Innovation Ventures, LLC v. Custom Nutrition Laboratories, LLC et al
OPINION AND ORDER granting in part and denying in part 332 Plaintiff's Motion for Partial Summary Judgment, and granting in part and denying in part 328 Defendants' Motion for Summary Judgment. Signed by District Judge Terrence G. Berg. (AChu)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
Case No. 12-13850
Hon. Terrence G. Berg
and ALAN JONES,
OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART PLAINTIFF’S MOTION FOR PARTIAL
SUMMARY JUDGMENT (DKT. 332) AND GRANTING IN
PART AND DENYING IN PART DEFENDANTS’ MOTION
FOR SUMMARY JUDGMENT (DKT. 328)
This is a breach of contract case that involves the liquid energy
supplement 5-hour ENERGY®. Plaintiff Innovation Ventures, the
manufacturer of 5-hour ENERGY®, alleges that, among other
things, Defendants Custom Nutrition Laboratories (“CNL”), Nutrition Science Laboratories (“NSL”), and Alan Jones breached an
agreement with Plaintiff not to produce energy shots containing ingredients from the Choline Family.
After several motions to dismiss by Defendants (Dkts. 16, 30, 74,
and 78), a previous motion for summary judgment by Defendants
(Dkt. 199), the first phase of a bifurcated jury trial (Dkts. 111, 301308), and a motion to dismiss Defendants’ counterclaims brought
by Plaintiff (Dkt. 317), the case is now approaching the second
phase of the bifurcated jury trial, and both Plaintiff and Defendants
have filed motions for summary judgment. Dkts. 332 (Plaintiff’s
motion) and 328 (Defendants’ motion). For the reasons below, both
motions are GRANTED IN PART and DENIED IN PART.
Plaintiff and Defendants have engaged in aggressive litigation
for nearly five years in this Court, after having settled a previous,
also ferociously litigated case in the state of Texas. The Court described this unfortunate story of business mistrust and mistreatment in its last summary judgment order, Dkt. 219, and none of the
key facts have changed since then, so a summary of those facts will
In short, Plaintiff hired CNL to develop a formula for what became 5-hour ENERGY® and to produce bottles of the energy shot
that Plaintiff sold in the market. Plaintiff then switched to another
supplier. CNL sued Plaintiff in Texas, the parties eventually settled
the case, and, as part of the Settlement Agreement, CNL and
Alan Jones (CNL’s President) agreed not to make energy shots containing ingredients in “the Choline Family.”
CNL then sold its assets to NSL, and, as part of the purchase,
NSL agreed to be bound to the Choline Family restriction in the
Settlement Agreement between CNL, Jones, and Plaintiff.
Alan Jones joined the NSL team, and together NSL and Jones allegedly went ahead and produced energy shots that violated the
Choline Family restriction, and sold those energy shots to major retailers around the country.
Plaintiff sued CNL, as well as NSL and Jones, for breach of contract and a number of other things, and after five years of motion
practice and the completion of the first phase of a bifurcated trial,
we have arrived at the current stage of this case: cross-motions for
summary judgment on issues relating to the second phase of trial.1
Plaintiff’s and Defendants’ cross-motions for summary judgment
are now before the Court, motions in limine are due tomorrow, and
the second phase of the bifurcated trial is a month away.
In a story for another time, in another case pending before this
Court, Plaintiff has sued NSL again, along with a company Plaintiff
alleges is NSL’s alter-ego, because, like CNL, NSL has now gone
out of business.
III. Standard of Review
“Summary judgment is appropriate if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
any affidavits, show that there is no genuine issue as to any material fact such that the movant is entitled to a judgment as a matter
of law.” Villegas v. Metro. Gov't of Nashville, 709 F.3d 563, 568
(6th Cir. 2013); see also Fed. R. Civ. P. 56(a). A fact is material only
if it might affect the outcome of the case under the governing law.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). On a
motion for summary judgment, the Court must view the evidence,
and any reasonable inferences drawn from the evidence, in the light
most favorable to the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations
omitted); Redding v. St. Edward, 241 F.3d 530, 531 (6th Cir. 2001).
“As the moving parties, the defendants have the initial burden
to show that there is an absence of evidence to support [plaintiff’s]
case.” Selhv v. Caruso, 734 F.3d 554 (6th Cir. 2013); see also Celotex
Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party
has met its burden, the non-moving party “may not rest upon its
mere allegations or denials of the adverse party’s pleadings, but rather must set forth specific facts showing that there is a genuine
issue for trial.” Ellington v. City of E. Cleveland, 689 F.3d 549, 552
(6th Cir. 2012).
Many of the arguments raised in these cross-motions for summary judgment are interrelated, so the Court will address both motions, starting with Plaintiff’s motion, and will discuss related issues together.
a. Plaintiff’s Motion for Partial Summary Judgment
Plaintiff raises four arguments in its motion: (1) Defendants’ patent counterclaims fail as a matter of law; (2) Plaintiff is entitled to
summary judgment on Count I (breach of the Choline Family restriction); (3) Defendants’ breaches of the Choline Family restriction tolled the restriction’s duration; and (4) Defendants’ duress counterclaims fail as a matter of law.
i. Plaintiff’s argument concerning Defendants’ patent-disclosure counterclaims is moot
As a preliminary matter, Plaintiff’s argument that it is entitled
to summary judgment on Defendants’ patent-disclosure counterclaims, Dkt. 332 Pg. ID 17,886, is moot; the Court granted Plaintiff’s motion to dismiss the counterclaims on April 7, 2017. Dkt. 337.
The patent-disclosure counterclaims are no longer pending, so summary judgment on those claims is inappropriate and Plaintiff’s motion with respect to this argument is DENIED.
ii. Plaintiff is not entitled to summary
judgment on Count I (breach of
Settlement Agreement § 5(c)(i))
Plaintiff argues that it is entitled to summary judgment on
Count I because both NSL and Jones breached § 5(c)(i) of the Settlement Agreement in multiple ways. Dkt. 332, Pg. ID 17,878.
Plaintiff has established that NSL made energy shots containing
betaine and Alpha-GPC. Dkt. 332, Pg. ID 17,878. Jones sold those
energy shots on NSL’s behalf. Dkt. 332, Pg. ID 17,878. And NSL
and Jones repeated the process at least nine times, with Jones securing agreements by other companies to pay NSL to make the following energy shots, all of which used Choline Family ingredients
in violation of § 5(c)(i):
Rock On (Walgreens);
Triple f/x (RBC Life Sciences);
Champion Energy (Kiosk Kings);
Winchester Pump Up (Max Professional);
The Energy Shot (GNC);
Up&Up (Weider Global Nutrition);
Members’ Mark/Simply Right (Weider Global Nutrition);
Weider High Energy (Weider Global Nutrition);
Kirkland Signature (Costco); and
Dkt. 332, Pg. ID 17,879.
Plaintiff also argues that Jones breached § 5(c)(i) by helping NSL
make the shots. Specifically, Plaintiff submits that Jones: signed
contracts as President of NSL; called himself President of NSL; discussed formulations for NSL’s energy shots with David Henzler
(NSL’s chief formula creator); and dealt with other production-related issues such as production readiness, taste-testing, product
testing methods, facility inspections, and health department citations. Dkt. 332, Pg. IDs 17,879-17,880. And Plaintiff argues that
Jones continued to offer to sell energy shots that contained betaine
after he left NSL and started working for Universal Nutrition.
Dkt. 332, Pg. ID 17,880.
Defendants don’t deny these allegations. Dkt. 333, Pg. ID 18,325.
Instead, they argue that—although they might have breached
§ 5(c)(i)—Plaintiff may not secure summary judgment on Count I
because Defendants’ laches defense could shield them from being
held liable for their breaches.2 Dkt. 333, Pg. ID 18,324. The laches
Elsewhere in their briefing, the parties discuss Defendants’ “illegal restraint on trade” and duress defenses. And elsewhere in this
order, the Court discusses why both of those defenses fail as a matter of law.
Also, Defendants argue that to secure summary judgment, Plaintiff
needs to disprove each affirmative defense that Defendants raised
in their Answer. Dkt. 333, Pg. ID 18,324. Defendants have not cited
controlling authority for this proposition, and have presented no argument that would warrant imposing such a harsh standard—one
defense applies, Defendants argue, because Plaintiff delayed filing
this lawsuit for three years during which Defendants openly used
ingredients that Plaintiff believed were prohibited under the Choline Family restriction’s ambiguous “catch-all” language, and Plaintiff now seeks to recover damages it claims accrued in that threeyear period. Dkt. 333, Pg. IDs 18,330-18,331.
To support their argument, Defendants submit that:
NSL made Rock On using choline bitartrate (which is
prohibited by name) from October 2009 until November 2011, and afterwards continued to make Rock On
using betaine (which is not prohibited by name, but
which Plaintiff believed was covered under the
“catch-all” language of the prohibition);
NSL made Slam using betaine from October 2009 until NSL stopped all energy shot production in March
Plaintiff knew that both Rock On and Slam were CNL
products (Exhibit D to the Settlement Agreement
lists both products), and knew or should have known
that they contained choline bitartrate or betaine;
Plaintiff nevertheless waited three years to file this
The three-year delay prejudiced Defendants because
Plaintiff now seeks tens of millions of dollars in damages for products that Defendants developed and sold
during the period of delay—products that Defendants
could have developed using other chemicals if Plaintiff had filed its lawsuit earlier.
Dkt. 333, Pg. IDs 18,327-18,331.
that would force Plaintiff to disprove numerous boilerplate affirmative defenses on which Defendants blocked discovery and about
which they have not uttered a word since filing their Answer.
Plaintiff replies that because it filed its claims within the statute
of limitations, laches is inapplicable. Dkt. 338, Pg. ID 20,517. Plaintiff also argues that there was no delay of the sort laches requires
because Defendants have not submitted a specific date on which
they claim Plaintiff knew or should have known of their breaches.
Dkt. 338, Pg. ID 20,518. And Plaintiff argues that Defendants have
not submitted proof that they were prejudiced by any delay, and
that in fact there was no prejudice because, after Plaintiff sued, Defendants denied liability and continued selling products rather than
stopping their use of the prohibited ingredients. Dkt. 338,
Pg. IDs 20,518-20,519.
Laches is the “negligent and unintentional failure to protect
305 F.3d 397, 408 (6th Cir. 2002). Under Michigan law, to successfully assert a laches defense, a party must show that there was a
passage of time combined with some prejudice to the party asserting the defense. Head v. Benjamin Rich Realty Co., 55 Mich. App.
348, 356 (Mich. Ct. App. 1974). Laches is concerned mainly with the
question of the inequity of permitting a claim to be enforced, and
depends on whether the plaintiff has exercised due diligence.
Sloan v. Silberstein, 2 Mich. App. 660, 676, 141 N.W.2d 332 (1966).
Defendants have set out their theory of why laches should bar
Plaintiff from recovering for breach of Count I. Defendants made
and sold some products containing ingredients that the Settlement
Agreement explicitly prohibited and others that Plaintiff believed
were prohibited, but Plaintiff waited three years after the execution
of the Settlement Agreement to file this lawsuit. In the meantime,
Defendants—without notice by way of a lawsuit that Plaintiff
viewed the products as violating the restrictive covenant—expanded the products they made (which inflated the damages Plaintiff could recover). Had Defendants been on notice of the alleged
breach, they argue, they could have initially designed those products not to use prohibited ingredients.
And Plaintiff’s arguments in reply are all without merit.
First, Plaintiff’s contention that laches are inapplicable because
Plaintiff filed its claims within the applicable statute of limitations
is incorrect. MEEMIC v. Morris, 460 Mich. 180, 200-201 (1999), the
case Plaintiff cites to support its position, does not contain a welldeveloped discussion of the laches doctrine. More importantly, the
case expressly limits its laches holding to “the circumstances of
[that] case,” which are not present here or generally in laches case
law.3 Instead, Michigan courts have noted time and again—both
Morris involved the retroactive application of Profit v. Citizens Ins.
Co. of Am., 444 Mich. 281, 506 N.W.2d 514 (1993): a Michigan Supreme Court opinion that reversed a Michigan Court of Appeals
opinion prohibiting insurance companies from deducting social security disability benefits from work-loss benefits paid out under the
before and after Morris—that “laches may bar a legal claim even if
the statutory period of limitations has not yet expired.” Tenneco Inc.
v. Amerisure Mut. Ins. Co., 281 Mich. App. 429, 456-57 (2008) (citing Eberhard v. Harper-Grace Hosp., 179 Mich. App. 24, 35-36
(1989) and Citizens Ins. Co. of America v. Bryant, 216 Mich. App.
217, 228 (1996)).
Second, although Defendants have not explicitly stated the exact
day they claim Plaintiff should have discovered the breach, Plaintiff
fails to cite a case that requires a party seeking to raise a laches
defense to allege an exact date that the other party learned or
should have learned there was reason to sue.
Third, by arguing that Defendants have not shown proof of prejudice, Plaintiff misunderstands the point of Defendants’ argument.
insurance policy. After the Michigan Supreme Court held that insurance companies could make the deduction, Plaintiffs sued for
reimbursement of benefits they had overpaid in reliance on the
Court of Appeals’ previous decision. Defendants raised laches as a
defense to the lawsuit, but the Michigan Supreme Court refused to
apply it. Instead, the court held that the delay (which the Court of
Appeals partly caused because insurance companies could not bring
such claims while its prior decision was in effect) did not bar the
lawsuit in its entirety, but did require the plaintiffs to prove that
reimbursement was fair under the circumstances. In other words,
the court appears to have recognized—albeit implicitly—that there
is an exception to laches where a court’s mistaken interpretation of
law, rather than a party’s inaction, caused the delay in the filing of
the lawsuit. Here, there is not even a hint of a court’s misapplication of law forcing Plaintiff to delay filing suit. So Morris is inapplicable.
Defendants’ theory is that Plaintiff permitted Defendants to make
products that Plaintiff—not Defendants—considered to be breaching products, then sat back, watched the potential damages accrue,
and only later sued after Defendants had created the offending
product-formulas, set up manufacturing lines, and developed customers. Plaintiff assumes that because Defendants did not immediately stop making and selling products containing betaine and alpha GPC when they were sued after they had been making them
for three years, Defendants also would not have stopped if they had
been sued at an earlier time. But the entire point of Defendants’
argument is that they would have reacted differently because they
could have designed the products differently from the outset.
Defendants have presented enough evidence of their laches defense to create genuine issues of material fact such that Count I
must go to a jury. For example, there are issues of fact concerning
(1) when Plaintiff learned of the breach, (2) when Plaintiff should
have learned of the breach, (3) how long Plaintiff actually delayed
in bringing its claim (if at all), and (4) what (if any) prejudice Defendants suffered from any delay. Thus, the Court will rely on a
jury “to consider [the] factual disputes in [Defendants’] laches defense,” GMC v. Lanard Toys, Inc., 468 F. 3d 405, 421 (6th Cir. 2006),
and will then “look at the prejudice to [Defendants] occasioned by
the delay” (if any) and will determine whether there was “an intermediate change of conditions that renders it inequitable to allow
[Plaintiff] to enforce its rights.” Luke v. Home-Owners Ins. Co., 2017
Mich. App. LEXIS 96, at *10 (Ct. App. Jan. 19, 2017). Consequently,
Plaintiff is not entitled to summary judgment on Count I, and its
motion with respect to this argument is DENIED.
iii. Plaintiff may not secure tolling of
§ 5(c)(i)’s duration
Plaintiff argues that under the doctrine of equitable tolling,
Defendants’ breaches of § 5(c)(i) tolled the duration of the restrictive
covenant because Defendants flouted their obligations under the
Specifically, Plaintiff argues that Defendants flouted their
Using choline bitartrate and choline citrate—two ingredients that § 5(c)(i) expressly prohibits;
Interchanging Choline Family ingredients with each
other, without regard for § 5(c)(i)’s Choline Family
Denying the true nature of Jones’s relationship with
Falsely maintaining that Jones did not work for NSL;
Neglecting to tell NSL’s chief Energy Liquid formulator about the § 5(c)(i) restrictions despite having incorporated the restrictions into the Asset Purchase
Agreement by which NSL bought CNL’s assets;
Jones claiming that he was not individually liable under the Settlement Agreement; and
Jones testifying that NSL “could make anything that
NSL wanted to” and that he was not concerned about
NSL complying with the Settlement Agreement.
Dkt. 332, Pg. IDs 17,883.
Plaintiff also argues that § 5(a)(xii) of the Settlement Agreement
specifically provides that the duration of the restrictions is extended (or tolled) by the time period of any breach. Dkt. 332,
Pg. IDs 17,884. And Plaintiff contends that any tolling remedy
should be in addition to its recovery of monetary damages. Dkt. 332,
Pg. ID 17,884. Indeed, Plaintiff submits that it needs to obtain both
tolling and damages for it to realize its bargained-for consideration.
Dkt. 332, Pg. ID 17,885.
Defendants respond that even if the period of restriction had
been extended during Defendants’ breaches, it has been more than
three years since either of them have breached § 5(c)(i), so there is
nothing left for the Court to toll. Dkt. 333, Pg. ID 18,333. NSL also
notes that the Court has already decided that it is not bound by
§ 5(a), so there is no basis in the Settlement Agreement to toll the
restrictive covenant as to it. Dkt. 333, Pg. ID 18,333. And Defendants argue that equitable tolling is inappropriate because they did
not flout their obligations and also because the Court ruled that the
restrictive covenant, as originally drafted, was unreasonable.
Dkt. 333, Pg. IDs 18,334-18,336. Finally, Defendants argue that
Plaintiff may not both secure tolling and also recover damages for
alleged breaches that took place prior to when the contract was reformed because, until the Court reformed the contract, the contract
was not capable of being breached. Dkt. 333, Pg. ID 18,339.
The Court concludes that Plaintiff may not toll the duration of
the restrictive covenant. By asking the Court to rule that the restrictive covenant began running not on the date CNL and Jones
signed the Settlement Agreement, but instead on the first date that
Defendants ceased breaching § 5(c)(i), Plaintiff seeks to enforce the
restrictive covenant against Defendants. In other words, Plaintiff
seeks specific performance of the contract.
But, under Michigan law, “specific performance is not granted
where damages would be an adequate remedy.” Downing v. Life
Time Fitness, Inc., No. 10-11037, 2010 U.S. Dist. LEXIS 136928, at
*18 (E.D. Mich. Dec. 28, 2010) (citing JPMorgan Chase Bank, N.A.
v. Winget, 510 F.3d 577, 584 (6th Cir. 2007)). Indeed, to obtain specific performance, a party must demonstrate that there is no adequate remedy at law. JPMorgan, 510 F.3d at 584 (citing Laker v.
Soverinsky, 318 Mich. 100, 27 N.W.2d 600, 601 (Mich. 1947) (“Specific performance will not be decreed where there is an adequate
remedy at law”)). Here, rather than attempting to demonstrate that
no remedy at law will compensate it for the harm Defendants allegedly caused by breaching § 5(c)(i), Plaintiff has requested and still
actively seeks damages. Dkt. 187, Pg. ID 6,716; Dkt. 332,
Pg. ID 17,884. Thus, Plaintiff may not seek to enforce § 5(c)(i) by
tolling its duration.4
Also, Plaintiff may not secure both tolling and damages for the
same breach. “[R]emedies of specific performance and money damages for breach of contract are mutually exclusive.” Zeichman, 2014
Mich. Cir. LEXIS 235 (Mich. Cir. Ct. 2014) (citing Rowry v. Univ of
Mich., 441 Mich. 1, 9 (1992) (“Rather than seeking money damages
for breach of contract, the plaintiff in this case seeks specific performance”); Forest City Enterprises. Inc v. Leemon Oil Co, 228 Mich.
App. 57, 79-80 (1998) (“equitable relief refers to the case of one seeking an injunction or specific performance instead of money damages”)); see also MoonScoop Sas v. Am. Greetings Corp., 489 F. App'x 95, 100 (6th Cir. 2012) (noting that, had a party secured summary judgment on its breach of contract claim, it would have been
entitled to “specific performance or damages” (emphasis added)).
The doctrine of election of remedies also bars Plaintiff from securing both tolling and damages. “Election of remedies is the legal version of the idea that a plaintiff may not have his cake and eat it too.
The doctrine is remedial in nature and does no more than prevent
double recovery.” Hickson Corp. v. Norfolk S. Ry. Co., 260 F.3d 559,
566-67 (6th Cir. 2001) (citations omitted). The purpose of tolling a
restrictive covenant is to give the party the benefit of its bargain.
And the purpose of monetary damages is to compensate a party who
has been harmed by a contract breach and has therefore not received the benefit of its bargain. So to allow Plaintiff to pursue both
remedies would be to allow it to obtain double the benefit of its bargain: first, tolling would confer the benefit Plaintiff bargained for (a
period during which the Defendants were prohibited from using
certain chemicals), and then damages would compensate Plaintiff
as if it had not received the benefit (allowing a monetary recovery
for the economic value of the loss of the three-year Choline Family
restriction period). In other words, Plaintiff would emerge from the
lawsuit in a better position than it would have been in if Defendants
had not breached § 5(c)(i).
To be sure, Plaintiff has cited two breach-of-contract cases in
which parties secured both tolling and damages: Best Team Ever v.
Prentice, 2015 WL 3874477 (Mich. App. June 23, 2015) and PrestoX-Co. v. Ewing, 442 N.W.2d 85, 90 (Iowa 1989). But both cases are
inapplicable here. In Best Team Ever, the court tolled the restrictive
period as a remedy for the breach of one provision of the contract,
and awarded damages to compensate the plaintiff for the breach of
a separate provision. 2015 WL 3874477 at *4, 6-8. And Presto-X is
a non-binding decision by a court in another state applying different
law. Thus the cases are distinguishable, and do not demonstrate an
exception to the rule under Michigan law that a party may not secure specific performance of the contract when damages are an adequate remedy.
The time period for which Plaintiff may recover damages is also
an issue of contention between the parties. In Plaintiff’s motion, it
seeks a ruling that it may recover damages from 2009 until 2014.
Dkt. 332, Pg. ID 17,884. And in Defendants’ motion, they seek a
ruling that the damages period ends no later than October 14, 2012.
Dkt. 328, Pg. ID 15,297. As explained above, Plaintiff may not toll
the restrictive covenant’s duration because Plaintiff has asserted
that damages are an adequate remedy for Defendants’ alleged
breach of § 5(c)(i). Thus, Plaintiff may recover damages from Jones
stemming from his breach of § 5(c)(i) between August 17, 2009 and
August 17, 2012: the date Jones signed the settlement agreement5
to the end date of the restrictive covenant (as reformed by the
Court). And Plaintiff may recover damages from NSL stemming
from its breach of § 5(c)(i) between October 14, 2009 and August 17,
2012, that is, from the date that NSL acquired CNL’s assets and
took on CNL’s obligations under § 5(c)(i) to the end date of the restrictive covenant (as reformed by the Court).
The period of time for which Plaintiff may recover damages from
NSL is shorter than the period of time for which Plaintiff may recover damages from Jones because NSL took over CNL’s obligation
after the restrictive period had started to run. If the Court were to
apply the same period to both NSL and Jones, then Plaintiff would
Defendants point out that the Court reformed the restrictive covenant to run for three years, but that the Court used as the start
date the date of the Asset Purchase Agreement between CNL and
NSL (October 14, 2009) rather than the date of the Settlement
Agreement between Plaintiff, CNL, and Jones. Dkt. 328,
Pg. ID 15,294. Section 5(c)(i) began running the day Plaintiff, CNL,
and Jones signed the Settlement Agreement, so that date is the correct start-date for the reformed restrictive covenant. Thus, the
Court RECONSIDERS its prior Order, Dkt. 219, and finds that
§ 5(c)(i) began running on August 17, 2009.
Also, Plaintiff submits that the correct date to begin the running of
§ 5(c)(i) is after the end of the sell-through period provided by § 5(d).
But, as noted below, those are two separate provisions, and Plaintiff
has not sued under § 5(d), so it may not secure damages for breach
of that provision and it may not use that provision to calculate the
beginning and end dates of the broader § 5(c)(i).
be able to recover money from NSL from a time when NSL had no
contractual obligations to Plaintiff. And if the Court were to rule
that Plaintiff could recover damages from NSL for breaches that
took place up to three years after NSL purchased CNL’s assets,
then the restrictive covenant would run for more than three years—
longer than the Court reformed the covenant to run. See Dkt. 219,
Pg. ID 9,237. Thus, the operation of the contracts impose separate
(albeit almost identical) time periods for which Plaintiff may recover damages from Jones and NSL.
Finally, Defendants’ argument that Plaintiff may not secure injunctive relief is correct. Dkt. 328, Pg. ID 15,294. Plaintiff may not
toll the duration of § 5(c)(i), meaning the last date on which Defendants could have breached § 5(c)(i) is August 17, 2012. That was
nearly five years ago, so the Court cannot enjoin Defendants once
this lawsuit finally comes to an end. Further, Plaintiff may not secure injunctive relief because it seeks damages for Defendants’ alleged breach of § 5(c)(i). As the Sixth Circuit has recognized—albeit
in a case applying federal law, not Michigan law—“an injunction
generally should not issue if there is an adequate remedy at law.”
CSX Transp., Inc. v. Tenn. State Bd. of Equalization, 964 F.2d 548,
551 (6th Cir. 1992). Here, Plaintiff’s decision to seek damages
demonstrates that it believes that there is an adequate remedy at
law (the damages Plaintiff seeks) for Defendants’ alleged breaches.
Thus Plaintiff may not also secure injunctive relief.
To summarize, should Plaintiff overcome Defendants’ laches defense at trial and hold Defendants’ liable for their breaches of
§ 5(c)(i), Plaintiff may recover damages to compensate it for the
breaches. But it may not attempt to toll the duration of § 5(c)(i), and
it may not secure injunctive relief against either NSL or Jones.
For these reasons, to the extent that Plaintiff’s motion seeks
summary judgment on whether the duration of the settlement
agreement’s restrictive covenant under § 5(c)(i) should be extended
as a matter of law, that motion is DENIED.
The above analysis also disposes of two of the grounds relied on
by Defendants in their motion for summary judgment. First, Defendants’ motion with respect to the argument that Plaintiff may
not obtain injunctive relief is GRANTED. Plaintiff may not secure
an injunction against Defendants. Second, Defendants’ motion with
respect to the argument that the damages period must end no later
than October 14, 2012 is GRANTED. As noted above, the damages
period for Jones’s breach of § 5(c)(i) runs from August 17, 2009 until
August 17, 2012, and the damages period for NSL’s breach of
§ 5(c)(i) runs from October 14, 2009 until August 17, 2012.
iv. Defendants’ purported duress defense
fails as a matter of law
Plaintiff argues that Defendants are not capable of mounting a
duress defense as to NSL because the facts concerning duress relate
to CNL (and NSL is not a successor to CNL), and as to Jones because of six alternative and independent reasons:
Res judicata and collateral estoppel bar Jones’s duress defense because Jones’s misappropriation claim
was dismissed with prejudice and CNL and Jones
stipulated that Plaintiff has always owned the formula;
Jones entered into the Settlement Agreement with
full knowledge of all the facts, after consulting with
legal counsel and using counsel to negotiate the
Jones had alternative legal remedies and chose to
Plaintiff did not commit an illegal act as the formula
has always belonged to it and never belonged to
Economic duress is legally insufficient under Michigan law; and
Jones ratified the terms of the Settlement Agreement.
Dkt. 332, Pg. IDs 17,892-17,893.
Defendants respond that, although the standard is high for a duress defense under Michigan law because it requires an illegal act,
they have raised a genuine issue of fact over “whether the Plaintiff
committed a theft of CNL’s trade secrets and then leveraged that
theft to coerce CNL to agree to the terms of the Settlement Agreement” and thus may present the defense at trial. Dkt. 333,
Pg. ID 18,352.
Having reviewed the record and the nature of Defendants’ arguments, the Court concludes that Plaintiff’s motion is well taken;
neither NSL nor Jones has a duress defense.
Under Michigan law, “to succeed with respect to a claim of duress, [Defendants] must establish that they were illegally compelled
or coerced to act by fear of serious injury to their persons, reputations, or fortunes.” Farm Credit Servs., P.C.A. v. Weldon,
232 Mich. App. 662, 681-682 (Mich. Ct. App. 1998) (emphasis
Here, the facts alleged by Defendants are that Plaintiff compelled only CNL to sign the Settlement Agreement. Dkt. 333,
Pg. IDs 18,350-18,351 (“there is really no dispute but that CNL was
acting out of ‘fear of serious injury to their persons, reputations, or
fortunes’”) (“CNL was in dire financial straights [sic] at the time of
the settlement”) (“Plaintiff obtained the formula under false pretenses and provided it to another manufacturer and then fraudulently induced CNL to incur substantial expenses right before cutting off all orders with CNL in a scheme designed and destined to
drive CNL out of business”) (emphasis added). NSL does not contend that Plaintiff illegally compelled it to sign the Settlement
Agreement, so it may not present a duress defense at trial.6
The same is true for Jones; he alleges only that Plaintiff coerced
CNL to enter into the Settlement Agreement, not that Plaintiff coerced him, too. Indeed, he was represented by counsel, was an officer of CNL, and is highly experienced in the industry. He points
to no facts showing that Plaintiff illegally compelled or coerced him
to act by fear of serious injury to his person, reputation, or fortune,
as would be required to raise an issue of fact on a duress defense.
Thus he may not present a duress defense at trial. Because the
Court resolves the argument as to Jones based on his failure to allege that he was coerced to sign the Settlement Agreement, the
Court need not address Plaintiff’s other arguments relating to the
inadequacy of Jones’s duress defense.
NSL was not a party to the Settlement Agreement, and the Court
has already ruled that NSL is not a successor to CNL (a ruling
sought by NSL), Dkt 219, Pg. IDs 9,202, 9,205, 9,215, so NSL may
not now stand in CNL’s shoes and assert the same defenses that
CNL could have asserted in this litigation. See Lexus Fin. Servs.,
Inc. v. Trombly Tindall, P.C., 261 Mich. App. 417, 421–2 (2004)
(Cooper, P.J. dissenting) ([I]f [defendants] individually are not successors in interest to the lease, they have no standing to assert a
defense to an action for repossession, replevin or judicial foreclosure
or to request arbitration”); Deere & Co. v. FIMCO Inc., 2017 WL
927235 at *27 (W.D. Ky. 2017) (“equitable defenses extend to successors-in-interest where privity has been established”).
Although CNL might have had a duress defense in the case, that
defense is not available to NSL and Jones. Plaintiff’s motion with
respect to this argument is GRANTED.
b. Defendants’ Motion for Summary Judgment
Defendants raise 14 arguments in their motion for summary
judgment.7 In the discussion of Plaintiff’s argument that Defendants’ breaches of the Choline Family restriction tolled the restriction’s duration, the Court resolved two of these arguments—
that Plaintiff may not obtain injunctive relief and that Plaintiff may
not recover damages past October 14, 2012. Defendants’ remaining
arguments are addressed below.
i. The settlement agreement is no longer
an illegal restraint on trade
Defendants argue that the Settlement Agreement is an illegal
restraint on trade because it has an adverse impact on competition
in the same market in which Plaintiff seeks damages. Dkt. 328,
Pg. ID 15,282. The Court need go no further with recitation of the
parties’ arguments to resolve this.
Throughout this case Defendants have attempted to use phrase
“illegal restraint on trade” to mean different things at different
The prolixity of argumentation in Defendants’ motion typifies the
over-litigation of this case. The parties throw in everything including the kitchen sink, then go to Home Depot®, buy another kitchen
sink, and throw that in, too.
times. As the Court has noted previously, a broad and unqualified
reference to the phrase “illegal restraint on trade” could be understood to raise claims of illegality under the federal Sherman and
Clayton Antitrust Acts, Mich. Comp. Laws § 445.772, or Mich.
Comp. Laws § 445.774(a)(1). Dkt. 337, Pg. ID 20,505. Defendants
began using the phrase to refer to the restrictive covenant’s duration under Mich. Comp. Laws § 445.774(a)(1), Dkt. 45, Pg. ID 743.
Then, years into the litigation and after Defendants had succeeded
on their “illegal restraint on trade argument” and had seen the
Court reform the restrictive covenant’s duration, they attempted to
breathe new life into the phrase by redefining it to mean that the
Settlement Agreement somehow violated federal antitrust laws.
See Dkt. 318, Pg. ID 15,135 (arguing that NSL’s counterclaim for
antitrust violations “clearly relate[d] back” to NSL’s counterclaim
seeking a declaratory judgment that the settlement agreement was
an illegal restraint on trade).
The Court will hold Defendants to the first meaning they gave
the phrase. The Court has already held that the Choline Family
restriction’s duration was too long and therefore unenforceable, and
further reformed the restriction’s duration so that the agreement is
legal. Dkt. 219, Pg. IDs 9,234-9,327.
Thus Defendants are not entitled to summary judgment on the
premise that the Settlement Agreement is still somehow an illegal
restraint on trade. Defendants’ initial position prevailed in pointing
out the unreasonableness of the restrictive covenant’s duration, and
that contract has now been reformed and that problem cured. Defendants may not raise this affirmative defense at trial. Defendants’ motion with respect to this argument is DENIED.
ii. Plaintiff may not attempt to prove lost
profits by using a market-share calculation, and may not recover a reasonable royalty
Defendants argue that Plaintiff may not prove lost profits using
a market-share calculation and may not recover a reasonable royalty because both remedies apply only in lawsuits for patent infringement. Dkt. 328, Pg. IDs 15,267, 15,282. Defendants also attack the market-share calculation itself. Dkt. 328, Pg. ID 15,272.
Plaintiff responds that Defendants seek to hold Plaintiff to a
higher standard of proving damages than the law requires, noting
that damages are an issue of fact decided by the jury. Dkt. 334,
Pg. ID 18,373. Plaintiff also argues that its lost profits calculation
methodology is sound, and runs through the analysis at length.
Dkt. 334, Pg. ID 18,372, 18,376-18,379. And Plaintiff argues that a
reasonable royalty is an appropriate remedy because a District
Court in Washington reached that conclusion when applying Washington contract law. Dkt. 334, Pg. ID 18,385 (citing Veritas Oper.
Corp. v. Microsoft Corp., 2008 WL 7404617, *3-4 (W.D. Wash. Feb.
Defendant replies by emphasizing the same arguments it raised
in its opening brief, and by distinguishing Veritas on the basis that
it applied Washington law, not Michigan law. Dkt. 340,
Pg. IDs 20,607-20,610; 20,613-20,615.
After reviewing the parties’ arguments and the relevant authorities, the Court concludes that Plaintiff may not attempt to prove
its lost profits using a market-share calculation, and may not recover a reasonable royalty.
This is not a patent infringement case. Plaintiff has not asserted
a legal monopoly as it would have if it had asserted a patent.
And Plaintiff has not put one of its legal monopolies at risk as it
would have if it had asserted a patent (which would allow Defendants to present invalidity contentions to the Court, and would provide an incentive for Defendants to seek to have the Patent Trial
and Appeal Board revoke the patent). In other words, Plaintiff is
attempting to invoke the benefits of a patent infringement case
without exposing itself to any of the burdens of one. Plaintiff has
cited no case for the proposition that it may calculate lost profits in
a breach of contract case by using a market-share analysis.
And Plaintiff has cited only a non-controlling case that applies
Washington contract law, not Michigan contract law, for the proposition that a reasonably royalty is an appropriate remedy in a
breach of contract case. Indeed, in citing the case law it does, Plaintiff appears to have overlooked the Federal Circuit’s pronouncement that there must be a finding of patent infringement for a court
to award a reasonably royalty. Gjerlov v. Schuyler Labs. Inc.,
131 F. 3d 1016, 1024 (Fed. Cir. 1997).
Without controlling law stating that, under Michigan contract
law, Plaintiff may invoke federal patent-infringement remedies,
Plaintiff may not pursue those remedies in this case.8 Defendants’
motion with respect to these arguments is GRANTED.
That said, Plaintiff may still recover lost profits under a non-patent-infringement specific method of calculation. Lost profits “are
subject to determination with a ‘reasonable’ degree of certainty as
opposed to being ‘conjectural or speculative.’” Fister v. Henschel, 7
Mich. App. 590, 595–596 (1967); Denha v. Jacob, 179 Mich. App.
545 (1989). If the nature of the case means that Plaintiff may be
able to submit only an estimate of lost profits, Plaintiff can do so
but must place before the jury all of the facts and circumstances
that tend to prove the probable amount. Jim-Bob, Inc v. Mehling,
178 Mich. App. 71 (1989); Body Rustproofing, Inc v. Michigan Bell
Tel Co, 149 Mich. App. 385 (1986). And damages for lost profits
must be based on net profits, not gross profits. See Lawton v. Gorman Furniture Corp, 90 Mich. App. 258 (1979); Benfield v. HK Porter Co, 1 Mich. App. 543 (1965).
iii. Plaintiff may not recover disgorgement
of Defendants’ proceeds
Defendants argue that Plaintiff may not obtain disgorgement9 of
proceeds because (1) Plaintiff did not ask for disgorgement within
its specific causes of action, it only asked for disgorgement in its
prayer for relief and (2) Plaintiff abandoned its request for disgorgement when it voluntarily dismissed its claims for unfair competition and unjust enrichment. Dkt. 328, Pg. ID 15,284.
Plaintiff responds that it may obtain disgorgement because
§ 5(c)(i) incorporates § 5(d), which provides disgorgement as a remedy. Dkt. 334, Pg. ID 18,389. Plaintiff also argues that disgorgement is an equitable remedy that Plaintiff specifically asked for in
its request for relief in every version of its complaint. Dkt. 334,
Pg. ID 18,390.
Defendants reply that to allow Plaintiff to obtain disgorgement
would be to allow it to resurrect its unjust enrichment claim—implying that disgorgement is only available in unjust enrichment
cases. Dkt. 340, Pg. ID 20,613.
Plaintiff may not obtain disgorgement of Defendants’ proceeds.
First, as to NSL, § 5(d) is inapplicable because it is not incorporated
“Disgorgement is an equitable remedy,” SEC v. Blavin, 760 F.2d
706, 713 (6th Cir. 1985), that forces a defendant to give up an
amount of money “equal to the defendant's unjust enrichment.”
Gavriles v. Verizon Wireless, 194 F. Supp. 2d 674, 681 (E.D. Mich.
into § 5(c)(i). Section 5(c)(i) prohibits the CNL parties from producing energy shots that contain ingredients in the Choline Family,
while § 5(d) outlines a sell-through period in which the CNL parties
could for three months produce products using formulas that they
were using for products in the market at the time they signed the
Settlement Agreement, and could for three more months sell products fitting that description; § 5(c)(i) contains a general prohibition
that is “subject to” the exception contained in § 5(d). In other words,
§ 5(c)(i) does not include § 5(d) within its terms to expand its reach,
it sets off § 5(d) as another subsection that limits § 5(c)(i)’s scope.
If, the day after signing the Settlement Agreement, a CNL party
introduced a product with a new formula that used Choline Family
ingredients, the party would be in breach of § 5(c)(i), but not in
breach of § 5(d). Thus, the Court reads the remedies contained in
§ 5(d) as applying only to breaches of § 5(d), not to breaches of the
broader § 5(c)(i). So Plaintiff may not obtain disgorgement of NSL’s
proceeds based on § 5(d).
Second, as to Jones, although he is bound to § 5(d), Plaintiff has
not sued him for breaching that provision. Plaintiff alleges only that
Jones breached his covenant not to use prohibited ingredients
(§ 5(c)(i)), not that he breached his covenant to stop making products using certain formulas after three months and to stop selling
those products after six months. Dkt. 187, Pg. IDs 6,705-6,706.
So Plaintiff may not disgorge Jones’s proceeds based on § 5(d).
Third, Plaintiff may not obtain disgorgement of Defendants’ proceeds because Plaintiff dropped its unjust enrichment claim. “Disgorgement is an equitable remedy.” SEC v. Blavin, 760 F.2d 706,
713 (6th Cir. 1985). Indeed, it forces “a defendant to give up the
amount equal to the defendant's unjust enrichment.” Gavriles v.
Verizon Wireless, 194 F. Supp. 2d 674, 681 (E.D. Mich. 2002). To obtain disgorgement, a plaintiff must “produce evidence from which
the Court can make a ‘reasonable approximation’ of [a] [d]efendant's unjust enrichment,” otherwise “disgorgement will not be allowed.” Rochow v. Life Ins. Co. of N. Am., 851 F. Supp. 2d 1090,
1093 (E.D. Mich. 2012) (vacated on other grounds by Rochow v. Life
Ins. Co. of N. Am., 780 F.3d 364 (6th Cir. 2015) (en banc)); see also
SEC v. Monterosso, 756 F. 3d 1326 (11th Cir. 2014) (“Disgorgement
is an equitable remedy intended to prevent unjust enrichment”).
Here, Plaintiff raised a claim of unjust enrichment in its initial complaint, Dkt. 1, Pg. IDs 8-9, but then dropped that claim in both its
First Amended Complaint and Second Amended Complaint.
Dkt. 58; Dkt. 187. Consequently, it may not obtain an equitable
remedy that attaches only to a claim that it has abandoned. Defendants’ motion with respect to this argument is GRANTED.
iv. Defendants are not entitled to summary judgment on Counts II-V, VII,
and VIII on the grounds that Plaintiff
has produced no evidence of damages
for those claims
Defendants argue that Plaintiff has produced no evidence of
damages as to Counts II-V, VII, and VIII, and submit—without a
single citation of a statute or court opinion—that they are therefore
entitled to summary judgment on those claims. Dkt. 328,
Pg. IDs 15,286-15,287.
This argument is entirely without merit. Plaintiff need not prove
actual damages to establish liability for breach of contract; Plaintiff
can recover nominal damages even when it has suffered no actual
damages. “Nominal damages are those damages recoverable where
[a] plaintiff's rights have been violated by breach of contract or tortious injury, but no actual damages have been sustained or none
can be proved.” 4041-49 W Maple Condo Ass'n v. Countrywide Home
Loans, Inc., 282 Mich. App. 452, 460 (2009). Defendants’ motion
with respect to this argument is DENIED.
v. Jones is entitled to summary judgment
on Count II (Breach of Contract,
Breach of Jones’s Affirmation That
Living Essentials Owns the Formula)
Jones argues that he is entitled to summary judgment on
Count II, in which Plaintiff alleges that Jones breached § 2 and
§ 5(e)(i) of the Settlement Agreement by (1) holding himself out on
his LinkedIn page as the “inventor and creator of the 2 oz. energy
shot supplement category” and stating that “5-hour ENERGY® was
our signature creation in 2004,” and (2) stating on his biographical
page for Universal Nutrients that he created the formula for, or his
action lead to, the creation of 5-hour Energy®. Dkt 328,
Pg. ID 15,287 (Jones’s argument); Dkt. 187, Pg. ID 6,707 (Count II).
Specifically, Jones submits:
Plaintiff does not say in what way his statements constitute a breach of the Settlement Agreement.
Section 2 provides that Jones agrees that Plaintiff
owns the formula, so nothing he did after signing the
Settlement Agreement could constitute a breach of
Section 5(e)(i) provides that Jones will not state that
his product is or was made in the same plant, by the
same or affiliated company or people, or on the same
equipment that 5-hour Energy® was made.
His LinkedIn page does refer to CNL (not Jones) as
the inventor and creator of the 2 oz. energy shot supplement category, but it indicates that the first energy shot on the market was a product called Shotz.
His bio on Universal Nutrients’ website never says
that he is the owner of the Formula.
Dkt 328, Pg. ID 15,287.
Plaintiff responds that § 2 is broader than just the ownership of
the 5-hour Energy® formula; it includes the affirmations that “the
CNL Parties confirm and agree that [Plaintiff] developed, solely
owns and has always solely owned the Formula.” Dkt. 334,
Pg. ID 18,392. Plaintiff contends that Jones breached both § 2 and
§ 5.e.i. by making the following statements:
“His formulas combined have generated revenues for
his customers of more than $8 billion USD”;
“5 Hour Energy was our signature creation in 2004”;
“[His proposal to Plaintiff] led to the creation of what
today is known as 5-Hour Energy®”; and
“As the pioneer of the 2 oz energy shot category and
the original formulator of 5 Hour Energy . . .”
Dkt. 334, Pg. ID 18,392-18,393.
Section 2 of the Settlement Agreement provides:
The Development and Ownership of the Formula
of 5HE. The CNL Parties each confirm and agree that
LE hired CNL to assist with formulating the Formula
for 5HE, and that LE or its assigns solely owns, and has
always solely owned, the Formula and derivatives of the
Formula, including all versions of the Formula, as well
as any and all trade secret and intellectual property
rights in and to the Formula. The CNL Parties represent
and warrant that with respect to their assistance with
formulating the formula, they did not and have not infringed upon any trade secrets or intellectual property
of any third party and that they had full and complete
rights to provide the assistance that they provided. The
Parties have agreed not to issue a joint press release,
which was originally intended to be attached as Exhibit
B, and therefore the document originally intended to be
Exhibit B is intentionally omitted; nevertheless, the
CNL Parties confirm and agree that one or more of the
LE Parties developed, solely owns and has always solely
owned the Formula, which confirmation shall also be reflected in the Order attached as Exhibit A. With respect
to products produced by the CNL Parties that could be
considered to be derivatives of the Formula because they
contain the same or substantially the same combination
of ingredients as the Formula, or that would infringe
upon the patent, if issued, pursuant to the application
for patent filed by one or more of the LE Parties, then
Section 5 below applies.
Dkt.332-2, Pg. ID 17,912.
And § 5(e)(i) provides:
Other Restrictions on the CNL Parties. The CNL
Parties, individually, collectively, or in concert with others, shall not, and will require all customers going forward by contract to refrain from, stating, disclosing, confirming, representing, or publishing, etc. that their
product is or was made in the same plant, by the same
or affiliated company or people, or on the same equipment that 5HE was made, or that their formula is similar to, or the same as, 5HE, and any label, labeling, advertising or public or private statement shall not state
or imply that it is the same as 5HE or that such competitive product lasts a specific number of hours. The CNL
Parties are not responsible for actively policing customers, but must enforce the contractual agreements described in the preceding sentence when notified of such
a violation. LE shall be an intended, third-party beneficiary of the provisions of such contractual agreements
described in the preceding two sentences.
Dkt. 332-2, Pg. ID 17,916.
Plaintiff’s claim is that Jones made statements after the settlement agreement in which he took credit for developing the formula
of 5-hour ENERGY®. In considering Defendants’ motion for summary judgment on this Count, the Court must decide whether § 2
of the Settlement Agreement contains any restriction that obligates
Jones to take or refrain from taking any specific action in the future. As a “CNL Party,” Jones agreed as follows: “the CNL Parties
confirm and agree that one or more of the LE Parties developed,
solely owns and has always solely owned the Formula, which confirmation shall also be reflected in the Order attached as Ex-
hibit A.”10 By this provision, Jones agreed and confirmed that Plaintiff owned and has always owned the formula, and that Plaintiff
developed the formula. Yet according to Plaintiff, Jones later made
statements inconsistent with this agreement, by claiming that
“5 Hour Energy was our signature creation” and he was the “original formulator” of 5-hour ENERGY®. Therefore, the question the
Court must decide is: Do these kinds of statements breach any obligation created by § 2?
Section 2 recites an agreement to a certain fact (Plaintiff developed and owns the 5-hour ENERGY® formula), not an agreement
to take or refrain from taking any particular action in the future.
So this section does not prohibit Jones from making statements inconsistent with the agreement that he made. If Jones were to try to
claim any legal rights to the formula, § 2 would bar such a claim.
But its terms do not go further and restrict him from making statements—false or misleading though they may be—in the future.11
The “Order attached as Exhibit A”, a signed copy of which is in
the record at Dkt. 331-10, does not impose any obligation on Jones
to refrain from making statements in the future about the origins
of the formula.
11 The Court is not called upon to determine the ethics of Jones’s
conduct in making public statements that appear to blatantly contradict a recitation that he made and agreed to. One does not need
a judge’s intervention to see that to do so is wrong. The question
here, however, is whether the statements breached Jones’s contract
Indeed, it is abundantly clear that, had the parties sought to restrict Jones from making future statements about the ownership
and creation of the formula, they knew how to craft a provision that
imposed such a restriction: § 5(e)(i) contains a similar restriction on
future conduct and speech.
In § 5(e)(i), Jones agreed not to state or represent that any product made by a CNL party (including CNL and Jones himself):
(1) was made by the same plant that made 5-hour Energy®; (2) was
made by the same affiliated company or people that made 5-hour
Energy®; (3) was made on the same equipment that 5-hour Energy® was made on; or (4) has the same or similar formula as 5hour Energy® has. And Plaintiff alleges that Jones breached this
provision as well.
The statements that Plaintiff alleges as the basis for its claim,
however, are not the kinds of statements Jones agreed to refrain
from making. None of Jones’s statements reference a specific CNLparty product or CNL-party customer’s product, which would be required for a violation of § 5(e)(i) because the section prohibits only
statements that “their product” was made in a comparable way to
Thus no reasonable jury could find that Jones breached § 2 by
making the statements at issue because § 2 did not restrain Jones’s
future conduct. And, without Plaintiff having identified a statement
Jones made where he compared a specific CNL- or Jones-product to
5-hour Energy®, no reasonable jury could find that Jones breached
§ 5(e)(i). Jones’s motion with respect to Count II is therefore
vi. Jones is not entitled to summary judgment on Count III (Breach of Contract,
Jones’s Cooperation with Adverse Parties)
Jones argues that he is entitled to summary judgment on Count
III, which alleges that he breached § 13 of the Settlement Agreement by acting as a witness for NSL and assisting NSL in its defense of this lawsuit, because § 13 is against public policy. Dkt. 328,
Pg. ID 15,288. Section 13 provides:
Cooperation with Persons or Entities Adverse to
the Parties. Each Party shall refrain from cooperating
with anyone adverse to the other party (subject to customary exclusions for a valid subpoena, etc.); each Party
shall give notice and the opportunity to challenge any
Dkt. 332-3, Pg. ID 17,920.
To support his position, Jones cites cases from across the country, Dkt. 328, Pg. ID 15,288, but provides no controlling authority.
And Jones fails to explain how the reasoning employed in any of the
cases he cites should apply to this case and persuade the Court to
rule in his favor.
Jones also cites the Michigan Rules of Professional Conduct and
a Michigan case stating that a lawyer may not ask a potential expert witness to refrain from cooperating with an opposing party,
Dkt. 328, Pg. ID 15,289, but offers no explanation of why prohibitions on what an attorney may do should extend to nullify a contractual provision between a number of sophisticated parties, including corporate entities and officers acting pursuant to advice of
Without controlling authority or a detailed, persuasive explanation of why the Court should apply the law of other non-controlling
jurisdictions from other states, the Court will not block Plaintiff
from seeking to hold Jones liable for what appears to be a blatant
breach of § 13. Jones’s motion with respect to Count III is DENIED.
vii. Jones is entitled to summary judgment
on Count IV (Other Breaches of Contract by CNL, NSL and Jones)
Jones argues that he is entitled to summary judgment on Count
IV because the provision of the Settlement Agreement (§ 8) that
Plaintiff alleges Jones violated by failing to disclose information to
a third party in fact permits disclosure but does not require it.
Dkt. 328, Pg. ID 15,290. Section 8 states:
Confidentiality and Non-disparagement. The mere
existence of this Agreement is not confidential. The Parties may indicate that the matter has been settled. The
Parties, however, agree not to advertise or issue an an39
nouncement or press release that this matter has settled, and further agree not to disclose the terms or conditions of this Agreement except (a) as may be required
by law, so long as prior to making any such disclosure,
the disclosing Party provides the other Party with
prompt written notice and provides such other Party a
reasonable opportunity to object and/or seek a protective
order; (b) in confidence to the insurers, professional legal
and financial counsel representing such party or to a
bona fide prospective significant investor or acquirer of
such Party (so long as such prospective significant investor or acquirer is subject to a confidentiality agreement); (c) as agreed by the Parties, including, but not
limited to, the disclosure of any settlement terms in the
Orders set forth in Section 9 or as otherwise called for in
Section 2, 3.d, or 12; (d) to the limited extent necessary
to enforce the terms or conditions of this Agreement; or
(e) those limited provisions is Section 5 above, specifically only Subsection 5.a to and including Subsection
5(d) but no other portion of Section 5, to the limited extent necessary for CNL to inform customers or potential
customers of its right to manufacture and sell products
permitted by Subsection 5.a to and including Subsection
5(d), but only if such consumer or potential customer executes and is bound by a valid and enforceable confidentiality agreement restricting such use and disclosure of
the limited purpose described above. The Parties shall
not make any disparaging remarks or statements about
any of the other Parties.
Plaintiff fails to contest this argument. Instead, Plaintiff only
addresses Count IV in a portion of its response that acknowledges
that both Count IV and Count V have been “resolved” by the Court’s
decision that “the APA incorporates the SA only in part.” Dkt. 334,
Pg. ID 18,395. As Plaintiff does not contest Jones’s motion for summary judgment on Count IV, his motion is GRANTED. See, e.g.,
Jackson v. Fed Express, 766 F. 3d 189, 195-96, 198 (2nd Cir. 2014)
(noting that “a partial response arguing that summary judgment
should be denied as to some claims while not mentioning others
may be deemed an abandonment of the unmentioned claims”).
viii. Defendants are entitled to summary
judgment on Count V (Breach of Contract by NSL and Jones)
Defendants argue that they are entitled to judgment on Count V
because the Court has already ruled that NSL is not bound to the
contractual provision (§ 5(e)(1)) that Plaintiff argues NSL breached
by referring to 5-hour Energy® on the labels of some of its energy
shots. Dkt. 328, Pg. ID 15,291.
Plaintiff concedes that the Court’s decision that NSL is bound
only to § 5(c) resolves this claim against NSL. Dkt. 334,
Pg. ID 18,394. But Plaintiff argues that Jones breached § 5(e)(i) by
representing that NSL products were made by the same people—
Jones himself—who made 5-hour Energy®. Dkt. 334, Pg. ID 18,393.
NSL is entitled to summary judgment based on Plaintiff’s concession. And Jones is entitled to summary judgment because, although Plaintiff labeled Count V “Breach of Contract by NSL and
Jones,” Plaintiff neglected to allege within the Count that Jones
breached § 5(e)(1)—or, for that matter, any other specific provision
of the Settlement Agreement. See Dkt. 187, Pg. IDs 6,710-6,711.
Indeed, in Count II Plaintiff alleges that Jones breached § 5(e)(1),
see Dkt. 187, Pg. IDs 6,707-6,708, and, as noted above, Jones is en-
titled to summary judgment on that claim. So Count V is duplicative as to Jones, and he is entitled to summary judgment on it. Defendants’ motion with respect to Count V is therefore GRANTED.
ix. NSL is entitled to summary judgment
on Count VII (Tortious Interference
with contract by NSL)
NSL argues that Plaintiff’s allegation of interference with the
contract stems from NLS’s purchase of CNL’s assets, and that the
purchase was a legitimate business transaction that the Court has
already reviewed and found contains no indicia of fraud. Dkt. 328,
Pg. ID 15,292. NSL also argues that Plaintiff fails to articulate how
the Asset Purchase Agreement constitutes a breach of the Settlement Agreement. Dkt. 328, Pg. ID 15,292.
Plaintiff responds that, because the Court ruled that NSL was
not a party to the entire settlement agreement, Plaintiff may argue
that NSL interfered with portions of the Settlement Agreement to
which NSL is not bound. Dkt. 334, Pg. ID 18,395. Specifically,
Plaintiff identifies §§ 5.e.i., 2, 13, and 15 as provisions of the Settlement Agreement with which NSL could have tortiously interfered,
Dkt. 334, Pg. ID 18,396, and concludes that Count VII is still alive
with respect to non-§ 5(c)(i) breaches. Dkt. 334, Pg. ID 18,396.
NSL is entitled to summary judgment on this claim. Plaintiff is
correct that it could have argued that NSL interfered with the contract between Plaintiff and Jones and CNL by inducing Jones and
CNL to breach contractual provisions outside of § 5(c). But Plaintiff
has limited its claim to § 5(c)(i) conduct. Indeed, Plaintiff’s only allegation in Count VII of its Second Amended Complaint is that NSL
interfered with the contract when it “induced CNL and Jones to
sell CNL’s assets and liabilities to NSL and, as a result, to breach
the Agreement by assisting NSL to individually, collectively, or
in concert with one or more of them, directly or indirectly, Produce
Energy Liquids that contain the Prohibited Ingredients.”
Dkt. 187, Pg. ID 6,713 (emphasis added). So the only way that
Plaintiff alleges that NSL interfered with the contract is by causing
CNL and Jones to breach § 5(c)(i). But NSL is bound by § 5(c)(i).
NSL “cannot tortiously interfere with its own contract” Willis v.
New World Van Lines, Inc., 123 F. Supp. 2d 380, 396 (E.D. Mich.
2000), so it is entitled to summary judgment on this claim. NSL’s
motion with respect to Count VII is therefore GRANTED.
x. NSL is entitled to summary judgment
on Count VIII (tortious interference
with a business expectancy by NSL)
NSL argues that Count VIII is moot because the Court has already determined that a valid contract (as reformed by the Court)
existed between Plaintiff, Jones, and CNL. Dkt. 328, Pg. ID 15,293.
Plaintiff responds that Count VIII is an alternative Count it has
brought in the event that the Court rules that a provision of the
Settlement Agreement is void. Dkt. 334, Pg. ID 18,398.
NSL is entitled to summary judgment on Count VIII. As noted
above, NSL’s duress defense fails as a matter of law, and NSL’s “illegal restraint on trade” defense is moot. So there is no basis on
which NSL could seek to invalidate the Settlement Agreement,
meaning Plaintiff will never find itself in the alternative scenario
for which it brought the claim. NSL’s motion with respect to Count
VIII is therefore GRANTED.
xi. NSL has not established as a matter of
law that Plaintiff may not recover attorneys’ fees from it
NSL argues that under Michigan law, the winning party in a
lawsuit generally may not recover attorneys’ fees from the losing
party. Dkt. 328, Pg. ID 15,297 (citing Haliw v. City of Sterling
Heights, 471 Mich. 700, 707 (Mich. 2005)). An exception, NSL notes,
is when the parties to a contract expressly provide for the payment
of fees in litigation. Dkt. 328, Pg. ID 15,297 (citing Pransky v. Falcon Group, Inc., 311 Mich. App. 164, 193-94 (Mich. Ct. App. 2015)).
NSL submits that § 20 of the Settlement Agreement provides for
attorneys’ fees, but that the Court has already ruled that NSL is
bound only to § 5(c). Dkt. 328, Pg. ID 15,297. Thus, NSL contends,
it is entitled to judgment on Plaintiff’s claim for attorneys’ fees.
Dkt. 328, Pg. ID 15,297.
Plaintiff responds that it may recover its attorneys’ fees from
NSL under § 5(d) of the settlement agreement, and also as discovery
sanctions. Dkt. 334, Pg. ID 18,400.
NSL’s argument fails. To be sure, as noted above, NSL is not
bound to § 5(d), and Plaintiff has not brought a claim against NSL
for breach of § 5(d), so NSL and is not subject to an attorneys’-fee
award based on that provision of the Settlement Agreement. And
NSL is not bound to any other portion of the Settlement Agreement
that requires the losing party in a lawsuit to pay the winning
party’s attorneys’ fees. But there are other ways that Plaintiff may
recover the fees—ways independent of the Settlement Agreement.
For example, Plaintiff may recover its attorneys’ fees, or at least
portions of those fees, under Federal Rules of Civil Procedure 11
and 37. Therefore Defendant is not entitled to a ruling that, as a
matter of law, Plaintiff may not recover any attorneys’ fees from
NSL. If Plaintiff believes it has a basis to recover attorneys’ fees on
grounds unrelated to the Settlement Agreement, Plaintiff may at
the appropriate time request leave to file a motion to recover its
fees. NSL’s motion with regard to this argument is DENIED.
For the foregoing reasons, both motions are GRANTED IN
PART and DENIED IN PART.
Specifically, Plaintiff’s motion is:
DENIED with respect to its argument that it is entitled to summary judgment on Defendants’ patent-disclosure counterclaims;
DENIED with respect to its argument that it is entitled to summary judgment on Count I;
DENIED with respect to its argument that Defendants’ breaches of § 5(c)(i) tolled the duration of the
restrictive covenant; and
GRANTED with respect to its argument that Defendants’ purported duress defense fails as a matter
And Defendants’ motion is:
GRANTED with respect to their argument that the
damages period ends no later than October 14, 2012;
GRANTED with respect to their argument that
Plaintiff may not secure injunctive relief;
DENIED with respect to their argument that the
Settlement Agreement is an illegal restraint on trade;
GRANTED with respect to their argument that
Plaintiff may not prove lost profits using a marketshare calculation;
GRANTED with respect to their argument that
Plaintiff may not recover a reasonable royalty;
GRANTED with respect to their argument that
Plaintiff may not recover disgorgement of Defendants’ proceeds;
DENIED with respect to their argument that they
are entitled to summary judgment on Counts II-V,
VII, and VIII on the grounds that Plaintiff has produced no evidence of damages for those claims;
GRANTED with respect to Jones’s argument that he
is entitled to summary judgment on Count II;
DENIED with respect to Jones’s argument that he is
entitled to summary judgment on Count III;
GRANTED with respect to Jones’s argument that he
is entitled to summary judgment on Count IV;
GRANTED with respect to their argument that they
are entitled to summary judgment on Count V;
GRANTED with respect to NSL’s argument that it
is entitled to summary judgment on Count VII;
GRANTED with respect to NSL’s argument that it
is entitled to summary judgment on Count VIII; and
DENIED with respect to NSL’s argument that Plaintiff may not recover attorneys’ fees from it.
Judgment is entered in Jones’s favor on Counts II, IV, and V, and
in NSL’s favor on Count V, VII, and VIII.
Dated: June 12, 2017
s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE
Certificate of Service
I hereby certify that this Order was electronically filed, and
the parties and/or counsel of record were served on June 12,
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