The Beanstalk Group, Inc. v. Am General Corp.

Decision Date30 March 2001
Docket NumberNo. 00 CV 0525 AS.,00 CV 0525 AS.
Citation143 F.Supp.2d 1020
PartiesTHE BEANSTALK GROUP, INC., Plaintiff, v. AM GENERAL CORPORATION and General Motors Corporation, Defendants.
CourtU.S. District Court — Northern District of Indiana

Thomas J. LaFountain, John D. LaDue, Joseph J. Jensen, Eric W. Seigel, Robert G. Devetski, South Bend, IN, for plaintiff.

Mark D. Boveri, Victoria L. Nilles, South Bend, IN, for defendant.

MEMORANDUM AND ORDER

ALLEN SHARP, District Judge.

This cause is before the Court on the Defendants' Motion to Dismiss all five counts of the Plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The Plaintiff responded with a Cross Motion for Partial Summary Judgment on Counts One and Two of the Complaint. The controversy between these parties arose out of a contract between the Plaintiff, The Beanstalk Group, Inc. ("Beanstalk"), and one of the Defendants, AM General, for the right to market the HUMMER trademark, owned by the Defendant. The Plaintiff claims that AM General and General Motors breached the contract when AM General sold the HUMMER name to General Motors. Briefs, responses, and replies have been submitted by the parties on all motions, and the issues are now ripe for ruling.

I. JURISDICTION

Jurisdiction is premised upon complete diversity of citizenship pursuant to 18 U.S.C. § 1332(a). The amount in controversy is alleged by the Plaintiff to be well in excess of the jurisdictional amount, $75,000.

II. RELEVANT FACTS

The Plaintiff, Beanstalk, is a New York corporation with its principal place of business in New York. Compl. at ¶ 1. It is engaged in the business of licensing trademarks and other intellectual properties on behalf of the owners. Id. at ¶ 6. The Defendant, AM General, is a Delaware Corporation with its principal place of business in South Bend, Indiana. Id. at ¶ 2. General Motors Corporation ("GM") is also a Delaware corporation, with its principal place of business located in Detroit, Michigan. Id. at ¶ 3.

AM General manufactures automobiles under various trade names, including the HUMMER title at issue in this litigation. Id. at ¶ 7. On February 6, 1997, Beanstalk entered into a Representation Agreement (the "Agreement") with AM General to market certain of its trademarked names. Id. at ¶ 8. Because the terms to this Agreement are central to resolving the dispute between these parties, the relevant portions are set forth in detail.

1. Definitions.

(a) "Property" shall mean the name, symbols, designs, logos, packaging, copyrights and trademarks of HUMMER, and such other trade names, trademarks, copyrights, logos and other ancillary rights relating thereto to the fullest extent that Owner has, or may hereafter obtain, title or right thereto.

Id. at 1.

(b) The term "License Agreement" as used in this Agreement shall be deemed to include any agreement or arrangement, whether in the form of a license or otherwise, granting merchandising or other rights in the Property.

2. Nature of Representation. Owner hereby engages Beanstalk, and Beanstalk accepts such engagement, to act as its sole and exclusive non-employee representative ... (i) for the purpose

of conceiving and establishing licensing programs in the Property, (ii) to seek out persons, firms or corporations to enter into License Agreements for use of the Property, and (iii) to solicit and negotiate agreements on the Owner's behalf with any person, firm or corporation in the Territory granting licenses to use the property and all trademarks, trade names, service marks, copyrights ... in connection with the manufacture, distribution, sale, advertising and promotion of any and all articles of merchandise or commerce, services, endorsements or any other form of exploitation of the business of the person, firm or corporation so licensed."

Id. at 2.

4. Compensation of Beanstalk.

(a). As complete and total compensation for Beanstalk's services hereunder, Beanstalk shall be entitled to receive thirty-five percent (35%) of the gross receipts or other compensation or the value of other consideration actually received on Owner's behalf (i) under any License Agreements entered into and executed and/or substantially negotiated prior to the date of termination or expiration of the Agreement ... and (ii) under any initial term, renewals, extensions or modifications of any such License during the term of this Agreement, and any renewal or extension thereof, whether prior to or after termination or expiration hereof ... Beanstalk's share of advances, guarantees, royalties, or other compensation under any License Agreement once fully executed, cannot be waived, modified or amended by Owner without Beanstalk's prior written consent.

Id. at 3.

6. Termination.

(a) The term of this Agreement shall be for a period beginning February 1, 1997 through December 31, 2000 ("the first period"), unless otherwise terminated pursuant to the provisions hereof.

(b) If this Agreement has not been terminated prior to the expiration of the first period, Beanstalk is not in default under any provision of this Agreement, and the total amount of minimum guarantees paid, due, and contracted for, plus all royalty overages, under License Agreements entered into pursuant to this Agreement during the first period exceeded $250,000 then this Agreement shall be automatically renewed for one two-year period.

Id. at 4.

7. Effect of Expiration or Termination. Upon expiration or in the event this Agreement is terminated for any reason whatsoever, neither party shall have any obligations to the other except as set forth in Paragraphs 4(a), 5 and 8 hereof.

Id. at 5.

11. Right of Owner to Use Property. Nothing in this Agreement shall be construed to limit the right of Owner to use the Property in connection with any commercial or other activity provided it does not conflict with the terms of this Agreement.

12. Right of Owner to Veto License Agreements. Owner shall have the absolute right to veto, without cause and at its sole discretion, any program, person, firm, corporation or proposed or negotiated license or License Agreement ...

Id. at 6.

14. Expenses.

(c) ... If Owner decides to discontinue marketing any of the titles which constitute the Property, Owner shall give Beanstalk ninety (90) days prior written notice of such intention. Upon receipt of such notice, Beanstalk agrees to cease all exploitation of that title.

Id. at 7.

The facts are not in dispute. AM General's Resp. in Opp. at 3; Pl.'s Reply at 1-2. Beanstalk performed successfully under the Agreement, negotiating approximately twenty-four License Agreements for the Property on the Defendant's behalf. Compl. at ¶ 14. The value of those agreements grew from $63,750 in 1997, to $438,841 in 1998, to $1,088,866 in 1999. Id. However, circumstances changed for AM General when it entered into a joint manufacturing venture with General Motors (GM) to produce a new version of the HUMMER vehicle. Id. at ¶ 17. The AM General/GM Agreement, provided that GM would (i) design, engineer, certify and release a new version of the HUMMER vehicle, (ii) lend AM General as much as $235,000, without interest, the proceeds of which are to be used for, among other things, the construction of a new factory; (iii) acquire an option on as much as forty percent of AM General's stock; and (iv) guarantee that it would purchase a minimum number of the new HUMMER vehicles. Id.

This agreement was a multi-faceted business transaction which included, as part of the transaction, the transfer of ownership of the HUMMER name, together with all incidents of ownership, to General Motors. Def.'s Resp. at 3-4. Initially, the Defendants sought to amend the representation agreement to specifically exclude from its definition of License Agreements any "agreements between [AM] and any individual for the purpose of producing motor vehicles or motor vehicle parts and accessories, even if rights in the Property are licensed, transferred, or otherwise involved in such agreements." Pl.'s Mem. in Supp. at 6, citing Def.'s letter dated February 16, 1999. Beanstalk refused to amend the Agreement. Id.

AM General and GM went forward with their plans for the new HUMMER vehicle, and on or about December 21, 1999, entered into an agreement under which AM General conveyed to GM ownership of the HUMMER trademark as part of the transaction. Id.; Def.'s Mem. in Supp. at 3. After entering this agreement, the Plaintiff alleges that AM General informed Beanstalk that Beanstalk would have to look to GM for any further dealings regarding the HUMMER trademark because AM General no longer owned the trademark. Pl.'s Mem. in Supp. at 6. GM then informed Beanstalk that it was canceling the Agreement, and that Beanstalk would receive no compensation with respect to any License Agreement entered into after December 31, 1999, or with respect to any renewal or extension of any existing License Agreements. Id.

On August 28, 2000, Beanstalk filed this action asserting claims against AM General and GM for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and tortious interference with a contract. The Defendants filed a motion to dismiss all counts for failure to state a claim upon which relief can be granted, and the Plaintiffs filed a cross-motion for summary judgment on claims one and two for breach of contract. The Court has carefully examined the contract and considered the submissions of the parties, and now rules as follows.

III. STANDARD OF REVIEW
A. Motion to Dismiss

The Defendants have moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. To succeed on a motion to dismiss under Rule 12(b)(6), the defendant must prove that even assuming the plaintiff's allegations are true, the complaint fails to state a claim upon which relief can be granted. In reviewing a motion to dismiss, the...

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