## Facts

- Victor M. Ortiz was a professional boxer.
- Ortiz entered into a five-year promotional agreement with Top Rank, Inc., a boxing promoter.
- The agreement included exclusivity and related restrictions that limited Ortiz’s ability to box for other promoters during the contract term (including time-based restrictions tied to televised bouts).
- Before the five-year term expired, Ortiz filed a voluntary Chapter 7 bankruptcy petition.
- The promotional agreement was treated as an executory contract in the Chapter 7 case.
- The Chapter 7 trustee did not assume the agreement within the time allowed by 11 U.S.C. § 365(d)(1), so the agreement was rejected by operation of law.
- After rejection, Ortiz sought to enter into arrangements with other boxing promoters and alleged Top Rank interfered by asserting that the rejected contract’s exclusivity provisions remained enforceable against him.
- Ortiz filed an adversary proceeding in bankruptcy court seeking injunctive relief to stop Top Rank’s interference and related declaratory relief concerning his obligations under the rejected agreement.
- The bankruptcy court entered judgment for Ortiz, reasoning that the trustee’s rejection terminated Ortiz’s remaining contractual obligations and left Top Rank with only a monetary damages claim against the estate; the bankruptcy court also treated the restrictive provisions as an unreasonable restraint.
- Top Rank appealed to the United States District Court for the Central District of California, arguing that rejection did not eliminate its non-monetary rights and that it could still seek injunctive relief to enforce the exclusivity provisions, subject to applicable nonbankruptcy law.

## Issues

1. Whether rejection of an executory contract under 11 U.S.C. § 365(d)(1) terminates the contract and extinguishes the nondebtor’s non-monetary rights, or instead constitutes a breach that can leave such rights in place under nonbankruptcy law.
2. Whether the bankruptcy court erred by granting declaratory and injunctive relief on the premise that rejection alone freed Ortiz from the agreement’s exclusivity restrictions and limited Top Rank solely to a damages claim.

## Decision

- The district court reversed the bankruptcy court’s judgment for Ortiz.
- The district court held that rejection under § 365 is treated as a breach, not a rescission or termination of the contract.
- Because rejection is a breach, the nondebtor counterparty is not automatically confined to a damages claim; non-monetary rights may survive to the extent they exist under applicable nonbankruptcy law and are not barred by the Bankruptcy Code.
- The district court concluded the bankruptcy court’s declaratory and injunctive relief rested on an incorrect legal view of rejection’s effect and therefore could not stand as entered.
- The case was remanded for further proceedings consistent with the district court’s ruling.

## Legal Principles

- Rejection of an executory contract under 11 U.S.C. § 365 constitutes a breach (as defined by § 365(g)); it does not automatically cancel the contract or erase all contractual rights.
- Rejection relieves the bankruptcy estate from performing the debtor’s remaining obligations as an administrative matter, but it does not, by itself, determine the continued existence or enforceability of the counterparty’s rights under nonbankruptcy law.
- A nondebtor’s non-monetary remedies (including potential injunctive relief) are not automatically eliminated by rejection; their availability depends on state law and any limits imposed by the Bankruptcy Code.
- Bankruptcy courts may not award declaratory or injunctive relief that treats rejection as termination and thereby strips the nondebtor of surviving rights without an independent legal basis beyond rejection itself.

## Conclusion

In re Ortiz holds that a Chapter 7 trustee’s rejection of Ortiz’s promotional agreement with Top Rank operated as a breach rather than a termination, so rejection alone did not automatically wipe out Top Rank’s possible non-monetary rights such as seeking an injunction to enforce exclusivity provisions. Because the bankruptcy court’s declaratory and injunctive relief rested on the contrary premise that rejection ended all of Ortiz’s obligations and left Top Rank only a damages claim, the district court reversed and remanded for further proceedings under the correct standard.


In re Ortiz, 400 B.R. 755 (2009)