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BUS 393

E200

MARS INC. VS M&M Meat shops

Abhinav Menon

Bella Yu

BACKGROUND

  • Plaintiff and Defendant

  • Other Parties Involved

  • Background Information

  • Timeline

Background

Analysis

Plaintiff & Defendant

Plaintiff

  • Mars Canada Inc.
  • make and sell confectionary products
  • trademarks

Defendant

  • M&M Meat Shop Ltd.
  • sell prepared fresh and forzen meat, confectionary products
  • trademarks: "M&M Meat Shops"

Other Parties Involved

  • Mac's Convenience Stores Inc.

  • Mr. Voisin, Officer at M&M Meat Shops

  • Judge Pattillo

Background information

  • In October 1991, M&M Meat applied to register a new M&M logo containing in English just the letters “M&M” for use in association with the operation of its retail outlets dealing with the sale of food products.

  • In March 1994, Mars opposed the application

Timeline

Mars was aware of M&M Meat’s arrangement with Mac’s from a newspaper article

M&M Meat entered into an arrangement with Mac’s Convenience Stores Inc.

entered into a Settlement Agreement

March 7, 1995

September 2005

In 2001

March 2003

November 1999

change content of paragraph three

the Settlement Agreement has been amended

Settlement

Agreement

SETTLEMENT AGREEMENT

Settlement

Agreement

Information

Settlement Agreement

  • A short two and a half page document

  • Result in Mars withdrawing its opposition to M&M Meat’s application and allowing it to proceed to registration

obligations for M&M Meat

obligation for M&M Meat

  • agrees not to use or register its marks in association with candy products or toys
  • agrees not to use or register “M&M’s” as a business name or trading style or to abbreviate its marks in the form “M&M’s”
  • agrees to restrict its sales of products in the dessert, baked goods and prepared mixes categories to its company owned or franchised stores trading under the M&M Meat Shops name
  • agrees not to use the M&M component of its business name or trading style in a script, logo or colour similar to Mars’ M&M’s
  • agree not to object or interfere with the use of or oppose any application filed by Mars to register or extend a registration of M&M’s for products other than certain non-confectionary products

In your opinion, which obligations are unfair to M&M Meat?

obligations for Mars

Obligation for Mars

  • agrees not to use or register its M&M's mark in association with the same specific list of non-confectionary products set forth in paragraph 5
  • agree not use its M&M’s mark in a script, logo or colour similar to M&M Meat’s trademarks
  • agree not to object to or interfere with the use or oppose M&M Meat’s application for registration
  • agree to withdraw its opposition to M&M Meat’s pending application

General

Obligations

General Obligations

  • Paragraph 10: provide the Settlement Agreement is binding on the parties, their successors and assigns
  • Paragraph 11: contains an entire agreement clause
  • Paragraph 12: provide that the Settlement Agreement shall be construed and governed in accordance with Ontario law

change of paragraph three

Paragraph Three

  • In November 1999, it was extended to include M&M Meat’s new trademark design

  • In March 2003, the restricted products in paragraph three of the Settlement Agreement were extended to include ice-cream products

  • M&M Meat Shops agrees to restricted its sales of ice-cream, ice-cream novelties and products in the dessert, baked goods and prepared mixed therefor categories to its company owned or franchised stores trading under the names LES ALIMENTS M&M and M&M MEAT SHOPS

THE DISPUTE

CASE INFO

FRANCHISE AGREEMENT

OVERVIEW OF ARRANGEMENT

-In 2001, M&M meat shops entered into an agreement with Mac’s convenience stores to become an M&M meat franchisee

- Franchisor = M&M Franchisee = Mac's

-Since 2001, 15 franchise agreements are made between M&M and Mac. Stores in Ontario, Alberta and Quebec

-14 of 15 Mac’s locations are near the premises of a M&M shop.

Cont.

  • Article 2.1 mentions that the Franchisor (M&M meat shops) grants to the franchisee (Mac's) the “right, license and privilege to operate an M&M Meat Shop from the Premises” for a term of TEN years

  • Article 1.1 contains a key defin

"Premises" means the area of operation for the franchised business

MARS Inc.

LEGAL ACTION

-In September 2005, Mars found out about the agreement between M&M and Mac.

-They believed this was a violation of paragraph 3 of the Settlement Agreement (Restricted products) and decided to commence action via an application.

FOCUS AREAS

CASE ANALYSIS

MARS INC. AND PARAGRAPH 3

PARAGRAPH 3 SPECIFICS

  • Prohibits M&M Meat from selling the Restricted Products anywhere other than in its own separate, stand alone branded M&M Meat Shop stores, either company owned or franchised

  • Extrinsic evidence and the cross-examination by Mr. Voisin should be used

PRECEDENT

KEY POINTS

Ventas Inc. v. Sunrise Senior Living Reit (2007)

the Court of Appeal considered the interpretation of an asset purchase agreement

a) gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective

b) determining the intention of the parties in accordance with the language they have used in the written document and based upon the presumption that they have intended what they have said

KEY POINTS CONT.

c) without reference to extent there is any ambiguity in the contract

d) follows sound commercial principles and good business sense

JUDGE'S ANALYSIS

JUDGE'S BREAKDOWN OF SITUATION

  • With regards to paragraph 3 of the settlement agreement, the main intent was to prevent the sale of products on the restricted list

  • The wording in paragraph 3 is clear and straightforward

  • Therefore, extrinsic evidence submitted by Mr.Voison is not considered

Cont.

  • paragraph three of the Settlement Agreement can be read in a restrictive way. The words themselves do not provide for such restriction

Do you think Mars is being too restrictive/unreasonable with the wording of paragraph 3?

M&M MEAT SHOP LOCATIONS

M&M VS. Mac SET UP

  • one or more signs on both a sign post and the premises itself clearly and separately identifying the M&M Meat Shop (with its trademark logo)

  • Inside the location, the M&M Meat Shop retail area is physically segregated from the Mac’s store by signage, display and counter.

  • All furnishings, fixtures, equipment, signs, and decorations conform to M&M Meat’s required standards in respect of colour, appearance and design

M&M LOCATIONS CONT.

There is a main counter behind which M&M Meat products are primarily located

This counter is the point of sale

cannot purchase M&M Meat Shop products from Mac’s cashiers (and vice-versa)

wear uniforms of the colour and type prescribed by M&M Meat identifying them as an employee of the M&M Meat Shop.

  • The Mac’s employees, on the other hand, wear Mac’s uniforms which are different in colour and type and identify them as Mac’s employees.

  • The Mac’s stores operate almost exclusively on a self-serve format.

  • Can only purchase M&M’s candy products (Mars) at a Mac’s store counter, not M&M Meat shop counters

MAC LOCATIONS

DEFENDANT'S CASE

VERDICT

  • Stores are run completely different
  • Although Mac’s sells products from Mars Inc., the same products can’t be purchased at a M&M meat shop location
  • M&M meat shops have a separate uniform, point of sale system, marketing scheme from Mac stores
  • Finally, M&M meat shops follow the terms of settlement agreement and do not breach the “Restricted products” policy
  • Mars Inc. is being too restrictive on the words of selling “‘Restricted products”.
  • M&M is not physically selling these products, Mac stores are.

PLAINTIFF'S CASE

PLAINTIFF

  • Some operating principles are similar such as procedures and techniques, which were developed by M&M meat shops and included in the franchise agreement

  • Mac’s stores sell products from Mars Inc. and are franchises of M&M meat shops, there is a case for restricted products being exchanged through other means

JUDGE'S DECISION

  • M&M Meat Shops operated by Mac’s in or adjacent to its convenient stores are clearly M&M Meat franchised stores, trading under the names LES ALIMENTS M&M and M&M MEAT SHOPS

  • Mars seeks $35,000 indemnity fees and disbursements

  • M&M meat shops seeks $65,000

  • Judge rules Mars to pay M&M meat shops $42,500

Discussion Questions

DISCUSSION QUESTIONS

1. Do you agree with judge's decision?

2. What would you have changed about the settlement agreement in order to prevent the dispute?

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