addition to explicit powers, implied powers (e.g., an implied federal prohibition on mail theft; an implied power to punish violation of federal laws, etc.) derived from the explicit powers. M'Culluch is perhaps at its objective purposivist peak when it argues that the power to incorporate a bank is best viewed as such an implied power. C/., id. at 411 ("The power of creating a corporation [unlike that of making war, levying taxes, or regulating Congress] is not a great substantive and independent power which cannot be implied as incidental to other powers or used as a means of executing them"). In contrast, the case is at its nadir when it construes a use of "necessary" in the Constitution. A judge in interpreting Constitutional or statutory language is construing its proper legal meaning, which-when it pertains, inter alia, to a complicated Constitutional issue involving Congress' implicit power to incorporate a bank- should not depend on everyday parlance. Nonetheless, Judge Marshall inquires rhetorically: Does [necessary] always import an absolute physical necessity so strong that one thing to which another may be termed necessary cannot exist without the other? We think it does not. If reference be had to its use in the common affairs of the world or in approved authors, we find that it frequently imports no more than that one thing is convenient, useful, or essential to another.
276. Id, at 413.
277. This may be welcome news to an employee whose boss tells him or her: "It is necessary for me to receive your analysis by close-of-business tomorrow." Somehow, I think if that employee submitted the analysis after close-of-business tomorrow, along with a copy of M'Culloch with the word "convenient" highlighted, his or her boss would not think too highly of the employee and may even have a lower opinion of Chief Judge Marshall as well. "Necessary" just does not allow for that expansive a meaning (in fact, it allows for less expansive meanings than do "close-of-business tomorrow" and many other objects of necessity). Thus, Elster's initial reference to M'Culloch before he delves into an analysis of different possible meanings of the second use of "necessary" in § 1113(b)(1)A) does not help him. Nonetheless, Elster does appear to be genuinely attempting to come up with a fair and balanced construction of this provision. Although he is less sympathetic than I am to Wheeling-Pittsburgh's construction of this second use of necessary in the provision, because he thinks the construction is too exclusive, he also believes that the Second Circuit in another case does not provide "parties with a clear enough rubric for proposing modifications [to the CBAs]" which "also impermissibly tilts in the favor of debtors." See Elster, supra note 212, at 183.
278. Basic logic states that if A is necessary for B, if not A, then not B which would make A essential for B.
279. See 11 U.S.C. § 1113(b)(1)(A): ...prior to...seeking rejection of a collective bargaining agreement, the debtor in possession or trustee...shall make a proposal to the authorized representative of the employees covered by such agreement...which provides for those necessary modifications in the employees benefits and protections...necessary to permit the reorganization...and assures that...all...affected parties are treated fairly and equitably, (emphases added).
280. See generally Elster, supra note 212.
281. Another term, such as "probably necessary," would invariably communicate a clearer meaning the accuracy of which may often be empirically checked.
282. See 11 U.S.C. §1113(b)(1)(A).
283. Id. Then again, perhaps such simple phrasing is not always so easy for Congress. Congress' first use of the word "necessary" between "those" and "modifications" in § 1113(b)(1)(A), before its second use of this word-i.e.,"...those necessary modifications in the employee benefits and protections that are necessary to permit the reorganization[.]"-is itself unnecessary and signals a drafting error, not something particularly ambiguous in the word "necessary." Regardless, if one tries to read some sense into the first use of "necessary," that sense necessarily would involve some further constriction, not expansion, of the proposed CBA modifications that would pass muster under § 1113(b)(1)(A). Thus, a prima facie objective textualist interpretation of the first use of "necessary" does not further the case of those who would allow for proposed modifications that would not be strictly necessary for reorganization.
284. See generally Miller et al, supra note 207, at 483-98.
285. Id. at 496-98.
286. See 11 U.S.C. §§ 1113(b)(1)(A) and (b)(2).
287. Truc Drivers Local 807, Intern. Broth. Of Teamsters, et al. v. Carey Transp.n Inc., 816 F.2d 82 (2d Cir. 1987).
288. Courts certainly should not strain to read "necessary to permit the reorganization" in § 1113(b)1)(A) as "necessary for DIP to flourish eventually." One sees this strain in the Second Circuit's rejection of the Wheeling-Pittsburgh reading of this provision in Carey Transportation, which stated that it would be "impossible to weigh necessity as to reorganization without looking into the debtor's ultimate future and estimating what the debtor needs to attain financial health."
289. Id. at 89-90.
290. Note that the disagreement between the Second Circuit here and the Third Circuit in Wheeling-Pittsburgh is not over what "necessary" means, but what the object of the necessity should be construed as.
291. Elster, supra note 212, at 183.
292. Id. at footnote 97.
293. Supra note 218.
294. This may be similar to a famous utilitarian maxim-"the greatest good for the greatest number"- which obviously cannot be achieved, except as an approximation, because of the conflicting efficiency ("greatest good") and equity ("greatest number") goals. However, good approximations may be possible. For instance, suppose income distribution is normalized such that one could use a modified mean (or median, if positive skew remains). Suppose further that one wanted to see how efficient and equitable the income distribution was. Although this is a simplification, for didactic purposes, one could take the mean income (efficiency measurement) and subtract from it the standard deviation from the mean (inequity measurement). Thus, in terms of income, ceteris paribus, a country with a mean yearly income of $70,000 with a standard deviation of $30,000 may be equivalent, in terms of approximation of composite efficiency and equity, to a country with a mean income of $55,000 and a standard deviation of $15,000.
295. Although I, Elster, and no doubt many others have tried to balance the interests of labor and DIP as these interests pertain to constructing § 1113,1 am also disappointed to find that ostensibly disinterested commentary in a law review from attorneys whose firm represents management not only attempts no such balance, but is frequently contemptuous of labor. See generally Miller et al., supra note 207- Add to the irony that this contemptuous polemical piece occurs in a law review the fact that its authors-a partner, counsel, and an associate of one of the most prestigious law firms in the world where one might expect more sophistication-accuse unions and their advocates of the very emotionalism they evince. Id. For instance, unions are characterized as "archaic organizations that appear to rigidly defend their organizations despite the economic realities of globalization.
296. See id at 465.
297. In addition to using contemptuous language to blame unions implicitly for at least part of corporate America's difficulties in competing in a globalized world, the article characterizes labor's response to Bildisco as "an immediate outcry" (id. at 476) that led to § 1113, while asserting that labor's opinions of § 1113 have now apparently evolved into one of "collective...disdain for [the section which] seems to emanate from the prevailing belief that unions, and therefore its members, are the most important aspect of the companyf.]" (emphasis in original). Id. Thus, corporate counsel, camouflaged as disinterested scholars, state that labor has been irrational and arrogant. The unnecessary inflammatory rhetoric is intensified in the article's conclusion: "[M]any labor organizations are caught in a time warp and believe that the economy still is operating in the economic climate of the 1950s and 1960s...Notwithstanding potentially draconian [sk] consequences for the possibilities of reorganization, unions continue to lobby Congress for special interest legislation in an effort to gain more leverage, apparently because of the dissatisfaction with the victory they won in 1984 in causing the enactment of section 1113."
298. Miller et al, supra note 207, at 497.
299. No mention is made of the special interest lobbying of corporations. The author is disappointed to find such polemicism in a law review, because law reviews are one of the relatively few places where one should be able to find mostly disinterested legal analysis. The writers of this polemical piece almost certainly had the knowledge and skill to write a far more valuable piece on how corporate counsel could better navigate through current legal and political challenges considering the positions of unions as well as present bankruptcy and labor laws and bills. The issue is very important in the context of this paper's emphasis on balance, because if law reviews accept advocacy pieces as ostensibly disinterested scholarship (the primary intended audience of the piece was clearly Congress and the bankruptcy and labor scholarly and legal communities in general, not corporate restructuring practitioners in particular), this creates some unhelpful imbalance.
300. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
301. Kuney, supra note 18, at 133.
302. Id. at 136.
303. Although analogous arguments could be made when the IP is a copyright.
304. Kuney, supra note 18, at 125.
305. Id.
306. See 11 U.S.C. §§ 365(c) and (f).
307. In re Footstar, Inc., 323 B.R. 566, 573, 575 (Bankr. S.D.N.Y. 2005).
308. Id. at 574-75.
309. Kuney, supra note 18, at 133.
310. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
311. Kuney, supra note 18, at 131.
312. Cf. id. at 132 (quoting a bankruptcy court opinion as stating that [i]t "would strain credulity to argue that a promise not to sue one person can be transferred by that person to another person, thus preventing the licensor from suing the third party to whom the licensor made no such promise." (internal quotation and citation omitted)).
313. See generally In re Footstar, Inc., 323 B.R. 566 (Bankr. S.D.N.Y. 2005).
314. See 11 U.S.C. §§ 365(c) and (f).
315. See id.
316. See id.
317. See 11 U.S.C. §§ 365(c)(1) and (f)(1).
318. Kuney, supra note 18, at 127 (asking if there is a "principled middle ground that is consistent with existing law and reasonably accommodating to the business community r and stating that [t]he ultimate result should be simple; the goals of chapter 11 should be harmonized with the needs to protect patent owners. The monopoly power should be preserved through rigorous rules against assignment, and the ability to reorganize kept intact through the ability to assume the contracts. Assignment should be precluded unless consent is obtained; assumption should be permitted with the usual requirement for curing prepetition defaults, if any. The answer must be found under the guise if "plain meaning," [sic] then perhaps the Aerobox approach will gain momentum.)
319. Recall that the "Aerobox approach," influenced by the "Footstar approach," held that DIP assumption without intention to assign could not be precluded by § 365(c)(1), although Aerobox made this holding in the context of a pre-petition patent and licensing agreement that DIP sought to continue to operate according to its terms (see supra Part II B-lb). It appears that the "Footstar approach" has already gained momentum.
320. Jennifer Ying also emphasizes the critical importance of assumption and assignment for DIP.
321. Cf., Ying, supra note 19, at 1227 (noting that: the right to continue using intellectual property licenses - in particular patent licenses - is critical to the survival of a distressed debtor. Most importantly, the debtor-licensee's assured ability to assume and assign the license will determine whether it will be able to successfully obtain financing or even continue operations after undergoing a Chapter 11 filing.).
322. Yet Ying nonetheless sides with the hypothetical test, in large part because she believes that a plain reading of § 365(c) shows DIP licensee assumption alone to be an automatic assignment of the license because she also believes that "the licensee is no longer the same legal entity as it was prebankruptcy."
323. Id. at 134-35. If this reasoning was correct, the patentee counterparty's relationship with a DIP licensee who assumed but did not intend to assign the license would not be an ongoing relationship, but a new one between the contract counterparty and an assignee which this counterparty might thus be able to preclude under § 365(c)(1).
324. Kuney, supra note 18, at 158.
325. See In re Footstar, Inc., 323 B.R. 566, 577 (Bankr. S.D.N.Y. 2005).
326. See supra Part II-C.
327. See 3-365 Collier on Bankruptcy 365.03[1](16th Edition, [2009]).
328. As this treatise also states, the value-from DIP'S perspective- of assumption is critical for yet another reason: "If the contract is rejected, the estate will lose any benefit from the contract and will be liable for damages for the breach, which may be allowed as a prepetition claim and thereby dilute recoveries to other creditors. If the contract is assumed, any liability thereafter will be an expense of administration[.]"
329. Id at 365.03[2].
330. Note that this is a considerable benefit for DIP's creditors, because administrative expenses are given the highest priority.
331. Ying, supra note 19, at 1281.
332. See id. at note 48 of her comment, where she acknowledges that the Supreme Court held in NLRB v. Bildisco & Bildisco. 465 U.S. 513, 528 (1984) that "it is sensible" to view prepetition DIP-to-be and post-petition DIP as the same entity, although she tempers this acknowledgment with a citation to Bonneville Power Admin, v. Mirant Corp. (In re Mirant), 440 F.3d 238,254 n.21 (5th Cir. 2006), which uses the prefatory language, "For our purposes...," in this Bildisco holding to argue that this holding cannot be generalized beyond Bildisco. However, although Bildisco considered fruitless expending exhaustive effort in determining whether the post-petition DIP is better characterized as the "alter ego" or "successor employer" of the pre-petition DIP-to-be, that does not mean Bildisco spent no effort at all in reasoning through the issues of the equivalence of, and distinctions between, pre-petition DIP-to-be and post-petition DIP. The Court's reasoning, though clearly signaling that it has not definitively disposed of the issues, just as surely shows that it found its construction to be sensible and obvious: Obviously if the latter [the post-petition DIP] were a wholly "new entity," it would be unnecessary for the Bankruptcy Code to allow it to reject executory contracts, since it would not be bound by such contracts in the first place. For our purposes, it is sensible to view the debtor-in-possession as the same "entity" which existed before the filing of the bankruptcy petition, but empowered by virtue of the Bankruptcy Code to deal with its contracts and property in a manner it could not have employed absent the bankruptcy filing.
333. NLRB v. Bildisco & Bildisco, 465 U.S. 513, 528 (1984).
334. It would be equally obvious that if the post-petition DIP is not a wholly "new entity," the bankruptcy petition could not effect a "contractual self-assignment".
335. Id. at 1234-35
336. Id. at 112.
337. In other words, the estate, a collection of property, is not a legal person with rights it can accept via contract assignment or duties it must perform as delegated by the contract.
338. Ying's plain language textualism, advocacy of the hypothetical test, and distinction between pre-petition and post-petition licensee are nonetheless similar in many respects to aspects of my initial analysis when I began to conduct research for this article. Certainly, I thought, one cannot equate a subset, DIP, with a set, the debtor (which would include the debtor not in possession). However, although DIP is the debtor with added trustee-like duties, functions, powers, and rights, the pertinent question, from an objective purposivist perspective at least, is whether those added duties, functions, powers, and rights affect the contract counterparty's benefit of the bargain. Consider the hypothetical analogy of John Smith who becomes a judge, thereby gaining additional legal duties, functions, powers, and rights. But he is still John Smith and there are many legal duties, powers, functions, and rights which are unaffected by his becoming a judge. For instance, although the Honorable John Smith must maintain neutrality and cannot be an advocate of any candidate for public office, his right to vote for candidates for public office has not been reduced. If anything, although the judge must remain neutral, the public would benefit if he kept himself informed and voted regularly, because this active involvement might give him insights on pertinent political issues.
339. Ying, supra note 19, at 1241, referring to part of U.S. Const, art. I, § 8, cl. 8, which states: "The Congress shall have Power To Promote the Progress of Science and useful Arts, by Securing for Limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."
340. Id. at 1243.
341. See id.
342. Id. at 1243-1244.
343. See. e.g., In re Footstar, Inc., 323 B.R. 566, 575 (Bankr. S.D.N.Y. 2005).
344. See. e.g. id.
345. See 11 U.S.C. §§ 365(c) and (f).
346. See Ying, supra note 19, at 1274 (stating that "[w]ithout the ability to assume and continue using the [patent] license, the debtor [licensee] loses a substantial asset that could seriously affect its ability to conduct business").
347. Perhaps the only benefit to the nonexclusive licensor patentee is to compel rejection which would allow this licensor to seek out a new licensee that is under less financial distress and thus has a greater probability of successfully commercializing the patented invention. See infra, note 282, at note 356 (within Ying article), for further discussion.
348. Ying, supra note 19, at 1270-72. Ying states: [T]he Bankruptcy Amendments and Federal Judgeship Act of 1984...originated in a 1980 House amendment to an earlier Senate bill that sought to correct technical errors and make minor substantive changes to the Bankruptcy Reform Act of 1978. The 1980 House amendment was accompanied by 'a relatively obscure committee report" stating, ["][t]his amendment makes it clear that the prohibition against a trustee's power to assume an executory contract does not apply where it is the debtor that is in possession and the performance to be given or received under a personal service contract will be the same as if no petition had been filed because of the personal nature of the contract...." Here, there is only a single statement, made in a "relatively obscure committee report," that suggests any intent contrary to the literal reading of section 365(c). Further, this committee report was part of the legislative history of the 1980 House amendment, not the actual 1984 Act passed by Congress. As the record reflects, there is remarkably little, if any, legislative history that would enable definitive statements regarding Congress's intent. Thus, though the committee report's statement is worthy of consideration, it is not the sort of conclusive legislative history that would trump the plain language of the statute, (emphasis added) (citations omitted).
349. Ying's criticisms of the committee report are consistent with the Catapult opinion, where the Ninth Circuit also rejected an argument based on the committee report because the report referred to an earlier version of the amendment that "predates enactment" of the amendment by several years and "expresses at most the thoughts of one committee."
350. In re Catapult Entertainment, Inc., 165 F. 3d 747, 754 (9th Cir. 1999).
351. Id. at 1271.
352. In re Footstar, Inc., 323 B.R. 566, 575 (Bankr. S.D.N.Y. 2005).
353. Ying, supra note 19, at 1271.
354. Id. at 1272.
355. In re Footstar, Inc., 323 B.R. 566, 574-75 (Bankr. S.D.N.Y. 2005).
356. Id. at 575.
357. Ying, supra note 19, at 1277, with accompanying footnote.
358. See 11 USC § 365(b)(1)(C).
359. See 11 USC § 365(f)(2)(B).
360. In other words, if DIP never defaulted pre-petition, perhaps, other than being in bankruptcy, DIP has given the licensor no reason to worry about future performance. However, the licensor may never have dealt with DIP's assignee before and thus, unlike with DIP, DIP's assignee does not have a successful track record of conformity to the particular license's terms.
361. See 11 USC § 365(b)(1).
362. See also supra Part II-B2b, pages 426-28, of this article where I argue that the present § 365 requirements of adequate assurance of future performance under the executory contract suffice as they pertain to the contract counterparty's concerns about DIP's future performance.
363. 11 USC § 365(b)(1).
364. Although Kuney locates such financing problems not in the hypothetical test, but in the uncertainty in the law: This is not an academic issue, but one rooted in the hard practicalities of the commercial world This lack of consistency in applying bankruptcy law principles to non-exclusive licenses has consequences which may be untenable for licensees, licensors, and those which provide financing to licensees. If the right to continue to use an essential asset is subject to conflicting rules of law, then none of the parties can be sure of its rights. The consequence of this can be substantial. If a lender cannot be assured of having a lien of a licensee's technology license in the event of a bankruptcy filing, the lender might decide not to lend or demand a higher rate of interest.
365. Kuney, supra note 18, at 124-26.
366. Nonetheless, like me, Kuney believes that a principled middle ground that protects the interests of patent licensor counterparty and debtor patent licensee can be found in Aerobox, which in turn was built partly on Footstar, which Kuney also described as manifesting a potential turning point in the pertinent law, thus suggesting that Footstar, considering its following, could have laid at least some of the foundation for the sort of consistent treatment of the § 365(c)(1) exception to § 365(f)(1) which is needed.
367. Ying, supra note 19, at note 356 (within Ying article); see also supra note 266.
368. For an analogy outside the patent context, yet again see In re Footstar, Inc., 323 B.R. 566, 568 (Bankr. S.D.N.Y. 2005)
369. which contains a report of projected effects of the rejection of DIP Footstar's executory contract for both the reorganization effort and creditor recovery in the case.
370. Adam J. Levitin, Toward a Federal Common law of Banliruptcy: Judicial Lawmaking in a Statutory Regime, 80 AM. BANKR. L. J. 1, 3 (2006).
371. See id.
372. Id. at 104.
373. U.S. CONST, art. 1, § 8, cl. 4.
374. See Levitin. supra note 284, at 4 (arguing that the federal courts have a federal common lawmaking power in bankruptcy, both because the uniformity requirement of the Bankruptcy Clause of the U.S. Constitution gives bankruptcy law a "uniquely federal interest" and because the Code implicitly provides the federal courts with this power).
375. Id. at 4-5.
376. See id. at 5. Levitin describes "practicalists" as emphasizing the "factual individuality of each case. Therefore, they believe that bankruptcy judges must have broad discretion and powers to implement bankruptcy policy...Proceduralists, on the other hand.. iavor clear rules and rule of law over judicial flexibility and discretion." Levitin's distinction between practicalists and proceduralists sounds akin both to my distinction between adherents to the actual test and adherents to the hypothetical test on issues pertaining to constructions of §§ 365(c)(1) and 365(eX2XA) and to my distinctions between purposivism and textualism in bankruptcy statutory interpretation. Perhaps yet another apt analogy to a main topic of an earlier part of my article pertains to the balance Levitin is aiming to strike via federal common law that "tempers the rigidity of the Code" (id. at 102) without providing excess discretion in doing so, i.e. the tempering of free assignability notwithstanding applicable nonbankruptcy law in § 365(f)(1) provided by carving out particular nonbankruptcy law exceptions to assignment in § 365(c)(1).
377. Id. at 82.
378. Id. at 4.
379. Id.
380. Cf. id. at 99.
381. Cf., Popkin, supra note 186, stating that if judges are especially knowledgeable because they serve on specialized courts, they might be expected to take a bolder interpretative role. One commentator on bank-ruptcy decisions has made just this observation regarding the more policy-oriented approach of lower courts, including bankruptcy judges, compared to the Supreme Court, which is less knowledgeable about bankruptcy matters. And Frederick Schauer hints at the relevance of expertise when he justifies textualism in part as a response to judicial inability to handle complex issues.
382. Robert K. Rasmussen also uses judicial inability of the Supreme Court to go beyond textualism ironically as a justification for it: The decisions by the lower courts, which are more fluent with bankruptcy policy, ensure that when cases reach the Court policy justifications often exist for each of the competing results. The Court then selects the result that best comports with the statutory text. This strategy ensures that the textualist result is supported by some bankruptcy policy, while at the same time allowing the Court to decide such cases without engaging in the policy debate. Textualism is thus the best pragmatic strategy for the Court to employ when interpreting the Bankruptcy Code, (emphases added).
383. Robert K. Rasmussen, A Study of the Costs and Benefits of Textualism- The Supreme Court's Bankruptcy Cases, 71 WASH. U. L. Q. 535 (1993).
384. If what Rasmussen states is true, it is difficult to believe that this really was the best the Supreme Court could do. Each justice has three or four clerks. Thus, the combination of clerks and justices sums to about 40. In addition, they are supposed to be among the crime de la crime of legal scholars. Nonetheless, when there are competing policy justifications, instead of examining the policy, because they lack the knowledge-although they have many resources and considerable legal skill and time to acquire it-to evaluate the pertinent bankruptcy policy, the justices and their clerks use a textualist approach as the decisive factor? The textualist result would certainly be supported by "some bankruptcy policy," but Rasmussen is facile in saying that such textualism would be the pragmatic and best approach. The bankruptcy judges who really know bankruptcy law are looking deeply at policy, which should signal to the Court that bankruptcy policy may be what is particularly important. If the Court makes textualist decisions that bind all federal bankruptcy, district, and appellate courts, but may be backed up by the least compelling bankruptcy policy, not because textualism is really the best approach, but because it is the best "pragmatic" approach for a highly talented Court that wishes not to educate itself about the pertinent bankruptcy policies, of course this would be problematic. That said, although some of what Rasmussen states may be true, studies show that the Supreme Court is generally not as textualist, and particularly not as textualist in constructing bankruptcy statutes, as many assume.
385. See, e.g., Karen M. Gebbia-Pinetti, Bankruptcy Symposium; Interpreting the Bankruptcy Code, An Empirical Study of the Supreme Court's Bankruptcy Decisions, 3 CHAPMAN L. REV. 173, 192 (2000) (providing many conflicting views on approaches the Court uses to construct bankruptcy statutes).
386. Moreover, in keeping with this article's motif of maintaining fair balances, it should be noted that one could also cynically attribute the greater advocacy of the actual test among bankruptcy courts than circuit courts partly to the fact that the actual test furthers the goals of bankruptcy better, although the hypothetical test furthers the goals of the applicable non-bankruptcy law referred to in § 365(c)(1) better, just as one could cynically view the Federal Circuit, prior to KSR (KSR v. Teleflex, Inc., 127 S. Ct. 1727, 1741 (2007)),
387. as applying a low bar in determining non-obviousness in part because the Federal Circuit judges generally believe in encouraging patents as a means of facilitating progress in the useful arts. Cf, regarding the Federal Circuit's pre-KSR obviousness determinations for biotechnology patents
388. Thomas M. Mackey, Patent Portfolios for Maximal Near-Term Commercialization & Commons for Maximal Long-Term Medical Gain, 13 (1) MARQ. INTEIX. PROP. L. REV. 123, 157 (2009)
389. stating in footnote 109 of this article: [P]rior to KSR, there was growing concern that both rejection rates during prosecution and invalidity determinations during litigation were too low, largely because the obviousness bar had become too low. Regarding invalidity determinations during litigation...in biotechnology cases, the Federal Circuit has bent over backward to find biotechnology inventions nonobvious, even if the prior art demonstrates a clear plan for producing the invention, (internal citations and quotations omitted).
390. In other words, just as some higher appellate judges might prefer textualism because it does not require the same depth of substantive knowledge of particular areas of law that purposivism does, some bankruptcy judges might see their role in Chapter 11 cases too much as facilitator of successful restructuring, and some Federal Circuit judges might see their role too much as facilitator of innovation in the useful arts which they believe patents encourage.
391. See 35 U.S.C. § 141; 37 C.F.R. § 1.303.
392. See Chevron. U.SA. Inc. v. Hatural Resources Defense Council, 467 U.S. 837 (1984).
393. My view is similar to that of Adam Levitin: The exercise of lawmaking power by bankruptcy courts is consistent with the post-New Deal system of administrative agencies exercising law-making power through rule-making and adjudications. Bankruptcy is the only major statutory system in the United States without a federal agency responsible for its implementation. Instead, in bankruptcy, the courts play the role that agencies fill in other areas of law. Although bankruptcy proceedings are not governed by the Administrative Procedure Act, bankruptcy judges bring technical expertise to bear like agencies in rulemaking, (internal citation omitted).
394. Levitin, supra note 284, at 103.
395. See Chevron, U.SA., Inc.. v. Hatural Resources Defense Council, 467 U.S.
396. There is a report of considerable tension between the PTO and the Federal Circuit on this issue of if and, if so, in what situations and to what extent, the Federal Circuit should defer to the BPArs patentability determinations and the PTO Commissioner's statutory constructions, which makes it a topic particularly worthy of more extensive focused analysis than this article will allow.
397. See Craig Allen Nard, Deference, Defiance, and the Useful Arts, 56 OHIO ST. L. J. 1415 (1995).
398. The PTO is described as displaying "an independent temperament, at times to the point of defiance, [arguing] for greater deference with respect to its patentability decisions and interpretations of various provisions of the patent code (i.e., Title 35)."
399. Id. at 1421.
400. This dissatisfaction with the Federal Circuit may be partly due to that court's resistance in applying the Chevron doctrine "when confronted with a question of law pertaining to patentability on appeal from the PTO's Board of Patent Appeals and Interferences (BPAI)."
401. Id. at 1422.
402. The Federal Circuit is also reported-in marked contrast to the bankruptcy courts which have found much ambiguity in the post-BAPCPA Code-as employing an approach to statutory construction in patent cases which will "rarely [lead] to a finding of ambiguity, thus eviscerating the Chevron doctrine."
403. Id. at 1484-85.
404. Nard thus believes that it is the Federal Circuit, not the PTO, that primarily needs to change, in order to fix this problem: "My principle assertion, grounded in both doctrine and policy, is that the Federal Circuit's judicial review of the BPAI's patentability determinations and the Commissioner's statutory interpretations is paternalistic and results in a less than optimal balance of interpretive power."
405. Id. at 1423.
406. But again, the Federal Circuit judges are patent law experts themselves; a paternalistic approach would certainly give insufficient weight to BPAI patentability interpretations and Commissioner statutory interpretations, but a deferential approach would just as certainly give excess weight to these interpretations from the PTO.