THE AMERICAN OUTDOORSMAN, INC. v. SHADOW BEVERAGES AND SNACKS, LLC
Filing
104
OPINION denying 61 SEALED MOTION (This document Sealed pursuant to Order on Motion for Leave to File Documents Under Seal), filed by SHADOW BEVERAGES AND SNACKS, LLC; granting 65 SEALED MOTION (This document Sealed pursuant to Order on Motion for Leave to File Documents Under Seal), filed by THE AMERICAN OUTDOORSMAN, INC. Signed by Magistrate Judge Maureen P. Kelly on 12/19/2014. (bb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
THE AMERICAN OUTDOORSMAN,
INC.,
Plaintiff,
vs.
SHADOW BEVERAGES AND
SNACKS, LLC,
Defendant.
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Civil Action No. 13-443
Chief Magistrate Judge Maureen P. Kelly
Re: ECF Nos. 61, 65
OPINION
KELLY, Chief Magistrate Judge
This single count breach of contract action stems from the failure of Defendant Shadow
Beverages and Snacks, LLC (“Shadow Beverages”) to perform under a License Agreement it
entered into with Plaintiff American Outdoorsman, Inc. (“American Outdoorsman”) in October
of 2011.
Presently before the Court is a Motion for Partial Summary Judgment submitted on behalf
of Defendant Shadow Beverages, ECF No. 61, and a Motion for Summary Judgment submitted
on behalf of Plaintiff American Outdoorsman. ECF No. 65. For the reasons that follow, Shadow
Beverages’ Partial Motion for Summary Judgment will be denied and American Outdoorsman’s
Motion for Summary Judgment will be granted.
I.
FACTUAL AND PROCEDURAL BACKGROUND
It appears undisputed that American Outdoorsman is a small media company that creates
hunting, fishing and outdoor adventure programing and that Shadow Beverages is a limited
liability company that works to cross market brands in the beverage and snack foods industries
through licensing programs, building products and taking them to market. It is also undisputed
that American Outdoorsman and Shadow Beverages entered into a License Agreement (“the
Agreement”) on October 18, 2011, whereby American Outdoorsman granted Shadow Beverages
the right to use American Outdoorsman’s name and logo “on and in connection with the
development, advertising, promotion, marketing, distribution, sale use and other exploitation of
... all RTD non-alcoholic beverages, beef jerky, nutritional bars, trail mix and other snacks to be
mutually agreed upon.” ECF No. 68-1, p. 2. In return, Shadow Beverages agreed, inter alia, to
make Guaranteed Royalty payments to American Outdoorsman on a quarterly basis. The
Agreement provided that the first three Guaranteed Royalty payments, each in the amount of
$50,000.00, were to be made to American Outdoorsman on July 31, 2012, October 31, 2012, and
January 31, 2013. Id. at p. 6. Shadow Beverages concedes that it did not make any of these
payments. ECF No. 75: p. 7, ¶ 15; p. 9, ¶ 19; pp. 11-12, ¶ 23. Consequently, in accordance with
the terms of the Agreement, American Outdoorsman provided Shadow Beverages with a written
Notice of Default in a letter dated February 7, 2013. ECF No. 68-3. When Shadow Beverages
failed to cure the default within ten days after receiving the Notice of Default, American
Outdoorsman terminated the Agreement in a Termination Letter dated March 18, 2013. ECF No.
68-4.
American Outdoorsman filed the instant Complaint on March 25, 2013, bringing a claim
for breach of contract (Count I). ECF No. 1. Shadow Beverages filed an Answer to the
Complaint, ECF No. 3, on April 22, 2013, which was followed by a period of discovery.
Thereafter, on March 18, 2014, American Outdoorsman filed a Redacted Motion for Summary
Judgment, along with a Brief in Support of Motion for Summary Judgment and a Redacted
Concise Statement of Material Facts. ECF Nos. 48-51. On March 25, 2014, these same
2
documents were refiled under seal in their un-redacted form. ECF Nos. 65-68. Similarly, on
March 19, 2014, Shadow Beverages filed a Motion for Partial Summary Judgment, a redacted
Brief in Support of Motion for Partial Summary Judgment, a redacted Concise Statement of
Material Facts and an Appendix to its Motion for Partial Summary Judgment, ECF Nos. 52-55,
which were refiled un-redacted and under seal on March 20, 2014. ECF Nos. 61-64. Because
the parties requested, and were granted, leave to file their respective dispositive motions under
seal, the sealed Motions filed at ECF Nos. 61 and 65, are the operative Motions. See ECF Nos.
47; 3/13/2014 Text Order.
II.
STANDARD OF REVIEW
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.” Fed. R. Civ. P. 56(a). An issue of
material fact is in genuine dispute if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
See Doe v. Abington Friends Sch., 480 F.3d 252, 256 (3d Cir. 2007) (“A genuine issue is present
when a reasonable trier of fact, viewing all of the record evidence, could rationally find in favor
of the non-moving party in light of his burden of proof”). Thus, summary judgment is warranted
where, “after adequate time for discovery and upon motion . . . a party . . . fails to make a
showing sufficient to establish the existence of an element essential to that party's case, and on
which that party will bear the burden of proof at trial.” Marten v. Godwin, 499 F.3d 290, 295 (3d
Cir. 2007), quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
The moving party bears the initial burden of demonstrating to the court that there is an
3
absence of evidence to support the non-moving party=s case. Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986). See Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 140 (3d Cir.
2004). “W]hen the moving party has carried its burden under Rule 56(c), its opponent must do
more than simply show that there is some metaphysical doubt as to the material facts . . . . Where
the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,
there is no genuine issue for trial.” Scott v. Harris, 550 U.S. 372, 380 (2007), quoting Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).
In deciding a summary judgment motion, a court must view the facts in the light most
favorable to the nonmoving party and must draw all reasonable inferences, and resolve all doubts
in favor of the nonmoving party. Matreale v. New Jersey Dep’t of Military & Veterans Affairs,
487 F.3d 150, 152 (3d Cir. 2007); Woodside v. Sch. Dist. of Phila. Bd. of Educ., 248 F.3d 129,
130 (3d Cir. 2001).
III.
DISCUSSION
As previously discussed, it is undisputed in this case that Shadow Beverages breached the
Agreement by failing to develop and market the licensed brands and by failing to make any of the
Guaranteed Royalty payments provided for in the Agreement. It is also undisputed that Shadow
Beverages is liable to American Outdoorsman for the three Guaranteed Royalty payments that
were past due when American Outdoorsman terminated the Agreement in March of 2013. What
is in dispute is whether Shadow Beverages is also liable to American Outdoorsman for the
remainder of the Guaranteed Royalty payments itemized in the Agreement that had not yet
become due when the Agreement was terminated. At the core of the controversy is the
interpretation of the Termination provision contained in the Agreement which provides that:
4
23. Termination. (a) If either Party at any time during the Contract Period
of this Agreement (i) fails to make any payment of any sum of money herein
specified to be made, or (ii) fails to observe or perform any of the
covenants, agreements, or obligations hereunder (other than the payment of
money and except as otherwise provided in Paragraph 23(b) (d) and (e)
below), the non-defaulting Party may terminate this Agreement if such
default is not cured within ten (10) calendar days after the defaulting Party
will have received a written notice specifying such default.
*
*
*
(g) Upon the termination of this Agreement, notwithstanding anything to
the contrary herein, all rights licensed to [Defendant] under this Agreement
immediately revert to [Plaintiff] without any further notice and all unpaid
Guaranteed Royalty payments and any other payments due [Plaintiff],
including reimbursements and Earned Royalty payments, for the Contract
Period shall be deemed to be fully earned and shall be paid to [Plaintiff]
within five (5) days from the effective date of the termination.
ECF No. 68-1, pp. 13-14 (emphasis added). The Contract Period is defined in the Agreement as
“the Initial Term and Renewal Term (if any) collectively.” ECF No. 68-1, p. 2.1 In turn, the
Initial Term is defined as “that period of Ten (10) Contract Years commencing on the Effective
Date and terminating on December 31, 2022, unless terminated earlier in accordance with this
Agreement.” Id. (emphasis added).
American Outdoorsman argues that by definition the Contract Period for which the
Guaranteed Royalties are due is the full ten year life of the contract as contemplated by the
parties when they entered into the Agreement, and that Paragraph 23(g) constitutes an
acceleration clause under which all ten years of Guaranteed Royalty payments set forth in the
Agreement are deemed fully earned and owed to American Outdoorsman. See ECF No. 68-1,
pp. 6-7. American Outdoorsman therefore contends that Shadow Beverages is liable for the over
5
$5 million dollars American Outdoorsman would have received had all the Guaranteed Royalty
payments delineated in the Agreement been made. Shadow Beverages, on the other hand,
focuses on the language in the definition of Initial Period, which states that the Contract Period is
ten years “unless terminated earlier in accordance with this Agreement,” and argues that because
American Outdoorsman terminated the Agreement prior to the termination date of December 31,
2022, the Initial Term expired on the date that American Outdoorsman terminated the Agreement
or on March 18, 2013. Shadow Beverages therefore concludes that it only owes American
Outdoorsman the three Guaranteed Royalty payments due as of March 18, 2013, or $150,000.00.
It is well settled that “[i]n construing a contract, the court is to determine the intent of the
contracting parties.” Kingsly Compression, Inc. v. Mountain V Oil & Gas, Inc., 2010 WL
4929076, at *3-4 (W.D. Pa. Nov. 30, 2010), citing Homart Dev. Co. v. Sgrenci, 443 Pa. Super.
538, 662 A.2d 1092, 1097 (1995). To determine the intent of the parties in a contract that is
unambiguous on its face, the court should first look to the words contained in the contract, id., as
courts “do not assume that a contract’s language was chosen carelessly, nor do they assume that
the parties were ignorant of the meaning of the language they employed.” Great Am. Ins. Co. v.
Norwin Sch. Dist., 544 F.3d. 229, 243 (2008). Thus, to ascertain the intent of the parties, courts
are to consider the contract as a whole and not merely individual terms. Gillin v. Universal
Underwriters Ins. Co., 2011 WL 780744, at *6 (E.D. Pa. Mar. 4, 2011). Courts therefore “will
not interpret one provision of a contract in a manner which results in another portion being
annulled.” Kamco Indus. Sales, Inc. v. Lovejoy, Inc., 779 F. Supp. 2d 416, 427 (E.D. Pa. 2011),
quoting LJL Transp., Inc. v. Pilot Air Freight Corp., 599 Pa. 546, 962 A.2d 639, 647-48 (2009).
1
Because the Agreement was obviously never renewed, the latter language does not apply.
6
Moreover, “[a] Court [should] adopt the interpretation which, under all circumstances of the
case, ascribes the most reasonable, probable and natural intention of the parties, bearing in mind
the objects manifestly to be accomplished.” Gillin v. Universal Underwriter’s Ins. Co., 2011 WL
780744, at *5, quoting Galvin v. Occidental Life Ins. Co., 206 Pa. Super. 61, 211 A.2d 120, 122
(Pa. Super.1965). See Bohler–Uddeholm Am., Inc. v. Ellwood Group, Inc., 247 F.3d 79, 96 (3d
Cir. 2001) (“if the plain meaning of a contract term would lead to an interpretation that is absurd
and unreasonable, Pennsylvania contract law allows a court to construe the contract otherwise in
order to reach ‘the only sensible and reasonable interpretation’ of the contract”).2
In this case, looking at the Agreement as a whole and giving effect to all of its terms, the
Court finds that the only reasonable interpretation of Paragraph 23(g) is that it is an acceleration
clause that obligates Shadow Beverages to pay American Outdoorsman all ten years of
Guaranteed Royalty payments as set forth in the Agreement. The plain language of Paragraph
23(g), which is part of the Termination provision, sets forth certain rights “[u]pon termination of
this Agreement,” and thus necessarily contemplates rights and obligations that arise following
termination of the Agreement. Indeed, Samuel Jones, the co-founder and presently the Director
of Innovation at Shadow Beverages, see ECF No. 68-7, pp. 13-16, acknowledged in his
deposition testimony that the provision applies only after the Agreement is terminated by one of
the parties. ECF No. 68-7, pp. 57-58. Thus, Shadow Beverages’ argument that Paragraph 23(g)
somehow does not apply because the Agreement had been terminated by American Outdoorsman
is not only nonsensical by would render Paragraph 23(g) completely meaningless.
2
It should be noted here that neither party has argued that the Agreement is ambiguous but rather have taken the
position that they merely disagree on its proper interpretation. See Bohler–Uddeholm Am., Inc. v. Ellwood Group,
Inc., 247 F.3d at 93 (a contract is not rendered ambiguous merely because the parties do not agree upon the proper
7
In addition, Paragraph 23(g) requires payment of all unpaid Guarantee Royalties for the
Contract Period or the Initial Term which, by definition, is the ten years that the parties
anticipated that the Agreement would be in effect. Although Initial Term is defined as ten years
“unless terminated earlier in accordance with this Agreement,” the modifying language does not
negate the fact that Paragraph 23(g) itself provides for payment of all Guaranteed Royalties upon
termination of the Agreement. Moreover, Paragraph 23(g) requires payment of Guaranteed
Royalties for the Contract Period “notwithstanding anything to the contrary herein.” Thus,
under the terms of the Agreement, Paragraph 23(g) takes precedence and, regardless of how
Initial Period is defined, all the unpaid Guaranteed Royalties are owed to American Outdoorsman
upon termination of the Agreement.
Furthermore, the language deeming all unpaid Guaranteed Royalties “to be fully earned”
upon termination of the Agreement further evidences that Paragraph 23(g) was intended to be an
acceleration clause. If the Guaranteed Royalty payments were limited to only those payments
owed prior to the termination date, the language deeming them fully earned would be superfluous
because those payments were already earned. It is therefore clear, giving full meaning to all the
provisions of the Agreement, that the parties intended for Paragraph 23(g) to be an acceleration
clause whereby Shadow Beverages would be obligated to pay American Outdoorsman all of the
Guaranteed Royalty payments set forth in the Agreement in the event that Shadow Beverages
breached the Agreement and American Outdoorsman exercised its right to terminate the
Agreement as a result.
construction, nor may a court rely upon an unreasonable interpretation to create ambiguity).
8
Shadow Beverages’ arguments to the contrary are not persuasive. First, Shadow
Beverages suggests that, because the cases cited by American Outdoorsman for the general
proposition that acceleration clauses are enforceable under Pennsylvania law involve mortgage
loans and real estate transactions (which in and of itself is incorrect), the use of acceleration
clauses are somehow limited to those two situations. See Royal Bank of Pa. v. 1600 Walnut St.
Associates, 1991 WL 78189, at *2 (E.D. Pa. May 7, 1991); Weinberger v. Blair Mill Ltd., 1991
WL 127045, at *2 (E.D. Pa. July 10, 1991); Kingsly Compression, Inc. v. Mountain V Oil &
Gas, Inc., 2010 WL 4929076, at *6. Not only was an equipment lease at issue in Kingsly, and
not a mortgage or real estate lease, but none of these cases state that the use of an acceleration
clause is limited to any particular type of contractual agreement. Moreover, not only has Shadow
Beverages failed to provide the Court with any cases that do restrict the application of
acceleration clauses to particular contracts, but such clauses have clearly been recognized and
enforced in contract agreements other than mortgage loans and real estate transactions including
license agreement like that at issue here. See id. (enforcing acceleration clause in the lease for a
natural gas compressor). See also Nat’l Audubon Soc’y, Inc. v. Sonopia Corp., 2010 WL
3911261, at *2-3 (S.D.N.Y. Sept. 1, 2010), Report and Recommendation adopted by 2010 WL
5373900 (S.D.N.Y. Dec. 22, 2010) (enforcing an acceleration clause regarding minimum
guaranteed royalty payments in a license agreement); Oscar de la Renta, Ltd. v. Mulberry Thai
Silks, Inc., 2009 WL 1054830, at *6 (S.D.N.Y. April 17, 2009) (finding that the guaranteed
minimum royalties provided for in the License Agreement were “simply the sum of the minimum
royalties due under the contract for the unexpired term of the contract at the time of the breach
and thus represented “the minimum amount [the plaintiff] stood to gain from the remainder of the
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contract); Kenneth Jay Lane, Inc. v. Heavenly Apparel, Inc., 2006 WL 728407, at *3 (S.D.N.Y.
Mar. 21, 2006) (finding that under the terms of the License Agreement, “the defendant agreed
that, upon default, it would pay, in an accelerated fashion, all royalty payments due under the
License Agreement” and awarding “the minimum amount of royalty payments to which [the
plaintiff] would have been entitled during the entire term of the parties’ contract”); Paramount
Pictures Corp. v. Johnson Broad. Inc., 2006 WL 367874, at *7 (S.D. Tex. Feb. 15, 2006)
(enforcing acceleration clause in a License Agreement).
Second, Shadow Beverages contends that Paragraph 23(g) cannot be a liquidated
damages clause because it applies to both parties and thus would require Shadow Beverages to
pay all of the Guaranteed Royalty payments to American Outdoorsman even if American
Outdoorsman was the party who defaulted and Shadow Beverages had terminated the
Agreement. Shadow Beverages argues that interpreting Paragraph 23(g) as a liquidated damages
clause would therefore not only allow American Outdoorsman to benefit from its own bad
behavior but would effectively eliminate Shadow Beverages’ ability to terminate the Agreement - even if American Outdoorsman defaulted -- without having to pay American Outdoorsman over
$5 million dollars.
Interestingly, to support its position, Shadow Beverages points to the deposition
testimony of Timothy Rothwell, an owner and the previous President and CEO of American
Outdoorsman, see ECF No. 63, p. 2, ¶ 7; ECF No. 79, p. 2, ¶ 7; ECF No. 64, p. 28, in which he
testified that, although Paragraph 23 applies to both American Outdoorsman and Shadow
Beverages, subsection 23(g) would not apply or obligate Shadow Beverages to pay the
Guaranteed Minimum payments if American Outdoorsman breached the Agreement thereby
10
causing Shadow Beverages to terminate it. ECF No. 64, pp. 42-45. Indeed, as argued by
American Outdoorsman, such a result would be unreasonable -- even absurd -- and is clearly not
a result intended by the parties.
Third, Shadow Beverages argues that, even if Paragraph 23(g) can be interpreted as an
acceleration clause, it is unconscionable and thus not enforceable.
To prove unconscionability under Pennsylvania law, the party challenging the contract
provision must show that it is both procedurally and substantively unconscionable. Romero v.
Allstate Ins. Co., ___ F. Supp. 2d. ___, 2014 WL 4966147, at *12 (E.D. Pa. Oct. 6, 2014), citing
Quilloin v. Tenet HealthSystem Phila., Inc., 673 F.3d 221, 230 (3d Cir. 2012).
“Procedural unconscionability examines the process leading to the
formation of the contract and the form and language of the agreement.”
Porreca v. Rose Grp., No. Civ.A.13–1674, 2013 WL 6498392, at *7 (E.D.
Pa. Dec. 11, 2013). A procedurally unconscionable contract bears a lack of
meaningful choice in the acceptance of the challenged provision. Quilloin,
673 F.3d at 235. Such contracts are typically “contracts of adhesion,” which
are defined as “a standard-form contract prepared by one party, to be signed
by the party in the weaker position, usually a consumer, who adheres to the
contract with little choice about the terms.” Id. (quotation omitted).
*
*
*
“Substantively unconscionable terms are those that are unreasonably or
grossly favorable to one side and to which the disfavored party does not
assent.” Id. (quoting Estate of Hodges, No. Civ.A.12–1698, 2013 WL
1294480, at *6 (E.D. Pa. Mar. 29, 2013)). “To establish substantive
unconscionability, the plaintiff must show that the contract terms are
unreasonably favorable to the drafter and that the other party had no
meaningful choice but to accept those terms.” Cronin v. Citifinancial Servs.,
Inc., No. Civ.A.08–1523, 2008 WL 2944869, at *3 (E.D. Pa. July 25, 2008).
Id.
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Here, Shadow Beverages does not specifically address the procedural prong of
unconscionability, but implies elsewhere in its Brief and Statement of Material Facts that it
lacked a meaningful choice in arriving at the terms of the Agreement because Timothy Rothwell
testified at his deposition that the Agreement is “basically a boilerplate license agreement” that
he has used previously. ECF No. 64, pp. 38-39. The fact that the same agreement has been used
by Mr. Rothwell in contracting with other licensees, however, does not mean that Shadow
Beverages did not have the opportunity to negotiate or renegotiate its terms -- including
Paragraph 23(g). Indeed, Samuel Jones and George Martinez, co-founder and presently the
President and CEO of Shadow Beverages, see ECF No. 68-9, p. 12, acknowledged at their
depositions that they had an opportunity to review and propose revisions to the terms of the
Agreement and that the Agreement was also reviewed by counsel. ECF No. 68-7, pp. 40-41;
ECF No. 68-9, pp. 30-31; ECF No. 75, p. 4, ¶ 8. Moreover, it is undisputed that the template for
the Agreement was previously used as the template for a license agreement entered into by
Shadow Beverages and GNC. ECF No. 66, p. 3, ¶ 9; ECF No. 75, pp. 3-4, ¶ 9. Shadow
Beverages therefore was aware of the language used in Paragraph 23(g) before entering into the
Agreement with American Outdoorsman. In addition, without any protestations from Shadow
Beverages, American Outdoorsman has categorized Shadow Beverages as a sophisticated
business entity with expertise in the licensing industry. Under these circumstances, Shadow
Beverages’ failure to take advantage of the opportunity to voice objections or propose revisions
to the Agreement does not mean that Shadow Beverages did not have a meaningful choice
regarding the language of Paragraph 23(g).
12
With respect to substantive unconscionability, Shadow Beverages reiterates its argument
that Paragraph 23(g) grossly favors American Outdoorsman because, under its terms, Shadow
Beverages would be required to pay American Outdoorsman all of the remaining Guaranteed
Royalties even if American Outdoorsman was the breaching party. To be substantively
unconscionable, however, the term objected to must be one to which the disfavored party did not
assent and had no meaningful choice but to accept. As already discussed, the record shows that
Shadow Beverages had the opportunity to negotiate the terms of the Agreement, including
Paragraph 23(g), and, having voiced no objection, assented to its terms.
Shadow Beverages also argues that Paragraph 23(g) is substantively unconscionable
because under Vino 100, LLC v. Smoke on the Water, LLC, 864 F. Supp. 2d 269, 285-86 (E.D.
Pa. 2012), I Can't Believe It's Yogurt v. Gunn, 1997 WL 599391, at *22-25 (D. Colo. Apr. 15,
1997), and Postal Instant Press, Inc. v. Sealy, 43 Cal. App. 4th 1704, 1713-14 (Cal. Ct. App.
1996), American Outdoorsman is not entitled to future royalties. These cases, however, are
easily distinguishable. Not only were there no acceleration clauses in the various franchise
agreements at issue in these cases but the royalty payments in question were not Guaranteed
Royalty payments as are at issue in this case. To the contrary, all three of these cases were
concerned with the licensor’s ability to collect future royalties in the form of lost profits from
anticipated sales after the franchise agreements were terminated. In Sealy, which the courts in
both Vino 100 and I Can’t Believe It’s Yogurt relied upon, the court found that, while there was a
natural and direct causal connection between the franchisee’s breach of the agreement and the
loss of past royalty payments, thereby entitling the franchisor to recoup those losses, the loss of
future profits was not causally connected to the franchisee’s breach but rather was caused by the
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franchisor’s termination of the agreement. Sealy, 43 Cal. App. 4th at 1710-11. Because nothing
about the franchisee’s failure to pay past royalties prevented the franchisor from receiving its
future royalty payments, even if the franchisor had to sue in order to obtain them, the court found
that it was the franchisor’s own decision to terminate the franchise agreement that deprived it of
any future profits and declined to find that the defendant was liable for future loss profits. Id.
In this case, however, the Guaranteed Royalty payments that American Outdoorsman
seeks to recoup are not loss profits from anticipated, but unrealized, future sales. Rather, by
definition, the Guaranteed Royalties constitute “compensation” to American Outdoorsman for
granting Shadow Beverages the right to use the American Outdoorsman name and logo in the
development, manufacture and sale of certain products and merchandise. ECF No. 68-1, p. 5.
Moreover, the dates the Guaranteed Royalties were due and the specific amounts due on those
dates are expressly set forth in the Agreement. ECF No. 68-1, pp. 6-7. Thus, unlike in Sealy,
there is a natural and direct causal connection between Shadow Beverages’ breach of the
Agreement and American Outdoorsman’s loss of the Guaranteed Royalties. The fact that the
compensation Shadow Beverages owed to American Outdoorsman for the right to use its name
and logo was set to be paid over the anticipated ten year life of the Agreement, does not lessen
American Outdoorsman’s entitlement to them and does not render the Guaranteed Royalty
payments future profits simply because they became due after the Agreement was terminated.3
3
Indeed, the Agreement contemplates the payment of future profits, i.e., Earned Royalties, separately from
Guaranteed Royalty payments. ECF No. 68-1, p. 7. Moreover, Plaintiff has represented in its Brief that, if
successful on its Motion for Summary Judgment, it will not seek Earned Royalty payments but will be satisfied with
the payment of the Guaranteed Royalties. Plaintiff nevertheless reserves the right to seek Earned Royalties in
addition to the Guaranteed Royalties, should summary judgment on its behalf be denied. See ECF No. 67, p. 15;
ECF No. 81, p. 3.
14
Fourth, Shadow Beverages argues that enforcing the acceleration clause so as to award
American Outdoorsman all of the lost Guaranteed Royalty payments provided for in the
Agreement would give American Outdoorsman a double recovery. To support its argument,
Shadow Beverages cites to two cases that stand for the proposition that in a commercial lease a
landlord must elect either repossession and actual damages or acceleration of the balance due,
and that allowing a lessor to collect under an acceleration clause at the same time it has
repossessed the property and rented to another tenant would be unjust. See Kingsly
Compression, Inc. v. Mountain V Oil & Gas, Inc., 2010 WL 4929076, at *6; Grakelow v. Kidder,
95 Pa. Super. 250, 256 (1928). Shadow Beverages then concludes that it would be unjust to
permit American Outdoorsman to both repossess the trademark property and collect future
royalty payments. ECF No. 77, p. 7. The Court, however, has already found that the Guaranteed
Royalties that American Outdoorsman seeks to recoup are not future royalty payments as
Shadow Beverages interprets them but rather are bargained for terms of the Agreement that
compensate American Outdoorsman for giving Shadow Beverages the right to use American
Outdoorsman’s name and logo. The fact that Shadow Beverages did not avail itself of that
opportunity does not deprive American Outdoorsman of the benefit of its bargain which was ten
years of Guaranteed Royalty payments. As stated by Mr. Rothwell at his deposition, that’s why
they’re called guaranteed payments. ECF No. 68-11, p. 28. See Emerson Radio Corp. v. Orion
Sales, Inc., 253 F.3d 159, 168-69 (3d Cir. 2001) (applying the reasoning of cases that found that
minimum or guaranteed royalty payments “protect the licensor/supplier from the possibility of
the failure of the licensee/buyer to use reasonable or best efforts”); Helpin v. Trustees of Univ. of
Pa., 608 Pa. 45, 50, 10 A.3d 267, 270 (2010), quoting Lambert v. Durallium Products Corp., 364
15
Pa. 284, 72 A.2d 66, 67 (1950) (“[t]he purpose of a damage award is to place the non-breaching
party ‘as nearly as possible in the same position [it] would have occupied had there been no
breach’”); Ferrer v. Trustees of Univ. of Pa., 573 Pa. 310, 341, 825 A.2d 591, 610 (2002),
quoting Taylor v. Kaufhold, 368 Pa. 538, 84 A.2d 347, 351 (1951) (the non-defaulting party is
entitled to “whatever damages he suffered, provided (1) they were such as would naturally and
ordinarily result from the breach, or (2) they were reasonably foreseeable and within the
contemplation of the parties at the time they made the contract, and (3) they can be proved with
reasonable certainty”).
Moreover, Shadow Beverages’ argument that American Outdoorsman would benefit from
a double recovery is necessarily contingent on American Outdoorsman having entered into a new
agreement with a new licensee. Not only has American Outdoorsman represented that no such
agreement has been entered into but Shadow Beverages has not pointed to any evidence to
support a contrary finding. See ECF No. 81, p. 5. As such, Shadow Beverages cannot escape the
acceleration clause contained in the Agreement by arguing American Outdoorsman would enjoy
a double recovery.
IV.
CONCLUSION
For the foregoing reasons, the Court finds that, as evidenced by the plain language of the
Agreement and giving effect to all of its terms, the only reasonable interpretation of Paragraph
23(g) is that the parties intended that upon termination of the Agreement by American
Outdoorsman due to Shadow Beverages’ default, all unpaid Guaranteed Royalties itemized in the
Agreement for the ten year Contract Period contemplated by the parties were fully earned and
thus are owed to American Outdoorsman. Accordingly, American Outdoorsman’s Motion for
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Summary Judgment, ECF No. 65, will be granted and Shadow Beverages’ Motion for Partial
Summary Judgment, ECF No. 61, will be denied.
A separate Order will follow.
/s/ Maureen P. Kelly
MAUREEN P. KELLY
CHIEF UNITED STATES MAGISTRATE JUDGE
Dated: December 19, 2014
cc:
All counsel of record via CM/ECF
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