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Monster Truck Show Producer Crushes Appeal of Million-Dollar Verdict

Known more for showcasing vehicular acrobatics than legal maneuvering, "Monster Jam" show producer Feld Motor Sports ("Feld") nevertheless put on a great show before the Fifth Circuit, convincing the appellate court to uphold a million-dollar jury verdict for unpaid royalties. In its opinion, the court found that a licensing agreement between Feld and radio-controlled model maker Traxxas was ambiguous, and the district court properly presented the issue to the jury that subsequently found in Feld's favor. (Feld Motor Sports, Inc. v. Traxxas, L.P., No. 16-40686 (5th Cir. June 30, 2017)). As such, the "monster" jury award was upheld – providing Feld with $955,620.30 in unpaid royalties, in addition to attorneys' fees and legal costs.

Dubbing itself "The Fastest Name in Radio Control," Traxxas produces radio-controlled models of extreme vehicles like monster trucks, speedboats and desert racers. Some of their models are powered by nitromethane and reach speeds of over 60 miles per hour. Not the basic radio-controlled cars seen buzzing on the playground, the base model wholesales for $150 and the premium lines cost several hundred dollars.

Feld produces live entertainment, including "Monster Jam," "a thrill-a-second four-wheel extravaganza" featuring outlandishly styled, oversized trucks (10 feet tall and weighing in at five tons), that race, perform jumps, and crush cars in a dirt arena. 

In 2010, Feld licensed its "Monster Jam" branding to Traxxas for use on certain monster truck models. Under the agreement, Traxxas paid royalties to Feld for certain "Stampede" model trucks, including ones with Monster Jam branding. When the contract term ended in January 2014, Feld blew a gasket after an audit of license payments revealed Traxxas owed them an additional $1 million in royalties. Though Traxxas claimed the agreement only covered the "base" model, Stampede, Feld insisted it was due royalties for four additional Stampede models: the Stampede VXL, Stampede Nitro, Stampede 4x4 and Stampede 4x4 VXL (the latter two models having been introduced after the parties entered into the agreement). Traxxas sought declaratory relief in Texas state court that Feld's claims were nothing but a stunt, while Feld filed its own breach of contract suit in federal court in the Eastern District of Virginia. The cases eventually were consolidated in the Eastern District of Texas. (Feld Motor Sports, Inc. v. Traxxas, L.P., No. 4:14-cv-00543 (E.D. Tex.)). 

At issue in this demolition derby was the terminology in the contract setting the royalty rate, which gave Feld royalties for licensed articles "that shall be deemed to include all R/C Vehicle Units and R/C Bodies manufactured with Stampede chassis and/or Stampede bodies, whether or not branded with the Property or 'Stampede.'" Traxxas claimed that the terms "Stampede body" and "Stampede chassis" referred to the unique parts found only on the base model Stampede and not to any additional premium models and that Feld's theory would result in an unfair windfall. However, Feld insisted that the parties intended to include the entire Stampede line within the royalty calculation, as evidenced by their own interpretation of the contract and statements made during negotiations. The district court denied both parties' motions for summary judgment, finding the contract ambiguous, and empowering the jury to determine whose interpretation of the contract was correct. In a thundering verdict, the jury found in favor of Feld, prompting Traxxas to mash the throttle and appeal to the Fifth Circuit. Traxxas argued that the lower court erred in determining the contract was ambiguous and the case should not have reached the jury.

Agreeing with the lower court, the Fifth Circuit found "that the Agreement [was] ambiguous and worthy of submission to a factfinder." It reasoned that the terms "Stampede body" and "Stampede chassis" do not have definite and precise meanings in the contract and that Traxxas failed to show that such terms are industry terms, rather than "specific terms for a specific contract." The court also stated that Feld's interpretation was "plausible" – just because the royalty provision states that compensation is due on models "that shall be deemed to include the Stampede chassis," which Traxxas claimed only applied to the base Stampede, it does not necessarily imply that other premium Stampede models are excluded from the licensing agreement. While the jury's interpretation ended up more favorable for Feld, the court ruled that such a result was not "absurd," given the other promotional benefits and exemptions contained in the agreement that benefited Traxxas. Therefore, when the dust cleared, the appeals court affirmed the district court's ruling that the contract was ambiguous and upheld the jury award.

It looks like the Fifth Circuit has waived the checkered flag over this contest, as it appears unlikely Traxxas has enough nitro in its tank to scale the Supreme Court steps.

© 2017 Proskauer Rose LLP.

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