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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : SENSORMATIC SECURITY CORPORATION v. SENSORMATIC ELECTRONICS CORPORATION, et al. : : Civil Action No. DKC 2002-1565 : : MEMORANDUM OPINION Presently pending in this franchise-related action are several motions to dismiss and cross motions for summary judgment. The

issues are fully briefed, and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. I. In the Second Amended Background Complaint, Sensormatic Security

Corporation (SSC) brings claims against Sensormatic Electronics Corporation (Sensormatic), ADT Security Services, Inc. (ADT) and Wallace Computer Services (Wallace) for breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and tortious interference with contract. Sensormatic filed a

counterclaim for declaratory judgment and unjust enrichment. Plaintiff SSC, a franchisee of Sensormatic, claims an

exclusive right to lease, sell, distribute, service, repair and maintain Sensormatic security and anti-theft equipment in Maryland, the District of Columbia, and Virginia. Sensormatic was acquired

by Tyco International Ltd. (Tyco) in November 2001 and is now a wholly-owned subsidiary of Tyco and is part of the Tyco Safety

Products group, within Tyco's Fire and Security Services business unit. ADT is also a wholly-owned subsidiary of Tyco, within the

Fire and Security Services business unit. SSC has been a franchisee of Sensormatic since 1967. The

Restated Franchise Agreement dated December 1, 1976, granting an exclusive franchise in Virginia, is attached as Exhibit 1 to the Second Amended Complaint. Agreement dated December Exhibit 2 is a Restated Franchise 1, 1976, between Sensormatic of

Washington, Inc., a former affiliate of SSC, and Sensormatic, granting Sensormatic of Washington, Inc. an exclusive franchise territory in Maryland and the District of Columbia. In 1978, Thus,

Sensormatic of Washington, Inc. merged into Sensormatic.

Sensormatic claims the exclusive franchise in Maryland, Virginia, and the District of Columbia. SSC asserts that the Franchise Agreement grants it an

exclusive franchise to lease, sell and/or otherwise distribute, and service, repair, and maintain Sensormatic's equipment and to use Sensormatic Section 9(c) trademarks of the in connection with those activities. from

Agreement

prohibits

the

franchisor

competing with SSC in selling or leasing equipment in Plaintiff's territory and from granting "to any third party a franchise or any other right to sell, lease or service Equipment in [SSC's]

territory."

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The term "Equipment" is defined in the Franchise Agreement as "All Detection Devices, Tags, Accessories and Supplies." The term

"Detection Devices", in turn, is defined as "the detection systems and devices presently being marketed by the Franchisor for

Automatic Theft Detection Uses . . . which include a transmitter and coordinated receiver and alarm console, and which may be installed and used as a system or device to activate and detect Tags, sounding an alarm or otherwise activating a control device, and all successors thereto." "Tags" are alleged to include "tags,

labels, sensors, transponders and sensoremitters and the like, marketed by the Franchisor for Automatic Theft Detection Uses." SSC also claims entitlement to a commission of 40% of the gross revenues received by Sensormatic from the lease or sale of

Detection Devices and Tags, and the right to install, service and repair and maintain the equipment in SSC's territory According to the complaint, the only exception to SSC's exclusive right is Sensormatic's right to sell and lease equipment to National Accounts and to enter into service or maintenance contracts with National Account Customers regarding that equipment. A National Account is "any customer . . . of the Franchisor or the Franchisee who or which has leased or purchased or may lease or purchase products for use in more than one state."

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A settlement agreement on December 7, 1984 amended certain provisions and is attached to the Second Amended Complaint as Exhibit 3. Paragraph one of the agreement states, in part:

The Company agrees that the Company's Sensorgate System, and the present and future electro-magnetic product lines of the Company, of which the SensorGate System is a part, shall be included within the franchise under the Franchise Agreement between the Company and the Franchisee for Automatic Theft Detection Uses (as defined in the Franchise Agreement), and in that connection shall be included within the meaning of Detection Devices, Tags, Accessories, Supplies and Equipment (as defined in the Franchise Agreement), as the case may be. Paragraph two reads, in part: The Company agrees that the Company's SensorVision (CCTV) System, and the Company's present and future CCTV product lines of which the SensorVision System is a part, shall be included within the franchise under the Franchise Agreement, for Automatic Theft Detection Uses (as defined in the Franchise Agreement), as well as for surveillance in other common areas of customers for the Company's Equipment for Automatic Theft Detection Uses, and in that connection shall be included within the meaning of Detection Devices, Accessories, Supplies and Equipment (as defined in the Franchise Agreement), as the case may be. A Letter of Understanding dated December 7, 1984 is exhibit 4. With regard to National Sales, the letter states: Sensormatic agrees that the Franchisee will be informed of sales calls to be made by Sensormatic representatives to accounts (including national accounts) in the the [sic] Franchisee's territory. The Franchisee's representative will be invited to go along on 4

the sales call, unless the customer objects; if so, then on a best efforts basis, Sensormatic will try to persuade the customer to allow the attendance of the Franchisee's representative on the sales call. If, at the customer's insistence, a specific individual representing the Franchisee is not allowed to attend, if feasible, Sensormatic will attempt to persuade the customer to allow a different representative from the Franchisee to attend the sales call. If for any reason a sales call is made by Sensormatic in the Franchisee territory without a representative of the Franchisee in attendance, Sensormatic will promptly report the substance and results of such sales call to the Franchisee. On February 11, 1997, Wallace entered into a licensing

agreement with Sensormatic by which Wallace has the right to use Sensormatic trademarks to manufacture and sell Ultra-Max labels. SSC asserts that the Ultra-Max labels are "tags" as defined in its franchise agreements. The complaint goes on to allege that Sensormatic used

Intelligent Marketing as its manufacturer's representative in the mid-Atlantic territory for several years and, through that company, has authorized between 20 and 40 distributors and dealers to sell and service Sensormatic Equipment to customers within SSC's

exclusive territory. On November 13, 2001, Tyco acquired Sensormatic. was merged into Tyco Acquisition Corp (TAC), a Sensormatic wholly-owned

subsidiary of Tyco.

TAC then changed its name to Sensormatic

Electronics Corporation. Tyco has divided the company's operations among other Tyco entities. Sensormatic sells equipment to ADT, 5

which then sells and leases equipment through its sales force, including to customers allegedly in Plaintiff's territory. The Second Amended Complaint contains seven counts: Count I

alleges breach of contract by Sensormatic by authorizing third parties to sell and service within SSC's territory; Count II

alleges breach of contract against Sensormatic for failure to pay commissions; Count III alleges breach of contract against

Sensormatic for failure to provide documentation; Count IV is a breach of contract claim and breach of covenant of good faith and fair dealing against Sensormatic regarding replacement parts; Count V is a claim for unjust enrichment against ADT; Count VI is a claim for tortious interference with contract against Wallace based on its contract with Sensormatic; and Count VII is a claim for tortious interference with contract against ADT due to its

relationship with Sensormatic. In Count I of its counterclaim, Sensormatic seeks a

declaratory judgment that it has the right under the Franchise Agreement to terminate the Franchise Agreement on reasonable notice and that its letter of August 22, 2002, providing a minimum of six months notice constitutes reasonable notice. for unjust enrichment to SSC for asserting CCTV that it that Count II is a claim inadvertently are not sold paid for

commissions

products

Automatic Theft Detection Uses. II. Motions to Dismiss

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A.

Standard of Review A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) ought

not be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." (1957). Conley v. Gibson, 355 U.S. 41, 45-46

All that the Federal Rules of Civil Procedure require of

a complaint is that it contain "`a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Id. at

47; Comet Enters. Ltd. v. Air-A-Plane Corp., 128 F.3d 855, 860 (4th Cir. 1997). "Given the Federal Rules' simplified standard for

pleading, `[a] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Swierkiewicz v.

Sorema N.A., 534 U.S. 506, 514, 122 S.Ct. 992, 998 (2002), quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). In reviewing the complaint, the court accepts all well-pled allegations of the complaint as true and construes the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff. Cir. 1997). Ibarra v. United States, 120 F.3d 472, 473 (4th

The court must disregard the contrary allegations of A.S. Abell Co. v. Chell, 412 F.2d 712, 715 (4th

the opposing party. Cir. 1969).

The court need not, however, accept unsupported legal

conclusions, Revene v. Charles County Comm'rs, 882 F.2d 870, 873 7

(4th Cir. 1989), legal conclusions couched as factual allegations, Papasan v. Allain, 478 U.S. 265, 286 (1986), or conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). B. Analysis 1. ADT's motion to dismiss count V for unjust enrichment.

ADT moves to dismiss count V, asserting that SSC has not

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