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
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
Most of the agreements here in issue, such as the licensing
agreements, are governed by New York law. See Men's
Accessories License Agreement, § 18.7; Jeanswear License
Agreement, § 14.7; Store License Agreement, § 16(g). Under New
York law, parties to a commercial contract do not ordinarily
fiduciary relationship to one another unless they specifically
so agree. See, e.g., Northeast Gen. Corp. v. Wellington Adver.,
Inc., 82 N.Y.2d 158, 160-65, 604 N.Y.S.2d 1, 624 N.E.2d 129
(1993); see also Mia Shoes, Inc. v. Republic Factors Corp.,
1997 WL 525401, at *2 (S.D.N.Y. Aug. 21, 1997) (applying New
York law). This is as true in the case of a licensing agreement
as in any other case. See, e.g., Surge Licensing, Inc. v.
Copyright Promotions Limited, 258 A.D.2d 257, 685 N.Y.S.2d 175,
176 (1st Dep't, 1999).
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
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 ...