Debra A. Dandeneau


The current COVID-19 market environment presents unique circumstances to companies and investors who may, as a result of the tumultuous markets and the financial and personal effects of COVID-19, have opportunities to acquire distressed businesses at potentially depressed prices. Particularly in this market environment, though, one or more of the following scenarios may apply: The target needs to consummate a sale quickly because the target’s cash resources are dwindling. The buyer wonders whether the distressed…

The US Supreme Court has reversed the First Circuit’s ruling in Mission Products (Mission Prod. Holdings v. Tempnology, LLC (In re Tempnology, LLC), 879 F.3d 389 (1st Cir. 2018)), thereby allowing the trademark licensee in that case to continue using the licensed trademark despite the debtor trademark licensor’s rejection of the underlying trademark agreement in its bankruptcy case.

The decision, written by Justice Kagan, provides a solid analysis of section 365 of the Bankruptcy Code.  A philosophical debate exists within the US bankruptcy community about what the purpose of a debtor’s rejection of a contract is — is it simply to free a debtor from the burdens associated with the contract, or does it also have the effect of eviscerating the non-debtor contract counterparty’s rights?  Except with respect to certain types of contracts marked for particular treatment (such as intellectual property licenses under section 365(n) of the Bankruptcy Code), the Bankruptcy Code is pretty laconic about the effect of rejection:  “the rejection of an executory contract constitutes a breach of such contract,” with such breach being deemed to have occurred “immediately before the date of the filing of the [bankruptcy] petition.”