Richards Layton & Finger
 

Court Adopts 'Time' Approach in Applying Section 502(b)(6) Cap

June 10, 2015

U.S. Bankruptcy Judge Kevin J. Carey of the District of Delaware's recent opinion in In re Filene's Basement LLC, Case No. 11-13511 (KJC), has provided long-awaited guidance on the application of Section 502(b)(6) of the Bankruptcy Code to lease rejection damages claims in the bankruptcy context. Perhaps most significantly, the court concluded that the "15 percent" referred to in Section 502(b)(6)(A) of the Bankruptcy Code refers to the remaining term of the lease, rather than the remaining rent due thereunder. The Filene's opinion marks the first time that the Delaware bankruptcy court has addressed this issue, an issue that has been the subject of a split in authority amongst other jurisdictions. Additionally, the court adopted an instructive approach for determining whether certain additional landlord claims should be subject to the cap contained in Section 502(b)(6)(A).