Bruce Kirby, Inc. v. Laserperformance (Europe) Ltd.

          ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR PARTIAL SUMMARY JUDGMENT

          Jeffrey Alker Meyer, United States District Judge.

         Plaintiff Global Sailing Ltd. has moved for partial summary judgment on the narrow question of whether defendants LaserPerformance (Europe) Ltd. and Quarter Moon, Inc. breached licensing agreements in the 2010s that their predecessors established in the 1980s. I agree with Global Sailing that defendants breached some aspects of those agreements, but I do not agree that the evidence supports summary judgment on each alleged breach that Global Sailing claims. So I will grant in part and deny in part Global Sailing's motion for summary judgment.

         Background

         This motion is the latest stage of a long-running dispute between the parties. Because I discuss this case's history at Bruce Kirby, Inc. v. LaserPerformance (Europe) Ltd., 2018 WL 3614117, at *1-*3 (D. Conn. 2018), and Bruce Kirby, Inc. v. LaserPerformance (Europe) Ltd., 2016 WL 4275576, at *1-*2 (D. Conn. 2016), I will address here only the facts pertinent to Global Sailing's motion, largely as laid out in the parties' Local Rule 56(a) statements.

         In 1969, Bruce Kirby designed the 13' 10½” Laser sailboat, a high-performance racing vessel. See Doc. #470-2 at 1 (¶ 1); Kirby, 2016 WL 4275576, at *1. Kirby does business through his Connecticut-based company, Bruce Kirby, Inc, and I refer to them together as the “Kirby Plaintiffs.” See Doc. #470-2 at 1-2 (¶ 2).

         To regulate Laser production, the Kirby Plaintiffs entered into a “Head Agreement” with various organizations that governed sailing. See Kirby, 2016 WL 4725576, at *1; Doc. #472 at 1 (¶ 1); see also Doc. #470-2 at 2-3 (¶ 6). The Head Agreement required any party to that agreement to obtain written permission from all other parties to the agreement before assigning any rights under the agreement. Doc. #472 at 1 (¶ 1). To actually produce Lasers, the Kirby Plaintiffs also entered into “Builder Agreements” with individual sailboat manufacturers. See Kirby, 2016 WL 4725576, at *1; see also Doc. #470-2 at 2-3 (¶ 6).

         This case is about two of those Builder Agreements. The Kirby Plaintiffs entered into the first agreement with Brook Shaw Motor Services in 1983. Doc. #470-2 at 3 (¶ 7). They entered into the second agreement with PY Small Boats, Inc. in 1989. Ibid. (¶ 9). United Kingdom-based defendant LaserPerformance has succeeded Brook Shaw's rights and obligations under the 1983 Agreement, and Rhode Island-based defendant Quarter Moon has done the same for PY under the 1989 Agreement. Id. at 2, 4 (¶¶ 4-5, 11-12). Ontario law governs the 1983 Agreement, and Connecticut law governs the 1989 Agreement. See Id. at 3-4 (¶¶ 8, 10).

         Both Builder Agreements had several common obligations. They required the builder licensees to pay royalties for the right to manufacture and market Lasers, to pay interest on overdue royalty payments, to maintain sales records of Lasers, and to make those records available for inspection. Id. at 6 (¶ 17). Both agreements provided that a failure to pay royalties on time would be a condition of default. Id. at 7 (¶ 20). Both agreements provided that the defaulting party could receive written notice of the defaulting event at the Kirby Plaintiffs' option. Id. at 8 (¶ 23).^[1] And both agreements required that the Kirby Plaintiffs could only assign their rights in the Laser design to an assignee who would enter into an agreement with the builder licensees with identical terms and conditions to the preexisting Builder Agreements. Doc. #472 at 1 (¶ 2).

         The agreements also had several notable distinctions. Each agreement had a different “no contest” clause preventing a licensee from challenging various intellectual property rights the Kirby Plaintiffs held. The 1989 Agreement provided that a builder defaults if “the Licensee contests in any manner whatsoever the right and interest of [the Kirby Plaintiffs] in and to the Licensed Design.” Doc. #470-2 at 9 (¶ 28). The 1983 Agreement, by contrast, provided that a builder defaults if it “contests in any manner whatsoever the validity of [the Kirby Plaintiffs'] exclusive and complete Copyright.” Id. at 10 (¶ 31). The 1983 Agreement stated that “Copyright” referred to “copyright and industrial design rights in” the Laser. See Doc. #228-11 at 4 (¶ 2.1).

         Aside from the “no contest” clauses, the 1983 Agreement also sought to protect the Kirby Plaintiffs' intellectual property by requiring that, after a termination of the agreement, a builder licensee must stop manufacturing Lasers and stop using the production tooling, moulds, and plugs associated with manufacturing Lasers. Doc. #470-2 at 12 (¶ 38). The 1983 Agreement also provided that, in the event the agreement was terminated, the licensee would “attempt in good faith to negotiate a sale to [the licensor], or to negotiate a sale to another [Laser licensee] all plugs, moulds, and tooling” owned by the licensee and related to manufacturing Lasers. Doc. #228-11 at 18 (¶ 10.8); see also Doc. #470-2 at 11-12 (¶ 37).^[2]

         In 2008, the Kirby Plaintiffs entered into a “Sale Agreement” with New Zealand-based Global Sailing. Doc. #470-2 at 4 (¶ 13). That agreement “was a valid contract that transferred all of [the Kirby Plaintiffs'] rights to G[lobal Sailing], including [the Kirby P]laintiffs' rights under the terms of the Head and Builder Agreements.” Kirby, 2016 WL 4275576, at *4. In January 2009, Global Sailing sent a letter to the builder licensees indicating that the Laser rights had been transferred from the Kirby Plaintiffs to Global Sailing, providing an updated address for royalty payments, and stating that matters would continue to be “business as usual” and that “[a]ll extant agreements with Kirby, Inc., including rights and obligations, have been assigned to Global Sailing.” Doc. #470-2 at 5 (¶ 16).

         After the sale, defendants continued selling Lasers. Id. at 7 (¶ 21). Uncontroverted evidence submitted by Global Sailing indicates that LaserPerformance sold Lasers at least until 2015, but does not distinguish when during 2015 those sales took place. See Doc. #414-6 at 20-44. Further uncontroverted sales records appear to show Laser sales in 2017 and 2018, and those records list an entity named “Quartermoon” at the top, alongside named “LP Topco, ” “SINA, ” “Full Moon Holdings Ltd., ” and “LaserPerformance NA.” See Id. at 45-48. Those records do not distinguish which entity sold which Lasers. Ibid. Defendants assert, without citing evidence, that they no longer sell Lasers. Doc. #470-2 at 7 (¶ 21).

         The parties agree, however, that defendants stopped paying royalties, Doc. #470-2 at 7 (¶ 22), and that defendants received notice of a claim that they owed royalties, id. at 8 (¶ 24).^[3]Global Sailing therefore argues that defendants' failure to pay royalties provides one basis for summary judgment that defendants have breached the Builder Agreements.

         The parties have also argued over the Builder Agreements' intellectual property provisions. Global Sailing and LaserPerformance agree that the 1983 Agreement has been terminated, id. at 11 (¶ 36), and that LaserPerformance has not participated in negotiations to sell back plugs, moulds, and tooling used for making Lasers. See Doc. #414-11 at 4-5 (¶¶ 53-55). Still, LaserPerformance denies that it has breached any obligations under the 1983 Agreement. Doc. #470-2 at 11-12 (¶ 37). LaserPerformance admits that it contests Kirby's rights in the Laser design, id. at 10-11 (¶ 33), but argues that it has not disputed any copyright in the design. Id. at 10 (¶ 32). Quarter Moon, for its part, maintains that there are no design rights in the Kirby sailboat. Id. at 11 (¶ 34).

         The parties' dispute landed on the federal docket in March 2013, when the Kirby Plaintiffs sued LaserPerformance, Quarter Moon, and several other defendants on numerous contract and trademark claims. See Doc. #1. Soon thereafter, Global Sailing entered the case as a defendant to LaserPerformance and Quarter Moon's counterclaims. See Doc. #40 at 20 (¶ 5). In 2015, Global Sailing argued (and submitted a sworn declaration maintaining) that because the Kirby Plaintiffs had not satisfied the Head Agreement and Builder Agreements' contractual condition that the Kirby Plaintiffs obtain consent from their counterparties before assigning their rights, it had no part in this case. See Doc. #222-1 at 3 (¶ 6); Doc. #472 at 2 (¶ 3). But I rejected this argument in August 2016, when I determined that the 2008 Sale Agreement had validly transferred the Kirby Plaintiffs' rights to Global Sailing. Kirby, 2016 WL 4275576, at *4.

         Only in May 2017 did Global Sailing move to assert contract claims against defendants. See Doc. #298. I denied this motion because Global Sailing had not diligently sought leave to amend, and because giving Global Sailing leave to do so would prejudice defendants. Doc. #312 at 1-3. Global Sailing then filed a new case to assert its contract claims against defendants, see Global Sailing Ltd. v. Rastegar, 17cv1178 (D. Conn. 2017), and I consolidated that case with this one, see Doc. #321.^[4] I then dismissed and granted summary judgment on many of the non-contract claims in July 2018. See Bruce Kirby, Inc. v. LaserPerformance (Europe) Ltd., 2018 WL 3614117 (D. Conn. 2018); Bruce Kirby, Inc. v. LaserPerformance (Europe) Ltd., 2018 WL 3614116 (D. Conn. 2018). In the wake of those decisions, Global Sailing has now moved for summary judgment as to whether LaserPerformance and Quarter Moon have breached their respective Builder Agreements. See Doc. #434 at 4. I agree with Global Sailing in part, and so will grant in part and deny in part its motion for summary judgment.

         Discussion

         The principles governing the Court's review of a motion for summary judgment are well established. Summary judgment may be granted only if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The Court must view the facts in the light most favorable to the party who opposes the motion for summary judgment and then decide if those facts would be enough-if eventually proved at trial-to allow a reasonable jury to decide the case in favor of the opposing party. My role at summary judgment is not to judge the credibility of witnesses or to resolve close contested issues but solely to decide if there are enough facts that remain in dispute to warrant a trial. See generally Tolan v. Cotton, 572 U.S. 650, 656-57 (2014) (per curiam); Benzemann v. Houslanger & Assocs., PLLC, 924 F.3d 73, 78 (2d Cir. 2019).

         Global Sailing has moved for summary judgment on the narrow question of whether each defendant breached its respective Builder Agreement. It has not moved for summary judgment on damages, and it views the precise extent of how any breach occurred as a question to be resolved in addressing damages. See Doc. #434 at 5 (“Each of these breaches . . . provide an independent basis for entry of summary judgment on the issue of liability. Put simply, GSL need only show one breach to prevail; here, it can show several.”).

         The parties agree that substantially similar law governs a breach of contract claim in Connecticut and Ontario. See Doc. #434 at 7; Doc. #470 at 4-11 (not challenging Global Sailing's claim that Connecticut and Ontario breach of contract claims are similar and noting that Connecticut and Ontario material breach standards resemble each other). I also agree. In Connecticut, a breach of contract claim requires that the parties form an agreement, the plaintiff performs as agreed, the defendant does not, and that nonperformance hurts the plaintiff. See Meyers v. Livingston, Alder, Pulda, Meiklejohn and Kelly, P.C., 311 Conn. 282, 291 (2014). “Under Ontario law, the elements of a claim for breach of contract are ‘the particulars of the alleged contract including its terms, the nature of the alleged breach, causation and damages that are alleged to have flowed from the breach.'” PPC Broadband, Inc. v. Transformix Engineering Inc., 2015 WL 339564, at *6 (N.D.N.Y. 2015) (quoting McCarthy Corp. PLC v. KPMG LLP, [2006] O.J. 1492, 2006 CanLII 11919, at ¶ 42 (Can. Ont. S.C.J.)).^[5]

         LaserPerformance and Quarter Moon have focused their opposition to summary judgment on two main lines of defense. First, they argue that Global Sailing brought suit too late under both Connecticut and Ontario law. Second, they argue that, regardless of timing, the Builder Agreements do not bind them. I address each objection in turn.

         Statute of limitations

         Defendants begin by arguing that Ontario and Connecticut's respective statutes of limitations for contract claims restrict Global Sailing's claims against LaserPerformance and Quarter Moon. See Doc. #470 at 1 n.1. Global Sailing objects on the ground that any failure of defendants to pay royalties is a continuing violation under both Connecticut and Ontario law, and so should reset the date from which the statutory clock runs to that of the most recent breach. See Doc. #471 at 10. I am unpersuaded by Global Sailing's argument.

         To begin with, Connecticut law has traditionally applied the continuing course of conduct doctrine to torts, and the Connecticut Supreme Court has not applied the doctrine to claims based on breach of contract. See St. Bernard Sch. of Montville v. Bank of Am., 312 Conn. 811, 834 n.11 (2014) (noting that “[a]lthough our Appellate Court has questioned the extent to which this doctrine applies outside of claims sounding in tort, we have no occasion to consider that question in the present case”). And in AT Engine Controls Ltd. v. Goodrich Pump & Engine Control Systems, Inc., 2014 WL 7270160 (D. Conn. 2014), aff'd, 637 Fed.Appx. 645 (2d Cir. 2016), I noted that even in the tort context, Connecticut courts require “a ‘special relationship' between the parties or . . . later wrongful acts.” Id. at *14-*15 ...