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L.G.B. INC. v. GITANO GROUP

July 1, 1991

L.G.B. INC., PLAINTIFF,
v.
THE GITANO GROUP, INC., G.V. GITANO, INC. AND G.V. LICENSING, INC., DEFENDANTS.



The opinion of the court was delivered by: Whitman Knapp, District Judge.

OPINION & ORDER

By Opinion & Order dated May 17, 769 F. Supp. 1236, we denied defendant G.V. Licensing, Inc.'s ("Licensing") preliminary injunction application, and reserved decision both on plaintiff's motion for summary judgment on its claim for a declaratory judgment establishing the exclusivity of its licenses, and on defendants' motion pursuant to Fed.R.Civ.P. 12(b)(6) which (1) sought dismissal of the entire amended complaint as against The Gitano Group ("Group"), which is Licensing's parent, and G.V. Gitano, Inc. ("G.V. Gitano"); and (2) sought dismissal as against all defendants of the first and second claims (those predicated on plaintiff's assertion that its licenses are exclusive); the third, fourth and fifth claims (based on allegations of trademark infringement and unfair competition); the fourteenth and fifteenth claims (based on theories, respectively, of common law fraud and negligent misrepresentation); and the sixteenth claim (based on intentional interference with contractual relations and prospective economic advantage).

For reasons that follow, we now grant plaintiff's motion for partial summary judgment, and grant in part and deny in part defendants' motion to dismiss the amended complaint.

The background of the litigation is set forth in our May 17 opinion, familiarity with which is assumed.

I. PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiff moves for summary judgment on its claim for a declaratory judgment establishing the exclusivity of its three licenses. Because we conclude that the agreements unambiguously evidence that the parties at the time of contracting intended the licenses to be exclusive, which intent is consistent with evidence of their subsequent conduct, the motion is granted.

A. Background

As noted in our May 17 opinion, plaintiff obtained its licenses from Murjani International Limited and its successor, Murjani Worldwide, B.V. (collectively, "Murjani"), pursuant to three agreements, each covering a different category of women's apparel. The first such agreement, dated May 18, 1984 covers swimwear and was, on November 15, 1984, expanded to include beachwear (the "Swimwear License"); the second, dated September 29, 1988, covers sweaters and coordinated sweater bottoms (the "Sweater License"); and the third, also dated September 29, covers performancewear and activewear, which include tennis, bicycle and warm-up suits (the "Activewear License").*fn1 On or about December 23, 1988, Murjani sold the Mark to defendant Licensing, along with its rights under all three licensing agreements.

The question of whether or not the licenses are exclusive arose soon after Licensing succeeded Murjani as licensor. According to the amended complaint:

    Since February 1989, various conversations and
  meetings have taken place between representatives
  from [plaintiff] and various Gitano entities. At
  those meetings, representatives of the defendants
  . . . advised [plaintiff's] representatives for
  the first time that, in their view, the license
  agreements were non-exclusive and that Gitano had
  the right, either directly itself or indirectly
  through other licensees, to use [the Mark] on
  ladies' swimwear, cover-ups, beachwear, sweaters,
  coordinated sweater bottoms, performance wear and
  activewear.

Am. Cmplt. ¶ 26

As our May 17 opinion noted, this question was discussed at a conference before us on September 12, 1989, shortly after this litigation was commenced and just prior to the start of the protracted but unsuccessful attempt at settlement. We then expressed our tentative conclusion that the three licenses seemed unambiguously exclusive.

In its motion to dismiss the amended complaint, Licensing contends, inter alia, that the licenses are unambiguously non-exclusive. Soon after the motion to dismiss was filed, plaintiff moved for summary judgment, contending that the licenses are unambiguously exclusive, and offered extrinsic evidence in an effort to demonstrate that Murjani had so intended them to be.

The extrinsic evidence offered by plaintiff included affidavits from several former Murjani employees who had participated in the negotiation, execution and/or monitoring of plaintiff's three licenses. These affiants include: Charles Cornwell, who, as vice president of Murjani's Licensing and International Operations, had negotiated the terms of the Swimwear License, and had executed it on Murjani's behalf; Hugh Docker, who, as Murjani's Design Manager, had been in charge of monitoring plaintiff's performance under the Swimwear License and who later was promoted to Vice President of Licensing Operations; Irene Narissi, who, as Murjani's Licensing Manager, participated in the negotiations for the Sweater and Activewear Licenses; and Helen Isaacson, who, as an account executive at Murjani, also was involved in the negotiations for those licenses. Each of their affidavits in various ways asserts that it is the present recollection of the affiant that it was Murjani's intention to make the particular license discussed by the affiant to confer an exclusive license. Cornwell Affid. ¶ 5; Docker Affid. ¶ 3; Narissi Affid. ¶ 4; Issacson February 21 Affid. ¶ 4. We conclude that such present recollection of past intent would be inadmissible at a trial and therefore should not be considered on this motion.*fn2 Cf. Lubrication & Maintenance, Inc. v. Union Resources Co. (S.D.N.Y. 1981) (Weinfeld, J.) 522 F. Supp. 1078, 1081 ("Determination of the intent of the parties at the time they entered into the contract is not governed by their unexpressed subjective views.")

However, the affidavit of each of the above-mentioned Murjani employees also asserts that Murjani's conduct with respect to the license under discussion was wholly consistent with such asserted intention. Thus, with respect to the Swimwear License, Cornwell and Docker both observed that during their employment Murjani never competed with plaintiff during the time it acted as licensor. Cornwell stated in his affidavit:

  In fact, during the period Murjani acted as
  licensor under the swimwear license while I was
  employed by Murjani, Murjani never manufactured
  or sold or licensed to a third party to
  manufacture or sell any such Licensed Items
  bearing [the Mark].

Cornwell Affid. ¶ 5; see Docker Affid. ¶ 3

B. Discussion

Each of the agreements provides that it is governed by New York law. Swimwear License ¶ 20.3; Sweater License ¶ 21.3; Activewear License ¶ 21.3 Under New York law, we first look to the written agreements to ascertain the parties' intent, limiting our inquiry to the words of the agreements so long as the agreements set forth the parties' intent clearly and unambiguously. See Nicholas Laboratories Ltd. v. Almay, Inc. (2d Cir. 1990) 900 F.2d 19, 20-21 (applying New York law). In discerning the parties' intent from the written agreements, we of course are guided by the fundamental principle that a reasonable and effective meaning be given to every one of the agreements' provisions. See, e.g., Rothenberg v. Lincoln Farm Camp, Inc. (2d Cir. 1985) 755 F.2d 1017, 1019 ("an interpretation that gives a reasonable and effective meaning to all the terms of a contract is generally preferred to one that leaves a part unreasonable or of no effect"). Bearing these principles in mind, we conclude that the agreements unambiguously evidence the parties' intent that the licenses be exclusive. We cannot conclude otherwise in light of the nearly identical language that appears in paragraph 4.8 of each agreement.

Paragraph 4.8 of the Swimwear License provides:

    4.8 Freedom to License. In the event of
  termination of this Agreement or the receipt by
  Murjani of a notice of termination from Licensee,
  Murjani shall be free to license to others the use
  of the Mark in connection with the manufacture and
  sale of Items in the Territory, but only if all
  advertising and sale of such Items produced
  pursuant to such third party agreements is
  prohibited until after the termination of this
  Agreement.

The Sweater and Activewear Licenses contain the same language in their respective paragraphs 4.8, but insert language that provides for a third event that would trigger Murjani's freedom to license to others. Thus, paragraph 4.8 of both the Sweater and Activewear Licenses is identical to that of the Swimwear License but for the insertion of the language italicized below:

    4.8 Freedom to License. In the event of
  termination of this Agreement or the receipt by
  Murjani of a notice of termination from Licensee,
  or in the event of Licensee's failure to given
  notice of its intention to renew in accordance
  herewith, Murjani shall be free to license to
  others the use of the Mark in connection with the
  manufacture and sale of Items in the Territory, but
  only if all advertising and sale of such Items
  produced pursuant to such third-party agreements is
  prohibited until after the termination of this
  Agreement.

In our view, this provision permits no reasonable interpretation but that Murjani agreed not to grant to any third party a license that would permit competition with the plaintiff during the time that the subject licenses were in effect. Were the three licenses intended — as Licensing asserts — to be nonexclusive, the provision would be wholly superfluous, a result contrary to the above-mentioned principle of contract construction that disfavors an interpretation that would render a provision meaningless. See, e.g., Two Guys from Harrison-N.Y., Inc. v. S.F.R. Realty Assoc. (1984) 63 N.Y.2d 396, 403, 482 N.Y.S.2d 465, 468, 472 N.E.2d 315, 318 ("In construing a contract, one of a court's goals is to avoid an interpretation that would leave contractual clauses meaningless.")

The exclusivity of the licenses is further supported by the following language which appears in each agreement and, inter alia, vests Licensing with ownership of plaintiff's designs:

¶ 8.6 (emphasis added) Pursuant to this provision, Murjani takes ownership of the very designs plaintiff is obligated to submit to it for approval, and is free to use those designs "in any manner it desires, provided that such use does not conflict with any rights granted [plaintiff] hereunder." If, as Licensing maintains, the parties intended the licenses to be non-exclusive, this provision would permit Licensing to authorize others, not only to compete with plaintiff, but to do so by using plaintiff's own designs. This would seem unlikely.*fn3

In opposition to plaintiff's motion, Licensing relies upon other provisions which — in the absence of the "Freedom to License" paragraph — might render the agreements ambiguous on the question of exclusivity.*fn4 However, none of these other provisions is rendered a nullity by our interpretation of the language of the "Freedom to License" paragraph.

The first such provision — and the one upon which Licensing primarily relies — reads:

  [Plaintiff] acknowledges that Murjani and its
  licensees may manufacture, distribute and sell
  Items which are the same as or similar to Items
  manufactured and sold by [plaintiff].*fn5

Sweater License ¶ 2.1; Activewear License ¶ 2.1 This provision indicates that Murjani (and others so authorized) may make and sell "Items" which are the same as "Items" manufactured and sold by plaintiff. Thus, Licensing contends, one can only conclude that the licenses are not exclusive. Licensing's contention proceeds from the assumption that the parties intended the term "Items" to include ...


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