Old Cold, LLC v. Schleicher & Stebbins Hotels, L.L.C, Bk. 15-11400-CJP

CourtUnited States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of New Hampshire
Writing for the CourtChristopher J. Panos, United States Bankruptcy Judge.
PartiesIn re: Old Cold, LLC (f/k/a Tempnology, LLC), Debtor v. Schleicher & Stebbins Hotels, L.L.C., Defendant 2021 BNH 003 Mission Product Holdings, Inc., Plaintiff
Docket NumberBk. 15-11400-CJP,Adv. 18-01026-CJP
Decision Date06 August 2021

2021 BNH 003 In re: Old Cold, LLC (f/k/a Tempnology, LLC), Debtor Mission Product Holdings, Inc., Plaintiff

Schleicher & Stebbins Hotels, L.L.C., Defendant

Bk. No. 15-11400-CJP

Adv. No. 18-01026-CJP

United States Bankruptcy Court, D. New Hampshire

August 6, 2021

Robert J. Keach, Esq., Lindsay Zahradka Milne, Esq., Bernstein, Shur, Sawyer & Nelson, PA Attorneys for Plaintiff.

Christopher M. Candon, Esq., Ryan P. Lirette, Esq. Sheehan Phinney Bass & Green, PA Attorneys for Defendant.


Christopher J. Panos, United States Bankruptcy Judge.

The plaintiff, Mission Product Holdings, Inc. ("Mission"), has moved for leave to file a first amended complaint [AP Dkt. No. 19][1] (the "Motion"), pursuant to Fed.R.Civ.P. 15(a)(2), as made applicable to this proceeding by Fed.R.Bankr.P. 7015, to add defendants and assert additional claims against the existing defendant, Schleicher & Stebbins Hotels, L.L.C. ("S&S"), the successful bidder to purchase a majority of the assets of the debtor Old Cold LLC f/k/a Tempnology, LLC (the "Debtor" or "Tempnology"), and the proposed added defendants, Coolcore LLC ("Coolcore"), as the alleged transferee of S&S's interests in the acquired assets or purchase agreement, and Mark Stebbins (Coolcore and Mr. Stebbins, together, the "Proposed Defendants").[2] See Mot. ¶ 26. S&S filed an objection [AP Dkt. No. 23] (the "Objection") to the Motion. Mission filed a reply [AP Dkt. No. 27] (the "Mission Reply") to the Objection. After a hearing on the Motion, the Court directed the parties to file any additional submissions in support of their respective positions and S&S filed a supplemental brief [AP Dkt. No. 45] (the "S&S Reply Brief"). Upon consideration of the arguments of counsel at the hearing, the Motion, the Objection, the supplemental responses and briefing, and the record of this proceeding and the Debtor's bankruptcy case, the Court DENIES the Motion for the reasons stated below.


On November 21, 2012, Tempnology and Mission entered into a Co-Marketing and Distribution Agreement (the "Agreement"), which provided Mission exclusive rights to distribute certain "Coolcore"-branded products in the United States (the "Exclusive Distribution Rights") and granted Mission a non-exclusive license to use the "Coolcore" trademarks and related intellectual property (the "Trademarks") in the United States and worldwide.

A. The Chapter 11 Case

Tempnology filed its voluntary Chapter 11 petition on September 1, 2015 (the "Petition Date"). The next day, the Debtor filed a motion to establish procedures for the sale of substantially all of its assets free and clear of liens, claims, and interests [Dkt. No. 34] (the "Sale Motion") and an Omnibus Motion to Reject Executory Contracts Nunc Pro Tunc to the Petition Date [Dkt. No. 35] (the "Rejection Motion"). Mission filed a combined objection to the Sale Motion, the Rejection Motion, and the Debtor's request for debtor-in-possession financing [Dkt. No. 99] (the "Sale/Rejection Objection"), in which Mission objected to any sale free and clear of what it asserted to be its intellectual property rights or rights arising under the Agreement and explicitly elected to retain its intellectual property rights under the Agreement pursuant to 11 U.S.C. § 365(n)(1)(B)[4] (the "§ 365(n) Election"). The Court (Deasy, J.) entered an order granting the Rejection Motion, approving the rejection of the Agreement as of the Petition Date "subject to Mission Product Holdings' election to preserve its rights under 11 U.S.C. § 365(n)." Ord. Granting Rejection Mot., Dkt. No. 188. On October 15, 2015, the Debtor filed a motion requesting determination of the applicability and scope of Mission's § 365(n) Election [Dkt. No. 211] (the "Motion to Clarify"), asserting that Mission's § 365(n) Election preserved only Mission's non-exclusive intellectual property license of the Trademarks under the Agreement and did not preserve Mission's Exclusive Distribution Rights to distribute the "Coolcore"-branded products. Mission objected to the Motion to Clarify [Dkt. No. 231] (the "Clarification Objection"). On November 3, 2015, the Bankruptcy Court issued preliminary oral rulings at the hearing on the Motion to Clarify to permit parties to consider those rulings in advance of the auction scheduled for November 5, 2015 (the "Auction"). The Court stated on the record that its preliminary conclusions were that Mission's § 365(n) Election did not protect the Trademark license or the Exclusive Distribution Rights. See Mot. to Clarify Hr'g Tr. 65:5-67:14, Dkt. No. 455.

On November 5, 2015, the Debtor conducted the Auction as contemplated by the bid procedures order [Dkt. No. 194] (the "Bid Procedures Order"). The Debtor ultimately declared a bid submitted by S&S as the highest and best bid. See Debtor's Notice of Successful Bidder, Dkt. No. 235. Mission subsequently filed an amended objection to the Sale Motion, challenging the conduct of the Auction [Dkt. No 246] (the "Amended Sale Objection").

On November 12, 2015, the Court issued a Memorandum Opinion regarding the Debtor's Motion to Clarify [Dkt. No. 239] (the "365(n) Opinion")[5] and a separate order granting the Motion to Clarify [Dkt. No. 240] (the "365(n) Order"), ordering in pertinent part as follows:

[Mission's] election pursuant to 11 U.S.C. § 365(n) provides Mission rights as a non-exclusive licensee only as to any patents, trade secrets, and copyrights as are granted to Mission in section 15(b) of the Agreement
Mission's election pursuant to 11 U.S.C. § 365(n) provides no protectable interest in the Debtor's trademarks or trade names
Mission's election pursuant to 11 U.S.C. § 365(n) provides no protectable interest in the Debtor's "Exclusive Products" and the "Exclusive Territory" as those terms are defined in the Agreement 365(n) Ord. ¶¶ 2-4, Dkt. No. 240. Mission appealed the 365(n) Opinion and 365(n) Order. See Notice of Appeal, Dkt. No. 242

On December 18, 2015, the Bankruptcy Court approved the sale of substantially all the

Debtor's assets to S&S or its assignee, notwithstanding Mission's objections. See Mem. Op. 1, Dkt. No. 306 (the "Sale Opinion"); Ord. 1, Dkt. No. 307 (the "Sale Order").[6] The Sale Opinion and Sale Order overruled all of Mission's objections to the proposed sale. In doing so, the Bankruptcy Court made certain findings and rulings including: (1) the purchase price was fair and reasonable, (2) the Chapter 11 case was not filed in bad faith, (3) S&S acted at all times in good faith and arms' length and did not act in bad faith in connection with the auction and debtor-in-possession financing, see Sale Ord. ¶¶ 2, 15, (4) "there was no evidence of fraud, collusion, or any other tainting of the sale process in the record," Sale Op. 37, (5) S&S was a good faith purchaser and entitled to the protections afforded by § 363(m), see id. at 36, and (6) the sale was approved and the Debtor and S&S were authorized to immediately consummate the sale, see Sale Ord. ¶ 10. Additionally, the Sale Order provided, among other things, that the Debtor's assets were being sold free and clear of claims and interests (subject only to any claims Mission may have pursuant to § 365(n) as determined by a final non-appealable order by a court of competent jurisdiction) and that S&S would have no successor or vicarious liability. See Sale Ord. ¶ 5. The specific "free and clear" language provided:

Pursuant to section 363(f) of the Bankruptcy Code, the Assets are being sold and transferred free and clear of all liens[, ] claims, interests, and encumbrances (collectively[, t]he "Liens") except as otherwise provided in the Successful Bidder's Purchase Agreement, with any and all such Liens to attach to proceeds of such sale with the same validity, priority, force, and effect such Liens had on the Assets immediately prior to the sale and subject to the rights, claims, defenses, and objections, if any, of the Debtor and all interested parties with respect to any such asserted Liens, provided, however, the sale of the Assets shall not be free and clear of claims Mission Product Holdings, Inc. may have pursuant to 11 U.S.C. § 365(n) as determined by a final non-appealable order by a court of competent jurisdiction.

Sale Ord. ¶ 5. Regarding successor or vicarious liability, the Court also ordered:

Except as expressly set forth in the Successful Bidder's Asset Purchase Agreement, the Successful Bidder shall have no successor or vicarious liabilities of any kind or character. Neither the purchase of the Assets by the Successful Bidder nor the subsequent operation by the Successful Bidder of any business previously operated by the Debtor, shall cause the Successful Bidder to be deemed a successor in any respect to the Debtor's business within the meaning of any law, rule or regulation[, ] including but not limited to any revenue, pension, ERISA, tax, labor or environmental law, rule or regulation or under any products liability law with respect to the Debtor.

Id. at ¶ 14. Further, the Sale Order included provisions enjoining the prosecution of certain claims not otherwise permitted by the asset purchase agreement (the "Asset Purchase Agreement"). See id. at ¶ 6. In relevant part, such injunction is described as follows:

Except as expressly permitted by the Successful Bidder's Purchase Agreement as to any Liens, all persons and entities[, ] including, but not limited to, . . . contract counterparties, . . . licensors, . . . and other persons, holding Liens of any kind or nature whatsoever against or in the Debtor or the Debtor's interests in the Assets (whether known or unknown, legal or equitable, matured or unmatured, contingent or noncontingent, liquidated or unliquidated, asserted or unasserted, whether arising prior to or

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