In Re Exide Technologies

Battery manufacturer Exide Technologies (Exide) (debtor) sold its industrial-battery business to EnerSys Delaware, Inc. (EnerSys) for $135 million in 1991. Exide granted EnerSys a license to use the Exide trademark in the industrial-battery business, while Exide continued to use the trademark for other products. EnerSys assumed Exide’s liabilities, including numerous contracts and accounts receivable, and operated the business for over 10 years. In 2000, Exide wanted to reenter the industrial-battery business and use the trademark on all its products, but EnerSys refused to relinquish the trademark rights. Exide reentered the business by acquiring another battery company while remaining bound by the trademark-license agreement. That meant Exide had to compete directly with EnerSys selling batteries under the Exide name. In 2002, Exide filed for reorganization under Chapter 11 of the Bankruptcy Code and asked the bankruptcy court to approve rejection of the trademark-license agreement and three related agreements as executory contracts with unperformed obligations. For example, the trademark agreement required EnerSys to observe use restrictions, not use the trademark outside the industrial-battery business, and follow quality standards, but Exide never actually provided quality standards. The agreements also imposed ongoing indemnity and further assurances obligations. The bankruptcy court treated the agreements as a single integrated agreement with a New York choice-of-law provision, concluded the agreement qualified as an executory contract under New York law, and approved rejection. The district court affirmed, and EnerSys appealed.