Ebker v. Tan Jay Intern. Ltd.

• Decision Date: 05 July 1990
• Docket Number: No. 78 Civ. 0905 (IBC).,78 Civ. 0905 (IBC).
• Citation: 741 F. Supp. 448
• Parties: Nancy EBKER, Plaintiff, v. TAN JAY INTERNATIONAL LTD. and Peter Nygard, Defendants.
• Court: U.S. District Court — Southern District of New York

741 F. Supp. 448

Nancy EBKER, Plaintiff, v. TAN JAY INTERNATIONAL LTD. and Peter Nygard, Defendants.

No. 78 Civ. 0905 (IBC).

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

July 5, 1990.

COPYRIGHT MATERIAL OMITTED

Freedman & Spector, Rockville Centre, N.Y., for plaintiff (Sol Freedman, of counsel).

Jacobson & Triggs, New York City, for defendants (John F. Triggs, of counsel).

OPINION

IRVING BEN COOPER, District Judge.

Plaintiff Nancy Ebker ("Ebker"), a designer and merchandiser of women's apparel, commenced this action against defendants Peter J. Nygard ("Nygard") and Tan Jay International Ltd. ("Tan Jay"), alleging that defendants wrongfully repudiated an oral joint venture agreement entered into between Ebker and Nygard. Tan Jay is a corporation involved in the manufacture of women's sportswear, and Nygard is its chief executive officer and principal shareholder.

Plaintiff asserts that Nygard and Tan Jay breached and repudiated the oral joint venture agreement by, inter alia, firing and excluding Ebker from the newly formed venture and preventing her from performing her duties thereunder; announcing to the suppliers of the venture and others that Ebker was not authorized to make contracts and commitments on behalf of the venture and refusing to continue to supply the funds required for the operation of the venture; giving notice that the employment of key personnel, constituting Ebker's management team, was being terminated, and actively soliciting and seeking to transfer the loyalty of others to Tan Jay; and continuing to use Ebker's designs, name and likeness in connection with the sale of Tan Jay's merchandise without her approval.¹

Plaintiff seeks an accounting from defendants for their alleged wrongful acts, and the imposition of punitive damages.

Defendants deny the allegations of the complaint. Tan Jay asserts a counterclaim against Ebker, alleging that she wrongfully interfered with Tan Jay's business operations, thus causing it to miss crucial shipping dates, and is therefore liable to it for conversion, breach of bailment contract, tortious interference with contract, and tortious interference with prospective advantage. Additionally, Tan Jay seeks the imposition of punitive damages against Ebker.

PRIOR PROCEEDINGS

A remarkable procedural history accompanies this twelve-year-old-action. Ebker filed suit on March 1, 1978. A jury trial was held before the Honorable Mary Johnson Lowe in October, 1981. Judge Lowe strictly limited the trial to the resolution of two questions: (1) whether Ebker had entered into a joint venture partnership agreement with Nygard and/or (2) whether Ebker had entered into a joint venture partnership agreement with Tan Jay. The counterclaim of defendant Tan Jay was severed from the main action for trial at a later date. The jury found that Ebker had entered into a joint venture partnership agreement with Nygard, but had not entered into such an agreement with Tan Jay. Judge Lowe set aside the finding of the jury that Ebker and Nygard had entered into a joint venture and entered judgment in favor of Nygard.

Two years later, in October, 1983, trial of the counterclaim was held. Judge Lowe instructed the jury that "Since the jury found that there was no joint venture relationship between Nancy Ebker and Tan Jay, the only relationship that can be asserted now vis-a-vis the counterclaim is that of employer, being Tan Jay, and employee, being Ebker." Ebker v. Tan Jay International, Ltd., 739 F.2d 812, 821 (2d Cir.1984). The jury, governed by Judge Lowe's instruction that Ebker was an employee of Tan Jay, awarded Tan Jay $322,718 in compensatory damages.

Plaintiff appealed from both the entry of judgment notwithstanding the verdict in the first trial and the award of damages in the second trial. Tan Jay cross-appealed solely on the issue of Judge Lowe's refusal to instruct the jury as to punitive damages against Ebker. Our Circuit Court, in an opinion by the late Judge Friendly, held that Judge Lowe erroneously granted j.n. o.v. in favor of defendant Nygard. The Court directed that the case be remanded to the district court and the verdict in favor of Ebker in the first trial be reinstated, with appropriate further proceedings to be conducted with respect to what remedies Ebker might have. The Court of Appeals vacated the judgment entered in Tan Jay's favor on its counterclaim, in light of the fact that the trial had proceeded on the assumption that Ebker was an employee of Tan Jay, and not a joint venturer with Nygard, and remanded the counterclaim to the district court for a new trial on an assumption more favorable to Ebker. Tan Jay's cross appeal was dismissed without prejudice.

This action was reassigned to us on March 3, 1986. Trial to the Court was held on September 14-18, and concluded on October 6, 1987. At the conclusion of plaintiff's case, defendants moved for a directed verdict, which motion was subsequently denied. At the close of trial both plaintiff and defendants moved for directed verdicts and plaintiff moved to dismiss Tan Jay's counterclaim. We reserved decision on these motions.

Subsequently, on January 27, 1988, plaintiff moved to reopen the trial record to admit certain documentary and testimonial evidence which plaintiff had attempted to introduce at trial.² On September 1, 1988 we granted plaintiff's motion, and held a hearing on October 12, 1988, strictly limited to evidence and testimony with respect to the March 3, 1978 conference before Judge Ascione. Defendants objected to any of the evidence or testimony introduced at the hearing becoming a part of the trial record; we reserved decision on this motion.

The parties submitted all post-trial and post-hearing papers by the end of March, 1989. We base our holding on the findings of fact and conclusions of law hereinbelow.

FINDINGS OF FACT

Plaintiff was born on December 7, 1938 (Tr. 8)³ and in 1959 she received a degree in fashion design from the Parsons School of Design. (Tr. 9) Following her graduation she was employed by various organizations as a designer (Tr. 9-11); in 1964 she accepted a position with the Jonathan Logan Corporation, the largest manufacturer of women's apparel in the United States at that time. (Tr. 15) Ebker's title was vice-president of merchandising and design of the company's newly founded women's sportswear division which was entitled "Act III" (Tr. 16). Ebker's duties for "Act III" included, inter alia, the design, development, and merchandising of the "Act III" line of apparel. When Ebker commenced her employment with the Jonathan Logan Corporation the sales of the newly founded "Act III" were zero; and when she terminated her employment in 1976, "Act III" had achieved $80,000,000 in gross sales. (Tr. 21) Ebker's name was prominently displayed in all Act III advertising, and was in effect synonymous with the "Act III" line. (Tr. 22, Ex. 1)

In 1976 Ebker accepted a position with Genesco, Inc. ("Genesco"), a corporation consisting of more than eighty-eight divisions. (Tr. 27) Genesco hired Ebker to head its floundering "Susan Thomas" division, which consisted of two lines of women's apparel, the "Susan Thomas" line and the "Vivo" line. (Tr. 35) Ebker was appointed President of the "Susan Thomas" division and was given complete control over the design, merchandising, marketing and production of the two lines. (Ex. 2; Tr. 38) Ebker was the only woman president of a major apparel division at that time. (Tr. 38) Her employment contract with Genesco provided that she was to receive a salary of $125,000 as well as a guaranteed bonus of $25,000. (Ex. 2) The contract further provided that in the event it was terminated at any time by Genesco, without cause, Genesco would continue to pay Ebker compensation at a minimum rate of $152,500 per year until July 31, 1979, or until she accepted other employment, whichever occurred earlier; that if Ebker accepted employment with another employer prior to July 31, 1979, her compensation from Genesco would be reduced only to the extent of her earnings from her new employer; and that discontinuance by Genesco of the division would be construed as a termination without cause of Ebker's employment, entitling her to all of the termination rights and benefits. (Ex. 2; Complaint para. 6)

Ebker commenced her employment with Genesco on September 23, 1976 (Tr. 41) and immediately realized that the "Susan Thomas" division had been grossly mismanaged and was at that time generating only $4,000,000 in gross sales. (Tr. 41) Ebker decided to replace the ailing "Susan Thomas" apparel line with a new line entitled "Sportwork-Nancy Ebker," and to upgrade the "Vivo" line. (Tr. 51)

Within one year after Ebker's arrival at Genesco the "Vivo" line was generating over $9,000,000 in gross sales, which was three times more than it had been generating when she first joined Genesco. (Tr. 62) The "Sportwork-Nancy Ebker" line also achieved great success under Ebker's management; within a four month period it generated over $1,300,000 in sales. (Tr. 63) Ebker received numerous letters and telegrams from executives at Genesco and other persons in the fashion industry congratulating her on her success with the "Susan Thomas" division. (Ex. 5; Tr. 64)

In August, 1977, Ebker was advised by officers at Genesco that it wished to divest itself of all of its unprofitable apparel divisions. (Tr. 68-69; Ex. 10) At that time the "Susan Thomas" division, although performing extremely well under Ebker's direction, was approximately $700,000 away from being a profitable division. (Tr. 69; 80) Ebker was afforded the opportunity to purchase the assets of the "Susan Thomas" Division in order that the "Vivo" and "Sportwork-Nancy Ebker" lines could continue. Genesco listed the value of these assets on its books as approximately $1,000,000. (Tr. 74-75) Genesco was particularly concerned with the continued production of these two lines of apparel because of the existence of...