Delaware Business Litigation Report

Court of Chancery Denies Plaintiff's Motion for Declaratory Judgment, Specific Performance and Damages Resulting From Alleged Breaches of Licensing Agreements

Shadewell Grove IP, LLC v. Mrs. Fields Franchising, LLC, C.A. No. 1691-N, 2006 WL 1375106 (Del. Ch. May 8, 2006). Plaintiff Shadewell Grove IP, LLC sought declaratory judgment, specific performance and damages resulting from Defendant Mrs. Fields Franchising, LLC's alleged breaches of three licensing agreements. Plaintiff and Defendant were parties to three trademark license agreements providing Plaintiff with the exclusive right to develop and distribute products utilizing Mrs. Fields trademarks, service marks and trade names. The first two agreements allowed Defendant to terminate the agreements after thirty days notice if Plaintiff defaulted on any payments due under the agreements. These agreements contained no cure provisions. Unlike the first two agreements, the third agreement allowed Plaintiff to cure a default within five days of notice of default. Plaintiff consistently had difficulty making the necessary payments on time. In July 2005, Defendant sent a notice of default and termination to Plaintiff. Following this notice, principals of Plaintiff and Defendant spoke on the telephone. Plaintiff claimed that the parties agreed on the call that payment in full by a certain date would cure all of the agreements and sent an email requesting written confirmation of the agreement the next day. Defendant claimed no such agreement was reached and sent a letter stating that payment would only cure breaches of the third agreement. Plaintiff paid the amount it owed and acted as if the license agreements had not been terminated. Defendant sent a letter stating that while the third license agreement remained in effect, the other two agreements would terminate thirty days after the notice of default and termination. At trial, Plaintiff claimed that the parties orally modified the license agreements so that they could all be cured after default and Plaintiff had so cured its breaches. Plaintiff also argued that Defendant had waived its right to strict compliance with the terms of the license agreements and that the amount it had paid prior to the notice of default should be applied to he second and third agreements. Applying Utah law, the Court rejected Plaintiff's arguments. The Court held that: (1) the parties had not modified the agreements to allow Plaintiff to cure a default because Plaintiff failed to meet its burden of showing mutual consent by a preponderance of the evidence; (2) Defendant had not waived strict compliance with the terms of the agreements because the agreements contained nonwaiver provisions and Defendant had consistently sought payment when Plaintiff was late in the past; and (3) the payments should be allocated ratably to all three agreements. Share