Landlords contemplating terminating a lease with a distressed
tenant in advance of a possible tenant bankruptcy will want to
consider carefully a recent decision from the Seventh Circuit. The
decision, In re Great Lakes Quick Lube LP,
reversed and remanded a bankruptcy court decision in favor of a
landlord. In so doing, the Seventh Circuit allowed an action to
proceed against the landlord brought by the Official Committee of
Unsecured Creditors (Committee) appointed in the tenant's
chapter 11 proceeding.
Fifty-two days prior to the commencement of the tenant's
bankruptcy case, the landlord and tenant entered into a voluntary
termination of certain leases of the tenant. After the tenant
commenced its chapter 11 proceeding, the Committee sued the
landlord in the bankruptcy court. The Committee sought a
determination that the prepetition terminations constituted either
avoidable preferential transfers or fraudulent conveyances.
Further, the Committee sought an order
