Trient Partners I Ltd. v. Blockbuster Entertainment Corp.
| Decision Date | 10 May 1996 |
| Docket Number | No. 95-21011,95-21011 |
| Court | U.S. Court of Appeals — Fifth Circuit |
| Parties | TRIENT PARTNERS I LTD., Plaintiff-Counter-Defendant-Appellee, v. BLOCKBUSTER ENTERTAINMENT CORPORATION, et al., Defendants, Viacom Inc., Successor By Merger to Blockbuster Entertainment Corporation, Defendant-Counter Claimant-Appellant, and Blockbuster Videos, Inc; Blockbuster Entertainment, Inc., Defendants-Appellants. TRIENT PARTNERS I LTD., Plaintiff-Appellee, v. BLOCKBUSTER ENTERTAINMENT INC., Defendant-Appellant. |
David L. Burgert, Warren Wayne Harris, Amy Marlyse Wilson, Porter & Hedges, Houston, TX, Paul A. Renne, Cooley, Godward, Castro, Huddleson & Tatum, San Francisco, CA, for Trient Partners I Ltd.
Bruce R. Coulombe, Dubois & Joseph, Montgomery, TX, for Blockbuster Entertainment Corp., Blockbuster Videos, Inc., Blockbuster Entertainment, Inc. and Viacom, Inc.
Appeals from the United States District Court for the Southern District of Texas.
Before KING, WIENER and BENAVIDES, Circuit Judges.
When this appeal is reduced to its bare essentials and stripped of all hyperbole, technical terminology, and obfuscatory theorizing, it presents a straightforward exercise in the interpretation of the provisions of two contracts: the "Agreement for System License" (the License Agreement); and a commercial store space lease--actually forty-three separate retail store space leases (the Leases). As the licensee of Defendant-Appellant Blockbuster, 1 Plaintiff-Appellee Trient Partners I Ltd. (Trient) opened and operated forty-three Blockbuster "Superstores" at locations within licensed areas in the states of Oregon and Washington. The instant facet of this diversity jurisdiction litigation implicates Trient's decision to go out of the video rental and sales business altogether; specifically, to abandon or "terminate" the License Agreement, return or re-convey proprietary personal property to Blockbuster, and--here's the rub--sell or assign the Leases to the highest bidder, whether that be Blockbuster or one or more third parties. Insisting that it has the right to acquire the Leases, Blockbuster has managed, through its litigating tactics, to delay Trient's disposition of the Leases for months. The litigation between Trient and Blockbuster has other aspects, but the issues surrounding the sale or assignment of the Leases are all that is before us today.
We conclude that under the instant circumstances (1) Trient cannot be prevented from unilaterally terminating the License Agreement, and (2) Blockbuster cannot force Trient to convey the Leases to Blockbuster following Trient's unilateral termination of the License Agreement. Consequently, we affirm the district court's summary judgment and lift all judicial constraints on alienation of the Leases. Our ruling leaves Trient free to dispose of the Leases as it sees fit, subject, of course, to the rights of its lessors thereunder, who were neither made parties hereto nor intervened herein, and whose rights are in no manner affected by our judgment.
In 1987 Blockbuster granted the License Agreement to Trient's predecessor, James M. Grisebaum. Covering several geographical areas in the country, the License Agreement authorized Grisebaum or his successor to develop and operate Blockbuster Superstores in those areas for the rental and sale of videotapes. After obtaining Blockbuster's consent as required in the License Agreement, Grisebaum transferred it to Trient, a Texas Limited Partnership, the General Partner of which is a Texas corporation. The License Agreement specified that all matters arising thereunder would be governed by Texas law, and neither the parties nor the courts have questioned the applicability of Texas law thereto.
Over the course of the ensuing eight years, Trient successfully opened and operated forty-three Blockbuster Superstores in its licensed areas in or around Portland, Oregon, and Seattle, Washington. By 1995 Trient's Superstores were generating middle-eight-figures gross income.
Trient and Blockbuster first tangled judicially in 1994, after Blockbuster opened proprietary music stores in close proximity to a number of Trient's Superstore locations. Trient took umbrage with this move by Blockbuster largely because, in addition to audio disks and cassettes, the music stores sold blank and recorded videotapes, laser disks and video games. Contending that Blockbuster had violated non-competition provisions in the License Agreement, Trient sued Blockbuster in district court. In response, Blockbuster voluntarily ceased selling recorded videotapes from its music stores but continued to sell video games, video laser disks, and blank videotapes. Aspects of that litigation are ongoing.
Following these negative developments in the relationship between Trient and Blockbuster Apparently aware of provisions in the License Agreement that prohibit the transfer of the going business and the alienation of specified proprietary materials, computer programs, and the like without Blockbuster's consent, Trient nevertheless prepared to liquidate its unrestricted assets--among which it included the Leases--on the open market. In furtherance of this effort, Trient hired an investment banking firm to put together an offering or bid package and shop the package among potential purchasers. After Blockbuster received a copy of that package, it advised Trient that its Superstores could not be alienated without Blockbuster's consent, and that any attempt by Trient to transfer those stores would be met with opposition from Blockbuster. In response, Trient called to Blockbuster's attention the fact that the proposed disposition of assets would expressly exclude Trient's rights under the License Agreement, as well as the Superstores as operating businesses.
Trient decided in 1995 to exit the video rental and retail sales market altogether. The record contains no evidence that Trient was or is in default under either the License Agreement or the Leases, now or at any other times pertinent to this appeal
Again, the only assets of concern to us today are the forty-three Leases. On the one hand, Trient insists that it can terminate the License Agreement and thereafter dispose of all nonproprietary assets, including the Leases, to anyone it chooses, whether that be Blockbuster, competitors of Blockbuster, or non-competitive third parties. On the other hand, Blockbuster insists that some of the provisions of the License Agreement, as well as an express provision found in twenty-three of the forty-three Leases, prohibit Trient from selling or assigning the Leases on the open market and give Blockbuster the right to acquire them. 2
PROCEEDINGS
Trient filed this declaratory judgment action against Blockbuster in federal district court in Texas, seeking judicial recognition of Trient's right to (1) terminate the License Agreement unilaterally, even in the absence of a default by Blockbuster or other cause, and (2) proceed thereafter with its plan to sell its assets, principally the Leases. The case comes to us from a unique procedural history in the district court. The court signed an Order on November 30, 1995, allowing "the sale of Trient's assets clear from obligations to Blockbuster" to proceed as scheduled, with bids due to be received on December 8, 1995. On December 4, 1995, Blockbuster filed (1) a notice of appeal in that case, to which appeal this court assigned No. 95-21011; and (2) an emergency petition for a writ of mandamus, to which we assigned No. 95-21008. We denied the mandamus on December 13, 1995, but held other motions in abeyance so that Blockbuster could promptly file a motion in the district court for severance, and the district court could act expeditiously on such motion. The day after we took that action, Blockbuster filed a joint motion for severance in which it requested a ruling from the district court by or before December 20, 1995. The motion for severance included Blockbuster's motion for reconsideration based on newly discovered evidence.
Trient's bid deadline had been moved to January 5, 1996, so--after conducting a hearing on December 20, 1995--the district court, on the afternoon of January 4, 1996, rendered its opinion on limited remand and its order of severance. In response, Blockbuster amended its notice of appeal to include this ruling of January 4th. Blockbuster followed that with a motion asking this court for a stay pending appeal, and Trient filed a motion seeking expedited appeal. We granted both motions, and heard oral argument on March 5, 1996.
ANALYSIS
The aspect of this case that was severed by the district court was determined on summary judgment, which we will affirm only when we are "convinced, after an independent review of the record, that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." 6 Fact questions must be considered with deference to the non-movant; questions of law are reviewed de novo. 7
Our de novo review of legal questions includes the interpretation of contracts. 8 In its brief to this court,...
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