Daryl K. Wash. & Sunday Players, Inc. v. Kellwood Co.

• Decision Date: 21 April 2015
• Docket Number: No. 05cv10034.,05cv10034.
• Citation: 105 F.Supp.3d 293
• Parties: Daryl K. WASHINGTON and Sunday Players, Inc., Plaintiffs, v. KELLWOOD CO., Defendant.
• Court: U.S. District Court — Southern District of New York

105 F.Supp.3d 293

Daryl K. WASHINGTON and Sunday Players, Inc., Plaintiffs,

v.KELLWOOD CO., Defendant.

No. 05cv10034.

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

Signed April 21, 2015.

Aubrey Nick Pittman, The Pittman Law Firm, P.C., Dallas, TX, David Avi Rosenfeld, Joseph Frank Russello, Mark Samuel Reich, Robbins Geller Rudman & Dowd LLP, Melville, NY, for Plaintiffs.

Anthony Nicholas Elia, III, The Law Offices of Anthony N. Elia, P.C., Katherine Marguerite Lieb, Kenneth Roy Schachter, Sills Cummis & Gross, P.C., New York, NY, for Defendant.

MEMORANDUM & ORDER

MICHAEL H. DOLINGER, United States Magistrate Judge:

Plaintiffs Daryl K. Washington and Sunday Players, Inc. (“Sunday Players”) commenced this lawsuit against Kellwood Company (“Kellwood”), primarily asserting that Kellwood breached the terms of a November 2003 license agreement whereby Kellwood was to manufacture, promote, and distribute so-called compression¹sports apparel and accessories under the Sunday Players brand.

The parties have moved to exclude the testimony of each other's valuation experts.

(Docket nos. 38–48). Defendant argues that the testimony of plaintiffs' expert, Scott A. Barnes, is inadmissible in whole or in part under Federal Rule of Evidence 702and related case-law. Plaintiffs argue that the testimony of defendant's expert, Gary R. Trugman, is inadmissible under the same body of law, as well as under Rule 403.²

For the reasons that follow, defendant's motion in granted in part and denied in part and plaintiffs' motion is denied.

BACKGROUND

In 2002, plaintiff Daryl K. Washington developed several licensed marks for a “Sunday Players” brand, which plaintiffs set out to use in designing and selling compression sportswear apparel and accessories. (Corrected 2d Am. Compl. [hereinafter “Compl.”] ¶ 6; Answer to Corrected 2d Am. Compl. [hereinafter “Answer”] ¶ 6; Pls.' Opp. Mem. 2). According to plaintiffs, at some point they “began to explore partnering with major manufacturing and marketing companies in order to exploit the market for the type of apparel developed by Plaintiffs.” (Compl. ¶ 7; see alsoWashington Dep. 31–32). It was through these efforts that plaintiffs' relationship with Kellwood began. (Compl. ¶ 7).

Kellwood manufactures, markets, and distributes apparel of various sorts, although the relevant scope of Kellwood's business is a matter of some dispute.³In or about June 2002, Messrs. Greg Dorf and Rick Peterson—employees of Kellwood, in its “performance and apparel division within the intimate apparel division” (Dorf Dep. 15–16)—travelled to Texas to discuss with plaintiffs “the possibility that Kellwood would serve as the manufacturer of products displaying Plaintiffs' marks.” (Compl. at ¶ 8; see alsoDef.'s Mem. 1). Thereafter, Kellwood apparently “became the sole manufacturer of Sunday Players products.” (Pls.' Mem. 5–6; see alsoCompl. ¶ 7–8).

According to plaintiffs, in the summer of 2002, Messrs. Dorf and Peterson represented both “that Kellwood believed the Sunday Players brand would be very successful, profitability-wise” and “that Kellwood had significant experience in marketing and selling apparel and that it had substantial and unlimited relationships with ‘major retailers,’ which would enable Plaintiffs' products to achieve hundreds of millions annually in sales.” (Id.at ¶¶ 9–10).⁴Accordingly, plaintiffs allege, they and Kellwood began discussing the possibility of a joint venture involving more than Kellwood's manufacturing of Sunday Players products for plaintiffs. (Id.at ¶ 9).

Plaintiffs assert that, approximately one year later, Kellwood made preliminary introductions between plaintiffs and various representatives of retailers, who “expressed considerable interest in selling products displaying Plaintiffs' marks,” and that Kellwood later represented that “the initial orders with Target and Foot Locker would easily exceed $10 million.” (Id.at ¶ ¶ 11, 14). Furthermore, according to plaintiffs, “[o]n or about September 5, 2003, Kellwood told Plaintiffs that MTV, a well-known cable television station, wanted to partner with Sunday Players, that MTV would promote the Sunday Players brand, and that this promotion would lead to hundreds of millions in product sales.” (Id.at ¶ 13).

As a result of these dealings, plaintiffs entered into a license agreement with Kellwood on November 25, 2003 (id.at ¶ 15; Answer ¶ 16 [hereinafter “License Agreement”] ), which granted Kellwood an exclusive license to use the Sunday Players mark “with the production, manufacture, advertising, merchandising, promotion, importation, distribution and sale” of various types of apparel and accessories. (License Agreement § 1.1 & Schedule A Item 4⁵; see alsoCompl. ¶ 16; Def.'s Mem. 3).

Pursuant to this arrangement, Kellwood was to pay Mr. Washington a five-percent royalty on net sales of Sunday Players merchandise. (License Agreement §§ 6.1–6.3 & Schedule A Item 7). Kellwood was also obligated to spend three percent of net sales on marketing. (Id.at § 9.1 & Schedule A Item 10). The agreement's initial term was set to expire on January 31, 2007 (id.at § 2.1 & Schedule A Item 6(a)), although Kellwood had the right to renew the license for an additional three-year term, ending on January 31, 2010. (Id.at § 2.2).

In the wake of the execution of License Agreement, the parties entered into a modification of their arrangement whereby plaintiffs themselves would be authorized to sell Sunday Players merchandise “to certain retailers, including college and university stores, certain specialty shops and small retailers known as ‘mom-and-pop stores,’ ” while Kellwood had the exclusive right to sell to a substantial list of major retailers. (Letter dated Dec. 16, 2003 at Ex. D to Schachter Decl. I). This agreement emphasized that “[i]t is specifically and clearly understood by the parties hereto that under no circumstances shall ... Sunday Players or Washington sell or attempt to sell to those [major] retailers.” (Id.). The December 2003 arrangement expired at the end of July 2004, after which Kellwood took over sales to small retailers as well. (Compl. ¶ 24 & Ex. B; Letter dated Aug. 17, 2004 at Ex. E to Schachter Decl. I).

Additionally, plaintiffs allege that, “in various oral and written agreements,” Kellwood undertook a number of additional obligations. These included “[s]pend[ing] additional funds on marketing products using the Sunday Players name.” (Compl. ¶ 25).

According to plaintiffs, Kellwood “fail[ed] to use its best, or even reasonable, efforts to generate profits under the agreement.” (Id.at ¶ 32). Plaintiffs expand on their position in their memorandum in opposition to defendant's motion, in which they state as follows:

To begin with, although Defendant argues as though it is a foregone conclusion that Kellwood performed to the best of its abilities under the exclusive license agreement, the evidence shows just the opposite. The evidence shows that instead of putting forth even reasonable good faith efforts to market Sunday Players to the national retailers, Kellwood pulled a bait and switch and, using the Sunday Players brand as a[n] intro into the stores, tried to sell a less expensive (and more profitable brand) to the retailers. In fact, Kellwood cannot establish any real efforts it made to perform under the “exclusive” license agreement. Notably absent is the testimony from a single retailer that it did not want the Sunday Players brand, which, according to Kellwood's own admission, was a better quality product than Under Armour. In the end, it will be up to a jury to determine the effect of Kellwood's breach of its duties under both the exclusive license agreement and the Sales and Marketing Agreement as well as from Kellwood's fraud and misrepresentations.

(Pls.' Opp. Mem. 2).⁶

Defendant's memorandum in support of its motion asserts, to the contrary, that “Kellwood made diligent efforts to market and promote a Sunday Players label.” (Def.'s Mem. 2). According to defendant, Kellwood was unable to make a single sale⁷even though “Dorf and Peterson visited approximately eighteen large retailers to pitch the brand (such as Target and Foot Locker), attended numerous trade shows and spent over $220,000.00 in various marketing efforts,” which defendant characterizes as going “above and beyond” its obligations under the License Agreement. (Def.'s Mem. 2; see alsoDef.'s Reply Mem. 3).⁸Plaintiffs quite obviously disagree. (See, e.g.,Compl. ¶ 32).

In any event, during the course of the relationship between plaintiffs and Kellwood, there apparently arose the possibility of a promotion agreement with MTV. (SeeEx. 5 to Pls.' Reply Mem. [docket no. 48–5] [hereinafter “Draft MTV Agreement”]; see alsoDorf Dep. 111–12; Jackson Dep. 71–73). Discussions with MTV began even before the execution of the License Agreement between plaintiffs and Kellwood (seeOctober 2003 emails at Ex. 11 to Pls.' Opp. Mem. [docket no. 45–11] ), and plaintiffs state that “it was the imminent MTV Promotional Agreement that helped convince Plaintiffs to enter into the license agreement with Kellwood.” (Pls. Mem. 8).⁹Discussions between these entities proceeded far enough for a detailed agreement between MTV and Kellwood to be drafted and circulated. (Draft MTV Agreement; Dorf Dep. 120; Jackson Dep. 73). At Kellwood's direction, however, the deal was not finalized, although, according to Angela Jackson—an MTV employee with personal knowledge of the relevant facts—MTV was prepared to execute the drafted agreement. (SeeTrugman Report p. 17; Dorf Dep. 120; Jackson Dep. 73; see alsoDef.'s Mem. 2 n. 2).¹⁰

In or about April 2005, Kellwood terminated its arrangements with plaintiffs, including those under the original written License Agreement. (Compl. ¶¶ 26–27; Exs. J & K to Schacter Decl. I).¹¹That step triggered the current lawsuit.

PROCEDURAL HISTORY

Plaintiffs filed suit in this court on November 29, 2005 and amended their complaint on December 9, 2005. (Docket nos. 1, 3). Kellwood filed a motion to...