Delaware Bankruptcy Insider:
Be In The Know
About This Blog
The Delaware Bankruptcy Insider is a premier blog designed to bring its readers a comprehensive analysis of the latest Delaware corporate bankruptcy news and rulings. Brought to you by Ashby & Geddes, P.A.
Subscribe to RSS
Blog Contributors
Follow Us On LinkedinTopics
Judges and Courts
- Delaware Court of Chancery
- Delaware District Court
- Delaware Supreme Court
- Judge Brendan L. Shannon
- Judge Christopher S. Sontchi
- Judge Kevin Gross
- Judge Kevin J. Carey
- Judge Laurie Selber Silverstein
- Judge Mary F. Walrath
- Judge Peter J. Walsh
- Third Circuit Court of Appeals
- Uncategorized
- United States Supreme Court
Recent Posts
- Getting Noticed in the Digital Age: Delaware Bankruptcy Court Finds Email Notice Satisfies Due Process but Not Rule 2002
- Third Circuit Reversal Paves the Way For NextEra to Potentially Recover Administrative Expenses Incurred in Connection With Failed Merger
- Delaware District Court Disagrees with Bankruptcy Court’s Ruling and Holds That Committee’s Challenge Rights Survived Entry of the Sale Order and Consummation of Sale
HELPFUL LINKS
For more information
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, LLC (the “Debtor”) whereby, among other things, the Debtor granted Mission a license to use certain Debtor trademarks. Thereafter, the Debtor filed for chapter 11 relief and sought to reject its contract with Mission. The Bankruptcy Court approved the Debtor’s rejection and held that, as a consequence of rejection, Mission’s license to use Debtor trademarks terminated. The Bankruptcy Appellate Panel reversed and found that while a rejection of an executory contract constitutes a breach of such contract, it does not terminate those rights that would survive a contract breach outside of bankruptcy. The First Circuit Court of Appeals rejected the Bankruptcy Appellate Panel’s ruling and reinstated the Bankruptcy Court’s decision. The Supreme Court granted certiorari.
In reaching its decision that the rejection of an executory contract results in nothing more than a breach of that contract (and not a termination thereof), the Supreme Court analyzed the effect of a breach under state law against the language and history of Section 365 of the Bankruptcy Code. To that end, the Supreme Court first looked to non-bankruptcy contract law and “how the law of breach works outside of bankruptcy”. Writing for the majority, Justice Kagan, explained that if a party breaches a contract, the counterparty has the option to continue or cease performance thereunder. If the non-breaching party wishes to continue utilizing its rights under the contract, it may do so. The breaching party, however, does not enjoy such a choice. Therefore, the Court reasoned, if a rejection constitutes a breach, as is the case under Section 365(g) of the Bankruptcy Code, the same result should follow in bankruptcy. That is, in bankruptcy the non-breaching party may elect its remedies following the rejection – and breach – of the contract.
Justice Kagan further explained that Section 365 of the Bankruptcy Code reflects the general bankruptcy principle that the estate cannot possess anything more than the debtor possessed outside of bankruptcy. As a result, if the pre-petition debtor entity was subject to a counterparty’s contract right, then the post-petition debtor must be as well. To find otherwise and allow rejection to serve as a termination or rescission of an agreement, the Court explained, would functionally transform rejection into avoidance – an approach that would circumvent the Bankruptcy Code’s “stringent” limits on avoidance actions.
The Court rejected the Debtor’s principal textual argument that because Section 365 of the Bankruptcy Code identifies specific categories of contracts under which a counterparty may retain contract rights (including Section 365(n) addressing licensing contracts of certain “intellectual property”, which does not include trademarks), trademark licenses are not entitled to the general rights and protections that Section 365 and the rejection-as-breach approach confers. That argument, according to the Court, pays too little heed to the main provisions governing rejection generally, and ascribes too much weight to the specific exceptions for certain executory contracts rejected in bankruptcy. The Court also shot down the Debtor’s policy argument, which contended that if rejection of a trademark licensing agreement did not terminate the counterparty’s right to use the mark, the debtor would have to choose between using its scarce resources on preserving the quality of the mark or risk losing the mark altogether. Either choice, argued the Debtor, would impede a debtor’s ability to reorganize. The Court rejected this argument and found that while a debtor’s rejection power is significant tool, a debtor is not exempt from the burdens of generally applicable law. The Court ruled that nothing in Section 365 of the Bankruptcy Code relieves a debtor of the responsibility to make difficult economic decisions concerning the preservation of the estate’s value. For a debtor to gain certain benefits under the Bankruptcy Code (such as contract rejection), there may be inescapable burdens arising from interests and expectations of non-debtor counterparties. This strive for balance runs throughout the Bankruptcy Code and, as acknowledged by the Supreme Court in the Mission decision, is reflected in Section 365’s “edict” that rejection is breach.
Takeaway: The import of the Mission holding is significant and cannot be overstated. Though framed as a question concerning the rejection of trademark licenses, the Supreme Court’s ruling has far-reaching implications for all executory contracts in bankruptcy. Because non-debtor contract counterparties may choose to continue performance and retain rights following the rejection of the underlying agreement, Debtors will need to assess the relative value (and cost) associated with the prospect of such continued performance before seeking rejection. Failure to carefully consider the ramifications of a prospective rejection may yield unintended (and costly) consequences to the estate.
I like this weblog very much, Its a really nice billet to read and find info .
I appreciate, cause I found exactly what I was looking for. You’ve ended my four day long hunt! God Bless you man. Have a great day. Bye
Valuable information. Lucky me I found your site by accident, and I am shocked why this accident didn’t happened earlier! I bookmarked it.
This is very attention-grabbing, You are an excessively skilled blogger. I have joined your feed and look forward to in the hunt for extra of your excellent post. Also, I have shared your web site in my social networks!
It’s really a nice and useful piece of information. I am glad that you shared this helpful information with us. Please keep us up to date like this. Thanks for sharing.
Rattling informative and great structure of content material, now that’s user friendly (:.
Hey There. I found your weblog the use of msn. That is an extremely neatly written article. I’ll make sure to bookmark it and come back to read more of your useful info. Thanks for the post. I’ll definitely return.
Someone essentially help to make seriously articles I would state. This is the first time I frequented your web page and thus far? I surprised with the research you made to make this particular publish extraordinary. Magnificent job!
Hello, Neat post. There’s an issue along with your website in internet explorer, may test this… IE still is the market leader and a huge component to other folks will miss your great writing due to this problem.
I appreciate, cause I found exactly what I was looking for. You have ended my four day long hunt! God Bless you man. Have a nice day. Bye
Thanks for this post, I am a big fan of this internet site would like to keep updated.
I am not sure the place you’re getting your information, but good topic. I must spend some time finding out much more or figuring out more. Thank you for great info I was searching for this info for my mission.
You are my intake, I possess few blogs and infrequently run out from to post .
Pretty component of content. I just stumbled upon your website and in accession capital to assert that I acquire in fact enjoyed account your weblog posts. Anyway I’ll be subscribing on your feeds or even I fulfillment you access constantly rapidly.
With havin so much content and articles do you ever run into any issues of plagorism or copyright infringement? My site has a lot of exclusive content I’ve either authored myself or outsourced but it seems a lot of it is popping it up all over the web without my permission. Do you know any solutions to help reduce content from being stolen? I’d really appreciate it.
I would like to thnkx for the efforts you’ve put in writing this web site. I am hoping the same high-grade website post from you in the upcoming also. In fact your creative writing skills has inspired me to get my own blog now. Really the blogging is spreading its wings quickly. Your write up is a good example of it.
Woah! I’m really loving the template/theme of this blog. It’s simple, yet effective. A lot of times it’s tough to get that “perfect balance” between user friendliness and visual appearance. I must say that you’ve done a amazing job with this. Also, the blog loads extremely fast for me on Internet explorer. Excellent Blog!
Thanks a lot for providing individuals with an extraordinarily marvellous chance to read critical reviews from this blog. It’s always so amazing plus full of a lot of fun for me personally and my office co-workers to search your site at minimum three times weekly to see the new guidance you will have. And definitely, I’m usually contented for the sensational ideas you serve. Some 3 ideas in this post are surely the simplest I have had.
Terrific work! This is the kind of information that are meant to be shared across the internet. Disgrace on Google for not positioning this publish upper! Come on over and visit my site . Thank you =)
Just want to say your article is as astounding. The clearness in your post is just nice and i could assume you’re an expert on this subject. Fine with your permission allow me to grab your feed to keep updated with forthcoming post. Thanks a million and please keep up the enjoyable work.
Fantastic blog you have here but I was wondering if you knew of any community forums that cover the same topics talked about in this article? I’d really like to be a part of online community where I can get feed-back from other experienced individuals that share the same interest. If you have any suggestions, please let me know. Thanks!
you have a great blog here! would you like to make some invite posts on my blog?
I do believe all the concepts you’ve offered to your post. They’re really convincing and can definitely work. Still, the posts are too brief for starters. May you please prolong them a little from subsequent time? Thank you for the post.
I don’t even know how I ended up here, but I thought this post was great. I do not know who you are but definitely you’re going to a famous blogger if you aren’t already 😉 Cheers!
You got a very good website, Sword lily I discovered it through yahoo.
I will immediately take hold of your rss as I can not to find your e-mail subscription hyperlink or e-newsletter service. Do you’ve any? Please let me recognize in order that I may subscribe. Thanks.
Wonderful work! This is the type of information that should be shared around the internet. Shame on Google for not positioning this post higher! Come on over and visit my site . Thanks =)
Great article and straight to the point. I don’t know if this is actually the best place to ask but do you guys have any thoughts on where to hire some professional writers? Thanks 🙂
Today, I went to the beachfront with my kids. I found a sea shell and gave it to my 4 year old daughter and said “You can hear the ocean if you put this to your ear.” She placed the shell to her ear and screamed. There was a hermit crab inside and it pinched her ear. She never wants to go back! LoL I know this is totally off topic but I had to tell someone!
Heya i am for the first time here. I came across this board and I find It really useful & it helped me out much. I hope to give something back and aid others like you aided me.
I am glad to be one of the visitors on this great site (:, thankyou for posting.
Hi there! This is kind of off topic but I need some help from an established blog. Is it tough to set up your own blog? I’m not very techincal but I can figure things out pretty fast. I’m thinking about setting up my own but I’m not sure where to start. Do you have any ideas or suggestions? With thanks
I’d should verify with you here. Which is not something I often do! I get pleasure from studying a publish that can make people think. Additionally, thanks for allowing me to comment!
The other day, while I was at work, my cousin stole my iPad and tested to see if it can survive a 30 foot drop, just so she can be a youtube sensation. My apple ipad is now destroyed and she has 83 views. I know this is completely off topic but I had to share it with someone!
Utterly written written content, Really enjoyed examining.
You have observed very interesting points! ps decent internet site.
I love your blog.. very nice colors & theme. Did you create this website yourself? Plz reply back as I’m looking to create my own blog and would like to know wheere u got this from. thanks
Hi, Neat post. There’s a problem with your site in internet explorer, would check this… IE still is the market leader and a big portion of people will miss your excellent writing because of this problem.
Hiya very cool blog!! Man .. Beautiful .. Amazing .. I’ll bookmark your blog and take the feeds also…I’m happy to search out numerous useful information here within the publish, we’d like develop more techniques in this regard, thanks for sharing. . . . . .