Court Opinion

ID: 9490706
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:52:22.157108+00
Date Added: 2024-06-11T17:54:16.422612
License: Public Domain

FLOYD R. GIBSON, Circuit Judge,
dissenting.
I respectfully dissent because, in this case, forfeiture is not “ ‘consonant with notions of fairness and justice under the law.’ ” Colonial Discount Corp. v. Bowman, 425 N.E.2d *739266, 268 n. 1 (Ind.Ct.App.1981) (quoting Skendzel v. Marshall, 261 Ind. 226, 301 N.E.2d 641, 650 (Ind.1973)).5 In exchange for a large portion of Klipsch’s assets, including the right to use various license rights under the License Agreement, WWR issued a $210,238 Equipment Note and a $701,134 Inventory Note, as well as a $425,000 Convertible Subordinated Debenture, in favor of Klipsch. The maturity date on the Equipment Note was March 31, 1993, and the maturity date on the Inventory Note was August 31, 1993. Klipsch extended the maturity date on the Equipment note four times and extended the maturity date on the Inventory Note three times. When most of these extensions were granted, payment on the notes was already past due, thus triggering the Termination provision of the License Agreement. Each time, however, Klipsch neglected to act upon its right to terminate the license agreement. On February 23, 1994, WWR’s then-parent company, Concept, paid WWR’s obligations on the Equipment and Inventory Notes in full.
On August 5,1994, the parties entered into an Extension and Modification Agreement which, inter alia, extended the maturity date of the Debenture from March 15, 1994 to June 30, 1995, and substituted Concept for WWR as the responsible party. The Debenture was payable on demand any time on or after the June 30th maturity date, provided Klipsch gave Concept thirty days notice. Klipsch provided notice of its intent to redeem the Debenture, but Concept failed to pay the full amount of the Debenture to Klipsch by June 30. Because Concept failed to redeem the Debenture, Concept was required to make an interest payment on July 1, 1995, which it did not pay to Klipsch until July 14. On August 15, 1995, Concept paid to Klipsch the remaining balance on the Debenture. Thus, as of August 15, 1995, Concept had paid Klipsch $210,238 on the Equipment Note, $701,134 on the Inventory Note, and $425,000 on the Debenture.
During the time that Klipsch allowed WWR to make late payments without invoking the Automatic Termination provision, WWR continued to develop and market the professional loudspeaker business using the Klipsch trademark, arguably greatly improving the value of that trademark. After years of developing Klipsch’s name and after paying Klipsch over one million dollars for the right to develop its own business using the Klipsch name, Klipsch is essentially asking for the forfeiture of WWR’s business. Without the use of the Klipsch trademark that WWR substantially developed, WWR will no longer have the use of a recognizable name in the loudspeaker business which is essential to its successful operation. In the final analysis, WWR spent three years developing a name which it now has no right to use. Effectively, WWR has given up considerable time, money, and effort in exchange for a loudspeaker business which is not worth much of anything without the use of the trademark under the License Agreement. Because I do not believe these results are “consonant with notions of fairness and justice,” id., as found by District Judge Harry F. Barnes in his opinion in this case, I would affirm the district court’s decision based on the equitable forfeiture issue.

. The footnote stated that the Skendzel court “recognized exceptions to the rule, when forfeiture clauses may properly be enforced,” but stated that " '[w]e are persuaded that forfeiture may only be appropriate under the circumstances in which it is found to be consonant with notions of fairness and justice under the law.’ ’’ Colonial, 425 N.E.2d at 268 n. 1 (quoting Skendzel, 301 N.E.2d at 650).