Sensormatic Sec. v. Sensormatic Electronics Corp., No. DKC 2002-1565.

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtChasanow
Citation249 F.Supp.2d 703
PartiesSENSORMATIC SECURITY CORPORATION v. SENSORMATIC ELECTRONICS CORPORATION, et al.
Docket NumberNo. DKC 2002-1565.
Decision Date28 March 2003

Page 703

249 F.Supp.2d 703
SENSORMATIC SECURITY CORPORATION
v.
SENSORMATIC ELECTRONICS CORPORATION, et al.
Civil Action No. DKC 2002-1565.
United States District Court, D. Maryland.
March 28, 2003.

Page 704

David J. Butler, Martin L. Zerwitz, Trade H. Yoon, Swidler Berlin Shereff Friedman, LLP, Washington, DC, Terence J. Lynam, Akin Gump Strauss Hauer and Feld, LLP, Washington, DC, for Sensormatic Security Corporation.

Stefan Alexander Hagerup, Terence J. Lynam, Akin Gump Strauss Hauer and Feld, Washington, DC, Anthony T. Pierce, Washington, DC, for Tyco International Ltd.

Terence J. Kyman, Akin Gump Strauss Hauer and Feld, Washington, DC, for Sensormatic Electronics Corporation.

Sean F. Murphy, John S. Jenkins, Jr., Nancy L. Werner, Stanley F. Wruble, III, McGuire Woods, LLP, McLean, VA, for Wallace Computer Services, Inc.

MEMORANDUM OPINION

CHASANOW, District Judge.


Presently pending in this franchise-related action are several motions to dismiss and cross motions for summary judgment. The issues are fully briefed, and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary.

I. Background

In the Second Amended Complaint, Sensormatic Security Corporation (SSC) brings claims against Sensormatic Electronics Corporation (Sensormatic), ADT Security Services, Inc. (ADT) and Wallace Computer Services (Wallace) for breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and tortious interference with contract. Sensormatic filed a counterclaim for declaratory judgment and unjust enrichment.

Plaintiff SSC, a franchisee of Sensormatic, claims an exclusive right to lease, sell, distribute, service, repair and maintain Sensormatic security and anti-theft equipment in Maryland, the District of Columbia, and Virginia. Sensormatic was acquired by Tyco International Ltd. (Tyco) in November 2001 and is now a whollyowned subsidiary of Tyco and is part of the Tyco Safety Products group, within Tyco's Fire and Security Services business unit. ADT is also a wholly-owned subsidiary of Tyco, within the Fire and Security Services business unit.

SSC has been a franchisee of Sensormatic since 1967. The Restated Franchise Agreement dated December 1, 1976, granting an exclusive franchise in Virginia, is attached as Exhibit 1 to the Second Amended Complaint. Exhibit 2 is a Restated Franchise Agreement dated December 1, 1976, between Sensormatic of Washington, Inc., a former affiliate of SSC, and Sensormatic, granting Sensormatic of Washington, Inc. an exclusive franchise territory in Maryland and the District of Columbia. In 1978, Sensormatic of Washington, Inc. merged into Sensormatic. Thus, Sensormatic claims the exclusive franchise in Maryland, Virginia, and the District of Columbia.

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SSC asserts that the Franchise Agreement grants it an exclusive franchise to lease, sell and/or otherwise distribute, and service, repair, and maintain Sensormatic's equipment and to use Sensormatic trademarks in connection with those activities. Section 9(c) of the Agreement prohibits the franchisor from competing with SSC in selling or leasing equipment in Plaintiffs territory and from granting "to any third party a franchise or any other right to sell, lease or service Equipment in [SSC's] territory."

The term "Equipment" is defined in the Franchise Agreement as "All Detection Devices, Tags, Accessories and Supplies." The term "Detection Devices", in turn, is defined as "the detection systems and devices presently being marketed by the Franchisor for Automatic Theft Detection Uses ... which include a transmitter and coordinated receiver and alarm console, and which may be installed and used as a system or device to activate and detect Tags, sounding an alarm or otherwise activating a control device, and all successors thereto." "Tags" are alleged to include "tags, labels, sensors, transponders and sensoremitters and the like, marketed by the Franchisor for Automatic Theft Detection Uses." SSC also claims entitlement to a commission of 40% of the gross revenues received by Sensormatic from the lease or sale of Detection Devices and Tags, and the right to install, service and repair and maintain the equipment in SSC's territory

According to the complaint, the only exception to SSC's exclusive right is Sensormatic's right to sell and lease equipment to National Accounts and to enter into service or maintenance contracts with National Account Customers regarding that equipment. A National Account is "any customer ... of the Franchisor or the Franchisee who or which has leased or purchased or may lease or purchase products for use in more than one state."

A settlement agreement on December 7, 1984 amended certain provisions and is attached to the Second Amended Complaint as Exhibit 3. Paragraph one of the agreement states, in part:

The Company agrees that the Company's Sensorgate System, and the present and future electro-magnetic product lines of the Company, of which the SensorGate System is a part, shall be included within the franchise under the Franchise Agreement between the Company and the Franchisee for Automatic Theft Detection Uses (as defined in the Franchise Agreement), and in that connection shall be included within the meaning of Detection Devices, Tags, Accessories, Supplies and Equipment (as defined in the Franchise Agreement), as the case may be.

Paragraph two reads, in part:

The Company agrees that the Company's SensorVision (CCTV) System, and the Company's present and future CCTV product lines of which the SensorVision System is a part, shall be included within the franchise under the Franchise Agreement, for Automatic Theft Detection Uses (as defined in the Franchise Agreement), as well as for surveillance in other common areas of customers for the Company's Equipment for Automatic Theft Detection Uses, and in that connection shall be included within the meaning of Detection Devices, Accessories, Supplies and Equipment (as defined in the Franchise Agreement), as the case may be.

A Letter of Understanding dated December 7, 1984 is exhibit 4. With regard to National Sales, the letter states:

Sensormatic agrees that the Franchisee will be informed of sales calls to be made by Sensormatic representatives to

Page 706

accounts (including national accounts) in the the [sic] Franchisee's territory. The Franchisee's representative will be invited to go along on the sales call, unless the customer objects; if so, then on a best efforts basis, Sensormatic will try to persuade the customer to allow the attendance of the Franchisee's representative on the sales call. If, at the customer's insistence, a specific individual representing the Franchisee is not allowed to attend, if feasible, Sensormatic will attempt to persuade the customer to allow a different representative from the Franchisee to attend the sales call. If for any reason a sales call is made by Sensormatic in the Franchisee territory without a representative of the Franchisee in attendance, Sensormatic will promptly report the substance and results of such sales call to the Franchisee.

On February 11, 1997, Wallace entered into a licensing agreement with Sensormatic by which Wallace has the right to use Sensormatic trademarks to manufacture and sell Ultra-Max labels. SSC asserts that the Ultra-Max labels are "tags" as defined in its franchise agreements.

The complaint goes on to allege that Sensormatic used Intelligent Marketing as its manufacturer's representative in the mid-Atlantic territory for several years and, through that company, has authorized between 20 and 40 distributors and dealers to sell and service Sensormatic Equipment to customers within SSC's exclusive territory.

On November 13, 2001, Tyco acquired Sensormatic. Sensormatic was merged into Tyco Acquisition Corp (TAC), a wholly-owned subsidiary of Tyco. TAC then changed its name to Sensormatic Electronics Corporation. Tyco has divided the company's operations among other Tyco entities. Sensormatic sells equipment to ADT, which then sells and leases equipment through its sales force, including to customers allegedly in Plaintiffs territory.

The Second Amended Complaint contains seven counts: Count I alleges breach of contract by Sensormatic by authorizing third parties to sell and service within SSC's territory; Count II alleges breach of contract against Sensormatic for failure to pay commissions; Count III alleges breach of contract against Sensormatic for failure to provide documentation; Count IV is a breach of contract claim and breach of covenant of good faith and fair dealing against Sensormatic regarding replacement parts; Count V is a claim for unjust enrichment against ADT; Count VI is a claim for tortious interference with contract against Wallace based on its contract with Sensormatic; and Count VII is a claim for tortious interference with contract against ADT due to its relationship with Sensormatic.

In Count I of its counterclaim, Sensormatic seeks a declaratory judgment that it has the right under the Franchise Agreement to terminate the Franchise Agreement on reasonable notice and that its letter of August 22, 2002, providing a minimum of six months notice constitutes reasonable notice. Count II is a claim for unjust enrichment asserting that it inadvertently paid commissions to SSC for CCTV products that are not sold for Automatic Theft Detection Uses.

II. Motions to Dismiss

A. Standard of Review

A motion to dismiss pursuant to Fed. R.Civ.P. 12(b)(6) ought not be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-^6, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). All that the Federal Rules of Civil Procedure require of a complaint is that it contain

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"`a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiffs claim is...

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13 practice notes
  • Avram v. Samsung Elecs. Am., Inc., Civ. No. 2:11-6973 (KM)
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • July 11, 2013
    ...for the defendant to retain the benefit without the payment of its value."'Sensormatic Sec. Corp. v. Sensormatic Electronics Corp., 249 F. Supp. 2d 703, 708 (D. Md. 2003) (quoting County Comm'rs v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 95 n. 7, 747 A.2d 600, 607 n. 7 (2000)). North C......
  • Willis v. Bank of Am. Corp., Civil Action No. ELH-13-02615
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • August 1, 2014
    ...the State of Maryland has conclusively resolved the choice of law issue. See Sensormatic Sec. Corp. v. Sensormatic Electronics Corp., 249 F. Supp. 2d 703, 707 (D. Md. 2003). However, under the Restatement (First) of Conflict of Laws § 453, the Restatement (Second) of Conflict of Laws § 221,......
  • Coastal Labs., Inc. v. Jolly, Civil Action No. RDB-20-2227
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • November 23, 2020
    ...of the contract by the third party; and (5) resulting damages to the plaintiff. Sensormatic Sec. Corp. v. Sensormatic Elecs. Corp. , 249 F. Supp. 2d 703, 710 (D. Md. 2003). Plaintiffs adequately allege this tort with their allegations that Plaintiffs had contracts with third-party nursing h......
  • Rico v. Green, Case No.: GJH-18-1949
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • March 30, 2021
    ...is merely to allege facts, not to allege evidence" (brackets in original) (quoting Sensormatic Sec. Corp. v. Sensormatic Elecs. Corp., 249 F. Supp. 2d 703, 710 (D. Md. 2003))). 24. Defendants argue that "Plaintiff's allegation of retaliation here fails because the Amended Complaint is devoi......
  • Request a trial to view additional results
13 cases
  • Avram v. Samsung Elecs. Am., Inc., Civ. No. 2:11-6973 (KM)
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • July 11, 2013
    ...for the defendant to retain the benefit without the payment of its value."'Sensormatic Sec. Corp. v. Sensormatic Electronics Corp., 249 F. Supp. 2d 703, 708 (D. Md. 2003) (quoting County Comm'rs v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 95 n. 7, 747 A.2d 600, 607 n. 7 (2000)). North C......
  • Willis v. Bank of Am. Corp., Civil Action No. ELH-13-02615
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • August 1, 2014
    ...the State of Maryland has conclusively resolved the choice of law issue. See Sensormatic Sec. Corp. v. Sensormatic Electronics Corp., 249 F. Supp. 2d 703, 707 (D. Md. 2003). However, under the Restatement (First) of Conflict of Laws § 453, the Restatement (Second) of Conflict of Laws § 221,......
  • Coastal Labs., Inc. v. Jolly, Civil Action No. RDB-20-2227
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • November 23, 2020
    ...of the contract by the third party; and (5) resulting damages to the plaintiff. Sensormatic Sec. Corp. v. Sensormatic Elecs. Corp. , 249 F. Supp. 2d 703, 710 (D. Md. 2003). Plaintiffs adequately allege this tort with their allegations that Plaintiffs had contracts with third-party nursing h......
  • Rico v. Green, Case No.: GJH-18-1949
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • March 30, 2021
    ...is merely to allege facts, not to allege evidence" (brackets in original) (quoting Sensormatic Sec. Corp. v. Sensormatic Elecs. Corp., 249 F. Supp. 2d 703, 710 (D. Md. 2003))). 24. Defendants argue that "Plaintiff's allegation of retaliation here fails because the Amended Complaint is devoi......
  • Request a trial to view additional results

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