Opals On Ice Lingerie v. Body Lines Inc.

Decision Date24 February 2003
Docket NumberDocket No. 02-7392.
PartiesOPALS ON ICE LINGERIE, Designs by Bernadette, Inc., Plaintiff-Counter-Defendant-Appellant, v. BODY LINES INC., d/b/a Curves, Defendant-Counter-Claimant-Appellee.
CourtU.S. Court of Appeals — Second Circuit

David P. Lennon, White Plains, N.Y. (Lennon & Klein, White Plains, NY, of counsel), for Appellant.

Michael A. Haskel, Garden City, NY, for Appellee.

Before: MESKILL, NEWMAN and POOLER, Circuit Judges.

MESKILL, Circuit Judge.

Plaintiff-appellant Opals on Ice Lingerie, Designs by Bernadette, Inc. (Opals) appeals from an order of the United States District Court for the Eastern District of New York, Glasser, J., granting summary judgment in favor of defendant-appellee Bodylines, Inc. (Bodylines) on Opals' action seeking declaratory judgment and an order directing Bodylines to submit to arbitration. Diversity jurisdiction is proper pursuant to 28 U.S.C. § 1332 because the appellant is a New York corporation with its principal place of business in New York, and the appellee is a Nevada corporation with its principal place of business in California, and the amount in controversy is more than $75,000. We have appellate jurisdiction pursuant to 28 U.S.C. § 1291 as this is an appeal from a final judgment of the district court. See Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000).

BACKGROUND

Opals is a New York corporation that designs, manufactures and sells women's lingerie. The president of Opals is, and was at all relevant times, Bernadette DiVito (DiVito). Bodylines is a Nevada corporation that was in the business of manufacturing and selling silicone breast enhancement inserts for women's undergarments. The president of Bodylines is, and was at all relevant times, Julie Sautter (Sautter).

In September 1997, representatives of Opals and Bodylines were introduced to each other by Irwin Karnick, the president of a catalog production firm that had done work for both companies. The parties discussed the possibility of entering into a joint venture making women's undergarments that would be specially designed to accommodate the silicone inserts already being marketed by Bodylines. Bodylines requested that Opals send it samples of Opals' products; Opals refused to send samples until the parties entered into a formal agreement.

In October 1997, Opals faxed a Non-Circumvention Agreement (the "10/97 Agreement") to Bodylines which specified, inter alia, that Opals would continue to own all of the intellectual property rights in its products. The 10/97 Agreement was signed by DiVito on behalf of Opals. The Agreement included the following provision: "Any dispute arising under or relating to this Agreement shall be submitted to binding arbitration in the State of New York pursuant to the rules for commercial arbitration of the American Arbitration Association."

On November 17, 1997, Bodylines faxed the 10/97 Agreement back to Opals, signed by Sautter on behalf of Bodylines. Opals contends that it received the 10/97 Agreement with Sautter's signature on it, and no additional writing or addenda. However, Bodylines contends that it added the following sentence under the signature line when Sautter signed the 10/97 Agreement: "This Agreement is subject to the attached addendum." This addendum (the "11/97 Addendum") made various changes to the 10/97 Agreement, including replacing the paragraph regarding arbitration in New York with a paragraph containing the following language:

This Agreement shall be deemed to [illegible] California and any and all performance hereunder of [sic] breach thereof shall be interpreted and construed pursuant to the laws of the State of California without regard to conflict of laws and principles. If both parties fail to agree to arbitrate or mediate any disputes, the parties hereby consent to the jurisdiction of the courts of the State of California.

The 11/97 Addendum was signed by Sautter on behalf of Bodylines; it was not signed by Opals.

Later in November 1997, Irwin Karnick, who had first introduced the parties, requested that another Non-Circumvention Agreement (the "Karnick Agreement") be drafted which confirmed a "finder's fee" for Karnick and provided for Bodylines to pay Opals $5,000 towards "development costs." The Karnick Agreement, which is undated, contained the language that had been included in the 10/97 Agreement regarding arbitration in New York. The Karnick Agreement was signed by DiVito on behalf of Opals. Opals contends that it faxed the Karnick Agreement to Bodylines, and that Bodylines faxed the Karnick Agreement back, signed by Sautter.

Bodylines contends that it never received the Karnick Agreement, and that neither Sautter nor any agent of Bodylines signed the Karnick Agreement. When Opals filed its complaint in district court, it attached a copy of the Karnick Agreement only, and the complaint relied on the Karnick Agreement entirely, not mentioning any other alleged agreements.

Sautter's signature appears on the copy of the Karnick Agreement that is in the record. Sautter's signature also appears on the copy of the Karnick Agreement that was attached to Opals' complaint. However, Bodylines claims that the signature was "cut and pasted" onto the Karnick Agreement from another document. Each party retained its own forensic expert to review the document, and both experts agreed that the Sautter signature on the Karnick Agreement attached to Opals' complaint was indeed "cut and pasted."1 The parties now do not dispute that the Karnick Agreement does not bear an original signature by Sautter or by anyone else on behalf of Bodylines. There is no evidence in the record that would indicate who cut and pasted Sautter's signature onto the Karnick Agreement, or when it was done.

In or about December 1997, Sautter and DiVito had a meeting at which Opals showed Bodylines certain samples of its products. It is unclear whether these samples actually were given to Bodylines at that time, or whether Sautter simply viewed them at the meeting. Additional samples were sent to Bodylines at some time in 1998.

On December 10, 1997, Bodylines faxed to Opals a document entitled "Addendum to Non-Circumvention Agreement" (the "12/97 Addendum") which was signed by Sautter on behalf of Bodylines. The 12/97 Addendum contains the following language:

This Agreement shall be deemed to have been made in Belmont, California and any and all performance hereunder of [sic] breach thereof shall be interpreted and construed pursuant to the laws of the State of California without regard to conflict of laws and principles. Any disputes arising out of this Agreement shall be subject to arbitration by the American Arbitration Association in the State of California in the Northern District. Nothing shall preclude either party from seeking injunctive relief from a court.

At the same time, Bodylines also faxed a Confidentiality Agreement to Opals. Opals did not sign either the 12/97 Addendum or the Confidentiality Agreement.

Bodylines and Opals never consummated a working relationship. Opals contends that Bodylines appropriated Opals' lingerie designs and manufactured its own infringing products, based on the samples it received from Opals. On May 18, 1999, Opals commenced an arbitration proceeding in New York alleging infringement of Opals' designs and unfair trade practices. In June 1999, counsel for Bodylines asserted that there was no valid agreement to arbitrate. In response to that assertion by Bodylines, Opals commenced the instant litigation in the Eastern District of New York.

The complaint, filed with the district court on July 2, 1999, has one attachment: the Karnick Agreement. The complaint states that Opals seeks a declaration "that the non-circumvention Agreement is binding and enforceable as against the parties," a declaration "that all claims between the parties hereto relating to the Agreement must be arbitrated in the State of New York," and an injunction barring Bodylines "from taking any steps to interfere with the administration of the American Abritration Association relating to the parties' dispute." There is no question that the "Agreement" referred to in the complaint is the Karnick Agreement.

While this litigation was pending before the district court, both Bodylines and Opals participated in proceedings before the arbitration panel in New York, including conferences and discovery. However, Bodylines argued throughout the process that the arbitration clause was not valid, that the arbitration panel did not have jurisdiction over the dispute, and that Bodylines was not required to participate in arbitration. On February 1, 2000, seven days before the arbitration hearing was scheduled to begin, Bodylines filed suit in a California court seeking a temporary restraining order and preliminary injunction preventing the arbitration from going forward, as well as a declaration that the Karnick Agreement was void. The court in California denied Bodylines' motion for a TRO/preliminary injunction on February 7, 2000, and the arbitration hearing proceeded as scheduled on February 8, 9 and 10, 2000. The hearing was not completed in those three days, and was scheduled to continue at a later date.

At the outset of the arbitration hearing, the arbitrators made a provisional finding that the panel had jurisdiction to hear the matter, and ordered the hearing to proceed. The arbitrators indicated that they believed that the facts relating to jurisdiction — that is, to whether there was an enforceable contract to arbitrate — were inextricably connected with the proof required on other issues. Accordingly, the arbitrators determined that it made sense to proceed with the hearing and to rule definitively on the jurisdictional issue along with the other issues at the end of the proceedings.

On June 21, 2000, after the...

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