Samsung C&T America, Inc. v. Tommy Bahama Group, Inc.

Background

In 2016, Tommy Bahama Group, Inc. and Tommy Bahama Global Sourcing Limited granted TB Footwear LLC an exclusive license to manufacture, advertise, sell, and distribute footwear bearing Tommy Bahama marks. GMI USA Corp. guaranteed TB Footwear’s performance under that license. Tommy Bahama, TB Footwear, and Samsung C&T America, Inc. later entered an Authorization Agreement allowing Samsung to finance manufacturing, purchase, import, sell, distribute, and invoice the licensed products based on orders submitted by TB Footwear.

The Authorization Agreement stated that Samsung’s activities had to be conducted “in accordance with the applicable terms of the License Agreement.” It also allowed Samsung, after termination of the license, to sell existing inventory during a 120-day “Sell-Off Period,” subject to specified notice and royalty requirements. Another provision stated that TB Footwear remained responsible for its duties under the License Agreement and that Samsung generally did not have to pay amounts owed by TB Footwear, except for earned royalties on certain sales during the Sell-Off Period.

Tommy Bahama terminated the License Agreement in July 2020. Tommy Bahama alleged that Samsung failed to pay required royalties, continued selling licensed products beyond the Sell-Off Period, sold products outside the authorized distribution channels, and breached other requirements before termination. Tommy Bahama asserted two breach-of-contract causes of action against Samsung and also brought claims against TB Footwear and GMI.

Motion and Legal Standard

Samsung moved under Federal Rule of Civil Procedure 12(c) for partial judgment on the pleadings. That motion uses the same standard as a motion to dismiss for failure to state a claim: the court accepts the counterclaims’ factual allegations as true and asks whether they plausibly state a claim for relief. Samsung also moved to sever Tommy Bahama’s claims against TB Footwear and GMI if the partial judgment motion were granted.

The Authorization Agreement selected New York law. Under that law, a breach-of-contract claim requires an agreement, adequate performance by the claimant, a breach by the defendant, and damages. The court explained that contract interpretation is ordinarily a legal question, but a claim based on a materially ambiguous contract term generally cannot be dismissed at the pleading stage.

Court’s Analysis

Incorporation of the License Agreement. Samsung argued that the Authorization Agreement did not bind it to most of the License Agreement’s requirements. Tommy Bahama argued that the Authorization Agreement incorporated those requirements by reference.

The court focused on Paragraph Three, which authorized Samsung to conduct specified activities “in accordance with the applicable terms of the License Agreement.” The court rejected Samsung’s argument that this language unambiguously applied only to orders submitted by TB Footwear, rather than to Samsung’s performance of the authorized activities. The comma separating the phrases weakened Samsung’s interpretation, and the court found that the language could reasonably be read to regulate Samsung’s conduct. The court therefore held that Paragraph Three was, at a minimum, ambiguous about whether Samsung was bound by the relevant terms of the License Agreement. Resolving the parties’ competing interpretations would require further litigation rather than dismissal on the pleadings.

Exculpation provision. Samsung argued that Paragraph Five protected it from liability except for royalties owed during the Sell-Off Period. The court agreed that the provision addressed amounts owed by TB Footwear and required Samsung to pay certain royalties on qualifying Sell-Off Period sales. But the provision did not address Samsung’s own alleged breaches of the License Agreement outside that period. Because the counterclaims concerned those alleged breaches, Paragraph Five did not require their partial dismissal.

Causation and the termination notice. Samsung argued that TB Footwear, rather than Samsung, caused Tommy Bahama’s alleged pre-termination damages. Samsung relied on Tommy Bahama’s termination notice, which stated that TB Footwear and GMI had not paid outstanding amounts and were in breach. The court questioned whether it could consider the notice on a pleading-stage motion because it was not clear that the document was integral to Tommy Bahama’s counterclaims. Even assuming the notice could be considered, the court found that it did not say Samsung was not also in breach and therefore did not contradict Tommy Bahama’s causation allegations.

Disposition

Judge John P. Cronan denied Samsung’s motion for partial judgment on the pleadings. The court also denied Samsung’s motion for severance as moot. The court continued the existing redacted and sealed treatment of the License Agreement until further order and directed the clerk to close the motion pending at Docket Number 39.

Classification note

This is a procedural order because the court ruled on a Rule 12(c) pleading-stage motion and did not finally decide whether Samsung breached the agreements or whether Tommy Bahama is entitled to damages.