DigiART, LLC v. Casale

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DIGIART, LLC, Plaintiff, v. DANNY CASALE, Defendant.

No. 6:22-cv-494-WWB-RMN

United States District Court, M.D. Florida, Orlando Division

September 15, 2023

ORDER

WENDY W. BERGER, UNITED STATES DISTRICT JUDGE

THIS CAUSE is before the Court on Defendant's Motion for Summary Judgment (Doc. 50), Plaintiff's Response (Doc 53), and Defendant's Reply (Doc. 54). For the reasons set forth below, Defendant's Motion will be granted.

I. BACKGROUND

Defendant Danny Casale, is an artist known for his surreal, humorous, and crudely drawn digital animations. (Doc. 50-1, ¶ 5).^[1] In January 2021, Defendant entered into an agreement with non-party The Art Plug LLC (“Art Plug”), operated by Marcel Katz, to act as his east coast representative. (Id. ¶¶ 6-7; Doc. 50-2 at 6-7, 9, 94-95). Based on the partnership with Art Plug, Katz asked Defendant if he would be interested in partnering with a new entity, which ultimately became Plaintiff DigiART, LLC (“DigiART”), to create and sell non-fungible tokens (“NFTs”). (Doc. 50-1, ¶¶ 11-14; Doc. 50-2 at 22-24; Doc. 53-6 at 2). Defendant expressed interest in the project. (Doc. 50-2 at 97-98).

After some discussions regarding sales proceeds and royalties from secondary sales-which can represent a significant portion of the proceeds from the sale of NFTs-, Plaintiff's representative e-mailed Defendant a draft agreement. (Doc. 50-1, ¶¶ 12, 16, 18; Doc. 50-2 at 32, 98, 101; Doc. 50-4 at 22). The draft contained several blanks, including the effective date, the name of the artist, and the allocation of net sale proceeds. (Doc. 50-2 at 47, 103-106; Doc. 50-4 at 32-33). In the body of the e-mail, Plaintiff's representative stated that the profit split would be “50/50” “on initial NFT drops” with “[a]ll secondary market royalties” going to Defendant. (Doc. 50-2 at 101). The email did not contain an effective date for the agreement. (Id.). Defendant signed and returned the draft agreement, still containing blanks, on April 30, 2021. (Doc. 50-1, ¶ 23; Doc. 50-2 at 101, 108-111; Doc. 50-4 at 36).

On May 3, 2021, Katz forwarded the signed agreement to other individuals involved in DigiART. (Doc. 50-2 at 42-43, 115). When he sent the document, the blank for effective date had been filled with “May 2nd, 2021[,]” Defendant's information was included as the “Artist,” and the “Allocation of Net Proceeds” provided for a fifty-fifty split without any differentiation between initial sales and secondary sales. (Id. at 116). The agreement had also been signed on behalf of the company. (Id. at 119). Defendant did not receive a countersigned copy of the agreement until March 2022, at which time he discovered that the blanks in the agreement he signed had been filled. (Doc. 50-1, ¶ 28; Doc. 50-4 at 11; Doc. 50-4 at 41).

In March 2021, Defendant began creating and selling NFTs culminating in the Coolman's Universe (“CMU”) NFT Project. (Doc. 50-1, ¶¶ 9-10). Between the purported effective date of the agreement at issue in this case and February 2022, Katz and other DigiART employees were aware of Defendant's NFT project. (Doc. 50-2 at 78, 123; Doc. 50-3 at 10-11, 15-16, 19-20, 33, 39, 133-134; Doc. 50-4 at 67-69, 72, 74-75). Defendant states that despite this knowledge, Plaintiff did not attempt to enforce the agreement, inform him that he was in breach of the agreement, or otherwise acknowledge any contractual relationship or obligations between Plaintiff and Defendant. (Doc. 50-1, ¶¶ 32-71). Katz testified that he was “not sure” but he “probably told [Defendant] to chill out” when he found out about his work outside the purported agreement but concedes that he never made any such statement in writing and that it probably occurred after Defendant launched the CMU. (Doc. 50-2 at 78, 81; Doc. 50-3 at 45, 74). DigiART admits that it did not inform Defendant that his release would be a violation of any agreement until months after it became aware of the CMU NFT Project. (Doc. 50-4 at 67-68, 7274, 107-108).

II. LEGAL STANDARD

Summary judgment is appropriate when the moving party demonstrates “that 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 dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material if it may “affect the outcome of the suit under the governing law.” Id. “The moving party bears the initial burden of showing the court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial.” Allen v. Bd. of Pub. Educ., 495 F.3d 1306, 1313-14 (11th Cir. 2007). Stated differently, the moving party discharges its burden by showing “that there is an absence of evidence to support the nonmoving party's case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).

However, once the moving party has discharged its burden, “Rule 56(e) . . . requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Id. at 324 (quotation omitted). The nonmoving party may not rely solely on “conclusory allegations without specific supporting facts.” Evers v. Gen. Motors Corp., 770 F.2d 984, 986 (11th Cir. 1985). Nevertheless, “[i]f there is a conflict between the parties' allegations or evidence, the [nonmoving] party's evidence is presumed to be true and all reasonable inferences must be drawn in the [nonmoving] party's favor.” Allen, 495 F.3d at 1314.

III. DISCUSSION

On March 8, 2022, DigiArt filed the Complaint (Doc. 1) alleging claims for breach of contract (Count I), promissory estoppel (Count II), and fraud in the inducement (Count III). (See generally id.). Defendant seeks summary judgment on all three counts.

A. Breach of Contract

First, Defendant argues that summary judgment must be granted as to Count I because no valid contract was formed. To prevail on a breach of contract claim under Florida law, “a plaintiff must establish the following elements: ‘(1) a valid contract, (2) a material breach, and (3) damages.'” De Gazelle Grp., Inc. v. Tamaz Trading Establishment, 113 F.Supp.3d 1221, 1223 (M.D. Fla. 2014) (quoting Havens v. Coast Fla., P.A., 117 So.3d 1179, 1181 (Fla. 2d DCA 2013)). “[T]he question of whether a valid contract exists is a threshold question of law that may be properly decided by the court.” Kolodziej v. Mason, 774 F.3d 736, 740 (11th Cir. 2014).

“[I]t is a fundamental principle of contracts that in order for a contract to be binding and enforceable, there must be a meeting of the minds on all essential terms and obligations of the contract.” Silk Road Trading & Shipping Co. v. World Fuel Servs. Corp., 572 F.Supp.3d 1296, 1303 (S.D. Fla. 2021) (quotation omitted); see also Kolodziej, 774 F.3d at 741 (“[M]utual assent is a prerequisite for the formation of any contract.” (citing Gibson v. Courtois, 539 So.2d 459, 460 (Fla. 1989)). “While a ‘meeting of the minds' may not be necessary as to every term for a contract to be formed, mutual assent is necessary as to essential terms.” LSQ Funding Grp., L.C. v. EDS Field Servs., 879 F.Supp.2d 1320, 1327 (M.D. Fla. 2012) (quoting David v. Richman, 568 So.2d 922, 924 (Fla. 1990)). A court evaluates the existence of mutual assent “by analyzing the parties' agreement process in terms of offer and acceptance.” Kolodziej, 774 F.3d at 741. “A valid contract-premised on the parties' requisite willingness to contract-may be ‘manifested through written or spoken words, or inferred in whole or in part from the parties' conduct.'” Id. (quoting L & H Constr. Co. v. Circle Redmont, Inc., 55 So.3d 630, 634 (Fla. 5th DCA 2011)).

“The party seeking to enforce a purported agreement has the burden of establishing assent to the essential terms by the opposing party.” Triton Stone Holdings, L.L.C. v. Magna Bus., L.L.C., 308 So.3d 1002, 1007 (Fla. 4th DCA 2020).

First the Court must determine if the missing terms-effective date and the allocation of net proceeds-are essential terms to the agreement. “The definition of ‘essential term' varies widely according to the nature and complexity of each transaction and is evaluated on a case-by-case basis.” Lanza v. Damian Carpentry, Inc., 6 So.3d 674, 676 (Fla. 1st DCA 2009). In this case, the parties do not dispute that the allocation of proceeds as to initial sales is an essential term. Instead, Plaintiff argues that the effective date and allocation of secondary sales are not essential terms.

With respect to allocation of secondary sales, Plaintiff's argument is simply that there could be no sales on the secondary market and, therefore, this term is not essential. However, the same can be said of the initial sales as well. There is no dispute, however, that a secondary market for NFTs, like the ones at issue in this case, exists and could be the source of significant revenue. Simply because it might not have been an essential term to Plaintiff does not mean that it was not an essential term to the agreement. Plaintiff has not offered any legal authority in support of its argument and, as Defendant points out, pricing terms are generally essential terms. See Technocable Wiring Specialist, Inc. v. Genesis Networks Telecom Servs LLC, No. 8:16-cv-2590-T, 2019 WL 13144188, at *3 (M.D. Fla. Feb. 12, 2019) (noting that in forming a joint venture the allocation of profits and losses would be an essential term to the agreement); Uphoff v. Wachovia Sec., LLC, No. 09-80420-CIV, 2009 WL 5031345, at *3 (S.D. Fla. Dec. 15, 2009) (“An example of an essential term is price, or in this case, the amount of the...