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December 5, 2000


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


By order dated August 29, 2000 the Court granted those portions of defendants' then-pending motion under Rules 12(b)(6) and 12(f), Fed.R.Civ.P. that sought dismissal in their entirety of Counts Four, Five, and Sixteen of plaintiffs' Complaint and that sought as to Count Eight of the Complaint dismissal of defendants Linda Wachner and The Warnaco Group, Inc. and a stay pending arbitration as to defendant Warnaco, Inc.*fn1 This Memorandum explains the reasons for these rulings.

The somewhat complicated contractual relations between the parties chiefly derive from a series of agreements they entered into on March 14, 1994 (the "March 1994 Agreements") that were designed to apportion between them the rights to exploit various Calvin Klein trademarks.*fn2 First, plaintiff Calvin Klein, Inc. ("CKI") entered into a "Trust Agreement" with the Wilmington Trust Company that established the Calvin Klein Trademark Trust ("CK Trust"), which is co-plaintiff here. The Trust Agreement was also "Accepted and Agreed to" by defendant Linda Wachner in her capacity as principal officer of one of the companies used to effectuate some of the transfers undertaken pursuant to the March 1994 Agreements. Pursuant to a "World Wide Transfer Agreement," CKI then conveyed the trademarks "Calvin Klein," "CK/Calvin Klein," "CK/Calvin Klein Jeans," and "CK" (collectively the "Marks") to the CK Trust in return for three ownership certificates: a Class B certificate representing use of the Marks on and in connection with women's intimate apparel, a class C certificate representing use of the Marks on and in connection with men's underwear, and a Class A certificate representing use of the Marks on and in connection with all other products. Under an "Acquisition Agreement" between CKI and defendants The Warnaco Group, Inc. ("Warnaco Group") and its subsidiary Warnaco, Inc. ("Warnaco"), CKI then sold the Class B and Class C certificates to Warnaco for $58,500,000. Additionally, under a "Men's Accessories License Agreement," CKI gave Warnaco an exclusive license to use the Marks on and in connection with the manufacture, distribution, and marketing of men's belts and accessories. CKI, the CK Trust, and Warnaco also entered into a "Quality Assurance Agreement" to help maintain the value of the Marks and an "Administration Agreement" to provide for the administration of the other March 1994 Agreements.

Thereafter, on August 4, 1994, CKI entered into a "Jeanswear License Agreement" with defendant Calvin Klein Jeanswear Co. ("Calvin Klein Jeanswear"), a subsidiary of defendant Designer Holdings, Inc., ("Designer Holdings") giving Calvin Klein Jeanswear an exclusive license to sell jeans and jean-related items bearing one or more of the Marks. Further, on October 31, 1996, CKI entered into a "Store License Agreement" with defendant Outlet Holdings, Inc. ("Outlet Holdings"), an affiliate of Calvin Klein Jeanswear, giving Outlet Holdings the right to maintain and operate "Calvin Klein Outlet Stores" as long as the Jeanswear License Agreement remained in effect. Finally, in late 1997, Warnaco Group acquired Designer Holdings and thereby obtained the right to act as licensee under both the Jeanswear License Agreement and the Store License Agreement.

Count Four of the Complaint premises that by virtue of these various agreements defendants Warnaco, Warnaco Group, and Linda Wachner (principal officer of various of the defendants) owe fiduciary duties to plaintiffs CKI and the CK Trust, which these defendants allegedly breached through bad business practices, material misrepresentations, and fraud. See Complaint, ¶¶ 127-141. In fact, however, none of these agreements, singly or in tandem, imposes upon these defendants anything more than ordinary contractual duties, and hence Count Four must be dismissed.

In certain limited and unusual circumstances there may be special factors that create fiduciary relationships between contracting commercial parties, such as, for example, when one party's superior position or superior access to confidential information is so great as virtually to require the other party to repose trust and confidence in the first party. See, e.g., Feigen v. Advance Capital Management Corp., 150 A.D.2d 281, 541 N.Y.S.2d 797, 799 (1st Dep't, 1989); ADT Operations v. Chase Manhattan Bank, N.A., 173 Misc.2d 959, 662 N.Y.S.2d 190, 192 (N.Y.Sup.Ct., New York County, 1997); BBS Power Mod, Inc. v. Prestolite Electric, Inc., 71 F. Supp.2d 194, 203 (W.D.N.Y. 1999) (applying New York law). But nothing of that sort is here alleged, nor, given the size and sophistication of the contracting parties, could it be.

Rather, so far as the New York contracts are concerned, plaintiffs rely on largely conclusory allegations that in entering into the March 1994 Agreements the parties intended to establish a "close working relationship" that, by its very nature, would involve obligations of mutual trust. See, e.g., Complaint ¶¶ 22, 132. Under New York law, however, "[a] conventional business relationship, without more, does not become a fiduciary relationship by mere allegation." Oursler v. Women's Interart Ctr., Inc., 170 A.D.2d 407, 566 N.Y.S.2d 295, 297 (1st Dep't, 1991). Nor can allegations of subjective intent substitute for an absence of objective manifestation of fiduciary obligation in the contracts in question. See, e.g., Northeast Gen. Corp., 82 N.Y.2d at 162, 604 N.Y.S.2d 1, 624 N.E.2d 129.

Plaintiffs' fallback position is to seek a basis for defendants' alleged fiduciary obligations under Delaware law, and specifically under the Delaware Business Trust Act, Del.Code. Ann. tit. 12, § 3801 et seq. (1974 & Supp. 1999), which governs the Trust Agreement.

However, unlike an ordinary property trust that is instinct with fiduciary obligation, a "business trust" is simply an alternative form of business organization, see generally Morrissey v. Commissioner of Internal Revenue, 296 U.S. 344, 357, 56 S.Ct. 289, 80 L.Ed. 263 (1935), designed, especially in Delaware, to give sophisticated commercial parties unusual flexibility in structuring their ventures, see R. Franklin Balotti and Jesse A. Finkelstein, The Delaware Law of Corporations and Business Organizations, § 25.1. Moreover, none of the defendants here is named as a trustee under the Trust Agreement. Rather, the Trust Agreement treats the transferees of the Class A, Class B, and Class C Certificates — CKI and Warnaco — as beneficial owners of the their respective portions of the corpus of the CK Trust. But no provision of the Delaware Business Trust Act provides that beneficial owners of a Delaware business trust have fiduciary obligations to each other.

Plaintiffs, however, contend that a beneficial owner of a Delaware business trust who has some power (as the beneficial owners here arguably did) to give directions to the trustee assumes thereby some of the fiduciary responsibilities of a trustee. They support this argument chiefly by reference to § 3806(a) of the Delaware Business Trust Act, which reads as follows:

Del.Code Ann. tit. 12, § 3806(a) (1974 & Supp. 1999). Plaintiffs argue that the last sentence of § 3806(a) implies that but for a disclaimer in the governing instrument of a business trust, a beneficial owner with power to give direction to the trustee of the trust has fiduciary duties to other beneficial owners. This, however, is hardly the only logical reading: for example, the last sentence might simply confer on the parties the ability, if they wanted to exercise it, to negate conclusively any future risk that a court might someday seek to impose on the parties special legal duties or liabilities (not necessarily of a fiduciary nature) where none were intended.

Put another way, the central difficulty with plaintiffs' argument as that it assumes the point in controversy, i.e., the existence of a default rule that imposes fiduciary duties on beneficial owners of a Delaware business trust, at least where they exercise some directive authority. While, as plaintiffs contend, the last sentence of § 3806(a) does not negate the possible existence of such a default rule, neither does it affirm it: rather, it is simply silent on the matter. Without more explicit authority under Delaware law, the Court will not presume to find through silent implication an affirmation in § 3806(a) of anything as substantial as the imposition ...

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