Cacique Inc v. Reynaldos Mexican Food Company LLC et al

Filing 145

ORDER GRANTING CACIQUES MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM #41 AND DENYING REYNALDOS MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM(ECF no.75 by Judge Otis D. Wright, II. (lc). Modified on 2/7/2014 (lc).

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O 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 13 14 15 CACIQUE, INC., v. Plaintiff/Counter-Defendant, Case No. 2:13-cv-1018-ODW (MLGx) ORDER GRANTING CACIQUE’S MOTION FOR SUMMARY REYNALDO’S MEXICAN FOOD JUDGMENT ON COUNTERCLAIM COMPANY, LLC, [41] AND DENYING REYNALDO’S MOTION FOR SUMMARY Defendant/Counterclaimant. JUDGMENT ON COUNTERCLAIM [75] 16 17 I. INTRODUCTION 18 Before the Court are Cross-Motions for Summary Judgment on Defendant 19 Reynaldo’s Mexican Food Company, LLC’s counterclaim for breach of contract. 20 (ECF Nos. 41, 75.) The contract is a settlement agreement executed in May 2011— 21 the MTK Settlement Agreement. Reynaldo’s alleges that Plaintiff Cacique, Inc. is 22 subject to the terms of the MTK Settlement Agreement, and that the agreement bars 23 Cacique’s trademark and trade dress claims in this action. Cacique asserts that it is 24 not a party to the MTK Settlement Agreement, and, even if it was a party, the MTK 25 Settlement Agreement does not release Cacique’s trademark and trade dress claims. 26 While numerous documents associated with these Cross-Motions have been filed 27 under seal, the Court finds that the reasons for sealing those documents do not apply 28 to the contents of this Order. For the reasons discussed below, the Court GRANTS 1 Cacique’s Motion for Summary Judgment on Counterclaim (ECF No. 41) and 2 DENIES the Reynaldo’s Motion for Summary Judgment on Counterclaim. (ECF 3 No. 75.) II. 4 FACTUAL BACKGROUND 5 Cacique, a well-known brand in the Hispanic cheese market, was formed in 6 1976 by the de Cardenas family—Gilbert L. de Cardenas, Sr., and Jennie de Cardenas. 7 (ECF No. 42: Gil Decl. ¶ 23.)1 Their son, Gilbert B. de Cardenas, Jr. (“Gil”2), formed 8 MTK, a Delaware corporation, in 2004. (Id. ¶ 5.) MTK’s only directors are Gil and 9 Jon Kmett. Gil is the only officer. (Id. ¶¶ 6–7; ECF No. 42: Kmett Decl. ¶¶ 6–7.) Gil 10 owns 85 percent of MTK with the remaining 15 percent owned by his children in 11 trust. (ECF No. 42: Gil Decl. ¶ 8, Kmett Decl. ¶ 2.) 12 In 2006, MTK partnered with the Huff Alternative Fund, L.P. and the Huff 13 Alternative Parallel Fund, L.P. (the “Huff Funds”) to acquire the assets of Reynaldo’s. 14 (ECF No. 79: Bloom Decl. ¶ 5.) At the time, Reynaldo’s was a bankrupt Hispanic 15 foods manufacturer. (Id.) The Huff Funds are private-equity funds that also own the 16 Wisconsin Cheese Group (“WCG”). (Id. ¶ 4.) WCG is the third largest Hispanic 17 foods manufacturer in the United States and a major competitor with Cacique. (Id.) 18 MTK and the Huff Funds formed Hispanic Food Holdings, LLC (“HFH”) for the 19 acquisition of Reynaldo’s. (Id. ¶ 5.) Under this partnership, the Huff Funds provided 20 capital to acquire Reynaldo’s and MTK contributed its Hispanic lunch meat business 21 and Gil’s management skills. (Id. ¶ 6.) The partnership between MTK and the Huff 22 Funds was memorialized in several documents including (1) the Contribution 23 Agreement, (2) the Operating Agreement, and (3) the Employment Agreement. (Id. 24 25 26 27 28 1 A large number of declarations have been submitted in support of and in opposition to the instant Cross-Motions. The Court has reviewed all of the declarations. But for ease of reading, and to avoid redundancy, the Court will not refer to every declaration in which the evidence can be found. There are also several declarants who have submitted multiple declarations. In order to distinguish the declarations, the Court will cite to the docket entry where the cited declaration can be located. 2 The Court respectfully refers to certain individuals by their first names where necessary to avoid confusion. 2 1 ¶ 6, Exs. 1–3.) Reynaldo’s contends that these documents demonstrate that all 2 involved were aware of Gil’s connection to Cacique and took steps to prevent Gil’s 3 involvement with Cacique while working with Reynaldo’s and the Huff Funds. 4 From November 2006 until his termination in January 2009, Gil served as 5 President and CEO of Reynaldo’s. (Id. ¶ 15; ECF No. 42: Gil Decl. ¶ 3.) Gil claims 6 that he was not employed by Cacique during the time that he worked for Reynaldo’s. 7 (ECF No. 42: Gil Decl. ¶ 3.) In February 2009, Gil went to work for Cacique as the 8 Chief Operations Officer, and he remains in that position to date. (Id. ¶ 4.) Gil claims 9 that at no time has he served as a director of Cacique, and he has never attended any 10 Cacique board meetings. (Id.) The only evidence presented in these Cross-Motions 11 of any business relationship between MTK and Cacique was between February 2009 12 and April 2009.3 The two entities entered into an oral agreement that a business 13 consultant for MTK, with a work visa sponsored by MTK, would do work for Cacique 14 because Cacique could not hire him directly. (ECF No. 42: Gil Decl. ¶ 9, Kmett Decl. 15 ¶¶ 8–9, Iglesias Decl. ¶ 2.) MTK has apparently conducted no other business, except 16 to wind up affairs, since the end of the oral agreement with Cacique in April 2009. 17 (ECF No. 42: Gil Decl. ¶ 5, Kmett Decl. ¶ 5.) 18 In April 2009, Reynaldo’s filed suit against Gil in Los Angeles County Superior 19 Court alleging that Gil breached the non-compete clause in the Employment 20 Agreement with Reynaldo’s when he went to work at Cacique. (Reynaldo’s Mexican 21 Food Co. v. Gilbert B. de Cardenas Jr., No. BC411673.) The case settled on June 24, 22 2010, with Gil signing the settlement agreement individually and on behalf of MTK 23 (“Employment Settlement”). (ECF No. 42: Gil Decl. ¶ 22, Ex. 3.) 24 In February 2010, while the employment lawsuit was still pending, another 25 lawsuit was filed in Los Angeles County Superior Court, Fischer et al. v. Hispanic 26 3 27 28 Reynaldo’s has also submitted evidence that Antonio de Cardenas’ law office shared an address with MTK. (ECF No. 51: Tobin Decl. ¶ 8, Ex. 5.) Antonio is Gil’s brother. However, this evidence does not demonstrate a business connection between MTK and Cacique. It only demonstrates that Antonio’s law practice and MTK may share a business relationship. 3 1 Food Holdings et al., No. BC431228. Certain trustees and MTK were plaintiffs, 2 while HFH, the Huff Funds, Reynaldo’s, and various other entities were defendants. 3 (ECF No. 42: Gil Decl. Ex. 1.) 4 investment funds. (Id.) The case settled, and a settlement agreement was executed on 5 May 17–18, 2011 (“MTK Settlement Agreement”). (Id. ¶ 13, Ex. 2; ECF No. 79: 6 Bloom Decl. ¶ 20, Ex. 5.) The MTK Settlement Agreement is the basis of the breach- 7 of-contract counterclaim filed by Reynaldo’s in this action. The dispute concerned bonds held by various 8 At the time the MTK Settlement Agreement was executed in May 2011, Gil 9 was COO of Cacique. (ECF No. 42: Gil Decl. ¶ 4.) He was also a 3.75 percent 10 shareholder in Cacique.4 (Id.) Gil is a signatory to the MTK Settlement Agreement, 11 but the signature line states that he signed as President and CEO of MTK. (Id. Ex. 2) 12 Cacique is not explicitly mentioned anywhere in the MTK Settlement Agreement. 13 (Id.) However, as Reynaldo’s points out, the MTK Settlement Agreement purports to 14 bind not only the signatories but also a long list of entities and individuals including 15 “affiliated entities.” (Id. at §§ 7.1–7.2.) Reynaldo’s argues that it was the intent of the 16 parties to bind Cacique to the MTK Settlement Agreement as an affiliated entity. The 17 MTK Settlement Agreement also contains broad releases of all claims “known or 18 unknown” at the time the agreement was executed. (Id. at §§ 7.1–7.3.) Reynaldo’s 19 contends that these broad releases bar the present trademark and trade dress 20 infringement claims brought by Cacique. 21 Cacique filed the Complaint in this action on February 12, 2013. (ECF No. 1.) 22 Prior to filing suit, Cacique sent a cease-and-desist letter to Reynaldo’s. (ECF No. 78: 23 Tobin Decl. ¶ 11, Ex. 9.) In the letter and in the Complaint, Cacique alleges that the 24 infringement by Reynaldo’s began around April 2011, which is before the MTK 25 Settlement Agreement was executed. (Id.; Compl. ¶ 13.) Reynaldo’s filed its Answer 26 along with the breach-of-contract counterclaim on April 13, 2013. (ECF No. 19.) 27 4 28 At the time the MTK Settlement Agreement was executed, Gil also owned 18 to 19 percent of Cacique, USA. (ECF No. 144: Tobin Decl. Ex. B) Cacique, USA is the distribution arm of Cacique and was a separate business entity in 2011 that later merged with Cacique. (Id.) 4 1 The present Cross-Motions for Summary Judgment were filed on December 2, 2 2013, and December 17, 2013.5 (ECF Nos. 41, 75.) The same arguments and nearly 3 identical evidence have been presented in support of and in opposition to both 4 Motions. The Cross-Motions and supporting documents were sealed by the Court due 5 to extensive references to confidential settlement agreements—including the MTK 6 Settlement Agreement and the Employment Settlement. The settlement agreements 7 involve individuals and entities that are not parties to this action. The Court also 8 granted a request from Reynaldo’s to conduct additional depositions and file 9 supplemental briefing pursuant to Federal Rule of Civil Procedure 56(d).6 (ECF 10 No. 54.) A hearing on the Cross-Motions for Summary Judgment was held on 11 January 27, 2014. III. 12 LEGAL STANDARD 13 Summary judgment should be granted if there are no genuine issues of material 14 fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. 15 P. 56(c). The moving party bears the initial burden of establishing the absence of a 16 genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). 17 Once the moving party has met its burden, the nonmoving party must go beyond the 18 pleadings and identify specific facts through admissible evidence that show a genuine 19 issue for trial. Id.; Fed. R. Civ. P. 56(c). Conclusory or speculative testimony in 20 affidavits and moving papers is insufficient to raise genuine issues of fact. Thornhill’s 21 Publ’g Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). 22 23 24 25 26 27 28 5 Reynaldo’s also filed a Motion for Summary Judgment on Cacique’s trademark and trade dress claims. (ECF No. 64.) A separate order will issue on that motion. 6 In the supplemental briefing, Reynaldo’s references an apparent discovery dispute regarding the deposition of Jennie de Cardenas. (ECF No. 131.) Jennie was not one of the individuals that Reynaldo’s named in its Rule 56(d) request. (ECF No. 47.) According to Reynaldo’s, Jennie has not been made available for deposition despite repeated notices. Reynaldo’s wants to depose Jennie about Cacique’s corporate structure. But a declaration from Jennie has been filed on the docket in this case in relation to a protective order before the Magistrate Judge. (ECF No. 92.) The declaration states that Jennie has not been involved in Cacique business for ten years. Therefore, the Court finds that the inability to depose Jennie is not pertinent to determination of these CrossMotions. 5 1 A genuine issue of material fact must be more than a scintilla of evidence or 2 evidence that is merely colorable or not significantly probative. Addisu v. Fred 3 Meyer, 198 F.3d 1130, 1134 (9th Cir. 2000). A disputed fact is “material” where the 4 resolution of that fact might affect the outcome of the suit under the governing law. 5 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1968). An issue is “genuine” if 6 the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving 7 party. Id. Where the moving and nonmoving parties’ versions of events differ, courts 8 are required to view the facts and draw reasonable inferences in the light most 9 favorable to the nonmoving party. Scott v. Harris, 550 U.S. 372, 378 (2007). IV. 10 DISCUSSION 11 These Cross-Motions for Summary Judgment on the Reynaldo’s Counterclaim 12 hinge entirely on contract interpretation, making the counterclaim ripe for summary 13 judgment. The Cross-Motions essentially present two issues: (1) whether Cacique is 14 an “affiliated entity” bound by the MTK Settlement Agreement, and (2) if Cacique is 15 bound, whether the MTK Settlement Agreement bars Cacique from bringing its 16 trademark and trade dress claims. The Court resolves both issues in Cacique’s favor. 17 A. 18 Governing Principles of Contract Interpretation Before reaching the issues at the heart of these Cross-Motions, the Court must 19 first address the governing principles of contract interpretation. “A settlement 20 agreement is treated as any other contract for purposes of interpretation.” United 21 Commercial Ins. Serv., Inc. v. Paymaster Corp., 962 F.2d 853, 856 (9th Cir. 1992). 22 Moreover, state law applies to interpretation of contracts generally. 23 California law, which governs the MTK Settlement Agreement, the intent of the 24 parties determines the meaning of the contract. Cal. Civ. Code § 1636. But a court 25 should interpret a contract solely by its language if the language is “clear and 26 explicit,” especially when the contract has been reduced to writing. §§ 1638–39. Id. Under 27 The parol-evidence rule comes into play when a court is presented with 28 extrinsic evidence. A court may not consider extrinsic evidence of any prior or 6 1 contemporaneous oral or written agreement to vary or contradict the clear and 2 unambiguous terms of a written, integrated contract. Wolf v. Walt Disney Pictures & 3 Television, 162 Cal. App. 4th 1107, 1126 (2008). However, extrinsic evidence is 4 admissible to interpret an agreement when a material term is ambiguous. Id. Here, 5 the MTK Settlement Agreement contains an integration clause. (ECF No. 42: Gil 6 Decl. Ex. 2 at § 15.7.) But both Cacique and Reynaldo’s have presented the Court 7 with extrinsic evidence to support their respective interpretations of the MTK 8 Settlement Agreement. The Court finds that to the extent the Court relies on extrinsic 9 evidence to interpret terms of the contract, it does not violate the parol evidence rule.7 10 When the meaning of a contract term is disputed, a court engages in a series of 11 inquiries. See id. at 1126–27. First, the court provisionally receives any proffered 12 extrinsic evidence and must determine whether the terms of the contract are 13 reasonably susceptible to the interpretation advanced by that evidence. Id.; see also 14 Miller v. Glenn Miller Prods., Inc., 454 F.3d 975, 989–90 (9th Cir. 2006) (“California 15 law recognizes that words of a written instrument often lack a clear meaning apart 16 from the context in which the words were written . . . .”) If the language is reasonably 17 susceptible to the proposed meaning, the court admits extrinsic evidence. Wolf, 162 18 Cal. App. 4th at 1126–27. If there is no material conflict between the extrinsic 19 evidence adduced, the court interprets the contract solely as a matter of law. Id. But 20 when “there is a conflict in the extrinsic evidence, the factual conflict is to be resolved 21 by the jury.” Id. With these principles of interpretation in mind, the Court evaluates 22 the two terms of the MTK Settlement Agreement that are in dispute. 23 /// 24 /// 25 26 27 28 7 The Court has reviewed the evidentiary objections lodged by the parties. To the extent that the Court relies upon evidence to which one or more parties have objected, the Court OVERRULES those objections. As already indicated, any extrinsic evidence upon which the Court relies to interpret the MTK Settlement Agreement does not run afoul of the parol-evidence rule. Furthermore, the evidence upon which the Court relies is also relevant, within the declarants’ personal knowledge, and based on nonhearsay under the Federal Rules of Evidence. 7 1 B. Cacique Is Not an Affiliated Entity 2 The first issue to address is whether Cacique is even subject to the releases 3 contained in the MTK Settlement Agreement, as Cacique was not a party to the 4 lawsuit and did not sign the settlement agreement. Reynaldo’s argues that Cacique is 5 an “affiliated entity” of MTK under section 7.1 of the MTK Settlement Agreement. 6 Section 7.1 contains a general release of claims. On the other hand, Cacique contends 7 that it is not an “affiliated entity” of MTK and is not subject to the general release. 8 The relevant portion of section 7.1 reads as follows: 9 Plaintiffs and each of them and their agents, officers, directors, 10 shareholders, partners, members, representatives, employees, attorneys, 11 insurers, accountants, predecessors, successors, parent companies, 12 subsidiaries, affiliated entities, assigns and beneficiaries, expressly 13 waive any claims against Defendants and each of them, and fully, finally 14 and forever release Defendants . . . from any and all claims, demands, 15 causes of action, actions, proceedings, assertions of liability, obligations, 16 loss, of every kind and nature, whether known or unknown, suspected 17 or unsuspected, fixed or contingent, mature or unmatured, that Plaintiffs 18 now own or hold or at any time may have held or owned against the 19 Plaintiffs Released Parties . . . . 20 (ECF No. 42: Gil Decl. Ex. 2) (emphasis added). 21 Looking at the four corners of the MTK Settlement Agreement, the Court 22 cannot immediately ascertain the meaning of “affiliated entities.” The agreement does 23 not define the term and does not specifically name any affiliated entities.8 Moreover, 24 Cacique is not explicitly named in section 7.1 or any other section of the MTK 25 /// 26 8 27 28 Section 7.1 does identify Antonio de Cardenas and the de Cardenas Law Group as additional nonparty releasers, but does not specify their relationship to the parties in the lawsuit—i.e., whether they are “affiliated entities” or one of the myriad other non-party releasers such as agents or attorneys. (ECF No. 42: Gil Decl. Ex. 2 at § 7.1.) 8 1 Settlement Agreement. Thus, the Court must look elsewhere to assess whether 2 Cacique is an affiliated entity under the MTK Settlement Agreement. 3 The Court notes that the absence of Cacique’s name in the MTK Settlement 4 Agreement is probative of a lack of intent to make Cacique subject to its general 5 releases. But Reynaldo’s directs the Court to prior agreements involving Gil, MTK, 6 the Huff Funds, and Reynaldo’s to demonstrate that all involved were aware of the 7 link between Gil, MTK, and Cacique. Cacique is a direct competitor of Reynaldo’s in 8 the Hispanic cheese market. (ECF No. 79: Bloom Decl. ¶ 4.) Reynaldo’s argues that 9 those prior agreements—the Operating Agreement, Contribution Agreement, and 10 Employment Agreement—safeguarded all involved from the negative consequences 11 of the Cacique connection. 12 Employment Agreement between Gil and Reynaldo’s included a non-compete claus. 13 (ECF No. 50: Bloom Decl. ¶¶ 7, 11, Ex. 3 at § 9.) (Reynaldo’s Opp’n 14:4–15:9.) For example, the 14 However, the Court finds that these prior agreements are not as persuasive as 15 Reynaldo’s makes them out to be. While all involved were aware of Gil’s family 16 connection to Cacique, the prior agreements never refer to Cacique as an affiliate of 17 MTK. Moreover, the fact that steps were taken to keep Gil’s connection to Cacique 18 separate from the acquisition of Reynaldo’s actually demonstrates that MTK and the 19 Huff Funds9 understood that Cacique was not affiliated with MTK. 20 In addition, as Cacique argues, when Reynaldo’s intends to bind an affiliated 21 entity, it specifically names that entity. (Cacique Mot. 13:8–15.) The June 2010 22 Employment Settlement contains the same “affiliated entities” language as the MTK 23 Settlement Agreement, and specifically identifies an affiliated entity—Lisy Corp. 24 (ECF No. 42: Gil Decl. Ex. 3, Recital B.) Reynaldo’s was a party to that agreement, 25 and the Court finds this evidence persuasive. But the inquiry does not end there, 26 because the term “affiliated entities” in the MTK Settlement Agreement is not 27 28 9 Since the falling out with MTK, the Huff Funds now wholly own Reynaldo’s. (ECF No. 50: Bloom Decl. ¶ 4.) 9 1 superfluous. See Cal. Civ. Code § 1641 (“The whole of a contract is to be taken 2 together, so as to give effect to every part, if reasonably practicable, each clause 3 helping interpret the other.”). The mere fact that affiliated entities are not specifically 4 named in the MTK Settlement Agreement cannot alone establish that Cacique is not 5 an affiliated entity. 6 More helpful to the inquiry is attempting to define the term “affiliated entities.” 7 There are a number of definitions of “affiliate,” and all include some element of 8 control. See, e.g., Cal. Corp. Code § 150 (“A corporation is an ‘affiliate’ of, or a 9 corporation is ‘affiliated’ with, another specified corporation if it directly, or indirectly 10 through one or more intermediaries, controls, is controlled by or is under common 11 control with the other specified corporation.”); Black’s Law Dictionary (9th ed. 2009) 12 (“A corporation that is related to another corporation by shareholdings or other means 13 of control.”). The contracting parties’ intent and prior dealings can supersede strict 14 legal definitions such as these when it comes to contract interpretation. Cal. Civ. 15 Code § 1644; see also Marder v. Lopez, 450 F.3d 445, 451 (9th Cir. 2006). But 16 Cacique bolsters the control element in the above definitions by pointing to the 17 Operating Agreement that was executed when MTK and the Huff Funds created HFH 18 to purchase and run Reynaldo’s. (ECF No. 50: Bloom Decl. Ex. 2.) The Operating 19 Agreement includes a definition of “affiliate” that reads as follows: 20 “Affiliate” shall mean any individual, partnership, corporation, trust or 21 other entity or association, directly or indirectly, through one or more 22 intermediaries, controlling, controlled by, or under common control with 23 the Member, Manager or other party being referenced. 24 “control,” as used in the immediately preceding sentence, means, with 25 respect to a corporation, the right to exercise, directly or indirectly, more 26 than fifty percent (50%) of the voting rights attributable to the controlled 27 corporation, and, with respect to any individual, partnership, limited 28 liability company, trust, other entity or association, the possession, 10 The term 1 directly or indirectly, of the management or policies of the controlled 2 entity. 3 (Id. at § 1.2.) Based on the legal definitions of affiliate and the definition contained 4 in the Operating Agreement, the Court finds that the term “affiliated entities” in the 5 MTK Settlement Agreement requires that either MTK or Cacique exercise some level 6 of control over the other. 7 There is very little evidence linking MTK and Cacique in any sort of business 8 capacity. MTK and Cacique entered into an oral agreement between February 2009 9 and April 2009, so that an MTK consultant could temporarily work for Cacique 10 pending a change in his immigration status. (ECF No. 42: Gil Decl. ¶ 9, Kmett Decl. 11 ¶¶ 8–9, Iglesias Decl. ¶ 2.) But this hardly establishes that Cacique exercised control 12 over MTK, or vice versa.10 While Gil was certainly involved in both MTK and 13 Cacique at a high level at the time the MTK Settlement Agreement was executed in 14 May 2011, there is no evidence that he was unable to observe the legal distinction 15 between the two corporations. While Reynaldo’s argues that Gil was entirely in 16 control of both entities, the Court is not convinced. Gil has never been a director of 17 Cacique and he has never attended a board meeting. (ECF No. 42: Gil Decl. ¶ 4.) Gil 18 did own 3.75 percent of Cacique at the time the MTK Settlement Agreement was 19 executed, but that was not a controlling share of the corporation. (Id.) Reynaldo’s has 20 proffered no evidence to put these facts in dispute.11 Moreover, Gil signed the MTK 21 10 22 23 24 25 26 27 28 The evidence Reynaldo’s cites to support “close contact” between MTK and Cacique is objectionable at best. The evidence is merely a conclusory statement from Donna Tobin, trial counsel for Reynaldo’s, citing a single exhibit that purports to demonstrate that “Cacique regularly issued checks to MTK at the direction of Gil in his capacity as employee and COO of Cacique.” (ECF No. 51: Tobin Decl. ¶ 6, Ex. 3.) The exhibit actually two copies of the same check dated February 23, 2009 for $15,000. (Id. at Ex. 3.) The only purpose this invoice serves is to corroborate Cacique’s proffered evidence of the February 2009 to April 2009 oral consulting agreement. 11 Reynaldo’s did file a supplemental declaration that includes deposition testimony from Gil and another Cacique employee, arguing that the testimony demonstrates Gil’s control over MTK and Cacique. (ECF Nos. 142–144.) But this testimony only further proves that Gil is COO of Cacique and that employees report to him. It sheds no light on the relationship between MTK and Cacique during the relevant time period: May 2011. Nor does the supplemental declaration suggest Gil was unable to properly observe corporate formalities as the head of MTK and COO of Cacique. 11 1 Settlement Agreement explicitly as President and CEO of MTK only. (Id. at Ex. 2.) 2 He did not sign the agreement as an individual, so whether Gil as an individual is 3 affiliated with Cacique is irrelevant. 4 business since April 2009 except to wind up its affairs. (ECF No. 42: Gil Decl. ¶ 5, 5 Kmett Decl. ¶ 5.) Thus, a relationship between MTK and Cacique that rises to the 6 level of “affiliate” at the time that the MTK Settlement Agreement was executed in 7 May 2011 is even less likely. In addition, MTK has apparently done no 8 Based on the above facts and an absence of facts to the contrary, the Court finds 9 that the contracting parties to the MTK Settlement Agreement did not intend Cacique 10 to be subject to its terms as an affiliated entity.12 11 C. MTK Settlement Agreement Does Not Bar Cacique’s Claims 12 Reynaldo’s argues that the MTK Settlement Agreement’s broad releases bar 13 Cacique’s claims here because Cacique admits in both its cease-and-desist letter and 14 the Complaint that the alleged infringement began in April 2011, one month before 15 the MTK Settlement Agreement was executed. (ECF No. 78: Tobin Decl. ¶ 11, Ex. 9; 16 Compl. ¶ 13.) In contrast, Cacique contends that, if bound, the subject of the MTK 17 Settlement Agreement is so unrelated to the intellectual-property claims here that the 18 agreement cannot operate as a release. (Cacique Mot. 18:4–20:6.) Even if Cacique 19 were an affiliated entity of MTK at the time the MTK Settlement Agreement was 20 executed, the Court finds that the agreement does not release Cacique’s trademark and 21 trade dress claims. 22 There is no question that the MTK Settlement Agreement contains broad 23 releases of all claims “known or unknown” at the time the agreement was executed. 24 25 26 27 28 12 Reynaldo’s also contends that Cacique admits to being subject to the MTK Settlement Agreement because Cacique seeks attorneys’ fees in the Proposed Judgment submitted with these CrossMotions. (Reynaldo’s Opp’n 10:9–12.) But the law is clear on this point. A contractual attorneys’ fees provision is reciprocal if a non-signor is sued as if it was a signor or party to the contract. Cal. Civ. Code § 1717; Reynolds Metals Co. v. Alperson, 25 Cal. 3d 124, 128–29 (1979). Therefore, Cacique’s request for attorneys’ fees does not amount to an admission that it is subject to the MTK Settlement Agreement. 12 1 (ECF No. 42: Gil Decl. Ex. 2 at §§ 7.1–7.3.) The parties also expressly waive 2 California Civil Code section 1542 regarding unknown claims at the time of 3 settlement. 4 Agreement contains broad releases, the agreement does create some boundaries. 5 Recital C of the MTK Settlement Agreement is instructive: (Id. § 7.3.) But the Court finds that, while the MTK Settlement 6 The Parties now desire to settle all past and present claims, differences, 7 disputes, rights, interests, and liabilities which exist or may exist between 8 them and arising out of or which are in any way connected to the 9 Complaint and the underlying, facts, circumstances, and claims asserted 10 therein without admitting any wrongdoing. 11 (ECF No. 42: Gil Decl. Ex. 2) (emphasis added). 12 The MTK Settlement Agreement arose out of a state court lawsuit concerning 13 bonds held by certain investment funds—the funds used to acquire Reynaldo’s. The 14 lawsuit had nothing to do with trademark or trade dress infringement, or intellectual 15 property rights in general. 16 Agreement, the Court cannot read each section in a vacuum. Cal. Civil Code § 1641. 17 Taken as a whole, the Court finds that Recital C reflects the parties’ intent to resolve 18 all claims “known or unknown” that relate to the investment and finance disputes that 19 were the subject of the litigation leading up to the MTK Settlement Agreement. An 20 alternative interpretation would simply be untenable in light of the agreement’s own 21 terms. In interpreting the terms of the MTK Settlement 22 Reynaldo’s cites a handful of cases to support its proposition that the broad 23 releases contained in the MTK Settlement Agreement encompass Cacique’s 24 intellectual-property claims. But the Court finds those cases distinguishable from the 25 one at bar. In Augustine Medical, Inc. v. Progressive Dynamics, Inc., 194 F.3d 1367, 26 1372 (Fed. Cir. 1999), the Federal Circuit, applying Minnesota contract law, held that 27 a broad release in a settlement agreement stemming from a patent dispute barred a 28 later patent claim. But unlike here, the claims settled in the agreement and the 13 1 subsequent claims involved the same subject matter—patents. 194 F.3d at 1372. The 2 reliance by Reynaldo’s on this Court’s conclusions of fact and law in ProMex, LLC v. 3 Hernandez, 781 F. Supp. 2d 1013 (C.D. Cal. 2011), is similarly flawed. Once again, 4 the settlement agreement at issue there and the subsequent claims that the agreement 5 released both involved intellectual property rights. 781 F. Supp. 2d at 1016–17. 6 Instead, the Court finds that the holding in World Trading 23, Inc. v. EDO 7 Trading, Inc., No. 12-cv-10886-ODW (PJWx), 2013 WL 1767954 (C.D. Cal. Apr. 24, 8 2013), is more instructive. In World Trading 23, this Court held that the language of 9 the prior settlement agreement required a nexus between the subject of the settlement 10 agreement and the new claims. 2013 WL 1767954, at *3. The Court then went on to 11 find that no nexus existed and the new claims were not barred, even though all of the 12 settled claims and new claims both concerned intellectual property. Id. In this case, 13 the Court finds that Recital C creates a similar nexus requirement. Moreover, the 14 MTK Settlement Agreement is the product of a lawsuit involving investments and 15 finance, while Cacique’s claims are for trademark and trade dress infringement. The 16 Court cannot comprehend any nexus between the subject of the MTK Settlement 17 Agreement and Cacique’s intellectual property rights. Cacique’s claims are not even 18 in the same sphere of influence as the MTK Settlement Agreement. 19 The Court holds that, even if Cacique were bound by the terms of the MTK 20 Settlement Agreement as an affiliated entity, the agreement does not release Cacique’s 21 trademark and trade dress claims. 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 14 V. 1 2 CONCLUSION For the reasons discussed above, the Court GRANTS Cacique’s Motion for 3 Summary Judgment on Counterclaim. 4 Reynaldo’s Motion for Summary Judgment on Counterclaim. (ECF No. 75.) 5 (ECF No. 41.) The Court DENIES the IT IS SO ORDERED. 6 7 February 7, 2014 8 9 10 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15

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