655 Fed.Appx. 785 (11th Cir. 2016), 14-13485, Progressive Emu Inc. v. Nutrition & Fitness, Inc.

Docket Nº:14-13485
Citation:655 Fed.Appx. 785
Opinion Judge:JULIE CARNES, Circuit Judge:
Party Name:PROGRESSIVE EMU INC., f.k.a. Johnson EMU Inc., Plaintiff - Counter Defendant -Appellant Cross Appellee, v. NUTRITION & FITNESS, INC., Defendant - Counter Claimant - Appellee Cross Appellant
Attorney:For PROGRESSIVE EMU INC., f.k.a. Johnson EMU Inc., Plaintiff - Appellant-Cross Appellee: David B. Anderson, Marvis L. Jenkins, Deanna L. Weidner, Anderson Weidner, LLC, BIRMINGHAM, AL. For NUTRITION & FITNESS, INC., Defendant - Appellee-Cross Appellant: Charles A. Burke, Jacob S. Wharton, Womble ...
Judge Panel:Before JORDAN and JULIE CARNES, Circuit Judges, and ROBREÑ O,[*] District Judge.
Case Date:July 19, 2016
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 785

655 Fed.Appx. 785 (11th Cir. 2016)

PROGRESSIVE EMU INC., f.k.a. Johnson EMU Inc., Plaintiff - Counter Defendant -Appellant Cross Appellee,

v.

NUTRITION & FITNESS, INC., Defendant - Counter Claimant - Appellee Cross Appellant

No. 14-13485

United States Court of Appeals, Eleventh Circuit

July 19, 2016

DO NOT PUBLISH. (See Federal Rule of Appellate Procedure Rule 32.1)

Appeals from the United States District Court for the Northern District of Alabama. D.C. Docket No. 2:12-cv-01079-WMA.

For PROGRESSIVE EMU INC., f.k.a. Johnson EMU Inc., Plaintiff - Appellant-Cross Appellee: David B. Anderson, Marvis L. Jenkins, Deanna L. Weidner, Anderson Weidner, LLC, BIRMINGHAM, AL.

For NUTRITION & FITNESS, INC., Defendant - Appellee-Cross Appellant: Charles A. Burke, Jacob S. Wharton, Womble Carlyle Sandridge & Rice, PLLC, WINSTON-SALEM, NC; John David Collins, George G. Lynn, Maynard Cooper & Gale, PC, BIRMINGHAM, AL; Stephen N. Fitts, III, Hand Arendall, LLC, BIRMINGHAM, AL.

Before JORDAN and JULIE CARNES, Circuit Judges, and ROBREÑ O,[*] District Judge.

OPINION

JULIE CARNES, Circuit Judge:

Plaintiff Progressive Emu1 sued Defendant Nutrition & Fitness alleging various breach-of-contract claims. Defendant responded with a lawsuit of its own. After the district court held in a preliminary order that Plaintiff had no contractual rights to a disputed trademark, Plaintiff amended its complaint to assert that Defendant's registered trademark should be cancelled because it was procured by fraud. The district court disposed of all claims through summary judgment. The parties have now appealed several of the district court's rulings.

Plaintiff challenges the district court's grant of summary judgment in favor of Defendant on Plaintiff's multiple claims for royalties as well as its trademark-cancellation claim. Defendant appeals the district court's grant of summary judgment in favor of Plaintiff on Defendant's claim for overpayments. After careful review and with the benefit of oral argument, we affirm in part and reverse in part and remand for further proceedings.

I. BACKGROUND

Plaintiff, an Alabama corporation, raises and slaughters emus for their oil, which purportedly has various anti-inflammatory and soothing properties. Defendant, a North Carolina corporation, manufactures, markets, and distributes consumer health products. In 2000, Plaintiff began developing an emu-oil pain cream. Defendant was brought on board to introduce Plaintiff's cream to mass markets. Defendant placed its first order for " Super-Strength Blue Emu" with Plaintiff on May 3, 2002. That same day, Defendant filed an application with the United States Patent and Trademark Office (Trademark Office) for a trademark on the term " Blue Emu," 2 describing the product as a " topical ointment for use in relieving joint or muscle pain." 3

One week later, Plaintiff and Defendant executed an Operating Agreement Letter of Intent (Letter of Intent), according to which Defendant would purchase emu oil for its products exclusively from Plaintiff. Defendant also agreed to purchase 2.3 million units of emu-oil cream4 from Plaintiff and loan Plaintiff $250,000 to buy additional emu oil. In return, Plaintiff agreed to grant Defendant " exclusive worldwide distribution, marketing, and advertising rights" for any products containing Plaintiff's emu oil.5 The Letter of Intent also stipulated that the parties would " jointly own any current and future trademarks of products that contain [Plaintiff's] [e]mu [o]il."

A 2003 Sales, Marketing and Operating Agreement (the Agreement) between Plaintiff and Defendant expressly superseded their Letter of Intent and any other earlier contracts between the parties. The Agreement altered the parties' relationship in significant ways. First, Defendant agreed to place its orders for emu oil at least 30 days before a requested delivery date. Notwithstanding the notice requirement, Plaintiff agreed to " use its best efforts" to fulfill all orders " as quickly as reasonably possible." Furthermore, if Plaintiff was unable to satisfy any of Defendant's orders within 60 days of the order, Defendant could then purchase emu oil from a third party. However, as soon as Plaintiff became able to supply Defendant with oil and notified Defendant of the same, Defendant would lose its right to purchase oil from a third party. Defendant also agreed not to order more oil than would reasonably be needed for 60 days of production.

Second, rather than pay Plaintiff per unit of cream, Defendant would purchase emu oil from Plaintiff for $118.18 per gallon and pay Plaintiff a royalty of 8% of net revenue from Blue Emu sales and a royalty of 5% of net revenue from sales of any other products containing emu oil.

Third, either party could terminate the Agreement for cause if the other party (1) was in default (defined, in relevant part, as a failure to materially comply with any term in the Agreement) or (2) failed to make a payment due. Before termination could occur, the allegedly breaching party was to be given an opportunity to cure the breach.

Fourth, whereas the Letter of Intent contemplated joint ownership of all trademarks for products containing oil harvested from Plaintiff's birds, the Agreement was silent as to ownership. As for other intellectual property issues, the Agreement prevented Defendant from using Plaintiff's marks without Plaintiff's consent. And Defendant agreed that all of its products containing Plaintiff's oil would bear Plaintiff's trademark on its packaging. Finally, the Agreement clarified that Plaintiff and Defendant's relationship would be one of independent contractors.

The Agreement underwent two substantive amendments.[6] In 2004, the parties stipulated that Plaintiff could develop, market, and sell products containing emu oil " in markets other than the Mass. Retail Market." 7 A 2008 amendment, which the parties refer to as the " Fourth Amendment," worked four major changes to the Agreement. First, it established an escalating price scale for barrels of oil.8 Second, it prohibited Plaintiff from marketing, selling, or distributing emu fat or oil to third parties unless Plaintiff obtained Defendant's express consent, which was to be granted if Defendant could not use all of Plaintiff's available supply. Third, the Amendment released Defendant from its obligation to pay Plaintiff royalties for products other than " Original Blue Emu." Finally, it extended the Agreement's term to December 31, 2015.

The parties' relationship began to unravel in 2011, when the market price of emu oil spiked. Defendant allegedly insisted that it had the right to purchase more oil than it actually needed and to resell that excess oil for a profit on the open market. Plaintiff disagreed. Defendant then accused Plaintiff of selling oil to third parties in breach of the Agreement. On September 20, 2011, Defendant notified Plaintiff that Defendant " plan[ned] to purchase all the oil [Plaintiff] produce[d]. . . until further notice" and that any sale to a third party would constitute a breach of the Agreement. The relationship remained strained, yet Plaintiff filled all of Defendant's orders through February 2012.

In March 2012, Defendant sent Plaintiff four purchase orders requesting a total of nine barrels of oil. Plaintiff wrote to Defendant on March 28 that it could not satisfy Defendant's orders because it had no oil on hand and no birds ready to harvest. Plaintiff enclosed a copy of a complaint it had filed the day before in Alabama state court asserting various claims against Defendant.[9] On April 2 and 13, Defendant covered by purchasing oil from third parties. Defendant then sued Plaintiff in the Eastern District of North Carolina on April 11 and informed Plaintiff that it would suspend all payments and royalties and would hold these funds until the litigation concluded. Plaintiff's state-court action was removed to the Northern District of Alabama and consolidated with Defendant's suit, which was transferred to the Northern District of Alabama from the Eastern District of North Carolina.

In June 2012, Plaintiff slaughtered a number of its birds. Plaintiff did not notify Defendant of its renewed ability to fill Defendant's oil needs but instead sold the oil to a third party on July 16. Plaintiff then sold 19,000 pounds of emu fat to the same third party in August 2012. The parties had no contact outside of litigation after March 2012.

II. DISCUSSION

The parties have appealed various summary judgment rulings. We review a district court's grant of summary judgment de novo. Bank of Brewton v. Travelers Cos., 777 F.3d 1339, 1341 (11th Cir. 2015). In so doing, " we [construe] all evidence and draw all reasonable inferences in the light most favorable to the...

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