In an 8-1decision issued on May 20, the Supreme Court held that rejection of an executory trademark license agreement in a bankruptcy of the licensor is merely a breach, and not a termination or rescission, of the agreement. The licensee retains whatever rights it would have had upon a breach of the agreement prior to bankruptcy and can continue to use the trademarks pursuant to its contractual rights under applicable law. Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___, No. 17-1657 (May 20, 2019).
Background
Following W.R. Grace’s filing for bankruptcy in April 2001, a series of cases were filed against Maryland Casualty, which was the company’s primary general liability insurer from 1962 to 1973. Specifically, the twenty-nine plaintiffs in this matter filed a lawsuit relating to their diagnosis of asbestosis, in the District Court of Montana in November 2001. The plaintiffs originally named the State of Montana only. Maryland Casualty was named in March 2002. Additionally, seven of the twenty-nine plaintiffs had previously filed suit against Maryland Casualty, in June 2001.
What Is the "Rule in Gibbs"?
The rule in Gibbs is a long-established common law principle in which the Court of Appeal determined that a debt governed by English law cannot be discharged or compromised by a foreign insolvency proceeding(Anthony Gibbs and Sons v La Société Industrielle et Commerciale des Métaux (1890) 25 QBD 399). The rule in Gibbs remains a fundamental tenet of English insolvency law.
Why Does the Rule in Gibbs Matter?
In a brief but significant opinion, the United States District Court for the District of Delaware reversed a decision by the United States Bankruptcy Court for the District of Delaware and allowed more than $30 million in unsecured, post-petition fees incurred by an indenture trustee ("Indenture Trustee").1 In reversing, the District Court relied upon a uniform body of Court of Appeals opinions issued on the subject.
On October 20, 2017, in In re MPM Silicones, LLC ("Momentive"), Nos. 15-1682, 15-1771, 15-1824, the Second Circuit Court of Appeals, considering the Supreme Court's opinion in Till v. SCS Credit Corp., 541 U.S. 465 (2004), adopted the Sixth Circuit's two-step approach to determining an appropriate cramdown interest rate that, in certain circumstances, results in the application of a market rate of interest. In doing so, the Second Circuit reversed the bankruptcy and district court holdings on the cramdown interest rate issue.
On June 22, Sears Canada Inc. ("Sears Canada") and certain affiliates1 (collectively, the "Sears Canada Group") sought and obtained insolvency protection under the Companies' Creditors Arrangement Act (CCAA) from the Ontario Superior Court of Justice (Commercial List) (the "Court"), which in turn appointed FTI Consulting Canada Inc. (FTI or the "Monitor") as monitor.
For many litigants, the decision whether to prosecute or defend a lawsuit vigorously boils down to a rather basic calculus: What are my chances of success? What is the potential recovery or loss? Is this a "bet the company" litigation? And, how much will I have to pay the lawyers? In many respects, it is not all that different from a poker player eyeing his chip stack and deciding whether the pot odds and implied odds warrant the call of a big bet.
For many litigants, the decision whether to prosecute or defend a lawsuit vigorously boils down to a rather basic calculus: What are my chances of success? What is the potential recovery or loss? Is this a “bet the company” litigation? And, how much will I have to pay the lawyers? In many respects, it is not all that different from a poker player eyeing his chip stack and deciding whether the pot odds and implied odds warrant the call of a big bet.
On January 17, the US Court of Appeals for the Second Circuit rendered a much anticipated decision in Marblegate Asset Management, LLC v. Education Management Corp., No. 15-2124-cv(L), 15-2141-cv(CON), reversing the Southern District of New York's holding that only a non-consensual amendment to an indenture's core payment terms violates Section 316(b) of the Trust Indenture Act (TIA).
On November 17, 2016, the US Court of Appeals for the Third Circuit in Delaware Trust Co. v. Energy Future Intermediate Holding Co. LLC, No. 16-1351 (3d Cir. Nov. 17, 2016) clarified the often-muddy interplay between indenture acceleration provisions and "make-whole" redemption provisions, holding that Energy Future Intermediate Holding Co. LLC and EFIH Finance Inc. (collectively, "EFIH") were unable to avoid paying lenders approximately $800 million in expected interest by voluntarily filing for bankruptcy.