In Re Trak Auto Corporation

367 F.3d 237 (2004)

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Nature of the Case

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Facts

P, a retailer of auto parts and accessories, filed a petition under Chapter 11 and continued in business as debtor in possession. P obtained court approval to close its stores in four states, Illinois, Indiana, Michigan, and Wisconsin. P then sought to assume and assign certain of its leases of retail space where stores had been closed. At issue is P's lease with D. The lease contains explicit use restrictions and limits 'PERMITTED USES' to the 'sale at retail of automobile parts and accessories and such other items as are customarily sold by Tenant at its other Trak Auto stores.' P got bids, but none came from an auto parts retailer. A&E Stores, Inc., an apparel merchandiser that offered $80,000 to buy out the lease. A&E was going to sell brand name family apparel at discount prices. D objected in that the assignment would breach the lease provision limiting use to the sale of auto parts and accessories wherein the restriction enforceable under 365(b)(3)(C). P claimed the use restrictions was an unenforceable anti-assignment provisions under § 365(f)(1) and that an assignment to A&E would not, as a matter of fact, disrupt the tenant mix. The bankruptcy court and the district court agreed with P. D appealed.