Leadership Studies, Inc. v. Blanchard Training and Development, Inc. et al

Filing 153

ORDER: The Motion for Reconsideration (ECF No. 134 ) is Granted. Section IV.C of the Order (ECF No. 130 ) is Vacated. Signed by Judge William Q. Hayes on 04/10/2018. (All non-registered users served via U.S. Mail Service)(ajs)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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LEADERSHIP STUDIES, INC.,

Case No.: 15-cv-1831-WQH-KSC
Plaintiff,

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v.

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ORDER

BLANCHARD TRAINING AND
DEVELOPMENT, INC.,

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Defendant.

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BLANCHARD TRAINING AND
DEVELOPMENT, INC.,

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Counter-Claimant,
v.
LEADERSHIP STUDIES, INC.,

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Counter-Defendant.

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HAYES, Judge:
The matter before the Court is the Motion for Reconsideration of Order on Motion
for Summary Judgment (ECF No. 134) filed by Leadership Studies, Inc.
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I.

Background

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On November 7, 2016, Leadership Studies, Inc. (“Leadership”1) filed the Third

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Amended Complaint (ECF No. 49) (the “TAC”). The TAC asserts nine causes of action

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against Blanchard Training and Development, Inc. (“Blanchard”). (ECF No. 49 at 1). The

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TAC’s third cause of action is for trademark infringement under the Lanham Act, § 43(A),

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15 U.S.C.A. § 1125(A). Id. The fourth cause of action is for trademark infringement via

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reverse confusion under the Lanham Act, § 43(A), 15 U.S.C.A. § 1125(A). Id.

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On April 17, 2017, Blanchard filed a Motion to Dismiss Trademark Claims (Third,

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Fourth, and Fifth Cause of Action) pursuant to Fed. R. Civ. P. 12(b)(l) and, in the

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Alternative, Motion for Summary Judgment Pursuant to Fed. R. Civ. P. 56 (ECF No. 65)

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(the “Motion for Summary Judgment”). In the Motion for Summary Judgment, Blanchard

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contended that Leadership is barred from pursuing its third cause of action for trademark

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infringement and its fourth cause of action for trademark infringement via reverse

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confusion (the “Trademark Claims”) by the following language in a 1982 agreement

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between Leadership and Blanchard (the “1982 Agreement”): “[Leadership] further

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agree[s] not to pursue violation of trademark action now or in the future as it refers to

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Situational Leadership.” ECF No. 65-1 at 8 (citing ECF No. 65-7 at 2).2

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Dr. Paul Hersey founded Management Education & Development, Inc. (“MED”) in 1976 and
Leadership Studies Productions, Inc. in 1979. (ECF No. 116 at ¶ 2). In July 1985, Leadership Studies
Productions, Inc. changed its name to “Leadership Studies.” Id. MED merged into Leadership Studies in
September 1985. Id. Leadership Studies changed its name to “Leadership Studies, Inc.” in 2009. Id.
This Order refers to the Plaintiff (the company named “Leadership Studies Productions, Inc.,” then
“Leadership Studies,” then “Leadership Studies, Inc.”) as “Leadership.”
Blanchard also moved for summary judgment on Leadership’s fifth cause of action for fraud in
obtaining registered marks under 15 U.S.C. §§ 1064(3) and 1119. (ECF No. 49 at 1). The Court denied
Blanchard’s motion for summary judgment on Leadership’s fifth cause of action. (ECF No. 130 at 18).
Leadership’s fifth cause of action is not implicated by Leadership’s Motion for Reconsideration (ECF
No. 134).
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On May 12, 2017, Leadership filed a Response to the Motion for Summary

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Judgment. (ECF No. 92).3 Leadership contended that that the Covenant Not to Sue does

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not prevent Leadership from bringing the Trademark Claims because the parties to the

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1982 Agreement intended the Covenant Not to Sue to apply only to a dispute relating to a

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company called Video University. (ECF No. 116 at 10). Leadership also contended that

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the Covenant Not to Sue in the 1982 Agreement does not prevent Leadership from bringing

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the Trademark Claims because the 1982 Agreement was superseded by a 1987 agreement

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between Leadership and Blanchard (the “1987 Agreement”). Id. at 3.

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On December 1, 2017, the Court issued an Order (ECF No. 130) denying the Motion

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for Summary Judgment (the “Order”). The Court determined that “the jury, not the Court,

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will have to decide on the proper interpretation of the Covenant Not to Sue” and concluded

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that “[b]ecause the undisputed facts do not establish, as a matter of law, that the Covenant

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Not to Sue bars Leadership from bringing the Trademark Claims, Blanchard Inc. is not

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entitled to summary judgment on the Trademark Claims.” (ECF No. 130 at 10). The Court

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further

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conclude[d] that the 1987 Agreement did not supersede the Covenant Not to
Sue as a matter of law because (1) there is no language in the 1987 Agreement
that expressly revokes the Covenant Not to Sue, (2) there are no provisions of
the 1987 Agreement that conflict with the Covenant Not to Sue, and (3) the
conduct of the parties has [4] been consistent with the continued validity of
the Covenant Not to Sue.

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Id. at 15.

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Leadership initially filed its Response to the Motion for Summary Judgment under seal. See ECF
No. 98. Leadership has since filed an unsealed version of its Response to the Motion for Summary
Judgment (ECF No. 116).
In the Order, the Court inadvertently and incorrectly stated “the conduct of the parties has not been
consistent with the continued validity of the Covenant Not to Sue.” ECF No. 130 at 15 (emphasis added).
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On December 22, 2017, Leadership filed the Motion for Reconsideration (ECF No.

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134).5 Leadership seeks reconsideration of the Court’s conclusion that the 1987 Agreement

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did not supersede the Covenant Not to Sue as a matter of law. ECF No. 134 at 2 (citing

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ECF No. 130 at 15). On January 12, 2018, Blanchard filed a Response to the Motion for

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Reconsideration. (ECF No. 139). On January 22, 2018, Leadership filed a Reply in

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Support of the Motion for Reconsideration. (ECF No. 144).

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II.

Contentions

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Leadership contends that the Court should reconsider its ruling that the 1987

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Agreement did not novate the 1982 Agreement as a matter of law. (ECF No. 134-1 at 6).

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Leadership contends that “the existence of novation hinges on intent, a highly-fact specific

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inquiry that generally should not be decided as a matter of law.” Id. at 15 (citing Fanucchi

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& Limi Farms v. United Agri Prod., 414 F.3d 1075, 1082, 1086–87 (9th Cir. 2005)).

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Leadership contends that “a reasonable fact-finder could conclude that the 1982

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Agreement . . . was extinguished [by the 1987 Agreement],” id. at 16, based on (1) the

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deposition testimony of Blanchard’s founder, Dr. Kenneth Blanchard; (2) an internal

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Blanchard memorandum (the “1987 Memorandum”) that “made no reference to the 1982

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Agreement” and “noted that the 1987 [Agreement], among other things, gave BTD a

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‘royalty free license . . . to use Situational Leadership,” id. at 10 (omission in original)

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(numbering and emphasis omitted) (citing ECF No. 83-6); (3) “the parties’ course of

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conduct,” id. at 18; (4) “the negotiations leading up to the 1987 [Agreement],” id.; (5) “the

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terms of the 1987 [Agreement],” id., and (6) the fact that, “[u]ntil its second Answer in the

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instant litigation, [Blanchard] . . . never raised the 1982 Agreement as a defense to any

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potential trademark infringement suit,” id. at 22 (emphasis omitted). Leadership contends

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that the Order improperly “infer[red] that the Parties meant, in the 1987 [Agreement], to

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Leadership filed a Motion to File Documents Under Seal in Support of Motion for Reconsideration
of Order on Motion for Summary Judgment. (ECF No. 135). The Motion to File Documents Under Seal
(ECF No. 135) is GRANTED.
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only enable [Leadership] to sue [Blanchard] for breach of contract, even though the 1987

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[Agreement] is expressly a trademark license and contains no language suggesting that

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[Leadership] waived potential trademark infringement claims.” Id. at 19 (referencing the

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Order at 14). Leadership contends that the Court’s conclusion that the 1987 Agreement

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did not novate the 1982 Agreement as a matter of law was premature because Blanchard

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did not move for summary judgment on this issue. (ECF No. 144 at 5).

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Blanchard contends that “the intention on the part of all parties that [an] agreement

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should constitute a novation must clearly appear.” ECF No. 139 at 20 (emphasis omitted)

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(citing O’Reilly v. Johnson, 205 P.2d 716, 717 (Cal. Ct. App. 1949)). Blanchard contends

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that “the 1987 Agreement is completely distinct from the 1982 Agreement, and imposes

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no conflicting obligations.” Id. at 19. Blanchard contends that “Leadership Studies can

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enforce the 1987 [A]greement, if necessary, by suing for breach of contract, just as it has

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in this matter.”

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Memorandum, which made no reference to the 1982 Agreement, establishes a clear intent

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to substitute and extinguish the 1982 Agreement.” Id. (quotation omitted). Blanchard

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contends that “the parties’ conduct has been consistent with the continued validity of the

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1982 Agreement.” Id.

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III.

Id. at 20.

Blanchard contends that “it defies logic that the 1987

Discussion

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“[A] district court has the inherent power to revisit its non-final orders . . . .” Dreith

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v. Nu Image, Inc., 648 F.3d 779, 787 (9th Cir. 2011). A denial of a motion for summary

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judgment is a non-final order. Oppenheimer v. Los Angeles Cty. Flood Control Dist., 453

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F.2d 895, 895 (9th Cir. 1972).

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Blanchard’s Motion for Summary Judgment asked the Court to grant summary

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judgment on the Trademark Claims based on the Covenant Not to Sue contained in the

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1982 Agreement. ECF No. 65-1 at 8 (citing ECF No. 65-7 at 2). In the Response to the

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Motion for Summary Judgment, Leadership opposed the Motion for Summary Judgment

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on two grounds: (1) the Covenant Not to Sue only applied to disputes involving Video

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University, not broader claims like this case; and (2) even if the 1982 Agreement applied
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broadly, the 1987 Agreement superseded the Covenant Not to Sue. (ECF No. 116 at 3,

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10). Consequently, in order to grant the Motion for Summary Judgment, the Court would

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have had to conclude that, as a matter of law, (1) the Covenant Not to Sue applied to

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disputes not involving Video University, and (2) the 1987 Agreement did not supersede

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the Covenant Not to Sue. The Court was required to deny the Motion for Summary

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Judgment if it concluded that the evidence on the record and the justifiable inferences that

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could be drawn therefrom did not warrant either one (or both) of those two conclusions.

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In the Order denying the Motion for Summary Judgment, the Court concluded that

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the evidence on the record and the justifiable inferences that could be drawn therefrom did

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not establish, as a matter of law, that the Covenant Not to Sue applied to disputes not

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involving Video University. (ECF No. 130 at 10). Based upon this conclusion, the Court

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was required to deny the Motion for Summary Judgment. Consequently, resolving the

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Motion for Summary Judgment did not require the Court to decide whether the 1987

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Agreement novated the 1982 Agreement. The Court finds that its conclusion that “the

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1987 Agreement did not supersede the Covenant Not to Sue as a matter of law” was

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premature.6 (ECF No. 130 at 15).

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IV.

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Conclusion
The Motion for Reconsideration (ECF No. 134) is GRANTED. Section IV.C of the

Order (ECF No. 130) is VACATED.
Dated: April 10, 2018

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Leadership has not filed a motion for summary judgment asking the Court to conclude that the 1987
Agreement did novate the 1982 Agreement as a matter of law.
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