Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

SYKEL ENTERPRISES, INC. v. PATRA

United States District Court, S.D. New York


March 31, 2004.

SYKEL ENTERPRISES, INC., Plaintiff, -against- PATRA, LTD., PAT DIPIETRANTONIO, individually, THE MAY DEPARTMENT STORES COMPANY, ABC RETAILER CORPORATIONS numbered 1-50, said names being fictitious and unknown, and XYZ PRINTER CORPORATIONS, numbered 1-50, said names being fictitious and unknown, Defendants

The opinion of the court was delivered by: THOMAS GRIESA, Senior District Judge

Opinion

This is an action for copyright infringement and fraud brought by a fabric distributer against garment manufacturers and retailers pursuant to the Copyright Act, 17 U.S.C. § 101 et seq., and state law. Plaintiff Sykel Enterprises, Inc. ("Sykel") is a New York corporation that imports and distributes fabric patterns and printed fabric. Defendant Patra, Ltd. ("Patra") is a New York corporation doing business as a manufacturer of women's garments. Defendant Pat DiPietrantonio ("DiPietrantonio") is the owner of Patra. Defendant The May Department Stores Company ("May") is the owner and operator of various department stores throughout the country, including Lord & Taylor. Also named as defendants in the action, but not relevant to the current motion, Page 2 are unknown retailer defendants, ABC Retailer Corporations, and unknown printer defendants, XYZ Printer Corporations.

Patra, May, and DiPietrantonio move to compel arbitration of Sykel's copyright and fraud claims against Patra, to dismiss Sykel's copyright claims against Patra and May insofar as they seek attorneys' fees and costs, and to dismiss Sykel's fraud claim against DiPietrantonio. The motion to compel arbitration is denied, the motion to dismiss the attorney's fees and costs portions of the copyright claims is granted in part, and the motion to dismiss the DiPietrantonio fraud claim is granted.

  THE COMPLAINT

  The complaint alleges that Sykel is a bulk fabric distributer whose business includes the importation of fabric patterns, the printing of those patterns on fabric, and the sale of the printed fabrics to garment manufacturers. The complaint states that upon purchasing a fabric pattern from a designer, Sykel also acquires all rights associated with the pattern, including but not limited to its copyright. Sykel's sales force solicits and is solicited by manufacturers throughout the country to meet and present samples of fabrics bearing patterns owned by Sykel.

  The complaint alleges that on or about November 27, 2001 Sykel purchased a pattern titled ROMA 3465 JOSS 1025 ("Pattern 3926") from a French designer. The complaint alleges that in Page 3 addition to the pattern itself, Sykel purchased all of the designer's rights in the pattern.

  The complaint alleges that in or around April 2002 Patra contacted John Feeney, a Sykel salesman, and expressed interest in viewing patterns and fabrics appropriate for evening dresses known in the industry as "after-five" dresses. Subsequently, Feeney met with Patra's in-house designer and presented several appropriate patterns and fabrics, including Pattern 3926.

  The complaint alleges that soon after this meeting, a representative of Patra contacted Feeney to inform him that Patra was interested in Pattern 3926, and to request sample yardage of Pattern 3926 printed on espresso (brown) stretch velvet. On or about April 30, 2002, Sykel shipped four yards of Pattern 3926 printed on espresso stretch velvet, and two yards of solid espresso stretch velvet to Patra. This transaction was memorialized in a sales agreement dated April 26, 2002. At the bottom of the agreement was a paragraph stating, "This contract is subject to all terms and conditions on this and the reverse side thereof, including the provisions of paragraph 8 providing for arbitration of all disputes."

  The complaint attaches the face of this document, but does not attach the reverse side, which is said to contain the terms of the contract. This was appropriate as far as the plaintiff was concerned, because plaintiff is not suing under the sales Page 4 contracts per se. However, defendants in their motion papers did not supplement the record by including this reverse side with the terms of the contract. As will be described later, the issue of whether Patra is or is not entitled to arbitration depends upon whether claims in this case do or do not have a relationship to the terms of the contract. Although Patra seeks arbitration, it has not furnished the contracts itself.

  A Sykel sales invoice dated April 30, 2002 was also issued. At the bottom of the invoice were several "fine print" terms, including an arbitration clause: "All controversies arising out of, or relating to this contract or any modification thereof or the breach thereof shall be settled by arbitration, in New York, before and in accordance with the Rules of the American Arbitration Association." The parties treat this as the relevant arbitration clause in the motion papers.

  The complaint alleges that Patra contacted Sykel on three additional occasions — in or around the beginning of May 2002, in or around the middle of May 2002, and in or around June 2002 — to reiterate interest in Pattern 3926 and request that additional sample yardage of the pattern printed on espresso stretch velvet be shipped. Sykel complied on each occasion, shipping eleven additional yards of Pattern 3926. Each of these transactions is memorialized in sales contracts identical to that described above — one dated April 30, 2002, another May 22, 2002, and the final Page 5 contract bearing no date. Each transaction also was memorialized in an invoice identical to the invoice described above, dated May 7, 2002, May 22, 2002, and July 16, 2002.*fn1

  Thus, between April 30, 2002 and July 16, 2002 Patra received from Sykel a total of fifteen yards of Pattern 3926 printed on espresso stretch velvet.

  The complaint alleges that soon after Patra received the final shipment of Pattern 3926, DiPietrantonio contacted Feeney and inquired whether it was possible to obtain more solid espresso stretch velvet to match the fabric on which Pattern 3926 had been printed for prior shipments. Feeney replied that the solid color was available. Later during the same conversation DiPietrantonio requested a price quote for Pattern 3926 printed on espresso stretch velvet, as had been previously shipped. The complaint states that Feeney furnished DiPietrantonio with the requested price quote, and that DiPietrantonio indicated that he would let Feeney know whether he was interested in placing an order. The complaint does not specify whether the furnishing of the price quote and DiPietrantonio's final remarks occurred during or subsequent to the above-described telephone conversation.

  It is relevant to note that the statements described above, Page 6 and contained in paragraphs 27 through 29 of the complaint, are presented differently in paragraphs 80 and 81 of the complaint. While paragraphs 27 through 29 of the complaint, describing the conversation between DiPietrantonio and Feeney, contain no allegations other than those set forth above, paragraph 80 of the complaint states that DiPietrantonio represented to Sykel that he "was interested in placing an order with the Plaintiff for espresso stretch velvet bearing Pattern 3926." Paragraph 81 states that "DiPietrantonio affirmatively represented to Plaintiff that [he] was interested in placing an order with Plaintiff for espresso stretch velvet bearing Pattern 3926." These statements are clearly different from the complaint's earlier allegations, and it is unclear whether paragraphs 80 and 81 add additional description of the telephone conversation between Feeney and DiPietrantonio, refer to a different conversation, or simply extrapolate from the comments alleged to have been made in the conversation described above.

  The complaint alleges that in the weeks following the conversation with DiPietrantonio, Feeney was in contact with an unnamed Patra designer regarding potential orders of patterns other than Pattern 3926. Feeney inquired of this designer whether Patra intended to place an order for Pattern 3926. The designer indicated to Feeney that Patra decided not to include Pattern 3926 in its after-five line. Page 7

  The complaint alleges that Sykel regularly conducted inspections of national retail department stores to ascertain whether garments with patterns or designs owned by Sykel were being sold without Sykel's authorization. In or around November 2002 a representative of Sykel making such an inspection of a Lord & Taylor store in Manhattan noticed a dress for sale made from fabric printed with Pattern 3926. Sykel subsequently contacted DiPietrantonio, who explained that, although DiPietrantonio had wanted to order Pattern 3926 for the after-five line, Patra had rejected the price quote given by Feeney. DiPietrantonio stated that Patra had ordered Pattern 3926 printed on espresso stretch velvet from another company.

  On January 9, 2003 Sykel registered its copyright in Pattern 3926 with the United States Copyright Office.

  On May 13, 2003 Sykel filed a complaint alleging that the conduct of Patra, May, and unknown retailers and printers violated Sykel's exclusive rights as owner of the copyright in Pattern 3926. The complaint seeks an award of costs, attorney's fees, and disbursements on the copyright counts.

  The complaint also alleges that Patra and DiPietrantonio committed fraud by inducing Sykel to send samples of Pattern 3926 for the sole purpose of enabling Patra to copy the pattern and thereby infringe Sykel's copyright. With respect to DiPietrantonio, the complaint alleges that DiPietrantonio made Page 8 numerous misrepresentations to Sykel, including but not limited to stating that DiPietrantonio was interested in placing an order with Sykel for espresso stretch velvet bearing Pattern 3926. The complaint alleges that DiPietrantonio made these misrepresentations with the intention of procuring samples of Pattern 3926 that Patra would then illegally copy. The complaint also states that Sykel relied on the misrepresentations made by DiPietrantonio in providing Patra with the samples of Pattern 3926.

  DISCUSSION

  I. Motion to Compel Arbitration

  Defendants argue that the arbitration clauses contained in the above-described sales agreements require that Sykel's copyright and fraud claims against Patra be arbitrated. Sykel, on the other hand, argues that arbitration of these claims was not contemplated by the sales agreements between Sykel and Patra because the contracts themselves, and performance thereof, are not at issue in the claims.

  A threshold issue to be addressed is whether federal or state law governs the arbitration clause in question. The Federal Arbitration Act, 9 U.S.C. § 1 et seq. applies only to arbitration clauses contained in "contracts evidencing a transaction involving commerce," meaning "commerce among the several States or with foreign nations." 9 U.S.C. § 1 and 2. Page 9 By contrast, if the arbitration clause is contained in a contract that does not involve interstate commerce, Article 75 of the New York C.P.L.R. governs the court's interpretation of the clause. See Bernhardt v. Polygraphic Co. of America, 350 U.S. 198 (1956); 200 East 87th Street Associates v. MTS, Inc., 793 F. Supp. 1237 (S.D.N.Y. 1992). Although both parties raise this issue, they take no position on it, citing both federal and New York law in the pleadings on the motion, and arguing that both federal and New York law equally support both of their positions.

  The Court assumes, without deciding, that the FAA, and therefore federal law, governs interpretation of the arbitration clause. The complaint contains evidence that Pattern 3926 moved in interstate commerce prior — namely, from a French designer to Sykel — prior to its sale from Sykel to Patra. This fact would appear sufficient to bring the arbitration clause within the reach of the FAA, under the Supreme Court's expansive interpretation of the phrase "involving commerce." See Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265 (1995). In Allied-Bruce, the Court concluded that a contract should be deemed to be "involving commerce" if the transaction to which it pertains in fact involved interstate commerce; whether the parties contemplated engaging in interstate commerce in executing the contract was irrelevant. Id. at 279-81. Moreover, the Supreme Court concluded that the fact that the materials used by Page 10 one party to the contract to carry out its obligations moved in interstate commerce prior to performance of the contract was relevant to determining that the contract involved commerce. Id. at 281. Here, as noted above, Pattern 3926 was purchased by Sykel from a French vendor before its resale to Patra.

  In any case, it appears that the Court's analysis of the scope of the arbitration clause in the instant case would be identical, whether conducted under the FAA of under New York. Both the FAA and the C.P.L.R. have been interpreted as evincing a strong policy favoring arbitration, and New York courts have expressed an intention to, as much as possible, bring New York arbitration law in line with federal arbitration law. See Weinrott v. Carp, 32 N.Y.2d 190, 199-200 & n.2 (1973).

  In determining whether a claim is within the scope of an arbitration clause under the FAA, the court's first inquiry must be whether the clause is broad or narrow. See Prudential Lines. Inc. v. Exxon Corp., 704 F.2d 59, 63 (2d Cir. 1983). If the clause is broad, then there is a presumption that the claims are arbitrable. Id. at 64. Here, the clause in question calls for arbitration of " [a]11 controversies arising out of, or relating to this contract or any modification thereof or the breach thereof." This language of "arising out of or relating to" has been classified by the Second Circuit as "the paradigm of a broad clause." Mehler v. Terminix International Co. L.P., 205 F.3d 44, Page 11 49 (2d Cir. 2000); Collins & Aikman Products Co. v. Building Systems, Inc., 58 F.3d 16, 20 (2d Cir. 1995); Weinrott, 32 N.Y.2d at 196. Thus, the Court must presume that Sykel's claims are arbitrable.

  That presumption can be rebutted, however, if "the dispute is in respect of a matter that, on its face, is clearly collateral to the contract." Id. at 23. If it appears that the factual allegations in the complaint do not "touch matters" covered by the agreement in which the arbitration clause is contained, see Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 846 (2d Cir. 1987), then the court should engage in the following analysis, elaborated by the Second Circuit:

[A] court should test the presumption by reviewing the allegations underlying the dispute and by asking whether the claim alleged implicates issues of contract construction or the parties' rights and obligations under it. If the answer is yes, then the collateral dispute falls within the scope of the arbitration agreement; claims that present no question involving construction of the contract, and no questions in respect of the parties' rights and obligations under it, are beyond the scope of the arbitration agreement.
Collins & Aikman, 58 F.3d at 23; see also Associate Brick Mason Contractors of Greater N.Y., Inc. v. Harrington, 820 F.2d 31, 35 (2d Cir. 1987) ("We will order arbitration if the arbitration clause is broad and if the party seeking arbitration has made a claim that on its face is governed by the contract.").

 A. The Copyright Claim

  To prevail on its claim of infringement, Sykel must prove Page 12 two elements: That it owned a valid copyright, and that Patra's conduct amounted to infringement of that copyright. Yurman Design. Inc. v. PAJ, Inc., 262 F.2d 101, 108-09 (2d Cir. 2001). As noted above, Patra has not submitted the terms of the sales contracts. Therefore, it is impossible to examine the contracts themselves. However, it would appear that Sykel's copyright claim does not "touch matters" contained within the sales contracts between Sykel and Patra, i.e., the purchase and delivery of fabric. Thus, the Court must inquire into whether the facts underlying Sykel's claim implicate issues of contract construction or the parties' contractual obligations.

  Sykel's copyright claim alleges that Sykel owned copyrighted material, namely Pattern 3926, that Patra purchased fabric printed with this pattern, and that Patra proceeded to copy the fabric in infringement of Sykel's copyright. These allegations do not bear upon the terms of or obligations under the sales contracts. The contracts between Sykel and Patra are not alleged to affect or in any way speak to Sykel's ownership of the copyright in Pattern 3926. Nor is either party's performance of the sales contracts, which were fully executed, at issue in Sykel's claims. Sykel alleges merely that Patra's purchase of Sykel's copyrighted pattern was the means by which Patra infringed the copyright. Thus, this case is distinguishable from those cited by defendants, in which claims under the Copyright Page 13 Act were submitted to arbitration, where the terms of the contract itself affected whether an unauthorized infringement had taken place. See Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108 (2d Cir. 1993).; Kamakazi Music Corp. v. Robbins Music Corp., 684 F.2d 228 (2d Cir. 1982); JVN Music, Inc. v. Rodriguez, No. 99 Civ. 11889, 2000 WL 827702 (S.D.N.Y. June 27, 2000).

  Therefore, Sykel's claims of copyright infringement against Patra are not governed by the arbitration clauses in the sales contracts. Defendants' motion to compel arbitration of the fraud claim against Patra is denied.

 B. The Fraud Claim

  To prevail on its claim that Patra obtained samples of Pattern 3926 in order to defraud Sykel, Sykel must prove five elements: a material misrepresentation or omission of fact by Patra, knowledge of the falsity of the misrepresentation, intent to defraud, reasonable reliance by Sykel, and damage to Sykel. See Schlaifer Nance & Co., Inc. v. Estate of Warhol, 194 F.3d 323, 336 (2d Cir. 1999). Again, although the terms of the sales contracts are not available for examination by the Court, these issues do not appear touch matters contained within the sales contracts between Sykel and Patra. Sykel does not contend that the contracts themselves were fraudulently entered or executed.

  The question, then, is whether the facts underlying Sykel's claim implicate issues of contract construction or the parties' Page 14 contractual allegations. The complaint alleges that Patra defrauded Sykel by misrepresenting to Sykel that Patra was interested in placing an order for espresso stretch velvet bearing Pattern 3926, when in fact Patra was merely obtaining samples of the material for purposes of copying it. As with Sykel's copyright claim, the only relevance of the sales contracts to these allegations is the bare undisputed fact that the contracts were entered into and fully executed. Sykel's allegation that Patra's purchase of Pattern 3926 was the modus operandi of Patra's fraud involves no questions of either contract interpretation or the parties' rights under the contracts.

  Defendants argue that Sykel's fraud claim essentially alleges fraud in the inducement, and therefore is governed by a consistent body of cases finding fraud in the inducement claims to be governed by broad arbitration clauses. See, e.g., Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 338 U.S. 395 (1967); Genesco, 815 F.2d at 854-55. However, Sykel's claim is distinguishable. The crux of a fraud in the inducement claim is that material misrepresentations made in the course of contractual dealings procured the participation of a party to the contract under false pretenses, thus rendering the contract voidable. In such a claim, both the terms of the contract and the course of performance of the contract itself are at issue. Page 15

  Here, by contrast, the terms and performance of the sales contracts are irrelevant to the misrepresentations alleged by Sykel and the reliance they allegedly induced. Sykel's claim "is in respect of a matter that . . . is clearly collateral to the contract." Collins & Aikman, 58 F.3d at 23.

  Because Sykel's claim does not present questions "involving construction of the contract, and no questions in respect of the parties' rights and obligations under it," it is beyond the scope of the arbitration clause. See Id. Therefore, defendants' motion to compel arbitration of the fraud claim-against Patra is denied.

  II. Attorney's Fees and Costs

  Defendants argue that Sykel's claims for copyright infringement against Patra and May should be dismissed to the extent that they request attorney's fees and costs.

  Sykel requests in counts 1 and 2 that the Court award "costs, reasonable attorney's fees, and disbursements . . . pursuant to 17 U.S.C. § 505." Section 505 of the Copyright Act provides that "[i]n any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof." 17 U.S.C. § 505. However, the Act also provides that a prevailing plaintiff is not entitled to attorneys' fees in an action for infringement of copyright "after first publication of Page 16 the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work." 17 U.S.C. § 412.

  Defendants rightly contend that Section 412 precludes Sykel from recovering attorney's fees because the alleged infringement by Patra and May occurred before January 9, 2003, the effective date of Sykel's copyright registration. However, there appears to be no statutory bar to Sykel's recovery of costs under § 505. Therefore, the motion to dismiss counts one and two with respect to the request for attorney's fees and costs is granted with respect to attorney's fees, and denied with respect to costs.

  III. The DiPietrantonio Fraud Claim

  DiPietrantonio moves to dismiss Sykel's fraud claim on the ground that Sykel has failed to plead reliance on DiPietrantonio's alleged misrepresentations, and on the alternative ground that Sykel has failed to plead its fraud claim with the particularity required by Fed.R. Civ. P. 9(b). This is the only claim brought against DiPietrantonio in his individual capacity. At this time, there are insufficient allegations in the complaint to support a claim of fraud against DiPietrantonio. This count is therefore dismissed, with leave to replead.

  CONCLUSION

  Defendants' motion to compel arbitration of the copyright and fraud claims against Patra is denied. Defendants' motion to Page 17 dismiss the copyright infringement claims with respect to the copyright infringement claims against Patra and May is granted with respect to attorneys fees, and is denied with respect to costs. Defendants' motion to dismiss the fraud claim against DiPietrantonio is granted.

  SO ORDERED


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.