The opinion of the court was delivered by: PETER K. LEISURE
This is a breach of contract action arising out of a Licensing Agreement entered into between defendant Boyden World Corporation ("Boyden"), as licensor, and plaintiff V.S. International, S.A. ("V.S. International"), as licensee. The Licensing Agreement ("Agreement" or "Px. 2") was entered into in March or April of 1987, but was effective as of January 1, 1987. Trial Transcript ("Tr.") at 372. Plaintiff Victorio Sanchez Lopez ("Sanchez") was also a party to the Agreement, as President of V.S. International. Sanchez is referred to in the Agreement as the "Control Individual." A trial was held in this matter without a jury from September 27, 1993 to September 30, 1993. The Court has considered all the evidence presented, and the following constitutes this Court's findings of fact and conclusions of law, pursuant to Fed. R. Civ. P. 52(a).
This Court has jurisdiction over this breach of contract action based on diversity of citizenship, pursuant to 28 U.S.C. § 1332. The parties stipulated in the Agreement, Px. 2 at P 23, and on the record in open Court, Tr. at 15, that the law of New York would apply to this action. Thus, the Court will apply New York law. See Ostano Commerzanstalt v. Telewide Systems, Inc., 794 F.2d 763, 765 n.1 (2d Cir. 1986) ("Because of the choice of law clause, appellee's contract claims are governed by New York law."); Freedman v. Chemical Constr. Corp., 43 N.Y.2d 260, 265, 401 N.Y.S.2d 176, 179, 372 N.E.2d 12, 15 n.* (1977) ("As a general matter, the parties' manifested intentions to have an agreement governed by the law of a particular jurisdiction are honored.").
In an Opinion and Order issued March 4, 1993, this Court granted partial summary judgment in defendant's favor, pursuant to Fed. R. Civ. P. 56, dismissing plaintiffs' third cause of action. However, the Court found there to be triable issues of fact and, accordingly, denied defendant's motion with respect to the issues of: (1) liability; (2) plaintiffs' claim for damages; and (3) defendant's counterclaims.
Prior to the start of trial, the Court denied plaintiffs's untimely request for a jury, which was first made in the pretrial order. Fed. R. Civ. P. 38.
Plaintiff V.S. International is an executive search firm headquartered in Madrid Spain. Tr. 16. Plaintiff Sanchez is the president and founder of V.S. International. Id. at 14. Defendant Boyden is a Delaware Corporation, with offices in New York, which licenses its name "Boyden" to executive search firms worldwide, but does not itself engage in executive searches. Id. at 370.
In 1986, Boyden's relationship with its representative in Spain, Jean Bella, was terminated, and Boyden began to look for an individual to replace Bella and continue to run an executive search operation in Spain, using the Boyden name. Id. at 17-19, 380-384, 437-38. Three of Bella's former associates, Jose Montalar, Carlos Velilla, and Jaime Ferrer, expressed interest in continuing to operate their respective executive search businesses using the Boyden name, and suggested to Boyden that it begin an association with Sanchez, who, through V.S. International, was already engaged in the executive search business in Madrid. Sanchez discussed this possibility with Ferrer, and also discussed with Ferrer the possibility of forming an arrangement whereby either Sanchez, Velilla, or Montalar would secure a license from Boyden, so they could all continue to operate under the Boyden name. Id. at 17-19, 437-41.
After meeting with Boyden representatives, Sanchez, on behalf of himself and V.S. International, entered into a letter agreement with Boyden, effective April 15, 1986. Id. at 20-25. Pursuant to the letter agreement, V.S. International would be Boyden's representative office in Madrid and, assuming their relationship proceeded smoothly, they would enter into a formal licensing agreement. Px 11.
At its September 1986 Board of Directors meeting, the Boyden board decided to grant Sanchez a license for the Spanish territory and also decided to allow him to handle the internal questions regarding the offices and personnel within Spain. Tr. 99-102; Px. 13. The board's decision was formally communicated to Sanchez by way of a letter from Putney Westerfield ("Westerfield"), Boyden's president, dated September 26, 1986. Px. 14.
On November 10, 1986, Sanchez entered into a written agreement with Montalar and Velilla. This agreement, written by Sanchez and sent to the other two individuals, provided in relevant part:
it is the intention of the signers to form or utilize a mercantile society whose actions would be property of its signers in equal parts/shares and whose presidency will be held initially by D. Victorio Sanchez Lopez, whose company will channel the relationship with Boyden Associates Corporation, it being the one who granted the mark for spain.
Px. 37 (translation), 37-A. The November 10 agreement also stated that Sanchez had no problem with Montalar and Veilla continuing to use the Boyden name and having their businesses revolve around this name. This agreement also provided that the financial terms would be the same as those which Boyden established for V.S. International. Id.2
The Licensing Agreement between V.S. International and Boyden was entered into in March or April of 1987, but was effective as of January 1, 1987, and dated accordingly. Tr. 372. Pursuant to the Agreement, defendant Boyden granted V.S. International the exclusive right, franchise, license and privilege of using the name "Boyden" and the symbols, methods and systems of operation of Boyden in connection with the operation of its executive recruiting business within Spain, from January 1, 1987 to December 31, 1989. Agreement, at PP 1-3. The Agreement specifically stated that "except as otherwise provided herein, the grant of such license within the Territory shall be exclusive." Agreement, at P 1(a)(i). The Agreement reiterated the exclusivity of the license in a separate provision which defined the relevant "Territory" for the license:
Licensee shall have the exclusive right to operate its executive recruiting business and to use [the Boyden name] in Spain (the "Territory"), and to establish offices within the Territory, the location of which shall be subject to the prior written approval of Licensor, which approval shall not be unreasonably withheld. Licensor agrees that it will not grant a license to another licensee in the Territory.
In exchange for this licensing right, the Agreement provided for the payment of license fees, first due for the period July 1, 1987 through December 31, 1987. Agreement, at P 6. The agreement also included a guarantee of the payment of such fees by plaintiff Sanchez. Id. at P 17. While the initial term of the Agreement was three years, terminating on December 31, 1989, the Agreement also contained an automatic extension clause which provided that the Agreement would be automatically extended for successive periods of one year, unless 180 days prior to the expiration of the term, written notice of termination was made by one party to the other. Id. at P 3(a). The termination clause of the Agreement required Boyden to issue a written warning to V.S. International at least six months before issuing the notice of termination, except in the case of default. Id. at P 3(b). Termination of the Agreement by default could occur if one of the parties violated any of the terms provided in the Agreement, and failed to cure such a default within thirty (30) days after notice has been sent. Failure to pay the licensing fees would constitute such a default. Agreement, at P 12.
After Boyden granted the license to V.S. International in January 1987, Montalar and Sanchez continued to work amicably in their respective regions of Spain under the Boyden name. Sanchez and Montalar entered into an additional letter agreement, dated January 7, 1988, which, conditioned on Boyden's approval, provided, inter alia, the following: (1) plaintiffs, as a licensee of Boyden Spain, authorized Montalar's business, Servicios de Search, S.A, to continue to use the name Boyden for business promotion under the same terms that Boyden applies to the rest of its members; (2) Servicios de search, S.A., agreed to pay its share of the expenses termed "license fee" for which V.S. International was responsible to Boyden; and (3) both parties agree to work towards a mutual partnership. Px. 5; Dx O, (translation O-1). Regarding this arrangement, Sanchez gave the following testimony before this Court: "I authorized Montalar to use the name Boyden . . . only use the name Boyden in his paperhead, and making proposals as a Boyden associate. . . . I allow him and I gave him an office and office employee." Tr. at 39-40. "I allowed him, by recommendation of Mr. Westerfield, to use the name [in] Valencia ...