Sears, Roebuck and Co. v. Sears Realty Co., Inc.

• Decision Date: 22 July 1996
• Docket Number: No. 89-CV-1350.,89-CV-1350.
• Citation: 932 F. Supp. 392
• Parties: SEARS, ROEBUCK AND COMPANY, Plaintiff, v. SEARS REALTY COMPANY, INCORPORATED, d/b/a Sears Express Shoppe(s), Sears Oil Company, Incorporated, and Sears Petroleum and Transport Corporation, Defendant.
• Court: U.S. District Court — Northern District of New York

932 F. Supp. 392

SEARS, ROEBUCK AND COMPANY, Plaintiff, v. SEARS REALTY COMPANY, INCORPORATED, d/b/a Sears Express Shoppe(s), Sears Oil Company, Incorporated, and Sears Petroleum and Transport Corporation, Defendant.

No. 89-CV-1350.

United States District Court, N.D. New York.

July 22, 1996.

Nims, Howes, Collison, Hansen & Lackert (William R. Hansen, of counsel), New York City, Greene, Hershdorfer & Sharpe (Bruce G. Soden, of counsel), Syracuse, New York, for Plaintiff.

Bond, Schoeneck & King (Deborah H. Karalunas, of counsel), Syracuse, New York, Miles & Stockbridge (Vincent M. Amberly, of counsel), Washington, D.C., for Defendants.

MEMORANDUM-DECISION AND ORDER

MUNSON, Senior District Judge.

Presently before the court is defendant's motion seeking enforcement of an alleged oral settlement agreement and dismissal of the instant complaint with prejudice. Plaintiff opposes defendant's motion and brings cross motions seeking summary judgment dismissing defendant's state common law damages claim, and Rule 11 sanctions against defendant for filing the instant motions.

BACKGROUND

In the instant case, plaintiff Sears, Roebuck and Company ("Sears Roebuck") alleges five causes of action: 1) trademark infringement under § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1); 2) unfair competition under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); 3) dilution of trademark under § 368-d of the New York General Business Law; 4) unfair competition under New York common law; and 5) declaratory judgment under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202. Complaint, Document ("Doc.") 1. The complaint was filed in response to defendant, Sears Realty Co., Inc., d/b/a Sears Express Shoppe(s), Sears Oil Co., Inc., and Sears Petroleum and Transport Corporation's ("Sears Oil"), planned expansion of its gasoline service station business in late 1988, as well as defendant's proposed move into the convenience store and credit card businesses. Defendant's answer includes several affirmative defenses and counterclaims. The first counterclaim requests declaratory relief under the federal Declaratory Judgment Act. The second counterclaim alleges state common law trademark infringement and unfair competition arising from plaintiff's use of the "SEARS" mark on its oil products. By order dated December 4, 1990, the court granted a motion by plaintiff for a preliminary injunction prohibiting defendant from using the SEARS mark in connection with certain gas stations, convenience stores and credit card operations. Dec. 4, 1990 Memorandum-Decision and Order ("MDO"), Doc. 59¹. By order dated July 8, 1993, the court denied both parties' motions for summary judgment and continued the preliminary injunction. July 8, 1993 MDO, Doc. 79.

The present dispute arises out of the events surrounding a settlement conference. Defendant claims that the meeting resulted in a binding oral settlement agreement, and seeks enforcement of the alleged agreement. Defendant's ("Def.") Notice of Motion, Doc. 83. Plaintiff opposes the instant motion and cross moves for summary judgment of defendant's state law claim for damages. Plaintiff's Notice of Cross Motions, Doc. 83. In addition, plaintiff asks the court to sanction defendant for filing the instant motion. Id. A hearing was held on November 21, 22 and 30, 1994, at Syracuse, New York. The following constitutes the court's MDO with respect to defendant Sears Oil's motion to enforce the alleged settlement agreement, and with regard to plaintiff's cross motions for summary judgment and sanctions.

FINDINGS OF FACT

Since plaintiff initiated the instant lawsuit on November 8, 1989, the parties have made substantial efforts to settle the case. At a pretrial conference in late November 1993, the parties agreed to a meeting of the principals to discuss a settlement, inasmuch as all previous negotiations handled by legal counsel were unsuccessful. The principals for Sears Roebuck and Sears Oil were James D. Thornton, Vice President-Automotive Division of Sears Roebuck, and Howard P. Sears, Jr., President of Sears Oil.

Prior to the meeting between the principals, counsel for both parties attempted to establish parameters for the meeting. Mr. Sears was particularly concerned that the principal for Sears Roebuck have the authority to bind plaintiff to a contract. This was expressed in a letter from counsel for Sears Oil to counsel for Sears Roebuck: "Howard Sears would like to meet with the appropriate business person or persons at Sears Roebuck & Co. to discuss a settlement, businessman to businessman. Our only requirement is that the individual(s) who meets with Mr. Sears be qualified to settle this matter on behalf of your client." Dec. 1, 1993 Letter, Def.'s Exh. 1. Counsel for Sears Roebuck, William R. Hansen, gave assurances that Mr. Thornton had authority to bind his company to a settlement. Dec. 15, 1993 Letter, Def.'s Exh. 3 ("Mr. Thornton is an officer of Sears, Roebuck and Co. and has authority to speak for the corporation."); Dec. 21, 1993 Letter, Def.'s Exh. 4 ("As I confirmed to you on the telephone, Mr. Thornton is an officer of Sears, Roebuck and Co. and has the authority to obligate the corporation to a contract such as a settlement of the litigation.").

However, the parties appeared equally concerned with preserving the right not to be bound as a result of a meeting of the principals. Def.'s Exhs. 1-4. For example, in a letter to counsel for Sears Oil, Mr. Hansen expressly referred to the upcoming meeting as being held "off-the-record" and "completely without prejudice to the position of any of the parties to the litigation." Def.'s Exh. 3. In another letter, Mr. Hansen gave his assurance that Mr. Thornton had authority to bind Sears Roebuck, but qualified that statement with the following: "However, as I told you, this letter is not to be construed as an undertaking that Mr. Thornton will exercise his authority to so bind the corporation at the time of the meeting or at any time thereafter." Def.'s Exh. 4. Indeed, in a letter to Mr. Hansen, Vincent M. Amberly, counsel for Sears Oil, acknowledged the "without prejudice" status of the upcoming meeting of the principals. Def.'s Exhs. 1.

The court finds particularly instructive Mr. Thornton's understanding of the purpose of the principal's only meeting. As part of his duties as an officer for Sears Roebuck, Mr. Thornton regularly conducts contract negotiations. It is a Sears Roebuck policy that all contracts must be in writing, and any documents of a legal nature are subject to prior review by counsel. At the time of the principals-only meeting, Mr. Thornton knew that he had the authority to bind his company to a settlement. He first became aware of the instant lawsuit only about one month before the meeting with Mr. Sears and had no prior involvement in the course of settlement negotiations. Mr. Thornton was told by in-house counsel that the meeting was to be a "discussion without prejudice, off the record, as an attempt to try to resolve it with non-lawyers." Thornton Tr., Doc. 117, at 9. Based on his conversation with in-house counsel, Mr. Thornton believed that anything said during the meeting was not to have any binding effect on Sears Roebuck. While it was Mr. Thornton's intention to attend the meeting to listen to Mr. Sears' views as to how the matter could be resolved without a trial, he did not know that Mr. Sears intended to reach a settlement agreement at their meeting.

After a brief introduction of the parties at the meeting of the principals on January 5, 1994, the attorneys were dismissed from the room and Messrs. Sears and Thornton privately met for several hours. The meeting began with a general discussion in which Mr. Sears described the history of Sears Oil. He then expressed frustration with the course of the present litigation and accused the attorneys of being "obstructionists". Thornton Tr., Doc. 117, at 11-12; Thornton Tr., Doc. 107, at 27. During this portion of the discussion, Mr. Thornton said that in the "normal course of doing business, all documents of that nature or any legal contract would be reviewed by counsel." Thornton Tr., Doc. 107, at 27-31; Sears Tr., Doc. 110, at 105. Mr. Thornton did not explicitly state, however, that any settlement agreement reached during this particular meeting was subject to attorney review. Thornton Tr., Doc. 107, at 27-31.

The parties then discussed the territory in which Sears Oil sold automotive fuels, operated car washes and offered to consumers the use of a Sears Oil credit card under the SEARS mark. Sears Tr., Doc. 110, at 29-30. Mr. Thornton expressed his concerns with the territorial expansion of Sears Oil's operations. Mr. Sears produced a map that showed the territory into which Sears Oil wished to expand its services. It was at this early stage of the meeting that Mr. Thornton said that he first wanted to have market research conducted and to speak with local Sears Roebuck managers. Mr. Thornton explained to Mr. Sears that it was the normal course of business at Sears Roebuck to conduct market research to measure consumer reaction, and that he heavily relied upon such research. Thornton Tr., Doc. 108, at 28, 31, 34, 36. The parties then discussed a market survey that had been conducted by Sears Roebuck earlier on in the instant lawsuit. Mr. Sears noted that the prior survey was not favorably viewed by the court, Thornton Tr., Doc. 108, at 28, and that he did not place much value in such surveys. Id. at 36. Mr. Thornton reiterated his desire to first conduct and review a new survey, and said that he needed to speak with Sears Roebuck managers in the Syracuse area. Thornton Tr., Doc. 117, at 12.

It is undisputed that the parties agreed that the territory into which Sears Oil may expand its operations would not extend into the states of Massachusetts or Vermont, or into downstate New York. Thornton Tr., Doc. 107, at 2-3; Sears Tr., Doc. 110, at 28-30. With regard...