Category Archives: Executory Contracts

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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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 →

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 →

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 →

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 →