RNC Systems, Inc. v. Modern Technology Group, Inc.
2012 U.S. Dist. LEXIS 37161
| D.N.J. | 2012Background
- RNC and MTG entered December 2003 into a Technology License and Service Agreement covering Limo Touch and Multiplex technologies used in limousines.
- Limo Touch was developed by RNC with MTG distributing Mastrcon and related components; Multiplex was never successfully developed.
- MTG paid royalties for Limo Touch from 2004 to Sept. 2008; MTG stopped after Oct. 2008 though sales continued.
- RNC seeks royalties from MTG for Limo Touch sales post-2008; MTG argues Limo Touch is not Licensed Technology under 1.5 and thus not royalty-bearing.
- MTG asserts MTG’s counterclaims include fraud in inducement and unfair competition; RNC moves for summary judgment on those and on breach damages.
- Court granted partial summary judgment on MTG’s royalty obligation (narrow issue) and partial summary judgment dismissing Lanham Act and fraudulent inducement claims; issues remain for damages calculation and certain breach claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is MTG obligated to pay royalties for Limo Touch sales post-2008? | RNC: Limo Touch is a Licensed Product under 1.9 and 4.1, triggering royalties. | MTG: Limo Touch falls outside Licensed Technology under 1.5, so no royalties. | MTG owes royalties for Limo Touch; contract language unambiguous. |
| Does 1.5’s Licensed Technology exclude Limo Touch, affecting royalty duty? | RNC: Ambiguity resolved by reading 1.5 with 1.9; royalties based on Licensed Products. | MTG: 1.5 excludes Limo Touch; no Licensed Technology. | No; 1.5 ambiguity resolved against MTG; Limo Touch is Licensed Products under 1.9. |
| Are MTG’s pre-contract fraud claims barred by the economic loss doctrine and integration clause? | RNC: Fraud claims arise from contract performance and are barred. | MTG: Fraud claims should survive despite contract. | Fraudulent inducement claims barred by the New Jersey economic loss doctrine and integration clause. |
| Are MTG’s pre-contract fraud claims barred by parol evidence rule due to integration clause? | RNC: Integration clause bars parol evidence. | MTG: Pre-contract statements may be admitted. | Integration clause and parol evidence rule bar MTG’s fraudulent inducement claims. |
Key Cases Cited
- Ocean Cape Hotel Corp. v. Masefield Corp., 63 N.J. Super. 369 (App.Div. 1960) (fraud in inducement vs. contract; extrinsic fraud allowed before contract formation)
- Travelodge Hotels, Inc. v. Honeysuckle Enterprises, Inc., 357 F. Supp. 2d 788 (D.N.J. 2005) (parol evidence limits on fraud in the integrated writing)
- Filmlife, Inc. v. Mal “Z” Ena, Inc., 251 N.J. Super. 570 (App.Div. 1991) (parol evidence and integration clause limits in fraud cases)
- Magnet Res., Inc. v. Summit MRI, Inc., 318 N.J. Super. 275 (App.Div. 1998) (material breach affects contract remedies; continued benefit analysis)