D3 Int'l v. AGGF Cosmetic Grp. S.P.A.
| Decision Date | 07 March 2023 |
| Docket Number | 21-cv-06409 (LJL) |
| Parties | D3 INTERNATIONAL, INC., Plaintiff, v. AGGF COSMETIC GROUP S.P.A. and COMSETICA, S.R.L., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Defendants AGGF Cosmetic Group S.p.A. (“AGGF”)[1] and Cosmetica S.r.l. (“Cosmetica,” and collectively with AGGF “Defendants”) move, pursuant to Federal Rule of Civil Procedure 56, for summary judgment: (1) dismissing the complaint of plaintiff D3 International Inc. (“D3” or “Plaintiff”); (2) granting Defendants' second counterclaim for account stated; (3) finding Plaintiff liable for Defendants' fourth counterclaim for tortious interference with contract and their fifth counterclaim for unfair competition;[2] and (4) awarding Defendants costs and fees.[3] Dkt. No. 27. For the following reasons the motion for summary judgment is granted in part and denied in part.
The following facts are undisputed unless otherwise indicated. They are taken from Defendants' Rule 56.1 Statement and the materials submitted in connection with the motion.[4]
AGGF and Cosmetica are companies organized under the laws of Italy and located in Milan, Italy and are engaged in the manufacture and sale of cosmetics. Dkt. No. 32 (“Defs 56.1”) ¶ 1; Dkt. No. 30 (“D'Angelo Decl.”) ¶ 3. Their cosmetic products, now sold under the “Diego dalla Palma” brand, are exclusively available in the United States through wholesale distributors such as Plaintiff. Defs. 56.1 ¶ 2; D'Angelo Decl. ¶ 4.
AGGF and D3 were parties to a written agreement providing that D3 would serve as the exclusive distributor of AGGF's cosmetics products in the United States (the “Distribution Agreement”) during the term of the agreement. Defs. 56.1 ¶ 2; Dkt. No. 30-1 (Distribution Agreement); Dkt. No. 37 ¶ 2. The Distribution Agreement required D3 to make escalating yearly minimum purchases of make-up and accessories from AGGF for subsequent sale in the United States. Dkt. No. 30-1 at Pt. I ¶ D. By its terms, the Distribution Agreement entered into force on January 1, 2010, and terminated at the end of December 31, 2012. Id. at Pt. I ¶ A.
Among its terms, the Distribution Agreement obligated D3 to promote the products in exchange for D3 being given the right to act as the sole distributor of AGGF's products. The Distribution Agreement did not commit D3 to any particular promotional activities-it left it up to D3 to determine how to best promote the products in the U.S. market. Defs. 56.1 ¶ 23. The Distribution Agreement required D3 to “promote the sale of [the products] in the most effective manner, guaranteeing to form and maintain an organization sufficient to achieve the [Distribution Agreement's] objectives.” Dkt. No. 30-1 at Pt. II ¶ 1.2. Such activities included “advertising, sales promotion and demonstration activities . . . corresponding reasonably to [ ] market demands.” Id. at Pt. II ¶ 1.3.
Under the Distribution Agreement, any costs for those advertising and promotional activities were to be at ¶ 3's expense. Defs. 56.1 ¶ 22. The Distribution Agreement mentioned D3's payment obligation several times. It stated that “[D3] shall, at its own expense, perform all necessary advertising.” Dkt. No. 30-1 at Pt. II ¶ 1.3. It also stated that:
It is in any case intended that [D3] shall be responsible for all advertising necessary to promote the PRODUCTS within the Territory. Unless otherwise specified, all of the costs of advertising (shows, exhibitions, events, P.R. events, and other) and of training, education, seminars are to be entirely covered by [D3].
Id.; see also Defs. 56.1 ¶ 22. These advertising and promotional activities were built into the price structure of the agreement. D3 agreed not to spend less on those activities than the percentage allocated for those activities indicated in the Distribution Agreement's attached price structure. Dkt. No. 30-1 at Pt. II ¶ 1.3; id. at Attach. B; Defs. 56.1 ¶ 22. AGGF approved the advertising program and would provide necessary “advertising supports” for the purpose of allowing D3 to carry out agreed advertising and promotional activities. Dkt. No. 30-1 at Pt. II ¶ 1.3; Defs. 56.1 ¶ 24. In exchange, AGGF agreed to refrain from appointing any other distributors, sales agents, or intermediaries for product sales in the United States. Dkt. No. 30-1 at Pt. II ¶ 1.
Dkt. No. 30-1 at Pt. I ¶ A. The Agreement could be terminated earlier than December 31, 2012, but only by written notice to the other party and under specified circumstances, such as the other party's uncured failure to fulfill or delay the fulfillment of a contractual obligation, or in the event of insolvency or bankruptcy. Id. at Pt. II ¶ XIII (Termination).
At no point during their relationships with D3 did AGGF or Cosmetica agree to pay D3's promotional expenses. Defs. 56.1 ¶ 24; D'Angelo Decl. ¶¶ 16-17. Defendants also never otherwise agreed to pay D3 in the event of a termination. Defs. 56.1 ¶ 21; D'Angelo Decl. ¶ 14.
There is conflicting evidence in the record as to how the Distribution Agreement came to an end. D'Angelo Decl. ¶ 6. Defendants state that the Agreement expired by its terms on December 31, 2012. Defs. 56.1 ¶ 5. Plaintiff contends that the parties cancelled the contract at some point at or before its expiration date of December 31, 2012, because D3 “didn't make [its] numbers,” Dkt. No. 29-4 at 13-15, 46; Defs. 56.1 ¶ 6, but it identifies no written notice that would have effected a termination.[5]
In any event, despite the fact that the Agreement expired by its terms no later than December 31, 2012, the parties continued to perform into 2013. Defs. 56.1 ¶ 5. D3 continued to buy products from Defendants and sell those products in the United States following the termination of the Distribution Agreement.
The parties dispute the terms under which they continued to do business after December 31, 2012. D3 contends that the parties formed an oral contract. Mr. Natale Palazzolo, the President of D3, in his declaration, states that D3, AGGF, and Cosmetica:
immediately entered into a subsequent oral contract in which the Defendants continued to grant the Plaintiff the right to be the exclusive distributor of Defendants' Diego dalla Palma cosmetic products in the United States for as long as the Defendants continued to export their Diego dalla Palma cosmetic products to the United States.
Dkt. No. 37 ¶ 2. The terms of that oral agreement, however, were entirely indefinite. Palazzolo testified that the “only thing” that D3 was told was that “they weren't looking for anyone else for the territory, and [they] can continue to sell and buy.” Dkt. No. 29-4 at 16. None of the terms of the written agreement applied to the new oral agreement. Id. at 35. According to Palazzolo, Plaintiff was “left to do what we wanted without any of the - the contractual things in the written agreement.” Id. at 14-15. Palazzolo further testified that D3 did not have any discussion with AGGF about the terms that would govern the parties' relationship going forward. Id. at 16. There was never discussion or agreement about a commitment to a perpetual contract or the longevity of the contract. Id. at 17. Palazzolo testified that “there was no discussion . . . of anything else.” Id.; Defs. 56.1 ¶ 7.
In any event, on January 1, 2016, AGGF assigned the rights it had under the Distribution Agreement to Cosmetica. Defs. 56.1 ¶ 8; Dkt. No. 30-2. D3 accepted Defendants' notice that Cosmetica was AGGF's assignee, and from January 1, 2016, onward, Cosmetica exclusively performed the contractual obligations that AGGF had previously performed. Defs. 56.1 ¶ 10; D'Angelo Decl. ¶ 7; Dkt. No. 29-4 at 26-27. Thereafter, Cosmetica provided the products to D3 for sale and exclusively carried out AGGF's obligations under the Distribution Agreement. Defs. 56.1 ¶ 9; D'Angelo Decl. ¶ 7. AGGF had no further involvement. Defs. 56.1 ¶ 9.
In early 2020, Cosmetica and D3 had discussions about possible revision or termination of their relationship. Id. ¶ 11. Cosmetica was disappointed with D3's sales performance; D3 had not placed any new orders for 2020. Id.; D'Angelo Decl. ¶ 8. D3's sales had been €31,252.05 in 2019 and €34,131.75 in 2018. Defs. 56.1 ¶ 12; D'Angelo Decl. ¶ 8. D3 also had not paid Cosmetica for products Cosmetica had supplied for U.S. distribution in 2019. Defs. 56.1 ¶ 13; Dkt. Nos. 30-4, 30-5. D3, as part of these discussions, told Cosmetica that “[w]e understand that [Cosmetica] has the right to choose a new distributor and to change strategic directions for the market.” Defs. 56.1 ¶ 14; Dkt. No. 30-3 (January 23, 2020, email from Palazzolo).
On or about July 15, 2020, Cosmetica advised D3 that it was unwilling to continue with D3 as its exclusive distributor because of its dissatisfaction with D3's performance. Defs. 56.1...
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