IN THE UNITED STATES BANKRUPTCY COURT FOR THE …omnimgt.com/CMSVol2/pub_47341/750963_383.pdf ·...

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In re:

FTD COMPANIES, INC., et al.,

Debtors.

)

)

)

)

)

)

)

)

)

)

Chapter 11

Case No. 19-11240 (LSS)

Jointly Administered

Hearing Date: July 31, 2019

Hearing Time: 11:00 AM

Objection Date: July 16, 2019

Docket No. 82, 210 and 286

ORACLE’S LIMITED OBJECTION TO AND RESERVATION OF RIGHTS

REGARDING MOTION OF THE DEBTORS FOR ENTRY OF ORDERS

(I)(A) APPROVING BIDDING PROCEDURES FOR THE SALE OF

SUBSTANTIALLY ALL OF THE DEBTORS' ASSETS, (B) AUTHORIZING

THE DEBTORS TO ENTER INTO ONE OR MORE STALKING HORSE

AGREEMENTS AND TO PROVIDE BIDDING PROTECTIONS THEREUNDER,

(C) SCHEDULING AN AUCTION AND APPROVING THE FORM AND MANNER

OF NOTICE THEREOF, (D) APPROVING ASSUMPTION AND ASSIGNMENT

PROCEDURES, (E) SCHEDULING A SALE HEARING AND APPROVING THE FORM

AND MANNER OF NOTICE THEREOF AND (F) GRANTING RELATED RELIEF;

(II)(A) APPROVING THE SALE OF THE DEBTORS' ASSETS FREE AND CLEAR OF

LIENS, CLAIMS, INTERESTS AND ENCUMBRANCES, (B) APPROVING THE

ASSUMPTION AND ASSIGNMENT OF EXECUTORY CONTRACTS AND

UNEXPIRED LEASES AND (C) GRANTING RELATED RELIEF

(“SALE MOTION”); AND (2) NOTICE OF CURE COSTS AND POTENTIAL

ASSUMPTION AND ASSIGNMENT OF EXECUTORY CONTRACTS AND

UNEXPIRED LEASES IN CONNECTION WITH SALE OF SUBSTANTIALLY ALL

ASSETS (“ASSUMPTION NOTICE”)

Oracle America, Inc. (“Oracle”), a creditor and contract counter-party in the above-

captioned jointly administered Chapter 11 cases, submits this Limited Objection and Reservation

of Rights (“Rights Reservation”) regarding the Sale Motion and the Assumption Notice filed by

FTD Companies, Inc., et al. (“Debtors”).

Case 19-11240-LSS Doc 383 Filed 07/15/19 Page 1 of 12

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I. INTRODUCTION

1. By the Sale Motion and the Assumption Notice, the Debtors seek Bankruptcy

Court authority to, among other things, assume and assign certain executory contracts between

the Debtors and Oracle.

2. Oracle objects to the proposed assumption and assignment on multiple grounds:

a) First, the targeted Oracle agreements are, or pertain to, one or more

licenses of intellectual property which are not assignable absent Oracle’s

consent, pursuant to both the underlying license agreements and applicable

law. Debtors also request a judicial determination that any anti-assignment

provision in contracts to be assumed and assigned is unenforceable and

void. Oracle objects to this sweeping determination being made regarding

its agreements with the Debtors.

b) Second, the Assumption Notice does not provide a complete description of

the Oracle contract the Debtors seek to assume and assign. The

Assumption Notice identifies one Oracle contract, while Oracle has

numerous active contracts with the Debtors. As a result, Oracle is unable

to determine either the accuracy of the Debtors’ proposed cure, or whether

the contract designation in the Assumption Notice is complete and correct.

c) Third, the Sale Motion does not provide Oracle with sufficient information

to determine whether the purchaser/assignee is capable of performing

under the terms of the contract, or contracts, which Debtors seek to

assume and assign.

d) Finally, the Sale Motion and the Purchase Agreements (defined below)

confirm both that the Debtors and the eventual purchasers will enter into a

TSA (defined below) which provides for certain transition services in

connection with the proposed sale, and indicate that the eventual

purchasers shall be joint owners of the Software Systems1 governed by a

Mutual PQUAD Covenant Agreement (“PQUAD Agreement”).

e) Oracle needs clarification about both the contemplated TSA and the

PQUAD Agreement, for the reasons set forth in more detail below.

1 Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the APA

and Sale Motion.


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3. Accordingly, Oracle requests that the Court deny the Sale Motion, solely to the

extent it seeks authority for the Debtors to assume and assign, transfer or share use of any Oracle

agreements in the absence of Oracle’s consent.

II. FACTUAL BACKGROUND

4. The above captioned case was filed on June 3, 2019 and an order directing joint

administration was entered shortly thereafter. The Debtors continue to operate as debtors in

possession.

5. On June 6, 2019, the Debtors filed their Sale Motion seeking Court authority to

sell substantially all of their assets.

6. Through the Sale Motion, the Debtors propose to sell the entire company or

certain segments of their company, dependent upon how the sale progresses.

7. On June 19, 2019, the Debtors entered into an asset purchase agreement with

Gateway Mercury Holdings, LLC (“Gateway”) for the sale of their FTD.com business, their

florist business segment and the Restructured ProFlowers Business (“Gateway APA”).

8. The Gateway APA is attached as Exhibit “B” to the Motion of the Debtors for

Entry of An Order (I) Authorizing the Debtors to Provide Bidding Protections in Accordance

with the Bidding Procedures and the Gateway Stalking Horse Agreement and (II) Granting

Related Relief.


Farids & Co., LLC (“Farids”) for the sale of their gourmet food business, including Shari’s

Berries (“Farid APA”).


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10. The Farids APA is attached as Exhibit “B” to the Motion of the Debtors for Entry

of An Order (I) Authorizing the Debtors to Provide Bidding Protections in Accordance with the

Bidding Procedures and the Farids Stalking Horse Agreement and (II) Granting Related Relief.


PlanetArt LLC (“PlanetArt”, together with Gateway and Farids, the “Purchasers”) for the sale of

the personal creations business, including Gifts.com (“PlanetArt APA”, together with Gateway

APA and Farid APA, “Purchase Agreements”).

12. The PlanetArt APA is attached as Exhibit “B” to the Motion of the Debtors for

Entry of An Order (I) Authorizing the Debtors to Provide Bidding Protections in Accordance

with the Bidding Procedures and the PlanetArt Stalking Horse Agreement and (II) Granting

Related Relief.

13. On July 1, 2019, the Debtors filed the Assumption Notice. Schedule “1” to the

Assumption Notice lists one agreement between Provide Commerce, Inc. and Oracle, described

only as an “Oracle Cloud Service Agreement” (“Oracle Agreement”).

14. The cure amount shown in the Assumption Notice for the Oracle Agreement is

$0.00. The Assumption Notice does not indicate whether the proposed assignee will be

Gateway, Farids or PlanetArt.

15. The Purchase Agreements contemplate a transition services agreement (“TSA”)

between and among the Debtors, Gateway and the Purchasers, which will be negotiated prior to

Closing.

16. Based on the Farids APA and PlanetArt APA, it appears these services will be

made available for at least twelve (12) months after the closing, as follows:

Access Agreements. Prior to the Closing, Sellers and Purchaser will negotiate

mutually acceptable terms of an agreement providing Sellers with access, for a


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period of at least 12 months following the Closing Date, to Purchaser’s personnel,

including the Transferred Employees, information technology systems, including

email, third party service providers and books and records, and use of office space

and office support for employees of Sellers, as is reasonably necessary or

appropriate in connection with the administration of the Bankruptcy Case and to

permit Sellers to wind-down and liquidate the Sellers’ Bankruptcy estates

following the Closing.

(See, Section 8.8 of PlanetArt APA and Section 8.7 of Farids APA).

17. Since the TSA has not been filed, Oracle is unable to determine how its contracts

will be affected by the proposed transitional use.

18. The Purchase Agreements also indicate that the Purchasers will be joint owners of

the Software Systems to be governed by the PQUAD Agreement.

19. These Software Systems may contain Oracle software. Oracle currently is unable

to determine how its rights may be affected since the PQUAD Agreement has not been provided,

despite the fact that the Farids APA indicates that it is attached as Exhibit “A”.

III. ARGUMENT

A. Debtors May Not Assume And Assign The Oracle Agreement Absent Oracle’s

Consent Because It Pertains To One Or More Licenses Of Intellectual Property.

20. Section 365(c) 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.

21. Federal law makes non-exclusive patent and copyright 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


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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)); See Also, In Re Trump

Entm't Resorts, Inc., 526 B.R. 116, 126 (Bankr. D. Del. 2015) (“Non-Exclusive patent and

copyright licenses create only personal and not property rights in the licensed intellectual

property and so are not assignable.”)).

22. The Oracle Agreement referenced in the Assumption Notice is, or pertains to,

non-exclusive licenses of copyrighted software.

23. Therefore, pursuant to Bankruptcy Code section 365, the Debtors may not assume

and assign the Oracle Agreement without Oracle’s consent.

24. For the reasons discussed herein, Oracle does not, at this time, consent to the

Debtors’ proposed assumption and assignment.

25. The Sale Motion is also objectionable because it requests a blanket determination

by the Court that any anti-assignment provision in contracts to be assumed and assigned is

unenforceable and void.

26. The request is framed by the Debtors as follows:

“Finally, in order to facilitate the assumption and assignment of Contracts in

furtherance of maximizing the value of the Assets, the Debtors further request that

the Court find that any anti-assignment provision included in any Contract,

whether such provision expressly prohibits, or has the effect of restricting or

limiting assignment of a Contract, is unenforceable and prohibited pursuant to

section 365(f) of the Bankruptcy Code.”

Sale Motion ¶57.

27. Oracle objects to the Debtors’ requested finding because, as discussed above, the

Oracle Agreement involves the non-exclusive license of copyrighted software, which is non-

assignable absent Oracle’s consent.


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28. Because Bankruptcy Code section 365 and applicable law expressly preserve

Oracle’s right to consent to any assignment of its license agreements, the Debtors may not

unilaterally nullify the anti-assignment provisions of the Oracle Agreement.

29. Accordingly, Oracle requests that the Debtors be denied this blanket authorization

to the extent it would allow them to assume and assign, or transfer, the Oracle Agreement.

B. The Debtors Have Not Adequately Identified The Oracle Agreement To Be

Assumed and Assigned.

30. The Oracle contract the Debtors seek to assume and assign is described very

generally as a “Cloud Services Agreement.”

31. The Debtors have omitted specific mention of the related support agreement. In

addition, Oracle has numerous agreements with the Debtors, leaving Oracle unable to determine

which contract Debtors potentially may assume and assign.

32. It is impermissible for the Debtors to segregate the underlying Oracle license

agreement from the corresponding support and any payment agreement for purposes of

assumption and assignment, if that is the Debtors’ intention. See, e.g., In re Interstate Bakeries

Corporation, 751 F.3d 955, 963 (8th Cir. 2014); In re Buffets Holdings, 387 B.R. 115 (Bankr. D.

Del. 2008).

33. To clarify which Oracle contract Debtors may seek to assume and assign, Oracle

requests that the Debtors specify the targeted contract’s (a) name and date; (b) identification

number; and (c) any associated support or support renewals.

34. This information will enable Oracle to evaluate whether the Oracle agreement

proposed for assumption and assignment is assignable, whether it is supported, expired or in

default, and, if in payment default, the appropriate cure amount.


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35. Additionally, it will allow Oracle to assess whether Oracle may accept

performance from an entity other than the Debtors.

36. Oracle reserves its right to be heard on this issue until after the Oracle

agreement(s) the Debtors seek to assume and assign are identified with greater specificity.

C. The Debtors May Not Have Provided The Correct Cure Amount.

37. Before assuming and assigning any executory contract, the Debtors must cure (or

provide adequate assurance of a prompt cure of) any default under the subject contracts. 11

U.S.C. § 365(b)(1).

38. The Debtors have failed to describe the Oracle Agreement they seek to assume

and assign with sufficient particularity for Oracle to identify which agreements are at issue, and

thereby confirm the corresponding cure amount.

39. As discussed above, Oracle has more than one agreement with the Debtors, so

Oracle needs specific information about which Oracle agreement(s) may be assumed and

assigned, in order to confirm the correct cure amount.

40. Therefore, Oracle reserves its right to be heard further regarding the cure amount

until after the contract or contracts the Debtors seek to assume and assign are identified with

enough specificity to allow Oracle to determine the correct cure.

D. The Debtors Have Not Provided Adequate Assurance of Future Performance By

the Assignees.

41. Before assuming and assigning any executory contract, the Debtors must provide

adequate assurance of future performance. 11 U.S.C. § 365(b)(1).


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42. Gateway, Farids and PlanetArt are currently the stalking horse bidders, but one or

more bidders may emerge in connection with the auction scheduled to be held on July 22, 2019;

after objections to the Sale Motion and Assumption Notice are due.2

43. The Assumption Notice is silent on the intended assignee of the Oracle

Agreement.

44. To satisfy 11 U.S.C. § 365(b), Oracle requests that the Debtors provide the

following information about the Purchasers or the ultimate assignee: (a) financial bona fides;

(b) confirmation that the purchaser is not an Oracle competitor; and (c) confirmation that the

ultimate assignee will (i) execute an Oracle Assignment Agreement and related documentation

which identifies with specificity the Oracle executory contract(s) to be assigned; and, if

appropriate, (ii) enter into an Oracle Master License Agreement.

45. Absent these assurances, Oracle cannot determine the proposed assignee’s

creditworthiness, its suitability as an Oracle customer, or its ability to adequately perform the

terms of the Oracle Agreement.

46. Until the information described above is provided, the Debtors have not complied

with the requirements of section 365(b)(1)(C).

47. Therefore, the Sale Motion and Assumption Notice must be denied, solely to the

extent they seek to authorize the Debtors to assume and assign the Oracle Agreement in the

absence of Oracle’s consent.

2 Oracle is aware that pursuant to the Notice of Sale, Bidding Procedures, Auction Sale Hearing and other Deadlines

Related Thereto, it has until July 26, 2019 in which to file an objection to adequate assurance. However, in order to

save duplicate filings, Oracle incorporates its objection to adequate assurance here and reserves its right to be heard

on this point.


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E. The Oracle Agreement Does Not Authorize Simultaneous Use By The Debtors

and the Purchasers.

48. The Purchase Agreements contemplate that certain transition services will be

provided between the Debtors and Purchasers.

49. The Debtors have not provided any additional information and the TSA has not

been filed, rendering Oracle unable to determine the scope of the proposed transitional use or

whether its contracts will be affected.

50. Shared access to, and use of, Oracle’s licenses exceed the scope of the permitted

uses under the Oracle Agreements, and may constitute an unauthorized splitting of the respective

licenses.

51. In addition, Oracle needs more information with respect to the PQUAD

Agreement to determine how its software will be affected.

52. Oracle reserves all rights regarding the TSA and PQUAD Agreement until it has

had a chance to review these agreements, and assess how they may impact, and potentially

constitute non-compliance under, the Oracle Agreement’s terms.

IV. CONCLUSION

53. For the reasons set forth above, Oracle respectfully requests that the Court deny

approval of the Sale Motion and the Assumption Notice, solely to the extent each seeks to

authorize Debtors to assume and assign, transfer, or share use of, any Oracle agreement. Oracle

reserves its right to be heard on all issues set forth herein.


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Dated: July 15, 2019

Wilmington, Delaware

MARGOLIS EDELSTEIN

By: /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.

DOSHI LEGAL GROUP, P.C.

1979 Marcus Avenue, Suite 210E

Lake Success, NY 11042

Tel: (516) 622-2335

E-Mail: [email protected]

Shawn M. Christianson, Esq.

BUCHALTER, A PROFESSIONAL

CORPORATION

55 Second Street, Suite 1700

San Francisco, CA 94105

Tel: (415) 227-0900

Deborah Miller, Esq.

Benjamin Wheeler, Esq.

ORACLE AMERICA, INC.

500 Oracle Parkway

Redwood City, California 94065 Telephone: (650) 506-5200

Attorneys for Oracle America, Inc.


mailto:[email protected]

12


IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In re:

FTD COMPANIES, INC., et al.,

Debtors.

)

)

)

)

)

)

)

)

)

)

Chapter 11

Case No. 19-11240 (LSS)

Jointly Administered

Hearing Date: July 31, 2019

Hearing Time: 11:00 AM

Objection Date: July 16, 2019

Docket No. 82, 210 and 286

CERTIFICATE OF SERVICE

I, James E. Huggett, hereby certify that on July 15, 2019, I served a copy of Oracle’s

Limited Objection To And Reservation Of Rights Regarding Motion Of The Debtors For Entry Of

Orders (I)(A) Approving Bidding Procedures For The Sale Of Substantially All Of The Debtors'

Assets, (B) Authorizing The Debtors To Enter Into One Or More Stalking Horse Agreements And

To Provide Bidding Protections Thereunder, (C) Scheduling An Auction And Approving The Form

And Manner Of Notice Thereof, (D) Approving Assumption And Assignment Procedures, (E)

Scheduling A Sale Hearing And Approving The Form And Manner Of Notice Thereof And (F)

Granting Related Relief; (Ii)(A) Approving The Sale Of The Debtors' Assets Free And Clear Of

Liens, Claims, Interests And Encumbrances, (B) Approving The Assumption And Assignment Of

Executory Contracts And Unexpired Leases And (C) Granting Related Relief (“Sale Motion”);

And (2) Notice Of Cure Costs And Potential Assumption And Assignment Of Executory Contracts

And Unexpired Leases In Connection With Sale Of Substantially All Assets (“Assumption Notice”)

on the parties listed on the attached Service List via electronic mail, where available.

_/s/ James E. Huggett___________

James E. Huggett (#3956)

Case 19-11240-LSS Doc 383-1 Filed 07/15/19 Page 1 of 2

2

SERVICE LIST

BY ECF

Daniel J. DeFranceschi, Esq.

Brett M. Haywood, Esq.

Megan F. Kenney, Esq.

Sarah Silveira, Esq.

RICHARDS LAYTON & FINGER, P.A.

One Rodney Square, 920 N. King Street

Wilmington, DE 19801

Jennifer R. Hoover, Esq.

Kevin M. Capuzzi, Esq.

BENESCH, FRIEDLANDER, COPLAN &

ARONOFF, LLP

222 Delaware Avenue, Suite 801


Timothy J. Fox, Jr., Esq.

OFFICE OF UNITED STATES

TRUSTEE

844 King Street, Suite 2207, Lockbox 35


BY REGULAR MAIL

Heather Lennox, Esq.

Thomas A. Wilson, Esq.

JONES DAY

901 Lakeside Avenue

Cleveland, OH 44114

Jason R. Adams, Esq.

William S. Gyves, Esq.

Maeghan J. McLoughlin, Esq.

Lauren S. Schlussel, Esq.

Eric R. Wilson, Esq.

KELLEY DRYE & WARREN, LLP

101 Park Avenue

New York, New York 10178

Caitlin K. Cahow, Esq.

Brad B. Erens, Esq.

Timothy Hoffman, Esq.

Jones Day

77 W. Wacker

Suite 3500

Chicago, IL 60601

Danielle D. Donovan, Esq.

JONES DAY

1420 Peachtree Street, N.E., Suite 800

Atlanta, GA 30309

Genna L. Ghaul

Jones Day

250 Vesey Street

New York, NY 10281

Case 19-11240-LSS Doc 383-1 Filed 07/15/19 Page 2 of 2

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