Stewart Cellars, LLC v. West Coast Wine Partners LLC
- Phyllis Hamilton
- 4:21-cv-02153
- U.S. District Court · Northern District of California
- 3
In Stewart Cellars v. West Coast Wine Partners, Judge Hamilton granted defendants’ motion to dismiss the rescission claim because alleged settlement breaches were not material.
Stewart Cellars LLC’s rescission claim was dismissed, while defendants West Coast Wine Partners LLC and Bacas Holdings, Ltd. obtained dismissal of that claim. Stewart Cellars was allowed to file another amended complaint within 28 days.
What happened
Stewart Cellars, LLC v. West Coast Wine Partners LLC concerned a settlement agreement resolving an earlier lawsuit between the parties. Stewart Cellars alleged that defendants violated the agreement in three ways involving a website page, a location-based landing page, and an employee’s LinkedIn page.
The court ruled that these alleged violations were not important enough to justify rescinding, or canceling, the settlement agreement. It also noted that Stewart Cellars waited nearly two years to notify defendants about the alleged violations. The court granted defendants’ motion to dismiss the rescission claim, granted their request for judicial notice of the settlement agreement, and allowed Stewart Cellars to file another amended complaint within 28 days.
Judge Phyllis J. Hamilton issued the October 8, 2021 order.
The detailed version
- Stewart Cellars, LLC v. West Coast Wine Partners LLC · No. 4:21-cv-02153
- Phyllis Hamilton
- Oct. 8, 2021
Background
Stewart Cellars sued West Coast Wine Partners LLC and Bacas Holdings, Ltd. The dispute followed an earlier lawsuit involving, among other claims, trademark infringement, false designation of origin, and unfair competition. The parties resolved that lawsuit through a settlement agreement dated September 4, 2018.
Stewart Cellars’ first cause of action sought rescission of the settlement agreement. The claim was based on three alleged violations: defendants’ use of a protected mark on a website’s “Contact Us” page, defendants’ failure to add a location-based landing page to a website, and use of one of the agreed-upon marks on an employee’s LinkedIn page.
Court’s Analysis
Under California law, rescission extinguishes a contract, ends further liability, and generally restores the parties to their former positions. A party may seek rescission when the consideration for its obligation fails because of the other party, or when that consideration fails in a material respect. A failure of consideration must be material—meaning it must go to the essence of the contract.
The court concluded that the settlement agreement covered the three alleged activities, but those provisions were part of a broader agreement containing more significant commitments and prohibitions concerning trademarks and designations, domain names, and wine-bottle labeling. Stewart Cellars did not adequately plead that the alleged violations were material enough to support rescission.
The court also observed that Stewart Cellars alleged the violations had continued since the settlement agreement was executed in September 2018, but did not notify defendants until August and September 2020. The court stated that, if the alleged violations were truly material, Stewart Cellars should have raised them sooner.
Disposition
The court granted defendants’ motion to dismiss Stewart Cellars’ rescission claim. The court also granted defendants’ request for judicial notice of the settlement agreement. The court extended the deadline and allowed Stewart Cellars to file a further amended complaint within 28 days from the date of the order. The opinion does not state that the entire case was dismissed.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.