United States District Court, S.D. New York
OPINION & ORDER
A. ENGELMAYER, DISTRICT JUDGE
before the Court are competing motions for partial summary
judgment in this dispute between a clothing supplier,
defendant Branded Apparel Group LLC ("Branded"),
and its contractually authorized sales representative,
plaintiff Supreme Showroom, Inc. ("Supreme"). The
parties' dispute, which involves claims by Supreme and
counterclaims by Branded, turns principally on whether
Supreme's agreement to serve as sales representative for
a third party, Gant USA Corporation ("Gant"), also
a clothing supplier, breached its legal duties to Branded.
For the reasons that follow, the Court denies all motions for
summary judgment, except as to Branded's counterclaim for
unjust enrichment, on which the Court grants Branded's
motion for summary judgment. The case will now proceed to
a Chicago-based corporation, is a "commissioned
independent sales representative" for companies in the
fashion apparel industry. JSF ¶ 1. Supreme's sole
shareholder is Joshua Muthart. Id.
formerly known as SXS Group LLC, is a New York City-based
limited liability company in the business of designing,
contracting for manufacture, importing, marketing, and
selling contemporary and private label menswear. Id.
¶ 3. Branded's members are Gary Jacobs, the
company's CEO, and his two sons, Jason Jacobs and Jeffrey
Jacobs. Id. ¶¶ 3-4. At all times relevant
here, Jason managed the company's finances and
operations, while Jeffrey worked in product development,
design, merchandising, and marketing. Id.
The Sales Representative Agreement
18, 2013, Branded and Supreme entered into a written Sales
Representative Agreement. Id. ¶ 11 Id.
Ex. A (the "SRA"). In exchange for a 12% sales
commission, Supreme agreed to serve as Branded's sales
representative in 12 Midwestern states. Id. ¶
9; SRA ¶¶ 1, 9(a). Branded also agreed to pay
Supreme a $1, 000 monthly showroom fee "to cover costs
associated with exhibiting [Branded's] line in
[Supreme's] showroom." SRA ¶ 9(a).
to the contract, Supreme agreed to "use its best efforts
to solicit orders for the sale of SXS's [i.e.,
Branded's] products by presenting SXS's products in a
clear, understandable and professional manner ... to
retailers within the Sales Representative's
[i.e., Supreme's] territory." SRA ¶ 2.
All purchase orders or sales orders were "subject to
SXS's approval," and SXS would prepare and deliver
all invoices to customers. Id. ¶ 3. Supreme
agreed to "assist SXS in collecting unpaid invoices upon
request by SXS" and "assist SXS in the resolution
of any and all disputes, adjustments, and/or other
differences between SXS and any customers." Id.
the heading "NO AGENCY." the SRA described
the parties' relationship as follows: "Sales
Representative is an independent contractor and under no
circumstances will Sales Representative commit SXS to the
delivery of SXS products and accessories, purport to legally
bind SXS in any matter, and/or hold himself out as an
employee or agent with legal authority to bind SXS."
Id. ¶ 4. "In keeping with the foregoing,
no Sales Representative may carry a business card that [is]
exclusive to SXS." Id.
the heading "RULES OF CONDUCT." the SRA
provided that "[u]nder no circumstances shall the
representative market, sell, distribute, solicit, or be
involved in any way with another manufacturer of contemporary
menswear and/or accessories, without the express written
approval of SXS." Id. ¶ 5(d) (the
"exclusivity provision"). The parties further agreed
that "any failure to enforce the paragraphs [under this
heading] is not to be considered a waiver of SXS's rights
hereunder and representative hereby waives any right they may
have to the defense of laches." Id. ¶
5(e). Finally, the agreement provided that "[a]ny
violation of the above provisions shall be grounds for
immediate termination by SXS of the agreement."
the heading "REPORTING AND SALES
FORECASTS," the SRA required Supreme to provide
monthly sales-activity reports and copies of all
correspondence between Supreme and customers. Id.
the heading "COMPEN SATION," the SRA
provided that Supreme would receive 12% of the net sale
amount of each order and $1, 000 per month in showroom fees.
Id. ¶ 9(a).The agreement further provided that
Branded "shall have the option of accepting or rejecting
any order or orders taken by the Sales Representative."
SRA ¶ 9(c).
the heading "GOVERNING LAW," the SRA
provided that the agreement was "drafted under the laws
of the state of New York, and the venue for any legal
recourse shall take place under laws as written in New
York." Id. ¶ 15.
under the heading "TERMS," the parties
agreed that the SRA would "continue in force for one
year, renewable for an additional one-year term by mutual
agreement." SRA ¶ 17.
The Parties' Course of Conduct Under the SRA
and Supreme worked together from June 18, 2013 through June
1, 2016. JSF ¶ 10. During this period, the parties did
not always conform their conduct to the terms of the SRA. For
instance, on one occasion, Branded allowed Supreme to work
outside of the territory contemplated by the SRA.
Id. ¶14. And Branded did not always observe the
SRA's payment requirements: Branded sometimes made only
partial commission payments, and sometimes (occasionally with
Supreme's permission) paid commissions either early or
late. Id. Branded also did not always pay the
showroom fee on time. Id. Nevertheless, Branded was
current on its showroom fees through October 2014, at which
point Supreme ceased operating a showroom. Id.
¶¶ 18-19. The parties agree that the October 2014
invoice was the only invoice Branded paid while Supreme did
not maintain a showroom. Id. ¶¶ 18-20.
parties also did not strictly observe the SRA's renewal
provision. On June 17, 2014, when the SRA's initial
one-year term expired, the parties never discussed the issue
of renewal. Id. ¶ 15. Instead, they simply
continued their business relationship. Id. Likewise,
on June 17, 2015, after the first one-year renewal term
expired, the parties again simply continued their business
relationship without discussion, until Branded terminated it
on June 1, 2016. Id. ¶ 16.
parties agree that throughout the course of their
relationship, Supreme lacked the authority to sign contracts,
hire employees, or grant customer markdowns on Branded's
behalf. Id. ¶12; see also Def. Mem. at
6. Instead, Supreme took the lead in negotiating sales of
Branded goods with customers, offering discounts that it
would then submit to Branded for approval. JSF ¶ 12.
Branded gave Supreme "quite a bit [of] room" in
offering these discounts. Id. Accordingly, when
Supreme wrote to request approval from Branded of the
discounts it had offered, the requests read like foregone
conclusions. See, e.g., Id. ¶ 27 ("Josh
extended a 20% courtesy discount."); see also
Id. ¶¶ 21-26. Branded represents, and Supreme
does not dispute, that Branded regularly honored the prices
negotiated by Supreme. Def. Mem. at 7 n.7 (citing Jacobs Aff.
Supreme's Representation of Gant
hiring Supreme, Branded did little to no business in the
Midwest. JSF ¶ 28. One of the first customers Supreme
developed for Branded, beginning in 2013, was Trunk Club-a
business offering retail customers the services of a personal
shopper. Id. ¶ 29. By the end of 2015, Trunk
Club had become Branded's largest customer. Id.
February or early March 2015, Supreme began conversations
with Gant, another clothing designer and Trunk Club vendor.
Id. ¶¶ 46, 51. Supreme did not notify
Branded of these conversations. Id. ¶ 47. On
May 1, 2015, Supreme entered into a written agreement with
Gant providing that Supreme would represent Gant's
menswear lines within the same territory covered by the SRA.
Id. Ex. B at Sched. A.
12, 2015, Supreme emailed Trunk Club to announce that it had
signed Gant. Id. ¶ 52. On May 18, 2015, Branded
learned (from sources other than Supreme) that Gant had hired
Supreme. Id. ¶ 53. The next day, Jeffrey Jacobs
reached out to Muthart by text to inquire. Id.
¶55. Muthart confirmed that Supreme had taken on Gant as
a client, to which Jeffrey replied
"[congratulations." Id. ¶ 55. Jeffrey
then added, "[d]on't tell [Gary and Jason] we spoke
about it if you don't mind ©." Id.
Muthart responded, "[g]onna be good for all of us,"
to which Jeffrey replied, "I think so."
that day, Muthart sent Branded's principals and its
President, Jeff Block, an email advising them of the Gant
representation and asking to set up a phone call.
Id. ¶ 56. Shortly thereafter, Jeffrey once
again contacted Muthart via text message:
Jeffrey: Thank you for the email Well done
So gary and jason are concerned about trunk club
Please give them some comfort
But I love the power move
Muthart: I would do nothing to hurt our business there
Jeffrey: It's great to be next to Gant with you and great
Muthart: We built that from the ground up and have way to
[sic] much work into it
Jeffrey: Are you handling trunk club for them?
Muthart: Yes but in a different capacity. There's no
concern. We'll pick up a lot of piggy back business here
and it will be great for sxs to hang with Gant at an agency
Jeffrey: I fully agree
Muthart: Please console your family please
Jeffrey: I will it's all good
If you take emotions out of it. It makes sense and I'm
proud of you. I just hope you continue to build the trunk
business with slate and not take dollars from us to Gant
Muthart: They don't have that capacity and that's not
Jeffrey: We love you and you are the backbone of ...