Eighth Circuit Holds that Trademark License Granted As Part of Sale Agreement is Not Executory

June 16, 2014

On June 6, 2014, the United States Court of Appeals for the Eighth Circuit held that a trademark license agreement that Interstate Bakeries Corporation (“IBC”) entered with Lewis Brothers Bakeries, Inc., as part of a sale of certain business lines was not executory and that IBC therefore could not reject the agreement under § 365(a) of the Bankruptcy Code. See Lewis Bros. Bakeries Inc. v. Interstate Brands Corp. (In re Interstate Bakeries Corp.), No. 11-1850, 2014 WL 2535294 (8th Cir. June 6, 2014) (“Interstate II”). An eleven-judge en banc panel reversed the earlier holding of the same court and held that the license agreement was part of an integrated asset-sale agreement that was no longer executory because both parties had substantially performed their obligations thereunder. The Interstate II opinion demonstrates a high burden for establishing “executoriness” of trademark license agreements and adds to the decisions in this evolving area of law.