## Facts

- Gunter Hotel Associates (Gunter) operated the historic Gunter Hotel in San Antonio, Texas.
- Gunter entered into a license agreement with Carlson Hospitality Group, Inc. (Carlson) that allowed Gunter to operate the hotel as a Radisson hotel.
- Under the agreement, Carlson provided brand affiliation and services, including access to Radisson’s reservation system, inclusion in Radisson directories and advertising materials, and national sales and referral channels.
- The Radisson affiliation had generated goodwill and exposure tied to long-lead marketing cycles (e.g., travel publications and directories printed quarterly or annually with Radisson branding and toll-free numbers).
- Gunter filed for Chapter 11 and proposed a plan of reorganization that included a provision for the bankruptcy court to retain post-confirmation jurisdiction over matters related to the plan.
- Before the plan-confirmation hearing, the bankruptcy court ordered Gunter to assume or reject all executory contracts, including the Carlson license agreement, by the confirmation hearing.
- Gunter filed a motion to reject the license agreement under 11 U.S.C. § 365, but asked the court to (i) postpone the effective date of rejection until about 60 days after plan confirmation and (ii) require Carlson to continue giving reservation-system referrals when callers specifically requested the Gunter Hotel, extending into 1989.
- Gunter argued it was in discussions with other hotel chains, but could not finalize a replacement affiliation until after confirmation; maintaining a national brand affiliation during the interim was important to avoid a loss of business and goodwill.
- Carlson opposed the motion and sought an order compelling immediate, unconditional rejection, arguing Gunter could not impose terms on rejection and that any post-confirmation extension would conflict with the court’s prior order.

## Issues

1. Whether a Chapter 11 debtor may reject an executory license agreement under § 365 while delaying the effective date of rejection and continuing to receive selected benefits (such as reservation referrals) during a transition period.
2. Whether the bankruptcy court may extend the time for the debtor to assume or reject the executory license agreement beyond the plan-confirmation hearing despite a prior order setting a pre-confirmation deadline.

## Decision

- The court denied Gunter’s request to reject the license agreement on the proposed conditions, including the delayed effective date coupled with continued referral benefits.
- The court denied Carlson’s motion to compel immediate rejection.
- The court extended Gunter’s deadline to assume or reject the license agreement to 60 days after the plan’s effective date.
- During the extension period, the license agreement remained in effect according to its existing terms unless and until Gunter made a proper election to assume or reject.

## Legal Principles

- Rejection under 11 U.S.C. § 365 is an all-or-nothing election: the debtor either assumes the executory contract (and takes it as a whole, with required cure and adequate assurance where applicable) or rejects it (treating nonperformance as a breach).
- Section 365 does not authorize “conditional” rejection that effectively rewrites the parties’ deal by allowing the debtor to keep selected contract benefits while avoiding corresponding obligations.
- A bankruptcy court has discretion over the timing of assumption or rejection, and may extend the decision deadline when doing so serves the estate and the reorganization effort.
- A prior scheduling order setting a deadline to assume or reject does not eliminate the court’s authority to adjust the deadline when warranted; however, any extension keeps the contract in force on its original terms, rather than on court-imposed, revised terms.
- When the plan provides for retained jurisdiction and the contract decision bears on plan feasibility, the court may address post-confirmation timing so long as it does not alter substantive contract rights during the extension.

## Conclusion

The bankruptcy court refused to approve Gunter’s proposed “conditional rejection” of the Radisson license because § 365 does not permit rejection on terms that preserve selected benefits like continued reservation referrals. At the same time, the court declined to force immediate rejection and instead extended the time for Gunter to assume or reject the license to 60 days after the plan’s effective date, leaving the agreement fully operative under its existing terms during that period.


In re Gunter Hotel Associates, 96 B.R. 696 (1988)