American Dairy Queen Corporation v. UAM, LLC
5:24-cv-01209
| W.D. Tex. | Apr 25, 2025Background
- American Dairy Queen Corporation (ADQ) authorized UAM, LLC to operate a Dairy Queen franchise in Anahuac, Texas, via a valid Franchise Agreement.
- ADQ terminated the franchise in October 2024 after UAM allegedly violated contractual covenants by substituting soft serve mix for fresh milk in shakes and malts, contrary to express requirements.
- ADQ sought partial summary judgment on liability for breach of contract, declaratory judgment, trademark infringement, and unfair competition; UAM responded in opposition.
- The court was asked to determine liability only (not damages) and whether ADQ’s notice of termination (sent via email) was proper.
- Parties stipulated to most operative facts, including validity of the contract and minimum admissions about the substitution practice and timing of ADQ’s notice.
- UAM admitted the breach occurred but claimed it was nonmaterial, excusable, and/or waived by ADQ.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract (use of non-milk in shakes) | UAM breached material term on ingredients | Breach was minor, isolated, nonmaterial | For Plaintiff: breach was material |
| Waiver of breach | Contract bars waiver unless persistent | ADQ’s notice/actions constituted waiver | No waiver; contract language unambiguous |
| Declaratory Judgment | Entitled due to clear contract breach | Not directly contested | For Plaintiff |
| Trademark Infringement & Unfair Competition | UAM used marks post-termination, causing likelihood of confusion | No valid termination until receipt of physical notice; ceased use day after receipt; no infringing use | For Plaintiff: notice by email sufficient; infringing use occurred |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standards; initial burden on movant)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (standard for genuine issue of material fact)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (summary judgment; inferences to nonmovant)
- Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321 (Lanham Act infringement test, likelihood of confusion)
- Bartush-Schnitzius Foods Co. v. Cimco Refrigeration, Inc., 518 S.W.3d 432 (materiality of breach as question of law when undisputed)