S.C. Johnson & Son, Inc. v. Minigrip, LLC, 16-cv-244-jdp

S.C. JOHNSON & SON, INC., Plaintiff, v. MINIGRIP, LLC, Defendant.

16-cv-244-jdp

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN

August 15, 2017

OPINION & ORDER

Plaintiff S.C. Johnson & Son, Inc. (SCJ), owns the Ziploc brand of reclosable plastic bags. SCJ brings this breach of contract case against defendant Minigrip, LLC, which manufactures Ziploc bags for SCJ. SCJ contends that Minigrip breached its agreement with SCJ by making bags for the Meijer grocery chain that are "similar" to SCJ's Ziploc bags, and by using SCJ's confidential information to make the Meijer bags.

Minigrip moves for summary judgment. Dkt. 44. The material facts are undisputed, and SCJ's first claim turns on the interpretation of the term "similar." The Meijer bags are not similar to the Ziploc bags under any reasonable interpretation of the term. As for the second claim, SCJ adduces no evidence that Minigrip used SCJ's confidential information in making the bags. The court will grant Minigrip's motion for summary judgment and deny all other pending motions.

UNDISPUTED FACTS

The following facts are undisputed except where noted.

The market for reclosable plastic bags includes national brands, such as Ziploc, Hefty, and Glad, and store brands that compete with the national brands. SCJ owns the Ziploc brand; Minigrip is a manufacturer of reclosable plastic bags. Minigrip makes Ziploc bags for SCJ, and it makes store brand bags for others. This dispute arises from an agreement between SCJ and Minigrip concerning Project Lincoln, which was SCJ's code name for the development of the latest iteration of the Ziploc bag.

A. Project Lincoln agreements

The parties executed several agreements in connection with Project Lincoln, but this case concerns only two: the Project Lincoln Confidential Disclosure and License Agreement, Dkt. 48-8 (License Agreement) and the Contract Manufacturing Agreement, Dkt. 48-16 (Manufacturing Agreement). Both agreements were drafted by SCJ, and they are governed by Wisconsin law.

Both agreements contain an exclusive dealing provision and a confidentiality provision. Neither agreement prohibits Minigrip from making reclosable bags for other parties, but the exclusive dealing provision prohibits Minigrip from making the Project Lincoln bags, or any bags similar to the Project Lincoln bags for anyone else. And both agreements prohibit Minigrip from using SCJ's confidential information for anything other than making Project Lincoln bags. The pertinent provisions in the License Agreement provide that Minigrip:

shall not, either before or after termination of the [License] Agreement: (i) manufacture the Project Lincoln Products or a similar product for, or sell the Project Lincoln Products or a similar product to, anyone other than Johnson; (ii) use any of Johnson's Intellectual Property or Confidential Information, . . . except for the purposes of manufacturing the Project Lincoln Products for Johnson . . . .

Dkt. 48-8, § 4.c. Similarly, the Manufacturing Agreement provides:

Exclusivity During the Term and for a period of two (2) years after termination of this Agreement, [Minigrip] shall not manufacture or sell the Product or a similar product for or to anyone other than Johnson.. . .

Confidentiality Obligation. [Minigrip] shall not disclose any Confidential Information to any third party or use or reproduce any Confidential Information for any purpose other than to carry out its obligations under the Agreement.

Dkt. 48-16, at 6, §§ 5.4, 13.2.

Neither agreement defines the term "similar" or specifies the characteristics of a "similar product."

B. Project Lincoln bags and Meijer bags

SCJ brought this case when it learned that Minigrip was manufacturing store-brand reclosable bags for the Meijer chain of grocery stores. The Meijer bags were designed by Bill Sweaney, an employee of Minigrip's parent company, Inteplast Group. See Dkt. 84, ¶¶ 49-50.

Specimens of both the Project Lincoln bags and the Meijer bags have been provided to the court, so there is no factual dispute about the features of the bags. The parties dispute whether the bags are "similar" as that term is used in the agreements. The bags are, of course, similar in the ways in which all reclosable plastic bags are similar, but there are also numerous visible differences. The differences include, among other things, number of zippers, zippers' colors, cross-hatching and dimples on lips, deformations on the zippers, grip strips, edges, and lip colors.

The parties focus on the last two features. The first involves the edges of the opening side of the bag. The Project Lincoln bags have a die-cut trapezoid-shaped tabs on one lip of the bags (like the tab on a file folder), which assists users to open the bags easily. SCJ calls these the Easy Open Tabs. The Meijer bags do not have die-cut tabs, but they have offset lips, meaning that on the opening side of the bag, one edge that protrudes further than the other. Dkt. 84, ¶ 63.

The second feature is the lip color. On the Project Lincoln bag, both lips are colored, with one side colored in the same hue but to a deeper intensity. Each Meijer bag has one colored lip and one clear, uncolored lip. The Project Lincoln bags and the Meijer bags compete with each other in Meijer stores.

C. SCJ's confidential information

SCJ contends that Minigrip designed, and now manufactures, the Meijer bags using SCJ's confidential information. The confidential information identified by SCJ is: SCJ's consumer research that shows consumers' preference for full-colored lips; SCJ's two "Ziploc Innovation" documents; and SCJ's method know-how on applying color to lips evenly. (SCJ also claims that Minigrip used SCJ's equipment in violation of the confidentiality provisions. But, as explained below, SCJ did not raise this claim in its complaint, and so SCJ will not be allowed to pursue that claim.)

D. Jurisdiction

The court has subject matter jurisdiction on the basis of diversity under 28 U.S.C. § 1332. SCJ is a Wisconsin corporation with its principal place of business in Wisconsin. Minigrip is a limited liability company. Minigrip's sole member is Inteplast, which is a limited partnership. Each of Inteplast's three partners, Amtopp Corporation, World-Pak Corporation, and Integrated Bagging System, Inc., is a Delaware corporation with a principal place of business in New Jersey. For the purposes of diversity, Minigrip is a citizen of Delaware and New Jersey. The parties are diverse; the amount in controversy exceeds $75,000.¹

ANALYSIS

A. Minigrip's summary judgment motion

A district court must grant summary judgment when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The court must view the evidence in the light most favorable to the nonmoving party, but "the nonmoving party must come forward with specific facts showing that there is a genuine issue for trial." Armato v. Grounds, 766 F.3d 713, 719 (7th Cir. 2014) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

Minigrip moves for summary judgment on both of SCJ's contract claims: (1) that the Meijer bags are "similar" to the Project Lincoln bags; and (2) that Minigrip used SCJ's confidential information in making the Meijer bags. Wisconsin law applies to both claims because the parties chose Wisconsin law as the governing law for both the License Agreement and the Manufacturing Agreement. To prevail on a breach-of-contract claim under Wisconsin law, a plaintiff must establish three elements: the existence of a valid contract; a breach; and damages. Brew City Redevelopment Grp., LLC v. The Ferchill Grp., 2006 WI App 39, ¶ 11, 289 Wis. 2d 795, 714 N.W.2d 582.

1. Exclusivity provisions

Both agreements prohibit Minigrip from making products that are "similar" to the Project Lincoln bags. Because the bags at issue are before the court, this is essentially a question of contract interpretation.

The overall objective of contract interpretation is to derive the parties' intention. Wilson Mut. Ins. Co. v. Falk, 2014 WI 136, ¶ 23, 360 Wis. 2d 67, 857 N.W.2d 156. The process beginswith the text of the contract. MS Real Estate Holdings, LLC v. Donald P. Fox Family Tr., 2015 WI 49, ¶ 37, 362 Wis. 2d 258, 864 N.W.2d 83. If the text is unambiguous, then the court adopts its plain meaning and goes no further. Id. If the text is ambiguous, the court may consider extrinsic evidence to ascertain the parties' intent. Ash Park, LLC v. Alexander & Bishop, Ltd., 2015 WI 65, ¶ 36, 363 Wis. 2d 699, 866 N.W.2d 679. In ascertaining the parties' intent, the court must "reject a construction that renders an unfair or unreasonable result." MS Real Estate Holdings, 2015 WI 49, ¶ 38 (quoting Tempelis v. Aetna Cas. & Sur. Co., 169 Wis.2d 1, 9, 485 N.W.2d 217 (1992)). And the court must afford contract terms "'common sense' and 'realistic' meaning." Id. (quoting Betz v. Diamond Jim's Auto Sales, 2014 WI 66, ¶ 68, 355 Wis.2d 301, 849 N.W.2d 292).

SCJ contends that the Meijer bags are "similar" to the Project Lincoln bags under four theories of what that term means: (1) they "directly compete" with each other; (2) they share certain physical attributes; (3) consumers could find them similar; and (4) Minigrip admitted that the bags were similar. Each of these theories fails as a matter of law for reasons explained below.

a. "Similar" as "directly competitive"

SCJ contends that prohibition on making "similar products" means that Minigrip agreed that it would not make reclosable bags that "compete directly (head-to-head) with" the Project Lincoln bags. Dkt. 70, at 17. This theory fails for three reasons.

First, SCJ's interpretation contradicts other express provisions in the parties' contracts. The License Agreement acknowledges that Minigrip is free to make and sell competing products to third parties. The License Agreement Section 9 states, "[e]ithe...