Insignia Systems, Inc. v. News Corporation

Background

Insignia and News are third-party providers of in-store promotion products and services sold to consumer-packaged-goods companies for placement in retail stores. Insignia’s complaint asserted federal and Minnesota antitrust claims, along with tortious-interference claims, based on allegations that News acquired and maintained a monopoly through exclusionary agreements with retailers and consumer-packaged-goods companies.

In 2004, Insignia brought an earlier antitrust action against News. After the first day of trial, the parties entered a settlement agreement on February 9, 2011. The agreement required News to pay Insignia $121 million, provided for a ten-year exclusive sales agreement concerning price signs in News’s retail network, addressed rights of first refusal and last refusal, and included mutual non-disparagement terms. It also released broad categories of claims and included a covenant under which Insignia agreed not to sue, introduce into evidence, or otherwise assert the released matters or the underlying facts or conduct supporting them.

News asserted a counterclaim alleging that Insignia breached the settlement agreement by including released allegations in its present complaint. After expedited discovery, News moved for summary judgment on the counterclaim, and Insignia moved for partial summary judgment.

Covenant Not to Sue

The court applied Minnesota law. It rejected Insignia’s interpretation that the covenant applied only to claims already extinguished by the release. The court held that the covenant’s reference to facts or conduct “underlying” and “supporting” the released matters identified facts and conduct that could not be reused in a future case. The covenant therefore operated prospectively and applied in any court, government body, or other proceeding.

The court distinguished a release from a covenant not to sue. A release gives up or extinguishes a right or claim and may be used as a defense. A covenant not to sue is an affirmative contractual promise not to enforce an existing claim and can itself be breached. The court therefore held that News had an actionable breach-of-contract counterclaim.

The court also held that the covenant did not bar general background information. It barred Insignia from asserting underlying facts or conduct that supported the released matters to prove its current claims. The court rejected Insignia’s arguments based on other litigation, finding those settlement agreements or rulings materially different from the agreement at issue here.

Allegations Found to Breach the Agreement

The court found that News demonstrated that Insignia’s current complaint reused facts and conduct from before the 2011 settlement that underlay and supported the released matters. The court specifically discussed alleged statements by News executives, allegations concerning News’s market power and exclusionary contracting practices, broad exclusivity provisions, staggered contract-renewal dates, rights of first refusal, and automatic contract rollovers.

The court found that the alleged executive “acknowledgements” in paragraphs 3, 31, 35, 42, and 43 rested exclusively on pre-2011 facts and conduct. It also found that other allegations concerning News’s acquisition and maintenance of market power, the effect of its retail network, exclusivity provisions, staggered renewal dates, and automatic rollovers were based on or repeated allegations and evidence from the earlier litigation. The court concluded that the pre-2011 facts and conduct were not merely contextual; they played a critical role in supporting Insignia’s current antitrust claims.

Remedy and Attorney Fees

News asked the court to dismiss Insignia’s complaint if News prevailed on the counterclaim. The court declined to dismiss the complaint and instead ordered Insignia to file an amended complaint within seven days, striking allegations that were clearly based on pre-2011 settlement conduct. The court noted that some issues, including whether certain exclusivity language could be tied to post-2011 facts and conduct, were better addressed at summary judgment after discovery was complete.

News also sought reimbursement of attorney fees and costs incurred in enforcing the covenant. The court held that request premature because factual questions remained about whether the parties intended such damages and whether Insignia breached the covenant in bad faith. The court did not award those fees or costs in this order.

Disposition

The court ordered that News’s motion for summary judgment on the counterclaim was GRANTED in part and DENIED in part. Insignia was ordered to file an amended complaint striking paragraph 2’s phrase “For over a decade”; the last sentence of paragraph 3; paragraph 5’s phrase “In the intervening decade since the antitrust litigation began”; the last sentence of paragraph 31; paragraphs 35, 42, and 43 in their entirety; and the last sentence of paragraph 40. The court DENIED Insignia’s motion for partial summary judgment.