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PICCOLI A/S v. CALVIN KLEIN JEANSWEAR CO.

September 8, 1998

PICCOLI A/S, Plaintiff, against CALVIN KLEIN JEANSWEAR CO., WORLD APPAREL PRODUCTS CO., AZTECA PRODUCTION INTERNATIONAL, INC., INTEREXPORT MARKETING LTD., TRIGLOBAL INTERNATIONAL MARKET SERVICES, INC., and COBRA CORP. U.S.A., Defendants.


The opinion of the court was delivered by: KAPLAN

MEMORANDUM OPINION

 LEWIS A. KAPLAN, District Judge.

 Piccoli A/S ("Piccoli"), a former exclusive distributor of Calvin Klein jeans in Scandinavia, alleges that its American counterpart, defendant Calvin Klein Jeanswear Co. ("Jeanswear"), conspired with Jeanswear's co-defendants to export Jeanswear's surplus jeans to Scandinavia and thus to destroy plaintiff's market. Piccoli asserts that Jeanswear's actions constituted breaches of contract and of the duty of good faith and fair dealing and that each defendant is liable for unjust enrichment, unfair competition, tortious interference with contractual relations, and violations of the Lanham Act and the Paris Convention. Jurisdiction is premised on the federal claims as well as alienage.

 Jeanswear and defendant Azteca Production International, Inc. ("Azteca") move to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. Defendant World Apparel Products Co. ("World Apparel") moves for judgment on the pleadings on substantially the same grounds. For the reasons stated below, the motions are granted in part and denied in part.

 Background

 The following facts are culled exclusively from the complaint, the truth of which is assumed for purposes of this motion.

 In 1991, Calvin Klein Inc. ("CKI"), the beneficial owner of the Calvin Klein trademarks, *fn1" granted Piccoli an exclusive license to distribute Calvin Klein jeans in Scandinavia (the "CKI/Piccoli Agreement"). *fn2" The CKI/Piccoli Agreement required Piccoli to purchase set amounts of jeans and to market, promote, and distribute them solely to upscale retailers. *fn3" Between 1991 and 1994, Piccoli successfully built relationships with upscale retailers and significantly increased sales "by making a substantial marketing effort, hiring additional skilled marketing personnel, spending thousands of hours and investing hundreds of thousands of dollars building and maintaining a distribution network." *fn4"

 In 1994, CKI granted Jeanswear an exclusive license to manufacture, distribute, and wholesale Calvin Klein jeans in North America (the "CKI/Jeanswear Agreement"). *fn5" The CKI/Jeanswear Agreement prohibited Jeanswear from selling Calvin Klein products outside North America and also from selling to third parties whom it knew or should have known would sell the products outside North America. *fn6"

 In May 1995, CKI granted CK Jeanswear Europe, S.P.A. ("European") an exclusive license to manufacture, distribute, and wholesale Calvin Klein jeans in Europe (the "CKI/European Agreement"). *fn7" A few months later, in August 1995, the CKI/Piccoli Agreement expired. *fn8" Piccoli then entered into an agreement with European which granted Piccoli another exclusive distributorship in Scandinavia (the "European/Piccoli Agreement"). *fn9" The European/Piccoli Agreement imposed upon Piccoli essentially the same obligations as had the CKI/Piccoli Agreement. *fn10" In furtherance of those obligations, Piccoli expended "substantial time, money, and effort in promoting and trying to maintain the prestigious market for Calvin Klein jeans in Scandinavia." *fn11"

 Trouble arose in the summer of 1995 when the defendants began to export Jeanswear's excess inventory of Calvin Klein jeans to Denmark. *fn12" The exported jeans were sold "through different distribution channels, to lower-end stores, and [were] advertised using different marketing methods." *fn13" Not surprisingly, the majority of them ended up on the shelves of Scandinavian discount stores. *fn14" In February 1996, Piccoli complained about these imports to European, noting "that its complaints to New York 'have not been dealt with in a satisfactory' manner." *fn15"

 In March 1996, Piccoli began to receive letters from its upscale customers complaining of the imported jeans and canceling orders. *fn16" This led to a second Piccoli complaint to European. *fn17" At some point prior to June 10, 1996, CKI gave Jeanswear some form of notice concerning Piccoli's complaints. *fn18"

 In October 1997, Piccoli discussed with European the possibility of litigation against Jeanswear. *fn19" European, however, refused to participate in a suit against a fellow Calvin Klein distributor. *fn20" On December 18, 1997, Piccoli terminated the European/Piccoli Agreement after learning that European also was exporting Calvin Klein jeans into Scandinavia. *fn21"

 Piccoli contends that Jeanswear's products continue to appear in Scandinavian discount stores *fn22" and, as a result, that "virtually all of the retailers who in the past had regularly purchased Calvin Klein products from Piccoli [have] now either canceled orders or dropped the line altogether." *fn23"

 Discussion

 Contract Claims Against Jeanswear

 A. Breach of Contract

 Piccoli claims that by exporting its surplus jeans to Scandinavia, Jeanswear breached the clause in the CKI/Jeanswear Agreement prohibiting it from selling or distributing the jeans outside of North America. Though not a party to the CKI/Jeanswear Agreement, Piccoli asserts that it has standing to enforce that contract as a third party beneficiary. *fn24"

 Under New York law, *fn25" only an intended beneficiary of a contract may assert a claim as a third-party beneficiary. *fn26" A third party is an intended beneficiary where either (1) "no one other than the third party can recover if the promisor breaches the contract" *fn27" or (2) "the language of the contract otherwise clearly evidences an intent to permit enforcement by the third party." *fn28"

 Piccoli manifestly does not qualify as an intended third-party beneficiary under the first prong of the test. The CKI/Jeanswear Agreement explicitly states that CKI has the right "to be compensated for damages for breach of this Agreement and to enjoin the unlawful or unauthorized use of the Licensed Marks." *fn29" The complaint alleges also that European had the opportunity but refused to sue Jeanswear as a result of the alleged breach of contract. *fn30"

 Nor has Piccoli alleged facts sufficient to show that the CKI/Jeanswear Agreement "otherwise clearly evidences an intent to permit enforcement by [Piccoli]." *fn31" The requirement of an intent to permit enforcement by the third party is satisfied by demonstrating an intent to benefit that party. *fn32" Although a "party need not necessarily be specifically mentioned in a contract to be considered a third-party beneficiary," *fn33" the parties' intention to benefit the third party nonetheless must be revealed "on the face of the agreement." *fn34"

 Piccoli contends that such an intention is implicit in the "Cooperation Clause" of the CKI/Jeanswear Agreement, wherein Jeanswear promised that it

 
"shall not export Articles from the Territory [the Americas] and shall not sell Articles to any third party which [Jeanswear] knows or has reason to know will export Articles from the Territory . . . [and] will cooperate with [CKI] with respect to prohibiting the diversion of Products into [CKI's] third party licensee's and distributors' territories." *fn35"

 Piccoli argues that the clear intent of this clause was to benefit not only CKI, but also CKI's exclusive distributors in other territories, and that the face of the contract therefore demonstrates an intention to benefit Piccoli. *fn36"

 Jeanswear responds that the CKI/Jeanswear Agreement not only does not evidence an intention to benefit third parties but, on the contrary, reveals an intention not to benefit anyone other than the signatories. Jeanswear draws this conclusion from a provision in the contract containing both non-assignment and inurement clauses:

 
"This Agreement is of a personal nature with respect to [Jeanswear] and, therefore, except as provided below, neither this Agreement nor the license or other rights granted hereunder may be sublicensed, assigned or transferred by [Jeanswear] except with [CKI's] prior written consent. . . . Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding upon the parties and permitted successors and assigns." *fn37"

 The prohibition on assignments and the specification that the contract inures to the benefit of and binds the parties except as otherwise indicated, Jeanswear argues, makes plain the parties' intention to preclude third-party enforcement.

 Courts in this district have construed similar provisions as inconsistent with the existence of an intention to confer a benefit upon a third party. In Sazerac Co. v. Falk,38 for example, the court relied in part upon nearly identical provisions in concluding that the contract in question manifested the parties' intention not to ...


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