Fred Segal, LLC v. Cormackhill, Lp ( 2020 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS AUG 4 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
FRED SEGAL, LLC, No. 18-56093
Plaintiff-counter- D.C. No.
defendant-Appellee, 2:16-cv-06653-VAP-E
v.
MEMORANDUM*
CORMACKHILL, LP,
Defendant-counter-claimant-
Appellant.
FRED SEGAL, LLC, No. 18-56169
Plaintiff-counter- D.C. No.
defendant-Appellant, 2:16-cv-06653-VAP-E
v.
CORMACKHILL, LP,
Defendant-counter-
defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
Virginia A. Phillips, Chief District Judge, Presiding
Argued and Submitted February 4, 2020
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Pasadena, California
Before: THOMAS, Chief Judge, and WARDLAW and NGUYEN, Circuit Judges.
These cross-appeals arise from a trademark infringement action by Fred
Segal, LLC, the owner of marks relating to the name “Fred Segal,” against
CormackHill, LP for use of the name on the Melrose Center (“the Center”) in Los
Angeles.
CormackHill appeals the district court’s denial of summary judgment to
CormackHill on Fred Segal, LLC’s claims and grant of partial summary judgment
in favor of Fred Segal, LLC on CormackHill’s counterclaims, in which the district
court found that CormackHill is not a third-party beneficiary to the License
Agreement and its subsequent Radius Amendment. Fred Segal, LLC cross-appeals
the district court’s grant of final judgment in favor of CormackHill, based on its
earlier partial denial of summary judgment in which it concluded that tenants of the
Center who retained the right to use the Fred Segal mark could remain holdover
tenants—with rights to the mark—indefinitely. Applying that conclusion as “law
of the case,” the district court denied prospective injunctive relief to Fred Segal,
LLP and granted final judgment for CormackHill. Because the parties are familiar
with the facts of this case, we do not further repeat them here.
We have jurisdiction under 28 U.S.C. § 1291, and we affirm in part and
reverse in part.
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1. The district court did not err in granting partial summary judgment to
Fred Segal, LLC and denying summary judgment to CormackHill based on its
conclusion that CormackHill was not a third-party beneficiary of the License
Agreement and Radius Amendment. In considering whether a nonparty is a third-
party beneficiary to a contract, California courts examine the contract and the
relevant circumstances to determine “(1) whether the third party would in fact
benefit from the contract, . . . (2) whether a motivating purpose of the contracting
parties was to provide a benefit to the third party, and (3) whether permitting a
third party to bring its own breach of contract action against a contracting party is
consistent with the objectives of the contract and the reasonable expectations of the
contracting parties.” Goonewardene v. ADP, LLC, 6 Cal. 5th 817, 830 (2019).
CormackHill undoubtedly benefits from the continued presence of the Fred
Segal mark on signs at the Center, and from the Radius Amendment’s exclusion of
other uses of the Fred Segal mark in the surrounding area. But “[t]he circumstance
that a literal contract interpretation would result in a benefit to the third party is not
enough to entitle that party to demand enforcement.” Hess v. Ford Motor Co., 27
Cal. 4th 516, 524 (2002) (quoting Neverkovec v. Fredericks, 74 Cal. App. 4th 337,
348 (1999)); see also Goonewardene, 6 Cal. 5th at 830 (explaining that the parties
“must have a motivating purpose to benefit the third party, and not simply
knowledge that a benefit to the third party may follow”).
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The License Agreement does not have a “motivating purpose” to benefit
CormackHill because the License Agreement expressly precludes CormackHill
from succeeding to the rights CormackHill now seeks to enforce. The License
Agreement grants the Licensee the right to use the Fred Segal mark on signs
“within the physical boundaries of the Center.” But it expressly precludes third-
party purchasers of the Center, like CormackHill, from succeeding to the License:
if the Center is sold outside the Brown Family, “such transferee shall not succeed
to the rights of [the] Licensee hereunder.” The License is instead granted “only to
the extent Licensee [the Brown Family] owns and operates such Center.”
CormackHill responds that an isolated clause of the License Agreement,
which provides that “none of the signs in or about the Center shall be removed as a
consequence of” a transfer outside the Brown Family, shows a motivating purpose
to benefit third-party transferees like CormackHill. But the complete sentence
makes clear its meaning:
If the transferee is not a member of the Brown Family, the individual
tenants shall retain all of their rights with respect to the Name and none
of the signs in or about the Center shall be removed as a consequence
of such transfer, but such transferee shall not succeed to the rights of
Licensee hereunder.
Thus, read in context, tenants who secured the right to use the mark in connection
with their lease retain that right if the Center is sold to someone outside the Brown
Family. But the clause expressly precludes a transferee who is not a member of
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the Brown Family from “succeed[ing] to the rights of [the] Licensee.” An intent to
benefit any remaining tenants still using the Fred Segal mark is consistent with
other provisions of the License Agreement that contemplate benefits to tenants
who entered into separate license agreements with Fred Segal. By contrast, no
other provision of the License Agreement contemplates benefits for non-Brown
Family owners of the Center.1
Nothing in the Radius Amendment alters this understanding. The Radius
Amendment contemplates the existence of a “Licensee” with the ability to waive
the Amendment’s restrictions. It thus does not have a motivating purpose to
benefit CormackHill, a non-Licensee who was expressly precluded from
succeeding to the rights of the Licensee.
2. The district court erroneously held that its denial of Fred Segal, LLC’s
partial motion for summary judgment operated as “law of the case,” requiring it to
grant final judgment to CormackHill. In that motion, Fred Segal, LLC had sought
a ruling that if tenants held over after their lease terms, and if by operation of
California law they became month-to-month tenants, they would not similarly be
1
CormackHill also argues that a holding that it is not a third-party
beneficiary impermissibly burdens it with third-party obligations to maintain the
signs for tenants. But CormackHill is free to remove the signs of its own volition
if it so desires; the License Agreement says only that when the Center is
transferred outside of the Brown Family, the signs might stay to the extent a
remaining tenant’s license has not expired.
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entitled to month-to-month extensions of their licenses to use the Fred Segal mark.
But rejection of Fred Segal’s position at summary judgment was not law of the
case requiring the district court to conclude that such holdover tenants, if any,
would be entitled to retain licensing rights on a month-to-month basis indefinitely.2
“[T]he denial of a summary judgment motion is never law of the case
because factual development of the case is still ongoing.” Peralta v. Dillard, 744
F.3d 1076, 1088 (9th Cir. 2014) (en banc). CormackHill argues that the district
court nonetheless intended its legal ruling to be final, but a denial of summary
judgment is not law of the case even when the court “clearly intended to decide the
issues at hand.” Id. While the district court noted that its ruling was not based on
“a dispute of material fact,” the denial of summary judgment is simply “a ruling
that [a party] could hypothetically prove some set of facts that would support his
claim,” not a conclusive determination of that claim. Id. Thus, the district court’s
summary judgment ruling does not preclude Fred Segal, LLC from providing new
or different evidence and law to support its argument.
Because the district court erroneously believed that it was bound by the law
of the case in determining that prospective injunctive relief was speculative, we
2
The district court clearly referred to its law of the case reasoning in holding
that prospective injunctive relief was speculative. And Fred Segal, LLC properly
prayed for injunctive relief in its Complaint.
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reverse the entry of final judgment and remand for further proceedings. See United
States v. Lummi Nation, 763 F.3d 1180, 1187–88 (9th Cir. 2014).
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Costs on appeal are awarded to Fred Segal, LLC.
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