Supreme Court: Rejection of Executory Contract Constitutes Breach, Does Not Terminate Non-Debtor Counterparty’s Rights
The U.S. Supreme Court has held in Mission Product Holdings, Inc. v. Tempnology, LLC that a trademark licensee may retain certain rights under a trademark licensing agreement even if the licensor enters bankruptcy and rejects the licensing agreement at issue, reports Paul Weiss.
“Relying on the language of section 365(g) of the Bankruptcy Code, the Supreme Court emphasized that a debtor’s rejection of an executory contract has the ‘same effect as a breach of that contract outside bankruptcy’ and that rejection ‘cannot rescind rights that the contract previously granted,’” according to the firm.
“The Supreme Court’s decision has far-ranging implications, as the opinion’s reasoning can be expanded to apply to the vast majority of contracts that may be rejected in bankruptcy,” the article concludes.
