Benetton S.p.A. v. Benedot, Inc.

• Decision Date: 15 April 1994
• Citation: 642 So.2d 394
• Parties: BENETTON S.p.A., et al. v. BENEDOT, INC., et al. BENEDOT, INC. v. BENETTON, S.p.A., et al. BENETTON S.p.A. v. BENEDOT, INC., et al. BENETTON S.p.A., et al. v. BENEDOT, INC., et al. 1920907, 1920958, 1921169 and 1921285.
• Court: Alabama Supreme Court

Page 394

642 So.2d 394

BENETTON S.p.A., et al. v. BENEDOT, INC., et al.

BENEDOT, INC. v. BENETTON, S.p.A., et al.

BENETTON S.p.A. v. BENEDOT, INC., et al.

BENETTON S.p.A., et al. v. BENEDOT, INC., et al.

1920907, 1920958, 1921169 and 1921285.

Supreme Court of Alabama.

April 15, 1994.

Rehearing Denied May 27, 1994.

Jere F. White, Jr. and Michael L. Bell of Lightfoot, Franklin, White & Lucas, Michael Edwards of Balch & Bingham, Birmingham, Charlie E. Buffon and Deborah A. Garza of Covington & Burling, Washington, DC, for appellants/cross appellees Benetton S.p.A., et al.

N. Lee Cooper and Jeffrey M. Grantham of Maynard, Cooper & Gale, P.C., Birmingham, for appellees/cross-appellants Benedot, Inc., et al.

PER CURIAM.

These appeals arise from a case involving a commercial dispute between Benetton S.p.A. (an Italian clothing manufacturer), and some Alabama store owners.

Benetton, Benetton Manufacturing Corporation (Benetton's United States manufacturing facility), Benetton Services Corporation (Benetton's United States subsidiary) (collectively referred to hereinafter as "Benetton"), and DixieBen Company (Benetton's independent sales representative), Mr. Gilberto Casagrande (the primary salesman for DixieBen and its sole shareholder), and Boaz-Ben Company (a discount store for Benetton merchandise owned and operated by Casagrande) appeal from seven separate judgments.

In 1984, Casagrande met with Frank and Karle Falkenburg to discuss the possibility of opening a Benetton retail store in Brookwood Mall in Birmingham, Alabama. According to the Falkenburgs, they decided to open the store based on Casagrande's statements concerning the profitability of Benetton stores. The Falkenburgs formed a corporation called Al-Ben, Inc., to operate this store.

Al-Ben opened several other Benetton stores in Alabama. All of the stores opened late because of delays caused by Italian workers required by Benetton to install Italian fixtures in the stores and because of the late arrival of merchandise. Al-Ben also had problems with nonconforming and unordered merchandise being delivered to the stores and with Benetton's refusing to allow Al-Ben to return it. Al-Ben also contends that it had a right of first refusal for any future Benetton stores and that Benetton subsequently violated that right.

In 1986, Clardy Malugen and her brother, Joe Malugen, met with Casagrande concerning opening a store in Dothan. The Malugens, along with Harrison Parrish and Mary Lois Parrish, formed Benedot, Inc., to operate stores in Dothan and Auburn. The stores were delayed in opening because the Italian workers were late in installing certain fixtures and because both stores received nonconforming and unordered merchandise, which Benedot was forced to sell at a loss because Benetton would not accept a return of the merchandise.

According to Al-Ben and Benedot, Casagrande told the operators of those companies that they would earn substantial profits; that Benetton would provide Al-Ben and Benedot with guidance and instructions about how to successfully run their stores; and that if the stores were not successful, Benetton would buy the stores at a profit.

Al-Ben and Benedot sued Benetton, DixieBen, Casagrande, and Boaz-Ben, alleging fraud, conspiracy, and breach of contract. Benetton, DixieBen, Casagrande, and Boaz-Ben counterclaimed against Al-Ben and Benedot and against the Falkenburgs individually, for money owed on unpaid invoices.

Al-Ben and Benedot claimed that Benetton, DixieBen, Casagrande, and Boaz-Ben expanded into the southeastern United States by sending its agent, Casagrande, into the area to find buyers for Benetton retail outlets. According to Al-Ben and Benedot, Benetton persuaded them, through lies, threats, and blackmail, to open Benetton stores in an already weak market area. To prove their claims, Al-Ben and Benedot presented, among other things, memorandums from Casagrande to Benetton's corporate office in Italy. (It should be noted that the following excerpts were translated, as stipulated by the parties, from Italian into English; they are quoted here in their original translation.) On April 11, 1984, Casagrande wrote:

"[T]he three states Louisiana, Mississippi, Alabama they really are deep south. Anyway, we think that we can do an honest job with at least 20 shops. (Obviously shops with total amount of sales are rarely over $500,000.) The amount is what it is but we'll try to squeeze it as much as possible, but around Christmas often they go around here with shorts. (It is not too cold, except for few days).

"Generally, they don't care too much the way they dress in the daytime. In the evening they are instead very conservative in the way they dress in the evening. Black dress to go out to dinner. What is missing is the high middle income. They are according to me the one that spend the most in the shops. There are very few families very very rich and lot of families real poor. Anyway, they don't go around naked. In any case, they buy something.... But even us poor little negroes down here will do our part even with the limitation of our possibilities looking to the future."

R.T. 96-100.

On March 11, 1987, Casagrande wrote:

"I would like to call your attention to a few facts.

"1. This zone [Louisiana, Mississippi and Alabama] is the smallest, is the poorest, is the most difficult of all the United States.

"2. With the unemployment rate of 25%, the sensibility to style is below zero and the family income is the lowest in America, I believe. There is little to dream--please come here to see and you will realize with your own eyes.

"3. With inhuman efforts we have opened about 20 adults, 9 number 12's [children's] and we are opening 3 Sisley [brand name of clothing produced by Benetton]. Furthermore, in the Autumn we will start a test for a fourth one.

"4. I believe that other zones richer and more evolved would not have given these results.

"5. Here is like to work in Basilicata or Calabero (dictator says you'll have to know that these two are two of the poorest regions in Italy). Lots of negroes, a lot of poverty and hunger. But these things you do not read in the papers in Italy. You need to come here to see them. It is 30? centigrade nine months of the year with 85% humidity.

"....

"6. ... [W]ith this zone you too must have a little patience. I have a lot. Last winter without having any client still convinced to do it. (It is useless for us to hide behind a shadow of one finger. The Sisley [store] will lose money for still another two years and then they can only be done by rich clients. But in this area are not here yet.)...."

"...."

R.T. 100-05.

On April 9, 1987, Casagrande wrote:

"7. Al-Ben. Clients with four shops. Excellent under the profile of merchandising. Is that one that probably understand better than all our product in the area. She ¹ follows the shops well, she's organized with the computer, etc. Even in the payments, she's doing well until a year ago. When, in her own town, Birmingham, Alabama, we opened another shop with another client. That strangely is that lady of CloverBen [the Benetton shop located in the Galleria shopping mall near Birmingham] that she should give her some competition and instead, when everything goes wrong, then everything goes wrong, and she has to close the shop. ² When we opened with the new client, CloverBen, the old client Al-Ben was very upset and obviously, now that she knows that the other shop is for sale, she is doing everything to buy it for herself. She is giving us a lot of problems. I do not want to give Al-Ben the shop of the CloverBen for sale for our well-known reasons, all the healthy business strategy, to create competition. At this point, the sale of the shop of the CloverBen seems finally closed, I blocked the merchandise in custom for Al-Ben. I didn't do it before because if I was not able to find somebody else I would have to give the shop to Al-Ben and I advised her if she doesn't pay right away, she will have delays also for winter merchandise deliveries.... If I would have had a strong CloverBen instead of having a situation of a shop for sale and would have a strong client and aggressive, at this time I could have done a little different with Al-Ben. Like, not allow her to do Sisley [store]. But, as we well know, she will lose money for at least another couple of years and then, a deal arrived even to have had patience until she finished the assembly of the furniture. Or, if I would have thought that the CloverBen could have done the Sisley, I could have blocked the spring merchandise since the beginning to the Al-Ben, etc. But, with the CloverBen so weak, ... 'I was caught with my tail under the door until now.' Only now that CloverBen has a dependable buyer, and then Al-Ben is already ahead with construction work of Sisley, I could intervene to block the merchandise to Al-Ben and threaten her with the winter merchandise. Then, at this point, the games with Al-Ben, since she already created all these problems with the payments, I'll fix her up in this way. Overall, move with caution. Do not blackmail her too much with the winter '87 for now, because she could also decide to quit everything and then the situation become even more complicated. Having as soon as possible all the last winter paid, so the risk is half. Then, once the winter '86 is paid, that obviously must happen before the new shipment for winter '87, tie her wrist and keep the merchandise blocked for autumn/winter '87 until she brings me a letter of credit.... This area [the South] is too small, too weak, too short of resources and then vulnerable and at very high risk ... and is not any good to have the knife by the handle and to know how to use it,.... If there is no meat to cut...."

R.T. 100-05.

After a jury trial, the court entered the following judgments:

1) Judgment in favor of Al-Ben, Inc., and against Benetton S.p.A., Benetton Services Corporation, Benetton...