On a Mission: Supreme Court Clarifies Effect of Rejection of Executory Contract

Mission Prod. Hldgs., Inc. v. Tempnology, LLC, No. 17-1657 (2019).

In Mission Prod. Hldgs., Inc. v. Tempnology, LLC, the United States Supreme Court resolved a long-standing Circuit Court split in holding that a debtor’s rejection of an executory contract does not eliminate a contract counterparty’s right to use certain debtor trademarks provided thereunder.  Rather, according to the Court, following the debtor’s rejection of such contract, the counterparty retains the rights it received pursuant to the terms of the underlying agreement and applicable nonbankruptcy law.

Generally, Mission Product Holdings, Inc. (“Mission”) entered into a contract with Tempnology,… Read More

Delaware District Court Agrees That Plans Need Not Reflect Bargained For Priority Provisions in Subordination Agreements

Law Debenture Trust Co. et al. v. Tribune Media Co. (In re Tribune Media Co.), 587 B.R. 606 (D. Del. 2018)

In this Memorandum, the Delaware District Court upheld the decision of the Delaware Bankruptcy Court to confirm the plan of reorganization (the “Plan”) of Tribune Media Company (“Tribune”) and its debtor affiliates (collectively, the “Debtors”), despite the fact that the distributions proposed therein on account of certain claims infringed on prepetition subordination agreements.  In rendering the decision, Judge Sleet agreed with Judge Sontchi’s lower court opinion that the strict enforcement of subordination agreements, including provisions therein… Read More

Lease Profit Sharing Provisions Held Per Se Unenforceable Under 11 U.S.C. § 365(f)(1)

Antone Corp. v. Haggen Holdings, LLC (In re Haggen Holdings, LLC), No. 15-1136 (GMS), 2017 WL 3730527 (D. Del. Aug. 30, 2017)

In this Opinion, Judge Sleet of the Delaware District Court affirmed the holding of Judge Gross of the Delaware Bankruptcy Court that profit sharing provisions contained in leases are per se unenforceable anti-assignment provisions under section 365(f)(1) of the Bankruptcy Code.  The provision at issue on appeal entitled the landlord to fifty percent of any “net profits” of the subject lease should the debtor-tenant assign it.  In connection with its proposed sale in… Read More

Battle Between Prepetition Lender and Consignor Over Inventory Continues – Bankruptcy Court Holds Parties Cannot Contract to Subject Relationship to UCC

TSA Stores, Inc. v. M J Soffe, LLC (In re TSAWD Holdings, Inc.), No. 16-50364 (MFW), 2017 WL 892329 (Bankr. D. Del. Mar. 6, 2017)

Prior to the petition date, consignment vendor M J Soffe, LLC (“Soffe”) sold approximately $5.4 million of goods to the Sports Authority debtors (the “Debtors”) pursuant to a Pay by Scan Agreement.  That agreement expressly provided that the arrangement between Soffe and the Debtors qualified as a “consignment” as such term is defined in section 9-102(a)(20) of the Uniform Commercial Code (“UCC”).  During the bankruptcy proceedings the Debtors sold the Disputed Goods, and litigation arose… Read More

Delaware Bankruptcy Court Refuses to Enforce an Employee Arbitration Agreement with a Class Action Waiver Despite Its Opt-out Provision

Chan v. Fresh & Easy, LLC (In Fresh & Easy, LLC), No. 15-51897 (BLS), 2016 WL 5922292 (Bankr. D. Del. Oct. 11, 2016)

In this motion to compel arbitration Opinion, the Bankruptcy Court for the District of Delaware ruled on two issues of first impression in Delaware:  (i) whether a class action waiver provision in an arbitration agreement violates the National Labor Relations Act (the “NLRA”); and if so, (ii) whether the agreement remains enforceable if it allows an employee to opt-out.  The Court found that the class action waiver was unenforceable because it violated the NLRA.  The… Read More

Executoriness for Purposes of Kiwi Defense to Preference Action Determined on a Contract by Contract Basis; Purchase Orders Issued under Master Agreement Were Separate Divisible Contracts

PIRINATE Consulting Grp., LLC v. C.R. Meyer & Sons Co. (In re NewPage Corp.), No. 13-52429 (KG), 2017 WL 571478 (Bankr. D. Del. Feb. 13, 2017)

The Litigation Trustee (“Trustee”) of the NP Creditor Litigation Trust brought this adversary proceeding against C.R. Meyer & Sons Co. (“CRM”) seeking to avoid and recover over $2.3 million in alleged preferential transfers.  NewPage Corporation (“NewPage”) and its affiliates (collectively, “Debtors”) operated paper mills throughout the United States, and CRM handled maintenance and construction at the Escanaba, Michigan and Duluth, Minnesota mills.  Prior to the Debtors’ bankruptcy filing, the parties entered into… Read More

Delaware Bankruptcy Court Finds Debtor Did Not Properly Terminate Contract, Faces Significant Breach of Contract Damages

In re Outer Harbor Terminal, LLC, No. 16-10283 (LSS), 2017 WL 696676 (Bankr. D. Del. Feb. 21, 2017)

In the context of a claims objection, the Court adhered to unambiguous contract language in determining that the presence of a termination triggering event did not automatically terminate a contract, opening the door for potentially significant damages.  This matter will now proceed to the damages phase, where the non-debtor contract counterparty has alleged in its proof of claim an approximate $13.3 million in, among other things, breach of contract damages.

Outer Harbor Terminal, LLC (the “Debtor”) provided stevedoring services—docking and loading/unloading… Read More

Third Circuit Affirms Debtors’ Right to Reject Expired Collective Bargaining Agreement Under Section 1113

In re Trump Entm’t Resorts, Unite Here Local 54, Appellant, No. 14-4807, 2016 WL 191926 (3d. Cir. Jan. 15, 2016), aff’g In re Trump Entm’t Resorts, Inc., 519 B.R. 76 (Bankr. D. Del. 2014)

On direct appeal, the Third Circuit Court of Appeals has affirmed a Delaware Bankruptcy Court ruling (see previous post here) that debtors’ powers under section 1113 of the Bankruptcy Code to reject a collective bargaining agreement remain in effect even if the agreement has expired.

Under the facts of the underlying case, a collective bargaining agreement (the “CBA”) between the Trump Entertainment Resorts debtors (the “Debtors”) and their… Read More

Delaware Bankruptcy Court Walks “Interpretive Tightrope” Between Automatic Stay And The Norris-La Guardia Act

In re Trump Entm’t Resorts, Inc., No. 14-12103 (KG) (Bankr. D. Del. July 21, 2015)

Aligning itself with Sixth and Second Circuit law, the Delaware Bankruptcy Court ruled that activities described in, and protected by, the Norris-La Guardia Act (“NLA”) do not constitute violations of the automatic stay under Bankruptcy Code section 362.  Although wrestling to reconcile the two statutes, an anti-injunction labor law on the one hand and a broad bankruptcy-based injunction statute on the other, the Bankruptcy Court relied on the uncontroverted congressional intent that the automatic stay cannot enjoin certain NLA protected activities, and instructed the… Read More

District Court Finds a Series of Agreements to be One – Reverses and Remands to Bankruptcy Court

Huron Consulting Servs., LLC v. Physiotherapy Holdings, Inc. (In re Physiotherapy Holdings, Inc.), No. 14-693 (LPS), 2015 WL 4205146 (D. Del. July 13, 2015)

In the spring of 2014, the Delaware Bankruptcy Court was presented with a contested assumption dispute involving six agreements between Physiotherapy Holdings Inc. and its various affiliates (together, the “Debtors”) and Huron Consulting Services, LLC (“Huron”).  While the Debtors sought to assume just one – a Licensing Agreement necessary to ongoing operations – Huron argued that all six agreements were integrated and must be assumed together or not at all.  For reasons discussed in our previous Read More