Opinion
19 Civ. 9404 (LAP)
07-24-2024
SULZER MIXPAC AG, Plaintiff, v. DXM CO., Ltd., and DENTAZON CORPORATION, Defendants.
OPINION & ORDER
LORETTA A. PRESKA, SENIOR UNITED STATES DISTRICT JUDGE
Plaintiff Sulzer Mixpac AG ("Mixpac") moves for summary judgment on its breach-of-contract claim based on the violation of a 2016 settlement agreement by Defendants DXM Co., Ltd. and Dentazon Corporation (together, "Defendants"). Defendants oppose the motion. For the reasons set forth below, Mixpac's motion is GRANTED, but Mixpac's request for a permanent injunction is DENIED.
(See Pl.'s Mot. for Summ. J., dated Feb. 3, 2021 [dkt. no. 91]; Pl.'s Amend. Mem. of Law in Supp. of Mot. for Summ. J. ("Pl.'s Br."), dated Feb. 8, 2023 [dkt. no. 122]; Deci, of Daniel I. Hwang, dated Feb. 8, 2023 [dkt. no. 123]; Appendix for Amend. Mem. ("App."), dated Feb. 8, 2023 [dkt. no. 123-1]; Local Rule 56.1 Statement of Undisputed Facts for Summ. J. ("Pl.'s 56.1"), dated Feb. 8, 2023 [dkt. no. 124]; Pl.'s Reply Br. ("Pl.'s Reply"), dated Mar. 22, 2023 [dkt. no. 127].)
(See Defs.' Br. in Opp'n Mot. for Summ. J. ("Defs.' Br."), dated Mar. 8, 2023 [dkt. no. 125]; Counterstatement to Pl.'s Local Rule 56.1 Statement of Undisputed Facts for Summ. J., dated Mar. 8, 2023 [dkt. no. 126].)
I. Background
The parties do not dispute the following facts. Mixpac and Defendants both manufacture systems used by dentists for mixing adhesives. Mixpac's dental system includes a dispenser, a cartridge, and a mixing tip. The mixing tip is manufactured using "candy-like" colors, including yellow, teal, blue, pink, purple, and brown, on the lower portion of the mixing tip. (App. 26-27, 49.} Mixpac is the registered owner of trademarks for the candylike colors used on the mixing tips. (Id. at 26-27, 50; Pl.'s Br. at 2 n.3.)
A. The 2015 Lawsuit and the 2016 Settlement Agreement
In 2015, Mixpac sued Defendants in this District for producing and selling dental mixing tips that allegedly infringed Mixpac's trademarks in the candy-like colors. Sulzer Mixpac AG v. DXM Co. Ltd., No. 15-CV-9359 (ER) (S.D.N.Y.). The parties resolved that lawsuit through a confidential settlement agreement (the "2016 . Settlement Agreement" or "Agreement") and a parallel consent judgment that permanently enjoined Defendants from selling the products that allegedly infringed Mixpac's trademarks. (See Consent Judgment and Permanent Injunction, dated June 16, 2016 [dkt. no. 47 in 15-CV-9359].)
The 2016 Settlement Agreement is filed under seal at dkt. no. 48 .
The Agreement begins with a "Recitals" section, containing eight "Whereas" clauses that provide background and define material terms. First, the parties explained that "in association with" the "colored, dome-shaped mark" with Mixpac's mixing tip (the "Mixpac Mixing Tips"), "Mixpac has used six 'candy-like' colors, namely, of yellow, teal, blue, pink, purple, and brown," i.e., the "Candy Colors." (2016 Settlement Agreement, at 1.) "Mixpac alleges," in the 2015 lawsuit, "that Defendants have sold, advertised, ordered for sale, or imported mixing tips that are counterfeits of the Mixpac Mixing Tips and simulate the appearance of the Colored Dome Mark, but do not bear 'MIXPAC®' stamped on the top beveled edge ('the Accused Mixing Tips')." (Id. at 1-2.) The "Accused Mixing Tips" were further defined by reference to photos attached to the Agreement, including the following:
(Image Omitted)
In addition, "Defendants propose to offer for sale and sell in interstate commerce new mixing tips that do not include the Candy Colors in any manner and have two (2) wings or four (4) wings in the lower portion of the mixing tip (the 'New Mixing Tips')." (Id. infringement in violation of state and federal law, and violation of New York state unfair competition law. Sulzer Mixpac AG v. DXM Co. ("Mixpac I"), No. 19-CV-9404, 2020 WL 3619047, at *2 (S.D.N.Y. July 2, 2020).
On July 2, 2020, this Court granted Mixpac's motion for a preliminary injunction. Relevant to the instant motion, Mixpac demonstrated a likelihood of success on its breach-of-contract claim. Id. at 5. The "2016 Settlement Agreement permitted Defendants to produce and sell its 'New Mixing Tips,' which are defined in the Agreement's introduction as 'new mixing tips that do not include the Candy Colors in any manner.'" Id. (quoting 2016 Settlement Agreement at 2, ¶ 5).
The Court rejected that the Accused Mixing Tips were "different" from the New Mixing Tips. Although "Defendants are admittedly correct that the Accused Mixing Tips are 'different,' . . . they are only different in the most literal sense. At the most basic level, the Accused Mixing Tips are a near carbon copy of the 'New Mixing Tips' that were permitted by the 2016 Settlement Agreement." Id. The Court's interpretation was further supported by "the 2016 Settlement Agreement's explicit mandate that Defendants' New Mixing Tips do not feature the Candy Colors in any way, shape, or form," which "signals an intent for the definition of 'New Mixing Tips'" to "sweep broadly." Id. In addition, "the Agreement would have little bite if the definition of 'New Mixing Tips' allowed Defendants to escape the consequences of the agreement simply by adding a Candy Colored wing over the clear mixing tips permitted by the Agreement." Id.
C. Intervening Court: of Appeals Decision & Defendants' Motion to Rescind the 2016 Settlement Agreement
While this case was pending, on February 18, 2021, the Court of Appeals held in a different case involving Mixpac's same trademarks over the candy-colored mixing tips that Mixpac's "colors are functional, rendering Mixpac's trade dress unprotectible." Sulzer Mixpac AG v. A&N Trading Co., 988 F.3d 174, 183 (2d Cir. 2021). As a result of that holding, Defendants moved for judgment on the pleadings on Mixpac's breach-of-contract claim, to vacate the 2016 permanent injunction and this Court's 2020 preliminary injunction, and to rescind the 2016 Settlement Agreement. Sulzer Mixpac AG v. DXM Co. ("Mixpac II"), No. 19-CV-9404, 2022 WL 4280343, at *2 (S.D.N.Y. Sept. 15, 2022) . Defendants claimed that because the injunctions and the 2016 Settlement Agreement "are premised on the validity of" Mixpac's trademarks, "[n]ow that Plaintiff's Candy Color Trademark Rights have been found to be functional and thus effectively invalid, the entire legal foundation" for them "has collapsed." Id.
This Court denied Defendant's motions. The Agreement and injunctions did not include "as a condition to their enforceability or validity the existence of trademark rights in the underlying
Candy Colors marks." Id. at *5. "A deal is a deal, and while the Court of Appeals' decision in A&N forecloses Plaintiff's claims sounding in infringement as to those marks actually litigated and decided in that case, it does not provide a basis for vacating or rescinding the parties' 'calculated settlement' in the prior litigation between these parties." See id. at *6 (citing United States v. Bank of N.Y., 14 F.3d 756, 760 (2d Cir. 1994)).
Mixpac now moves for summary judgment on the breach-of-contract claim and "asks that the court make the Preliminary Injunction permanent." (See Pl.'s Br. at 1.)
II. Legal Standards
A. Summary Judgment
A court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A material fact is one that "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. In assessing whether summary judgment is proper, the Court construes the evidence in the light most favorable to the non-moving party. Lucente v. IBM Corp., 310 F.3d 243, 253 (2d Cir. 2002).
B. Breach of Contract and Contract Principles
"A settlement agreement is a contract that is interpreted according to general principles of contract law." Powell v. Omnicom, 497 F.3d 124, 128 (2d Cir. 2007). The parties agree that the 2016 Settlement Agreement is governed by New York law. (Pl.'s 56.1 ¶ 5; 2016 Settlement Agreement ¶ 10.) "To prevail on a breach of contract claim under New York law, a plaintiff must show that '(1) a contract exists; (2) plaintiff performed in accordance with the contract; (3) defendant breached its contractual obligations; and (4) defendant's breach resulted in damages.'" Martinez v. Agway Energy Servs., LLC, 88 F.4th 401, 409 (2d Cir. 2023) (quoting 3406 73, LLC v. Seneca Ins. Co., 198 N.E.3d 1282 (N.Y. 2022)).
"Summary judgment is appropriate if the terms of the contract are unambiguous." Fischer & Mandell, LLP v. Citibank, N.A., 632 F.3d 793, 799 (2d Cir. 2011). "The language of a contract is not made ambiguous simply because the parties urge different interpretations." Glob. Reinsurance Corp, of Am. v. Century Indem. Co., 22 F.4th 83, 94 (2d Cir. 2021). "The proper interpretation of an unambiguous contract is a question of law for the court, and a dispute on such an issue may properly be resolved by summary judgment." Omni Quartz, Ltd, v. CVS Corp., 287 F.3d 61, 64 (2d Cir. 2002).
"The primary objective of a court in interpreting a contract is to give effect to the intent of the parties as revealed by the language of their agreement." Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153, 157 (2d Cir. 2000). The agreement must be read "as a harmonious and integrated whole" where "every part will be interpreted in reference to the whole." Westmoreland Coal Co. v. Entech, Inc., 794 N.E.2d 667 (N.Y. 2003). Moreover, "[t]he court should 'construe the agreements so as to give full meaning and effect to the material provisions'" and to "give effect to its general purpose." Beal Sav. Bank v. Sommer, 865 N.E.2d 1210 (N.Y. 2007) (first quoting Excess Ins. Co. v. Factory Mut. Ins., 822 N.E.2d 768 (N.Y 2004); and then quoting Westmoreland, 794 N.E.2d at 667).
Ill. Discussion
The only contested element of the breach-of-contract claim is the third element: whether Defendants violated the 2016 Settlement Agreement. Neither party contends that the Agreement is ambiguous. (See Pl.'s Br. at 7; Defs.' Br. at 8, 12-13.) Rather, the issue of Defendants' breach turns on the interpretation of the 2016 Settlement Agreement, which is appropriate for the Court to resolve on the motion for summary judgment.
Mixpac argues that the 2016 Settlement Agreement "prohibits DXM from using the Candy Colors in any manner on the New Mixing Tips" and that the 2018 Accused Mixing Tips "are the New Mixing Tips with Candy Colored wings." (Pl.'s Br. at 8, 13.) Therefore, according to Mixpac, Defendants' distribution of the 2018 Accused Mixing Tips falls within conduct prohibited by the Agreement. (See id. at 11-13.) Defendants rejoin that the 2018 Accused Mixing Tips do not fall within the meaning of the New Mixing Tips but are "other" mixing tips governed by Paragraph 8, which requires a "trademark-based likelihood of confusion test" to determine "what Defendants are prohibited from selling." (Defs.' Br. at 9, 15.) Applying that test here, there can be no likelihood of confusion because Mixpac has "non-existent trademark rights" so no product can "conceivably be found to be confusingly similar" or, at a minimum, there are disputed facts that preclude applying the likelihood-of-confusion analysis at this stage. (Id. at 16-18.)
For essentially the same reasons that justified the Court's previous interpretation of the 2016 Settlement Agreement, see Mixpac I, 2020 WL 3619047, at *5, the Court again finds that Mixpac has the better construction.
First and foremost, the law of the case doctrine supports adhering to the Court's prior interpretation. "The law of the case doctrine, although not binding, 'counsels a court against revisiting its prior rulings in subsequent stages of the same case absent "cogent" and "compelling" reasons,' including, inter alia, 'the need to correct a clear error or prevent manifest injustice.'" In re Peters, 642 F.3d 381, 386 (2d Cir. 2011) (quoting Ali v. Mukasey, 529 F.3d 478, 490 (2d Cir. 2008)). The doctrine is "flexible where the prior decision was made on a preliminary injunction motion." City of New York v. Gordon, 155 F.Supp.3d 411, 419 (S.D.N.Y. 2015). However, "deference" should be afforded to "legal conclusions, . . . unless there is an intervening change in the law." Id. (deferring to a previous decision's statutory construction because "good sense dictates that a court interpret the same statute in the same way throughout a litigation"); see also Grocery Haulers, Inc, v. C & S Wholesale Grocers, Inc., No. ll-CV-3130, 2013 WL 342693, at *3 (S.D.N.Y. Jan. 29, 2013)(applying the doctrine to a previous decision that relied on "principles of contract construction as applied to a factual record that was, in the pertinent parts, undisputed").
This Court's previous legal interpretation of the Agreement on an uncontested factual record that has not changed in material ways is deserving of deference. Defendants argue, however, that the Court should not adhere to its previous interpretation because the Court's preliminary injunction order "presumed validity of Plaintiff's trademark rights." (Defs.' Br. at 11.) While that may be true, the Court's interpretation of the 2016 Settlement Agreement did not depend on the validity Mixpac's trademarks. As this Court explained in denying Defendants' motion to vacate the injunctions: "the 2020 Preliminary Injunction in this case is not based on the likelihood of success of Plaintiff's claim that Defendants infringed Plaintiff's mark; it is based on the Court's finding that Plaintiff is likely to succeed on its claim that Defendants' alleged distribution of a new product line violates the 2016 Settlement Agreement." Mixpac II, 2022 WL 4280343, at *6. . Thus, Defendants fail to offer a compelling reason why the Court should change course from its previous decision.
Further, the summary judgment record supports the Court's interpretation. Mixpac agreed that "Defendants may make, have made, offer for sale, sell, distribute, promote and advertise the New Mixing Tips." (2016 Settlement Agreement ¶ 5.) The "New Mixing Tips" were defined as "mixing tips that do not include the Candy Colors in any manner and have two (2) wings or four (4) wings in the lower portion of the mixing tip." (Id. at 2.) The Agreement explicitly referenced the photos of entirely clear mixing tips with wings as shown above in Figure 2. Mixpac did not agree that the New Mixing Tips could include wings with the Candy Colors. It stated the opposite: the permissible New Mixing Tips could "not include the Candy Colors in any manner." The parties clearly considered the necessity of the wings on the New Mixing Tips but required that they not include any Candy Color.
No reasonable interpretation of the 2016 Settlement Agreement would permit Defendants to evade the requirement that the New Mixing Tip be entirely clear and include wings if Defendants could simply have added candy-colored wings. Any other interpretation of the Agreement would not be commercially reasonable and would fail to give "a practical interpretation of the expressions of the parties." Greenwich Cap. Fin. Prod., Inc, v. Negrin, 903 N.Y.S.2d 346, 348 (N.Y.App.Div. 2010) (quoting Duane Reade, Inc, v. Cardtronics, LP, 863 N.Y.S.2d 14, 16 (N.Y.App.Div. 2008)); see also Amtrust N. Am., Inc, v. Kf&B, Inc., No. 17-CV-5340, 2020 WL 6306444, at *28 (S.D.N.Y. Oct. 27, 2020), aff'd, No. 20-4155, 2021 WL 2451663 (2d Cir. Apr. 2, 2021).
This interpretation of the 2016 Settlement Agreement does not render the operative paragraphs of the Agreement superfluous or inconsistent. Defendants assert that reliance on the whereas clause defining "New Mixing Tip" results in an interpretation of the Agreement that "prohibit[s] all use of Candy Colors, even if such use does not create a likelihood of confusion," which is inconsistent with Paragraph 8. (Defs.' Br. at 8 (emphasis added}.) But the Court's interpretation does not foreclose future use of the "likelihood-of-confusion" test as applied to "other mixing tips" pursuant to Paragraph 8. (2016 Settlement Agreement ¶ 8.) It is simply that the 2018 Accused Mixing Tips are so close to the New Mixing Tips - as this Court said previously, "a near carbon copy of the 'New Mixing Tips' that were permitted by the 2016 Settlement Agreement" but with a "Candy Colored wing grafted on to the base," Mixpac I, 2020 WL 3619047, at *5 - such that there is no reasonable interpretation of the Agreement where the 2018 Accused Mixing Tips are not per se barred from sale and distribution.
Defendants also contend that the Court's rationale relies "on a finding that the Whereas Clause was binding on Defendants," which is inconsistent with the "view of long-established New York law." (Defs.' Br. at 11.) Defendants are correct that "the ''Whereas' clauses of a contract do not determine its operative effect." Jim Bouton Corp, v. Wm. Wrigley Jr. Co., 902 F.2d 1074, 1077 (2d Cir. 1990) . But such clauses "do furnish a background in relation to which the meaning and intent of the operative provisions can be determined." Id.; see also Maryland Cas. Co. v. Cont'l Cas. Co., 332 F.3d 145, 162-63 (2d Cir. 2003) (relying on a whereas clause as "relevant" in interpreting a settlement agreement).
Here, given that the relevant whereas clauses include definitions of key terms, they "have a material bearing on the construction of the contract" and are appropriate to consider. Est. of Hatch by Ruzow v. Nyco Mins. Inc., 666 N.Y.S.2d 296, 299 (N.Y.App.Div. 1997) (granting summary judgment); see also Potter v. Padilla, 38 N.Y.S.3d 372 (N.Y.App.Div. 2016) (affirming the district court's reliance on a definition in the agreement's whereas clause "because such recital paragraphs may be used to 'assist in determining the proper construction of a contract'" (citation omitted)); Dawson Home Fashions, Inc, v. SRCO Inc., No. 94-CV-6333, 1995 WL 679253, at *4-6 (S.D.N.Y. Nov. 15, 1995) (construing the agreement using the definition of a term found in the recital and granting summary judgment), Defendants even concede that terms material to the contract are "defined" in the whereas clauses. (See Defs.' Br. at 14.) This Court's interpretation of the 2016 Settlement Agreement is thus entirely consistent with New York law.
Accordingly, the Court concludes that Defendants breached the 2016 Settlement Agreement when they distributed and sold the 2018 Accused Mixing Tips and grants Mixpac's motion for summary judgment.
IV. Permanent Injunction
Mixpac asks that the Court make the preliminary injunction permanent. "The test for determining when to grant [a permanent injunction] requires the plaintiff to demonstrate: '(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.'" ABKCO Music, Inc, v. Sagan, 50 F.4th 309, 322 (2d Cir. 2022) (quoting eBay Inc, v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006)). Whether to grant permanent injunctive relief is within the Court's discretion. eBay Inc., 547 U.S. at 391.
Mixpac merely cites the 2016 Settlement Agreement and the 2020 preliminary injunction order to argue that it is entitled to a permanent injunction. (See Pl.'s Br. at 1, 15.) In pertinent part, Paragraph 13 of the 2016 Settlement Agreement stipulates that "Defendants agree that such a violation or breach [of the Agreement] would cause irreparable harm and that Mixpac shall be entitled to injunctive relief."
At best, Mixpac's reliance on Paragraph 13 addresses only the first requirement that a plaintiff must show it will suffer irreparable harm. And while clauses such as the one in Paragraph 13 "may be entitled to weight, they 'do[ ] not control the question whether . . . injunctive relief is appropriate.'" JTH Tax, LLC v. Agnant, 62 F.4th 658, 674 (2d Cir. 2023) (first alteration in original)(quoting Baker's Aid, Inc, v. Kussmann Foodservice Co., 830 F.2d 13, 16 (2d Cir. 1987)). Indeed, courts in this District have been highly skeptical of such provisions, finding that parties' "consent" to injunctive relief should be treated only as "persuasive evidence" that the plaintiff will suffer irreparable harm absent an injunction "rather than dispositive evidence." EMA Fin,, LLC v. AIM Expl., Inc., No. 18-CV-145, 2019 WL 689237, at *12 (S.D.N.Y. Feb. 19, 2019) (collecting cases). "[T]he Court remains obliged to make an independent determination as to whether injunctive relief is appropriate." In re M.B. Int'l W.W.L., No. 12-CV-4945, 2012 WL 3195761, at *12 (S.D.N.Y. Aug. 6, 2012).
Mixpac has not offered any reasons independent of Paragraph 13 to justify the equitable relief sought, nor has it addressed the three other factors that the Court must consider. Whether remedies available at law would be sufficient remains unclear, because Mixpac has not argued why - or why not - monetary damages for Defendants' breach would not compensate its injury. To be sure, Paragraph 13 (the very provision that Mixpac argues justifies finding irreparable harm) includes another provision demonstrating that the parties thought monetary damages might be appropriate in certain circumstances for breach of contract. (See 2016 Settlement Agreement ¶ 13. ("In the event that Defendants are later found to have violated, ., this Agreement, Mixpac may recover its damages . . . .")) Mixpac likewise fails to explain why the third or fourth factors weigh in its favor. Consequently, Mixpac's request for a permanent injunction is denied.
V. Conclusion
For the reasons discussed above, Mixpac's motion for summary judgment [dkt. nos. 91, 122] is GRANTED, Mixpac's request for a permanent injunction is DENIED.
SO ORDERED.