United States District Court, E.D. Michigan, Southern Division
OPINION AND ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
(DKT. 332) AND GRANTING IN PART AND DENYING IN PART
DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (DKT.
TERRENCE G. BERG UNITED STATES DISTRICT JUDGE
a breach of contract case that involves the liquid energy
supplement 5-hour ENERGY®. Plaintiff Innovation Ventures,
the manufacturer of 5-hour ENERGY®, alleges that, among
other things, Defendants Custom Nutrition Laboratories
("CNL"), Nutrition Science Laboratories
("NSL"), and Alan Jones breached an agreement with
Plaintiff not to produce energy shots containing ingredients
from the Choline Family.
several motions to dismiss by Defendants (Dkts. 16, 30, 74,
and 78), a previous motion for summary judgment by Defendants
(Dkt. 199), the first phase of a bifurcated jury trial (Dkts.
Ill. 301-308), and a motion to dismiss Defendants'
counterclaims brought by Plaintiff (Dkt. 317), the case is
now approaching the second phase of the bifurcated jury
trial, and both Plaintiff and Defendants have filed motions
for summary judgment. Dkts. 332 (Plaintiffs motion) and 328
(Defendants' motion). For the reasons below, both motions
are GRANTED IN PART and DENIED IN PART.
and Defendants have engaged in aggressive litigation for
nearly five years in this Court, after having settled a
previous, also ferociously litigated case in the state of
Texas. The Court described this unfortunate story of business
mistrust and mistreatment in its last summary judgment order,
Dkt. 219, and none of the key facts have changed since then,
so a summary of those facts will suffice.
short, Plaintiff hired CNL to develop a formula for what
became 5-hour ENERGY® and to produce bottles of the
energy shot that Plaintiff sold in the market. Plaintiff then
switched to another supplier. CNL sued Plaintiff in Texas,
the parties eventually settled the case, and, as part of the
Settlement Agreement, CNL and Alan Jones (CNL's
President) agreed not to make energy shots containing
ingredients in "the Choline Family."
then sold its assets to NSL, and, as part of the purchase,
NSL agreed to be bound to the Choline Family restriction in
the Settlement Agreement between CNL, Jones, and Plaintiff.
Alan Jones joined the NSL team, and together NSL and Jones
allegedly went ahead and produced energy shots that violated
the Choline Family restriction, and sold those energy shots
to major retailers around the country.
sued CNL, as well as NSL and Jones, for breach of contract
and a number of other things, and after five years of motion
practice and the completion of the first phase of a
bifurcated trial, we have arrived at the current stage of
this case: cross-motions for summary judgment on issues
relating to the second phase of trial.Plaintiffs and
Defendants' cross-motions for summary judgment are now
before the Court, motions in limine are due tomorrow, and the
second phase of the bifurcated trial is a month away.
Standard of Review
judgment is appropriate if the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with any affidavits, show that there is no genuine issue as
to any material fact such that the movant is entitled to a
judgment as a matter of law." Villegas v. Metro.
Gov't of Nashville, 709 F.3d 563, 568 (6th Cir.
2013); see also Fed.R.Civ.P. 56(a). A fact is material only
if it might affect the outcome of the case under the
governing law. See Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249 (1986). On a motion for summary judgment,
the Court must view the evidence, and any reasonable
inferences drawn from the evidence, in the light most
favorable to the non-moving party. See Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986) (citations omitted); Redding v. St. Edward,
241 F.3d 530, 531 (6th Cir. 2001).
the moving parties, the defendants have the initial burden to
show that there is an absence of evidence to support
[plaintiffs] case." Selhv v. Caruso, 734 F.3d
554 (6th Cir. 2013); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 325 (1986). Once the moving party
has met its burden, the non-moving party "may not rest
upon its mere allegations or denials of the adverse
party's pleadings, but rather must set forth specific
facts showing that there is a genuine issue for trial."
Ellington v. City of E. Cleveland, 689 F.3d 549, 552
(6th Cir. 2012).
the arguments raised in these cross-motions for summary
judgment are interrelated, so the Court will address both
motions, starting with Plaintiffs motion, and will discuss
related issues together.
Plaintiffs Motion for Partial Summary Judgment
raises four arguments in its motion: (1) Defendants'
patent counterclaims fail as a matter of law; (2) Plaintiff
is entitled to summary judgment on Count I (breach of the
Choline Family restriction); (3) Defendants' breaches of
the Choline Family restriction tolled the restriction's
duration; and (4) Defendants' duress counterclaims fail
as a matter of law.
Plaintiffs argument concerning Defendants'
patent-disclosure counterclaims is moot
preliminary matter, Plaintiffs argument that it is entitled
to summary judgment on Defendants' patent-disclosure
counterclaims, Dkt. 332 Pg. ID 17, 886, is moot; the Court
granted Plaintiffs motion to dismiss the counterclaims on
April 7, 2017. Dkt. 337. The patent-disclosure counterclaims
are no longer pending, so summary judgment on those claims is
inappropriate and Plaintiffs motion with respect to this
argument is DENIED.
Plaintiff is not entitled to summary judgment on Count I
(breach of Settlement Agreement § 5(c)(i))
argues that it is entitled to summary judgment on Count I
because both NSL and Jones breached § 5(c)(i) of the
Settlement Agreement in multiple ways. Dkt. 332, Pg. ID 17,
878. Plaintiff has established that NSL made energy shots
containing betaine and Alpha-GPC. Dkt. 332, Pg. ID 17, 878.
Jones sold those energy shots on NSL's behalf. Dkt. 332,
Pg. ID 17, 878. And NSL and Jones repeated the process at
least nine times, with Jones securing agreements by other
companies to pay NSL to make the following energy shots, all
of which used Choline Family ingredients in violation of
§ 5(c) (i):
■ Rock On (Walgreens);
■ NXT (Walgreens);
■ Slam (AdvoCare);
■ Triple f/x (RBC Life Sciences);
■ Champion Energy (Kiosk Kings);
■ Winchester Pump Up (Max Professional);
■ The Energy Shot (GNC);
■ Up&Up (Weider Global Nutrition);
■ Members' Mark/Simply Right (Weider
■ Weider High Energy (Weider Global
■ Kirkland Signature (Costco); and
■ Shotz (Velocity).
Dkt. 332, Pg. ID 17, 879.
also argues that Jones breached § 5(c) (i) by helping
NSL make the shots. Specifically, Plaintiff submits that
Jones: signed contracts as President of NSL; called himself
President of NSL; discussed formulations for NSL's energy
shots with David Henzler (NSL's chief formula creator);
and dealt with other production-related issues such as
production readiness, taste-testing, product testing methods,
facility inspections, and health department citations. Dkt.
332, Pg. IDs 17, 879-17, 880. And Plaintiff argues that Jones
continued to offer to sell energy shots that contained
betaine after he left NSL and started working for Universal
Nutrition. Dkt. 332, Pg. ID 17, 880.
don't deny these allegations. Dkt. 333, Pg. ID 18, 325.
Instead, they argue that-although they might have breached
§ 5(c)(i)-Plaintiff may not secure summary judgment on
Count I because Defendants' laches defense could shield
them from being held liable for their breaches. Dkt. 333, Pg. ID
18, 324. The laches defense applies, Defendants argue,
because Plaintiff delayed filing this lawsuit for three years
during which Defendants openly used ingredients that
Plaintiff believed were prohibited under the Choline Family
restriction's ambiguous "catch-all" language,
and Plaintiff now seeks to recover damages it claims accrued
in that three-year period. Dkt. 333, Pg. IDs 18, 330-18, 331.
support their argument, Defendants submit that:
■ NSL made Rock On using choline bitartrate (which is
prohibited by name) from October 2009 until November 2011,
and afterwards continued to make Rock On using betaine (which
is not prohibited by name, but which Plaintiff believed was
covered under the "catch-all" language of the
■ NSL made Slam using betaine from October 2009 until
NSL stopped all energy shot production in March 2014.
■ Plaintiff knew that both Rock On and Slam were CNL
products (Exhibit D to the Settlement Agreement lists both
products), and knew or should have known that they contained
choline bitartrate or betaine;
■ Plaintiff nevertheless waited three years to file
this lawsuit; and
■ The three-year delay prejudiced Defendants because
Plaintiff now seeks tens of millions of dollars in damages
for products that Defendants developed and sold during the
period of delay-products that Defendants could have developed
using other chemicals if Plaintiff had filed its lawsuit
Dkt. 333, Pg. IDs 18, 327-18, 331.
replies that because it filed its claims within the statute
of limitations, laches is inapplicable. Dkt. 338, Pg. ID 20,
517. Plaintiff also argues that there was no delay of the
sort laches requires because Defendants have not submitted a
specific date on which they claim Plaintiff knew or should
have known of their breaches. Dkt. 338, Pg. ID 20, 518. And
Plaintiff argues that Defendants have not submitted proof
that they were prejudiced by any delay, and that in fact
there was no prejudice because, after Plaintiff sued,
Defendants denied liability and continued selling products
rather than stopping their use of the prohibited ingredients.
Dkt. 338, Pg. IDs 20, 518-20, 519.
is the "negligent and unintentional failure to protect
one's rights." Nartron Corp. v.
STMicroelectronics, Inc., 305 F.3d 397, 408 (6th Cir.
2002). Under Michigan law, to successfully assert a laches
defense, a party must show that there was a passage of time
combined with some prejudice to the party asserting the
defense. Head v. Benjamin Rich Realty Co., 55
Mich.App. 348, 356 (Mich. Ct. App. 1974). Laches is concerned
mainly with the question of the inequity of permitting a
claim to be enforced, and depends on whether the plaintiff
has exercised due diligence. Sloan v. Silberstein, 2
Mich.App. 660, 676, 141 N.W.2d 332 (1966).
have set out their theory of why laches should bar Plaintiff
from recovering for breach of Count I. Defendants made and
sold some products containing ingredients that the Settlement
Agreement explicitly prohibited and others that Plaintiff
believed were prohibited, but Plaintiff waited three years
after the execution of the Settlement Agreement to file this
lawsuit. In the meantime, Defendants-without notice by way of
a lawsuit that Plaintiff viewed the products as violating the
restrictive covenant-expanded the products they made (which
inflated the damages Plaintiff could recover). Had Defendants
been on notice of the alleged breach, they argue, they could
have initially designed those products not to use prohibited
Plaintiffs arguments in reply are all without merit. First,
Plaintiffs contention that laches are inapplicable because
Plaintiff filed its claims within the applicable statute of
limitations is incorrect. MEEMIC v. Morris, 460
Mich. 180, 200-201 (1999), the case Plaintiff cites to
support its position, does not contain a well-developed
discussion of the laches doctrine. More importantly, the case
expressly limits its laches holding to "the
circumstances of [that] case, " which are not present
here or generally in laches case law. Instead, Michigan courts
have noted time and again-both before and after
Morris-that "laches may bar a legal claim even
if the statutory period of limitations has not yet
expired." Tenneco Inc. v. Amerisure Mut. Ins.
Co., 281 Mich.App. 429, 456-57 (2008) (citing
Eberhard v. Harper-Grace Hosp., 179 Mich.App. 24,
35-36 (1989) and Citizens Ins. Co. of America v.
Bryant, 216 Mich.App. 217, 228(1996)).
although Defendants have not explicitly stated the exact day
they claim Plaintiff should have discovered the breach,
Plaintiff fails to cite a case that requires a party seeking
to raise a laches defense to allege an exact date that the
other party learned or should have learned there was reason
by arguing that Defendants have not shown proof of prejudice,
Plaintiff misunderstands the point of Defendants'
argument. Defendants' theory is that Plaintiff permitted
Defendants to make products that Plaintiff-not
Defendants-considered to be breaching products, then sat
back, watched the potential damages accrue, and only later
sued after Defendants had created the offending
product-formulas, set up manufacturing lines, and developed
customers. Plaintiff assumes that because Defendants did not
immediately stop making and selling products containing
betaine and alpha GPC when they were sued after they had been
making them for three years, Defendants also would not have
stopped if they had been sued at an earlier time. But the
entire point of Defendants' argument is that they would
have reacted differently because they could have designed the
products differently from the outset.
have presented enough evidence of their laches defense to
create genuine issues of material fact such that Count I must
go to a jury. For example, there are issues of fact
concerning (1) when Plaintiff learned of the breach, (2) when
Plaintiff should have learned of the breach, (3) how long
Plaintiff actually delayed in bringing its claim (if at all),
and (4) what (if any) prejudice Defendants suffered from any
delay. Thus, the Court will rely on a jury "to consider
[the] factual disputes in [Defendants'] laches defense,
" GMC v. Lanard Toys, Inc., 468 F.3d 405, 421
(6th Cir. 2006), and will then "look at the prejudice to
[Defendants] occasioned by the delay" (if any) and will
determine whether there was "an intermediate change of
conditions that renders it inequitable to allow [Plaintiff]
to enforce its rights." Luke v. Home-Owners Ins.
Co., 2017 Mich.App. LEXIS 96, at *10 (Ct. App. Jan. 19,
2017). Consequently, Plaintiff is not entitled to summary
judgment on Count I, and its motion with respect to this
argument is DENIED.
Plaintiff may not secure tolling of § 5(c)(i)'s
argues that under the doctrine of equitable tolling,
Defendants' breaches of § 5(c)(i) tolled the
duration of the restrictive covenant because Defendants
flouted their obligations under the Settlement Agreement.
Dkt. 332, Pg. IDs 17, 880-17, 885. Specifically, Plaintiff
argues that Defendants flouted their obligations by:
■ Using choline bitartrate and choline citrate-two
ingredients that § 5(c)(i) expressly prohibits;
■ Interchanging Choline Family ingredients with each
other, without regard for § 5(c)(i)'s Choline Family
■ Denying the true nature of Jones's relationship
■ Falsely maintaining that Jones did not work for NSL;
■ Neglecting to tell NSL's chief Energy Liquid
formula-tor about the § 5(c) (i) restrictions despite
having incorporated the restrictions into the Asset Purchase
Agreement by which NSL bought CNL's assets;
■ Jones claiming that he was not individually liable
under the Settlement Agreement; and
■ Jones testifying that NSL "could make anything
that NSL wanted to" and that he was not concerned about
NSL complying with the Settlement Agreement.
Dkt. 332, Pg. IDs 17, 883.
also argues that § 5(a)(xii) of the Settlement Agreement
specifically provides that the duration of the restrictions
is extended (or tolled) by the time period of any breach.
Dkt. 332, Pg. IDs 17, 884. And Plaintiff contends that any
tolling remedy should be in addition to its recovery of
monetary damages. Dkt. 332, Pg. ID 17, 884. Indeed, Plaintiff
submits that it needs to ...