Jacked Up, L.L.C. v. Sara Lee Corporation
854 F.3d 797
| 5th Cir. | 2017Background
- Jacked Up licensed its energy ingredients and brand to Sara Lee for manufacture and sale under royalties; the initial term was five years with a three-year renewal, plus termination provisions including a 60-day notice before anniversaries (Section 14(b)) and a change-of-control provision (Section 14(c)).
- Sara Lee later sold its North American Beverage Division to Smucker, which decided not to assume the license; Sara Lee terminated the license in November 2011.
- Jacked Up sued in Texas state court and, after removal, in federal court, alleging breach of contract, breach of fiduciary duty, fraud, and fraudulent inducement; Jacked Up also asserted tortious interference against Smucker and a trade secret misappropriation claim against Smucker.
- The district court granted summary judgment for Sara Lee and Smucker on multiple claims, and the court denied Jacked Up’s Rule 56(d) continuance request; the Fifth Circuit affirmed in part, reversed in part, and remanded for further proceedings.
- Issues that survive include whether Section 14(b) is ambiguous and how termination is triggered and timed, whether Sara Lee breached the contract, whether Jacked Up can prove fraud or fraudulent inducement with respect to reliance, whether Smucker engaged in privileged tortious interference, and whether Ohio law should govern the trade secret misappropriation claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Term interpretation of Section 14(b) timing | Jacked Up: annual termination right; timing ambiguous | Sara Lee: termination effective upon written notice | Ambiguous; question of fact on termination timing |
| Breach of contract after termination | Jacked Up contends dispute factual issues on breach | Sara Lee argues no breach under interpretation | Genuine disputes exist; remand on contract breach |
| Fraud and fraudulent inducement pleadings and reliance | Jacked Up pleaded common-law fraud and constructive fraud; reliance justified | Sara Lee argues lack of fiduciary duty and unjustified reliance | District court erred; genuine disputes on fraud and reliance |
| Tortious interference by Smucker | Jacked Up claims Smucker induced breach by terminating or not assuming | Smucker acted with business justification/privilege | Judgment for Smucker affirmed due to privilege and lack of unjustified interference |
| Trade secret misappropriation governing law and damages | Texas or Ohio law; damages should be proven; discovery needed | Ohio UTSA applies; insufficient evidence of misappropriation; Rule 56(d) denial proper | Ohio law applies; no proof of misappropriation; affirmed summary judgment on claim; Rule 56(d) affirmed denial |
Key Cases Cited
- Gallagher v. Lenart, 874 N.E.2d 43 (Ill. 2007) (contract interpretation; ambiguity governs parol evidence admissibility)
- Cent. Ill. Light Co. v. Home Ins. Co., 821 N.E.2d 206 (Ill. 2004) (contractual ambiguity and construction principles)
- Curia v. Nelson, 587 F.3d 824 (7th Cir. 2009) (ambiguity; parol evidence admissible to ascertain intent)
- Rockwell Eng’g Co. v. Automatic Timing & Controls Co., 559 F.2d 460 (7th Cir. 1977) (contract termination language interpretation guidance)
- Int’l Adm’rs, Inc. v. Life Ins. Co. of N. Am., 753 F.2d 1373 (7th Cir. 1985) (contract term interpretation and notice provisions)