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COFACE v. OPTIQUE DU MONDE

December 17, 1980

COFACE, Plaintiff,
v.
OPTIQUE DU MONDE, LTD., Norman Edidin, and Edidin Associates, Defendants



The opinion of the court was delivered by: CONNER

OPINION AND ORDER

Before the Court are motions by defendants Norman Edidin and Edidin Associates ("the Edidins") to dismiss the claims against them for failure to state a claim upon which relief may be granted, Rule 12(b)(6), F.R.Civ.P., and for improper venue, Rule 12(b)(3), F.R.Civ.P. Alternatively, the Edidins seek transfer of the claims against them to the United States District Court for the Northern District of Illinois, either because venue does not lie in this Court, 28 U.S.C. § 1406(a), or because the Illinois forum would better serve the convenience of parties and witnesses and the interests of justice, 28 U.S.C. § 1404(a).

BACKGROUND

 The claims in this litigation arise out of the financial difficulties of defendant Optique du Monde, Ltd. ("Optique"), a Delaware corporation formerly doing business in Connecticut. At about the time this complaint was filed, Optique filed a petition in bankruptcy in the United States District Court for the District of Connecticut, staying all proceedings against it. All of the relevant occurrences leading to the filing of this action preceded the Optique bankruptcy petition.

 Optique's former business included the purchase and redistribution of eyewear. In connection with this aspect of its business, by June 6, 1979 Optique had become indebted to certain eyewear manufacturers located in France in the amount of approximately $ 2,000,000 ("the Debt").

 Plaintiff Coface is an agency of the Government of the Republic of France, with an office in Paris, France. Coface is responsible for promoting foreign trade, and to that end insures the receivables of certain French manufacturers. Apparently as a result of such a relationship with Optique's French creditors, Coface acquired their interests in the Debt owed by Optique.

 Defendant Norman Edidin is a principal shareholder of Optique, who resides and maintains a place of business solely within the Northern District of Illinois. Edidin Associates is a limited partnership also located solely within the Northern District of Illinois.

 In order to facilitate Optique's payment of its debt to Coface, Coface, Optique and the Edidins entered into an agreement on June 6, 1979, the significant provisions of which are here summarized:

 (1) a schedule was drawn up whereby Optique agreed to repay the Debt to Coface in monthly installments of $ 100,000;

 (2) Coface agreed to insure the receivables of the French manufacturers for eyewear supplied to Optique in the future up to an outstanding balance of $ 220,000 ("New Orders"). Optique was to make payment on New Orders within 60 days of shipment; and

 (3) the Edidins signed the agreement as guarantors of Optique's obligations to pay the Debt and to pay for New Orders, up to a maximum combined balance of $ 600,000.

 On January 2, 1980, the parties amended the agreement, essentially increasing Optique's monthly payments on the Debt to $ 150,000, increasing Optique's credit on New Orders insured by Coface to $ 450,000, and increasing the Edidins' exposure as guarantors to a maximum of $ 830,000.

 On March 26, 1980, the parties executed a new agreement ("Agreement"), drafted by Coface, which is the subject of the disputes here. The preamble to the Agreement acknowledges the existence of the June 6, 1979 Agreement, as amended on January 2, 1980, and recites that "rather than enter into a secondary amendatory agreement all parties hereto have agreed to execute a new agreement containing the latest terms and conditions agreed to between them." The Agreement acknowledges that, as a result of prior payments from Optique to Coface, the amount of the Debt had been reduced to approximately $ 1,500,000, and sets forth a revised payment schedule, with $ 25,000 due on the 15th of each month from March 1980 through June 1980, and $ 100,000 due on the 15th of each month from July 1980 until satisfaction of the Debt, with interest, in September 1981. The provisions governing New Orders and the liability of the Edidins as guarantors are virtually identical to corresponding provisions in the prior agreement, as amended.

 The Agreement contains two additional procedural provisions relevant to the instant motion. Paragraph 11 provides that the "Agreement is made in the State of New York and shall be governed by and construed and interpreted in accordance with the laws of the State of New York." And Paragraph 12 provides in pertinent part that Optique and the Edidins "consent to the jurisdiction of the State and Federal courts sitting in New York in any action arising out of or connected in any way with this Agreement ...."

 On April 4, 1980, Coface gave notice to Optique and the Edidins, pursuant to the "notice of default" provisions of the Agreement, that Optique had failed to make payment within 60 days of shipment of a New Order.

 On April 23, 1980, Coface filed its complaint, alleging, inter alia :

 (1) that Optique has made no payment on the Debt after the $ 25,000 payment due March 15, 1980;

 (2) that Optique has failed to make payments for certain New Orders within 60 days of shipment, and that the Edidins have failed to cure the default after receipt of notice; and

 (3) that Optique and the Edidins entered into the Agreement knowing that Optique was unable to make the requisite payments on the Debt and for New Orders, and failed to advise Coface of such.

 Counts One and Two of the complaint seek damages from Optique and the Edidins, respectively, for breach of the Agreement. Count Three of the complaint seeks damages from both Optique and the Edidins, apparently on a fraud theory.

 DISCUSSION

 I. Motion to Dismiss Count Two for Failure to State a Claim

 Count Two of the complaint alleges breach of contract by the Edidins for failure to cure, after receipt of notice, the default of Optique as to payments within 60 days of shipment of New Orders. *fn1" In support of their motion, the Edidins argue that Optique could not be in default until 60 days after shipment; that the Agreement was executed on March 26, 1980; that therefore no payments could be due until at least 60 days therefrom, or May 26; and that therefore Optique could not have been in default when notice was sent (April 4) or when the complaint was filed (April 23). In response, Coface has contended that the New Orders sued upon were delivered under the prior agreements and that 60 days had in fact run since shipment without payment by Optique; that the Agreement, by reference to the prior agreements, incorporates Optique's obligations to pay for New Orders under the prior agreements; and that a reference in the preamble of the Agreement purportedly defining New Orders as orders by Optique during the period that the Debt is being repaid, coupled with the recognition in Paragraph 2 that payments against the Debt commenced in September 1979, establish that, under the Agreement, Optique's obligation of payment within 60 days of shipment of New Orders applies to New Orders predating the Agreement as well as those which were to follow it. The Edidins in their reply argue that the preamble provision, quoted above, which recites that the parties have chosen to execute a new Agreement rather than again amending the prior agreements, precludes any interpretation that obligations under the prior agreements are incorporated into the Agreement; and that the provision of the Agreement, setting forth Coface's insurance of Optique's credit for New Orders and Optique's obligation to pay within 60 days of shipment, is prefaced with the phrase "(from) the date hereof," precluding any interpretation that the provision applies to preexisting New Orders.

 The problem with the Edidins' argument is that it proves too much. If the Agreement does not incorporate by reference any aspect of the prior agreements, and if Optique's obligation to pay for New Orders within 60 days of shipment applies only to post-Agreement New Orders, then Coface has not only waived its right to payment within 60 days for pre-March 26, 1980 New Orders, but has also forfeited its right to any payment for such New Orders. In other words, if the Agreement constitutes the sole contract and only requires payment for New Orders "from the date hereof," then there is no requirement of payment for pre-Agreement New Orders, a result which is at least arguably an unlikely measure of the true intent of the parties, especially since the Agreement does not include any reference to Coface's relinquishment of entitlement to such payments.

 The Edidins argue that the prior agreements, as parol evidence, cannot be considered because the Agreement clearly reflects the intent of the parties. However, the Court cannot agree with the Edidins that the Agreement unambiguously supports their construction. A provision in the preamble to the Agreement makes specific reference to the prior agreements. The subsequent provision, noting that the parties have chosen to execute a new Agreement rather than re-amending the prior agreements, does not necessarily preclude a construction that the Agreement is to govern prospectively without voiding preexisting obligations not addressed in the Agreement. A similar interpretation is not implausible as to Paragraph 6, governing New Orders after March 26, 1980, especially in light of the provision in the preamble recognizing the existence of New Orders prior to March 26, 1980.

 Of course, the Court here is not suggesting the superiority of either party's construction of the Agreement, but merely that the Edidin's interpretation is not, as a matter of law, exclusive. The Court concludes that, as to the contract claim regarding New Orders, the Edidins have not demonstrated that Coface "can prove no set of facts in support of (its) claim which would entitle (it) to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-102, 2 L. ...


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