Opinion
Case No. 03-72779.
December 18, 2003
ORDER GRANTING DEFENDANT'S MOTIONS TO DISMISS
This matter came before the Court on Defendant's September 5, 2003 motions to dismiss Counts I-III of the complaint. Count I alleges breach of contract. Counts II and III seek declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201. Defendant moves the Court to dismiss Counts I and II for failure to state a claim. Defendant moves the Court to dismiss Count III for lack of jurisdiction; alternatively, Defendant asks the Court to exercise its discretion and refuse to hear the declaratory relief request in Count III.
Being fully advised in the premises, having read the pleadings, and for the reasons set forth below, the Court hereby GRANTS Defendant's motions to dismiss Counts I-III.
I. Factual Overview
Defendant stipulated to the truthfulness of the facts as stated in the complaint. (Def. Mt. at 2) Since 1964, Defendant Pep Boys has used their registered mark, "Futura", for car accessories. In 1993 Plaintiff Ford Motor Company applied to register the trademark "Futura" for use on "badges and insignia for automobiles." (Am. Compl. at 2, ¶ 7) Pep Boys opposed Ford's application; shortly thereafter, the parties entered into negotiations to reach an agreement regarding Ford's application and Pep Boys' registered mark for Futura. The parties contracted in December 1995 for Pep Boys to withdraw their opposition to Ford's 1993 trademark application for Futura, in exchange for Ford's restricted use and registration of the mark as set forth in the contract. (Am. Compl. Ex. B) Pep Boys withdrew their opposition to Ford's 1993 application, and until 2003 Ford likewise complied with the contract.
In 2003, Ford applied to register the Futura trademark for use on a new line of cars. (Def. Mt. at 3) Upon learning of Ford's 2003 registration application, Pep Boys' legal counsel sent a letter to Ford asserting that the new application to register Futura was a "patent violation of Ford's contractual rights to Pep Boys" under the 1995 agreement. (Def. Mt. at 3 Am. Compl. Ex. C) Ford responded to Pep Boys' cease and desist letter by filing suit with this Court.
Ford's complaint asserts three counts. Count I alleges that Pep Boys materially breached the 1995 contract by sending the July 2003 cease and desist letter to Ford and by threatening litigation therein. Count II is a request for declaratory judgment as to Ford's compliance with the 1995 agreement. In Count III, Ford seeks a declaration that "any trademark Infringement claims by Pep Boys against Ford based on Ford's use or planned use of the Futura mark . . . violate the 1995 Agreement and are barred thereby." (Am. Compl. at 5)
II. Choice of Law
In making choice of law determinations, federal courts sitting in diversity must apply the choice of law provisions of the forum state in which it is sitting. See Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496 (1941). The Court has diversity jurisdiction over this case. See 28 U.S.C. § 1332.
In the absence of a binding choice of law provision in a contract, courts must apply Michigan law "unless a rational reason for doing otherwise exists." Hall v. General Motors Corp., 229 Mich. App. 580, 582 (1998). Michigan has adopted the choice of law formula contained in the Restatement (Second) of Conflict of Laws to guide courts in making this determination. See Johnson v. Ventra Group, Inc., 191 F.3d 732, 739 (6th Cir. 1999). When the parties to a contract have not included a choice of law provision, Section 188 of the Restatement provides that the following factors should be considered in determining the applicable law: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the places of incorporation and business of the parties. Restatement 2d of Conflict of Laws § 188(2). Furthermore, "if the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied." Restatement 2d of Conflict of Laws § 188(3).
Applying the above factors to the instant action, the Court concludes that Michigan substantive law should apply. The 1995 contract was negotiated long distance by attorneys in Michigan and Washington, D.C., and was last executed in Pennsylvania. Performance of the agreement was primarily in Michigan. (Def. Mt. at 5) Ford's principal place of business is in Michigan; Pep Boys' is in Pennsylvania. In relation to the contract at issue here, the parties' contacts have predominantly been in Michigan. There is no rational reason to apply the law of any state other than Michigan.
III. Motion to Dismiss Counts I II for Failure to State a Claim
A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. See Elliot Co., Inc. v. Caribbean Utilities Co., Ltd., 513 F.2d 1176, 1182 (6th Cir. 1975). When considering a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) the court "must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of this claims that would entitle him to relief." In re Delorean Motor Company, 990 F.2d 1236, 1240 (6th Cir. 1993). The complaint must include direct or indirect allegations "respecting all the material elements to sustain recovery under some viable legal theory." Id. (citations omitted). A motion to dismiss a complaint for failure to state a claim should not be granted "unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." See Elliot Co. at 1182 (citations omitted).
Here, Ford has alleged in the complaint that Pep Boys materially breached the 1995 agreement by sending the 2003 cease and desist letter to Ford. Additionally, Ford asserts that this Court should declare that Ford has not breached the agreement by launching the Futura car-line or by applying to register Futura for use on cars. Pep Boys contends that Counts I and II should be dismissed for failure to state a claim because the 1995 agreement prohibits Ford from using the Futura mark for a new line of cars. Therefore, the Court must interpret the contract to decide this motion to dismiss. General rules of contract interpretation apply to interpretation of the 1995 agreement between the parties. See Bamerilease Capital Corp. v. Nearburg, 958 F.2d 150, 152 (6th Cir. 1992).
A. Count I: Breach of Contract
Under Michigan law, the elements of a breach of contract claim are: (1) a contract exists between the parties, (2) the terms of the contract require performance of certain actions, (3) at least one of the parties breached the contract, and (4) the breach caused injury to the non-breaching party. See Webster v. Edward D. Jones Co., 197 F.3d 815, 819 (6th Cir. 1999). It is undisputed that in December 1995 the parties entered into a contract which required performance of certain actions by both Ford and Pep Boys. Ford does not plead specific injuries arising from Pep Boys' alleged breach. (Am. Compl. at 4, ¶ 25)
The third element requires a breach of the agreement by one of the parties. Ford alleges that Pep Boys breached the agreement by sending the 2003 cease and desist letter. (Am. Compl. at 4, ¶ 23; Letter at Ex. C) However, the parties disagree about the restrictions placed on Pep Boys and Ford by the contract. Thus, the Court must decide whether the terms of the agreement are ambiguous, and then interpret the terms of the agreement to discern whether or not Ford has sufficiently plead a breach by Pep Boys.
The question of whether a contract is ambiguous is a question of law for the courts. See Steinmetz Elec. Contractors v. Local Union No. 58, 517 F.Supp. 428, 432 (E.D. Mich. 1981). A contract that has only one interpretation is unambiguous. See Fragner v. American Community Mut. Ins. Co., 199 Mich. App. 537, 540 (1993). In contrast, a contract provision is ambiguous if it is capable of two or more reasonable constructions. See Petovello at 642. Construction of a contract, whether ambiguous or unambiguous, is a question of law for the court. See Petovello v. Murray, 139 Mich. App. 639, 642 (1984).
The terms of the agreement state that "Ford shall restrict its use and registration of the Futura mark to exterior insignia badges, hood ornaments, and the like, for Ford Falcon Futura models manufactured during the years 1959 through 1962." (Am. Compl. Ex. B at 2, ¶ 1) The third paragraph of the agreement further restricts Ford's use of the Futura mark: ". . . Ford shall not use the designation FUTURA alone, or in combination with any other name(s), word(s) or symbol(s), in connection with any tires, wheels, or products used with such items." (Am. Compl. Ex. B at 2, ¶ 3) in the fifth paragraph, Pep Boys agrees to not object to Ford's registration "on application serial no. 74/442, 334"; Pep Boys further agrees to not object to any use of the mark by Ford that is in conformance with the agreement. (Am. Compl. Ex. B at 2, ¶ 5)
The Court, having reviewed the agreement and heard the parties arguments, finds the agreement to be unambiguous. Despite Ford's contention that paragraph three renders paragraph one ambiguous, the Court finds that paragraph three is a further restriction on Ford's use of the Futura mark that does not create ambiguities in the agreement. Furthermore, the Court finds that Pep Boys did not materially breach the agreement by sending Ford the cease and desist letter in July 2003. Accepting all of Ford's factual allegations as true, the Court finds that Ford undoubtedly cannot prove any set of facts that would entitle Ford to prevail on the claim that Pep Boys breached the agreement between the parties. Accordingly, Count I is dismissed.
B. Count II: Declaration that Ford's Actions and Planned Actions Conform with the 1995 Agreement
In Count II of the complaint, Ford requests a declaration from the Court that "all of Ford's actions and planned actions with regard to the FUTURA mark . . . are in conformance with the terms of the 1995 Agreement and not in breach of the 1995 agreement." (Am. Compl. at 5, ¶ 27) Above, the Court interpreted the 1995 agreement to unambiguously forbid Ford's current pursuit of registration of Futura for use on a new line of cars. In light of the Court's findings of law as to Count I, Count II is dismissed for failure to state a claim because Ford cannot prove any set of facts in support of this request for declaratory judgment. Pep Boys' motion as to Count II is GRANTED.
IV. Count III: Declaration that Pep Boys Cannot Sue Ford
Count III of the complaint requests the Court to declare that any trademark infringement claims by Pep Boys against Ford for using Futura violate the 1995 agreement and are barred. (Am. Compl. at 5) In light of the Court's dismissal of Counts I and II above, Count III is moot, and thus dismissed as well.
VI. Conclusion
Being fully advised in the premises, having read the pleadings and heard the parties' arguments November 5, 2003, and for the reasons stated above, the Court hereby dismisses Count I, II and III.