Opinion
CIVIL ACTION NO. 02-12147-PBS
November 26, 2003
MEMORANDUM AND ORDER
I. INTRODUCTION
Plaintiffs, John G. Alden Insurance Agency, Inc. ("Alden Mass"), and John G. Alden, Inc. of Massachusetts ("JGAM") (collectively, "plaintiffs") move for summary judgment on their breach of contract and trademark infringement claims. Plaintiffs allege that defendants, John G. Alden Insurance Agency of Florida, Inc. ("Alden Florida") and John G. Alden Special Risks, Inc. ("Special Risks") (collectively, "defendants") used their trademark in violation of a trademark licensing agreement, and that they are entitled to recover trademark infringement damages and collect on the unpaid royalty payments. The parties have stipulated to injunctive relief. After hearing, plaintiffs' motion is DENIED and the Court orders entry of judgment in favor of defendant pursuant to Fed.R.Civ.P. 56(b).
II. FACTUAL BACKGROUND
The following facts are undisputed, except where otherwise noted.
Plaintiffs are Massachusetts corporations in the business of providing maritime insurance. JGAM began doing business under the name John G. Alden in 1909, and Alden Mass has been selling marine insurance since 1955. Defendants are also in the marine insurance business. Alden Florida was incorporated in Florida and began selling marine insurance in 1981, and Special Risks, a Florida corporation, conducting the same business, was incorporated on November 18, 1999.
JGAM owns several federal registrations for marks related to the Alden name. On December 9, 1981, Alden Mass and Alden Florida entered into a license agreement (the "License Agreement") which granted Alden Florida, as licensee:
These marks include: U.S. Service Mark Registration Nos. 2,308,835 and 2,307,288 for ALDEN®; No. 2,290,215 for JOHN G. ALDEN®; and a "rope logo" bearing Nos. 2,292,686, 2,291,150, 2,294,400, and 2,291,119.
The exclusive right and license in the State of Florida to operate an insurance, excluding life insurance, brokerage and agency business under the name "John G. Alden Insurance Agency of Florida, Inc." together with the right to use [Alden Mass's] commonly known logo on advertising matters and stationery.
The License Agreement provided that in exchange for the rights granted to Alden Florida, it would pay Alden Mass "three percent (3%) of gross commissions paid to [Alden Florida] and its salespersons for the sale of insurance. . . ." (the "Royalty Clause"). Alden Florida was to make this payment each month for the prior month's sales. The License Agreement also included a termination clause (the "Termination Clause"), which provided:
The license granted herein may be terminated by [Alden Mass] by notice upon the happening of any of the following events [including failure to make payment] and only after willful refusal by [Alden Florida] to comply within thirty (30) days with a notice of violation given to Licensee by Licensor.
Alden Florida made payments under the Royalty Clause from the time it entered into the License Agreement until July 1986. Alden Florida has not made any payments since that time but continued to use the Alden marks in conjunction with its insurance business. There has been no ongoing relationship between the parties since 1986. This situation continued until 2003, when, after this litigation commenced, the parties stipulated to injunctive relief, preventing defendants from continuing to use any of the Alden Marks.
On September 30, 2002, Alden Mass, through its attorneys, gave written notice to Alden Florida terminating the License Agreement and initiating the thirty-day cure period. Alden Florida did not respond to the letter.
III. DISCUSSION
A. Standard of Review"Summary judgment is appropriate when `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Barbour v. Dynamics Research Corp., 63 F.3d 32, 36 (1st Cir. 1995) (quoting Fed.R.Civ.P. 56(c)). "To succeed [in a motion for summary judgment], the moving party must show that there is an absence of evidence to support the nonmoving party's position." Rogers v. Fair, 902 F.2d 140, 143 (1st Cir. 1990); see also Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
"Once the moving party has properly supported its motion for summary judgment, the burden shifts to the non-moving party, who `may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing there is a genuine issue for trial.'" Barbour, 63 F.3d at 37 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986)). "There must be `sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable or is not significantly probative, summary judgment may be granted.'" Rogers, 902 F.2d at 143 (quoting Anderson, 477 U.S. at 249-50) (citations and footnote in Anderson omitted). The Court must "view the facts in the light most favorable to the non-moving party, drawing all reasonable inferences in that party's favor." Barbour, 63 F.3d at 36.
B. Repudiation
The parties hotly contest whether Alden Florida repudiated the License Agreement. Defendant claims that it repudiated the contract in 1986 by ceasing to make payments and by making statements to plaintiff indicating its intent not to make any further payments, and argues that plaintiff was aware of the repudiation. Plaintiff denies that defendant actually repudiated the contract at any point, and argues that the contract remained in effect until it invoked the Termination Clause in 2002.
As provided in the License Agreement, Massachusetts law governs this dispute. Repudiation is a "statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach." Mobil Oil Exploration Producing S.E., Inc. v. United States, 530 U.S. 604, 608 (2000) (quoting Restatement (Second) of Contracts § 250(a) (1981)). "While an obligor's `mere expression of doubt as to his willingness or inability to perform is not enough to constitute a repudiation,' language that is `sufficiently positive to be reasonably interpreted to mean that the party will not or cannot perform' is sufficient." Burlington Landmark Assoc. v. RHI Holdings, Inc., 27 F. Supp.2d 95, 99 (D. Mass. 1998) (quoting Restatement § 250 cmt. b.) See also Thermo Electron Corp. v. Schiavone Constr. Co., 958 F.2d 1158, 1164 (1st Cir. 1992) ("Commentators have pointed out that there `must be a definite and unequivocal manifestation of intention [not to render performance].'") (quoting 4 Corbin on Contracts § 973, at 905-06 (1951)). An act or series of acts constitutes a repudiation if it renders the actor's performance "actually or apparently impossible." Id. cmt. c. To constitute a repudiation, the statement or act "must be either with respect to the entire performance that was promised or with respect to so material a part of it as to go to the essence [of the contract]. It must involve a total and not merely a partial breach." Bucciero v. Drinkwater, 12 Mass. App. Ct. 551, 555, 434 N.E.2d 1315, 1318 (1982) (citations omitted).
Plaintiff is correct that Massachusetts has not generally recognized the doctrine of anticipatory repudiation. See Cavanagh v. Cavanagh, 33 Mass. App. Ct. 240, 243, 598 N.E.2d 677, 679 (1992); Prance, Anticipatory Repudiation of Contracts: A Massachusetts Anomaly, 67 Mass. L. Rev. 30 (1982) (noting that Massachusetts is alone in not recognizing the doctrine of anticipatory repudiation). However, several exceptions to this general holding have developed, including where an actual breach is accompanied by an anticipatory breach. Cavanagh, 330 Mass. App. Ct. at 243-44 n. 6. See Parker v. Russell, 133 Mass. 74 (1882) (where defendant agreed to support plaintiff during his lifetime, and after complying with contract for five years, then breached for period of two years, plaintiff had the right to treat the contract as "absolutely and finally broken").
Moreover, Massachusetts courts have held that when there is a clear and unequivocal repudiation of a party's obligations under a contract calling for ongoing performance, the statute of limitations with respect to the entire obligation begins to run from the date of the repudiation. See Callender v. Suffolk County, 57 Mass. App. Ct. 361, 364, 783 N.E.2d 470, 473 (2003) (involving county's violation of continuing weekly obligation to pay assault benefits to corrections officer). Even when there is an obligation to make multiple payments in installments, a clear and unequivocal repudiation will trigger the statute of limitations as to all payments. Id. (rejecting a "rolling" statute of limitations as to each payment). See also Gordon v. Southcrate Park Corp., 341 Mass. 534, 537-38, 170 N.E.2d 691, 693-94 (1960) (finding that single but substantial breach in series of ongoing obligations on construction contract was "continuing confirmation of contractor's unwillingness to perform obligations currently due under the contract"); Barber v. Fox, 36 Mass. App. Ct. 525, 527, 632 N.E.2d 1246, 1248 (1994) (in land transfer contract, promisor could not have committed breach prior to promisee's request for transfer "unless prior to that time he clearly and unequivocally repudiated his obligation").
Plaintiff also argues that Alden Florida could not have repudiated the contract because "the law is clear that a party cannot assert that it has repudiated the contract while continuing to accept its benefits."United States v. Consol. Edison Co. of New York, 452 F. Supp. 638, 654 (S.D.N.Y. 1977) (holding that when the plaintiff continued its performance in the face of the alleged repudiation, and the defendant continued to accept the product, there was no clear repudiation of the agreement). This doctrine developed to prevent situations where one party to a contract rescinds the contract but continues to accept ongoing performance by the other party. "This rule is specially applicable to contracts for the purchase of stock claimed to have been fraudulently sold . . . when, with knowledge of the facts, the purchaser accepts dividends, he will be held to have waived the fraud and to have ratified his purchase." Brennan v. Nat'l Equitable Inv. Co., 247 N.Y. 486, 489, 160 N.E. 924, 925 (1928) (citing Black on Rescission (1st Ed.) § 347). This doctrine does not apply to the instant case where Alden Florida did not continue actively to accept performance by Alden Mass and there has been no ongoing relationship between the parties since 1986.
The question whether a party has repudiated a contract is generally a question of fact for determination by the jury. See Gunther v. Gunther, 181 Mass. 217, 217-18, 63 N.E. 402, 402 (1902);Garcia v. Chase Manhattan Bank, 735 F.2d 645, 648 (2d Cir. 1984);Minidoka Irrigation Dist. v. Dep't of the Interior, 154 F.3d 924, 927 (9th Cir. 1998) (quoting Contractors Health Welfare Plan v. Harkins Constr. Equip. Co., 733 F.2d 1321, 1326 (8th Cir. 1984) ("Whether sufficient notice of [repudiation] has been given raises a question of fact that requires examination of all parties.") (citations omitted)).Cf. Local 92, Int'l Ass'n of Bridge, Structural Ornamental Ironworkers v. B B Steel Erectors, Inc., 850 F.2d 1551, 1556 n. 5 (11th Cir. 1988) ("Given undisputed facts, the district court on summary judgment . . . may draw the conclusion that as a matter of law [a party's] conduct is or is not sufficient to repudiate the [contract].");Burlington Landmark Associates, 27 F. Supp.2d at 102 (holding as a matter of law that purchaser of commercial real estate did not repudiate contract where his refusal to sign at closing "would constitute merely a partial, minor breach having nothing to do with the essence of the contract").
In this case, defendant argues that Alden Florida repudiated the contract by refusing to make payments to Alden Mass after 1986 and by indicating an intent not to honor the contract. Alden Florida argues that Alden Mass was aware of the repudiation by the late 1980's. Grafton J. Corbett, III, an attorney and the chairman of the Board of Tillotson Corporation, the parent corporation of Alden Mass, acknowledged that the former head, Mr. Tillotson would not authorize a suit, and Corbett realized "the only way we are going to collect is to sue him." (Corbett Dep. at 50). Nancy G. Ronan, plaintiff's former employee, testified that defendant's managers stated payments would not be made, and defendant's Chairman and CEO, Frank Atlass, stated "that payments were not going to be made at least at that time." (Ronan Dep. at 11-12). Emphasizing the "at least at that time" language, Alden Mass insists that Alden Florida did not at any point communicate an intention never to pay in any event or at any time; it only communicated that payments would cease while a secondary dispute over another franchise agreement between the parties concerning the Shatel Corporation, a yacht brokerage firm, was ongoing. (Id. at 10-13). However, that secondary dispute was resolved in 1987 (Corbett Dep. at 48), and payment of all the monies owed on the License Agreement was still not made. Although Atlass's initial repudiation was arguably contingent on resolution of the joint brokerage disagreement, after that contingency evaporated, no payment was made for sixteen years. That course of conduct, combined with defendant's statements, constituted a clear and unequivocal repudiation, at least by 1993.
Accordingly, the statute of limitations has run, and judgment for the defendant is appropriate on the breach of contract claim. C. Lanham Act Claim
Alden Mass argues that it is entitled to recover damages for trademark infringement under 15 U.S.C. § 1117(a), which provides:
When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office . . . shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled,. . . subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.
(emphasis added).
The parties agree that Alden Florida continued to use the Alden Marks until 2003. However, because Alden Florida repudiated the licensing agreement in 1986 and the infringement action arose at the point of repudiation, plaintiff is now barred by the equitable doctrine of laches from asserting a Lanham Act claim sixteen years later.
"The equitable doctrine of laches bars assertion of a claim where a party's delay in bringing suit was (1) unreasonable, and (2) resulted in prejudice to the opposing party." K-Mart Corp. v. Oriental Plaza, Inc., 875 F.2d 907, 911 (1st Cir. 1989). Courts have applied laches to bar trademark infringement claims where the trademark holder knowingly allowed the infringing mark to be used without objection for a lengthy period of time. See E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir. 1983) (allowing laches defense where claimant did not file suit until the allegedly infringing mark had been used for eight years and claimant had known of infringing use for six years) (cited in Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1061 (9th Cir. 1999)). See also Westchester Media v. PRL USA Holdings, 214 F.3d 658, 668 (5th Cir. 2000) ("Laches comprises three elements: (1) delay in asserting one's trademark rights, (2) lack of excuse for the delay, and (3) undue prejudice to the alleged infringer caused by the delay."); President and Fellows of Harvard College v. Harvard Bioscience, Inc., 204 F. Supp.2d 134, 136 (D. Mass. 2002) (barring trademark infringement claim where plaintiffs had acquiesced in manufacturer's use of mark for over 100 years).
Alden Mass has offered no valid reason for the sixteen-year delay in bringing suit. Therefore, the Court finds that the delay was unreasonable under the circumstances. See Minnesota Mining Mfg. Co. v. Beautone Specialties Co., Ltd., 82 F. Supp.2d 997, 1003-04 (D. Minn. 2000) (finding unreasonable delay where plaintiff waited twelve years from time it became aware of defendant's alleged infringement, almost twice that of the relevant statute of limitations, before bringing suit).
Moreover, defendant suffered prejudice as a result of the delay. In the time since the purported repudiation of the license agreement, Alden Florida built up its business and steadily increased its revenues.See id. at 1004 (where alleged infringer expanded its business, thus exposing itself to substantial potential legal liability for trademark infringement, "clear showing of economic prejudice . . . is more than sufficient to meet the prejudice requirement of laches"); Hot Wax, Inc. v. Turtle Wax, Inc. 191 F.3d 813, 824 (7th Cir. 1999) ("The market position pursued by [defendant] with respect to the products at issue was uncontested by [plaintiff] for years. . . . Had [plaintiff] successfully pressed its claims in a timely manner, [defendant] certainly could have invested its time and money in other areas or simply renamed the product."); Restatement (Third) of Unfair Competition § 31 cmt. a (stating that inexcusable delay can "prejudice the defendant by increasing the amount of plaintiff's loss").
CONCLUSION
Plaintiff's motion for summary judgment is DENIED and the Court GRANTS summary judgment to defendants.