The opinion of the court was delivered by: Freeh, District Judge.
Plaintiff Lanvin, Inc. ("Lanvin") and third-party defendant
Lanvin Parfums, S.A. ("Lanvin Parfums") have moved this Court for
summary judgment on all claims asserted by or against Lanvin in
this action. For the reasons stated at oral argument on October
21, 1991 and below, the motion for summary judgment is denied.
In 1981, Lanvin, exclusive licensee of various French perfumes,
granted the predecessor of defendant Colonia, Inc. ("Colonia")
the exclusive right to use Lanvin's trademarks and to manufacture
and distribute Lanvin products in the United States. (Motion at
6-7). In December 1983, Colonia succeeded to its predecessor's
rights and obligations under both the License and Supply
Agreements with Lanvin. (Id.).
Under the terms of the License Agreement, Colonia and its
distributors are prohibited from selling Lanvin products "under
such circumstances that the resale of those [products] outside of
[the United States] may reasonably be expected to result . . ."
(Motion at 8). After discovering quantities of Lanvin products
traceable to Colonia outside the United States and conducting an
audit of Colonia's books that indicated sales of Lanvin products
not previously reported (Id. at 10-18), Lanvin unilaterally
terminated the agreement with Colonia. (Id. at 18) (in view of
its findings, Lanvin "determined not to permit Colonia to invoke
the 60-day notice and cure period provided in . . . the License
Agreement."). Lanvin also initiated this action, seeking a
declaratory judgment that Colonia had breached the agreements and
claiming damages in excess of $2,000,000.
Colonia counterclaimed against Lanvin, arguing that Lanvin
breached the License and Supply Agreements by (1) failing to
provide Colonia with the requisite sixty-days notice and
opportunity to cure the alleged breach; (2) selling Lanvin
products under such circumstances that Lanvin should have
reasonably expected that the products would be exported to the
United States; (3) failing to provide Colonia with the fragrance
"essence" required to manufacture new products; and (4)
wrongfully terminating the two agreements. Colonia also brought a
third-party complaint against Lanvin's parent company, Lanvin
Parfums, claiming that Lanvin Parfums should guaranty any
liability Lanvin may have to Colonia. (Id. at 3-4).
Pursuant to Fed.R.Civ.P. 65, Colonia moved for a temporary
restraining order and preliminary injunction to prevent Lanvin
and Lanvin Parfums from allowing another party to manufacture and
distribute Lanvin products in the United States. Colonia also
sought to protect its right to receive fragrance essence in time
to meet orders for the 1990 Christmas season.*fn1 After a
three-day evidentiary hearing, the Court denied Colonia's request
for an injunction, concluding that Colonia had not proved either
irreparable harm or a substantial likelihood of success on the
merits. (June 1990 Order and Opinion, 739 F. Supp. 182, 185).
Lanvin has now moved for summary judgment, claiming that the
evidence adduced at the preliminary injunction hearing supports a
ruling in its favor. Specifically, Lanvin claims that (1) the
undisputed documentary evidence of discrepancies between
Colonia's reported sales and actual sales of Lanvin products
justifies Lanvin's termination of the License and Supply
Agreements; (2) Lanvin was justified in refusing to provide
Colonia with an opportunity to cure the alleged breach; (3)
Colonia's demands for injunctive relief should be dismissed
because Colonia failed to demonstrate irreparable harm; and (4)
Colonia failed to raise issues of fact regarding its claim that
Lanvin permitted its products to be transshipped into the United
States. (Motion at 3-5).
Colonia opposes the motion for summary judgment, claiming that
(1) material issues of fact remain in dispute; (2) Colonia has
been denied the opportunity to take discovery on these issues;
and (3) in any event, Lanvin failed to comply with the notice
requirements under the agreements. (Opposition at 2).
Fed.R.Civ.P. 56 provides that summary judgment is only
appropriate where "there is no genuine issue as to any material
fact and . . . the moving party is entitled to a judgment as a
matter of law." In determining motions for summary judgment, the
Court must view the evidence in the light most favorable to the
party opposing the motion — in this case, Colonia. United States
v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8
L.Ed.2d 176 (1962) (per curiam). Summary judgment is not
appropriate, however, when issues regarding
a party's intent are raised. See Westhemeco Ltd. v. New
Hampshire Ins. Co., 484 F. Supp. 1158, 1162-63 (S.D.N.Y. 1980).
Contrary to Lanvin's claims, it is not clear that it was
"justified" in terminating the License and Supply Agreements, or
in failing to give Colonia the requisite notice of default under
those agreements. The contract language regarding "transshipping"
outside the U.S. is ambiguous and merely states that Colonia and
its distributors must refrain from selling Lanvin products under
circumstances that would "reasonably be expected to result" in
transshipping. (June 1990 Opinion and Order at 185). As Colonia's
3(g) statement indicates, questions of fact arise whether Colonia
or its distributors had any reason to believe transshipping was
probable, and whether Colonia knew of any of the instances of
transshipping alleged by Lanvin. Moreover, Colonia has come
forward with an explanation for the differing sales figures
discovered by Lanvin during its audit. (Opposition at 16-23).
Contrary to Lanvin's claims, evidence of contradictory sales
reports and Lanvin products being sold outside the United States
does not, standing alone, support a finding that Colonia breached
the License Agreement.
In addition, Colonia may have a legitimate claim that by
failing to comply with the notice requirements under the
agreements, Lanvin breached their agreement. Section 22(a)(i) of
the License Agreement specifically states that a party may
terminate that agreement if the other party is in default and
"such default continues for a period of sixty (60) days after
notice to the other party." (Opposition at 66). It is undisputed
that Lanvin notified Colonia of its "breach" and terminated the
agreements simultaneously. Lanvin argues that Colonia's breach
went to the "essence" of the parties' agreement and thus was
incapable of cure. (Motion at 34). Colonia disputes that
assertion and states that, had it been notified, it could have
purchased the goods that had been found in storage in Europe and
elsewhere and could have used registration numbers on its
products to trace the source of the transshipped goods and then
acted to prevent such transshipping in the future.*fn2
(Opposition at 69-70). Despite the accounting inconsistencies,
there is little evidence that Colonia knowingly and willfully
failed to perform under the agreement. In any event, evaluating
Colonia's conduct and intent requires a factual analysis, which
is inappropriate here. Lanvin is not entitled to judgment as a
matter of law on the notice issue.
Lanvin argues that summary judgment is appropriate because a
"testimonial hearing, with cross-examination" has already been
had on "all the issues which form the basis for Lanvin's
motion." (Motion at 29). However, the Court's earlier finding
that Colonia was unlikely to succeed on the merits should not
foreclose Colonia from proceeding to trial. American
International Group, Inc. v. London American International Corp.
Ltd., 664 F.2d 348, 351 (2d Cir. 1981) ("[I]t remains true that
summary judgment is improper when the court merely believes that
the opposing party is unlikely to prevail on the merits after
trial."). Although evidence was introduced during the three-day
preliminary injunction hearing, the purpose of that hearing was
to evaluate Colonia's entitlement to injunctive relief, not
Lanvin's right to judgment on the merits. In determining a motion
for summary judgment, we may consider the Court's findings of
fact and conclusions of law in a prior motion for preliminary
injunction. However, those earlier findings are not binding,
particularly where, as here, hearsay evidence was introduced at
the preliminary injunction hearing but would not be admissible in
the summary judgment context. See University of Texas v.
Camenisch, 451 U.S. 390, 395, ...