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LIZ CLAIBORNE, INC. v. MADEMOISELLE KNITWEAR

September 29, 1997

LIZ CLAIBORNE, INC. and L.C. LICENSING, INC., Plaintiffs, against MADEMOISELLE KNITWEAR, INC., individually and d/b/a THE MILL LTD. SWEATER FACTORY OUTLET; CHARLES STEFANSKY; VARIOUS JOHN DOES, JANE DOES and XYZ COMPANIES, Defendants.

ROBERT W. SWEET, U.S.D.J.


The opinion of the court was delivered by: SWEET

Sweet, D.J.

 Liz Claiborne, Inc. and L.C. Licensing, Inc. (collectively, "Claiborne"), has moved for summary judgment under Rule 56, Fed. R. Civ. P. against the defendants Mademoiselle Knitwear, Inc. ("Mademoiselle"), Charles Stefansky ("Stefansky"), and Shraga Newhouse ("Newhouse" and collectively, the "defendants"). Claiborne has alleged (1) trademark counterfeiting, trademark infringement, unfair competition and/or false designation of origin arising under the Trademark Act of 1946, 15 U.S.C. 1051, et seq., as amended by the Trademark Counterfeiting Act of 1984, Public Law 98-473 (the "Lanham Act"); (2) trade name infringement, unfair competition, unfair trade practices and trademark dilution under the laws of the State of New York; (3) fraud; (4) breach of contract; and (5) breach of covenant of good faith. Claiborne seeks (1) a permanent injunction; (2) treble damages in the amount of $ 2,635,099; (3) profits; (4) prejudgment interest; (5) reasonable attorney's fees and costs; (6) release from all bonds posted by Claiborne; (6) destruction of all Claiborne merchandise in Mademoiselle's possession; and (7) an injunction ordering that plaintiffs have no obligation to order the manufacture of merchandise from, or conduct any other business activity with, defendants. *fn1"

 Parties

 Liz Claiborne, Inc. is a Delaware corporation, having its principal place of business at 1441 Broadway, New York, New York.

 L.C. Licensing, Inc. is a wholly owned subsidiary of Liz Claiborne, Inc. and is a Delaware corporation, having its principal place of business at 1441 Broadway, New York, New York.

 Mademoiselle Knitwear, Inc. is a New York corporation with an office and/or principal place of business at 930 Flushing Avenue, Brooklyn, New York.

 Charles Stefansky is an individual residing within the State of New Jersey and at the times relevant to this motion was employed by Mademoiselle.

 Shraga Newhouse is an individual residing within the State of New York and at the times relevant to this motion was President of Mademoiselle.

 Prior Proceedings

 The prior proceedings of this case are set forth in the previous opinions of the Court, familiarity with which is assumed. See Liz Claiborne, Inc. v. Mademoiselle Knitwear, Inc., 1997 U.S. Dist. LEXIS 1272, 96 Civ. 2064, 1997 WL 53184 (S.D.N.Y. Feb. 10, 1997); Liz Claiborne, Inc. v. Mademoiselle Knitwear, Inc., 1996 U.S. Dist. LEXIS 17094, 96 Civ. 2064, 1996 WL 668862 (S.D.N.Y. Nov. 19, 1996); Liz Claiborne, Inc. v. Mademoiselle Knitwear, Inc., 1996 U.S. Dist. LEXIS 8847, 96 Civ. 2064, 1996 WL 346352 (S.D.N.Y. June 25, 1996).

 Claiborne filed the instant motion on April 9, 1997. Oral argument was heard on June 4, 1997, at which time this motion was considered fully submitted. *fn2"

 Facts

 Claiborne designs, produces, and distributes apparel and other merchandise utilizing trademarks registered with the United States Patent and Trademark Office. Claiborne utilizes approximately two hundred contractors worldwide to manufacture goods to its specifications which bear the Claiborne trademarks.

 Since at least 1992, Mademoiselle and Claiborne established a relationship whereby Mademoiselle would produce knitwear for Claiborne. Claiborne orders merchandise from Mademoiselle by issuing a "cutting ticket." The cutting ticket provides the quantity, style number and trademark to be used.

 A. Sale of Irregulars and Overruns

 Manufacturing knitwear is not a perfect science, and from time-to-time there are (1) goods that do not pass quality control inspections ("Irregulars") and (2) goods that pass the quality inspections but exceed by more than five percent ...


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