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United States District Court for the District of Maryland finds Plaintiff’s Promissory Estoppel Claims to be Time-Barred by the Statute of Limitations.

AGV Sports Group, Inc. v. Lemans Corp
No. GLR-11-16 (D. Md. Dec. 2, 2013)
by Wayne C. Heavener, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In AGV Sports Group, Inc. v. Lemans Corp., the United States District Court for the District of Maryland held that a plaintiff corporation’s promissory estoppel claim against a defendant corporation was barred under the applicable three-year statute of limitations. Writing for the Court, Judge George Russell III found that the plaintiff corporation’s cause of action accrued at the time it knew, or reasonably should have known, that the defendant corporation would not be executing a contract that parties had been negotiating for about one (1) year. Because the plaintiff corporation reasonably should have known that the defendant did not intend to execute the parties’ contract in 2007, but did not file suit until 2011, the plaintiff’s claim was time barred by the statute of limitations.

AGV Sports Group, Inc. (“AGVSG”) is a Maryland corporation that designs, distributes, and licenses “AGV Sport” branded motorsports apparel. LeMans Corporation (“LeMans”) is a Wisconsin corporation that distributes motorsport products, including AGV apparel. Lemans began distributing AGV merchandise in 1989, before AGVSG existed. At that time, Lemans purchased AGV merchandise from an Italian Company, AGV SpA, through its United States importer, Michael Parrotte. Mr. Parrotte eventually formed AGVSG, which entered into a written three-year exclusive distribution agreement (“Initial Agreement”) in 1994. The Initial Agreement automatically renewed up to three times. In 2006, Lemans and AGVSG were negotiating an exclusive licensing agreement (“Licensing Agreement”) that would grant LeMans an exclusive license and virtual ownership of the AGV Sport trademark in the United States and Canada. The Initial Agreement, having renewed automatically, was still in effect while the parties were negotiating the Licensing Agreement.

In 2007, the Licensing Agreement had yet to be executed. AGVSG alleged that LeMans nevertheless instructed AGSVSG to operate under the terms of the Licensing Agreement, because the Licensing Agreement was close to being finalized. As a result, AGVSG ceased advertising and terminated half of its office staff. According to LeMans, it never gave AGVSG any such instruction because the Licensing Agreement was proving problematic; in particular, AGVSG could not offer LeMans the exclusive license that it sought because an Independent manufacturer, Dainese, reserved the legal right to enter into the North American market to sell AGV Sports apparel. LeMans alleged that throughout 2006 and 2007, the parties conducted business on a purchase order-buy-purchase order basis. By early 2008, the parties were negotiating a $750,000.00 product order for the 2008 riding season, when Lemans informed AGVSG that it would not proceed with either the Licensing Agreement or the February product order.

On January 3, 2011 AGVS filed a Complaint in the United States District Court for the District of Maryland, seeking recovery under theories of breach of contract, or, in the alternative, promissory estoppel. AGVS sought recovery for Lemans’ alleged promises to enter into the Licensing Agreement and place the 2008 purchase order. Both parties filed motions for summary judgment. Before ruling on LeMans’ Motion for Summary Judgment, the Court denied AGVSG’s Motion for Summary Judgment because of material disputes of fact.

Upon consideration of LeMans’ Motion for Summary Judgment, the Court entered judgment in favor of LeMans with respect to AGVSG’s promissory estoppel claim arising out of the failed Licensing Agreement, and denied the remainder of LeMans’ motion because of remaining disputes of material fact. Noting that the applicable limitations period for promissory estoppel is three (3) years, the Court held that the period began running at the point AGVSG knew, or with due diligence reasonably should have known, of issues with the Licensing Agreement. The Court found that LeMans raised concerns about the Licensing Agreement as early as March 2007, at which point the limitations period began to accrue. Therefore, AGVSG’s promissory estoppel claims relating to the Licensing Agreement were time-barred. The Court held, however, the AGVSG’s promissory estoppel claim arising out of the 2008 purchase order did not begin to accrue until February 2008. Hence, that promissory estoppel claim relating to the 2008 purchase order was filed timely. Additionally, the Court rejected LeMans’ argument that AGVSG’s promissory estoppel claims were barred under the economic loss doctrine, finding that promissory estoppel is a valid alternative means of obtaining contractual relief.