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ARIS-ISOTONER GLOVES, INC. v. BERKSHIRE FASHIONS

June 5, 1992

ARIS-ISOTONER GLOVES, INC., plaintiff,
v.
BERKSHIRE FASHIONS, INC., defendant.



The opinion of the court was delivered by: KENNETH CONBOY

 KENNETH CONBOY, DISTRICT JUDGE:

 The Court has before it the parties' objections to the Report and Recommendation of United States Magistrate Judge Naomi Reice Buchwald, dated November 1, 1991 ("Remand Report"). Pursuant to 28 U.S.C. § 636(b)(1), the Court has conducted a de novo review of the record. Our sole point of departure from the Remand Report is our finding that the unclean hands of defendant Berkshire Fashions, Inc. ("Berkshire") removes this case from equity and so prevents application of the defense of laches to Berkshire's production of infringing gloves bearing the double diamond design.

 I. Unclean Hands

 A court may decline to exercise its equitable powers in favor of a party whose "unconscionable act . . . has immediate and necessary relation to the matter that he seeks in respect of the matter in litigation." Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245, 78 L. Ed. 293, 54 S. Ct. 146 (1933). Application of the "unclean hands" doctrine rests with the discretion of the court, which is "not bound by formula or restrained by any limitation that tends to trammel the free and just exercise of discretion." Id. at 245.

 Upon questioning at the remand proceedings, Berkshire President Issac R. Dweck made sworn statements relating to a matter in issue that directly and inexplicably contradicted his testimony in the original contempt proceedings. No other conclusion can exist but that Dweck fabricated his testimony either in the instant proceedings or in the original contempt proceedings, when the information upon which his later testimony was based was readily available to him. Such behavior is unconscionable and thus warrants a finding of unclean hands.

 In the initial contempt hearing, Dweck engaged in the following colloquy with counsel:

 
Q. Can you describe for the court the pattern of your sales of the interlocking diamond gloves since you introduced them in early '87?
 
A. We started initially in a very small quantity.
 
Q. Why is that?
 
A. There was some question about what might happen. Mr. Swire had indicated "Put the goods on the market and then we'll see what happens. If we see it's a problem then we'll take action. If we don't take, you know, we'll see what happens."
 
So we started in a a small way, built the production up greater in 1988 and still nothing happened. And then in 1989 we went full scale and all of a sudden we were being sued.

 Transcript of Hearing Before Hon. Naomi R. Buchwald Dated November 30, 1989 at 163-164 (included in Joint Appendix Before United States Court of Appeals for the Second Circuit, Action No. 90-7394 ("JA") at 442-43).

 In Berkshire's papers in opposition to the original finding of contempt, Berkshire argued that (1) its use of the double diamond design was in good faith and (2) Berkshire detrimentally relied upon Aris' delay in suing Berkshire. Defendant's Memorandum of Law in Opposition to Plaintiff's Contempt Motion at 15, 19-20 (JA at 238, 242-243). Although the Magistrate Judge's first Report and Recommendation made a threshold finding against laches on other grounds, the first Report adopted Dweck's above statements in its factual findings. Report and Recommendation Dated January 26, 1990 ("First Report") at pages 7, 14-15. The ...


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