Slep-Tone Entertainment Corporation v. Kugel et al
Filing
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ORDER denying Plaintiff's 106 Motion for Summary Judgment. IT IS FURTHER ORDERED that by October 14, 2014, Plaintiff shall file with the Court a memorandum stating any reason why summary judgment should not be granted for Defendant. Signed by Judge Neil V. Wake on 10/1/14.(CLB)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE DISTRICT OF ARIZONA
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Slep-Tone Entertainment Corporation,
Plaintiff,
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ORDER
v.
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No. CV-12-02631-PHX-NVW
Donald Kugel, et al.,
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Defendants.
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Before the Court are Plaintiff’s Motion for Summary Judgment (Doc. 106),
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Defendant Ernest McCullar’s Response (Doc. 108) and Plaintiff’s Reply (Doc. 109). For
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the following reasons, Plaintiff’s Motion will be granted.
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I.
BACKGROUND
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Plaintiff sued Defendant for trademark infringement and unfair competition in
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2009. Pursuant to a settlement agreement (“Agreement”) reached by the parties in May
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2010, Defendant agreed to (1) pay Plaintiff a total of $51,000 over the course of eight
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years, with two up-front payments of $1,500 followed by 96 monthly payments of $500,
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(2) employ only “original discs,” as that term is defined in the Agreement, when
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producing karaoke shows for a period of three years, (3) provide Plaintiff with any “non-
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original media” in Defendant’s possession, and (4) refrain from manufacturing any media
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bearing the SOUND CHOICE trademark. The Agreement provided that Plaintiff would
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furnish to Defendant two groups of original discs, each featuring at least 4,800 karaoke
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tracks.
In addition, Plaintiff pledged (1) not to bring any copyright or trademark
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infringement suit against Defendant based on conduct prior to execution of the
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Agreement and (2) to dismiss Defendant from the pending trademark infringement suit,
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without prejudice, within five business days of receiving the first payment from
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Defendant. This latter provision called on Defendant to “cooperate as necessary or
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helpful to effectuate such dismissal, as directed by [Plaintiff’s] counsel, and specifically
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[to] sign a stipulation of dismissal in the form provided in EXHIBIT B hereto.” Doc.
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106-1 at 7. Under Paragraph 15 of the Agreement, if Defendant missed a payment to
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Plaintiff and failed to cure the breach within 30 days, Plaintiff was entitled, “at its
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option,” to “(y) accelerate any debts owed to it, declaring them immediately due and
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payable, and institute an action for breach of the AGREEMENT, or (z) void the covenant
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[not to bring a copyright or trademark suit] and institute an action for trademark
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infringement, such action being based upon acts of DEFENDANT undertaken both
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before and after the effective date of this AGREEMENT.” Id. at 7-8.
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Defendant signed this Agreement on May 28, 2010. One week previously, on
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May 21, 2010, Defendant had filed a Motion to Dismiss Plaintiff’s trademark
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infringement suit. Neither Plaintiff nor the court acted on this Motion until October 26,
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2010, when the court issued an order directing Plaintiff to show cause why the suit should
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not be dismissed. After Plaintiff failed to respond within the allotted ten-day window,1
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the court dismissed Plaintiff’s suit on November 17, 2010.
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Prior to dismissal, however, a dispute arose between the parties regarding each
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side’s alleged failure to comply with the Agreement.
In a May 26, 2010, email,
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Plaintiff’s counsel (“Counsel”) asked Defendant to sign and return two documents
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provided in an attachment: the Agreement and a proposed Stipulation to Dismiss
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Defendant Ernest McCullar (“Stipulation”), which Counsel said he needed in order to
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dismiss the suit. Defendant apparently had concerns about the Agreement, and he and
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Counsel discussed them over the phone on May 28, 2010. Later that day, Counsel sent
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According to Plaintiff’s counsel, he never received a copy of the order because of
a “technical failure” in his office. Doc. 106 at 3 n.1.
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Defendant an email containing a revised version of the Agreement and asked him to
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return signed copies of the Agreement and the Stipulation; the attachment in this second
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email does not appear to have included the Stipulation. Counsel followed up by email on
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June 1, 2010, to inform Defendant that he had received Defendant’s “documents and
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paperwork” but was still missing a signed copy of the Stipulation. Doc. 106-3 at 21.
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Defendant responded that he had not received a copy of the Stipulation but would sign
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and mail it to Counsel if he provided a new attachment, which Counsel did on June 7,
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2010. Counsel never received a signed copy of the Stipulation from Defendant, and
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Plaintiff never voluntarily dismissed its suit.
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As required by the Agreement, Defendant made both of the initial $1,500
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payments he owed Plaintiff, which were due by May 31, 2010, and June 28, 2010, as well
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as the first monthly installment of $500.
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September 1, 2010, he has missed all subsequent payments. In December 2012, Plaintiff
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instituted the instant action against Defendant and several other entities, alleging they had
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infringed Plaintiff’s trademarks and trade dress and engaged in unfair competition. After
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the Court severed Defendant from the original action, Plaintiff amended its Complaint to
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include a breach-of-contract action against Defendant.
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Plaintiff’s trademark and unfair competition claims but retained jurisdiction over the
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contract claim. Plaintiff now moves for summary judgment on that claim, the sole
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remaining claim.
But beginning with the payment due on
The Court later dismissed
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II.
LEGAL ANALYSIS
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A party moving for summary judgment must demonstrate that there is no genuine
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issue as to any material fact in order to be entitled to judgment as a matter of law. Fed.
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R. Civ. P. 56(a). At the summary judgment stage, courts view all evidence in the light
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most favorable to the non-moving party. Rohr v. Salt River Project Agric. Imp. & Power
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Dist., 555 F.3d 850, 857 (9th Cir. 2009). “A trial court can only consider admissible
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evidence in ruling on a motion for summary judgment.” Orr v. Bank of Am., 285 F.3d
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764, 773 (9th Cir. 2002). The movant has the burden of showing the absence of genuine
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issues of material fact. See Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099,
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1103 (9th Cir. 2000). A material fact is one that might affect the outcome of the suit under
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the governing law, and a factual issue is genuine “if the evidence is such that a reasonable
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jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477
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U.S. 242, 248 (1986).
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The governing law in this case is Arizona contract law. “In order to state a claim
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for breach of contract, a plaintiff must allege the existence of a contract between the
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plaintiff and defendant, a breach of the contract by the defendant, and resulting damage to
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the plaintiff.” Warren v. Sierra Pac. Mortg. Servs. FN, No. CV-10-02095-PHX-NVW,
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2011 U.S. Dist. LEXIS 44407, at *9 (D. Ariz. Apr. 22, 2011) (citing Chartone, Inc. v.
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Bernini, 207 Ariz. 162, 170, 83 P.3d 1103, 1111 (Ariz. App. Ct. 2004)).
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Defendant argues that the Agreement precludes Plaintiff from bringing this claim
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at all because Paragraph 15 of the Agreement limits Plaintiff, in the event Defendant
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misses payments, to suing for breach of contract “or” suing for trademark infringement.
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Because Plaintiff has already sued for trademark infringement following Defendant’s
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non-payment, Defendant maintains, Plaintiff’s breach-of-contract claim is not permitted
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by the Agreement.
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infringement suit applies only to “infringement occurring prior to the effective date of
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this AGREEMENT.” Doc. 106-1 at 7 (emphasis added). Whether the Agreement bars
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the present breach-of-contract claim therefore turns on whether the trademark
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infringement suit Plaintiff filed in December 2012 is based on conduct that allegedly
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occurred prior to execution of the Agreement.
Plaintiff’s covenant not to bring a copyright or trademark
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Plaintiff’s Second Amended Complaint avoids using almost any dates. One of the
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few references to a specific year appears in Paragraph 73, which states that “[b]ased upon
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observations of [Defendant’s] commercial activities in 2012, [Plaintiff] believes that
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[Defendant] has entirely disregarded his obligation not to use media-shifted karaoke
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accompaniment tracks to produce commercial karaoke shows,” as required by the
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Agreement. Doc. 66 at 11 (emphasis added). Even if this sentence is interpreted to
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suggest indirectly that infringement occurred in 2012, the rest of the Second Amended
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Complaint, read as a whole, also alleges infringing conduct prior to May 2010, when the
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Agreement was finalized. Paragraph 61, for instance, recites that Defendant “has known
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at least since January 2010, and upon information and belief since well before that date,
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that the creation and use of karaoke accompaniment tracks or computer files
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representative of karaoke accompaniment tracks that bear the Sound Choice Marks is not
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authorized.” Id. at 9 (emphasis added). Although this paragraph does not say it in so
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many words, the clear implication is that Defendant’s alleged infringement has been
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occurring since before May 2010. The portion of the Second Amended Complaint that
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details the parties’ prior litigation alleges that “[i]n 2009,” Plaintiff’s employees
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“observed [Defendant’s] commercial use of unauthorized media-shifted karaoke
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accompaniment tracks that bore the Sound Choice Marks.” Id. at 10. When presented
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with Defendant’s contention that the breach-of-contract claim is barred by the
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Agreement, Plaintiff in its Reply did not dispute that its trademark claims encompass all
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of Defendant’s infringing conduct. See Doc. 109 at 4.
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In the case of a default by Defendant, the Agreement gave Plaintiff the right to sue
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for breach of contract or to stand on his underlying right to sue for prior trademark
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infringement, but not both. Plaintiff bound itself to this choice when it signed the
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Agreement; it cannot now escape the plain limitation of the Agreement through evasive
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pleading. Plaintiff’s breach-of-contract claim fails as a matter of law. Because the
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Second Amended Complaint on its face shows that Plaintiff’s breach-of-contract claim is
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precluded, it appears there is nothing else to do in this case except grant summary
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judgment for Defendant on the contract claim and enter a final judgment.
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Finally, Defendant asserts that (1) Counsel never mentioned the Stipulation or
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provided him with a copy to sign and (2) the copy of the Agreement he received from
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Counsel lacked an amortization schedule laying out when his payments were due to
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Plaintiff. As resolving these ostensible factual disputes is unnecessary, the Court will not
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address them.
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IT IS THEREFORE ORDERED that Plaintiff’s Motion for Summary Judgment
(Doc. 106) is denied.
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IT IS FURTHER ORDERED that by October 14, 2014, Plaintiff shall file with the
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Court a memorandum stating any reason why summary judgment should not be granted
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for Defendant.
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Dated this 1st day of October, 2014.
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