Complete Concepts, Ltd. v. General Handbag Corp.

• Decision Date: 10 August 1989
• Docket Number: No. 88-8606,88-8606
• Citation: 880 F.2d 382
• Parties: COMPLETE CONCEPTS, LTD., Plaintiff-Counter Defendant-Appellee, v. GENERAL HANDBAG CORPORATION, a/k/a General Handbag, Inc., Defendant-Counter Claimant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 382

880 F.2d 382

COMPLETE CONCEPTS, LTD., Plaintiff-Counter Defendant-Appellee, v. GENERAL HANDBAG CORPORATION, a/k/a General Handbag, Inc.,

Defendant-Counter Claimant-Appellant.

No. 88-8606.

United States Court of Appeals, Eleventh Circuit.

Aug. 10, 1989.

Harold T. Daniel, Webb & Daniel, William C. Gentry, Atlanta, Ga., for defendant-counter-claimant, appellant.

Harvey D. Harkness, Maley, Wilensky, Cohen, Wittner & Kessler, Susan L. Howick, for plaintiff-counter defendant-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before KRAVITCH and CLARK, Circuit Judges, and HENDERSON, Senior Circuit Judge.

PER CURIAM:

In this appeal of a breach of contract action we are confronted primarily with two issues: whether the district court had jurisdiction over the appellant and the speculative nature of the appellee's proof of its damages for lost commissions. We consider these and other issues and affirm in part, reverse in part and remand with instructions.

Organized as a holding company in 1983, the plaintiff-appellee Complete Concepts, Ltd. (Complete) is a Georgia corporation owning a number of subsidiaries which market and manufacture ladies handbags. Complete's wholly owned subsidiary McCrackin Industries, Inc. (McCrackin), also a Georgia corporation, produces leather handbags under the trademark of "Stone Mountain" and has registered other trademarks as well, including "Smoke Valley."

General Handbag Corporation (General), the defendant-appellant, is a Florida corporation and former manufacturer of ladies handbags. Initially incorporated in the 1960s by Murray Resnick, president of long-time handbag makers Julius Resnick, Inc., New York and Julius Resnick Florida, Inc. (collectively, J.R. Handbags), General remained inactive until 1983. In that year, Resnick began implementing a plan to start up a new handbag plant.

In late 1983, Resnick invited Jack Lieberman, an Atlanta-based sales representative for Stone Mountain, to Miami to discuss the marketing of General's handbags. Lieberman accepted Resnick's invitation and was accompanied on the trip by Kenneth Orr, Complete's vice president. The following afternoon Orr visited Resnick at J.R. Handbags' factory. The two discussed the feasibility of General producing leather handbags designed by Complete to compete with imported merchandise retailing in the range of $50.00-$70.00. As the lengthy conversation came to a close, Resnick announced that he wanted to go through with the deal.

Shortly thereafter, General borrowed $500,000.00, a loan personally guaranteed by Resnick, to establish a manufacturing facility. Within a few months, the new factory was ready. Thus, early in 1984, Resnick and Orr resumed negotiating the details of the contemplated manufacturing and marketing operation, meeting in either New York or Miami. At some point, Resnick and Earnest Bentley, General's president, traveled to Atlanta to tour Complete's factory in Conley, Georgia and discuss the proposed agreement with David Hauck, Complete's president. Bargaining in Georgia, the company's principals conferred over the raw materials required for the medium-priced handbags--which were to be marketed under the trademark "Smoke Valley"--the ornaments for Smoke Valley, and general marketing and merchandising concepts.

By March, the parties reached an agreement. A letter addressed to Resnick, signed by Hauck and dated March 7, 1984, purported to memorialize the contract's terms. But Resnick refused to execute this writing on behalf of General, ¹ objecting to portions which contradicted his understanding of the antecedent oral agreement. A contract had been made, however, and many of the essential operative terms were not in dispute. Under the uncontested conditions of the contract, Complete agreed to create the styles of handbags to be manufactured by General and to market, merchandise and sell the bags. Complete's right to sell the handbags was exclusive. General, in addition to making the handbags and shipping them to buyers, agreed to cover all costs, including raw materials and labor. Complete assumed no liability for the production of the handbags. General agreed to pay Complete a commission of 10% (later raised by mutual agreement to 15%) of net sales, although at the trial the parties differed as to when the commissions were due ² and argued over the type of sales on which a 10%, or full, commission was to be paid. ³ Another sharply disputed provision in the March letter was a cancellation clause requiring six months written notice to terminate the agreement. Resnick testified that the parties had never discussed cancellation during the negotiations. Nevertheless, despite some apparent uncertainty concerning the details of the agreement, General made, and Complete marketed, Smoke Valley handbags for nearly two years.

Early in 1985, Complete began negotiating with an unrelated third party, Jaclyn, Inc. (Jaclyn), with a view toward reaching an agreement under which Jaclyn would manufacture handbags bearing another McCrackin trademark, "Saddle River." A budget bag, Saddle River was expected to retail in the $25.00-$50.00 price range. Thus, Complete intended that Saddle River not compete with the moderately priced Smoke Valley and the upscale Stone Mountain lines but planned instead to penetrate a new market. As 1985 drew to a close, Jaclyn and Complete consummated a deal, and Jaclyn began making Saddle River handbags. The contract between Complete and Jaclyn did not offend Complete's agreement with General, there being no exclusivity provision in the latter.

Trouble in the Smoke Valley operation surfaced in the summer of 1985, when, according to Complete, General ceased making timely commission payments. By December, Resnick sensed that Complete was displeased with General, and, at a meeting in Complete's New York showroom in January or February of 1986, Orr confirmed Resnick's suspicions. Complete's subsequent demands for payment of commissions alleged to be owing went unmet.

Finally, on March 27, 1986, Resnick and Hauck again met in New York City at Complete's showroom to discuss their deteriorated relationship. During the course of the lengthy conversation, Resnick proposed as a solution that Complete acquire General. According to Resnick, Hauck agreed to purchase General for one dollar. R.4-278. The men agreed to meet again on April 1, 1986.

On the appointed date, the parties gathered in New York City, at Complete's offices. Complete insisted that numerous conditions be met prior to the consummation of the contemplated transaction. Specifically, Complete requested the right to review General's audited statements, a guarantee that two key employees, Carlos Salgado and Bentley, would remain with the company and written authorization from the shareholders supporting Resnick's authority to sell General's stock. Also discussed was the necessity for Complete to obtain financing. Resnick insisted that Complete either assume the $500,000.00 note on which he was personally liable, or retire that debt with other borrowed funds, and he made arrangements for Hauck to meet with General's banker in Miami. Resnick, believing that the parties already had made a "handshake deal" for the purchase of General's stock, expected to close on April 1, 1986. No agreement was reached on that date, however.

On April 9, 1986, Hauck sent a letter of intent to Resnick which contained Complete's version of the proposed stock purchase agreement. Resnick refused to sign this document, objecting to its contents. In a letter dated April 15, 1986 and addressed to Orr, Resnick returned all unfilled orders for Smoke Valley products--about $20,000.00-$25,000.00 worth by Resnick's estimate. Also, the letter informed Complete that General intended to close down in two weeks.

At Complete's request, the parties met one last time at General's factory in Opa-Locka, Florida. During this meeting, held April 22, 1986, Hauck and Orr stressed their desire to save the Smoke Valley line. Since General would not make the handbags, Orr suggested that Jaclyn manufacture Smoke Valley handbags in Hong Kong using leather earmarked for the Saddle River brand. Orr declined Resnick's offer to send Smoke Valley samples to Jaclyn's Hong Kong factory.

The next day Resnick telephoned Hauck and asked him how Jaclyn's Smoke Valley samples had been made up. Hauck explained that Jaclyn had assembled them about three or four weeks earlier at its New Jersey workshop, and that the samples already had been delivered to the company's overseas factory. Because of the time required to fabricate and ship samples to Hong Kong, Resnick concluded that Complete had intended for some time to replace General with Jaclyn as the maker of Smoke Valley handbags.

In May Complete began notifying customers that Smoke Valley had changed its name to Saddle River. Outstanding Smoke Valley orders were cancelled, and Complete urged buyers to resubmit them as orders for Saddle River. Jaclyn was able to reproduce about 75% of the styles of the basic Smoke Valley line. However, although the bags were identical to the Smoke Valley bags being replaced, the new manufacturer refused to use the Smoke Valley name, because the trademark had been licensed to General. The first Jaclyn-made, Smoke Valley-style Saddle River handbags were shipped to the United States from Hong Kong in July, 1986.

About three months later, Complete filed a complaint in the United States District Court for the Northern District of Georgia, seeking compensatory and punitive damages for breach of contract, demanding the value of goods and funds advanced on General's account, and asking for an accounting of General's net profits, of which it claimed a share. General denied the material allegations of the complaint and filed a counterclaim for compensatory and punitive damages, alleging a breach by Complete of the stock purchase agreement and a...