Gidatex, S.r.L. v. Campaniello Imports, Ltd.

• Decision Date: 06 October 1999
• Docket Number: No. 97 CIV. 9518(SAS).,97 CIV. 9518(SAS).
• Citation: 82 F.Supp.2d 126
• Parties: GIDATEX, S.r.L., Plaintiff, v. CAMPANIELLO IMPORTS, LTD., Campaniello Imports of Florida, Ltd., and Campaniello Enterprises, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

82 F.Supp.2d 126

GIDATEX, S.r.L., Plaintiff, v. CAMPANIELLO IMPORTS, LTD., Campaniello Imports of Florida, Ltd., and Campaniello Enterprises, Inc., Defendants.

No. 97 CIV. 9518(SAS).

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

October 6, 1999.

Thomas G. Bailey, Jr., Frank Morreale, Whitman, Breed, Abbott & Morgan, L.L.P., New York City, for Plaintiff.

Nathan Lewin, Paul F. Enzinna, Tim Preso, Miller, Cassidy, Larroca & Lewin, L.L.P., Washington, D.C., for Defendants.

OPINION AND ORDER

SCHEINDLIN, District Judge.

Plaintiff Gidatex, S.r.L. ("Gidatex") filed this suit against Defendants Campaniello Imports, Ltd., Campaniello Imports of Florida, Ltd., and Campaniello Enterprises, Inc. (collectively "Campaniello") in 1997, alleging violations of the Lanham Act, 15 U.S.C. §§ 1114(1)(a) and 1125(a), common law trademark infringement, and common law unfair competition. Jurisdiction is based on the Lanham Act, 15 U.S.C. § 1121 and 28 U.S.C. §§ 1331 (federal question), 1332 (diversity of citizenship), 1338 (jurisdiction to adjudicate cases involving infringement of a federally registered trademark and accompanying claims of unfair competition) and 1367(a) (supplemental jurisdiction).

Defendants assert, inter alia, the equitable defenses of unclean hands, laches and acquiescence. The Court bifurcated the equitable and legal claims, and the latter were tried to a jury from August 23 to August 31, 1999. The jury trial resulted in a verdict for plaintiff on all of its trademark and unfair competition claims and an award of defendants' profits in the amount of $50,000. Seeking to bar an injunction against their use of plaintiff's trademark, defendants now submit for the Court's consideration their affirmative defenses of unclean hands, laches and acquiescence. Final submissions on the equitable portion of the case were made on October 1, 1999. This opinion constitutes the Court's findings of fact and conclusions of law regarding these equitable defenses.

I. Findings of Fact

1. From 1974 to 1994, Campaniello acted as the exclusive sales representative for Saporiti Italia ("Saporiti"), an Italian furniture manufacturer. See Testimony of Thomas Campaniello, owner or Campaniello, Trial Transcript ("Tr.") at 462-3. In March 1994, Campaniello sued Saporiti for breach of contract, fraud, and misrepresentation, arguing, inter alia, that Saporiti violated the terms of the exclusive arrangement with Campaniello by taking direct orders from Campaniello's exclusive sales territories. (The "1994 Litigation"). See id. at 468-469.

2. During the course of the 1994 Litigation, Saporiti filed for the Italian equivalent of bankruptcy. Id. Subsequently, under the supervision of an Italian bankruptcy court, plaintiff Gidatex leased Saporiti's assets with the option to purchase them at a later date. Id. at 470.

3. Gidatex then entered into a distributorship agreement with Campaniello similar to the one between Saporiti and Campaniello (the "Agreement"). As part of the Agreement, Campaniello withdrew its 1994 Litigation against the Saporiti defendants. In return, Gidatex engaged Campaniello as the exclusive distributor of Saporiti Italia furniture in the United States and other Western Hemisphere countries through March 31, 1995, with an automatic five-year extension if Gidatex purchased Saporiti's assets.¹ The terms of the Agreement required Campaniello to make certain minimum purchases of Saporiti Italia furniture. Id. at 474-75, 812; Memorandum of Agreement, June 14, 1994, Defs.' Ex. R.²

4. Between June 1994 and March 1995, Campaniello was displeased with the quality of the Saporiti Italia goods and Gidatex's delays and inaccuracies in filling its orders. See Tr. at 491, 495, 517, 814 (T. Campaniello); Correspondence from T. Campaniello to Gidatex notifying Gidatex of customer complaints, Defs.' Exs. CC, DD, EE, FF, GG, KK, MM, PP, XX, CCC, LLL, ZZZ, CCCC; Letter from Nurit Kandel, interior designer and Campaniello customer, to Campaniello voicing complaints with Saporiti Italia goods, Defs.' Ex. UU. To appease its customers, Campaniello provided refunds and discounts. See Correspondence from Campaniello to customers informing them of discount due to customer's displeasure with Saporiti, Defs.' Exs. YY, KKK; Correspondence from Campaniello to Gidatex informing Gidatex of refunds and discounts it offered to displeased customers, Defs.' Ex. EEEE. Ultimately, Campaniello did not place sufficient orders with Gidatex to meet its minimum purchase requirements. See Tr. 517 (T. Campaniello).

5. Gidatex purchased Saporiti Italia's assets, but refused to continue Campaniello's distributorship for the additional five years as provided by the Agreement, citing Campaniello's failure to meet its minimum required purchases. In April 1995, ten months after it entered into the Agreement, Gidatex verbally terminated its relationship with Campaniello. See Declaration of Thomas Campaniello, March 17, 1998 ("T. Campaniello Decl."), attached to Defendants' Post-Trial Memorandum of Law in Support of Unclean Hands Defense, Ex. A, ¶ 6.

6. At the time of the termination, Campaniello had approximately $1 million worth of Saporiti Italia furniture in its warehouses and showrooms. See Tr. 298 (Raffaele Saporiti, sole administrator of Gidatex), 531-32 (T. Campaniello). Gidatex refused to buy back the furniture, but allowed Campaniello to sell its remaining stock. Tr. 298 (R. Saporiti).

7. Despite the termination of the Agreement, Campaniello continued to use the Saporiti Italia trademark. Eight months after Gidatex's oral termination of the Agreement, Gidatex's counsel advised Campaniello's counsel that Campaniello was only permitted to use the Saporiti Italia trademark in connection with the sale of the remaining Saporiti inventory. See Letter of David A. Botwinik, Esq. to Stephen Hochhauser, Esq., December 22, 1995, Pl.'s Ex. 4. Specifically, Gidatex communicated the following:

We therefore request that you advise your client to discontinue the use of the Saporiti trademark in connection with its business. A mere walkby of the Campaniello premises located [in New York City] indicates that the name Saporiti is displayed more prominently than Campaniello. It is an elementary principle of trademark law that the public should not be subjected to confusing trademarks. Thus, the Saporiti trademark should be removed from all locations on the Campaniello premises where it is prominently displayed. Of course, any remaining use of the Saporiti trademark must be limited to Saporiti products.

In the event that Campaniello continues to improperly use the Saporiti trademark, we will, on behalf of our clients, pursue their remedies in all appropriate forums.

Id. Twenty-two months later, Gidatex's counsel sent a "cease and desist" letter to Campaniello. See Letter from Thomas G. Bailey, Jr., Esq. to Thomas Campaniello, October 16, 1997, Pl.'s Ex. III-A. That letter warned:

It has come to our attention that without authorization from Gidatex, Campaniello is displaying Saporiti Italia signage at its retail locations, maintaining telephone listings under the Saporiti Italia name and otherwise using the Saporiti Italia trademark in commerce in a manner that imitates and infringes upon Gidatex's rights.

In order to avoid unnecessary litigation to enforce Gidatex's rights, we urge you to remove immediately the Saporiti Italia signs from each of your stores and to cease and desist from any further infringing activities. Unless we have received a written confirmation from you by October 31, 1997 that all signs and all other indicia of any connection between Campaniello and Saporiti Italia have been removed, and that Campaniello will cease all future use of the Saporiti Italia trademark and name, we will have no alternative but to seek all relief to which Gidatex may be entitled.

Id. Gidatex's letter provoked the following curt response from Campaniello: "This letter is to inform you that we have no intention of removing the name Saporiti Italia from our wholesale showrooms...." Letter of Thomas Campaniello to Thomas G. Bailey, Jr., Esq., October 21, 1997, attached to Plaintiff's Memorandum of Law in Opposition to Defendants' Motion in Limine to Preclude Evidence of Communications of Investigators ("Pl.'s Mem."), Ex. 2.

Within the following two months, Gidatex sent undercover investigators into Campaniello's showroom to determine whether Campaniello was using the Saporiti Italia trademark to "pass off" other brands of furniture similar in style to authentic Saporiti merchandise. See Letter of Investigator Susan M. Peterson to Thomas G. Bailey, Esq., December 22, 1997, attached to Pl.'s Mem., Ex. 3. Displeased with Campaniello's continued use of the Saporiti mark, plaintiff filed suit on December 29, 1997, but did not serve defendants until February 23, 1998. See Tr. 835 (T. Campaniello).

8. At trial, Thomas Campaniello testified that after the termination of the Agreement in April 1995, no one from Gidatex gave Campaniello permission to use the Saporiti signs or trademark. See Tr. 686 (T. Campaniello). Mr. Campaniello remembered that his lawyer, Mr. Hochhauser, had given him a copy of the December 22, 1995 letter from Mr. Botwinik during that same month. Although Mr. Campaniello understood that the letter requested that he take down the Saporiti sign, he disregarded the letter because he considered it "incidental". Id. at 688-89. Mr. Campaniello also recalled seeing the October 1997 cease and desist letter and taking this second warning more "seriously". Id. at 690. Mr. Campaniello agreed with plaintiff's counsel that the two letters "left no doubt" in his mind that Gidatex did not approve of Campaniello's use of the Saporiti sign and trademark. Id. at 692.

9. Nevertheless, Saporiti signs remained on the storefront of Campaniello showrooms in New York, Dallas and Miami and Dania, Florida where Saporiti stock continued to be sold. See Tr. 675-76 (Sandra Campaniello,...