On February 25, 2020, in Rodriguez v. FDIC,1 the U.S. Supreme Court unanimously rejected the application of the so-called “Bob Richards” rule, a judicial doctrine that was developed in the context of a bankruptcy case almost 60 years ago concerning ownership of tax refunds secured by the parent corporate entity on behalf of a bankrupt subsidiary included in a consolidated group tax return.
The United States Supreme Court in an 8-1 decision issued on May 20, 2019, settled a split among the Circuits in holding a debtor’s rejection of a trademark license agreement under Bankruptcy Code Section 365 did not rescind the rights of the trademark licensee under the agreement. In Mission Product Holdings, Inc. v. Tempnology, LLC, the Court adopted what is known as the “rejection-as-breach” approach, which holds that post-contract rejection a trademark licensee still retains its rights under applicable state law.
The Supreme Court has granted certiorari to resolve whether rejection of a trademark license in the licensor’s bankruptcy terminates the licensee’s rights to use the mark. Though Congress determined 30 years ago that holders of copyright and patent licenses would be protected from rejection, it left trademark licenses outside that safety. Circuit courts applying general rules of bankruptcy law have split on whether those rules protect the trademark licensee or leave the mark at risk, and the grant of certiorari invites a decision with important implications.
In a widely anticipated ruling, the Supreme Court in Czyzewski v. Jevic Holding Corp. ruled that bankruptcy courts “may not approve structured dismissals that provide for distributions that do not follow ordinary priority rules without the consent of affected creditors.” In doing so, the Court rejected the Third Circuit’s ruling that the circumstances were an unusual “rare case,” justifying deviation from the ordinary priority rules.