Opposition Brief — Exide Technologies v. EnerSys Delaware, Inc.

en

ret mer waived any argu

yurt of Appeals for the Third Circuit erred in app

the “Countryman Test” (defined below) to determi

whether the Agreements (defined below) wer¢

executory,” when the Petitioner failed to assert ar

rybjection to the use of the Countryman Test or proposs

the use of any other test of executorimess in proceeding

before the Court of Appeals (or either of the lower court

that addressed this matter prior to the Court

Appeals), and, in fact, affirmatively argued to all three

ourts below that the Countryman Test applied and \

atisfied, and raised the issue of the use of the

Countryman Test for the first time in its Pe i

Writ { Ce? OT ,

2. Should the Pet.tion be denied because there

real, intolerable or genuine conflict among the fed

yurts of appeals regarding the test for detern

hether a contract 1s executory

3 n ld tn i lion ¢t ene te (

extent that there ts a conflict among the federal «

of appea rey ding the t t for determining wl ner

intract OX, tor. t not tf nt at

: Shi ne Pe n b¢ t e¢

extent that there mnflaet ay g the feder T

ippea regarding (ne le for determining whe

r | ay! r r

yu i i | } ( ur ad parc ¢

tent that there is a conflict among the federa

f appeal reoparding the test for deten ng vhetl

contract 1s executory, it rel { ul e whic

Lsufficiently important

{ bye if i@d because to U

f hould the Petitior

ent that there is a conflict umong the federal court

f ippeal ; regarding the test for determining whetl

ontract is execulory, Chis Is not an apy ;

rasointion of ch conflict

LIST OF PARTIES TO THE PROCEEDINGS

BELOW AND RULE 29.6 STATEMENT

’

lhe names of all parties in the United States Cour

Appeals for the Third Circutbare Exide Technologie

Petiboner) and EnerSys Delaware Ine (Respondent

Isa wholly-owned

ory a?

XI DI HA WAIVIED ANY

ARGUMENT THAT THE COURT O]

APPEALS APPLIED itt

INCORRECT TEST TO DETERMINE

WHETHER THE AGREEMENT

ERE EXARCUTORY

TF |

vvI

Che Proceedings Kefore the ¢

Appeals

Il THERE IS NO CONFLICT AMONG

TiE FEDERAL COURTS Ot

APPEALS REGARDING THE TEST

FOR DETERMINING WHETHER A

CONTRACT IS EXECUTORY

\. There Is No Conflict Between the

Sixth Cireurt and the Circuits That

Have Adopted the Countryman Test

Regarding the Test for Determining

Whether a Contract Is Execulory

There Is No Conflict Between the

Mleventh Circuit and the Circuit

That Have Adopted the Countryman

fest Regarding the Test for

Determining Whether a Contract 1

le xecutory

1.TO THE EXTENT THERE IS A

CONFLICT AMONG THE FEDERAI

COURTS OF APPEALS REGARDING

THE DEFINITION OF EXECUTORY

CONTRACT, IT IS UNDEVELOPED AND

DOES NOT WARRANT TILE GRANT OF

EXIDE’'S PETITION.

rO THE EXTENT THERE IS A

CONFLICT AMONG THE FEDERAL

COURTS OF APPEALS REGARDING

THE DEFINITION OF EXECUTORY

CONTRACT, IT IS BASED ON

OUTDATED AUTHORITY AND DOES

NOT WARRANT THE GRANT OF

EXIDE’S PETITION

PO THE EXTENT THERE IS A

CONFLICT AMONG THE FEDERAI

COURTS OF APPEALS REGARDING

THE TEST TO DETERMINE

WHETHER A CONTRACT IS

EXECUTORY, THE ISSUF RAISEDIS

NOT IMPORTANT ENGUGH TO

WARRANT GRANTING EXIDI

PETITION

iO FHE EXTENT THERE IS A

CONFLICT AMONG THE FEDERAI

COURTS OF APPEALS REGARDING

Tk DEFINITION OF EXECUTOR,

CONTRACT AND ime IS

DETERMINED TERAT THE ISSUE

RAISED IS IMPORTANT ENOLIGH TO

WARRANT RESOLUTION BY TILIS

COURT, THIS CASE IS A POOR

VEHICLE TO EFFECT SUCH

RESOLUTION

rHeE COUNTRYMAN TEST IS_ THt

CORRECT AND APPROPRIATE TEST FOR

DETERMINING WHETHER A CONTRACT

IS EXECUTORY

CONCLUSION

PABLE Ot

APPENDIX A K

tRIEF OF APPI

MXTDE TECHNOLOGTI iN i

UNEPED STATES COURT OF APPEAI

POR THE THIRD CIRCUIT, DATED

JANUARY 12, 2009

APPENDIX B PETITION OF APPELLEI

KE AIDEI TECHNOLOGIES FOR

REHEARING EN BANC IN THE UNITED

TATES COURT OF APPEALS FOR THI

PMIRD CIRCUTT, DATED JUNI NO

APPENDIA C ORDER OF THE UNITED

STATES COURT OF APPEALS FOR THI

THIRD CIRCUIT, DATED JUNE I, 201

APPENDIX D COMPLAINT IN H |

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWAR

DATED AUGUST 20, 2

WM)

sub nom

A rceara

OTHER AUTHORITII

nN leg I

" . A > | 1

} ‘ |

i

. .

a) WAT

H bay A

nied i , {

+¢ a, f

i

Lawr« ( (

A

I

f i

)

f ‘ A,

le i f >

| } 1.

i ;

P l A

\ Ce re } ‘ f

A J? j }

‘ i/ /

|

requests that this Cor

a writ of cerlrorari seeking revie.

of the United States Court of Appeal

he Judgmer

tor

ind Upinion

[ 1Csrenst (“Courtof Appeal

Thir

t to knersy ind |

4 [exide Technologie I}

entered into an Asset Purchase Agreemer

“Petition” or “Pet ati

A sy on June 10, 1991), Ene

‘ a\ ' '

enting

$135 million, repres

Exide”),

APA”) Petition

All of the a> el

y business, including plant

trademark: tradename

und related goodwill Pet

APA (and also in ¢

price), Ex.

worldwide

Lad hnolop Vy

sider |

Idition, at closing on the

fully patd $135 million purchase

i the

1 perpetual, exclusive

‘rT anted ene rs

royalty-free license to use certain trademart including

lo xia (collectively the “Marks”), on produ

he industrial battery business pursuant to a ‘Tra

into the AP

old

h was incorporated

Agreement

it (“Trademark Agreement

(Oa Obtaining the perpetual

ldwide, royalty-free right to use the Mark

ym industrial batteries was critical to the decision

“nerSys to enter into the APA Transcript of March

004 Hearing at 126, 128, 130, Jn re Faide Technolog:

an

NO UZd-]

11125 (Bankr D Del.)

t April 15, 2002, t e and ats debtor affiliates

intary petitions for relief under Chapter II of

litle 11 of the United States Code (the “Bankruptcy

Code") | he United States Bankruptcy Court for th

District of Delaware (the “Bankruptcy Court”)

tal,No O2Z-111% os ee

ry (72 years atler the

xide filed four Notices of Rejecti

‘Trademark Agreement, «

elated iuyreement

Agreements”) Pet at8, Poet App 29a &n 3, /n

Technologve etal ? 25, DI 1613, 1614,

Y 1617 (Banks | ). The four Notices of Reyection

deseribed above are collectively referred to as the

Notices to Reject " Wxide’s primary objective in filing

to Reject was to recapture the exclusive

Marks (including “Exide”) on industrial

App 1Ou, notwithstanding that it had

nsferred that right lo bneroys in perpetuity in ld

paid f rthat transfer Pet

erand) lasupporting: oj on prar gv | 1

request that at be permitted to reject the Agreeme

the Rejection Order” and the “Bankruptcy Court

Opinion,” respectively) Pet App. 27a-S88a, Pet at

On February 27, 2008, the Umited States District Cour

f the District of Delaware (the District Court

Hormed the Rey ccthron Order ina Memorandum O

the “District Court Order Vet App

On June 1, 2010, the Court of Appea !

mn (the “Court of Appeals Opinion”), determ ‘

at the Arrceement are not execrtory and cannot be

reiected, and a judgment (ihe Court of Appeal

Judgment’) vacating: the District Court Order

{ and

remanding for further proceedings consistent with tl

Court of Appeals Opinion Pet App la-l3a, Opp. Apy

78a-79a On June 1h, 2010, Exide petitioned the ¢

Appeal lor rehearing en banc Op) App oba

On Jims As) O10. the € ird of Apy " Lore t

} tion for rehearing ¢ } Ap) 4-\-$

kexide did} eek astay of Lhe mandate L(t

Appeals and, on Ju 2010, the Cour tl Appe

edit mandate Jr v6 } de Tech (ie et ¢ i

OS-1872 (3d Cir. July 010) On July 14, 2010, tl

District Court vacated the District Court Orde

remanded the case to the Bankruptey Court for furtt

4 4

\ ] !

proceeding in re Arve jechno ( Vt

1) | D. Ds July ] , )

( Au ) theo } | ' '

i rder tf { I ne ther hing Y

eyvection Order ind denied the N ; r

i / . ,

in order that amonded tts Aupust 27, 2010 Orde

respects that are not relevant to this Petition 77

ide Technol Tle el a No QO 1) ]

Bankr. D Del )

REASONS FOR DENYING THE PETITION

I. EXIDE TITAS WAIVED ANY ARGUMENT THAT

THE COURT OF APPEALS APPLIED THI

INCORRECT TEST TO DETERMINE WHETHER

THE AGREEMENTS WERE EXECUTORS

t u uid Kidde < l

i I

Exide argues inits Petition that the Court of Appe:

rred in applying the “Countryman Test’ th

Countryman Test”) to determine whether Che

Agreements are executory and further argues that a

well-entrenched conflict” exists among the feder

courts of appeals regarding the test lo be used

determine what constitutes an “executory contract

inder Section 365(a) of the Kankruptey Code? Pet at

The Countryman Test defines an execulory ct

“ nr

1 contract under which the obligation of both the bankru

and the other party to the contract are so far underperform

st the failure of either to complete performance woul

onstitute a material breach excusing the performance of (

ther” Sharon Steel Corp v Nat'l Fuel Gas Distmb Corp , 87

F2d 386. 39 (3d Cir 1989). see also Jn re Colugnils (;as

ctis between se

19 According to Ioxide, the ce bye

ircuits, including the Third Circuit, which have adopted

the Countryman Test ind two cireuds which léxid

isserlts have adopted the “Functional Test” Pet at 13

Kor the reason iscu ed below. there 1 ne if

eonfliet Further, to the extent any such confliet exist

snot well developed, is based on very old cireuit cour

deqsions purporting to adopt the Functional Ty

ssue that is

!

at

important enourh t

loes not relate to ani

varrant granting the Petition And, in any event, t)

case 1S a particularly poor vehicle to resolve any suc

eonflict It is not necessary, however, for this C

address or resolve any of those issues because Ex

a threshold matter, has waived any

the Court of Appeals erred in apply

tin this case

At no time prior te filing its Petition did le evi

jueslion or oppose the use of the ¢ ountryman ‘Te

determine whether the Apres ments were executor

propose that the Bankruptley Court, the District Cont

ler ipply the Functiona

or the Court of Appeals cons!

l'e t, or any other test. to a ‘ 1 ceterminatior

set forth below, | le affirmative

l'o the contrary, as

Lhiee courts that

irpued to all tryman .

phed ar

\ The Proceedings Before the Bankrupt

L-ourtl

On January 14, 2004 } or to the hearing of tl

ulter in the Bankruptey Court, Exide file \ ‘

ejection Hearing Brief. Exide wrote

Although the Bankruptcy Code does 1

pecify what constitute an execuls

contract,” courts generally follow the

Countryman Definition,” which defines at

agreement as executory if the oblhwation

both the bankrupt and the other party to the

contract are so far unperformed that the

failure of either to complete performances

would constitute a muteril breach excusing

performance of the other” Sharon Steel Cary

National Fuel Gas Distrib Corp , 872 F 2

16, 39 (8d Cir. 1989) (quoting Countryman

mHrecutory Contracts i Bankri pte) /

Minn L. Rev 489, 460 (197

erted no objection to the use of the Countryman Test

| prope ed no other test for ex lLoring [nda

Exide filed ils Pre-Reye Hearing Brief

ankru vy Court under seal bul has apree 1¢

ftnerovs citation ¢ d i f t

j nt refers i? <

Lne rar l { i t i |

irmatively argued that the ( Intryman Lest appli

ind had been atisfied Iran: ript of March

Hearing, at 37, 67, In ve Veide Techn ( N

Lt Bankr DD

Following the he ing t | ee | ‘

bmitted to the Bankrupt Court. Exide rai

tirmatively argued that the Countryman Test app

ind had been satished Debtor Vost- Trial Brief at 3

iiny ride Technologies, etal, No 02-11] y[ 4

Bankr ID Del Apt 1} J4 ! e wrol

A thi { urt ha rujed the perti

yuestion is Whether “the failure of eithe {

mplete performance would co tittite

material breach excusing performance f t

aye ‘ diay , Uf py { y ‘ / j

i) fr sf } ( r ;

I Agra 1¢ a ert , § t I

untryman Test and propo 1] her t

eculorine S ¢ Ut ( Lid? Debt Post-Trial Br

In re Exide Technolog é )2 -] » (I |

Del A rr’ 1.4 OO4

in the bankruptcy 4 rt OF ed "

4, the Bankruptey Court apphed the Counts

‘ ex ’

.

¢ genera /

' ‘

r recor i¢

ect either the heject

imt On wor neludir

erie ‘ he (

7 ) '

BK. The Proceedings |

ky r +}

i Cl pp (

rict (our in} al «

if I x }¢ ivy alo i (

; ] ; |

ntryman I" wna p

? ripe Nee é ‘

4

\ppeal from Bankt

| . ; NJ (¥

‘ } } r |

( x { ins |

yrrectly found that tl

had be tisfied Ay

eal from Bankruptey ¢

Anotogies, etal, No O06

/

de

¢

rt

ippropriate Lor was happii ible it

even claimed that court generally foll

her refining the characteriza

rinancs due to some extent, on both

est there be ar confu n repard

non tne appropriate test tor execulori

‘ Che plain language the |

{ Inequive al} my ( on both

ual rong ’ i {

thie yntr { KECU under tf

?

>

( Le Vect \)

{ Appellee filed tr

ried no objec

roposed no ot}

Appellee’s Opy

p< \ { ’

{ 1) ft

e { unt mar

pellee's Opposit

urt al J? j

efore the Dists

never argued or implied that it wa:

HERE 1 NO ONFLI‘

FEDERAL COURTS OF APPEAI

rie TEST FOR DETERMININ

ONTRACT IS EXECUTORY

2 instant case, GI -*’s ability t

hase agwreements which obligated itt Imm pro

dewvelopedcd homesite lots to tens of thousands

purchasers, when it was simply fiamancially unable

such contractual obligations toas critical to Csi»

reorganization "") (emphasis supplied). Exxicile, howev<

appears to interpret General Meveloprrierit Ss >ete

REL Ee

much lower bar, allowing for treatrment of a contract

, ecutory af rejection would “-ellieve the debtor of

burdensome or disadvantageous obligratio

{'itrewuit amd the Circuits "That hbiave Adopted

the Countryman Test Regarding the Test for

Determining Whether = <“ormt act

Itxecutory

Thkeere Is No Ceonfiict BSetweem the Sixth

| > fo’s arpourment that the Saxth Cur<

law COvoumtryrmaan ‘Test amd adopte:« thies

basedi om /?72 re Yotlty, O74 ri2a SAY CGth

reze@2@cdk, ASY ss 929 C1973), ws wrllepedily

Aoreaeltl & Crace Coat Cc 761 2d 31

t+ ATagreas, VT2 - is Cast ta

xide mot rm

scores.” ” “cd assaact waar liage

therm fror a

eiven sacle’

$ BERLAgPEOR I-c: t

PIrme anmeai mAmta pre rlagration

raal fand amy swasrat, Cleooees racets

‘quire that . af frat re

to the

ively acdlopte«< the Countryman Test more tha

YCArS ALO, sce In re ‘errell, BO2 Ee’ 2a 469 €5t

>". saancl to> cas cetliascussed below, the aii cu S10Yr "

¢ of the PFourctiomazal twas dicta

>—rell, the = Fh Fg q€lircunt rmoteci that tiho ter

y contract” is anot defined in the Bankrupt«

then stateci- “CWongress apparently had inrn

it

1iti9© autory contracts set forth :

imtryrmman, ‘ortracts in BRanrnl-ruptcy Pa

"The 7 e-? then re-stated, verbatim t

Ourntrymman aa t i171 > a wspplied t

Qurmtryrianm “Besst to Che fucts ard comclucde a, “*Le jJleur

re are material obligations left to bo performed

th partic to the contract.”"?’ [ad at a’72 Based on tha

lirigz the Court Reldthat the contract in question wa

ecutory ld at 4°73

CCconspiciuoiusty refi QOpPimi]3S8i is mr

ritiom of the la arther, since t}

< r@maim Ferrell -crm cited by lo <

é F- ste f.rile 3 even toa €:te the "ew? «ie 1S31aom rm t

t > l< alone attempt to distinguish it or explain ah

> riot preciude uny finding of comflict between the appr re

he im &F < rc? to dctermining whether a contract

wtory ama cne approach rm the sever < r«< tits na r a

, @? P e '

ceurts han the saiaxtti < 1f ews t za Ciearicid aan py | . tc!

proposition that, in the Sixth Caircuit, the Countrymar

best applies -e Lee wre FleaAwver swood Apartrierits i_tet

I38B8 BR 307 311 c6th Cir BAP 2008) (‘‘After crting thi«

clefinition set forth in the iegprusiative history, the Verre

eourt adopted the so-called Countryrman definition orf

mr @xecutor: ecomtract.’”’)>, Fre wre Wat’! Ftv tealty Frmeet

226 SB .kF 5B8So, 56839 (Bankr WY ID Ky 1998) Ceriting Ferrel

and stating “he prevaihng definition throughout ths«

CL¥ymited States is reneratli referred to as t h«

Clounmtrymrman’ dofinition The Sixth Circeait 1s, n«dopte«

ttacat. <ciesfiraitiorns -

reroveldzZ,. omits own, defewuts EF xida «- lias 1 of ‘ ?

between the Sixth Circuit and those iz rat ae at <

adopted th« Countryman “Test Sut even sf th« xt

cClirceast had not Issued its 7 v7 ell Aecision mo rez

imtolerable or genuine conflict would exist hetwuw-een tl

Imawiimthoae Sixth Circuit. amd the law im th rceit hha }

Mave nudopted the Coountryman ‘i t reas prarr-«i 4 tIhh«

Gdefimition of an execcutory comtruct

fr Jolly. prior two thia falarge » fi tine aj b> ¢

bamkruptcy petition, the debtor enter« J amto a: pritra c

to purchase burial plots ith the purs« Lasse pric« f r the«

ots to be paici over a When the debtor later

ajaefaulteda on hes pay rt oblipat ons wnder tf

rpmtract, the cermetery owner cance nHhecontract ar

perio. te the deobtor’s banmkrupt« lamp, Vbtuinmaci

default pert for the balamce ie Jolly 74

J After tne debtor f1

edi his bankrupt«

SRWUBF LA ELE

ahol« a-corifl

aafly raraquair

of cert~ore.y

Clireciwit do

the ¢C*ountr

\ 976, 978

rplimnmtryrmarnr

tatimy {t

Jaoattly t39 ce

ad defimitio

urther ww ne

ma »priflict t

imilar fix

iis that ha

"r eee Jolly ¢«

ot. executor

‘ fi ,

appled the

2arme comecltu

iriirigze rmater

tai ac 2AQOD s

4 <i . $ the

or I <iclie’

tratle on gz

< irctuinit rope

act amci the

a YY ¥¥i <4 Th A <

<

tha

beat

Lzaat

th

ice

ase which applied

suuntryman lest or any ¢

Countryman Test, let alone reject the Countryman ‘I’

Rather, the Court in Becknell simply quoted from Jo!

and then, without any independent reasoning, found the

‘ase purchase agreement in that case to be executory

because all of the parties to the contract “had obligation:

to perform in the future " /2 re Becknell, 761 F2d

And, there 1s no indication in the Becknel/ opmioT

were n

material As a result, it cannot be said with any

mfidence that the result in Becknell would have beer

Set otter

that the remaining obligations of the parties

{

any different under the Countryman Test

Gressman, Shapiro and Geller, Supreme Court P

13 (7th Ed 1993)

Finally, the decision of the Sixth Ciremt in Magne

;

ends no support to Exide's ¢]

um of a conflict because

Vagness was not a case in which executoriness was eve

atissue Rather, in Magness, the Court was required t

letermine whether a cuutract could

assigned notwithstanding the provisions of 11 U.!

365(c), which preelude assignment. of certain types of

972 F.2d at 689. While the

be assumed an

5 ¢

ontracts. Jn re Magness,

Vagness Court did cite both the Countryman Test and

iy, it speeifically noted that “{iJn the instant case

because the trustee does not propose to reject tl

contract but wishes to assign it, 76 is mot necessary to

further explore the executery contract problem" |

at 694 (emphasis suppled) The discussion in Magni

of the Countryman Test and Jolly was mere dicta and

», does not provide any basis to find that a real

tolerable or genuine conflict exists between the test

mployed by the Sixth Circuit to determine wheth

Lract 1s executory and the test employed

tha

WY Lite ‘

Lit Lila ivt l | ] {

} ! v Scott, 610 F3d 701, 708 (11th Cit

Dict neither h law of the case nor bindn

pre edent \7 ay Pharma enxtica Cor vera

3d 1,3 (1st Cir 2001) (“Dictuam constitutes neither the

vy of the ca nor e stuff of binding precede

“he CONCLUSIOT l inescapabl that ni ig

n thie t

tolerable or gpenuine conflict exists between

reuit’s approach to determining whether a «

xecutory and the approach of the seve

ive adopted the Countryman Test

B. There Is No Conflict Between eleventh

Circuit and the Circuits That Have Adopted

the Countryman Test Regarding the Test for

Determining Whether Contract |

Executory

x { irreume I i i ¢ Vul nt

int ofits Petition exists between the Eleventh Cu

dad tt ven circuits that have adopted the

ountryman Test 1s based on a single case, /] '

(reneral Dev Corp , 84 F8d 1364 (1th Cir 1991 (

ut. 16-17 Exide's reliance on Ge D ye?

placed

ct ral 7 l'¢ Opie ri al er I } t

hich the Eleventh Circuit did not author an opin

rather, simply affirmed ba ed on (he opinion of the

district court. /d@ at 1365 As noted by this Court

ru State Bd frRiec v Soc lasl Workers, 440 1

mmary affirmance can extend no farther than ‘the

precise issues presented and necessarily decided by

those actions ’“ Additionally, in Edwards v Carpente?

529 US 446, 452 n 3 (2000), this Court stated “In any

event, per curzam opiniwns decided without the benef

ull briefing or oral argument are of little precedentia

even if the lack of pres edential value of the Gener

Development decision were to be ignored, it docs nat

create a real, intolerable or genuine conflict with the

law of the seven circuits that have adopted the

Countryman Test In General Development, the district

court — not the Eleventh Circuit - stated “While it does

nol appear that the Eleventh Circuit has adopted thé

‘functional approach’ over the ‘Countryman approach

the Eleventh Circuit in Jn re Martin Brothers

Toolmakers, Jnc. {internal citations omitted] appear

more mnclined to embrace the ‘functional apnroach.’

nve General Dev Corp ,177B R 1000, 1018 (SD Fla

995). In other words, while the district court opinion

Creneral Development, affirmed without opimtion by the

Mleventh Circuit, predicts that the Eleventh Circuit

would embrace the Functional Test, it also acknowledges

J

that the Eleventh Circuit 2.@s8s not ruled on whether the

Countryman Test or some version of the Functional Test

hould be apphed in determining whether contracts are

executory /d And that is exactly how lower courts in

the Bleventh Circuit have interpreted Ge

Development See.eg, Inve WB Care Cente C4

RR. 62, 70 (Bankr. SD Fla 2009) (eiting Gener

Development and stating, “lelven though this Circuit

imenable'’ to the funetional test, 1 has not outrigh

adopted the functional test over the Countryman f {

While the Fleventh Cireuit may have expr dati

is “amenable” to the Munctional Test, that expression

f amenability falls far short of ereating a rea

intolerable or genuine conflict between the eleventh

Circurt and the seven circuits that have affirmatively

and unambiguously adopted the Countryman Test. And

nee, for reasons discussed above, no such conflict ex

between the Sixth Circuit and the seven circuits whiel

have adopted the Countryman Test, there is no conflict

among the federal courts of appeals that would just

granting Exide's Petition

HW. TO THE EXTENT THERE IS A CONFLICT

AMONG THE FEDERAL COURTS OF APPEALS

REGARDING THE DEFINITION Ol

EXECUTORY CONTRACT, Wh IS

UNDEVELOPED AND DOES NOT WARRAN'

THE GRANT OF EXIDE’S PETITION

To the extent this Court concludes that there

conflict regarding the approach to determining whethe

1 contract is executory employed in the seven circutt

which have adopted the Countryman Test, on the one

hand, and either the Sixth Circuit or the Elevent}

ircuil,. on tne other h ind the conttict 1 unde ve

ic approacn

the Countryman Te:

xth Circuit panel in Joli

sixth Circuit

S51: In 7

panel in

e Becknell i

‘ars after Jolly was issued

a difft

in Terrell, adopting

F'2d at 471-73 & n

lec extent. y i 1 Becknell adopted

the Functional Test, an internal conflict

ixth Cireurt. Before this Court commits its

to resolving any perceived conflic

the Sixth C

idopted the Countryman Test, tl

5 ne OLX

©

and the seven circuits

7

between the approae ho

defining executory contracts and the approach of th

have udopted the Countryman Te

1¢ based on an opinion of a district court, affirn

even circuits that

rcunmam by the Rleventh C

ircull

1364 Before this C

IV. TO THE EXTENT THERE IS A CONFLIC’1

AMONG THE FEDERAL COURTS OF APPEAI

REGARDING THE DEFINITION O|

EXECUTORY CONTRACT, IT IS BASED ON

OUTDATED AUTHORITY AND DOES NO’

WARRANT THE GRANT OF EXIDI

PETITION

tion I< a ( f

ic Kankruptey Act

i

renealar 1979)

r 4 ended Jlilbert ‘ \4

or ( lr 158 3d 573 nh Cor }

» 14 I 3d } HOF Sth Uir LYy é

rcor / 3 | 193 141 (9th Cr 7

rd, 3 Fi3d 1207, 1 | Ith Cir 2009) |] 1

{ the appellate rt ce [ ed by }

pting the Countr an T wore render

( isl yeur a agaecidt

} | ( od

Lr pre [

e? an ne i l ]

LT nan I’ i (

nsidered the j f t! t ! (

t i 11d ot } {

ng tne lef) Nn cx ite

Vv. TO THE EXTENT THERE IS A CONFLI(

AMONG THE FEDERAL COURTS OF APPEAI

REGARDING THE TEST TO DETERMIN!

WHETHER A CONTRACT IS EXECUTORY

THE ISSUE RAISED IS NOT [IMPORTANT

ENOUGH TO WARRANT GRANTING EXIDI

PETITION

vw} } ryt ~ateay f

Wil al al PVILCAL

Countryman Test or a version of the Functional Ti

ould lead to a different outcome in a case which has

any real chance of arising is where the non-debtor has

fully or materially performed (or never had any

performance obligations), the debter has not fu

performed, and the debtor wants to reject the contract

However, even within this narrow category, the

listinction between the Functional Test and the

Countryman Test will have no significance in most ca

for the reasons stated below

~ } ¢ , +

Such a contract would be non-executor;

Countryman Test, since the non-debtor has materially

performed. And if rejection 1s not “critical” to the

debtor's reorganization, the contract would also likely

be non-executory under the version of the Functiona

Test Exide asserts has been adopted m the Eleventh

Circuit, stnce very few individual contracts are critical

ry undel

to a debtor's ability to reorganize See Jn re Gener

Der Corp , 84 F3d at 1374

Moreover, if the debtor’s remaining obligatior

inder a contract which has been maternally performed

y the non-debtor do not constitute “claims,” as tha

term is defined in the Bankruptey Code, 11 U.SC. §

}

)

101(5), it will not matter whether a version of the

Functional Test or the Countryman Test is apphed

because rejection does not relieve debtors of obligation

under contracts that are not “claims "Jn re The Grov

Round, 482 F3d 15, 18-19 (Ist Cir. 2007), In re Lavigne

114 E3d 379, 386-87 (2d Cir. 1997); In re ¢ Der

19 F3d 1077, 1083 (5th Cir 1994), ce lene

3 US 874 (1994). Such is the case because reject

nstitutes a breach of contract immediately before

inkruptcy petition date which, in turn, relegates at

lamages meeting the definition of “ela” in 11 US

10](5) to prepetition unsecured status 1] US ¢

S05 ft) See M1 t-hael T Andrew, Fxecutory ¢ Tontract ?

Bankruptcy Understanding “Rejection,” 59 U Cor

I, Rev 845 (1988) [Andrew I], Michael T Andrew

A Reply to Professor

Westbrook, 62 U. Coto. L Rev. 1 (1991) [Andrew II

Jay Lawrence Westbrook, A Functiona

Executory Contracts Revisited

recutory Contracts, 74 Minn L Rev 227 (1989), see

y Ti . . «age 1

In re The Ground Round, 482 1 at 18-19, /

, 4 > “ oo 4

L,at ié 114 [ 1d at 386-87 i € Aust? I ¢ (

| iL tUAS

Tr { ; raion b BR nor } , ned |

rn Wl, asarepuedc oY mnNne ICIOW ANG Aa { CD,

by Circuit Judge Thomas L Ambro im his concurrn

pimion in the Court of Appeals in this case, rejectior

| \ a

yuld not have divested EnerSys of its mghts under th

lrademark Agreement Pet App 14a-2la As a result

at least from the perspective of Judge Ambro, selection

it

! the Countryman Test or the Functional T wou

) nave Made anv ailiference in this case

' fA ‘ry r T ; 4

‘ r I Dp] It rt } a

he issue of impact of reyecuon addressed by Judge Amt

e were remanded to the Court of Appeals for application of

different executory contract test, and if it were deternur

VI. TO THE EXTENT THERE IS A CONFLICT

AMONG THE FEDERAL COURTS OF APPEALS

REGARDING THE DEFINITION OF

EXECUTORY CONTRACT AND IT IS

DETERMINED THAT THE ISSUE RAISED IS

IMPORTANT ENOUGH TO WARRANT

RESOLUTION BY THIS COURT, THIS CASE IS

A POOR VEHICLE TO EFFECT SUCH

RESOLUTION

the extent it 1s delermined that there 1s a confli

ng the federal courts of appeals regarding the

yper definition of executory contract and that the

ue is Important enough to warrant resolution by 1

rguing for application of the Functional Test given it:

ulure to make that argument to the Bankruptcy Court

the District Court, or the Court of Appeals, that failure

makes this case a poor vehicle to resolve any issues

lating to the definition of executory contract since thi

ourt would be addressing those issues without the

benefit of any analysis from the Bankruptcy Court, the

strict Court, or the Court of Appeals

: ; oat =

Second, as noted by Exide in its Petition

equent to the issuance by the Court of Appea

ord lenying Exide’s petition for rehearing er banc

xide filed ‘complaint (the “Exide Declaratory

Judgment Complaint”) in the Bankruptcy Court

ecking a declaration of rights under its confirr

rpanization (the “] de Plan

Op) ' ‘ ) nt) e DD ;

Judgment Cc nplaint, f gea ert mong Live

things, that based on the discharge and revest

provisions of che Bankruptcy Code and notwithstanding

that the Court of Appeals has determined that thi

Apreemenés are not executory and cannot be rejected

KnerSys does t have an enforceable right post

confirmation to use the EXIIEF mark under the

(Trademark) Agreement”, and “Reorganized Exidk

not encumbered by any use restriction provided in the

Trademark] Agreement,” and prays for an orde

declaring those assertions to be correct Opp App. 95a

oa In other words, according to Exide, even if it

Petition were denied, it would still get all the relief

suught in connection with rejection of the Agreement

e, exclusive use of the Exide trademark ar

tradename, even though it would be unable to re)

the Agreements While EnerSys strongly disagrees will

e claims asserted inthe Exide Declaratory Judgment

Complaint, the fact that these claims are being assert

by Exide and, if accepted, would render moot the issue

which Exide asks this Court to review (2 e , whether the

reements are executory and can be rey eLed), make

this case an extremely poor vehicle to resolve issue

relating to the definition of executory contr

Vhird, if the Petition is granted and this Court we

decide that the version of the Munctional Test Exid

asserts has been adopted by the Eleventh Circuit shoul

have been applied, the Agreements would still!

to be non-executory because re} ior of the

Aura vesike ox .] ly not “ert eee

Apreements Was Cclea&rly ( critical a requ 1 OY

> > frenera Lit ( M2 4} is d it. 1La¢4 (¢ Uf

P

.

hat exide confirmed its plan of reorganization in Apr

of 2004 without the ruling of the Bankruptcy Court

granting its request to reject the Agreements, whic]

did not come until April of 2006, two years after the plan

had been confirmed See In re aide Technolog

’ /

J1e8, cl

No 02-11125, D I 4341 dated Aprij 21, 2004 & D |

378 dated April 3, 2006 (Bankr. D Del.), Pet App a

SIA

Fourth, 1f the Petition ts granted, for reasons stated

Judge Ambro in his concurring opimon, even if the

Agreements were found to be executory and Exide wert

permitted to reject, EnerSys would not be deprived of

ts rights under the Trademark Agreement Pet. App

l4a-2la

THE COUNTRY MAN TEST IS THE CORRECT AND

APPROPRIATE TEST FOR DETERMINING

WHETHER A CONTRACT IS EXECUTORY.

For the reasons stated by Professor C ym:

article, see Countryman, Ezxecutory Contracts

ink rupicy, Part 1,57 Minn L Rev 439, 460 (1973), and

his

for the reasons stated

n the multitude of decision

including the seven court of appeals decisions cited by

Exide, Pet. at 17, which have adopted the C

he

ountryman

Pest, the Countryman Test ts the

cor ind

appropriate Lest for determining whether

(

executory In the event the Petition is grant rs

will address in detail why the Countryman T

correct. However, for the hmited purposes of | Bri

Opt osition, EnerSy respectfully notes the following

lurst, Section 365 of the Bankruptey Code per

issumption or rejection of executory contract

tion

US.C § 365. It does not permit assumption or rejecti

statutory

of all contracts Since a basic tenet of

ruction is that a statute should be construed

f o that

hat effect 1s given to all of its provisions,

part well be rmoperative or superfluous, void «

msignificant unless the provision Is the result of obvioeu

mistake or error, Szalvernian v ]

Investor Fund, J, P, 51 3d 28, 31 (8d Cir, 1995), Co

f Pa Dept of Public Welfare v US D pt f flealt}

and Iinman Services, 928 } 378. 1885 (3d Cir 199]

the term “executory” must define a subset of all debt

mtract

The legislative history of Section 3¢ rovide on

:

elp in creating that subset by stating that, general

‘chntory contracts are contract

emains due to some extent on both sides

58, reprinted in U.S Code

sin “which performances

’

‘

989, Goth Cong., 2d Sess

Cong & Ad News 5787, 5844; If R Rep N

0 595,

Cong , 2d Sass. 347, reprinted an 1978 US Code Cor

& Ad News 5787, 5963 & 6303 (empha l supplied

“he Countryman Test fends meaning to the tern

executory” within the constraints imposed

Congress te, by limiting executlory contract:

due on both sides and

ntracts with performance

jistingruishing within Chat universe between executory

ind non-executory contracts by reference to the

quantum of perf rmance remaining on both side And

meaning ascribed by the Countryman Test to tt

term executory is supported by common sense B

tor ntracts tot ew

fexecutary co

ing the universe

;

atlerial obligations remaining on both side

Countryman Test ensures that only contracts with son

threshold level of importance will be subject t

pecial powers of assumptron and reject

second, the Countryman Test introduces a level

byectivity and consistency to distinguishing betwet

executlory contracts and non-executory centracts |

reference to a well established body of federal

bankruptcy law that has developed since the

Countryman Test was first announced in 1973, includiny

aw in the seven circuits that have formally adopted tt

1.

Countryman Test, and state contract law

12 Exide attacks the Countryman Test on the ba that

ud produce results that vary based on the law of the applicable

tate Pet at 22 However, Exide cites no examples of actua

3eS applying the Countryman rest and the materiality law

alate, in which the result would have been different had ¢

iw of a different state been applied In fact, the laws of t

les are very consistent in defining maternal versus no

material contractual obligations, as evidenced by the fact tl

at least forty three states have either adopted or cited w

approval the f ve-factor test stated in Section 24] of tl

Restatement (Second) of Contracts or its predecessor, Sects

75 Cart N Pickerill, Precutory Contracts Re-Revisiled, 83 AM

BANKR LJ 63, 84 n 128 (2009) (collecting cases) Further

Exide 1s incorrect in stating that the Court of Appeals Opintwr

the first time the concept of substantial performance ha

ntroduced into the materiality analysis Pel at 10, 11, 14

19 In fact, numerous courts have considered substant

erformance in their materially analysis in applying

«

Countryman Test See, ¢g, Vermont Plastics vy Brine, In

3d 272, 279 (2d Cir 1996), Jn re Munple, Ltd , 868 F2d 1129

1130 (9th Cir 1989), Royal Bunk of Canudav Fene

Minancal Leasing Corn, No 8&7 Cow 1056, 1992 US Dist LEX

16, *24-25 (SD NY June 29, 1992), Jacob & Youngs, It

Kent, 129 N F889, 891(N Y 1921), reh'g dented, 130 N I

NOY 19077 r , , he 1NQIN UW 49 ) \

i ae | aso ge ¢ ~¥ & 5 »

‘ er! hat the Countryman Test has worked cr

1 1} CAS by i lling lkexids \ } I

racn mé blivatlions extending tothe future

it 2G s belied by the tuct Fxrde ha ! iffiry il

Dligation that extend into the futur Kather

required only to refrain from interfering with the

exclu ve, worldwide, perpetual, : vulty-free license that

tl provided to I nerosy 1991 and for which it wi: W

pull twenty years ayo. Pet. App. 29a. That is not

onerous” burden under anyone’s definition In fact

tt ease, the Countryman ‘Test has not work

chief but, rather, has prevented an abuse by

{the bankruptcy Code rejection power

The Countryman ‘Test ha er 1 the bankrup

proce in tne | nited stats well over th waSt Ul {

eight year is evidenced by its formal ad iption’ (

reuits and the fact thatit has not been directly rejecled

iny federal court ofappeals | he event the Pel

rranted Ener Vili re Lhe if Nn

nt in Tk nm er dat