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DALOW INDUS. v. JORDACHE ENTERPRISES

October 30, 1985

DALOW INDUSTRIES, INC., Plaintiff,
v.
JORDACHE ENTERPRISES, INC., et al., Defendants



The opinion of the court was delivered by: KNAPP

MEMORANDUM & ORDER

 WHITMAN KNAPP, District Judge.

 Defendant Jordache moves to dismiss the second amended complaint on the ground, among others, that plaintiff is precluded from asserting its claims by a previous arbitration proceeding. *fn1" For reasons which follow, we grant the motion.

 BACKGROUND

 Plaintiff Dalow, a manufacturer of jewelry, has filed three complaints in this action stemming from disputes between it and Jordache under a license agreement. After it filed its first amended complaint, Jordache moved to compel arbitration based upon provisions contained in the agreement. We granted the motion and stayed this action. After the arbitration was held and an award in favor of Jordache rendered and confirmed by this Court, Dalow submitted a second amended complaint, which Jordache now seeks to dismiss.

 Underlying all the complaints is essentially one set of facts. Jordache is the registered trademark holder of the trade name "Jordache" as well as of a fashion design of a horse (the "Jordache marks" or "marks"). Jordache has granted licenses to about 35 different companies to use these marks on a variety of goods which it does not itself manufacture. These include jewelry. In 1981, Dalow become a Jordache licensee and obtained the exclusive right to use the Jordache marks on "jewelry of precious and semi-precious metals," including "karat gold, gold filled, gold plate, and sterling silver." Pursuant to this contract, it manufactured expensive, 14 karat gold jewelry, and undertook to promote it with a costly advertising campaign.

 About a year after this contract was signed, Jordache entered into a license agreement with defendant Rolo whereby Rolo acquired the right to use the Jordache marks on

 
fashion jewelry of metal, plastic, stone and any other material, exclusive of 'karat gold,' 'gold filled,' 'gold plate' and 'sterling silver'.

 Under this agreement, defendant Rolo and its national sales agent, defendant Glenn Mitchell, manufactured jewelry which was gold in color and which was described as "fashion gold" or "basic gold," but which was sold for substantially less than the genuine gold items created by Dalow. Rolo and Glenn Mitchell did not undertake to advertise their products, but nevertheless achieved huge sales success. Dalow's sales, on the other hand, were ruinous.

 Dalow contends that Rolo's license with Jordache impermissibly overlapped with its exclusive contract. It also claims that Rolo's great success was achieved only by virtue of "piggy-backing" onto the substantial promotional campaign Dalow had undertaken to market its genuine gold jewelry. In its first amended complaint (the subject of Jordache's motion to compel arbitration), it charged Jordache with unfair trade practices, false description of goods, antitrust violations, breach of contract, fraud, and abandonment of trademark by Jordache's indiscriminate practice of granting licenses. Its second amended complaint (submitted after the arbitration), contains a cause of action for false description of goods, false representation, unfair competition, and abandonment of trademark. *fn2"

 At the arbitration, Jordache charged Dalow with failing to pay royalties due under its license agreement and with failing to honor other provisions of the contract, including advising Jordache of the amount of inventory it held upon termination of the agreement, expending a specified amount on advertising the Jordache marks, and submitting to an audit of its records. Jordache sought approximately $700,000 in past royalties.

 In response, Dalow, which was represented at the arbitration by the extremely able counsel who continue to represent it before us, filed extensive affirmative defenses and counterclaims. These included the following:

 
5. It is [Dalow's] position that the [license agreement] is invalid and void and that, in any event, it was terminated . . . when [Jordache] entered into a conflicting Agreement with Rolo . . .
 
7. The agreement . . . is invalid and void because of [Jordache's] material misrepresentations as to the exclusivity of [Dalow's] license to use the Jordache trademarks on and in ...

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