01-1318 Fyrnetics Ltd. v. Quantum Group, Inc.

Listen to this article

“With respect to FHK, the district court correctly explained that there are several ways that a non-signatory can be bound by a contract, such as through the doctrines of assumption, agency, equitable estoppel, veil piercing, and incorporation by reference. See Am. Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 352 (2d Cir. 1999).

Relying on the doctrine of assumption, the district court explained that FHK evidenced its assumption of the license agreement through its payment of royalties to Quantum at the two and one-half percent rate as set out in the license agreement. As FHK highlights on appeal, however, no evidence was presented to the district court that FHK actually paid any royalties to Quantum. Rather, the parties presented evidence that Fyrnetics and then Kidde, but not FHK, paid the two and one-half percent royalty rate. Further, the district court relied solely on this incorrect factual determination to bind FHK to the license agreement, and the record is devoid of other evidence supporting this conclusion. The district court clearly erred in making this factual determination and therefore, in the absence of other factual findings to support the district court’s conclusion that FHK assumed the license agreement, we must remand to the district court to further reexamine this issue. Through further findings, FHK might prove to have assumed the license agreement or prove to be bound through one of the other alternative theories for binding a nonsignatory.”

Affirmed in part, and remanded in part.

Appeal from the United States District Court for the Northern District of Illinois, Kennelly, J., Kanne, J.