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Note: Pursuant to the terms of its lease, Liberate Technologies (Tenant/Applicant) provided a US$8,800,00 standby LC payable to Circle Star Center Associates (Landlord/Beneficiary) which permitted a drawing in the event of default. The lease required Tenant/Applicant to "replenish" the LC in the event of a drawing. After Tenant/Applicant stopped paying rent and moved out, Landlord/ Beneficiary drew on the LC for US$1,900,000 which was honored. Tenant also filed for bankruptcy relief but the case was dismissed as having been brought in bad faith and the attempted rejection of the lease was unwound.

Landlord/Beneficiary then sued Tenant/Applicant for breach of the lease and sought replenishment of the amount drawn on the LC. Before the court was a motion by Beneficiary for an award of attorney's fees caused by the bankruptcy filing as permitted under the lease. Tenant/Applicant's demurrer was sustained by the trial court. On appeal, the Court of Appeal of California, Siggins, J., reversed in part and affirmed in part.

[JEB/mm]

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