Ross-Simons v. Baccarat, Inc., C.A. No. 96-062L (D. R.I. 9/__/1998), C.A. No. 96-062L.
| Decision Date | 01 September 1998 |
| Docket Number | C.A. No. 96-062L. |
| Parties | ROSS-SIMONS OF WARWICK, INC., ROSS-SIMONS, INC., ROSS-SIMONS OF BARRINGTON, INC., ROSS-SIMONS OF ATLANTA, L.L.C., and ROSS-SIMONS OF NORTH CAROLINA, L.L.C., Plaintiffs v. BACCARAT, INC., Defendant. |
| Court | U.S. District Court — District of Rhode Island |
Plaintiffs ("Ross-Simons") seek damages for alleged breach of contract and related claims arising out of a 1992 agreement. Two motions by defendant ("Baccarat") are now before the Court: a motion for summary judgment as to all counts of plaintiffs' Amended Complaint and a motion to dismiss, or in the alternative, to strike plaintiffs' claims for punitive damages and Count VI of the Amended Complaint. For the reasons stated below, defendant's motion for summary judgment is denied, defendant's motion to dismiss plaintiffs' claims for punitive damages is granted in part, and defendant's motion to dismiss Count VI of the Amended Complaint is granted.
Plaintiffs are retailers of jewelry, tableware, giftware, crystal, and similar items with stores in Rhode Island, North Carolina, and Georgia. Catalog and telemarking sales, however, account for approximately eighty-five percent of Ross-Simons' total sales, with approximately 45 million catalogs distributed annually. The catalog and telemarketing sales are coordinated through a distribution center in Cranston, Rhode Island.
Ross-Simons is a substantial national retailer of items such as china and crystal, ranking among the national leaders in sales volume for these products and generating $150 million annually in total sales from all operations. Nearly all of Ross-Simons' sales are at prices below suggested retail prices, with discounts often reaching fifty percent. An important aspect of Ross-Simons' sales strategy is the development of a large bridal registry actively promoted by the firm. Each year the program attracts approximately 15,000 new registrants. This business is important to Ross-Simons because each new registration is likely to result in multiple purchases on behalf of the registered couple.
Defendant is the United States subsidiary of Companie des Cristalleries de Baccarat and the exclusive United States distributor of the world-renowned French lead crystal produced by Compagnie des Cristalleries de Baccarat. Prior to 1992, Baccarat refused to sell crystal to Ross-Simons, asserting the philosophy that luxury items such as Baccarat crystal are not appropriate for discounting. Furthermore, when Baccarat became the exclusive distributor of Haviland Limoges china in 1991, it terminated Ross-Simons' status as an authorized dealer of the china.
In January 1992, Ross-Simons filed a civil action against Baccarat in the United States District Court for the District of Rhode Island alleging violations of federal and state antitrust statutes. That case was assigned to this writer. In its antitrust suit, Ross-Simons alleged that Baccarat had improperly refused to deal with Ross-Simons because Baccarat disapproved of Ross-Simons' discounting and catalog sales practices.
Prior to a hearing of the antitrust suit on its merits, the parties settled their differences. On November 24, 1992, they executed a written agreement, labeled "Agreement of Compromise and Settlement" ("1992 Agreement"), intended to resolve the conflict underlying the antitrust suit. This Agreement was never presented to the Court for approval or for inclusion in a final judgment.
According to its own terms, the 1992 Agreement was designed to be "a compromise between the parties for the settlement of their claims, differences and causes of action." In Section Two thereof, the antitrust suit brought by Ross-Simons was referenced. Ross-Simons alleged a concerted refusal to deal by Baccarat and two other porcelain dinnerware suppliers and a horizontal agreement regarding pricing between the three suppliers. This Section concluded by explaining that Ross-Simons and Baccarat "desire to reach a compromise and settlement of the aforementioned legal action."
The substance of the 1992 Agreement was contained in Section Three (entitled "Terms of Settlement"), which enumerated the respective obligations of the parties under the settlement. The writing describes these obligations as "mutual covenants." According to the compromise, Ross-Simons agreed to dismiss its antitrust suit. The parties agreed that such dismissal would be without prejudice and that each party would bear its own costs and legal expenses. In exchange for this dismissal, Baccarat accepted several duties.
First, Baccarat agreed to reinstate Ross-Simons as an authorized dealer of Haviland Limoges porcelain dinnerware, to appoint Ross-Simons as an authorized dealer of Raynaud Ceralene Limoges porcelain dinnerware, and to appoint Ross-Simons as an authorized dealer of Baccarat crystal. For each line of goods, Baccarat promised that Ross-Simons would be "entitled to purchase and resell such products at such prices and upon such terms as are available to other authorized dealers."
Second, Baccarat promised to "not terminate Ross-Simons' status as an authorized dealer, nor otherwise discriminate against Ross-Simons in any manner" because of Ross-Simons' discount pricing policies. Baccarat further agreed that it would not discriminate against Ross-Simons' applications for authorization of additional stores, but would "consider all applications . . . under the same standards generally applied to other authorized dealers."
The 1992 Agreement states no durational term. It does, however, purport to bind and benefit "the parties and their respective legal representatives, successors and assigns." In addition, the compromise agreement expressly disclaims any power of a party to terminate or rescind the agreement based on a change of facts.
Following the execution of the 1992 Agreement, the parties cordially maintained a sizable business relationship. During this period, Ross-Simons grossed approximately $1 million annually in Baccarat crystal sales. The dynamics of that relationship changed, however, when Jean-Luc Negre assumed the presidency of Baccarat in 1994. Negre replaced Francois de Montmorin, the Baccarat president who executed the 1992 Agreement on Baccarat's behalf.
At an October 31, 1994 meeting with Darrell Ross, the president of Ross-Simons, Negre expressed his belief that discounting was an inappropriate method of selling luxury items like Baccarat crystal. Ross-Simons became further concerned in the summer of 1995 when Baccarat refused to grant authorized dealer status to a new Ross-Simons retail store in Raleigh, North Carolina. Baccarat explained to Ross-Simons at the time that no new dealerships were being granted pending the development of a new authorized dealer program and agreement. Ross-Simons alleges that a Baccarat official had previously agreed to authorize the Raleigh store and that Baccarat authorized two new dealerships for other retailers late in the summer of 1994 despite the moratorium explained to Ross-Simons.
The deterioration of the relationship accelerated in the fall of 1995 when Negre initiated a new program for appointing authorized Baccarat dealers. On October 17, 1995, Negre announced the "Authorized Dealer Program," aimed at "enhancing the overall image and prestige throughout the United States of [Baccarat's] world renowned name."
At the center of this new initiative was a proposed "Authorized Dealer Agreement" ("Proposed Agreement"). In his letter to Ross-Simons, Negre instructed that to be considered for designation as an authorized dealer for 1996, dealers were required to execute and return the Proposed Agreement by December 15, 1995. Contained within the Proposed Agreement were several provisions that Ross-Simons deemed inimical to their discount pricing business. In effect, the Proposed Agreement required that Ross-Simons abandon its discount pricing strategy. It prohibited the advertising of Baccarat products in catalogs that devote more than twenty-five percent of their space to off-price advertising. The Proposed Agreement also granted Baccarat the power to terminate a dealership if it found, in its sole discretion, that the dealer was acting in a way that was "damaging to the prestige, image and goodwill associated with Baccarat products." Given Ross-Simons' practice of devoting nearly all of the space in its catalogs to discounted items and Negre's philosophical opposition to discounting luxury items, the Proposed Agreement was viewed by Ross-Simons management as a "suicide note."
Ross-Simons expressed to Baccarat its concerns with the Proposed Agreement and asserted that the 1992 Agreement guaranteed Ross-Simons the right to continue selling Baccarat products according to its off-pricing strategy. Baccarat disagreed, asserting that the 1992 Agreement required Baccarat to treat Ross-Simons in the same manner as it treated all other dealers. Baccarat claimed that the Proposed Agreement was a standard dealership proposal offered to all authorized dealers on equal terms. Baccarat refused to modify the Proposed Agreement to suit Ross-Simons, so Ross-Simons refused to sign it. On January 23, 1996, a Baccarat official informed Ross-Simons that effective January 1, 1996, Baccarat would no longer fill Ross-Simons' orders.
Ross-Simons responded to Baccarat's refusal to fill orders by filing a suit in Rhode Island Superior Court alleging, inter alia, breach of the 1992 Agreement. Baccarat removed the case to this Court. See 28 U.S.C. § 1332(a)(1) (diversity jurisdiction), 1441 (allowing removal of cases where diversity is the basis of jurisdiction). The case was assigned to Senior Judge Boyle. After conducting an evidentiary hearing, he granted Ross-Simons' request for a preliminary injunction compelling Baccarat to continue dealing with Ross-Simons according to the terms of the 1992 Agreement. Baccarat appealed to the United States Court of...
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