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Cacique, Inc. v. Reynaldo's Mexican Food Company, LLC

United States District Court, C.D. California

February 7, 2014

CACIQUE, INC., Plaintiff/Counter-Defendant,
v.
REYNALDO'S MEXICAN FOOD COMPANY, LLC, Defendant/Counterclaimant.

ORDER GRANTING CACIQUE'S MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM [41] AND DENYING REYNALDO'S MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM [75]

OTIS D. WRIGHT, II, District Judge.

I. INTRODUCTION

Before the Court are Cross-Motions for Summary Judgment on Defendant Reynaldo's Mexican Food Company, LLC's counterclaim for breach of contract. (ECF Nos. 41, 75.) The contract is a settlement agreement executed in May 2011- the MTK Settlement Agreement. Reynaldo's alleges that Plaintiff Cacique, Inc. is subject to the terms of the MTK Settlement Agreement, and that the agreement bars Cacique's trademark and trade dress claims in this action. Cacique asserts that it is not a party to the MTK Settlement Agreement, and, even if it was a party, the MTK Settlement Agreement does not release Cacique's trademark and trade dress claims. While numerous documents associated with these Cross-Motions have been filed under seal, the Court finds that the reasons for sealing those documents do not apply to the contents of this Order. For the reasons discussed below, the Court GRANTS Cacique's Motion for Summary Judgment on Counterclaim (ECF No. 41) and DENIES the Reynaldo's Motion for Summary Judgment on Counterclaim. (ECF No. 75.)

II. FACTUAL BACKGROUND

Cacique, a well-known brand in the Hispanic cheese market, was formed in 1976 by the de Cardenas family-Gilbert L. de Cardenas, Sr., and Jennie de Cardenas. (ECF No. 42: Gil Decl. ¶ 23.)[1] Their son, Gilbert B. de Cardenas, Jr. ("Gil"[2]), formed MTK, a Delaware corporation, in 2004. ( Id. ¶ 5.) MTK's only directors are Gil and Jon Kmett. Gil is the only officer. ( Id. ¶¶ 6-7; ECF No. 42: Kmett Decl. ¶¶ 6-7.) Gil owns 85 percent of MTK with the remaining 15 percent owned by his children in trust. (ECF No. 42: Gil Decl. ¶ 8, Kmett Decl. ¶ 2.)

In 2006, MTK partnered with the Huff Alternative Fund, L.P. and the Huff Alternative Parallel Fund, L.P. (the "Huff Funds") to acquire the assets of Reynaldo's. (ECF No. 79: Bloom Decl. ¶ 5.) At the time, Reynaldo's was a bankrupt Hispanic foods manufacturer. ( Id. ) The Huff Funds are private-equity funds that also own the Wisconsin Cheese Group ("WCG"). ( Id. ¶ 4.) WCG is the third largest Hispanic foods manufacturer in the United States and a major competitor with Cacique. ( Id. ) MTK and the Huff Funds formed Hispanic Food Holdings, LLC ("HFH") for the acquisition of Reynaldo's. ( Id. ¶ 5.) Under this partnership, the Huff Funds provided capital to acquire Reynaldo's and MTK contributed its Hispanic lunch meat business and Gil's management skills. ( Id. ¶ 6.) The partnership between MTK and the Huff Funds was memorialized in several documents including (1) the Contribution Agreement, (2) the Operating Agreement, and (3) the Employment Agreement. ( Id. ¶ 6, Exs. 1-3.) Reynaldo's contends that these documents demonstrate that all involved were aware of Gil's connection to Cacique and took steps to prevent Gil's involvement with Cacique while working with Reynaldo's and the Huff Funds.

From November 2006 until his termination in January 2009, Gil served as President and CEO of Reynaldo's. ( Id. ¶ 15; ECF No. 42: Gil Decl. ¶ 3.) Gil claims that he was not employed by Cacique during the time that he worked for Reynaldo's. (ECF No. 42: Gil Decl. ¶ 3.) In February 2009, Gil went to work for Cacique as the Chief Operations Officer, and he remains in that position to date. ( Id. ¶ 4.) Gil claims that at no time has he served as a director of Cacique, and he has never attended any Cacique board meetings. ( Id. ) The only evidence presented in these Cross-Motions of any business relationship between MTK and Cacique was between February 2009 and April 2009.[3] The two entities entered into an oral agreement that a business consultant for MTK, with a work visa sponsored by MTK, would do work for Cacique because Cacique could not hire him directly. (ECF No. 42: Gil Decl. ¶ 9, Kmett Decl. ¶¶ 8-9, Iglesias Decl. ¶ 2.) MTK has apparently conducted no other business, except to wind up affairs, since the end of the oral agreement with Cacique in April 2009. (ECF No. 42: Gil Decl. ¶ 5, Kmett Decl. ¶ 5.)

In April 2009, Reynaldo's filed suit against Gil in Los Angeles County Superior Court alleging that Gil breached the non-compete clause in the Employment Agreement with Reynaldo's when he went to work at Cacique. ( Reynaldo's Mexican Food Co. v. Gilbert B. de Cardenas Jr., No. BC411673.) The case settled on June 24, 2010, with Gil signing the settlement agreement individually and on behalf of MTK ("Employment Settlement"). (ECF No. 42: Gil Decl. ¶ 22, Ex. 3.)

In February 2010, while the employment lawsuit was still pending, another lawsuit was filed in Los Angeles County Superior Court, Fischer et al. v. Hispanic Food Holdings et al., No. BC431228. Certain trustees and MTK were plaintiffs, while HFH, the Huff Funds, Reynaldo's, and various other entities were defendants. (ECF No. 42: Gil Decl. Ex. 1.) The dispute concerned bonds held by various investment funds. ( Id. ) The case settled, and a settlement agreement was executed on May 17-18, 2011 ("MTK Settlement Agreement"). ( Id. ¶ 13, Ex. 2; ECF No. 79: Bloom Decl. ¶ 20, Ex. 5.) The MTK Settlement Agreement is the basis of the breach-of-contract counterclaim filed by Reynaldo's in this action.

At the time the MTK Settlement Agreement was executed in May 2011, Gil was COO of Cacique. (ECF No. 42: Gil Decl. ¶ 4.) He was also a 3.75 percent shareholder in Cacique.[4] ( Id. ) Gil is a signatory to the MTK Settlement Agreement, but the signature line states that he signed as President and CEO of MTK. ( Id. Ex. 2) Cacique is not explicitly mentioned anywhere in the MTK Settlement Agreement. ( Id. ) However, as Reynaldo's points out, the MTK Settlement Agreement purports to bind not only the signatories but also a long list of entities and individuals including "affiliated entities." ( Id. at §§ 7.1-7.2.) Reynaldo's argues that it was the intent of the parties to bind Cacique to the MTK Settlement Agreement as an affiliated entity. The MTK Settlement Agreement also contains broad releases of all claims "known or unknown" at the time the agreement was executed. ( Id. at §§ 7.1-7.3.) Reynaldo's contends that these broad releases bar the present trademark and trade dress infringement claims brought by Cacique.

Cacique filed the Complaint in this action on February 12, 2013. (ECF No. 1.) Prior to filing suit, Cacique sent a cease-and-desist letter to Reynaldo's. (ECF No. 78: Tobin Decl. ¶ 11, Ex. 9.) In the letter and in the Complaint, Cacique alleges that the infringement by Reynaldo's began around April 2011, which is before the MTK Settlement Agreement was executed. ( Id.; Compl. ¶ 13.) Reynaldo's filed its Answer along with the breach-of-contract counterclaim on April 13, 2013. (ECF No. 19.)

The present Cross-Motions for Summary Judgment were filed on December 2, 2013, and December 17, 2013.[5] (ECF Nos. 41, 75.) The same arguments and nearly identical evidence have been presented in support of and in opposition to both Motions. The Cross-Motions and supporting documents were sealed by the Court due to extensive references to confidential settlement agreements-including the MTK Settlement Agreement and the Employment Settlement. The settlement agreements involve individuals and entities that are not parties to this action. The Court also granted a request from Reynaldo's to conduct additional depositions and file supplemental briefing pursuant to Federal Rule of Civil Procedure 56(d).[6] (ECF No. 54.) A hearing on the Cross-Motions for Summary Judgment was held on January 27, 2014.

III. LEGAL STANDARD

Summary judgment should be granted if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Once the moving party has met its burden, the nonmoving party must go beyond the pleadings and identify specific facts through admissible evidence that show a genuine issue for trial. Id.; Fed.R.Civ.P. 56(c). Conclusory or speculative testimony in ...


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