Beanstalk Group Inc v. AM General Corp

In the
United States Court of Appeals
For the Seventh Circuit

No. 01-2164

Beanstalk Group, Inc.,

Plaintiff-Appellant,

v.
AM General Corporation and General Motors
Corporation,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Indiana, South Bend Division.
No. 00 C 525--Allen Sharp, Judge.

Argued January 7, 2002--Decided March 15, 2002

Before Posner, Rovner, and Evans, Circuit
Judges.

Posner, Circuit Judge. Beanstalk, which
serves owners of intellectual property by
negotiating licenses of their property,
brought this diversity suit for breach of
its contract with AM General; the
substantive issues are governed by the
law of Indiana. The contract, called a
"representation agreement," appointed
Beanstalk an agent of AM General to
obtain licenses to use the latter’s
"HUMMER" trademark. When the contract was
made in 1997, AM General was the
manufacturer of the Humvee, a military
vehicle that is the successor to the jeep
and like the jeep is also sold in a
version intended for the civilian market,
under the name "Hummer." Beanstalk named
General Motors as an additional defendant
for reasons that will appear in a moment.
The district judge granted the
defendants’ motion to dismiss the
complaint (to which Beanstalk had
attached the representation agreement)
for failure to state a claim. Fed. R.
Civ. P. 12(b)(6). Since the
representation agreement was part of a
pleading rather than submitted
separately, the judge could consider it
without converting the defendants’ motion
to one for summary judgment. Fed. R. Civ.
P. 12(c); Berthold Types Ltd. v. Adobe
Systems Inc., 242 F.3d 772, 775 (7th Cir.
2001).

The agreement made Beanstalk AM
General’s "sole and exclusive non-
employee representative" for the purpose
of licensing the Hummer trademark and
entitled Beanstalk to 35 percent of the
"gross receipts . . . received on Owner’s
[AM General’s] behalf . . . under any
License Agreements" made while the
representation agreement was in force.
Each license agreement "shall provide for
all payments thereunder to be made to
Beanstalk on Owner’s behalf," and
Beanstalk is required to account
quarterly to AM General for "all gross
receipts actually received during the
preceding calendar quarter under any
License Agreements." AM General is given
"the absolute right to veto, without
cause and at its sole discretion," any
proposed license, including renewals.
"License agreement" is defined as "any
agreement or arrangement, whether in the
form of a license or otherwise, granting
merchandising or other rights in the
Property," which in turn is defined to
mean trademarks and related rights. The
contract, which is assignable (though by
Beanstalk only with AM’s consent) and
contains an integration clause, was to
continue until the end of 2000.

The agreement was drafted by Beanstalk,
but this fact has little interpretive
significance since AM General is a
commercially sophisticated party
represented by counsel. Most courts now
agree with this exception to the
principle that contracts are to be
construed against the party that drafted
it. Western Sling & Cable Co. v.
Hamilton, 545 So. 2d 29, 31-32 (Ala.
1989); Wood River Pipeline Co. v.
Willbros Energy Services Co., 738 P.2d
866, 872 (Kan. 1987); Kinney v. Capitol-
Strauss, Inc., 207 N.W.2d 574, 577 (Iowa
1973); Dawn Equipment Co. v. Micro-Trak
Systems, Inc., 186 F.3d 981, 989 n. 3
(7th Cir. 1999); Northbrook Excess &
Surplus Ins. Co. v. Procter & Gamble Co.,
924 F.2d 633, 638-39 and n. 6 (7th Cir.
1991); Missouri Pacific R.R. v. Kansas
Gas & Electric Co., 862 F.2d 796, 799-800
(10th Cir. 1988); First State
Underwriters Agency of New England
Reinsurance Corp. v. Travelers Ins. Co.,
803 F.2d 1308, 1311-12 (3d Cir. 1986);
Eagle Leasing Corp. v. Hartford Fire Ins.
Co., 540 F.2d 1257, 1261 (5th Cir. 1976).
There are holdouts, illustrated by
Eastern Bus Lines, Inc. v. Board of
Education, 509 A.2d 1071, 1073-74 (Conn.
App. 1986), where the court, quoting an
earlier opinion, said that "the party who
actually does the writing of an
instrument will presumably be guided by
his own interests and goals in the
transaction. He may choose shadings of
expression, words more specific or more
imprecise, according to the dictates of
these interests." No doubt; but the other
party, if commercially sophisticated and
represented by counsel, will insist on
clarification. Indiana has yet to take a
stand on the exception, though the only
case from Indiana that we can find which
bears on it, Nationwide Mutual Ins. Co.
v. Neville, 434 N.E.2d 585, 599 (Ind.
App. 1982), leans in favor of rejecting
it. No matter; AM does not need the rule
in order to prevail. We add that the rule
is in practice a makeweight rather than a
tie breaker.

Beanstalk set about obtaining agreements
for the licensing of the Hummer
trademark. In 1999, however, two years
into the representation agreement with
Beanstalk, AM General entered into a
joint-venture agreement with General
Motors under which GM would design and
engineer a new version of the Hummer,
would make an interest-free loan of $235
million to AM General for the
construction of a factory to manufacture
the new version, would promise to buy a
minimum number of the new vehicles, would
obtain an option to buy up to 40 percent
of AM General’s common stock--and would
acquire the Hummer trademark. GM informed
Beanstalk that it had not assumed any of
AM General’s obligations under the
representation agreement and that it
would not compensate Beanstalk for any
license agreements made or renewed after
the effective date of the joint-venture
agreement.

Beanstalk argues that the agreement
between AM General and GM, although of
course not labeled a license agreement,
was one because it transferred the Hummer
trademark to GM and thus was an
"agreement or arrangement, whether in the
form of a license or otherwise, granting
merchandising or other rights in the
Property"; for the transfer gave GM the
right, indeed the exclusive right, to
merchandise the Hummer trademark, that
is, the "Property." The contract thus is
clear, Beanstalk argues--the joint
venture was an "agreement" that
"grant[ed]" GM "merchandising . . .
rights" in the Hummer trademark and it
did not have to be "in the form of a
license" because the representation
agreement says "in the form of a license
or otherwise"--and under accepted
principles of contract law we should look
no further. Beanstalk wants 35 percent of
so much of the consideration running from
GM to AM General as represents the value
of the Hummer trademark. We do not know
what the consideration was, or what that
value is, because no evidence has been
taken--in fact, the joint-venture
agreement is not even in the record,
though the sketch we have just given of
its terms is not contested.

Beanstalk is correct that written
contracts are usually enforced in
accordance with the ordinary meaning of
the language used in them and without
recourse to evidence, beyond the contract
itself, as to what the parties meant.
This presumption simplifies the
litigation of contract disputes and, more
important, protects contracting parties
against being blindsided by evidence
intended to contradict the deal that they
thought they had graven in stone by using
clear language. It is a strong
presumption, motivated by an
understandable distrust in the accuracy
of litigation to reconstruct contracting
parties’ intentions, but it is
rebuttable--here by two principles of
contract interpretation that are closely
related in the setting of this suit. The
first is that a contract will not be
interpreted literally if doing so would
produce absurd results, in the sense of
results that the parties, presumed to be
rational persons pursuing rational ends,
are very unlikely to have agreed to seek.
USA Life One Ins. Co. of Indiana v.
Nuckolls, 682 N.E.2d 534, 539 (Ind.
1997); Haworth v. Hubbard, 44 N.E.2d 967,
970 (Ind. 1942); Merheb v. Illinois State
Toll Highway Authority, 267 F.3d 710, 713
(7th Cir. 2001); Funeral Financial
Systems v. United States, 234 F.3d 1015,
1018 (7th Cir. 2000); Grun v. Pneumo Abex
Corp., 163 F.3d 411, 420 (7th Cir. 1998);
Catalina Enterprises, Inc. Pension Trust
v. Hartford Fire Ins. Co., 67 F.3d 63, 66
(4th Cir. 1995).
 This is an interpretive principle, not
a species of paternalism. "The letters
between plaintiff and defendant were from
one merchant to another. They are to be
read as businessmen would read them, and
only as a last resort are to be thrown
out altogether as meaningless futilities.
. . . If literalness is sheer absurdity,
we are to seek some other meaning whereby
reason will be instilled and absurdity
avoided." Outlet Embroidery Co. v.
Derwent Mills, 172 N.E. 462, 463 (N.Y.
1930) (Cardozo, C.J.). "There is a long
tradition in contract law of reading
contracts sensibly; contracts--certainly
business contracts of the kind involved
here--are not parlor games but the means
of getting the world’s work done. . . .
True, parties can contract for
preposterous terms. If contract language
is crystal clear or there is independent
extrinsic evidence that something silly
was actually intended, a party may be
held to its bargain, absent some
specialized defense." Rhode Island
Charities Trust v. Engelhard Corp., 267
F.3d 3, 7 (1st Cir. 2001); see also
Dispatch Automation, Inc. v. Richards,
No. 01-2273, 2002 WL 221755 at *2-3 (7th
Cir. Feb. 11, 2002).
The second principle is that a contract
must be interpreted as a whole. Freigy v.
Gargaro Co., 60 N.E.2d 288, 291 (Ind.
1945); Harseim v. Booth, 33 N.E. 1016,
1017 (Ind. 1893); Allstate Ins. Co. v.
Hammond, 759 N.E.2d 1162, 1168 (Ind. App.
2001); United States v. Schilling, 142
F.3d 388, 395 (7th Cir. 1998); LaSalle
National Trust, N.A. v. ECM Motor Co., 76
F.3d 140, 144 (7th Cir. 1996); A.D.E.
Inc. v. Louis Joliet Bank & Trust Co.,
742 F.2d 395, 396 (7th Cir. 1984);
Catalina Enterprises, Inc. Pension Trust
v. Hartford Fire Ins. Co., supra, 67 F.3d
at 66. Sentences are not isolated units
of meaning, but take meaning from other
sentences in the same document.

The second principle thus is linguistic;
the first reflects the fact that
interpretation is a cultural as well as a
linguistic undertaking. To interpret a
contract or other document, it is not
enough to have a command of the grammar,
syntax, and vocabulary of the language in
which the document is written. One must
know something about the practical as
well as the purely verbal context of the
language to be interpreted. In the case
of a commercial contract, one must have a
general acquaintance with commercial
practices. This doesn’t mean that judges
should have an M.B.A. or have practiced
corporate or commercial law, but merely
that they be alert citizens of a market-
oriented society so that they can
recognize absurdity in a business
context. A blinkered literalism, a
closing of one’s eyes to the obvious, can
produce nonsensical results, as this case
illustrates. Beanstalk is in the business
of merchandising trademarks. If, while
the representation agreement was in
effect, a toy company wanted to make a
toy Hummer, Beanstalk was authorized to
grant the toy company a license in
exchange for a fee that it would split
35/65 with AM General. The joint-venture
agreement was not that kind of
arrangement. It was not an arrangement
for the promotion of AM General’s
trademark. By the agreement creating the
joint venture, AM General essentially
transferred the Hummer business to
General Motors, retaining a role limited
to manufacturing, in a factory built with
GM’s money, a vehicle designed by,
engineered by, and to be marketed by
(that is the significance of the transfer
of the trademark) GM. Quite apart from
the option that GM also received to buy a
large, doubtless controlling interest in
AM General, it’s as if AM General had
sold its entire business, including its
manufacturing assets and all its
trademarks, to GM.

Beanstalk is not a business broker. It
had nothing to do with the joint venture
and indeed didn’t even know about it
until after it took place. The parties
could hardly have intended that Beanstalk
should get a commission if AM General
decided, as in effect it did, to get out
of the Hummer business. A business would
not contract to pay an agent for work
that the agent did not do but that the
business did itself. Beanstalk and AM
General must have known when they signed
the representation agreement that if AM
General ever sold its Hummer business,
the trademark would go with it, as the
purchaser would need it in order to
identify the product, while AM General
would no longer have any need or use for
it. Indeed, AM General would have nothing
to attach the trademark to--and a
trademark is an identifier, not a free-
standing piece of intellectual property;
hence the rule that a trademark cannot be
sold in gross, that is, without the
assets that create the product that it
identifies. 15 U.S.C. sec. 1060; United
Drug Co. v. Theodore Rectanus Co., 248
U.S. 90, 97 (1918); In re Cult Awareness
Network, Inc., 151 F.3d 605, 608 n. 1
(7th Cir. 1998); Green River Bottling Co.
v. Green River Corp., 997 F.2d 359, 362
(7th Cir. 1993); Sands, Taylor & Wood Co.
v. Quaker Oats Co., 978 F.2d 947, 956
(7th Cir. 1992); Beauty Time, Inc. v. VU
Skin Systems, Inc., 118 F.3d 140, 150 (3d
Cir. 1997). The parties would hardly have
intended Beanstalk to obtain a commission
on the sale of the business merely
because the sale would inevitably include
the trademark. And they would not have
wanted to burden the sale with the added
cost of allocating the purchase price
between the trademark and the other
assets involved in the sale, as Beanstalk
claims they must do in order to compute
the commission to which it is entitled on
the joint venture. (Such allocations may
be required for tax purposes. See
Thrifticheck Service Corp. v.
Commissioner, 287 F.2d 1, 2, 3-4 (2d Cir.
1961) (Friendly, J.). We are not told
whether that was the case with the AM
General-GM joint venture.)

The unreasonableness of Beanstalk’s
position can be seen most clearly by
imagining that the joint venture had
taken place the day after the
representation agreement between
Beanstalk and AM General went into
effect. Then on Beanstalk’s
interpretation it would be entitled to 35
percent of the entire value of the Hummer
trademark even though it had made
absolutely no contribution to that value.
That makes no sense; it is apparent that
the definition of "License Agreement" in
the representation agreement covers any
agreement that has the function or
character of a trademark licensing
agreement even if the word "license" or a
cognate term does not appear; the sale of
a business is an agreement of an entirely
different character. "[The] issue of
whether a transfer of the use of a
trademark is a sale or a license for tax
purposes is a thorny one, and has not
always been consistently solved in the
courts. The basic problem is to determine
the extent to which the transferor
retains proprietary rights in the
transferred asset. If the transferor
retains sufficient proprietary rights,
the transfer must be considered a license
rather than a sale. . . . We do not sug
gest that [the] nomenclature [used in the
contract] should be finally determinative
of the distinction between a license and
a sale." Consolidated Foods Corp. v.
United States, 569 F.2d 436, 437, 442
(7th Cir. 1978). Indeed not.

Beanstalk ignores relevant provisions of
the contract, one of which engages
Beanstalk to be AM General’s "sole and
exclusive non-employee representative,"
implying that AM General’s employees can
negotiate license agreements without
going through Beanstalk. Beanstalk agrees
with this interpretation, as it must
(there is no possible ambiguity), but
claims that even when an employee of AM
General negotiates such an agreement with
no involvement by Beanstalk, Beanstalk is
entitled to 35 percent of the revenues
that AM General obtains under the
agreement. No reason is given why AM
General would compensate Beanstalk for
services rendered wholly by AM General’s
own employees, whom it must compensate.
That would be paying double for the same
service.

Further ignored are the provisions
keying Beanstalk’s commissions to gross
receipts "received"--obviously by
Beanstalk--"on Owner’s [that is, AM
General’s] behalf" and requiring
Beanstalk to account to AM General
periodically for the gross receipts of
the license agreements. This implies that
Beanstalk would receive receipts only for
license agreements that it negotiated.
The implication is reinforced by the fact
that the representation agreement
contains no provision for compensating
Beanstalk out of receipts received
directly by AM General, for example under
a license agreement negotiated by an
employee of AM General.

Beanstalk goes so far as to argue that,
whoever negotiates the license agreement,
the receipts generated by it must be paid
in the first instance to Beanstalk to
enable it to take its 35 percent cut off
the top. Beanstalk thus is arguing that
not 35 percent but 100 percent of so much
of the consideration that GM paid AM
General for the joint-venture agreement
that represented the value of the Hummer
trademark had to be paid to Beanstalk.
Beanstalk’s argument amounts to saying
that if Chrysler hired it to license the
Chrysler trademarks and then sold its
entire automobile business to Daimler for
$10 billion, Beanstalk would be entitled
to an immediate cash receipt of $3.5
billion, from which it would deduct 35
percent of the value of the Chrysler
trademarks and then remit the balance to
Chrysler. Absurd.

Against all this it might be argued that
to disregard a contractual term, whether
on the basis that interpreting it
literally would yield absurd results or
that other terms in the contract alter
the disputed term’s apparent meaning,
requires evidence and thus cannot be done
on a motion to dismiss. Not so. For when
we said earlier that the interpretation
of a contract is a cultural as well as a
linguistic undertaking, we did not add
that the materials of interpretation are
limited to literal meanings on the one
hand and trial-type evidence on the
other. The cultural background that a
judge brings to the decision of a
contract case includes as we said a
general knowledge of how the world
operates, including the commercial world,
and this knowledge, precisely because it
is general rather than being knowledge of
the specific facts of the case
("adjudicative facts"), can show that the
literal interpretation of a particular
contractual term would be unsound, in
which event no evidence need be taken.
Unelko Corp. v. Prestone Products Corp.,
116 F.3d 237, 240 (7th Cir. 1997).

It would be different if Beanstalk,
instead of standing on the literal terms
of the representation agreement--
onquicksand, in other words--wanted to
present evidence to show that the
agreement means what it says it means.
The only evidence it wants to present is
that before selling the Hummer business
to GM, AM General approached Beanstalk
and asked for an express exclusion from
the representation agreement of any
agreement "for the purpose of producing
motor vehicles" even if such an agreement
included a transfer of trademark rights.
But of course. It was simple prudence for
AM General to try to head off this
lawsuit. It doesn’t follow that the
lawsuit has any merit. Indeed, to
penalize AM General for attempting an
amicable resolution of a potential
dispute in advance would violate the
spirit of the rule that makes settlement
offers inadmissible in an adjudication on
the merits. See Fed. R. Evid. 408.

With our conclusion that there was no
breach of contract, Beanstalk’s other
claims collapse, though not, as the
defendants argue, because they are
sketchily alleged. Federal pleading
rules, which require that a complaint
only give notice of the plaintiff’s
claim, and not that it spell out the
facts underlying the claim, Leatherman v.
Tarrant County Narcotics Intelligence &
Coordination Unit, 507 U.S. 163, 168
(1993); Kirksey v. R.J. Reynolds Tobacco
Co., 168 F.3d 1039, 1041 (7th Cir. 1999)
("all that’s required to state a claim in
a complaint filed in a federal court is a
short statement, in plain (that is,
ordinary, nonlegalistic) English, of the
legal claim. . . . The courts keep
reminding plaintiffs that they don’t have
to file long complaints, don’t have to
plead facts, don’t have to plead legal
theories"), govern even in diversity
suits. Johnson v. Hondo, Inc., 125 F.3d
408, 417 (7th Cir. 1997); Colton v.
Swain, 527 F.2d 296, 304 (7th Cir. 1975).
And while we are about correcting the
defendants, we point out that AM General
is incorrect to argue that an appellate
court is to give weight to the district
court’s interpretation of the law of the
state in which the district court is
located. Leavitt v. Jane L., 518 U.S.
137, 145 (1996) (per curiam); Salve
Regina College v. Russell, 499 U.S. 225,
231 (1991); Triple G Landfills, Inc. v.
Board of Commissioners, 977 F.2d 287, 291
(7th Cir. 1992).

GM cannot be guilty of tortious
interference with Beanstalk’s contract
with AM General when GM did not
"interfere" with it, that is, procure a
breach, though the defendants are wrong
to argue that Indiana requires that the
interference be "malicious"; it’s enough
if it’s intentional and unjustified.
Winkler v. V.G. Reed & Sons, Inc., 638
N.E.2d 1228, 1235 (Ind. 1994); Zemco
Mfg., Inc. v. Navistar Int’l
Transportation Corp., 186 F.3d 815, 822-
23 (7th Cir. 1999) (Indiana law). The
word "malicious" does appear in a few
cases, such as Morgan Asset Holding Corp.
v. CoBank, ACB, 736 N.E.2d 1268, 1272
(Ind. App. 2000), but it is apparent that
the "malice" to which it refers, as in
the cases that require proof of "actual
malice" in a defamation suit by a public
figure, is intentionality rather than ill
will. See Flintridge Station Associates
v. American Fletcher Mortgage Co., 761
F.2d 434, 441 (7th Cir. 1985).

Neither defendant can be guilty of
unjust enrichment either. When a contract
defines the relationship of two parties,
termination without fault is a defense to
a claim of unjust enrichment, Bayh v.
Sonnenburg, 573 N.E.2d 398, 409 (Ind.
1991); Boushehry v. Ishak, 550 N.E.2d
784, 787 (Ind. App. 1990); Murray v. Abt
Associates, Inc., 18 F.3d 1376, 1379 (7th
Cir. 1994), unless part or full
performance by one party has resulted in
the conferral of uncompensated values on
the other party. That often happens when
a contract is voided under the statute of
frauds after performance by one party but
before payment by the other. Hensley v.
Hilton, 131 N.E. 38, 40 (Ind. 1921);
Wallem v. CLS Industries, Inc., 725
N.E.2d 880, 887, 890 (Ind. App. 2000);
Fischer v. First Chicago Capital Markets,
Inc., 195 F.3d 279, 283 (7th Cir. 1999).
In such a case the performing party is
entitled to the fair value of his
performance. There is nothing like that
here. Beanstalk received the full
consideration for which it had
negotiated, namely 35 percent of the
gross receipts of the license agreements
that it negotiated.

As for GM’s having told Beanstalk that
it will not pay any commissions on
license agreements that are renewed, GM
was entitled as the owner of the
"Property" to veto any license
agreements, including renewals, that
Beanstalk might propose. Even if GM
remains bound by the representation
agreement, which it does not, because the
agreement did not require AM General to
assign its duties under it to an assignee
of the "Property" covered by the
agreement, the veto power granted the
represented party excuses GM from any
duty to renew any license agreements
negotiated by Beanstalk.

Affirmed.

Rovner, Circuit Judge, dissenting in
part. I believe the majority has strayed
beyond the bounds of Rule 12(b)(6) in
affirming the dismissal of Beanstalk’s
breach of contract claim, and I therefore
respectfully dissent. At this stage of
the proceedings, we must accept all
factual allegations in the complaint and
draw all reasonable inferences from those
facts in favor of the plaintiff.
Leatherman v. Tarrant County Narcotics
Intelligence and Coordination Unit, 507
U.S. 163, 164 (1993); Slaney v. The
International Amateur Athletic
Federation, 244 F.3d 580, 597 (7th Cir.
2001), cert. denied, 122 S. Ct. 69
(2001); Camp v. Gregory, 67 F.3d 1286,
1290 (7th Cir. 1995), cert. denied, 517
U.S. 1244 (1996). We are obliged to allow
the case to proceed unless it appears
beyond doubt that the plaintiff can prove
no set of facts in support of its claim
which would entitle it to relief. Pokuta
v. Trans World Airlines, Inc., 191 F.3d
834, 839 (7th Cir. 1999). The majority
proceeds down two paths to conclude that
Beanstalk’s claim fails as a matter of
law, but I believe that, at most, these
paths lead to the conclusion that the
contract is ambiguous, and we must
therefore look to extrinsic evidence to
determine the intention of the
contracting parties.

We all seem to agree that, when read
literally, the contract clause defining
"License Agreement" would include AM
General’s sale of its Hummer business,
including the "Hummer" and "Humvee"
trademarks, to General Motors. The
majority holds that we may disregard the
literal interpretation of a single clause
whenever (1) this literal reading would
produce absurd results, or (2) when the
isolated clause takes on a different
meaning when viewing the contract as a
whole. I have no quarrel with either
proposition as a correct statement of the
law of contracts in Indiana, the relevant
jurisdiction here. However, I do not
agree that a literal interpretation of
the defined term "License Agreement"
would necessarily lead to absurd results.
Moreover, when the contract is read as a
whole, that term is at worst ambiguous.
Under these circumstances, dismissal for
failure to state a claim is inappropriate
because there may be some set of facts
that Beanstalk could prove which would
entitle it to relief.

I foresee two problems with the
application of the "absurd results" rule
in this case. First, and most
importantly, we come to this case not
after trial or even on summary judgment
after a full and fair airing of the
relevant facts through discovery, but
rather on a motion to dismiss. It is
probably no coincidence that nearly every
case on which the majority relies for the
"absurd results" rule is on appeal from
either a summary judgment ruling or a
trial. See USA Life One Ins. Co. of
Indiana v. Nuckolls, 682 N.E.2d 534, 536
(Ind. 1997) (summary judgment); Haworth
v. Hubbard, 44 N.E.2d 967, 968 (Ind.
1942) (trial); Merheb v. Illinois State
Toll Highway Authority, 267 F.3d 710, 711
(7th Cir. 2001) (summary judgment);
Funeral Financial Systems v. United
States, 234 F.3d 1015, 1017 (7th Cir.
2000) (summary judgment); Grun v. Pneumo
Abex Corp., 163 F.3d 411, 419 (7th Cir.
1998), cert. denied, 526 U.S. 1087 (1999)
(summary judgment); Rhode Island
Charities Trust v. Engelhard Corp. 267
F.3d 3, 4 (1st Cir. 2001); Catalina
Enterprises, Inc. Pension Trust v.
Hartford Fire Ins. Co., 67 F.3d 63, 64
(4th Cir. 1995), cert. denied, 517 U.S.
1105 (1996) (summary judgment); Dispatch
Automation, Inc. v. Richards, 2002 WL
221755 at *1 (7th Cir. Feb. 11, 2002)
(summary judgment). In the one case
decided on a motion to dismiss, the
motion was denied and that denial
affirmed, meaning the case was allowed to
move forward to discovery and trial. See
Outlet Embroidery Co. v. Derwent Mills,
172 N.E. 462 (N.Y. 1930) (Cardozo, C.J.).
The value of discovery in these
circumstances cannot be overstated.
Beanstalk, in making a cross-motion for
summary judgment, submitted an affidavit
which calls into question the majority’s
conclusion that a literal reading of the
"License Agreement" provision leads to an
absurd result. In the affidavit,
Beanstalk reveals, and AM General does
not dispute, that shortly before AM
General sold the Hummer business to
General Motors, AM General asked
Beanstalk to modify the contract. In
particular, AM General sought to
expressly exclude certain types of
transactions relating to the transfer of
rights in the trademark,
including"agreements between [AM General]
and any individual or entity, for the
purpose of producing motor vehicles or
motor vehicle parts and accessories, even
if rights in the [trademarks] are
licensed, transferred, or otherwise
involved in such agreements." R. 24,
Exhibit B, at para. 1(c). In other words,
AM General seems to have well understood
the contract to include the sale of its
Hummer business, and wished to avoid
paying Beanstalk 35% of the value of the
trademarks in the sale. Beanstalk
declined to make this change, and now,
even though both of the parties seem to
have assumed the contract covered, or
potentially covered the sale to GM, the
majority finds this to be an absurd
conclusion. See R. 24, Exhibit C.
Certainly it might have been poor
judgment for AM General to have agreed to
this term, and AM General no doubt wishes
to disown this language now that it is in
litigation. But we do not normally
protect parties from the consequences of
entering into bad deals except when the
contract is unconscionable and the party
being held to it is unsophisticated.
Operating Engineers Local 139 Health
Benefit Fund v. Gustafson Const. Corp.,
258 F.3d 645, 650 (7th Cir. 2001)
("People generally are held to the
agreements they sign and are not
permitted to fob them off as
’boilerplate’ without invoking fraud,
unconscionability, or mutual mistake as a
ground for walking away from their
contract."). I doubt AM General needs our
protection.

Second, in the absence of discovery, the
majority substitutes its own "cultural
understanding," its own "cultural
background," and its own general
knowledge of the commercial world for a
defined term in the contract, a dubious
proposition at best. Judges are trained
in law, not business, and however
cosmopolitan we may be about the world of
commerce, I think it an unwise practice
to substitute our general knowledge of
the business world for the express terms
of a contract, especially in the absence
of any discovery that might elucidate the
parties’ true intent. Beanstalk’s
affidavits reveal not only that AM
General sought to change the terms of the
contract to exclude the sale at issue
here, but also that in early
negotiations, Beanstalk explained to AM
General that it expected a share of any
license agreements that internal
employees of AM General negotiated. See
R. 24, at para. 4. The majority dismisses
Beanstalk’s interpretation of this term,
arguing that this would be paying double
for the same services. On this 12(b)(6)
motion, however, we have no idea what the
parties bargained for. Beanstalk could
well have accepted a smaller commission
than it normally obtains in order to get
a cut of the in-house business. Beanstalk
has argued on appeal that, because it was
generally increasing the value of the
trademarks, it was entitled to a share of
any transfer of rights in the trademarks,
whether or not it was directly involved
in negotiating the deal. This explanation
is not so absurd that Beanstalk should
lose its claim as a matter of law, before
we even allow discovery. Indeed, it is
not absurd at all. Remember that at this
stage of the proceedings, we must sustain
the complaint unless it appears beyond
doubt that the plaintiff can prove no set
of facts in support of its claim which
would entitle it to relief.

Finally, even when reading the contract
as a whole, I believe the language is at
worst ambiguous. The majority deftly
points out various terms in the contract
that render Beanstalk’s interpretation
suspect. I agree that when reading the
contract as a whole, Beanstalk’s claim is
weak, and indeed might not survive
summary judgment. But Rule 12(b)(6) is
not a substitute for summary judgment,
and we must avoid the temptation to weed
out weak claims by bending the Federal
Rules of Civil Procedure past the
breaking point. We have acknowledged that
the Federal Rules, drafted at a time when
our courts were less busy, may not have
kept up with the realities of the growth
of federal litigation. Jackson v. Marion
County, 66 F.3d 151, 153 (7th Cir. 1995).
We noted an increasing tendency to bend
the Rules to dispose of cases on summary
judgment that formerly would have gone to
trial, and to dismiss on the pleadings
cases that would have gotten at least as
far as summary judgment. Id. We drew the
line in Jackson to make clear that we
will not interpolate a requirement of
fact pleading into the federal rules. I
believe we should similarly draw the line
here to require discovery on the
intentions of the contracting parties
rather than substituting our own cultural
understanding for ambiguous contract
terms. Although there is a tension
between the definition of License
Agreement and other provisions of the
contract, it is not for us to resolve
that tension on a motion to dismiss.
Therefore, I respectfully dissent from
the majority’s affirmance of the
dismissal of Beanstalk’s breach of
contract claim. I join the majority’s
opinion on the unjust enrichment and
tortious interference claims.