Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca4-06-02097/USCOURTS-ca4-06-02097-0/pdf.json

Parties Involved:
ADT Security Systems, Incorporated
Appellee
Sensormatic Electronics Corporation
Appellee
Sensormatic Security Corporation
Appellant

Document Text:

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 06-2097

SENSORMATIC SECURITY CORPORATION,

Plaintiff - Appellant,

versus

SENSORMATIC ELECTRONICS CORPORATION; ADT

SECURITY SYSTEMS, INCORPORATED,

Defendants - Appellees.

No. 06-2099

SENSORMATIC SECURITY CORPORATION,

Plaintiff - Appellant,

versus

SENSORMATIC ELECTRONICS CORPORATION,

Defendant - Appellee.

No. 06-2124

SENSORMATIC SECURITY CORPORATION,

Plaintiff - Appellee,

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2

versus

SENSORMATIC ELECTRONICS CORPORATION; ADT

SECURITY SYSTEMS, INCORPORATED,

Defendants - Appellants.

Appeals from the United States District Court for the District of

Maryland, at Greenbelt. Deborah K. Chasanow, District Judge.

(8:04-cv-00174-DKC; 8:05-cv-03473-DKC)

Argued: November 1, 2007 Decided: March 31, 2008

Before WILKINSON and SHEDD, Circuit Judges, and Claude M. HILTON,

Senior United States District Judge for the Eastern District of

Virginia, sitting by designation.

Affirmed in part, reversed in part, and remanded by unpublished per

curiam opinion.

ARGUED: Robert V. Zener, BINGHAM & MCCUTCHEN, L.L.P., Washington,

D.C., for Sensormatic Security Corporation. Edward C. Barnidge,

III, WILLIAMS & CONNOLLY, L.L.P., Washington, D.C., for Sensormatic

Electronics Corporation and ADT Security Systems, Incorporated. ON

BRIEF: David J. Butler, Jason R. Scherr, BINGHAM & MCCUTCHEN,

L.L.P., Washington, D.C., for Sensormatic Security Corporation.

Bruce R. Genderson, George A. Borden, Katherine G. Lindsey,

WILLIAMS & CONNOLLY, L.L.P., Washington, D.C., for Sensormatic

Electronics Corporation and ADT Security Systems, Incorporated.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

Franchisee Sensormatic Security Corporation (“SSC”) brought

these actions against its franchisor, Sensormatic Electronics

Corporation (“Sensormatic”), and ADT Security Systems (“ADT”) for

breach of contract. There are three issues before this Court on

appeal. First, SSC seeks entitlement to certain contract terms and

commission rates contained in Sensormatic’s agreement with another

franchisee pursuant to a More Favorable Contracts clause in the

SSC-Sensormatic Franchise Agreement. Next SSC argues that

Sensormatic and ADT breached the Franchise Agreement by failing to

sell certain products through the procedures established by the

Franchise Agreement. Finally, in a counterclaim Sensormatic seeks

declaration that certain language in the Agreement grants

Sensormatic the right to terminate the Franchise Agreement without

cause and pay only damages specified by the contract. The district

court held on summary judgment that certain products were outside

the purview of the Franchise Agreement. The district court

dismissed two of SSC’s claims under the rule against claim

splitting. The district court granted summary judgment to SSC on

Sensormatic’s counterclaim. We affirm in part and reverse in part.

I.

Sensormatic pioneered the development of anti-theft devices in

the 1960s and continues to develop and sell related products today.

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In the 1960s and 1970s, Sensormatic’s primary product was the

“Sensormatic System,” which it sold to retail customers through a

franchise arrangement, with franchisees servicing various

territories in the United States. In recent years, Sensormatic

chose to move away from the franchise model and has now bought out

all but two of its franchisees.

SSC has been the Sensormatic franchisee for the

Maryland/Washington, D.C./Virginia territory since 1967. The

present disputes arise under a 1976 Amended Franchise Agreement

between SSC and Sensormatic. The Agreement grants SSC an exclusive

right to sell and/or distribute within the franchise territory

“Detection Devices, Tags, Accessories and Supplies for Automatic

Theft Detection Uses.” “Detection Devices” and “Automatic Theft

Detection Uses” are defined in the contract. 

A “More Favorable Contracts” (“MFC”) clause provides SSC with

an option to amend the Agreement if Sensormatic “enters into any

contract” with another similarly situated franchisee that contains

more favorable terms and conditions.

The Agreement is not limited to a specific term, but permits

Sensormatic to terminate for various causes, such as SSC’s

insolvency. However, Section 12.H of the Agreement states that

“[t]he termination of this Agreement for any reason whatsoever

shall not terminate the obligations of the parties” and establishes

specific payments, which “are deemed to be full satisfaction . . .

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of any claim . . . which the Franchisee may have or assert arising

from the termination of this agreement.” 

In 1984, SSC and Sensormatic amended the Agreement to settle

a dispute over whether the Agreement covers certain closed-circuit

television (“CCTV”) products. This Settlement provides that

certain CCTV products are included in the franchise and that SSC

receive a commission rate of forty percent of the gross profits on

the sale of those products in the SSC territory. The 1976

Agreement establishes a commission rate of fifty percent of gross

revenue on sales of all other Sensormatic products covered by the

Agreement and sold in the SSC territory.

In 1978, Sensormatic entered into a Franchise Agreement with

Winner & Bagnara, Inc. (“Winner”) to cover the

Pennsylvania/Delaware territory. Winner’s Agreement is materially

identical to SSC’s 1976 Agreement, except that Winner’s contains an

addendum that broadens Winner’s franchise to include “accesscontrol” products. Access-control products are designed and

marketed to control whether an individual has access to enter a

building or a room within a building. At the same time Winner and

Sensormatic executed their Franchise Agreement, Sensormatic leased

from Winner the exclusive right to operate in the Winner franchise

territory for twenty years. At the end of the twenty year lease,

Sensormatic had the option to buy out Winner’s rights entirely as

the duration of Winner’s franchise, like SSC’s, was not limited to

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a specific term. In 1998, Sensormatic attempted to buy out

Winner’s rights and a legal dispute ensued (the Winner litigation).

In United States District Court for the Western District of

Pennsylvania, Winner argued that Sensormatic’s attempted buyout

constituted breach of contract. The Winner court held that

Sensormatic forfeited its right to buy out the Winner franchise and

the Court of Appeals for the Third Circuit affirmed. Sensormatic

Electronics Corp. v. First Nat’l Bank Pa., 148 Fed. App’x. 99 (3rd

Cir. 2005)(unpublished). 

To properly calculate damages, the Winner court considered

whether the sale of certain, more recently developed Sensormatic

products was covered by the Winner Agreement and subject to the

Agreement’s commission rate. The Winner court held that CCTV,

radio frequency identification device (“RFID”), and various other

more newly-developed products were covered by the Winner Agreement.

This ruling subjects the sale of CCTV products in the Winner

territory to the fifty percent of gross sales commission rate

stated in the Franchise Agreement rather than the forty percent of

gross profits rate agreed-upon by SSC and Sensormatic in their 1984

Settlement.

In 2002, SSC brought suit in United States District Court for

the District of Maryland against Sensormatic to challenge

Sensormatic’s distribution of newly-developed CCTV products in the

SSC franchise territory and its failure to pay commission to SSC on

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those sales (Sensormatic I). Sensormatic I is currently pending at

the district court and is not on appeal. Over one year after

filing its complaint in Sensormatic I but prior to the deadline for

filing an amended complaint, SSC learned of the addendum

Sensormatic signed with Winner including access-control products in

the Winner franchise. By the time SSC decided to assert a claim

based on the Winner addendum, the deadline for filing an amended

complaint had passed. SSC sought leave to file an amended

complaint and the court denied SSC’s motion on the ground that SSC

“did not diligently address the need for an amendment of the

scheduling order when it first learned of the Winner Addendum,

before the scheduling order deadline passed.” 

The day after its motion for leave was denied, SSC filed a

separate action in the same court asserting the identical MFC claim

it sought to add to Sensormatic I (Sensormatic II). SSC later

amended the Sensormatic II complaint to include claims that

Sensormatic breached the Franchise Agreement by failing to sell

RFID products in the SSC territory in accordance with the Franchise

Agreement. Sensormatic moved to dismiss both the access-control

claims and the RFID claims on the ground that the second suit

violates the rule against claim splitting. The district court

granted this motion with respect to the access-control claims, but

denied it with respect to the RFID claims. The district court

later granted Sensormatic’s motion for summary judgment on the RFID

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*

ADT is not a party in Sensormatic III.

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claims, holding that RFID products are not covered by the Franchise

Agreement. 

In Sensormatic II, Sensormatic filed a counterclaim seeking

declaration from the court that Section 12.H of the Franchise

Agreement establishing SSC’s damages in the event of termination

“for any reason whatsoever” constitutes a liquidated damages

provision and grants Sensormatic the right to terminate the

Franchise Agreement and pay only the damages stated in that

Section. The district court granted SSC’s motion for summary

judgment, holding that Section 12.H did not give Sensormatic the

right to terminate the Franchise Agreement and pay only liquidated

damages. The district court’s decisions to dismiss SSC’s accesscontrol claims, grant Sensormatic’s summary judgment motion on

SSC’s RFID claims, and grant SSC’s summary judgment motion on

Sensormatic’s counterclaim are all currently before this Court on

appeal.

After the Third Circuit affirmed the district court’s decision

in Winner — holding that the Winner Agreement covered certain CCTV

products — SSC filed a third lawsuit seeking a more favorable

commission rate for the sale of CCTV products (Sensormatic III).*

SSC argued that the MFC clause requires Sensormatic to give SSC the

more favorable forty percent of gross sales commission rate for the

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profits rate established by the 1984 Settlement. As Sensormatic

III was filed forty-two months after SSC filed Sensormatic I and

involves the same products at issue in that case, the district

court granted Sensormatic’s motion to dismiss on the ground that

the claims in Sensormatic III violate the rule against claim

splitting. SSC’s appeal of this decision is also currently before

this Court.

II.

This Court reviews de novo the district court’s grant of

Sensormatic’s motion for summary judgment on SSC’s RFID claims.

See Nat’l City Bank of Ind. v. Turnbaugh, 463 F.3d 325, 329 (4th

Cir. 2006)(“We review a grant of summary judgment de novo”). SSC

argued below that collateral estoppel ought to apply to the Winner

court’s decision that the Winner Agreement covers RFID products.

Review of a district court’s decision on collateral estoppel is

also de novo. See id. We consider SSC’s collateral estoppel

argument first.

A.

When federal jurisdiction in a prior case is based on

diversity of citizenship, for any subsequent suit in federal court,

federal law incorporates the preclusion law of the state in which

the court that rendered judgment in the prior suit sits. Semtek

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Intern. Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001). As

Winner was a diversity case in Pennsylvania, this Court applies the

collateral estoppel law of Pennsylvania.

Collateral estoppel prevents “the relitigation of issues of

fact or law that are identical to issues which have been actually

determined and necessarily decided in prior litigation in which the

party against whom [collateral estoppel] is asserted had a full and

fair opportunity to litigate.” Ramsay v. I.N.S., 14 F.3d 206, 210

(4th Cir. 1994). The Winner court held that the Winner franchise

included all Sensormatic product lines that are used for the

prevention and detection of shoplifting and other theft and

concluded that RFID products are within the scope of that

definition. 

The district court declined to apply collateral estoppel to

the RFID-coverage issue because that issue “was not actually

litigated in the Pennsylvania case because Sensormatic did not

contest that RFID products were an Automatic Theft Detection

Product.” See Uzdaviness v. Weeks Marine, Inc., 418 F.3d 138, 146

(2d Cir. 2005)(stating that “[m]ost courts have held that a fact

established in prior litigation by stipulation, rather than by

judicial resolution, has not been actually litigated”).

Stipulation is evidenced by the Winner court’s quotation from a

Sensormatic brief stating that newly-developed Sensormatic products

“are not ‘successors’ to the Sensormatic System. These products do

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not use microwave technology and have not been marketed as

replacements to the microwave-based Sensormatic System.

Additionally, with the exception of the other electronic article

surveillance systems and RFID, none of them are even products for

Automatic Theft Detection.” (emphasis added). 

SSC argues that the district court erred because the issue of

franchise coverage of RFID products is comprised of two more narrow

issues: whether RFID products are used for Automatic Theft

Detection under the Agreement and whether RFID products are

successor products to the Sensormatic System that existed in 1970s.

SSC argues that in Winner, Sensormatic chose to stipulate that RFID

products were used for Automatic Theft Detection and contested the

coverage issue on the ground that RFID products are not “successors

to” the 1970s Sensormatic System. SSC argues that “[a] finding

that rests in part on a stipulation and in part on litigation,

however, supports preclusion.” 18A Wright, Miller and Cooper,

Federal Practice and Procedure § 4443. 

SSC’s argument is unpersuasive because the rule giving

preclusive effect to issues established by stipulation in prior

litigation has only a narrow exception. In recognizing the

exception for findings that rest partially on stipulation and

partially on litigation, the Seventh Circuit commented that:

[t]he decisive reason for giving [stipulations]

collateral estoppel effect is that a lawyer’s recognition

that the evidence is so stacked against him on some point

that a failure to admit it will open him to sanctions

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under Fed. R. Civ. P. 37(c) is as good an indication of

where the truth probably lies as a determination by a

judge or jury. 

Kairys v. I.N.S., 981 F.2d 937, 941 (7th Cir. 1992)(holding the

rule against collateral estoppel of stipulated issues did not apply

where the party against whom estoppel was sought stipulated that

Nazi Germany invaded the Soviet Union on June 22, 1941). Indeed,

the court in Kairys distinguished the case where a prior judgment

rested solely on an admission — preclusion does not apply — from

the case where “the party later sought to be estopped had put up a

fight, conceding only the points hopelessly against him.” Id.

While we can only speculate as to why Sensormatic conceded in

Winner that RFID products were used for Automatic Theft Detection,

it is clear that this issue is not a mere background fact like

whether Nazi Germany invaded the Soviet Union on a particular date.

There is no indication that Sensormatic conceded the “Automatic

Theft Detection Uses” issue because the point was “hopelessly

against” it. 

An issue for collateral estoppel purposes is “a single certain

and material point arising out of the allegations and contentions

of the parties.” 18 Moore’s Federal Practice § 132.02. Whether

RFID products are used for Automatic Theft Detection is such an

issue and the district court correctly ruled that its prior

stipulation not be given collateral estoppel effect.

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We now turn to whether the district court properly granted

summary judgment to Sensormatic, holding that RFID products are not

covered by the Franchise Agreement.

 

B.

Summary judgment is appropriate where there is no genuine

issue as to any material fact. See Fed. R. Civ. P. 56 (c). Once a

motion for summary judgment is properly made and supported, the

opposing party has the burden of showing that a genuine dispute

exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475

U.S. 574, 586-87 (1986). A material fact in dispute appears when

its existence or non-existence could lead a jury to different

outcomes. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986). A genuine issue exists when there is sufficient evidence

on which a reasonable jury could return a verdict in favor of the

non-moving party. See id. Mere speculation by the non-moving

party "cannot create a genuine issue of material fact." Beale v.

Hardy, 769 F.2d 213, 214 (4th Cir. 1985); see also Ash v. United

Parcel Serv., Inc., 800 F.2d 409, 411-12 (4th Cir. 1986). Summary

judgment is appropriate when, after discovery, a party has failed

to make a "showing sufficient to establish the existence of an

element essential to that party’s case, and on which that party

will bear the burden of proof at trial." Celotex Corp. v. Catrett,

477 U.S. 317, 322 (1986). When a motion for summary judgment is

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made, the evidence presented must always be taken in the light most

favorable to the non-moving party. See Smith v. Virginia

Commonwealth Univ., 84 F.3d 672, 675 (4th Cir. 1996) (en banc).

RFID technology is used to identify and track products along

the distribution chain. A RFID tag houses a chip that communicates

product information to a “reader,” which feeds the information to

a computer database. The current primary use of RFID technology is

to track pallets of a particular good — laundry detergent, for

example — so that a particular quantity of that good can be more

easily sent to the retail location that needs it most. For

example, RFID enables Wal-Mart to know that its Manassas, Virginia

location is running low on laundry detergent and to divert to

Manassas a shipment currently en route to another store. SSC

argues that, despite its current primary use, RFID technology can

be used to prevent theft. Because RFID can be used to track

pallets of a particular good, it stands to reason that RFID could

be used to signal when a pallet has gone missing. 

By contrast, the Sensormatic System is a microwave-emitting

“electronic article surveillance” device. The System typically

sits at a retail store’s exit and is designed to detect tags

attached to merchandise that are not removed, as is typically done

after an item has been purchased. When the System detects a tag,

an alarm or other control device is activated, automatically

signaling a potential theft. 

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Section 2 of the Franchise Agreement gives SSC the right to

sell/lease within the franchise territory “Detection Devices, Tags,

Accessories and Supplies for Automatic Theft Detection Uses.”

“Detection Devices” are defined by the Agreement as: 

the detection systems and devices presently being

marketed by the Franchisor for Automatic Theft Detection

Uses . . . which include a transmitter and coordinated

receiver and alarm console, and which may be installed

and used as a system or device to detect Tags, sounding

an alarm, or otherwise activating a control device, and

all successors thereto. 

“Automatic Theft Detection Uses” are defined in pertinent part as

“uses for the prevention of shoplifting and other theft,” which

includes “the control and surveillance of inventory and merchandise

offered for resale by retailers, wholesalers, manufacturers,

government agencies, and others.” To be covered by the Agreement,

RFID products must be used for “Automatic Theft Detection” and must

also satisfy the Agreement’s definition of “Detection Devices.”

We first consider whether RFID products are used for

“Automatic Theft Detection.” Sensormatic argues that summary

judgment is appropriate because there is no evidence in the record

showing that a single Sensormatic customer uses RFID products for

theft detection. Indeed, the record contains testimony from

various industry participants, including SSC’s President, stating

that Sensormatic RFID products are not currently being used or sold

for theft detection, but rather are used to more efficiently

distribute inventory among retail locations. Whether RFID could be

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used for theft detection is not relevant to whether the Franchise

Agreement covers these products as the Agreement only covers

Sensormatic products sold for theft detection. 

Certain Sensormatic/ADT marketing materials indicate that, at

one time, Sensormatic and ADT considered theft detection to be a

potential use for RFID products. However, a Sensormatic product is

not covered by the Franchise Agreement simply because it was, at

some point in time, marketed for theft detection. The Agreement

covers “Detection Devices” “presently being marketed for” theft

detection. As the Agreement was signed in 1976, the “presently

being marketed for” language refers only to those products being

marketed by Sensormatic for theft detection in 1976. This reading

does not prevent post-1976 products from being covered by the

Agreement, however. Whether a newly-developed Sensormatic product

is a “Detection Device” covered by the Agreement depends on whether

it is a “successor” to the 1976 Sensormatic System. Moreover, the

“presently being marketed for” language applies only to the

question of whether a product at issue is a “Detection Device,” not

whether the product is used for “Automatic Theft Detection.”

Therefore these marketing materials do not create a genuine issue

of material fact with regard to whether RFID products are used for

“Automatic Theft Detection.” 

As there is no material fact issue regarding whether RFID

products are used for “Automatic Theft Detection,” we hold that the

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district court did not err in awarding summary judgment to

Sensormatic. We need not consider whether RFID constitutes a

“Detection Device” under the contract, as coverage under the

Agreement requires both that a product be used for “Automatic Theft

Detection” and be a “Detection Device.” 

III.

The rule against claim splitting is one of the principles of

res judicata. See Nash County Bd. of Educ. v. Biltmore Co., 640

F.2d 484, 490 (4th Cir. 1981). Consequently, the standard of

review on the district court’s decisions to dismiss two of SSC’s

claims as violations of the rule against claim splitting is de

novo. Pueschel v. United States, 369 F.3d 345, 354 (4th Cir.

2004)(“We review de novo a district court’s application of the

principles of res judicata”). 

A.

In Sensormatic I, SSC sought leave to file an amended

complaint after the district court’s deadline for filing an amended

complaint had passed. This claim was based on the Winner

Agreement’s addendum making access control products part of the

Winner Franchise. SSC sought to use the MFC clause to require

Sensormatic to offer it the same terms as Winner, thus making

access-control products part of the SSC Franchise. Although the

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Winner Agreement and addendum were signed in 1978, SSC did not

learn of the addendum until May 9, 2003. The Sensormatic I court

denied SSC’s request for leave to amend on the ground that SSC

learned of the addendum approximately one month prior to the

deadline for filing an amended complaint yet failed to timely

amend. That court held that SSC’s failure to timely amend was

without good cause and denied the request. SSC asserted the same

claim in a new lawsuit, Sensormatic II, the day after the

Sensormatic I court denied its motion for leave.

The rule against claim splitting “prohibits a plaintiff from

prosecuting its case piecemeal and requires that all claims arising

out of a single wrong be presented in one action.” Myers v.

Colgate-Palmolive Co., 102 F. Supp. 2d 1208, 1224 (D. Kan. 2000).

In a claim splitting case, the second suit will be barred if the

claim involves the same parties and “arises out of the same

transaction or series of transactions as the first claim.” See

Trustmark Insur. Co. v ESULU, Inc., 299 F.3d 1265, 1269-70 (11th

Cir. 2002). When one suit is pending in federal court, a plaintiff

has no right to assert another action “on the same subject in the

same court, against the same defendant at the same time.” Curtis

v. Citibank, N.A., 226 F.3d 133, 139-39 (2d Cir. 2000). Often, the

rule against claim splitting applies to prevent a plaintiff from

filing a new lawsuit after the court in an earlier action has

denied the plaintiff’s request for leave to amend to add the claims

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later asserted in the second lawsuit. See Northern Assurance Co.

Of Am. v. Square D. Co., 201 F.3d 84, 87-88 (2d Cir. 2000)(citing

string of cases dismissing claim in second suit that was

duplicative of claim sough to be amended to first suit); Devoc,

Inc. v. NGC, 309 B.R. 458, 465-66 (Bankr. N.D. Tex. 2004)(same). 

In support of its motion for leave to amend the Sensormatic I

complaint, SSC argued that amendment was permissible “because the

new breach of contract claim is based upon the same Restated

Franchise Agreement that is currently at issue.” In Sensormatic

II, SSC argued against dismissal on claim splitting grounds because

the claims in Sensormatic II are based on the Winner Agreement,

rather than the SSC-Sensormatic Franchise Agreement that is the

subject of Sensormatic I. Notwithstanding the fact that SSC has

taken fundamentally different positions in arguing two different

motions, its argument in Sensormatic II is incorrect. The factual

allegations to be resolved in Sensormatic II do not concern the

validity or scope of the Winner addendum, but the scope of the SSCSensormatic Franchise Agreement. 

Dismissal pursuant to the rule against claim splitting is

appropriate in this case for two reasons. First, it is apparent

that SSC sought to circumvent the Sensormatic I court’s decision to

deny SSC’s motion for leave to file an amended complaint.

Presuming that SSC felt that this denial was in error, it should

have waited to appeal the decision until Sensormatic I becomes

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final. Second, the access-control claims at issue are “on the same

subject in the same court, against the same defendant at the same

time,” Curtis, 226 F.3d at 139-140, and therefore are in violation

of the rule against claim splitting. Consequently, we believe that

the district court properly dismissed SSC’s access-control claims

in Sensormatic II.

B.

In Sensormatic III, SSC brought suit under the MFC clause

seeking more favorable commission rates for the sale of CCTV

products. Whether certain CCTV products are covered by the

Franchise Agreement was a subject of dispute between SSC and

Sensormatic in the early 1980s. A 1984 Settlement resolved the

dispute and established that Sensormatic pay SSC a fifty percent of

gross profits commission rate for CCTV sales in the SSC territory

rather than the forty percent of gross sales rate paid for all

other Sensormatic products covered by the Agreement. The Winner

court held that these CCTV products were covered by the Winner

Franchise Agreement and therefore subject to the forty percent of

gross sales commission rate. As Winner did not dispute this issue

in the 1980s it did not get resolved until Winner and Sensormatic

engaged in litigation in the late 1990s. SSC now seeks to invoke

the MFC clause to obtain the more favorable commission rate Winner

obtained in court. 

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SSC argues that it failed to bring this claim in Sensormatic

I or Sensormatic II because it did not obtain the more favorable

rights with respect to the sale of CCTV products until after the

Third Circuit affirmed the Winner court’s decision. This argument

is not persuasive because SSC brought its RFID claims in

Sensormatic II — claims that the district court decided did not

violate the rule against claim splitting — based on the Winner

court’s decision that the Winner Agreement covered RFID products.

SSC offers no plausible reason why it had to wait for the Third

Circuit’s decision before bringing its CCTV claims but was able to

bring its RFID claims in the wake of the district court’s decision

in Winner. Consequently, SSC offers no plausible reason why it did

not bring these claims in Sensormatic II. As this is an action “on

the same subject in the same court, against the same defendant at

the same time,” Curtis, 226 F.3d at 139-39, we hold that the

district court did not err in dismissing Sensormatic III on

improper claim splitting grounds. 

IV.

Section 12.H of the Agreement states that “the termination of

this Agreement for any reason whatsoever shall not terminate the

obligations of the parties . . . and, in particular, shall not

terminate the obligation of the Franchisor to make” certain

specified payments. Sensormatic seeks declaration that this clause

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is a liquidated damages provision, granting it the authority to

terminate the Agreement “for any reason whatsoever” and pay only

the contractually specified payments. Section 12.C states that

“[t]he Franchisor shall have the right, at its option, to terminate

this Agreement and the franchise if” the franchisee fails in its

marketing commitments, defaults on specified covenants in the

Agreement, becomes insolvent, or ceases to continue in the business

of selling or servicing the equipment covered by the Agreement.

SSC argues that Section 12.H applies only to terminations made for

the reasons outlined in Section 12.C. SSC argues that if Section

12.H requires that Sensormatic pay only liquidated damages for

terminations that are not specifically authorized by Section 12.C,

then the Agreement makes no distinction between valid and invalid

terminations and the language in Section 12.C is superfluous. The

district court so found and granted SSC’s summary judgment motion.

The Agreement provides and the parties agree that Florida law

governs the Franchise Agreement. Florida contract law requires

that courts give effect to a contract’s plain meaning. See,

Volusia County v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126,

132 (Fla. 2000)(“It is axiomatic that when construing a document,

courts should give effect to the plain meaning of its terms”). A

fair reading of the phrase “for any reason whatsoever” is that it

refers to all possible reasons, not to a narrower subset of

reasons. Consequently the plain meaning of the phrase “for any

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reason whatsoever” in Section 12.H is that the phrase applies to

any and all reasons for termination, not just the reasons specified

in the contract. Indeed, Florida courts have held that a

termination clause that grants the parties the right to terminate

“for any reason whatsoever” permits the parties to terminate for

“good cause, bad cause, or no cause.” Terranova Corp. v. 1550

Biscayane Assocs., 847 So. 2d 529, 532 (Fla. Dist. Ct. App. 2003).

SSC argues that interpreting the Agreement according to its

plan meaning would result in a conflict between Section 12.H and

the contract provisions outlining specific grounds for termination

by the franchisor. Where contract language is ambiguous, “an

interpretation which gives a reasonable meaning to all provisions

of a contract is preferred to one which leaves a part useless or

inexplicable.” Siedle v. Nat’l Ass’n of Sec. Dealers, Inc., 248 F.

Supp. 2d 1140, 1144 (M.D. Fla. 2002)(quoting Golden Door Jewelry

Creations v. Lloyds Underwriters Non-Marine Ass’n, 117 F.3d 1328,

1338 (11th Cir. 1997)). SSC argues that applying Section 12.H’s

limitation of liability clause to all terminations results in an

outcome where Section 12.C is rendered useless. This argument

ignores the fact that Section 12.H’s limitation of liability does

not bar claims for money owed prior to termination. Because the

Agreement is unambiguous, the plain meaning of the phrase “for any

reason whatsoever” is that Section 12.H’s limitation of liability

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applies to all terminations, including terminations for reasons not

specifically described in the Agreement. 

The Fifth Circuit, in Sulzer Carbomedics, Inc. v. Oregon

Cardio-Devices, Inc., 257 F.3d 449 (5th Cir. 2001), interpreting a

Texas contract with a similar provision, considered whether to

enforce a contract clause limiting liability for termination “for

any reason whatsoever” when the contract also specified grounds for

termination. The court considered the argument that “the

limitation of liability clause renders meaningless the termination

provisions.” Id. at 456. The court held that the limitation of

liability clause applied to terminations made for the causes

defined by the contract as well as to all other terminations. Id.

at 457. The court reasoned that the limitation of liability clause

“does not render meaningless the section of the contract setting

out specific grounds of termination” as the limitation clause does

not bar claims for monies owed prior to termination. Id. at 456-

57. Furthermore, the court noted that the contract specifically

stated that no party was to be liable for incidental, special, or

consequential termination damages. Id. at 457. 

Here, the parties explicitly excluded any damages not

described in Section 12.H and specifically identified lost profits

as non-recoverable. Section 12.H is clear and unambiguous. The

language in Section 12.H means what it says and should be given

plain meaning. 

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V.

For the foregoing reasons, the judgment of the district court

is affirmed in part and reversed in part and remanded for entry of

summary judgment in favor of Sensormatic on its claim for

declaratory judgment and any further proceedings consistent with

this opinion. 

 AFFIRMED IN PART,

 REVERSED IN PART,

 AND REMANDED

 

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