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Petitioner Mission Product Holdings, Inc., entered into a contract with Respondent Tempnology, LLC, which gave Mission a license to use Tempnology’s trademarks in connection with the distribution of certain clothing and accessories. Tempnology filed for Chapter 11 bankruptcy and sought to reject its agreement with Mission. Section 365 of the Bankruptcy Code enables a debtor to “reject any executory contract”—meaning a contract that neither party has finished performing. 11 U. S. C. §365(a). It further provides that rejection “constitutes a breach of such contract.” §365(g). The Bankruptcy Court approved Tempnology’s rejection and further held that the rejection terminated Mission’s rights to use Tempnology’s trademarks. The Bankruptcy Appellate Panel reversed, relying on Section 365(g)’s statement that rejection “constitutes a breach” to hold that rejection does not terminate rights that would survive a breach of contract outside bankruptcy. The First Circuit rejected the Panel’s judgment and reinstated the Bankruptcy Court’s decision.

Held:

1. This case is not moot. Mission presents a plausible claim for money damages arising from its inability to use Tempnology’s trademarks, which is sufficient to preserve a live controversy. See Chafin v. Chafin, 568 U.S. 165, 172. Tempnology’s various arguments that Mission is not entitled to damages do not so clearly preclude recovery as to render this case moot. Pp. 6–7.

2. A debtor’s rejection of an executory contract under Section 365 of the Bankruptcy Code has the same effect as a breach of that contract outside bankruptcy. Such an act cannot rescind rights that the contract previously granted. Pp. 7–16.

(a) Section 365(g) provides that rejection “constitutes a breach.” And “breach” is neither a defined nor a specialized bankruptcy term—it means in the Code what it means in contract law outside bankruptcy. See Field v. Mans, 516 U.S. 59, 69. Outside bankruptcy, a licensor’s breach cannot revoke continuing rights given to a counterparty under a contract (assuming no special contract term or state law). And because rejection “constitutes a breach,” the same result must follow from rejection in bankruptcy. In preserving a counterparty’s rights, Section 365 reflects the general bankruptcy rule that the estate cannot possess anything more than the debtor did outside bankruptcy. See Board of Trade of Chicago v. Johnson, 264 U.S. 1, 15. And conversely, allowing rejection to rescind a counterparty’s rights would circumvent the Code’s stringent limits on “avoidance” actions—the exceptional cases in which debtors may unwind pre-bankruptcy transfers that undermine the bankruptcy process. See, e.g., §548(a). Pp. 8–12.

(b) Tempnology’s principal counterargument rests on a negative inference drawn from provisions of Section 365 identifying categories of contracts under which a counterparty may retain specified rights after rejection. See §§365(h), (i), (n). Tempnology argues that these provisions indicate that the ordinary consequence of rejection must be something different—i.e., the termination of contractual rights previously granted. But that argument offers no account of how to read Section 365(g) (rejection “constitutes a breach”) to say essentially its opposite. And the provisions Tempnology treats as a reticulated scheme of exceptions each emerged at a different time and responded to a discrete problem—as often as not, correcting a judicial ruling of just the kind Tempnology urges.

Tempnology’s remaining argument turns on how the special features of trademark law may affect the fulfillment of the Code’s goals. Unless rejection terminates a licensee’s right to use a trademark, Tempnology argues, a debtor must choose between monitoring the goods sold under a license or risking the loss of its trademark, either of which would impede a debtor’s ability to reorganize. But the distinctive features of trademarks do not persuade this Court to adopt a construction of Section 365 that will govern much more than trademark licenses. And Tempnology’s plea to facilitate reorganizations cannot overcome what Section 365(a) and (g) direct. In delineating the burdens a debtor may and may not escape, Section 365’s edict that rejection is breach expresses a more complex set of aims than Tempnology acknowledges. Pp. 12–16.

879 F.3d 389, reversed and remanded.

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