Sally DeLorean v. DeLorean Motor Company ( 2019 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 18-3333
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SALLY DELOREAN, as administratrix for
The Estate of John Z. DeLorean
Appellant
v.
DELOREAN MOTOR COMPANY (Texas)
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On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 2-18-cv-08212)
District Judge: Honorable Jose L. Linares
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Submitted Under Third Circuit L.A.R. 34.1(a)
October 21, 2019
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Before: GREENAWAY, JR., PORTER, and COWEN, Circuit Judges.
(Opinion Filed: December 5, 2019)
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OPINION*
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GREENAWAY, JR., Circuit Judge.
This case requires that we interpret a Settlement Agreement entered into by Sally
DeLorean as administratrix of the Estate of John Z. DeLorean (the “Estate”) and
DeLorean Motor Company (Texas) (“DMC Texas”) in the action Estate of DeLorean v.
DeLorean Motor Company (Texas), No. 2:14-cv-1146 (D.N.J.). The question presented
is whether the Settlement Agreement precludes the Estate’s claims in this action. The
District Court found that it did, and the Estate appealed. For the following reasons, we
will affirm.
BACKGROUND
In the 1970s, John Z. DeLorean founded the DeLorean Motor Company (“DMC”).
DMC designed, manufactured, and sold an automobile named the DMC 12, which
featured gull-wing doors. DMC ceased operations in 1979 and was subsequently
dissolved through bankruptcy proceedings.
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
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A. The Universal Agreement
DMC may have gone defunct decades ago, but the DeLorean automobile remains
culturally relevant in large measure due to Universal Pictures’s popular “Back to the
Future” film series, which prominently features the DeLorean automobile. On March 14,
1989, Mr. DeLorean entered into an agreement with Universal (“the Universal
Agreement”). Under the Universal Agreement, Mr. DeLorean granted Universal certain
exclusive “rights in and to the name and appearance of the DeLorean automobile in order
to enable [Universal] to engage in certain merchandising and commercial tie-up activities
in connection with the [‘Back to the Future’ films].” App. 26. When he entered into this
contract, Mr. DeLorean represented that he was the sole owner of the rights in the
material granted under the contract. In consideration for these exclusive rights, Universal
agreed to pay Mr. DeLorean five percent of Universal’s “net receipts . . . from
merchandising and commercial tie-ups in connection with the [‘Back to the Future’
films].” App. 27. The contract states that it “shall bind and inure to the benefit of [Mr.
DeLorean’s] and [Universal’s] respective heirs, legal representatives, successors and
assigns.” App. 29.
Accordingly, upon Mr. DeLorean’s death in 2005, the Estate alleges that it
succeeded to the rights under the Universal Agreement. The Estate alleges that Universal
made some payments under the Universal Agreement but stopped doing so at a time
unknown to the Estate. The Estate further alleges that Mr. DeLorean did not have a copy
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of the Universal Agreement at the time of his death and that the Estate therefore could not
enforce Mr. DeLorean’s rights under it.
B. DMC Texas and the Settlement Agreement
In 1997, DMC Texas purchased many of the assets sold in DMC’s bankruptcy.
These included, inter alia: inventory, good will, trade names, and other tangible and
intangible assets. DMC Texas subsequently registered two trademarks: one of the
stylized “DeLorean” logo on the rear bumper of the car and one of the “DMC” logo on
the front grill. As of 2018, DMC Texas sold automobiles, automobile parts, clothing,
video game licenses, commercial licenses, and various other merchandise. It also
licensed its trademarks to various companies.
The Settlement Agreement provides, in relevant part, that DMC Texas will pay the
Estate the full amount of any claims asserted in the 2014 Action and that the Estate, in
exchange, would release and discharge all claims “that were sought, or could have been
sought, in the [2014 Action],” except for the obligations imposed upon DMC Texas by
the Settlement Agreement. App. 21–22. Specifically, DMC Texas agreed not to
participate willingly “in any legal proceeding against DMC Texas in the future in
connection with” DMC Texas’s use of the name “DeLorean Motor Company” or any of
the DeLorean Marks. App. 22. In addition, the Settlement Agreement acknowledged
DMC Texas’s “worldwide rights . . . to use, register, and enforce any of [sic] DeLorean
Marks for any and all goods and services, relating to automobile dealerships,
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automobiles, automobile parts and accessories, clothing, and promotional items.” Id. It
also provided that any disputes arising under it would be governed by New Jersey state
law. Notably, the Settlement Agreement did not reference the Universal Agreement.
C. Universal’s Failure to Pay Under the Universal Agreement
In discovery during the 2014 action, the Estate became aware of the Universal
Agreement. App. 7. In February 2018, the Estate contacted Universal to determine the
amount of royalties that Universal owed to the Estate under the Universal Agreement.
The Estate claims that Universal represented that DMC Texas had indicated that it
possessed the rights under the Universal Agreement and that the overdue royalty
payments were remitted to DMC Texas instead of the Estate. The Estate alleges that in
April 2018, counsel for DMC Texas threatened to bring a lawsuit against the Estate for
tortious interference unless the Estate immediately retracted its request that Universal
make royalty payments to the Estate under the Universal Agreement.
D. The District Court Decision
The Estate then commenced this action seeking: (1) a declaratory judgment that
the Settlement Agreement does not grant DMC Texas any rights under the Universal
Agreement and (2) an order directing DMC Texas to account for and pay to the Estate all
money it had received from Universal under the Universal Agreement. DMC Texas
moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The Estate
opposed that motion and filed a cross-motion for summary judgment.
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The District Court enforced the Settlement Agreement and found that dismissal
was warranted. The District Court explained that the main issue before it was “whether
the materials licensed in the Universal Agreement were included in the Settlement
Agreement, thereby barring Plaintiff from asserting a claim under the Universal
Agreement as a matter of law.” App. 9. The District Court first found that both
agreements covered the same subject matter. The District Court then found that the
context of the agreements indicated that the Estate’s claims to the royalties under the
Universal Agreement were incorporated into the Settlement Agreement and therefore
barred by the Settlement Agreement. The Estate timely appealed.
DISCUSSION
A. Jurisdiction and Standard Review
The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We have
jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review over a decision to
grant a motion to dismiss. Delaware Nation v. Pennsylvania, 446 F.3d 410, 415 (3d Cir.
2006).
B. Legal Standard
“[I]n deciding a motion to dismiss, all well-pleaded allegations of the complaint
must be taken as true and interpreted in the light most favorable to the plaintiffs, and all
inferences must be drawn in favor of them.” McTernan v. City of York, 577 F.3d 521,
526 (3d Cir. 2009) (citation omitted). To withstand a Rule 12(b)(6) motion to dismiss, a
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complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
C. Analysis
The Estate makes several arguments on appeal asserting why the District Court
should have found that DMC Texas did not have authority to enforce the Universal
Agreement in its own name. None of these arguments is availing, however, because the
Settlement Agreement barred the Estate from suing DMC Texas for the conduct it
engaged in here.
In accordance with the terms of the Settlement Agreement under which this
dispute arises, we apply New Jersey contract law. Neither party argues that the
Settlement Agreement was entered into involuntarily; therefore, we “enforce the
agreement as a binding contract voluntarily entered by both parties.” D.R. by M.R. v. E.
Brunswick Bd. of Educ., 109 F.3d 896, 901 (3d Cir. 1997). New Jersey law requires that
we “enforce contracts as the parties intended,” which requires that we “examin[e] the
plain language of the contract, the surrounding circumstances, and the purpose of the
contract.” MacDonald v. CashCall, Inc., 883 F.3d 220, 228–29 (3d Cir. 2018).
The Settlement Agreement incorporates the subject matter of the Universal
Agreement. Indeed, the Settlement Agreement expressly states that the Estate agrees not
to sue DMC Texas for its use, registration, or enforcement of the DeLorean Marks “in
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conjunction with the automobile industry and associated business ventures, including
those associated with the DeLorean automobile . . . and related brand merchandising and
licensing associated or related to the business of [DMC Texas] and its associated brand.”
App. 22.
As the District Court explained, the subject matter of the Universal Agreement
clearly falls within the ambit of this clause in at least three ways. First, the marks
described in both agreements include the DMC logo and the stylized word DeLorean.
Second, both agreements cover these marks as they relate to the DeLorean automobile’s
image. Third, both agreements implicate the use of these marks in the context of
manufacturing and distributing products that display the DeLorean automobile’s image
and logo. Accordingly, we will affirm the District Court’s holding that the subject matter
of the Universal Agreement and the Settlement Agreement overlap.
The remaining question then is whether DMC Texas’s dealings with Universal fall
within its “worldwide rights . . . to use, register, and enforce” these marks in connection
with its business or brand. We find that it does. In addition to selling automobiles and
other products, DMC Texas’s business involves licensing its trademarks and rights to the
DeLorean automobile brand to other companies, such as Mattel, Inc., Target, and
Microsoft. Here, the demand that Universal pay DMC Texas for the use of marks for
which it has “worldwide rights” falls within its business of licensing and enforcing the
licenses to its marks and other intellectual property. The Estate insists that DMC Texas
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was not “using” its marks when it requested payments from Universal, but the Estate fails
to make any compelling argument why that conduct does not constitute enforcing DMC
Texas’s rights to the marks at issue, which is also expressly covered by the Settlement
Agreement.
The Estate’s argument that DMC Texas’s interference with the Estate’s contract
with Universal only occurred after the 2014 action and therefore could not be
contemplated by the Settlement Agreement is unavailing for two reasons. First, the
Settlement Agreement is not merely retrospective. Instead, it both resolves all claims that
were sought and could have been sought in the 2014 action and recognizes DMC Texas’s
rights to use these marks in the future. Those rights, as explained above, include the
enforcement of DMC Texas’s marks and licenses to those marks. Second, the Settlement
Agreement expressly carves out specific areas in which the Estate retains its right to
pursue legal action against DMC Texas—namely, any other use of the name DeLorean,
any aspect of John Z. DeLorean’s life, and any depiction of his likeness. That the
Universal Agreement is not mentioned in the Settlement Agreement suggests that the
parties did not intend to permit the Estate to be able to sue DMC Texas for attempting to
enforce its rights to the marks against other entities, including Universal. Accordingly,
we find that the Settlement Agreement shields DMC Texas from suit brought by the
Estate for the conduct at issue here.
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Because the Settlement Agreement bars the Estate from pursuing this action, we
do not have to determine whether the Estate assigned its rights under the Universal
Agreement to DMC Texas. Likewise, we do not reach DMC Texas’s alternative
arguments that (1) the Estate has no right to the intellectual property covered by the
Universal Agreement, and (2) judicial estoppel bars the Estate’s claims.
CONCLUSION
For the foregoing reasons, we will affirm the judgment of the District Court.
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