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U.S. Licensing Associates, Inc v. the Rob Nelson Company

April 26, 2012


The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge:


Before the Court is a motion for summary judgment brought by defendant The Rob Nelson Company ("RNC") and a cross-motion for partial summary judgment brought by plaintiff U.S. Licensing Associates, Inc. ("USLA"). For the reasons set forth below, both motions are DENIED.


An additional description of the facts of this case is provided in this Court's recent decision granting in part and denying in part RNC's motion to dismiss the amended complaint, familiarity with which is assumed. USLA v. RNC, 11 Civ. 4517, 2011 WL 5910216 (S.D.N.Y. Nov. 28, 2011). That opinion dismissed Plaintiff's second and third causes of action, leaving a single cause of action for breach of contract.

Pursuant to a license agreement ("1992 License Agreement"), RNC's predecessor in interest, the Jim Bouton Corporation ("JBC") licensed the use of trademarks for a shredded gum called Big League Chew to the predecessor in interest of non-party Wrigley WM Jr. Co. ("Wrigley"), Amurol Products Company ("Amurol") in exchange for a 5-year agreement, which was subsequently renewed, under which Amurol would pay JBC 6.5 percent of the net sales of Big League Chew, with a Guaranteed Minimum Royalty of $500,000.00 each year. RNC 56.1 ¶ 1; ULSA 56.1 ¶ 2, 1992 License Agreement ¶¶ 5, 6. The Guaranteed Minimum Royalty was increased to $530,000.00 in 2009. Feureisen Decl. ¶ 26. USLA acted as an agent for JBC and facilitated the original license agreement between JBC and Amurol. Alati Decl. ¶¶ 3-4. As compensation for its facilitation of this agreement, USLA also entered into a contract ("1992 Contract") with JBC, through which USLA was promised 1.5 percent of the sales of Big League Chew, Seymour Decl. Ex. B, 1992 Contract ¶ 2b, or if the sales were below the Guaranteed Minimum Royalty, USLA would be entitled to 23 percent of the difference between the Guaranteed Minimum Royalty and the actual royalties earned. Id. at ¶ 4b. JBC later assigned all its rights, obligations and liabilities under the 1992 Agreement and 1992 Contract to RNC and Amurol assigned its rights, obligations, and liabilities under the 1992 License Agreement to Wrigley. RNC 56.1 ¶¶ 5, 6.

The second term of the 1992 License Agreement ended on December 31, 2001 and was renewed on January 1, 2002. Id. at ¶ 7. Approximately two years before the 1992 License Agreement was set to expire, Wrigley notified RNC that it wanted to terminate the agreement early in exchange for payment of the 2011 Guaranteed Minimum Royalty. RNC 56.1 ¶¶ 11-12; USLA 56.1 ¶¶ 12-13. Instead, RNC waived its right to the 2011 Guaranteed Minimum Royalty, and Wrigley agreed to sell the equipment it had used to manufacture Big League Chew Products pursuant to the Termination Agreement to RNC. RNC 56.1 ¶¶ 15-16; USLA 56.1 ¶¶ 18-21. The parties dispute whether or not this equipment was sold to RNC at a vastly reduced price. RNC 56.1

¶¶25-27, 32; USLA Response to RNC 56.1 ¶¶ 16, 25. Wrigley also agreed not to sell a competing product, USLA 56.1 ¶ 21, and helped RNC with transitional matters including transferring trademarks, websites, formulas, inventory and customer lists. Feureisen Decl. ¶ 15. The parties also dispute whether this assistance and the non-compete had any value. USLA Opp. 17-24; RNC MSJ 12-16.

The 1992 Contract, 1992 License Agreement and the Termination Agreement explicitly state that the agreements should be construed under the laws of the state of New York. Seymour Decl. Ex. B, 1992 Contract ¶ 7; Seymour Decl. Ex. A, 1992 License Agreement ¶ 31; Seymour Decl. Ex. D, Termination Agreement ¶ 10(c).


Summary judgment shall be granted in favor of a movant where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A court must resolve all ambiguities and draw all inferences against the moving party. LaSalle Bank Nat'l Ass'n v. Nomura Asset Capital Corp., 424 F.3d 195, 205 (2d Cir. 2005). The movant bears the burden of establishing the absence of any genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). A material fact "might affect the outcome of the suit under the governing law," and an issue of fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Holtz v. Rockefeller & Co., 258 F.3d 62, 69 (2d Cir. 2001) (internal citation omitted). "The party against whom summary judgment is sought . . . 'must do more than simply show that there is some metaphysical doubt as to the material facts . . . . [T]he nonmoving party must come forward with specific facts showing that there is a genuine issue for trial.' " Caldarola v. Calabrese, 298 F.3d 156, 160 (2d Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).

New York rules govern choice-of-law questions in diversity actions. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 498 (1941). Under New York law, "a contractual choice-of-law provision is generally binding on a party claiming rights under a contract." CIH Int'l. Holdings, LLC v. BT United States, LLC, No. 10 Civ. 7790, 2011 WL 4483983, at *4 (S.D.N.Y. Sept. 28, 2011) (citing Hartford Fire Ins. Co. v. Orient Overseas Containers Lines (UK) Ltd., 230 F.3d 549, 556 (2d Cir. 2000) (relying on New York Contract law to resolve issues raised in the case).


A. There is a Genuine Issue of Material Fact Regarding Whether RNC Breached the 1992 Contract with USLA

In the sole remaining Count, USLA alleges that RNC breached the 1992 Contract with USLA by "waiving the 2011 Minimum Guaranteed Royalty," Compl. ¶ 37, and "by failing to pay plaintiff USLA the greater of 23% of the 2011 Minimum Guaranteed Royalty or 23% of the valuable consideration that Wrigley gave RNC for defendant RNC's promise to waive the 2011 Minimum Guaranteed Royalty." Id. at ¶ 38. ...

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