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MORSE v. SWANK

June 30, 1980

MARVIN W. MORSE, Plaintiff, against SWANK, INC., PIERRE CARDIN, S.A.R.L. de GESTION PIERRE CARDIN, MAX J. BELLEST, and COORDINATING OFFICE, INC., Defendants.


The opinion of the court was delivered by: TENNEY

Marvin Morse brought this action charging (1) a violation of the antitrust laws, (2) breach of contract, (3) tortious interference with a contract, (4) fraud, and (5) negligence. The action grew out of Morse's attempt to obtain distribution rights for Pierre Cardin cigarette lighters. Early in the litigation, defendants Max J. Bellest and Coordinating Office, Inc. ("Bellest defendants") and Pierre Cardin and S.A.R.L. de Gestion Pierre Cardin ("Cardin defendants") moved for summary judgment pursuant to Federal Rule of Civil Procedure ("Rule") 56. Bellest also moved individually for a stay of his deposition. By an Opinion and Order entered October 11, 1978, 459 F. Supp. 660 (S.D.N.Y.1978), the Court granted summary judgment to the Bellest defendants on the fraud and negligence causes of action. It otherwise denied the defendants all relief.

After the completion of discovery, the defendants, including Swank, Inc., moved for summary judgment on the first and third causes of action. Morse consents to an order dismissing the first and third causes of action as against Bellest, Affidavit of Daniel R. Solin, sworn to June 22, 1979 ("Solin Aff."), P 2, but he otherwise opposes the motions. For the other reasons given below, the Court grants the defendants' motions for summary judgment and dismisses the first and third causes of action as against all defendants.

BACKGROUND *fn1"

 Morse alleges that in March 1977 he reached an agreement with the Cardin defendants giving him exclusive distribution rights in the United States for Pierre Cardin lighters. Two weeks after Morse and the Cardin defendants reached the alleged agreement, Herve Duquesnoy of S.A.R.L. de Gestion Pierre Cardin ("SARL" when referred to separately) informed Morse that the negotiations were ended because the license had been promised to Swank. Letter from Herve Duquesnoy to Mr. Worse (sic), dated Mar. 24, 1977, Exh. I to Affidavit of Howard Breindel, sworn to Feb. 16, 1978.

 
In his letter terminating negotiations with Morse, Duquesnoy referred to a long-standing relationship between Cardin and Swank that began at least as early as October 13, 1967 when those two parties entered a licensing agreement for the manufacture and sale of men's jewelry and related product lines. The term jewelry was understood to include lighters. The agreement gave Swank exclusive rights to market the specified items except, as is relevant here, "to jewelry manufactured of precious metals or containing precious stones, retailing at a price in excess of $ 75.00 per item." Cardin-Swank Agreement, dated October 13, 1967, P 1, appended to Cardin Defendants' Motion for Summary Judgment ("1967 Agreement"). ( *fn2" ) However, while Swank began exploring the marketing of Cardin lighters in 1975, see affidavit of John A. Tulin, sworn to April 1978, Exhibits A, B (letters from prospective suppliers of Cardin lighters providing requested prices) . . ., not until March 8, 1977 did Marshall Tulin, vice-president of Swank, write Pierre Cardin to tell him of Swank's decision to consider the sale of lighters as provided for in the 1967 Agreement. Two weeks later, SARL, through Duquesnoy, terminated further negotiations with Morse.
 
459 F. Supp. at 662-63 (renumbered footnote).
 
Antitrust Cause Of Action
 
In the first of five causes of action, Morse sues all five defendants under section 1 of the Sherman Act, 15 U.S.C. ยง 1 (as amended). He alleges a combination and conspiracy in restraint of trade: to bar him from distributing Pierre Cardin lighters; from competing with Swank, which distributes a line of Cardin products under its 1967 Agreement with the Cardin defendants; and to perpetuate Swank's status as the sole licensee of the Pierre Cardin name in the United States for men's jewelry and related items. Amended Complaint P 19(a)-(c). Morse claims that, to effectuate the conspiracy, the Cardin defendants *fn3" breached their distribution agreement with Morse and refused to deal with him, Cardin and Swank entered a distribution agreement, and Cardin attempted to have Morse deal with Swank regarding distribution rights for Pierre Cardin lighters. Id. P 20(a)-(d). Morse alleges that among the effects of the combination and conspiracy are the following: competition in the distribution of Pierre Cardin lighters in the United States has been restrained; Morse has been prevented from distributing Pierre Cardin lighters in the United States; American consumers have been deprived of the choice of purchasing "Pierre Cardin" lighters from Morse rather than other lighters sold by Swank; competition in the use of the name Pierre Cardin on jewelry and related items has been suppressed; and Swank's status as the sole licensee of Pierre Cardin jewelry and related items in the United States has been perpetuated. Id. P 21(a)-(e).
 
In addressing the previous summary judgment motions, the Court concluded, inter alia, that
 
(o)n the factual questions whether there was a combination or conspiracy and whether it had the intent or effect of restraining competition, Morse has so far provided meager support. The Court is mindful, however, of the Supreme Court's caution concerning summary judgment in antitrust cases: "We believe that summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot." Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S. Ct. 486, 491, 7 L. Ed. 2d 458 (1962)(footnote omitted). The instant case cannot be thought of as complex antitrust litigation, but motive and intent are key questions, and the answers are in the hands of the alleged coconspirators. Accordingly, Morse should have the opportunity to pursue his claims through discovery, and the defendants' motions for summary judgment on the antitrust cause of action are denied with leave to renew after completion of discovery. Morse, by further discovery, including but not limited to depositions of Swank officials and Max Bellest, shall "set forth specific facts" as to the alleged combination or conspiracy among the defendants.
 
459 F. Supp. at 666. As an indication of the "specific facts" that Morse should set out after discovery, the Court discussed Oreck Corp. v. Whirlpool Corp., 579 F.2d 126 (2d Cir.)(en banc), cert. denied, 439 U.S. 946, 99 S. Ct. 340, 58 L. Ed. 2d 338 (1978).
 
Oreck Corp. . . . mandates resort to rule of reason, rather than per se, analysis in cases of vertical agreements to protect distributors from competition. In Oreck Corp., Whirlpool, a manufacturer of vacuums, and Sears, Roebuck & Co. ("Sears"), Whirlpool's principal distributor, allegedly agreed that (Whirlpool's) agreement with Oreck, another distributor, should be terminated. The court of appeals concluded that the vertical agreement, even with the purpose or effect of removing Sears' competitor, could not alone amount to a violation of Section 1 of the Sherman Act. To do so, the agreement must be "anticompetitive in purpose or effect," a phrase the Second Circuit interprets to refer to its effect on the industry as a whole, not the effect on the excluded competitor alone. Id. at 133. To have shown a violation, Oreck Corp. would have to have established that the alleged agreement to exclude it either promoted a Whirlpool monopoly in the vacuum cleaner industry or gave Sears a market position that enabled it to raise prices even with interbrand competition. Id. at 130 n. 5.
 
459 F. Supp. at 666 n. 7.
 
After discovery, presumably conducted with a view to the Court's prior Opinion and Order, all defendants moved for summary judgment on the antitrust cause of action. In its motion, Swank contends that Morse has failed to raise a genuine issue of fact entitling him to a trial on this cause of action. Swank argues that Morse has failed to set forth specific facts raising a factual issue as to a combination and conspiracy or as to the market effect of the alleged combination and conspiracy. Rather, it alleges that the facts demonstrate that Swank has been distributing Pierre Cardin products continuously since reaching the 1967 Agreement with the Cardin defendants and that, in 1977, Swank decided to reenter, under the 1967 Agreement, the market in cigarette lighters after a five-year absence. Swank Memorandum at 15-16; Affirmation ...

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