Sally DeLorean v. DeLorean Motor Company

• Court: Court of Appeals for the Third Circuit
• Decided: December 5, 2019
• Docket: 18-3333
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

______________

No. 18-3333 ______________

SALLY DELOREAN, as administratrix for The Estate of John Z. DeLorean Appellant

v.

DELOREAN MOTOR COMPANY (Texas) ______________

On Appeal from the United States District Court for the District of New Jersey (D.C. Civ. No. 2-18-cv-08212) District Judge: Honorable Jose L. Linares ______________

Submitted Under Third Circuit L.A.R. 34.1(a) October 21, 2019 ______________

Before: GREENAWAY, JR., PORTER, and COWEN, Circuit Judges.

(Opinion Filed: December 5, 2019) ______________

OPINION* _____________

GREENAWAY, JR., Circuit Judge.

This case requires that we interpret a Settlement Agreement entered into by Sally

DeLorean as administratrix of the Estate of John Z. DeLorean (the “Estate”) and

DeLorean Motor Company (Texas) (“DMC Texas”) in the action Estate of DeLorean v.

DeLorean Motor Company (Texas), No. 2:14-cv-1146 (D.N.J.). The question presented

is whether the Settlement Agreement precludes the Estate’s claims in this action. The

District Court found that it did, and the Estate appealed. For the following reasons, we

will affirm.

BACKGROUND

In the 1970s, John Z. DeLorean founded the DeLorean Motor Company (“DMC”).

DMC designed, manufactured, and sold an automobile named the DMC 12, which

featured gull-wing doors. DMC ceased operations in 1979 and was subsequently

dissolved through bankruptcy proceedings.

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. 2 A. The Universal Agreement

DMC may have gone defunct decades ago, but the DeLorean automobile remains

culturally relevant in large measure due to Universal Pictures’s popular “Back to the

Future” film series, which prominently features the DeLorean automobile. On March 14,

1989, Mr. DeLorean entered into an agreement with Universal (“the Universal

Agreement”). Under the Universal Agreement, Mr. DeLorean granted Universal certain

exclusive “rights in and to the name and appearance of the DeLorean automobile in order

to enable [Universal] to engage in certain merchandising and commercial tie-up activities

in connection with the [‘Back to the Future’ films].” App. 26. When he entered into this

contract, Mr. DeLorean represented that he was the sole owner of the rights in the

material granted under the contract. In consideration for these exclusive rights, Universal

agreed to pay Mr. DeLorean five percent of Universal’s “net receipts . . . from

merchandising and commercial tie-ups in connection with the [‘Back to the Future’

films].” App. 27. The contract states that it “shall bind and inure to the benefit of [Mr.

DeLorean’s] and [Universal’s] respective heirs, legal representatives, successors and

assigns.” App. 29.

Accordingly, upon Mr. DeLorean’s death in 2005, the Estate alleges that it

succeeded to the rights under the Universal Agreement. The Estate alleges that Universal

made some payments under the Universal Agreement but stopped doing so at a time

unknown to the Estate. The Estate further alleges that Mr. DeLorean did not have a copy

3 of the Universal Agreement at the time of his death and that the Estate therefore could not

enforce Mr. DeLorean’s rights under it.

B. DMC Texas and the Settlement Agreement

In 1997, DMC Texas purchased many of the assets sold in DMC’s bankruptcy.

These included, inter alia: inventory, good will, trade names, and other tangible and

intangible assets. DMC Texas subsequently registered two trademarks: one of the

stylized “DeLorean” logo on the rear bumper of the car and one of the “DMC” logo on

the front grill. As of 2018, DMC Texas sold automobiles, automobile parts, clothing,

video game licenses, commercial licenses, and various other merchandise. It also

licensed its trademarks to various companies.

The Settlement Agreement provides, in relevant part, that DMC Texas will pay the

Estate the full amount of any claims asserted in the 2014 Action and that the Estate, in

exchange, would release and discharge all claims “that were sought, or could have been

sought, in the [2014 Action],” except for the obligations imposed upon DMC Texas by

the Settlement Agreement. App. 21–22. Specifically, DMC Texas agreed not to

participate willingly “in any legal proceeding against DMC Texas in the future in

connection with” DMC Texas’s use of the name “DeLorean Motor Company” or any of

the DeLorean Marks. App. 22. In addition, the Settlement Agreement acknowledged

DMC Texas’s “worldwide rights . . . to use, register, and enforce any of [sic] DeLorean

Marks for any and all goods and services, relating to automobile dealerships,

4 automobiles, automobile parts and accessories, clothing, and promotional items.” Id. It

also provided that any disputes arising under it would be governed by New Jersey state

law. Notably, the Settlement Agreement did not reference the Universal Agreement.

C. Universal’s Failure to Pay Under the Universal Agreement

In discovery during the 2014 action, the Estate became aware of the Universal

Agreement. App. 7. In February 2018, the Estate contacted Universal to determine the

amount of royalties that Universal owed to the Estate under the Universal Agreement.

The Estate claims that Universal represented that DMC Texas had indicated that it

possessed the rights under the Universal Agreement and that the overdue royalty

payments were remitted to DMC Texas instead of the Estate. The Estate alleges that in

April 2018, counsel for DMC Texas threatened to bring a lawsuit against the Estate for

tortious interference unless the Estate immediately retracted its request that Universal

make royalty payments to the Estate under the Universal Agreement.

D. The District Court Decision

The Estate then commenced this action seeking: (1) a declaratory judgment that

the Settlement Agreement does not grant DMC Texas any rights under the Universal

Agreement and (2) an order directing DMC Texas to account for and pay to the Estate all

money it had received from Universal under the Universal Agreement. DMC Texas

moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The Estate

opposed that motion and filed a cross-motion for summary judgment.

5 The District Court enforced the Settlement Agreement and found that dismissal

was warranted. The District Court explained that the main issue before it was “whether

the materials licensed in the Universal Agreement were included in the Settlement

Agreement, thereby barring Plaintiff from asserting a claim under the Universal

Agreement as a matter of law.” App. 9. The District Court first found that both

agreements covered the same subject matter. The District Court then found that the

context of the agreements indicated that the Estate’s claims to the royalties under the

Universal Agreement were incorporated into the Settlement Agreement and therefore

barred by the Settlement Agreement. The Estate timely appealed.

DISCUSSION

A. Jurisdiction and Standard Review

The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We have

jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review over a decision to

grant a motion to dismiss. Delaware Nation v. Pennsylvania, 446 F.3d 410, 415 (3d Cir.

2006).

B. Legal Standard

“[I]n deciding a motion to dismiss, all well-pleaded allegations of the complaint

must be taken as true and interpreted in the light most favorable to the plaintiffs, and all

inferences must be drawn in favor of them.” McTernan v. City of York, 577 F.3d 521,

526 (3d Cir. 2009) (citation omitted). To withstand a Rule 12(b)(6) motion to dismiss, a

6 complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to

relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

C. Analysis

The Estate makes several arguments on appeal asserting why the District Court

should have found that DMC Texas did not have authority to enforce the Universal

Agreement in its own name. None of these arguments is availing, however, because the

Settlement Agreement barred the Estate from suing DMC Texas for the conduct it

engaged in here.

In accordance with the terms of the Settlement Agreement under which this

dispute arises, we apply New Jersey contract law. Neither party argues that the

Settlement Agreement was entered into involuntarily; therefore, we “enforce the

agreement as a binding contract voluntarily entered by both parties.” D.R. by M.R. v. E.

Brunswick Bd. of Educ., 109 F.3d 896, 901 (3d Cir. 1997). New Jersey law requires that

we “enforce contracts as the parties intended,” which requires that we “examin[e] the

plain language of the contract, the surrounding circumstances, and the purpose of the

contract.” MacDonald v. CashCall, Inc., 883 F.3d 220, 228–29 (3d Cir. 2018).

The Settlement Agreement incorporates the subject matter of the Universal

Agreement. Indeed, the Settlement Agreement expressly states that the Estate agrees not

to sue DMC Texas for its use, registration, or enforcement of the DeLorean Marks “in

7 conjunction with the automobile industry and associated business ventures, including

those associated with the DeLorean automobile . . . and related brand merchandising and

licensing associated or related to the business of [DMC Texas] and its associated brand.”

App. 22.

As the District Court explained, the subject matter of the Universal Agreement

clearly falls within the ambit of this clause in at least three ways. First, the marks

described in both agreements include the DMC logo and the stylized word DeLorean.

Second, both agreements cover these marks as they relate to the DeLorean automobile’s

image. Third, both agreements implicate the use of these marks in the context of

manufacturing and distributing products that display the DeLorean automobile’s image

and logo. Accordingly, we will affirm the District Court’s holding that the subject matter

of the Universal Agreement and the Settlement Agreement overlap.

The remaining question then is whether DMC Texas’s dealings with Universal fall

within its “worldwide rights . . . to use, register, and enforce” these marks in connection

with its business or brand. We find that it does. In addition to selling automobiles and

other products, DMC Texas’s business involves licensing its trademarks and rights to the

DeLorean automobile brand to other companies, such as Mattel, Inc., Target, and

Microsoft. Here, the demand that Universal pay DMC Texas for the use of marks for

which it has “worldwide rights” falls within its business of licensing and enforcing the

licenses to its marks and other intellectual property. The Estate insists that DMC Texas

8 was not “using” its marks when it requested payments from Universal, but the Estate fails

to make any compelling argument why that conduct does not constitute enforcing DMC

Texas’s rights to the marks at issue, which is also expressly covered by the Settlement

Agreement.

The Estate’s argument that DMC Texas’s interference with the Estate’s contract

with Universal only occurred after the 2014 action and therefore could not be

contemplated by the Settlement Agreement is unavailing for two reasons. First, the

Settlement Agreement is not merely retrospective. Instead, it both resolves all claims that

were sought and could have been sought in the 2014 action and recognizes DMC Texas’s

rights to use these marks in the future. Those rights, as explained above, include the

enforcement of DMC Texas’s marks and licenses to those marks. Second, the Settlement

Agreement expressly carves out specific areas in which the Estate retains its right to

pursue legal action against DMC Texas—namely, any other use of the name DeLorean,

any aspect of John Z. DeLorean’s life, and any depiction of his likeness. That the

Universal Agreement is not mentioned in the Settlement Agreement suggests that the

parties did not intend to permit the Estate to be able to sue DMC Texas for attempting to

enforce its rights to the marks against other entities, including Universal. Accordingly,

we find that the Settlement Agreement shields DMC Texas from suit brought by the

Estate for the conduct at issue here.

9 Because the Settlement Agreement bars the Estate from pursuing this action, we

do not have to determine whether the Estate assigned its rights under the Universal

Agreement to DMC Texas. Likewise, we do not reach DMC Texas’s alternative

arguments that (1) the Estate has no right to the intellectual property covered by the

Universal Agreement, and (2) judicial estoppel bars the Estate’s claims.

CONCLUSION

For the foregoing reasons, we will affirm the judgment of the District Court.