Mission Products Holdings, INC., v. Tempnology, LLC, NKA Old Cold LLC

Summarized by:

  • Court: United States Supreme Court
  • Area(s) of Law: Bankruptcy Law
  • Date Filed: May 20, 2019
  • Case #: 17-1657
  • Judge(s)/Court Below: KAGAN, J., delivered the opinion of the Court, in which ROBERTS, C. J., and THOMAS, GINSBURG, BREYER, ALITO, SOTOMAYOR, and KAVANAUGH, JJ., joined. SOTOMAYOR, J., filed a concurring opinion. GORSUCH, J., filed a dissenting opinion.
  • Full Text Opinion

A debtor's rejection of an executory contract in bankruptcy has the same effect as a breach outside bankruptcy under 11 U.S.C. § 365.

Petitioner entered into a licensing agreement with Respondent to exclusively distribute some of Respondent’s products. The contract also included a non-exclusive license to use Respondent’s trademarks. Prior to the expiration of the agreement, Respondent filed for Chapter 11 bankruptcy and asked the bankruptcy court to allow it to reject the licensing agreement under 11 U.S.C. § 365(a). The court approved Respondent’s proposed rejection and further held that the rejection extinguished any trademark rights held by Petitioner. The Bankruptcy Appellate Panel relied on the Court of Appeals for the Seventh Circuit to find that rejection of a contract constitutes a breach and does not terminate the other party’s rights under Section 365(g). The Court of Appeals for the First Circuit reversed and held that a rejection has the effect of rescission in contract law. The United States Supreme Court held that approach taken by the Seventh Circuit was supported by the text of Section 365(g), which states that rejection constitutes a breach of “any executory contract.” The Court held that this broad language extends to licensing and trademark agreements. The holding is further supported by various bankruptcy principles. This decision resolves the split between the First and Seventh Circuits. REVERSED and REMANDED.

Advanced Search

Back to Top