Genesis Healthcare filed for Chapter 11 in July 2025 as the operator of roughly 175 senior living facilities across several states. After two rounds of marketing and bidding and a purchase price north of one billion dollars, an entity called 101 West State Street Holdings emerged as the buyer of substantially all of it. The Memorandum Opinion and Order entered on June 30, 2026, is not about the enterprise. It is about one 120-bed nursing home in a small town outside Washington, D.C., and a minority partner who wanted to pull that single facility out of the deal.

The minority partner is Madison Manor, an affiliate of the University of Maryland Medical System. Madison owns a quarter of a non-debtor partnership that owns the nursing home. The other three-quarters belongs to two Genesis debtors, whose partnership interests the buyer agreed to acquire as part of the whole-company sale. Madison's partnership agreement carries a right of first refusal, and Madison read that clause to mean the debtors had to peel off an allocated slice of the billion-dollar price, hand Madison the number, and let Madison match it to take full ownership of the facility.

The court disagreed. Judge Stacey G. Jernigan overruled every Madison objection. She held the agreements could be assumed and assigned because neither Maryland's personal-services doctrine nor its partnership statutes excused Madison; that the debtors substantially complied with the right of first refusal while Madison never exercised it; and, in the alternative, that the right of first refusal was unenforceable under Section 365(f) in any event. The result is a clear illustration of how a right of first refusal fares when it meets a large, multi-asset Section 363 sale, and a reminder that a preemptive right a holder never affirmatively exercises is a right it can lose. The order is a trial-court ruling, subject to appeal, and the overall sale closing remains targeted for later in the summer, pending numerous regulatory approvals.

Madison's Four Arguments and the Court's Rulings

Madison advanced four arguments for why the sale could not reach its partnership interests without honoring the right of first refusal on its terms. The court rejected each.

Bowie Center Limited Partnership owns and operates the Larkin Chase Skilled Nursing Facility, a 120-bed licensed nursing home in Bowie, Maryland, in Prince George's County. Bowie Center is not a debtor. Its three partners are Madison and two Genesis debtors, Maryland Harborside and Harborside Healthcare Limited Partnership, referred to together as the Bowie Debtors. Madison holds a 0.25% general partner interest and a 24.75% limited partner interest, 25% in all. The Bowie Debtors hold the remaining 75%.

Two contracts govern the relationship. The first is a 2015 Second Amended and Restated Agreement of Limited Partnership among Madison and the Bowie Debtors. The second is a Management Agreement dated April 7, 1993, under which Bowie Debtor #2 serves as manager of the facility. Madison is a party to the partnership agreement but not to the management agreement, which by its own terms has no third-party beneficiaries. Both contracts are governed by Maryland law.

The facility itself has a history worth noting. It closed for roughly three years starting in 2022 after an explosion in the kitchen forced extensive renovations, and it reopened in the spring of 2025, only months before the bankruptcy. The management agreement is now 33 years old. When it was signed in 1993, the facility went by a different name and a different corporate general partner signed for the manager. Personnel have come and gone across three decades. Those facts matter, as the analysis below shows, because Madison's central theory depended on treating these agreements as intensely personal arrangements that no substitute performer could step into.

The sale did not happen quickly or in a single pass. It ran through two full rounds of marketing, bidding, and auctions, each authorized by the court, and Madison's conduct across both rounds became central to the ruling.

The first round began with a sale procedures order in August 2025 and a stalking horse agreement. Madison received notice and filed its first objection in October, asking that any sale preserve its right of first refusal and complaining that the stalking horse's price was not allocated to the nursing home. The first auction convened in November. It entertained bids for the entire company, called WholeCo Bids, and bids for pieces of it, called Piecemeal Bids. Four piecemeal bids and two whole-company bids were qualified. Madison did not attend. It did not submit a bid of either kind, and it did not ask, as the bidding unfolded, for an allocation to the partnership interests it cared about.

The first auction produced a winner, but the court declined to approve that sale after the Official Committee of Unsecured Creditors raised fairness objections about the process and the possible exclusion of qualified bidders. A second round followed. Revised procedures named a replacement stalking horse in December, the court approved that agreement in January 2026, and a second auction convened on January 13. This one was presided over by the investment bankers for both the committee and the debtors, with an agreed monitor and mediator in the room and a representative of the U.S. Trustee in attendance. Three whole-company bids and six piecemeal bids came in. Madison, again, did not attend, did not bid, and did not ask in real time to match any offer under its right of first refusal.

The buyer won the second auction. Madison filed a third objection days later, and the court entered the sale order on January 26, 2026. The pattern across both auctions is the fact that anchors much of what follows. Madison filed three separate objections purporting to preserve its rights, and it submitted zero bids.

Procedural Chronology

Both agreements are executory contracts under the Countryman definition the Fifth Circuit applies: performance remains due on both sides, and a failure to perform by either party would be a material breach. No one seriously disputed that. The Fifth Circuit has assumed as much for a partnership agreement before, in In re O'Connor, and the parties here did not fight over the label.

The framework flows from there. Section 365 lets a debtor in possession assume an executory contract and, under subsection (f), assign it to a third party. Subsection (c) supplies the important limit. A debtor may not assume or assign an executory contract if applicable law would excuse the non-debtor counterparty from accepting performance from someone other than the debtor, and that counterparty does not consent. The classic example of such applicable law is a personal services contract, but the category is not limited to personal services.

So the first question is whether anything in Maryland law let Madison refuse to accept performance from the buyer without Madison's consent. If the answer were yes, the analysis would end there and Madison would win. The court worked through two candidates, personal services and the Maryland partnership statutes, and rejected both.

Madison's first theory was that a partnership agreement rests on the personal trust and confidence of the partners, which makes it the kind of personal arrangement Madison cannot be forced to continue with a stranger. Madison cited a handful of cases for the proposition. None of them interpreted Maryland law, and the court could find no Maryland decision treating a partnership agreement as a personal services contract. Madison offered nothing at all on the management agreement.

Maryland sets a high bar. Under the state's Macke decision, a contract is personal not merely because it is unique but because it calls for rare genius and extraordinary skill, the kind that cannot be transferred. The court quoted the illustration Maryland borrowed from California: not every painter works like Reynolds or Claude Lorraine, and not every writer produces drama like Shakespeare or fiction like Dickens. A federal court in Maryland has applied the same standard, requiring that choice of the specific performer have been part of the bargain.

Measured against that standard, the agreements fell short. There was no evidence, as the court put it, that the Bowie Debtors are the Shakespeare or Rembrandt of the nursing home world. Neither agreement named a single individual who had to perform any particular service. The buyer proved it was fully capable of performing the duties both agreements contemplate, and it intends to keep most of the debtors' existing employees. Running a licensed nursing home well is demanding and important work. It is not the sort of irreplaceable, personal performance that lets a counterparty veto a substitute.

Madison's second theory leaned on In re O'Connor, where the Fifth Circuit read a Louisiana statute to bar assumption of a partnership agreement because the non-debtor partner had not consented. Madison argued Maryland law works the same way. It does not.

The Louisiana statute in O'Connor required consent to make someone a member of the partnership, with no alternative route. Maryland's statutes are built differently. For limited partners, Section 10-703(a) of the Code of Maryland Corporations and Associations lets an assignee become a limited partner if the assignor grants that right in accordance with authority described in the partnership agreement, or if all other partners consent. The word that matters is or. For general partners, Section 10-401 admits additional general partners except as otherwise provided in the partnership agreement. Both provisions let the parties contract around consent.

The partnership agreement here did exactly that. Section 5.1 generally prohibits transfers, but it carries six exceptions, and the relevant one, Section 5.1(f), expressly allows the Bowie Debtors to transfer their entire general and limited partner interests to an unrelated third party, subject to the right of first refusal and the other restrictions in Section 5.2. Read as a whole, the agreement contemplates a nonconsensual transfer to an outside buyer so long as the seller honors the right of first refusal. Maryland law let the parties write that deal, and they wrote it. Applicable law did not excuse Madison from accepting the buyer. With that threshold cleared, the dispute turned back to the right of first refusal itself.

With applicable law out of the way, the case turned on the right of first refusal in Section 5.2, and on two related questions. What did the clause require, and did anyone satisfy it?

Maryland reads contracts objectively, asking what a reasonable person in the parties' position would have understood the language to mean, and construing the agreement as a whole so that every clause has effect. The right of first refusal has three operative parts. Under the Offering Notice provision, if the Bowie Debtors receive a bona fide written third-party offer for their interests, they must first tender Madison an offer to buy those interests at the same price and on the same terms. Under the Acceptance provision, Madison then has 30 days from receipt to elect in writing to accept or decline, and silence past 30 days counts as a decline. Under the third provision, once Madison declines or is deemed to decline, the debtors are free to sell to the third party on those same terms.

The court found the debtors substantially complied. Madison received written notice of each proposed sale transaction through the court-approved processes: the first stalking horse agreement and its terms, the replacement stalking horse agreement and its terms, and ultimately the winning bid, all noticed out to thousands of parties including Madison. The Offering Notice provision specifies no magic form. It requires written notice of the third-party offer and a chance to match, and Madison got both, twice.

What Madison never did was accept. Filing three objections to preserve its rights is not the same as electing, in writing and within 30 days, to match a specific offer. Maryland law is settled that exercising an option must be unequivocal and in exact accord with the option's terms. Objections that reserve a position are equivocal by design. They preserve the ability to decide later. They do not decide.

Madison's fallback was testimony that, after the second auction, it made an offer to the debtors for just the partnership interests. That did not help. No written offer was put into evidence. Based on counsel's own objections during the testimony, the offer appears to have surfaced in settlement discussions. It was not at the same price or on the same terms as the buyer's whole-company bid, and it came well after the 30-day window had run. An offer for only the carved-out interests, on terms different from the winning bid and delivered after the deadline, is not an exercise of the right of first refusal. It is a different proposal the debtors were free to decline. Separately, in its post-sale briefing Madison put forward its own unilateral calculation that $4.5 million of the buyer's price should be allocated to the interests, an allocation no bidder or sale process had produced. Under Section 5.2.4, Madison's failure to match within the window left the debtors free to sell to the buyer. The court also flagged Section 8.13's instruction that consents and approvals not be unreasonably delayed, adding that the delay here was concerning.

The court could have stopped after finding compliance. It went further and held that, even if the right of first refusal had been perfectly preserved, enforcing it the way Madison wanted would run into Section 365(f).

Section 365(f)(1) makes unenforceable any contract provision, or applicable law, that prohibits, restricts, or conditions the assignment of an executory contract. Those three verbs are written in the disjunctive, and a right of first refusal, while not a flat prohibition, plainly conditions an assignment by giving the holder a chance to take the interest from the proposed assignee. Two bankruptcy decisions, Mr. Grocer and Adelphia, have treated rights of first refusal as unenforceable restraints on assignment for exactly that reason. Both recognized the practical problem: a preemptive right can chill bidding, because a purchaser who does the work of formulating and submitting a bid may simply watch the holder match it without ever bettering it.

Neither decision applied a per se rule. Both asked, on the facts, whether the restriction hindered assignment enough to be unenforceable, and Adelphia flagged multi-asset bankruptcy sales as the setting where enforcing a right of first refusal on one piece can be most destructive to value. This case is that setting. Roughly 175 nursing homes were on the block. Most bidders wanted the whole enterprise and priced it that way, without allocating value to each facility, for tax and business reasons. The whole did not equal the sum of the parts.

The court found the process fair on its own terms. A complex capital structure, thousands of creditors, and an active creditors' committee produced a heavily safeguarded auction, including a monitor and mediator installed at the request of parties in interest. Piecemeal bids were expressly allowed at both auctions, so Madison had a clear path to participate and did not take it. Madison also keeps its annual purchase option, which the debtors and buyer agreed survives the sale. Weighing those facts, the court held that forcing the debtors to break out and offer the partnership interests to Madison would improperly restrict an assignment that had sound business justification and benefited the estate. The right of first refusal, applied as Madison urged, was an unenforceable restraint on assignment.

One piece of Madison's position did survive, and the court treated it as significant. Separate from the right of first refusal, the partnership agreement gives Madison an annual purchase option at Section 6.7, exercisable after a milestone date that has already passed, to buy the partnership interests under defined procedures. The debtors and the buyer agreed that this option remains intact and enforceable against the buyer after closing.

That agreement mattered to the fairness calculus. Madison did not lose its long-term ability to acquire the facility. It retained a standing, annual right to purchase the interests from the new owner on the option's terms. What it lost was the argument that the sale could not proceed without first routing an allocated price through the right of first refusal. The court noted, almost in passing, that the survival of the purchase option left it wondering why the parties kept fighting over the right of first refusal at all, and suspected an economic reason. The point frames the practical stakes for anyone holding a similar right.

Strip away the Maryland partnership statutes and the nursing-home specifics, and the opinion offers durable lessons for three sets of players.

If you hold a right of first refusal and a bankruptcy sale threatens the asset you care about, the message is direct: show up and act. Madison had the same information every bidder had. It knew the terms, it knew the timeline, and it knew both auctions would entertain piecemeal bids. It filed objections instead of bidding, and it treated those objections as if they preserved a right it could exercise later, on its own schedule and at its own price. An option is not a placeholder. Exercising it means matching the actual offer, unequivocally, inside the window the contract sets. If your right depends on an allocated price the seller has not provided, the place to demand that allocation is at the auction, in real time, on the record, not in post-sale briefing months later.

If you are debtor's counsel running a whole-company sale, the decision supports a familiar instinct: notice broadly, keep the process clean, and let the record show that every party with a preemptive right had a fair chance to participate. Substantial compliance with a contractual notice provision, delivered through a court-approved sale process and served on thousands of parties, can satisfy a right of first refusal even without a bespoke offer letter. A well-run auction with independent safeguards, a monitor or mediator, and an active committee is not just good practice. It becomes part of the factual record that makes a right of first refusal unenforceable under Section 365(f) when someone tries to use it to carve out a single asset.

If you are the buyer, the takeaway is that adequate assurance and continuity still carry weight. The court leaned on evidence that the buyer could perform both agreements and intended to retain the workforce. That evidence did double duty, defeating the personal services theory and supporting the finding that assignment was appropriate. Building that record early is worth the effort.

The larger point is about the tension the case sits on. Preemptive rights are contract entitlements that parties bargain for and expect to enforce. Section 363 sales exist to maximize value for the estate, and in a large, multi-asset case that value often lives in selling the enterprise whole rather than slicing it into pieces a series of preemptive-right holders can pick off. When those two forces meet, this opinion shows a bankruptcy court willing to protect the sale, provided the process was fair and the objecting party had a real opportunity it chose not to use.