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April 29, 1992

MARILYN MIGLIN, INC., Plaintiff, against GOTTEX INDUSTRIES, INC., and GOTTEX MODELS, LTD., Defendants. GOTTEX INDUSTRIES, INC., Plaintiff, - against - LEE MIGLIN, Defendant.


The opinion of the court was delivered by: JAMES C. FRANCIS IV




 In these two consolidated actions, each party has asserted against the other claims of breach of contract, fraud, and tortious interference with prospective economic advantage; they also seek recovery under various equitable theories. The plaintiff in the first action is Marilyn Miglin, Inc. ("Miglin"); the defendants in that action, Gottex Industries, Inc. and Gottex Models, Ltd. (collectively referred to as "Gottex"), have counterclaimed and, in the related action, have sued one of Miglin's directors, Lee Miglin, claiming breach of a personal guaranty, promissory estoppel, fraud, and tortious interference. The parties consented to my jurisdiction over the cases for all purposes including trial pursuant to 28 U.S.C § 636(c). Gottex has now moved for summary judgment, seeking dismissal of Miglin's claims against it pursuant to Rule 56(b) of the Federal Rules of Civil Procedure. For the reasons that follow, I grant the motion in part and deny it in part.


 The claims in this case arise from a failed attempt at cooperation between Gottex Industries, Inc. ("Gottex Industries") and Marilyn Miglin, Inc. ("Miglin"). Both are multi-million dollar corporations that are largely under family control. Both enjoy wide reputations for dealing in high-quality merchandise. Gottex Industries, a New York corporation, is the exclusive U.S. distributor of swimwear that is made and sold by Gottex Models, Ltd. ("Gottex Models"), an Israeli corporation. The president of Gottex Industries, Miriam Ruzow, is a daughter of the founders of Gottex Models. Miglin, an Illinois corporation, makes and sells fragrances and perfume. Its president is Marilyn Miglin, and her husband, Lee Miglin, is a shareholder and director. The parties dispute many of the details of their past relationship. The following account consists as fully as possible of uncontested facts, and I have noted where the parties' accounts differ. Additional facts and allegations appear below where relevant to the legal analysis.

 In 1986, Gottex Industries began to seek ways in which to expand the use of the Gottex name and trademark from swimwear to other product lines, including sun-care products. In late 1987, Gottex began negotiations with Manhattan Ice, Inc. ("Manhattan Ice"), a fragrance maker, to allow use of the Gottex trademark in connection with a new sun-care line. Gottex and Manhattan Ice signed a license agreement on September 15, 1988, but on November 4, 1988, Gottex advised Manhattan Ice of its intention to terminate the agreement because Manhattan Ice's October royalty payment had been returned for lack of sufficient funds. Shortly afterwards Manhattan Ice declared bankruptcy.

 Before the termination of Manhattan Ice, however, advertisements had been placed in national fashion publications to announce the introduction of the new sun-care line: Gottex Systeme Soleil. Gottex now sought a company to take the place of Manhattan Ice in bringing out the new products that had been publicized. Gottex learned of Miglin through Galland/Gunn, the licensing agent that earlier had introduced Gottex to Manhattan Ice. After some preliminary contact between Miglin and Manhattan Ice, Dennis MacFarlane, Miglin's executive vice president, met on January 20, 1987 with Ms. Ruzow and other Miglin and Gottex officers. Many of the claims in this case involve conflicting versions of the circumstances surrounding this meeting.

 Miglin claims that it and Gottex agreed in principle to all of the significant details of their relationship, so that any subsequent writing would be a mere "memorialization" of terms upon which the parties had already agreed. Gottex, however, contends that significant issues remained to be negotiated after the meeting and that the document produced subsequent to this meeting was merely a "proposed agreement." Miglin also claims that at this meeting Ms. Ruzow exaggerated how much Manhattan Ice had already accomplished in developing and marketing Systeme Soleil. Gottex contends that Miglin knew the extent of Manhattan Ice's progress from meetings with Manhattan Ice and Galland/Gunn prior to the meeting between Miglin and Gottex. Following the January 20 meeting and other contacts between the parties, a license agreement was drafted by lawyers for both companies. In essence, this agreement gave Miglin long-term use of the Gottex trademark with which to market Systeme Soleil. In return, Miglin would pay Gottex a 5% annual royalty payment, though royalties would be waived for the first year. Gottex never signed this agreement, despite continued redrafting of it to reflect ongoing discussions between the two corporations in February and March. Miglin contends, however, that Gottex gave repeated assurances of its readiness to sign the agreement.

 In early April, 1989, Miglin signed the agreement. It also satisfied Gottex's request that Lee Miglin personally guarantee a stated minimum royalty amount for each of the first five years of the agreement. Since the January meeting, Miglin had pressed ahead width formulating the new product, designing packaging, and creating a new marketing program. Miglin succeeded in shipping the new product in the spring of 1989 to four prominent department store chains, as agreed upon, although not by the April 1 delivery date specified in the draft license agreement.

 During this time the Miglin-Gottex relationship was characterized both by cooperation and by tension. On the one hand, as Gottex required, Miglin purchased release of the Gotten license from Manhattan Ice and also submitted its designs using the Gottex trademark to Ms. Ruzow for her approval. On the other hand, Gottex contends that it also required, as a condition for waiving the first-year royalty fee and then as a condition to executing the agreement at all, that Miglin settle any fee requests that Galland/Gunn would make to Gottex for having facilitated the licensing agreement with Miglin. Gottex also claims that Miglin defectively formulated and misbranded Systeme Soleil and that it failed to obtain the necessary liability insurance. For its part, Miglin claims that Gottex fell far short of providing the promised assistance in marketing and promoting Systeme Soleil.

 A breaking point appears to have been reached at the Gottex fashion show held on August 8, 1989. While Gottex allowed Miglin representatives to hand out Systeme Soleil samples, Miglin complains that Gottex did not even mention the new product in the show itself. Three weeks after the show, Lee Miglin terminated Miglin's relationship with Gottex, citing several such instances of Gottex's alleged lack of support. (Letter from Lee Miglin to Miriam Ruzow, of 8/30/89, Gottex's Exhibits to Memorandum in Support of Motion for Summary Judgment ("Gottex exhs.") at tab 47). On September 18, Mr. MacFarlane requested that Gottex reimburse Miglin for the expense of finished goods and other items that Miglin had paid for in connection with developing and marketing Systeme Soleil. (Letter from Dennis MacFarlane to Miriam Ruzow of 9/18/89, Miglin's Exhibits to Memorandum in Opposition to Motion for Summary Judgment ("Miglin exhs.") at tab 20). When Gottex refused, Miglin brought suit against Gottex Industries and Gottex Models in United States District Court for the Northern District of Illinois. Gottex counterclaimed on the basis that if there were an agreement between Gottex and Miglin, it was Miglin that had breached it.

 On April 6, 1990 the United States District Court for the Northern District of Illinois granted Gottex's motion to have the Miglin suit transferred to this court pursuant to 28 U.S.C. § 1404(a). Here it was consolidated with an action that Gottex had filed against Lee Miglin for breach of the guaranty to pay minimum royalties and for damages on the basis of claims of promissory estoppel, fraud, and tortious interference. On October 31, 1990, Judge David N. Edelstein, then presiding over the consolidated cases, denied Gottex's motion for dismissal. Subsequently, the cases were referred to me and Gottex made the instant motion for summary judgment, seeking dismissal of Miglin's claims.


 A. Law of the Case

 The Court must determine two preliminary questions before considering the merits of Gottex's motion for summary judgment. First, Miglin invokes the law of the case doctrine, arguing that I am precluded from considering Gottex's motion for summary judgment because of Judge Edelstein's order denying of Gottex's motion to dismiss the same claims. Miglin argues that Gottex's motion to dismiss should be considered a motion for summary judgment because Gottex submitted some evidence in support of it. This contention is meritless. When a party submits affidavits or other evidence in connection with a motion to dismiss, the court has two options: it may exclude the additional material and decide the motion on the basis of the complaint alone, or it may convert the motion to one for summary judgment and give all parties the opportunity to present supporting material. See Fonte v. Board of Managers of Continental Towers Condominium, 848 F.2d 24, 25 (2d Cir. 1988). Here it is clear that Judge Edelstein chose the first option. He denied Gottex's motion in a one-sentence order that gives no indication that he considered any evidence outside of the pleadings. Moreover, in the fourteen months between that order and the filing of the instant motion, the parties have expanded the record to the point that it now includes, by Miglin's estimate, "nearly 750 pages of exhibits," Pl.'s Sur-reply at 1. Thus it is particularly inapt for Miglin to contend, as it does repeatedly in its papers, that Judge Edelstein's order forecloses Gottex's motion.

 B. Personal Jurisdiction

 A second preliminary issue is raised by Gottex's claim that Miglin has failed to establish in personam jurisdiction over the Israeli corporation Gottex Models. The Second Circuit has held that until an evidentiary hearing or trial is held, a plaintiff need only make a prima facie showing that jurisdiction exists. Beacon Enterprises v. Menzies, 715 F.2d 757, 768 (2d Cir. 1983). In the absence of a hearing and where doubt ...

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