Ermenegildo Zegna Corp. v. Zegna
| Decision Date | 06 January 1998 |
| Docket Number | No. 1981,D,1981 |
| Citation | 133 F.3d 177 |
| Parties | ERMENEGILDO ZEGNA CORPORATION and Lanificio Ermenegildo Zegna, S.p.A., Plaintiffs-Appellants, v. Lanificio Mario ZEGNA, S.p.A., Defendant-Appellee, Sespi Sette Spighe, S.p.A. and Romeo Fashions, Defendants. ocket 96-9717. |
| Court | U.S. Court of Appeals — Second Circuit |
Jonathan M. Jacobson, New York City. (Alan Siegel, David M. Zensky, Drew H. Cohen, Erika K. Thomas, Akin, Gump, Strauss, Hauer & Feld, L.L.P., on brief), for Plaintiff-Appellant.
William R. Hansen, New York City. (Paul W. Garrity, Nims, Howes, Collison, Hensen & Lackert, on brief), for Defendant-Appellee.
Before: WINTER, Chief Judge, JACOBS and LEVAL, Circuit Judges.
On and off since 1941, rival branches of the Zegna family have been disputing each other's use of the ZEGNA name in connection with the manufacture or marketing of high-end woolen fabrics and clothing. Ten years ago, the rival companies--Ermenegildo Zegna Corporation ("EZC") and Lanificio Mario Zegna, S.p.A. ("LMZ")--settled litigation pending in the United States District Court for the Southern District of New York by entering into an agreement, so ordered by the court, which (in relevant part) (i) specified in detail how and where LMZ may use the ZEGNA name, (ii) submitted disputes to arbitration, and (iii) barred the parties from contesting the agreement. The current dispute concerns an arbitration that LMZ has commenced in Milan, seeking to reform the settlement agreement along lines authorized by an intervening change in Italian law.
Plaintiff EZC brought on a motion in the original Southern District lawsuit, seeking (i) an order finding LMZ in contempt on the ground that the arbitration seeks reformation (or, effectively, rescission) of the agreement in contravention of the no-contest EZC's appeal challenges each decision of the district court, and LMZ moves to dismiss for lack of appellate jurisdiction. We conclude that this appeal is premature. Lacking appellate jurisdiction, we dismiss without reaching the parties' substantive arguments.
clause, and (ii) summary enforcement of the agreement. LMZ moved (i) to compel EZC to submit to the arbitration, notwithstanding EZC's position that LMZ's initiation of the arbitration, and the relief sought therein, violated the no-contest clause; and (ii) for a stay of proceedings pending the outcome of the arbitration. The district court denied EZC's motion for contempt and for summary enforcement, and granted LMZ's motion to compel arbitration and to stay further proceedings in the district court pending a ruling by the arbitral panel.
EZC, a United States corporation, is a retailer and wholesaler of men's fashions in the United States and Canada. Its parent corporation, plaintiff Lanificio Ermenegildo Zegna, S.p.A., is an Italian corporation that designs, manufactures, and sells fine fabric and high fashion clothing worldwide. LMZ, also an Italian corporation, is a weaver and seller of fine woolen fabrics. The Zegna family business began manufacturing woolen fabrics in Italy in 1915. By 1941, the family business had split into two separate companies. In 1949, the companies entered into an agreement governing the use of the ZEGNA name in Italy and abroad.
The 1949 agreement remained serviceable until EZC commenced an action in 1985 in the Southern District of New York, alleging that LMZ's use of the name "Mario Zegna" in the United States amounted to trademark infringement and unfair competition. In 1987, the parties entered into an agreement settling this litigation, which was so ordered by the district court on April 9, 1987 (the "Agreement"). The Agreement undertook to resolve all disputes over the ZEGNA mark and specified very particularly how LMZ could use the name "Mario Zegna" in the future, including the location and size of the mark on LMZ's fabrics and the types of garments on which the mark may appear.
The 22-page Agreement includes two provisions that bear on the current appeal. Paragraph 12(a) provides:
Should there be any dispute arising between the parties with respect to the interpretation of this Agreement and Stipulation or with respect to the rights, duties and obligations undertaken by the parties herein, or arising herefrom, ... [i]f such dispute arises in the Republic of Italy, it shall be submitted for arbitration in Milan, Italy under Section 806 et seq. of the Italian Code of Civil Proceedings.
The so-called "no contest" clause appears in paragraph 11(b):
The parties agree that they will not contest the validity of this Agreement and Stipulation or seek to set it aside in any proceeding. If any portion or provision hereof, however, is found to be invalid, the balance of the Agreement (and in any case Paragraphs 2, 7 and 11 hereof) will continue to be in full force and effect as among the parties. 1
Some years after the Agreement was signed and so ordered, Italy changed its law of trademarks to relax restrictions on co-existing trademarks on the same surnames. Citing this change of law, LMZ commenced an arbitration in Italy in July, 1996, alleging that equity justifies the reformation of the Agreement to expand LMZ's permissible use of the Mario Zegna name in Italy to the fuller extent permitted by the new law. In the arbitration, LMZ seeks to modify paragraphs five, seven, and nine of the Agreement. 2
EZC responded to the Petition for Arbitration by filing an order to show cause in the Southern District action that had previously been concluded in 1987, seeking (among other relief) an order of civil contempt against LMZ, and summary enforcement of the Agreement by means of a permanent injunction. EZC alleges that LMZ's commencement of the arbitration was a violation of the no-contest clause of the Agreement, because the arbitration seeks to set aside key restrictions on LMZ's use of the ZEGNA name. LMZ filed a cross-motion for an order staying proceedings in the district court and compelling EZC to submit to arbitration in Milan.
The district court considered, as a preliminary matter, whether it should decline to exercise its jurisdiction on comity grounds. The court's decision to exercise its jurisdiction is not challenged on appeal.
The district court recognized that the pro-arbitration stance of federal law requires the court to compel arbitration unless it can say "with positive assurance" that the dispute at issue falls outside the clause, went on to consider whether the arbitration clause was susceptible to an interpretation that would include the dispute underlying the Milan arbitration within its scope, and concluded that it was. The court then examined the no-contest clause, and ruled that it would bar a challenge to the Agreement in its entirety (or to all of its key provisions), but is no obstacle to an arbitration challenging particular provisions of the Agreement. The court decided that LMZ's claims in the Milan arbitration did not violate the no-contest clause because they did not amount to an attack on the Agreement in its entirety. The district court therefore denied EZC's motion for contempt and a preliminary injunction, and granted LMZ's motion to compel arbitration. The court also stayed its proceedings pending the arbitration.
EZC urges a number of grounds for reversal; but the threshold question is whether section 16 of the Federal Arbitration Act authorizes us to review the district court's decision. We conclude that it does not, so we do not reach the parties' arguments on the merits of this appeal.
The Federal Arbitration Act ("FAA"), enacted originally in 1925 and codified as amended at 9 U.S.C. §§ 1-16, had as its purpose "to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 1651, 114 L.Ed.2d 26 (1991). To that end, its "provisions manifest a 'liberal federal policy favoring arbitration agreements.' " Id. at 25 (quoting Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983)). Section 16, which was added to the statute in 1988, see Pub.L. 100-702, tit. X, § 1019(a), 102 Stat. 4642, 4670-71 (1988), furthers the statute's aim of eliminating barriers to arbitration by "promot[ing] appeals from orders barring arbitration and limit[ing] appeals from orders directing arbitration." Filanto, S.p.A. v. Chilewich Int'l Corp., 984 F.2d 58, 60 (2d Cir.1993); see also Janneh v. GAF Corp., 887 F.2d 432, 436 n. 5 (2d Cir.1989) (), cert. denied, 498 U.S. 865, 111 S.Ct. 177, 112 L.Ed.2d 141 (1990).
Section 16 provides:
(C) denying an application under section 206 of this title to compel arbitration (D) confirming or denying confirmation of an award or partial award, or
(E) modifying, correcting, or vacating an award;
(2) an interlocutory order granting, continuing, or modifying an injunction against an arbitration that is subject to this title; or
(3) a final decision with respect to an arbitration that is subject to this title.
(b) Except as otherwise provided in section 1292(b) of title 28, an appeal may not be taken from an interlocutory order--
(1) granting a stay of any action under section 3 of this title;
(2) directing an arbitration to proceed under section 4 of this title;
(3) compelling arbitration under section 206 of this title; or
(4) refusing to enjoin an...
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