Annie Sloan Interiors, Ltd. v. Jolie Design & Decor, Inc.

Filing 42

ORDER AND REASONS that Annie Sloan Interiors, Ltd 9 Motion for Partial Summary Judgment is GRANTED. IT IS FURTHER ORDERED that Annie Sloans Interiors, Ltd.'s 14 Motion for Partial Dismissal of Jolie Design & Decor, Inc.'s Counterclaim is GRANTED, as to a portion of Jolie Design & Decor, Inc.'s second counterclaim, and it is DISMISSED. The motion is otherwise DENIED. Signed by Judge Mary Ann Vial Lemmon on 5/4/2018. (cms)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ANNIE SLOAN INTERIORS, LTD.

CIVIL ACTION

VERSUS

NO: 17-11767

JOLIE DESIGN & DECOR, INC.

SECTION: "S" (1)

ORDER AND REASONS
IT IS HEREBY ORDERED that Annie Sloan Interiors, Ltd.'s Motion for Partial Summary
Judgment (Doc. #9) is GRANTED.
IT IS FURTHER ORDERED that Annie Sloan Interiors, Ltd.'s Rule 12(b) Motion for
Partial Dismissal of Jolie Design & Decor, Inc.'s Counterclaim (Doc. #14) is GRANTED, as to a
portion of Jolie Design & Decor, Inc.'s second counterclaim, and it is DISMISSED. The motion
is otherwise DENIED.
BACKGROUND
This matter is before the court on a motion for partial summary judgment and a motion to
dismiss counterclaims filed by plaintiff and defendant-in-counterclaim, Annie Sloan Interiors, Inc.
("ASI").
ASI, which was founded by Annie Sloan, is a foreign company organized under the laws of
the United Kingdom that maintains its principal place of business in Oxford, England. ASI designs
and manufactures paints and associated products under the trademarks ANNIE SLOAN® and
CHALK PAINT®.
In 2009, Lisa Rickert, a Louisiana resident, ordered CHALK PAINT® online from ASI's ecommerce platform for her personal use. Rickert liked the product and contacted ASI to find out
if there were any distributors in the United States that could provide her with the product more

quickly and cheaply. ASI informed Rickert that it was in the process of searching for a distributor
in the United States to develop the market for CHALK PAINT®.
Rickert had experience in supply chain management and her husband, David Manuel, had
experience in warehouse operations management.

Rickert and Manuel participated in a

teleconference with Sloan to discuss the business opportunity of their becoming the United States
distributor of CHALK PAINT®, as well as working with Davis Paint, a paint manufacturer in the
United States.
After the call, Rickert and Manuel formed defendant and plaintiff-in-counterclaim, Jolie
Design & Decor, Inc. ("JDD"), as the entity to serve as ASI's distributor in the United States. JDD
is organized under the laws of and maintains its principal place of business in Louisiana.
Rickert, on behalf of JDD, drafted and proposed two agreements for discussions among the
parties regarding their business relationship: (1) a manufacturing agreement between ASI, JDD and
Davis Paint, granting Davis Paint the exclusive right to manufacture CHALK PAINT® in the United
States; and (2) an agreement between JDD and ASI for JDD to be ASI's exclusive distributor of
CHALK PAINT® in the United States. After discussions and revisions, the parties executed both
agreements. JDD and ASI signed the distribution agreement on April 19, 2010 (the "2010
Agreement").
Pursuant to the 2010 Agreement, JDD became ASI's exclusive distributor in the United
States. The operative contractual language in this regard states:
Supplier [ASI] hereby appoints Distributor [JDD] as Supplier's
[ASI's] exclusive distributor of Products in the Territory, and
Distributor accepts that position on a perpetual basis.
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The 2010 Agreement defines "Territory" as the "United States of America." As ASI's distributor,
JDD was required by the 2010 Agreement to "use its best efforts to distribute the Products and to
fully develop the market for the Products within the Territory." ASI and JDD agreed that with JDD
using its "best efforts" the "Annual Market Potential" for the first year was that JDD would purchase
and distribute 4,800 quarts of paint in the territory. The parties agreed annually to consult with each
other to agree on the Annual Market Potential for that year. ASI retained the right to renegotiate the
terms of the 2010 Agreement if JDD did not reach 50% of the agreed upon Annual Market Potential
in any given year. Under the 2010 Agreement, the parties also stipulated that "[a]ll Products
purchased by [JDD] shall be purchased solely for commercial resale, excepting those Products
reasonably required by [JDD] for advertising and demonstration purposes."
Working under the 2010 Agreement, JDD successfully built a distribution network for ASI's
products in the United States. JDD claims that as a result, ASI asked JDD to expand its territory to
cover all of North America, Central America, South America and Australasia, and JDD expended
resources to do so.
ASI and JDD agree that their relationship eventually deteriorated. ASI claims that it was
concerned with certain actions on the part of JDD that ASI deemed detrimental to its brand, such
as JDD's expanding its territory to areas not covered by the 2010 Agreement, JDD's failure to abide
by "brand guidelines," and JDD's lack of uniformity in its wholesale pricing structure. JDD claims
that in 2013 and 2014, "ASI attempted to insert itself into JDD's distribution and operational
practices" in many ways such as: demanding that JDD use ASI generated marketing, promotions and
advertisements; prohibiting JDD from using its own new marketing initiatives as "off-brand";
requiring JDD to adopt the name "Annie Sloan Unfolded"; limiting JDD's ability to expand into new

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markets within South and Central America; making decisions on which stockists JDD could bring
on or let go; dictating JDD's wholesale pricing; prohibiting stockists from sharing paint color
recipes; mandating how ANNIE SLOAN® products had to be displayed at the stockists' retail
locations; restricting the stockists ability to conduct workshops; and, demanding approval over
JDD's routine business matters.
In 2015, ASI informed JDD that it no longer considered the 2010 Agreement to be
"sufficient" to accomplish ASI's business objectives and that it would be releasing "brand
guidelines" that JDD and other distributors were expected to follow. JDD requested that ASI attend
a mediation administered by the International Dispute Resolution Center to attempt to resolve their
differences. ASI refused to participate, and told JDD that it would seek a declaratory judgment on
the validity of the 2010 Agreement. ASI did not file suit and requested that JDD participate in a
video conference presentation of the revised set of "brand guidelines." JDD participated in the call
in January 2016.
Thereafter, ASI requested that JDD prepare a document associating each of the "brand
guidelines" to a provision of the 2010 Agreement. JDD complied, producing a document that
indicated whether the "brand guideline" changed the parties' rights and responsibilities under the
2010 Agreement, if so, whether JDD would be amenable to adopting it, and the commitments JDD
would need in return for amending the 2010 Agreement to conform to the "brand guidelines." JDD
presented the document to ASI for consideration. ASI responded that the "brand guidelines" were
non-negotiable and refused to mediate.
Eventually, the parties began to communicate, and ASI requested that JDD meet with ASI
in Oxford, England. The meeting occurred in April 2017. In September 2017, JDD informed ASI

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that it intended to begin selling ASI products on Amazon.com. ASI requested that JDD develop a
plan to ensure that online sales would benefit the traditional brick-and-mortar stockists of ASI's
products. JDD complied. ASI requested that JDD delay its Amazon.com launch so that ASI could
meet with representatives of Amazon Europe. JDD waited a few weeks and when it did not receive
an update from ASI regarding its talks with Amazon Europe, JDD began selling on Amazon.com
on October 4, 2017. ASI claims that JDD's selling ASI's products on Amazon.com is a violation of
the 2010 Agreement because the contract restricts JDD to "commercial resale," and does not permit
sales directly to consumers.
On November 3, 2017, ASI filed this action against JDD alleging diversity subject matter
jurisdiction under 28 U.S.C. § 1332, and seeking a declaratory judgment finding that: (1) the 2010
Agreement's perpetual term is against Louisiana public policy and is terminable at the will of either
party upon a reasonable notice pursuant to Louisiana Civil Code article 2024; (2) 180 days
constitutes reasonable notice for terminating the 2010 Agreement; (3) JDD's activities in countries
other than the United States are not encompassed by the 2010 Agreement and JDD does not have
rights to the exclusive distributorship of ASI's products in those countries; and, (4) to the extent that
JDD's activities in countries other than the United States are conducted under the 2010 Agreement,
the termination of the 2010 Agreement would result in the termination of JDD's exclusive
distributorship in those countries.
JDD filed an Answer and Counterclaim. In its Counterclaim, JDD seeks a declaratory
judgment finding that: (1) the 2010 Agreement is legally enforceable, including its provisions
regarding its duration and the grounds for resolution or termination; (2) JDD is in full compliance
with its obligations under the 2010 Agreement and has not breached it by any action or inaction, and

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that the 2010 Agreement is in full force and effect; (3) the 2010 Agreement permits JDD to sell
ASI's products directly to consumers, including over the Internet; (4) to the extent JDD has not
implemented some or all of ASI's "brand guidelines" in territories where JDD sells ASI's products,
such action does not constitute a breach of JDD's obligations under the 2010 Agreement or a
justification for ASI to resolve or terminate it; (5) JDD has the right under the 2010 Agreement to
market, advertise, promote, distribute and sell ASI's products using whatever methods and means
JDD, in its reasonable discretion, deems appropriate; (6) JDD has exclusive distribution rights for
ASI's products in North America, the United States, Canada, Central America, South America,
Australia, New Zealand, and other parts of Australasia; (7) the 2010 Agreement applies to control
the relationship between ASI and JDD in all of those geographical areas where JDD is the exclusive
distributor of ASI's products; (8) JDD has the sole right to select and terminate stockists in its
reasonable discretion in those geographical areas where JDD is the exclusive distributor of ASI's
products; and, (9) in the alterative, if the court declares that ASI is entitled to terminate the 2010
Agreement at will with reasonable notice, that reasonable notice under the circumstances would
consist of a substantial period of time, the precise duration of which to be established by evidence
at trial.
On December 19, 2017, ASI filed the instant motion for partial summary judgment seeking
a declaration that the 2010 Agreement's perpetual term is against Louisiana public policy and is
terminable at the will of either party upon a reasonable notice pursuant to Louisiana Civil Code
article 2024. On January 2, 2018, ASI filed the instant motion to dismiss JDD's counterclaims
arguing that JDD's request for declaration that the 2010 Agreement is in full force and effect does
not present a justiciable controversy because both parties agree that the 2010 Agreement remains

6

in force. ASI also argues that JDD's counterclaims numbers 2 and 4 through 8 should be dismissed
under Rule 12(b)(6) of the Federal Rules of Civil Procedure because they do not state claims for
which relief can be granted.
ANALYSIS
I.

ASI's Motion for Partial Summary Judgment (Doc. #9)
ASI seeks partial summary judgment on the narrow legal question of whether Louisiana Civil

Code article 2024 applies to the 2010 Agreement.
A. Summary Judgment Standard
Rule 56 of the Federal Rules of Civil Procedure provides that the "court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law." Granting a motion for summary judgment is proper if
the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits filed in
support of the motion demonstrate that there is no genuine issue as to any material fact that the
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Anderson v. Liberty
Lobby, Inc., 106 S.Ct. 2505, 2509-10 (1986). The court must find "[a] factual dispute . . . [to be]
'genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party
. . . [and a] fact . . . [to be] 'material' if it might affect the outcome of the suit under the governing
substantive law." Beck v. Somerset Techs., Inc., 882 F.2d 993, 996 (5th Cir. 1989) (citing Anderson,
106 S.Ct. at 2510).
If the moving party meets the initial burden of establishing that there is no genuine issue, the
burden shifts to the non-moving party to produce evidence of the existence of a genuine issue for
trial. Celeotex Corp. v. Catrett, 106 S.Ct. 2548, 2552 (1986). The non-movant cannot satisfy the

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summary judgment burden with conclusory allegations, unsubstantiated assertions, or only a scintilla
of evidence. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). If the
opposing party bears the burden of proof at trial, the moving party does not have to submit
evidentiary documents properly to support its motion, but need only point out the absence of
evidence supporting the essential elements of the opposing party’s case. Saunders v. Michelin Tire
Corp., 942 F.2d 299, 301 (5th Cir. 1991).
B. Contract Interpretation Under Louisiana Law
In Clovelly Oil Co., LLC v. Midstates Petroleum Co., LLC, 112 So.3d 187, 192 (La. 3/19/13)
(citations and quotations omitted), the Supreme Court of Louisiana explained the law applicable to
contract interpretation:
Contracts have the effect of law for the parties and the interpretation
of a contract is the determination of the common intent of the parties.
The reasonable intention of the parties to a contract is to be sought by
examining the words of the contract itself, and not assumed. When
the words of a contract are clear and explicit and lead to no absurd
consequences, no further interpretation may be made in search of the
parties' intent. Common intent is determined, therefore, in accordance
with the general, ordinary, plain and popular meaning of the words
used in the contract. Accordingly, when a clause in a contract is clear
and unambiguous, the letter of that clause should not be disregarded
under the pretext of pursuing its spirit, as it is not the duty of the
courts to bend the meaning of the words of a contract into harmony
with a supposed reasonable intention of the parties. However, even
when the language of the contract is clear, courts should refrain from
construing the contract in such a manner as to lead to absurd
consequences. Most importantly, a contract must be interpreted in a
common-sense fashion, according to the words of the contract their
common and usual significance. Moreover, a contract provision that
is susceptible to different meanings must be interpreted with a
meaning that renders the provision effective, and not with one that
renders it ineffective. Each provision in a contract must be interpreted

8

in light of the other provisions so that each is given the meaning
suggested by the contract as a whole.1
The clause of the 2010 Agreement at issue in ASI's motion for partial summary judgment
states:
Supplier [ASI] hereby appoints Distributor [JDD] as Supplier's
[ASI's] exclusive distributor of Products in the Territory, and
Distributor accepts that position on a perpetual basis.
The parties disagree as to the meaning and effect of this clause. ASI argues that this clause
stating that the 2010 Agreement will continue on a "perpetual basis" means that the contract is of
an unspecified duration that is neither ceratin, fixed, nor determinable, rendering it subject to Article
2024 and terminable at the will of either party upon reasonable notice. On the other hand, JDD
argues that the contract has a specified term of a determined duration, which is perpetual or forever.
JDD argues that because the contract specifies that it will go on perpetually, it has a stated certain
term of duration and Article 2024 is inapplicable.
Article 2024 states: "[a] contract of unspecified duration may be terminated at the will of
either party by giving notice, reasonable in time and form, to the other party." La. Civ. Code art.
2024. This Article was added to the Louisiana Civil Code in 1984. Id. It did "not change the law",
but rather made "generally applicable the principle contained in" Article 2686 of the Louisiana Civil
Code of 1870.2 La. Civ. Code art. 2024, Comment (a).

1

2

It is undisputed that Louisiana law applies to the interpretation of the contract at issue.
Article 2686 of the Louisiana Civil Code of 1870 applied to leases and stated:
The parties must abide by the agreement as fixed at the time of the lease.
If no time for its duration has been agreed on, the party desiring to end it
must give notice in writing to the other, at least fifteen days before the
expiration of the month, which has begun to run.

9

Louisiana intermediate courts of appeal have explained that, pursuant to Louisiana Civil
Code article 133, Article 2024 must be read in pari materiai with Louisiana Civil Code article 1778,
which states:
A term for the performance of an obligation is a period of time either
certain or uncertain. It is certain when it is fixed. It is uncertain when
it is not fixed but is determinable either by the intent of the parties or
by the occurrence of a future and certain event. It is also uncertain
when it is not determinable, in which case the obligation must be
performed within a reasonable time.
Schultz v. Hill, 840 So.2d 641, 644-45 (La. Ct. App.), writ denied, 852 So. 2d 1043 (La. 2003)
(quoting La. Civ. Code art. 1778); see also Caddo Gas Gathering L.L.C. v. Regency Intrastate Gas
LLC, 26 So.3d 233, 236 (La. Ct. App. 2009). Under Article 1778, "'a term may be fixed not only
by a period of time allowed for the performance of an obligation but also by an event which is
certain, such as a person's death.'" Id. at 645 (quoting La. Civ. Code art. 1778, Comment (b)).
Reading Articles 2024 and 1778 together, the court in Schultz explained:
In essence, LSA–C.C. art. 1778 describes three different types of
scenarios concerning the term of a contract: (1) a certain or fixed
term; (2) an uncertain but determinable term; or (3) an uncertain and
undeterminable term. Taking the comments and text of Article 1778
together, one concludes that an uncertain term that is determinable by
reference to the happening of a future event is valid and enforceable,
even though the date of the happening of that future event cannot be
known until its occurrence.
We reconcile Article 2024 and 1778 by concluding that Article 2024
can only be applied to contracts of “unspecified duration;” i.e.,
contracts having an uncertain and undeterminable term.
Id.

3

Article 13 states: "[l]aws on the same subject matter must be interpreted in reference to each other."
La. Civ. Code art. 13.

10

After reciting these principles, the court in Shultz held that Article 2024 did not apply to the
contract at issue. Id. The real estate commission agreement stated that the landlord would pay
commissions to the real estate agent "during the initial term, options, renewals, extensions,
assignments or additional leases with the Tenant[s]" that the real estate agent found for the landlord's
properties. Id. at 644-45. The court held that the contract contained an uncertain but determinable
term that was fixed by the happening of a future event, i.e. the termination of the applicable leases.
Id. at 645. Thus, Article 2024 did not apply. Id.
To reach this conclusion, the Shultz court analyzed State ex rel. Guste v. Orkin
Exterminating Co., 528 So.2d 198 (La. Ct. App.), writ denied, 533 So.2d 18 (La. 1988), which
involved a contract for pest control and repair services that were guaranteed for the lifetime of the
treated structures as long as the customers paid a specific annual renewal fee. Id. The contracts did
not provide for a general increase in the annual renewal fees, and legal action was taken when Orkin
began to raise them. Guste, 528 So.2d at 199-200. Orkin argued that the contracts were for an
uncertain and undeterminable term and thus could be cancelled with reasonable notice. Id. at 201.
The court found that "[a] contract for the lifetime of the structure is for a definite and ascertainable
period." Id. The court explained that "[c]ontractual obligations dependent upon an ascertainable fact
or event is sufficient to render the duration of the contract definite and certain. Contracts may be
uncertain as to point of time when they will terminate, so long as there is no uncertainty as to the
event which will bring about their termination." Id. (citations omitted).
In Caddo Gas, 26 So.3d at 235-36, the court followed the analysis of the Shultz case
regarding the application of Article 2024. Caddo Gas involved a contract whereby defendant,
Regency Intrastate Gas LLC, agreed to transport through its pipeline natural gas for plaintiff, Caddo

11

Gas Gathering L.L.C. Id. at 234. The contract at issue stated that it "shall remain in force and effect
. . . for a term coextensive with the ownership or use of [the pipeline] by [Regency]." Id. Regency
argued that the contract was "of unspecified duration and that it may be terminated by either party
upon reasonable notice as provided by" Article 2024. Id. at 235. Applying the reasoning of Shultz
regarding the interpretation of Article 2024 and examining Shultz and Guste, the court held that
Article 2024 was inapplicable because the contract had an uncertain but determinable term by
reference to the happening of a future event, i.e. Regency's ownership or use of the pipeline. Id. at
236-39.
Following these principles, the court determines that Article 2024 is applicable. The 2010
Agreement states that JDD accepts the appointment as ASI's distributor of certain products in the
Territory "on a perpetual basis." The 2010 Agreement "specifies" that its term is "perpetual."
However, using a specific word to define the term does not automatically mean that the contract has
a specific duration. To the contrary, a contract that continues on "a perpetual basis" will presumably
go on forever. The "perpetual" term of the 2010 Agreement is for an "unspecified duration" that is
also undeterminable. There is nothing in the contract that references a specific future event the
happening of which will terminate the contract like there was in Shultz (when the leases terminated),
Caddo Gas (when Regency no longer used or owned the pipeline), or Guste (for the life of the
structures).
In Williams v. Classic Locksmith, L.L.C., 405 Fed. Appx. 884, 885-86 (5th Cir. 2010), the
United States Court of Appeals for the Fifth Circuit, citing Caddo Gas and Shultz, noted that
"Louisiana case law also follows this pattern of determining duration with reference to a specific
identifiable event[,]" and held that an entity's need for a product "cannot be described as a single

12

definable moment at which the contract would terminate." Although the 2010 Agreement would
terminate when ASI stops selling its products in the Territory, this is not a single definable moment
at which the contract would terminate and the contract does not reference any specific event that
would bring about its termination. Therefore, the 2010 Agreement is of an uncertain and
undeterminable term, which makes it a contract falling under the purview of Article 2024 and
terminable "at the will of either party by giving notice, reasonable in time and form, to the other
party."
This result is bolstered by the United States Court of Appeal for the Fifth Circuit's ruling in
Trident Partners I Ltd. v. Blockbuster Entm't Inc., 83 F.3d 704 (1996), which applied Texas law that
is analogous to Article 2024. "Under Texas law, when a contract 'contemplate[s] continuing
performance or successive performances and . . . [is] indefinite in duration,' it may be terminated at
the will of either party." Id. at 708 (quoting Clear Lake City Water Auth. v. Clear lake Util. Co., 549
S.W.2d 385, 390-91 (Tex. 1977)). Trident Partners involved a contract whereby Trident Partners
was granted a license by Blockbuster to operate video rental stores in Oregon and Washington under
Blockbuster's brand (the "License Agreement"). Id. at 706-07. The License Agreement allowed for
termination upon "(1) defaults by either party that are not or cannot be cured within a specified
number of days; (2) the death or incapacity of a natural person who is one of Trident's partners, if
Blockbuster does not consent to the transfer of the deceased partner's interest; (3) the transfer or
change of control of Trident's partnership without Blockbuter's prior approval; and (4) the
insolvency of either party." Id. at 708. The court held that none of the aforementioned conditions
were of "the kind of determinable events that transform a contract of indefinite duration into one of
definite duration[,]" and explained that it

13

would not hold that a contract is definite in duration when it (1) expressly
states that it will "continue indefinitely," and (2) is confined in time only
by "termination provisions" which contain conditions that are likely never
to transpire. If we were thus to hold, Trident could very well be forced by
Blockbuster to stay in the video rental and sales business, and operate
Superstores, in perpetuity. This is precisely the antithetical result that
courts seek to avoid by holding indefinite duration contract to be
terminable at will.
Id. at 709 (citations omitted). Moreover, the court noted that "'this circuit . . . does not favor
perpetual contract' and 'presumes that [any such] contract is terminable at will.'" Id. at 708 (quoting
Delta Serv. & Equip., Inc. v. Ryko Mfg. Co., 908 F.2d 7 (5th Cir. 1990) (applying Iowa law, which
provides that contracts "are terminable at will upon reasonable notice unless a provision in the
contract makes it a contract of definite duration," and holding that the contract did not contain such
a provision.)). Thus, the United States Court of Appeals for the Fifth Circuit recognizes that under
the laws of several states contracts of an indefinite duration are terminable at the will of either party.
The reasoning of Trident Partners applies to the case at bar. The 2010 Agreement expressly
states that it will continue "on a perpetual basis", i.e. indefinitely, and it does not contain any
terminating provisions. Thus, if this court were to hold that Article 2024 does not apply to the
contract, either JDD or ASI could force the other to remain in the business of selling ASI's products
in the Territory in perpetuity, "precisely the antithetical result that courts seek to avoid by holding
indefinite duration contract to be terminable at will." Id. at 709. Further, applying Article 2024 to
the 2010 Agreement comports with the United States Court of Appeals for the Fifth Circuit's
unfavorable view of perpetual contracts and presumption that such contracts are terminable at will.
Id. at 708.

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C. Erie Guess
JDD argues that this court should not rely on any of the above cited jurisprudence from the
Louisiana intermediate courts of appeal, and instead should find that those cases were wrongly
decided because they did not consider the history of Article 2024, which indicates that it should be
applied only to real estate and employment contracts, not general commercial contracts.
This court has diversity subject matter jurisdiction over this case and Louisiana law is
undisputedly applicable. A federal district court applying Louisiana law looks first to the final
decisions of the Supreme Court of Louisiana to determine the law on the issue. Howe ex. rel Howe
v. Scottsdale Ins. Co., 204 F.3d 624, 627 (5th Cir. 2000). If the Supreme Court of Louisiana has not
ruled on the issue, then the court must make an “Erie guess” and “determine as best it can” what the
Supreme Court of Louisiana would decide. Id. To do so, this court may look to the decisions of the
Louisiana intermediate courts of appeal for guidance. Id. “Intermediate appellate courts of Louisiana
are a datum for ascertaining state law which is not to be disregarded by a federal court unless it is
convinced by other persuasive data that the highest court of the state would decide otherwise.” Id.
(quotations and citations omitted). The federal court's role is to predict, not create or modify state
law. Id. at 628. Thus, the precedent provided by the intermediate appellate courts of Louisiana
cannot be disregarded when the party advocating a departure from those rulings does not offer
anything to suggest why the Supreme Court of Louisiana would decide the case differently. Id.
JDD explains that it thinks the cases cited above were wrongly decided because the cases
do not consider that the history of Article 2024 is grounded in law applicable to leases, and that
other perpetual contracts are recognized in Louisiana, such as those for the eternal care of graves.
However, JDD does not explain why the Supreme Court of Louisiana would decide Shultz, Caddo

15

Gas, or Guste differently in terms of how Louisiana courts are to determine whether a contract is for:
(1) a certain or fixed term; (2) an uncertain but determinable term; or (3) an uncertain and
undeterminable term, and then apply Article 2024 if it falls the third category. Indeed, the Supreme
Court of Louisiana denied writs in Shultz and Guste. Although the denial of a writ does not have
jurisprudential value, it demonstrates that the Supreme Court of Louisiana had the opportunity to
address the question at hand but declined to do so. This court is bound to consider the jurisprudence
of the Louisiana intermediate appellate courts when there is no precedent on point from the Supreme
Court of Louisiana. Further, the comments to Article 2024 indicate that it made the principles of
the former Article 2686 generally applicable to all contracts, not just ones related to leases or
employment. Thus, this court will not accept JDD's invitation to find that the aforementioned
Louisiana jurisprudence was wrongly decided.
D. JDD's Affirmative Defenses
JDD argues that there are factual disputes pertinent to its affirmative defenses of equitable
estoppel, detrimental reliance and waiver that preclude summary judgment. The question posed and
resolved by ASI's motion for partial summary judgment is a narrow legal issue of whether the 2010
Agreement is subject to Article 2024 because it is for an uncertain and undeterminable term. JDD's
affirmative defenses do not impact whether Article 2024 applies, but rather the manner in which ASI
will proceed under Article 2024, if it chooses to do so. Article 2024 requires "[r]easonable advance
notice" for cancellation of the contract "to avoid unwarranted injury to the interest of the other party"
and "the parties must comply with the overriding duty of good faith" in employing Article 2024. La.
Civ. Code art. 2024, Comment (e). JDD's defenses which rely on the amount of time, money and
effort it has expended in perusing the 2010 Agreement pertain to the reasonable notice that ASI must

16

give to JDD to proceed under Article 2024, not whether Article 2024 applies. Therefore, ASI's
affirmative defenses do not preclude this court from ruling on ASI's motion for summary judgment
and finding that the 2010 Agreement is subject to Article 2024 because the contract is for an
unspecified and undeterminable duration. ASI's motion for summary judgment is GRANTED.
II.

ASI's Motion to Dismiss (Doc. #14)
A. Rule 12(b)(1) of the Federal Rules of Civil Procedure
ASI argues that part of JDD's second counterclaim should be dismissed under Rule 12(b)(1)

of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction because it does not
state a justiciable controversy.
"Motions filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure allow a party to
challenge the subject matter jurisdiction of the district court to hear a case.” Ramming v. United
States, 281 F.3d 158, 161 (5th Cir.2001). “Lack of subject matter jurisdiction may be found in any
one of three instances: (1) the complaint alone; (2) the complaint supplemented by undisputed facts
evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's
resolution of disputed facts.” Id. In a 12(b)(1) motion, the party asserting jurisdiction bears the
burden of proof that jurisdiction does in fact exists. Id.
Article III of the Constitution of the United States “limits federal courts' jurisdiction to
‘cases' and ‘controversies.’" Sample v. Morrison, 406 F.3d 310, 312 (5th Cir. 2005) (citing U .S.
Const. art. III, § 2). Ripeness is an essential component of federal subject matter jurisdiction. Id. “A
court should dismiss a case for lack of ‘ripenesss' when the case is abstract or hypothetical.” New
Orleans Public Serv., Inc., v. Council of City of New Orleans, 833 F.2d 583, 587 (5th Cir. 1987)
(citations omitted).

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Moreover, the federal Declaratory Judgment Act states: “[i]n a case of actual controversy
within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading,
may declare the rights and other legal relations of any interested party seeking such declaration,
whether or not further relief is or could be sought.” 28 U.S.C. § 2201. “A federal court may not issue
a declaratory judgment unless there exists an ‘actual controversy’; i.e., there must be a substantial
controversy of sufficient immediacy and reality between the parties having adverse legal interests.”
Middle S. Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir.1986). A controversy is
justiciable only where “it can be presently litigated and decided and not hypothetical, conjectural,
conditional or based upon the possibility of a factual situation that may never develop.” Rowan Cos.
v. Grim, 876 F.2d 26, 28 (5th Cir. 1989) (quoting Brown & Root, Inc. v. Big Rock Corp., 383 F.2d
662, 665 (5th Cir. 1967)). It gives federal courts the competence to declare rights, but it does not
impose a duty to do so. If there is jurisdiction, whether to grant a declaratory judgment is within the
sound discretion of the trial court.
ASI argues that part of JDD's second counterclaim, which seeks a declaration that "the 2010
Agreement is in full force and effect" does not state a justiciable controversy because the parties
concur that the 2010 Agreement is in full force and effect. JDD argues that there is a dispute as to
the full force and effectiveness of the 2010 Agreement because ASI seeks a declaration that it is a
contract with an unspecified duration that can be terminated by either party with reasonable notice
under Article 2024.
This portion of JDD's second counterclaim does not present a justiciable controversy. The
parties concur that the 2010 Agreement was at the time of filing, and is currently, "in full force and
effect." Indeed, the parties continue to perform thereunder. ASI's seeking a declaration as to the

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applicability of Article 2024 to the 2010 Agreement is not a controversy over whether the contract
is in effect, but rather as to whether ASI can terminate it with reasonable notice to JDD. It is a
dispute about the meaning of a contractual term, not the effectiveness of the contract as a whole.
Because the parties agree that the contract is currently in full force and effect, ASI's motion to
dismiss this portion of JDD's second counterclaim is GRANTED.
B. Rule 12(b)(6) of the Federal Rules of Civil Procedure
ASI argues that JDD's counterclaims numbers 2 and 4 through 8 should be dismissed under
Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief
can be granted.
Rule 12(b)(6) permits a motion to dismiss a complaint for failure to state a claim upon which
relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, enough facts to state a claim
for relief that is plausible on its face must be pleaded. In re Katrina Canal Breaches Litig., 495 F.3d
191, 205 (5th Cir. 2007) (quoting Bell Atl. v. Twombly, 127 S.Ct. 1955, 1964-65 & 1973 n. 14
(2007)). A claim is plausible on its face when the plaintiff pleads facts from which the court can
“draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 129 S.Ct. 1937, 1949 (2009). “Factual allegations must be enough to raise a right to relief
above the speculative level, on the assumption that all the allegations in the complaint are true (even
if doubtful in fact).” Twombly, 127 S.Ct. at 1965. The court “must accept all well-pleaded facts as
true and view them in the light most favorable to the non-moving party.” In re S. Scrap Material Co.,
LLC, 541 F.3d 584, 587 (5th Cir. 2008). However, the court need not accept legal conclusions
couched as factual allegations as true. Iqbal, 129 S.Ct. at 1949-50.

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1. JDD's Counterclaims 2 and 4
In its second and fourth counterclaims, JDD seeks declarations that:
2.

JDD is in full compliance with its obligations under the 2010
Agreement and has not breached that agreement by any action
or inaction.

4.

To the extent JDD has not implemented some or all of the
policies and practices ASI refers to as "brand guidelines" in
the territories where it sells ANNIE SLOAN® and CHALK
PAINT® brand products, such action does not constitute a
breach of JDD's obligations under the 2010 Agreement or a
justification for ASI to resolve or terminate that agreement.

ASI, citing Welsh v. Navy Fed. Credit Union, 2017 WL 5075930, at *7 (W.D. Tex. June 9,
2017), argues that it is improper to use a declaratory judgment action to adjudicate whether a party
breached an existing contract and ask a court to condone a party's past actions. Thus, ASI argues
that it is improper for JDD to raise counterclaims 2 and 4 which seek declarations that JDD did not
breach the contract.
JDD argues that ASI's contention is not supported by the jurisprudence cited by ASI. In
Walsh, 2017 WL 5075930 at *6, the plaintiff raised a breach of contract claim and a declaratory
judgment claim seeking a declaration regarding the correct and reasonable interpretation of the
contract at issue. The court found that the declaratory judgment claim was redundant and
unnecessary because it raised the same issues as the breach of contract claim. Id. The court went on
to state that:
Declaratory judgment is not the appropriate vehicle when the
determination of the issue actually asks the court to decide whether
the defendant breached the contract. Rather, declaratory judgment is
appropriate where it seeks adjudication of the parties' rights and
guides their future conduct.

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Id. at *7. JDD points out that ASI did not sue it for breach of contract, but instead is seeking a
declaratory judgment that it can opt out of the contract. JDD's counterclaims 2 and 4 seek
declarations that certain actions it may have taken do not constitute grounds for ASI to cancel the
contract and direction to guide the parties' future conduct. Therefore, JDD's counterclaims 2 and
4 raise questions proper for declaratory judgment, and ASI's motion to dismiss is DENIED as to
counterclaims 2 and 4, other than the portion of counterclaim 2 that this court found does not state
a controversy.
2. JDD's Counterclaims 5 though 8
In its fifth through eighth counterclaims, JDD seeks declarations that:
5.

JDD has the right per the 2010 Agreement to market,
advertise, promote, distribute, and sell ANNIE SLOAN® and
CHALK PAINT® products using whatever methods and
means deemed appropriate by JDD in its reasonable
discretion;

6.

JDD has exclusive distribution rights for ANNIE SLOAN®
and CHALK PAINT® brand products in North America, the
United States, Canada, Central America, South America,
Australia, New Zealand, and other parts of Australasia;

7.

the 2010 Agreement applies to control the relationship
between ASI and JDD in all of those geographical areas
where JDD is the exclusive distributor of ANNIE SLOAN®
and CHALK PAINT® brand products;

8.

JDD has the sole right to select and terminate stockists in its
reasonable discretion in those geographical areas where JDD
is the exclusive distributor of ANNIE SLOAN® and CHALK
PAINT® brand products.

ASI contends that these counterclaims are not plausible because JDD seeks declarations that
the 2010 Agreement allows JDD to act in ways that are inconsistent with the terms of the 2010
Agreement. ASI argues that JDD's fifth through eighth counterclaims fail to state claims because
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the 2010 Agreement does not give JDD carte blanche to use whatever means it wants to market
ASI's products, while disregarding ASI's trademarks and promotional materials; does not permit ASI
to expand its territory beyond the United States; and, does not address JDD's alleged right to chose
stockists without input from ASI.
JDD argues that ASI's motion should be denied because these counterclaims raise plausible
claims for relief. As to counterclaims number 5, JDD argues that it has alleged various instances
of ASI's inserting itself into JDD's marketing operations and that it seeks a declaration that "ASI's
efforts to dictate details of how JDD conducts its activities managing its distribution network and
marketing the products . . . are not authorized by the [2010] Agreement and that JDD therefore is
not obliged to follow ASI directive regarding these matters as long as the methods and means
employed by JDD are reasonable." JDD argues that ASI's insistence on JDD's using brand guidelines
actually interferes with JDD's contractual obligations to use its "best efforts" to market ASI's
products.
With respect to counterclaims 6 and 7, JDD argues that ASI's complaint also seeks a
declaration regarding JDD's territory. JDD agrees with ASI that the plain terms of the 2010
Agreement state that JDD's territory is the Untied States. However, JDD argues that it has stated
claims for relief in counterclaims 6 and 7 because JDD alleges that the 2010 Agreement was
modified to expand JDD's territory. JDD argues that counterclaim 8 states a claim for relief because
the 2010 Agreement does not permit ASI to encroach on JDD's operations in the manner alleged.
Counterclaims 5 though 8 state claims for relief regarding ASI's actions that are allegedly
not authorized by the 2010 Agreement and the alleged modification of the 2010 Agreement. JDD
is seeking guidance on the parties' future dealings under the 2010 Agreement, and any alleged

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modifications thereof, should the parties not proceed under Article 2024. Therefore, ASI's motion
to dismiss JDD's counterclaims 5 though 8 is DENIED.
CONCLUSION
IT IS HEREBY ORDERED that Annie Sloan Interiors, Ltd.'s Motion for Partial Summary
Judgment (Doc. #9) is GRANTED.
IT IS FURTHER ORDERED that Annie Sloan Interiors, Ltd.'s Rule 12(b) Motion for
Partial Dismissal of Jolie Design & Decor, Inc.'s Counterclaim (Doc. #14) is GRANTED, as to a
portion of Jolie Design & Decor, Inc.'s second counterclaim, and it is DISMISSED. The motion
is otherwise DENIED.

New Orleans, Louisiana, this _____ day of May, 2018.
4th

____________________________________
MARY ANN VIAL LEMMON
UNITED STATES DISTRICT JUDGE

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