FENDI ADELE v. Burlington Coat Factory Warehouse

• Decision Date: 23 March 2010
• Docket Number: No. 06 Civ. 85(LBS).,06 Civ. 85(LBS).
• Citation: 689 F. Supp.2d 585
• Parties: FENDI ADELE S.R.L., Fendi S.R.L., and Fendi North America, Plaintiffs, v. BURLINGTON COAT FACTORY WAREHOUSE CORP. et al., 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

689 F.Supp.2d 585

FENDI ADELE S.R.L., Fendi S.R.L., and Fendi North America, Plaintiffs, v. BURLINGTON COAT FACTORY WAREHOUSE CORP. et al., 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).

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

February 8, 2010.

Memorandum and Order Amended on Reconsideration March 23, 2010.

Richard L. Mattiaccio, Steven Skulnik, Victor Genecin, Squire, Sanders & Dempsey, L.L.P., New York, NY, for Plaintiffs, Fendi Adele S.R.L., Fendi S.R.L., Fendi North America, Inc.

J. Joseph Bainton, Smith, Gambrell & Russell, LLP, New York, NY, for Defendants/Third Party Plaintiffs.

Carmine Joseph Castellano, John Jongmin Lee, Smith, Gambrell & Russell, LLP, New York, NY, for Burlington Coat Factory Warehouse Corporation.

Robert Ian Goodman, Law Office of Louise M. Valiquette, Ossining, NY, for Colton International.

Bruce D. Katz, Bruce D. Katz, Esq., New York, NY, for 546332 BC Ltd.

Gerard Francis Dunne, Law Office of Gerard F. Dunne, P.C., New York, NY, for Ashley Reed Trading, Inc.

Kirk Gordon Downing, Law Offices of Kirk G. Downing, Beverly Hills, CA, for Moda Oggi, Inc.

John Smargiassi, Joseph & Smargiassi, LLC, New York, NY, for Euro Moda, Inc.

Lawrence Badash Fechner, Jaffe, Ross & Light LLP, New York, NY, for Summit Resource Imports LLC.

MEMORANDUM AND ORDER

SAND, District Judge.

In this Court's 2007 opinion, Fendi Adele S.R.L. v. Burlington Coat Factory, No. 06 Civ. 85, 2007 WL 2982295 (S.D.N.Y. Oct. 10, 2007), we 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"), finding Defendants Burlington Coat Factory Warehouse Corporation and Cohoes Fashion, Inc., a wholly-owned subsidiary of Burlington Coat Factory, (collectively known as "Burlington") in contempt of this Court's 1987 Injunction that prohibited Burlington from selling any Fendi-branded merchandise without written permission from Fendi.¹ Fendi now moves for summary judgment on its remaining causes of action.² In addition, three other motions are pending before the Court: Burlington's Motion to Amend the Answer; Burlington's Motion for Summary Judgment against the Third Party Defendants; and Colton's Cross-Motion to Dismiss the Third-Party Complaint. We will also address Fendi and Burlington's objections to Magistrate Judge Dolinger's December 1, 2009 Report and Recommendation.

I. Background

Fendi owns the federally-registered Fendi trademarks and is the exclusive designer of handbags, shoulder bags, purses, wallets and key holders bearing this trademark. (Pl.'s 56.1 ¶ 1-2.) Five Fendi trademarks, each registered with the United States Patent Trademark Office, are used on their products. (Pl.'s 56.1 ¶ 68.) Each of its products is individually designed, as are the components used, in a complex design process. (Pl.'s 56.1 ¶¶ 73-75.) Fendi manufactures and sells its products in two annual seasons. Fendi's authorized customers visit Fendi's showrooms during the Fall and Spring Fashion Weeks in Milan, view the collection for the season, and place their orders for specific products in specific quantities. (Pl.'s 56.1 ¶¶ 77, 84.)

Fendi contracts with small companies in Florence, Italy to assemble the products. (Pl.'s 56.1 ¶ 97.) Each assembly order is for a stated quantity of a specific product in a specific combination of materials. (Pl.'s 56.1 ¶ 102.) Fendi gives the sub-contractors a sixteen digit code for each product. The code indicates the style number, combination of materials used, and the season for which the order is manufactured. (Pl.'s 56.1 ¶¶ 110-11.) The code is stamped on a piece of leather trim that is sewn into the inside lining of each product. (Pl.'s 56.1 ¶ 112.) Fendi monitors the coding of its products by its assembly subcontractors. (Pl.'s 56.1 ¶ 113.) As of the Fall-Winter season of 2003, Fendi began stitching a hologram label in the lining of every product. (Pl.'s 56.1 ¶¶ 117-18.) When the hologram is placed under a microscope, symbols can be seen within a genuine hologram, permitting it to be identified as authentic. (Pl.'s 56.1 ¶ 122.) A specialized vendor manufactures the hologram labels for Fendi; the holograms are delivered to Fendi's manufacturing facility and locked in a safe. (Pl.'s 56.1 ¶¶ 123-24.) One hologram is placed in each item, and Fendi tracks the number on each item. (Pl.'s 56.1 ¶¶ 125-26.)

Fendi visits its assembly contractors twice a week, monitors their work, and conducts inspections. (Pl.'s 56.1 ¶¶ 131-33.) Fendi also conducts inspections of its sub-subcontractors. (Pl.'s 56.1 ¶ 134.) Fendi inspects the finished products, and if a product has not been assembled correctly and cannot be repaired, Fendi destroys the product. (Pl.'s 56.1 ¶ 141.) The products are then shipped from Fendi's distribution center directly to Fendi's authorized customers. (Pl.'s 56.1 ¶ 141.) Each purchaser receives an invoice, which includes Fendi's name, the locations of the corporate offices in Italy, the date the goods were ready for shipment, the name and address of the authorized customer, and the order number assigned to the order. (Pl.'s 56.1 ¶¶ 147-48.) The invoice also details the contents of each box and the exact quantity of each style, which is described by Fendi's style number and materials code, and a narrative description of the article. (Pl.'s 56.1 ¶¶ 149-50.) Alberto Fabbri, the chief financial officer of Fendi Group, is able to access the computerized records of all the invoices going back to 2001. (Pl.'s 56.1 ¶ 152.)

Leonardo Minerva, Industrial Director of Leather Goods and Logistics Director for Fendi, was in charge of the manufacturing of the products from September 2002 to March 2008. (Pl.'s 56.1 ¶ 154.) As part of his duties, Minerva, along with his assistant, Massimo Lepri, examined hundreds of questioned Fendi-branded items each year for authenticity. (Pl.'s 56.1 ¶¶ 155-60.) Fendi has a multi-step process to determine whether an item is genuine, which involves: (1) visually inspecting the physical characteristics of the item, such as the quality of the materials, the purported Fendi trademark, the finishing, the metallic hardware, and the way the product was manufactured; (2) checking the item against Fendi's records to determine whether the particular style has been manufactured using the correct combination of materials; (3) inspecting each of the components for conformity with Fendi's specifications; (4) examining the sixteen digit code stamped on the leather trim inside the lining to determine if it matches Fendi's internal manufacturing and design records; and (5) examining the hologram for genuineness and checking the serial number on the hologram label to see if it matches Fendi's records. (Pl.'s 56.1 ¶¶ 157-65.)

At his deposition, Minerva testified that he never saw an instance in which a Fendi-branded item had correct codes but imperfect material. (Pl.'s 56.1 ¶ 117.) Minerva testified regarding forty three Fendi-branded items that were either sold by Burlington or that were selected from their inventory during discovery. These inspections were conducted by Minerva and his assistant Lepri. (Pl.'s 56.1 ¶ 166; Def.'s Response to 56.1 ¶ 166.) Minerva testified that thirty nine of the items were counterfeit, and three items were genuine Fendi products. (Pl.'s 56.1 ¶¶ 166-68.) Burlington's principal sources for Fendi-branded handbags and small leather goods were: 546332 BC, Ltd. d/b/a/ Colton International ("Colton"); Eura Moda, Inc. ("Euro Moda"); Moda Oggi, Inc. ("Moda Oggi"); Summit Resources LLC ("Summit"); and Ashley Reed Trading, Inc. ("Ashley Reed") (collectively known as the "Vendors"). (Pl.'s 56.1 ¶ 187.) Colton, Moda Oggi, Summit and Ashley Reed have never been customers of Fendi. (Pl.'s 56.1 ¶ 189.) In 2002 and 2003, Euro Moda made occasional purchases in small quantities of Fendi-branded items from an outlet store operated by Fendi. (Pl.'s 56.1 ¶ 189.) Minerva did not inspect any Fendi-branded goods supplied by Ashley Reed to Burlington but testified that he, along with Lepri, inspected twenty Fendi-branded items supplied by Ashley Reed to Filene's Basement, Big M, Inc., Nordstrom's Rack and Saks Off Fifth. (Pl.'s 56.1 ¶ 190.) Minerva testified that the items supplied by Ashley Reed were counterfeit. (Pl.'s 56.1 ¶ 190.)

On April 12, 2004, Stacy Haigney, Burlington's in-house counsel since 1990, met with counsel for Louis Vuitton Malletier, a company that has the same ultimate ownership as Fendi, to attempt to settle a trademark infringement litigation brought against Burlington. (Pl.'s 56.1 ¶ 204; Haigney Dec. ¶ 4, 13.) At the negotiations, counsel showed Haigney a Fendi-branded handbag that had been purchased from Burlington and informed Haigney that the handbag was counterfeit. (Pl.'s 56.1 ¶ 215.) Haigney requested that counsel send him a formal letter to that effect. (Def.'s Response to 56.1 ¶ 215.) Haigney confirmed that Colton had supplied the bag to Burlington and contacted counsel for Colton regarding the handbag. (Pl.'s 56.1 ¶¶ 216-17.) In late April 2004, Haigney received a letter on behalf of Fendi, which formally placed Burlington on notice that it was selling counterfeit branded goods and demanded that it cease and desist. (Pl.'s 56.1 ¶ 218; Haigney Dec. ¶ 18.) During the ensuing months, Fendi engaged in correspondence with Colton regarding the allegedly counterfeit bag. (Haigney Dec. ¶ 19.) On August 4, 2004, Colton sent a fax to Haigney containing a copy of an unsigned letter in Italian, purportedly from Minerva, together with an English translation stating that Fendi had examined the handbag and found that it had been made by Fendi and was within Fendi's standards of quality. (Pl.'s 56.1 ¶ 229.) Fendi challenged the authenticity of the letter. (Def.'s Response to 56.1 ¶ 232.) On ...