United States District Court, W.D. Washington, Seattle
ORDER AFFIRMING BANKRUPTCY COURT
RICARDO S. MARTINEZ, CHIEF UNITED STATES DISTRICT JUDGE.
matter comes before the Court on appeal by LBJ Creekside, LLC
(“LBJ”) from an Order of the Bankruptcy Court for
the Western District of Washington (“Bankruptcy
Court”) granting in part an administrative claim
against debtor Door to Door Storage, Inc.
(“Debtor” or “Door to Door”). Dkt.
March 17, 2016, Door to Door Storage, Inc., and LBJ entered
into a non-residential commercial lease for property located
at Building 2, 20425 72nd Avenue, South Kent, Washington (the
“Lease”). See Dkt. #9 at 12 - 13. The
base rent was due on a monthly basis on the first day of each
calendar month in the amount of $18, 312. Id. at 12
and 14. On November 7, 2016, Debtor Door to Door filed a
chapter 11 petition in the Bankruptcy Court. Dkt. #5-1 at 2.
parties agree that on May 17, 2017, the Bankruptcy Court
entered an Order approving the sale of substantially all of
Debtor's assets free and clear of liens and approved the
assumption and/or rejection of certain contracts and leases.
Pursuant to the terms of the Order, Debtor was to reject
LBJ's unexpired lease and provide 10 days' written
notice to LBJ before the rejection would be effective.
23, 2017, LBJ received the written notice of rejection by
Debtor, which notice was dated May 22, 2017. Dkt. #9 at 6-7.
The notice said in relevant part:
“…you are hereby provided notice that the Debtor
is rejecting its non-residential real property lease with LBJ
Creekside, LLC with respect to the premises located at
Building 2, 20435 72nd Avenue South, Kent, Washington 98032
(the ‘Lease') as of the date that is 10 days after
the date of this notice (the ‘Rejection
Id. The date 10 days after May 22, 2017, is June 1,
made an administrative claim for the entire month of June
2017. Id. at 3-5. Debtor objected to this claim,
id. at 48-52, and the Bankruptcy Court sustained
that objection, but did allow administrative rent on a
pro-rated basis for one day of rent in June. See Id.
at 58- 69. In doing so, the Bankruptcy Court specifically
noted that the rejection date was June 1, 2017. Id.
at 65. The Court rejected the application of cases cited by
the parties, found that there was no binding Ninth Circuit
authority, and “follow[ed] the majority of Courts that
have adopted the proration, or accrual method, which follows
the pre-Bankruptcy Code practice of prorating a debtor's
rent payments due under a lease, regardless of the billing
date.” Id. at 66 - 67 (citing In re
Phar-Mor, Inc., 290 B.R. 319, 323-24 (Bankr.N.D.Ohio
2003). The Court noted that this outcome “serves the
legislative intent of providing landlords with a current
payment for current services without producing results that
are inconsistent with the Bankruptcy Code.”
Id. at 67 (citing In re GCP CT School
Acquisition, LLC, 443 B.R. 243, 251 (Bankr. D. Mass.
appealed, arguing that it is entitled to an administrative
claim for the entire month of June 2017 pursuant to §
365(d)(3) of the Bankruptcy Code.
District Court has original subject matter jurisdiction over
Debtor's chapter 11 case and over all civil proceedings
arising in or related to the chapter 11 case. 28 U.S.C.
§ 1334. The District Court, acting in its appellate
capacity, reviews the bankruptcy court's legal conclusion
de novo and its factual determinations for clear
error. In re Olshan, 356 P.3d 1078, 1083 (9th Cir.
2004). However, a bankruptcy court's order allowing or
disallowing a proof of claim, including an administrative
claim, is reviewed for abuse of discretion. Burlington N.
R.R. Co. v. Dant & Russell, Inc. (In re Dant &
Russell, Inc.), 853 F.2d 700, 707 (9th Cir. 1988);
Bitters v. Networks Elec. Corp. (In re Networks Elec.
Corp.), 195 B.R. 92, 96 (9th Cir. BAP 1996). A
bankruptcy court abused its discretion if it applied the
wrong legal standard or its findings were illogical,
implausible or without support in the record.
TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d
820, 832 (9th Cir. 2011).
initial matter, the Court agrees with the Bankruptcy
Court's determination that the rejection date was June 1,
2017. The Debtor's notice was sent on May 22, stating
that the rejection was effective ten days later. Although,
the notice was not received until May 23, under Federal Rule
of Bankruptcy Procedure 9006(f), adding time for mailing only
occurs if there is a response allowed after the service.
There was no response allowed, therefore it was served on May
argues that it is entitled to an administrative claim for the
entire month of June 2017 pursuant to § 365(d)(3) of the
Bankruptcy Code. LBJ cites to the same cases before the
Bankruptcy Court, namely In re Koenig Sporting Goods
Inc., 203 F.3d 986, 989 (6th Cir. 2000); In re
Montgomery Ward Holding Corp., 268 F.3d 205 (3rd Cir.
2011); In re Cukierman, 265 F.3d 846 (9th Cir.
2001); and Pacific Atlantic Trading Company, 27 F.3d
401, 405 (9th Cir. 1994). Dkt. #7. LBJ argues that
Cukierman stands for the proposition that there is a