United States District Court, D. Massachusetts
Machine Project, Inc. and Kinser Chiu, Plaintiffs,
Pan American World Airways, Inc., Defendant.
MEMORANDUM & ORDER
Nathaniel M. Gorton United States District Judge.
case arises from a dispute over a licensing agreement between
plaintiff Machine Project, Inc. (“MPI”) and
co-plaintiff Kinser Chiu, its former president, and defendant
Pan American World Airways, Inc. (“Pan Am”).
Plaintiffs generally allege that defendant breached that
license agreement and committed fraud. Pending before this
Court is defendant's motion for summary judgment on all
claims. For the reasons that follow, defendant's motion
will be allowed, in part, and denied as moot, in part.
April, 2007, Pan Am and MPI entered into a Merchandising
License Agreement (“the 2007 MLA” or
“Agreement”) which is at issue in the instant
action. At that time, Chiu and his colleague, Anthony Lucas,
were each 50% stockholders in MPI and they both executed the
Agreement on its behalf. The Agreement granted MPI 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.
2007 MLA also established annual gross revenue requirements
for MPI. In the event MPI failed to generate the required
revenue, Pan Am had 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.
The Agreement further provided for termination by either
party upon 30 days written notice in the event that a breach
of a material provision was not cured within the 30-day
fall of 2007, Pan Am ostensibly became dissatisfied with the
progress of the branding program. Several months later, Pan
Am sent a Notice of Termination of the 2007 MLA to MPI and
took the position that it was entitled to do so because,
among other reasons, the minimum gross revenue requirements
set forth in the 2007 MLA had not been met. In or about
August, 2008, Pan Am hired Lucas as its “Head of
Marketing” and his wife as a “merchandising and
design manager, ” intending to accomplish what the
Agreement was supposed to do.
2008 State Court Action
2008, Chiu and MPI brought suit against Lucas and Pan Am in a
New York state trial court 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 the state court for lack of diversity
jurisdiction because Chiu and Lucas were both residents of
New Jersey. Pan Am successfully moved to dismiss the
complaint in that action on the grounds that the dispute had
to be litigated in Boston, Massachusetts in accordance with
the forum selection clause of the 2007 MLA.
2008 Federal Action
June, 2008, Pan Am brought an action in the United States
District Court for the Southern District of New York against
Chiu and a company controlled by Chiu, Vetements, Inc.
(“Vetements”) (“the 2008 action”).
Pan Am alleged that Chiu and Vetements infringed its
trademarks by continuing to sell Pan Am-branded products
after Pan Am terminated the 2007 MLA. In November, 2009, Chiu
and Vetements filed a motion to dismiss that action for
failure to name MPI and Lucas as parties. In September, 2010,
the Court found that Lucas and MPI were “necessary
parties” and ordered that they be joined in the action.
thereafter, 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 the
counterclaims on improper forum grounds and for lack of
brought this action in January, 2014. Their complaint
contains three counts against Pan Am: breach of contract
(Count I), breach of the covenant of good faith and fair
dealing (Count II) and fraud (Count III). Counts IV and V
allege breach of fiduciary duty and tortious interference
with contractual relations, respectively, against Lucas.
March, 2014, this Court entered default judgment against
Lucas for failing to appear pursuant to Fed.R.Civ.P. 55(a).
After protracted discovery caused, at least in part, by the
necessity of obtaining letters rogatory, and several
extensions of deadlines, in April, 2016, Pan Am moved to
dismiss all claims for lack of federal subject matter
jurisdiction. MPI filed a notice of voluntary dismissal of
its claim against defendant Lucas that same day. This Court
subsequently allowed plaintiffs' dismissal of their
claims against Lucas but otherwise denied Pan Am's motion
pending before the Court is Pan Am's motion for summary
judgment on all claims.
Defendant's Motion for Summary Judgment
threshold matter, defendant avers that Chiu lacks standing to
bring claims for breach of the covenant of good faith and
fair dealing (Count II) and fraud (Count III) because there
is no evidence that he has been personally injured by the
purported conduct. Chiu responds that he has suffered
personal injuries separate from the alleged damages to MPI.
a stockholder does not have standing to assert a claim on
behalf of a business entity in which he owns stock.
Laverty v. Massad, 661 F.Supp.2d 55, 61-62 (D. Mass.
2009). Thus, Chiu lacks standing to bring claims in Counts II
and III to enforce the contractual rights of MPI. See
Quaglieri v. Steeves, Docket No. 11-10377, 2013 WL
1222220, at *3 (D. Mass. Mar. 26, 2013). The pleadings and
the record are unclear, however, as to what claims are
asserted on behalf of the individual and/or corporate
plaintiffs so the Court will do its best to differentiate.
Legal Standard for Summary Judgment
role of summary judgment is “to pierce the pleadings
and to assess the proof in order to see whether there is a
genuine need for trial.” Mesnick v. Gen. Elec.
Co., 950 F.2d 816, 822 (1st Cir. 1991). The burden is on
the moving party to show, through the pleadings, discovery
and affidavits, “that there is no genuine dispute as to
any material fact and that the movant is entitled to judgment
as a matter of law.” Fed.R.Civ.P. 56(a). A fact is
material if it “might affect the outcome of the suit
under the governing law.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). A
genuine issue of material fact exists where the evidence with
respect to the material fact in dispute “is such that a
reasonable jury could return a verdict for the nonmoving
the moving party has satisfied its burden, the burden shifts
to the non-moving party to set forth specific facts showing
that there is a genuine, triable issue. Celotex Corp. v.
Catrett, 477 U.S. 317, 324 (1986). The Court must view
the entire record in the light most favorable to the
non-moving party and indulge all reasonable inferences in
that party's favor. O'Connor v. Steeves, 994
F.2d 905, 907 (1st Cir. 1993). Summary judgment is
appropriate if, after viewing the record in the non-moving