Opinion
Case No. 00-2280-CIV-HUCK
October 18, 2001
ORDER RE: PRELIMINARY INJUNCTIONS
This matter is before this Court on Plaintiff's Motion for Preliminary Injunction, filed August 21, 2000, Counter-plaintiffs' Cross-Motion for Preliminary Injunction, filed October 11, 2000, and on Counter-plaintiffs' Motion for Preliminary Injunction Against Gaby McHeileh and Ailatan Investments, filed December 22, 2000. The Court has considered the motions, the responses, the voluminous materials related thereto, and all pertinent materials in the file. In addition, an evidentiary hearing lasting a week was held commencing May 14, 2001.
Background
This lawsuit was filed June 27, 2000. The complaint alleged all of the essential facts leading to the Plaintiff's motion for preliminary injunction (PI) filed some two months later. No request for a Temporary Restraining Order was sought. Indeed, Plaintiff agreed to a motion to extend time to file an answer in July, 2000. Although the motion for PI and another motion to expedite discovery suggest that Plaintiff just discovered continued wrongdoing on the part of Defendants, the complaint makes the same allegations.
While it is true that the complaint sought injunctive relief, plaintiff did nothing to "push" the issue until the filing of the instant motion.
The answer and counterclaim were filed August 25, 2000. Just like the complaint, the counterclaim seeks injunctive relief. On August 31, 2000, Plaintiff agreed to a motion to extend time for Defendants to respond to the motion for PT. In September, Plaintiff sought, and received, an extension of time to file its reply. Shortly thereafter, Defendants/Counter-plaintiffs filed their motion for PI as to Plaintiff, and subsequently as to new parties Gaby Mcheileh and Ailatan Investments, Inc..
The evidentiary hearing was originally scheduled by this Court to commence February 19, 2001. On January 4, 2001, new parties Mcheileh and Ailatan Investments sought a continuance of the hearing. That motion was opposed by Defendants/Counter-plaintiffs, only. The hearing was continued to May, 2001.
The Court found sorting out of the truth to be extraordinarily difficult. To some extent, the credibility of virtually every one of the testifying witnesses left something to be desired.
Facts
This case, which at first blush involves competing claims of trademark infringement, is really about a breach of contract. The Plaintiff, I.C.E. Marketing Corp., d/b/a and a/k/a International Cosmetics Exchange, Inc. ("ICE"), claims all right, title and interest in the "FAIR WHITE" trademark (the "FW Mark") in the United States, Canada and the Caribbean pursuant to an agreement dated as of April 10, 1999 with Defendant/Counter-plaintiff Continental/Laboratories Medica SARL ("CLM"), the stated owner of the FW Mark in France and Europe (the "ICE/CLM Agreement"). Counter-plaintiffs CLM, Xavier Tancogne ("Tancogne"), and Gapardis Health Beauty, Inc. ("Gapardis"), claim that the ICE/CLM Agreement was procured by fraud and that Gapardis has the real rights pursuant to an exclusive distributorship agreement dated as of April 13, 2000.
Pursuant to agreement of the parties, the competing claims for a preliminary injunction were tried by the undersigned United States Magistrate Judge on May 14-18, 2001. Based upon the testimony and evidence presented, the Court makes the following findings of fact and conclusions of law.
FINDINGS OF FACT The Parties
1. On April 18, 1995, Michael Aini formed ICE, which is engaged in the purchase, importation, sale and distribution of ethnic cosmetic products. ICE has always been the only company used by him as an importer and distributor of cosmetics, although together with his brother Harry he also owns and operates a company called "Home Boys" which has a retail store in the New York area. (Trial Transcript Vol. (hereafter "Tr.") I, pp. 54-59; 61-62; 195; Def.s' Ex. 28). The initials "I.C.E." refer to "International Cosmetics Exchange," and the company has been referred to indiscriminately as I.C.E. Marketing, International Cosmetics Exchange, I.C.E., and other name variations. (Tr. I, p. 55).
2. ICE admitted that prior to the April 10, 1999 ICE/CLM Agreement discussed below, CLM was the owner of the trademark rights to the mark "FAIR WHITE" in the United States. (Tr. I, p. 135). There is no dispute that CLM was, and still is, the owner of the trademark rights to the mark outside the United States. This is consistent with Michael and Jacob Aini's testimony that, although Jacob Aini fast brought samples of "FAIR WHITE" cosmetics from Paris beginning in 1998, (Tr. 1, pp. 80-81); (Michael Aini, dep. p. 80-81), (Tr. 11, pp. 49-50), prior to the April 10, 1999 ICE/CLM Agreement, ICE and Jacob Aini only re-distributed CLM's genuine "FAIR WHITE" goods without any agreement with CLM. (Tr. I, pp. 118, 135-36); (Tr. II, pp. 49-50). The first shipment directly from CLM to ICE was also done without any agreement regarding the "FAIR WHITE" products. (Tr. III, p. 117).
3. The ICE/CLM Agreement, which is central to the dispute in this case, is between ICE and CLM, a French corporation. (Pls. Ex. 14; Def.s' Ex. 42). The ICE/CLM Agreement was drafted by counsel for ICE, Michael Ioannou, who used a prior contract by "International Cosmetics Exchange, Inc." as the source of what he believed to be the "correct" name. As it turns out, both contracts (and apparently some others as well) were incorrect, and the registered, correct name of the plaintiff is "I.C.E. Marketing Corp.," a New York corporation. (Tr. I, pp. 54-55).
4. There has only been one company, and, aside from a very early temporary office above a retail store, it was always at the same address, 56-25 Flushing Avenue, Maspeth, New York, with no confusion except as to the technical name of the entity. (Tr. I, pp. 57-58; 185). The stationery, envelopes, checks, invoices and other documents regarding ICE show "I.C.E. Marketing" and that the various names have been used interchangeably. (Tr. I, pp. 56-57). Indeed, the "International Cosmetics Exchange" name was used so commonly, since it is what the "I.C.E." initials are supposed to have represented, that the company's president who formed it in 1995, Michael Aini, did not even notice the technical misnomer and signed the ICE/CLM Agreement as president of "International Cosmetics Exchange, Inc." (Tr. I, pp. 161-162).
5. At the time the ICE/CLM Agreement was executed in 1999, CLM represented that it was the owner and holder of all rights to the FW Mark in France and Europe. (Pl.'s Ex. 14; Def.'s Ex.42). Tancogne executed the ICE/CLM Agreement, which contained that representation, as president of CLM. ( Id.). Tancogne now claims that he is the owner of the mark personally. Thus, both sides have demonstrated looseness regarding use of corporate entities.
6. Michel Farah is the owner of Gapardis Health Beauty Inc. (Gapardis), which entered into an agreement with Tancogne/CLM to distribute the F W product at issue on or about May 21, 2000.
7. Gaby McHeileh/Ailatan Investments, Inc., were in business, originally, with Michel Farah. Originally he only sold the genuine product. McHeileh was excluded from the agreement between Farah/Gapardis and then received and sold product from ICE.
8. In meetings between McHeileh, Farah and Tancogne, they discussed awareness of the agreement with ICE.
9. Tanios Saba and Abdallah Ghandour sold product received from ICE. in Miami.
10. This case presents classic examples of the need to regard substance over form. Use of the name "International Cosmetics Exchange, Inc." in the ICE/CLM Agreement was a scrivener's error which will be disregarded. Likewise, the simultaneous claims by the owner and manager of a closely held company will not stand in the way of reaching an equitable result. The Court finds that the parties before it are the proper parties on both sides to be bound by the result of this action.
Initial Dealings
11. In 1995, Jacob Aini ("Aini"), the brother of ICE president Michael Aini and a representative of ICE, went to Paris to reside, primarily for the purpose of establishing a European market for sale of "Body Clear" brand cosmetic products owned by ICE, and to create an international component to the "ICE Marketing" and "Home Boys" names. (Tr. I, pp. 61-62; Tr. II, pp. 32-33). There he began doing business with Simon Mamane ("Mamane"), a distributor of cosmetic products who was also, during 1997, CLM's exclusive distributor. ( Id.). Aini and Mamane began doing business together on at least an informal basis, using the name "ICE Marketing" and "Home Boys." ( Id.) In 1997 Aini returned to New York to live, but Mamane continued to use the "ICE Marketing" and "Home Boys" names pursuant to respectively oral and written licensing agreements. ( Id.) at 40. Neither Aini nor ICE had any financial or ownership interest in any of Mamane's businesses. (Tr. II, pp. 15, 34).
12. On or about February 13, 1997, Aini met in Paris with Daniel Vonachen ("Vonachen") who stated that he was running a company called "Laboratoire Dermatologique de France" or "Labo Derma" in the Ivory Coast in partnership with Tancogne. (Tr. II, pp. 35-36). Aini and Vonachen discussed various FW cosmetics products, and shortly after the visit, Vonachen sent to Aini some information regarding the manufacture of "FAIR WHITE" brand products ("FW Products"), including the formula of its active ingredients. ( Id. at 37).
13. In approximately March, 1997 Aini visited the Ivory Coast where Vonachen showed Aini a few samples of FW Products. ( Id. at 37-39). Vonachen also showed Aini the garage of his home where they were producing some of it. Aini liked the FW Products he saw and expressed interest in selling and promoting them in the United States provided that ICE would own the mark. ( Id.).
14. In 1998, Aini met on several occasions in Paris with Bruno Benisuea ("Benisuea"), a commissioned salesman of CLM. (Tr. II, pp. 40-41). Aini and Benisuea discussed the possibility of Aini selling FW Products in the United States, and Aini stated that he would be interested in an agreement regarding FW Products, provided that he would own the FW Mark in the United States. Benisuea indicated that should be no problem. ( Id.)
15. Aini brought some of these products into the United States via his luggage, and they were test marketed in the four Home Boys stores Michael Aini owned in the New York area at the time. (Tr. II, pp. 44-47; 49 Pl.'s Ex.6A). ICE placed a few orders for FW Products, including a 100,000 French franc order in February 1999, to test market acceptance in the United States and also to show Tancogne that he was serious. (Tr. I, pp. 80-81; 82-90; Pl.'s Exs. 7, 8). No one else was selling FW or using the FW Mark in the United States at the time, nor did anyone else do so until approximately February 2000. ( Id. at 49; 184-185; Tr. II at 161-62).
The ICE/CLM Agreement: Aini's Version
16. The circumstances surrounding execution of the ICE/CLM Agreement are the subject of serious dispute. Aini testified that toward the end of 1998 he met with Tancogne at Mamane's offices in Paris, which Aini also used from time to time. (Tr. II, pp. 41-43). Aini testified that at the meeting, attended by Aini, Mamane, Tancogne, and Benisuea, Aini told Tancogne that ICE wanted to own all rights to the FW Mark in the United States, Canada and Caribbean and felt that both parties could save manufacturing costs by working together to place sizeable orders so as to achieve economies of scale. ( Id.). Ownership of the mark was of particular importance to Aini because he had just emerged from several years of litigation over trademark rights to another product, and he had no desire to repeat the process. (Tr. I, pp. 84-85; Tr. II, pp. 42-44). According to Aini, Tancogne said that such an arrangement should be satisfactory.
17. Aini also testified that toward the end of March 1999, he met again with Tancogne in Paris and again discussed what he regarded as the two critical terms of any agreement, i.e., that ICE would own the FW Mark, and that ICE and CLM would work together to save manufacturing costs. (Tr. II, pp. 43-44; 47-50). Aini testified that Tancogne agreed and asked Aini to prepare an agreement as to the details. ( Id. at 50). On returning to the United States Aini asked ICE's lawyer, Michael Ioannou, to prepare a contract including the terms he and Tancogne had discussed. ( Id.).
18. Aini testified that Ioannou prepared the document which became the ICE/CLM Agreement and that Ioannou faxed it to ICE on April 12, 1999. (Tr. II, pp. 50-51). Aini immediately re-faxed it to Tancogne with a cover letter requesting that Tancogne execute it and fax it back. ( Id.; Pl.'s Ex. 12). Aini states that he called a few times over the next month or so to see whether it had been signed but Tancogne advised him he had been unable to sign it because he had been traveling. ( Id. at 51-52).
19. Aini testified that on June 19, 1999, he went to Paris on some other business and arranged an appointment to see Tancogne. (Tr. II, pp. 53-56). According to Aini, they met on June 23, 1999, again at Mamane's office, to discuss the proposed agreement, and that the meeting was attended by himself, his wife Rachel Aini, Benisuea, Tancogne and Young Bae Kang ("Kang"), an ICE distributor in New Jersey who had accompanied Aini to Europe on unrelated business. ( Id.). Aini testified that following a few minutes of informal greetings and some coffee, Tancogne pulled a copy of the agreement out of his attache case, and Aini produced his own copy which he had brought with him from the United States. ( Id.). They discussed them briefly, and Tancogne said he wanted language added about sales targets for the product, since he did not want FW Products to get lost among the various other brands of cosmetic products that ICE was importing and selling. ( Id.). Aini states that he then hand-wrote a new paragraph 2A at the bottom of both his and Tancogne's copies agreeing to use best efforts to sell $250,000 worth of product in the first year. ( Id.).
Two original agreements were executed, and the new paragraphs 2A handwritten at the bottom of each by Aini contain slightly different language. The original that Aini kept states, "ICE will do its best to do more sales than $250,000 for the time — 1 year + do 20% more in next five years." The original that Tancogne kept states, "ICE will do its best to do more sales than $250,000 for the time 1-year in the beging (sic) year + will do it (sic) best to do 20% more in next five years." (Pl.'s Ex. 14; Def.s' Ex. 42). The Court finds that the differences between the two agreements are not material.
20. Aini testified that both parties were thus satisfied, that both parties initialed the language Aini had just added, and that Tancogne then executed the two originals of the ICE/CLM Agreement on behalf of CLM. Tancogne's signature was witnessed by two witnesses, Benisuea and Kang, who both then also signed the ICE/CLM Agreement on the two lines for witnesses to the left of Tancogne's signature. ( Id. at 57-58.). Aini testified that because it was an important document he then asked Tancogne for some photo identification, that Tancogne presented his passport, and that Aini then made photocopies of Tancogne's passport and his own New York drivers license which he then affixed to both original copies of the ICE/CLM Agreement. ( Id.). Then everyone left for lunch. ( Id. at 59).
The ICE/CLM Agreement: Tancogne's Version
21. Tancogne's testimony about the meeting at which the ICE/CLM Agreement was signed is so diametrically opposed to Aini's that the two versions cannot be reconciled.
22. Tancogne denies that he met with Aini in November 1998, (Tr. III, p. 159) denies that the two ever discussed transferring United States, Canadian and Caribbean fights to the FW Mark to Aini, denies that the two ever discussed joint manufacture of FW Products, and states that all that was ever proposed was that Aini receive distribution rights. (Tr. III, p. 132).
23. Tancogne testified that the meeting at which the ICE/CLM Agreement was signed did not occur in June, but rather on either April 10 or April 12, 1999 (Tr. III, pp. 129-31). Tancogne testified that Mamane was at the meeting but that Kang was not, and that he has never seen Kang before, much less had lunch with him. (Tr. III, p. 130). In fact, Tancogne testified that there was no lunch after the meeting at all, since he left the meeting and caught a train or airplane back to Bordeaux where he works and resides, a distance of some 700 kilometers. (Tr. III, p. 138).
24. Tancogne testified not only that the circumstances surrounding the meeting were significantly different but that he was induced to sign the ICE/CLM Agreement through fraud. According to Tancogne, he did not receive a copy of the agreement some two months before the meeting and bring his copy to the meeting, but instead the document was shown to him for the first time at the meeting itself (Tr. III, pp. 133-34). Indeed, Tancogne testified that not only did he not have a copy of the proposed agreement in advance, he could not have produced a copy from his attache case because he never owned an attache case but instead uses only a cloth knapsack or backpack which he displayed to the Court. (Tr. III, pp. 134-35).
25. Tancogne testified that, although in the past year his ability has improved, at the time of the meeting he could only speak and read English to a limited extent (Tr. III, p. 101) and that he generally relies upon someone else to translate more complex English statements. (Tr. III, p. 101). Tancogne testified that when he saw the document for the first time at the meeting, Aini represented that the agreement was only for purposes of United States customs and of registering FW Products with the Food and Drug Administration, and that it was only an agreement to agree to distribute FW Products. (Tr. III, pp. 113, 139, 141). Tancogne testified that Aini did not tell him that he was transferring or assigning any rights to the FW Mark, and that had he believed it was a binding contract he would never have signed it. (Tr. III, p. 139). Tancogne also testified that he never discussed joint manufacturing with Aini, and that he would never have signed the document if he had believed that ICE would purchase FW Products from third parties. (Tr. III, p. 140).
26. Tancogne states that he remarked at the time that the document was very short and that distributorship documents in France were much longer. Tancogne testified that he also told Aini the agreement had to contain a quota, and that Aini assured him that ICE could and would sell $250,000 in the first year, which he then hand wrote and initialed at the bottom of the document. (Tr. III, p. 141). Tancogne acknowledged that Benisuea's signature appeared next to his own as a witness, but he testified that he had never met Kang before and could not explain how Kang's signature appeared on the witness line below Benisuea' s on both his and Aini's original. (Tr. IV, pp. 83-84).
Resolution of the Conflicting Testimony: The Date
27. The first step toward resolution of the conflicting testimony came during cross-examination of Tancogne, when the Court granted Tancogne's request to interrupt cross-examination and reopen his direct testimony in order to change it out of candor to the tribunal. Tancogne then proceeded to change his earlier testimony about the date of the meeting. He conceded that it could not have occurred earlier than June 3, 1999, and not on April 10 or 12, 1999 as he had previously testified. (Tr. IV, pp. 137-39).
28. Tancogne's testimony as to the date had already revealed some discrepancies on cross-examination, however. Tancogne had testified that the meeting had to have occurred mid-week, since it was his practice never to go to Paris at the beginning or end of a week. Yet the two alternative dates he had testified the meeting occurred, April 10 and 12, 1999, were respectively a Saturday and a Monday. June 23, 1999, which is the date that Aini had testified the meeting occurred, was a Wednesday.
29. Additionally, as noted above, Tancogne had testified that he had never seen Kang before he testified in court in this case, that he was not at the meeting in Paris, and that he did not have lunch with him or anyone else but went straight back to Bordeaux after the meeting. Kang testified that he had attended the meeting, that he met Tancogne there, that he witnessed the meeting as well as Tancogne's signature, that the meeting occurred on or about June 23, 1999, and that they went to lunch at a Turkish restaurant after the meeting. (Tr. 1, pp. 201-207). Kang presented his airline ticket receipt and boarding passes to confirm that he left for Paris on June 19, 1999 and returned on June 28, 1999. ( Id. at 199-201). This evidence, together with Tancogne's inability to explain how Kang's witness signature appeared on both originals including his own, confirms that Tancogne's previous testimony that the meeting occurred in April was probably false even without Tancogne's subsequent recantation. Thus, the Court finds that the meeting occurred on June 23, 1999, which is the only Wednesday that fell within the block of time Kang was in Europe.
Resolution of the Conflicting Testimony: Prior Receipt
30. Another fact as to which there was conflicting testimony was whether Tancogne received a copy of the document in April, which is when Aini testified he faxed it to Tancogne, or whether he saw it for the first time at the meeting. This is, of course, one of the central factual issues with respect to Tancogne's claim that the ICE/CLM Agreement was procured by fraud. If he received a copy of the agreement in April and the meeting occurred in June, he would have had ample time to have it translated, as he testified he needed, or to have it reviewed by his French attorney, which he testified he had done before executing the agreement with Gapardis the following year. In the event that Tancogne had been sent the proposed agreement some two and one-half months earlier, it would not be likely that the person who sent it, knowing there was ample time to have it translated and/or reviewed with an attorney, would try to make fundamental misrepresentations about the nature and content of the document. Regardless, if Tancogne received the document well in advance of the meeting at which it was executed, reliance upon any such fundamental misrepresentations would also be unreasonable.
31. As to the date of Tancogne's receipt of the document, Aini testified that he had faxed it to Tancogne on approximately April 12, 1999 together with a cover letter, and that Tancogne had brought a copy with him to the meeting. Kang also testified that he remembered seeing Tancogne pull out a copy of the agreement from an attache case which Tancogne had placed on the table at the meeting. Tancogne, of course, not only denied he had received a copy of the agreement in advance of the meeting, he denied that he pulled his copy out of an attache case, and he denied that he has ever even owned an attache case.
32. Once again, the physical evidence reveals that Tancogne's testimony that he did not receive a faxed copy of the ICE/CLM Agreement in April is false. First, the paper used for both original agreements is consistent with the Aini/Kang version and inconsistent with Tancogne's. Aini's original document (Pl's Ex. 14) consists of three pages, the first two being the body of the agreement itself, and the latter being the photocopy of the identification papers. The first two pages are on standard American 8 1/2 by 11 paper which is noticeably different in color and texture from the third page. The third page is also on the longer European size paper, consistent with that size paper having been used to make the identification papers photocopies in France. (Tr. IV, pp. 64-69).
33. Tancogne's original document (Def.'s Ex. 42) consists of four pages, the first two being the body of the agreement, and the latter two being two copies of the paper on which the identification papers had been photocopied, an extra one apparently having been appended to Tancogne's original but not Aini's. All four pages of Tancogne's original are on the longer European size paper. (T. Vol. IV at 64-66). Additionally, Tancogne acknowledged during cross examination that the first two pages of his original, the body of the agreement, were on paper which was noticeably different in color and texture from the last two pages, the identification papers photocopies. Tancogne also acknowledged on cross that the color and texture of the paper used for the identification papers photocopies appended both to his original and to Aini's appeared to be the same. (T. Vol. IV at 64-66).
34. The difference in size, color and texture between the body of the agreement in Tancogne's original and Aini's original is consistent with Aini's testimony that he re-faxed the document to Tancogne in April (where it would have been printed out on European sized paper), that Tancogne brought the re-faxed copy with him to the meeting, and that Aini brought his own copy (on American sized paper) to the meeting. Those differences in size, color and texture are likewise difficult to reconcile with Tancogne's version, particularly given the difference in color and texture of the paper between the first two pages of Tancogne's original versus the last two pages which consist of the identification paper photocopies. Since the paper is different as between the first two pages and the last two pages, it is unlikely (although conceivably possible) that they were photocopied from the same machine at the same time, and thus unlikely that the first two pages of Tancogne's original were made by the same machine that copied the last two pages.
35. Yet another difference between the originals, however, resolves the issue beyond any doubt. At the top of the first two pages of Aini's original (Pl's Ex. 14), the body of the agreement, is the imprint from a fax machine reflecting that it was sent, as pages one and two of two pages, to Aini from his counsel at 16:43 (4:53 P.M.) on April 12, 1999. This same fax machine notation appears on the first two pages of Tancogne's original, demonstrating that Tancogne's original is a copy of Aini's original.
36. Also on the first two pages of Tancogne's original (Def.'s Ex. 42), however, is another fax machine imprint which indicates those two pages were produced when Aini's original was re-faxed to Tancogne. The second imprint reflects the date and time the document was re-faxed (April 12, 1999 at 4:00 P.M.), reflects that the pages are page numbers two and three (suggesting they were accompanied by a cover page which did not remain together with the document itself), but does not indicate from where or to whom the document was re-faxed.
37. Upon initial examination, the second fax machine imprint on Tancogne's original would present a puzzle. That imprint is located above the one from the lawyer, indicating that it was made when the document received from the lawyer was re-faxed. This would be consistent with Aini's testimony that he received the fax from his lawyer and re-faxed it to Tancogne. When a document is re-faxed, the date/time imprint of the first fax is part of the document that is sent, and at the receiving end the fax machine imprints a second date and time reflecting when the re-fax was sent.
38. The problem is the time. The fax imprint from the lawyer reflects a time of 16:53, or 4:53 P.M., but the one above it reflects 4:00 P.M. This would suggest an impossibility, since the time of the top fax imprint (the re-fax) is earlier than the one below it (the original fax), which would mean that the re-fax would somehow have been sent fifty-three minutes before the original fax was received.
39. The anomaly was resolved by Michael Aini's rebuttal testimony. Michael Aini testified that ICE's fax machine dates from around 1996, and that it is manually set to record (on the recipient's fax) the date, time and page number of the fax that is sent. (Tr. VI, pp. 95-96). Aini also testified without objection (although the Court could take judicial notice of the fact) that New York switched from standard time to daylight savings time at 2:00 A.M. on Sunday, April 4, 1999, the first Sunday in April, when clocks were supposed to be reset one hour ahead. Id. at 98-100.
40. Michael Aini testified that the only time he remembers ever manually readjusting the time was after a power outage. ( Id. at 98; 100). This circumstance, which anyone with a VCR will readily appreciate, explains how the second fax appears to have been sent before the first was received. The lawyer had correctly reset his fax machine to daylight savings time, but Aini did not.
41. This answer to the puzzle demonstrates that Tancogne's original is a re-fax of the fax sent by ICE to Tancogne on April 12, 1999. The original fax from the lawyer, with the 16:53 fax imprint, was re-faxed to Taneogne where it was printed by his fax machine on European size paper which was different in color and texture from the photocopies of the identification papers which were made at the meeting. At the top, Tancogne's fax machine printed out the time and date Aini's machine sent it (the erroneous 4:00 P.M., which should have been 5:00 P.M. had Aini corrected his machine for daylight savings time), as well as the page numbers (two and three), which also confirms that the re-fax was accompanied by a cover letter (the missing page one) which thereafter was separated from the body of the agreement.
42. Tancogne's own original copy of the ICE/CLM Agreement thus proves beyond any reasonable doubt that Tancogne's original was faxed to him on April 12, 1999, more than two months before the June 23, 1999 meeting. (Def.'s Ex. 42). Tancogne's original also causes the Court to find that Tancogne brought his copy with him to the meeting in a briefcase or attach6 case and not in a knapsack or backpack as Tancogne testified. The paper is pristine, showing no sign of having been folded, worn or wrinkled such as would likely be the case if it were carried around in the cloth backpack Tancogne demonstrated at the hearing. Moreover, Tancogne's inability to explain how Kang's witness signature appears on his own copy, which he testified he took with him from the meeting, makes Kang's (and Aini's) version of events more credible as well.
Other Discrepancies
43. The ICE/CLM Agreement has no stated term, which would arguably be inconsistent with its being only a distribution agreement of limited duration. Indeed, this handwritten addition at Tancogne's request is also inconsistent with his testimony that he could not read and understand its English language, for if Tancogne could not understand what was in the document already, how could he know what needed to be added?
44. Tancogne claimed that he did not believe that the ICE/CLM Agreement was a formal contract because it was only two pages in length and in France he was used to dealing with distribution contracts that are ten or more pages long. This is inconsistent with his own conduct, since Tancogne's agreement with Mamane in 1997 consisted of but two sentences on one page, and his initial agreement with Gapardis was only one sentence on one page.
The ICE/CLM Agreement is Binding
45. In sum, because the Court finds that Tancogne received a copy of the ICE/CLM Agreement on April 12, 1999 and therefore had it for more than two months before the June 23, 1999 meeting at which he executed it, the Court rejects Tancogne's testimony that he did not understand the nature and the plain language of the ICE/CLM Agreement. The Court finds that both parties entered into the ICE/CLM Agreement intending to be bound by its terms.
Further Conflict: Joint Manufacturing
46. Aini testified that at the June 23rd meeting, as at the previous meetings, he again discussed pooling orders of FW Products with Tancogne so as to get products manufactured at cheaper rates. (Tr. II, pp. 44; 48-49). Apparently it was the understanding of the parties that initially ICE would purchase FW Products from CLM but that as the market for FW Products increased in the United States, Canada and Caribbean both parties would later seek to reduce costs through joint purchasing in the same manner that ICE has developed other cosmetic products for which it has United States trademark rights. (Tr. 1, pp. 148-149; 152; Tr. II, pp. 16-17). Tancogne denied that there was any discussion or understanding as to joint manufacture and that it was always his intention to manufacture FW Products using CLM's facilities. (Tr. III, p. 140).
47. Once again, the physical documentary evidence supports Aini's testimony and is inconsistent with Tancogne's. On the day following the meeting at which the ICE/CLM Agreement was executed, June 24, 1999, Tancogne sent to Aini on CLM stationery a list of the manufacturers of FW Products for Aini to contact. (Tr.II, pp. 16-17; 59-62; PL's Exs. 15, 16, 17). Tancogne testified that he sent the list because Aini requested him to identify manufacturers for another product ICE was considering having manufactured in Europe. This is convenient but not credible, particularly in light of Tancogne's lack of credibility with respect to the other events surrounding the ICE/CLM Agreement.
48. Additionally, the ICE/CLM Agreement is silent as to purchase or manufacture of the products, but it does state that the parties desired to enter into it "in furtherance of their mutual objective of continuing to develop, market and promote the "FAIR WHITE" brand name in the United States, Canada, the Caribbean islands, and Europe." (emphasis supplied). (Pl.'s Ex.14; Defs.' Ex. 42). Thus the agreement itself is consistent with Aini's testimony and inconsistent with Tancogne's.
Subsequent Purchases by ICE
49. The ICE/CLM Agreement obligated ICE to use its best efforts to sell $250,000 of FW Products during the first year and to increase sales by twenty percent per year over the next five years. Tancogne testified that ICE breached the agreement by failing to purchase any FW Products in the first year.
50. Once again, the documentary evidence is inconsistent with Tancogne's testimony. In August 1999, Aini placed an order for about 840,000 French francs (approximately $125,000 worth) of merchandise. (Tr. 1, pp. 98-100; Pl.'s Exs. 18, 19, 20). Tancogne then sent Aini a pro forma invoice, and on September 1, 1999 supplied the products according to an actual invoice. ( Id.). The products were delivered to Mamane's facility in Paris, but the invoice expressly states that they were for export to the United States. (Apparently Mamane kept part of the shipment for his own use and sent the balance to ICE in New York.) The value of this order in United States dollars was approximately half of the amount ICE agreed to use best efforts to sell in the first year.
51. ICE paid an initial amount of 300,000 French francs at the time of the order. (Tr. I, pp. 100-08; 166-67). The payment was made directly to CLM's bank in France by ICE's New York bank. ( Id.). Tancogne requested that the remaining 300,000 French francs not be sent to CLM but rather be sent to him individually at an account at a branch of the Bank of Scotland in the United Kingdom. ( Id.).
Aini testified that Tancogne requested to be allowed to send the merchandise to Mamane for reshipment to ICE in the United States because he was not familiar with shipping containers to the United States, and that as an accommodation ICE agreed to the request even though Jack Aini and Mamane had ceased doing business together for nearly two years. Mamane was independently selling FW Products in France, and on receiving the shipment took out a quantity before forwarding the balance to ICE in New York. (During 1997 Mamane had been CLM's exclusive distributor in France.). Mamane undertook to pay Tancogne directly for this portion of the shipment, and the balance of the 840,000 French francs owing by ICE thus became 300,000 francs rather than 540,000.
52. Apparently there were some initial difficulties regarding Tancogne's receipt of the second payment of 300,000 French francs due to erroneous bank account instructions Tancogne had provided. ( Id.). Michael Aini in fact sent the money, however, and Aini told Tancogne the problem was between him and his bank, not with ICE. ( Id.) Eventually the problem was straightened out, and the merchandise was fully paid for. ( Id.).
Of significance to Tancogne's claim of unfamiliarity with the English language, he wrote to Michael Aini to straighten the matter out using English. (Pl.'s Ex. 21).
53. Tancogne testified that this shipment of FW Products was to Mamane, and that the payments of 600,000 French francs by ICE was to pay a debt of Mamane, not ICE. Here again Tancogne's testimony is at odds with the documents. The invoice stated that the goods were for export to the United States, not for sale to Mamane in Paris. The invoice was to ICE at its New York address, not to Mamane's company. All communications regarding payment were between Tancogne and ICE in New York. The 600,000 French francs were paid through ICE's bank in New York. Tancogne's claim that this transaction was with Mamane rather than ICE is simply not credible.
Tancogne initially denied that ICE made the first payment of 300,000 French francs. Then he indicated he did not remember receiving 300,000 francs at his bank in France, although he did recall receiving 300,000 French francs paid to his account at the Bank of Scotland in the United Kingdom. Then he did not remember whether there were two payments of 300,000 francs or just one, because it goes back too far and he did not check the bookkeeping. ICE presented testimony and documents reflecting that in fact two payments of 300,000 francs were made, one to Tancogne's account at Societe Generale in France and the other to his account at the Bank of Scotland in England.
54. Using the goods it purchased in the fall of 1999, ICE immediately began intensifying its efforts to develop the FW Mark in the United States. (Tr. I, pp. 67-73; 75-79; 91-92; 97). Michael Aini testified that the method ICE used to develop the FW Mark was the same as had been used for the various other products ICE sold. ( Id.). ICE placed advertising and quantities of merchandise on consignment in retail stores through the distribution chain used for ICE's other products. ( Id.). ICE encouraged the proprietors to make efforts to achieve sales by providing to them substantially higher than normal profit margins. ( Id.). ICE placed the FW Products in the retail stores on consignment, seeking payment only after the product was sold. ( Id.).
55. In approximately March 2000, during a trip to Paris, Aini met with Tancogne and attempted to place an order for what would have been most of the balance of the $250,000 of FW Products ICE had agreed to use its best efforts to sell in the first year. (Tr. II, pp. 64-68). Tancogne told Aini he would not ship the products because Mamane owed Tancogne about $13,000. ( Id.). Aini testified that he told Tancogne that he and Mamane had no business relationship at that time, that they ran wholly separate businesses, and they had never had any relationship at all with respect to United States, Canadian or Caribbean sales of FW Products or any other product. ( Id.). Aini advised Tancogne, however, that he did not want a $13,000 problem between Tancogne and Mamane to interfere with ICE's ability to order FW Products from CLM, and for that reason he would take care of the Mamane's $13,000 obligation and resolve the matter separately with Mamane. ( Id.).Aini gave Tancogne 50,000 French francs (about $7,000) in cash and on April 11, 2000 ICE sent the balance from the United States to Tancogne. ( Id.)
56. Tancogne provided ICE with a pro forma invoice for the FW Products which ICE sought to order (and which it paid the $13,000 Mamane obligation in order to obtain), but then Tancogne failed to ship the products, despite repeated efforts by Aini. (Tr. 1, pp. 112-16; Tr. II, pp. 67-69, Pl.'s Ex. 25). In mid-April, 2000, after ICE transferred the balance of the $13,000 to CLM, Tancogne advised ICE that no more FW Products would be shipped to ICE at all. ( Id.).
The CLM-Gapardis Dealings
57. Unbeknownst to ICE, in February 2000, Michel Farah ("Farah"), a principal of defendant Gapardis, ordered FW Products from CLM through Farah's Swiss company, Mitchell Cosmetics. (Pl.'s Ex. 37). CLM issued an invoice to the Swiss company, although it stated that the goods were for export to the United States. ( Id.).CLM then shipped the FW Products, through a shipping broker, directly to Miami. (Tr. V, pp. 53-55, VI, pp. 63-64). Not only was this in breach of the ICE/CLM Agreement, in fact, Farah was an FW Products customer of ICE before Farah purchased the FW Products from CLM in February 2000, and had been first introduced to FW Products by ICE.
58. Farah initiated the contact with Tancogne after first investigating who the manufacturer of FW Products was by having a business associate, Tanios Saba ("Saba"), who subsequently became a principal of Gapardis, contact Tancogne to request that Tancogne call Farah. (Tr. II, pp. 200-202) The reason Farah did this was that he was having difficulty in obtaining sufficient quantities of FW Products from ICE, which he knew to have an agreement of some form with Tancogne regarding FW Products in the United States. ( Id. at 193-200).
59. Tancogne testified that he made the February sale to Farah in the United States in order to help out a client who agreed to help stop counterfeiting of FW Products in the United States. (Tr. VI, p. 75) Tancogne had no evidence that any counterfeit (i.e., non-CLM produced) FW Products were being sold in the United States by ICE or anyone connected with it, although he was aware of counterfeit goods being sold in France.
On cross-examination Tancogne admitted that stopping counterfeiting in the United States was of benefit to him, which is why he made the February 2000 sale to Farah. On his direct testimony, however, when he was being asked whether the obligation ICE assumed in the ICE/CLM Agreement to enforce and protect the FW Mark and to be solely responsible for the expenses of legal proceedings to stop counterfeit products in the United States, Canada and the Caribbean constituted a valuable consideration to him, he testified that it was not.
60. Tancogne had become aware of the counterfeits in France in approximately October of 1999. Tancogne conducted an investigation and concluded that the goods which he believed were being sold by Mamane were being produced by a company called Jabones Pardo in Spain. It was Tancogne's understanding that Comercial Rodrigal, which he believed to be an affiliate of Jabones Pardo in Spain, attempted to register the FW Mark in Europe in November 1999. Despite his understanding of these activities, however, it was not until October, 2000, approximately one year later, that Tancogne's French lawyer first wrote to anyone with a demand to cease and desist making FW Products. (Tr. VI, p. 61).
61. In March, 2000, Tancogne traveled to the United States. He testified that the reason for his trip was to investigate counterfeit FW Products in the United States. He testified that he traveled first to Miami where he met with Farah but that he discovered no counterfeit FW Products in Miami. He testified that he and Farah then traveled to New York to investigate the market there. They were met at the airport by Dong Sup Yang ("Dong"), the sales manager for Gapardis in New York, who drove them to see about twenty-five stores in the New York area. According to Tancogne, he found the market to be "flooded" with counterfeit FW Products. He claims that he purchased samples of the counterfeits, including a sample he bought at the "Home Boys" store in Brooklyn owned by Michael Aini, but that he had no receipts for any of the purchases, nor did he seek to introduce any of the goods he claims to have purchased. (Tr. IV, pp. 38-40, 43-45, VI, p. 70).
62. The only purported evidence of any counterfeit products purchased anywhere in the United States before August, 2000, was provided by Farah. Farah testified that he took a sample from a shipment of FW Products that had been sent to him from ICE in January 2000 and saved it for use at trade shows. (Defs.' Ex. 52). According to Farah he placed the sample in a plastic bag, marked the date and source by hand on a self-adhering sticker he placed on the bag, then placed it in a box in his "library" together with samples of other products. (Tr. V, pp. 23-24). The FW Products sample, however, is the only one among those in the box that he marked in such a manner. ( Id. at 87-92; Tr. VI, pp. 3-4). Tancogne testified that the sample from the plastic bag was a counterfeit.
63. This Court accepts that some counterfeit product was found in the United States at some point, although evidence that it was produced, distributed, or sold by ICE is (viewed in a light most favorable to Counter-plaintiffs) sketchy, at best. The testimony of Farah is, in large part, rejected by this Court. The Court finds questionable that evidence of counterfeit product was found in New York, but not documented in any fashion.
ICE does not dispute that in May, 2000, after Tancogne refused to ship any more FW Product to ICE, it began to place orders for non-CLM manufactured FW Product which was shipped to ICE in the United States beginning in late May or June, 2000.
64. There is no question that Tancogne made a trip to the U.S. around March 2000, and the Court accepts that some effort was made peruse the product in this country. However, there apparently were other reasons for the trip.
The Tancogne/Gapardis Agreement
65. During this trip Tancogne conferred with United States counsel regarding the validity of the ICE/CLM Agreement, and on March 29, 2000 his U.S. counsel applied to register the FW Mark in the United States in violation of the ICE/CLM Agreement. (Def.'s Ex. 44A; Tr. Ill, p. 26). On or about April 13, 2000 he entered into a one page, one sentence exclusive representation agreement with Gapardis, which was replaced in mid-July 2000 with a more elaborate distribution agreement `as of' April 13, 2000 (the "Tancogne/Gapardis Agreement"). The Tancogne/Gapardis Agreement obligated Gapardis, among other things, to purchase a minimum of $1 million of FW Products from Tancogne and to assign the FW Mark back to Tancogne upon termination of the distributorship agreement. (Tr.VI, pp. 74-75). The trip accordingly provided CLM and Tancogne with an opportunity to take steps to try get out of the ICE/CLM Agreement in order to enter into a new agreement with Gapardis which contained vastly more favorable terms for Tancogne and CLM.
The ICE/CLM Agreement states, in pertinent part:
1. C.L.M. grants to I.C.E. and I.C.E accepts the exclusive right to register the "FAIR WHITE" mark in connection with cosmetics, namely face and body creams, soaps, lotions, gels and the like in the United States Patent and Trademark Office in the name of ICE., and to use, distribute and promote the "FAIR WHITE" mark for any and all lawful purposes in the United States, Canada and Caribbean Islands. As of the effective date of this Agreement and for all purposes hereof, I.C.E. shall be the owner and holder of all rights, title and interest in the mark "FAIR WHITE" in the United States, Canada and Caribbean Islands.
66. Tancogne not only concealed the existence of the Tancogne/Gapardis Agreement from ICE, he failed to take other steps to communicate the notices and complaints that would be expected from a truly aggrieved party.
(a) Tancogne testified that he entered into the ICE/CLM Agreement because Aini said ICE would place a big order of FW Products for cash. Tancogne testified that Aini never did so. Yet there is no communication, oral or written, from Tancogne complaining about the lack of any order. (Tr. I, pp. 122-23; II, pp. 8-12).
(b) The ICE/CLM Agreement obligated ICE to take steps to curtail counterfeiting in the United States, a matter of sufficient importance and benefit to Tancogne that he offers it as the justification for having sold FW Products to Farah in February 2000. (Tr.VI, pp. 63-64; 75). Yet Tancogne never once warned ICE about counterfeiting or asked ICE to take any steps to combat it. (Tr. VI, pp. 61, 70).
(c) Tancogne testified that he believed Mamane was selling counterfeit FW Products in France as early as October 1999, and he repeatedly tried to link ICE with Mamane, yet he never said anything about Mamane's alleged activities to ICE.
(d) Tancogne testified that he believed in the fall of 1999 that Jabones Pardo was manufacturing FW Products and had applied for the FW Mark in Europe, yet the first letter from his French lawyer to Jabones Pardo did not occur until October 2000, a year later. (Tr.VI, p. 61).
(e) Tancogne testified that he came to the United States to investigate counterfeiting and not only found the New York market "flooded" with counterfeits but purchased counterfeit FW Products from Michael Aini's Home Boys store in Brooklyn. Yet he never said a word about it to ICE. (Tr. VI, p. 70).
(f) Tancogne testified that he believed the ICE/CLM Agreement was procured by fraud in the inducement, yet not once did he orally or in writing say anything about it to ICE or anyone else. It was not even until August 2000, after this litigation had commenced and well over a year following execution of the ICE/CLM Agreement, that his counsel wrote to ICE to present his claim.
67. Taking all of these factors and inconsistencies into consideration, the Court concludes that Tancogne has failed to act reasonably and/or in good faith. However, the Court also notes that, at least in some part, "the knife cuts both ways." There is no evidence that ICE communicated to Tancogne that it was going to get FW Product from a different source since he refused to ship, or that he was in breach of the contract for refusing to do so.
ICE's Action to Obtain Substitute FW Products
68. After Tancogne refused to ship any more FW Products to ICE in mid-April, 2000, ICE took immediate steps to order FW Products from other sources. (Tr. I, p. 117). Specifically, ICE provided samples of FW Products and the formula of its active ingredients, which Aini had received in 1997 from Vonachen, Tancogne's partner in the Ivory Coast at the time, to Jabones Pardo which soon thereafter began shipping FW Products to ICE from Spain. (Tr. II, pp. 25-26).
69. The Ainis testified that no sales of FW Products other than goods produced by CLM occurred until after Tancogne's refusal to ship FW Products to ICE in April 2000, and there is no document to the contrary and the evidence which attempts to refute this is viewed by the Court, in light of the testimony accompanying same, with some skepticism, at least as the attempt is made to connect it to the plaintiff.
70. With respect to the ability of Jabones Pardo to duplicate and ship FW Products, Tancogne testified that it would require a minimum of four to six months. On the other hand, the Ainis testified that based on their experience in the industry, a company such as Jabones Pardo which had large integrated manufacturing capability could do so within a matter of a few days to a week. Actually bolstering this testimony is Tancogne, himself, who testified that Jabones Pardo had been making some sort of "FAIR WHITE" products since perhaps the fall of 1999. Thus the amount of time required for Jabones Pardo, as opposed to some other manufacturer, to make and ship FW Products is somewhat moot.
The FW Products Formula
71. With respect to the formula for FW Products, Tancogne testified that it had taken him five years to develop the precise formula and manufacturing process, (Tr. III, p. 105) and that it was known only to him and to a single trusted chemist in his factory, (Tr. III, pp. 105-107) although it was filed with the French Government just in case it was needed because of some accident. (Tr. III, p. 110). Tancogne also testified that until 1997 he was conducting some manufacturing in the Ivory Coast along with Vonachen, (Tr. III, pp. 113-14) but that he closed down those operations and moved all manufacturing to his plant in France. (Tr. III, p. 112). At the time he did so, he testified, he completely changed the formula and the manufacturing processes, although he offered no explanation of why he did so. (Tr. III, pp. 114-15).
72. Tancogne's claim that he changed the formula and manufacturing process after that is presumably calculated to indicate that the FW Products ICE has been having produced since May 2000 are different from the FW Products CLM is now producing. If so, however, it would show that CLM's formula for FW Products has changed at least three times, from the original 1997 era formula, to that Tancogne effected when he shut down operations in the Ivory Coast, to that now in use in France where hydroquinone, one of the primary original agreements, is now banned. (Tr. IV, pp. 6-7). There was no testimony from Tancogne's chemist, even in affidavit form, about CLM's formula and there is no other evidence regarding the alleged filing of the secret formula with French authorities.
Confusion in the Market
73. Regardless, it is clear from all the evidence that since the summer of 2000 there has been substantial confusion in the marketplace regarding FW Products. ICE is importing product made for it, CLM is providing Gapardis with FW Products of its own manufacture, and others may be importing FW Products from still other sources. Indeed, CLM is distributing signs, brochures and information advising customers that its are the only "real" FW Products and that others are "counterfeit." The lines of responsibility for quality control, product liability and other purposes are confused if not even chaotic. However, from all of the evidence, the Court is unable to conclude which of the products is "genuine."
CONCLUSIONS OF LAW
The Court concludes that the ICE/CLM Agreement was not procured by fraud. The Court further concludes that assuming the Agreement was otherwise enforceable, the contract was breached by both plaintiff and defendants, although the first breach was by the defendants Tancogne and CLM. Were it only that such a conclusion would make the remainder of the issues as easy to resolve as plaintiff would have this Court believe. As will be seen, infra, there are two paragraphs of the contract that are of particular importance: paragraph A; and paragraph C.
Paragraph A of the contract clearly reflects the prior finding of fact that the contract granted Counter-plaintiffs "all rights, title and interest in the brand name `FAIR WHITE'. . . ." When read in conjunction with paragraph C, it is clear that the "Products" referred to in the contract are those of CLM, especially when the concern regarding counterfeit products is mentioned in paragraph C. It is further clear that Tancogne/CLM held, and still holds, the trademark rights to FW everywhere but, arguably, in the United States.
Although the contract gives plaintiff the right to distribute the Products in the United States, Canada and the Caribbean Islands, it only purports to give the right to register FW in the United States.
Preliminary Injunction — Standards
In order to be entitled to a preliminary injunction, the moving party must show: (1) a substantial likelihood of success on the merits; (2) a substantial threat of irreparable injury if the injunction is not granted; (3) that the threatened injury to Plaintiff outweighs the harm an injunction may cause the defendant; and (4) that the injunction would not disserve the public interest. See e.g., American Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407 (11th Cir. 1998); Tally-Ho v. Coast Community College District, 889 F.2d 1018 (11th Cir. 1989). A preliminary injunction is an extraordinary remedy that should only be granted when the movant has made a clear showing of its burden of proof Cafe 207 v. St. Johns County, 989 F.2d 1136, 1137 (11th Cir. 1993).The first question that must be resolved in evaluating the parties' respective claims is whether the ICE/CLM Agreement is valid and binding. Next, the court must determine whether any of the parties have a "substantial likelihood of success" when the Agreement's language is interpreted.
Is the Contract Enforceable?
CLM initially argues that the ICE/CLM Agreement is either void or terminable at will because no duration is expressly provided. This argument is without merit. The Agreement provides that it is to be interpreted pursuant to New York law. Under New York law, "[I]n the absence of an express term fixing the duration of a contract, the courts may inquire into the intent of the parties and supply the missing term if a duration may be fairly and reasonably fixed by the surrounding circumstances and the parties' intent." Haines v. City of New York, 364 N.E.2d 820, 822 (N.Y. 1977).
The Court finds that the parties did not intend that the Agreement continue indefinitely. Rather, the fact that the parties included a "best efforts" clause which provided minimum sales amounts for the first year, and the next five years, suggests that the parties intended that the contract continue for the limited period of six years. Accordingly, the Court finds that the Agreement is not void for indefiniteness as to duration, nor was the Agreement terminable at will.
Furthermore, even if the contract was terminable at will, CLM did not take steps to legally effect its termination. A party does not "terminate" a contract by breaching it. CLM gave no notice to ICE that it wished to terminate ICE's exclusive distributorship. Rather, the evidence shows that CLM quit supplying product to ICE, and then began providing it to a competitor.
The Court further finds that as of the date of the Agreement, ICE became the "owner and holder of all rights, title and interest" in the FW mark in the United States, Canada and the Caribbean. This language flies in the face of CLM's argument that it gave a revocable at will license to ICE as to the FW Mark. No particular terms are necessary to effectuate an assignment under New York law. See, e.g., Maloney v. John Hancock Mutual Life Ins. Co., 271 F.2d 609 (2d Cir. 1959). Furthermore, New York law recognizes conditional assignments. Id. Therefore, it appears that the Agreement validly assigned the trademark rights in the United States to ICE.
Finally, CLM argues that the contract cannot be enforced because it was an "assignment in gross." Because trademarks do not have discrete value as property, when a trademark assignment results in a bare transfer, not involving assets, trade secrets, management, or goodwill, courts will invalidate the transfer as an assignment-in-gross. J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 18-17, p. 27; see also Marshak v. Green, 746 F.2d 927, 929 (2d Cir. 1984). By refusing to enforce assignments-in-gross, courts protect the public from being misled or confused about the source or nature of products, and insure that a mark continues to symbolize the identity and quality of a product. See, e.g., Money Store v. Harriscorp Fin., Inc., 689 F.2d 666, 676 (7th Cir. 1982).
The statutory basis for the assignment-in-gross is § 1060 of the Lanham Trademark Act, 15 U.S.C. § 1060.
However, in gross rules were "not evolved for the purpose of invalidating all trademark assignments which do not satisfy a stereotyped set of formalities." Syntex Laboratories, Inc. v. Norwich Pharmacal Co., 315 F. Supp. 45, 54 (S.D.N.Y. 1970), aff'd, 437 F.2d 566 (2d Cir. 1971). Indeed, the main consideration is that customers not be misled by the transfer, and the test is whether the transaction is such that the assignee can "go on in real continuity with the past." Merry Hull Co. v. Hi-Line Co., 243 F. Supp. 45, 51-52 (S.D.N.Y. 1965). Accordingly, "a trademark may be validly transferred without a simultaneous transfer of any assets as long as the recipient continues to produce goods of the same quality and nature previously associated with the mark." Defiance Button Machine Co. v. CC Metal Products Corp., 759 F.2d 1053, 1059 (2d Cir. 1985).
The Third Circuit dealt with a factually similar issue in Premier Dental Products Co. v. Darby Dental Supply Co., 794 F.2d 850 (3d Cir. 1986). In that case, a dental supply company had been acting as an exclusive distributor for a trademarked product for ten years. Id. at 851. The foreign manufacturer assigned the company all of the trademark rights in the product in the United States, without any attendant transfer of assets or goodwill of the foreign company. Id. at 851-52. The Third Circuit affirmed the district court, finding that the domestic company had developed independently the goodwill of the product prior to the assignment, and therefore the assignment was a valid assignment of the trademark and established goodwill. Id.; see also Bambu Sales Inc. v. Sultana Crackers, Inc., 683 F. Supp. 899 (E.D.N.Y. 1988) (finding an assignment not in gross where, preceding the assignment, the assignee was the exclusive distributor of the mark and widely advertised the product). The contract at issue here clearly recognizes the prior efforts of Plaintiff ICE with respect to the Fair White Product.
Similarly, the ability of the transferee to manufacture the product, as well as continuity of management are other factors the courts may consider, as demonstrated by the case of J. Atkins Holdings, Ltd. v. English Discounts, Inc., 729 F. Supp. 945 (S.D.N.Y. 1990). In that case, the assignee was the a U.S. Corporation established (as a wholly owned subsidiary) by the owner of the exclusive rights to distribute the trademarked goods. The trademarks were to be used in connection with the same goods and to be sold through the same distributor, owned by the parent company of the assignee, with practically identical personnel. The court found the assignment to be legitimate, finding that "[u]nder the `continuity of management' exception . . . a viable business continues to operate as a licensee of the marks. The public continues to receive the same quality of goods and services which have always accompanied the BW trademarks." Id. at 951.
The Court notes that in this case, there was conflicting evidence as to whether, at the time of the transfer, ICE was in possession of the "authentic" FW formula. Regardless, the ICE/CLM agreement provided that ICE would guard against the production or distribution of counterfeit products. Therefore, even though the assignment did not specifically transfer the formula, it was ensured that the product the new owner of the trademark would be distributing would be the genuine FW Product developed by CLM. Furthermore, the Agreement itself recites that ICE had already established goodwill in the product in the United States. Contr. ¶ B.. Accordingly, the Court finds that the assignment of the trademark was not in-gross, and that the contract is enforceable.
ICE's Entitlement to Injunctive Relief
The Court finds that ICE has established a substantial likelihood of success as to its claim against CLM for breach of contract. First, the evidence showed that CLM sold FW Product to Gapardis for distribution in the United States, in violation of the grant of exclusive ownership of the "FAIR WHITE" Mark and ICE's exclusive distribution rights in the United States. Furthermore, New York law provides that "[i]mplied in every contract is a covenant of good faith and fair dealing [citation omitted], which is breached when a party to a contract acts in a manner that, although not expressly provided by any contractual provision, would deprive the other party of the right to receive benefits under their agreement." Jaffe v. Paramount Communications, Inc., 644 N.Y.S.2d 43, 47 (N.Y.App.Div. 1996). Because CLM and ICE agreed that ICE would use its best efforts to sell a certain amount of FW Product, while also guarding against the sale of any counterfeit products in the United States, CLM had a duty of good faith and fair dealing to supply ICE with the FW Product. When CLM refused to do so, it breached that duty.
However, the Court finds that ICE has not shown irreparable harm which would warrant injunctive relief. The evidence showed that as of the date of the hearing, CLM had and was supplying the Fair White Product to another distributor in the United States. With respect to a certain period of time prior to the hearing, those sales were in derogation of ICE's exclusive right to distribute that product. However, as of the time of the hearing, in light of its breach of the Agreement, as discussed below, ICE no longer had exclusive distribution rights in the United States. Damages can compensate ICE for the distribution during the period it did own the rights. However, the Court finds that ICE has failed to show irreparable injury as of the time of the hearing. Therefore, ICE is not entitled to a preliminary injunction.
CLM's Entitlement to Injunctive Relief
When ICE began selling counterfeit FW Product obtained from Jabones Pardo, as the evidence presented at the hearing showed, ICE clearly breached paragraph 3 of the ICE/CLM Agreement. This evidence also supports CLM's claim that ICE diluted the "FAIR WHITE" mark, as to which CLM retained ownership rights in Europe, and that there is a likelihood of confusion regarding the FW Mark. Subsequent sales by McHeileh/Ailatan Investments, Inc. added to the confusion. Accordingly, the Court finds that CLM has shown a substantial likelihood of success on the merits of its claims.
The Court further finds that CLM has demonstrated a substantial threat of irreparable injury if injunctive relief is not granted. Although ICE may have owned the trademark for a period of time, at some time prior to the hearing, ownership of the trademark rights in the United States reverted to CLM. Even not considering ownership rights in the United States, CLM is undisputedly the owner of rights in the FW mark in Europe. The evidence showed that as of the time of the hearing, Plaintiff ICE was selling counterfeit FW Product in the United States. The Eleventh Circuit has found that "a sufficiently strong showing of likelihood of confusion . . . may by itself constitute a showing of [a] substantial threat of irreparable harm." Davidoff Cie, S.A. v. PLD International Corp., 263 F.3d 1297, 1304 (11th Cir. 2001) (quoting E. Remy Martin Co., S.A. v. Shaw-Ross International Imports, Inc., 756 F.2d 1525, 1529 (11th Cir. 1985)).
Furthermore, the threatened injury to CLM, by confusion in the market regarding the FW Mark, outweighs any harm to ICE in preventing it from selling product supplied by third parties, particularly in light of the Court's finding that ICE is no longer the exclusive distributor. Finally, the Court finds that granting injunctive relief to CLM would in no way disserve the public interest. Rather, the Eleventh Circuit has held that public interest is served when customer confusion is prevented. Kason Indus., Inc. v. Component Hardware Group, Inc., 120 F.3d 1199, 1207 (11th Cir. 1987).
CONCLUSION
Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby ORDERED AND ADJUDGED as follows:
1. Plaintiffs Motion for Preliminary Injunction is hereby DENIED;
2. Defendants/Counter-plaintiffs' Cross-Motion for Preliminary Injunction is hereby GRANTED;
3. Counter-plaintiffs' Motion for Preliminary Injunction Against Gaby McHeileh and Ailatan Investments is hereby GRANTED;
4. Defendants/Counter-plaintiffs are hereby directed to submit to the Court a proposed order as to the form of injunctive relief to be granted.
DONE AND ORDERED this day of October, 2001 Miami, Florida.