The opinion of the court was delivered by: MOTLEY
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiff is a New York corporation wholly owned by Gulf & Western Industries, Inc. Bookthrift is a Simon & Schuster division of plaintiff. (Tr. 2).
Michael Shimkin ("Shimkin") was a founder and sole owner of Bookthrift, a consultant to Simon & Schuster and an officer of defendant Craftique Productions, Inc. ("Craftique"). Arthur Mills ("Mills") was president of Craftique. 442(7).
Defendant is a Connecticut corporation. Seventy-five percent of its stock is owned by Creative Marketing Group, Inc. ("Creative Marketing") (Tr. 457), a wholly-owned subsidiary of Curtis Publishing Company, Inc. ("Curtis") a holding company. (Tr. 457). The other twenty-five percent of its stock is at present the subject of a pre-judgment order of attachment obtained by Curtis in the United States District Court for the District of Connecticut. (Ex B to Merritt Aff). The shares representing this 25% interest are held by Arthur Mills, Craftique's former president. (Tr. 457).
Late in 1979, Craftique was formed by Creative Marketing and SRM, Inc., a corporation 50% of which was owned by Arthur Mills and 50% of which was owned by Michael Shimkin. (Tr. 508). Dr. Cory Servaas has been president of the Curtis Publishing Company ("Curtis") during all times relevant to this action. 592(14)-595(3). William Gardiner, served as vice president and secretary of the Curtis. He was also president of Creative Marketing and a director and vice president of the defendant. 499(24)-500(20). John W. Merritt became president of Craftique on or about October 27, 1980. 423(11).
A total of 19 books (the Works) are at issue in this case: six Norman Rockwell Blank Books, ten State Edition Blank Books, "The Elf Blank Book", "Baby's Own Book," and "A Family Tree". 34(16)-35(6). This litigation involves a disagreement over which of the parties may legally manufacture and sell the Works; in what markets the sales may be made; and the duration of any manufacturing and marketing rights arising out of a written contract between the parties which plaintiff claims has been breached by defendant, resulting in irreparable injury to plaintiff.
Plaintiff, Gulf & Western Corporation, brought this matter on by order to show cause for a temporary restraining order on Friday, January 30, 1981. On the same day, after hearing from both plaintiff and defendant, this court issued a temporary restraining order prohibiting defendant from selling, marketing, or disposing of the Works. The TRO was extended pending hearing and determination of the instant motion for preliminary injunction. Testimony was taken on February 11, 12, 17, 18, 19 and 23, 1981. Oral argument was heard on February 24, 1981. For the reasons given below, plaintiff's request for preliminary relief is granted.
The court finds that the sales and profits plaintiff would lose as a result of defendant's breach of the agreement between the parties would be difficult to ascertain. (Tr. 57-58, 82, 142-143, 151). The breach by defendant has resulted in a break in the continuity of sales to customers which plaintiff had established in the specialized market. (Tr. 56, 57, 150, 154). Plaintiff has also been prevented from approaching the largest prospective markets for the Works because of the disruption in its supply. (Tr. 56-57, 150, 157, 160, 220-21, 222, 229-30, 268-69).
Plaintiff's markets for the Works are such that one cannot anticipate the magnitude of the response until the product is actually offered for sale in those markets. (Tr. 57-58, 59). This is particularly true of the Premium and Special Sales Division of Simon & Schuster, which contacts large banks, corporations, and associations to sell books in large numbers to be offered as premiums or gifts in conjunction with various products and promotions. (Tr. 58, 59).
The court also finds that defendant's sales of the Works for the balance of the contract term would provide an inadequate basis for calculating plaintiff's damages. (Tr. 82). This is so because:
(a) With the exception of a $ 23,000 order for "A Family Tree" from Lillian Vernon, a customer from which plaintiff has already received large orders for one of the Works, defendant has only some $ 2,900 in orders for the Works. In contrast, plaintiff sold 316,271 copies of the Works from February to August, 1980. Def. Ex. k, page 3.
(b) Plaintiff has a considerably larger sales force than defendant and enjoys greater access to markets than defendant. (Tr. 58-59, 158-159, 208-209, 269-270, 432, 449-451). Plaintiff is well entrenched in those markets and has immediate entry into them. (Tr. 299-270).
(c) Defendant, until recently, had no sales organization. (Tr. 159, 433, 449). It has only recently approached independent sales organizations to market its products (Tr. 159, 432, 449) and does not enjoy Bookthrift's reputation as one of the largest and most successful distributors, or the reputation and resources of Simon & Schuster, of which Bookthrift is a division.
(d) In addition, Craftique has increased the suggested retail prices and the prices to its customers for the Works from those established by Bookthrift, which will lower the total number of sales of the Works and add to the difficulty plaintiff would have in calculating its lost profits. (Tr. 439, 464-465).
(e) Because Bookthrift has no way to determine the source of copies of books once shipped, it is likely to receive returns and issue credits for ...