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Kodak Dumps the Oscar Theater, Proving that Contract Rejection is like No Fault Divorce: There is No Defense

posted by Nathalie Martin

Just under a month ago, Eastman Kodak filed for chapter 11 and now it is doing what many chapter 11 debtors do, trying to decide which of its contractual obligations it’ll honor and which it won’t. Back in 2000, Kodak signed a $74 million deal to get its name displayed atop the fancy Los Angeles theater that hosts the Oscars. Since Kodak has not yet paid the full freight for this naming, it has now decided to end the relationship, just like that. Kodak has decided that the benefits of having the company's name on the 3,300- seat theatre don’t justify the ongoing costs.

The owners of the theater, CIM Group, are now trying to figure out whether to find another sponsor before the February 26 Oscar event, or leave the theater nameless. The court order allowing Kodak to reject its contract with CMI did not specify whether the sign atop the venue would need to come down before the Oscars ceremony. The theatre's owner, CMI, objected to Kodak's request and has expressed qualms about removing the signage, but of course, there is no defense to the debtor’s business judgment decision to reject a contract.

Back in 2000, the company agreed to pay $3.6 million per year to call the venue at Hollywood and Highland the Kodak Theatre. Yesterday’s ruling terminates Kodak’s obligation to pay $38 million of the $72 million contract price, leaving CMI with an unsecured claim in the amount of its damages.

February 16, 2012 at 12:26 PM in Corporate Bankruptcy

Comments

You make it sound like Kodak did this all on their own, but it had to be approved by a court to happen.

Posted by: Brad C | February 16, 2012 at 06:08 PM

true Bred, but there is no defense right? It sort of is like they can do it on their own.

Posted by: Nathalie Martin | February 16, 2012 at 06:13 PM

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