November 18, 2019

November 18, 2019

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Seller of George Forman Trademarks Down for the Count on Breach of Contract Claims

In a breach of contract dispute over the sale of “George Foreman” trademarks, the U.S. Court of Appeals for the Third Circuit, in a non-precedential decision, ruled against the plaintiff, concluding that no breach of contract took place and that all remaining claims were waived.  Perlmutter v. Russell Hobbs, Inc., Case No. 10-4121 (3rd Cir., Sept. 13, 2011) (Barry, J.).

Sam Perlmutter, a Los Angeles attorney, introduced former heavyweight boxing champion George Foreman to the opportunity to endorse a kitchen appliance that later was branded as the “George Foreman Lean Mean Fat-Reducing Grilling Machine.”   Commonly known as the “George Foreman Grill,” more than 100 million of the indoor grills have been sold worldwide.  Perlmutter entered into a contract with defendant Salton, Inc. to sell the defendant certain George Foreman trademarks and associated goodwill.  Salton agreed to pay Perlmutter $5.5 million in four installments of $1,375,000.  Salton made the first three payments but defaulted on the fourth.  The parties then amended their agreement to permit Salton to make the fourth payment in shares of stock.  Section 3(a) of the amendment specified that the shares would not originally be registered under the Securities Act of 1933 and could not be sold until registration took place.  Section 3(d) of the amendment further provided that if Perlmutter was unable to sell the shares for the full amount due him, Salton would make another payment in cash or stock to equal the difference. 

Upon selling the issued shares, Perlmutter was left with a shortfall of $1,012,563.71.   Salton then issued additional shares that equaled in value the shortfall amount.  These shares, however, were also unregistered, and thus could not immediately be sold.  Perlmutter asked Salton to register the shares, and Defendant agreed to do so, but failed to follow through on this promise; as a result, upon selling these shares, Plaintiff was again left with a shortfall. 

Perlmutter subsequently brought claims against Salton for breach of contract, breach of the implied covenant of good faith and fair dealing, and negligent misrepresentation.   Perlmutter contended that Salton had breached their agreements by paying the shortfall amount in restricted shares and failing to end the stock restrictions as promised. Perlmutter also sought to amend his complaint to cure a number of unspecified defaults.  Ultimately, the district court dismissed Perlmutter’s breach of contract claims because it found that the payment of the shortfall amount in restricted shares was not a breach, because it was expressly authorized by Section 3(a) of the amendment.  Further, the district court denied Perlmutter’s request to amend his complaint. 

The 3rd Circuit affirmed the district court’s holding that the payment of the shortfall amount in restricted shares was not a breach, as it was expressly authorized by the parties’ amendment.  The court refused to consider Salton’s argument that Section 3(d) of the agreement, which required Salton to compensate Perlmutter for any devaluation of the shares as a result of the restriction, also applied to the shortfall shares, finding that Perlmutter had waived the argument by failing to raise it in district court.  The court also disposed of Perlmutter’s claim concerning Salton’s failure to timely register the shortfall shares, finding that it was a “gratuitous promise without consideration” and that any promissory estoppel claim would similarly fail for lack of evidence of reliance on the promise.

Refusing to consider Perlmutter’s other claims because he failed to develop them in his opening appellate brief, the court nevertheless went on to state that the breach of covenant claim would have been unsuccessful because the allegedly breaching conduct of using restricted stock was expressly authorized by Section 3(a).

The court also upheld the denial of Perlmutter’s requests to amend his complaint to cure various defaults because he did not articulate to the trial court any reason why he should be given “another bite at the apple.”

© 2019 McDermott Will & Emery


About this Author

Katie Bukrinsky, McDermott Will Emery Law Firm, Intellectual Property Attorney

Katie Bukrinsky focuses her practice on intellectual property litigation. She regularly represents plaintiffs and defendants in federal court in all types of Lanham Act disputes, including trademark and trade dress infringement, false advertising and cyberpiracy. She practices before the Trademark Trial and Appeal Board, as well as before arbitration forums under the Uniform Dispute Resolution Policy. Katie also counsels clients on acquisition and clearance of trademarks.