Conseal Int'l Inc. v. Neogen Corp.

• Decision Date: 21 September 2020
• Docket Number: Case No. 19-cv-61242-BLOOM/Valle
• Citation: 488 F.Supp.3d 1257
• Parties: CONSEAL INTERNATIONAL INCORPORATED, Plaintiff, v. NEOGEN CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Florida

488 F.Supp.3d 1257

CONSEAL INTERNATIONAL INCORPORATED, Plaintiff,

v.NEOGEN CORPORATION, Defendant.

Case No. 19-cv-61242-BLOOM/Valle

United States District Court, S.D. Florida.

Signed September 21, 2020

Entered September 22, 2020

Joshua David Martin, Johnson & Martin, P.A., Fort Lauderdale, FL, for Plaintiff.

Andrew W. Clark, Pro Hac Vice, Honigman LLP, J. Michael Huget, Pro Hac Vice, Honigman LLP, Ann Arbor, MI, Raechel Tyler Xara Conyers, Honigman LLP, Detroit, MI, for Defendant.

OMNIBUS ORDER

BETH BLOOM, UNITED STATES DISTRICT JUDGE

THIS CAUSE is before the Court upon Plaintiff ConSeal International Inc.’s ("Plaintiff") Motion for Summary Judgment on its Breach of Contract Claim (Count I), ECF Nos. [71] & [77] ("Plaintiff's Motion"), and Defendant Neogen Corporation's ("Defendant") Motion for Summary Judgment, ECF Nos. [69] & [81]¹ ("Defendant's Motion"), (collectively, the "Motions"). The Court has carefully reviewed the Motions, all opposing and supporting submissions, the record in this case, and the applicable law, and is otherwise fully advised. For the reasons set forth below, Plaintiff's Motion is denied and Defendant's Motion is denied.

I. BACKGROUND

Plaintiff initiated its breach of contract action against Defendant on May 16, 2019. ECF No. [1] ("Complaint"). The Complaint asserts five Counts: Count I – Breach of Contract; Count II – Open Account; Count III – Account Stated; Count IV – Promissory Estoppel; and Count V – Unjust Enrichment. See generally id. On July 9, 2019, Defendant filed its Answer and Affirmative Defenses to Plaintiff's Complaint, ECF No. [11] ("Answer"), which asserted seven affirmative defenses: (1) the License Agreement, ECF No. [80-2] ("Agreement" or "License Agreement"), is not enforceable against Defendant because it is not a party to the Agreement nor was it ever properly assigned to Defendant; (2) Preserve, Inc. ("Preserve") is the Licensee and counter-party to the License Agreement, not Defendant; (3) the License Agreement is illusory and unenforceable because it fails to fix a price term and therefore lacks a meeting of the minds; (4) Plaintiff's claims are barred due to its failure to set commercially reasonable price terms in good faith; (5) Plaintiff's claims are barred because it failed to mitigate its damages; (6) Plaintiff cannot recover any amount beyond its provable economic damages; and (7) recovery for the minimum purchase requirements under the License Agreement would amount to an unenforceable penalty against Defendant to pay liquidated damages. ECF No. [11].

Plaintiff has filed its Motion, ECF No. [77], along with its corresponding Statement of Material Facts, ECF No. [78] ("Plaintiff's SMF"). Defendant filed its Response in Opposition, ECF No. [97] ("Defendant's MSJ Response"), and its Response to Plaintiff's SMF, ECF No. [96] ("Defendant's SMF Response"). Plaintiff also filed a Reply, ECF No. [112] ("Plaintiff's MSJ Reply").

Defendant has filed its Motion, ECF No. [81], with its corresponding Statement of Material Facts in Support of its Motion, ECF No. [80] ("Defendant's SMF"). Plaintiff filed a response in opposition, ECF No. [99] ("Plaintiff's MSJ Response"), together with its Statement of Material Facts in Opposition, ECF No. [100] ("Plaintiff's SMF Response"). Finally, Defendant filed a Reply in Support of its Motion, ECF No. [111] ("Defendant's MSJ Reply"), and a Reply in Support of its Statement of Material Facts, ECF No. [103] ("Defendant's SMF Reply"). The Motions, accordingly, are ripe for consideration.

II. MATERIAL FACTS

Based on the parties’ statements of material facts in support of and in opposition to the Motions, along with the evidence in the record, the following facts are not genuinely in dispute unless otherwise noted.

Plaintiff is a specialty chemical private label manufacturer of multiple different products. ECF No. [78-1] ¶ 3. Around 2009, Preserve approached Plaintiff about selling one of Plaintiff's liquid chemical formulas containing a stabilized chlorine dioxide solution for use in livestock facilities for sanitizing and disinfecting. Id. ¶ 4; ECF No. [78-2] at 36:3-37:11. Through this arrangement, but without any formal written agreement, Plaintiff began selling the product to Preserve in 2009 for the marketing, distribution, and sale by Preserve as an EPA sub-registered product under the tradename "MaxKlor" ("MaxKlor" or "MaxKlor products"). ECF No. [78-1] ¶ 5; ECF No. [78-2] at 37:21-24, 42:16-43:2.

After several years, in late 2015, Plaintiff and Preserve entered into a formal written License Agreement, with an Effective Date of May 20, 2015. Plaintiff, among other things, agreed to provide Preserve exclusivity to sell MaxKlor products in certain market segments and, in exchange, Preserve agreed to make minimum purchase requirements of MaxKlor each year. ECF No. [80-2]. The Agreement's initial term was through December 31, 2019. Id. § 10.

On May 1, 2016, Defendant acquired all of Preserve's stock. ECF No. [78-4]. Jason Lilly ("Lilly"), Defendant's Vice President of Corporate Development at the time, had reached out to Steve Perry ("Perry"), Plaintiff's President, prior to the acquisition in April 2016 to discuss the License Agreement and MaxKlor. See ECF No. [78-1]; ECF No. [78-5] at 2.

Immediately after the acquisition, on May 2, 2016, Lilly sent an e-mail to Plaintiff informing it of Defendant's acquisition of Preserve. ECF No. [78-5]. Lilly also indicated in his e-mail that "we do believe there is much we can do together, both with MaxKlor and future developments" and that he would be sending Plaintiff a consent letter "whereas you agree to continue to operate under the current agreement." Id. Shortly thereafter, Lilly sent the consent letter to Plaintiff as promised. ECF No. [78-4]. The consent form included the language "Consent for assignment of License Agreement" in the subject line, and in the body Defendant stated that, "As part of this transaction, it is our desire to transfer the Agreement between Conseal and Preserve to Neogen Corporation. It is our intent to continue to fulfill Preserve International's obligations in the agreement." Id.

As Plaintiff's COO Donna Gilmore ("Gilmore") explained in the e-mail, Plaintiff did not sign that particular consent form because it contained incorrect information, but the parties continued to discuss the possibility of consenting to the assignment in the same e-mail thread. ECF No. [78-9]; ECF No. [78-7]. Plaintiff contends that it provided written permission for a transfer of the Agreement from Preserve to Defendant later in that same e-mail chain after a discussion between Gilmore and Lilly. Specifically, on May 10, 2016, Gilmore, in discussing why Plaintiff could not sign the consent form, stated that "now might be a good time to discuss a revised License Agreement directly between ConSeal and Neogen." ECF No. [78-7]. Lilly responded that "We can do this, however, as Preserve is a current entity and the license between Preserve and Conseal is still valid, we can maintain the current agreement, I was simply trying to clean things up. As stated, we have no issue with the requirements of Agreemen [sic]." Id. Gilmore responded, "Great, we can continue on under the current agreement." Id. By making that statement, Plaintiff understood that Lilly was referring to Defendant taking the place of Preserve under the current Agreement, and that Gilmore was agreeing that the parties could operate pursuant to the current Agreement rather than entering into a revised Agreement. ECF No. [78-2] at 140:18-144:8, 147:13-20. Gilmore testified that she intended her response to Lilly as confirmation that it was acceptable for Defendant to continue on under the current Agreement in Preserve's place. Id. In that same email chain, on May 17, 2020, Lilly followed up with Gilmore about the confirmation, asking, "You are comfortable working under the current agreement – yes?" ECF No. [78-7]. Gilmore responded "yes." Id. ; ECF No. [78-2] at 149:21-150:11. However, there is no formal executed license agreement between the parties. ECF No. [80-3] at 148: 22–25.

Plaintiff explains that Defendant then began taking certain actions pursuant to the Agreement, such as sending Plaintiff its purchase orders for MaxKlor and listing itself in the contact information, ECF No. [78-16]; making payments to Plaintiff for MaxKlor orders from Defendant's bank account, ECF No. [78-17]; preparing "MaxKlor Receiving Reports" to reflect its receipt of orders of MaxKlor products, ECF No. [78-12]; depositing all revenue from MaxKlor sales into Defendant's bank accounts, ECF No. [78-13]; listing MaxKlor for sale on its website and in its product catalogs, ECF Nos. [78-14] & [78-15]; and sending all e-mails to Plaintiff from Defendant's email addresses with Defendant's signature blocks. Defendant also filed a U.S. Trademark Application for the MAXKLOR trademark on May 16, 2016, days after Plaintiff agreed to the transfer of the Agreement, which eventually registered as U.S. Trademark Registration No. 5,114,133 on January 3, 2017. ECF No. [78-16]. Defendant owns that Registration and it represented in its application that it was using the MAXKLOR trademark. ECF No. [78-17]. Meanwhile, Preserve ceased operating its website and its employees became Defendant's employees. ECF No. [78-6] at 20:16-21:24.

After the acquisition, Preserve continued to exist as a separately incorporated and operating entity under Nevada law. Before the consent form was sent to Plaintiff, it inquired whether "things will remain functioning as ‘Preserve’? or change to Neogen?" ECF No. [80-4]. Lilly replied, "WE WILL REMAIN FUNCTIONING AS PRESERVE, BUT YOU WILL SEE NEOGEN AS THE ENTITY PAYING THE BILL." Id. Plaintiff acknowledged that arrangement in an email from Gilmore indicating that she "understood that it would continue as Preserve but the PO's and the payments are coming from Neogen. We are good with this as long as we have the proper paperwork in place." ECF No....