United States District Court, D. Utah
MRS. FIELDS FRANCHISING, LLC, a Delaware limited liability company, Plaintiff and Counterclaim-Defendant,
MFGPC, INC., a California corporation, Defendant and Counterclaim-Plaintiff, and MRS. FIELDS FAMOUS BRANDS, a Delaware limited liability company, d.b.a. Famous Brands International, Third-Party Defendant.
MEMORANDUM DECISION AND ORDER GRANTING MFGPC'S
MOTION FOR SUMMARY JUDGMENT
N. Parrish, United States District Court Judge.
the court are: (1) a Motion for Summary Judgment (ECF No. 99)
filed by Mrs. Fields Franchising, LLC and Mrs. Fields Famous
Brands, LLC (collectively, “Mrs. Fields”); (2) a
Motion for Leave to File Amended Complaint (ECF No. 101)
filed by MFGPC; (3) a Motion Under Rule 56(d) to Defer or
Deny Consideration of Defendants' Motion for Summary
Judgment (ECF No. 102) filed by MFGPC; (4) a Request for a
Status and Scheduling Conference (ECF No. 103) filed by
MFGPC; and (5) a Motion for Summary Judgment (ECF No. 120)
filed by MFGPC.
a contract case. MFGPC and Mrs. Fields entered into a
Licensing Agreement. MFGPC received a license to manufacture
and sell prepackaged popcorn bearing the “Mrs.
Fields” trademark. In exchange, Mrs. Fields received
royalties. The parties performed under the Agreement for over
eleventh year, Mrs. Fields purported to terminate the
Agreement, citing MFGPC's failure to pay a
“Guaranteed Royalty.” But MFGPC had paid the
Guaranteed Royalty in full, so MFGPC informed Mrs. Fields
that the termination was ineffective. Mrs. Fields never
responded and instead filed suit.
Fields' lawsuit sought a declaration that it had properly
terminated the Agreement. MFGPC asserted a counterclaim for
breach of contract. MFGPC alleged that Mrs. Fields'
attempted termination was without basis and therefore
constituted a repudiation of the Agreement.
Fields moved to dismiss the counterclaim, and the court
granted the motion. Because the court held that MFGPC failed
to state a claim for breach of contract, Mrs. Fields moved to
dismiss its complaint as moot. The court granted the motion
and dismissed Mrs. Fields' complaint.
appealed, arguing, among other things, that the court erred
when it dismissed the claim for breach of contract. The Tenth
Circuit agreed, reversing the dismissal of the claim for
breach of contract and remanding the case for further
proceedings. On remand, MFGPC's counterclaim for breach
of contract is the only remaining claim.
parties have moved for summary judgment. Mrs. Fields argues
that the undisputed facts establish that it properly
terminated the Agreement. MFGPC contends that the undisputed
facts establish the opposite: that the termination was
without basis and therefore constituted a repudiation of the
UNDISPUTED FACTS AND PROCEDURAL BACKGROUND
April 30, 2003, Mrs. Fields, through a predecessor entity,
entered into a Trademark Licensing Agreement with LHF, Inc.
Under the Agreement, LHF obtained a license to develop,
manufacture, package, distribute, and sell prepackaged
popcorn products bearing the “Mrs. Fields”
trademark. Christopher Lindley executed the Agreement on
behalf of LHF. On June 30, 2003, LHF assigned its right and
obligations under the Agreement to MFGPC-another entity owned
and operated by Mr. Lindley.
The Initial Term, the Guaranteed Royalty, and Running
Agreement provides for an “Initial Term” of five
years. The Initial Term began on April 30, 2003. At the end
of the Initial Term, the Agreement automatically renewed for
successive five-year terms if certain conditions were met.
These terms are called “Option Periods.”
the Initial Term, MFGPC was required to pay Mrs. Fields a
“Guaranteed Royalty.” Section 6(a) of the
Agreement defines the Guaranteed Royalty as four guaranteed
payments due at the end of the second, third, fourth, and
fifth years of the Initial Term. The schedule for payment of
the Guaranteed Royalty is as follows:
$100, 000 
the Initial Term and all Option Periods, MFGPC was required
to pay “Running Royalties.” Running Royalties are
“5% of Net Sales of Royalty Bearing
Products.” MFGPC was required to remit these
royalties to Mrs. Fields “on the last day of the month
following the end of each calendar quarter covered by the
7 provides that “[i]f [MFGPC] fails to generate
royalties sufficient to meet its Guaranteed Royalty as set
forth in Section 6(a) . . ., [Mrs. Fields] shall have the
option to receive additional Running Royalties from [MFGPC]
in the manner and in an amount equal to the Running Royalties
that would have been paid had [MFGPC] met its Guaranteed
Royalty, and if paid, [MFGPC] shall retain the exclusive
license described herein.”
noted above, at the end of the Initial Term, the Agreement
would automatically renew if certain conditions were met.
Specifically, Section 16(a) provides:
The initial term of this Agreement shall begin upon the
execution hereof and shall continue for a period of sixty
(60) months. So long as [MFGPC] is not in material default
and subject to Section 7, has met and/or paid Running
Royalties based on its Guaranteed Royalty as described in
paragraph 6(a) hereof, this Agreement would then
automatically renew for successive five year terms
(“Option Periods”) until such time as either
party terminates the Agreement upon no more [sic] than twenty
(20) days prior written notice to the other
parties agree that the Agreement automatically renewed at the
end of the Initial Term.
resolution of this lawsuit turns on the Agreement's
termination provisions. Section 16(b) of the Agreement
provides the only grounds on which either party could
terminate the Agreement. There are six paragraphs in Section
16(b). The first three are relevant here:
(i) If [MFGPC] defaults in the payment of any Running
Royalties then this Agreement and the license granted
hereunder may be terminated upon notice by [Mrs. Fields]
effective thirty (30) days after receipt of such notice,
without prejudice to any and all other rights and remedies
[Mrs. Fields] may have hereunder or by law provided, and all
rights of [MFGPC] hereunder shall cease.
(ii) If [MFGPC] fails to pay its Guaranteed Royalty as set
forth in paragraph 6(a) hereof, then, this Agreement and the
license granted hereunder may be terminated upon receipt of
such notice by [MFGPC], without prejudice to any and all
other rights and remedies [Mrs. Fields] may have hereunder or
by law provided, and all rights of [MFGPC] shall cease.
(iii) If [MFGPC] fails to perform in accordance with any
material term or condition of this Agreement (other than
described in paragraph 16(b)(i) and (ii) above) and such
default continues unremedied for thirty (30) days after the
date on which [MFGPC] receives written notice of default,
unless such remedy cannot be accomplished in such time period
and [MFGPC] has commenced diligent efforts within such time
period and continues such efforts until the remedy is
complete, then this Agreement may be terminated upon notice
by [Mrs. Fields], effective upon receipt of such notice,
without prejudice to any and all other rights and remedies
[Mrs. Fields] may have hereunder or by law provided.
summary, Section 16(b)(i) covers termination based on
MFGPC's failure to pay Running Royalties, Section
16(b)(ii) covers termination based on MFGPC's failure to
pay the Guaranteed Royalty, and Section 16(b)(iii) covers
termination based on MFGPC's failure to perform any other
“material term or condition” of the Agreement.
Notably, before Mrs. Fields could terminate the Agreement
under Section 16(b)(iii), it was required to give MFGPC
“written notice of default” and an opportunity to
The First Two Option Periods
paid the Guaranteed Royalty in full during the Initial Term.
In June 2008, at the end of the Initial Term, the Agreement
automatically renewed for a five-year Option Period that ran
from June 1, 2008 to April 30, 2013. The parties continued to
perform under the Agreement, and it automatically renewed for
another five-year Option Period in June 2013 that ran from
June 1, 2013 to April 30, 2018. Indeed, an employee from Mrs.
Fields sent MFGPC an email on June 21, 2013, in which the
employee wrote, “Your agreement just Auto-Renewed for
another 5 years.”
The Notice of Termination
December 22, 2014, counsel for Mrs. Fields, Avery Samet, sent
a letter to MFGPC. The letter states, in relevant part:
Our records indicate that MFGPC . . . has paid royalties of
merely $5, 206.22 since the fourth quarter of 2011 and no
payments whatsoever since the third quarter of 2012. Pursuant
to section 6(a) of the [Agreement], MFGPC was required to pay
[Mrs. Fields] a Guaranteed Royalty of $100, 000 a year.
Pursuant to Section 16 of the [Agreement], the Agreement
would not automatically renew at the conclusion of its
five-year term in 2012 if, among other things, MFGPC had
failed to remit its Guaranteed Royalty to [Mrs. Fields].
Because of MFGPC's failure to do so, the Agreement did
not renew, the license terminated and MFGPC lost any right to
use the Mrs. Fields mark or to represent itself as a licensee
of Mrs. Fields.
To the extent that MFGPC claims that the Agreement did renew,
notwithstanding the failure to pay Guaranteed Royalties, the
Agreement is hereby terminated pursuant to Section 16(b)(ii)
for MFGPC's failure to pay Guaranteed Royalties for
periods beyond July 2012.
letter was inaccurate for a number of reasons.
First, there was no requirement that MFGPC pay
“a Guaranteed Royalty of $100, 000 a year.” The
Guaranteed Royalty is defined as four payments that MFGPC was
required to make during the Initial Term. Second,
the second Option Period ended in 2013, not 2012.
Third, the Agreement did automatically
renew at the end of the second Option Period, and MFGPC
therefore retained a license to manufacture and sell
“Mrs. Fields” branded popcorn. Fourth,
the Agreement could not be terminated “pursuant to
Section 16(b)(ii) [based on] MFGPC's failure to pay
Guaranteed Royalties, ” because MFGPC had paid the
Guaranteed Royalty in full.
January 19, 2015, counsel for MFGPC, Carolyn Dye, responded
to Mrs. Fields' termination letter. Ms. Dye explained
that the letter was inaccurate:
[Y]our letter is inaccurate because there is no requirement
of any Guaranteed Royalties beyond the initial term
. . .
The words “initial term” are defined in the
License as the first five years of the agreement. Following
that definition, Section 6(a) clearly provides that
Guaranteed Royalties were to be paid only during the
“Initial Term” and the payment schedule in
Section 6(a) follows that definition.
. . .
As of August 15, 2008, 100% of the . . . Guaranteed Royalty
due [Mrs. Fields] by MFGPC during the Initial Term had been
[paid] in full.
. . .
You also suggest in your letter that because MFGPC failed to
pay Guaranteed Royalties beyond July 2012, the License was
actually terminated at that time. Again, you misread the
contract. Nothing in Section 16 . . ., which discusses the
“Terms and Termination” aspects of the Agreement,
can be read to permit a termination on that basis. Because
Guaranteed Royalties were fully paid, the License
automatically renewed (and without any notice required for
renewal) every five years unless there has been a default of
another kind, and even in that event, there must be a
required notice and opportunity to cure pursuant to Section
also explained that Mrs. Fields could not terminate the
Agreement based on MFGPC's failure to pay Running
Royalties, even though Mrs. Fields had not attempted to do
so. She noted that, during the course of the parties'
relationship, Mrs. Fields had purchased prepackaged popcorn
from MFGPC and that, from time to time, the parties would
offset the amount Mrs. Fields owed for the popcorn against
the amount MFGPC owed in Running Royalties. Ms. Dye, in her
letter, explained that Mrs. Fields owed MFGPC $70, 222.60 for
popcorn and that MFGPC currently owed Mrs. Fields $43, 562.17
in Running Royalties. Accordingly, Ms. Dye notified Mrs.
Fields that MFGPC was owed the difference: $26, 660.43. Ms.
Dye requested a response on or before January 26, 2015 and