Shopping centers are a delicate blend of stores and services, carefully crafted at the hand of the master mixologist: the landlord. However, if a landlord doesn’t take certain precautions, it may lose its right to control the balance of the ingredients to this cocktail: the tenant mix. On May 30, 2018, Eastern District of Virginia Bankruptcy Judge Keith Phillips ruled that a landlord in Brea, Calif., could not rely on 11 U.S.C. § 365(b)(3)(C) and (D) to prevent Toys “R” Us (TRU) from assigning its lease to Burlington Coat Factory, LLC. This opinion makes clear that a landlord cannot rely on use restrictions in leases with third-party tenants, or undefined notions of tenant mix, to prevent the assumption of a lease in a bankruptcy case.

On the petition date, TRU leased space in Brea Union Plaza. During the bankruptcy case, TRU auctioned unexpired leases to buyers for assumption and assignment. TRU sought court approval to assign the lease to Burlington. Brea Union Plaza I LLC, the Brea Union Plaza landlord, in an effort to preserve its delicately balanced shopping center cocktail, objected to the assignment on two bases: (1) The assignment would cause Brea to violate a restriction contained in a lease with Ross Dress For Less, Inc., a nonparty tenant in the same center; and (2) allowing Burlington to become a tenant of Brea Union Plaza would disrupt the tenant mix.