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DALOW INDUS. v. JORDACHE ENTERPRISES

April 7, 1986

DALOW INDUSTRIES, INC., Plaintiff,
v.
JORDACHE ENTERPRISES, INC., ROLO MANUFACTURING CO., INC., and GLENN-MITCHELL ASSOCIATES, INC., Defendants



The opinion of the court was delivered by: KNAPP

MEMORANDUM AND ORDER WHITMAN KNAPP, U.S.D.J.

 Defendants Rolo Manufacturing Company ("Rolo") and Glenn-Mitchell Associates, Inc. ("Glenn-Mitchell") move to dismiss the complaint on the ground that the issues there presented have been resolved in their favor by a prior proceeding. For reasons which follow, we deny the motion.

 Background

 Plaintiff Dalow Industries, Inc. ("Dalow") manufactures jewelry. In 1981 it acquired an exclusive license to use the trademarked name and fashion horse design owned by Jordache Enterprises, Inc. ("Jordache") on "jewelry of precious and semi-precious metals," including "karat gold, gold filled, gold plate, and sterling silver." Pursuant to this contract, Dalow manufactured expensive, 14-karat gold jewelry and promoted it with a costly advertising campaign.

 About a year later, Jordache granted to Rolo, which also manufactures jewelry, the right to use the Jordache name and fashion design on

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

 Pursuant to this license, Rolo and Glenn-Mitchell, its national sales agent, manufactured costume jewelry which was gold in color. It was called "basic" or "fashion" gold. They sold it for a substantially lower price than the genuine gold items made by Dalow. They did not mount an advertising campaign but nevertheless achieved huge success. Dalow's sales, in contrast, were ruinous.

 Dalow consequently brought suit against Jordache, Rolo and Glenn-Mitchell. It charged all defendants with unfair competition, false description of goods and false representation. It in addition charged Rolo and Glenn-Mitchell with tortiously interfering with its contract with Jordache.

 Jordache moved to compel arbitration pursuant to an arbitration clause contained in its contract with Dalow. We granted that motion. Both parties asserted claims and counterclaims in the arbitration, which was lengthy and which fills about 1700 transcript pages. Rolo and Glenn-Mitchell, not being parties to the Dalow-Jordache contract, did not participate in the arbitration. However, it appears that they made their representatives available as witnesses to both sides.

 By a six paragraph award dated February 13, 1985, the arbitrators unanimously declared the Dalow-Jordache contract terminated. (Par. 1). They directed Dalow to pay to Jordache $ 145,000 (Par. 2) as well as the arbitrators' compensation (Par. 4) and the administrative fees of the American Arbitration Association. (Par. 5) They denied all other claims and counterclaims "in their entirety" (Par. 3) and stated that the award was "in full settlement" of all claims and counterclaims submitted to them. (Par. 6) They gave no reasons for their disposition and made no findings of fact or conclusions of law. The amount they ordered Dalow to pay was far less than the approximately $ 700,000 sought by Jordache, and they awarded to Dalow no portion of the $ 11.5 million for which it had counterclaimed.

 By Memorandum and Order dated October 30, 1985, we granted Jordache's motion to dismiss the complaint as to it on the ground that the arbitration precluded litigation before us. We held that the arbitrators' award in full settlement of all claims and counterclaims was necessarily an adjudication of all claims presented to them. We ruled that since Dalow's counterclaims in the arbitration were essentially identical to its claims before us, the award should be given res judicata effect.

 Rolo and Glenn-Mitchell now argue that the arbitration also disposed of the claims asserted by Dalow against them. They base their argument on the doctrines of res judicata and collateral estoppel.

 Discussion

 Res judicata, or claim preclusion, treats a judgment rendered by a court of competent jurisdiction as the "'full measure of relief to be accorded between the same parties on the same cause of action.'" Murphy v. Gallagher (2d Cir. 1985) 761 F.2d 878, 879 (citation omitted). It applies to ...


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