Abraham Zion Corp. v. Lebow

• Decision Date: 25 June 1984
• Docket Number: No. 83 CIV. 1469 (CBM).,83 CIV. 1469 (CBM).
• Citation: 593 F. Supp. 551
• Parties: ABRAHAM ZION CORP. and Lebow Clothes, Inc., Plaintiffs, v. Harry P. LEBOW, Individually and as Trustee of the Estate of Benjamin Lebow, Deceased, H. Poe Lebow, Ltd., Oakloom Clothes, Inc., and H. Poe Lebow, Ltd. and Oakloom Clothes, Inc., Doing Business as a Joint Venture, Defendants.
• Court: U.S. District Court — Southern District of New York

593 F. Supp. 551

ABRAHAM ZION CORP. and Lebow Clothes, Inc., Plaintiffs, v. Harry P. LEBOW, Individually and as Trustee of the Estate of Benjamin Lebow, Deceased, H. Poe Lebow, Ltd., Oakloom Clothes, Inc., and H. Poe Lebow, Ltd. and Oakloom Clothes, Inc., Doing Business as a Joint Venture, Defendants.

No. 83 CIV. 1469 (CBM).

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

June 25, 1984.

COPYRIGHT MATERIAL OMITTED

Golenbock & Barell by Stephen M. Rathkopf, Harold M. Hoffman, New York City, for plaintiffs.

Mark D. Lebow, New York City, for defendant Harry P. Lebow.

Felfe & Lynch, by Richard Bennett, New York City, for H. Poe Lebow, Ltd. and Oakloom Clothes, Inc.

Felfe & Lynch by Richard E. Bennett, New York City, for H. Poe Lebow Ltd., et al.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

MOTLEY, Chief Judge.

Plaintiffs bring this action alleging breach of contract, breach of fiduciary duty, and violation of various trademark laws. At the hearing on plaintiffs' motion for a preliminary injunction, the court ordered that the hearing be consolidated with a trial on the merits. The court's findings of fact and conclusions of law follow.

I. Findings of Fact

A. The Parties

Plaintiff Abraham Zion Corporation (AZC) is and was at all relevant times a Pennsylvania corporation with a place of business at 1290 Avenue of the Americas, New York, New York.

Plaintiff Lebow Clothes, Inc. (LCI) is a subsidiary of AZC, created on or after June 30, 1982. LCI is a Delaware corporation with a place of business at 1290 Avenue of the Americas, New York, New York. LCI is engaged, inter alia, in the business of manufacturing and selling higher-priced men's clothing, primarily to retail men's "specialty" shops throughout the United States, for resale to the general public.

Defendant Oakloom Clothes, Inc. is a Maryland corporation engaged in the business, inter alia, of manufacturing and selling men's clothing. Its principal place of business is in Maryland, and it also has a place of business at 1290 Avenue of the Americas, New York, New York.

Defendant H. Poe Lebow, Ltd. (HPL, Ltd.) is a Maryland corporation, created by defendant Harry P. Lebow in or about August of 1982, with its principal place of business in Maryland. It is engaged in the business of designing higher-priced men's clothing in connection with the manufacture and sale of such clothing by defendant Oakloom.

Defendant Harry P. Lebow, an individual, is a resident of the State of Maryland. Harry Lebow is engaged in the business of designing higher-priced men's clothing in connection with the manufacture of such clothing by defendant Oakloom.

B. Ownership of the "Harry Lebow" Name

Lebow Brothers, Inc. (LB) was a Maryland corporation formed shortly after the turn of this Century by Benjamin Lebow, grandfather of defendant Harry Lebow. LB was engaged in the business of manufacturing and selling higher-priced men's clothing to men's clothing shops for resale to the general public throughout the United States.

LB was the registrant and owner of the following federal trademarks: "Lebow Clothes," "The Lebow Collection," and a stylized "LB" logo (collectively, the Lebow Trademarks).

By agreement dated June 30, 1969 (the 1969 agreement), Victor Lebow, Sr., father of defendant Harry Lebow, together with certain individuals as trustees under the will of Benjamin Lebow (the Sellers), sold the stock of LB to After Six, Incorporated, a Pennsylvania corporation. (Plaintiff's Exh. 2.)

As part of the 1969 agreement, the Sellers warranted title in LB and/or an LB subsidiary to the trade name "Lebow Clothes" and, inter alia, to all trademarks necessary to conduct the business of LB. (Plaintiffs' Exhibit 2 at par. 3(f).) Paragraph 3(g) of the 1969 agreement reads as follows:

In order further to secure to After Six the benefits of the trade name "Lebow," Sellers hereby agree not to use the said name or any variant thereof in any business transaction (other than those of After Six or its subsidiary or affiliated companies) in which they or any of them directly or indirectly have an interest as owner, employee or otherwise in connection with the men's clothing business. Except for the license agreements referred to in Exhibit C, neither Sellers nor Lebow Brothers, Inc. nor L.B. International, Inc. (the LB subsidiary) have licensed or granted to any person or entity the right to use the name Lebow, and Sellers know of no person or entity who claims the right to the use of the name "Lebow" in the mens' clothing industry.

(Plaintiffs' Exh. 2, par. 3(g) (emphasis added).) Three license agreements for use of the name "Lebow," none of which is relevant to the instant litigation, were listed in Exhibit C. (Plaintiffs' Exh. 2.) It is undisputed that the name "Harry Lebow" or "H. Poe Lebow" had never been used as a trade name or trademark in connection with LB products at the time of the 1969 agreement. (E.g., Trial transcript (Tr.) at 37.) At the time of the 1969 agreement, Harry Lebow worked primarily as a traveling salesman for LB, and assisted his father in the purchase of fabrics (called "piece goods") for the company (Tr. at 40,265), and was not involved in the design of LB garments. The court finds that neither "Harry Lebow" nor "H. Poe Lebow" is a "variant" of the tradename "Lebow" and they were not assets of LB at the time of the 1969 agreement, never having been used by the company in connection with the manufacture or sale of its products. The names "Harry Lebow" and "H. Poe Lebow" were nothing more than personal names and LB had no rights in the names.

Under and subject to the terms of a trust under the will of Benjamin Lebow, Harry Lebow was to receive one-half of the purchase price of the stock owned by Benjamin Lebow paid by After Six to the trustee-Sellers. (Plaintiffs' Exh. 20 at, e.g., Item Five, par. H.)

The 1969 agreement further provided that LB enter into employment contracts with three individuals, including Harry Lebow. (Plaintiffs' Exh. 2, par. 10.) After the sale, LB entered into an employment agreement, on or about December 30, 1969. This contract provided, inter alia, that Harry Lebow would be Vice President of LB, performing the duties that he had performed for LB prior to the sale of stock to After Six. The term of the employment contract was "five (5) years, ending on the earlier of the 31st day of December, 1974, Harry Lebow's death or six (6) months after Harry Lebow's disability." The employment contract included a covenant not to compete, which covenant ran "from the date of the employment agreement until three (3) years after the expiration of this agreement or three (3) years after the termination by Harry Lebow of his employment by LB hereunder, whichever shall occur later...." (Plaintiffs' Exh. 3.) The employment agreement was not renewed and, by its terms, expired on December 31, 1974. Harry Lebow never terminated his employment under the agreement. The covenant not to compete therefore expired no later than December 31, 1977. Harry Lebow's employment contract was not assignable, "except pursuant to a merger, consolidation or other reorganization of LB." (Plaintiffs' Exh. 3 at par. 10.)

Harry Lebow was later substituted as trustee under the will of Benjamin Lebow, and in that capacity signed an agreement dated February 25, 1971 (the 1971 agreement). The 1971 agreement sets forth terms for the payment of part of the purchase price of the stock of LB by After Six. The 1971 agreement recites that "the parties hereto are party to an Agreement dated June 30, 1969 ... providing ... for the purchase by After Six ... of all of the outstanding capital stock of LB...." (Plaintiffs' Exh. 4, at 1.)

After his father's death in 1971, Harry Lebow took on additional fabric buying and sales functions. In 1972, Harry Lebow was appointed president of LB. (Tr. at 126, 285.) In or about 1976, he began to design patterns for piece goods to be used in LB garments. (Tr. at 286, 290.) The fabrics were adapted to the LB "silhouette," which was generally a "middle of the road classic" garment. (Tr. at 287.) Harry Lebow selected the styles for the LB garments, as well as the fabrics used in those garments. (Tr. at 44, 285.) The key element of men's, as distinguished from women's, clothing design, is the design of fabric patterns. (Tr. at 287.) Harry Lebow was not, however, identified to the public or to buyers for retail stores as a designer of LB garments. (Tr. at 145-46.)

As of July 1, 1974, After Six and Harry Lebow entered into a new employment agreement, whose terms were embodied in a letter dated September 5, 1974. Pursuant to the new agreement, Harry Lebow was to receive a fixed salary plus a bonus keyed to LB's "pre-tax earnings," a medical reimbursement plan, and continuation of an insurance policy. (Defendants' Exh. G, first document.) The agreement did not include a covenant not to compete, nor did it include any restrictions on Harry Lebow's use of his name.

During the mid-1970's, Harry Lebow had personal contact with the vast majority of buyers for the various retail stores to which LB sold garments. (Tr. at 292.) He met with almost every buyer who visited LB's New York offices. (Tr. at 293.) By 1978, many buyers would not place orders until Harry Lebow had personally suggested fabrics or an "approach" for the particular store. (Tr. at 391-92.)

A new employment agreement for Harry Lebow was concluded on December 20, 1977, effective January 1, 1978. The terms of the agreement were memorialized in a letter dated December 22, 1977, and included an increase in Harry Lebow's fixed salary, as well as an increased percentage rate for calculating Harry Lebow's bonus. The agreement did not include a covenant not to compete, nor did it include any restrictions on Harry Lebow's use of his name. (Defendants' Exh. G, Second Document.)

In the late fall of 1978, Bernard Toll, Vice President for communications of After Six, approached Harry Lebow with a proposal to...