Ja Apparel Corp. v. Abboud
| Decision Date | 12 January 2010 |
| Docket Number | No. 07 Civ. 7787(THK),07 Civ. 7787(THK) |
| Citation | 682 F.Supp.2d 294 |
| Parties | JA APPAREL CORP., Plaintiff, v. Joseph ABBOUD, Houndstooth Corp., and Herringbone Creative Services, Inc., Defendants. and Joseph Abboud, Houndstooth Corp., and Herringbone Creative Services, Inc., Counterclaim-Plaintiffs, v. JA Apparel Corp. and Martin Staff, Counterclaim-Defendants |
| Court | U.S. District Court — Southern District of New York |
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Phillip A. Geraci, Kaye Scholer, LLP, New York, NY, for Plaintiff.
Thomas A. Smart, Kaye Scholer, LLP, New York, NY, for Plaintiff and Counter Defendants.
Eva H. Posman, Eva H. Posman, Esq., New York, NY, for Defendants.
Louis Sherman Ederer, John Maltbie, Arnold & Porter, LLP, New York, NY, for Defendants and Counter Claimants.
In this action, Plaintiff JA Apparel Corp. ("Plaintiff or "JA Apparel") sues Defendants Joseph Abboud ("Abboud"), Houndstooth Corp. ("Houndstooth"), and Herringbone Creative Services, Inc. ("Herringbone") (at times, collectively "Abboud") for (1) breach of contract, (2) trademark infringement, false designation of origin, unfair competition, trademark dilution, false and deceptive trade practices, and (3) a declaratory judgment regarding the nature of its rights, stemming from a June 16, 2000 Purchase and Sale Agreement (the "Agreement"), and a related July 13, 2000 Side Letter Agreement (the "Side Letter"), between, on the one hand, JA Apparel, and on the other, Abboud and Houndstooth.
Defendants assert counterclaims against JA Apparel and one of its principals, Martin Staff ("Staff'), for false endorsement, false advertising, violation of New York Civil Rights and General Business Laws, and common law unfair competition, stemming from activities in which JA Apparel and Staff allegedly engaged subsequent to the expiration of the Side Letter.
The parties consented to trial before this Court, pursuant to 28 U.S.C. § 636(c) and Fed.R.Civ.P. 73. Following a bench trial, the Court issued a Memorandum Opinion and Order, concluding that the parties' Agreement clearly included the sale to JA Apparel of all of Joseph Abboud's trademarks, as well as his name for all commercial purposes. The Court, therefore, granted Plaintiff injunctive relief and dismissed all of Abboud's counterclaims. See JA Apparel Corp. v. Abboud, 591 F.Supp.2d 306 (S.D.N.Y.2008) ("Abboud I"). On appeal, the Second Circuit concluded that the language of the Agreement was ambiguous, and vacated this Court's decision and remanded for further proceedings. See J A Apparel Corp. v. Abboud, 568 F.3d 390, 403 (2d Cir.2009).
Following remand, the parties submitted hefty briefs, containing their proposed findings of fact and conclusions of law with respect to those issues raised by the Second Circuit, namely, any extrinsic evidence of the parties' intent regarding the sale of Abboud's name, and whether Abboud's proposed advertisements for his new clothing line, containing his name, constitute trademark fair use. ; Defendants and Counterclaim-Plaintiffs' Second Supplemental Findings of Fact, dated Nov. 6, 2009 ( ); Defendants and Counterclaim-Plaintiffs' Second Supplemental Proposed Rulings of Law, dated Nov. 6, 2009 ( ); Plaintiff and Counterclaim-Defendants' Reply Brief on Remand, dated Nov. 20, 2009 ("Pl.'s Post-Remand Reply Mem."); Defendants and Counterclaim-Plaintiffs' Reply Memorandum of Law, dated Nov. 20, 2009 ( ).) What follows are the Court's findings of fact and conclusions of law.
The facts underlying this action are set out in more complete detail in the Court's initial Opinion. See Abboud I, 591 F.Supp.2d at 311-15. The Court assumes the reader's familiarity with those facts, and, in this Opinion, includes only relevant background information, procedural history, and facts relating to any extrinsic evidence of the parties' intent and Abboud's proposed use of his name in promoting his new clothing line.1
At the heart of this litigation is the interpretation of the Purchase and Sale Agreement, executed on June 16, 2000, by and between JA Apparel, Abboud and Houndstooth. In exchange for a payment of $65.5 million, which was to be "allocated 100% to Abboud," Abboud agreed to "sell, convey, transfer, assign and deliver" to JA Apparel "all of [his] right, title and interest in and to" the following:
(A) The names, trademarks, trade names, service marks, logos, insignias and designations identified on Schedule 1.1(a)(A), and all trademark registrations and applications therefor, and the goodwill related thereto (collectively, the "Trademarks")... and all other Intellectual Property (as hereinafter defined).
(B) All licenses to use the Trademarks granted by Houndstooth or Abboud... (collectively, the "License Agreements").
(C) All rights to use and apply for the registration of new trade names, trademarks, service marks, logos, insignias and designations containing the words "Joseph Abboud," "designed by Joseph Abboud," "by Joseph Abboud," "JOE" or "JA," or anything similar to or derivative thereof, either alone or in conjunction with other words or symbols (collectively, the "New Trademarks"), for any and all products and services.
(D) All books, financial records, invoices, and other documents, records and data files relating primarily to the Trademarks or the License Agreements.
(E) The goodwill of or pertaining to the Trademarks. (The items referred to in clauses (A) through (E) of this Section 1.1(a) are collectively referred to as the "Assets").
(PX-1 ¶ 1.1(a)(A)-(E).)2 The Schedule attached as an exhibit to the Agreement is labeled "Trademark Report by Mark," and contains the name Joseph Abboud.
The Agreement also has an integration clause, which states:
9.9. Entire Agreement This Agreement, including the Exhibits and Schedules hereto and the documents, certificates and instruments referred to herein, embody [sic] the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions.
(Id. ¶ 9.9.)
On July 13, 2000, the same parties entered into the Side Letter, pursuant to which Abboud agreed to serve as "Chairman Emeritus" of JA Apparel, and, for a period of five years, provide JA Apparel with, among other things, consulting services relating to fashion design and brand promotion of products sold under the Abboud marks. The Side Agreement, therefore, was to expire on July 13, 2005, but the terms provided that upon expiration, Abboud would not compete with JA Apparel for a period of two years—until July 13, 2007 (the "Restricted Period").
Not long after the execution of the Agreement and the Side Letter, the par-ties' relationship soured. They fought over Abboud's role in the creative process at JA Apparel, and Abboud filed and later dismissed a lawsuit against JA Apparel. The parties temporarily resolved their differences in the summer of 2004 by way of a June 29, 2004 Letter Agreement, pursuant to which Abboud was given new responsibilities at JA Apparel. The following year, in the spring of 2005, Abboud informed JA Apparel that he would no longer continue in his position with JA Apparel. The Personal Services period terminated on July 13, 2005, thereby triggering the Restricted Period that was to run until July 13, 2007.
In early 2007, Abboud began plans to start his new "jaz" clothing line, which would compete in certain respects with the clothing and accessories sold by JA Apparel under the Joseph Abboud trademark.3But it was not until August 2007 that JA Apparel first learned of Abboud's intentions to use his name in connection with the new venture through an article published in DNR, a leading magazine of the men's fashion industry. (See PX-8.) The DNR article initially stated that "Abboud, the person, is prohibited from using the Joseph Abboud name on any product or marketing materials." (PX-8.) The article's author, however, notified JA Apparel that Defendants had requested a correction (see PX-9), and DNR later ran a "Clarification," which stated that Abboud is "allowed to use his name on marketing and advertising materials for Jaz." (PX-10.) In August 2007, the Wall Street Journal ran a similar article announcing the new "jaz" line, and which reported that Abboud "plans to promote his new label with the tagline 'a new composition by designer Joseph Abboud.' " (PX-11.)
Subsequently, Abboud created several "mock-ups" of proposed ads for the new "jaz" clothing line. (See, e.g., PX-42, PX-43, DX-187, and DX-188.) Each of these ads includes the words "Joseph Abboud" in addition to Abboud's new trademark, "jaz." While the ads are similar in many respects, the font, size, and placement of the words differ in each of the ads, and are discussed in greater detail in this Opinion's fair use analysis.
JA Apparel maintains that while Abboud is free to compete in the menswear market, he sold all rights to use his name in connection with goods and services, and that his proposed uses of his name in connection with the "jaz" line would violate the Agreement, infringe JA Apparel's trademarks, and constitute unfair competition.
Defendants, conversely, maintain that Abboud merely sold the use of his name as a trademark and did not sell the exclusive right to use his name for all commercial purposes. Thus, they argue, the proposed use of his name in advertising constitutes...
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