Entrepreneur and reality television star Marcus Lemonis, host of CNBC’s The Profit, has learned a tough lesson about contract law. With a business strategy that makes every lawyer cringe, Lemonis prides himself on having made millions of dollars on handshake deals. But, he may think twice the next time he purchases intellectual property on a handshake.
Last year, CNBC aired an episode of The Profit featuring A. Stein Meat Products Inc. (“A. Stein Meat”), owner of the trademarked Brooklyn Burger hamburger brand. A. Stein Meat was struggling financially and had only enough cash to remain in business for approximately two more weeks. During the episode, Lemonis offered to purchase the Brooklyn Burger brand for $200,000. Ultimately, off camera, the parties agreed to $190,000.
In keeping with his handshake deal, Lemonis wired $190,000 to A. Stein Meat. A. Stein Meat, however, refused to transfer the intellectual property rights associated with Brooklyn Burger and, instead, offered to repay Lemonis his $190,000. Lemonis refused the repayment offer and filed suit in the United States District Court for the Eastern District of New York.
A. Stein Meat responded to Lemonis’ complaint with a motion to dismiss. A. Stein Meat argued, among other things, that Lemonis’ breach of contract claim failed because the Lanham Act and New York contract law require written agreement. Under the Lanham Act, the sale of a trademark is considered an assignment and an assignment of a federally registered trademark is unenforceable unless it is made in a signed writing. U.S.C. § 1060(a)(3). Under New York contract law, a contract for the sale of personal property, which includes intellectual property, is not enforceable beyond $5,000 unless there is a signed writing. N.Y. U.C.C. § 1-206(1). Rhode Island law requires a signed written for any contract for the sale of personal property in excess of $5,000. See R.I. Gen. Laws § 9-1-4.
While Lemonis argued that the videotaped episode was sufficient to overcome the requirement of a signed writing, the court disagreed, finding no authority to support such an argument. Lemonis also argued that an email between the parties after the agreement had been reached satisfied the requirement of a signed writing, but again, the court disagreed, concluding that the email was not a representation of the actual terms of the oral agreement. Accordingly, the court dismissed Lemonis’ breach of contract count for failure to state a claim on which relief may be granted. The court refused, however, to dismiss Lemonis’ unjust enrichment claim – an equitable claim that requires a person who is unjustly enriched at the expense of another to make restitution.
Lemonis may have lost his opportunity to purchase the Brooklyn Burger brand, but the parties resolved the dispute through a confidential settlement agreement, leaving viewers to wonder whether Lemonis profited from his handshake deal. While Lemonis may have done so, his handshake deals should be left to TV. For all other businesses, it is time to get back to reality.
