Wildhawk Investments, LLC v. Brava I.P., LLC

• Citation: 27 F.4th 587
• Decision Date: 23 February 2022
• Docket Number: No. 21-2496,21-2496
• Parties: WILDHAWK INVESTMENTS, LLC, Plaintiff - Appellee v. BRAVA I.P., LLC ; Billibob Boor; Paragon Roof Systems, LLC, Defendants - Appellants Estate of Gerald E. Edson, Defendant Donna Murphy; Gerald Edson, Defendants
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

27 F.4th 587

WILDHAWK INVESTMENTS, LLC, Plaintiff - Appellee

v. BRAVA I.P., LLC ; Billibob Boor; Paragon Roof Systems, LLC, Defendants - AppellantsEstate of Gerald E. Edson, DefendantDonna Murphy; Gerald Edson, Defendants

No. 21-2496

United States Court of Appeals, Eighth Circuit.

Submitted: January 12, 2022

Filed: February 23, 2022

David Thomas Bower, Spencer S. Cady, Jeffrey D. Harty, Nyemaster & Goode, Des Moines, IA, for Plaintiff-Appellee.

John P. Fredrickson, Marriam Lin, Boyle & Fredrickson, Milwaukee, WI, R. Scott Johnson, Fredrikson & Byron, Des Moines, IA, for Defendants-Appellants.

Before SMITH, Chief Judge, WOLLMAN and ERICKSON, Circuit Judges.

ERICKSON, Circuit Judge.

Wildhawk Investments, LLC ("Wildhawk") initiated this breach of contract action against Brava I.P., LLC ("Brava I.P."), Paragon Roof Systems, LLC ("Paragon"), and Billibob Boor (collectively, "Paragon Defendants") for producing composite roofing shingles contrary to an exclusive license agreement. The district court entered a preliminary injunction prohibiting the Paragon Defendants from manufacturing or selling their products. The Paragon Defendants appeal, contending the district court misinterpreted the contract, erroneously rejected their equitable estoppel defense, and improperly found a threat of irreparable harm. We reverse and vacate the preliminary injunction.

I. BACKGROUND

Composite roof tiles are made with synthetic materials and imitate traditional barrel, shake, and slate shingles. Boor and Gerald Edson owned Brava I.P., through which they obtained patents, developed purported trade secrets, and gained technical knowledge related to the design and manufacture of composite roofing products.¹ Boor and Edson produced and sold composite shingles through a separate company, Brava Technologies, LLC, under the brand Brava Roof Tile.

Brava Roof Tile produces composite shingles in four styles: Brava Old World Spanish, Brava Shake, Brava Old World Slate, and Brava Slate. A unique colorization process allows Brava Roof Tile products to resemble their natural counterparts more closely than their competitors’ products. Boor and Edson created the designs and manufacturing techniques by using their experience in the composite roofing industry.

Wildhawk approached Boor and Edson about purchasing Brava Roof Tile. In July 2015, Boor sent an email to Wildhawk member Adam Brantman proposing "an exclusive license for manufacturing current roofing products." Boor specified that Wildhawk would "have a right of first refusal on all new product [d]evelopments." Brantman responded with a draft letter of intent reiterating that "Wildhawk would have a first right of refusal on new inventions and developments from Boor/Edson." Brantman characterized Wildhawk's offer as "what we believe is a fair price for the business as it exists today." Boor requested in another message, "Remove other compression mold products wording. This deal is for the four products only as discussed." Brantman sent back, "Agreed." The final nonbinding letter of intent, signed on July 14, 2015, included the first refusal language from the earlier draft.

On November 25, 2015, the parties executed asset purchase agreements and a license agreement. Wildhawk paid a total of almost $4 million for Brava Roof Tile's assets and for licenses to its patents, know-how, and intellectual property rights.

The license agreement granted Wildhawk "an exclusive, perpetual, license to use the Know-How in practicing the Patents or in the manufacturing of raw materials for the production of Licensed Products in accordance with the Manufacturing Guidelines and Conditions." Know-How included "all engineering, manufacturing data, formulas, designs, methods and processes, programs, listings, documentation and drawings, notes, flow charts, manuals, manufacturing aids, plans, technology, trade secrets, know-how, and other proprietary information licensed by Licensor and related to the Field of Use." Field of Use was defined as "the manufacture and sale of quality Roofing Shingles and the related accessories." Roofing Shingles meant "products used as roofing shingles and related materials and accessories including, as an example, the items shown in the list attached hereto as Exhibit A," which specifically identified the four existing Brava Roof Tile products. The agreement defined Licensed Products as "all quality Roofing Shingles and Related Materials products licensed for production herein or that, if unlicensed, would infringe or otherwise violate one or more claims of the Patents or utilizes the Know-How."

Moreover, the license agreement conferred on Wildhawk an automatic license to "any Improvements," defined as "improvements to the Technology, whether patentable or not, including any method, apparatus, design, component, system or device." Technology meant "the Patents and Know-How, collectively." Brava I.P., Boor, and Edson also warranted that the "Patents, Know-How and/or Intellectual Property Rights constitute all of the intellectual property used in or necessary to conduct the business of manufacturing and selling plastic roofing shingles as conducted and as currently planned to be conducted by Seller or any other entity owned and/or controlled by Seller."

A month before executing the license agreement, the parties agreed to remove a "New Product Applications" section due to requirements imposed by Wildhawk's lender. The deleted section read:

In the event that Licensor develops new products under its rights to the Technology, Licensee will have forty five (45) calendar days upon being informed of the new product by Licensor in which Licensee may choose to itself seek to purchase a license to the product prior to Licensor's entering into a binding agreement with a third party purchaser or licensee.

Boor and Wildhawk acknowledge that despite removal of that language, they entered into an oral handshake agreement for a right of first refusal at the time they signed the license agreement.

Wildhawk achieved success after the acquisition, growing Brava Roof Tile's gross annual sales from approximately $1 million to $13 million in four years. None of Wildhawk's members had previous experience in the composite roofing industry. As a result, Wildhawk retained Boor and Edson as paid consultants subject to initial 18-month noncompete agreements. Brantman referred to Boor as "the most important person in the organization."

In August 2016, Boor sent an email to Wildhawk that began with, "As per our handshake agreement, Gerald and I would like to let you know of, and offer your group first right of refusal on the below products." Among the proposed products was "Platinum Tile," a design for composite shingles that would later become known as Natura shake. Boor followed up several months later with an outline of a research and development deal structure for Natura shake that suggested "[d]esign and IP rights will remain under Billibob and Gerald ownership until" reaching a $1 million royalty cap. He also mentioned duplicating the deal for a Natura slate design.

On May 5, 2017, Boor, Edson, and Wildhawk entered into a confidentiality and nondisclosure agreement ("NDA") regarding "possible R&D ‘new or enhanced product’ agreements." The NDA stated in part:

As part of the [license agreement], it was agreed that Billibob Boor and Gerald Edson would give Recipient first right of refusal on all new R&D developments that they develop related to the composite roofing industry. This agreement was requested to be made a binding verbal agreement on or before November 2015, between Gerald Edson, Billibob Boor, and Wildhawk Investments LLC, due to restrictions on Recipients SBA financing requirements. Recipient understands that breaching this confidentiality agreement would be a breach of the [license agreement].

After signing the NDA, Wildhawk responded with a proposal to purchase the Natura shake design. Wildhawk offered an increased $1.5 million royalty cap and requested "a right of first refusal ... for all future profile/product developments." A Wildhawk member boasted that "if this deal yields the type of success that both parties anticipate, there would be no reason to think that this deal couldn't serve as a framework ... for subsequent deals including" additional composite shingle designs. The parties continued negotiations throughout late 2018 and early 2019 but failed to reach an agreement.

Boor and Edson formed Paragon in May 2019, while Boor was still employed as a consultant for Wildhawk. On August 18, 2019, Boor emailed Wildhawk with a final offer regarding the Natura designs. Boor stated that he and Edson had assessed what "we can make on our own over the next five years producing the materials ourselves while still owning the company and have settled on 10 million USD being the number for us to step away from that and to place the program in the hands of Wildhawk." The email concluded, "Time is of the essence. If we are going to work on a program and tie ourselves together [then] the time is now." Wildhawk never substantively responded to the offer.

In January 2020, Paragon began producing Natura products in barrel, shake, and slate styles. Ten months later, Wildhawk sued the Paragon Defendants in Iowa state court for breach of contract and other claims not relevant here. The Paragon Defendants removed the case to federal court. The district court granted Wildhawk's ensuing motion for a preliminary injunction and barred the Paragon Defendants from manufacturing or selling composite roofing products. This appeal followed.

II. DISCUSSION

We review the district court's grant of a preliminary injunction for abuse of discretion. Brakebill v. Jaeger, 932 F.3d 671, 676 (8th Cir. 2019). An abuse of discretion arises "when the district court relies on clearly erroneous factual findings or an error of law." Dixon v. City of St. Louis, 950 F.3d 1052, 1055 (8th Cir. 2020). The interpretation of a contract is a legal question reviewed ...