In re Trak Auto Corp.
United States Court of Appeals for the Fourth Circuit
367 F.3d 237 (2004)
In 2001, Trak Auto Corporation (Trak Auto), an automobile parts and accessories retailer, filed for chapter 11 bankruptcy. As part of its reorganization, Trak Auto sought bids to buy out Trak Auto’s lease with West Town Center LLC (West Town) for space at a Chicago shopping center. The lease included a restriction on permitted uses that limited Trak Auto’s business to the retail sale of automobile parts, accessories, and related items. A & E Stores, Inc. (A & E), the highest bidder, intended to operate a discount-clothing store in the space, in violation of the permitted uses provision of the lease. Trak Auto asked the bankruptcy court to authorize the lease assignment to A & E. West Town objected, claiming that the assignment would breach the lease’s permitted uses. The court authorized the assignment, ruling that the lease’s permitted use restrictions were anti-assignment provisions prohibited under § 365(f)(1) of the Bankruptcy Code. The district court affirmed the bankruptcy court, and West Town appealed.
Rule of Law
Holding and Reasoning (Michael, J.)
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