O’Melveny Worldwide

Law Journal Newsletters: District Court Provides Guidance on ‘Psychedelic Confusion’

December 1, 2022

O’Melveny partner John Rapisardi and counsel Matthew Kremer co-authored this article discussing what the US District Court for the Southern District of New York observed as “psychedelic confusion” in relation to the junction of Bankruptcy Code §365, which concerns the assumption and rejection of executory contracts, and Bankruptcy Code §503, which deals with administrative priority. “The District Court’s holding reverses some of the potentially harmful consequences of the lower court’s decision — which, if affirmed, would have undermined the Bankruptcy Code’s statutory protections intended to encourage parties to transact with debtors in bankruptcy,” the authors wrote. “Contract counterparties should take comfort that under the ‘fair contemplation’ test an agreement to extend contract terms will not be used against such party in determining whether a breach arises post-petition, potentially entitling the party to administrative priority.”

Read the full article here.