Reality shows featuring charismatic hosts swooping in to save struggling businesses have become a staple of modern television. These programs typically involve the owner receiving consulting services and business improvements in exchange for appearing on the show and taking the host's advice. But, is appearing on a reality show enough to create a legally binding contract in the State of New York? A federal judge recently examined this question.
Lemonis v. A. Stein Meat Products, Inc.
Marcus Lemonis hosts the popular reality show “The Profit” on the cable network CNBC. Lemonis is CEO of the Good Sam Enterprises, a recreational vehicle company. On “The Profit,” Lemonis visits a struggling company and offers to invest his own money to help transform the business.
The March 4, 2014, episode of “The Profit,” featured Lemonis' visit to A. Stein Meat Products, a Brooklyn wholesale meat supplier which sold products under the “Brooklyn Burger” brand name. After reviewing the company's finances, Lemonis made an on-camera offer to purchase the brand name—i.e., the trademarks—from A. Stein for $190,000. After the episode taped, but before it aired, Lemonis transferred the $190,000 to A. Stein.
But, Lemonis never received the trademarks. As it turned out, A. Stein had previously put up the trademarks as collateral to secure a bank loan. When A. Stein defaulted on the loan in October 2014, the bank seized the trademarks and sold them to another company.
Lemonis subsequently sued A. Stein for breach of contract and other claims. On March 6, U.S. District Judge Dora L. Irizarry dismissed all but one of Lemonis' claims. Judge Irizarry said Lemonis could not recover for breach of contract because, as far as federal and New York law is concerned, he never had a binding agreement with A. Stein in the first place.
Trademarks are primarily governed by federal law. The Lanham Act, which governs the sale or assignment of trademarks, requires such transactions be in writing. Similarly, the Uniform Commercial Code, which applies to the sale of personal property under New York law, requires “some writing” for any agreement involving more than $5,000.
Here, there was never a written agreement between Lemonis and A. Stein. Instead, Lemonis submitted video footage from “The Profit” where the parties are seen discussing the trademark sale on-camera. Judge Irizarry said that was not enough to create a legally binding contract under either the Lanham Act or the UCC. While a written contract may be signed electronically, the judge said that “does not negate the underlying requirement that the parties execute a contract 'in writing.'”
Judge Irizarry did, however, decline to dismiss Lemonis' claim of “unjust enrichment” against A. Stein. Although the judge said there was no valid contract, the law may still allow Lemonis to recover the $190,000 he gave A. Stein. The judge did not decide this claim on the merits, but merely said it could proceed to pre-trial discovery.
Always Get It In Writing
Despite his well-known investment savvy, Lemonis fell prey to a common mistake in business—he didn't get it in writing. Handshake deals may look good on camera, but they ignore the legal reality of doing business in New York. Any business agreement you make should be in writing and comply with all applicable New York and federal laws. An experienced New York business attorney can advise you on the proper drafting of such contracts so that you won't get caught when the other party tries to get out of the deal. Contact our office today if you would like to speak with a qualified attorney.