Fendi Adele S.R.L. v. Burlington Coat Factory Warehouse Corp.

• Decision Date: 02 April 2012
• Docket Number: No. 06 Civ. 85(LBS)(MHD).,06 Civ. 85(LBS)(MHD).
• Citation: 867 F.Supp.2d 427
• Parties: FENDI ADELE S.R.L., Fendi S.R.L., and Fendi North America, Inc., Plaintiffs, v. BURLINGTON COAT FACTORY WAREHOUSE CORP. and Cohoes Fashions, Inc., Defendants. Burlington Coat Factory Warehouse Corp. and Cohoes Fashions, Inc., Defendants/Third Party Plaintiffs v. 546332 BC Ltd., d/b/a Colton International, Summit Resources Imports LLC, Euro Moda, Inc., Moda Oggi, Inc., and Ashley Reed Trading, Inc., Third Party Defendants.
• Court: U.S. District Court — Southern District of New York

867 F.Supp.2d 427

FENDI ADELE S.R.L., Fendi S.R.L., and Fendi North America, Inc., Plaintiffs,

v.BURLINGTON COAT FACTORY WAREHOUSE CORP. and Cohoes Fashions, Inc., Defendants.

Burlington Coat Factory Warehouse Corp. and Cohoes Fashions, Inc., Defendants/Third Party Plaintiffs

v.546332 BC Ltd., d/b/a Colton International, Summit Resources Imports LLC, Euro Moda, Inc., Moda Oggi, Inc., and Ashley Reed Trading, Inc., Third Party Defendants.

No. 06 Civ. 85(LBS)(MHD).

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

April 2, 2012.

Richard L. Mattiaccio, Steven Skulnik, Victor Genecin, Squire, Sanders & Dempsey (US) L.L.P., New York, NY, for Plaintiffs.

J. Joseph Bainton, John Jongmin Lee, Smith, Gambrell & Russell, LLP, Carmine Joseph Castellano, Lewis Brisbois Bisgaard & Smith LLP, New York, NY, for Defendants.

Bruce D. Katz, Bruce D. Katz, Esq., Gerard Francis Dunne, Law Office of Gerard F. Dunne, P.C., New York, NY, Kirk Gordon Downing, Law Offices of Kirk G. Downing, Beverly Hills, CA, John Smargiassi, Member-Joseph & Smargiassi, LLC, New York, NY, for Third Party Defendants.

MEMORANDUM & ORDER

SAND, District Judge.

Third Party Plaintiffs Burlington Coat Factory Warehouse Corporation and Cohoes Fashion, Inc. (collectively known as “Burlington”) have moved the Court for summary judgment against Third Party Defendant Ashley Reed Trading, Inc. (“Ashley Reed”). For the reasons provided below, summary judgment is granted.

I. Background¹

On October 10, 2007, this Court granted partial summary judgment in favor of Plaintiffs Fendi Adele S.R.L., Fendi S.R.L., and Fendi North America (collectively known as “Fendi”) and against Burlington, whom we found in contempt of court for violating a consent injunction, approved by this Court on May 19, 1987, in which it agreed not to “purchase or sell any merchandise bearing the Fendi trademark unless permission in writing is received from Fendi.” Fendi Adele S.R.L. v. Burlington Coat Factory Warehouse Corp., No. 06 Civ. 86, 2007 WL 2982295, at *4, 2007 U.S. Dist. LEXIS 75812, at *17–18 (S.D.N.Y. Oct. 10, 2007). We ordered Burlington to disgorge the profits it had made selling Fendi-marked goods in violation of the consent injunction. Id. We also ordered Burlington to pay Fendi's attorney's fees and costs involved in litigating the contempt action. Id. We subsequently referred the matter to Magistrate Judge Dolinger for a report and recommendation as to the amount of the relief to be imposed. Endorsed Letter (Dec. 20, 2007), Dkt. # 160.

On April 27, 2009, Magistrate Judge Dolinger filed a Report and Recommendation in which he recommended that the Court award Fendi a total of $2,528,768.00 in disgorgement and $541,913.65 in attorney's fees and costs. Fendi Adele S.R.L. v. Burlington Coat Factory Warehouse Corp., 642 F.Supp.2d 276, 303 (S.D.N.Y.2009). On December 1, 2009, the Magistrate Judge issued another Report and Recommendation in which he recommended a method for calculating the prejudgment interest associated with the contempt damages. Dkt # 318. We adopted both of Magistrate Judge Dolinger's Report and Recommendations in their entirety and on February 16, 2010, the Clerk of the Court issued an Amended Judgment against Burlington, awarding Fendi relief totaling $4,657,148.64. Dkt. # 326.

On February 8, 2010 we granted summary judgment on Fendi's remaining trademark counterfeiting, trademark dilution, and common law unfair competition claims against Burlington and ordered Burlington to pay treble damages on the goods it sold after April 2004, when it received a cease and desist letter from Fendi. Fendi Adele S.R.L. v. Burlington Coat Factory, 689 F.Supp.2d 585, 602–03 (S.D.N.Y.2010) (“February 8 Order”). We also ordered Burlington to compensate Fendi for the attorney's fees and costs expended litigating the trademark and unfair competition claims. Id. Finally, we ordered Burlington to pay prejudgment interest on the disgorgement award. Id.

Fendi moved for partial reconsideration of the February 8 Order, arguing that treble damages should also be awarded on those goods Burlington sold prior to its receipt of the 2004 cease and desist letter. On March 27, 2010, we granted Fendi's motion because we found that, even prior to its receipt of the cease and desist letter, Burlington had “willfully infringed” on Fendi's trademarks and acted in “reckless disregard for Fendi's trademark rights.” Id. at 608–09. We referred the matter to Magistrate Judge Dolinger to determine the appropriate amount of damages, attorney's fees, prejudgment interest, and costs. Id. at 603.

In a Report and Recommendation dated August 9, 2010 (“the August 9 R & R”), Magistrate Judge Dolinger recommended that Fendi be awarded an additional $5,626,568.91 in relief for Burlington's violations of federal and state trademark and unfair competition law. Dkt # 355. If adopted by this Court, Magistrate Judge Dolinger's Report and Recommendation would have brought the total judgment imposed on Fendi by this Court in connection with this litigation to $10,283,717.55. However, on December 1, 2010, the parties reached an agreement in which, in exchange for the settlement of all claims against it, Burlington agreed to pay Fendi $10,050,000.00. Haigney Aff. Supp. Mot. Summ. J. (“Haigney Aff.”) ¶ 9. This amount equals 97.7273% of what Fendi would have been awarded had we adopted all three of Magistrate Judge Dolinger's Report and Recommendations.

Burlington now moves the Court for summary judgment against Ashley Reed, one of the five vendors that sold Burlington the counterfeit goods at issue in this litigation. In the February 8 Order, we granted Burlington summary judgment on its indemnification claim against Ashley Reed and the other four distributors (“the Third Party Defendants”). We concluded that the Third Party Defendants, including Ashley Reed, had breached the express warranty of authenticity they made when they sold Burlington the counterfeit goods. Fendi, 689 F.Supp.2d at 604. In the February 8 Order, we reached only the issue of the Third Party Defendants' liability, however. Burlington now seeks summary judgment on the amount that Burlington is entitled to recover from Ashley Reed.

II. Standard of Review

A motion for summary judgment must be granted if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A fact is “genuine” if the evidence would justify a verdict for the non-moving party by a reasonable jury. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is “material” if it might affect the outcome of the suit. Id. In determining whether a genuine dispute of material fact exists, the Court “is to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought.” Patterson v. Cnty. of Oneida, 375 F.3d 206, 219 (2d Cir.2004). Nonetheless, the party opposing summary judgment “may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence” in support of its factual assertions, D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.1998).

III. Discussion

Neither Burlington nor Ashley Reed dispute any of the facts underlying this dispute. See Third Party Def. Ashley Reed's Opp'n Burlington Mot. Summ. J. (“Ashley Reed Opp'n”) at 2 (admitting the facts provided in Burlington's Rule 56.1 statement of facts). We therefore grant Burlington's motion for summary judgment, pursuant to Rule 56(a), and turn to the real issue in dispute: namely, the proper amount of damages, costs and attorney's fees, and prejudgment interest that Ashley Reed is required to indemnify Burlington.

A. Damages

In the August 9 R & R, Magistrate Judge Dolinger calculated that Burlington owed Fendi $3,912,963.00 in treble damages, $1,549.389.92 in attorney's fees, and $164,215.99 in costs arising out of Fendi's litigation of the trademark dilution, infringement and unfair competition claims. In total this amounted to a judgment against Burlington in the amount of $5,626,568.91 in connection with the trademark and unfair competition claims.

Burlington argues that under the terms of the indemnity agreement between the parties, Ashley Reed is required to indemnify it for a proportionate share of this entire judgment, once reduced to 97.7273% to take into account the reduction achieved as a result of settlement. Based on an analysis of its sales records from the relevant periods, it calculates that 5.73781% of the gross cost of the counterfeit Fendi goods at issue in this lawsuit originated from Ashley Reed. Haigney Aff. ¶ 18. Ashley Reed does not dispute this figure. Ashley Reed Opp'n at 2. Burlington therefore concludes that Ashley Reed must indemnify it for 5.73781% of 97.7273% of $5,498,692.60, or $315,504.53. Haigney Aff. ¶ 19.

Ashley Reed argues in response that, because it guaranteed to indemnify Burlington only against expenditures “occasioned by” allegations or legal actions that the goods it sold Burlington infringed on the trademark rights of a third party, it cannot be held responsible for costs that were not proximately caused by the trademark infringement. Hence, Ashley Reed argues, it is required to indemnify Burlington only for that portion of the settlement payment that compensates Fendi for the profits that Burlington made on the Ashley Reed goods. It is not, it argues, required to indemnify Burlington for either the treble damages, attorney's fees, or litigation costs portions of the settlement payment.

In order to resolve this dispute over the proper amount of damages, we turn to the language of the indemnity agreement. Paragraph 12 of the standard form Purchase Order that Ashley Reed signed each time it sold counterfeit goods to Burlington (“the indemnity agreement”) states in relevant part:

“Vendor agrees to indemnify and hold harmless Purchaser from and against any and all judgments,...