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GIDATEX, S.R.L. v. CAMPANIELLO IMPORTS

June 10, 1998

GIDATEX, S.r.L., Plaintiff, against CAMPANIELLO IMPORTS, LTD., CAMPANIELLO IMPORTS OF FLORIDA, LTD., and CAMPANIELLO ENTERPRISES, INC., Defendants.


The opinion of the court was delivered by: SCHEINDLIN

OPINION AND ORDER

 SHIRA A. SCHEINDLIN, U.S.D.J.:

 Plaintiff Gidatex, S.r.L. ("Gidatex") filed a Complaint on December 30, 1997, alleging violations of the Lanham Act, 15 U.S.C. §§ 1114(1) and 1125(a), common law trademark infringement, and common law unfair competition. Defendants Campaniello Imports, Ltd., Campaniello Imports of Florida, Ltd., and Campaniello Enterprises, Inc. (collectively "Campaniello" or "defendant"), in turn, asserted counterclaims for breach of contract, unfair competition, misappropriation, and unjust enrichment. Campaniello now moves for a preliminary injunction and Gidatex moves to dismiss all of defendant's counterclaims. For the reasons stated below, Gidatex's motion to dismiss is granted in part and denied in part and Campaniello's motion for a preliminary injunction is denied.

 I. Introduction

 The following facts are assumed to be true for purposes of the instant motions. In 1974, Campaniello agreed to become the exclusive United States distributor for Fratelli Saporiti Industria Arredamenti, S.n.c., an Italian furniture manufacturer. *fn1" Amended Answer and Counterclaim at pp. 5-6. Under the exclusive distributorship agreement, Campaniello was required to publicize the "Saporiti" name and trademark, first as "Fratelli Saporiti" and in later years as "Saporiti Italia." Id. at p. 6. Until July 1993, Campaniello's showrooms were exclusively devoted to the display and sale of Saporiti furniture. Id. at p. 8.

 A. The Gidatex Agreement

 In March 1994, Campaniello commenced an action in this Court against Saporiti and its owners (collectively, the "Saporiti defendants"), for breach of contract, fraud, and misrepresentation (the "1994 Litigation"). Id. at pp. 10-11. In April 1994, Saporiti applied to the Tribunal of Busto Arsizio for protection under the Italian law known as "Concordato Preventivo," which permits the restructuring of debts in a fashion similar to Chapter 11 of the United States bankruptcy laws. Id. at p. 11. On May 8, 1994, the Italian court authorized Gidatex to lease Saporiti's assets for ten months, with an option to purchase the assets at a later date. Id.

 On June 14, 1994, Gidatex and Campaniello entered into a nine-month exclusive distributorship agreement (the "Gidatex Agreement"), which replaced the previous distributor contract between Saporiti and Campaniello. Id. at 11-14. As part of the agreement, Campaniello agreed to withdraw the 1994 Litigation against the Saporiti defendants. Id. In return, Gidatex engaged Campaniello as the exclusive distributor of Saporiti Italia furniture in the United States and other Western Hemisphere countries through March 31, 1995, with an automatic five-year extension if Gidatex purchased Saporiti's assets. Id. at 11, 14. In a July 7, 1994 amendment to the Gidatex Agreement, the parties agreed to an arbitration-in-Italy clause, which provides as follows:

 
Italian law will be the applicable law. Any dispute which might arise between the parties in relation to that which is the object of the present agreements shall be resolved by irritual arbitration before a panel of friendly compositors composed of Avv.ti Amedo Travi and Sergio Fabrizi and by a third arbitrator who will act as President, appointed by the two arbitrators previously named, or in the event that they cannot agree, by the President of the Tribunal of Busto Arsizio.

 Amendment to the Gidatex Agreement, dated July 7, 1994, at P 4.

 B. Termination of the Gidatex Agreement

 On April 10, 1995, Gidatex verbally terminated the Gidatex Agreement, claiming that Campaniello had not satisfied certain of its obligations under the contract. Id. at 16. Gidatex subsequently refused to fill Campaniello's orders for Saporiti Italia furniture. Id. During and after April 1995, Campaniello sought other sources of Italian furniture and placed advertisements under its own name. Id. at 17. However, Campaniello still possessed a large stock of Saporiti Italia furniture that it had previously purchased. Id. As a result, Campaniello has continued to use the Saporiti Italia name in connection with its sale of this "leftover" Saporiti Italia furniture. Id.

 According to Campaniello, Gidatex plans to authorize at least four other companies to sell Saporiti Italia furniture, which will be located very near existing Campaniello showrooms in New York City, Dania, Florida, Dallas, Texas, and Washington, D.C. Id. at 18. Gidatex will grant these new distributorships the right to use the Saporiti Italia name and will supply them with the same type of furniture that is in Campaniello's existing Saporiti furniture stock. Id.

 C. Prior Litigation

 On October 16, 1995, Campaniello filed an action in this Court against Saporiti and its owners, and Gidatex and its principal officer and shareholder. In that action, Campaniello asserted claims for unjust enrichment, fraud, and misrepresentation, alleging that the defendants had (1) deceived and defrauded Campaniello in order to induce it to agree to settle, withdraw its complaint, and execute a settlement agreement outside the scope of the Concordato proceedings; (2) pretextually terminated Campaniello's exclusive agency provided for by the Gidatex Agreement; and (3) wrongfully captured the valuable good will in Campaniello's territories that Campaniello had created through its best efforts and investments. See Campaniello Imports, Ltd. v. Saporiti Italia S.p.A, 1996 U.S. Dist. LEXIS 11064, 95 Civ. 7685, 1996 WL 437907, at *3 (S.D.N.Y. Aug. 2, 1996) (Campaniello I).

 On August 2, 1996, the district court dismissed all of Campaniello's claims against Gidatex under section 3 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 3, because the claims were subject to mandatory arbitration under the Gidatex Agreement. See id. at *7-9. The Second Circuit affirmed this decision on April 7, 1997. Campaniello Imports, Ltd. v. Saporiti Italia S.p.A., 117 F.3d 655 (2d Cir. 1997).

 A. BII. Discussion

 A. Res Judicata

 Gidatex contends that, in light of the decision in Campaniello I, defendant's counterclaims are barred by res judicata. The question of whether federal or state rules of res judicata determine the effect of a federal court judgment rendered in a diversity action on a subsequent diversity action remains unresolved. See Maharaj v. Bankamerica Corp., 128 F.3d 94, 97 (2d Cir. 1997). I need not decide this issue, however, because both federal and New York principles of res judicata produce the same result here. The res judicata law of both jurisdictions provides that "[a] final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Id. (quotations omitted) (citing Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398, 69 L. Ed. 2d 103, 101 S. Ct. 2424 (1981)). Res judicata does not apply to a judgment that is not rendered on the merits, see Denton v. Hernandez, 504 U.S. 25, 34, 118 L. Ed. 2d 340, 112 S. Ct. 1728 (1992); Irish Lesbian and Gay Org. v. Giuliani, 1998 U.S. App. LEXIS 7819, No. ...


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