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BABDO SALES v. MILLER-WOHL CO.

August 4, 1970

BABDO SALES, INC., a Connecticut Corporation, Plaintiff,
v.
MILLER-WOHL COMPANY, Inc., a Delaware Corporation, Defendant


Bonsal, District Judge.


The opinion of the court was delivered by: BONSAL

MEMORANDUM

BONSAL, District Judge.

 In this diversity action plaintiff seeks a declaratory judgment that it is entitled to the use and occupancy of certain departments of defendant's stores under licensing agreements allegedly entered into by plaintiff with defendant, and the enjoining of defendant from attempting to terminate the agreements. Plaintiff moves, pursuant to F.R. Civ. P. 56 for summary judgment in its favor, and defendant moves for summary judgment dismissing the complaint on the ground that the alleged licensing agreements are void under the New York Statute of Frauds, General Obligations Law, McKinney's Consol. Laws, c. 24-A, § 5-701 (1).

 Plaintiff is a Connecticut corporation engaged in the retail sale of stationery, records, novelties, and other merchandise; it obtains licenses or leases from department stores to conduct its business on their premises in return for a percentage of its gross sales. Defendant, through its subsidiaries, operates a chain of discount department stores. Pursuant to concededly valid written agreements and extensions thereof entered into by plaintiff and defendant between 1961 and 1968, plaintiff now operates stationery and record departments in defendant's stores in Hutchinson, Kansas; Salina, Kansas; Waterloo, Iowa; Boise, Idaho; Muncie, Indiana; Marion, Ohio; Youngstown, Ohio; Newark, Ohio; Mansfield, Ohio; and Lima, Ohio (two stores -- Northland Plaza and American Mall). In addition, plaintiff operates a stationery and record department in defendant's twelfth store in Springfield, Ohio, with regard to which there is no written agreement; defendant contends that plaintiff is a trespasser in that store. The agreements or extensions thereof under which defendant operates its departments in the first eleven stores are due to expire at various dates from 1970 through 1972, beginning with August 31, 1970 (the Youngstown store) and October 31, 1970 (the Boise and Newark stores). The sole issue presented by these motions for summary judgment is whether alleged new oral agreements extending and amending the written agreements involving the eleven stores, and a new oral agreement involving the Springfield store, which allegedly do not terminate until February 28, 1975, are void under the New York Statute of Frauds so that plaintiff's right to utilize departments of defendant's stores for its stationery and record business terminates as of the expiration dates of the existing agreements (and, as to the Springfield store, whether there is a presently valid agreement: eviction proceedings in an Ohio state court were removed to an Ohio federal court and there stayed pending disposition of this action).

 The original written agreements are similar in substance, providing that the subsidiary operating the store, as "Licensor," grants to plaintiff, as "Licensee," a license and privilege of operating a "Department" within the store to sell stationery and records, in a specified area of space within the store, the location of which is indicated on an attached diagram, for a specified period of time; that notwithstanding the term of the license, it shall terminate whenever defendant ceases operating the store for whatever reason; that the Licensor has sole discretion at any time to change the location of the Licensee's space to another space of the same areas within the store; and that the Licensee agrees to pay a yearly minimum rental of $8,500.00 or $10,000.00 and 7% of gross record sales and 10% of all other sales in excess of the minimum rental.

 In 1968, plaintiff and defendant entered into negotiations regarding the terms of a licensing agreement for the operation by plaintiff of a stationery and record department in defendant's new, twelfth store to be opened in Springfield, Ohio. In the course of these negotiations it was agreed that the rentals at the new store would be 8% on records and 12% on other gross sales, and that the license would run to February 28, 1975. During these negotiations, the parties appear to have orally agreed to extend the existing 11 licensing agreements to February 28, 1975, in consideration of an increase in rentals based on the Springfield negotiation.

 On February 12, 1969, Victor Fortgang, a vice-president of defendant and chief negotiator of the licensing agreements with plaintiff, sent an internal memorandum to Max Shor, defendant's assistant comptroller. The memorandum bears only Fortgang's typed signature, and reads as follows:

 
"February 12, 1969
 
"Memo: Shor
 
We have today negotiated a new license agreement with Mr. Hy Weinberg of Babdo Sales, which will be as follows:
 
1. All stationery is now rentable at 12% of sales and all records at 8% of sales.
 
2. The minimum guarantees are to be increased to reflect increased percentages.
 
[handwritten] 8500 to 10,000-.
 
10,000 to 12,000-.
 
3. We are to deduct earned percentage on a week-to-week basis.
 
The above agreement will be effective as of March 1, 1969 and will run until February 28, 1975. New licensing agreements will go forward in about a week to replace those presently in effect. Agreements will cover all stores -- 801 through 812.
 
Victor Fortgang
 
cc: Seslowe
 
Nieman
 
Jankell
 
M.W. Tomber"

 Sometime in March or April, 1969, after plaintiff had examined a preliminary draft, Leonard Nieman, a vice-president and the comptroller of defendant, sent 10 letter agreements dated February 28, 1969 to plaintiff. The letter agreements recite that they contain the complete terms of the extensions of the licensing agreements for the first 10 stores, and conclude with the following paragraph:

 
"Your signature at the foot hereof shall constitute the entire agreement in this respect. Please sign and return two copies of this letter, and retain one copy for your own files."

 At the end of each letter agreement the names of both parties are typed with blank spaces for signatures and the words "Agreed to" ...


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