Author

Debra A. Dandeneau

Browsing

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.” 

In many decisions involving US chapter 15 cases, the bankruptcy court’s principal focus will be on what is the debtor’s center of main interests (COMI).  An ancillary issue is whether it is appropriate to create COMI to obtain the benefit of a more favorable jurisdiction to restructure a company’s debt (otherwise known as “COMI shifting”). That was one of the issues Bankruptcy Judge Martin Glenn for the US Bankruptcy Court for the Southern District of New York addressed when he granted recognition of the foreign debtors’ proceedings in In re Ocean Rig UDW, Inc.Â