1 (Slip Opinion) OCTOBER TERM, 2018

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.


## SUPREME COURT OF THE UNITED STATES

Syllabus

MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC, NKA OLD COLD LLC

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FIRST CIRCUIT

No. 17–1657. Argued February 20, 2019—Decided May 20, 2019

Petitioner Mission Product Holdings, Inc., entered into a contract with

Respondent Tempnology, LLC, which gave Mission a license to use Tempnology’s trademarks in connection with the distribution of cer

tain clothing and accessories. Tempnology filed for Chapter 11 bank

ruptcy and sought to reject its agreement with Mission. Section 365 of the Bankruptcy Code enables a de btor to “reject any executory con

tract”—meaning a contract that neither party has finished perform

ing. 11 U. S. C. §365(a). It further provides that rejection “consti

tutes a breach of such contract.” §365(g). The Bankruptcy Court approved Tempnology’s rejection and further held that the rejection terminated Mission’s rights to use Tempnology’s trademarks. The Bankruptcy Appellate Panel reversed, relying on Section 365(g)’s statement that rejection “constitutes a breach” to hold that rejection does not terminate rights that would survive a breach of contract outside bankruptcy. The First Circu it rejected the Panel’s judgment and reinstated the Bankruptcy Court’s decision.

Held : 1. This case is not moot. Mission presents a plausible claim for money damages arising from its in ability to use Tempnology’s trade

marks, which is sufficient to pr eserve a live controversy. See Chafin

v. Chafin , 568 U. S. 165, 172. Tempnology’s various arguments that Mission is not entitled to damages do not so clearly preclude recovery as to render this case moot. Pp. 6–7.

2. A debtor’s rejection of an exec utory contract under Section 365 of the Bankruptcy Code has the same effect as a breach of that contract outside bankruptcy. Such an act cannot rescind rights that the con

tract previously granted. Pp. 7–16.2 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

Syllabus

(a) Section 365(g) provides that rejection “constitutes a breach.” And “breach” is neither a defined nor a specialized bankruptcy
term—it means in the Code what it means in contract law outside bankruptcy. See Field v. Mans , 516 U. S. 59, 69. Outside bankrupt

cy, a licensor’s breach cannot revoke continuing rights given to a counterparty under a contract (assuming no special contract term or state law). And because rejection “c onstitutes a breach,” the same re

sult must follow from rejection in bankruptcy. In preserving a coun

terparty’s rights, Section 365 reflects the general bankruptcy rule that the estate cannot possess anyt hing more than the debtor did outside bankruptcy. See Board of Trade of Chicago v. Johnson , 264
U. S. 1, 15. And conversely, allo wing rejection to rescind a counter

party’s rights would circumvent the Code’s stringent limits on “avoidance” actions—the exceptional cases in which debtors may un

wind pre-bankruptcy transfers that undermine the bankruptcy pro

cess. See, e.g. , §548(a). Pp. 8–12. (b) Tempnology’s principal counterargument rests on a negative inference drawn from provisions of Section 365 identifying categories of contracts under which a counterparty may retain specified rights after rejection. See §§365(h), (i), (n). Tempnology argues that these provisions indicate that the ordina ry consequence of rejection must be something different— i.e. , the termination of contractual rights previously granted. But that argu ment offers no account of how to read Section 365(g) (rejection “constitutes a breach”) to say essential

ly its opposite. And the provisions Tempnology treats as a reticulat

ed scheme of exceptions each emerged at a different time and re

sponded to a discrete problem—as often as not, correcting a judicial ruling of just the kind Tempnology urges.

Tempnology’s remaining argument turns on how the special fea

tures of trademark law may affect th e fulfillment of the Code’s goals. Unless rejection terminates a licensee’s right to use a trademark, Tempnology argues, a debtor must choose between monitoring the goods sold under a license or riskin g the loss of its tr ademark, either of which would impede a debtor’s ab ility to reorganize. But the dis

tinctive features of trademarks do not persuade this Court to adopt a
construction of Section 365 that w ill govern much more than trade

mark licenses. And Tempnology’s pl ea to facilitate reorganizations cannot overcome what Section 365(a) and (g) direct. In delineating the burdens a debtor may and may not escape, Section 365’s edict that rejection is breach expresses a more complex set of aims than Tempnology acknowledges. Pp. 12–16.

879 F. 3d 389, reversed and remanded.

K

AGAN

, J., delivered the opinion of the Court, in which R OBERTS

, C. J.,3 Cite as: 587 U. S. ____ (2019)

Syllabus

and T HOMAS , G INSBURG , B REYER , A LITO , S OTOMAYOR

, and K AVANAUGH

, JJ., joined. S OTOMAYOR , J., filed a concurring opinion. G ORSUCH

, J., filed a dissenting opinion._________________

_________________ 1 Cite as: 587 U. S. ____ (2019)

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Wash

ington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.


## SUPREME COURT OF THE UNITED STATES

No. 17–1657

MISSION PRODUCT HOLDIN GS, INC., PETITIONER v. TEMPNOLOGY, LLC, NKA OLD COLD LLC

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FIRST CIRCUIT

[May 20, 2019]

J USTICE K AGAN delivered the opinion of the Court.
Section 365 of the Bankruptcy Code enables a debtor to “reject any executory contract”—meaning a contract that neither party has finished performing. 11 U. S. C. §365(a). The section further provides that a debtor’s rejection of a contract under that authority “constitutes a breach of such contract.” §365(g). Today we consider the meaning of those provisions in the context of a trademark licensing agreement. The question is whether the debtor-licensor’s rejection of that contract deprives the licensee of its rights to use the

trademark. We hold it does not. A rejection breaches a
contract but does not rescind it. And that means all the rights that would ordinarily survive a contract breach, including those conveyed here, remain in place.

I
This case arises from a licensing agreement gone wrong. Respondent Tempnology, LLC, manufactured clothing and accessories designed to stay cool when used in exercise. It marketed those products under the brand name “Coolcore,” using trademarks ( e.g., logos and labels) to2 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

Opinion of the Court

distinguish the gear from other athletic apparel. In 2012, Tempnology entered into a co ntract with petitioner Mis

sion Product Holdings, Inc. See App. 203–255. The agreement gave Mission an exclusive license to distribute certain Coolcore products in the United States. And more important here, it granted Mi ssion a non-exclusive license to use the Coolcore trademarks, both in the United States and around the world. The agreement was set to expire in July 2016. But in September 2015, Tempnology filed a petition for Chapter 11 bankrup tcy. And it soon afterward asked the Bankruptcy Court to allow it to “reject” the licensing agreement. §365(a). Chapter 11 of the Bankruptcy Code sets out a frame

work for reorganizing a bankrupt business. See §§1101– 1174. The filing of a petition creates a bankruptcy estate consisting of all the debtor’s assets and rights. See §541. The estate is the pot out of which creditors’ claims are paid. It is administered by either a trustee or, as in this case, the debtor itself. See §§1101, 1107. Section 365(a) of the Code provides that a “trustee [or debtor], subject to the court’s approval, may assume or reject any executory contract.” §365(a). A contract is executory if “performance remains due to some extent on
both sides.” NLRB v. Bildisco & Bildisco , 465 U. S. 513, 522, n. 6 (1984) (internal quotation marks omitted). Such an agreement represents both an asset (the debtor’s right to the counterparty’s future performance) and a liability (the debtor’s own obligations to perform). Section 365(a) enables the debtor (or its trustee), upon entering bank

ruptcy, to decide whether the contract is a good deal for the estate going forward. If so, the debtor will want to assume the contract, fulfilling its obligations while bene

fiting from the counterparty’s performance. But if not, the debtor will want to reject the contract, repudiating any further performance of its duties. The bankruptcy court will generally approve that choice, under the deferential3 Cite as: 587 U. S. ____ (2019)

Opinion of the Court

“business judgment” rule. Id., at 523.According to Section 365(g), “the rejection of an executory contract[ ] constitutes a breach of such contract.” As both parties here agree, the counterparty thus has a claim against the estate for damages resulting from the debtor’s nonperformance. See Brief for Petitioner 17, 19; Brief for Respondent 30–31. But such a claim is unlikely to ever be paid in full. That is because the debtor’s breach is deemed to occur “immediately before th e date of the filing of the[bankruptcy] petition,” rather than on the actual postpetition rejection date. §365(g)(1). By thus giving the counterparty a pre-petition claim, Section 365(g) places that party in the same boat as the debtor’s unsecured creditors, who in a typical bankruptcy may receive only
cents on the dollar. See Bildisco , 465 U. S., at 531–532 (noting the higher priority of post-petition claims). In this case, the Bankruptcy Court (per usual) approved Tempnology’s proposed rejection of its executory licensing agreement with Mission. See App. to Pet. for Cert. 83–84. That meant, as laid out above, two things on which the parties agree. First, Tempnology could stop performing under the contract. And second, Mission could assert (for whatever it might be worth) a pre-petition claim in the bankruptcy proceeding for damages resulting from Temp

nology’s nonperformance. But Tempnology thought still another consequence ensued, and it returned to the Bankruptcy Court for a declaratory judgment confirmi ng its view. According to Tempnology, its rejection of the contract also terminated the rights it had granted Mission to use the Coolcore trademarks. Tempnology based its argument on a nega

tive inference. See Motion in No. 15–11400 (Bkrtcy. Ct. NH), pp. 9–14. Several provisions in Section 365 state that a counterparty to specif ic kinds of agreements may keep exercising contractual ri ghts after a debtor’s rejec

tion. For example, Section 365(h) provides that if a bank

-4 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

Opinion of the Court

rupt landlord rejects a lease, the tenant need not move out; instead, she may stay and pay rent (just as she did before) until the lease term expires. And still closer to home, Section 365(n) sets out a similar rule for some types of intellectual property licenses: If the debtor-licensor rejects the agreement, the licensee can continue to use the property (typically, a patent), so long as it makes whatever payments the contract demand s. But Tempnology pointed out that neither Section 365(n) nor any similar provision covers trademark licenses. So, it reasoned, in that sort of
contract a different rule must apply: The debtor’s rejection must extinguish the rights that the agreement had con

ferred on the trademark licensee. The Bankruptcy Court agreed. See In re Tempnology, LLC , 541 B. R. 1 (Bkrtcy. Ct. NH 2015). It held, rely ing on the same “negative inference,” that Tempnology’s rejection of the licensing agreement revoked Mission’s right to use the Coolcore

marks. Id., at 7. The Bankruptcy Appellate Panel reversed, relying heavily on a decision of the Court of Appeals for the Sev

enth Circuit about the effects of rejection on trademark licensing agreements. See In re Tempnology, LLC , 559
B. R. 809, 820–823 (Bkrtcy. App. Panel CA1 2016); Sun

beam Products, Inc. v. Chicago Am. Mfg., LLC , 686 F. 3d 372, 376–377 (CA7 2012). Rather than reason backward from Section 365(n) or similar provisions, the Panel fo

cused on Section 365(g)’s statement that rejection of a contract “constitutes a breach.” Outside bankruptcy, the court explained, the breach of an agreement does not eliminate rights the contract had already conferred on the non-breaching party. See 559 B. R.

, at 820. So neither could a rejection of an agreement in bankruptcy have that effect. A rejection “convert[s] ” a “debtor’s unfulfilled obli

gations” to a pre-petition damages claim. Id., at 822 (quot

ing Sunbeam , 686 F. 3d, at 377). But it does not “termi

nate the contract” or “vaporize[ ]” the counterparty’s5 Cite as: 587 U. S. ____ (2019)

Opinion of the Court

rights. 559 B. R., at 820, 822 (quoting Sunbeam , 686
F. 3d, at 377). Mission could thus continue to use the
Coolcore trademarks. But the Court of Appeals fo r the First Circuit rejected the Panel’s and Seventh Circuit’s view, and reinstated the Bankruptcy Court decision terminating Mission’s license.
See In re Tempnology, LLC , 879 F. 3d 389 (2018). The majority first endorsed that co urt’s inference from Section 365(n) and similar provisions. It next reasoned that spe

cial features of trademark law counsel against allowing a licensee to retain rights to a mark after the licensingagreement’s rejection. Under that body of law, the majority stated, the trademark owne r’s “[f]ailure to monitor and exercise [quality] control” ov er goods associated with a trademark “jeopardiz[es] the continued validity of [its] own trademark rights.” Id., at 402. So if (the majority continued) a licensee can keep using a mark after an agreement’s rejection, the licensor will need to carry on its monitoring activities. And a ccording to the majority, that would frustrate “Congress’s principal aim in providing for rejection”: to “release the debtor’s estate from burdensome obligations.” Ibid. (internal quotation marks omitted). Judge Torruella dissented, mainly for the Seventh Cir

cuit’s reasons. See id., at 405–407. We granted certiorari to resolve the division between the First and Seventh Circuits. 586 U. S. ___ (2018). We now affirm the Seventh’s reasoning and reverse the deci

sion below. 1

——————

1 In its briefing before this Court, Mission contends that its exclusive distribution rights survived the lic ensing agreement’s rejection for the same reason as its trademark rights did. See Brief for Petitioner 40–
44; supra, at 2. But the First Circuit held that Mission had waived that argument, see 879 F. 3d, at 401, and we have no reason to doubt that conclusion. Our decision thus affects only Mission’s trademark rights.6 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

Opinion of the Court

II
Before reaching the merits, we pause to consider Temp

nology’s claim that this case is moot. Under settled law, we may dismiss the case for that reason only if “it is im

possible for a court to grant any effectual relief whatever” to Mission assuming it prevails. Chafin v. Chafin , 568
U. S. 165, 172 (2013) (internal quotation marks omitted). That demanding standard is not met here. Mission has presented a claim for money damages— essentially lost profits—arising from its inability to use the Coolcore trademarks between the time Tempnology rejected the licensing agreement and its scheduled expira

tion date. See Reply Brief 22, and n. 8. Such claims, if at all plausible, ensure a live controversy. See Memphis Light, Gas & Water Div. v. Craft , 436 U. S. 1, 8–9 (1978). For better or worse, nothing so shows a continuing stake in a dispute’s outcome as a demand for dollars and cents. See 13C C. Wright, A. Miller & E. Cooper, Federal Prac

tice and Procedure §3533.3, p. 2 (3d ed. 2008) (Wright & Miller) (“[A] case is not moot so long as a claim for mone

tary relief survives”). Ultimate recovery on that demand may be uncertain or even unlikely for any number of reasons, in this case as in ot hers. But that is of no mo

ment. If there is any chance of money changing hands,
Mission’s suit remains live. See Chafin , 568 U. S., at 172. Tempnology makes a flurry of arguments about why Mission is not entitled to damages, but none so clearly precludes recovery as to make this case moot. First, Tempnology contends that Mission suffered no injurybecause it “never used the trademark[s] during [the postrejection] period.” Brief for Respondent 24; see Tr. of OralArg. 33. But that gets things backward. Mission’s nonuse of the marks during that time is precisely what gives rise to its damages claim; had it employed the marks, it would not have lost any profits. So next, Tempnology argues that Mission’s non-use was its own “choice,” for7 Cite as: 587 U. S. ____ (2019)

Opinion of the Court

which damages cannot lie. See id., at 26. But recall that the Bankruptcy Court held that Mission could not use the marks after rejection (and its decision remained in effect through the agreement’s expiration). See supra, at 4. And although (as Tempnology counters) the court issued “no injunction,” Brief for Respondent 26

, that difference does not matter: Mission need not have flouted a crystal-clear ruling and courted yet more le gal trouble to preserve its claim. Cf. 13B Wright & Miller §3533.2.2, at 852 (“[C]ompliance [with a judicial decision] does not moot [a case] if it remains possible to undo the effects of compli

ance,” as through compensation). So last, Tempnology claims that it bears no blame (and thus should not have to pay) for Mission’s injury because all it did was “ask[ ] the court to make a ruling.” Tr. of Oral Arg. 34–35. But whether Tempnology did anything to Mission amounting to a legal wrong is a prototypical merits question, which
no court has addressed and which has no obvious answer.
That means it is no reason to find this case moot. And so too for Tempnology’s further argument that Mission will be unable to convert any judgment in its favor to hard cash. Here, Tempnology notes that the bankruptcy estate has recently distributed all of its assets, leaving nothing to satisfy Mission’s judgment. See Brief for Re

spondent 27. But courts often adjudicate disputes whose “practical impact” is unsure at best, as when “a defendant
is insolvent.” Chafin , 568 U. S., at 175. And Mission notes that if it prevails, it can seek the unwinding of prior distributions to get its fair share of the estate. See Reply Brief 23. So although this suit “may not make [Mission] rich,” or even better off, it remains a live controversy— allowing us to proceed. Chafin , 568 U. S., at 176.

III
What is the effect of a debtor’s (or trustee’s) rejection of a contract under Section 365 of the Bankruptcy Code?8 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

Opinion of the Court

The parties and courts of appeals have offered us two starkly different answers. A ccording to one view, a rejec

tion has the same consequence as a contract breach out

side bankruptcy: It gives the counterparty a claim for damages, while leaving intact the rights the counterparty has received under the contract. According to the other view, a rejection (except in a few spheres) has more the effect of a contract rescission in the non-bankruptcy world: Though also allowing a damages claim, the rejection ter

minates the whole agreement along with all rights it conferred. Today, we hold that both Section 365’s text and fundamental principles of bankruptcy law command the first, rejection-as-breach approach. We reject the compet

ing claim that by specifically enabling the counterparties in some contracts to retain rights after rejection, Congress showed that it wanted the counterparties in all other contracts to lose their rights. And we reject an argument for the rescission approach turning on the distinctive features of trademark licenses. Rejection of a contract— any contract—in bankruptcy operates not as a rescission
but as a breach.

A
We start with the text of the Code’s principal provisions on rejection—and find that it does much of the work. As noted earlier, Section 365(a) gives a debtor the option, subject to court approval, to “assume or reject any execu

tory contract.” See supra, at 2. And Section 365(g) de

scribes what rejection means . Rejection “constitutes a breach of [an executory] contract,” deemed to occur “im

mediately before the date of the filing of the petition.” See

supra , at 3. Or said more pithily for current purposes, a rejection is a breach. And “breach” is neither a defined nor a specialized bankruptcy term. It means in the Code what it means in contract law outside bankruptcy. See

Field v. Mans , 516 U. S. 59, 69 (1995) (Congress generally9 Cite as: 587 U. S. ____ (2019)

Opinion of the Court

meant for the Bankruptcy Code to “incorporate the estab

lished meaning” of “terms that have accumulated settled meaning” (internal quotation marks omitted)). So the first place to go in divining the e ffects of rejection is to nonbankruptcy contract law, which can tell us the effects of

breach. Consider a made-up executory contract to see how the law of breach works outside bankruptcy. A dealer leases a photocopier to a law firm, while agreeing to service it every month; in exchange, the firm commits to pay a monthly fee. During the lease term, the dealer decides to stop servicing the machine, thus breaching the agreement in a material way. The law firm now has a choice (assum

ing no special contract term or state law). The firm can keep up its side of the bargain, continuing to pay for use of the copier, while suing the dealer for damages from the service breach. Or the firm can call the whole deal off, halting its own payments and returning the copier, while suing for any damages incurred. See 13 R. Lord, Williston on Contracts §39:32, pp. 701–702 (4th ed. 2013) (“[W]hen a contract is breached in the course of performance, the injured party may elect to continue the contract or refuse to perform further”). But to repeat: The choice to termi

nate the agreement and send back the copier is for the law firm . By contrast, the dealer has no ability, based on its own breach, to terminate the agreement. Or otherwise said, the dealer cannot get back the copier just by refusing to show up for a service appointment. The contract gave the law firm continuing rights in the copier, which the dealer cannot unilaterally revoke. And now to return to bankruptcy: If the rejection of the photocopier contract “constitut es a breach,” as the Code says, then the same results should follow (save for one twist as to timing). Assume here that the dealer files a Chapter 11 petition and decides to reject its agreement with the law firm. That means, as above, that the dealer10 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

Opinion of the Court

will stop servicing the copier. It means, too, that the law firm has an option about how to respond—continue the contract or walk away, while suing for whatever damages go with its choice. (Here is where the twist comes in: Because the rejection is deemed to occur “immediately before” bankruptcy, the firm’s da mages suit is treated as a pre-petition claim on the estate, which will likely receive only cents on the dollar. See supra, at 3.) And most im

portant, it means that assuming the law firm wants to keep using the copier, the dealer cannot take it back. A rejection does not terminate th e contract. When it occurs, the debtor and counterparty do not go back to their pre

contract positions. Instead, the counterparty retains the rights it has received under the agreement. As after a breach, so too after a rejection, those rights survive. All of this, it will hardly surprise you to learn, is not just about photocopier leases. Sections 365(a) and (g) speak broadly, to “any executory co ntract[s].” Many licensing agreements involving trademarks or other property are of that kind (including, all agree, the Tempnology-Mission contract). The licensor not only grants a license, but provides associated goods or services during its term; the licensee pays continuing royalties or fees. If the licensor breaches the agreement outside bankruptcy (again, bar

ring any special contract term or state law), everything said above goes. In particular, the breach does not revoke the license or stop the licensee from doing what it allows. See, e.g., Sunbeam , 686 F. 3d, at 376 (“Outside of bank

ruptcy, a licensor’s breach does not terminate a licensee’s right to use [the licensed] intellectual property”). And because rejection “constitutes a breach,” §365(g), the same consequences follow in bankru ptcy. The debtor can stop performing its remaining obligations under the agree

ment. But the debtor cannot rescind the license already conveyed. So the licensee can continue to do whatever the
license authorizes.11 Cite as: 587 U. S. ____ (2019)

Opinion of the Court

In preserving those rights, Section 365 reflects a general bankruptcy rule: The estate cannot possess anything more than the debtor itself did outside bankruptcy. See Board of Trade of Chicago v. Johnson , 264 U. S. 1, 15 (1924) (establishing that principle); §541(a)(1) (defining the
estate to include the “interests of the debtor in property” (emphasis added)). As one bankruptcy scholar has put the point: Whatever “limitation[s] on the debtor’s property [apply] outside of bankruptcy[ ] appl[y] inside of bankruptcy as well. A debtor’s property does not shrink by happen

stance of bankruptcy, but it does not expand, either.” D. Baird, Elements of Bankruptcy 97 (6th ed. 2014). So if the not-yet debtor was subject to a counterparty’s contractual right (say, to retain a copier or use a trademark), so too is the trustee or debtor once the bankruptcy petition has been filed. The rejection-as-breach rule (but not the rejection-as-rescission rule) ensures that result. By insisting that the same counterparty rights survive rejection as survive breach, the rule prev ents a debtor in bankruptcy from recapturing interests it had given up. And conversely, the rejection-as-rescission approach would circumvent the Code’s stringent limits on “avoid

ance” actions—the exceptional cases in which trustees (or debtors) may indeed unwind pre-bankruptcy transfersthat undermine the bankruptcy process. The most notable example is for fraudulent conveyances—usually, something-for-nothing transfers that deplete the estate (and so cheat creditors) on the eve of bankruptcy. See §548(a). A trustee’s avoidance powers are la id out in a discrete set of sections in the Code, see §§544–553, far away from Section

365. And they can be invoked in only narrow circum

stances—unlike the power of rejection, which may be exercised for any plausible economic reason. See, e.g., §548(a) (describing the requirements for avoiding fraudu

lent transfers); supra, at 2–3. If trustees (or debtors) could use rejection to rescind previously granted interests, then12 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

Opinion of the Court

rejection would become functi onally equivalent to avoid

ance. Both, that is, would roll back a prior transfer. And that result would subvert everything the Code does to keep avoidances cabined—so they do not threaten the rule that the estate can take only what the debtor possessed before filing. Again, then, core tenets of bankruptcy law push in the same direction as Section 365’s text: Rejection is breach, and has only its consequences.

B
Tempnology’s main argument to the contrary, here as in the courts below, rests on a ne gative inference. See Brief for Respondent 33–41; supra, at 3–4. Several provisions of Section 365, Tempnology notes, “identif[y] categories of contracts under which a counterparty” may retain speci

fied contract rights “notwith standing rejection.” Brief for Respondent 34. Sections 365(h) and (i) make clear that certain purchasers and lessees of real property and

timeshare interests can continue to exercise rights after a debtor has rejected the lease or sales contract. See §365(h)(1) (real-property leases); §365(i) (real-property sales contracts); §§365(h)(2), (i) (timeshare interests). And Section 365(n) similarly provides that licensees of some intellectual property—but not trademarks—retain con

tractual rights after rejection. See §365(n); §101(35A);

supra, at 4. Tempnology argues from those provisions that the ordinary consequence of rejection must be some

thing different— i.e., the termination, rather than survival, of contractual rights previously granted. Otherwise, Tempnology concludes, the statute’s “general rule” would “swallow the exceptions.” Brief for Respondent 19. But that argument pays too little heed to the main provisions governing rejection and too much to subsidiary ones. On the one hand, it offers no account of how to read Section 365(g) (recall, rejection “constitutes a breach”) to say essentially its opposite ( i.e., that rejection and breach13 Cite as: 587 U. S. ____ (2019)

Opinion of the Court

have divergent consequences). On the other hand, it treats as a neat, reticulated scheme of “narrowly tailored exception[s],” id., at 36 (emphasis deleted), what history reveals to be anything but. Each of the provisions Temp

nology highlights emerged at a different time, over a span of half a century. See, e.g., 52 Stat. 881 (1938) (real

property leases); §1(b), 102 Stat. 2538 (1988) (intellectual property). And each responded to a discrete problem—as often as not, correcting a judicial ruling of just the kind Tempnology urges. See Andrew, Executory Contracts in Bankruptcy, 59 U. Colo. L. Rev. 845, 911–912, 916–919 (1988) (identifying judicial decisions that the provisions overturned); compare, e.g., In re Sombrero Reef Club, Inc

., 18 B. R. 612, 618–619 (Bkrtcy. Ct. SD Fla. 1982), with,

e.g., §§365(h)(2), (i). Read as generously as possible to Tempnology, this mash-up of legislative interventions says nothing much of anything about the content of Section 365(g)’s general rule. Read le ss generously, it affirmatively refutes Tempnology’s re ndition. As one bankruptcy scholar noted after an exhaustive review of the history: “What the legislative record [reflects] is that whenever Congress has been confronted with the consequences of the [view that rejection termi nates all contractual rights], it has expressed its disapproval.” Andrew, 59 U. Colo. L. Rev., at 928. On that account, Congress enacted the pro

visions, as and when needed, to reinforce or clarify the general rule that contractual rights survive rejection. 2

——————

2 At the same time, Congress took the opportunity when drafting those provisions to fill in certain details, generally left to state law, about the post-rejection relationsh ip between the debtor and counterparty. See, e.g., Andrew, Executory Contra cts in Bankruptcy, 59 U. Colo. L. Rev. 845, 903, n. 200 (1988) (describing Congress’s addition of subsidiary rules for real property le ases in Section 365(h)); Brief for
United States as Amicus Curiae 29 (noting that Congress similarly set out detailed rules for patent licenses in Section 365(n)). The provisions
are therefore not redundant of Sectio n 365(g): Each sets out a remedial scheme embellishing on or tweaking the general rejection-as-breach14 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

Opinion of the Court

Consider more closely, for example, Congress’s enact

ment of Section 365(n), which addresses certain intellec

tual property licensing agreem ents. No one disputes how that provision came about. In Lubrizol Enterprises v. Richmond Metal Finishers, the Fourth Circuit held that a debtor’s rejection of an executory contract worked to re

voke its grant of a patent license. See 756 F. 2d 1043, 1045–1048 (1985). In other words, Lubrizol adopted the same rule for patent licenses that the First Circuit an

nounced for trademark licenses here. Congress sprang into action, drafting Section 365(n) to reverse Lubrizol and ensure the continuation of patent (and some other intellec

tual property) licensees’ rights. See 102 Stat. 2538 (1988);
S. Rep. No. 100–505, pp. 2–4 (1988) (explaining that Sec

tion 365(n) “corrects [ Lubrizol ’s] perception” that “Section 365 was ever intended to be a mechanism for stripping innocent licensee[s] of rights”). As Tempnology highlights, that provision does not cover trademark licensing agree

ments, which continue to fall, along with most other con

tracts, within Section 365(g)’s general rule. See Brief for Respondent 38. But what of that? Even put aside the claim that Section 365(n) is part of a pattern—that Con

gress whacked Tempnology’s view of rejection wherever it
raised its head. See supra , at 13. Still, Congress’s repudi

ation of Lubrizol for patent contracts does not show any

intent to ratify that decision’s approach for almost all others. Which is to say that no negative inference arises. Congress did nothing in adding Section 365(n) to alter the natural reading of Section 365(g)—that rejection and

breach have the same results. Tempnology’s remaining argument turns on the way special features of trademark law may affect the fulfill

ment of the Code’s goals. Like the First Circuit below, Tempnology here focuses on a trademark licensor’s duty to

—————— rule.15 Cite as: 587 U. S. ____ (2019)

Opinion of the Court

monitor and “exercise quality control over the goods and services sold” under a license. Brief for Respondent 20;

see supra, at 5. Absent those efforts to keep up quality, the mark will naturally decline in value and may eventu

ally become altogether invalid. See 3 J. McCarthy, Trademarks and Unfair Competition §18:48, pp. 18–129, 18–133 (5th ed. 2018). So (Tempnology argues) unless rejection of a trademark licensing agreement terminates the licensee’s rights to use the mark, the debtor will have to choose between expending scarce resources on quality control and risking the loss of a valuable asset. See Brief for Respondent 59. “Eithe r choice,” Tempnology con

cludes, “would impede a [debtor’s] ability to reorganize,” thus “undermining a fundamental purpose of the Code.” Id., at 59–60. To begin with, that argument is a mismatch with Tempnology’s reading of Section 365. The argument is trademark-specific. But Temp nology’s reading of Section 365 is not. Remember, Tempnology construes that section to mean that a debtor’s rejection of a contract terminates the counterparty’s rights “unless the contract falls within an express statutory exception.” Id., at 27–28; see supra, at 12. That construction treats trademark agreements identically to most other contracts; the only agreements getting different treatment are those falling within thediscrete provisions just discussed. And indeed, Tempnology could not have discovered, however hard it looked, any trademark-specific rule in Section 365. That section’s special provisions, as all agree, do not mention trade

marks; and the general provisio ns speak, well, generally. So Tempnology is essentially arguing that distinctive features of trademarks should persuade us to adopt a construction of Section 365 that will govern not just trademark agreements, but pre tty nearly every executory

contract. However seriou s Tempnology’s trademarkrelated concerns, that would allow the tail to wag the16 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

Opinion of the Court

Doberman. And even putting aside that incongruity, Tempnology’s plea to facilitate trademark licensors’ reorganizations cannot overcome what Sections 365(a) and (g) direct. The Code of course aims to make reorganizations possible. But it does not permit anything and everything that might advance that goal. See, e.g. , Florida Dept. of Revenue v. Piccadilly Cafeterias, Inc. , 554 U. S. 33, 51 (2008) (observ

ing that in enacting Chapter 11, Congress did not have “a single purpose,” but “str[uck] a balance” among multiple competing interests (internal quotation marks omitted)). Here, Section 365 provides a debtor like Tempnology with a powerful tool: Through rejection, the debtor can escape all of its future contract obligations, without having to pay much of anything in return. See supra, at 3. But in allow

ing rejection of those contractual duties, Section 365 does not grant the debtor an exemption from all the burdens that generally applicable law—whether involving con

tracts or trademarks—imposes on property owners. See 28 U. S. C. §959(b) (requiring a trustee to manage the estate in accordance with applicable law). Nor does Sec

tion 365 relieve the debtor of the need, against the back

drop of that law, to make economic decisions about pre

serving the estate’s value—such as whether to invest the

resources needed to maintain a trademark. In thus delin

eating the burdens that a debtor may and may not escape, Congress also weighed (among other things) the legitimate interests and expectations of the debtor’s counterparties. The resulting balance may indeed impede some reorgani

zations, of trademark licensors and others. But that is only to say that Section 365’s edict that rejection is breach expresses a more complex set of aims than Tempnology acknowledges.

IV
For the reasons stated above, we hold that under Sec

-17 Cite as: 587 U. S. ____ (2019)

Opinion of the Court

tion 365, a debtor’s rejection of an executory contract in bankruptcy has the same effect as a breach outside bank

ruptcy. Such an act cannot re scind rights that the con

tract previously granted. Here, that construction of Sec

tion 365 means that the debtor-licensor’s rejection cannot

revoke the trademark license. We accordingly reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.

It is so ordered._________________

_________________ 1 Cite as: 587 U. S. ____ (2019)

S OTOMAYOR

, J., concurring



## SUPREME COURT OF THE UNITED STATES

No. 17–1657

MISSION PRODUCT HOLDIN GS, INC., PETITIONER v. TEMPNOLOGY, LLC, NKA OLD COLD LLC

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FIRST CIRCUIT

[May 20, 2019]

J USTICE S OTOMAYOR , concurring.
I agree with the Court that a debtor’s choice to reject an executory contact under 11 U. S. C. §365(a) functions as a breach of the contract rather than unwinding the rejected
contract as if it never existed. Ante , at 8–10. This result follows from traditional bankruptcy principles and from the general rule set out in §365(g) of the Bankruptcy Code. I also agree that no specif ic aspects of trademark law compel a contrary rule that equates rejection with rescis

sion. I therefore join the Court’s opinion in full. I write separately to highlight two po tentially significant features of today’s holding. First, the Court does not decide that every trademark licensee has the unfettered right to continue using li

censed marks postrejection. The Court granted certiorari to decide whether rejection “terminates rights of the licen

see that would survive the lic ensor’s breach under appli

cable nonbankruptcy law.” Pet. for Cert. i. The answer is no, for the reasons the Court explains. But the baseline inquiry remains whether the licensee’s rights would sur

vive a breach under applicable nonbankruptcy law. Spe

cial terms in a licensing contract or state law could bear on that question in individual cases. See ante , at 9–10; Brief for American Intellectual Property Law Association

as Amicus Curiae 20–25 (discussing examples of contract2 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

S OTOMAYOR

, J., concurring

terms that could potentially lead a bankruptcy court to limit licensee rights postrejection). Second, the Court’s holding confirms that trademark licensees’ postrejection righ ts and remedies are more expansive in some respects than those possessed by licen

sees of other types of intellectual property. Those vari

ances stem from §365(n), one of several subject-specific provisions in the Bankruptcy Code that “embellis[h] on or twea[k]” the general rejection rule. Ante , at 13, n. 2. Section 365(n)—which applies to patents, copyrights, and four other types of intellectual property, but not to trade

marks, §101(35A)—alters the general rejection rule in several respects. For example, a covered licensee that chooses to retain its rights postrejection must make all of its royalty payments; the licensee has no right to deduct damages from its payments even if it otherwise could have done so under nonbankruptcy law. §365(n)(2)(C)(i). This provision and others in §365(n) mean that the covered intellectual property types are governed by different rules

than trademark licenses. Although these differences may prove significant for

individual licensors and licen sees, they do not alter the
outcome here. The Court ri ghtly rejects Tempnology’s argument that the presence of §365(n) changes what §365(g) says. As the Senate Report accompanying §365(n) explained, the bill did not “a ddress or intend any inference to be drawn concerning the treatment of executory con

tracts” under §365’s general rule. S. Rep. No. 100–505,

p. 5 (1988); see ante , at 14. To the extent trademark licensees are treated differently from licensees of other forms of intellectual property, that outcome leaves Con

gress with the option to tailor a provision for trademark licenses, as it has repeatedly in other contexts. See ante,
at 13–14. With these observations, I join the Court’s opinion._________________

_________________ 1 Cite as: 587 U. S. ____ (2019)

G ORSUCH

, J., dissenting



## SUPREME COURT OF THE UNITED STATES

No. 17–1657

MISSION PRODUCT HOLDIN GS, INC., PETITIONER v. TEMPNOLOGY, LLC, NKA OLD COLD LLC

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FIRST CIRCUIT

[May 20, 2019]

J USTICE G ORSUCH , dissenting.
This Court is not in the business of deciding abstract questions, no matter how intere sting. Under the Consti

tution, our power extends only to deciding “Cases” and “Controversies” where the outcome matters to real parties in the real world. Art. III, §2 . Because it’s unclear whether we have anything like that here, I would dismiss the petition as improvidently granted. This case began when Mission licensed the right to use certain of Tempnology’s trade marks. After Tempnology entered bankruptcy, it sought and won from a bankruptcy court an order declaring that Mission could no longer use those trademarks. On appeal and now in this Court, Mission seeks a ruling that the bankruptcy court’s decla

ration was wrong. But whoever is right about that, it isn’t
clear how it would make a difference: After the bank

ruptcy court ruled, the licens e agreement expired by its own terms, so nothing we might say here could restore Mis

sion’s ability to use Tempnology’s trademarks. Recognizing that its original case seems to have become moot, Mission attempts an alternative theory in briefing before us. Now Mission says that if it prevails here it will, on remand, seek money damages from Tempnology’s estate for the profits it lost when, out of respect for the bankruptcy court’s order, it refrained from using the2 MISSION PRODUCT HOLDINGS, INC. v. TEMPNOLOGY, LLC

G ORSUCH

, J., dissenting

trademarks while its license still existed. But it’s far from clear whether even this theory can keep the case alive. A damages claim “suffices to avoid moot

ness only if viable,” which means damages must at least be “legally available for [the alleged] wrong.” 13C C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure §3533.3, p. 22 (3d ed. 2008). Yet, as far as Mission has told us, Tempnology did nothing that could lawfully give rise to a damages claim. After all, when Tempnology asked the bankruptcy court to issue a declar

atory ruling on a question of law, it was exercising its protected “First Amendment ri ght to petition the Govern

ment for redress of grievances.” Bill Johnson’s Restau

rants, Inc. v. NLRB , 461 U. S. 731, 741 (1983). And peti

tioning a court normally isn’t an actionable wrong that can give rise to a claim for damage s. Absent a claim of malice (which Mission hasn’t suggested would have any basis here), the ordinary rule is that “ ‘no action lies against a party for resort to civil courts’ ” or for “the assertion of a legal argument.” Lucsik v. Board of Ed. of Brunswick City
School Dist. , 621 F. 2d 841, 842 (CA6 1980) ( per curiam );

see, e.g. , W. R. Grace & Co. v. Rubber Workers , 461 U. S. 757, 770, n. 14 (1983); Russell v. Farley , 105 U. S. 433, 437–438 (1882). Maybe Mission’s able lawyers will conjure something better on remand. But, so far at least, the company hasn’t come close to articulating a viable legal theory on which a claim for damages could succeed. And where our jurisdic

tion is so much in doubt, I would decline to proceed to the merits. If the legal questions here are of sufficient im

portance, a live case presenting them will come along soon enough; there is no need to press the bounds of our consti

tutional authority to reach them today.