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In Re Centura

In Re Centura

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Published by Sam Han

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Published by: Sam Han on Jan 09, 2009
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 when a debtor ends up in bankruptcy, but‘‘does not concede dischargeability.’’
In this case, however, the Missouri courtchose not to award attorney’s fees as partof its contempt judgment. Thus, the ap-parent rationale of 
is not applicable. And, the bankruptcy court did not findthat Nangle’s actions in the bankruptcycourt constituted the willful disobedienceof a court order, or bad faith, or vexatious, wanton, or oppressive behavior. There-fore, there is no basis for abrogating the American Rule.Finally, we note that the Federal Rulesof Bankruptcy Procedure do provide a spe-cific procedure for awarding attorney’sfees against a party that files a pleadingfor an improper purpose such as harass-ment, to cause unnecessary delay, or toneedlessly increase the cost of litigation.
That rule contains procedural safeguardsto insure that fees are not awarded unlessa party, and its counsel, are given notice of the specific pleadings and actions that themovant contends are sanctionable.
Ms.Siemer, however, did not file her motionpursuant to Rule 9011, and did not providethe notice required, therefore, we need notconsider its applicability here.For all of these reasons, we reverse thebankruptcy court’s award of attorney’sfees.
In re CENTURA SOFTWARE CORPO-RATION, dba Mbrane, aka MbraneIncorporated, Raima, Centura Solu-tions, Vista Development Corporation,Debtor.Raima UK Limited, an Englishcorporation, Plaintiff, v.Centura Software Corporation, dbaMbrane, aka Mbrane Incorporated,Raima, Centura Solutions, Vista De- velopment Corporation, Defendant.Bankruptcy No. 01–32164–DM.Adversary No. 01–3239.
United States Bankruptcy Court,N.D. California.July 24, 2002.Party that Chapter 11 debtor had li-censed to use debtor’s trademark sued fordetermination that it had not breached itsobligations under licensing agreement,such that debtor’s purported terminationof agreement was invalid. Debtor soughtdetermination that, upon its rejection of licensing agreement, licensee no longerhad any right to use licensed trademarks,but was limited to claim for damages forbreach of contract. On competing motionsfor partial summary judgment, the Bank-ruptcy Court, Dennis Montali, J., heldthat: (1) genuine issue of material fact, whether debtor had expressly authorizedits English subsidiary to act as its agent innegotiating a sublicensing agreement withtrademark licensee, or whether its repre-
at 242.
Fed.R.Bankr.P. 9011.
See, e.g., In re Deville,
280 B.R. 483, 496–97 (9th Cir. BAP 2002) (stating that theremust be a separate notice for sanctions, andthat the notice must specify the authority forthe sanctions, as well as the sanctionable con-duct);
 Halverson v. Funaro (In re Funaro),
263 B.R. 892, 901 (8th Cir. BAP 2001) (hold-ing that Rule 9011 requires the court to findthat specific procedural requirements havebeen met).
Cite as 281 B.R. 660 (Bkrtcy.N.D.Cal. 2002)
sentations to licensee were such as to giverise to ostensible agency, precluded entryof summary judgment on question of  whether debtor was bound by language insublicensing agreement; (2) Congress spe-cifically excluded trademark licensees fromprotection accorded to other intellectualproperty licensees under executory licens-ing agreements rejected by debtor-li-censor; and (3) upon debtor’s rejection of executory trademark licensing agreement,licensee no longer had any right to uselicensed trademarks, but was limited toclaim for damages.Licensee’s motion denied; debtor’smotion granted.
1. Principal and Agent
96, 99
Under English law, agency relation-ship may be established in many ways,including by a grant of actual or apparentauthority.
2. Principal and Agent
Under English law, one of the ways toestablish agency by grant of actual author-ity is by presenting proof of express autho-rization by principal.
3. Principal and Agent
To establish ostensible agency underEnglish law, party asserting the existenceof relationship must prove that principal(1) by its conduct, created an appearanceof agency; (2) made a representation of such authority to third party; and (3)caused third party to rely on the appear-ance of agency.
4. Bankruptcy
Genuine issue of material fact, as to whether Chapter 11 debtor, in capacity asholder of trademark, had expressly autho-rized its English subsidiary to act as itsagent in negotiating a sublicensing agree-ment with trademark licensee, or whetherits representations to licensee were suchas to give rise to ostensible agency, pre-cluded entry of summary judgment uponquestion of whether debtor was bound bylanguage in sublicensing agreement, thatpurported to give licensee the right to setoff against its monthly payments to debtorsums not paid by debtor’s subsidiary.
5. Principal and Agent
Under English doctrine of ostensibleauthority, representation of agent’s au-thority can be express or implied.
6. Trade Regulation
Language in trademark sublicensingagreement, purporting to give licensee theright, if sublicensee delayed or failed tomake any payment, to set off amountsowed by sublicensee against ‘‘any’’ of licen-see’s own obligations to sublicensee’s par-ent, the holder of trademark, was broadenough in scope, assuming it was bindingon parent on agency theory, to permitlicensee to set off against its obligations toparent for licensing fee.
7. Contracts
In interpreting contract, court willlook first at literal terms of the writtendocument and determine what these termsmean from the ordinary language used.
8. Bankruptcy
Congress specifically excluded trade-mark licensees from protection accorded toother intellectual property licensees underexecutory licensing agreements rejectedby debtor-licensor. Bankr.Code, 11U.S.C.A. § 365(n).
9. Statutes
188, 217.4
 Where statutory language is clear, ju-dicial inquiry is complete, and there is noneed to delve into statute’s legislative his-tory when interpreting it.
10. Bankruptcy
Prior to debtor-licensor’s rejection of intellectual property licensing agreement,bankruptcy statute dealing with post-rejec-tion rights of licensees is useful only as aguide or factor in determining whethercontract should be rejected; however, stat-ute controls adjudication of licensee’srights once rejection is approved. Bankr.Code, 11 U.S.C.A. § 365(n).
11. Bankruptcy
Because bankruptcy statute purport-ing to protect the rights of intellectualproperty licensees under executory licens-ing agreements rejected by debtor specifi-cally excludes trademark licensees fromprotection, such licensees, in order to pro-tect themselves, must assert their rightsearly in case, before franchisor receivescourt approval of its rejection decision.Bankr.Code, 11 U.S.C.A. § 365(n).
12. Bankruptcy
2834, 3115.1
Upon bankrupt trademark licensor’srejection of executory trademark licensingagreement, licensee no longer had anyright to use licensed trademarks, but waslimited to claim for damages for breach of contract. Bankr.Code, 11 U.S.C.A.§ 365(g, n).Dillon E. Jackson, Foster, Pepper &Shelfelman, PLLC, Seattle, WA, DouglasG. Boven, Crosby, Heafey, Roach & MayP.C., San Francisco, CA, for Raima UK,Ltd.Michael B. Schwarz, LeBoeuf, Lamb,Green & MacRae, L.L.P., San Francisco,CA, for The Official Committee of Unse-cured Creditors.David S. Caplan, Brooks & Raub, APC,Palo Alto, CA, for Centura Software Corp.MEMORANDUM DECISION ONMOTIONS FOR PARTIALSUMMARY JUDGMENTDENNIS MONTALI, BankruptcyJudge.
The court has been asked to decide whatappears to be a question of first impres-sion: following a debtor’s rejection of alicense agreement that grants a counter-party a license to use the debtor’s softwareand trademarks, may the counter-partycontinue to use the trademarks after elect-ing to retain its rights in the software? While the result may appear harsh to thecounter-party, the court concludes thatonce a license has been rejected, the coun-ter-party may not continue to use thetrademarks.Two motions have been filed in this ad- versary proceeding involving a disputeover rights asserted by Plaintiff RaimaUK Limited (‘‘Raima UK’’) to continue tomarket and sell software products undertrademarks owned by Debtor/DefendantCentura Software Corporation (‘‘CenturaUS’’). Raima UK filed its motion for par-tial summary judgment (‘‘Setoff RightsMotion’’), requesting a determination that(1) its exercise of setoff rights was proper,(2) Centura US’ termination of RaimaUK’s license agreement (‘‘Raima UKTrademark Agreement’’) was therefore in- valid and improper, and (3) Raima UK isentitled to the fees and costs it has in-curred in obtaining the order invalidatingthe termination. Centura U.S. and theCommittee of Unsecured Creditors (‘‘Com-mittee’’) filed their joint motion for partialsummary judgment pursuant to 11 U.S.C.§ 365(n)
(‘‘365(n) Motion’’). They re-
Unless otherwise indicated, all chapter, sec-tion and rule references are to the Bankrupt-

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