Ja Apparel Corp. v. Abboud

Decision Date05 June 2008
Docket NumberNo. 07 Civ. 7787 (THK).,07 Civ. 7787 (THK).
Citation591 F.Supp.2d 306
PartiesJA APPAREL CORP., Plaintiff, v. Joseph ABBOUD, Houndstooth Corp., and Herringbone Creative Services, Inc., Defendants. Joseph Abboud, Houndstooth Corp., and Herringbone Creative Services, Inc., Counterclaim-Plaintiffs, v. JA Apparel Corp. and Martin Staff, Counterclaim-Defendants.
CourtU.S. District Court — Southern District of New York

Phillip A. Geraci, Thomas A. Smart, Kaye Scholer, LLP, New York, NY, for Plaintiff.

Louis Sherman Ederer, John Maltbie, Arnold & Porter, LLP, New York, NY, for Defendants.

Thomas A. Smart, Kaye Scholer, LLP, New York, NY, for Counterclaim-Defendants.

MEMORANDUM OPINION AND ORDER

THEODORE H. KATZ, United States Magistrate Judge.

In this action, Plaintiff JA Apparel Corp. ("Plaintiff" or "JA Apparel") sues Defendants Joseph Abboud ("Abboud"), Houndstooth Corp. ("Houndstooth"), and Herringbone Creative Services, Inc. ("Herringbone") (at times, collectively "Abboud") for (1) breach of contract, (2) trademark infringement, false designation of origin, unfair competition, trademark dilution, false and deceptive trade practices, and (3) a declaratory judgment regarding the nature of its rights, stemming from a June 16, 2000 Purchase and Sale Agreement, and a related July 13, 2000 Side Letter Agreement, between, on the one hand, JA Apparel, and on the other, Abboud and Houndstooth.

Defendants assert counterclaims against JA Apparel and one of its principals, Martin Staff ("Staff'), for false endorsement, false advertising, violation of New York civil rights and general business laws, and common law unfair competition, stemming from activities in which JA Apparel and Staff allegedly engaged subsequent to the expiration of the Side Letter Agreement.

The Court's jurisdiction over the federal trademark and related claims arises under 28 U.S.C. §§ 1331 and 1338(a) and (b) and 15 U.S.C. § 1121, and its supplemental jurisdiction over the state law claims arises under 28 U.S.C. § 1367.

On September 4, 2007, Plaintiff filed its Complaint seeking, among other things, preliminary and permanent injunctive relief against Defendants. By agreement of the parties, JA's motion for a preliminary injunction was consolidated with a trial on the merits. After engaging in intensive documentary and deposition discovery, on December 5, 2007, the parties consented to trial before this Court, pursuant to 28 U.S.C. § 636(c) and Fed.R.Civ.P. 73. The Court presided over a bench trial on February 20-22 and March 10-12, 2008, and closing arguments were heard on April 3, 2008. What follows are the Court's Findings of Fact and Conclusions of Law.

FACTUAL BACKGROUND1

Joseph Abboud began his career in the fashion industry in Boston, in the late 1960s, with the menswear retailer, Louis Boston. He worked there for twelve years, serving as a buyer, designer, merchandiser, and coordinator of promotion and advertising. In 1980, Abboud left Louis Boston and went to work for a company called Southwick, where he was responsible for designing tailored clothing. About a year later, in 1981, Abboud left Southwick and began working for Polo Ralph Lauren as a menswear designer. In 1985, Abboud was approached by Barry Bricken, an individual in the menswear business, who asked Abboud to join him in creating an entire menswear collection. Abboud accepted Bricken's offer and, during this time, established what he refers to as his designer "DNA" — a style that rests between traditional American "preppie" clothes and "faster" European clothes.

In 1987, Abboud launched his first menswear line under the "Joseph Abboud" label, while working for the Milton Freeberg Company. It was at this time that Abboud also registered his personal name, "Joseph Abboud," as a trademark with the United States Patent and Trademark Office. Thereafter, in March 1988, Abboud, through his new wholly-owned corporation, Houndstooth, entered into a joint venture with GFT International B.V. ("GFT") to manufacture, market, and sell various products under the Joseph Abboud brand name.2 The joint venture was named JA Apparel — which is the Plaintiff in this case. During the joint venture, pursuant to a March 1, 1988 License Agreement, Abboud licensed the "Joseph Abboud" trademarks to JA Apparel, which used the "Joseph Abboud" trademarks in the manufacture, marketing, and sale of its products. Abboud remained responsible for the design of JA Apparel's men's clothing and accessory lines.

The joint venture continued in this form until 1996, when GFT, which had recently been acquired by new Italian owners, bought out Abboud's interest in the joint venture and JA Apparel became a whollyowned subsidiary of GFT. In connection with this transaction, GFT canceled the 1988 License Agreement in exchange for Abboud issuing two new licenses to JA Apparel for the use of the "Joseph Abboud" trademark in the manufacture, marketing and sale of men's tailored clothing and sportswear, that was to be approved by Abboud. Throughout the new license period, through the year 2000, JA Apparel, then wholly-owned by GFT, continued to sell its products under the "Joseph Abboud" trademarks. Sales of products under the Joseph Abboud trademarks grew substantially in the period from 1988 through 2000, and Abboud became a wellknown and highly respected figure in the fashion industry.

The Purchase And Sale Agreement

On June 16, 2000, JA Apparel entered into the Purchase and Sale Agreement with Abboud and Houndstooth (the "Agreement"). Abboud was represented by counsel during the negotiation and execution of the Agreement, read the Agreement before signing it, and initialed each page on behalf of himself and Houndstooth. The Agreement is the genesis of the current litigation.

In exchange for a payment of $65.5 million, which was to be "allocated 100% to Abboud," Abboud agreed to "sell, convey, transfer, assign and deliver" to JA Apparel "all of [his] right, title and interest in and to" the following:

(A) The names, trademarks, trade names, service marks, logos, insignias and designations identified on Schedule 1.1(a)(A), and all trademark registrations and applications therefor, and the goodwill related thereto (collectively, the "Trademarks") ... and all other Intellectual Property (as hereinafter defined).

(B) All licenses to use the Trademarks granted by Houndstooth or Abboud ... (collectively, the "License Agreements").

(C) All rights to use and apply for the registration of new trade names, trademarks, service marks, logos, insignias and designations containing the words "Joseph Abboud," "designed by Joseph Abboud," "by Joseph Abboud," "JOE" or "JA," or anything similar to or derivative thereof, either alone or in conjunction with other words or symbols (collectively, the "New Trademarks"), for any and all products and services.

(D) All books, financial records, invoices, and other documents, records and data files relating primarily to the Trademarks or the License Agreements.

(E) The goodwill of or pertaining to the Trademarks. (The items referred to in clauses (A) through (E) of this Section 1.1(a) are collectively referred to as the "Assets").

(See PX 1 at ¶ 1.1(a)(A)-(E).)

The Agreement also has an "Interpretation" provision, which provides, in pertinent part:

9.8. Interpretation. . . . The parties have participated jointly in the negotiation and drafting of this Agreement. If any ambiguity or question of interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumptions or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any provisions of this Agreement....

(Id. ¶ 9.8.) It also has an integration clause, which states:

9.9. Entire Agreement. This Agreement, including the Exhibits and Schedules hereto and the documents, certificates and instruments referred to herein, embody (sic) the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions.

(Id. ¶ 9.9.)

* * *

The Side Agreement

Approximately one month later, on July 13, 2000, the same parties entered into another agreement, alternately referred to by the parties as the Side Letter Agreement or Personal Services Agreement (referred to herein as the "Side Agreement"). Abboud was represented by counsel during the negotiation and execution of the Side Agreement, pursuant to which Abboud agreed to serve as "Chairman Emeritus" of JA Apparel, and, for a period of five years, provide JA Apparel with, among other things, consulting services relating to fashion design and brand promotion of products sold under the Abboud marks.

The Side Agreement, therefore, was to expire on July 13, 2005, but the terms provided that upon expiration, Abboud would not compete with JA Apparel for a period of two years-until July 13, 2007 (the "Restricted Period"). Specifically, the non-competition provision provides as follows:

2. Prohibition of Competing Activities by Abboud

(a) For the two-year period immediately following the expiration of the Personal Services Period (the "Restricted Period"), Abboud agrees that he will not, directly or indirectly, through any partnership, corporation, limited liability company, trust or other entity, be associated as an owner, director, officer, employee, consultant or other participant with, any person, group, business enterprise, or other entity which is engaged in or proposes to engage in the business of designing, licensing, manufacturing, marketing or distributing any products or services which are or would be competitive with the business of...

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3 cases
  • Ja Apparel Corp. v. Abboud
    • United States
    • U.S. District Court — Southern District of New York
    • 12 Enero 2010
    ...The Court, therefore, granted Plaintiff injunctive relief and dismissed all of Abboud's counterclaims. See JA Apparel Corp. v. Abboud, 591 F.Supp.2d 306 (S.D.N.Y.2008) ("Abboud I"). On appeal, the Second Circuit concluded that the language of the Agreement was ambiguous, and vacated this Co......
  • Ja Apparel Corp. v. Abboud
    • United States
    • U.S. Court of Appeals — Second Circuit
    • 10 Junio 2009
    ...issues. I. BACKGROUND The following facts are taken from the district court's findings after trial, see JA Apparel Corp. v. Abboud, 591 F.Supp.2d 306 (S.D.N.Y.2008) ("JA Apparel"), and, unless otherwise indicated, are not A. The Parties Abboud is a world-famous fashion designer and philanth......
  • L & L WINGS, INC. v. MARCO-DESTIN, INC.
    • United States
    • U.S. District Court — Southern District of New York
    • 16 Diciembre 2009
    ...and that the best evidence of what parties to a written agreement intend is what they say in their writing." JA Apparel Corp. v. Abboud, 591 F.Supp.2d 306, 338 (S.D.N.Y.2008). In this case, it is undisputed that the Licensing Agreement clearly sets a termination date of October 31, 2006. (P......

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