The Eighth Circuit Weighs In on Trademark Licenses as Executory Contracts in Bankruptcy Proceedings

by McDermott Will & Emery

Lewis Bros. Bakeries, Inc. v. Interstate Brands Corp. (In re Interstate Bakeries Corp.)

An en banc panel of the U.S. Court of Appeals for the Eighth Circuit reversed an earlier ruling of the same court finding that a trademark license agreement that was entered into as part of an asset purchase agreement was not executory because both parties to the agreement had substantially performed their obligations thereunder; therefore, the agreement could not be rejected under § 365(a) of the Bankruptcy Code.  Lewis Bros. Bakeries, Inc. v. Interstate Brands Corp. (In re Interstate Bakeries Corp.), Case No. 11-1850 (8th Cir., June 6, 2014) (Colloton, J.) (Bye, J., concurring-in-part and dissenting-in-part).


In 1996, the Justice Department challenged Interstate Bakeries Corporation’s (Interstate Bakeries) acquisition of the Continental Baking Company under antitrust laws, which resulted in a judgment requiring Interstate Bakeries to divest at least one of its brands in four different geographic territories.  Accordingly, Interstate Brands Corporation (IBC), a subsidiary of Interstate Bakeries, and Lewis Brothers Bakeries (LBB) entered into an asset purchase agreement and a license agreement selling two of Interstate Bakeries’ bread operations and assets, including an exclusive trademark license for 13 different trademarks.

In 2004, Interstate Bakeries and several subsidiaries, including IBC, filed bankruptcy petitions under Chapter 11 and the license agreement with LBB was identified as an executory contract that Interstate Bakeries intended to assume as part of its plan of reorganization.  In 2008, LBB filed a complaint seeking a declaratory judgment that the license agreement was not an executory contract under 11 U.S.C. § 365 and therefore not subject to assumption or rejection by the debtor.  The bankruptcy court reviewed only the license agreement and found that both IBC and LBB had “material, outstanding obligations” and thus held that the license agreement was executory.  LBB appealed and the district court affirmed the bankruptcy court.  LBB then appealed to the 8th Circuit, where a divided panel affirmed the district court.

LBB filed a petition for rehearing en banc, and the full court received amici curiae from the Department of Justice and the Federal Trade Commission arguing that treating the license agreement as an executory contract and allowing Interstate Bakeries to reject the license agreement in bankruptcy would harm the purpose of the original antitrust decree.  LBB’s petition was granted.

The 8th Circuit En Banc

To determine whether the license agreement is executory, the court explained that it must first identify what constitutes the agreement at issue and then establish whether the “agreement” as it is defined is an executory contract under the bankruptcy code.  On the first question, the court disagreed with the lower courts which reviewed only the license agreement as a standalone document.  Instead, the court held that, under the applicable Illinois state law, the appropriate analysis should consider both the license agreement and the asset purchase agreement to be an integrated agreement between the parties.  The court stated that absent evidence showing a contrary intention of the parties, “where two or more instruments are executed by the same contracting parties in the course of the same transaction, the instruments will be considered together.”

Once the court determined that the asset purchase agreement and the license agreement should be considered together as one contract, it turned to the question of whether the integrated agreement was an executory contract, namely, a “contract under which the obligation of both the bankrupt and the other party to the contract are so far underperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other.”  The court then found that the essence of the integrated agreement was the sale of IBC’s two bread operations and not merely the licensing of IBC’s trademarks.  Therefore, in that context, the court concluded that the agreement at issue was not executory because IBC substantially performed its obligations under the asset purchase agreement and the license agreement and that the failure to perform any remaining obligations would not be a material breach.  Citing analogous facts in the U.S. Court of Appeals for the Third Circuit’s decision in In re Exide, the court found that the parties’ remaining obligations under the agreement did not “outweigh the substantial performance rendered and benefits received…” and held that the contract was not executory and reversed and remanded.


Judge Bye, joined by Judges Smith and Kelly, filed a dissent arguing that both parties had ongoing, material obligations under the license agreement (even when considered as part of an integrated agreement), and specifically cited LBB’s obligation to maintain quality control of trademarked goods and IBC’s obligation to refrain from use of the trademarks in the territory.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McDermott Will & Emery | Attorney Advertising

Written by:

McDermott Will & Emery

McDermott Will & Emery on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.