The opinion of the court was delivered by: Leisure, District Judge.
Gianni Versace, S.p.A. seeks an order, pursuant to Federal Rule
of Civil Procedure 70, Local Civil Rule 83.9, and this Court's
inherent power, finding defendants Alfredo Versace and Foldom
International (U.S.A.), Inc. in civil contempt for violating a
preliminary injunction entered by the Honorable Sidney H. Stein,
United States District Judge, in Civil Action No. 98-0123(SHS)
(the "Foldom Action"). In addition, Gianni moves this Court for
leave to amend its answer, counterclaim, and third-party
complaint in Civil Action No. 96-9721(PKL) (the "A.V. Action").
following reasons, Gianni's application for contempt sanctions is
granted with respect to Alfredo Versace and denied with respect
to Foldom International (U.S.A.), Inc., and its motion for leave
to amend its pleadings is granted.
Gianni Versace, S.p.A. ("Gianni") is a world-famous design
house founded in the 1970s by the late Italian designer, Mr.
Gianni Versace. Gianni owns a number of famous trademarks
incorporating the name "Versace," as well as its signature
"Medusa" trademarks. A.V. By Versace, Inc. ("A.V.") is a
manufacturer of clothing and athletic shoes bearing the
trademarks "A.V. By Versace" and "Alfredo Versace," pursuant to
an alleged license with Alfredo Versace ("Mr.Versace"), an
Italian citizen and United States resident. Mr. Versace has also
been accused of marketing jeans and other items of clothing, as
well as cigarettes, in conjunction with codefendant Foldom
International (U.S.A.), Inc. ("Foldom"), through the use of
various marks confusingly similar to trademarks registered by
Gianni in the United States. The parties filed separate lawsuits
in December 1996 and January 1998, which were later consolidated
by this Court. See A.V. by Versace, Inc. v. Gianni Versace,
S.p.A., No. 96 Civ. 9721, 1998 WL 832692 (S.D.N.Y. 1998), at *1.
The facts underlying the A.V. Action have been set forth in
greater detail in this Court's January 28, 1997 Memorandum Order,
A.V. by Versace v. Gianni Versace, S.p.A., 1997 WL 31247, at *1
(S.D.N.Y. Jan. 28, 1997), familiarity with which the Court
assumes. In December 1996, A.V. commenced the A.V. Action after
its customer, Kinney Shoe Corporation ("Kinney"), received a
cease and desist letter from Gianni's attorneys alleging that
Kinney's sales of "A.V. By Versace" and "Alfredo Versace"
clothing and shoes infringed various Gianni trademarks. As to
Gianni, A.V. sought (1) declaratory relief, declaring that its
products do not infringe Gianni's registered trademarks; (2)
injunctive relief, enjoining Gianni from sending further "cease
and desist" letters to A.V.'s customers; and (3) damages, under
theories of unfair competition and tortious interference with
contract. See id. Against Mr. Versace, A.V. requested (1)
declaratory relief, ruling that (a) it has the sole right to use
the mark "Alfredo Versace," and (b) if the mark is registered in
the United States, it must be assigned the registration; and (2)
compensatory and punitive damages. See id.
On January 28, 1997, this Court denied A.V.'s request for a
preliminary injunction against the two defendants that would have
prohibited both from using the mark "Alfredo Versace," based on
A.V.'s failure to demonstrate a likelihood of irreparable harm.
See id. at *2-3. Gianni subsequently filed counterclaims, a
cross-claim, and third-party claims of trademark infringement and
unfair competition against A.V. and third-party defendants
Anthony J. Pelligrino ("Pelligrino") and Patrick Marano
("Marano") (collectively, the "third-party defendants").*fn1
See A.V., 1998 WL 832692, at *1.
II. The Foldom Action and Judge Stein's Preliminary
On January 8, 1998, after sending another "cease and desist"
letter to Mr. Versace's counsel and to Foldom, Gianni filed a
separate lawsuit against Mr. Versace and Foldom, alleging
trademark infringement, unfair competition, and trademark
dilution in violation of the Lanham Act, 15 U.S.C. § 1114(1),
1125(a), and 1125(c); trademark dilution, pursuant to N.Y. Gen.
Bus. Law § 360-l; and trademark infringement and unfair
competition under New York
common law. See Foldom Compl. ¶ 1. In short, Gianni claimed
that Mr. Versace and Foldom were manufacturing and selling
products that infringed Gianni's registered trademarks, or
licensing or franchising such infringing trademarks. See id. ¶
17. These products allegedly included men's and women's suits,
jeans, tee-shirts, sweaters, active wear, handbags, leather
goods, and packaging bearing the names "AV Versace," "Versace by
A.V.," or "Alfredo Versace." Id. ¶ 18. Of specific displeasure
to Gianni was an advertisement that appeared in the November 12,
1997 issue of Women's Wear Daily, soliciting persons to license
or franchise trademarks from "AV Versace." Id. ¶ 18. By its
complaint, Gianni sought a preliminary injunction enjoining Mr.
Versace and Foldom from using "its trademarks or trade dress or
any designation so similar as likely to cause confusion, mistake
or deception," including among others, "Alfredo Versace," "A.V.
by Versace," "Versace by A.V." and "A. Versace," id. ¶ A, as
well as compensatory and punitive damages, id. ¶¶ C, E-G. The
case was initially assigned to the Honorable Sidney H. Stein,
United States District Judge.
On February 4, 1998, Judge Stein granted Gianni's request for a
preliminary injunction, issuing his decision from the bench.
See Max Aff. ¶ 8; Prelim. Inj. at 1; see also Order to Show
Cause, dated Jan. 12, 1998. During that hearing, defense counsel
raised the issue of the injunction's extraterritorial
THE COURT: . . . [Defendants' attorney] Mr. Feldman
has raised separate issues in the papers in regard
to my ability to adjudicate these issues in regard
to Pakistan and Austria, so forth.
MR. MAX: So long as he is here and licensing it
THE COURT: If the license is entered into here, I do
MR. MAX: If he is an actor here, if he wants to move
to Austria and do licensing there, I certainly
would agree with your Honor that we have no
jurisdiction over him. But as I believe the letter
that Mr. Feldman passed up at the last hearing
indicates, which dealt with correspondence between
Mr. Versace [in] New York and someone in Italy,
clearly the spider at the middle of the web is here
in New York, so long as he is licensing and
franchising his trademark from New York.
THE COURT: It is a jurisdictional matter. I think you
are right. I will let that be. I will let Mr.
Feldman convince me otherwise. To the extent that
he is directing things be done, I guess that is a
pretty basic contract matter, I have jurisdiction
to stop him from doing things.
Feb. 4, 1998 Conf. Tr. at 20-21. Yet, Judge Stein declined to
rule definitively on the question, and instead asked the parties
to provide him with case law, which he expected would clarify the
legal principles involved. See id. at 24. He did, however,
state that "[i]n the absence of [a clear holding from the Second
Circuit], the proposed preliminary injunction should cover
licensing in the States. For licenses to be entered abroad, let's
see what the cases say." Id.
Between February 4 and February 9, 1998, both sides submitted
letter brief; and proposed orders arguing their respective
positions on the issue of the Court's power to reach activities
directed from within the United States that take place outside
the country. See Max Aff. ¶ 14-17 & Exhs. B-D. On February 6,
1998, the attorneys for Foldom and Mr. Versace proposed a change
to paragraph 11 of the proposed order (concerning publicity),
which would have added the phrase "within the United States."
See Proposed Prelim. Inj. at 7 (Max Aff., Exh. D). Counsel
contended that his proposal was meant "to clarify the issue that
this order is not preventing our client from conducting
businesses in foreign countries which may allow him to use his
name or a variation
thereof as a trademark." Letter from John F. Kaley, Esq. to the
Court, dated Feb. 6, 1998, at 2 (Max Aff., Exh. D). Later that
day, counsel for Gianni wrote a letter to the Court, objecting to
the proposed change, see id. at 2-4, to which counsel for
defendants replied three days later, see Letter from Stephen E.
Feldman, Esq. to the Court, dated Feb. 9, 1998, at 2-3 (Max Aff.,
Exh. D), and which in turn provoked a surreply from Gianni, see
Letter from Max to the Court, dated Feb. 10, 1998, at 2-3 (Max
Aff., Exh. D).
Six days after issuing its oral decision, on February 10, 1998,
the Court entered a preliminary injunction, which ordered, inter
[d]efendants, their officers, agents, servants,
employees, representatives, licensees, and attorneys,
and all persons in active concert or participation or
privity with any of them who receive actual notice of
this Order, are hereby enjoined, pendente lite, in
the United States of America*fn2 from registering,
attempting to register, using, advertising,
marketing, licensing, franchising, promoting or
authorizing the use of any of the Versace Trademarks,
Versace Trade Dress, or the Medusa Designs,*fn3 as
or as part of a trademark, service mark, business
name, or trade name for any product, service, or
business, or in such a manner as to create the
impression that such name, logo or symbol is the
trade name or business name of any designed,
manufacturer, distributor, retailer or other business
or trademark or service mark for any product or
service. . . .
Prelim. Inj., dated Feb. 10, 1998 ("Prelim.Inj.") ¶ 8 (Max Aff.,
Exh. E); see also id. ¶¶ 9, 10 (prohibiting Mr. Versace from
using his name as a trademark and restricting the use of his
name, other than to identify him as the designer of goods he
actually designed); id. ¶ 12 (prohibiting defendants from
attempting to register various marks and requiring that any
pending application be withdrawn or abandoned); id. ¶ 13
(prohibiting Mr. Versace from delegating or licensing rights or
obligations under the preliminary injunction, subject to limited
exceptions); id. ¶ 15 (ordering defendants to provide a copy of
the Order to "all present and former licensees, franchisees,
customers and distributors"). With the exception of paragraph 8,
however, no other provision in the Order — including paragraph 11
— includes any geographic limitation. See id.; Max Aff. ¶ 18.
Subsequently, in a letter dated March 25, 1998, counsel for the
two defendants requested a conference with Judge Stein to clarify
the scope of the preliminary injunction with regard to its
extraterritorial application. Letter from Kaley to the Court,
dated Mar. 25, 1998, at 1-3 (Max. Aff., Exh. F). Counsel inquired
Under the [preliminary injunction], may Alfredo
Versace sign a license agreement while present in his
office in New York licensing a foreign entity or
concern (e.g., a Japanese or Korean company) to
distribute goods bearing the trademark AV Versace or
Alfredo Versace outside the United States, in, for
example, a country where Alfredo Versace has rights
to manufacture and distribute goods bearing either of
Id. at 2. Evidently, however, Judge Stein felt there was no
need for such a conference, as, on April 10, 1998, by Memorandum
Endorsement, he denied Mr. Versace's
"request for `clarification.'" Id. at 1. Gianni now insists
that counsel's letter "posed a question that the Court had
definitively answered at both the February 4, 1998 hearing and in
the February 10, 1998 order." Max. Aff. ¶ 19. Naturally, Mr.
Versace disputes Gianni's characterization of its efforts to seek
clarification as an attempt to "create ambiguity where none
existed." Kupferman Aff. ¶ 14.
On July 30, 1998 Judge Stein stayed the Foldom Action,
pending the resolution of the A.V. Action. In that Order, Judge
Stein relied on his determination that Gianni's cross-claim in
the A.V. Action was "`broad enough to encompass the basic
allegations of trademark infringement that are alleged in [the
Foldom A]ction.'" A.V., 1998 WL 832692, at *1 (quoting Order
of July 30, 1998, Gianni Versace, S.p.A. v. Versace, 98 Civ.
III. Consolidation and the Motions Before the Court
Upon Gianni's motion, on December 1, 1998, this Court
consolidated the A.V. Action with the Foldom Action,
concluding that "[m]any common questions of both law and fact
exists between the [two actions]." A.V., 1998 WL 832692, at *2.
The Court further recognized that "[t]he complaint filed by
[Gianni] in the Foldom Action seeks similar relief [to that of
its cross-claim in the A.V. Action], overlapping substantially
with the cross-claim." Id. In addition, the Court lifted ...