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Summit Properties International, LLC v. Ladies Professional Golf Association

June 14, 2010

SUMMIT PROPERTIES INTERNATIONAL, LLC, PLAINTIFF,
v.
LADIES PROFESSIONAL GOLF ASSOCIATION, DEFENDANT.



The opinion of the court was delivered by: Sand, J.

MEMORANDUM & ORDER

Plaintiff Summit Properties International, LLC ("Summit") was the exclusive licensing agent for Defendant Ladies Professional Golf Association ("LPGA") from 1999 until 2006. In 2006, LPGA terminated the relationship with Summit. Summit filed this diversity action for breach of contract. Both parties have moved for partial summary judgment. In addition, LPGA has filed four motions in limine. LPGA's partial summary judgment motion is granted in part, denied in part. As a result, LPGA's motions in limine are moot. Summit's partial summary judgment motion is granted in its entirety.

I. Background

In 1999, Summit and LPGA entered into a Representation Agreement, which appointed Summit as the exclusive licensing representative of LPGA outside of the United States. In 2002, the parties executed the Amended and Restated Representation Agreement, which expanded Summit's role to include the United States. (Holmes Aff. Ex. A ("Agreement").) The Agreement operated until March 31, 2007, unless extended or terminated in accordance with the provisions of the Agreement. According to the Agreement, Summit had the right to extend the Agreement "as it is in effect as of June 30, 2006 through December 31, 2009 by notice given on or before September 30, 2006." (Agreement ¶ 18(a).) Summit was required to pay LPGA annual payments ("Guarantees") regardless of the amount of the royalties Summit collected. (Def.'s 56.1 ¶ 2.) These payments ensured that LPGA would receive a minimum amount of revenue. From 2002 to 2005, Summit paid LPGA $170,000 more in Guarantees than it received in royalties from the licensees it procured. (Def.'s 56.1 ¶ 9; Pl.'s Response to 56.1 ¶ 9.) The only year Summit's receipts exceeded the Guarantees it paid was 2003. (Def.'s 56.1 ¶¶ 6, 7.) In December 2005, Summit made a series of projected revenues in connection with a business plan it shared with LPGA. (Def.'s 56.1 ¶ 10.) The December 15, 2005 "conservative" projections (the "Projections") are relied upon by Summit and its expert in the instant litigation. (Def.'s 56.1 ¶ 12.) The Projections predicted continued losses through 2007; however, beginning in 2008, the Projections anticipated that royalties would begin to exceed the Guarantees. (Pl.'s 56.1 ¶¶ 13, 14.) Five of the Summit representatives that had made the Projections were deposed: Geoffrey Holmes and Kenneth Wang, Summit's founders and principals; Sharlene Sones, who worked on the predictions for the United States; Matthew Holmes, who worked on the predictions for Canada and Europe; and Daniel Mao, who worked on the predictions for Asia. (Def.'s Mem. Summ. J. 4.) The Projections did not use a specific growth rate but rather "assumed conservative growth." (M. Holmes Dep. at 114:8-18.)

In June 2006, LPGA sent Summit a notice that it was terminating Summit as LPGA's exclusive licensing representative for alleged breaches. (Def.'s 56.1 ¶ 26.) Summit rejected the notice, and in September 2006 Summit sent LPGA a notice extending the Agreement. (Pl.'s 56.1 ¶ 28.) Summit did not pay LPGA any Guarantee payments after June 2, 2006, the date of LPGA's termination notice. (Def.'s Response to 56.1 ¶ 30.) Summit filed the instant suit in November 2007.

II. Standard of Review

A court may only grant a motion for summary judgment if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The court looks to the substantive law to identify which facts are material; only disputes over facts that might affect the outcome of the suit under the governing law will preclude summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Kinsella v. Rumsfeld, 320 F.3d 309, 311 (2d Cir. 2003). "[T]his standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48 (emphasis in original). An issue is genuine if "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Id. at 249. If the evidence is "merely colorable" or "not significantly probative," summary judgment may be granted. Id. at 249-50.

To show the existence of a genuine issue, the nonmoving party must have more than a scintilla of evidence to support its position. Id. at 252. "The non-moving party may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence showing that its version of the events is not wholly fanciful." D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998). In evaluating cross-motions for summary judgment, "each party's motion must be examined on its own merits, and in each case all reasonable inferences must be drawn against the party whose motion is under consideration." Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir. 2001). The court must draw all inferences in favor of the non-moving party. Id.

III. Discussion

a. LPGA's Motion for Partial Summary Judgment

Defendant moves for partial summary judgment dismissing six of Plaintiff's claims: (1) breach of contract insofar as it seeks damages for lost profits; (2) breach of contract insofar as it seeks damages relating to Golfsmith, a potential licensee; (3) breach of contract insofar as it seeks damages after December 31, 2006; (4) a permanent injunction; (5) declaratory judgment; and (6) unjust enrichment for the period before June 2, 2006.*fn1

i. Lost Profits

In order to recover loss of future profits as damages for breach of contract under New York law,*fn2 the plaintiff must establish the existence and the amount of lost profits with reasonable certainty, and that the lost profits were within the contemplation of the parties at the time the contract was made. Schonfeld v. Hilliard, 218 F.3d 164, 173 (2d Cir. 2000) (citing Kenford Co., Inc. v. Erie County, 67 N.Y.2d 257, 261 (1986) ("Kenford I")). To meet this burden, the plaintiff must establish (1) the existence of the lost profits with reasonable certainty, and (2) that the alleged loss is capable of proof with reasonable certainty. Kenford I, 67 N.Y.2d at 261. "[T]he damages may not be merely speculative, possible or imaginary, but must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes." Id; see also 3497 Austin Boulevard Assoc. LLC v. M.K.D. Capital Corp., No. 04 Civ. 8596 (NRB), 2007 WL 1575265, at *2 (S.D.N.Y. May 30, 2007) ("Projections of future profits which are made on the basis of a 'multitude of assumptions' that require 'speculation and conjecture' with few known factors do not provide the requisite certainty for recovery."). Additionally, "evidence of lost profits from a new business venture receives greater scrutiny because there is no track record upon which to base an estimate." Schonfeld, 218 F.3d at 172.

Summit need not establish the exact amount of lost profits; it "need only provide the jury with a sound basis for approximating with reasonable certainty the profits lost as a result" of LPGA's actions. S&K Sales Co. v. Nike, Inc., 816 F.2d 843, 853 (2d Cir. 1987). Accordingly, LPGA can prevail on its motion for summary judgment on the issue of lost profits only if Summit has failed to raise a genuine issue of material fact as to the existence of lost profits.*fn3 V.S. Int'l, S.A. v. Boyden World Corp., No. 90 Civ. 4091 (PKL), 1993 WL 59399, at *7 ...


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