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August 12, 1999


The opinion of the court was delivered by: Spatt, District Judge.


This is a contract action between a British company, the plaintiff Landis and Staefa Limited (the "plaintiff" or "Landis"), which, for a period of time, purchased for resale motorized heating valves, also known as mid-position valves, from the defendant Flair International Corporation (the "defendant" or "Flair"). Landis manufactures and resells heating and air conditioning control equipment. A claim was made against the plaintiff for patent infringement involving valves, based on a United Kingdom ("UK") patent, by Honeywell Limited and Honeywell Control Systems Limited (collectively "Honeywell"). The plaintiff settled that claim for the sum of £ 660,000. Of that amount, the plaintiff states that roughly one third of the settlement figure involved Flair valves.

Landis contends that a written contract existed between it and Flair. According to Landis, this contract contained a provision that Flair will indemnify Landis against any claim of patent infringement with regard to the valves sold to it by Flair. This lawsuit was brought to recover the amount of the settlement sum paid by Landis to Honeywell involving the Flair valves, which is approximately the sum of £ 220,000, in addition to legal fees and costs.

The amended complaint contains two causes of action. The first cause is for contractual indemnification based on the alleged written contract. The second cause is for "implied indemnification" under the provisions of the New York Uniform Commercial Code ("UCC"), namely, the obligation to deliver the valves "free of the rightful claim of any third person by way of infringement." (See UCC § 2-312[3]) (the "UCC cause of action").

As to the first cause of action, Flair denies that it entered into any written contract. With regard to the UCC cause of action, Flair contends that there was an express exclusion of any warranty by clear language on its documents, pursuant to the provisions of UCC § 2-316, so that it has no liability for any U.K. patent infringement claim. In addition, the defendant contends that the valves were sold "FOB" the defendant's plant or "FOB" Hauppauge or "FOB" the Port of New York, so that title changed in New York. Under these circumstances, there being no United States patent claim, Flair contends that there would be no infringement of the U.K. patent. Flair, therefore, disclaims any responsibility to Landis in any manner under either cause of action.

Initially, the Court takes note of an unusual situation that arose in this case. Jamie E. Frank ("Frank"), the attorney for defendant Flair, is the sole stockholder of Flair. Also, Frank was the key Flair executive in the negotiation of the valve transaction between the parties. Thus, Frank is a key witness in this case. In letters dated April 30, 1998 and June 5, 1998, the plaintiff's counsel moved before United States Magistrate Judge Michael L. Orenstein to disqualify Frank as counsel for Flair. In an order dated July 17, 1998, Judge Orenstein denied the application without prejudice, and with leave to renew after the depositions of Rita Paleschuck and Susan Nicoletti were completed and after Frank certified that he will not be a witness in this action. By certificate dated July 28, 1998, Frank certified "that he will not act as a witness at the trial of this action."

During the trial, the Court, on is own initiative, raised this conflict as to Frank's representation of Flair. It was explained by Frank that: (1) Flair was a family business operated by him and his mother Rita Paleschuck; (2) the business and corporation is defunct and no longer operating; (3) he agreed not to testify; and (4) if he was removed as attorney, the corporation would not be represented by counsel.

In response to the Court's inquiry on the subject of disqualification, Frank submitted an affirmation dated July 7, 1999, which stated the following:

  1) I own directly or indirectly, and I control all of
  the voting shares of stock in Flair International
  2) The corporation is neither a parent or a
  subsidiary of any other corporation.

3) The corporation is insolvent.

  4) I closed down the operation and terminated all
  employees in June of 1997, in order to stop the
  5) At that time the corporation vacated its leased
  6) The corporation has not done any business since
  7) The corporation has no assets of any kind,
  including no bank accounts, deposits, securities,
  land, buildings, inventory, machinery, equipment or
  accounts receivable.
  8) The corporation has no possible means of hiring
  counsel to represent its interest.
  9) I personally paid the out of pocket costs of this
  action, although I had no legal obligation to do so.
  10) The corporation still exists as a legal entity;
  it not yet been dissolved primarily because it cannot
  complete the tasks necessary as a prerequisite to
  11) It is my intention to dissolve the corporation
  upon obtaining proper authority to do so.

The Court is aware that, in the Federal Court, ordinarily, a corporation cannot act pro se. See Pridgen v. Andresen, 113 F.3d 391, 393 (2d Cir. 1997); Eagle Associates v. Bank of Montreal, 926 F.2d 1305, 1308 (2d Cir. 1991); Shapiro, Bernstein & Co. v. Continental Record Co., 386 F.2d 426, 427 (2d Cir. 1967). In view of this situation, coupled with the absence of a further motion by the plaintiff to disqualify Frank, the Court permitted him to remain as Flair's counsel. However, the Court denied Frank's application to testify at the trial, based on his prior certification stating that he would not testify as a witness in this case.


This opinion and order includes the Court's findings of fact and conclusions of law as required by Fed.R.Civ.P. 52(a). See Rosen v. Siegel, 106 F.3d 28, 32 (2d Cir. 1997); Colonial Exchange Ltd. Partnership v. Continental Casualty Co., 923 F.2d 257 (2d Cir. 1991). During this discussion, the Court will make the necessary findings of fact.

  A. First Cause of Action — Was There a Valid Written

The plaintiff contends that there was in existence a written contract (Plf.Ex.4). As to duration, this agreement stated that it was "for the period July 1, 1989 to June 30, 1990, and thereafter by mutual agreement." The contract was dated: "Agreed this ____ day of May, 1989," was unsigned by Landis, and, as to Flair, it appears to be signed by "JGB Stiles." The second page of the contract appears as follows:

  Agreed this ____ day of May, 1989.
  By: _______________________________
  By:           JGB Stiles

Alan Mac Hardie, the Landis Product Development Manager, related the facts concerning Flair's supply of valves to Landis and the Honeywell patent infringement claim. With regard to the alleged written agreement, Mac Hardie testified that he found a "copy" in April 1996 by searching in an old company archive area. Significantly, Mac Hardie testified that he never saw the original contract and did not know if it ever existed. Further, Mac Hardie was not aware of anyone in the company who actually saw the original contract. At trial, the plaintiff entered in evidence Plf. Ex. 4, what purported to be the "contract" between the parties. This document consists of two pages titled "agreement," together with eight annexed documents. Mac Hardie did not recall whether these documents were actually annexed to the "agreement" when he found it. Mac Hardie stated that he looked for the original contract for one month and in 200 or 300 boxes of records.

According to Mac Hardie, the signature on the contract appeared to be "J.G.B. Stiles." He stated, however, that he did not know if the signature was that of John Stiles, a representative of Flair. Mac Hardie further testified that he met John Stiles once at the Landis office. He candidly conceded that he could not conclude that Stiles could bind Flair. According to Mac Hardie, Stiles was the U.K. agent or "an ...

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