Bose Corp. v. Ejaz

732 F.3d 17

BOSE CORPORATION, Plaintiff, Appellee,

v.Salman EJAZ, Defendant, Appellant.

No. 12–2403.

United States Court of Appeals, First Circuit.

Oct. 4, 2013.

Emily E. Smith–Lee, with whom Sana Abdullah and Smith Lee Nebenzahl LLP were on brief, for appellant.

Jeffrey S. Patterson, with whom Christopher S. Finnerty, Morgan T. Nickerson, and Nelson Mullins Riley & Scarborough LLP were on brief, for appellee.

Before LYNCH, Chief Judge, TORRUELLA and KAYATTA, Circuit Judges.

LYNCH, Chief Judge.

Plaintiff Bose Corporation won summary judgment on its breach of contract and trademark claims against defendant Salman Ejaz. Bose Corp. v. Ejaz, No. 11–10629, 2012 WL 4052861 (D.Mass. Sept. 13, 2012). Ejaz admitted to selling home theater systems manufactured by Bose for use in the United States to customers in other countries, selling them across international markets to take advantage of higher retail prices abroad. Bose asserted that Ejaz sold its American products in Australia without Bose's consent even though he had signed a settlement agreement promising not to do so after he had made similar sales in Europe. Ejaz appeals, and we affirm.

I.

Because this case comes to us following Bose's motion for summary judgment, we recite the facts in the light most favorable to Ejaz.

Ejaz first began selling Bose products online through eBay as early as 2005. He was not an authorized reseller or distributor of Bose products. Rather, he sought to take advantage of the fact that the price of electronics can vary significantly between different countries, and would buy electronics in one country and resell them in another. Products sold in this way are known as “gray market goods” because the goods themselves are legitimate and unaltered products of the claimed manufacturer, but they are sold outside of their intended retail markets.

Throughout 2005 and 2006, Ejaz sold Bose products designed for use in the United States to customers in other countries, mostly in Europe. Bose soon became aware of Ejaz's activities and approached him in late 2006 with threats of legal action. At that time, Bose indicated that Ejaz could be liable for roughly $250,000 for trademark infringement based on his unauthorized sales of Bose products. Bose then went on to offer a settlement: in essence, Bose would drop all of its existing legal claims against Ejaz, including a suit that it had already filed in the United Kingdom, and in exchange, Ejaz would not sell Bose products without Bose's permission.

Negotiations over the settlement were tense. Ejaz chose to be unrepresented and later stated that he found the tactics Bose's lawyers used “very pressurizing, very intimidating.” He was recently married, and he and his wife were “anxious to resolve the dispute.” Ejaz felt as though Bose's lawyers were implicitly suggesting throughout the negotiations that he would go to jail if he did not reach an agreement with Bose, although he never claims such threats of criminal prosecution were actually made. By January of 2007, Ejaz agreed to settle the claims.

The agreement was executed through two documents. First, the parties agreed to the terms of a written Settlement Agreement. The Settlement Agreement released all of Bose's preexisting claims, including those not related to the U.K. lawsuit, and prohibited Ejaz from selling Bose products anywhere in the world without Bose's prior consent. It further provided that Ejaz would owe Bose $50,000 in liquidated damages for every violation of the Settlement Agreement. Ejaz signed the Settlement Agreement on January 27, 2007. Bose signed it on February 26, 2007, and it took effect on that date. Second, the Settlement Agreement included a Consent Order, to be filed in the British High Court of Justice. The Consent Order was filed with that court on February 23, 2007, and issued by that court on March 9, 2007. The Consent Order terminated the U.K. lawsuit in exchange for Ejaz's promise to stop selling Bose products in the European Union.

Not long after executing the Settlement Agreement, Ejaz violated it. As he wrote in an email, “greed got [the] better of [him],” and he started selling Bose products in Australia. In response, Bose initiated the present case. Bose sought damages against Ejaz for breach of the Settlement Agreement on seven occasions.¹ It also added further claims, of which only its claim for trademark infringement is relevant here.

After discovery, Bose moved for summary judgment. Ejaz opposed the motion, claiming that there were a number of disputed material facts relating to several contract defenses. He further maintained that Bose had not carried its burden of proving each element of its trademark claim.

Ejaz also asked the district court to extend discovery before ruling on Bose's motion for summary judgment. He complained that Bose's corporate representative had been unable to answer questions on many of the topics for which he had been designated to give deposition testimony on Bose's behalf. That inability was particularly problematic, Ejaz maintained, because Bose had previously opposed a motion to extend discovery by explaining that Ejaz would be able to obtain all the information he needed by deposing its corporate representative. Ejaz argued that Bose had thus obstructed his discovery attempts, and that he should be granted more time for discovery as a result.

Without ruling on the motion to extend discovery, the district court granted summary judgment in favor of Bose on its breach of contract and trademark infringement claims. Ejaz now appeals. He argues that the Settlement Agreement, or at least its liquidated damages provision, is unenforceable, and that the district court erred in holding him liable under it on summary judgment. He further argues that genuine questions of material fact remain such that summary judgment on the trademark infringement claim is inappropriate. Finally, he contends that the district court abused its discretion in declining to extend discovery. We reject these claims and affirm the grant of summary judgment.

II.

We review the district court's grant of summary judgment de novo, drawing all reasonable inferences in favor of the nonmoving party. Rockwood v. SKF USA Inc., 687 F.3d 1, 9 (1st Cir.2012). Summary judgment is appropriate “when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Cortés–Rivera v. Dep't of Corr. & Rehab. of P.R., 626 F.3d 21, 26 (1st Cir.2010).

According to Section 8.4 of the Settlement Agreement, “interpretation and performance of [ ] [the] Agreement” is governed by Massachusetts law. ² Under Massachusetts law, a breach of contract claim requires the plaintiff to show that (1) a valid contract between the parties existed, (2) the plaintiff was ready, willing, and able to perform, (3) the defendant was in breach of the contract, and (4) the plaintiff sustained damages as a result. See Singarella v. City of Boston, 342 Mass. 385, 173 N.E.2d 290, 291 (1961). Ejaz contests only two elements of Bose's case: whether a valid contract existed and whether the contract's liquidated damages clause is enforceable.

A. Contract Validity

Ejaz offers four arguments to explain why the Settlement Agreement is not a valid contract: (1) there was no consideration supporting the Settlement Agreement, (2) there was no meeting of the minds when the parties signed the Agreement, (3) the Settlement Agreement is unconscionable,and (4) he signed the Settlement Agreement under duress.

1. Consideration

Ejaz argues that the Settlement Agreement lacked consideration because, although it purported to release Bose's legal claims against Ejaz, that release was illusory, as the earlier Consent Order in the British courts had already released those same claims. This argument is contradicted by the facts of the case in three respects: the Consent Order was not an “earlier,” separate agreement, but rather part and parcel of the Settlement Agreement; the actual issuance of the Consent Order was not earlier; and the releases were not coextensive. Ejaz signed the Settlement Agreement on January 27, 2007 and has not identified any releases predating that agreement. The Settlement Agreement became effective upon Bose's signing it on February 26, 2007. The Consent Order was not issued until March 9, 2007, after both parties had executed the Settlement Agreement. Additionally, the Consent Order released only those legal claims at issue in the U.K. litigation, while the Settlement Agreement released all legal claims, regardless of location. Ejaz did receive consideration for his promises in the Settlement Agreement.

2. Meeting of the Minds

Ejaz offers two arguments for his claim that there was no meeting of the minds. First, he contends that he subjectively attached a different understanding to the contract than Bose did: Bose believed, in accordance with the contract's explicit language, that Ejaz would be barred from selling Bose products anywhere without permission, while Ejaz believed that he would be barred from selling Bose products only in the United States and United Kingdom, leaving him free to sell in Australia. Second, he argues on appeal that he never even saw the terms of the Settlement Agreement before signing it, and that instead he was merely given a signature page that he thought corresponded to the Consent Order, which he had previously reviewed.

Ejaz's subjective belief is insufficient to invalidate the contract. Absent fraud, an individual “who signs a written agreement is bound by its terms whether he reads and understands them or not.” Awuah v. Coverall N. Am., Inc., 703 F.3d 36, 44 (1st Cir.2012) (quoting St. Fleur v. WPI Cable Sys./Mutron, 450 Mass. 345, 879 N.E.2d 27, 35 (2008)) (internal quotation mark omitted). Ejaz falls directly within the scope of this rule.

Ejaz's second argument attempts to avoid that rule by asserting that he was defrauded, arguing Massachusetts binds an...