G.P.P., Inc. v. Guardian Prot. Prods., Inc.

Decision Date18 January 2017
Docket NumberCase No. 1:15-cv-00321-SKO
CourtU.S. District Court — Eastern District of California

(Docs. 92, 93, 98)

Before the Court are Defendant/Counterclaimant Guardian Protection Products, Inc.'s ("Guardian") Motion for Partial Summary Judgment as to the First Cause of Action in the Counterclaim for Declaratory Relief ("Guardian's Motion"), (Doc. 92), both Defendants' joint Motion for Partial Summary Judgment as to the Second Amended Complaint ("Defendants' Motion"), (Doc. 93), and Plaintiff/Counterdefendant G.P.P., Inc. d/b/a Guardian Innovative Solutions' ("GIS") Motion for Summary Judgment ("GIS's Motion"), (Doc. 98). For the reasons provided herein, the Court GRANTS IN PART and DENIES IN PART all three of these motions.


This action involves a dispute arising out of agreements in which GIS agreed to be the exclusive distributor for Guardian's products in certain geographic areas. GIS is "a Pennsylvania corporation based in Pitcairn, Pennsylvania . . . that, together with its predecessors, has been a warehousing distributor for Guardian for nearly three decades." (Doc. 98, Ex. 2, Joint Statement of Undisputed Facts ("JSOF") ¶ 1.) Guardian "was incorporated under the laws of the State of Delaware on January 14, 2000" and its "primary place of business is in Hickory, North Carolina." (Id. ¶¶ 5-6.) Defendant RPM Wood Finishes Group, Inc. ("RPM") "is a Nevada corporation with its primary place of business in Hickory, North Carolina." (Id. ¶ 7.)

A. Factual Background
1. The Agreements

"As of January 2013, GIS and Guardian were parties to nine valid [warehousing distributor agreements]" (collectively, the "Agreements"), "which grant GIS the exclusive right to distribute 'Guardian Products' in all or parts of eleven states and the District of Columbia covered by those various Agreements." (Id. ¶ 12.) The Agreements were initially executed between 1988 and 1998 by Guardian Protection Products, Inc. a "California corporation," with its "business address" in California. (See Doc. 120, Exs. 1-9.) That entity was incorporated under the laws of California in 1985, and was dissolved in 1999. (See Doc. 96, Decl. of Calvin Davis in Supp. of Defendants' Motion ("Davis Decl."), Exs. F & H.) Defendant/Counterclaimant Guardian became a party to the Agreements pursuant to an Agreement for the Purchase and Sale of Assets executed on February 1, 2000. (See Doc. 95, Decl. of Ronnie Holman in Supp. of Defendants' Motion ("HolmanDecl."), Exs. A & B; JSOF ¶ 11.) The Agreements provide that GIS currently has distribution rights to certain Guardian products in the following geographic areas: (1) certain counties in Pennsylvania (the "Pennsylvania Agreement"), (see Doc. 120, Ex. 1); (2) the remaining counties in Pennsylvania, Maryland, the District of Columbia, and certain counties in New York (the "Mid-Atlantic Agreement"), (id., Ex. 2); (3) Ohio (the "Ohio Agreement"), (id., Ex. 3); (4) Cook County in Illinois (the "Cook County Agreement"), (id., Ex. 4); (5) Indiana (the "Indiana Agreement"), (id., Ex. 5); (6) the remaining counties in Illinois, Iowa, and certain counties in Missouri (the "Midwest Agreement"), (id., Ex. 6); (7) Alabama (the "Alabama Agreement"), (id., Ex. 7); (8) Florida (the "Florida Agreement"), (id., Ex. 8); and (9) Tennessee (the "Tennessee Agreement"), (id., Ex. 9). All of the Agreements "are governed by California law." (JSOF ¶ 13.)

The Agreements provide that GIS "is . . . granted the right to represent itself as the Authorized Distributor for Guardian Labeled Products for the area(s) outlined . . . for the purpose of the promotion, solicitation and sale of Guardian Labeled Distributor Products within the . . . assigned area(s)." (Doc. 120, Ex. 1 ¶ 1; id., Ex. 2 ¶ 1; id., Ex. 3 ¶ 1; id., Ex. 4 ¶ 1; id., Ex. 5 ¶ 1; id., Ex. 6 ¶ 1; id., Ex. 7 ¶ 1; id., Ex. 8 ¶ 1; id., Ex. 9 ¶ 1.) The Agreements also provide the following "quota requirement":

The term of this Agreement is for the period of one (1) year beginning on the date of execution of this document. [GIS] shall be entitled to automatic renewals at the end of each anniversary of this Agreement for an indefinite period, provided only that within each twelve (12) months of said anniversary, [GIS] shall purchase [Guardian Labeled Distributor Products] in quantities equal to or more than that delineated on Addendum #1 which is attached hereto, including both the initial and monthly purchases up to and including the annual purchase requirement. In the event [GIS] fails to meet or exceed said purchase amount, [GIS] shall be notified that [it] is in violation of this Agreement and will be given sixty (60) days to effect compliance. In the event [GIS] fails to effect compliance within the sixty (60) day period, Guardian shall have the right to terminate this Agreement . . . .

(Id., Ex. 3 ¶ 5; id., Ex. 4 ¶ 5; id., Ex. 5 ¶ 5; id., Ex. 6 ¶ 5; id., Ex. 7 ¶ 5; id., Ex. 9 ¶ 5; see also id., Ex. 1 ¶ 5 (stating that the quota "quantities" are described in "paragraph two" and providing a ninety day period for GIS to cure); id., Ex. 2 ¶ 5 (stating that the quota "quantities" are "referenced in paragraph two . . . and delineated on Addendum #1"); id., Ex. 4 ¶ 5 (same); id., Ex. 8 ¶ 5(same).) The Florida, Alabama, and Tennessee Agreements include an attached "Addendum #1" describing a "monthly . . . purchase requirement." (Id., Ex. 7 at 11; id., Ex. 8 at 23; id., Ex. 9 at 11.)

With the exception of the Pennsylvania Agreement, the Agreements all provide the following description of "Guardian Labeled Distributor Products":

For the purposes of this Agreement, the term Guardian Labeled Distributor Products shall be construed to mean; Products that are produced or caused to be produced by [Guardian] which are identified as Guardian Products on the front panel of the product label. It is understood that unless specifically noted by a mutually agreed upon Addendum hereto, Guardian Labeled Distributor Products shall be only those items indicated on [a specific exhibit] which is attached hereto.

(Id., Ex. 2 ¶ 7(c); id., Ex. 3 ¶ 8; id., Ex. 4 ¶ 7(c); id., Ex. 5 ¶ 8; id., Ex. 6 ¶ 8; id., Ex. 7 ¶ 8; id., Ex. 8 ¶ 7(c); id., Ex. 9 ¶ 8.) The Pennsylvania Agreement, on the other hand, does not include any description of which products qualify as "Guardian Labeled Distributor Products." (See id., Ex. 1.)

The Florida and Mid-Atlantic Agreements include an attached exhibit that provides a list of products that qualify as "Guardian Labeled Distributor Products." (See id., Ex. 2 at 11-16; id., Ex. 8 at 11-16.) Unlike these two agreements, the Ohio, Cook County, Indiana, Midwest, Alabama, and Tennessee Agreements do not include a similar exhibit providing a list of products that qualify as "Guardian Labeled Distributor Products," or an addendum otherwise describing what constitutes these products. (See id., Exs. 3-7, 9.)

All of the Agreements also include the following non-compete provision:

As another and further consideration for the execution of this Agreement, [GIS] agrees that it will not compete with [Guardian] by selling competing products during the term of this [A]greement in its assigned area(s). "[C]ompeting products" mean products of comparable claims or qualities. Should [Guardian] develop new products and amend [a specified exhibit] to reflect said new products and prices, [GIS] agrees not to sell products which compete with said new products.

(Id., Ex. 1 ¶ 10; id., Ex. 2 ¶ 11; id., Ex. 3 ¶ 12; id., Ex. 4 ¶ 11; id., Ex. 5 ¶ 12; id., Ex. 6 ¶ 10; id., Ex. 7 ¶ 10; id., Ex. 8 ¶ 11; id., Ex. 9 ¶ 10.)

With the exception of the Pennsylvania Agreement, the Agreements each provide the following notice and cure provision:

Should either party be in material breach or non-compliance of any of the terms of this Agreement, the other party may terminate this Agreement by giving written notice of such breach or non-compliance and the right to correct the breach. If the breach is not corrected or compliance is not made within sixty (60) days of the date of such notice, this Agreement may be terminated at the end of said sixty (60) day period.

(Id., Ex. 2 ¶ 16; id., Ex. 3 ¶ 18; id., Ex. 4 ¶ 16; id., Ex. 5 ¶ 18; id., Ex. 6 ¶ 16; id., Ex. 7 ¶ 16; id., Ex. 8 ¶ 16; id., Ex. 9 ¶ 16.) The Pennsylvania Agreement does not include a similar provision. (See id., Ex. 1.)

2. The Purported Breach and Termination of the Florida, Alabama, and Tennessee Agreements

On August 19, 2013, a representative of Guardian sent letters to GIS with a subject line that states "[s]ales [q]uotas." (Doc. 124, Decl. of Dylan J. Liddiard in Supp. of GIS's Motion ("Liddiard Decl."), Exs. P-R.) In these letters, Guardian states that "[a] review of [its] sales records for the months of June and July indicate that [GIS] ha[s] failed to meet [its] quota for" Florida, Alabama, and Tennessee "pursuant to [these Agreements]." (Id.) The letters further compare GIS's "purchases," as compared to the "quota[s]." (Id.) Guardian states that the letter is a "notice of that breach" and "demand[s] that the breach be cured in sixty (60) days as required by the [Agreements]." (Id.) Finally, the letters provide that "[f]ailure to cure the breach of the sales quota requirements will result in termination of the agreement and of [GIS's] distribution rights for the territory." (Id.)

On October 23, 2013, a representative of Guardian sent three additional letters to GIS. (Doc. 67, Exs. 12-14.) In these letters, Guardian states that "[t]he cure period has now expired and the breach has not been remedied." (Id.) As such, Guardian states that it "is exercising its right to terminate [GIS's] distribution...

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