On June 3, 2019, the U.S. Supreme Court clarified the standard for holding a creditor in contempt for attempts to collect a debt from someone who previously received a bankruptcy discharge. In Taggart v. Lorenzen, Executor of the Estate of Brown, et al., 587 U.S. ____ (2019), the Supreme Court reversed the Court of Appeals for the Ninth Circuit and held that the proper standard to apply to bankruptcy discharge violations was an objective standard.

On May 20, 2019, the Supreme Court issued its opinion in Mission Product Holdings, Inc. v. Tempnology, LLC (“Tempnology”) deciding that rejection of an executory contract by a debtor is only a prepetition breach and not a termination of the contract.

Merit Management

In a victory for Chapter 13 debtors, the United States Court of Appeals for the Fourth Circuit recently issued a major decision that changes the way bankruptcy courts in North Carolina will deal with certain home mortgages in Chapter 13.

In Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___ (2019), the Supreme Court held that a debtor’s rejection of a trademark license does not eliminate the licensee’s right to use the trademark through the completion of the contract, settling a split in the Circuits. The Supreme Court also ruled that the case was not moot, despite the bankruptcy estate’s distribution of all of its assets, which may have important implications for the developing jurisprudence on mootness in bankruptcy cases.

A recent decision by a federal appeals court appears to open the doors of United States Bankruptcy Courts nationwide… or does it? The Ninth Circuit’s decision from Garvin v. Cook Investments provides a helpful roadmap for understanding the challenges and opportunities for marijuana-related businesses considering their access to bankruptcy courts.

Marijuana Businesses Generally Violate Federal Law

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.

Decision is a Win for Trademark Licensees

Creditors and credit furnishers often find properly reporting a payment status to Credit Reporting Agencies (CRAs) during, and after, bankruptcy a challenge. The recent Report of the American Bankruptcy Institute on Consumer Bankruptcy recognizes those challenges, and looks to convene a forum to provide better guidance and clarity as to proper credit reporting once a borrower goes into bankruptcy.

Challenges

In Mission Product Holdings Inc. v. Tempnology LLC,1 the Supreme Court, in an 8-to-1 decision, held that bankrupt trademark owners cannot use bankruptcy law to unilaterally revoke a trademark license. The Court summarized the question at issue and held that: