# Opposition Brief — Exide Technologies v. EnerSys Delaware, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2535%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 2011 - **Citation:** 562 U.S. 1216 ## Text 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 ( Le Vect \) { Appellee filed tr ried no objec roposed no ot} Appellee’s Opy pete 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 = fo’s arpourment that the Saxth Cur". 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} l riot preciude uny finding of comflict between the appr re he im &F , 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. ¢ 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 “ 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 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2535%3A3. Public record. Not legal advice.