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BANGKOK CRAFTS CORP. v. CAPITOLO DI SAN PIETRO

June 23, 2004.

BANGKOK CRAFTS CORPORATION, Plaintiff/Counterclaim Defendant,
v.
CAPITOLO DI SAN PIETRO IN VATICANO, Defendant/Counterclaimant. CAPITOLO DI SAN PIETRO IN VATICANO, Defendant/Counterclaimant, v. TREASURES OF ST. PETER'S IN THE VATICAN LTD., et al., Additional Counterclaim Defendants.



The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge

OPINION

The defendant Capitolo di San Pietro in Vaticano ("Capitolo") has moved under Rule 56, Fed.R. Civ. P., for partial summary judgment on its counterclaims against plaintiff Bangkok Crafts Corporation ("BCC"). Upon the following findings and conclusions, the motion is granted and the August 2000 agreement is declared void, the 1996 license properly terminated, and alternatively expired before its renewal.

Prior Proceedings

  BCC initiated this action against Capitolo in the Supreme Court of the State of New York, County of New York, and it was removed by Capitolo to this Court on January 2, 2003.

  BCC alleged that Capitolo vacated a license agreement dated August 28, 2000 (the "2000 license and February 8, 1996 one "1996 License"). Discovery proceed in the instant motion was filed on October 20, 2003 and heard and marked fully submitted on February 11, 2004. The Facts

  The facts are set forth in the Local Rule 56.1 Statement of Capitolo and in the opposing affidavit of John Loata ("Loata") and are not disputed except as noted.

  Capitolo is the chapter or clergy of St. Peter's Basilica in the Vatican City; its between 30 and 40 members are all priests in the Catholic Church, appointed by the Pope. From among the members, five Camerlenghi, or administrators, are appointed. The Camerlenghi are responsible for administering the day-to-day affairs of Capitolo, subject to the ultimate authority of the Capitolo members themselves.

  The Capitolo owns numerous valuable and unique works of art — predominantly crosses, chalices, communion trays, and other pieces used in religious services, as well as commemorative medal coins the "Works"). In 1996, the Capitolo's chief chancellor, or Camerlengo Maggiore, Monsignor Michele Basso ("Basso"), was approached by Loata on behalf of BCC regarding a license to manufacture and sell reproductions of the Works. On February 8, 1996, Loata and Basso executed a Promessa Di Contratto (the "Promessa"), written in Italian, setting forth the terms of the arrangement for BCC to manufacture and sell reproductions of the Works. A few months later, on May 8, 1996, Loata and Basso executed an English language license agreement (including the handwritten "amendments" thereto) (the "1996 License") under which Capitolo granted to BCC an exclusive right and license, effective is of February 8, 1996, to manufacture and sell reproductions of the Works ("Reproductions").

  The 1996 License required BCC to pay royalties to Capitolo equal to five percent of all net sales of the Reproductions on a quarterly basis within 30 days after the end of each quarter and be accompanied by a certified sales report. This typed amendment to Section 6 also permitted BCC to enter into sublicenses with unaffiliated parties, and obligated BCC to pay royalties to Capitolo equal to five percent of the fees BCC receives from its sublicensees.

  BCC provided no accounting for sales, and no royalty payments at all during the first 15 months that the 1996 License is in effect. After counsel for Capitolo wrote to BCC on or about May 2, 1997 demanding the required royalty payments and certified sales reports BCC produced its first sales statement to Capitolo. The sales report from BCC was not certified.

  Between July 22, 1997 and July 12, 1998, BCC failed to make timely payments and accounting was provided no royalty payments or certified sales reports for during this one-year period. On August 5, 1998, BCC produced its next accounting, purporting to proffer December 19, 1997 through July 12, 1998 covering a seven-month period and omitted any report for seven months — May 9, 1997 through December 18, 1997. BCC did not report or pay royalties for the missing seven months. BCC also failed to make the $2,500 royalty payment until October 9, 1998.

  After the August 1998 report and October 1998 payment, BCC did not send another royalty payment or certified statement of sales to Capitolo until July 9, 1999. This royalty payment and sales report covered only the seven-month period from November 1, 1998 through May 31, 1999. BCC did not provide royalty payments and did not account for the three-month period between August 1, 1998 and October 31, 1998.

  On October 6, 1999, BCC submitted a royalty payment and certified sales report to Capitolo covering the period from June 1, 1999 through September 30, 1999. On or about February 9, 2000, BCC submitted a royalty payment and sales report covering the period from October 1, 1999 through December 31, 1999.

  BCC has not submitted any royalty payments or certified sales reports to Capitolo since its February 9, 2000 report, and BCC has not provided any royalty payments or reports covering any period since December 31, 1999.

  The 1996 License provides: "BCC will fax to Monsr. a copy of all reproductions for review and will provide a sample of the reproduction thereafter." The 1996 License also prohibits BCC from "employ[ing] any promotional or advertising material in the sale of the Reproductions that is unethical, immoral or offensive to good taste and which is not consonant with moral and religious principles."

  BCC has not submitted any sublicensed reproductions or related advertising material to Capitolo for the required review.

  The initial term of the 1996 License was for five years, commencing on February 8, 1996, and renewable for another five-year term at BCC's election. Section 9 of the 1996 License provides:
The term of this Agreement shall continue in effect for a period of 5 years from the date first above written, and shall be renewable at the election of BCC, for an additional period of 5 years.
License § 9.

  Capitolo's counsel wrote to BCC's counsel on September 3, 1998 stating expressly that Capitolo's contractual relationship with BCC would conclude at the expiration it the original five-year term on February 7, 2001. During meetings between Loata and Capitolo's representative, Commendative Angela Sironi ("Sironi") on May 20, and 21, 2000, Sironi again informed Loata of Capitolo's refusal to renew or extend the 1996 License because of Capitolo's complete dissatisfaction with BCC's performance under the 1996 License. Following this meeting, counsel for Capitolo wrote to BCC on July 27, 2000, once again stating Capitolo's refusal to extend or renew the 1996 License beyond its original five-year term.

  According to BCC, on August 28, 2000 it obtained Capitolo's agreement to a new, vastly expanded license agreement with a term renewable at BCC's election for up to 45 years (the "2000 License"), executed on Capitolo's behalf by Cardinal Virgilio Noè (Archpriest of the Capitolo) ("Noè") and Monsignor Giuseppe Bordin (then Camerlengo Maggiore) ("Bordin"). On or about October 16, 2000, Capitolo received a letter from counsel for a BCC sublicensee, Maxx International, Inc. ("Maxx"), requesting Capitolo's confirmation of the 2000 License. Noè and Bordin deny any prior knowledge of the existence ...


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