Chinook USA, L.L.C. v. Duck Commander, Incorporate ( 2018 )

Case: 17-30596 Document: 00514387804 Page: 1 Date Filed: 03/15/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 17-30596 United States Court of Appeals
Summary Calendar Fifth Circuit
FILED
March 15, 2018
CHINOOK USA, L.L.C., Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
DUCK COMMANDER, INCORPORATED; DAHLEN ASSOCIATES,
INCORPORATED; 3292 BRANDS, L.L.C.; CHECKERED FLAG BUSINESS,
L.L.C.; GO-TIME ENERGY, L.L.C.,
Defendants - Appellees
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 3:16-CV-113
Before KING, ELROD, and HIGGINSON, Circuit Judges.
PER CURIAM:*
Plaintiff–Appellant Chinook USA, LLC, initiated this action against
Defendants–Appellees Duck Commander, Inc., Dahlen Associates, Inc.,
3292 Brands, LLC, Go-Time Energy, LLC, and Checkered Flag Business, LLC,
for, inter alia, breach of a licensing agreement. After a bench trial, the district
court ruled in favor of the defendants. Chinook appealed. We AFFIRM.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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I.
Duck Commander, Inc. (“DC”), is a Louisiana corporation owned by the
Robertson family, which originally manufactured and marketed duck calls and
hunting-related equipment. The Robertson family had starred in a reality
television series called Duck Dynasty on the A&E network. Si Robertson
(“Uncle Si”) is one of the Robertson family members and had a well-known
affinity for iced tea. DC retained Dahlen Associates, Inc. (“Dahlen Associates”),
as its licensing agent for DC-branded products. Afterwards, Rachel Dahlen and
Korie Robertson formed 3292 Brands, LLC (“3292 Brands”), to oversee and
maintain a licensing process for such products.
Chinook USA, LLC (“Chinook”), is a company that bottles, markets, and
sells ready-to-drink (“RTD”) beverages. At all relevant times, Mark Gunderson
was Chinook’s Chief Marketing Officer, and David Salmon was Chinook’s
President and Chief Operating Officer. Paul Cox owned and operated a venture
capital firm that provided funding to Chinook to approach DC about producing
and licensing an Uncle Si’s Iced Tea. Chinook submitted a licensing proposal
to DC, which DC accepted. DC then presented its form licensing agreement to
Chinook. In addition to Trey Fisher, Gunderson and Salmon negotiated the
final agreement on behalf of Chinook. Rachel Dahlen, Scott Headington, Korie
Robertson, and David Bolls negotiated on behalf of DC.
On January 7, 2014, Chinook and DC executed the Licensing Agreement
(“Agreement”) that had an effective date of October 23, 2013. Under this
Agreement, Chinook had a five-year exclusive right to license, manufacture,
and distribute DC-branded “Licensed Products.” “Licensed Products” are
defined as “Iced tea, Ready-to-Drink (RTD) Teas, RTD Beverages.” In
exchange, Chinook agreed to pay DC an annual $1,000,000 guaranteed
minimum royalty and a royalty based on net sales, set forth in Schedule A,
paragraph 6, of the Agreement. Chinook also agreed to pay $1,000,000 for Si
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Robertson’s endorsement of the DC-branded iced tea. The endorsement fee
provisions are in Schedule B, and, as relevant here, they state:
Endorsement: Licensee agrees to support the launch of the Duck
Commander Ice Tea program with a personal endorsement fee for
Si Robertson of $1,000,000 and for the support of key Robertson
family members. Si Robertson and key Robertson family members
involvement includes activities such as;
Content Development | Social Media: Year One for “content
development” is critical to help launch, promote and grow the Iced
Tea brand.
Examples of activities include but are not limited to:
- YouTube Video Development
- 6-Second Vine Videos | Snapchat Video
- Instagram | Pinterest Photo Development
- Facebook Content Development
- Twitter Content (and Tweets or Re-Tweets from
Uncle Si)
- Signing of select brand items (off-site — not event
based)
- Quick customized welcome videos for Distributor Sales
Pitches (primarily Quarter One/Year One)
- Content for blogs (pre-determined)
*As the face of the brand, our goal is to drive direct
association with Uncle Si and the tea, it’s very important
Year 1 & 2 that we tell the brand story through meaningful
quick video and pictures. We will bundle content requests to
maximize Uncle Si’s time. Our goal is to build the Duck
Commander Iced Tea brand into a brand that sustains
revenue for many decades to come.
Included in the agreement is the support of Duck Commander and
key Robertson family members and the support of their social
media and public relations efforts when appropriate. . . .
Media Interviews: Up to ten 15 - minute interviews during first
six months of launch. We will work closely with Duck Commander
team to drive smart and strategic media exposure. . . .
Special Appearances: One per quarter, up to four annually.
These will be decided upon by Si and Korie and Willie Robertson
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based on their assessment of which events will be the most
impactful and workable for Si. . . . [Chinook] to submit appearance
suggestions to Dahlen for review with the family.
Planning Meetings: Two annual planning meetings with
Robertson family members. Additional meetings will be handled
by Dahlen team.
The Agreement is governed by Louisiana law and contains an
integration clause which states that the Agreement is the “entire
understanding of the parties” and “shall not be modified or amended except in
writing signed by the parties hereto and specifically referring to this
Agreement.”
On April 1, 2014, DC entered into an agreement with Go-Time Energy,
LLC (“Go-Time”), which granted Go-Time a three-year exclusive right to
license, manufacture, sell, and distribute DC-branded energy shots. On
August 6, 2014, 3292 Brands provided Chinook with a proposal to DC from
Checkered Flag Business, LLC (“Checkered Flag”), to license a vitamin water
and gave Chinook an opportunity to submit a proposal for a similar product,
which Chinook later turned down. 3292 Brands also attached a proposed
amendment to the Agreement that would give Chinook the right of first refusal
for future opportunities. Chinook did not sign that amendment. Later, on
September 22, 2014, DC granted Checkered Flag a five-year non-exclusive
license to sell DC-branded vitamin water. In January 2015, DC and Checkered
Flag terminated their licensing agreement.
In January 2014, Chinook paid DC a $250,000 royalty payment. Around
late June 2014, Chinook transferred $250,000 to 3292 Brands, which acted as
an agent for DC. Sales for the iced tea product then fell flat in summer 2014.
Around late September 2014, Chinook transferred another $250,000 to 3292
Brands, which again acted as an agent for DC.
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In January 2016, Chinook initiated this action against DC, Dahlen
Associates, 3292 Brands, Go-Time, and Checkered Flag. Chinook alleged fraud
in the inducement, breach of contract, breach of the covenant of good faith,
federal trademark infringements, tortious interference with a contractual
relationship, civil conspiracy relating to tortious interference with a
contractual relationship, unfair trade practices, and bankruptcy-related
claims. In March 2016, DC asserted a counter-claim that Chinook breached the
contract by failing to pay DC the royalty payments and endorsement fee. The
following month, the district court dismissed the federal-trademark-
infringements claim and bankruptcy-related claims with prejudice. On
February 2, 2017, both sides moved for summary judgment. In May 2017, the
district court ruled on these motions. It denied Chinook’s motion for partial
summary judgment in its entirety and denied the defendants’ motion for
summary judgment in part and granted it in part, dismissing Chinook’s claims
related to tortious interference with a contractual relationship and civil
conspiracy. Subsequently, the district court held a bench trial on June 5 and 6,
2017. The district court entered judgment in favor of the defendants with
respect to Chinook’s remaining claims of fraud in the inducement, breach of
contract, breach of the covenant of good faith, and unfair trade practices. It
also entered judgment in favor of Chinook with respect to DC’s breach-of-
contract counterclaim. Chinook timely appealed, and now argues that the
district court erred in concluding that DC did not breach the Agreement. 1
II.
As this is a diversity case, we apply Louisiana law. See Dickerson v.
Lexington Ins. Co., 556 F.3d 290, 294 (5th Cir. 2009). The district court’s
1 The district court found that Chinook abandoned the breach-of-contract claims
against all of the defendants except for DC. Chinook does not challenge this finding on appeal
and only argues for breach of contract by DC.
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findings of fact are reviewed for clear error, and conclusions of law are reviewed
de novo. See Kona Tech. Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 601 (5th
Cir. 2000).
Chinook contends that DC violated the Agreement in two ways. First,
Chinook argues that the Agreement granted it an exclusive license for all as-
is ready-for-consumption beverages, and DC violated the Agreement when DC
contracted with Go-Time for energy shots and Checkered Flag for vitamin
water. Second, Chinook claims that DC breached the Agreement by failing to
comply with the endorsement provisions. Under Louisiana law, the elements
of a breach of contract claim are “(1) the obligor’s undertaking an obligation to
perform, (2) the obligor failed to perform the obligation (the breach), and (3) the
failure to perform resulted in damages to the obligee.” Favrot v. Favrot, 68 So.
3d 1099, 1108–09 (La. Ct. App. 2011). “The burden of proof in an action for
breach of contract is on the party claiming rights under the contract.” Vignette
Publ’ns, Inc. v. Harborview Enters., Inc., 799 So. 2d 531, 534 (La. Ct. App. 2001)
(citing Phillips v. Insilco Sports Network, Inc., 429 So. 2d 447, 449 (La. Ct. App.
1983)).
“Contract interpretation is a question of law which we review de novo.”
Kona, 225 F.3d at 609 (citing Fina, Inc. v. ARCO, 200 F.3d 266, 268 (5th Cir.
2000)). Under Louisiana law, the general rules of contract interpretation are
contained in articles 2045–2057 of the Louisiana Civil Code. “Interpretation of
a contract is the determination of the common intent of the parties.” La. Civ.
Code Ann. art. 2045. A contract provision “must be interpreted in light of the
other provisions so that each is given the meaning suggested by the contract
as a whole.” Id. art. 2050. “When the words of a contract are clear and explicit
and lead to no absurd consequences, no further interpretation may be made in
search of the parties’ intent.” Id. art. 2046.
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Extrinsic evidence is admissible only when “the written expression of the
common intention of the parties is ambiguous.” Campbell v. Melton, 817 So. 2d
69, 75 (La. 2002) (citing Ortego v. State, Dep’t of Transp. & Dev., 689 So. 2d
1358, 1363 (La. 1997)). “A contract is considered ambiguous on the issue of
intent when either it lacks a provision bearing on that issue, the terms of a
written contract are susceptible to more than one interpretation, there is
uncertainty or ambiguity as to its provisions, or the intent of the parties cannot
be ascertained from the language employed.” Id. (collecting authorities). If an
ambiguity remains after applying the other general rules of construction, then
the ambiguous contractual provision is to be construed against the drafter. See
La. Civ. Code Ann. art. 2056; Hebert v. Webre, 982 So. 2d 770, 774 (La. 2008).
Chinook argues that “RTD Beverages” in the Agreement is not
ambiguous and incorporates energy shots and vitamin water. It also contends,
alternatively, that if (as the district court held) the term is ambiguous, the
district court erred by failing to address the appropriate objective factors under
Louisiana law. We find its arguments unpersuasive. The Agreement granted
Chinook a five-year exclusive right to license, manufacture, sell, and distribute
DC-branded “Iced tea, Ready-to-Drink (RTD) Teas, RTD Beverages.” “RTD
Beverages” is not expressly defined in the contract. The term is susceptible to
more than one interpretation. Cf., e.g., Nelson v. Nelson, 985 So. 2d 1285, 1290
(La. Ct. App. 2008) (“Either interpretation can be reasonably ascertained from
the four corners of the [contract].”). On one hand, the term could cover all
beverages that are as-is ready for consumption including energy shots and
vitamin water. On the other hand, as tea (i.e., the main product under the
Agreement) is part of a category of beverages that generally require an
additional step of preparation prior to consumption, the term may cover only
the beverages within this category. Thus, we agree with the district court that
the term “RTD Beverages” in the Agreement is ambiguous.
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When the parties’ intent cannot be solely discerned from the text of the
contract, a court can rely on uncontradicted testimony of one of the parties to
determine intent. See, e.g., Book v. Schoonmaker, 26 So. 2d 366, 369 (La. 1946).
Those who negotiated on behalf of DC testified that “RTD Beverages” did not
incorporate all as-is ready-for-consumption liquids. Specifically, Dahlen
testified that contract exclusivity was for “unsweetened tea and sweet tea.” She
also testified that “RTD is a definition that we utilize when we’re describing
something where you would normally have to have another step,” that the
definition is utilized “in iced tea and coffee almost exclusively,” and that during
the negotiations, tea was the focus for 95 percent of the time and Chinook’s
progression into coffee was the focus for the remaining 5 percent. Dahlen,
Bolls, and Korie Robertson all testified that “RTD Beverages” could
encapsulate potential future coffee products.
Chinook did not present any testimony from Fisher, Gunderson, and
Salmon—the parties who negotiated on its behalf. It presented testimony from
Cox and Willie Robertson that the contract concerned more than just teas and
coffees, but they did not participate in the negotiations. Chinook argued that
DC had proposed the addition of a first right of refusal to the Agreement
because DC wanted to remove exclusivity for energy shots and vitamin water.
But Dahlen and Bolls testified that DC drafted the amendment at Chinook’s
request “to be good partners.” Further, on May 16, 2014, Salmon had sent a
letter to Bolls, requesting a confirmation that Chinook had an exclusive license
over the “Licensed Products.” Bolls replied stating, “[t]hank you for taking the
time to ask for a confirmation of Chinook USA’s rights as our exclusive licensee
of tea in single serve and food service channels. This email confirms the same.”
Chinook did not dispute the coverage of the exclusive license until months
later, when sales became stagnant.
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Based on the extrinsic evidence, we agree with the district court’s
conclusion that the parties intended that “RTD Beverages” be limited to teas
and coffees. 2 Accordingly, Chinook did not meet its burden to prove that DC
had agreed to exclusively license energy shots and vitamin water to Chinook
and therefore did not show that a violation of the contract’s exclusive license
occurred.
Next, Chinook argues that the district court erred by placing the burden
on Chinook to make repeated requests to DC to comply with the endorsement
provisions and that DC breached the Agreement by failing to comply with these
provisions. We find these contentions unpersuasive as well. In the district
court, Chinook contested DC’s fulfillment of the endorsement provisions in the
following sections of Schedule B: “Content Development | Social Media,”
“Media Interviews,” “Special Appearances,” and “Planning Meetings.” On
appeal, Chinook’s primary argument is that the plain language of the contract
does not impose a requirement for Chinook to make requests for media and
advertising assistance from DC. Even assuming arguendo this is true, 3 the
plain language also does not mandate the specified activities in the
aforementioned sections of Schedule B. Under the terms of Schedule B, DC
merely “agree[d] to support the launch of the [DC] Ice Tea program” and that
such support “include[d] activities such as” those enumerated in the
2 Conflicting testimony was presented on who the drafter of the term “RTD Beverages”
was. However, it is not necessary to determine who the drafter was because the term is only
construed against the drafter “[i]n case of doubt that cannot be otherwise resolved.” La. Civ.
Code Ann. art. 2056.
3 We need not resolve whether the plain language supports a requirement for Chinook
to make requests for DC’s support, but we note that there is some evidence in the language
of Schedule B that suggests that such a requirement existed. In “Content Development |
Social Media,” it states that “[w]e will bundle content requests to maximize Uncle Si’s time.”
In “Special Appearances,” it states that Chinook will “submit appearance suggestions to
Dahlen for review with the family.”
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aforementioned sections (emphasis added). These sections did not include
language that mandated the listed activities.
Further, Korie Robertson testified that the parties negotiated that
Chinook would perform social media and traditional advertising of the product,
that DC thought Chinook would “take the lead” and submit requests to Dahlen
for assistance, and that requests would be made to “maximize Uncle Si’s time.”
The district court considered the evidence presented and concluded that it was
reasonable for DC to decline certain requests or reschedule others due to, for
example, short notice in the process of working together with Chinook. Chinook
does not contest any specific piece of evidence on appeal. Accordingly, Chinook
did not meet its burden to prove that DC breached the endorsement provisions
in Schedule B.
III.
For the foregoing reasons, we AFFIRM the district court’s judgment
against Chinook on Chinook’s breach of contract claim.
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