In re Interstate Bakeries Corp., Case No. 04-45814 (Bankr. W.D. Mo. 6/4/2010)
| Decision Date | 04 June 2010 |
| Docket Number | Case No. 04-45814.,Adv. No. 08-4239. |
| Parties | In re: INTERSTATE BAKERIES CORP., et al., Debtor. LEWIS BROTHERS BAKERIES INC., and CHICAGO BAKING CO., Plaintiffs, v. INTERSTATE BRANDS CORP., Defendant. |
| Court | U.S. Bankruptcy Court — Western District of Missouri |
This matter comes before the Court on cross-motions for summary judgment. The sole issue for consideration in these motions as well as the Plaintiffs' complaint is whether a license agreement between the parties granting the Plaintiffs a perpetual, royalty-free trademark license (the "License") to certain brands of bread is an executory contract for purposes of assumption pursuant to 11 U.S.C. § 365. The Defendant argues that it is; the Plaintiffs argue that it is not. For the reasons stated below, the Court finds that the undisputed facts establish that the License is an executory contract. Therefore, the Court will grant the Defendant's motion for summary judgment and deny the Plaintiffs' motion.
Summary judgment is appropriate when the pleadings, discovery, and any affidavits show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.1 In a motion for summary judgment, the moving party has the initial burden of demonstrating the absence of genuine issues of material fact.2 Once the moving party has met this initial burden of proof, the non-moving party must set forth specific facts sufficient to raise a genuine issue for trial and may not rest on its pleadings; self-serving allegations or mere assertions of disputed fact are insufficient to defeat the motion.3
The Debtor, Interstate Bakeries Corp., first disclosed the existence of the License with the Plaintiffs Lewis Brothers Bakeries Inc., and Chicago Baking Co. (collectively "LBB/CBC") in an amended exhibit filed on November 21, 2008, to its proposed plan of reorganization. Apparently, the Debtor had failed to disclose the license agreement as an executory contract in its Bankruptcy Schedules and Statements of Financial Affairs. The amended exhibit — Amended Plan Exhibit O: Schedule of Assumed Unexpired Leases and Non-Union Executory Contracts — identified the License as one of the executory contracts the Debtor intended to assume as part of its plan of reorganization. LBB/CBC filed this adversary complaint on December 1, 2008, seeking a determination that the license agreement is not an executory contract for purposes of assumption or rejection under 11 U.S.C. § 365.
On December 4, 2008, the Debtor filed a motion to reject the License. The Debtor's Answer and Counterclaim to LBB/CBC's complaint, filed on January 8, 2009, reiterated its intent to reject the License and sought a declaratory judgment that the License is an executory contract capable of rejection under § 365.
Both parties filed motions for summary judgment. Shortly after each party had filed a response to the other's motion for summary judgment, however, the Debtor filed a notice withdrawing its motion to reject the License filed in the main case and its Counterclaim seeking rejection of the License. The notice further stated that the Debtor was "reinstating" its request to assume the License pursuant to Amended Plan Exhibit O, and that the withdrawal of its Counterclaim does not affect its request for a declaratory judgment that the License is an executory contract. The Court granted the Debtor's withdrawal of its Counterclaim on April 27, 2010.
The Court's recitation of undisputed facts is limited to those bearing on whether the License is executory; facts bearing on the propriety of IBC's now-withdrawn Counterclaim and motion to reject the License have been omitted.
1. On September 22, 2004, Interstate Bakeries Corporation and eight other subsidiaries and affiliates, including Defendant Interstate Brands Corporation ("IBC"), filed Chapter 11 voluntary bankruptcy petitions in this Court.
2. Plaintiff Lewis Brothers Bakeries Inc., is a Missouri corporation, and Plaintiff Chicago Baking Co., is an Illinois corporation, wholly-owned by Lewis Brothers Bakeries Inc.
3. On or about January 9, 1996, in conjunction with Interstate Bakeries Corp.'s acquisition of Continental Baking Company — owner of the Wonder Bread and Hostess brands and trademarks — the United States District Court for the Northern District of Illinois entered a final judgment ("Judgment") in an antitrust action brought by the United States Department of Justice and captioned U.S. v. Interstate Bakeries Corporation and Continental Baking Company (N.D. Ill., Case No. 95 C 4194).
4. The Judgment required that, as a condition of Interstate Bakeries Corp.'s acquisition of Continental Baking, IBC divest itself of certain rights and assets for the purpose of establishing viable competitors in the sale of "White Pan Bread" in and around the Chicago, Illinois area.
5. With regard to IBC's divestiture of trademarks, the Judgment directed IBC to grant to one or more purchasers a "perpetual, royalty-free, assignable, transferable, exclusive" license to use the "Relevant Labels," which included the Butternut Label and Wonder Label in the Chicago Territory (defined in the Judgment), and either the Butternut, Sunbeam, or Wonder Label in the Central Illinois Territory (also defined in the Judgment).
6. The Judgment states that it "expires" on the tenth anniversary of the date of its entry.
7. On December 27, 1996, IBC, CBC, and LBB entered into an Asset Purchase Agreement ("APA") under which IBC, in exchange for $20 million paid by LBB and CBC and the assumption of various liabilities related to IBC's businesses, would sell to LBB and CBC its Butternut Bread business operations and assets in the Chicago Territory, as well as its Sunbeam Bread business operations and assets in the Central Illinois Territory. IBC is designated as the "Seller" in the APA and all of the assets that IBC "shall sell" to LBB/CBC, including the trademarks, are defined as the "Assets Purchased." Under the APA, IBC agreed to grant a "perpetual, royalty-free, assignable, transferable exclusive license" to use the Butternut trademark and the other IBC trademarks in the Chicago Territory.
8. Contemporaneous with the execution of the APA on December 27, 1996, IBC, LBB and CBC executed the License, which granted LBB and CBC "a perpetual, royalty-free, assignable, transferable, exclusive . . . license" for the Butternut trademark (and other trademarks, as set forth in Schedule A to the License), and released all rights to the Sunbeam, Roman Meal, and Purity trademarks in the Central Illinois Territory, as well as the Sun Maid Raisin brand in the Chicago Territory.
9. The following provisions of the License are pertinent to the resolution of the summary judgment motions now before the Court:
a. In the first "WHEREAS" clause: "IBC is the owner of or has the right to use and sublicense to Licensee (LBB/CBC) the trademarks, labels and logos and registrations thereof set forth in Schedule A hereto."
b. In the second WHEREAS clause: "[I]n order to comply with the Final Judgment . . . IBC has agreed to extend a license to Licensee and Licensee desires to make use of the Trademarks subject to the terms and conditions set forth herein."
c. Section 1.1(a):
d. Section 1.4: "Licensee shall have no right to sublicense the Trademarks or the use of the Trademarks to any third party."
e. Section 2.1:
f. Section 2.2: "Licensee shall not anywhere register, or cause to be registered, any corporate logo, name or trademark consisting of, comprising or containing the Trademarks, including without limitation any registration in the United States Patent and Trademark Office."
g. Section 2.3: "Licensee shall not contest the title of IBC to the Trademarks or registrations thereof or challenge the validity of this Agreement and Licensee shall not take any action or fail to take any action the result of which could reasonably foreseeably adversely prejudice IBC's interest in the Trademarks." h. Section 3.1: "Licensee shall use the Chicago Trademarks owned by IBC only in the form and manner and with appropriate legends as prescribed from time to time by IBC."
i. Section 3.2: "Licensee shall not use any of the Trademarks owned or licensed by IBC as its corporate name or title in whole or in part and shall not, without the prior written consent of IBC, alter or combine such owned or sublicensed Trademarks with other terms, or use such Trademarks in connection with any business other than as licensed hereunder."
j. Section 5.2:
k. Section 5.3: ...
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