Introduction
Ten years ago, in 2003, the Seventh Circuit issued its Qualitech decision,1 which sought to reconcile a perceived conflict between section 365(h) and section 363(f). On the one hand, in a circumstance where a debtor rejects an unexpired lease of real property under which the debtor is the lessor, section 365(h) permits a lessee to elect to retain its rights under its lease, which many courts and commentators equate to an absolute right to stay in possession of the leased premises for the term of the lease. On the other hand, section 363(f) permits a debtor to sell property free and clear of interests if it satisfies one of five requirements. In Qualitech, the parties fought over whether the underlying property could be sold free and clear of the lease under section 363(f), notwithstanding that the lessee asserted a right pursuant to section 365(h) to stay in possession of the property for the term of the lease.
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Originally published in Norton Annual Survey of Bankruptcy Law, 2013 Edition.
Footnote
1 Precision Industries, Inc. v. Qualitech Steel SBQ, LLC, 327 F.3d 537, 41 Bankr. Ct. Dec. (CRR) 65, 49 Collier Bankr. Cas. 2d (MB) 1765, Bankr. L. Rep. (CCH) P 78836 (7th Cir. 2003).
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