Thomas Paine would be proud of this Court’s commonsense approach to the Bankruptcy Code

 

In the In re FirstEnergy Solutions Corporation bankruptcy cases,[1] the court recently issued an opinion narrowing the number of situations in which a fixed-price supply agreement (used to hedge against rising input costs and constituting a “forward contract” in bankruptcy parlance) will be treated as an exception to the general rules governing “executory contracts”[2] in chapter 11 bankruptcy cases.

The “automatic stay” under section 362 of the Bankruptcy Code usually prevents a contract counterparty from terminating an executory contract without first getting court approval (i.e., relief from the automatic stay); this is true even if the contract provides it may be terminated upon the filing of