Hyosung America, Inc. v. Sumagh Textile Co., Ltd.

Citation934 F. Supp. 570
Decision Date19 April 1996
Docket NumberNo. 94 Civ. 0568 (SAS).,94 Civ. 0568 (SAS).
PartiesHYOSUNG AMERICA, INC. and Hyosung America, Inc. as Assignee of Orkid Tex, Inc., Plaintiffs, v. SUMAGH TEXTILE CO., LTD., Defendant.
CourtU.S. District Court — Southern District of New York

COPYRIGHT MATERIAL OMITTED

Harlan M. Lazarus, Lazarus & Lazarus, P.C., New York City and Matthew Gluck, Fried Frank Harris Shriver & Jacobson, New York City, for plaintiffs.

Steven C. Bennett, Fredrick E. Sherman, Jones, Day, Reavis & Pogue, New York City, for defendant.

OPINION AND ORDER

SCHEINDLIN, District Judge:

Sumagh Textile Co., Ltd. ("Sumagh") moves for summary judgment seeking dismissal of the amended complaint filed by Hyosung America, Inc. ("Hyosung"). The complaint pleads nine causes of action, including claims arising from and relating to Sumagh's alleged breach of warranty, breach of contract, fraud, violation of both the Lanham Act and the Wool Products Labeling Act, and claims for compensatory and punitive damages. Hyosung alleges that Orkid Tex, Inc. ("Orkid") ordered fabric from Sumagh that was to contain 65% rayon and 35% wool but that, contrary to the supply orders, the fabric Sumagh supplied contained no more than 30% wool. Thereafter, Orkid assigned its rights and interests in the underlying contracts to Hyosung.

For the reasons stated below, Sumagh's motion is granted. Hyosung's amended complaint is this matter is thus hereby dismissed.

I. Facts
A. Agreement Between Hyosung and Orkid

On January 24, 1991, Hyosung entered into an agreement ("Agreement") with Orkid which provided that Orkid would "obtain and assign to Hyosung purchase orders from customers" for textile goods, and "shall arrange to purchase Goods from Orkid's various suppliers." Defendant's Local Rule 3(g) Statement ("Def. 3(g)") ¶¶ 1-3.1 Under the Agreement, Orkid submitted customer purchase orders to Hyosung and one of Hyosung's factors for review. Id. ¶ 4. Each purchase order was "subject to full credit approval" of the factor as well as subject to Hyosung's "satisfaction, in its discretion, with the terms of the transaction." Id. ¶ 5. Once Hyosung was provided with "all details of the purchase," Hyosung arranged to open a letter of credit for the benefit of the supplier of the goods in order to fill the customer's purchase order. Id. ¶¶ 6-7.

When the goods were shipped, Hyosung cleared them through Customs and arranged to ship them to the customer. Id. ¶ 8. Hyosung then collected payment for the shipment from the customer, and subsequently remitted payment to Orkid, minus various charges. Id. ¶ 9. If "for any reason" Hyosung did not receive payment of the customer's purchase order in full — such as because of "merchandise disputes" — Hyosung could withhold payment to Orkid. Id. ¶ 10. Orkid retained the responsibility for "obtaining any required import or export licenses for the Products and for compliance with all laws and regulations governing the sale, purchase or use of the products." Id. ¶ 11. Any cancellation of a customer's purchase order "whether before or after production had been completed or before or after delivery of shipment to the Customers" was Orkid's "total responsibility." Id. ¶ 12. The Agreement was never terminated, and thus governed the fabric sales at issue in this action. Id. ¶ 15.

B. Orkid Makes a Deal with San Moire

Sometime in late 1992 or early 1993, Mervyn's, a department store chain, placed an order with San Moire, Inc. ("San Moire") for garments made of rayon/wool fabric. Def. 3(g) ¶ 65. San Moire had discussions with Orkid regarding rayon/wool fabric which San Moire needed to produce garments for Mervyn's. Id. ¶ 67. After providing Orkid with a sample of the type of fabric it wanted, San Moire placed a series of purchase orders with Orkid for production of the fabric. Id. ¶¶ 68-69. Specifically, San Moire requested fabric consisting of 65% rayon and 35% wool. Id. ¶ 70.

In February and March 1993, Sumagh sent Orkid a series of memoranda, referring to a range of qualities and prices for rayon/wool fabric that Sumagh could provide to Orkid. Eventually, Sumagh agreed to provide fabric to Orkid.

In June 1993, Orkid made the first delivery of fabric to San Moire, which San Moire accepted.2 Id. ¶ 109. San Moire, in turn, sent sample garments to Mervyn's, to which Mervyn's did not object. Id. ¶ 110. In a memorandum to Sumagh dated July 27, 1993, Orkid confirmed that it was satisfied with the quality of rayon/wool fabric that Sumagh had been shipping, noting: "We don't care wear (sic) you get the ... goods from as long as its the same quality that you been shipping." Id. ¶¶ 111-12.

C. The San Moire Deal Goes Bad

But the deal soon soured. On September 30, 1993, San Moire sent a letter to Hyosung and Orkid, which stated: "There is a problem with the content of the Rayon Wool goods purchased. All payments of invoices for the Rayon Wool fabrics will not be paid until the problem is resolved." Def. 3(g) ¶ 113.

On October 4, 1993, Mervyn's sent a letter to San Moire, in which it rejected "the entire shipment of rayon/wool merchandise" sent by San Moire. Id. ¶ 114. Mervyn's stated that it was rejecting the goods because "Mervyn's purchase order required that the fabric content of the merchandise be 65% rayon and 35% wool," that the fabric content varied from that amount, and that "no fabric content tolerance is allowed." Id. ¶ 115. After October 4, 1993, San Moire continued to cut rayon/wool fabric received from Orkid into garments. Id. ¶ 116. Although San Moire never returned any of the rayon/wool fabric, it refused to pay Hyosung for some of the fabric. Id. ¶ 117.

Prior to the commencement of this action, Orkid "assigned all of its rights, title and interests for and to the various contracts at issue herein with Sumagh to Hyosung." Id. ¶ 137 (citing Declaration of Frederick E. Sherman, dated Oct. 2, 1995, Exhibit 25, ¶ 1).

II. Procedural History

On October 18, 1994, Hyosung filed a complaint against San Moire in New York State Supreme Court. Def. 3(g) ¶ 118. Hyosung alleged that it delivered rayon/wool fabric to San Moire, that San Moire had a reasonable opportunity to inspect it and did not reject it, and that San Moire wrongly refused to pay for the fabric. Id. ¶¶ 121-23. Hyosung sought damages of $556,199.25, the amount of the unpaid fabric invoices. Id. ¶¶ 124-25. Hyosung and San Moire eventually settled this claim for $180,000. Id. ¶¶ 126-27. After $130,000 had been paid to Hyosung pursuant to the Stipulation of Settlement, San Moire advised Hyosung that it would liquidate its remaining assets; the "residual" claim of $50,000 was then settled for $25,000. Affidavit of J.R. Cho, Vice President of Hyosung, dated October 26, 1995, ¶¶ 5-6.

On November 9, 1994, Hyosung filed a complaint against Orkid in New York State Supreme Court. Def. 3(g) ¶ 128. In its complaint, Hyosung alleged that Orkid authorized Sumagh to manufacture rayon/wool textile fabric with a fiber content of "less than 35% wool and greater than 65% rayon." Hyosung later sought a default judgment. Id. ¶ 133. There is no indication in the record as to whether a default judgment was entered.

Hyosung commenced this action against Sumagh on January 31, 1994, seeking damages of "not less than" $600,000. Am.Cplt. ¶ 68.

III. Standard for Summary Judgment

Summary judgment "is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986) (quoting Fed. R.Civ.P. 1). The court's function on a summary judgment motion is "carefully limited to discerning whether there are any genuine issues of material fact to be tried, not to deciding them." Gallo v. Prudential Residential Services, Ltd. Partnership, 22 F.3d 1219, 1224 (2d Cir.1994). Thus, "a court may not grant a motion for summary judgment unless it determines that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex, 477 U.S. at 322-23, 106 S.Ct. at 2552-53, 91 L.Ed.2d 265 (1986). The party seeking summary judgment bears the initial burden of showing the absence of a genuine factual dispute. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). In deciding a summary judgment motion, the court should resolve all ambiguities and draw all factual inferences in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513-14, 91 L.Ed.2d 202 (1986); Brady v. Town of Colchester, 863 F.2d 205, 210-11 (2d Cir.1988). Finally, "if, as to the issue on which summary judgment is sought, there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party, summary judgment is improper." Chambers v. TRM Copy Centers Corp., 43 F.3d 29, 37 (2d Cir.1994).

IV. Analysis
A. Arguments Advanced by Sumagh

Defendant argues that it is entitled to judgment as a matter of law on several grounds. First, Defendant notes the familiar principle that the knowledge of both agents and assignors are imputed, as a matter of law, to their principals and assignees, respectively. As Orkid was aware that the fiber content of the rayon/wool fabric ordered from Sumagh was not 65% rayon and 35% wool, Sumagh argues that it is therefore entitled to summary judgment because a principal/agent relationship existed between Hyosung and Orkid, and Orkid's knowledge of the actual fiber content of the fabric must be imputed to Hyosung. Second, Sumagh argues that it is entitled to summary judgment because as Orkid's assignor, Hyosung "stands in the shoes" of Orkid, and is charged with Orkid's knowledge.

Alternatively, Defendant argues that should this Court deny its request for summary judgment in toto, it is...

To continue reading

Request your trial
8 cases
  • Merck Eprova AG v. Gnosis S.P.A.
    • United States
    • U.S. District Court — Southern District of New York
    • September 30, 2012
    ...were used to market Gnosis's 6R,S Mixture Product, as opposed to being merely included with shipments. See Hyosung Am., Inc. v. Sumagh Textile Co., 934 F.Supp. 570, 580 (S.D.N.Y.1996) (finding that “neither advertisement nor promotion [was] involved” when false description of a product was ......
  • Hyosung America, Inc. v. Sumagh Textile Co., Ltd.
    • United States
    • U.S. District Court — Southern District of New York
    • August 25, 1998
    ...April 19, 1996, this Court granted defendant's motion in its entirety, dismissing the Complaint. Hyosung America, Inc. v. Sumagh Textile Co., 934 F.Supp. 570 (S.D.N.Y.1996) (Hyosung I). Defendant's counterclaims were tried to the Court on July 8 and 9, 1996, and a money judgment was entered......
  • R.L. Polk & Co. v. Infousa, Inc.
    • United States
    • U.S. District Court — Eastern District of Michigan
    • November 7, 2002
    ...duties and liabilities as the assignor and is chargeable with knowledge of these duties and liabilities"); Hyosung Am., Inc. v. Sumagh Textile Co., 934 F.Supp. 570, 576 (S.D.N.Y.1996) (noting that "the knowledge of an assignor must be attributed to its assignee"), aff'd in part, rev'd in pa......
  • Marshak v. Treadwell
    • United States
    • New Jersey Supreme Court
    • July 30, 1999
    ...in the shoes of his assignors and that Marshak can have no greater trademark rights than they had. See Hyosung America, Inc. v. Sumagh Textile Co., 934 F.Supp. 570, 576-77 (S.D.N.Y.1996), aff'd in part, reversed in part, 137 F.3d 75 (2d Cir.1998). Nor has there been any dispute that the ass......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT