Rgi Brands LLC v. Brisset-Aurige

• Decision Date: 18 April 2013
• Docket Number: 12 Civ. 1369 (LGS) (AJP)
• Citation: RGI Brands LLC v. Cognac Brisset-Aurige, S.A.R.L., 12 Civ. 1369 (LGS) (AJP) (S.D. N.Y. Apr 18, 2013)
• Parties: RGI BRANDS LLC, Plaintiff, v. COGNAC BRISSET-AURIGE, S.A.R.L., Defendant.
• Court: U.S. District Court — Southern District of New York

RGI BRANDS LLC, Plaintiff, v. COGNAC BRISSET-AURIGE, S.A.R.L., Defendant.

12 Civ. 1369 (LGS) (AJP)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

April 18, 2013

REPORT AND RECOMMENDATION

ANDREW J. PECK, United States Magistrate Judge:

To the Honorable Lorna G. Schofield, United States District Judge:

Plaintiff RGI Brands ("RGI") brought this action against defendant Cognac Brisset-Aurige ("CBA") seeking damages for, inter alia, breach of the parties' distribution agreement. (Dkt. No. 1: Compl.) CBA counterclaimed that RGI unlawfully registered and used CBA's trademarks in the United States. (Dkt. No. 14: Ans. & Counterclaims.) Presently before the Court is RGI's motion for a default judgment and damages. (Dkt. No. 32: Notice of Motion.)

For the reasons set forth below, RGI's motion should be GRANTED as modified herein, judgment should be entered for RGI against CBA on default for damages of $57,940 plus interest and costs, and CBA's counterclaims should be dismissed with prejudice.

BACKGROUND

Procedural History

On April 30, 2012, Judge Jones referred this matter to me for general pretrial purposes. (Dkt. No. 3: 4/30/12 Referral Order.) On January 29, 2013, I granted CBA's counsel's motion to withdraw on consent, and issued the following Order:

1. Counsel's motion to withdraw (Dkt. No. 24), on consent of the defendant, is GRANTED.

. . . .

3. A corporation cannot appear pro se but must be represented by counsel.

4. Plaintiff is to move for a default and submit proof of damages (or for other relief) for inquest . . . .

(Dkt. No. 27: 1/29/13 Order; see Dkt. No. 29: 2/11/13 Memo Endorsed Order.)

On February 20, 2013, RGI moved for a default judgment and filed inquest papers. (Dkt. No. 32: Notice of Motion; Dkt. No. 33: Paltrowitz Aff.; Dkt. No. 34: Rapp Aff.; Dkt. No. 35: RGI Br.) On February 25, 2013, CBA submitted a letter to the Court with attachments responding to RGI's inquest submissions. (Dkt. No. 37: 2/25/13 Letter.) On March 4, 2013, I endorsed CBA's submission as follows: "Defendant cannot appear except through counsel. If you [CBA] wish to contest the inquest, you must be represented by an attorney." (Dkt. No. 38: 3/4/13 Order.) No further submissions were received. On March 11, 2013, this matter was reassigned to Judge Schofield. (Dkt. No. 39: Notice of Case Reassignment.)

The Complaint¹

RGI seeks monetary damages arising from, inter alia, CBA's alleged breaches of the parties' exclusive distribution agreement, including, damages for "lost sales" of "at least . . . $250,000." (Dkt. No. 1: Compl. ¶¶ 75-78, 83-85; see also Dkt. No. 33: Paltrowitz Aff. ¶ 12.)

The Contract

The parties' relationship is governed by their "Exclusive Distribution Agreement" and "Supplemental Agreement," both entered into on January 14, 2008 (collectively, the "Contract"). (Dkt. No. 1: Compl. Ex. A: Distrib. Contract; Compl. Ex. B: Contract Supp.) The Contract appoints RGI as "the sole and exclusive distributor" of bottles of specific vodka brands, and gives RGI "the exclusive rights to market, sell, promote, distribute and/or service the Products to third parties located or headquartered in" the designated area, including the United States. (Compl. Ex. A: Distrib. Contract ¶ 1.) Under the Contract, RGI "agree[d] to actively promote and solicit sales" of the products, and CBA agreed to "make [its] best efforts to provide additional technical and promotional assistance and support as is reasonably required by [RGI], including product samples, English language technical information about Products, and other materials and information as may be reasonably required by [RGI] from time to time." (Distrib. Contract ¶¶ 1, 2(a).)

The Contract requires CBA to "maintain at its expense sufficient inventory to maintain reasonable delivery times" to the United States, but also provides that RGI "shall make its best efforts to regularly inform [CBA] of its expected supply needs." (Distrib. Contract ¶ 2(c).) CBA warranted that "all Products are free of any defects," that CBA will address any defective product claims "fairly and promptly in good faith," and that it "will replace at its cost all defective Products within thirty (30) days" of the claim. (Distrib. Contract ¶¶ 4(a)-(b).) CBA "agree[d] to make [a] good-faith effort to acquire the appropriate quality of raw materials at the lowest price" to avoid upward price fluctuations from the base prices set forth in the Contract. (Distrib. Contract ¶ 3(a).)

The Contract sets forth specific pricing and payment parameters:

(a) Price. The purchase price to [RGI] for a 750ml bottle of "Dragon Bleu Vodka" shall be €3.70, as of December 7, 2007. This price does not include [CBA's] profit, which will equal the greater of €1 or $1.50 USD. Therefore, the total price to [RGI] for a 750ml bottle of "Dragon Bleu Vodka" shall equal the greater of €4.70 or the sum of €3.70 plus $1.50 USD. Profit payment terms may be changed from time to time as required by [CBA] and may be modified by subsequent agreement. The price of such bottle will fluctuate, up or down, depending on the wholesale price of raw materials used to manufacture said Products. [CBA] agrees to make good-faith effort to acquire the appropriate quality of raw materials at the lowest price.

(b) Payment. [RGI] shall remit payment to [CBA] for the products as follows. (a) 50% of total payment amount shall be due at the time the order is placed; (b) 30% of total payment amount shall be due at the time the products are ready and [CBA] ships the products; and (c) 20% of total payment amount shall be due 30 days after the products are delivered to [RGI's] facility in the Territory. All payments will be by wire transfer to [CBA's] designated account.

(Distrib. Contract ¶¶ 3(a)-(b); see also Compl. Ex. B: Contract Supp. ¶ 2.)

Additional terms in the Supplemental Agreement provide, inter alia, as follows:

1. [RGI] agrees to advance payment in the amount of €85,000 to [CBA]. Such payment shall include: (a) €63,000 paid for 50,000 glass bottles, as well as corks, caps, and necessary boxes for all 50,000 bottles, and (b) €22,000 paid for the decoration and bottling of 20,000 bottles.

. . . .

3. For the first order of 20,000 bottles from [CBA], 50% of the total payment amount, which is due at the time the order is placed, shall be deducted from the advance payment of €85,000. Subsequently, for orders of the following 30,000 bottles only, 50% of the total payment amount, which is due at the time the order is placed, shall be calculated as follows: (a) for each order of 10,000 bottles, a sum of €12,500 will be deducted from the advance payment of €85,000; (b) the remaining €11,000 shall be paid by [RGI] at the time the order is placed.

(Contract Supp. ¶¶ 1, 3.)

The Contract has an initial seven-year term, but provides that at any time prior to its expiration, either party may terminate it "for good cause," such as if "the other party fails to remedy a material breach." (Distrib. Contract ¶¶ 5(a)-(b).)

The Contract is governed by New York law, and further provides that "each party hereby consents to service of process and personal jurisdiction" in New York. (Distrib. Contract ¶ 10.)

Performance Under the Contract

RGI placed its first order for products in May 2008; CBA shipped that product in Container 1 on or about August 5, 2008. (Dkt. No. 1: Compl. ¶¶ 19-20.) Upon receipt and inspection of the shipment, RGI discovered a portion of the products in Container 1 was defective, and notified CBA on or about August 29, 2008. (Compl. ¶¶ 21-23.) Pursuant to CBA's instructions, RGI shipped the non-duty-paid defective products back to France, and retained the duty-paid defective products in the United States where CBA would arrange for repair or replacement. (Compl. ¶¶ 24-26.) CBA never repaired or replaced the duty-paid defective products. (Compl. ¶ 27.)²

In August 2010, RGI placed its fifth and sixth orders for products, for shipment in Containers 5 and 6. (Compl. ¶¶ 28, 34-35.) RGI's Container 5 order, which was scheduled to ship in time for the 2010 holiday season, included an order for 1.75 liter bottles (the "Futura Bottles"). (Compl. ¶¶ 29-30, 42.) RGI paid the first 50% installment for Container 5 in August 2010, and the first 50% installment for Container 6 in September 2010. (Compl. ¶¶ 34-35.) After accepting thefirst installments, CBA informed RGI that the orders would not be filled unless RGI paid the second 30% installment on Container 5—which, under the Contract's payment terms, was not due until the products were ready for shipment (Distrib. Contract ¶ 3(b))—in order to cover the costs of the raw materials needed to manufacture the products, including the Futura Bottles. (Compl. ¶¶ 30-32, 36-38, 40.) Because RGI had already accepted third-party orders that it would not be able to fill without the products in Containers 5 and 6, RGI acquiesced to CBA's demand and paid the second 30% installment on Container 5 in October 2010. (Compl. ¶¶ 33, 37, 39, 41.)³

CBA failed to ship Container 5 in time for the 2010 holiday season as agreed; RGI received Container 5 on or about January 15, 2011. (Compl. ¶¶ 42-43.) At the United States arrival port, it was determined that the weight listed on Container 5's bill of lading exceeded the permissible weight for containers being transported on United States highways. (Compl. ¶¶ 52-53.) Container 5 had to be broken down into two different containers, causing RGI to incur further delays and expenses that CBA refused to reimburse. (Compl. ¶ 54.)

Upon receipt and inspection of Container 5, RGI determined that "some or all" of the products were defective, and so informed CBA on or about April 12, 2011. (Compl. ¶¶ 56-58.) CBA has not repaired or replaced the defective products in Container 5. (Compl. ¶¶ 59-60.)

CBA attempted to impose a unilateral price increase for the products to be shipped in Container 6, and demanded the second 30% installment on Container 6 before it would manufacture the products. (Compl. ¶¶ 44, 63.) RGI...