The opinion of the court was delivered by: Edelstein, District Judge: Background
Battle Fowler, New York City, Betsy L. Anderson and W. Bruce
Johnson, of counsel, for Lanvin, Inc.
Fulbright Jaworski & Reavis McGrath, Marc S. Dreier, Donald
J. Lough, and Joyce Kanciper, of counsel, Felfe & Lynch, New
York City, Marius J. Jason, of counsel, for Colonia, Inc.
An Order to Show Cause was brought before this court
requesting a Temporary Restraining Order and a Preliminary
Injunction pursuant to Rule 65 of the Federal Rules of Civil
Procedure. The Order to Show Cause was returned unsigned and
instead, the court held a hearing on the Preliminary Injunction
issue. Defendant seeks to preliminarily enjoin plaintiff from
distributing its products without defendant, alleging that it
will suffer irreparable harm if the relief sought is denied.
For the reasons stated below, defendant has not met the
burden required to obtain a preliminary injunction. Accordingly
the defendant's motion is denied.
Plaintiff, Lanvin Inc., is a Delaware corporation with its
principal place of business located in New York, New York. It
is the exclusive licensee of the trademarks "Lanvin" and
"Arpege" for various fragrances and toiletry products (the
"Licensed Products") in the United States.
Third-Party Defendant, Lanvin Parfums S.A., is a French
corporation with its principal place of business located in
Paris, France. It owns the "Lanvin" and "Arpege" trademarks
referred to above. It and its affiliates manufacture fragrance
products and the essential oils used in such products, for
distribution through distributors and/or licensees worldwide.
Defendant, counterclaim plaintiff and third-party plaintiff,
Colonia, Inc. ("Colonia") is a Connecticut corporation with its
principal place of business located in Connecticut. Colonia is
in the business of manufacturing, marketing and distributing
various brands of fine fragrances.
On or about January 8, 1981, Lanvin Inc. entered into a
License Agreement (the "License Agreement") and a Supply
Agreement (the "Supply Agreement") with a predecessor of
Colonia. Pursuant to the terms of the two agreements, Lanvin
Inc. granted to that predecessor the exclusive rights to use
Lanvin's trademarks in connection with fragrances and
toiletries in the U.S. (the "Territory") from January 1, 1981
through November 30, 1995. License Agreement Arts. 1(a), 1(c),
1(d), 1(e), 2(b), 3. That party, for its part, agreed to
purchase fragrance essence from Lanvin to be used as the basis
for the manufacture of Licensed Products by that party in the
U.S. for distribution in the Territory. License Agreement Art.
13(c) at 19; Supply Agreement Art. 5.
In or about December 1983, Colonia succeeded to its
predecessor's rights and duties under the two agreements.
Lanvin Inc. commenced the instant action on August 8, 1989 by
filing a Complaint alleging that Colonia materially breached
the License Agreement by selling substantial quantities of
Lanvin's Licensed Products under such circumstances that
Colonia would have or should have reasonably expected that the
Licensed Products would be resold outside of the Territory.
Lanvin claimed damages of over $2 million.
Article 2(c) of the License Agreement provides that while
Colonia may utilize other distributors to distribute and sell
Licensed Products "in the Territory," Colonia "shall remain
primarily responsible and liable for the fulfillment of all its
obligations under the Agreement," and all such distributors
shall "undertake to take no action inconsistent with "the
obligations imposed on [Colonia] under this Agreement." Article
2(i) provides, in relevant part, that Colonia:
(i) . . . and its Distributors, if any, shall
refrain from selling Licensed Products to vendees
under such circumstances that the resale of those
Licensed Products outside of the Territory may
reasonably be expected to result and shall
cooperate fully with [Lanvin Inc.] and its
Affiliates and their Licensees to prevent or
reduce the likelihood of such resales. Any sale of
Licensed Products by [Colonia] or its Distributors
shall be deemed not for export outside the
Territory if the seller has in good faith no
reason to believe that export outside the
Territory of the Licensed Products sold is
On August 28, 1989 Colonia served an Answer and Counterclaims
denying Lanvin's allegation and counterclaiming for $5 million
in damages. For its First Counterclaim, Colonia alleged that
Lanvin had no right to terminate without first providing
Colonia with 60-days' notice and an opportunity to cure.
Colonia's Second Counterclaim alleges that Lanvin sold
substantial quantities of the Licensed Products under such
circumstances that Lanvin would have or should have reasonably
expected that the products would be exported into the
Territory. The Third Counterclaim alleges that Lanvin failed to
provide Colonia with new Licensed Products. The Fourth
Counterclaim alleges that Lanvin wrongfully terminated the
License and Supply Agreements.
On September 7, 1989, Colonia also served a third-party
complaint against Lanvin Parfums, S.A., claiming that company
should guaranty any liability Lanvin Inc. may have to Colonia.
The parties subsequently exchanged documents. No depositions
have yet been taken.
Colonia brought on the instant motion by Order to Show Cause
on February 28, 1990, requesting a Temporary Restraining Order
and a Preliminary Injunction pursuant to Rule 65 of the Federal
Rules of Civil Procedure. The Order to Show Cause was returned
unsigned and a three-day evidentiary hearing was held.
With its motion, Colonia served an Amended Answer and
Counterclaims, which is substantially similar to its original
Answer and Counterclaims served in August 1989 except that it
adds a Fifth Counterclaim alleging irreparable harm. Colonia
now demands, in addition to the $5 million in compensatory
damages and punitive damages requested, an injunction to
reestablish the License Agreement between Lanvin and Colonia,
and an injunction against Lanvin's distributing Lanvin
products, except through Colonia, until November 30, 1995. The
same injunctive demands are made in an Amended Third-Party
Complaint against Lanvin Parfums S.A.
Lanvin's position is that Colonia has not shown irreparable
harm; that Colonia is unlikely to succeed on its claims,
including its claim that the termination of Colonia was
wrongful; that Colonia has not presented serious questions
going to the merits; and that the balance of hardships does not
tip decidedly in Colonia's favor.
Colonia sells 20 different brand names of fragrances. These
include: Gucci, Camp Beverly Hills, Balmain, Charles Jourdan,
Maja, Pavlova, Ivoire, Vent Vert, Silences, L'Innocent, Jolie
Madame, Un Jour, Votre, Payot, Jenny, Replique, Tabac, Carrera,
Dallas, Jacomo, and 4711. Colonia's business grew from $12
million in sales in 1983 to $50 million in 1989.
Colonia's president and chief executive officer, Lawrence
Pesin, testified that the fragrance industry is characterized
by new promotional activity, with consumers responding to new
brands and the introduction of new products. Colonia's growth
was based on Colonia's introduction of two new brands from
Gucci and one from Camp Beverly Hills. Pesin further testified
that, consistent with the way the fragrance market works, all
of the profits Colonia has made since 1983 have been generated
by its new brands.
Pesin testified that Lanvin has not introduced a new brand
since its relationship with Colonia began in 1983. Because of
Colonia's introduction of new products, the proportion of its
overall sales represented by Lanvin has declined. Sales of
Lanvin products constituted approximately 10 percent of
Colonia's business in 1989.
One of the fragrances Colonia sells, 4711, is a famous
fragrance manufactured by Colonia's German parent corporation,
itself called "4711." In 1989 that company had $300 million in
revenues and eight manufacturing subsidiaries worldwide.
Another of the fragrances sold by Colonia, Gucci No. 3, a
prestige fragrance, was Colonia's biggest selling brand in
1989. Another Colonia fragrance, Jenny, started in 1989, is
also a prestige fragrance.
Following the termination by Lanvin, Colonia launched a new
fragrance called "Only," associated with the Spanish singer
Julio Iglesias. "Only" had a significant impact because it gave
Colonia entry and strength in stores that Colonia had been
attempting to grow in over the years. Although the fragrance
was not available until the last four months in 1989, it
contributed over 10 percent of all Colonia's sales in 1989.
Colonia also launched a "21 Club" fragrance in 1989.
Colonia is the exclusive licensee of Graceland Enterprises,
licensor for a perfume called "Moments," associated with Elvis
Presley's widow, Priscilla. Colonia intends to launch "Moments"
In or about July 1988, Colonia sent to Kapustin the "Colonia,
Inc. Sales Recap by Corporate Number," Plaintiff's exh. 16.
That document purports to show all Arpege sales made by Colonia
to its customers in the first six months of 1988, including the
comparative differences between 1988 and 1987.
In or about March 1989, Colonia provided Kapustin with
several additional sales documents for 1988. One was the
"Corporate Ranking by Gross Dollars," Plaintiff's exh. 14,
which purports to provide all the customers for all "Arpege
"-labelled products sold by Colonia in 1988. The document lists
a total of 1,288 customers. The customer with the largest total
purchases in 1988 was J.C. Penney, with purchases of
$774,691.10, constituting 17.2 percent of Colonia's total sales
of Arpege in 1988. Osco Drug, Inc., another retailer, was fifth
with $103,478. Page 27 of the documents indicates that the
1,288 customers listed account for 100 percent of Colonia's
Arpege sales in 1988, amounting to $4,503.592. Plaintiff's exh.
Another document Colonia sent to Lanvin, the "Product Ranking
By Gross Dollars/Arpege," Plaintiff's exh. 15, provides the
relative product rankings, by product number, for all the
different "Arpege"-labelled products sold by Colonia in 1988.
The fourth entry on page 1, Arpege Eau de Toilette 1-oz. spray,
carries product number 85199, with total sales of $334,625.
Colonia also sent Royalty Statements to Lanvin for every
quarter in 1988, and for December 1988 through February 1989.
Plaintiff's exhs. 17 and 18. The portion of sales reported in
the Royalty Statements that is attributable to sales of
Arpege-labelled products corresponds with the figures in the
"Corporate Ranking by Gross Dollars," plaintiff's exh. 14, and
the "Product Ranking By Gross Dollars," plaintiff's exh. 15.
In early 1989, Lanvin announced that it was going to be
purchased by Midland Bank. A director of Midland Bank, Leon
Bressler, became Lanvin's chairman and chief executive officer.
Also in early 1989, Lanvin announced that it was taking a more
aggressive stance with respect to unauthorized transshipments
("gray-marketing") of Lanvin's "Arpege" products. Plaintiff's
exh. 6. Prior to that time, Lanvin products manufactured by
Colonia had been found outside the Territory on several
occasions, and Lanvin revealed complaints from several of its
distributors regarding the products.
In September 1988, Lanvin sent to Colonia a letter enclosing
an advertisement from a British newspaper advertising Arpege
product allegedly "Imported from USA." Plaintiff's exh. 8 at 2.
The ad stated: "by special arrangement we can sell direct to
you — world famous guaranteed genuine designer perfume — the
real thing. No extra overheads, no middle men. Plaintiff's exh.
8 at 2. Lanvin told Colonia that Lanvin was "extremely
concerned by such an occurrence" and was:
. . under great pressure from our United Kingdom
retailers and distributor to solve the problem,
i.e. to stop what we consider to be parallel
imports from the United States. . . . [T]he