Machine Project, Inc. v. Pan American World Airways, Inc.

199 F. Supp. 3d 382, 2016 U.S. Dist. LEXIS 98782, 2016 WL 4098551
CourtDistrict Court, D. Massachusetts
DecidedJuly 28, 2016
DocketCivil Action No. 14-10022-NMG
StatusPublished
Cited by1 cases

This text of 199 F. Supp. 3d 382 (Machine Project, Inc. v. Pan American World Airways, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Machine Project, Inc. v. Pan American World Airways, Inc., 199 F. Supp. 3d 382, 2016 U.S. Dist. LEXIS 98782, 2016 WL 4098551 (D. Mass. 2016).

Opinion

MEMORANDUM & ORDER

GORTON, Judge.

Machine Project, Inc. (“MPI”) and Rin-ser Chiu (“Chiu”) (jointly “plaintiffs”) bring claims against Pan American World Airways, Inc. (“Pan Am”) and Anthony Lucas (“Lucas”) (jointly “defendants”) for breach of contract and fraud. Pending before the Court is defendant Pan Am’s motion to dismiss for lack of subject matter jurisdiction. For the reasons that follow, the motion will be denied.

I. Background

A. Factual Background

Plaintiff MPI is a New York corporation with its principal place of business in New York. Co-plaintiff Chiu was President and 50% owner of MPI. Defendant Pan Am is a Delaware corporation with its principal place of business in New Hampshire. Co-defendant Lucas was Secretary and 50% owner of MPI. Both Chiu and Lucas are residents of New Jersey.

1. The Parties’ Agreement

In September, 2005, Pan Am and Machine Ltd. (the predecessor in interest to MPI) entered into a Merchandising License Agreement (“the 2005 MLA”) which, inter alia, granted Machine Ltd. the right to authorize others to use Pan Am’s trademarks in certain territories. Lucas, who at that time was President of Machine Ltd., signed the 2005 MLA on behalf of Machine Ltd.

Plaintiffs allege that shortly after the signing of the 2005 MLA, Lucas approached Chiu to seek his assistance in reviving and developing the Pan Am brand, and that in April, 2006, Lucas and Chiu formed a joint venture whereby Chiu agreed to “help” in the development of the Pan Am brand in exchange for a 50% ownership stake in Machine Ltd. Lucas and Chiu later formed MPI as the new corporate entity through which they intended to carry out them joint venture.

In April, 2007, Pan Am and MPI entered into a new Merchandising License Agreement (“the 2007 MLA”) which is at issue in the instant action. The 2007 MLA, which Chiu and Lucas executed on behalf of MPI, provided MPI with, inter alia, the

exclusive, sublicensible right.. .to use [Pan Am’s trademarks] in the Territory on Merchandising Products and in connection with the sale, distribution, advertising and promotion of Merchandising Products in the Territory.

The 2007 MLA also established annual gross revenue requirements for MPI to reach, and provided that, in the event MPI failed to meet such requirements, Pan Am would have the option to collect from MPI the royalty that would have been due from MPI if the requirements for such “Royalty Year” had been satisfied, or to terminate the agreement upon 30 days prior written notice to MPI.

The 2007 MLA further provided that it could be terminated by either party upon 30 days written notice in the event that a breach of a material provision were not cured during that 30-day notice period. Finally, the 2007 MLA contained a forum selection clause which provided that:

All disputes under this Agreement shall be resolved by the courts located in the State of Massachusetts in Boston, Massachusetts, including the United States District Court for the District of Massachusetts and each of the parties consents to the jurisdiction of such courts, agrees to accept service of process by [385]*385mail and hereby waives any jurisdiction or venue defenses otherwise available to it.

Plaintiffs allege that following the execution of the 2007 MLA:

1) Chiu invested significant time and capital into developing the Pan Am brand but that it became known to him that a third party had registered Pan Am trademarks and was selling Pan Am branded products in Japan (a region which plaintiffs purport fell within the “Territory” specified in the 2007 MLA);
2) such third party activity prevented MPI from entering the Japanese market;
3) the “trademark problem” was known to Lucas and Pan Am but they did not inform Chiu about the problem and Chiu continued to finance the MPI venture; and
4) without being able to enter the Japanese market, MPI’s sales dropped and defendants began discussing the possibility of ousting Chiu.

By the fall of 2007, Pan Am was ostensibly dissatisfied with the progress of the branding program and allegedly took actions in concert with Lucas to “oust Chiu and deprive him of the fruits of the 2007 MLA.” Specifically, plaintiffs allege that Lucas made misrepresentations that Chiu would be willing to sell his interest in MPI and, in early 2008, retroactively filled out and backdated corporate forms to indicate that Lucas was MPI’s sole shareholder.

In March, 2008, Pan Am sent a Notice of Termination of the 2007 MLA to Lucas and took the position that it was entitled to do so because, inter alia, the minimum gross revenue requirements set forth in the 2007 MLA had not been met. Plaintiffs allege that Chiu’s requests to Pan Am to provide him a copy of the Notice of Termination were denied, and that Pan Am claimed it did not need to provide such notice because Chiu did not have a proprietary interest in MPI. By August, 2008, Pan Am had allegedly hired Lucas as its “Head of Marketing” and his wife as a “merchandising and design manager” to accomplish precisely what MPI was contracted to do under the 2007 MLA.

2. The 2008 State Court Action

In May, 2008, Chiu and MPI commenced an action in the Supreme Court of the State of New York for New York County against Lucas and Pan Am for breach of the 2007 MLA, wrongful termination of the 2007 MLA and injunctive relief. Pan Am and Lucas removed the case to the United States District Court for the Southern District of New York but it was later remanded to state court for lack of diversity jurisdiction in that Chiu and Lucas were both residents of New Jersey. Pan Am subsequently moved to dismiss the complaint on the grounds that the action had to be litigated in the courts of Boston, Massachusetts in accordance with the forum selection clause of the 2007 MLA.

3. The 2008 Federal Action

In June, 2008, Pan Am brought an action against Chiu and Chiu’s company Vetements, Inc. (“Vetements”) in the United States District Court for the Southern District of New York (“the 2008 action”), alleging that Chiu and Vetements infringed Pan Am’s trademarks by continuing to sell Pari Am-branded products after Pan Am announced its termination of the 2007 MLA. In November, 2009, Chiu' and Vete-ments filed a motion to dismiss that action for failure to name MPI and Lucas as parties. In so moving, Chiu and Vetements argued that in order for Pan Am to prevail on its claim that Pan Am’s trademark rights were infringed, it must first establish that the 2007 MLA was rightfully terminated, and that such a determination could not be made without MPI and Lucas in the lawsuit. In September, 2010, the [386]*386court found that Lucas and MPI were necessary parties and ordered that they be joined to the 2008 action.

In November, 2010, Chiu, Vetements, and MPI asserted counterclaims alleging that Pan Am and Lucas were part of an unlawful scheme to defraud Chiu with respect to the geographic scope of the 2007 MLA. In April, 2012, the court permanently enjoined Vetements from manufacturing or selling goods bearing any trademarks owned by Pan Am and dismissed all counterclaims against Pan Am on improper forum grounds (citing the 2007 MLA’s forum selection clause) and for lack of standing.

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199 F. Supp. 3d 382, 2016 U.S. Dist. LEXIS 98782, 2016 WL 4098551, Counsel Stack Legal Research, https://law.counselstack.com/opinion/machine-project-inc-v-pan-american-world-airways-inc-mad-2016.