Beram v Glazer, et al.

Filing 60

Chief Judge Patti B. Saris: MEMORANDUM and ORDER entered. Ceaco's motion to dismiss (Docket No. 11 ) is ALLOWED as to Counts I, II, IX, XI, and XIV and otherwise DENIED. Glazer and Basques motion to dismiss (Docket No. 13 ) is ALLOWED as to Counts I, II, III, IV, IX, XI, and XIV and otherwise DENIED. The counts are dismissed with prejudice except for Count II. (Geraldino-Karasek, Clarilde)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
___________________________________
HARVEY BERAM, as Administrator of
the Estate of Sandy Beram,
Plaintiff,
v.
CEACO, INC.; CAROL J. GLAZER; and
CYNTHIA A. BASQUE,
Defendants.
______________________________

)
)
)
)
)
)
)
)
)
)
)
)
)

Civil Action
No. 16-10569-PBS

MEMORANDUM AND ORDER
December 1, 2016
Saris, C.J.
INTRODUCTION
Sandy Beram,1 a puzzle inventor, brought this suit against
Ceaco, Inc. (“Ceaco”), its President, Carol Glazer, and its CFO,
Cynthia Basque, alleging that they failed to make contractually
required royalty payments on puzzle product designs.
Much of the complaint is time-barred, and other claims are
without merit. Further, Glazer and Basque are not personally
liable for the contract claims. Ceaco’s motion to dismiss
(Docket No. 11) is ALLOWED in part and DENIED in part. Glazer

1

Sandy Beram passed away during the course of litigation.
Harvey Beram, the administrator of Sandy Beram’s estate, has
been substituted as the plaintiff. See Fed. R. Civ. P. 25(a).
1

and Basque’s motion to dismiss (Docket No. 13) is ALLOWED in
part and DENIED in part.
BACKGROUND
I.

Factual Allegations
For purposes of the motion to dismiss, the facts are taken

as alleged in the complaint. In re Loestrin 24 Fe Antitrust
Litig., 814 F.3d 538, 545 (1st Cir. 2016). The contract between
Beram and Ceaco, which is attached to the complaint, is also
considered because it is incorporated by reference in the
complaint and central to Beram’s claim. Giragosian v. Ryan, 547
F.3d 59, 65 (1st Cir. 2008).
Sandy Beram was a puzzle inventor. On November 2, 1993, she
and Ceaco entered into a contract by which Ceaco licensed
several of Beram’s puzzles for manufacture and sale. The covered
products were listed in Schedule 1 of the contract, which
initially referenced two puzzle designs: “Fuzzy Grip” and
“Search for Small Stuff.” Additional puzzle designs were added
to Schedule 1 in subsequent amendments, for a total of fourteen
licensed puzzle designs. One of those additional puzzle designs
was “Puzzle Stix,” which was added to Schedule 1 on September 3,
1999.
The contract contained the following provision regarding
royalty payments:

2

3. Royalties and Other Payments. Subject to
the terms and conditions of this Agreement,
CEACO, Inc. agrees to pay to Sandy Beram, for
each type of Merchandise, the Merchandise
Royalty Rate applicable to such Merchandise
multiplied by the Selling Price (as defined
below) for each item of such Merchandise sold
in the Territory by CEACO Inc. and all
sublicensees (“Royalty Payments”). As used in
this Agreement, (i) the “Selling Price” shall
mean the greater of (1) the actual sales price
for such item if sold on a wholesale basis,
and (2) if the item is sold other than on a
wholesale basis, (x) the actual sales price
less (y) returns, reasonable and customary
discounts, sales tax, freight and insurance;
and (ii) any product incorporating an Item
will be considered Merchandise for purposes of
this Agreement, and any product will be deemed
to incorporate an Item when it is based in
whole or in part on the Item or any part
thereof. Sales shall be deemed to have been
made when invoiced or shipped, whichever
occurs first.
Schedule 1 provided the royalty rates for each of the puzzle
designs.
In section 5 of the contract, Ceaco agreed to provide Beram
with quarterly reports listing selling prices, gross sales,
merchandise royalty rates, and royalty payments for her puzzle
designs.
Under section 16 of the contract, the effective term of the
contract is one hundred years following the death of Sandy
Beram, unless the contract is terminated earlier. The contract
provided for three early termination scenarios. First, if a
party breaches the agreement, the nonbreaching party may

3

terminate the agreement if the breaching party does not cure the
breach upon notice. Second, Beram may terminate the contract if
aggregate royalty payments for four consecutive quarters are
less than the “minimum annual royalty payment” amounts set forth
for each product in Schedule 1. Third, the contract may
automatically terminate upon certain conditions not present
here.
Beram alleges that the defendants have long failed to
submit payment reports or to pay total royalties, including
purportedly required minimum royalty payments. Beram also
alleges that Ceaco “fraudulently concealed” its books and
records relating to sales and royalties. Beram further alleges
that “[i]n or about the 2000’s,” Ceaco began to reduce and
ultimately eliminate the royalty payments. Upon inquiry, Glazer
told Beram that sales of her puzzles were being ended.
Beram also alleges that between 2011 and 2015, Ceaco sold a
product named “Puzzlestix” that Ceaco attributed to a different
inventor. Beram did not receive royalty payments for sales of
this product.
II.

Procedural History
Beram filed the complaint on March 23, 2016, listing

fourteen causes of action:
(1) Copyright infringement by Ceaco and Glazer,
(2) Trademark infringement by Ceaco and Glazer,
4

(3) Breach of contract by all defendants,
(4) Breach of implied covenant of good faith and fair
dealing by all defendants,
(5) Promissory estoppel/detrimental reliance by all
defendants,
(6) Unjust enrichment by Ceaco and Glazer,
(7) Conversion by Ceaco and Glazer,
(8) Misappropriation by Ceaco and Glazer,
(9) Fraud and deceit by all defendants,
(10) Negligent misrepresentation by all defendants,
(11) Fraudulent transfer/fraudulent conveyance by all
defendants,
(12) Violation of Mass. Gen. Laws ch. 93A by all
defendants,
(13) Civil conspiracy by all defendants, and
(14) Accounting as to all defendants.
As relief, Beram sought $4 million in compensatory and punitive
damages, in addition to equitable and declaratory relief.
On June 3, 2016, Ceaco moved to dismiss. On the same day,
Basque and Glazer moved to dismiss.
DISCUSSION
I.

Standard of Review
A Rule 12(b)(6) motion is used to dismiss complaints that

“fail[] to state a claim upon which relief can be granted.” See
5

Fed. R. Civ. P. 12(b)(6). In evaluating a Rule 12(b)(6) motion,
this Court must accept the factual allegations in Beram’s
amended complaint as true, construe reasonable inferences in her
favor, and “determine whether the factual allegations in the
plaintiff’s complaint set forth a plausible claim upon which
relief may be granted.” Foley v. Wells Fargo Bank, N.A., 772
F.3d 63, 71 (1st Cir. 2014).
II.

Choice of Law
The contract claims are governed by New York law because of

the choice-of-law provision in the contract.2
The parties agreed at the motion hearing that Massachusetts
law would apply to the tort claims. See James L. Miniter Ins.
Agency, Inc. v. Ohio Indem. Co., 112 F.3d 1240, 1245 (1st Cir.
1997) (federal court sitting in diversity is free to forego an
independent choice-of-law analysis and accept the parties’
agreement).
III. Time Bar
Beram alleges that Ceaco has not paid a full royalty amount
or submitted royalty reports since 1994. Beram’s claims are
time-barred to the extent that they fall outside the following
limitations periods:

2

Section 17(b) states: “Governing Law. The validity,
construction and enforcement of this Agreement shall be governed
by the laws of the State of New York, without regard to the
principles thereof regarding conflicts of law.”
6



Count III, Breach of Contract. N.Y. C.P.L.R. 213(2) (sixyear statute of limitations for New York contract actions).



Count IV, Breach of Implied Covenant of Good Faith and Fair
Dealing. N.Y. C.P.L.R. 213(2) (six-year statute of
limitations for New York contract actions); McCormick v.
Favreau, 82 A.D.3d 1537, 1540 (N.Y. App. Div. 2011).



Count V, Promissory Estoppel/Detrimental Reliance. N.Y.
C.P.L.R. 213(2) (six-year statute of limitations for New
York contract actions).



Count VI, Unjust Enrichment. Sentinel Prod. Corp. v. Mobile
Chem. Co., No. CIV. A. 98-11782-PBS, 2001 WL 92272, at *23
(D. Mass. Jan. 17, 2001) (three- or six-year statute of
limitations on Massachusetts unjust enrichment depending on
whether the essential nature of the claim is tort or quasicontract).



Count VII, Conversion. Mass. Gen. Laws ch. 260, § 2A
(three-year statute of limitations for Massachusetts tort
actions).



Count VIII, Misappropriation. Mass. Gen. Laws ch. 260, § 2A
(three-year statute of limitations for Massachusetts tort
actions).



Count IX, Fraud. Mass. Gen. Laws ch. 260, § 2A (three-year
statute of limitations for Massachusetts tort actions).

7



Count X, Negligent Misrepresentation. Mass. Gen. Laws ch.
260, § 2A (three-year statute of limitations for
Massachusetts tort actions).



Count XI, Fraudulent Conveyance/Fraudulent Transfer. Mass.
Gen. Laws, ch. 109A, § 10 (four-year statute of limitations
for Massachusetts fraudulent transfer).



Count XII, Violation of Mass. Gen. Laws ch. 93A. See Mass.
Gen. Laws ch. 260, § 5A (four-year statute of limitations
for Chapter 93A claims).



Count XIII, Civil Conspiracy. See Pagliuca v. City of
Boston, 626 N.E.2d 625, 628 (Mass. App. Ct. 1994) (threeyear statute of limitations for Massachusetts civil
conspiracy).

Beram makes two arguments with regard to the time-bar issue.
First, Beram argues that the Massachusetts fraudulent
concealment statute tolls the statute of limitations. See Mass.
Gen. Laws ch. 260, § 12. Beram argues that Ceaco fraudulently
concealed its misconduct by failing to provide Beram with
quarterly sale reports, as required by section 5 of the
contract.
Beram is correct that Ceaco has had a continuing
contractual obligation to provide quarterly sale reports. While
Ceaco suggests that it stopped selling Beram puzzle products
years ago, none of the termination conditions in the contract
8

have been met. Ceaco still has the obligation to keep providing
quarterly sale reports -- even if those reports reflect zero
sales. But while Ceaco’s failure to provide quarterly reports is
a potential contract violation, it does not rise to the level of
fraudulent concealment. Beram cites a number of cases for the
proposition that fraudulent concealment does not require an
affirmative act of concealment and that a mere failure to
disclose may count. But every one of those cases concerned a
failure to disclose within a fiduciary relationship. See, e.g.,
Demoulas v. Demoulas Super Markets, Inc., 677 N.E.2d 159, 174
(Mass. 1997) (“Where a fiduciary relationship exists, the
failure adequately to disclose the facts that would give rise to
knowledge of a cause of action constitutes fraudulent conduct
and is equivalent to fraudulent concealment for purposes of
applying § 12.”); Shane v. Shane, 891 F.2d 976, 985 (1st Cir.
1989) (“[W]here the plaintiff owes the defendant a fiduciary
duty, the failure to disclose facts tolls the statute of
limitations.”); Puritan Med. Ctr., Inc. v. Cashman, 596 N.E.2d
1004, 1010 (Mass. 1992) (“Where, as in this case, a fiduciary
relationship exists between plaintiff and defendant . . . mere
failure to reveal information may be sufficient to constitute
fraudulent conduct for the purposes of G.L. c. 260, § 12.”).
Here, there was a contractual disclosure requirement but no
fiduciary relationship between the parties. Fraudulent
9

concealment does not toll the statute of limitations on Beram’s
royalty claims dating back to 1994.
Second, Beram argues that even if fraudulent concealment
does not toll her claims, her suit should be allowed to move
forward to the extent that her complaint relates to time periods
that are within the statute of limitations. Under New York law,
the statute of limitations for installment contracts begins to
run when each installment becomes due. Cadlerock, L.L.C. v.
Renner, 898 N.Y.S.2d 127, 128 (N.Y. App. Div. 2010). A contract
that provides a continuing obligation to pay royalties can be
considered an installment contract. See Peterson v. Highland
Music, Inc., 140 F.3d 1313, 1321 (9th Cir. 1998); Gilkyson v.
Disney Enterprises, Inc., 244 Cal. App. 4th 1336, 1343 (Cal. Ct.
App. 2016) (“The continuing nature of the obligation to pay
periodic royalties renders each breach of that obligation
separately actionable.”). To the extent that Ceaco failed to
make required royalty payments for any quarterly periods within
the applicable statute of limitations, Beram’s claims are not
time-barred. The same is true to the extent that Beram complains
of Ceaco’s failure to provide required sale reports for any
period within the applicable statute of limitations.

10

IV.

Ceaco’s Other Arguments for Dismissal
A.

Copyright Infringement Claim

Registration of the copyright is a nonjurisdictional
precondition to filing a valid federal copyright infringement
claim. 17 U.S.C. § 411(a); see also Reed Elsevier, Inc. v.
Muchnick, 559 U.S. 154, 166–69 (2010); Airframe Sys., Inc. v. L3 Commc’ns Corp., 658 F.3d 100, 105 (1st Cir. 2011). Beram does
not allege that there was ever a registered trademark.
Beram responds that under section 1(b) of the contract, it
was the obligation of Ceaco to secure the copyright for her. But
while Ceaco’s failure to secure a copyright might be a breach of
contract, Beram points to no authority that would allow a
copyright claim to survive a failure of registration on the
basis of such a contractual breach. Count I is DISMISSED.
B.

Trademark Infringement Claim

Ceaco argues that, whatever trademark rights Beram may have
had to her puzzles, she has abandoned those rights through
cessation of use. See Gen. Healthcare Ltd. v. Qashat, 364 F.3d
332, 334–36 (1st Cir. 2004). Under the Lanham Act, “[a] mark
shall be deemed to be ‘abandoned’ . . . [w]hen its use has been
discontinued with intent not to resume such use. Intent not to
resume may be inferred from circumstances. Nonuse for 3
consecutive years shall be prima facie evidence of abandonment.”
15 U.S.C. § 1127. “To rebut a prima facie showing of
11

abandonment, a purported trademark owner must demonstrate that
it intends to resume use ‘in the reasonably foreseeable
future.’” Gen. Healthcare Ltd., 364 F.3d at 337 (quoting
Silverman v. CBS Inc., 870 F.2d 40, 46 (2d Cir. 1989)).
The complaint does not allege any recent use of the “Puzzle
Stix” name by Beram or by Ceaco, as her licensee, for her
puzzles. The complaint alleges that between 2011 and 2015, Ceaco
used that name to sell puzzles -- but those puzzles were
attributed to other people, not to Beram. She was also told by
Ceaco that sales of her puzzles had ended. Moreover, the
complaint fails to allege any intention by Beram’s estate to use
the name in the reasonably foreseeable future. Count II is
DISMISSED without prejudice.
C.

Breach of Contract for Failure to Make Required
Royalty Payments

Beram claims that Ceaco breached its contract by, among
other things, failing to make required royalty payments. This
claim can be divided into two sub-issues: whether Ceaco actually
sold any units of Beram’s puzzle products without paying
royalties, and whether Ceaco was required to make minimum annual
royalty payments even in the absence of any actual sales.
As to the first issue, Beram has adequately pleaded that
Ceaco made actual sales of Beram’s puzzle products within the
applicable statute of limitations period without paying required

12

royalties. Beram alleges that from 2011 to 2015, Ceaco sold a
product called “PuzzleStix,” attributed to another puzzle
creator, without paying required royalties to Beram. A product
named “Puzzle Stix” has been part of Beram’s agreement with
Ceaco since 1999. In the contract, “Puzzle Stix” is described as
“[a] boxed jigsaw puzzle with pieces resembling thin egg noodle
strips of various lengths with small connectors.” While the
complaint provides no description of the product that Ceaco was
selling as “PuzzleStix,” the complaint sufficiently alleges
actual sales of her product without payment of required
royalties.
As to the second, Beram’s breach of contract claim has no
merit inasmuch as she seeks minimum annual royalty payments even
in the absence of actual sales. The term “minimum annual royalty
payments” appears in only two places in the contract. First,
Section 16(b) of the contract provides that Beram may terminate
the contract if royalty payments fall below the “minimum annual
royalty payment” for four consecutive quarters. Second, Schedule
1 provides a dollar figure for “minimum annual royalty payments”
for each puzzle product.
Ceaco persuasively argues that the contract does not
establish an obligation for Ceaco to pay a “minimum annual
royalty payment” to Beram. When Schedule 1 is read in isolation,
it may appear that minimum annual royalty payments are due even
13

in the absence of actual sales. Each page of Schedule 1 lists a
product name, a royalty rate, and then a “minimum annual royalty
payment.” But a contract must be “read as a whole, with every
part interpreted with reference to the whole.” CNR Healthcare
Network, Inc. v. 86 Lefferts Corp., 59 A.D.3d 486, 489 (N.Y.
App. Div. 2009). Reading the contract as a whole makes it clear
that there is no minimum payment obligation.
Section 3 of the contract establishes Ceaco’s payment
obligation. It provides that Ceaco “agrees to pay” to Beram the
product of the merchandise royalty rate and the selling price of
each item sold. In other words, Ceaco’s obligation to pay is
based on the number of actual items sold. Section 3 never
requires Ceaco to pay a “minimal annual royalty payment.”
The minimum annual royalty payment is merely a number that
triggers Beram's termination rights under Section 16(b). Reading
the termination provisions as a whole reinforces that
conclusion. If Ceaco were required to make minimum annual
royalty payments even in the absence of actual sales, then
failure to make such payments would be a contractual breach that
would allow Beram to terminate the contract under section 16(a).
But that would render meaningless the separate provision in
section 16(b) that allows Beram to terminate if the aggregate
royalty payments are less than the minimum annual royalty
payment for four quarters.
14

Beram’s breach of contract claim survives Ceaco’s motion to
dismiss only to the extent that the claim is premised on Ceaco’s
failure to pay required royalties for actual sales of Beram’s
puzzle products within the applicable statute of limitations
period.
D.

Fraud Claims

Federal Rule of Civil Procedure 9(b) imposes a heightened
pleading standard for fraud that requires “specification of the
time, place and content of an alleged false representation, but
not the circumstances or evidence from which fraudulent intent
could be inferred.” Doyle v. Hasbro, Inc., 103 F.3d 186, 194
(1st Cir. 1996). Beram’s complaint does not meet that pleading
requirement. The complaint does not state what fraudulent
misrepresentations were made, when, where, or by whom. Fraud is
only pleaded in a conclusory way.
Beram argues that Ceaco engaged in fraud by selling
PuzzleStix under a different puzzle creator’s name and without
notifying Beram. But PuzzleStix was sold openly -- the complaint
alleges that they were sold in Barnes & Noble, among other
retail chains. Counts IX and XI are DISMISSED.
E.

Accounting

The existence of a fiduciary relationship is a prerequisite
for an equitable accounting claim under Massachusetts law. In re
McCabe, 345 B.R. 1, 10 (D. Mass. 2006) (citing Chedd-Angier
15

Prod. Co. v. Omni Publ’ns Int’l, Ltd., 756 F.2d 930, 937 (1st
Cir. 1985)). No fiduciary relationship existed. Count XIV is
DISMISSED.
F.

Other Claims

Ceaco lumps together a number of the other counts in the
complaint and argues, in a conclusory manner, that those claims
are insufficiently pleaded or time-barred. Due to a paucity of
briefing, this Court denies dismissal of other claims beyond
those addressed above.
V.

Individual Liability for Glazer and Basque
Glazer and Basque move to dismiss on the ground that Beram

has failed to assert a basis for individual liability. Glazer
signed the contract in her capacity as President of Ceaco, but
she is not an individual party to the agreement. “[I]t is
settled beyond peradventure that a person signing a contract
only in a corporate capacity, and unambiguously indicating that
fact on the face of the contract documents, does not thereby
become a party to the agreement.” McCarthy v. Azure, 22 F.3d
351, 356 (1st Cir. 1994). Basque did not sign the contract at
all, nor was she even an employee of Ceaco at the time the
contract was signed. She cannot be party to the contract either.
Beram argues for piercing the corporate veil to hold Glazer
and Basque personally liable on the contract. But the complaint
lacks any factual allegations that would support piercing the
16

corporate veil. See Morris v. N.Y. State Dep’t of Taxation &
Fin., 623 N.E.2d 1157, 1160–61 (N.Y. 1993). Beram claims that
the defendant’s use of multiple entities named “Ceaco” was
improper. But Beram seems to be pointing at a mere evolution of
corporate forms for Ceaco, which does not necessarily suggest
any impropriety. Beram also makes a conclusory accusation that
the “unity of control” of Glazer as Chairman, President, and
sole shareholder of Ceaco justifies piercing the veil. But
Glazer’s multiple roles does not by itself plausibly support any
finding of impropriety either. Beram cannot sustain a claim in
contract against either of the individual defendants. Counts III
and IV, as alleged against Glazer and Basque, are DISMISSED.
However, Glazer and Basque do not argue that there can be
no individual liability on any of the other claims. This Court
denies dismissal of the other claims against Glazer and Basque
beyond those addressed above with regard to Ceaco.

ORDER
Ceaco’s motion to dismiss (Docket No. 11) is ALLOWED as to
Counts I, II, IX, XI, and XIV and otherwise DENIED. Glazer and
Basque’s motion to dismiss (Docket No. 13) is ALLOWED as to
Counts I, II, III, IV, IX, XI, and XIV and otherwise DENIED. The
counts are dismissed with prejudice except for Count II.

17

/s/ PATTI B. SARIS
Patti B. Saris
Chief United States District Judge

18