TOWN & COUNTRY LINEN CORP. and TOWN & COUNTRY HOLDINGS v. INGENIOUS DESIGNS LLC

Background

Town & Country Linen Corp. and Town & Country Holdings, Inc. (collectively, the Plaintiffs) had a business relationship with Ingenious Designs LLC, Joy Mangano, and HSN, Inc. (collectively, the Defendants) involving the design, development, sourcing, and manufacture of products. The parties used mutual nondisclosure agreements. The agreement relevant to this motion was signed in 2015 between Ingenious Designs LLC and Town & Country Holdings, Inc., and included a clause stating that the parties and their representatives irrevocably and unconditionally waived jury trials for claims based on, arising out of, or relating to the agreement.

Plaintiffs alleged that, after the relationship broke down, Defendants misappropriated ideas, trade secrets, and intellectual property. The claims remaining for trial included breach-of-contract claims, trade-secret and idea-misappropriation claims, patent-infringement claims, and related counterclaims. Defendants moved under Federal Rule of Civil Procedure 39(a)(1) to strike Plaintiffs’ jury demand.

Enforceability of the Jury Waiver

The court held that the waiver was knowing, voluntary, and intentional. Plaintiffs did not dispute that Town & Country Holdings, Inc. and Ingenious Designs LLC had knowingly, voluntarily, and intentionally waived their jury-trial rights. The court also found that the waiver was conspicuous because it appeared in all capital letters, the agreement was negotiated between corporations, and Plaintiffs had substantial business experience.

The court rejected Plaintiffs’ argument that Defendants had later waived the contractual waiver. Defendants’ jury demands in their answer and counterclaims did not create a jury right that the parties had already waived. Those demands were limited to issues “triable to a jury,” and the court concluded that claims covered by the agreement were not within that description. The demands also were signed by an attorney, while the agreement required written changes signed by authorized representatives of the parties.

The court likewise held that the parties’ case-management plans did not amend or waive the agreement. Those plans were signed by attorneys and were provisional documents that could be modified for good cause. The court found good cause to allow Defendants to revise the trial arrangements. It also found that Plaintiffs had shown neither an inexcusable delay nor prejudice from the timing of Defendants’ motion. References to a jury in summary-judgment and expert-evidence briefing did not waive Defendants’ right to enforce the contractual waiver.

Scope of the Waiver

The court held that the waiver applied to Town & Country Linen Corp. even though that company did not sign the nondisclosure agreement. The agreement defined representatives to include affiliates and stated that the waiver applied to each party’s representatives. Plaintiffs did not dispute that Town & Country Linen Corp., a subsidiary of Town & Country Holdings, Inc., qualified as a representative. The court also held that Town & Country Linen Corp. accepted benefits under the agreement and thereby became bound by provisions that expressly applied to representatives.

The court further held that the waiver survived the agreement’s expiration. The agreement had a three-year term, but the waiver stated that it was “irrevocable.” The court interpreted that language to mean that the waiver could not be revoked or undone when the agreement expired. It reasoned that treating the waiver as ending with the agreement would make the waiver ineffective because a party could otherwise wait until the agreement expired before filing a claim and requesting a jury.

Finally, the court held that the waiver covered all remaining claims, including the patent-infringement claims and related counterclaims. The court interpreted the phrase “relating to” broadly to include claims having a connection or association with the agreement, even if proving a violation of the agreement was not an essential element of the claim. The patent claims concerned the CloseDrier project, materials exchanged under the nondisclosure agreement, and allegations that Defendants used Plaintiffs’ designs to develop a product that infringed Plaintiffs’ design patent. The court found those claims factually and legally connected to the agreement.

The court also held that Plaintiffs had admitted in their complaint that all claims arose out of or related to the nondisclosure agreement when they relied on the agreement’s forum provision to support venue. The court treated that allegation as a binding judicial admission and concluded that Plaintiffs could not later argue that the same claims were outside the jury-waiver provision.

Disposition

The court granted Defendants’ motion to strike Plaintiffs’ jury demand. The Clerk of Court was directed to close the docket entry for that motion. The opinion did not decide the underlying liability claims; it decided that the claims covered by the waiver would not be tried to a jury.