were hired as independent contractors. Mone, Sawyer's national
sales manager in 1987 and part of 1988, was responsible for
hiring and supervising sales representatives for the company.
Transcript ("Tr.") 8-9.
As the sole proprietor of MPM, Pincus was primarily in the
business of selling women's apparel at the time and maintained
his own showroom in New York City. Tr. 3. He contracted with
Sawyer in March and then again in November of 1987 to be the
exclusive sales representative for ladies outerwear, with MPM
having the "exclusive sales agency rights to the Sawyer line of
ladies' coats, jackets and skirts." Tr. 6, 67, and Stipulated
Exh. 1. By the March and November contracts, the duration of
Pincus' exclusive agency was established through 1988.
In addition to acting as Sawyer's sales manager, Mone
conceived of and designed a leather jacket and coat line for
men. Tr. 11. He developed this line for Sawyer in late 1987,
although the company was primarily in the shearling business
prior to that time. Contemporaneously, Sawyer was selling the
men's leather jacket line, recut to fit women, its first
efforts to develop a women's leather jacket line. Tr. 12.
Although the line was limited, Pincus was expected to sell the
women's line of leather coats as per explicit terms of
On or about June 6, 1988, Mone had a conversation with
Pincus, in which Mone represented his intent to leave Sawyer in
order set up his own company. Mone's desire was to sell his own
designs of ladies' leatherware. Tr. 51-52. At that time, Pincus
expressed some interest in working for Mone. Tr. 52, 53. During
July through August, Pincus and Mone continued to have further
discussions about the possibility of Pincus' representing
Mone's company, selling a ladies' leather line. Tr. 53-54. By
August 1988, the two had determined certain basic terms upon
which Pincus could represent Mone's new company — "Silverado
Leather Co., Inc. ("Silverado")." Tr. 54. After Mone's
departure from Sawyer, Paul Deutschman took over Mone's
managerial position. Tr. 18.
On August 15, 1988, Pincus entered into a contract with
Sawyer to last through 1989. That contract, in pertinent part,
states that Pincus was to "act as [its] exclusive selling
representative in the continental United States including
Alaska for the Sawyer coat Division line of Ladies Coats."
Stipulated Exh. 3; Tr. 88. The coat division included leathers
as well as shearling products. That contract further provided
that commissions were to be paid "in the amount of 10% on net
dollar value of all merchandise shipped (less returns in any
one month)." Stipulated Exh. 3. Also, "[o]rders accepted by
Sawyer for this line shall be credited to the MPM account
regardless of where the order is written or with whom it is
placed, [and that] [n]o commission [was to be paid] on off
price or close out sales unless negotiated in advance for each
transaction," was provided for within that contract. Stipulated
On August 18, 1988, Pincus was invited by Mone to meet, have
drinks, and view some of the leather jackets that he had
produced. After seeing the models, Pincus decided to represent
Silverado, signing contract to represent it on September 1,
1988. Tr. 18, 55-56. Upon learning that Pincus was to represent
Silverado in leathers, Sawyer's President and Chief Executive
Officer Milton Dranow called Pincus to say that because Pincus
undertook to sell a competitive line, "he was in a conflict of
interest" and that "[Dranow] wanted the samples out of his
[Pincus'] place [showroom] and [ ] didn't want him in any way
to be representative of Sawyer merchandise." Tr. 163.
Dranow committed Sawyer to honoring the 1988 contract through
to December 31, 1988, however, the Sawyer samples were removed
from Pincus' showroom and Pincus was left to sell shearlings
through Sawyer's printed literature alone. Tr. 26-29, 165-167.
In addition, Sawyer contracted with Ressler Enterprises
("Ressler"), whereby Ressler was to act as Sawyer's exclusive
ladies shearling coat representative during 1989. Both MPM and
claim breaches of the 1988 and 1989 contracts. At the point of
trial, Pincus was represented by Mone's counsel and Mone was
paying the attorneys' fees for the action commenced by Pincus
Pincus now seeks certain commission payments or remuneration
for sales that he procured after the Sawyer merchandise was
removed from MPM's showroom, and for sales promoted by him
during the 1988 contract. In addition, Pincus alleges that the
1989 contract was breached by Sawyer and that he is due all
commissions that he could have made for that year. Sawyer
counters by claiming that Pincus was paid all that was due him
on the 1988 contract; that Sawyer respected the integrity of
that contract up until December 31, 1988, that the 1989
contract was mutually rescinded, that purported damages on the
1989 contract are too speculative to merit; and, that, in any
event, Pincus induced by fraud the signing of the 1989 contract
and thus is not due any remuneration.
I. 1988 Contract
It is axiomatic that in New York, an exclusive agency creates
an implied promise of the agent to use his good faith, best
efforts to bring about the result sought by the agency.
Wood v. Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917), reh.
denied, 222 N.Y. 643, 118 N.E. 1082 (1918); Stendig, Inc. v.
Thom Rock Realty Co., 163 A.D.2d 46, 558 N.Y.S.2d 917 (1st
Dep't 1990). Similarly, implicit in all contracts entered
between Sawyer and Pincus was that Pincus would employ his best
efforts to sell Sawyer products. This precludes any possibility
for the sale of goods competing with the Sawyer line. Thus
Pincus was forbidden by his exclusive agency from entering into
contracts in conflict with Sawyer. Mone's goods were obviously
competing with Sawyer's products.
Pincus maintains that Mone's leather line was not in
competition with Sawyer's. However, Pincus was selling for
Silverado merchandise that Mone developed while in Sawyer's
employ. Tr. 11. Specifically, Mone developed a line of men's
leathers for Sawyer. Those leathers were reproportioned to fit
women. Pincus was employed to and did sell these unisex designs
in the women's apparel market. Tr. 12, 13, 140. However,
because Sawyer recut the mens' jackets to fit women, Pincus
asserts that such does not constitute a line of women's wear
Pincus' position that Sawyer was never in the business of
selling ladies leathers is untenable. Although Sawyer was
selling unisex leathers, sales procured by Pincus of unisex
leathers were credited him and the commissions paid him were
delineated as ladies leatherware sales. Moreover, Sawyer's
efforts to sell a ladies leather line arose prior to Mone's
abandonment. Apparently, Mone took the line that he produced
for Sawyer, while in its employ, to Silverado, thus undermining
Sawyer's efforts to enter the women's market for leathers.
Pincus then signed on with Silverado in direct competition with
Pincus maintains, however, that his taking on a competing
line of coats is not inconsistent with his duties to Sawyer. I
disagree. A manufacturer's representative could take on a
competing line only where the contract is not for an exclusive
agency. See Raycarr Sales Corp. v. Herman Rynveld's Son Corp.,
147 N.Y.S.2d 425 (Sup.Ct.N.Y.Co. 1955) rev'd on other grounds,
1 A.D.2d 952, 150 N.Y.S.2d 619 (1st Dep't 1956). Pincus relied
on Raycarr for the proposition that he could well serve Sawyer
even while representing Silverado. However, Pincus overlooks
the fact that his was an exclusive agency relationship with
Sawyer. Clearly, it was improper for Pincus as Sawyer's
representative to take on a competing line of clothing thus
violating his good faith, best efforts obligation to the
Finally, Pincus seeks damages under the 1988 contract for
sales procured by Pincus and not credited him after his
confrontation with Dranow at which time he ordered all Sawyer
merchandise be removed from Pincus' showroom. These damages
represent Pincus' estimate of additional
sales beyond all those sales booked, without any supporting
evidence that the sales could have been made or, that Sawyer
had the capacity to manufacture the product necessary to fill
the sales orders if they could have been obtained. Indeed, such
estimations of damages are purely speculative.
II. 1989 Contract
A contract is unenforceable if it was induced by wrongful
non-disclosure. Westbury Small Business Corp. v. Ballarine,
128 Misc.2d 469, 489 N.Y.S.2d 815, 821-22 (Sup.Ct. Nassau County
1985), aff'd, 125 A.D.2d 462, 509 N.Y.S.2d 569 (2d Dep't 1986).
Moreover, "[f]raud may consist of `the intentional suppression
of the truth'". Stevenson Equipment, Inc. v. Chemig Constr.
Corp., 170 A.D.2d 769, 565 N.Y.S.2d 318, 320 (3d Dep't 1991)
(citations omitted). "Under New York law, omissions of material
fact may rise to a level constituting fraud and serve as a
basis for action for money damages." Aaron Ferer & Sons Ltd. v.
Chase Manhattan Bank, Nat. Assoc., 731 F.2d 112, 123 (2d Cir.
1984). During negotiation of a business transaction, a duty to
disclose arises where "one party possesses superior knowledge,
not readily available to the other, and knows that the other is
acting on the basis of mistaken knowledge." Id. (citations
omitted). Likewise, silence may form the basis of actionable
fraud where there is a duty to speak. Westbury Small Business
Corp. v. Ballarine, 489 N.Y.S.2d at 821 (citing Donovan v.
Aeolian Co., 270 N.Y. 267, 200 N.E. 815 (1936)).
In the case at bar Pincus had a duty to affirmatively
disclose his intent to sell Silverado leathers. Instead, Pincus
evaded disclosure of his intent to sell Mone's product while
conducting negotiations with Sawyer on the 1989 contract.
Specifically, just prior to signing the 1989 contract when
Pincus was asked directly whether he was negotiating with Mone
to sell his leathers, Pincus replied: "I did not answer yes or
no." Tr. 60-62. Pincus' fraudulent conduct is further evidenced
in the comparison between the 1988 and 1989 contracts. With
respect to describing Sawyer goods in the 1988 contract, Pincus
named himself the exclusive Sawyer agent for "Sawyer Coat
Division, line of ladies coats, jackets and skirts." Stipulated
Exh. 2. In 1989, Pincus changed the terms, naming himself the
agent solely for Sawyer coat division line of ladies coats.
Stipulated Exh. 3. Relying on the fact that he omitted
reference to "jackets and skirts" in that contract, Pincus
claims that he had no further duty beyond selling Sawyer's
shearlings and no further duty to disclose his intent to sell
a competing line of leathers.
A failure by Pincus to affirmatively state that he would no
longer sell Sawyer's leathers constitutes a fraud in the
inducement of contract. Silently removing certain terms from
the 1989 contract is no substitute for an affirmative
statement. Pincus' contention that Sawyer had no ladies leather
line, based on the fact that the line was merely in its
germinating stages and developed by recutting and/or hemming
the men's leather, is of no moment. By intentionally choosing
to evade direct questions regarding new loyalty to Silverado,
Pincus omitted to disclose facts integral to his obligation
under contract with Sawyer. This dishonesty by omission cannot
be condoned here. The 1989 contract is a nullity and void.
Furthermore, Pincus has produced nothing more to base his claim
for commissions under the 1989 contract and I find that
Sawyer's termination of the 1989 was proper.
III. Fee Shifting
Under New York Labor Law, "an award of reasonable attorney's
fees, court costs, and disbursements" must be awarded to the
prevailing party in a civil action for damages. N.Y. Labor L.
§ 191-c subd. 3 (McKinney Supp. 1991). This statute had not
become effective until after the 1988 contract was entered, and
is thus applicable only to the 1989 contract. The evidence at
trial established that Pincus' claims with respect to the 1989
contract are without merit. As the prevailing party, therefore,
Sawyer "shall be entitled to reasonable attorney's
fees, court costs, and disbursements." Id.
For the foregoing reasons, Pincus' claims for various
commissions are deemed meritless and the complaint is dismissed
in its entirety. This matter is hereby referred to Magistrate
Judge Katz to determine the amount of fees, costs, and
disbursements to be awarded Sawyer, including the apportionment
of attorney time between the two contracts that are the subject
of this litigation.
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