Opinion
CV 03-895-HA, CV 03-248.
August 18, 2004
Douglas G. Houser, Randy Lee Arthur, Bullivant Houser Bailey, Portland, Oregon, Bryon L. Gregory, McDermott, Will Emery, Chicago, Illinois, Attorneys for Archway Cookies.
Brian J. Posewitz, Steven D. Olson, Tonkon Torp, Portland, Oregon, Attorneys for Smith Cookie Co. and United States Bakery.
OPINION AND ORDER
Before the court are Archway's Motion to Terminate License Agreement and Renewed Motion for Preliminary Injunction (Doc. #13) and Archway's Motion for Partial Summary Judgment (Doc. #36). For the following reasons, Archway's Motion to Terminate License Agreement and for Preliminary Injunction is granted in part, and Archway's Motion for Partial Summary Judgment is denied.
To the extent that the this ruling is in any way inconsistent with the court's prior rulings in either this case or in Lead Case Smith Cookie Co., et al. v. Archway Cookies, et al., CV-03-248-HA, this Opinion and Order controls. However, remaining in full effect are the court's prior rulings regarding (1) payments to be made by Archway to Smith for the sums owed to Smith, and (2) all undisputed royalty payments earned by Archway under the license agreement, without setoff, that Smith is required to remit to Archway.
BACKGROUND
On March 20, 1981, Smith and Archway entered into a License Agreement that authorized Smith to manufacture and sell cookies under Archway's trademarks throughout Washington, Oregon, Idaho, Montana, Alaska, and Hawaii. In October 1994, United States Bakery purchased Smith's factory, tools, and assets. Smith claims that after the sale it leased its factory, tools, and employees back from United States Bakery in order to produce cookies as Archway's licensee. Archway and United States Bakery sell competitive products in the same geographic region served by Smith.
Paragraph Twelve of the License Agreement allows either party to terminate the contract upon the other's breach upon the provision of notice and a thirty-day opportunity to cure to the breaching party. License Agreement ¶ 12. Termination may occur sixty days following the mailing of a Notice of Termination. Id.
On July 10, 2003, following this court's ruling on Archway's Motion to Dismiss and Smith's Motion for Preliminary Injunction, see Smith Cookie Co., et al. v. Archway Cookies, et al., CV-03-248-HA, Archway sent a Notice of Breach letter to Smith. Upon Smith's alleged failure to cure the breaches listed in the notice, Archway delivered a Notice of Termination letter to Smith on September 9, 2003.
STANDARDS
A. Preliminary Injunction
The court may issue a preliminary injunction under the traditional test used by the Ninth Circuit. A preliminary injunction shall be issued if the moving party can demonstrate "either (1) a likelihood of success on the merits and the possibility of irreparable injury, or (2) the existence of serious questions going to the merits and the balance of hardships tipping in [its] favor." Gilder v. PGA Tour, Inc., 936 F.2d 417, 422 (9th Cir. 1991) (citing Diamontiney v. Borg, 918 F.2d 793, 795 (9th Cir. 1990)). "These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Hunt v. Nat'l Broad. Co., Inc., 872 F.2d 289, 293 (9th Cir. 1989) (quoting United States v. Odessa Union Warehouse Co-op, 833 F. 2d 172, 174 (9th Cir. 1987)).
As to the second formulation of the test, "serious questions" are those questions "which cannot be resolved one way or the other at the hearing on the injunction and as to which the court perceives a need to preserve the status quo. . . ." Republic of the Philippines v. Marcos, 862 F.2d 1355, 1362 (9th Cir. 1988). Serious questions are "substantial, difficult and doubtful" enough to require more considered investigation. Id. (quoting Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2nd Cir. 1952)). Such questions need not show a certainty of success, nor even demonstrate a probability of success, but rather "must involve a `fair chance of success on the merits.'" Id. (quoting Nat'l Wildlife Fed'n v. Coston, 773 F.2d 1513, 1517 (9th Cir. 1985)).
B. Summary Judgment
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Summary judgment is not proper if material factual issues exist for trial. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995).
The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 324. Assuming that there has been sufficient time for discovery, summary judgment should be entered against a "party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322.
The court must view the evidence in the light most favorable to the nonmoving party. Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1284 (9th Cir. 1982). All reasonable doubt as to the existence of a genuine issue of fact should be resolved against the moving party. Hector v. Wiens, 533 F.2d 429, 432 (9th Cir. 1976). The inference drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Valadingham v. Bojorquez, 866 F.2d 1135, 1137 (9th Cir. 1989). Where different ultimate inferences may be drawn, summary judgment is inappropriate. Sankovich v. Ins. Co. of N. Am., 638 F.2d 136, 140 (9th Cir. 1981).
The issue of material fact required by Rule 56 need not be resolved conclusively in favor of the party asserting its existence. Id. At this stage of the litigation, the judge does not weigh conflicting evidence or make credibility determinations. These determinations are the province of the factfinder at trial. Id.; see also Abdul-Jabbar v. Gen. Motors Corp., 85 F.3d 407, 410 (9th Cir. 1996) (on a motion for summary judgment, the court is not to weigh the evidence or determine the truth of the matter, but only determine whether there is a genuine issue for trial).
Deference to the non-moving party does have some limit. The non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e) (emphasis added). The "mere existence of a scintilla of evidence in support of the plaintiff's position would be insufficient." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 252 (1986). Therefore, where "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
DISCUSSION
A. Termination of the License Agreement
On May 22, 2003, in Smith Cookie Co., et al. v. Archway Cookies, et al., CV-03-248, this court issued an Order initially enjoining the parties from terminating the License Agreement. The Order was based in part on Archway's failure to set forth the specific nature of the breach in the original Notice of Breach letter, dated July 29, 2002. At that time, the court was constrained to view Archway's allegations only through the lens of that Notice letter. In light of the limited record and a Notice letter that failed to properly present the issues currently before the court, Smith's request for equitable relief was granted.
Following the court's preliminary injunction ruling, Archway sent a much more exhaustive Notice of Breach letter to Smith on July 10, 2003. Based on the claims raised in the second Notice letter and the more developed factual record, the court concludes that Smith failed to cure several core breaches of the License Agreement, and Archway was entitled to terminate the parties' licensing relationship pursuant to Paragraph Twelve of the License Agreement. In accordance with the terms of the Agreement, this termination was effective sixty days following the mailing of the Notice of Termination on September 9, 2003.
1. Use of Smith's Plants, Tools, and Equipment
Paragraph Four of the License Agreement requires Smith to "continuously and diligently use [Smith's] best efforts and all of [Smith's] plant, tools, equipment and other resources in making cookies, which [Smith] will distribute and sell under said trade-mark `Archway'. . . ." License Agreement ¶ 4. Smith does not own any "plant, tools, or equipment." Smith admits that its assets are owned by United States Bakery.
The License Agreement refers to "the Baker's [ i.e. Smith's] plants, tools [and] equipment." However, Smith contends that nothing in the License Agreement prohibited it from leasing its plant, tools, and equipment and producing cookies as Archway's licensee.
The License Agreement is to be construed according to Michigan law. License Agreement ¶ 17. "Under ordinary contract principles, contract language should be given its ordinary and plain meaning." Lawsuit Financial, L.L.C. v. Curry, 683 N.W.2d 233, 240 (Mich.App. 2004) (citing Michigan Nat'l Bank v. Laskowski, 580 N.W.2d 8 (Mich.App. 1998)). The language of the License Agreement utilizes the possessive form of "the Baker" in reference to Smith. However, Smith owns no plants, tools, or equipment. In short, Smith does not possess any of the items listed in Paragraph Four of the License Agreement.
Smith's claim that it leases its tools fails to constitute the possession required by the License Agreement. The plant and tools used to manufacture Archway cookies are owned entirely by United States Bakery. The cookies are not produced using "Smith's" tools.
Absent ownership of any tangible assets, Smith has no plant, tools, or equipment to make and distribute Archway cookies. Accordingly, Smith is in breach of Paragraph Four of the License Agreement and has not cured this breach.
2. Use of Archway's Recipes
Paragraph One of the License Agreement requires Smith to confine its use of Archway's proprietary recipes and formulas "for making, distributing or and selling [Archway] cookies. . . ." License Agreement ¶ 1. Under the Agreement, these recipes and formulas remain in Archway's sole possession and Smith is prohibited from "dilvug[ing] or mak[ing] available to others said formulas, recipes and techniques, or permit the use thereof by any other person, firm or corporation with the aid or consent of [Smith], except to the extent reasonably necessary to enable [Smith] to make `Archway cookies.'" License Agreement ¶ 2.
United States Bakery admits that it has produced non-Archway cookies using recipes developed by Smith. See Declaration of Kim Albers ¶ 3 ("Formerly USB did use a few recipes developed and used by Smith"). United States Bakery also admits that it has made at least four Archway-branded products using the exact same recipe as non-Archway-branded cookies. Kim Albers Deposition at 54-56.
Smith asserts that the formulas used to manufacture these products are owned by Smith, not Archway. See Smith's Memorandum in Support of Motion for Preliminary Injunction at 13 ( Smith Cookie Co., et al. v. Archway Cookies, et al., CV-03-248) (asserting that "formulas used by Smith were predominantly formulas developed by Smith"). Smith therefore admits that is has made Archway-branded cookies using formulas supplied by Smith. The License Agreement requires Smith to use recipes supplied by Archway, and Smith is in breach of the License Agreement. Paragraph Three of the License Agreement requires Smith to "make, distribute and sell cookies in accordance with the formulas, recipes and techniques supplied it by [Archway]. . . ."
In addition to using Smith-created recipes, Smith admits that since January 1995 "Archway has provided five recipes used by Smith." Response to Archway's Concise Statement of Facts at 10. Smith could not have produced cookies using the five recipes supplied by Archway without disclosing those recipes to employees of United States Bakery. Smith claims the cookies were made by "Smith employees (leased from USB)." Response to Archway's Concise Statement of Facts at 10. This claim is disingenuous. The persons who physically produce the Archway cookies are undeniably employees of United States Bakery. Smith and United States Bakery admit as much in their moving papers, stating that the workers " technically were [United States Bakery] employees who were leased to Smith." Response to Archway's Motion for Summary Judgment at 9 (emphasis added).
The affiliation of the employees who make Archway cookies under the License Agreement is far more than a technicality. The employees were paid and managed by United States Bakery, worked in a factory owned by United States Bakery, and used tools and equipment owned by United States Bakery. The five recipes that Smith admits Archway supplied to it could not have been made without disclosure to United States Bakery employees. In doing so, United States Bakery employees became privy to recipes that were the "sole and absolute property" of Archway. License Agreement ¶ 2. Accordingly, Smith divulged or made available to others said formulas in breach of the Paragraph Two of the License Agreement. Smith failed to cure this breach because the same United States Bakery employees continue to produce Archway cookies and know Archway's proprietary recipes.
3. Product Labels
Paragraph Three of the License Agreement provides that all cookies manufactured by Smith must be packaged with the following label, "Licensed by Archway Cookies, Inc., Battle Creek, Michigan." License Agreement ¶ 3. Smith admits that it does not use this language on the packages of the Archway cookies it produces, but claims that Archway approved of this departure. Kim Albers Declaration ¶ 5 (indicating that packages are labeled as "Archway Cookies, Inc., Mfd. Sold by Smith Cookie Co., McMinnville, OR 97128").
Even after Archway's second notice of breach, Smith refused to immediately place the required language on the packaging, and instead offered to make the change once current inventories changed. Accordingly, Smith did not cure the breach by September 9, 2003, the date Archway notified Smith that it was exercising its right to terminate the License Agreement.
4. Transfer of Rights
Paragraph Eleven of the License Agreement forbids Smith from selling, assigning, or transferring any of Smith's rights, titles, or interests under the License Agreement to a third party without Archway's written consent. Smith breached this provision by transferring its licensee rights to United States Bakery. Smith does not employ workers and owns no plant or tools. Pursuant to the alleged sale and lease back relationship it created with United States Bakery, Smith transferred or assigned its rights and interests as a licensee under the License Agreement to United States Bakery. Smith fails to produce any evidence of Archway's written consent to such a transfer or assignment and, accordingly, is in breach of Paragraph Eleven.
5. Defenses
As outlined above, Smith breached several provisions of the License Agreement. Archway gave Smith proper notice of the breaches pursuant to Paragraph Twelve of the License Agreement, and Smith failed to cure the breaches. Accordingly, Archway was entitled to terminate the License Agreement sixty days after the Notice of Termination letter was mailed on September 9, 2003 unless a valid defense was asserted.
a. Modification of the License Agreement
Smith contends that Archway's predecessor modified several key provisions of the License Agreement through oral statements and a course of conduct. As discussed below, the License Agreement contains an anti-waiver provision. Anti-waiver provisions reflect the parties' heightened expectations regarding future modifications. Quality Prod. and Concepts Co. v. Nagel Precision, Inc., 666 N.W.2d 251, 258-9 (Mich. 2003) (addressing an alleged modification through a course of conduct). "This is because such restrictive amendment clauses are an express mutual statement regarding the parties' expectations regarding amendments." Id. (emphasis in original).
Smith offers no credible evidence that the License Agreement was modified. The only evidence of modifications arises from two declarations from representatives of Smith and United States Bakery. Neither provides any specific information such as dates or descriptions of conversations about oral modifications made or agreed to by Archway representatives.
The anti-waiver provision reflects the parties' intention to require heightened proof before modifying the License Agreement. Smith has offered no evidence suggesting that the parties intended to amend provisions of the License Agreement.
Paragraph Eleven of the License Agreement requires Archway's written consent in order to modify that provision concerning the assignment or transfer of Smith's rights. As discussed above, Smith breached that provision of the License Agreement, and there is no evidence of a written modification. Because Smith offers no evidence to suggest that the contract was modified, this defense fails as a matter of law.
b. Waiver and Estoppel
Smith asserts that Archway waived its rights under the License Agreement or should be otherwise estopped from asserting its claims. Smith states, "Even if Archway's prior positions did not create or confirm a modification, those positions were a waiver, and Plaintiffs' reliance estops Archway from retracting that waiver now." Smith's Reply in Support of Motion for Preliminary Injunction at 9 ( Smith Cookie Co., et al. v. Archway Cookies, et al., CV-03-248).
Paragraph Twelve of the License Agreement states, "The failure of either party to . . . exercise its . . . rights consequent upon a breach, shall not constitute a waiver by it of its rights to terminate this Agreement, or to take other action, in consequence of the continuation of such breach or of the occurrence of any subsequent breach." License Agreement ¶ 12.
The Michigan Supreme Court has held that under limited circumstances, parties may waive an anti-waiver provision of a contract. Quality Prod. and Concepts Co., 666 N.W.2d at 253 ("We hold that parties to a contract are free to mutually waive or modify their contract notwithstanding a written modification or anti-waiver clause because of the freedom to contract") (emphasis in original). Although some Michigan authority suggests that the issue of waiver could involve a fact question reserved for the jury, see Formall, Inc. v. Cmty. Nat'l Bank, 360 N.W.2d 902, 907 (Mich.App. 1984), the Michigan Supreme Court more recently held that a party claiming mutual waiver of an anti-waiver provision must provide clear and convincing evidence of the mutual waiver. Quality Prod. and Concepts Co., 666 N.W.2d at 259.
Smith has offered no evidence — let alone clear and convincing evidence — that the parties mutually agreed to waive Paragraph Twelve of the License Agreement or any other provision. Smith asserts that Archway waived various substantive provisions upon which Archway bases its current claims, but fails to produce any evidence that Archway waived the anti-waiver provision of the License Agreement. Accordingly, even if Archway acceded to or silently tolerated conduct prohibited by the License Agreement, Archway may still terminate the contract based on Smith's current breach of contract.
Likewise, no evidence in the record supports Smith's contention that Archway should be estopped from enforcing the License Agreement. The doctrine of equitable estoppel precludes a party from denying the existence of a particular fact if: "(1) a party, by representations, admissions, or silence intentionally or negligently induces another party to believe facts, (2) the other party justifiably relies and acts on that belief, and (3) the other party is prejudiced if the first party is allowed to deny the existence of those facts." Conagra, Inc. v. Farmers State Bank, 602 N.W.2d 390, 405 (Mich.App. 1999).
In light of the anti-waiver provision, Smith's alleged reliance upon Archway's silence could not have been justified. Archway did not waive the anti-waiver provision. Accordingly, any inference that Smith drew from either Archway's representation or silence suggesting that Archway would not enforce certain contract provisions was unreasonable.
"[T]he granting of equitable relief is ordinarily a matter of grace, and whether a court of equity will exercise its jurisdiction, and the propriety of affording equitable relief, rests in the sound discretion of the court, to be exercised according to the circumstances and exigencies of each particular case." Youngs v. West, 27 N.W.2d 88, 91 (Mich. 1947). Smith asks the court to estop Archway from cancelling the contract because Archway has allegedly acquiesced to Smith's breaches for several years. However, the express terms of the anti-waiver provision — negotiated by the parties at arms length — state that Archway's prior failure to assert its rights under the License Agreement does not prejudice its ability to later enforce those rights in the event of a continuing breach. The court finds that under the facts presented, it would be fundamentally inequitable to invoke the doctrine of equitable estoppel and strip the anti-waiver provision from the contract in complete contravention of the parties' signed agreement.
Accordingly, for the reasons provided above, Archway's Motion to Terminate the License Agreement is granted.
B. Summary Judgment
Archway moves for summary judgment on counts eights and nine of the First Amended Complaint. Count eight alleges that Smith and United States Bakery engaged in fraud during the execution of the Confidentiality Agreement. Count nine alleges that Smith and United States Bakery breached the Confidentiality Agreement when Smith disclosed confidential information to United States Bakery.
The Confidentiality Agreement is governed by Michigan law. Confidentiality Agreement ¶ 9.
In October 1994, Smith sold its plant, tools, and equipment to United States Bakery. In January 1995, all three parties executed the Confidentiality Agreement, which states that United States Bakery owns Smith's stock. There is no written evidence that United States Bakery disclosed its purchase of Smith's plant, tools, and equipment. United States Bakery stated in the Confidentiality Agreement that it was "in the business of baking and distributing breads and certain other baked products, but not cookies. . . ." Confidentiality Agreement at 1 (emphasis added).
Archway contends that United States Bakery engaged in fraud by representing to Smith that it was not in the cookie business, when in fact United States Bakery owned Smith's plant, tools, and equipment, all of which were used to produce Archway cookies.
In order to maintain a claim for fraud or misrepresentation under Michigan law, Archway must prove:
(1) defendants made a material representation; (2) it was false; (3) when defendants made it, defendants knew that it was false or made recklessly without knowledge of its truth or falsity; (4) defendants made it with the intent that plaintiffs would act upon it; (5) plaintiffs acted in reliance upon it; and (6) plaintiffs suffered damage.Mitchell v. Dahlberg, 547 N.W.2d 74, 77 (Mich.App. 1996) (citing Arim v. Gen. Motors Corp., 520 N.W.2d 695 (Mich.App. 1994)). The parties agree that Michigan law governs the breach of contract claim, but dispute the choice of law governing Archway's fraud claim. However, this dispute is immaterial to the court's analysis because the elements of common law fraud are substantially similar in Oregon and Michigan. See Musgrave v. Lucas, 238 P.2d 780 (Or. 1951); Lawrence v. Underwood, 726 P.2d 1189, 1191 (Or.App. 1986).
Although the record suggests that Smith and United States Bakery fraudulently misrepresented United States Bakery's involvement in the cookie business, that conclusion cannot be reached without this court weighing disputed evidence — a function reserved for the trier of fact. Smith and United States Bakery assert that they fully disclosed United States Bakery's October 1994 acquisition of Smith's assets to Archway. According to United States Bakery, its representation that it was not involved in the cookie business was accurate because the parties understood that representation to refer to the making of non-Archway cookies. Further, the parties allegedly understood that United States Bakery's ownership of Smith's assets did not constitute United States Bakery's presence "in the cookie business" because ultimately it was Smith, the licensee, who was making and distributing Archway cookies.
Smith also refutes Archway's fraud claim by asserting that Archway knew three months prior to the execution of the Confidentiality Agreement that Smith had sold its plant, tools, and assets to United States Bakery. Archway responds by correctly noting that conclusory allegations contained in self-serving affidavits are insufficient to create a genuine issue of material fact. United States v. 1 Parcel of Real Property, 904 F.2d 487, 492 n. 3 (9th Cir. 1990).
However, the evidence provided by Smith and Archway are more than conclusory. There are sufficient details to raise a genuine issue of material fact as to whether Archway has long been aware of the relationship between Smith and United States Bakery. See M. Robert Albers Affidavit, ¶ 2, 5; Boness Affidavit ¶ 7. These affidavits provide the approximate dates and locations of conversations and meetings between the respective parties concerning United States Bakery's ownership of Smith's assets.
"A misrepresentation claim requires reasonable reliance on a false representation. See Nieves v. Bell Indus., Inc., 517 N.W.2d 235, 238 (Mich.App. 1994) (citing State-William Partnership v. Gale, 425 N.W.2d 756 (Mich App. 1988)). If United States Bakery can prove that it disclosed its acquisition of Smith's assets to Archway, then even if the representation that United States Bakery was "not in the cookie business" were false, a factfinder could conclude that Archway's reliance on the representation was unreasonable, because Archway would have been relying on a statement it knew to be false. The court is prohibited from resolving this disputed evidence, and summary judgment is inappropriate.
Archway's other major assertion of fraud concerns the representation contained in the Confidentiality Agreement that confidential information would be disclosed only to Smith employees. At the time of that representation, Smith had no employees. As explained above, Smith's contention that it "leased" its employees from United States Bakery is a fiction. Although there is evidence suggesting that Smith and United States Bakery misrepresented this fact, summary judgment cannot be provided because Smith and United States Bakery have created a genuine issue of material fact as to whether Archway knew of the employment relationship between Smith and United States Bakery.
In addition to the reasons provided above, summary judgment cannot be granted to Archway because Smith and United States Bakery have raised a statute of limitations defense to Archway's fraud claim. Oregon has a two-year statute of limitations for fraud claims, which must be measured from the time Archway discovered or should have discovered the alleged fraud. O.R.S. § 12.110(1); Mathies v. Hoeck, 588 P.2d 1, 4 (Or. 1978). In Michigan, a plaintiff has six years to file an action for fraud, measured from the time the wrong was done. Kwasny v. Driessen, 202 N.W.2d 443, 446 (Mich.App. 1972). Without deciding which limitation applies here, the court finds that genuine issues of material fact exist as to whether Archway's fraud claims are time-barred.
Likewise, Archway's breach of contract claim cannot be resolved through summary judgment. Although the facts conclusively establish that Smith and United States Bakery violated Paragraph Four of the Confidentiality Agreement, which limits disclosure of Archway's confidential information to Smith's employees on a need-to-know basis and requires Smith's employees receiving such information to sign a non-disclosure contract, summary judgment cannot be granted. Archway has not established as a matter of law that it suffered any damage from the disclosure, nor that it has brought its claim for breach of contract in a timely manner. Michigan law establishes a six-year statute of limitations for breach of contract claims. See Steward v. Panek, 652 N.W.2d 232, 236 (Mich.App. 2002). Archway does not define the time-period when its claim for breach of contract accrued. Archway fails to identify the time-period of the disclosures or the specific confidential information that was disclosed. Because there are genuine issues of material fact regarding the information disclosed, the timing of the disclosure, and any consequent damages, Archway's Motion for Summary Judgment is denied.
C. Relief
The License Agreement provides that termination shall occur sixty days after the nonbreaching party has mailed the Election to Terminate letter. License Agreement ¶ 12. Archway elected to terminate the contract on September 9, 2003. Accordingly, this court declares that the License Agreement was properly terminated sixty days after September 9, 2003.
Archway also seeks an Order enjoining Smith and United States Bakery from using Archway's trademarks, recipes, and proprietary information. Because the License Agreement is now terminated, Archway may sell its products in the territory served formerly by Smith. Smith and United States Bakery indicated that they hope to continue serving the region using Archway's trademarks, notwithstanding the termination of the License Agreement. Such activity could lead to widespread consumer confusion, which could irreparably harm Archway's status in the marketplace. In order to avoid this result, Smith, United States Bakery, and all directors, officers, and agents of Smith and United States Bakery are enjoined from infringing upon Archway's trademarks, using Archway's Uniform Product Codes, or using any of Archway's recipes, formulas, or other proprietary information. They are further enjoined from making or distributing products that contain Archway marks. The court concludes that this injunctive relief is necessary in light of Archway's likely success on the merits and the possibility of the irreparable harm Archway might otherwise suffer.
CONCLUSION
For the foregoing reasons, Archway's Motion to Terminate License Agreement and for Preliminary Injunction (Doc. #13) is granted in part and Archway's Motion for Partial Summary Judgment (Doc. #36) is denied. The parties are ordered to confer with one another and to file Status Letters with the court proposing a final briefing and trial schedule for resolving the remaining issues in the case. These Letters must be filed by each party no later than September 17, 2004.
IT IS SO ORDERED.