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S.O. TEXTILES CO. v. A & E PRODS. GROUP

September 1, 1998

S.O. TEXTILES CO., INC., Plaintiff, against A & E PRODUCTS GROUP, A DIVISION OF CARLISLE PLASTICS, INC., AND TYCO INTERNATIONAL, LTD., Defendants.


The opinion of the court was delivered by: GLASSER

MEMORANDUM & ORDER

 GLASSER, United States District Judge:

 BACKGROUND

 Plaintiff S.O. Textiles Co., Inc. ("S.O." or "S.O. Textiles") is a New York Corporation located on West 40th Street in New York City. S.O. performs work as a "jobber" in the garment and textile industry and has been engaged in this business for about 40 years. Plaintiff sells to numerous manufacturing companies various products, including textiles, hangers, buttons, zippers, seam binding, polybags, trimming, and other related items. Generally, plaintiff purchases these items from third parties and then sells them at a markup to its own customers.

 Defendant A & E Products Group ("A & E') is a Division of Carlisle Plastics, Inc. ("Carlisle"). Carlisle is a Delaware Corporation with executive offices in Phoenix, Arizona. Carlisle, in turn, is a wholly-owned subsidiary of Tyco International (US) Inc. ("Tyco").

 A & E is engaged in the business of manufacturing garment hangers. One of the manufacturers from whom plaintiff S.O. purchased hangers was A & E. The hangers purchased from A & E were, for the most part, hangers whose specifications are approved for use by "huge nationwide retail clothing chain stores such as, for example, K-Mart, Wal-Wart, Mervins and others." These so called "approved hangers" are accepted by these retail stores for their sales programs. If garments are delivered to the stores without approved hangers, the stores would not accept the garments. Therefore, plaintiff's customers that were garment manufacturers were required to use only approved hangers in order to sell garments to these stores. P 16.

 In late December of 1996 or early January of 1997, A & E's then President and CEO, Clifford A. Dupree ("Dupree") along with others from A & E met with plaintiff and suggested to plaintiff that it purchase virtually all of its approved hangers from A & E. As incentive to do so, A & E offered plaintiff a seven percent rebate on all gross dollars invoiced by A & E to plaintiff in excess of $ 225,000 per month.

 Plaintiff S.O. claims that Dupree made the following representations to plaintiff:

 
1. Defendant A & E was "delighted" that plaintiff was "aggressively growing [its] garment hanger business."
 
2. A & E wants "to help [S.O.] be as successful as [it] can."
 
3. A & E "enjoyed [its] relationship with Julie [Bernstein] [a principal of Plaintiff]."
 
4. "If we [A & E and S.O.] can sell more hangers and have some fun together doing it we all win."
 
5. A & E would "always continue to be price competitive."
 
6. A & E "would provide a seven percent rebate on all dollars invoiced in excess of $ 225,000 in any month."

 Compl. PP 22-23. Dupree further represented that their understanding and agreement would continue for the "long term" and it would not be less than one year before the parties would begin to discuss any modifications to the contract.

 The parties' understanding and agreement was memorialized, in part, in a written letter agreement dated January 10, 1997, a copy of which was annexed to the plaintiff's complaint. This letter states in full:

 
I'm delighted you are aggressively growing your garment hanger business. Among distributors, you are our largest customer and so, of course, we want to help you be as successful as you can. In addition, I've personally enjoyed my relationship with Julian and I know it can be fun to work with him. So, if we can sell more hangers and have some fun together doing it, we all win. Our relationship is based on the following:
 
. Product Line: A& E offers one of the broadest product lines available.
 
. Service: From our North Bergen, New Jersey facility, we have the ability to make same day or next day deliveries.
 
. Price:
 
[checkmark] We have always and will continue to be price competitive (price list attached)*
 
[checkmark] We will provide a 7% rebate (payable on the 20th of the month following) on all dollars invoiced in excess of $ 225,000 in any month.
 
* In those instances when market prices are demonstrated to be below A & E prices, we will rebate the difference based on monthly review of shipments and prices.
 
We also would like to hold a meeting, in New York, to discuss concepts like team selling, drop shipments, and any other ideas which may be mutually helpful.

 Compl. (unnumbered attachment to complaint). The letter is signed by Clifford A. Dupree, President and CEO of Carlisle Plastics, Inc.

 In early February of 1997, A & E's new President, Steven McDonough, reconfirmed A & E's prior agreement. However, in a letter dated February 5, 1997, McDonough wrote: "we will continue to provide a 7% rebate on all dollars invoiced in excess of $ 225,000 in any month provided the W.A.F. Group, Inc. does not solicit our customers without prior approval. The discount will discontinue if we feel our customers are being solicited by the W.A.F. Group, Inc." This letter is also attached to plaintiff's complaint.

 Plaintiff relied on the above representations and as a result began purchasing fewer and fewer hangers from its other hanger supplier, Different Dimensions. In addition, plaintiff abandoned its plan to manufacture approved hangers itself.

 
In early May of 1997, defendant A & E purchased Different Dimensions. After this purchase, plaintiff claims that A & E "controlled or monopolized virtually all, or substantially all, of the sale and supply of Approved Hangers which the Plaintiff was purchasing to resell to Plaintiff's Customers, who were selling garments to the Program Stores." Compl. P 31. Then, almost immediately after the purchase of Different Dimensions, Defendant A & E unlawfully and illegally breached and reneged on its contractual agreement and representations to Plaintiff . . . . Defendant A & E went 'back on its word' with respect to those agreements and representations contained in Exhibits 'A' and "B' and went 'back on its word' with respect to their oral representations made to the Plaintiff at Defendant A & E's meeting with ...

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