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FASHION BOUTIQUE OF SHORT HILLS v. FENDI USA

October 23, 1996

FASHION BOUTIQUE OF SHORT HILLS, INC., Plaintiff, against FENDI USA, INC. and FENDI STORES, INC., Defendants.


The opinion of the court was delivered by: CEDARBAUM

 CEDARBAUM, J.

 What is the minimum activity required to constitute "advertising or promotion" within the meaning of the Lanham Act? That is the issue presented by this motion for partial summary judgment. Fashion Boutique of Short Hills, Inc. sues Fendi USA, Inc. and Fendi Stores, Inc. for unfair competition under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1994), and for unfair competition and defamation under New York common law. Fashion Boutique alleges that defendants' employees made disparaging comments regarding the quality and authenticity of the goods sold by Fashion Boutique to consumers who visited defendants' store in New York. After I denied in relevant part defendants' motion to dismiss the complaint, Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 1992 U.S. Dist. LEXIS 9881, No. 91 Civ. 4544 (MGC), 1992 WL 170559 (S.D.N.Y. July 2, 1992), Fashion Boutique conducted extensive discovery. Fashion Boutique also sent undercover investigators to defendants' New York store. Defendants have now moved for partial summary judgment pursuant to Fed. R. Civ. P. 56 limited to the Lanham Act claim. For the reasons that follow, defendants' motion is granted.

 From 1983 to July of 1991, Fashion Boutique operated a retail store in Short Hills, New Jersey, which sold only Fendi brand merchandise, including leather goods and furs. In August of 1988, Fashion Boutique and Fendi Diffusione Imp/Exp. s.r.1. entered into a written franchise agreement. The term of the franchise agreement was later extended, and limitations were placed on Fendi Diffusione's ability to sell Fendi products to certain retailers in New Jersey. (Defs.' 3(g) Statement PP 1, 5, 7; Pl.'s 3(g) Statement PP 1, 5, 7.)

 Fashion Boutique purchased all of its goods from manufacturers within the Fendi organization and from affiliated licensees. In 1987, Manetti-Farrow was appointed to distribute a separate line of Fendi goods to department stores in the United States. Fashion Boutique continued to purchase its goods as it had previously. (Defs.' 3(g) Statement PP 1-2, 7; Pl.'s 3(g) Statement PP 1-2, 7.)

 Fendi USA is a wholly-owned subsidiary of Fendi Diffusione, and Fendi Stores is a wholly-owned subsidiary of Fendi USA. On October 31, 1989, Fendi Stores opened a store on Fifth Avenue in New York City. When the New York store opened, a list of Fendi boutiques was displayed at the entrance. Fashion Boutique's Short Hills store was not included on the list. The New York store was promoted, in part, through public relations, advertising and direct mail. (Defs.' 3(g) Statement PP 3-4, 8-9, 13; Pl.'s 3(g) Statement PP 3-4, 8-9, 13.)

 Consumers

 When the Short Hills store closed in July of 1991, it maintained a list of approximately 8,000 customer addresses. (Defs.' 3(g) Statement P 29; Pl.'s 3(g) Statement P 29; Skulnik Reply Aff., Ex. NN.)

 Fashion Boutique has submitted declarations from fourteen people who visited the New York store before Fashion Boutique closed the Short Hills store. Four people were told that the Short Hills store sold a different line of Fendi products, although no reference was made to the quality of goods carried by the Short Hills store. (Marano Aff. P 3; Mironov Decl. P 3 *fn1" ; Sala Decl. P 2; Seldes Decl. P 2.) Three of these people had come to the New York store for assistance with repairs of defective merchandise that had been purchased at the Short Hills store. (Marano Aff. P 2; Mironov Decl. P 2; Seldes Decl. P 2.) Ten people were told that the Short Hills store carried a line of Fendi merchandise that was inferior to that carried by the New York store. (Amore Decl. P 4; Bassett Decl. PP 3-5; Green Decl. P 3; Lance Decl. PP 2-3; Mantel Aff. P 3; C. Montalbano Decl. PP 4, 6; M. Montalbano Decl. PP 6, 8; Ray Decl. P 4; Ring Decl. PP 3-4; Scheer Decl. P 3.) Two people were told that the Short Hills store sold "fake" or "bogus" Fendi merchandise. (Lance Decl. P 3; Ray Decl. P 4.) One couple was told that the furs carried by the Short Hills store were old and not well made. (C. Montalbano Decl. PP 4, 6; M. Montalbano Decl. PP 6, 8.) Employees at the New York store encouraged three people to write letters to Fendi Stores complaining about the inferior goods sold at the Short Hills store. (Green Decl. P 4; C. Montalbano Decl. P 7; M. Montalbano Decl. P 9.)

 Bruce Blomquist testified at his deposition that when he visited the New York store in January of 1990, an employee told him that the Short Hills store carried a different line of merchandise. (Blomquist Dep. at 27.) The employee also told Blomquist, "I don't know what their quality is like out there [in Short Hills]." (Id.) When Blomquist visited the New York store later in 1990, a salesperson asked him where he had purchased his Fendi belt. When Blomquist told him that it had been purchased in Short Hills, the salesperson asked him, "are you sure it is real?" The salesperson added, "you never know what kind of skins you get out there." (Id. at 28.)

 The majority of the declarations submitted by Fashion Boutique for the pre-July 1991 period are from people who heard rumors that the Fendi store in Short Hills sold "fake" Fendi merchandise. (B. Abdul-Oawi Decl. P 2; S. Abdul-Oawi Decl. P 2; Bright Decl. P 2; Bressler Decl. P 2; Crump Decl. P 2; Faerberg Decl. P 2; Hamilton Decl. P 2; Harper Decl. P 2; Jackson Decl. P 2; Juman Decl. P 2; Kenny Decl. P 2; Miro Decl. P 2; Pearce Decl. P 2; Ray Decl. P 7; Robinson Decl. P 2; Strollo Decl. P 2.) One declarant heard rumors that the Short Hills store carried fake Fendi merchandise, but could not remember when she had heard those rumors. (Giasullo Decl. P 2.)

 Fashion Boutique has also submitted eight declarations from people who visited or called the New York store after the Short Hills store closed. Three people were told that the Short Hills store had sold a line of merchandise different from that of the New York store, although no reference was made to the quality of goods formerly carried by the Short Hills store. (Farinella Decl. P 2; Sinins Decl. P 2; Stefanelli Decl. P 3.) Three people were told that the Fendi store in Short Hills did not sell "real" Fendi or that it sold inferior goods. (Pellino Decl. PP 2-4; Romano Decl. P 3; Van Strat Decl. P 5.) One person was told by an employee of the New York store that the Short Hills store was closed because it was too costly to maintain, (Martino Decl. P 3), and another was told that the Short Hills store was closed because "we've had a lot of problems with Fendi Short Hills." (Norcia Decl. P 3). One person heard rumors after July of 1991 that the Short Hills store closed because it had sold "fake" Fendi merchandise. (Criscitello Decl. P 2.)

 Undercover investigators

 Fashion Boutique sent nine different undercover investigators to the New York store on several occasions in 1990 and 1991. Usually, the undercover investigators brought a defective product that they said had been purchased at the Short Hills store and requested assistance with a repair. (See Meierhofer Aff., Ex. 15, Ex. A-E, H.) On three occasions, the undercover investigator complained about poor customer service at the Short Hills store. (Id. Ex. 15, Ex. A-C.)

 On August 6, 1990, an undercover investigator brought a defective wallet which she said had been purchased at the Short Hills store. She complained that the merchandise at the Short Hills store was terrible and that the people at the Short Hills store were rude. (Id. Ex. 15, Ex. A at 1.) Francesco Gittardi, an employee of Fendi Stores, told the undercover investigator that the New York store did not carry that particular style of wallet because it was from an "American distribution" line. (Id. at 1-2.) Gittardi also told the undercover investigator that "some customers have some problems with Short Hills." (Id. at 3.)

 On August 30, 1990, an undercover investigator brought a defective crocodile belt, which she said had been purchased at the Short Hills store, to the New York store for repair. She complained that the people at the Short Hills store had been very uncooperative. (Id. Ex. 15, Ex. B at 2.) Joanne Vernocchi, the customer service manager, told her that the belt was not real crocodile. (Id. at 2-3.) David Shreve, the manager for menswear, told her that the belt may be crocodile, but that it was not the same quality as crocodile sold in the New York store. (Id. at 10.) Shreve also noted that the Short Hills store had a reputation for being uncooperative and encouraged the undercover investigator to write a letter to Fendi Stores about the poor customer service at the Short Hills store. (Id. at 4, 7, 9.) On September 6, 1990, the same undercover investigator returned to the New York store with two other undercover investigators, complained again about the poor treatment she had received at the Short Hills store, and offered to write a letter of complaint. (Id. Ex. 15, Ex. C at 1, 4, 7.) Vernocchi told her that there had been a "lot of problems" with the Short Hills store and that the people at the Short Hills store were "rude to everybody." (Id. at 2, 6.) Vernocchi encouraged the undercover investigator to write a letter to Bruno D'Angelo, the Executive Vice President of Fendi Stores, and told her, "the more juice you put in the letter, the better." (Id. at 2, 5.) Shreve also encouraged the undercover investigator to write a letter. (Id. at 7.)

 On October 11, 1990, an undercover investigator brought a defective lizard cigarette case, which he said had been purchased at the Short Hills store, to the New York store for repair. (Id. Ex. 15, Ex. D at 1.) David Shreve told him that the New York store did not carry "this particular line." (Id. at 2.) He said that some of the merchandise carried by the Short Hills store was from a line manufactured by a different supplier. (Id. 3-4.) Shreve noted that although the quality of merchandise carried by the Short Hills store should be the same as the merchandise carried in the New York store, "unfortunately, it is not in some cases." (Id. at 3-4.) Shreve added that the Short Hills store also purchased merchandise from the same factories in Rome from which the New York store purchased merchandise, but that the stores did not always buy the same items. (Id. at 2, 4.) Shreve told the undercover investigator to take the case back to the Short Hills store, but warned him that he was "going to run into some problems with [Short Hills]." (Id. at 2-3.) When the undercover investigator returned the following day with another undercover investigator, he said that Shreve had told him that it would be difficult to return the case to the Short Hills store. (Id. Ex. 15, Ex. E at 2.) Vernocchi responded that there had been "a lot of problems with the Short ...


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