Ivy Mar Co., Inc. v. CR Seasons Ltd.

• Decision Date: 02 October 1995
• Docket Number: No. 95 CV 0508 (FB).,95 CV 0508 (FB).
• Parties: IVY MAR CO., INC., et al., Plaintiffs, v. C.R. SEASONS LTD., et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

907 F. Supp. 547

IVY MAR CO., INC., et al., Plaintiffs, v. C.R. SEASONS LTD., et al., Defendants.

No. 95 CV 0508 (FB).

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

October 2, 1995.

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Feinsilver Law Group, P.C. by David Feinsilver, Daniel V. Sollecito, New York City, for plaintiffs.

Congdon, Flaherty, O'Callaghan, Reid, Donlon, Travis & Fishlinger by William Fishlinger, Christine Gasser, Richard Mandaro, Rona L. Platt, Garden City, New York, for defendants C.R. Seasons Ltd, Seasonal Manufacturing Ltd, M.M., Seasonal Source Corp., Venice Associates, Inc., Richard R. Crandle, John Gaines, Howard Kahn, John S. Colocousis, Vito Badalamente, Neil Ferrara, Regina Santoro, Jerry L. Gonzalez, individually and d/b/a Sundance Marketing, Arthur Venezia, Paul Donato and Greg Dua, individually and d/b/a `Greg Dua Sales Company'.

Gibson, Dunn & Crutcher by Robert L. Weigel, Peter J. Beshar, New York City, for defendants Jetmax Ltd., Cheung Kam Cheung a/k/a Stephen Cheung and Lam Ming Hong a/k/a Tyrone Lam.

Law Offices of Fred M. Schwartz by Fred M. Schwartz, Smithtown, New York, for defendant Martin Mendick.

Moritt, Hock & Hamroff by Robert M. Tils, Hempstead, New York for defendants Griffin Sales Company, Inc. and Hoytt Griffin.

MEMORANDUM AND ORDER

BLOCK, District Judge:

By Order dated April 13, 1995, the Court referred this matter to Magistrate Judge Robert M. Levy for purposes of conducting hearings and submitting to this Court proposed findings of fact and recommendations regarding that portion of plaintiffs' motion for preliminary injunctive relief seeking to enjoin the employment of the individual defendants. See 28 U.S.C. § 636(b)(1)(B). After conducting the requisite hearing on April 20 and 21, 1995, Magistrate Judge Levy issued a Report and Recommendation ("R & R") on June 26, 1995 recommending that plaintiffs' motion for a preliminary injunction be denied, and on July 10, 1995 plaintiffs filed objections.

In accordance with Fed.R.Civ.P. 72(b), the Court has made a de novo determination upon the record of all portions of the R & R that plaintiffs have specifically objected to and accepts Magistrate Judge Levy's recommendation because, at the very least, the record fully supports his analysis and determination that plaintiffs have failed to sustain their burden of showing that there is a likelihood that plaintiffs will suffer irreparable harm if the preliminary injunction is not issued. (R & R at 28-38). Of particular significance, as pointed out at pages 29-32 of the R & R, plaintiffs' ten-month delay in seeking preliminary injunctive relief constitutes sufficient reason for denying plaintiffs' motion under the circumstances presented in this case. See Citibank, N.A. v. Citytrust, 756 F.2d 273 (2d Cir.1985); Lanvin Inc. v. Colonia, Inc., 739 F.Supp. 182 (S.D.N.Y. 1990); Century Time Ltd. v. Interchron Ltd., 729 F.Supp. 366 (S.D.N.Y.1990); The Comic Strip v. Fox Television Stations, Inc., 710 F.Supp. 976 (S.D.N.Y.1989); Gillette Co. v. Ed Pinaud, Inc., 178 F.Supp. 618 (S.D.N.Y. 1959) (cases cited by Magistrate Judge Levy in his R & R). This conclusion is reinforced by the Second Circuit's recent decision in Tough Traveler, Ltd. v. Outbound Prods., 60 F.3d 964 (2d Cir.1995), which was rendered on July 21, 1995, shortly after the R & R was issued.

In Tough Traveler, the district court granted plaintiff's motion for a preliminary injunction in an action brought for alleged trade dress infringement in violation of the Lanham Act. On appeal, the Second Circuit reversed because plaintiff delayed both bringing the action and moving for injunctive relief, notwithstanding the general rule that irreparable harm is presumed in trademark-infringement actions. Id. at 968 ("Plaintiff waited at least nine months to commence the present law suit. After commencing the action, plaintiff waited some four months longer ... before moving for a preliminary injunction."). In vacating the preliminary injunction, the Second Circuit stated:

Though such delay may not warrant the denial of ultimate relief, it may, standing alone, ... preclude the granting of preliminary injunctive relief ... because the failure to act sooner undercuts the sense of urgency that ordinarily accompanies a motion for preliminary relief and suggests that there is, in fact, no irreparable injury.... Although delay may not negate the presumption of irreparable harm if the delay was caused by the plaintiff's ignorance of the defendant's competing product or the plaintiff's making good faith efforts to investigate the alleged infringement, ..., if it is not so explainable, delay alone may justify denial of a preliminary injunction.

Id. (citations and quotations omitted).

Although the present case involves more than alleged trade dress violations, the Court finds this rationale persuasive with respect to plaintiff's ten-month delay. As noted by Magistrate Judge Levy, "plaintiffs concede that they did not initiate or participate in any settlement negotiations, and they do not contend that they used any part of the ten months before filing suit to conduct an investigation or inquiry into the facts of this case." (R & R at 32). Furthermore, the Court agrees with Magistrate Judge Levy that plaintiffs did not adequately support their contention that they delayed bringing this motion because they feared defendant Jetmax would not ship goods to its customers during the Christmas season. (R & R at 30-32). In any event, even if plaintiffs had not delayed bringing this motion, the Court agrees with Magistrate Judge Levy that plaintiffs have not established that they will be irreparably harmed if the injunction is not issued. (R & R at 32-38).

Accordingly, the Court accepts Magistrate Judge Levy's recommendation and DENIES plaintiffs' motion for a preliminary injunction.

SO ORDERED.

REPORT AND RECOMMENDATION

LEVY, United States Magistrate Judge:

By order dated April 13, 1995, the Honorable Frederic Block, United States District Judge, referred this matter to the undersigned for the purpose of conducting hearings and submitting proposed findings of fact and recommendations regarding that portion of plaintiff's motion for temporary injunctive relief seeking to enjoin the employment of the individual defendants. A preliminary injunction hearing was held before this court on April 20 and 21, 1995, and the parties' proposed findings of fact and conclusions of law were filed with the court on May 22, 1995. For the reasons set forth below, the undersigned respectfully recommends that plaintiffs' motion for a preliminary injunction enjoining the employment of the individual defendants be denied.

The following delineates the court's findings of fact and conclusions of law as required under Rule 65 of the Federal Rules of Civil Procedure.

BACKGROUND

The Parties

Plaintiff Lib Com Ltd. ("Lib Com") is a Delaware corporation and is the corporate parent of plaintiffs Ivy Mar Company, Inc. ("Ivy Mar") and Liberty Bell Christmas, Inc. ("Liberty Bell"), both also Delaware corporations. Lib Com, Ivy Mar and Liberty Bell all have their principal places of business in Central Islip, New York. Plaintiff Liberty Bell Limited, Taiwan ("LBT"), a Taiwan corporation with its principal place of business in Taiwan, is affiliated with Lib Com, Ivy Mar and Liberty Bell. All of the plaintiff corporations are in the business of importing and distributing at wholesale seasonal or general merchandise to major retailers throughout the United States.

The plaintiff companies were founded by the Margolin family, which owned and managed the companies until July 1990, when an investor named Ashok Khatori ("Khatori") purchased an eighty percent interest in each of the plaintiff companies. Despite the sale of a controlling interest, the founder's son, Joel Margolin ("Margolin"), continues to act as President and Chief Executive Officer for the plaintiffs.

Defendant Richard R. Crandle ("Crandle") was hired as a salesman for plaintiffs in 1975. Crandle left and returned to his employment with the plaintiff companies several times, but worked for plaintiffs continuously from November 1982 until April 1994. In July 1990, when Khatori obtained a controlling interest in the plaintiff companies, Crandle was given the title of Executive Vice President. In addition, Crandle received a package of annual income increases and bonuses which represented almost a four hundred percent raise over his prior salary. In return, Crandle was required to sign a six-year employment contract and a non-competition agreement, pursuant to which he promised that from June 1, 1990 until June 30, 1996, other than working on behalf of the plaintiff companies, he would not:

engage in the Business of importing or selling various items, including but not limited to Christmas merchandise and other seasonal goods, directly or indirectly, in the United States or in any foreign country in which Lib Com or any of its subsidiaries, affiliates, or principals currently markets products of the Business or has made plans to market such products....

If Crandle completed the six-year term of the contract, he was to receive one percent of the stock of the plaintiff companies, plus an additional $25,000 cash bonus.

Crandle terminated his employment with the plaintiff companies on or about March 31, 1994. Thereafter, in early April 1994, he became the Chief Executive Officer of defendant C.R. Seasons, Ltd. ("C.R. Seasons"). C.R. Seasons, a Delaware corporation founded in April 1994, has its principal place of business in Farmingdale, New York. Like the plaintiff companies, C.R. Seasons is engaged in the importation, sale and distribution of merchandise to retail merchant customers in the United States. It is affiliated with defendants Seasonal Manufacturing Ltd. ("Seasonal Manufacturing") and JetMax Ltd. ("JetMax"), both Hong Kong corporations having their principal places of business in...