631 F.3d 42 (2nd Cir. 2011), 09-3899, Diesel Props S.R.L. v. Greystone Business Credit II LLC

Docket Nº:Docket 09-3899-cv, 09-3900-cv.
Citation:631 F.3d 42
Opinion Judge:KEARSE, Circuit Judge:
Party Name:DIESEL PROPS S.R.L., Diesel Kid S.r.l., Plaintiffs-Counterclaim-Defendants-Appellants, v. GREYSTONE BUSINESS CREDIT II LLC, Global Brand Marketing Inc., Defendants-Counterclaimants-Appellees.
Attorney:Ira S. Sacks, New York, N.Y. (Jennifer Daddio, Law Offices of Ira S. Sacks, New York, NY, Mark S. Lafayette, Melanie Sacks, Olshan Grundman Frome Rosenzweig & Wolosky, New York, NY, on the brief), for Plaintiffs-Counterclaim-Defendants-Appellants. Oliver J. Armas, New York, N.Y. (Chadbourne & Par...
Judge Panel:Before: KEARSE, SACK, and LIVINGSTON, Circuit Judges.
Case Date:January 06, 2011
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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631 F.3d 42 (2nd Cir. 2011)

DIESEL PROPS S.R.L., Diesel Kid S.r.l., Plaintiffs-Counterclaim-Defendants-Appellants,

v.

GREYSTONE BUSINESS CREDIT II LLC, Global Brand Marketing Inc., Defendants-Counterclaimants-Appellees.

Docket Nos. 09-3899-cv, 09-3900-cv.

United States Court of Appeals, Second Circuit.

January 6, 2011

Argued: April 14, 2010.

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Ira S. Sacks, New York, N.Y. (Jennifer Daddio, Law Offices of Ira S. Sacks, New York, NY, Mark S. Lafayette, Melanie Sacks, Olshan Grundman Frome Rosenzweig & Wolosky, New York, NY, on the brief), for Plaintiffs-Counterclaim-Defendants-Appellants.

Oliver J. Armas, New York, N.Y. (Chadbourne & Parke, New York, NY, on the brief), for Defendant-Counterclaimant-Appellee Greystone Business Credit II LLC.

Michael J. Tiffany, New York, N.Y. (Leader & Berkon, New York, NY), submitted a letter in support of affirmance on behalf of Defendant-Counterclaimant-Appellee Global Brand Marketing Inc.

Before: KEARSE, SACK, and LIVINGSTON, Circuit Judges.

KEARSE, Circuit Judge:

Plaintiffs Diesel Props S.r.l. (" Props" ) and Diesel Kid S.r.l. (" Kid" ) (collectively " Diesel" ) appeal from a judgment entered in the United States District Court for the Southern District of New York following a bench trial before Harold Baer, Jr., Judge, (a) dismissing their claims against defendants Greystone Business Credit II LLC (" Greystone" ) and Global Brand Marketing Inc. (" GBMI" ), and (b) ordering Props to pay Greystone $677,381.93 in damages, including interest, on its counterclaim for unjust enrichment. On appeal, Diesel contends principally that the district court abused its discretion in rejecting, after trial, Diesel's claims against Greystone for breach of contract, unjust enrichment, and account stated, and in holding Props liable to Greystone for unjust enrichment. For the reasons that follow, we reverse the judgment against Props for unjust enrichment, and we affirm the judgment in all other respects.

I. BACKGROUND

Most of the background facts of this controversy are undisputed and were stipulated by the parties prior to trial.

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A. The Relationships Among the Parties

Props and Kid are Italian companies, subsidiaries of nonparty Diesel S.p.A. (" SpA" ), which owns the trademarks on Diesel-brand merchandise. Props and Kid are licensed by SpA to produce adult shoes and children's shoes, respectively, bearing Diesel trademarks. In 2005, Props and Kid entered into distribution agreements with GBMI, a California corporation (the " Distribution Agreements" ), pursuant to which GBMI would purchase Diesel-brand shoes designed and manufactured by Diesel and sell them to retailers in the United States. In the summer of 2006, GBMI was experiencing severe financial difficulties and owed SpA and Kid more than $7 million in back royalties and advertising commitments. By December 31, 2006, those amounts had increased to more than $11.5 million.

Greystone is a Delaware company that makes loans to financially distressed companies and takes security interests in their assets. In December 2006, Greystone, GBMI, and Diesel entered into agreements pursuant to which Greystone would make funds available to GBMI and would make payments from those funds directly to Diesel. On December 2, SpA and Kid sent a letter to GBMI, with a copy to Greystone, stating that Props and Kid were each willing to sign a three-way agreement with Greystone and GBMI with respect to such financing. On December 4, Greystone and GBMI executed a loan and security agreement (" LSA" ), pursuant to which Greystone established a $25 million revolving credit account for GBMI (the " revolver" ) in exchange for a security interest in substantially all of GBMI's present and after-acquired assets, including " all of [GBMI's] books and records relating ... to [GBMI's] business." On the same day, two letter agreements, identical in substance, were executed-one by GBMI, Greystone, and Props, the other by GBMI, Greystone, and Kid (the " tripartite agreements" or " TPAs" )-with reference to the LSA and the Distribution Agreements. The TPAs contained payment provisions requiring, inter alia, that GBMI not place an order under the Distribution Agreements unless it had received a bona fide purchase order for Diesel products from a retailer (a " Customer Purchase Order" ) and that GBMI provide copies of such customer orders to Diesel and Greystone; that Diesel, before delivering such products to GBMI, send Greystone copies of Diesel invoices for those products (" Diesel Invoices" ); and that GBMI supply Diesel and Greystone with copies of invoices that GBMI sent to its customers (" Customer Invoices" ). In those circumstances, GBMI's delivery of such Customer Invoices to Greystone would constitute an irrevocable request that Greystone automatically pay Diesel, from GBMI's revolving credit account, the amounts shown on the corresponding Diesel Invoices. With respect to GBMI debts on orders not placed according to the terms of the TPAs-including debts to its suppliers other than Diesel-Greystone was not authorized to make payments from GBMI's credit account except as expressly instructed by GBMI. Diesel was aware that the credit account could be used to pay other GBMI creditors. The TPAs provided that Diesel had the right, at any time before shipping shoes to GBMI, to request and receive information from Greystone as to, inter alia, whether GBMI was in noncompliance or default with respect to any requirements imposed by the LSA (the " notice provisions" ).

Despite the December 2006 arrangements, GBMI's financial difficulties continued. At various times-beginning in December 2006 and January 2007-GBMI was in default of revenue covenants and other terms of the LSA. In addition, during the next eight months, Diesel shipped

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to GBMI several lots of shoes for which Diesel was never paid. On September 4, 2007, Diesel notified Greystone that Greystone was in default of the TPAs for, inter alia, failing to make payments, and notified GBMI that GBMI was in default of the Distribution Agreements; Diesel informed each that unless its defaults were cured within 30 days, Diesel would consider its agreements terminated (the " conditional termination letters" ). On October 17, 2007, after neither Greystone nor GBMI had cured its defaults, Diesel notified them that their respective contracts were terminated as of October 4. Diesel shortly thereafter commenced the present action.

At the time of termination, GBMI had received orders from retailers for 520,202 pairs of Diesel shoes for the 2008 spring-summer season (" SS08" ) and had incurred significant expenses associated with collecting those orders. After terminating the Distribution Agreements with GBMI, Diesel designated Diesel USA (" D-USA" ), a wholly owned subsidiary of SpA, as its United States distributor. D-USA had operated Diesel-brand retail stores but had no experience in selling shoes to retailers, and it had little information about other retailers' orders for the SS08 season. In November, D-USA hired a former GBMI employee, who gave D-USA a complete list of GBMI's open orders (the " Order Book" ). Props personnel referred to the Order Book as the GBMI employee's " dowry" and wrote " [i]t looks like Christmas came early this year." D-USA had net sales for the SS08 season of more than $14 million, selling 369,266 pairs of Diesel-brand shoes to retailers who included those identified from the GBMI Order Book.

B. The District Court's Rulings After Trial

In the present action, Diesel asserted numerous claims, several of which were dismissed prior to trial. To the extent pertinent to this appeal, Diesel's third amended complaint alleged principally that Greystone had failed to give Diesel notice of many defaults by GBMI under the LSA and had thereby breached the TPA notice provisions; that the failures of GBMI and Greystone to pay Diesel for shoes shipped to GBMI breached the Distribution Agreements and the TPA payment provisions; and that Diesel was entitled to recover from each defendant for breach of contract, unjust enrichment, or account stated. Diesel sought approximately $20 million in damages, plus interest. Greystone, in connection with Props's acquisition of the GBMI Order Book, in which Greystone claimed a security interest, asserted a counterclaim seeking more than $30 million for unjust enrichment.

The district court held a three-day bench trial on the above claims. In a posttrial Opinion and Order reported at 2009 WL 2514033, No. 07 Civ. 9580 (S.D.N.Y. Aug. 18, 2009) (" Diesel " ), annotated with citations to pertinent documents and to testimony and other sworn statements by officials of Greystone, GBMI, SpA, Kid, and Props, the district court ruled against Diesel on all of its claims and ruled in favor of Greystone on its unjust enrichment counterclaim against Props. The court dismissed Diesel's claims against GBMI on the ground that GBMI's obligations to make payments to Diesel arose only under the Distribution Agreements, and those agreements contained forum-selection clauses requiring all claims thereunder to be litigated in Milan, Italy. See Diesel, 2009 WL 2514033, at *6, *11.

As to Diesel's claim against Greystone for breach of the payment provisions of the TPAs, the court concluded that Diesel was not entitled to recover, principally because

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it had not shown that a condition precedent to Greystone's obligation to make payments had been performed. The court found that the TPAs and the LSA, executed " on the same day," " made express reference to one another," and that " the terms of each w[ere] conditioned on the performance and fulfillment of...

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