AMB Property, L.P. v. Official Creditors for the Estate of AB Liquidating Corp.

This case arises from the bankruptcy of Adaptive Broadband Corporation (“Debt- or”). AMB Property, L.P. (“AMB”), Debt- or’s pre-petition landlord, appeals from the district court’s affirmance of the bankruptcy court’s judgment. In that judgment, the bankruptcy court sustained the Creditors’ Committee’s objection to AMB’s claim against Debtor’s estate for breach-of-lease damages. For the reasons set forth below, we affirm the judgment of the district court.

I. Background

This case was decided on stipulated facts in the bankruptcy court. On April 17, 2000 AMB and Debtor entered into a five year lease (the “Lease”) for certain commercial property. The Lease required a Security Deposit of $1,000,000. A contemporaneously dated Addendum allowed the Security Deposit to be in the form of a letter of credit. Debtor established a fully-collater-alized $1,000,000 letter of credit, in favor of AMB, through Union Bank (“Letter of Credit” or “Letter”).

Debtor filed for Chapter 11 bankruptcy July 26, 2001 and promptly rejected the Lease. AMB re-let the premises to another tenant and filed a $2,000,000 proof of claim for damages resulting from Debtor’s rejection of the Lease. The Creditors’…