Opinion
03 Civ. 0015 (RWS).
June 23, 2004
KOPPELL, LEAVITT, KERSON DUANE, Attorneys for Bangkok Crafts Corporation, New York, NY, By: JOHN F. DUANE, ESQ., Of Counsel.
HOGAN HARTSON, Attorneys for Capitolo di San Pietro in Vaticano, New York, NY, By: DAVID DUNN, ESQ., Of Counsel.
OPINION
The defendant Capitolo di San Pietro in Vaticano ("Capitolo") has moved under Rule 56, Fed.R.Civ.P., for partial summary judgment on its counterclaims against plaintiff Bangkok Crafts Corporation ("BCC"). Upon the following findings and conclusions, the motion is granted and the August 2000 agreement is declared void, the 1996 license properly terminated, and alternatively expired before its renewal.
Prior Proceedings
BCC initiated this action against Capitolo in the Supreme Court of the State of New York, County of New York, and it was removed by Capitolo to this Court on January 2, 2003.
BCC alleged that Capitolo violated a license agreement dated August 28, 2000 (the "2000 License") and February 8, 1996 (the "1996 License"). Discovery proceeded, the instant motion was filed on October 20, 2003 and heard and marked fully submitted on February 11, 2004.
The Facts
The facts are set forth in the Local Rule 56.1 Statement of Capitolo and in the opposing affidavit of John Loata ("Loata") and are not disputed except as noted.
Capitolo is the chapter or clergy of St. Peter's Basilica in the Vatican City; its between 30 and 40 members are all priests in the Catholic Church, appointed by the Pope. From among the members, five Camerlenghi, or administrators, are appointed. The Camerlenghi are responsible for administering the day-to-day affairs of Capitolo, subject to the ultimate authority of the Capitolo members themselves.
The Capitolo owns numerous valuable and unique works of art — predominantly crosses, chalices, communion trays, and other pieces used in religious services, as well as commemorative medal coins (the "Works"). In 1996, the Capitolo's chief chancellor, or Camerlengo Maggiore, Monsignor Michele Basso ("Basso"), was approached by Loata on behalf of BCC regarding a license to manufacture and sell reproductions of the Works. On February 8, 1996, Loata and Basso executed a Promessa Di Contratto (the "Promessa"), written in Italian, setting forth the terms of the arrangement for BCC to manufacture and sell reproductions of the Works. A few months later, on May 8, 1996, Loata and Basso executed an English language license agreement (including the handwritten "amendments" thereto) (the "1996 License") under which Capitolo granted to BCC an exclusive right and license, effective as of February 8, 1996, to manufacture and sell reproductions of the Works ("Reproductions").
The 1996 License required BCC to pay royalties to Capitolo equal to five percent of all net sales of the Reproductions on a quarterly basis within 30 days after the end of each quarter, and be accompanied by a certified sales report. This typed amendment to Section 6 also permitted BCC to enter into sublicenses with unaffiliated parties, and obligated BCC to pay royalties to Capitolo equal to five percent of the fees BCC receives from its sublicensees.
BCC provided no accounting for sales, and no royalty payments at all during the first 15 months that the 1996 License was in effect. After counsel for Capitolo wrote to BCC on or about May 2, 1997 demanding the required royalty payments and certified sales reports BCC produced its first sales statement to Capitolo. The sales report from BCC was not certified.
Between July 22, 1997 and July 31, 1998, BCC failed to provide timely payments and accountings and provided no royalty payments or certified sales reports for this one-year period. On August 5, 1998, BCC produced its next accounting, purporting to cover December 19, 1997 through July 31, 1998, covering a seven-month period and omitted any report for seven months — May 9, 1997 through December 18, 1997. BCC did not report or pay royalties for the missing seven months. BCC also failed to make the $2,500 royalty payment until October 9, 1998.
After the August 1998 report and October 1998 payment, BCC did not send another royalty payment or certified statement of sales to Capitolo until July 9, 1999. This royalty payment and sales report covered only the seven-month period from November 1, 1998 through May 31, 1999. BCC did not provide royalty payments and did not account for the three-month period between August 1, 1998 and October 31, 1998.
On October 6, 1999, BCC submitted a royalty payment and certified sales report to Capitolo covering the period from June 1, 1999 through September 30, 1999. On or about February 9, 2000, BCC submitted a royalty payment and sales report covering the period from October 1, 1999 through December 31, 1999.
BCC has not submitted any royalty payments or certified sales reports to Capitolo since its February 9, 2000 report, and BCC has not provided any royalty payments or reports covering any period since December 31, 1999.
The 1996 License provides: "BCC will fax to Monsr. a copy of all reproductions for review and will provide a sample of the reproduction thereafter." The 1996 License also prohibits BCC from "employ[ing] any promotional or advertising material in the sale of the Reproductions that is unethical, immoral or offensive to good taste and which is not consonant with moral and religious principles."
BCC has not submitted any sublicensed reproductions or related advertising material to Capitolo for the required review.
The initial term of the 1996 License was for five years, commencing on February 8, 1996, and renewable for another five-year term at BCC's election. Section 9 of the 1996 License provides:
The term of this Agreement shall continue in effect for a period of 5 years from the date first above written, and shall be renewable at the election of BCC, for an additional period of 5 years.
1996 License § 9.
Capitolo's counsel wrote to BCC's counsel on September 3, 1998, stating expressly that Capitolo's contractual relationship with BCC would conclude at the expiration of the original five-year term on February 7, 2001. During meetings between Loata and Capitolo's representative, Commendatore Angelo Sironi ("Sironi") on July 20, and 21, 2000, Sironi again informed Loata of Capitolo's refusal to renew or extend the 1996 License because of Capitolo's complete dissatisfaction with BCC's performance under the 1996 License. Following this meeting, counsel for Capitolo wrote to BCC on July 27, 2000, once again stating Capitolo's refusal to extend or renew the 1996 License beyond its original five-year term.
According to BCC, on August 28, 2000 it obtained Capitolo's agreement to a new, vastly expanded license agreement with a term renewable at BCC's election for up to 45 years (the "2000 License"), executed on Capitolo's behalf by Cardinal Virgilio Noè (Archpriest of the Capitolo) ("Noè") and Monsignor Giuseppe Bordin (then Camerlengo Maggiore) ("Bordin"). On or about October 16, 2000, Capitolo received a letter from counsel for a BCC sublicensee, Maxx International, Inc. ("Maxx"), requesting Capitolo's confirmation of the 2000 License. Noè and Bordin deny any prior knowledge of the existence of the 2000 License and deny signing it. Counsel for Capitolo informed both counsel for Maxx and BCC that the supposed extension and expansion was a forgery.
In February 2001, BCC produced to Capitolo a January 2, 2001 letter supposedly from the Vatican's Secretary of State, Cardinal Angelo Sodano ("Sodano") purporting to validate the August 28, 2000 license. Counsel for Capitolo, acting for it and for the Secretariat of the Vatican State, notified BCC in writing that the supposed letter of Sodano was forged as well.
Sodano, Noè and Bordin have declared their purported signatures to be forgeries. Capitolo's Italian handwriting expert and an American forensic document expert have also concluded that the signatures are forged.
Capitolo repudiated the 2000 License and terminated the 1996 License on February 7, 2001. On June 13, 2001, BCC sent a letter to Capitolo seeking renewal of the 1996 License for another five-year term. Capitolo, by letter of its counsel, rejected the requested renewal.
BCC, through its affiliate, Treasures of St. Peter's In The Vatican, Ltd. ("TSV"), continued its sublicensing activities and has, since November 2000, received royalty payments and fees from purported sublicensees. Until this action was filed, BCC/TSV did not report to Capitolo any receipt of funds, or sales activity for any period after December 1999 and has made no royalty payments whatsoever to Capitolo relating thereto.
During the course of the 1996 License term, BCC paid Capitolo over $50,000 and according to BCC showed Basso the Reproductions, and obtained his approval for their use.
According to Loata, BCC engaged Elio Rossi ("Rossi"), Antonio Battaglia ("Battaglia") and retained Giuseppe Eustacchi ("Eustacchi") as a translator to extend the 1996 License. Battaglia met with Noè and was informed that in order to obtain an extension to the 1996 License, a new agreement would have to be drafted, and BCC would have to pay Noè $500,000. According to BCC Noè refused wire transfers and requested cash and refused to meet with Loata.
According to Loata, BCC then retained Marco Sperduti ("Sperduti") to act as BCC's representative who advised BCC that a new agreement had been reached with Noè whereby BCC would be granted a renewal of the license for a 15-year term, with the option to renew for two additional 15-year terms. In consideration, BCC delivered to Noè $480,000 through Sperduti. On the advice of Sperduti, BCC has alleged that it made an additional payment of $102,000 to Capitolo.
According to BCC, it received a letter from Cardinal Camillio Ruini, a Vicar of the Pope, ("Ruini") who advised Loata and BCC to continue operating under the 1996 License until June 21, 2001, and on January 2, 2002, BCC received a letter from Sodano which confirmed the authenticity of the 2000 License. Sodano has denied any knowledge of this letter and has affirmed that the signature, purporting to be his, is a forgery.
Summary Judgment is Appropriate
Summary judgment is granted only if there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Silver v. City Univ., 947 F.2d 1021, 1022 (2d Cir. 1991); see generally 11 James Wm. Moore, et al., Moore's Federal Practice § 56.11 (3d ed. 1997 Supp. 2004). The court will not try issues of fact on a motion for summary judgment, but, rather, will determine "whether the evidence presents a sufficient disagreement to require submission to a [factfinder] or whether it is so one-sided that one party must prevail as a matter of law."Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).
"The party seeking summary judgment bears the burden of establishing that no genuine issue of material fact exists and that the undisputed facts establish her right to judgment as a matter of law." Rodriguez v. City of New York, 72 F.3d 1051, 1060-61 (2d Cir. 1995). In determining whether a genuine issue of material fact exists, a court must resolve all ambiguities and draw all reasonable inferences against the moving party.Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Gibbs-Alfano v. Burton, 281 F.3d 12, 18 (2d Cir. 2002). Thus, "[s]ummary judgment may be granted if, upon reviewing the evidence in the light most favorable to the non-movant, the court determines that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law." Richardson v. Selsky, 5 F.3d 616, 621 (2d Cir. 1993).
A material fact is one that would "affect the outcome of the suit under the governing law," and a dispute about a genuine issue of material fact occurs if the evidence is such that "a reasonable [factfinder] could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248; R.B. Ventures, Ltd. v. Shane, 112 F.3d 54, 57 (2d Cir. 1997). The Court is "to grant summary judgment where the nonmovant's evidence is merely colorable, conclusory, speculative or not significantly probative." Schwimmer v. Kaladjian, 988 F. Supp. 631, 638 (S.D.N.Y. 1997) (citing Anderson, 477 U.S. at 249-50).
BCC has sought to defeat Capitolo's motion under Fed.R.Civ.P. 56(f). To obtain Rule 56(f) relief, the party seeking additional discovery must file an affidavit explaining: (a) what facts are sought; (b) how those facts will create a factual issue precluding summary judgment; and (c) what efforts have been made to obtain these facts, and why such efforts failed. Cramer v. Devon Grp., Inc., 774 F. Supp. 176, 180 (S.D.N.Y. 1991) (citingHudson River Sloop Clearwater, Inc. v. Department of the Navy, 891 F.2d 414, 422 (2d Cir. 1989)); see also Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 925 (2d Cir. 1985).
BCC has not moved to enforce any further discovery from Capitolo. BCC's failure to do so precludes application of Rule 56(f). See Cramer, 774 F. Supp. at 180 (stressing importance of a party's use of mechanisms for enforcing right to discovery under Fed.R.Civ.P. 37 in connection with Rule 56(f) request for relief) (citations omitted).
With respect to the three Cardinals of the Catholic Church that BCC claims it should have the opportunity to depose prior to resolution of this motion, not one of them is under the control of Capitolo, and BCC's counsel has been on notice for months of the need to proceed formally to arrange to take discovery in Italy and the Vatican. BCC's failure to do so is not a valid basis for denying resolution of Capitolo's motion. See Burlington Coat Factory Warehouse Corp., 769 F.2d at 925 (affirming the lower court's denial of plaintiff's Rule 56(f) request because "whatever discovery went undone was the consequence of [plaintiff's] own conduct and was in any event inconsequential"); see also Trebor Sportswear Co. v. The Limited Stores, Inc., 865 F.2d 506, 511 (2d Cir. 1989) (denying plaintiff's request for further discovery because plaintiff "had a fully adequate opportunity for discovery").
BCC has not responded to Capitolo's statement of undisputed facts and has not offered competent or probative evidence to contest the testimony of Sodano and Bordin with respect to the forged 2000 License. BCC also does not dispute that its only attempt to exercise the option to renew the initial term of the 1996 License for an additional five-year term was submitted to Capitolo on June 16, 2001.
BCC has not submitted any admissible evidence to support its claim that Rossi, Battaglia and Sperduti undertook negotiations on BCC's behalf and has not obtained their testimony in discovery. Capitolo has noted that Rossi, Battaglia and Sperduti do not speak English and Loata does not speak Italian, and that Loata's claims are based on Eustacchi's statements. No affidavit or deposition testimony is cited.
In contrast to Loata's hearsay assertions, the testimony of Capitolo's handwriting expert and forensic document examiner have not been challenged, nor has the denial by Sodano of the authenticity of the January 2, 2001 letter.
There is no competent evidence of any payments to Capitolo on behalf of BCC in order to obtain the alleged 2000 License, or any request or demand for such payments from Capitolo. Loata's testimony is entirely hearsay.
Loata's declaration makes reference to an alleged "Capitolo Official, Monsignor Yuri Yugova," with whom Sperduti was supposedly dealing. There is no evidence submitted that such a Monsignor ever existed, and Loata does not claim that he ever met him or was even in his presence.
Loata also claims somehow to have relied upon a letter Loata says he received, not from Capitolo, but supposedly from Ruini, with respect to the validity and term of the 1996 License. No evidence has been adduced that Ruini had any position or role whatsoever with Capitolo.
BCC's factual submission is based on the declaration of Loata and the attached documents. His hearsay declaration fails to defeat the facts as set forth in Capitolo's factual statement.
The 2000 License Is Void
There are no probative facts adduced to dispute that the signatures of Noè and Bordin on the 2000 License are forged, thus rendering the contract void ab initio. See Orlosky v. Empire Sec. Sys., Inc., 230 A.D.2d 401, 403-04, 657 N.Y.S.2d 840 (3d Dep't. 1997) (collecting cases); see also Opals On Ice Lingerie v. Body Lines, Inc., 320 F.3d 362, 370 (2d Cir. 2003).
Both Noè and Bordin deny signing the 2000 License or any related documents and state that Capitolo "never authorized, accepted or ratified this forged License Agreement, but rather repudiated it promptly upon learning of its existence, through communications from its authorized attorneys to BCC." Both a preeminent Italian handwriting expert and a nationally renowned American forensic document examiner have independently concluded that the signatures of Noè and Bordin on the 2000 License and related documents are false.
BCC has offered no competent evidence in support of its assertion. Without any admissible evidence, it is well settled that BCC cannot defeat summary judgment that is otherwise appropriate. See Nora Beverages, Inc. v. Perrier Group of America, Inc., 269 F.3d 114, 123 (2d Cir. 2001); see also Fed.R.Civ.P. 56(e).
Although BCC continues to rely on a January 2, 2001 letter supposedly bearing the signature of Sodano, Sodano has denied signing the January 2, 2001 letter and both experts identified above have confirmed the signature is indeed a forgery.
Loata's claim that the letter is authentic because the DHL receipt accompanying the letter contains a handwritten notation that it was "from" the Vatican's Secretariat does not raise a triable issue as to the authenticity of the January 2, 2001 letter or the 2000 License. Loata is not a competent declarant regarding the source of the January 2, 2001 letter. Even assuming there were evidence to establish the DHL receipt did originate in some Vatican office, that fact could not establish that the letter itself is genuine.
BCC offers a tale of alleged negotiations with and payments to Capitolo in connection with the creation and execution of the 2000 License. Loata does not purport to have been personally involved in these negotiations or payments, and instead relied upon the representations of Rossi, Battaglia and Sperduti. However, no declaration or deposition from any one of these supposed negotiators has been submitted.
BCC Failed to Timely Renew the 1996 License Which Expired by Its Own Terms on February 7, 2001
BCC has also failed to raise a triable issue regarding the untimeliness, and thus invalidity, of its attempted renewal of the 1996 License for an additional five-year term. The initial term of the 1996 License commenced on February 8, 1996, and continued in effect for a period of 5 years from that date. Specifically, Section 9 of the 1996 License provides:
The term of this Agreement shall continue in effect for a period of 5 years from the date first above written, and shall be renewable at the election of BCC, for an additional period of 5 years.
1996 License at 4. BCC was required to provide notice of renewal prior to expiration of the first term of the license — before February 8, 2001 — or the 1996 License would expire by its terms.
BCC claims that sometime after the execution of the 1996 License, Basso told him that the "License Agreement was registered in the Capitolo on June 21, 1996." Given that Loata does not speak Italian and Basso does not speak English, this information could only have been conveyed from Basso to Loata through an intermediary. Nevertheless, even assuming Loata is a competent witness to testify to this purported fact (and assuming for purpose of this motion that the fact is true), whatever the significance of such alleged registration, it cannot alter the plain language of the 1996 License term. See Independent Energy Corp. v. Trigen Energy Corp., 944 F. Supp. 1184, 1191 (S.D.N.Y. 1996) (where the language of a contract is unambiguous, "the intent of the parties must be determined by their final writing and no parol evidence or extrinsic evidence is admissible") (quoting International Klafter Co., Inc. v. Continental Cas. Co., 869 F.2d 96, 100 (2d Cir. 1989)); see also W.W.W. Assoc., Inc. v. Giancontieri, 77 N.Y.2d 157, 163, 565 N.Y.S.2d 440, 443, 566 N.E.2d 639, 641 (1990) (extrinsic evidence may not be considered in order to create an ambiguity) (citations omitted).
Loata also claims to have relied upon a January 8, 2001 letter received from Ruini which instructed BCC to operate under the 1996 License through June 21, 2001. Ruini did not in January 2001, or at any other time, have any position or role with Capitolo, and BCC offers no evidence that would even suggest otherwise. Thus, even if this letter was genuine, it is irrelevant to the term of the 1996 License between BCC and Capitolo, or any other issue relating to this dispute.
BCC concedes that it made no attempt to renew the 1996 License until June 13, 2001, more than four months after the 1996 License had expired. When Capitolo received this untimely notice from BCC, it promptly responded by informing BCC that the notice was invalid, and that the 1996 License had been terminated and would not be renewed.
These facts establish as a matter of law that the 1996 License expired by its terms on February 7, 2001, and was no longer in effect thereafter, regardless of Capitolo's proper termination of the license due to BCC's numerous material breaches.
Capitolo Properly Terminated the 1996 License
BCC concedes that a failure to make payments under a licensing contract is a material breach. See ARP Films, Inc. v. Marvel Entm't Grp., Inc., 952 F.2d 643, 649 (2d Cir. 1991)). BCC further concedes that it failed to provide payment and sales reports as required by the 1996 License. That said, BCC claims that its royalty payments to Capitolo totaling $50,000, albeit untimely, somehow fully satisfied BCC's payment obligations under the 1996 License.
BCC failed to provide royalty payments and account at all for 24 ½ months during the original five-year term of the 1996 License, and failed to provide timely and certified reports and make timely payments for an additional 30½ months, more than half of the original term.
BCC now attempts to argue that Capitolo's acceptance of late royalty payments, when BCC chose to pay at all, somehow operated to affirm the 1996 License as a matter of law. However, the cases cited by BCC do not support this proposition. For example, inMarathon Enterprises, Inc. v. Schroter GMBH Co., 01 Civ. 0595, 2003 WL 355238, at *6 (S.D.N.Y. Feb. 18, 2003), the court concluded only that factual issues remained regarding whether the defendant acquiesced to untimely payment under the contract by accepting the plaintiff's late payment without protest, making summary judgment inappropriate.
In response to BCC's failure to make its payment and to report, starting in September 1998 Capitolo's representatives repeatedly protested BCC's performance and notified BCC of Capitolo's refusal to accept any renewal, extension or expansion of the 1996 License upon expiration of the initial five-year term. Given Capitolo's oft-expressed protests and express notices of intent to terminate, no testimony is necessary to clarify the intent and motivations of the parties. See Marathon Enter., 2003 WL 355238, at *6.
BCC has argued that its late payments somehow served to cure its numerous breaches of the 1996 License. The case cited by BCC fails to support its proposition. In Sinco, Inc. v. Metro-North Commuter Railroad Co., 133 F. Supp.2d 308, 313 (S.D.N.Y. 2001), the court explicitly stated that the party attempting to effect a cure must show that its cure conforms to the terms of the contract. Here, the undisputed record highlights gaps in payment and reporting that were never accounted for in BCC's delayed payment and accountings, clearly demonstrating that BCC failed to cure its breaches in accordance with the terms of Section 6 of the 1996 License.
Thus, BCC's failures to timely and adequately report and pay, individually and certainly collectively, constituted material breaches of the 1996 License and afforded Capitolo the right to terminate the 1996 License. See ARP Films, 952 F.2d at 649;see also V.S. Int'l, S.A. v. Boyden World Corp., 862 F. Supp. 1188, 1197 (S.D.N.Y. 1994) (party's failure to make required payments held a material breach, authorizing termination).
Contrary to BCC's assertion, the "election of remedies" doctrine does not bar Capitolo from terminating the 1996 License due to BCC's repeated material breaches. According to New York law, when a party commits a material breach of a contract, the other party may choose to terminate the contract and sue for damages. See NAS Electronics, Inc. v. Transtech Electronics PTE, Ltd., 262 F. Supp.2d 134, 145 (S.D.N.Y. 2003) (citation omitted). "The critical factor is not the passage of time, but `whether the non-breaching party has taken an action (or failed to take an action) that indicated to the breaching party that it had made an election.'" ESPN, Inc. v. Office of Commissioner of Baseball, 76 F. Supp.2d 383, 394 (S.D.N.Y. 1999) (quotingBigda v. Fischbach Corp., 898 F. Supp. 1004, 1012-13 (S.D.N.Y. 1995)).
Here, the evidence has established that as a result of BCC's repeated material breaches of the 1996 License, Capitolo elected the remedy of termination, and promptly and repeatedly informed BCC that the contract would not be renewed or extended beyond the expiration of the initial five-year term. In light of these repeated and consistent messages from Capitolo regarding its election of the remedy of termination, Capitolo's acceptance of untimely royalty payments and sales reports did not rescind its express election to terminate.
BCC's own evidence establishes that Capitolo refused the royalty payment received from BCC in February 2000, the last payment ever offered by BCC. And it is undisputed that BCC has not submitted any royalty payments or certified sales reports to Capitolo since February 2000, and has not provided any royalty payments or reports covering any period since December 31, 1999.
BCC has claimed reliance on the March 2, 2000 letter of Noè as the basis for not providing an accounting or payments after February 2000 and that Capitolo did not want payments made until the issues "surrounding BCC's license were resolved." But Loata has stated that such resolution came in August 2000, with the execution of the supposed new, expanded license agreement. However, BCC took no steps then or since to provide Capitolo any accountings or payments.
Given BCC's failure to cure its material breaches before February 7, 2001, Capitolo's notices effectively terminated BCC's right under Section 9 of the 1996 License to elect to renew the license for another five-year term.
Summary Judgment Is Not Premature
BCC's claim that Capitolo has failed to produce documents and witnesses that could raise genuine issues of material fact sufficient to defeat summary judgment is wholly unsupported by the factual record and relevant case law. Capitolo filed this motion in October 2003, and has repeatedly delayed its resolution at BCC's request. Discovery is now set to close in this action later this month. If and to the extent that BCC needed discovery to respond to this motion, the time to seek it is long past due.
Conclusion
For the reasons set forth above, Capitolo's motion for partial summary judgment is granted and the August 2000 agreement is declared void, the 1996 license properly terminated, and alternatively expired before its renewal.
It is so ordered.