On July 13, 2015, the United States District Court for the District of Delaware issued a memorandum opinion in Huron Consulting Services, LLC v. Physiotherapy Holdings, Inc. et al., Civ. No. 14-693-LPS. Chief Judge Leonard P. Stark authored the opinion which addressed whether a series of agreements was integrated, and whether a debtor was required to assume all agreements in their entirety or could selectively assume certain of the agreements, but not others.
The appeal by Huron stemmed from a series of orders entered by the Bankruptcy Court that permitted Physiotherapy (the debtor) to assume one contract but reject five other related agreements. On appeal, the issues raised by Huron included (i) whether the underlying agreements were actually assumable by the debtor, and (ii) whether the underlying agreements were integrated, such that they all had to be assumed or assigned together.
After concluding that nothing precluded the assumption or assignment of the underlying agreements, the court turned to the more pressing question of whether the debtor could assume only some of the agreements and not others.
In deciding that the contracts were no integrated, and therefore could be assumed separately, the Bankruptcy Court below made three observations. First, the agreements had been signed at different times. Second, the Bankruptcy Court noted that certain provisions of the agreements contradicted provisions in others, thus concluding that the parties did not mean to create a unified agreement. Third, the Bankruptcy Court found that the integration clause did not mean to create a unified contract but rather acted simply preclude parol evidence.
On appeal, Chief Judge Stark concluded that the parties did, indeed, intend to create one unified contract. In a well-reasoned and comprehensive analysis, the USDC concluded that, under ample Third Circuit law, separate agreements, even when executed at different times, can establish a single contract "if it appears to be a complete contract within itself . . . without any uncertainty as to the object or extent of the [parties'] engagement." (citations omitted).
The USDC also disagreed with the Bankruptcy Court that the alleged conflicting integration clauses merely addressed parol evidence. Instead, the provisions made clear that many agreements (identified within the clauses) constituted one agreement between the parties. Also, the USDC found that the clauses also provided a mechanism for resolving conflicts between the documents. In the event a conflict existed between documents, the provisions of one took precedence over the other. Rather than this evidencing separate agreements, the USDC believed this reinforced the concept that separate agreements were intended to act as one.
The USDC therefore found that the agreements could not be treated separately. Rather, the agreements had to be assumed or rejected as a whole. Chief Judge Stark refused to require the debtor to adhere to the provisions of a certain Master Agreement which the debtor had previously rejected. Rather, Chief Judg Stark remanded the matter to the Bankruptcy Court to allow the debtor to determine whether to assume all agreements or reject them all.