Court Holds That Fiduciary Duties Did Not Arise In A Licensing Transaction

by Winstead PC
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In Jacked Up, LLC v. Sara Lee Corp., Jacked Up entered into a licensing agreement whereby Sara Lee would produce and sell energy drinks developed by Jacked Up. No. 15-11019, 2017 U.S. App. LEXIS 7311 (5th Cir. April 25, 2017). Shortly thereafter, Sara Lee sold its beverage division to the J.M. Smucker Company (“Smucker”). Smucker decided not to assume Sara Lee’s licensing agreement with Jacked Up, and in November 2011, Sara Lee formally terminated the agreement. Jacked up then sued Sara Lee for breach of fiduciary duty and other claims, and the trial court dismissed all of the claims via summary judgment. Jacked Up appealed.

Jacked Up argued on appeal that its “‘partner’ relationship” with Sara Lee and the non-disclosure agreement (“NDA”) both parties signed created a fiduciary relationship between them. Sara Lee argued that the parties dealt with each other at arm’s length and noted that neither an NDA nor one party’s subjective trust in the other suffices to create fiduciary duties. The court of appeals agreed with Sara Lee and affirmed the dismissal of the breach of fiduciary duty claim. The court held that licensing agreements, NDAs, and other agreements requiring confidentiality generally do not create fiduciary relationships. The court found important that the licensing agreement made clear that it “does not, and shall not, be deemed to make any party hereto the agent, partner, joint venturer or legal representative of any other party for any purpose whatsoever.” Id. So, the parties’ express agreement negated a fiduciary relationship.

Jacked Up argued that it created a partnership with “dominant partner” Sara Lee. But it failed to cite any authority for the proposition that a dominant party in a commercial transaction, where each party is represented by counsel, owes fiduciary duties to the weaker party. The court did not find any authority either. Jacked Up argued that “the collaborative effort to develop the products, the joint marketing efforts, . . . and the promises of a long-term deal all would permit a reasonable juror to find the existence of a fiduciary relationship.” Id. The court held: “Such corporate dealings do not transform an arm’s length transaction into a fiduciary relationship.” Id.  The court concluded: “In sum, Jacked Up fails to point to sufficient evidence that would support finding a fiduciary relationship between the parties. Therefore, we affirm the district court’s grant of summary judgment in favor of Sara Lee on Jacked Up’s breach of fiduciary duty claim.” Id.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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