Category Archives: Executory Contracts

Court Denies Pinnacle Airlines’ Motion to Reject Collective Bargaining Agreement: Outlines Potential Resolution

Following the pattern recently established by other S.D.N.Y. bankruptcy judges in Hostess and American Airlines, Judge Robert Gerber denied Pinnacle Airlines’ motion to reject its collective bargaining agreement with the Air Line Pilots Association on narrow factual grounds. Although Judge Gerber found that Pinnacle had demonstrated that the “great bulk” of its final offer to the pilots was necessary to Pinnacle’s reorganization, the court held that:

• Pinnacle had not demonstrated that it was necessary to reduce its labor costs below the labor costs of its competitors,
• Given the substantial concessions requested from the pilots, the profit sharing proposals offered to the pilots were not fair and equitable, and
• Pinnacle’s failure to make any changes to the total labor cost savings requested from the pilots constituted good cause on the part of the pilots to reject Pinnacle’s proposal.
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Eighth Circuit Rules That a “Perpetual” Trademark Licensing Agreement Is an “Executory” Contract Subject to Rejection Under Bankruptcy Code Section 365

The United States Court of Appeals for the Eighth Circuit recently ruled that a perpetual, royalty-free, and exclusive trademark licensing agreement qualified as an executory contract subject to assumption or rejection under section 365 of the Bankruptcy Code. The decision creates new uncertainty for licensees under similar agreements, who may suddenly find that intellectual property rights they had taken for granted are at risk of termination in the event of a bankruptcy filing by the licensor. Lewis Bros. Bakeries Inc. v. Interstate Brands Corp. (In re Interstate Bakeries Corp.), 690 F.3d 1069 (8th Cir. 2012). Continue reading

Eighth Circuit Rules That a “Perpetual” Trademark Licensing Agreement Is an “Executory” Contract Subject to Rejection Under Bankruptcy Code Section 365

The United States Court of Appeals for the Eighth Circuit recently ruled that a perpetual, royalty-free, and exclusive trademark licensing agreement qualified as an executory contract subject to assumption or rejection under section 365 of the Bankruptcy Code. The Eighth Circuit’s ruling is seemingly at odds with a 2010 decision by the Third Circuit which found an extremely similar licensing agreement to be non-executory. These decisions may signal a circuit split on the issue, and in any event, create uncertainty for licensees who have acquired perpetual licenses in connection with an asset sale, and have otherwise been operating under the licensing agreement post-closing without incident. Continue reading

Twenty-Six Years Later, a Lubrizol Split by the Seventh Circuit

Chief Judge Frank Easterbrook of the Seventh Circuit recently created a split of authority regarding the rejection intellectual property licenses in bankruptcy by upholding a decision protecting a trademark licensee’s ability to use a debtor licensor’s trademark after the licensing … Continue reading

With Great Power Comes Great Responsibility: Delaware Bankruptcy Court Holds Debtor-Lessee Cannot Reject Lease Until It Surrenders Possession Of The Premises

On February 24, 2012, Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware held that the debtor-lessee’s rejection of a lease cannot become effective so long as a non-debtor sublessee maintained possession of the leased premises. The court held that under the Bankruptcy Code and the rejection order governing the case, the Debtors were required to deliver actual possession of the property to the landlord, merely surrendering their own interests in the property was not sufficient. See In re Amicus Wind Down Corp., No. 11-13167, 2012 Bankr. LEXIS 662 (Bankr. D. Del Feb. 24, 2012). Continue reading

Bankruptcy Bullets – Green Tree Servicing, LLC v. DBSI Landmark Towers, LLC., 2011 U.S. App. LEXIS 18078 (8th Cir. Aug. 30, 2011)

On August 30, 2011, the U.S. Court of Appeals for the Eighth Circuit affirmed a decision of the U.S. District Court for the District of Minnesota: granting a sublessee’s motion to treat its lease as terminated pursuant to section 365(h) of the Bankruptcy Code after the debtor-sublessor rejected the sublease; and denying the lessor’s claim for attornment (a real estate term meaning a tenant must acknowledge the assignment to the new landlord upon alienation of real property). The Court held that though the attornment provision between the lessor and the sublessee – both non-debtors – could survive termination, none of the triggering events that would require attornment had occurred. Continue reading

Bankruptcy Bullets – In re XMH Corp., 2011 U.S.App. LEXIS 15372 (7th Cir. Jul. 26, 2011)

On July 26, 2011 the U.S. Court of Appeals for the Seventh Circuit affirmed a ruling by the U.S. District Court for the Northern District of Illinois allowing an affiliate of the debtor – Simply Blue – to assign an executory contract over the objection of its counterparty – Western Glove Works – because the contract was not a trademark license. Continue reading