Matlin v. Spin Master Corp., No. 20-1049 (7th Cir. 2020)Annotate this Case
In 1997, Plaintiffs co-founded Gray Matter Holdings. A 1999 Withdrawal Agreement with Gray Matter entitled Plaintiffs to royalties on the sales of “Key Products.” In 2003, Gray Matter sold some assets to Swimways. After that sale, Plaintiffs took Gray Matter to arbitration four times over their royalty rights. The third arbitration determined that Gray Matter did not transfer its royalty obligations under the Withdrawal Agreement to Swimways but only transferred its intellectual property rights; Gray Matter, not Swimways, remained responsible for any royalty compensation owed to Plaintiffs. The fourth arbitration found no evidence to support Plaintiffs’ claim that Swimways tendered fraudulent filings to the Patent and Trademark Office regarding the intellectual property rights in the Key Products and that all intellectual property rights in the Key Products at issue had been transferred to Swimways.
Plaintiffs filed suit, alleging that they were entitled to royalties for the Key Products and that Swimways tendered the alleged fraudulent filings. The Seventh Circuit affirmed the dismissal of the complaint and the imposition of $271,926.92 in sanctions. The claims were barred by principles of res judicata and the arbitrations were “binding and final” under the Withdrawal Agreement. An accounting showed that attorneys and staff spent 273.1 hours, charging an average rate of about $1,000 per hour, preparing the motions to dismiss and for sanctions.