Pacific Sunwear of California, Inc. v. Olaes Enterprises, Inc.

In this appeal, clothing retailer Pacific Sunwear of California, Inc. (PacSun), appeals a trial court order granting summary judgment in favor of Olaes Enterprises, Inc. (Olaes), in PacSun’s breach of warranty lawsuit. The lawsuit alleges that Olaes breached the warranty contained in section 2312, subdivision (3) of the California Uniform Commercial Code (hereafter section 2312(3)), which requires certain sellers to warrant that their goods are “free of the rightful claim of any third person by way of infringement or the like.” (§ 2312(3).) PacSun seeks monetary damages for the alleged breach to compensate it for litigation expenses incurred in defending against a third party trademark infringement lawsuit that arose out of PacSun’s sale of T-shirts purchased from Olaes.

The trial court granted Olaes’s motion for summary judgment on the ground that the third party claim did not constitute a “rightful claim” of infringement under the California Uniform Commercial Code and thus did not breach the section 2312(3) warranty. The trial court reached this conclusion, as a matter of law, after analyzing a federal district court’s ruling on the third party’s request for a…