Nicholas Laboratories Ltd. v. Almay, Inc., 948
| Decision Date | 07 May 1990 |
| Docket Number | No. 948,D,948 |
| Citation | 900 F.2d 19 |
| Parties | NICHOLAS LABORATORIES LIMITED, Appellee, v. ALMAY, INC., Appellant. ocket 89-9179. |
| Court | U.S. Court of Appeals — Second Circuit |
Richard A. Williamson, New York City (Robert Polifka, Thomas A. Egan, Flemming, Zulack & Williamson, New York City, of counsel), for appellant.
Frederick Newman (Paula G. deDominici, Blodnick, Abramowitz, Newman, Schultz & Bass, Lake Success, N.Y.), for appellee.
Before OAKES, Chief Judge, FEINBERG and WALKER, Circuit Judges.
Almay, Inc. ("Almay"), appeals a November 27, 1989, judgment of the United States District Court for the Southern District of New York, Peter K. Leisure, Judge, granting summary judgment to Nicholas Laboratories Limited ("Nicholas Labs") in its action seeking a declaration that Almay may not terminate its licensing agreement with Nicholas Labs except upon Nicholas Labs' default, insolvency, or consent. The judgment was entered in accordance with an opinion dated October 27, 1989, and published at 723 F.Supp. 1015 (S.D.N.Y.1989). We affirm.
Pursuant to an agreement dated July 1, 1975, Nicholas Labs obtained a license to use Almay's trademark and technical know-how in connection with the distribution of Nicholas Labs' products in the United Kingdom, Ireland, Malta, Finland, the Isle of Man, the Channel Islands, and Gibraltar. By letter dated December 20, 1988, Almay notified Nicholas Labs that it intended to terminate the agreement as of June 30, 1990. Arguing that Almay had no such right to terminate, Nicholas Labs brought this action for a declaratory judgment.
Three paragraphs in the licensing agreement address termination. Paragraph 7 of the agreement allows Almay to terminate upon a default by Nicholas Labs, provided that Almay furnishes sixty days' notice. Paragraph 8 allows termination if Nicholas Labs becomes insolvent and expressly provides that no notice by Almay is required for termination upon insolvency. Almay contends that the third of these paragraphs, paragraph 9, provides authority for its right to terminate:
9. Term of Agreement
This Agreement shall take effect as of July 1, 1975 and shall continue in effect until June 30, 1980, and thereafter for successive periods of five (5) Fiscal Years, subject to Licensor's right to terminate in accordance with the provisions of paragraph 7 above [providing for termination upon default], termination in accordance with the provisions of paragraph 8 above [providing for termination upon insolvency], termination by mutual agreement of the parties hereto or termination by Licensee at any time upon at least 12 months prior notice to Licensor.
Almay's interpretation of the language in paragraph 9 stating that "[t]his Agreement shall take effect as of July 1, 1975 and shall continue in effect until June 30, 1980, and thereafter for successive periods of five (5) Fiscal Years" is that the agreement continues until June 30, 1980, and then may be renewed or terminated at will by the parties every five years. Under its interpretation, Almay would be entitled to terminate at will as of June 30, 1990, the conclusion of the most recent five-year period.
Nicholas Labs' position is that paragraph 9 limits termination to the four grounds specifically enumerated in the paragraph: default, insolvency, mutual agreement, and unilateral termination by the licensee Nicholas Labs upon twelve months' prior notice. Nicholas Labs contends that the language in paragraph 9 spelling out five-year terms starting on June 30, 1980, modifies paragraph 5(c) of the agreement, which structures the calculation of royalties into five-year terms, but does not identify the precise starting date of these terms:
5. Royalties
....
(c) During each Fiscal Year of the initial five year term hereof, Licensee shall pay to Licensor as royalties in accordance with the provisions of the preceding paragraphs (a) and (b) [] a minimum aggregate royalty of $75,000. In each subsequent five (5) Fiscal Year period Licensee shall during each Fiscal Year thereof pay to Licensor as royalties in accordance with the provisions of the preceding paragraphs (a) and (b) a minimum aggregate royalty equal to the greater of $75,000 or the annual average of the total amount of royalties paid in respect to Total Net Sales of all Products other than Licensee Products during the five (5) Fiscal Year period immediately preceding the first of those years.
The agreement provides that it is governed by New York law. Under New York law, we first look to the written agreement to discern the parties' intent and limit our inquiry to the words of the agreement itself so long as the agreement sets forth the parties' intent clearly and unambiguously. See International Klafter Co. v. Continental Casualty Co., 869 F.2d 96, 99 (2d Cir.1989) (citing Slatt v. Slatt, 64 N.Y.2d 966, 967, 477 N.E.2d 1099, 1100, 488 N.Y.S.2d 645, 646 (1985)). Because the interpretation of the words of a contract is generally a question of law, we review the district court's determination de novo. See Network Publishing Corp. v. Shapiro, 895 F.2d 97 (2d Cir.1990) (citing Eddy v....
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