Monster Daddy, LLC v. Monster Cable Products, Inc.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-1692
MONSTER DADDY, LLC,
Plaintiff - Appellee,
v.
MONSTER CABLE PRODUCTS, INCORPORATED,
Defendant - Appellant.
Appeal from the United States District Court for the District of
South Carolina, at Greenville. Henry M. Herlong, Jr., Senior
District Judge. (6:06-cv-00293-HMH)
Argued: May 18, 2012 Decided: June 19, 2012
Before KEENAN, WYNN, and FLOYD, Circuit Judges.
Affirmed by unpublished opinion. Judge Keenan wrote the
opinion, in which Judge Wynn and Judge Floyd joined.
ARGUED: Kirsten Elena Small, NEXSEN PRUET, LLC, Greenville,
South Carolina, for Appellant. Peter Jester Gleekel, WINTHROP &
WEINSTINE, PA, Minneapolis, Minnesota, for Appellee. ON BRIEF:
Sara Kanos, NEXSEN PRUET, LLC, Greenville, South Carolina;
Robert Payne, Scott J. Allen, LARIVIERE, GRUBMAN & PAYNE, LLP,
Monterey, California, for Appellant. Thomas H. Boyd, Bradley J.
Walz, WINTHROP & WEINSTINE, PA, Minneapolis, Minnesota, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
BARBARA MILANO KEENAN, Circuit Judge:
In this appeal, we consider a challenge to the district
court’s award of attorneys’ fees to Monster Daddy, LLC (Monster
Daddy), based on the court’s holding that Monster Cable
Products, Inc. (Cable Products) breached a forum selection
clause contained in a settlement agreement executed by the
parties. Cable Products contends that the district court erred
in summarily enforcing the forum selection clause, arguing that
disputed factual questions remained regarding another alleged
breach of the settlement agreement. Cable Products also argues
that the language of the settlement agreement did not support
the attorneys’ fee award. Upon our review, we affirm the
district court’s decision awarding attorneys’ fees to Monster
Daddy, because the forum selection clause was independently
enforceable under the terms of the parties’ contract and Monster
Daddy was a “prevailing party,” within the meaning of that
contract term.
I.
In 2006, Monster Daddy filed a declaratory judgment action
against Cable Products in federal district court in South
Carolina, seeking a declaration that Monster Daddy’s trademark
rights in certain cleaners, waxes, and adhesives did not
infringe Cable Products’ trademark rights in various electronic
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cables and their component parts. In 2007, after the parties
entered into a settlement agreement (the settlement agreement),
Monster Daddy dismissed its declaratory judgment action.
Two provisions of the settlement agreement are material to
our resolution of this appeal. First, the settlement agreement
included a forum selection clause (the forum selection clause),
which provided:
Choice of Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws
of the United States and the State of South Carolina
without regard to internal conflict of laws rules.
The Parties agree that any claim asserted in any legal
proceeding by one party against the other shall be
commenced and maintained in the United States District
Court for South Carolina or a South Carolina state
court of competent jurisdiction. Any mutually agreed
to alternative dispute resolution proceeding shall
take place in Greenville, South Carolina.
(Emphasis added.)
Second, the settlement agreement contained a provision
allowing an award of attorneys’ fees and costs incurred by a
prevailing party in enforcement of the agreement (the attorneys’
fees clause). This clause stated:
Attorney Fees and Costs. In the event of any breach
of this Agreement, the prevailing party shall be
entitled to recover not only the amount of any
judgment which may be awarded in its favor but also
all such other damages, costs and expenses that may be
incurred by the party, including but not limited to
court costs, reasonable attorneys’ fees, and all other
reasonable costs and expenses.
3
In 2010, Monster Daddy filed an action against Cable
Products in federal district court in South Carolina (the South
Carolina action) asserting, among other things, that Cable
Products breached the settlement agreement. In its answer,
Cable Products alleged that Monster Daddy had committed a prior
material breach of the settlement agreement by failing to abide
by certain terms in Monster Daddy’s trademark applications and
that, as a result of that prior breach, Cable Products was no
longer bound by the settlement agreement.
After Monster Daddy filed the South Carolina action,
Monster Daddy learned that an affiliate of Cable Products was
selling certain car cleaners and waxes which, according to
Monster Daddy, constituted an intentional infringement of its
trademark rights. Monster Daddy accordingly sought leave to
amend its complaint in the South Carolina action to include a
claim for intentional trademark infringement. Cable Products
opposed Monster Daddy’s request to amend, and filed an action
against Monster Daddy in federal district court in California
seeking a declaratory judgment that the sales of the various car
cleaners and waxes did not infringe Monster Daddy’s trademark
rights (the California action).
Monster Daddy thereafter filed in the South Carolina action
a motion to amend its complaint to include a claim for
intentional trademark infringement, and a motion to dismiss the
4
California action or to enjoin Cable Products from proceeding in
that action. The district court in South Carolina granted
Monster Daddy’s motion to amend, but denied the motion to
dismiss the California action citing the court’s lack of
authority to dispose of a matter pending in another
jurisdiction. However, the district court in South Carolina
found that Cable Products’ tactic in filing the California
action was “deceptive,” and agreed to consider the imposition of
sanctions against Cable Products.
When Cable Products failed to dismiss the California
action, Monster Daddy retained counsel to file a motion in that
action to transfer Cable Products’ claims to the district court
in South Carolina. After Monster Daddy filed this motion, Cable
Products voluntarily dismissed the California action.
Monster Daddy later filed in the South Carolina action a
motion to enforce the settlement agreement, arguing that Cable
Products breached the forum selection clause by filing the
California action. The district court agreed, and invited
Monster Daddy to seek reimbursement of its attorneys’ fees
incurred as a result of Cable Products’ breach of the forum
selection clause. Monster Daddy later filed a motion requesting
reimbursement of about $9,000 in attorneys’ fees. After Cable
Products failed to respond to Monster Daddy’s motion, the
district court awarded Monster Daddy the amount requested.
5
Cable Products filed a timely notice of appeal from the district
court’s award of attorneys’ fees.
II.
Cable Products argues that the district court erred in
summarily enforcing the settlement agreement, because there was
an unresolved factual dispute at the time of the court’s
decision regarding which party first breached the settlement
agreement. Cable Products argues that if a court determines
that Monster Daddy committed the first material breach of the
settlement agreement, Cable Products would not have been
required to perform its obligations under the settlement
agreement, including the obligation imposed by the forum
selection clause.
Cable Products also challenges the district court’s award
of attorneys’ fees on the grounds that: 1) Monster Daddy was not
a “prevailing party” under the terms of the settlement
agreement, because Cable Products voluntarily dismissed the
California action; and 2) the attorneys’ fees incurred in the
California action were beyond the scope of the settlement
agreement’s enforcement provision. We address each argument in
turn.
Generally, we review under an abuse of discretion standard
a district court’s decision to enforce a settlement agreement
6
and to award attorneys’ fees. See Bosley v. Mineral Cnty.
Comm’n, 650 F.3d 408, 411 (4th Cir. 2011) (attorneys’ fees);
Hensley v. Alcon Labs., Inc., 277 F.3d 535, 541 (4th Cir. 2002)
(enforcement of settlement agreement). However, we review a
district court’s interpretation of the language of a settlement
agreement, like a court’s interpretation of other contractual
language, de novo. Nehi Bottling Co. v. All-American Bottling
Corp., 8 F.3d 157, 162 (4th Cir. 1993).
The parties agree that our interpretation of the settlement
agreement is governed by South Carolina law. Under South
Carolina law, the issue whether a contract is ambiguous, and the
interpretation of an unambiguous contract, are questions of law
decided by the court. S.C. Dep’t of Natural Res. v. Town of
McClellanville, 550 S.E.2d 299, 302-03 (S.C. 2001). The
language of a contract is ambiguous when its terms are
susceptible to several reasonable interpretations. Id. at 302.
In such cases, the court should consider the parties’ intent in
determining the meaning of the language employed. Davis v.
Davis, 641 S.E.2d 446, 452 (S.C. Ct. App. 2006).
When the language of a contract is unambiguous, however, a
court’s only function is to interpret the contract’s lawful
meaning and the intent of the parties as expressed in the
contract’s terms. Miles v. Miles, 711 S.E.2d 880, 883 (S.C.
2011). Thus, when contract language is unambiguous, the plain
7
language of the contract determines its force and effect.
McGill v. Moore, 672 S.E.2d 571, 574 (S.C. 2009).
We begin by addressing Cable Products’ primary argument,
that the district court was precluded from enforcing the forum
selection clause of the settlement agreement, given the
unresolved dispute regarding whether Monster Daddy committed a
prior material breach of the agreement. In effect, Cable
Products argues that so long as there remains an unresolved
allegation that one party committed a prior material breach of a
settlement agreement, the other provisions of that settlement
agreement are unenforceable. We disagree with this argument.
By including a forum selection clause in the settlement
agreement, the parties implicitly recognized that disputes
concerning the agreement could occur at a later date. The forum
selection clause manifested the parties’ intent regarding the
forums where any such future disputes would be resolved. See
Jumara v. State Farm Ins. Co., 55 F.3d 873, 880 (3d Cir. 1995).
Because the forum selection clause was drafted to address the
treatment of future alleged breaches, any claim that the clause
became unenforceable as a result of such a breach is
inconsistent with the very purpose of the clause. See Texas
Source Group, Inc. v. CCH, Inc., 967 F. Supp. 234, 237 (S.D.
Tex. 1997).
8
Moreover, if we were to accept Cable Products’ argument,
parties could readily shirk their contractual obligation to
resolve disputes in a particular forum. A mere allegation that
the nonmoving party committed a prior material breach of the
contract would allow a party to litigate that alleged
contractual breach in an unapproved forum until the issue of
first breach ultimately was resolved. This ability to undermine
the enforcement of forum selection clauses counsels strongly
against the adoption of Cable Products’ argument. See id.Additionally, Cable Products’ reliance on the prior
material breach doctrine is misplaced. This doctrine only
excuses a non-breaching party’s performance when such
obligations were dependent upon the promises that the breaching
party failed to perform. See Restatement (Second) of Contracts
§ 237 cmt. e (1981). Thus, a party’s breach of one promise does
not discharge the non-breaching party’s duties with respect to
unrelated or independent promises to perform under the parties’
contract. Id.; see also 14 Williston on Contracts § 43:1 (4th
ed. 2012).
Here, performance under the forum selection clause was not
dependent upon the performance of any other contract provision
contained in the settlement agreement. In fact, the unambiguous
language of the forum selection clause does not mention any
other term, clause, or obligation in the settlement agreement.
9
Thus, adoption of Cable Products’ reasoning impermissibly would
result in rendering an independent and unambiguous provision in
the parties’ contract meaningless, in violation of South
Carolina law. See Schulmeyer v. State Farm Fire & Cas. Co., 579
S.E.2d 132, 134 (S.C. 2003) (a contract’s unambiguous language
determines its force and effect); Valley Pub. Serv. Auth. v.
Beech Island Rural Cmty. Dist., 462 S.E.2d 296, 299 (S.C. Ct.
App. 1995) (each term in a contract “must be considered and
given effect if possible”). Accordingly, because the forum
selection clause was an independent promise bearing no
relationship to the alleged prior material breach, the “first
material breach” doctrine was inapplicable as a defense in this
case. See 14 Williston on Contracts § 43:1.
We also observe that Cable Products’ argument is undermined
by its position concerning the applicable law governing the
settlement agreement. Under Cable Products’ reasoning, the
choice of law clause, which is contained in the same paragraph
as the forum selection clause, likewise would not be enforceable
as a result of the unresolved allegations of prior material
breach. Yet Cable Products agrees that South Carolina law
governs the interpretation of the settlement agreement, as
plainly stated by the choice of law clause. There is no
principled basis, however, for distinguishing between the choice
of law clause and the forum selection clause contained in the
10
same paragraph of the settlement agreement. Thus, to permit
such a distinction effectively would sanction Cable Products’
attempt to pick and choose which portions of the settlement
agreement remain enforceable.
Next, we conclude that Cable Products committed a breach of
the forum selection clause by filing the California action. The
forum selection clause unambiguously provides that “any claim
asserted in any legal proceeding by one party against the other
shall be commenced and maintained in the United States District
Court for South Carolina or a South Carolina state court of
competent jurisdiction.” (Emphasis added.) In disregard of
this provision, Cable Products filed the California action
against Monster Daddy. Because the California action involved a
claim that was “commenced and maintained” in a legal proceeding
by one party to the settlement agreement, Cable Products,
against the other party to that agreement, Monster Daddy, we
conclude that Cable Products plainly breached the settlement
agreement in this respect. * See McGill, 672 S.E.2d at 574.
*
Cable Products also argued before the district court that
it did not breach the settlement agreement because the issues
raised in the California action fell outside the scope of the
settlement agreement, and because additional parties were named
in the California action that were not signatories to the
settlement agreement. However, by failing to present these
arguments in its briefs before this Court, Cable Products has
waived them. United States v. Powell, 666 F.3d 180, 185 n.4
(4th Cir. 2011).
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We now turn to consider Cable Products’ contention that the
settlement agreement did not support the district court’s award
of attorneys’ fees because Monster Daddy was not a “prevailing
party,” within the meaning of the attorneys’ fees clause.
According to Cable Products, its voluntary dismissal of the
California action did not affect the legal relationship between
the parties because there still was a possibility of future
litigation of the merits of those dismissed claims. We disagree
with Cable Products’ argument.
The award of attorneys’ fees incurred by Monster Daddy in
the California action was permitted under the plain language of
the attorneys’ fees clause. See McGill, 672 S.E.2d at 574.
That clause provided, in relevant part, that “[i]n the event of
any breach of this Agreement, the prevailing party shall be
entitled to recover” attorneys’ fees. (Emphasis added.) As
stated above, Cable Products breached the forum selection clause
in the settlement agreement by filing the California action, and
the district court based its decision to award attorneys’ fees
on that ground, finding that Cable Products’ “filing of [the
California action] was in violation of the settlement
agreement.” Therefore, Monster Daddy was the “prevailing party”
with respect to Cable Products’ breach of the forum selection
clause of the settlement agreement. See McGill, 672 S.E.2d at
574.
12
Cable Products’ argument incorrectly presumes that, to be a
“prevailing party,” Monster Daddy was required to prevail in the
California action on the merits of the claims asserted in that
case. However, an award under the attorneys’ fees clause may be
made whenever a party prevails with respect to a particular
breach of the settlement agreement, which in this case was Cable
Products’ filing of the California action. Thus, to qualify as
a “prevailing party” with respect to the breach of the forum
selection clause, Monster Daddy did not need to prevail on the
merits of the California action.
Finally, we address Cable Products’ argument that the
district court erred in awarding to Monster Daddy its attorneys’
fees incurred in the California action. According to Cable
Products, the district court was entitled only to award
attorneys’ fees incurred in South Carolina in connection with
the motion to enforce the settlement agreement. We disagree.
The settlement agreement broadly provides that “[i]n the
event of any breach . . . the prevailing party shall be entitled
to recover not only the amount of any judgment which may be
awarded in its favor but also all such other damages, costs and
expenses that may be incurred by the party, including but not
limited to court costs, reasonable attorneys’ fees, and all
other reasonable costs and expenses.” (Emphasis added.) We
already have held that by filing the California action, Cable
13
Products breached the forum selection clause, and that Monster
Daddy was the prevailing party when the district court granted
the motion to enforce. Thus, based on Cable Products’ breach,
Monster Daddy was entitled to recover “all such other damages,
costs and expenses [] incurred by” Monster Daddy, which included
but were not limited to “reasonable attorneys’ fees” under this
clause.
To the extent that the attorneys’ fees clause required that
such costs and expenses relate to the opposing party’s breach of
the settlement agreement, we conclude that this nexus was
satisfied here. The attorneys’ fees incurred by Monster Daddy
in filing its motion to transfer in the California action, like
those incurred in filing its motion to enforce the settlement
agreement in the South Carolina action, resulted from Cable
Products’ breach of the forum selection clause. Moreover, both
actions were reasonable measures taken by Monster Daddy to
preserve its contractual right to litigate in its chosen forum.
Therefore, the district court did not err in including in its
attorneys’ fee award the time expended by counsel for Monster
Daddy in responding to the California action.
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III.
For these reasons, we affirm the district court’s award of
attorneys’ fees to Monster Daddy.
AFFIRMED
15