IN RE LUCRE, INC. (Bankr.W.D.Mich. 7-20-2010)

enant § 18 (2010); 52A C.J.S. Landlord Tenant § 1098 (2010).

The courts, though, recognized the inequity of permitting the landlord nothing for the interval between the petition date and the lease's rejection if in fact the estate had benefited through its continued occupancy of the premises. Therefore, the courts seized upon the notion of quantum meruit to award the landlord with whatever seemed reasonable based upon the benefit realized by the estate. As the American Anthracite panel observed later in its opinion:

Indeed, it is most apparent from those cases which hold that the measure of compensation to which the lessor is entitled is not the amount due under the contract or lease but the fair value of the benefit conferred upon the estate that the purpose of according priority in these cases is fulfillment of the equitable principle of preventing unjust enrichment of the debtor's estate, rather than the compensation of the creditor for the loss to him.

280 F.2d at 126 (citations omitted).

See also United Cigar, 69 F.2d at 515:

So far as they go into occupation of leased premises without adopting the lease, the landlord has a right to compensation for use and occupation out of funds in their hands. It is an equitable right based upon the reasonable value of the use and occupation.

(citations omitted).

The Bankruptcy Code, though, eliminated the fiction upon which the American Anthracite approach is premised. The Code instead provides that the debtor's interests in whatever executory contracts or unexpired leases he has as of the commencement of his case immediately becomes the estate's. Consequently, the accepted rationale for excusing the estate from paying the agreed upon rent for its continued occupancy of the leasehold granted — i.e., that the estate did not become a party to the lease's terms unless and until it was later assumed — no longer exists. Indeed, the concerns Judge Hand expressed when the American Anthracite approach was first adopted are even more poignant today.

[I]t would be a little hard to see by what power the court could keep a trustee in possession while he was determining his course, without compelling him meanwhile to fulfill the conditions imposed upon the term; for instance, the payment of any rent, secured by a right of reentry. While such ad interim payments need not, and of course would not, constitute an adoption of the term, insolvency ought not to give the lessee's creditors greater rights to possession than the lessee himself enjoyed; and if the trustee were to hold the premises even temporarily, he should be allowed to do so only upon the same terms as the lessee.

Palmer v. Palmer, 104 F.2d 161, 163 (2nd Cir. 1939) (emphasis added).

Palmer itself is often cited by modern courts as yet another Act case supporting the proposition that the administrative rent to be awarded in connection with a rejected lease is to be limited to only the benefit realized by the estate. See, e.g., In re GHR Energy Corp., 41 B.R. 668, 670 (Bankr.D.Mass. 1984); In re Mr. Gatti's, Inc., 164 B.R. 929, 934 (Bankr. W.D.Tex. 1994). However, while Judge Hand did concede in Palmer that the recognized law was just as he had described it, he did so only reluctantly. Indeed, he followed his concession with this musing:

Be that as it may, the trustee need not pay the rent during the probationary period, and the court will hold off the lessor, and force him to be content with the value of the use and occupation meanwhile, though ordinarily it will fix that at the same amount as the rent. This was the result in Quincy, etc., R. Co. v. Humphreys, 145 U.S. 82, 12 S.Ct. 787, 36 L.Ed. 632, and in United States Trust Co. v. Wabash Railway, 150 U.S. 287, 14 S.Ct. 86, 37 L.Ed. 1085, though so many other circumstances were thought relevant that we are not clear as to the precise scope of either ruling. But we have ourselves a number of times declared that the trustee's title `relates back', or that he is liable only for use and occupation, and in some instances what we said was necessary to the result. Whether justified in principle or note, the doctrine has by now become too well fixed to be uprooted, especially since no change was made when the whole subject was overhauled in the Chandler Act.

Id. (citations omitted).
Interestingly, American Anthracite also relied upon Congress' failure in 1938 to affect any change in the Chandler Act as further justification for its own conclusions concerning administrative rent.

In spite of these amendments favorable to contract creditors, Congress did not see fit to revise the doctrine limiting the priority of executory contract claim [sic] to circumstances where the contract was assumed by the trustee or debtor in possession or the property was actually used. It is not for the courts to read such an amendment into the statute.

280 F.2d at 126.
It is fair, then, to assume that the panel in American Anthracite would have come to the opposite result if it were sitting today, given that Congress in fact now has acted through its complete overhaul of the bankruptcy laws in 1978 to eliminate the crucial fiction upon which American Anthracite and other Act courts had previously relied.

For these reasons, then, this court is not persuaded by Carmichael and the myriad other cases that have cited American Anthracite or United Cigar that administrative claims are to be allowed "only to the extent the estate was benefited. . . ." Carmichael, 109 B.R. at 851.

See Sturgis, 420 B.R. at 731, n. 37.

Administrative Symmetry — Executory Contracts and Unexpired Leases.

Ironically, American Anthracite itself makes the case for treating administrative claims related to rejected executory contracts the same as administrative claims related to rejected leases. What it said was:

No rational basis exists for drawing a distinction between the right to priority where contracts for the lease of real property are concerned and that right where other kinds of contracts are involved.

280 F.2d at 125.

See also Jartran, 732 F.2d at 589:

[E]ven though the Agreement may have been an executory contract under § 365, in our view that fact is not dispositive for § 503 purposes.

This court agrees. Take, for example, a requirements contract under which the debtor purchases from its vendor a particular part at a fixed unit price. If the debtor, after filing, wanted to suspend purchases for a time in order to reassess the pricing, Section 365, with its provision for cure, would give the Chapter 11 estate the opportunity to rectify any ensuing default in the event it decided that assumption of the existing contract was the best course. However, an entirely different question arises if the debtor, as the Chapter 11 estate's representative, were to continue making purchases from the vendor pending its decision to assume or reject. It is certainly conceivable that the estate and its vendor could agree to a new temporary price during that interval. It is equally possible that the two could agree to forgo with the former contract altogether and replace it with something entirely different. In either event, the administrative claim for any unpaid shipment would undoubtedly be based upon whatever had been agreed upon as the new price.

Should, though, the outcome be different were the Chapter 11 estate to elect instead to continue accepting delivery of parts under the existing contract while it was deciding whether to assume its provisions or reject it for some better deal? While such an option would not have been conceivable under the former Act, the Code's elimination of the Copeland fiction now places the estate in immediate privity with the vendor and, therefore, in the position to continue performance under the already established contractual relationship if the estate so desires. Granted, the vendor might refuse to continue deliveries because of a material breach by the debtor beforehand. If, though, the vendor was willing to proceed on that basis, should not the estate in turn be obligated to pay for whatever was then delivered at the agreed upon price as opposed to what the estate might claim thereafter as a more "reasonable" price should the contract later be rejected?

That is, the fiction that the debtor's interest in an unexpired lease or an executory contract did not become property of the estate immediately upon the commencement of the case, but rather only upon the trustee's later "assumption" of the same.

If, as this court has concluded, the bankruptcy estate immediately becomes privy to an executory contract under the Bankruptcy Code, and if, as this court has also concluded, the estate can have no greater rights under that contract than had the debtor, then it follows that a vendor who had had the right to refuse further performance immediately before the commencement of the case because of the debtor's material breach should have the same right to refuse performance post-petition. In re Lucre, 339 B.R. 648 652-58 (Bankr.W.D.Mich. 2006). Indeed, it is only through the affirmance of the contract pursuant to Section 365, together with the attendant ability under that section to cure breaches, that the estate can re-establish its ability to demand performance. Id.

The court relies upon this reasoning to conclude that, to the extent AT T provided the necessary routing, its right to recover an administrative expense is dictated by the terms of the Verizon DEOT license that the parties had agreed upon. This conclusion might have been different were there evidence that Lucre and AT T had struck some other arrangement at the outset of the Chapter 11 — e.g., that AT T would allow Lucre continued use of its system for Verizon traffic at a new rate while they worked out their differences concerning the existing Verizon DEOT license or that a new arrangement would replace the old license altogether. However, Lucre has offered nothing to support such an inference. The inference instead is that to the extent Lucre had any postpetition dealings with AT T concerning the continued use of its system for Verizon traffic, those dealings would have simply been part of an implicit understanding between Lucre and AT T to continue, at least for the time being, doing business under the original Verizon DEOT license that had existed between Lucre and AT T since 2001 or 2002, and to which the Chapter 11 estate then became a party when the bankruptcy case was commenced.

Consider as well the trustee of a bankruptcy estate who wishes to continue the debtor's business but has neither the location nor the materials to proceed. The trustee could rent the necessary space and contract to purchase the needed materials. If, though, the trustee were to do so, this court doubts that Carmichael or any other court would limit the new landlord's administrative rent or the new vendor's administrative receivable to only what the estate ultimately realized as a benefit from the arrangements made. Granted, the notice and hearing provision of Section 503(b)(1) may require some involvement by the court before an administrative expense is finally allowed. However, once an authorized arrangement is made, the estate would have no recourse other than to honor the landlord's or the vendor's administrative claim based upon the terms to which it had become bound. In other words, the estate could not after the fact contend that only half of the rent due was entitled to priority because it turned out that the estate only needed half of what it had originally leased. Nor should the estate be able to return for full credit inventory it had previously purchased in the event that the inventory had yet to be used when operations finally terminated.

Section 503(b)'s requirement that there must be "notice and a hearing" before an administrative expense can be allowed is a bit odd if compared with, for example, the notice and a hearing requirement of Section 363(b), for the latter addresses only transactions where the trustee chooses to bind the estate (i.e., the sale, letting or use of the estate's property) whereas the former can involve undesired assessments as well (e.g., a fine or penalty, 11 U.S.C. § 503(b)(1)(C), or a tort claim, Reading, 391 U.S. 471, 88 S.Ct. 1759, 20 L.Ed.2d 751). Therefore, Section 503(b) suggests that the court's inquiry under that section is not whether the trustee's decision is the best vis-a-vis what other parties in interest might propose, which would be the case under Section 363(b), cf. In re Engman, 395 B.R. 610, 619-22 (Bankr.W.D.Mich. 2008), but whether the reimbursement requested in fact falls within one of the categories under that subsection.
As such, it is perhaps best to say that the trustee has the inherent authority under Section 503(b) to bind the estate in connection with his day-to-day administration of the estate, including, for example, the leasing of warehouse space, but that a subsequent request for reimbursement on account of that lease could still be subject to the limited challenge of the lease having no conceivable connection to the preservation of the estate. Of course, a prudent landlord would avoid this risk by insisting that the requisite Section 503(b) finding be made at the time the lease is entered.

But if this is true, what then distinguishes this scenario from one where the trustee continues to enjoy the occupancy of property that the debtor had previously leased or from one where the trustee continues to accept delivery of materials under a contract that the debtor had previously reached? The point is that space is space and purchases are purchases. If, as Reading instructs, administrative priority is to be afforded to whatever is incidental to the preservation, maintenance, or rehabilitation of the estate, then whoever makes such a contribution should be reimbursed at what by contract is required. Asymmetry and Bildisco.

This symmetry, of course, did not exist under the former Act because of the fiction then used to defer establishing the estate's privity under an existing executory contract or unexpired lease until the trustee actually assumed the same. However, for better or for worse, the Bankruptcy Code has eliminated that fiction and, as such, there is no longer any reason to ignore what sound legal reasoning otherwise demands.

Federal courts are not bound by stare decisis, especially when called upon to interpret congressionally enacted legislation like the Bankruptcy Code. Sturgis, 420 B.R. at 761, n. 84. This is not to say that past efforts by other courts are not instructive. Nor is there any question that a succession of opinions that all offer the same interpretation aids in the consistent application of whatever law Congress has enacted. However, other courts' interpretations cannot substitute for a particular judge's duty to make his own assessment of what Congress intended when it combined particular words to form a statute. Therefore, as a general proposition, it should make no difference to a federal judge whether ten, twenty, or even fifty other judges have arrived at a different conclusion. A judge's first and foremost responsibility is to enforce the law that Congress itself enacted, not what other judges said it enacted.

Therefore, there is considerable latitude within the federal system for independent thinking and analysis. However, the federal judiciary is also a hierarchal system, and, like all hierarchies, subordination to superior authority is expected. The phrase "first among equals" comes to mind. That is, the Supreme Court, like this court, performs exactly the same interpretative function when it is called upon to address an issue raised by the Bankruptcy Code. However, if the Court's interpretation is different than this court's, it is the Court's interpretation that must prevail because that court is, literally, the supreme court.

But again, the deference that a lower court is to give a superior court in the federal system is not a function of common law stare decisis. Rather, it derives from the administrative decisions made by the superior court. For example, the Sixth Circuit could have permitted every panel confronting a particular issue the ability to decide for itself what should be the outcome without regard to what any previous panel had decided. However, the Sixth Circuit instead has chosen to adopt a rule that obligates subsequent panels to follow whatever the first panel may have decided. See 6th CIR. R. 206(c). That rule, of course, provides predictability and uniformity at the circuit level. It also, though, provides the same for lower court decisions within the circuit for, as a practical matter, it would make little sense for a lower court to decide one way with the knowledge that the Sixth Circuit will decide the other way no matter what panel may be later selected. See Nat'l Sign and Signal v. Livingston (In re Livingston), 379 B.R. 711, 724-25, rev'd 422 B.R. 645 (W.D.Mich. 2009). Conversely, it is the absence of such an administrative rule at the district court level that permits this court more discretion when a particular district judge in this multiple judge district has previously reversed it and the same issue is then presented again for consideration. Id. See also Starbuck v. City and County of San Francisco, 556 F.2d 450, 457 n. 13; First of Am. Bank v. Gaylor (In re Gaylor), 123 B.R. 236, 242 (Bankr.E.D.Mich. 1991).

I preface this portion of my opinion with this discussion because the Supreme Court has in fact spoken with respect to how an administrative claim is to be measured when an executory contract has been rejected. Specifically, it has said this:

Damages on the contract that result from the rejection of an executory contract, as noted, must be administered through bankruptcy and receive the priority provided general unsecured creditors. See 11 U.S.C. §§ 502(g), 507. If the debtor-in-possession elects to continue to receive benefits from the other party to an executory contract pending a decision to reject or assume the contract, the debtor-in-possession is obligated to pay for the reasonable value of those services, Philadelphia Co. v. Dipple, 312 U.S. 168, 174, 61 S.Ct. 538, 541, 85 L.Ed. 651 (1941), which, depending on the circumstances of a particular contract, may be what is specified in the contract, see In re Public Ledger, 161 F.2d 762, 770-771 (C.A.3 1947). See also In re Mammoth Mart, Inc., 536 F.2d 950, 954-955 (C.A.1 1976). Should the debtor-in-possession elect to assume the executory contract, however, it assumes the contract cum onere, In re Italian Cook Oil Corp., 190 F.2d 994, 996 (C.A.3 1951), and the expenses and liabilities incurred may be treated as administrative expenses, which are afforded the highest priority on the debtor's estate, 11 U.S.C. § 503(b)(1)(A).

N.L.R.B. v. Bildisco and Bildisco, 465 U.S. 513, 531-532, 104 S.Ct. 1188, 1199, 79 L.Ed.2d 482 (1984) (emphasis added).

This court, with all due respect, believes that the Court is incorrect and that the reason for its error lies in relying upon case law decided under the former Act. Again, as this court explained in Sturgis, the notion under the former Act that only a reasonable amount is due as an administrative expense upon a rejected contract or lease stems from a legal fiction that has been replaced by a new approach under the Bankruptcy Code that mandates exactly the opposite conclusion.

Bildisco also included a decidedly different take on the administrative structure of a bankruptcy proceeding by premising its analysis upon the debtor-in-possession being:

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 done absent the bankruptcy filing.

Id. at 528, 104 S.Ct. at 1197.
This court takes issue with the Court's premise because the pertinent "entity" in a bankruptcy case is not the debtor-in-possession nor, for that matter, the trustee. Rather, it is the estate created by Section 541 that must be reckoned with whenever a case is commenced. A bankruptcy estate is a legal entity that exists separate and apart from the petitioning debtor. As for the estate's trustee or debtor-in-possession, they are simply the representatives through which this fictional entity is able to act. An apt comparison is between a corporate entity and its officers and directors.
Unfortunately, the Court's failure to distinguish between the bankruptcy estate itself and its representative led to this conclusory statement:

Obviously if the latter [i.e., the debtor-inpossession] 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.

Id.
Of course, the notion that the estate is not immediately a party to the debtor's executory contracts and unexpired leases is contradicted by, among other things, the Court's own observation years later in Owen v. Owen that:

An estate in bankruptcy consists of all the interests in property, legal and equitable, possessed by the debtor at the time of filing, as well as those interests recovered or recoverable through transfer and lien avoidance provisions.

500 U.S. 305, 308, 111 S.Ct. 1833, 1835, 114 L.Ed.2d 350 (1991). See also H.R. Rep. No. 95-595, at 332 (1978), as reprinted in 1978 U.S.C.C.A.N. 5963, 6323; S.Rep. No. 95-989, at 82 (1978), as reprinted in 1978 U.S.C.C.A.N. 5787, 5868; Triad Int'l Maint. Corp. v. Southern Air Transport, Inc. (In re Southern Air Transport, Inc.), 511 F.3d 526, 533-34 (6th Cir. 2007) ("It follows that SAT's right under the lease to exclusively possess the aircraft constituted property of the estate under 11 U.S.C. § 541(a)(1)."); 48th St. Steakhouse, Inc. v. Rockefeller Group, Inc. (In re 48th St. Steakhouse, Inc.), 835 F.2d 427, 430 (2nd Cir. 1987) ("The courts are in agreement that unexpired leasehold interests . . . constitute property of the bankrupt estate."); Arizona Appetito's Stores, Inc. v. Paradise Village Inv. Co. (In re Arizona Appetito's Stores, Inc.), 893 F.2d 216, 218 (9th Cir. 1990) ("A leasehold is property of the estate if a debtor is the lessee of the property at the time the petition for bankruptcy is filed.").
The Court's observation about the estate not being "bound by such contracts in the first place" is certainly consistent with how pre-Code courts would have used the Copeland fiction to prevent the bankruptcy estate from becoming privy to an unexpired lease or executory contract immediately upon the commencement of the case. However, the Bankruptcy Code, as the Court itself implicitly acknowledged in Owen, eliminates that fiction and, as a consequence, privity now exists with respect to such contracts and leases as soon as the petition is filed. Therefore, the Court too must rethink what is now meant by the term "rejection." It must also reassess postpetition relations between the estate and the other party during the interval before any such rejection takes place.

If Bildisco's statements concerning reasonable value and rejected contracts were merely dicta, then this court could justifiably ignore the same and proceed with this matter in accordance with what it believes is the correct interpretation of the Bankruptcy Code. However, one of the two questions that the Court specifically addressed in Bildisco was whether the debtor had violated the labor laws by unilaterally terminating or modifying the collective bargaining agreement before any rejection of the same had been approved. Moreover, it is clear that the Court's conclusion that there had been no violation turned in part upon its belief that the estate had never become a party to the contract. That the Court chose Philadelphia v. Dipple over American Anthracite or United Cigar was only a matter of preference. The principle in all is the same — that is, a debtor-in-possession, at least under the former Act, was obligated to pay only reasonable value on an executory contract or unexpired lease if ultimately the lease or contract was rejected.

This court, then, faces the dilemma of either proceeding with what it believes is the correct interpretation of the Bankruptcy Code or obeying the ruling of a superior court. Although there appears to be no good solution, a solution nonetheless must be had. Therefore, this court reluctantly defers to its superior. The federal judicial system is hierarchal for a reason. It makes no sense at all for a lower court to rule one way knowing full well that the superior court will simply reverse whatever was decided because of its prior rulings. Indeed, were a bankruptcy judge like the undersigned to disregard Supreme Court or Sixth Circuit precedent simply because it did not agree, the expense of having to seek redress through a costly and timeconsuming appeal could very easily deny an economically strapped debtor or similar litigant due process.

This court, therefore, will limit AT T's administrative claim for Lucre's postpetition use of the Verizon DEOT to only "the reasonable value of those services" if Lucre is able to establish that this particular relationship between Lucre and AT T arises from an executory contract as opposed to simply a licensing arrangement. On the other hand, this court will look to whatever is the contracted rate to establish AT T's administrative claim in the event that the court determines that the relationship between Lucre and AT T is based upon a mere license. Unfortunately for both parties, the record is insufficient at this time to make that determination as a matter of law. Rather, an evidentiary hearing will be needed unless one or the other files a more comprehensive motion for summary judgment at some later date.

Bildisco, 465 U.S. at 531, 104 S.Ct. at 1199.

The Filed Rate Doctrine.

AT T contends that it is in any event entitled to the $17,947.80 per month rate for Lucre's later usage of the Verizon DEOT because this case involves an industry with regulated pricing. Consequently, even if AT T were to concede that, as a general proposition, an adjustment to a more reasonable amount is required whenever a rejected executory contract is involved, it argues in this instance that there can be only one "reasonable" rate — that rate being whatever rate is set by the regulatory agency. Or, to state the argument differently, if Lucre doesn't like the $17,947.90 rate that AT T now insists upon, Lucre cannot use the bankruptcy court to usurp what is otherwise clearly the province of the regulator to decide.

The Michigan Public Services Commission apparently has regulatory authority over the rate charged in this instance because intrastate telephone traffic is involved. However, it appears from AT T's submissions that the MPSC uses as its rates the same rates as are set by the FCC.

This concept, which is referred to as the "filed rate doctrine," is well established in connection with the enforcement of tariffs imposed under the Interstate Commerce Act. The Supreme Court itself described the doctrine in Maislin Indus., U.S., Inc. v. Primary Steel, Inc.:

The classic statement of the "filed rate doctrine," as it has come to be known, is explained in Louisville Nashville R. Co. v. Maxwell, 237 U.S. 94, 35 S.Ct. 494, 59 L.Ed. 853 (1915). In that case, the Court held that a passenger who purchased a train ticket at a rate misquoted by the ticket agent did not have a defense against the subsequent collection of the higher tariff rate by the railroad.

"Under the Interstate Commerce Act, the rate of the carrier duly filed is the only lawful charge. Deviation from it is not permitted upon any pretext. Shippers and travelers are charged with notice of it, and they as well as the carrier must abide by it, unless it is found by the Commission to be unreasonable. Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed. This rule is undeniably strict and it obviously may work hardship in some cases, but it embodies the policy which has been adopted by Congress in the regulation of interstate commerce in order to prevent unjust discrimination." Id., at 97, 35 S.Ct., at 495.

497 U.S. 116, 127, 110 S.Ct. 2759, 2766, 111 L.Ed.2d 94 (1990).

However, the Court in a later case offered this further explanation of the doctrine:

The filed rate doctrine embodies the principle that a shipper cannot avoid payment of the tariff rate by invoking common-law claims and defenses such as ignorance, estoppel, or prior agreement to a different rate.

Reiter v. Cooper, 507 U.S. 258, 266, 113 S.Ct. 1213, 1219, 122 L.Ed.2d 604 (1993) (citations omitted). The point, of course, is that Lucre is not asserting that some common law claim or defense renders AT T's claim unreasonable, but that competing doctrine under another federally enacted scheme — to wit, the Bankruptcy Code — dictates that the reasonable rate is all that may be recovered as an administrative claim if the bankruptcy estate ultimately chooses to reject an executory contract subject to regulated rates.

Moreover, Bildisco itself seems to stand for the proposition that bankruptcy policy trumps whatever impetus there might be under federal telecommunications policy to restrict deviations from a published tariff to only the regulator's own discretion. Recall that the specific question in Bildisco was whether the Chapter 11 debtor-inpossession in that instance had committed an unfair labor practice under the National Labor Relations Act when it unilaterally modified a collective bargaining agreement. The Court answered by concluding that there could be no such violation unless and until the debtor-in-possession actually assumed the agreement.

The necessary result of the foregoing discussion is that the Board is precluded from, in effect, enforcing the contract terms of the collective-bargaining agreement by filing unfair labor practices against the debtor-in-possession for violating § 8(d) of the NLRA. Though the Board's action is nominally one to enforce § 8(d) of that Act, the practical effect of the enforcement action would be to require adherence to the terms of the collective-bargaining agreement. But the filing of the petition in bankruptcy means that the collective-bargaining agreement is no longer immediately enforceable, and may never be enforceable again. Consequently, Board enforcement of a claimed violation of § 8(d) under these circumstances would run directly counter to the express provisions of the Bankruptcy Code and to the Code's overall effort to give a debtor-in-possession some flexibility and breathing space. See H.R. Rep. No. 95-595, p. 340 (1977). We conclude that from the filing of a petition in bankruptcy until formal acceptance, the collective-bargaining agreement is not an enforceable contract within the meaning of NLRA § 8(d). Cf. Chemical Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157, 92 S.Ct. 383, 30 L.Ed.2d 341; Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 510-513, 82 S.Ct. 519, 524-525, 7 L.Ed.2d 483 (1962).

465 U.S. at 532, 104 S.Ct. at 1199.

Indeed, the "foregoing discussion" referenced in this quote included pertinent observations by the Court concerning the payment of only a reasonable value pending the debtor-in-possession's decision to assume or reject the contract involved. Id. at 531, 104 S.Ct. at 1199.

Ironically, the courts that had decided the former Act cases upon which Bildisco relied for its "reasonableness" proposition would have in all likelihood concluded that only the regulated rate could be considered under the circumstances. Granted, Bildisco itself suggests that the rate to be charged the estate for postpetition usage prior to rejection arises out of equity. However, as already explained, what actually drove these pre-Code decisions was the absence of a contractual relationship between the party providing the service and the bankruptcy estate until the contract was assumed and the resulting need to use the doctrine of unjust enrichment to fill in that gap. But unjust enrichment is associated with the common law, not equity. Consequently, a compelling argument can certainly be made that in a regulated environment the only rate available to the service provider and the bankruptcy estate to contract for would be the published tariff and, as such, there could be no other rate to consider as an alternative.

Richardson v. The Huntington Nat'l Bank (In re Cyberco, Inc.), 382 B.R. 118, 127-28 (Bankr.W.D.Mich. 2008).

In Sharon Steel Corp. v. Nat'l Fuel Gas Distrib. Corp., 872 F.2d 36 (3rd Cir. 1989), the lower court did not require the estate to pay the utility or administrative claim for its postpetition usage of natural gas prior to the ultimate rejection of the supply contract at the agreed-upon rate. Rather, the court concluded that the appropriate rate was the lower one then being charged to the utility's noncontract customers. However, in reaching this conclusion, it is important to note that the lower court limited its alternatives to only the two rates permitted under the regulatory scheme.

In any event, the court will defer making a final determination as to what was to have been the appropriate rate to charge Lucre for its postpetition use of the Verizon DEOT until the other crucial issues concerning AT T's provision of that service are also decided. Moreover, the parties are put on notice that this court does not necessarily accept AT T's contention that $17,947.80 per month is the correct tariff even if it ultimately were to decide that deference should be given to the regulated rates. For example, it would appear that the $17,947.80 rate is set in part upon the assumption that a capital outlay is required by the provider before the service can commence. If so, then the actual tariff to be charged Lucre for continuing a service for which the outlay has already been recovered may be considerably less.

CONCLUSION

In sum, there are genuine issues of fact regardless of whether the Verizon DEOT is treated as an executory contract or an unadorned license. If the latter, then the factual issues include when the DEOT could be terminated, whether it was in fact terminated, and when it would have expired under the five-year term that AT T contends originally applied. Proofs will also be needed to address the separate estoppel and delay defenses Lucre has raised. On the other hand, if the Verizon DEOT is in fact an executory contract, which itself is a factual issue, there will also remain the unanswered question of what is a reasonable amount. While Lucre has certainly offered its opinion that something less than $17,947.80 and even less than $3,185.78 would be reasonable, this court does not have enough to definitively state at this point what the reasonable amount should be, especially given that the contracted rates are to be given at least some deference in calculating what is reasonable under the circumstances.

Nor is it altogether clear that Lucre's contractual arguments (e.g., termination) may even be considered if its arrangement with AT T is determined to be an executory contract, for it would seem that Lucre is no more entitled to having it both ways than is AT T. In other words, if the court is to substitute a reasonable rate for what otherwise had been the contracted rate on the theory that Lucre, as debtor-in-possession, never became bound by the actual Verizon DEOT contract, then it would seem that Lucre cannot rely upon contractual defenses such as termination to avoid having to pay what is otherwise the reasonable amount for the service enjoyed. Although Lucre's estoppel and delay arguments may be less susceptible to this argument, their applicability too may have to be reconsidered if it is ultimately decided that the Verizon DEOT is an executory contract.

As for Lucre's claim for late fees, it is in and of itself a largely undisputed matter. That is, it requires only a calculation of whatever the parties agreed would be the late fee under the ICA and then appropriate consideration of the largely legal arguments that AT T has raised for why the charges Lucre claims are not due. Nonetheless, the court determines it best to defer deciding this matter until it is in a better position to decide all of the outstanding issues at once.

Therefore, the court will enter a separate order denying both motions.