Moe's Franchisor, LLC v. Taylor Investment Partners II, LLC (In re Taylor Investment Partners II, LLC), 533 B.R. 837

Debtors (TIP II-Ansley, TIP II-Suburban, and affiliated Taylor Investment Partners II) operate Moe’s Southwestern Grill franchises; franchise agreements contain quality/operations standards and permit termination after repeated failed ROSE inspections.
Movant (the franchisor) alleges Debtors failed multiple ROSE inspections, sent termination notices, and gave a six-month sell-or-vacate notice for the Decatur location; Debtors filed Chapter 11 shortly before the termination deadline.
Movant moved for relief from the automatic stay under 11 U.S.C. § 362 so it could terminate/enforce the franchise agreements, arguing Debtors cannot assume the contracts without Movant’s consent under 11 U.S.C. § 365(c).
The central legal dispute: whether § 365(c)’s restriction on assumption/assignment (when applicable law excuses the counterparty from accepting performance from entities other than the debtor) applies to a debtor in possession via § 1107.
As an alternative, Debtors argued the franchise agreements could “ride through” the bankruptcy (remain in force without assumption), which would preclude Movant from enforcing termination only to the extent the Code protects assumed contracts.

Issue	Plaintiff's Argument (Movant)	Defendant's Argument (Debtors)	Held
Whether § 365(c) bars a debtor in possession from assuming an executory franchise agreement without counterparty consent	§ 365(c) applies to debtors in possession via § 1107; trademark law bars assignment without licensor consent, so Debtors cannot assume without Movant’s consent	§ 365(c) should not bar a debtor in possession; some courts adopt an “actual” test requiring a real assignment to a non-debtor before § 365(c) blocks assumption	Held for Movant: 11th Circuit precedent (James Cable) binds; § 365(c) restricts debtors in possession and Debtors may not assume without Movant’s consent because Lanham Act bars assignment without consent
Whether the contracts can "ride through" the bankruptcy, leaving Debtors able to continue operating without assumption	N/A (Movant sought stay relief to enforce termination)	Even if § 365(c) bars assumption, the agreements could ride through the case and remain enforceable absent assumption or rejection	Held for Movant: Ride-through is possible but deprives Debtors of § 365 protections; because Debtors cannot assume, cause exists to lift/modify the stay to allow Movant to enforce state-law rights with respect to the agreements

Matter of West Elec., Inc., 852 F.2d 79 (3d Cir. 1988) (adopts the “hypothetical” test applying § 365(c) to debtors in possession)
In re Sunterra Corp., 361 F.3d 257 (4th Cir. 2004) (applies § 365(c) restriction to debtors in possession)
In re Catapult Entm’t, Inc., 165 F.3d 747 (9th Cir. 1999) (applies § 365(c) to bar assumption where applicable law prevents assignment)
Summit Inv. & Dev. Corp. v. Leroux, 69 F.3d 608 (1st Cir. 1995) (adopts an “actual” test limiting § 365(c) application and looks to legislative history)
James Cable Partners, L.P. v. City of Jamestown, 27 F.3d 534 (11th Cir. 1994) (holds § 365(c) restricts a debtor in possession from assuming executory contracts when applicable law excuses the counterparty from accepting performance from non-debtors)
Institut Pasteur v. Cambridge Biotech Corp., 104 F.3d 489 (1st Cir. 1997) (applies Leroux reasoning concerning § 365(c)/§ 365(e) interaction)
N.L.R.B. v. Bildisco & Bildisco, 465 U.S. 513 (U.S. 1984) (discusses executory contracts and the ride-through doctrine)