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Michigan Federal Court Concludes Licensing Agent Did Not Have Contractual Right to Royalties in “New” Agreement Between Licensor and Manufacturer
Posted in Contracts

A federal court in Michigan has recently granted Whirlpool Corporation’s motion for judgment on the pleadings in a contract dispute with its former licensing agent. Whirlpool Corp. v. Equity Mgmt., Inc., Case No. 1:19-cv-00259 (W.D. Mich. Sept. 30, 2020). Lathrop GPM represented Whirlpool in this dispute. When Whirlpool Corporation acquired the Maytag® brand in 2006, it inherited a third party licensing arrangement with the company Equity Management, Inc. (EMI) in which EMI administered third party licensing agreements with manufacturers using the Maytag® trademark. Whirlpool and EMI agreed in 2006 that EMI would continue to administer Maytag licensing agreements already in place, as well as any “renewals, modifications, or other amendments” of those agreements. When the last of those licensing agreements was set to expire at the end of 2018, Whirlpool informed EMI that it would enter into a new agreement with the licensee to begin in 2019, but without EMI’s involvement. In response, EMI withheld royalty payments owed to Whirlpool as a claimed setoff for what it believed to be a breach of contract by Whirlpool.

Whirlpool filed suit seeking declaratory judgment on the interpretation of EMI’s contractual rights, as well as breach of contract and conversion of royalty payments. The court granted Whirlpool’s motion for judgment on the pleadings on all of its claims, agreeing that Whirlpool’s new contract with the licensee was not a “renewal” of the old agreement, and that EMI’s contractual right to compensation ended when the old license agreement expired. The court rejected EMI’s claim that it had a right to be involved in all future relationships between the parties, and rejected the argument that EMI had a right to hold Whirlpool’s royalty payments as a purported setoff of claimed future damages. EMI has appealed the decision to the Sixth Circuit.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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