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Licensee May Continue Using a Trademark after Rejection, Supreme Court Rules

The Supreme Court yesterday handed down its decision in Mission Product Holdings Inc. v. Tempnology LLC, 17-1657 (Sup. Ct.), reversing the First Circuit and held that rejection of an executory trademark license does not bar the licensee from continuing to use the mark, according to a special analysis from ABI Editor-at-Large Bill Rochelle. As Justice Elena Kagan said, “A rejection breaches a contract but does not rescind it.” The opinion was almost unanimous, with Justice Neil M. Gorsuch dissenting; he believes that the petition for certiorari should have been dismissed as improvidently granted. In his view, the Court could not grant effective relief. Justice Sonia Sotomayor wrote a concurring opinion to say that nondebtor parties to rejected trademark licenses may have more rights following rejection than parties to other types of intellectual property licenses whose rights are limited by Section 363(n). The Court granted certiorari in October to resolve a split of circuits. Click here to read the full analysis.

A special ABI Podcast is being recorded this week to examine the Supreme Court’s decision in Tempnology. Bill Rochelle will be joined by Bankruptcy Judge Kevin Carey (D-Del.; Wilmington), Paul Hage of Jaffe Raitt Heuer & Weiss (Southfield, Mich.) and Lindsay Milne of Bernstein Shur (Portland, Maine). The podcast will be released on ABI social media and included in tomorrow’s Headlines. 

In addition to ruling on the effect of rejecting a trademark license, the Supreme Court yesterday agreed to review one bankruptcy case and denied a petition for certiorari in another. In Ritzen Group Inc. v. Jackson Masonry LLC, the Court granted certiorari to shed more light on what is or is not a final order conveying a right of appeal in a bankruptcy case. The justices declined to review Davis v. Tyson Prepared Foods Inc., a case that could have said whether passively holding property of the estate violates the automatic stay under Section 362(a). Click here for Rochelle's full analysis. 

Judge Reins in Jay Alix’s Bankruptcy Brawl with McKinsey

A bankruptcy judge in Virginia said AlixPartners LLP founder Jay Alix doesn’t have standing to pursue allegations that McKinsey & Co. hid investments that gave it a stake in the outcome of a major coal-mining chapter 11 bankruptcy filing, the Wall Street Journal reported. In an opinion filed Friday with the U.S. Bankruptcy Court in Richmond, Va., Judge Kevin Huennekens dealt a setback to Mr. Alix, who has for years tried to sanction McKinsey for what he says were illegal disclosure practices in the 2015 bankruptcy of Alpha Natural Resources. In his ruling, the judge said that while Alix’s allegations are troubling, his financial interests as an ANR creditor through his Mar-Bow Value Partners LLC investment fund aren’t sufficient to give him the standing he needs to continue seeking to punish McKinsey. Alix “is only one of the thousands of creditors that filed claims in the bankruptcy case” and the “only creditor seeking to effectively upset the deal struck among all constituencies,” the judge said. Judge Huennekens also declined to appoint an examiner to investigate Alix’s allegations independently. The U.S. Trustee Program and the Offices of the U.S. Attorneys remain free to look into Alix’s allegations, the judge said.

FirstEnergy Solutions Clears Major Bankruptcy Hurdle

A bankruptcy court yesterday approved milestone filings from FirstEnergy Solutions Inc., moving the Akron company significantly closer to receiving approval for its chapter 11 reorganization, the Akron (Ohio) Beacon Journal reported. Yesterday’s rulings mean the FirstEnergy Solutions reorganization plan can be put to a vote by the company’s creditors this summer. Then, if creditors approve, the plan goes back to bankruptcy court in August for the judge’s formal ruling, which could lead to the company legally separating from FirstEnergy Corp. and striking out as an independent electric generation business — likely with a new name. Any approved plan will also need regulatory approvals. Bankruptcy Court Judge Alan Koschik approved FirstEnergy Solutions amended disclosure statement. This was the fifth disclosure document filed with the court since FirstEnergy Solutions filed for Chapter 11 bankruptcy protection on March 31, 2018. Attorney Brad Kahn, representing FirstEnergy Solutions, told the judge that the latest document resolved objections raised by other parties in the case.

Power Company Empire Files for Bankruptcy Protection

Empire Generating Co., the owner of a power plant in upstate New York, filed for bankruptcy protection after striking a deal with a pair of hedge funds on a debt-for-equity swap, WSJ Pro Bankruptcy reported. Empire sought chapter 11 protection Sunday in U.S. Bankruptcy Court in White Plains, N.Y., with a restructuring support pact lined up with hedge funds Black Diamond Capital Management LLC and MJX Asset Management LLC. The two funds, which focus on distressed-debt investments, own about 55 percent of Empire’s senior debt of $353 million. They have agreed to a credit bid, which involves swapping debt for equity, for control of the plant, located in Rensselaer, N.Y., at a court-supervised auction, according to court papers. Ares Capital, which owns another 34 percent of Empire’s senior debt, opposes the credit bid and made its own offer — $37.8 million in cash plus 89.75 percent of the equity in the acquisition vehicle — for the company, court papers said.

Commentary: PG&E Finger-Pointing Is Counterproductive

The California Department of Forestry and Fire Protection, or CalFire, determined that PG&E was culpable for the 2018 blazes that killed 85 people. Earlier this year, the company filed for bankruptcy after being mired in legal uncertainty from the incident. PG&E’s owners and lenders certainly ought to bear some burden, but future risks remain, and the utility’s chapter 11 filing exposes the weaknesses not only at the company but in the state of California, according to a Wall Street Journal commentary. While it is an easy scapegoat, the greater public interest is to put customers and the utility companies in a better spot, according to the commentary. Fairer liability laws, better city planning and a structure that shares the burden should be politicians’ focus.

Ascena Retail Group Closing All of Its Nearly 650 Dressbarn Stores

Women’s retailer Dressbarn said yesterday that it plans to commence a wind-down of its retail operations, including the eventual closure of its approximately 650 stores, USA Today reported. Stores remain open along with the Dressbarn website, the company said. Dressbarn is part of New Jersey-based Ascena Retail Group, whose other brands include Ann Taylor, Lane Bryant, Catherines, Cacique and Justice. The company recently sold its Maurices brand. In a separate statement from Ascena, the company said the decision has no impact on the operations of the other brands.
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