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In re Redpath Computer Servs.

United States Bankruptcy Court for the District of Arizona

May 15, 1995, Decided ; May 15, 1995, FILED

Chapter 11 No. B-94-10160-PHX-GBN, No. B-94-10161-PHX-GBN (Jointly Administered)

Opinion

 [*976]  ORDER

Redpath Computer Services is one of two debtors in possession in a jointly administered Chapter 11 case. At issue is whether a licensee's termination of debtor's services under an executory agreement involved an "at will" contract or instead was a void action taken in violation of the automatic stay. 11 U.S.C. § 362(a)(3). This Court concludes the latter occurred, given the contract's terms and the parties' actions. The facts necessary for an understanding of this decision follow.

Debtor's President, Gary Goodenow, drafted a "Non-Exclusive End-User License Agreement: Object Code," which is the subject of this dispute. The agreement was signed on October 1, 1992, by debtor and Regional AHCCCS Health Plan, Inc. ("RAHP").

Pertinent agreement terms include the following:

Licensor desires to grant [**2]  to Licensee, and Licensee desires to acquire from Licensor, a non-exclusive right and license to use certain computer software . . . .

. . . .

2.1 Subject to compliance by Licensee with the terms hereof, Licensor hereby grants to Licensee, in perpetuity unless terminated as provided herein, a personal, non-exclusive (without the right of sublicense), license to:

. . . .

4.1 In consideration of the licenses granted hereunder, Licensee shall pay Licensor the sum of [$ 1.30] per member active on the first day of each month . . . .  [*977]  If licensee has no active members during any given month, Licensee shall not be liable for any payments to Licensor for that month.

. . . .

7.1 This Agreement . . . shall remain in force for a period of Sixty (60) months, until terminated as provided below, and shall be automatically renewed on a yearly basis, unless one party shall notify the other in writing of termination 90 days' prior to any anniversary date after the Fifth (5th) year.

7.2 Either Licensee or Licensor may, upon written notice and subject to the provisions of this Section respecting notice and right to cure, terminate this Agreement for cause upon the occurrence of a [**3]  material and continuing breach of the terms of this Agreement. Written notification expressly identifying such breach shall be furnished to the breaching party, whereupon such party shall have 30 days to remedy the specific breach or demonstrate that no such breach has occurred. Failure to cure the identified breach within such 30 day period shall constitute cause for immediate termination.

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181 B.R. 975 *; 1995 Bankr. LEXIS 646 **; 27 Bankr. Ct. Dec. 273

In re REDPATH COMPUTER SERVICES, INC., Debtor. ISOTECH MARKETING, INC., Debtor.

CORE TERMS

termination, nonexclusive, notice, Licensee, license, parties, default, automatic, Movant, computer service, executory, software, cure, suppliers, deposition, drafted, argues, parol, terms

Bankruptcy Law, Administrative Powers, Automatic Stay, General Overview, Business & Corporate Compliance, Contracts Law, Types of Contracts, Executory Contracts, Estate, Gift & Trust Law, Probate, Personal Representatives, Bankruptcy, Automatic Stay, Estate Property, Contractual Rights, Standards of Performance, Creditors & Debtors, Discharge & Termination, Civil Procedure, Statute of Limitations, Tolling of Statute of Limitations, Stay, Preliminary Considerations, Federal & State Interrelationships, Erie Doctrine, Contracts Law, Contract Interpretation, Parol Evidence, Evidence, Types of Evidence, Documentary Evidence, Parol Evidence, Defenses, Ambiguities & Mistakes, Ambiguities & Contra Proferentem, Intent, Contract Formation, Consideration, Mutual Obligations, Illusory Promises