Receiver’s power to reject executory contracts under the Michigan Receivership Act (MRA); Application of the MRA to a marijuana business; Meaning of “reject” vs “terminate”; Cross-default provisions in commercial cannabis leases; Receivership courts sitting in equity; Antiassignment provisions in leases; Adequacy of assurance of performance

Holding that the MRA authorized the receiver to reject executory contracts and the trial court properly declined to enforce cross-default provisions in the leases, but that remand was required on the adequacy of the receiver’s compliance with antiassignment clauses, the court affirmed in part, reversed in part, and remanded. Plaintiff-Tropics sued Skymint, a group of marijuana businesses, as a creditor after Skymint defaulted on loans exceeding $120 million, and the trial court appointed a receiver with authority over Skymint’s contracts and leases. The trial court granted the receiver’s motion to reject the Ypsilanti lease with appellant-Koach, rejected several leases with 3Fifteen, struck cross-default provisions, and approved the sale of Skymint’s assets to a stalking horse bidder designated by Tropics. The trial court also found that the stalking horse bidder had provided adequate assurance of performance despite antiassignment restrictions. On appeal, the court rejected Koach’s argument that the MRA does not allow rejection of leases by a tenant-receiver, holding that under MCL 554.1022(2)(d) and MCL 554.1012(e), “the plain language of the MRA explicitly grants the receiver the authority to reject leases.” It also found that the trial court properly treated “reject” and “terminate” synonymously, noting that the MRA allows the receiver’s powers to be “expanded, modified, or limited by court order.” Further, it upheld the trial court’s refusal to enforce the cross-default provisions, emphasizing that “receivership is a matter of equity” and that the MRA gives courts “broad discretion” to allow rejection of contracts “on terms appropriate under the circumstances.” Quoting the trial court, it noted that “[t]his is the year of receivership and receivership changes everything. And that’s why these broad powers are given to the Receiver. Save the business. If save the business means sell it, save the business.” However, the court agreed with Koach that the record was inadequate on whether the antiassignment conditions had been satisfied. While the receiver submitted an assurance letter, the court found it insufficient to establish compliance with the leases’ requirements that the assignee’s net worth equal or exceed the tenant’s and that all terms of the lease be satisfied. Because “nothing in the record indicates that the other terms and requirements of the transfer have been satisfied,” remand was required for an evidentiary hearing and factual findings.