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Biologix Franchise Marketing Corp. v. Logic

United States District Court, E.D. Missouri, Eastern Division

January 2, 2020

BIOLOGIX FRANCHISE MARKETING CORP., Plaintiff,
v.
KAY LOGIC, et al., Defendants.

          MEMORANDUM AND ORDER

          G. FLEISSIG UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Defendants' motion to enforce settlement (ECF No. 24). For the reasons set forth below, the motion will be granted in part and denied in part.

         BACKGROUND

         Plaintiff Biologix Franchise Marketing Corp. (“Biologix”) is a manufacturer and franchisor of industrial cleaning products. Defendant Kay Logic is a former franchisee owned by Defendant Edward Kellman (together, “Kay”). The parties appeared before the Court for an evidentiary hearing on September 11, 2019, and presented testimony described further below.

         In the underlying case, filed in May 2018, Biologix sued Kay for breach of contract alleging that, upon termination of the parties' franchise agreement, Kay violated the confidentiality and non-compete clauses by using Biologix's proprietary information to operate a competing business in prohibited territory. A month later, on June 14, 2018, the parties executed a confidential settlement agreement pursuant to which Kay agreed to pay $324, 000, payable in 27 monthly installments of $12, 000. The agreement further provides that Kay may use a portion of each payment as a credit toward the purchase of Biologix's products and may sell the products without restriction and using Biologix's trademark. Relevant provisions of the settlement agreement are excerpted below.

         Section 1 captures the crux of the agreement as follows:

FMC [Biologix] acknowledges and understands that the primary benefit to Kay Logic and Kellman under this Agreement is the $8, 250 credit for supplies … and if such supplies cannot be provided, the $12, 000 monthly payment shall cease and no further payments shall be due to FMC (subject to the below cure provision).

ECF No. 25-1, p. 1.

         Sections 2 and 3 describe the unlimited scope of Kay's sales rights and the nature and consequences of a default by either party:

There shall be no restrictions on the type and quantity of product that may be ordered by Kay Logic under the credit amount … There are no restrictions on how Kay Logic uses or what Kay Logic does with the products it purchases from FMC. If Kay Logic does not receive the products ordered by the 15th day of the month following its order, Kay Logic shall provide notice to FMC and FMC shall have 30 calendar days to cause the default to be cured and no further payment shall be due unless and until such default is cured with [sic] that 30-day period. If FMC does not cause the default to be cured… the $12, 000 monthly payments shall cease and no further payments shall be due FMC and this Agreement shall immediately be terminated.
… if Kay Logic fails to make any monthly payment, FMC will not be required to fill further orders until the failure to pay has been cured. In addition FMC shall have the option in its sole discretion the right [sic] to file the Consent Judgment and fill in the blanks, provided that it first gives notice and an opportunity to cure the payment default…

ECF No. 25-1, p. 1-2.

         Section 4 limits Kay's right to use Biologix's trademark except with respect to Biologix products purchased pursuant to the agreement:

During the term of this Agreement, the parties agree that Kay Logic will do its own billing and will use its own trademarks, trade names, service marks, logos, and commercial symbols and will not use any trademarks, trade names, service marks, logos, and commercial symbols of FMC. The parties acknowledge, understand, and agree they are prohibited from using any FMC trademark, trade name, service mark, logo, and commercial symbol, except for the sale and use of Biologix-branded products purchased under this Agreement.

ECF No. 25-1, p. 3.

         Section 21, titled Further Assurances, states:

The parties hereto agree to execute such other documents and to take such other action as may be reasonably necessary to ...

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