GEORGE COMPANY LLC v. SPIN MASTER US HOLDINGS INC SPIN MASTER INC CARDINAL INDUSTRIES INC WALMART INC JOEL BERGER (2023)

REPORT AND RECOMMENDATION

George & Co. and Spin Master have been fighting each other for years. These three lawsuits are only some of the “battle[s] ․ these parties have fought in their decade-plus war for trademark supremacy. The trademarks relate to a dice game that uses specially marked dice and playing chips. Versions of the game are sold at popular retailers, including Amazon.com, Walmart, Target, and Kohl's. George & Co.’s 17 trademarks ․ protect various formulations of the names and designs LEFT CENTER RIGHT and LCR for versions of its games, including for different visual styles and types of gameplay.” George & Co. v. Spin Master U.S. Holdings, Inc., No. 19-CV-4391, 2021 WL 6127389, at *1 (E.D.N.Y. Nov. 23, 2021) (citations omitted), report and recommendation adopted, 2021 WL 6125818 (Dec. 28, 2021). As this Court explained in a prior opinion:

Beginning in 2018, Plaintiff George & Company LLC (“George & Co.”) filed a series of trademark infringement actions against Spin Master Corporation, Spin Master Ltd. (“Spin Master”), or related companies. George & Co. claims that Spin Master infringed on its marks for the dice-playing game “LCR LEFT! CENTER! RIGHT!” George & Co. filed its first suit in the Middle District of Florida. There, it lodged six different complaints, amending five separate times. It subsequently filed a second lawsuit in this District. The Florida action was then transferred here. After the cases were consolidated, George & Co. attempted to file an eighth complaint, which the Court denied, finding the amendment futile and prejudicial․ George & Co. then filed this third lawsuit. And while this third suit was pending, George & Co. filed a fourth lawsuit. In total, there have been 10 complaints filed by George & Co. All relate to the same mark or family of marks. Nine of the 10 have been filed against a Spin Master entity.

George & Co. v. Spin Master Corp., No. 20-CV-4082, 2021 WL 6060700, at *1 (E.D.N.Y. Aug. 30, 2021) (citations omitted), report and recommendation adopted, 2021 WL 6063528 (Dec. 21, 2021), aff'd, No. 22-CV-126, 2023 WL 6053005 (2d Cir. Sept. 18, 2023).

But these three lawsuits were only the last round in a long-running fight. “George & Co. [first] sued Imagination Entertainment Limited, Imagination Holdings Pty Ltd., and Imagination DVD, Inc․ for trademark infringement in the Eastern District of Virginia in 2008. Imagination sold its own version of the dice game under the name ‘LeFT CeNTeR RIGHT’ and subsequently as ‘LEFT CENTER RIGHT.’ Spin Master is Imagination's successor-in-interest.” George & Co., 2021 WL 6127389, at *3 (citations omitted).¹ Then, “Imagination (and later Spin Master Ltd.) sought to register four separate marks, including LEFT, RIGHT AND CENTER before the PTO.” Id. And the parties litigated before the Trademark Trial and Appeal Board about Spin Master's attempt to register the marks. Id. at *4.

It appeared for a brief moment that the fighting had come to an end. The parties both agreed to this Court's settlement proposal—the “Neutral's Proposal” or the “Proposal”—to settle their disputes. But, unfortunately, past was merely prologue, and only a few weeks later, the parties found it impossible to reduce their argument to writing. And they have resorted yet again to expensive motion practice, this time in the form of dueling motions for settlement enforcement.²

This much is agreed: the parties have settled the three cases reflected in the caption. The settlement calls for a payment of a sum certain by Spin Master to George & Co. in return for a general release. And the parties agree on what framework guides their eventual written agreement: the Court's Neutral's Proposal. The parties also agree that the language of the Neutral's Proposal is as follows:

A payment of [Redacted] by Defendants in consideration for the resolution of all claims made by Plaintiff in this action. In addition, the parties will disclaim any rights to exclusivity in “Left, Center, Right,” and Defendants agree not to sell any item with the term “LCR.”

(Neutral's Proposal, attached as Ex. 1 to Pl.’s Mem. of Law in Supp. of Mot. to Enforce (“George & Co. Mem.”), Dkt. No. 106 at 1).³ Yet having agreed to all this, the parties disagree on what these words mean. They cannot agree on the geographic scope of the Neutral's Proposal. Does the disclaimer of rights in “Left, Center, Right” apply outside the United States? And is Spin Master permitted to sell items with the term “LCR” outside the United States?

In their discussions with the Court, the parties failed to ask about or insist on a term that defined the Proposal's geographic scope. The Court is forced to resolve this latent ambiguity, and discern the parties’ intent in agreeing to the Neutral's Proposal, by examining the limited extrinsic evidence on the subject. Ultimately, at its core, the parties have been fighting about their respective rights to sell the game “LEFT CENTER RIGHT” in the United States and Canada (and not in the rest of the world). And so, the Neutral's Proposal should only apply to the United States and Canada.

As such, for the reasons explained below, the Court recommends granting each party's motion to enforce in part—because both concede and agree that the Neutral's Proposal constitutes a binding enforceable agreement. The Court recommends, again at the parties’ mutual request, that the Neutral's Proposal's geographic scope be interpreted, but concludes that the Proposal's effect extends only to the United States and Canada. The Court recommends denial of the motions to the extent they seek any other form of relief or other interpretation of the Neutral's Proposal. In closing, the Court recommends that the Clerk of Court enter judgment consistent with the Neutral's Proposal, as interpreted herein.

PROCEDURAL HISTORY AND FACTUAL BACKGROUND

Though much of this history is recounted in prior decisions of this Court—see, e.g., George & Co. v. Spin Master Corp., No. 19-CV-4391, 2020 WL 3865098, at *1–*2 (E.D.N.Y. July 7, 2020); George & Co. v. Spin Master Corp., No. 19-CV-4391, 2020 WL 7042665, at *1–*2 (E.D.N.Y. Nov. 30, 2020)—those events relevant to the present motions to enforce are repeated below.

There have been several attempts at a resolution of these cases. The parties exchanged multiple formal, written settlement offers with no Court involvement. (See generally Confidential Settlement Letters, attached as Exs. D–J to Defs.’ Mem. of Law in Supp. of Mot. to Enforce (“Spin Master Mem.”), Dkt. No. 108). This Court held a virtual settlement conference on July 9, 2020. The parties did not reach a settlement at that conference. (Minute Entry dated July 9, 2020).

On September 23, 2022, the Court held a second settlement conference. The conference encompassed three of the cases between the parties: George & Co. v. Spin Master US Holdings, Inc., No. 19-CV-4391; George & Co. v. Cardinal Industries, Inc., No. 19-CV-4883; and George & Co. v. Target Corp., No. 21-CV-4254. There is no dispute about what the Court did at the end of the conference. The Court provided a proposed resolution to both sides. (See Neutral's Proposal; Spin Master Mem. at 7; George & Co. Mem. at 1). Each side was required to inform the Court ex parte, by September 30, whether it accepted this Neutral's Proposal or not. The Court later extended the deadline to October 14. (Emails Between Joshua Brown & the Ct. dated Sept. 30–Oct. 14, 2022 (“Spin Master Acceptance”); accord Spin Master Mem. at 7–8).⁴

On October 14, counsel for George & Co. wrote to the Court as follows: “George & Company, LLC accepts the neutral proposed settlement option that would require defendants to pay plaintiff a total of [Redacted]. A number of further terms would need to be agreed to, notably that Spin Master may not transfer or sell its ‘Left Center Right’ marks to any other parties.” (Email Acceptance of Ct.’s Neutral Proposal dated Oct. 14, 2022 (“October 14 Email”), attached as Ex. L to Spin Master Mem at 2). The Court responded to George & Co.’s counsel:

The Court at this point cannot accept Plaintiff's response to the neutral's proposal. The term providing Spin Master may not transfer or sell its own marks to any other party was not part of the Court's proposal or discussed with the parties. If Plaintiff has discussed this term with Defendant's counsel, it should inform the Court immediately; if not, the response will be deemed a rejection of the neutral's proposal. Alternatively, Plaintiff can accept the Court's neutral's proposal which was as follows: “A payment of [Redacted] by Defendants in consideration for the resolution of all claims made by Plaintiff in this action. In addition, the parties will disclaim any rights to exclusivity in ‘Left Center Right,’ and Defendants agree not to sell any product with the term ‘LCR.’ The exact wording of these and any other non-monetary terms to the settlement must be separately determined by the parties.”

(Id. at 1–2). Less than an hour later, counsel responded on behalf of George & Co., “We accept the Court's neutral's proposal.” (Id. at 1).

On October 14, the Court received a similar response from Spin Master's counsel. (Spin Master Acceptance at 1 (“Defendants accept your Neutral's Proposal.”)). Having received two ex parte acceptances from both adverse parties, the Court issued an order on the public docket, noting the settlement: “This matter has settled because the parties have accepted the Court's neutral proposal.” (Minute Entry & Order dated Oct. 14, 2022).⁵

On December 19, 2022, Spin Master's counsel filed a letter indicating that the parties were unable to reduce their agreement to writing. (Letter dated Dec. 19, 2022, Dkt. No. 101). The Court held a status conference on January 12, 2023, and thereafter set a briefing schedule for the parties’ cross-motions to enforce. (Minute Entry & Order dated Jan. 13, 2023; Order dated Mar. 2, 2023). George & Co. and Spin Master filed dueling motions to enforce their settlement agreement, (Dkt. Nos. 104–111), and in response to the Court's order, filed supplemental briefs specifically on the issue of whether there is a live, justiciable case for the Court to adjudicate. (Order dated Aug. 28, 2023; see Dkt. Nos. 112–114). Judge Diane Gujarati referred the cross-motions to enforce to the undersigned. (Order Referring Mot. dated Apr. 4, 2023).

DISCUSSION

There is an initial threshold question posed by the cross-motions to enforce: whether the Court can interpret the provisions of the Neutral's Proposal for the parties. As discussed below, the three cases before this Court and in this District are resolved by force of the acceptance of the Neutral's Proposal. The parties agree on that much. And they agree that the Neutral's Proposal constitutes a final, binding and enforceable agreement. Yet they want the Court to decide whether the parties are free, outside of these cases and outside of the United States, to engage in certain conduct and whether the parties retain or lack trademark rights outside the United States. Arguably, these are questions that were never before the Court. Yet the parties insist the Court should decide this issue—the geographic scope of the Neutral's Proposal—now, to forestall future litigation between them.

This Court is cognizant that it lacks the power to decide abstract, theoretical questions of interpretation that could arise some other day. Nike, Inc. v. Already, LLC, 663 F.3d 89, 94–95 (2d Cir. 2011) (“In trademark cases seeking relief under ․ Section 37 of the Lanham Act, 15 U.S.C. § 1119, a valid covenant not to sue may strip district courts of jurisdiction.”), aff'd, 568 U.S. 85 (2013). That being said, the present circumstance is sufficiently concrete to present a cognizable dispute for the Court's adjudication.⁶

When the parties have negotiated a resolution in a settlement conference—and where there is no subsequent written, detailed documentation of the agreement—the parties have “agreed only upon the basic aspect of relief.” Janus Films, Inc. v. Miller, 801 F.2d 578, 582 (2d Cir. 1986). And the Court's role is to enter a “settlement judgment.” Id. In that particular context, “the judge is obliged to determine the detailed terms of the relief and the wording of the judgment.” Id.; cf. Geller v. Branic Int'l Realty Corp., 212 F.3d 734, 737 (2d Cir. 2000) (“[W]hen a district court ‘so orders’ a stipulated settlement, it does accept some obligations. The clearest obligation is a duty to enforce the stipulation that it has approved.”). Of course, in so doing, “the judge may not award whatever relief would have been appropriate after an adjudication on the merits, but only those precise forms of relief that are either agreed to by the parties or fairly implied by their agreement.” Janus, 801 F.2d at 582 (citation omitted). The Court's obligation to enter a settlement judgment extends to “interpretations of the release” entered into by the parties. Manning v. N.Y. Univ., 299 F.3d 156, 164 (2d Cir. 2002). This ability to enter, interpret, and implement the terms of a settlement judgment is at its apex when the judgment is a result of the Court's own order: “[i]t is peculiarly within the province of the district court to determine the meaning of its own order.” Id. (quoting County of Suffolk v. Stone & Webster Eng'g Corp., 106 F.3d 1112, 1117 (2d Cir. 1997)).

And while the parties agree they have entered into a final agreement, and only disagree about its meaning, the Court has not yet entered judgment. Nor have the parties filed a stipulation of dismissal.⁷ The original controversy, in that sense, is live. See McCalla v. Liberty Life Assurance Co. of Bos., 839 F. App'x 651, 652–53 (2d Cir. 2021) (“No order terminating the case or judgment of dismissal was entered ․ at any time before Defendants’ motion to enforce the settlement was filed[.] ․ The District Court here therefore had jurisdiction to grant the motion[.]”).⁸ Moreover, it would only lead to unnecessary waste and delay for the Court to find that these three cases have been resolved by dint of the Neutral's Proposal, but the parties must file a new action (asserting a claim for a declaratory judgment) to determine the meaning of that agreement. Janus, 801 F.3d at 583 (“Due regard for the proper use of judicial resources requires that a trial judge proceed with entry of a settlement judgment after affording the parties an opportunity to be heard as to the precise content and wording of the judgment, rather than ․ precipitate an additional lawsuit for breach of a settlement agreement.”); Oriska Ins. Co. v. Power P.E.O., Inc., No. 03-CV-1481, 2008 WL 11355426, at *4 (N.D.N.Y. Aug. 26, 2008) (“[T]he fact that dismissal without enforcement will only result in another motion or action by plaintiffs seeking an enforcement order based on the same evidence [means] it is in the interests of judicial economy and necessary to prevent the waste of scarce public resources that this District Court ․ enforce the terms of the ․ settlement agreement.”); see also Starter Corp. v. Converse, Inc., 84 F.3d 592, 596 (2d Cir. 1996) (“[T]o promptly resolve controversies where the alleged owner of a trademark right threatens to sue for infringement․ [T]he finding of an actual controversy should be determined with some liberality.”), abrogated on other grounds by MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007). There also remains—given the long history of litigation between the parties—a risk of ongoing disputes. (George & Co. Suppl. Mem. at 1); George & Co. v. Spin Master Corp., No. 22-CV-126, 2023 WL 6053005, at *2 (2d Cir. Sept. 18, 2023) (“We recognize that ‘the threat of future litigation [is] relevant in determining whether an actual controversy exists.’ ” (alteration in original) (quoting Nike, 663 F.3d at 96)). Neither party has suggested that, should the Court decline to resolve the issue of the geographic scope of the Neutral's Proposal and simply enter judgment, it would not bring suit for enforcement (or breach) of the covenants therein, based on sales of their respective games outside the United States.

The Court, therefore, proceeds to resolve the dispute about the scope and meaning of the Neutral's Proposal.

* * *

“It is beyond question that verbal, in-court settlement agreements may be binding and enforceable, although the agreement was never reduced to writing.” Samuel v. Bd. of Educ., No. 12-CV-4219, 2015 WL 10791896, at *3 (E.D.N.Y. Aug. 11, 2015), aff'd, 668 F. App'x 381, 382 (2d Cir. 2016). Typically, a motion to enforce a settlement agreement requires examination of several well-established factors, including whether the parties reserved their right to be bound absent a written agreement and whether additional matters remained open for negotiation. See Winston v. Mediafare Ent. Corp., 777 F.2d 78, 80 (2d Cir. 1985) (“[C]ourt[s are] to consider (1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing.”). These Winston factors are irrelevant here, since the parties do not dispute that they have reached an agreement.

As noted, the Neutral's Proposal is as follows:

A payment of [Redacted] by Defendants in consideration for the resolution of all claims made by Plaintiff in this action. In addition, the parties will disclaim any rights to exclusivity in “Left, Center, Right,” and Defendants agree not to sell any item with the term “LCR.”

Though this written formulation was not provided to Spin Master (since it was embodied as part of the exchange between the Court and George & Co.), it agrees it is what Spin Master agreed to: “Defendants agree that the Court's description of its Neutral Proposal [in the October 14 Email] fairly reflects the terms of the settlement as understood by Defendants.” (See Spin Master Mem. at 9; see also id. at 12 (“Defendants now agree that the quoted language found in [the October 14 Email] fairly reflects the Neutral Proposal they accepted by email to Magistrate Judge Bulsara's chambers on October 14, 2022.”); Spin Master Suppl. Mem. at 8 (“Here, all parties agree a binding settlement has been reached[.]”). George & Co. would be hard-pressed to disagree, and they do not. (See George & Co. Mem. at 4; id. at 6 (“[B]oth parties accepted this Court's neutral proposal[.]”); id. at 10 (“The acceptances of the Court's neutral proposal, as memorialized by the Court on October 14, 2022, created an enforceable settlement of the key terms included in the Court's neutral proposal.”). Spin Master's counsel aptly summarized this unanimity between the parties:

As evidenced by the cross motions to enforce settlement, it is clear all parties agree that there is a binding oral agreement settling this litigation based on the Neutral Proposal delivered orally by Magistrate Judge Bulsara in open court on September 23, 2022, later described by the Court in ex parte communications with Plaintiff's counsel on October 14, 2022 ․ and accepted by both sides by emails to Magistrate Judge Bulsara's chambers later that day. As Plaintiff states: “The acceptances of the Court's neutral proposal, as memorialized by the Court on October 14, 2022, created an enforceable settlement of key terms included in the Court's neutral proposal.” Defendants agree.

(Defs.’ Resp. to Pl.’s Mot. to Enforce (“Spin Master Opp'n”), Dkt. No. 109 at 2 (quoting George & Co. Mem. at 10)). And both parties seek enforcement of the Neutral's Proposal as written. (George & Co. Mem. at 15; Pl.’s Reply in Supp. of Mot. to Enforce (“George & Co. Reply”), Dkt. No. 110 at 1 (“Plaintiff is requesting that the Court enforce the Neutral Proposal as it is written and as was expressly agreed by the parties.”); Spin Master Mem. at 1).

So, what is in dispute? The geographic scope of the Neutral's Proposal. The parties duke it out, largely on the same terms: both contend that the Neutral's Proposal is unambiguous. But they reach opposite conclusions. George & Co. contends that the Neutral's Proposal restricts the parties only to activity in the United States: “[T]he plain language of the Neutral Proposal effectively contains a geographic limitation to the United States.” (George & Co. Reply at 2). Spin Master contends, in converse, that there is no limitation and the agreement applies worldwide: “On its face ․ [the Neutral's Proposal] is susceptible to only one meaning—there is no limitation on its geographic scope.” (Spin Master Opp'n at 5).

In resolving this dispute, a few basic and familiar contract principles govern the Court's task.⁹ The Neutral's Proposal is not a typical settlement agreement, whose terms are supplied by the parties and then reduced to writing. The terms were supplied by the Court, as an option available to the parties for a resolution. The parties did not propose the wording to the Court (via written submission) or dicker with each other about the proposed wording. That being said, “[a] settlement agreement is a contract that is interpreted according to general principles of contract law,” Powell v. Omnicom, 497 F.3d 124, 128 (2d Cir. 2007); see also In re World Trade Ctr. Disaster Site Litig., 754 F.3d 114, 121 (2d Cir. 2014); this includes agreements entered into orally and only before the court. E.g., Powell, 497 F.3d at 129. “A fundamental precept of contract law is that agreements are to be construed in accordance with the parties’ intent.” In re World Trade Ctr. Disaster Site Litig., 754 F.3d at 122 (citing Greenfield v. Philles Recs., Inc., 98 N.Y.2d 562, 569 (2002)). The best evidence of intent is a contract's writing, and “a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.” Id. (quotations omitted).

Spin Master's position is that the settlement agreement is unambiguous. (Spin Master Mem. at 2, 14). And it criticizes George & Co. for essentially adding the terms “in the United States” to the Neutral's Proposal. There is no term in the Neutral's Proposal that addresses the geographic scope of the disclaimer of rights. There is no unambiguous term to enforce. In its briefing, Spin Master does not identify any unambiguous term in the Neutral's Proposal that addresses geography. Instead, it latches its argument to the term “any” in the phrase “any rights to exclusivity.” But the term “any” does not relate to or define geography.¹⁰ It modifies the bundle of rights (i.e., the methods of claiming exclusive use of the mark “Left Center Right”), not where those rights may be enforced. The term “any,” though broad, cannot be understood without reference to the words it is modifying. See, e.g., Livingston v. Trustguard Ins., 558 F. App'x 681, 683 (7th Cir. 2014) (“[T]he context in which ‘any’ appears makes its meaning clear.”). Its mere presence does not make a clause unambiguous. E.g., United States v. Long, 787 F.2d 538, 539 (10th Cir. 1986) (“The use of the word ‘any’ under these circumstances creates an ambiguity.”). And here, “any” is not modifying terms related to geography and could not be, since geography is not discussed in the Neutral's Proposal.

Spin Master also says that because there is no geographic limitation in the Neutral's Proposal, the scope of the agreement must be worldwide. (Defs.’ Reply in Supp. of Mot. to Enforce (“Spin Master Reply”), Dkt. No. 111 at 7). But the argument that, as a legal matter, this silence in the Neutral's Proposal—as the resolution of intellectual property litigation—must have a worldwide (or unlimited) geographic scope is without merit. None of the cases cited, (see id.), support such a broad, default legal principle.

In Medinol Ltd. v. Guidant Corp., the parties actually “specified the subject matter and geographic scope” of their license agreement resolving a pending patent dispute. 500 F. Supp. 2d 345, 346 & n.3 (S.D.N.Y. 2007). The parties were fighting over something else: whether the license contained a “field-of-use” restriction. Id. at 348 & n.14. But, unlike here, the court there held an extensive colloquy with the parties, on the record, with each side given an opportunity to state the terms they believed were part of the license agreement. Id. at 346; id. at 355 (“Medinol had the opportunity to state the terms of the settlement (which it did), including field-of-use restrictions (which it did not)[.]”). A field-of-use restriction is not the same as the geographic scope of a license.

Kabushiki Kaisha Hattori Seiko v. Refac Tech. Dev. Corp. is similarly inapposite. In that case, the parties disputed whether plaintiff's rights “to sell products coming within the scope of certain United States patents” were worldwide or limited to the United States. 690 F. Supp. 1339, 1342 (S.D.N.Y. 1988) (quotations and alterations omitted). The case turned on whether the term “scope” in patent law created a geographic limit. Id. at 1343 (“A patent's ‘scope,’ as is well established in patent law, refers not to the geographical area within which the patent provides protection, but to the nature of the products covered by the patent's claims.”). The discrete and unique meaning afforded to a term in patent law provides no guidance—and certainly does not set forth a default principle—on how lawyers (or parties) would understand a covenant not to sue in a trademark case.

The disconnect should not be surprising. The geographic scope of patent rights is not coextensive with those for trademarks. See generally Tim W. Dornis, Behind the Steele Curtain: An Empirical Study of Trademark Conflicts Law, 1952–2016, 20 Vand. J. Ent. & Tech. L. 567, 569–70 (2018) (“Within the umbrella of intellectual property, however, copyright and patent law seem to follow a different path from trademark law. While the former are perceived to be strictly territorial, trademark law is said to extend across national borders, and, to a certain extent, individual rights seem to be protectable ‘extraterritorially.’ ”). And so, it would be a mistake to derive default rules for geographic scope in trademark litigation from cases interpreting patent rights conferred by a separate and distinct statute.

Ultimately, Spin Master engages in the same conduct it accuses George & Co. of doing: adding a term into the agreement that does not exist. (In its case, the terms “worldwide” or “anywhere in the world.”). George & Co. takes the opposite position: asserting that the Neutral's Proposal “effectively contains a geographic limitation to the United States.” (George & Co. Reply at 2). But George & Co. has the same problem as Spin Master: it adds those terms to the Neutral's Proposal to fit its preferred outcome. Ultimately, “the fact that both parties agree that the operative contract is unambiguous does not mean that it is, especially where the parties disagree on its proper construction.” United States v. Prevezon Holdings, Ltd., 289 F. Supp. 3d 446, 451–52 (S.D.N.Y. 2018) (quotations and alterations omitted). The parties are not interpreting an unambiguous term. They are taking different sides in the debate over a latent ambiguity: the failure of the Neutral's Proposal to address its geographic scope.

A “latent ambiguity is where you show the words apply equally to two different things or subject-matters, and then evidence is admissible to show which of them was the thing or subject-matter intended.” Leather Form S.R.L. v. Knoll, Inc., 205 F. App'x 861, 864 n.1 (2d Cir. 2006) (quoting Petrie v. Trs. of Hamilton Coll., 158 N.Y. 458, 463–64 (1899)). In other words, while the ambiguity may not appear on the face of the contract, when the parties seek to enforce or apply terms of the agreement, its terms give rise to two or more equally plausible interpretations. Teig v. Suffolk Oral Surgery Assocs., 2 A.D.3d 836, 837 (2d Dep't 2003) (“Even where an agreement seems clear on its face, a latent ambiguity may exist by reason of the ambiguous or obscure state of extrinsic circumstances to which the words of the instrument refer.” (quotations omitted)); L & L Painting Co. v. Cont. Disp. Resol. Bd., 68 A.D.3d 594, 596 (1st Dep't 2009) (“A latent ambiguity does not readily appear in the language of a document, but instead arises from a collateral matter when the document's terms are applied or executed.”), aff'd, 14 N.Y.3d 827, 828 (2010).

Spin Master puts forth a bevy of alleged extrinsic evidence to argue that the Proposal is worldwide in scope. Much of the “extrinsic evidence” that Spin Master relies upon is not extrinsic to the Court's Neutral Proposal and is largely irrelevant.

First, Spin Master cites to settlement discussions dating back to 2018 between the parties. (Spin Master Mem. at 5 (“From the beginning of this litigation, trademark rights and activities outside the U.S. have also been addressed in most of the formal, written settlement offers exchanged between the parties.”)). None of these statements were ever provided to the Court before it held the settlement conferences that resulted in the Neutral's Proposal.

Second, Spin Master cites to communications and negotiations to an alternative to the Neutral's Proposal. (Id. at 7–8). While negotiating this “Option B,” Spin Master's counsel emailed George & Co.’s counsel; it proposed an agreement whereby Spin Master would stop using “Left Center Right” “anywhere in the world.” (Id. at 8). But Option B was never accepted; instead, the parties both accepted the Neutral's Proposal (which does not contain the language “anywhere in the world.”). Evidence about another, unexecuted agreement documenting an alternative arrangement does not shed light on the meaning of the Neutral's Proposal.

Third, Spin Master cites to the post-acceptance negotiations regarding the written agreement that was to follow after the Neutral's Proposal. These discussions took place after the Neutral's Proposal was accepted—which both parties contend was an enforceable agreement. Tchrs. Ins. & Annuity Ass'n v. Trib. Co., 670 F. Supp. 491, 498 (S.D.N.Y. 1987) (Leval, J.) (“[W]hen the parties have reached complete agreement (including the agreement to be bound) on all the issues perceived to require negotiation[,] [s]uch an agreement is preliminary only in form—only in the sense that the parties desire a more elaborate formalization of the agreement. The second stage is not necessary; it is merely considered desirable.”); Brit. Int'l Ins. Co. v. Seguros La Republica, S.A., 342 F.3d 78, 82 (2d Cir. 2003) (“[T]he court may accept any available extrinsic evidence to ascertain the meaning intended by the parties during the formation of the contract.” (emphasis added)). Their utility is therefore limited, if not nonexistent. Aguiar v. New York, No. 06-CV-3334, 2008 WL 4386761, at *8 (S.D.N.Y. Sept. 25, 2008) (“It is of little consequence what the parties attempted to do after-the-fact in drafting a written agreement[.]”), aff'd as modified, 356 F. App'x 523, 526 (2d Cir. 2009); Medinol, 500 F. Supp. 2d at 353 (“A court should be extremely hesitant to pry into the thoughts and motives of the parties after the fact in an attempt to discern their intent in settling a case.”); cf. Winkler v. Kingston Hous. Auth., 259 A.D.2d 819, 823 (3d Dep't 1999) (“In determining whether an agreement has been reached the court looks not to the parties’ after-the-fact professed subjective intent, but rather at their objective intent as manifested by their expressed words and conduct at the time of the agreement.”); LaSalle Bank Nat'l Ass'n v. Nomura Asset Cap. Corp., 424 F.3d 195, 207 n.10 (2d Cir. 2005) (“We note parenthetically that it is not clear to us that the extrinsic evidence on which the court relied—including letters exchanged between the parties in Spring 2000—was in any event relevant to the determination of the parties’ intent at the time they entered into the [contract], nearly three years earlier.” (citations and quotations omitted)).¹¹

Even fully considering this post-formation evidence, Spin Master goes too far. Its briefs try to suggest that during these negotiations, it told George & Co. that the “release” of claims was worldwide, George & Co. agreed, but then recanted. (Spin Master Mem. at 9–11, 20–21). “[C]ounsel has submitted a number of items, in particular, various unsigned iterations of a draft memorialization that were exchanged after the settlement conference. The undersigned simply does not find that these unsigned drafts offer the insight each party would read into them.” Carson Optical, Inc. v. Hawk Importers, Inc., No. 12-CV-1169, 2013 WL 5740452, at *7 (E.D.N.Y. Oct. 10, 2013).

Spin Master's initial communication recounted the Neutral's Proposal. (Emails Between Joshua Brown & Christopher Zampogna dated Oct. 19–24, 2022, attached as Ex. M to Spin Master Mem. at 2–3). That initial email—like the Proposal itself—contains no mention of geographic scope. Its counsel then sent an email the next day in which he said, “I added a release ․ and made clear the scope of the release and agreement are worldwide.” (Id. at 1). But in so doing, he added a term to the Neutral's Proposal (“worldwide”) that was not present when the parties accepted it. Several days later, George & Co.’s counsel said in a two-sentence email, “[t]hose terms look right to us.” (Id.). The parties then, over the course of several weeks, exchanged drafts of the agreement. In those discussions, there was no meeting of the minds on geographic scope. On November 18, George & Co's counsel stated, “[W]hat George & Company was not contemplating, and what the Court would not be able to adjudicate in the case, is extraterritorial activity. Our client has overseas business and trademark registrations which it desired to protect.” (Emails Between Joshua Brown & Christopher Zampogna dated Oct. 19, 2022–Jan. 4, 2023, attached as Ex. N to Spin Master Mem. at 8). Spin Master's counsel responded: “My client will not agree to less than a global settlement.” (Id. at 5).

This exchange reveals that the parties were still negotiating geographic scope after the Neutral's Proposal was accepted. It does not reflect a mutual understanding that the Neutral's Proposal was worldwide in scope (or unlimited geographically). As for George & Co.’s statement, “[t]hose terms look right to us,” Spin Master reads the statement out of context. It was made after Spin Master “added a release” “worldwide” in scope to its counsel's summary of the Neutral's Proposal. It was not an admission that George & Co. understood the Neutral's Proposal to be a worldwide agreement. At best, it reveals that George & Co. would agree to enter a release that was worldwide. It is extrinsic evidence of George & Co.’s intent with respect to the subsequent writing (which was never executed), not its understanding about the Court's Proposal.

There is some helpful extrinsic evidence. It relates to what the parties communicated to the Court prior to the settlement conferences. These communications were sent to the Court—and some were filed under seal, (see October 14 Email)—by the parties.¹² In none of the communications does either party discuss sales of, or infringement related to, games bearing the terms “Left Center Right” or “LCR” outside the United States. See supra at n.12.

Spin Master indicates that it raised the worldwide nature of the release to the Court by indicating it needed a settlement “on a global basis.” (Spin Master Mem. at 6–7). The Court does not share Spin Master's recollection or understanding of the settlement negotiations.¹³ When the Court made the Neutral's Proposal to the parties orally, neither Spin Master's client representative nor its counsel asked or suggested that the releases and covenants be worldwide in scope. Its counsel sent no email to the Court asking that the Neutral's Proposal be amended to clarify or state a geographic scope. Cf. Pullman v. Alpha Media Publ'g, Inc., No. 12-CV-1924, 2014 WL 5043319, at *16 (S.D.N.Y. Mar. 14, 2014) (“The defendants contend that at the September 10 settlement conference, they understood that the parties were agreeing to a general release of all claims. The term ‘general release,’ however, was never stated on the record, and the defendants do not claim that the term was ever stated, much less explicitly agreed upon, during or leading up to the settlement conference.” (quotations omitted)), report and recommendation adopted as modified, 2014 WL 5042250, at *2 (Sept. 10, 2014), aff'd, 624 F. App'x 774, 780 (2d Cir. 2015). Whatever secret intent or meaning Spin Master attributed to the Neutral's Proposal, it cannot inform the meaning of the Proposal. Klos v. Lotnicze, 133 F.3d 164, 168 (2d Cir. 1997) (“When interpreting the meaning of a contract, it is the objective intent of the parties that controls. The secret or subjective intent of the parties is irrelevant.” (citation omitted)).

All of that being said, the remaining pieces of extrinsic evidence—these lawsuits themselves—are instructive. The three lawsuits pending in this District identify George & Co.’s U.S. trademarks. (Complaint dated July 31, 2019 (“Compl.”), Dkt. No. 1 ¶ 33). Spin Master is a Canadian company, (id. ¶ 6), and George & Co. identifies sales and purchase orders taking place in Canada. (Id. ¶¶ 130, 356). George & Co. has consistently sought to bring Spin Master's related entities, located in Canada, into this litigation. E.g., George & Co., 2020 WL 7042665, at *10 (“Defendants Spin Master Corp. and Spin Master Ltd.—both Canadian corporations—have moved to dismiss the claims against those companies for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2).”). The parties also have litigated trademark and licensing rights in Canada. (See Aff. of Peter Smilanich dated Aug. 20, 2018 (“Smilanich Aff.”), Dkt. 19-CV-4883, Dk. No. 41-1 ¶ 80 (“Spin Master, insofar as I am aware, is prohibited from infringing our Canadian trademarks under Canadian law, a point resolved in our favor in a prior trademark proceeding in Canada, which Spin Master lost and our George & Company trademark rights in the mark LEFT CENTER RIGHT were upheld and protected. True copies of the opinions I received from the case in Canada and ruling against Spin Master and in favor of George & Company with respect to our trademarks in Canada are attached as Composite Exhibit ‘29.’ ”); Spin Master Ltd. v. George & Co. Decision dated Aug. 24, 2015, attached as Ex. 29 to Smilanich Aff.); see also In re Spin Master Ltd. v. George & Co., 2015 TMOB 156 (Can.). However, the references to activities outside the United States and Canada are quite limited. George & Co. alleges that the Game “Left Center Right” is in great demand throughout the world. (Compl. ¶ 37). And the game is manufactured in China. (Id. ¶ 67).

Thus, the parties have been disputing the scope of their respective rights under trademarks and license agreements in the United States and Canada. The factual bases for their respective claims are activities each has undertaken in the United States and Canada. One of the parties is based in the United States; the other in Canada. It is only logical to conclude that the parties, in accepting the Neutral's Proposal, understood they were dispensing with future litigation arising out of the activities that gave rise to the suits in the first place. That contested activity all took place in the United States and Canada. There is no reason—given the absence of any extrinsic evidence suggesting the parties ever intended such a result—to limit the scope of their agreement to the United States (and exclude Canadian activities). George & Co. offers no rebuttal to Spin Master's extrinsic evidence that the parties have been disputing licensing and trademark rights in Canada (and in fact, George & Co.’s attorneys filed the affidavit from George & Co.’s president that detailed the parties’ Canadian disputes with the Court early on in this litigation). (See generally Smilanich Aff.).

But by the same token, there is no basis to expand the scope of the Neutral's Proposal to encompass all worldwide activities. A single reference to China (which relates to manufacturing, not licensing or sales) or a generic statement about the game's popularity in the world do not compel such a result. Trademarks or activity outside the United States and Canada were never the subject of a claim, defense, discovery exchange, or any substantial litigation activity here.¹⁴

Because a district court has “ample authority to clarify ambiguities in the description of the settlement reached [on the record] by crafting the terms at issue,” Pullman v. Alpha Media Pub., Inc., 624 F. App'x 774, 778 (2d Cir. 2015) (alteration in original) (quoting Manning, 299 F.3d at 164), the Court interprets the Neutral's Proposal consistent with the parties’ intent to resolve their disputes in the United States and Canada. “In determining the wording of a settlement judgment, the judge proceeds ․ to draft language, adopt the proposal of the party that effectively ‘won,’ or adopt portions of the draft language proposed by any of the parties.” Janus, 801 F.2d at 582.¹⁵ The Neutral's Proposal should therefore read as follows: “[T]he parties will, [in the United States and Canada], disclaim any rights to exclusivity in ‘Left, Center, Right,’ and Defendants agree not to sell any item with the term ‘LCR’ [in either location].” E.g., Pullman, 624 F. App'x at 778 (affirming district court's determination regarding scope of release “and the meaning of ambiguous and unspecified terms”); Manning, 299 F.3d at 164 (affirming lower court interpretation of settlement agreement and rejecting argument, in so doing, that district court improperly added terms to agreement).

There is a separate and independent reason that the second clause in the Proposal—“Defendants agree not to sell any item with the term ‘LCR’ ”—must be limited to the United States and Canada. Though not labeled as such, this provision is a noncompetition provision. Although “not every restriction” “should be characterized as a non-compete,” Crye Precision LLC v. Bennettsville Printing, 755 F. App'x 34, 37 (2d Cir. 2018), here, Spin Master is not permitted to sell products bearing the “LCR” mark (and thus, not compete with George & Co.). See also Navajo Air, LLC v. Crye Precision, LLC, 318 F. Supp. 3d 640, 649 (S.D.N.Y. 2018) (interpreting provision that one party “shall immediately cease all sales” of products containing specific fabric pattern as non-compete provision).

New York law prohibits non-compete covenants that have an unreasonable geographic scope. It is axiomatic that parties cannot enforce covenants that are prohibited by law. So, here, the parties could not have entered a non-compete agreement that lacked a reasonable geographic limit. As a result, the only way to interpret this covenant in the Neutral's Proposal—and save it from invalidity—is to limit its application to the United States and Canada. Spin Master's view—that it agreed not to use the “LCR” mark anywhere in the world—would rob the Neutral's Proposal of any geographic limitation. Its reading would lead to an unreasonable and unenforceable covenant.¹⁶

To step back for a moment: “Covenants not to compete have traditionally arisen” in either sales of a business or employment contracts. See Crye Precision, 755 F. App'x at 36. Non-compete agreements that involve intellectual property do not, however, fall neatly into either of these two categories. See id. As such, “New York law does not contain a large body of guidance on the assessment of convents not to compete within commercial intellectual property licenses.” Id. at 37. That being said, as commercial contracts, such covenants are still subject to a “simple rule of reason,” which favors “robust competition and freedom of contract.” Id. at 36 (quotations omitted). And non-compete intellectual property agreements that contain no geographic limitation are unreasonable. See id. at 37.

In sum, “New York courts rarely find worldwide restrictions reasonable in any context.” Silipos, Inc. v. Bickel, No. 06-CV-2205, 2006 WL 2265055, at *6 (S.D.N.Y. Aug. 8, 2006). As result, the only way to give legal effect to the non-compete covenant in the Neutral's Proposal is to limit it geographically to the United States and Canada. E.g., Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 813 F. Supp. 2d 489, 507 (S.D.N.Y. 2011) (“In addition, the non-compete provision does not provide for any geographic limitations. Plaintiffs introduced no evidence to support the proposition that a covenant restricting competition of the kind at issue in this case, anywhere in the world, is reasonable in terms of scope; nor have Plaintiffs pointed to any cases in this jurisdiction that would support the Court drawing such a conclusion. Indeed, the case law suggests just the opposite.”). And it is well-established that “where an otherwise valid restrictive covenant does not contain a geographic limitation, the court may ․ interpret the clause in conformity with the intent of the parties.” Crye Precision, 755 F. App'x at 38 (alteration in original) (quoting Deborah Hope Doelker, Inc. v. Kestly, 87 A.D.2d 763, 765 (1st Dep't 1982)). As such, the phrase, “Defendants agree not to sell any item with the term ‘LCR,’ ” must by operation of law be limited, and here to only the United States and Canada.

CONCLUSION

For the reasons described above, the Court recommends granting each party's motion to enforce in part. The Court recommends that the Neutral's Proposal be interpreted to extend only to the United States and Canada. The Court recommends denial of the motions insofar as they seek any other form of relief or interpretation of the Neutral's Proposal. Finally, the Court recommends that the Clerk of Court enter judgment consistent with its interpretation of the Neutral's Proposal and close the three cases captioned.

Any objections to the Report and Recommendation above must be filed with the Clerk of the Court within 14 days of service of this report. Failure to file objections within the specified time may waive the right to appeal any judgment or order entered by the District Court in reliance on this Report and Recommendation. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(2); see also Caidor v. Onondaga County, 517 F.3d 601, 604 (2d Cir. 2008) (“[F]ailure to object timely to a magistrate[ ] [judge's] report operates as a waiver of any further judicial review of the magistrate[ ] [judge's] decision.” (quotations omitted)).

SO ORDERED.

FOOTNOTES

1.   See George & Co. v. Imagination Ent. Ltd., No. 07-CV-498, 2008 WL 2883771, at *1 (E.D. Va. July 25, 2008), aff'd, 575 F.3d 383 (4th Cir. 2009).

2.   A “motion to enforce” a settlement agreement is not a mechanism provided for by the Federal Rules of Civil Procedure. Hendrickson v. United States, 791 F.3d 354, 357 & n.1 (2d Cir. 2015). Nonetheless, the Second Circuit has reviewed district court rulings on such purported motions as “claim[s] for breach of a contract[.]” Id. at 358 (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381 (1994)).

3.   Unless otherwise stated, all docket citations are from the lead case, George & Co. v. Spin Master US Holdings, Inc., No. 19-CV-4391.

4.   The Spin Master Acceptance is attached to this Report and Recommendation, both to the version filed under seal and the public redacted version.

5.   Had either party declined the Neutral's Proposal, the Court would simply have noted on the docket that a settlement was not reached, without revealing which party had accepted or declined the Proposal.

6.   The Court directed the parties to submit briefing on this issue. (Order dated Aug. 28, 2023). Both sides believe the Court has the ability to decide the scope and meaning of the Neutral's Proposal and indeed urge the Court to do so. (Pl.’s Resp. to Defs.’ Mem. Addressing Ct.’s Jurisdiction (“George & Co. Suppl. Resp.”), Dkt. No. 114 at 1; Defs.’ Mem. Addressing Ct.’s Jurisdiction (“Spin Master Suppl. Mem.”), Dkt. No. 112 at 1).

7.   Such a stipulation of dismissal would be self-executing and would be effective without any Court involvement. See Guarnero-Ruiz v. 36-03 Food, LLC, No. 17-CV-3178, 2017 WL 7049543, at *9 (E.D.N.Y. Dec. 11, 2017).

8.   Furthermore, unlike in some other cases, the lack of clarity regarding the Proposal's geographic scope prevents the parties from moving forward with their business. As the parties acknowledge in their briefs, “Defendants have not completed payment to Plaintiff,” (Pl.’s Statement re: Justiciable Case or Controversy (“George & Co. Suppl. Mem.”), Dkt. 21-CV-4524, Dkt. No. 72 at 1), but “Defendants cannot tender the settlement payment where the parties disagree on the very consideration that was to be obtained in exchange for that payment,” (Defs.’ Resp. to Pl.’s Statement re: Justiciable Case or Controversy (“Spin Master Suppl. Resp.”), Dkt. No. 113 at 3). Without the Court's adjudication, then, the parties are stuck. Contra Bruce Winston Gem Corp. v. Harry Winston, Inc., No. 09-CV-7352, 2010 WL 3629592, at *5 (S.D.N.Y. Sept. 16, 2010) (“This is not a case where the plaintiff needs an adjudication of its rights so that it can conduct its business affairs without abandoning a mark or risking potential damages. Rather, this is a case where the defendants do not object to the plaintiff's current use of its mark[.]” (citation omitted)).

9.   The parties assume the enforcement and interpretation of the Neutral's Proposal is governed by New York, and not federal, law, despite the fact that the settlement resolves Lanham Act claims. (See George & Co. Mem. at 2–3; Spin Master Mem. at 2, 12–14; Spin Master Opp'n at 2). The Court finds it appropriate to follow New York law, as the Second Circuit has suggested be done in this context. Landau v. Am. Int'l Grp., Inc., 164 F.3d 618, 1998 WL 712430, at *1 (2d Cir. 1998) (table) (“We need not address the question of whether federal common law or New York law governs the interpretation of the Agreement with respect to its validity as a release of rights under a federal statute, because the content of federal common law in this context would in any event be supplied by New York law[.]”).

10.   And none of the cases cited by Spin Master analyze the word “any” in terms of its geographic reach. (Spin Master Mem. at 14 (first citing Constellation Power Source, Inc. v. Select Energy, Inc., 467 F. Supp. 2d 187, 205, 208 (D. Conn. 2006); and then citing N. River Ins. Co. v. Allstate Ins. Co., 866 F. Supp. 123, 127 (S.D.N.Y. 1994))).

11.   Of course, “[i]n determining the meaning of the language at issue, ․ the parties’ course of conduct throughout the life of the contract” may be informative. Hoyt v. Andreucci, 433 F.3d 320, 332 (2d Cir. 2006). But here the agreement has only been formed, not performed.

12.   See generally Target Inc.’s Ex Parte Settlement Conference Statement dated Dec. 17, 2021; Pl.’s Settlement Conference Statement dated Dec. 18, 2021; Pl.’s Settlement Conference Statement dated Sept. 16, 2022; Defs.’ Confidential Ex Parte Settlement Statement dated Sept. 16, 2022. These statements are attached to the version of this Report and Recommendation being filed under seal, but not with the public redacted version of the opinion.

13.   The parties were indeed seeking a global resolution, i.e., one that resolved all of the parties’ many lawsuits. But Spin Master uses “global” in a sense never expressed to the Court. Entering into a worldwide release was not discussed with the Court. This disconnect between the Court's understanding of the Neutral's Proposal and Spin Master's could have been a basis for Spin Master to walk away from the Neutral's Proposal. (Indeed, given that the scope of the release appears to be a material term that would typically be reduced to writing, either party could have argued that the Winston factors do not support enforcement of the Neutral's Proposal). But it seeks to enforce the Proposal (as does George & Co.). So the Court is left to interpret it.

14.   Spin Master also says, “[f]rom settlement discussions, Plaintiff also claims exclusive rights to these trademarks in China.” (Spin Master Mem. at 5). But it provides no citation for this assertion (not even to an attorney declaration containing recollection of such a discussion). None of the settlement statements provided to the Court make any reference to such activities. (See generally Confidential Settlement Letters, attached as Exs. D–J to Spin Master Mem.).

15.   Neither party asked the Court to hold a hearing on the issue. And simply because there is a dispute, the Court is not required to hold a hearing to interpret its own Proposal. See Core-Vent Corp. v. Implant Innovations, Inc., 53 F.3d 1252, 1259 (Fed. Cir. 1995) (“[T]he parties stated on the record both the terms of the settlement and their unqualified agreement to it. No hearing is necessary where there is no dispute as to the existence of a settlement.” (quotation and alteration omitted)); Medinol, 550 F. Supp. 2d at 353–54 (same).

16.   There is something quite counterintuitive about Spin Master's position. It seeks to have this covenant—which restricts its own activities—apply throughout the world, whereas George & Co. seeks it application only in the United States. But in this Bleak House Odyssey, it is not surprising to see the appearance of Alice in Wonderland.

SANKET J. BULSARA United States Magistrate Judge