Fashion Boutique of Short Hills v. Fendi Usa

• Decision Date: 19 November 1999
• Docket Number: No. 91 Civ. 4544(MGC).,91 Civ. 4544(MGC).
• Citation: 75 F.Supp.2d 235
• Parties: FASHION BOUTIQUE OF SHORT HILLS, INC., Plaintiff, v. FENDI USA, INC. and Fendi Stores, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

Page 235

75 F.Supp.2d 235

FASHION BOUTIQUE OF SHORT HILLS, INC., Plaintiff, v. FENDI USA, INC. and Fendi Stores, Inc., Defendants.

No. 91 Civ. 4544(MGC).

United States District Court, S.D. New York.

November 19, 1999.

Weil, Gotshal & Manges, LLP by Helene D. Jaffe, Kevin P. Hughes, Robert G. Sugarman, Laura Lehman, Heather Goldstein, New York City, for plaintiff.

Pavia & Harcourt by Steven Skulnik, Richard L. Mattiaccio, Victor Genecin, Paul B. Lyons, New York City, for defendants.

OPINION

CEDARBAUM, District Judge.

Defendants Fendi USA, Inc. and Fendi Stores, Inc. (together, "Fendi") move In limine to preclude the proposed testimony of Dov Frishberg, Ph.D. at the trial of this action. Plaintiff Fashion Boutique of Short Hills, Inc. ("Fashion Boutique") proffers the testimony of Dr. Frishberg as an expert to testify on the lost value of Fashion Boutique's retail business when Fashion Boutique closed that business in 1991. For the reasons discussed below, Fendi's motion is granted.

BACKGROUND

It is undisputed that plaintiff operated a retail store in a shopping mall in Short Hills, New Jersey from 1983 to 1991. Plaintiff was a Fendi franchisee and offered for sale only merchandise manufactured by Fendi. In late October 1989 defendant Fendi Stores, Inc. opened a retail store in New York City which also sold only Fendi products.

In this diversity case, Fashion Boutique asserted claims under the Lanham Act and common law claims of business slander and disparagement of goods. Fendi's motion for partial summary judgment dismissing Fashion Boutique's Lanham Act claims was granted in 1996. Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 942 F.Supp. 209 (S.D.N.Y.1996). In 1998, Fendi moved for summary judgment on the remaining common law claims. That motion was granted in part and denied in part, leaving nine actionable statements for the remaining claims of business slander and disparagement of goods. Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., No. 91 Civ. 4544, 1998 WL 259942 (S.D.N.Y. May 21, 1998). Those claims are scheduled for trial.

The three statements on which the claim of business slander is based are:

1. In December 1990, a fur salesperson and an assistant manager in Fendi's New York store allegedly told customers Carmen and Madeline Montalbano that the "Fendi organization" was planning to shut down Fashion Boutique "in the near future." (C. Montalbano Decl. ¶ 6; M. Montalbano Decl. ¶ 8.)

2. In March 1991, a customer service representative in Fendi's New York store allegedly told customer Joan Marano that Fashion Boutique would be "closing shortly." (Marano Decl. ¶ 3.)

3. In March 1991, the customer service manager in Fendi's New York store allegedly told customer Lawrence Ray that "we're having problems with the Short Hills store." (Ray Decl. ¶¶ 2-4.)

Plaintiff's claim of disparagement of goods is based on the following six statements:

1. In December 1990, a salesperson in Fendi's New York store allegedly told customer Anna Bassett that Fashion Boutique sold a "franchise line" that was inferior to the "top Fendi line" sold in the New York store. (Bassett Decl. ¶¶ 2-6.)

2. In December 1990, Jack Cohan, a fur salesman in Fendi's New York store, allegedly told the Montalbanos that "[e]verything [Fashion Boutique] sells is inferior. Their furs are old and they're not made well. If you're going to spend that kind of money, shop here instead. We are the real Fendi." (C. Montalbano Decl. ¶ 4.)

3. In December 1990, a salesperson in Fendi's New York store allegedly told customer Jerry Ring that "[i]f [he] bought [his briefcase] at the Fendi in Short Hills, it is not the real Fendi line." She went on to explain that Fashion Boutique sold an inferior line of goods. (Ring Decl. ¶¶ 3-6.)

4. Near Easter of 1991, a salesperson in Fendi's New York store allegedly told customer Valda Green that Fashion Boutique sold a "lesser line" of Fendi products. (Green Decl. ¶¶ 2-4.)

5. In the spring of 1991, Francesco Gittardi, a salesman in Fendi's New York store, allegedly told customer Philip Scheer that Fashion Boutique sold an inferior line of Fendi merchandise. (Scheer Decl. ¶¶ 2-3.)

6. In June 1991, the customer service manager in Fendi's New York store, Joan Vernocchi, allegedly told customer Carmela Amore "[Fashion Boutique] carried a completely different (and inferior) line of Fendi merchandise than the New York store." (Amore Decl. ¶¶ 2, 4.)

Three of the customers identified above testified that they repeated the statements to others. Green, to whom a statement was made near Easter of 1991, testified that she "was upset about buying something that was not authentic" and "made mention to others ... that [the merchandise] was not good quality." (Green Dep. at 37:11-13, 22-23.) Marano testified that she told her friends, with whom she was shopping when she heard the disparaging remarks in March of 1991, that "the Short Hills store is going out of business." (Marano Dep. at 47:21-22.) Carmen Montalbano testified that he told "co-workers" and "friends" about his December 1990 conversation with the New York Fendi store in which he was allegedly told that Fashion Boutique sold inferior merchandise. (C. Montalbano Dep. at 29:20.)

None of the statements complained about were in writing. Only isolated oral statements have been shown by admissible evidence. Fashion Boutique contends that these statements coupled with other circumstantial evidence, including the decline in its sales between December 1989 and July 1991 when it closed (Def.Mem.Ex. A at 22-23.), are sufficient proof that a campaign of disparagement caused the loss of Fashion Boutique's entire business. But evidence of declining sales is not a substitute for proof of causation in a case in which there is no evidence that statements were widely disseminated by the defendant.

Fashion Boutique has proffered other evidence as circumstantial evidence of causation. It offers the testimony of Caroline Clarke, the former Executive Director of Store Operations for Fendi Stores, Inc., to show that Fendi "wanted to put [Fashion Boutique] out of business." (Pl.Supp. Opp'n at 9.) Clarke testified in her deposition that sometime in 1990 Bruno D'Angelo, the executive vice president of Fendi USA, Inc., instructed her to keep a file on Fashion Boutique "in case the company ever moved to dissolve the ... franchise agreement." (Clarke Dep. at 110:10-14, 130:19-24.) Clarke stated that it was Fendi's policy to encourage Fashion Boutique customers to document their complaints and that complaint letters were collected for the Fashion Boutique file. (Clarke Dep. at 245:14-18, 369:2-4.) Clarke testified that in her opinion "[defendant] Fendi USA was not seeking to resolve the alleged problems with [Fashion Boutique] in a positive constructive manner" by informing "the franchise of the complaint[s]." (Clarke Dep. at 162:3-43, 14-21.) Clarke testified that "the general consensus of all of the management of Fendi Stores at the time" was to "get rid" of Fashion Boutique. (Clarke Dep. at 246:15-17.) These statements, even if admissible, do not show that Fendi widely disseminated defamatory statements or that statements by Fendi caused Fashion Boutique to close.

As evidence that disparaging statements were disseminated widely by Fendi, Fashion Boutique also offers reports of four private investigators who went separately to the New York store posing as dissatisfied Fashion Boutique customers or Fashion Boutique customers seeking repair for defective merchandise. I have previously ruled that the responses to the investigators' statements are not actionable as defamation or disparagement. Fashion Boutique, 1998 WL 259942, at *5. However, Fashion Boutique argues that such statements are "relevant in establishing the extent to which Fendi's statements were disseminated." (Pl.Supp. Opp'n at 10 n. 4.) Oral statements made on four isolated occasions are not evidence of wide dissemination of those statements even when added to the other statements.

In order for evidence of the lost value of Fashion Boutique entire business to be relevant, Fashion Boutique must show that Fendi's isolated defamatory statements caused it to lose its entire business. The circumstantial evidence described combined with evidence of declining sales beginning in December 1989 is not sufficient to support a rational inference that the oral statements made by employees of Fendi's New York store between December 1990, a full year after sales began to decline, and June 1991, two months after Fashion Boutique held a going out of business sale, destroyed Fashion Boutique's business.

DR. FRISHBERG'S PROPOSED TESTIMONY

Dr. Frishberg is Director of Economic Services at Deloitte & Touche, LLP. Dr. Frishberg's report contains his opinion regarding the value of Fashion Boutique's business. Dr. Frishberg explains that he has "analyzed the impact of certain allegations ... regarding actions by the Defendants to destroy the business of Fashion Boutique." (Def.Mem.Ex. A at 1.) He then explains that "[h]aving analyzed these allegations, [he] has proceeded to quantify certain categories of damages to Fashion Boutique." (Id.)

Dr. Frishberg assumes, for the purposes of his calculation of damages, that "but for the alleged campaign of disparagement" Fashion Boutique's growth, from January 1991 on, "would equal the Specialty Retail stores' sector growth rate." (Id.) Dr. Frishberg concludes that "$11,421,242 represents ... the minimum Plaintiffs are entitled to for economic damages sustained." (Def.Mem.Ex. A at 1.) In accounting for the time value of money through September 1999, Dr. Frishberg's revised report increases this estimate to $15,444,437. (Rev. Report at 10.) This figure also includes Dr. Frishberg's calculation of "lost profits from lost sales that Fashion Boutique suffered from the Defendants' alleged actions during 1989 and 1990." (Def.Mem.Ex. A at 5.) Dr. Frishberg assumes that Fendi's...