Everlast World's Boxing Headquarters Corp. v. Trident Brands Inc.

EVERLAST WORLD'S BOXING HEADQUARTERS CORP., Plaintiff, v. TRIDENT BRANDS INC., SPORTS NUTRITION PRODUCTS INC.,and MANCHESTER CAPITAL INC., Defendants.

TRIDENT BRANDS INC., Plaintiff, v. EVERLAST WORLD'S BOXING HEADQUARTERS CORP.and INTERNATIONAL BRAND MANAGEMENT LIMITED, Defendants.

19-CV-503 (JMF)

19-CV-510 (JMF)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

February 26, 2020

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

These consolidated cases arise from agreements between Everlast World's Boxing Headquarters Corp. ("Everlast") and International Brand Management Ltd. ("IBML"), on the one hand, and Trident Brands Inc. ("Trident") and Manchester Capital Inc. ("Manchester"), on the other, pursuant to which Trident agreed to pay royalties to Everlast and IBML in exchange for a license to use Everlast's trademark on certain fitness-related products and Manchester agreed to serve as Trident's guarantor.¹ Not long after entering the relevant agreements, Trident concluded that it had struck a bad deal and sought to renegotiate the royalty provisions of the agreements. When that effort failed to yield a written amendment to the parties' contracts, Trident terminated the principal agreement pursuant to an early termination clause. Predictably, litigation followed, with Everlast bringing breach of contract claims against Trident, Manchester, and Sports Nutrition Products Inc. ("SNPI-NV"), a wholly owned subsidiary of Trident; and Trident bringing breach of contract and various other claims against Everlast and IBML.

Now pending are three motions. First, SNPI-NV moves, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss Everlast's contract claim on the ground that SNPI-NV was not a party to the relevant contracts. Second, Everlast and IBML move, pursuant to Rule 12(b)(6), to dismiss Trident's Complaint in its entirety. And third, Everlast moves, pursuant to Rule 12(c), for judgment on the pleadings with respect to its breach of contract claim against Trident and Manchester. For the reasons that follow, all three motions are granted (albeit in the case of Everlast's Rule 12(c) motion as to liability only).

BACKGROUND

The following facts are undisputed unless otherwise noted.

A. The License Agreement

On June 4, 2013, Everlast and IBML entered into a licensing agreement (the "Licensing Agreement") with a New York corporation that is not a party to this litigation, Sports Nutrition Products, Inc. ("SNPI-NY"), and Manchester. The License Agreement authorized SNPI-NY to use certain Everlast trademarks on fitness-related products. See ECF No. 31 ("Amended Compl."), ¶10; ECF No. 31-1 ("License"), § 2 & Schs. 1-2. In exchange, SNPI-NY agreed to make quarterly royalty payments, subject to a minimum payment that increased on an annual basis. See Amended Compl. ¶¶ 41-42; Docket No. 19-CV-0510, ECF No. 1-1 ("Trident Compl."), ¶ 10; see also License §§ 6.1-6.2, 7.3. Manchester, meanwhile, agreed to serve as guarantor. That is, Manchester agreed to pay SNPI-NY's debts upon request in the event that SNPI-NY defaulted on its obligations. See Amended Compl. ¶¶ 11-12; see also License Sch. 7. Section 26.4 of the License Agreement provided that "[n]o amendment or other variation to this Agreement shall be effective unless it is in writing, is dated and is signed by a duly authorized representative of each Party."

By its terms, the License Agreement was to last fourteen and a half years, until December 31, 2027. See License § 4.1. But the agreement contained an early termination provision, Section 4.2, which stated that "[e]ither Party shall be entitled to terminate this Agreement without liability to the other Party, effective on 31 December 2017, by giving written notice to the other Party, no later than by 30 June 2017." Id. § 4.2. Other provisions addressed SNPI-NY's obligations in the event of termination. Section 6.5, for instance, provided: "Immediately upon termination of this Agreement, for whatever reason (and without prejudice to any other rights or remedies available to the Licensor under this Agreement or otherwise) all sums due to Licensor shall become payable immediately." Section 17.6, in turn, provided that "[t]ermination of this Agreement shall not affect any of the Parties' accrued rights or Liabilities." And Section 17.7, indicated that specified provisions of the License Agreement, including Sections 6.5 and 17.6, would "remain in full force and effect" after termination. Id. § 17.6 ("The provisions of this Agreement for whatever reason which in order to give effect to their meaning need to survive its termination shall remain in full force and effect thereafter including where applicable [Sections] 1, 6, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, and 26.").

B. The Assignment to Trident

The License Agreement prohibited assignment by SNPI-NY absent prior written authorization by Everlast "and/or" IBML. Id. § 22.1. On December 23, 2013, however, SNPI-NY assigned all of its rights and obligations under the License Agreement to Trident pursuant to a written agreement (the "Assignment") signed by representatives of Everlast, IBML, SNPI-NY, Manchester, and Trident. See Amended Compl. ¶ 13; see also ECF No. 31-2 ("Assignment"), § 1.1. Section 1.2 of the Assignment provided as follows:

The Assignee [Trident] agrees to perform all the Assignor's [SNPI-NY's] obligations under the Contract . . . through its wholly owned subsidiary, Sports Nutrition Products Inc. [SNPI-NV], a Nevada corporation . . . . The Assignee hereby acknowledges and agrees that it shall remain responsible to Licensor [Everlast] and IBML for all acts and omissions of SNPI[-NV] (which shall be deemed to be acts and omissions of the Assignee).

Assignment § 1.2. SNPI-NV, which is a party to this litigation, is mentioned nowhere else in the Assignment. Nor was SNPI-NV a signatory to the Assignment.

At some point, Trident appears to have developed a case of licensor's remorse, and understandably so. According to Trident's Complaint, the company spent approximately $3 million — including royalty payments to Everlast of between $600,000 to $700,000 — in connection with its licensing activities, yet it generated no more than about $100,000 in sales. See Trident Compl. ¶¶ 13-14. In the fall of 2016, Trident approached Everlast about changing the royalty structure to more favorable terms. See id. ¶ 15. According to Trident, in January 2017, Everlast's Chief Executive Officer and Trident's Chief Executive Officer orally agreed to revise the royalty provisions of the License Agreement once Trident made its outstanding royalty payment for the fourth quarter of 2016. See id. But no such agreement was reduced to writing; nor was a written amendment regarding royalties ever adopted. Trident alleges that it completed its royalty payment for the fourth quarter of 2016 in February 2017 and that Everlast refused to honor its alleged promise to "restructure the royalty, with a revised 2017 minimum royalty of $39,000 and a 3%royalty on all sales of licensed products." Id. ¶ 16.

C. Termination and Litigation

As noted above, the License Agreement provided that "[e]ither Party" was "entitled to terminate" the Agreement, "effective on 31 December 2017, by giving written notice to the other Party, no later than by 30 June 2017." License § 4.2. On June 28, 2017, representatives from Everlast, IBML, Trident, and Manchester (but not SNPI-NV) executed an amendment extending the notice deadline to July 31, 2017. See Amended Compl. ¶¶ 33-34; see also ECF No. 31-7 ("Amendment"), § 1.1. Trident sought to extend the notice deadline again, but the relevant parties could not reach agreement on the terms of such an extension. On July 31, 2017, therefore, Trident provided written "notice of termination under clause 4.2 effective December 31, 2017." See Amended Compl. ¶ 35; see also ECF No. 39-6 ("Trident July 31, 2017 Letter"). Thereafter, Everlast sent multiple written demands to Trident and Manchester for royalty payments due, without success. See Amended Compl. ¶ 49. By letter dated November 9, 2018, for example, Everlast demanded $425,555.29 from Trident and Manchester for royalties owed between the fourth quarter of 2016 and December 31, 2017. See Amended Compl. ¶ 50; see also ECF No. 39-4 ("Nov. 9, 2018 IBML Letter"). The letter also demanded interest of $96,264.63 (as of November 7, 2018), as well as costs, expenses, and legal fees incurred by Everlast in pursuing its claims. See Amended Compl. ¶ 50; see also Nov. 9, 2018 IBML Letter.

Not long after, litigation began, with Trident striking first. On January 11, 2019, Trident sued Everlast and IBML in New York state court, alleging five claims: (1) breach of the purported oral agreement; (2) breach of the implied covenant of good faith and fair dealing; (3) fraud; (4) negligent misrepresentation; and (5) declaratory judgment that Trident is not obligated to make further payments of royalties pursuant to Section 4.2 of the License Agreement. See Trident Compl. ¶¶ 21-43. Six days later, Everlast filed suit in this Court against Trident, Manchester, andSNPI-NV, alleging breach of the License Agreement and seeking more than $575,000 in damages. See Amended Compl. ¶¶ 44-63; see also ECF No. 1. The same day, IBML and Everlast removed Trident's lawsuit to this Court, see Docket No. 19-CV-0510, ECF. No. 1 ("Notice of Removal"), and the two lawsuits were eventually consolidated, see ECF No. 21. SNPI-NV's and Everlast's motions followed.

LEGAL STANDARDS

As noted, the Court is confronted (effectively, at least) with three motions. First, SNPI-NV moves to dismiss Everlast's contract claim against it pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Second, Everlast and IBML move to dismiss Trident's claims, pursuant to Rule 12(c). And finally, Everlast also moves with respect to its own claims for judgment on the pleadings, also pursuant to Rule 12(c).

Conveniently, a motion for...