
USCA1 Opinion

	




          November 17, 1995 UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                              _________________________          No. 95-1575                        IN RE:  THINKING MACHINES CORPORATION,                                       Debtor.                              _________________________                            THINKING MACHINES CORPORATION,                                      Appellee,                                          v.                      MELLON FINANCIAL SERVICES CORPORATION #1,                                      Appellant.                              _________________________                                     ERRATA SHEET                                     ERRATA SHEET               The opinion of  this court  issued on October  17, 1995,  is          corrected as follows:          On page  2, line 13;  page 6, line 24;  page 7, line  2; page 13,          line  10; page  15,  line  19;  page  17, line  22     change  "           365(c)(3)" to "  365(d)(3)"          On page 7, line 11   change "  365(c)(4)" to "  365(d)(4)"                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                              _________________________          No. 95-1575                        IN RE:  THINKING MACHINES CORPORATION,                                       Debtor.                              _________________________                            THINKING MACHINES CORPORATION,                                      Appellee,                                          v.                      MELLON FINANCIAL SERVICES CORPORATION #1,                                      Appellant.                              _________________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. William G. Young, U.S. District Judge]                                             ___________________                              _________________________                                        Before                           Selya and Stahl, Circuit Judges,                                            ______________                             and Gorton,* District Judge.                                          ______________                              _________________________               Kevin  J.  Simard, with  whom  Charles R.  Bennett,  Jr. and               _________________              _________________________          Riemer & Braunstein were on brief, for appellant.          ___________________               Charles  R. Dougherty, with whom Jonathan C. Lipson and Hill               _____________________            __________________     ____          & Barlow were on brief, for appellee.          ________                              _________________________                                   October 17, 1995                              _________________________          ______________          *Of the District of Massachusetts, sitting by designation.                    SELYA,  Circuit  Judge.    This appeal  compels  us  to                    SELYA,  Circuit  Judge.                            ______________          address a nagging question of bankruptcy law on which no court of          appeals  has yet  spoken and  on which  lower federal  courts are          divided.   The problem relates to the operation of section 365(a)          of the Bankruptcy Code, 11 U.S.C.   365(a) (1994), a statute that          permits a Chapter 11  trustee, subject to certain conditions,  to          assume or reject  any unexpired  lease or  executory contract  in          existence  on  the  date  the  insolvency  proceeding  commences.          Because the trustee's actions require court approval, and because          the  Code  treats nonresidential  leases  differently  than other          leases or  executory contracts, requiring the  estate to continue          paying rent at the contract rate until rejection takes effect, 11          U.S.C.     365(d)(3), a  question arises:    Is court  approval a          condition precedent or subsequent to the effective rejection of a          nonresidential lease  pursuant to section 365(a)?   This question          is of considerably more than academic interest.  Time is money in          the waiting game  that Chapter 11 often entails,  and substantial          sums  can ride  on how quickly  the trustee can  jettison a high-          priced  lease.  In this  case, for example,  the determination of          which  date controls  carries with  it a  swing of  approximately          $200,000.                    The courts  below disagreed on how  the question should          be  answered.  The  bankruptcy  court  ruled  that  the  debtor's          rejection  of its lease took effect only  on court approval.  See                                                                        ___          In  re  Thinking Machines  Corp., 178  B.R.  31 (Bankr.  D. Mass.          ________________________________          1994).  The  district court reversed, holding that  the rejection                                          3          was effective on the date that the debtor gave appropriate notice          of  its decision to reject.1  See  In re Thinking Machines Corp.,                                        ___  _____________________________          182 B.R.  365 (D. Mass.  1995).  Concluding,  as we do,  that the          statute is  most  propitiously  read to  make  court  approval  a          condition precedent to an effective rejection of a nonresidential          lease, we now reverse.          I.  BACKGROUND          I.  BACKGROUND                    The material  facts are undisputed.   In 1990, Thinking          Machines Corporation ("TMC" or "the debtor") leased a building in          Cambridge,   Massachusetts,   from   Mellon  Financial   Services          Corporation  #1 ("Mellon").   Apparently,  the environs  were not          sufficiently  conducive to  fertile thought,  for, on  August 17,          1994, TMC filed a voluntary petition seeking relief under Chapter          11 of the Code, 11 U.S.C.    1101-1145.  TMC proceeded to operate          the business as a  debtor in possession.  It  continued to occupy          the demised  premises, using only  a fraction  of the space.   On          September  13, 1994,  TMC filed  a  motion asking  the bankruptcy          court  to approve  its decision to  reject the lease.   The court          granted the motion on October 4.                    Three  weeks   later,   Mellon  moved   for   immediate          possession   of   the   premises  and   payment   of  $345,915.89                                        ____________________               1This date is sometimes  called, in bankruptcy parlance, the          "motion filing date."   The label refers to the  requirement that          the trustee or debtor  in possession must signify an  election to          accept or reject a particular lease  by the filing of a motion to          that effect in the bankruptcy court.  See Fed. R. Bankr. P. 6006,                                                ___          9014.  Mindful of the pithy advice that St. Ambrose is reputed to          have offered St.  Augustine ("When you  are at Rome  live in  the          Roman  style."), see Jeremy  Taylor, Ductor Dubitantium,  I, I, 5                           ___                 __________________          (1660), we shall employ this terminology.                                          4          (representing administrative  rent accrued  at the  contract rate          through the date on  which the bankruptcy court had  approved the          debtor's rejection of the lease, plus associated expenses).   TMC          parried  this thrust  by touting  the motion  filing date  as the          effective  date  of  its  rejection (and,  therefore,  the  outer          boundary of its liability under the lease).  It  also tendered to          Mellon $143,326.45 (the  amount due under  the lease through  the          motion filing date).                    The bankruptcy  judge resolved the dispute  in Mellon's          favor,  ruling that the rejection  did not take  effect until the          court had  approved it,  and that,  accordingly, the  debtor owed          Mellon $210,150.26  (the difference between the  total amount due          under  the  lease through  October  4  and  the  partial  payment          previously made  by  the debtor)  plus interest  and common  area          maintenance  charges.2   See Thinking  Machines, 178 B.R.  at 34.                                   ___ __________________          When TMC appealed, the district court took a different slant.  It          held that  the  rejection occurred  on  September 13,  1994  (the          motion  filing date),  and that,  therefore, no  further payments          were  due.  See Thinking Machines, 182  B.R. at 369.  This appeal                      ___ _________________          ensued.          II.  STANDARD OF REVIEW          II.  STANDARD OF REVIEW                    We afford plenary review  to determinations of law made          by a district court  sitting in appellate review of  a bankruptcy                                        ____________________               2We note  an $80 discrepancy between  the bankruptcy court's          judgment and the  total claimed  arrearage.  This  appears to  be          traceable to  the court  papers.   We  do not  pursue the  point,          confident that any necessary adjustment can be made on remand.                                          5          court order,  ceding no special deference to  the district court.          See,  e.g., In re Winthrop Old Farm  Nurseries, Inc., 50 F.3d 72,          ___   ____  ________________________________________          73 (1st Cir. 1995); In re  G.S.F. Corp., 938 F.2d 1467, 1474 (1st                              ___________________          Cir. 1991); In re Navigation Technology Corp. 880 F.2d 1491, 1493                      _________________________________          (1st Cir. 1989).   This standard is fully applicable  here, as it          is in  all cases in which we are asked to decipher the meaning of          a statute.   See, e.g., In re Jarvis, 53  F.3d 416, 419 (1st Cir.                       ___  ____  ____________          1995); United States  v. Holmquist,  36 F.3d 154,  158 (1st  Cir.                 _____________     _________          1994), cert. denied,  115 S.  Ct. 1797 (1995);  United States  v.                 _____ ______                             _____________          Gifford, 17 F.3d 462, 472 (1st Cir. 1994).          _______          III.  ANALYSIS          III.  ANALYSIS                    We  organize our  analysis  in three  segments, dealing          with  the statutory framework, the  time when the  rejection of a          nonresidential lease  becomes effective under that framework, and          the implications of our exercise in statutory construction on the          calculus of relief.                             A.  The Statutory Framework.                             A.  The Statutory Framework.                                 _______________________                    Section  365(a) states,  with  exceptions not  relevant          here,  that "the  trustee, subject to  the court's  approval, may          assume or reject any executory contract or unexpired lease of the          debtor."   11  U.S.C.    365(a).3    This proviso  furnishes  the          trustee  with a multipurpose elixir for use in nursing a business                                        ____________________               3For ease in  reference, we  discuss the issue  in terms  of          trustees.   We recognize, however, that under Chapter 11 a debtor          in possession has essentially the same rights, powers, and duties          as a trustee, see 11 U.S.C.    1107(a), 1108, including the right                        ___          under   365(a) to assume or reject a nonresidential lease.  Thus,          our  comments and  conclusions,  context permitting,  are equally          applicable to debtors in possession.                                          6          back to good health.  On one hand, the trustee  may prescribe the          elixir as a tranquilizer to ease the fears of squeamish suppliers          and  customers so that they  will continue doing  business with a          bankrupt  corporation.   On  the  other  hand,  the  trustee  may          prescribe  it  as an  emetic to  purge  the bankruptcy  estate of          obligations that promise to hinder a reorganization.                    Having  originally  given  Chapter  11  trustees  broad          latitude in dispensing the  elixir, Congress subsequently diluted          the  potion.    Since   section  365(a),  as  initially  enacted,          contained no temporal  boundaries within which  a trustee had  to          assume  or reject an unexpired lease, and did not require debtors          to pay rent at  the contract rate while the  trustee equivocated,          commercial  landlords  felt  themselves   unfairly  disadvantaged          because,  unlike other  creditors, they  were forced  to continue          extending  credit to  the  debtor  during  the  pendency  of  the          reorganization  proceeding.   See  130  Cong.  Rec. 20084,  20088                                        ___          (daily  ed. June 29,  1984), reprinted in  1984 U.S.C.C.A.N. 590,                                       _________ __          598-99 (statement of Sen. Hatch).   Whether or not love  of money          is the root of all evil, it is at the least a powerful motivator.          Spurred   by  financial  self-interest,   the  landlords  lobbied          successfully  for   passage  of  the  so-called  Shopping  Center          Amendments  (the  "S/C Amendments")  as  part  of the  Bankruptcy          Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353,          98 Stat. 333.                    The  S/C   Amendments   alter  the   equation  in   two          significant respects.    First, they  direct  the trustee,  in  a                                          7          timely fashion, to "perform all the obligations of the debtor . .          .  under any  unexpired  lease of  nonresidential real  property,          until such lease is assumed or rejected."  11 U.S.C.   365(d)(3).          This  provision requires  the trustee,  inter alia,  to  pay rent                                                  _____ ____          under the lease at the contract  rate unless and until he rejects          it, and gives the landlord what  amounts to a preference   in the          form of an administrative claim   for such avails.  Thus, section          365(d)(3)  is  a  marked  departure  from  the  tenet,  reflected          throughout the  Code, that post-petition  administrative expenses          should be allowed only for "actual, necessary costs and  expenses          of   preserving  the   [bankruptcy]   estate."     11  U.S.C.              503(b)(1)(A).  Second, if the trustee fails to take a position in          regard to the lease within sixty days from the date  of the order          for relief under Chapter 11 (or within such  longer period as the          court,  on application, may fix), the lease is deemed rejected at          that juncture.  See 11 U.S.C.    365(d)(4).  This provision gives                          ___          the bankruptcy estate a  measure of protection against indecision          or inadvertence on the trustee's part.                    These  modifications  ameliorate, but  do  not entirely          solve,  several of  the problems  related to  tenant bankruptcies          that  historically   have  plagued  commercial  landlords.    One          surviving problem concerns the  rampant uncertainty as to whether          a rejection will be deemed effective on the date of the trustee's          decision or only when the court thereafter endorses the decision.          It is to this question that we now turn.                          B.  When Is A Rejection Effective?                          B.  When Is A Rejection Effective?                              _____________________________                                          8                    The best hope for  capturing congressional intent is by          focusing   on  the   language   purposefully   deployed  by   the          legislature.    Thus,  a  statute ordinarily  will  be  construed          according  to its plain meaning.  See Estate of Cowart v. Nicklos                                            ___ ________________    _______          Drilling Co., 112 S. Ct. 2589, 2594 (1992); In re Jarvis, 53 F.3d          ____________                                ____________          at 419;  Pritzker v. Yari,  42 F.3d  53, 67-68  (1st Cir.  1994),                   ________    ____          cert. denied,  115 S. Ct. 1959 (1995).  But, when Congress' words          _____ ______          admit of more than one reasonable interpretation, "plain meaning"          becomes  an impossible dream, and an inquiring court must look to          the policies,  principles and purposes underlying  the statute in          order to  construe it.   See Pritzker,  42 F.3d at  67; see  also                                   ___ ________                   ___  ____          Sullivan  v. CIA, 992 F.2d 1249, 1252 (1st Cir. 1993) (explaining          ________     ___          that  courts  may  "look  behind  statutory  language"  when  the          legislature "blows an uncertain  trumpet").  Congress, after all,          does not legislate in a vacuum.                    Here,  the protagonists  assure us  that the  statutory          language is plain, and that we need not go beyond it.  The debtor          says that under section 365(a)  the rejection of a nonresidential          lease "plainly" becomes effective on the motion filing date (when          notice of rejection is given), subject to defeasance in the event          a judge later vetoes  the trustee's decision.  The  landlord says          that under section 365(a) the rejection of a nonresidential lease          "plainly" cannot  become effective until the  court approval date          (when  the   bankruptcy  court  places  its   imprimatur  on  the          decision).      The  authorities   are   divided   as  to   which          interpretation of  the statutory  language is appropriate.   Some                                          9          courts (albeit a minority) believe that section 365(a) should  be          read,  as TMC successfully argued in the district court, to align          judicial  approval as  a  condition subsequent  to the  trustee's          independently  effective rejection  of  a  nonresidential  lease.          See, e.g.,  In re Joseph C. Spiess Co., 145 B.R. 597, 604 (Bankr.          ___  ____   __________________________          N.D. Ill.  1992); In  re 1  Potato 2, Inc.,  58 B.R.  752, 755-56                            ________________________          (Bankr. D. Minn.  1986).  Other  courts (more numerous,  overall)          believe, as  Mellon successfully argued in  the bankruptcy court,          that section 365(a)  should be read to  require judicial approval          as  a  condition  precedent  to  an  effective  rejection  of   a          nonresidential lease.  See, e.g., In re Paul Harris Stores, Inc.,                                 ___  ____  ______________________________          148 B.R. 307, 309 (S.D. Ind. 1992); In re Federated Dept. Stores,                                              _____________________________          Inc., 131 B.R. 808, 815-816 (S.D. Ohio 1991); In re Swiss Hot Dog          ____                                          ___________________          Co., 72 B.R. 569,  571 (D. Colo. 1987);  In re 1 Potato 2,  Inc.,          ___                                      _______________________          182 B.R.  540, 542  (Bankr. D.  Minn.  1995); In  re Revco  Dept.                                                        ___________________          Stores, Inc., 109 B.R 264, 267 (Bankr. N.D. Ohio 1989).  No court          ____________          of appeals has ventured to answer the question.4                    In   our  judgment,   this   collision  of   viewpoints          underscores  the obvious:   although the  text of  section 365(a)          plainly indicates that a  trustee's rejection of a nonresidential                                        ____________________               4Contrary   to  Mellon's  characterization,  In  re  Arizona                                                            _______________          Appetito's Stores, Inc., 893 F.2d 216 (9th Cir. 1989),  is not on          _______________________          point.  There, the Ninth Circuit merely  observed that "rejection          of an unexpired lease can be accomplished only by an order of the          bankruptcy court."   Id. at  219-20 (dictum).   The statement  is                               ___          correct as far as it goes   but  it does not go far enough.   The          issue  here  is  not whether  court  approval  is required  under          section  365(a)     clearly, it  is     but  whether a  purported          rejection  becomes legally  effective  before court  approval  is                                                 ______          secured.                                          10          lease  is conditional upon court approval, the text is unclear as          to  whether that  approval constitutes  a condition  precedent or          subsequent  to  an effective  rejection.    Consequently, section          365(a)  is ambiguous  in  this respect.    See United  States  v.                                                     ___ ______________          Gibbens, 25 F.3d 28, 34 (1st  Cir. 1994) ("A statute is ambiguous          _______          if it can be read in more than one way.").                    While  the  competing interpretations  proposed  by the          parties are both reasonable renditions of the statute's language,          we  believe that section 365(a) is most faithfully read as making          court approval a  condition precedent to  the effectiveness of  a          trustee's rejection  of a  nonresidential lease.   Therefore, the          date of court approval, not the motion filing date, controls.  We          are guided to this conclusion by several signposts.                    First and foremost, we think that the  structure of the          Bankruptcy  Code and  the  nature of  judicial  oversight in  the          Chapter  11 milieu combine to make it highly likely that Congress          intended judicial  authorization to  be a condition  precedent to          rejection.   Bankruptcy is inherently  a judicial process.   From          the  moment that a debtor's  petition is filed  in the bankruptcy          court, the debtor's property is in custodia legis.  See 1 William                                             ________ _____   ___          C.  Norton,  Jr., Norton  Bankruptcy Law  and  Practice 2d    3:2                            ________________________________________          (1994).  From that point forward, the bankruptcy court is charged          with overseeing the trustee's management in order  to ensure that          the interests of the bankruptcy estate are served.  See 4 Norton,                                                              ___          supra,   77:4.          _____                    Judicial oversight of the reorganization  process takes                                          11          two  forms.   Many  routine decisions  are  made by  the  trustee          without any specific clearance from the bankruptcy court, and are          reviewed (if at all) only in  the course of an examination of the          trustee's overall stewardship (say, when a plan of reorganization          is proposed  or when an  application for  fees is filed).   Other          decisions  are  not   effective  unless  they   are  specifically          sanctioned by the court.   In those instances,  judicial approval          is  almost  invariably a  condition  precedent  to the  trustee's          action.5     Arranging  matters  in  this   sequence  facilitates          judicial  oversight,  minimizes false  starts,  and  enhances the          efficiency of the process.  We can  think of no convincing reason          why  Congress  would  abruptly  depart  from  this tried-and-true          formula.   More importantly,  we are  confident that if  Congress          wished to inaugurate  so radical  a change, it  would have  taken          pains to mark the trail brightly.                    A second  reason for reading section  365(a) to require          judicial  approval as  a condition  precedent  to rejection  of a          nonresidential  lease is  rooted  in history.   Congress  enacted          section 365(a) as  part of  the Bankruptcy Code  of 1978,  making          court approval of such rejections  obligatory for the first time.                                        ____________________               5We  note  several  examples.   Before  using,  selling,  or          leasing property  of the  estate outside  the ordinary course  of          business, the trustee must seek court approval.  See  11 U.S.C.                                                             ___          363(b)(1).    Unless each  entity that  has  an interest  in cash          collateral  consents, the  trustee  may not  use cash  collateral          unless the bankruptcy court  first grants authorization.  See  11                                                                    ___          U.S.C.    363(2)(A),  (B).   If the  trustee seeks  extraordinary          post-petition financing,  he  must first  obtain court  approval.          See 11 U.S.C.   364(b).  And the trustee may not abandon property          ___          of  the  estate,  even  if burdensome,  without  obtaining  court          approval.  See 11 U.S.C.   554(a).                     ___                                          12          The  predecessor   to  section  365(a),  section   70(b)  of  the          Bankruptcy Act of 1898,  11 U.S.C.   110(b) (repealed  1978), and          the applicable bankruptcy  rule governing actions taken  pursuant          to  section 70(b), Fed. R. Bankr. P. 607 (repealed 1978), did not          explicitly require judicial approval  of a trustee's rejection of          a lease, and  many courts  held that the  trustee, acting  alone,          could make a rejection stick.   See, e.g., Villas &  Sommer, Inc.                                          ___  ____  ______________________          v. Mahony  (In re Steelship Corp.),  576 F.2d 128, 132  (8th Cir.             _______________________________          1978).  The conclusion is irresistible that Congress, by changing          the protocol in 1978, intended to involve bankruptcy courts  more          actively  in the decisional process.  We believe that this policy          of  increased involvement  is better  served by  viewing judicial          approval  as  a condition  precedent  to the  effectiveness  of a          rejection instead of as a condition subsequent.                    In  a related  vein, we  note that several  courts have          found  support  for  requiring  court  approval  as  a  condition          precedent  to  rejection  in   two  extant  rules  of  bankruptcy          procedure, namely, Fed. R. Bankr.  P. 6006 and 9014.   See, e.g.,                                                                 ___  ____          Revco, 109  B.R. at 268.   Read  together, these rules  require a          _____          trustee who  desires to reject a lease to file a formal motion to          that  effect.     This,  too,  constitutes   an  innovation  for,          previously,  the rules  did not  provide a  formal  procedure for          rejecting  leases.  We think  this is another  sign that Congress          intended  courts  to  become  more  involved  in  the  decisional          process,  and, thus, reinforces our vision of court approval as a          condition  precedent to  a  valid rejection  of a  nonresidential                                          13          lease.                    The  third reason  for  our view  is  that reading  the          statute  in the  manner favored  by the  district court  tends to          reduce a bankruptcy court's order of approval to a bagatelle.  So          interpreted, the provision would trivialize judicial oversight of          the rejection  process.   Court orders are  customarily important          events in the life of a judicial proceeding; they are the primary          means through  which courts  speak, see, e.g.,  Advance Financial                                              ___  ____   _________________          Corp. v. Isla Rica Sales, Inc.,  747 F.2d 21, 26 (1st Cir. 1984),          _____    _____________________          and they should  carry commensurate weight.  We see no reason for          allowing a trustee to substitute his voice for that of the court.          The trustee may sing all he wants, but it is  the court that must          call the tune.  Cf. W.A. Mozart,  Le Nozze di Figaro, Act 1, sc.2                          ___               __________________          (1786) (Figaro's Aria).                    Along  the  same  lines,  we think  that  the  district          court's "valid,  but voidable" construct, see  Thinking Machines,                                                    ___  _________________          182 B.R.  at 368, is largely bereft of meaning.  In the rejection          scenario,  the sole reason for  seeking court approval  is to cut          off  the debtor's  post-petition  liability, imposed  by  section          365(d)(3),  under the  unexpired  nonresidential lease.   If  the          bankruptcy court  disapproves the trustee's motion for rejection,          then the "rejection"  never had any meaningful legal existence in          the first  place   the trustee will remain liable for rent at the          contract rate  from the  inception of the  insolvency proceeding.          As  judicial approval  will  always  be  the  last  step  in  the          rejection  pavane, it follows that the trustee's repudiation of a                                          14          lease can never be valid in any meaningful sense until the  court          has acted.                    A final reason for  our view stems from a  concern that          treating a  rejection as  "valid, but  voidable" from the  motion          filing date forward would further ensnarl the tangles inherent in          the complexities  of modern commerce.   If "valid,  but voidable"          were the rule, the parties could act on the trustee's notice, and          their  actions would  have  to  be  undone  if  the  court  later          disagreed.     Traditionally,   attempts  to   unwind  bankruptcy          transactions after the fact have proven nettlesome, see, e.g., In                                                              ___  ____  __          re Stadium  Mgmt. Corp., 895 F.2d 845, 849 (1st Cir. 1990); In re          _______________________                                     _____          Texaco, 92 B.R.  38, 50 (S.D.N.Y. 1988), and  we will not lightly          ______          assume  that   Congress   intended   to   invite   these   myriad          complications.                    This round  trip back to the future serves to highlight          the importance of factual certainty in the rejection process.  In          adopting  a  requirement of  court  approval,  Congress overruled          precedent that allowed trustees to  show by informal conduct that          they had either  assumed or rejected  leases (or other  executory          contracts, for that matter).  Thus, the requirement seems to have          been designed at least  in part to remedy the  problems attendant          upon informal or  equivocal rejections   particularly the lack of          clear notice to landlords as to when they could safely redeem and          relet  their property.    See  Gregory  G.  Hesse,  A  Return  to                                    ___                       _____________          Confusion and Uncertainty as  to the Effective Date  of Rejection          _________________________________________________________________          of  Commercial Leases in Bankruptcy,   9 Bankr.  Dev. J. 521, 531          ___________________________________                                          15          (1993) (discussing  legislative history).   Treating  a trustee's          rejection of a nonresidential lease as "valid, but voidable" tugs          in  the  opposite direction,  promoting  uncertainty  rather than          dispelling it.6                    In an effort to resist the force of these four reasons,          TMC counters with two principal points.  First, it notes that the          language  used   in  section   365(a)  is  atypical.     Congress          traditionally employs the vocabulary  of prior authorization when          inserting  a  requirement of  court approval  in  the Code.   For          example, the statutes cited in note  5, supra, all say that  "the                                                  _____          court,  after notice  and  a hearing,"  may authorize  particular          actions.    TMC  visualizes  the somewhat  different  wording  of          section  365(a) as betokening a  different mechanism.   But it is          risky  to  read too  much into  Congress'  use of  an alternative          formulation,  especially when the new language is opaque.  We are          unwilling,  without  more, to  construe  the mere  absence  of an          explicit  reference to securing  court approval in  advance as an          intentional departure  from the  pattern of prior  court approval          woven throughout the fabric of the Bankruptcy Code.                                        ____________________               6We do  not think that  it is any  real answer to  insinuate          that "valid, but voidable" is workable because a bankruptcy court          will usually  support a  trustee's desire to  scrap an  unexpired          nonresidential  lease.  The magnitude of the harm that a landlord          might suffer  if the bankruptcy court  subsequently disapproved a          particular  rejection after  the  landlord  diligently relet  the          rejected   premises,  or   incurred   substantial   expenses   to          rehabilitate or  advertise them, brings into  focus the potential          unfairness inherent  in adopting  the motion  filing date  as the          effective  date of a rejection.  We  have no reason to think that          Congress  intended to add an  element of Russian  roulette to the          already  tumultuous effects  of  the   reorganization process  on          commercial landlords.                                          16                    Next,  TMC  complains  that  using the  date  of  court          approval  as  the  termination  date of  a  nonresidential  lease          burdens  the scarce  resources  of bankruptcy  estates.   In this          respect,  section 365(a), in  conjunction with section 365(d)(3),          departs from one of the  general themes of Chapter 11 in  that it          hinders  the trustee's  efforts to  rid the bankruptcy  estate of          unnecessary  baggage.   But  general themes  are, by  definition,          general;  they are  not necessarily  controlling in  all specific          instances.  Since the S/C Amendments purposefully discounted this          general theme in relation to the specific circumstances presented          by nonresidential leases, TMC's  policy argument is best directed          to the legislative, not the judicial, branch.                    We need go no  further.  For the reasons  limned above,          we  hold that a rejection of a nonresidential lease under section          365(a) becomes legally effective only after judicial approval has          been obtained.                           C.  Relief Under Section 365(a).                           C.  Relief Under Section 365(a).                               ___________________________                    Although we have decided the precise issue presented on          appeal, we think it behooves us to make clear that nothing in our          holding  today precludes  a bankruptcy  court, in  an appropriate          section 365(a)  case, from approving  a trustee's rejection  of a          nonresidential  lease retroactive to the  motion filing date.  We          explain briefly.                    Bankruptcy courts  are courts of equity,  see Pepper v.                                                              ___ ______          Litton, 308 U.S.  295, 304-05  (1939), and,  particularly in  the          ______          Chapter  11  context,  they  may  sometimes  abandon   mechanical                                          17          solutions in favor  of the pliant reins of  fairness.  See, e.g.,                                                                 ___  ____          Winthrop Old Farm  Nurseries, 50  F.3d at 75  (explaining that  a          ____________________________          bankruptcy  court,  applying principles  of  equity,  may in  its          discretion choose between valuation methods).  In the section 365          context, this means that  bankruptcy courts may enter retroactive          orders of approval, and should do so when the balance of equities          preponderates in favor of  such remediation.  See In  re Jamesway                                                        ___ _______________          Corp., 179 B.R. 33, 39 (S.D.N.Y. 1995) (holding that a bankruptcy          _____          court  can order  rejection retroactive  to an  earlier date  "to          avoid penalizing the  debtor for an  unnecessary delay caused  by          the creditor"); see also  In re Garfinckels, Inc., 118  B.R. 154,                          ___ ____  _______________________          154  (Bankr. D.D.C.  1990)  (suggesting that,  in the  absence of          unfair  prejudice, a bankruptcy court may enter an order nunc pro          tunc  setting the  motion filing  date as  the effective  date of          approval);  see   generally  11  U.S.C.      105(a)  (authorizing                      ___   _________          bankruptcy courts to "issue any order,  process, or judgment that          is necessary or appropriate to carry out the provisions" of Title          11).                    Of course,  the equitable powers  of bankruptcy  courts          are  not unlimited.   They  can only  be brought  to bear  in the          service  of the Bankruptcy Code.   See Norwest Bank, Worthington,                                             ___ _________________________          v. Ahlers, 485 U.S. 197, 206 (1988).   Thus, a bankruptcy court's             ______          exercise of its residual equitable  powers must be connected  to,          and  advance the  purposes of,  specific provisions in  the Code.          See, e.g., In re Hoffman Bros. Packing Co.,  173 B.R. 177, 185-86          ___  ____  _______________________________          (Bankr. 9th  Cir. 1994)  (invalidating nunc pro  tunc order  that                                          18          contradicted  an  express  Code  provision).    There  is  little          question, however, that a retroactive order may be appropriate as          long   as  it   promotes   the  purposes   of  section   365(a).7          Consequently, we rule that a bankruptcy court, when principles of          equity  so dictate, may  approve a rejection  of a nonresidential          lease pursuant to section 365(a) retroactive to the motion filing          date.8                    The fact  that the  bankruptcy court has  the power  to          approve the  trustee's rejection  of an  unexpired nonresidential          lease retroactive to the  motion filing date has a  salutary side          effect; it should act  as a stimulus to all parties  to cooperate          in getting the trustee's motion to reject heard and determined at          the  earliest practicable  date.   Moreover,  the possibility  of          retroactivity  helps to explain the seeming rift in the case law.          Witness,  for example, In re  Joseph C. Spiess  Co., 145 B.R. 597                                 ____________________________          (Bankr. N.D. Ill. 1992),  the leading case cited by  the district          court in support of its "valid, but voidable" rationale.  A close          reading of Spiess indicates  that the court may have  reached its                     ______          ultimate  conclusion    that  the  rejection took  effect  on the                                        ____________________               7Retroactive approval orders do not  contradict   365(c)(3).          While  that provision  commands the  trustee to  pay rent  at the          contract rate until  a nonresidential lease is rejected,  it does          not   stipulate  that  a  rejection   cannot  be  made  to  apply          retroactively.  See Jamesway, 179 B.R. at 37.                          ___ ________               8We note, in this  connection, that because such retroactive          orders  are  within  the  bankruptcy  court's  sound  discretion,          appeals from  a bankruptcy court's  disposition of a  request for          retroactive relief will be reviewed only for abuse of discretion.          See, e.g., Jarvis, 53 F.3d at 420; Grella v. Salem Five Cent Sav.          ___  ____  ______                  ______    ____________________          Bank, 42 F.3d 26, 30  (1st Cir. 1994); In re Gonic  Realty Trust,          ____                                   _________________________          909 F.2d 624, 626 (1st Cir. 1990).                                          19          motion filing date as opposed to the court approval date   on the          basis  of  equitable, rather  than  statutory,  principles.   The          court's actual holding is  illuminating.  After determining "that          the trustee's rejection of  a lease should be retroactive  to the          date  that trustee takes  affirmative steps to  reject said lease          such as serving notice on motion to reject," the  court held that          a court-approved rejection of  an unexpired nonresidential  lease          could  "apply retroactively to  the date the  trustee notices the          motion requesting same."  Spiess, 145 B.R. at 606.   Thus, Spiess                                    ______                           ______          can  fairly  be  read  as  an  instance  of  a  bankruptcy  court          recognizing  that  retroactive  approval  orders  are within  its          equitable  powers  under  section  365(a),  and  acting  on  that          realization.                    Reading  Spiess  in  this manner  bridges  the apparent                             ______          conflict  in the case law.  Doctrinal incoherence vanishes, and a          single black-letter rule emerges:  rejection under section 365(a)          does  not take effect until judicial approval is secured, but the          approving court  has the equitable  power, in suitable  cases, to          order a rejection to operate retroactively.9          IV.  CONCLUSION          IV.  CONCLUSION                    We reverse  the decision of the  district court, vacate          its order, and direct that it remand the matter to the bankruptcy          court (which, if it  so elects, may in its  discretion reconsider                                        ____________________               9Because  no  two cases  are  exactly alike,  we  eschew any          attempt to  spell  out  the  range of  circumstances  that  might          justify the use of  a bankruptcy court's equitable powers in this          fashion.  That exercise is best handled on a case-by-case basis.                                          20          its original order in light of this opinion).                    The judgment of the district court is reversed, and the                    The judgment of the district court is reversed, and the                    _______________________________________________________          cause is  remanded  to the  district court  with instructions  to          cause is  remanded  to the  district court  with instructions  to          _________________________________________________________________          remit  the case  to  the bankruptcy  court.   Costs  in favor  of          remit  the case  to  the bankruptcy  court.   Costs  in favor  of          __________________________________________    ___________________          appellant.          appellant.          _________                                          21
