In Re at Home Corporation, a Delaware Corporation, Debtor. Pacific Shores Development, LLC v. At Home Corporation, Dba Excite at Home

In this appeal, we hold that a bankruptcy court may approve retroactively the rejection of an unexpired nonresidential lease. We adopt the First Circuit’s conclusion in Thinking Machines Corp. v. Mellon Financial Services Corp. # 1 (In re Thinking Machines Corp.), 67 F.3d 1021, 1029 (1st Cir.1995): although rejection of an unexpired nonresidential lease does not take effect until court approval, “the approving court has the equitable power, in suitable cases, to order a rejection to operate retroactively.” We further hold that the retroactive date may be earlier than the date on which the landlord retakes possession of the premises. Here, the bankruptcy court permissibly allowed the debtor to reject the leases as of the date on which the debtor filed its motion seeking to reject them. Accordingly, we affirm.

BACKGROUND

In happier times, Debtor At Home Corporation was actively engaged in the delivery of “broadband” network services to residential customers. As part of an aggressive growth strategy, in early 2000 Debtor leased two buildings from Pacific Shores Development Corporation, LLC. Debtor placed in escrow approximately $20 million to fund the remodeling of the two leased…