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

Background

In 2016, Tommy Bahama Group, Inc. and Tommy Bahama Global Sourcing Limited entered into a license agreement with TB Footwear LLC allowing TB Footwear to manufacture, advertise, sell, and distribute footwear bearing Tommy Bahama marks. GMI USA Corp. guaranteed TB Footwear’s obligations under that agreement.

Tommy Bahama, TB Footwear, and Samsung C&T America, Inc. later entered into an authorization agreement. That agreement authorized Samsung to finance, purchase, import, sell, distribute, and invoice licensed products to specified normal distribution channels based on TB Footwear’s orders. It also allowed Samsung, subject to stated conditions, to sell existing inventory for 120 days after termination of the license agreement.

Tommy Bahama terminated the license agreement on July 17, 2020, and notified Samsung. Tommy Bahama alleged that Samsung failed to pay royalties, sold inventory beyond the 120-day sell-off period, sold products to Tommy Bahama even though Tommy Bahama was not among the specified normal distribution channels, and violated other requirements before termination. Tommy Bahama asserted two breach-of-contract counterclaims against Samsung and brought related third-party 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. This procedure allows a party to seek judgment after the pleadings are closed but before trial. The court applied the same standard used for a motion to dismiss for failure to state a claim: it accepted the counterclaims’ factual allegations as true and asked whether they plausibly stated claims for relief.

The authorization agreement selected New York law. Under that law, a breach-of-contract claim requires an agreement, the plaintiff’s adequate performance, the defendant’s breach, and damages. The court also explained that a contract claim generally cannot be dismissed at the pleading stage when it depends on a materially ambiguous contract term.

Analysis

Incorporation of the license agreement. Samsung argued that the authorization agreement did not impose most of the license agreement’s obligations on Samsung. Tommy Bahama argued that the authorization agreement incorporated those obligations.

The court focused on Paragraph Three, which authorized Samsung to conduct specified activities “in accordance with the applicable terms of the License Agreement.” Samsung argued that this phrase applied only to orders submitted by TB Footwear, not to Samsung’s performance of the authorized activities. The court concluded that Samsung had not shown that its interpretation was unambiguously correct. The comma separating the phrase from “orders submitted by [TB Footwear]” supported a possible reading that the phrase applied more broadly. The court also found that the agreement’s differing language concerning the sell-off period did not resolve the issue.

Because Paragraph Three was at least ambiguous about whether Samsung was bound by the license agreement’s terms, the court declined to dismiss the counterclaims on this basis. The court stated that the parties’ competing interpretations would have to be resolved later in the litigation.

Exculpation argument. Samsung argued that Paragraph Five of the authorization agreement protected it from liability except for royalties owed on sales during the sell-off period. The court interpreted that paragraph as stating that TB Footwear remained responsible for its obligations under the license agreement and that Samsung generally did not have to pay amounts TB Footwear owed, with an exception for earned royalties on certain sell-off-period sales.

The court found that Paragraph Five did not address Samsung’s own alleged breaches of the license agreement outside the sell-off period. Because those were the claims Samsung sought to dismiss, the court rejected this argument.

Causation argument. Samsung argued that Tommy Bahama’s termination notice showed TB Footwear, rather than Samsung, caused any pre-termination damages. The court questioned whether it could consider the notice at the pleading stage because it was not clear that the counterclaims relied on it heavily enough for it to be treated as part of the pleadings.

Even assuming the notice could be considered, the court held that it did not require partial judgment for Samsung. Although the notice stated that Tommy Bahama viewed TB Footwear and GMI as having breached the license agreement, it did not state that Samsung had not breached the agreement. The notice therefore did not contradict Tommy Bahama’s allegations sufficiently to defeat them.

Disposition

The court denied Samsung’s motion for partial judgment on the pleadings. It also denied Samsung’s motion for severance as moot. The court continued the prior treatment of the unredacted license agreement as sealed and the redacted version as public, directed the clerk to close the pending motion, and struck the earlier opinion and order because this amended opinion and order superseded it.