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Progressive Emu Inc. v. Nutrition & Fitness Inc.

United States District Court, N.D. Alabama, Southern Division

August 9, 2017

PROGRESSIVE EMU INC., Plaintiff,
v.
NUTRITION & FITNESS INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          ABDUL K. KALLON, UNITED STATES DISTRICT JUDGE

         This action originated with a breach of contract claim by Progressive Emu, Inc. (“Pro Emu”) against Nutrition & Fitness, Inc. (“NFI”). See generally doc. 1-1. Along with its answer, NFI asserted contract and intellectual property counterclaims. See generally doc. 24. Both parties subsequently moved for summary judgment. See docs. 71 & 73. After Judge William Acker disposed of all claims in his ruling, doc. 120, the parties appealed, doc. 122. The Circuit reversed in part and remanded the case for further proceedings. Doc. 136. Presently before the court are cross motions for partial summary judgment-NFI has moved on Pro Emu's breach of contract claims, doc. 140, and Pro Emu has moved on the issue of the royalty payments, doc. 146.[1] For the reasons stated below, the motions are due to be granted in part.

         I. SUMMARY JUDGMENT STANDARD

         Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is proper “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.” “Rule 56[] mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who 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.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (alteration in original). The moving party bears the initial burden of proving the absence of a genuine issue of material fact. Id. at 323. The burden then shifts to the nonmoving party, who is required to “go beyond the pleadings” to establish that there is a “genuine issue for trial.” Id. at 324 (citation and internal quotation marks omitted). A dispute about a material fact is genuine “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).

         The court must construe the evidence and all reasonable inferences arising from it in the light most favorable to the non-moving party. Adickes v. S. H. Kress & Co., 398 U.S. 144, 157 (1970); see also Anderson, 477 U.S. at 255 (all justifiable inferences must be drawn in the non-moving party's favor). Any factual disputes will be resolved in the non-moving party's favor when sufficient competent evidence supports the non-moving party's version of the disputed facts. See Pace v. Capobianco, 283 F.3d 1275, 1276, 1278 (11th Cir. 2002) (a court is not required to resolve disputes in the non-moving party's favor when that party's version of events is supported by insufficient evidence). However, “mere conclusions and unsupported factual allegations are legally insufficient to defeat a summary judgment motion.” Ellis v. England, 432 F.3d 1321, 1326 (11th Cir. 2005) (per curiam) (citing Bald Mountain Park, Ltd. v. Oliver, 863 F.2d 1560, 1563 (11th Cir. 1989)). Moreover, “[a] mere ‘scintilla' of evidence supporting the opposing party's position will not suffice; there must be enough of a showing that the jury could reasonably find for that party.” Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990) (citing Anderson, 477 U.S. at 252)).

         II. FACTUAL BACKGROUND[2]

         Pro Emu raises emus and sells oil and other emu related products. Doc. 116-1 at 3. NFI, which specializes in marketing health products, entered into a contract with Pro Emu in 2002 in which Pro Emu agreed to supply NFI with emu oil and NFI also agreed to pay royalties to Pro Emu on the sale of NFI's Blue Emu products. See doc. 116-5 at 10. The next year, the parties entered into a Sales, Marketing, and Operating Agreement (the “Agreement”), which superseded the initial 2002 agreement and outlined the terms and conditions of their joint venture. Doc. 107-4. Relevant here, the Agreement describes the termination procedure in the event of a default and the method for calculating the royalties NFI owed Pro Emu from the sales of jointly created emu oil based products. Doc. 107-4 at 4-5. In 2008, the parties executed a Fourth Amendment, which provided, in relevant part, that Pro Emu needed permission from NFI to sell its oil to third parties and that NFI only owed Pro Emu royalties from the sale of the Original Blue Emu product. Doc. 107-5. Finally, the Fourth Amendment extended the Agreement to December 31, 2015. Id.

         The parties' relationship began to deteriorate in 2011. That August, Pro Emu informed NFI that NFI had purportedly breached the Agreement by ordering an excessive amount of oil, failing to pay the full amount of royalties due, and improperly reducing the price per gallon of oil. Doc. 141-2 at 2-3. After NFI disputed this contention, see generally doc. 141-3, the parties continued with the status quo until March 2012, when Pro Emu informed NFI that it would be unable to fulfil NFI's order, and authorized NFI to procure oil from another source, doc.

         107-13 at 2. Pro Emu also informed NFI that it had filed a lawsuit in the Circuit Court of Jefferson County, Alabama against NFI. Id. at 3. NFI, in turn, informed Pro Emu that it would not pay royalties on sales of Blue Emu products because of Pro Emu's purported breach of its obligations under the Agreement. Doc. 146-14 at 2. NFI also filed its own lawsuit in the Eastern District of North Carolina alleging various breaches of contract and intellectual property claims. Doc. 146-12. In light of the dueling lawsuits, the parties ceased all communications, and in July, Pro Emu sold 19, 000 gallons of oil to LB Processors without informing NFI. Doc. 144-1 at 9, 13. NFI removed Pro Emu's lawsuit to this court, and this matter is back on remand from the Eleventh Circuit.

         III. ANALYSIS

         Based on the Eleventh Circuit's ruling, Pro Emu's only remaining breach of contract claims are based on NFI's purported failure to pay royalties on sales of Blue Emu for the full duration of the contract, including royalties for alleged off-the-book sales. Doc. 136 at 29. NFI contends that it is entitled to summary judgment on this claim because the Agreement terminated in September 2011, when Pro Emu informed NFI that it considered NFI in default, or, alternatively, in March 2012 when Pro Emu filed this lawsuit. See generally doc. 141 (Citing Section 4.2 of the Agreement). Pro Emu, in turn, disputes these contentions, and argues that, even with a default, the Agreement still required NFI to pay royalties through its duration. See generally doc. 146-1. As such, Pro Emu has moved for summary judgment on the royalties issue. The court addresses these contentions below, beginning with the termination of the Agreement.

         A. Whether the Contract was Terminated in Accordance with Section 4.2 of the Agreement

         Section 4.2 provides that either party may terminate the Agreement by providing a “termination notice” in the event of a default, a failure to make payments, or the passage of a regulation that makes it impossible for a party to do business.[3] Doc. 141-1 at 5. The Agreement does not require any specific language to evince the intent to terminate; rather, it only requires that the defaulting party receive notice of the default and an opportunity to cure. Id. The offending party has ninety (90) days to cure a default or thirty (30) days to make the payments.[4] Id. If the defaulting party fails to cure the defect, “th[e] Agreement shall terminate at the end of such period immediately without further notice.” Id. (emphasis added); see also id. at 6 (Section 5.2 of the Agreement which provides that “[i]f the Party in default has not cured such default within the time period specified in Section 4.3, the notifying party shall be entitled, in addition to any other rights it may have under this Agreement to terminate this Agreement as provided in said Section 4.3.”). In other words, based on a plain reading of the Agreement, after notice of a default, in the absence of an attempt to cure, the Agreement automatically terminates at the end of the relevant time period. Id. at 5.

         1. Alleged August ...


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