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Bazak International Corp. v. Tarrant Apparel Group

June 11, 2007

BAZAK INTERNATIONAL CORP., PLAINTIFF,
v.
TARRANT APPAREL GROUP, DEFENDANT.



The opinion of the court was delivered by: VICTOR Marrero, United States District Judge

DECISION AND ORDER

Plaintiff Bazak International Corp. ("Bazak"), a textile merchandising company, brought this action in New York State Supreme Court against defendant Tarrant Apparel Group ("Tarrant"), a corporation also in the textile merchandising business. Tarrant removed the case to this Court on the basis of diversity jurisdiction, and the Court subsequently granted Tarrant's motion to dismiss Bazak's claim of unjust enrichment. See Bazak Int'l Corp. v. Tarrant Apparel Group, 347 F. Supp. 2d 1 (S.D.N.Y. 2004). The Court then denied Tarrant's motion for summary judgment on Bazak's breach of contract claim, finding that there were outstanding issues of material fact as to the existence of a contract between the parties. See Bazak Int'l Corp. v. Tarrant Apparel Group, 378, F. Supp. 2d 377 (S.D.N.Y. 2005). On November 27-30, 2006, December 1, 2006, January 26, 2007, and February 1, 2007, the Court held a bench trial to determine whether, in fact, Tarrant entered into a binding contract with Bazak and subsequently breached it, or whether, as Tarrant contends, the parties merely negotiated and never reached an agreement. For the reasons described below, the Court finds that Bazak did not meet its burden of proving at trial that it entered into a contract with Tarrant on the terms that Bazak alleges with respect to the merchandise at issue here. Additionally, even if a contract between the parties had formed, the Court finds that Bazak is unable to prove damages for lost profits.

I. BACKGROUND*fn1

A. FACTS

On September 15, 2003, Tuvia Feldman ("Feldman"), the president of Bazak, met with Gerrard Guez ("Guez"), Tarrant's chairman, in Tarrant's New York office to discuss a possible purchase of certain apparel, primarily jeans and other types of clothing, from Tarrant. During this meeting, Guez indicated that Tarrant had approximately 1.6 million items available to sell, and that he was looking for a buyer for his entire stock. Feldman expressed interest and asked that an inventory report be sent to him. Guez also offered Feldman the opportunity to invest money in Tarrant and in the Seven Licencing Company ("Seven"), a private company owned by Guez.

According to Guez, Feldman expressed a strong interest in Seven.

Tarrant manufactures apparel in Mexico and Hong Kong, which it refers to respectively as "domestic" and "imported" merchandise. Following Feldman's meeting with Guez, he received an inventory report from Tarrant dated September 18, 2003 (the "September 18 Inventory Report"). (See Pl. Trial Ex. 3.) This report indicates that the total number of items Tarrant had available to sell was 963,730.

On Thursday, September 25, Tarrant sent an email to Feldman attaching an inventory report dated September 24, 2003, which is described in the email as the "Imports available to sell report" (the "September 24 Inventory Report"), reflecting merchandise from Tarrant's Hong Kong operations. (See Pl. Trial Ex. 37.) This inventory report indicates a total of 201,466 items. The email states that Tarrant will also be sending Feldman the "Domestic ATS [Available To Sell] report." (Id.)

On Friday, September 26, Tarrant sent another email to Feldman attaching an inventory report dated September 26, 2003 and described in the email as the "Domestic Available to sell report" (the "September 26 Inventory Report"). (See Pl. Trial Exs. 4, 33.) The report listed 734,917 items of clothing. Feldman responded to this email the same day, urgently asking Tarrant why the inventory report listed only 963,000 items, approximately 600,000 fewer items than the 1.6 million items Guez had mentioned.*fn2 (See Pl. Trial Ex. 34.) Feldman sent a second email to Tarrant later that afternoon stating, "Please disregard, I know what happened." (Id.) Feldman testified that he had spoken with Guez, who informed him that some items had been sold to another buyer. Feldman expressed concern that the items sold were among the more valuable items, but Guez assured him that the price Feldman paid would be adjusted accordingly.

On Monday, September 29, Feldman traveled to Los Angeles with Avi Jacobi ("Jacobi"), a representative of R&I Trading ("R&I"). According to Feldman, he had initially planned to purchase the clothing jointly with R&I, but it was later agreed that Bazak would make the initial purchase and then resell the clothing to R&I. When Feldman and Jacobi arrived in Los Angeles, they met with Guez in his office. Guez introduced them to Brian Buchan ("Buchan"), a Tarrant employee who was instructed to show Jacobi samples of the merchandise for his inspection. Guez testified that, prior to that day, he did not know who Jacobi was and had never heard of R&I.

Feldman spent the following day with Guez, discussing the possibility of his investing in Tarrant and Seven. Jacobi spent the day in the warehouse with Buchan reading through the inventory reports and spot-checking the merchandise. Jacobi reported his findings to Feldman in the evening.

On Wednesday, October 1, Feldman borrowed Guez's Bentley and drove to Malibu to have lunch with friends. That afternoon, he met Guez at a private airport and flew to Las Vegas with Guez and several other people on a private jet to attend a Celine Dion concert.

Upon their return to Los Angeles at mid-morning of the following day, Feldman and Guez met at Guez's office to continue their negotiations. The parties offer divergent accounts of what occurred at this meeting. Feldman claims that the he and Guez reached an agreement for the sale of Tarrant's entire inventory of approximately 900,000 items of clothing at $2.40 per piece. This inventory was to include both the domestic inventory of approximately 700,000 items and the imported Hong Kong inventory of approximately 200,000 items. According to Feldman, when he and Guez reached an agreement on price, Guez said "mazal u'bracha," a Hebrew phrase that Feldman said is commonly used in certain areas of trade to indicate that a deal has been reached and to express a commitment to keep one's word.*fn3

Guez, on the other hand, denied having said "mazal u'bracha" on that occasion and insisted that no agreement was reached. He contends that he did not agree to a price of $2.40 per item at that meeting and was still asking for a price in the range of $3.00 to $4.00 per item, and that one of his conditions for any agreement was a purchase of the entire inventory without picking and choosing among any of the brands to select only the most desirable. Additionally, he stated that whether the Hong Kong inventory would be included in the deal was still an open issue because Feldman had not fully committed to accepting inclusion of that merchandise in the sale.

Feldman testified that after his meeting with Guez he returned to his hotel with Jacoby. At his hotel, Feldman dictated a note to Jacoby to be sent to Tarrant confirming the oral agreement that he allegedly reached with Guez. Jacoby dictated the note to Gali Neufeld ("Neufeld"), an employee of R&I, who emailed it to Buchan the following morning. This email (the "October 3 Email") states:

As per our agreement with Mr. Gerard Guez, we would like to inform you that Bazak International has bought the total inventory of 747,096 pcs per your Sep 30, 2003 inventory report less the following: Kohls men 8,000 pcs Structure men 22,000 pcs Express junior 10,000 pcs Express missy 19,200 pcs The total inventory purchased is 687,896 pcs. Please send us a proforma invoice in order for us to proceed in preparing our L/C. Please ship all samples per your conversation with Mr. Jacobi to Bazak International at the address listed above. (Pl. Trial Ex. 10.) Feldman explained that the four quantities of clothing excluded from the agreement represented items that were included in the September 30 Inventory Report (the "September 30 Inventory Report") but that Tarrant had already sold or agreed to sell to other ...


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