Case 14-10569-KG
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
SIMPLEXITY, LLC, et al.,
Debtors.
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Chapter 11
Case No. 14-10569 (KG)
Jointly Administered
Hearing Date: April 30, 2014 at 10:00 a.m.
Objection Date: April 23, 2014
Related Docket Nos. 56, 109, 113, 147 & 149
ORACLE'S OBJECTION TO AND RIGHTS RESERVATION REGARDING
DEBTORS’ NOTICE OF POSSIBLE ASSUMPTION AND ASSIGNMENT
OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES IN
CONNECTION WITH SALE (“OBJECTION”)
Oracle America, Inc. (“Oracle”), a creditor and contract counter-party in the abovecaptioned jointly administered Chapter 11 cases, submits this Objection to Debtors’ Notice of
Possible Assumption and Assignment of Certain Executory Contracts and Unexpired Leases in
Connection with Sale, dated April 11, 2014 (“Assumption Notice”). In support of the Objection,
Oracle states as follows:
I.
INTRODUCTION
1.
In connection with a Sale Motion, Debtor Simplexity, LLC (the “Debtor”), along
with its affiliated debtors, filed and served the Assumption Notice on contract counterparties
whose contracts may be assumed and assigned. Exhibit “1” to the Assumption Notice is a
document entitled “List of Debtors’ Contracts,” which identifies an Oracle contract with a stated
corresponding $0.00 cure.
2.
The Assumption Notice describes the Oracle contract as “Simplexity OSSA for
Chat and email” dated February 29, 2012, and states that the non-debtor counterparty is “Oracle
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Americas” (the “Oracle Contract”). No other information regarding the Oracle Contract is
shown on Exhibit “1” to the Assumption Notice.
3.
This vague contract description in the Assumption Notice for the Oracle Contract
is inadequate to allow Oracle an opportunity either to identify the impact of the proposed
assumption and assignment, or to determine the accuracy of the cure amount.
4.
The Oracle Contract’s description fails to provide a specific contract name, the
correct counter-party, or any reference to an underlying support agreement.
5.
Oracle’s records indicate that Simplexity, LLC and Oracle America, Inc. entered
into an Oracle Software Service Agreement, with various amendments and ordering documents
related thereto, on or about February 29, 2012. This presumably is the contract targeted, but the
disparity in the description leaves that issue open.
6.
For the Debtor to assume and assign the Oracle Contract, it must describe the
agreement at issue with enough specificity to allow identification, and include both the
governing license and any related support agreement.
7.
The cure amount shown on the Assumption Notice also appears to be incorrect.
At this time, Oracle is aware of at least six invoices with Debtor, Simplexity, LLC, totaling
$35,199.99, which are due and owing. Attached hereto as Exhibit “A” are true and correct
copies of the known outstanding Oracle invoices, which must be paid as a component of the cure
prior to assumption.
8.
Given the open questions with respect to the contract descriptions and the correct
cure, Oracle reserves all rights to object further regarding both the cure amount and the scope of
the Debtor’s proposed assumption and assignment, until all contracts and cure amounts are
identified with the requisite specificity.
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Further, the proposed Stalking Horse Agreement, or alternative emergent Asset
Purchase Agreement (“APA”), may contemplate Debtor’s provision of certain transitional
services to the purchaser under the APA.
10.
Oracle reserves its rights with respect to any potential transitional use, until
Oracle knows what, if any, Oracle contract access and services will be provided to the eventual
purchaser.
11.
Until this information is known, Oracle must reserve its rights regarding any
transitional use, including to the extent that the APA contemplates use of Oracle’s software or
support services by any entity other than the authorized Debtor.
12.
Oracle also objects specifically to any transitional use to the extent it may purport
to grant to both the Debtor and the Stalking Horse (or any other ultimate purchaser), the right to
simultaneous use of, and access to, Oracle’s software and services, as it may exceed permitted
uses under the applicable agreement.
13.
“Shared” access, if contemplated, would exceed the scope of the Oracle
agreement’s permitted uses, and would perhaps result in an unauthorized “splitting” of the
licenses between the Debtor and any transitional user of Debtor’s choosing.
14.
Such a “transition” is not authorized by the Oracle Contract, and if this is what the
Debtor and the eventual purchaser contemplate, such an approach must be curtailed as violative
of Oracle’s agreement.
15.
In addition, the buyer’s identity remains uncertain. While the Stalking Horse
Bidder is known, the Sale Motion and Assumption Notice specifically contemplate that a
different entity may emerge as the Successful Bidder. The sale is subject to a potential auction,
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and a sale hearing scheduled to be held on April 30, 2014, which is after the Assumption Notice
objections are due.
16.
Oracle cannot, as a result, evaluate either the eventual purchaser’s acceptability as
an assignee, or whether the prerequisites of 11 U.S.C. § 365(b) will be met.
17.
Since Oracle cannot assess how its pecuniary and proprietary interests may be
affected under the proposed sale, Oracle reserves its right to be heard on the matter once the
ultimate purchaser is known.
18.
As described below, the Debtor may not assume and assign the Oracle Contract
without Oracle’s consent, as the contract involves the licensing of patented and/or copyrighted
materials. In the absence of more information regarding the Debtor’s intentions, Oracle now
cannot consent to the proposed assumption and assignment.
19.
If the Debtor intends that the Oracle Contract is to be assumed and assigned via
the sale, in order to ensure adequate assurance of future performance by the ultimate purchaser,
Oracle requests that Debtor, at a minimum, provide to Oracle the following information about
the successful bidder: (a) financial bona fides; (b) confirmation of status as a non-competitor of
Oracle’s; and (c) confirmation of the eventual purchaser’s willingness to execute an Oracle
Assignment Agreement and related documentation identifying succinctly all of the executory
contracts to be assigned.
20.
Without this information, Oracle is unable to determine the buyer’s
creditworthiness or suitability/ability to adequately perform. Until this information is known,
Oracle also reserves all rights to object to the ultimate successful bidder as its eventual customer
and assignee.
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Oracle requests that the Court deny, at this time, any contemplated assignment, or
provision of other access under the ultimate APA (including transitional access), which could
allow the unauthorized use and transfer of Oracle’s software and/or services.
22.
Furthermore, to the extent the Debtor seeks assumption and assignment of any
Oracle agreements, Debtor also must provide an adequate description of the contract at issue, pay
the correct cure amounts due and owing and confirm the Successful Bidder’s ability to perform.
23.
For these reasons, Oracle requests that the Court deny, at this time, any
contemplated assumption and assignment of the Oracle Contract targeted by the Assumption
Notice.
II.
ARGUMENT
A.
The Debtor May Not Assume And Assign Or Transfer The Oracle
Contract, As It Pertains To Licenses Of Intellectual Property And
Oracle Does Not Consent To The Proposed Assignment At This Time.
24.
Section 365(c)(1) of the Bankruptcy Code provides, in relevant part:
The trustee may not assume or assign any executory contract ... of
the debtor ... if (1)(A) applicable law excuses a party, other than
the debtor, to such contract or lease from accepting performance
from or rendering performance to an entity other than the debtor ...,
whether or not such contract or lease prohibits or restricts
assignment of rights or delegation of duties; and (B) such party
does not consent to such assumption or assignment.
25.
Federal law makes non-exclusive patent licenses non-assignable absent consent of
the licensor. In re Catapult Entertainment, Inc., 165 F.3d 747 (9th Cir. 1999), cert. dismissed,
528 U.S. 924 (1999). See, In re Access Beyond Technologies, Inc., 237 B.R. 32, 48-49 (Bankr.
D. Del 1999) (citing In re: West Elec., Inc., 852 F. 2d 79 (3d Cir. 1988); In re ANC Rental
Corporation, Inc., 277 B.R. 226, 235 (Bankr. D. Del. 2002); In re Golden Books Family
Entertainment, Inc., 269 B.R. 311, 316 (Bankr. D. Del. 2001)).
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Oracle’s agreements involve the licensing of non-exclusive, patented software.
Oracle presently does not consent to any proposed assignment.
Accordingly, at this time, any
potential assumption and assignment or transfer by Debtor should be denied with respect to the
Oracle agreement identified in the Assumption Notice.
B.
The Contract Assumption And Assignment Described In The
Assumption Notice Should Be Denied With Respect To The Oracle
Contract Because It Fails To Provide For Payment Of Appropriate
Amounts Required Prior To Pursuit Of Any Assignment, Including A
“Transitional” One.
27.
Since assumption and assignment of one or more Oracle contracts is
contemplated, the Debtor cannot assign the Oracle agreement until any arrearages are tendered,
for Oracle will not consent to the assignment of contracts in payment default.
28.
Oracle is owed at least $35,199.99 by Simplexity, LLC. At this time, Oracle does
not have adequate assurance that the Debtor intends to pay the amounts owed, nor enough
certainty on the targeted contract to allow for clarity on the correctness of the stated cure shown
in the Assumption Notice.
29.
For this additional reason, Oracle withholds its consent to any assignment of the
Oracle agreement. See 11 U.S.C. § 365(b)(1)(A).
30.
Absent payment of the appropriate amount owed to Oracle, the Oracle Contract
may not be assumed, assumed and assigned or otherwise transferred.
31.
Oracle reserves its right to object to the cure further until more certainty on the
contract at issue is provided.
C.
The Proposed Assumption And Assignment Should Be Denied With
Respect To The Oracle Contract Because The Sale Motion Fails To
Confirm The Ultimate Buyer/Potential Assignee’s Identity.
32.
Section 365(b) of the Bankruptcy Code sets forth specific prerequisites that must
be met before a trustee/debtor can assume and assign an executory contract, including: (a) curing
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(or providing adequate assurance of a prompt cure of) any defaults under the subject contracts;
and (b) providing adequate assurance of future performance.
33.
Absent the foregoing, the executory contracts may not be assumed, assumed and
assigned, or transferred.
34.
Since the proposed sale is subject to a potential “Alternate Purchaser’s”
emergence and the Debtor may receive additional qualified bids, the identity of the
purchaser/assignee necessarily remains unknown as of the Sale Motion’s and Assumption
Notice’s objection deadlines.
35.
Therefore, at this time, Oracle cannot determine whether: (a) the ultimate
purchaser/assignee is capable of providing adequate assurance of future performance; (b) the
proposed assignee is a competitor of Oracle’s; and (c) the purchaser is willing to enter into a
standard form of Oracle Assignment Agreement and related documentation, reflecting the terms,
post-assignment, of the parties’ relationship.
36.
Until at least the information identified above is provided, Oracle is unable to
determine whether Debtor has complied, or will comply, with the protections of section
365(b)(1)(C).
III.
CONCLUSION
37.
The Debtor is prohibited from assuming and assigning or transferring any Oracle
agreement in the absence of obtaining Oracle’s consent pursuant to section 365(c) and applicable
case law.
38.
The Debtor has failed to comply with the statutory prerequisites for assumption
and assignment of the targeted Oracle Contract by failing to: (a) identify the buyer with certainty
so as to permit an evaluation of its ability to perform; (b) identify the contract or contracts at
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issue with specificity so as to permit an evaluation of their assignability and the accuracy of the
resultant cure payment; and (c) provide adequate assurance of future performance.
39.
For these reasons, and all those set forth above, Oracle respectfully requests that
the Court deny, at this time, any effort via Debtor’s Sale Motion and Assumption Notice, to
assume and assign any Oracle agreement, whether on a “transitional” or permanent basis, in the
absence of obtaining Oracle’s prior consent.
Dated: April 23, 2014
Wilmington, Delaware
Respectfully submitted,
MARGOLIS EDELSTEIN
/s/ James E. Huggett
James E. Huggett, Esq. (#3956)
300 Delaware Avenue, Suite 800
Wilmington, Delaware 19801
Telephone:
(302) 888-1112
E-mail:
[email protected]
Amish R. Doshi, Esq.
MAGNOZZI & KYE, LLP
23 Green Street, Suite 302
Huntington, New York 11743
Tel: (631) 923-2858
Shawn M. Christianson, Esq.
BUCHALTER NEMER P.C.
333 Market Street, 25th Floor
San Francisco, California 94105-2126
Telephone: (415) 227-0900
Deborah Miller, Esq.
Michael Czulada, Esq.
ORACLE AMERICA, INC.
500 Oracle Parkway
Redwood City, California 94065
Telephone:
(650) 506-5200
Attorneys for Oracle America, Inc.
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EXHIBIT A
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
SIMPLEXITY, LLC, et al.,
Debtors.
)
)
)
)
)
)
Chapter 11
Case No. 14-10569 (KG)
Jointly Administered
CERTIFICATE OF SERVICE
I, James E. Huggett, hereby certify that on April 23, 2014, I served a copy of Oracle's
Objection to and Rights Reservation Regarding Debtors’ Notice of Possible Assumption and
Assignment of Certain Executory Contracts and Unexpired Leases in Connection with Sale on
the parties listed on the attached service list via the Court’s CM/ECF Notification System and by
electronic mail.
/s/ James E. Huggett___________
James E. Huggett, Esq. (#3956)
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Young Conaway Stargatt & Taylor
1000 North King Street
Rodney Square
Wilmington, DE 19801
Attn: Robert S. Brady and Edmon L. Morton
[email protected]
[email protected]
Klehr Harrison Harvey Branzburg LLP
919 Market Street, Suite 1000
Wilmington, DE 19801
Attn: Dominec E. Pacitti
[email protected]
Klehr Harrison Harvey Branzburg LLP
1835 Market Street, Suite 1400
Philadelphia, PA 19103
Attn: Morton R. Branzburg
[email protected]
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attn: Mark U. Schneiderman
[email protected]
Richards, Layton & Finger P.A.
One Rodney Square
920 North King Street
Wilmington, DE 19801
Attn: Michael K. Merchant
[email protected]
Goldberg Kohn Ltd.
55 East Monroe Street, Suite 3300
Chicago, IL 60603
Attn: Randall L. Klein
[email protected]
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166-0193
Attn: Matthew K. Kelsey and Keith R. Martorana
[email protected]
[email protected]
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