Lewis Brothers Bakeries Inc. v. Interstate Brands Corp. (In re Interstate Bakeries Corp.)
- Citation:
- Lewis Brothers Bakeries Inc v. Interstate Brands Corp (In re Interstate Bakeries Corp.), No. 11-1850 (8th Cir. Aug 30 2012)
- Tag(s):
-
- Ruling:
- Following the Countryman test for an executory contract (whether obligations remain on both sides so underperformed that the failure of either party to complete performance of those obligations would constitute a material breach excusing the performance of the other), the court ruled that the obligations remaining on a license agreement entered into as part of the sale of a business was an executory contract. The Court distinguished the Third Circuit decision In Re Exide Technologies, 607 F.3d 957 (3r Cir 2010) on the basis of the obligation of the non-debtor to maintain quality standards. The dissent argued that the license agreement was but a part of a sale that had occurred years previously and the remaining obligations were not material, as the sale had been substantially consummated.
- Procedural context:
- Affirming the bankruptcy court and the district court finding that a perpetual, royalty free, assignable, transferable, exclusive license granted as part of the sale of the equipment and intellectual property associated with two brands of bread to be an executory contract.
- Facts:
- In 1996 two brands of products were sold by Interstate Brands to Lewis Brothers Bakeries for the Chicago area as part of an anti-trust judgment. The parties allocated $11.88 million to tangible assets and $8.82 million to intangible assets, including the perpetual, royalty-free, assignable, transferable, exclusive license to the brands and trademarks in certain parts of Illinois. Eight years later, Interstate Brands filed for bankruptcy protection and asserted that the perpetual, royalty free, assignable, transferable, exclusive license that was included with the sale Bakeries was an executory contract because there were performance obligations on both sides, which if not performed, would excuse performance by the other side. Lewis Brothers Bakeries had agreed that it would be a material breach if it failed to maintain the character and quality of the goods sold under the marks and Interstate Brands had the standard obligations of notice, forbearance of licensing, and defense of the marks. The dissent noted that the license was but a part of a sale that had occurred 8 years previously as a part of an anti-trust judgment requiring the complete divestiture of the brands in question and both sides considered the sale to have been completed at that time.
- Judge(s):
- Bye (majority author), Smith, and Colton (dissenting)
ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!
