Opinion
05 Civ. 3938 (NRB), 05 Civ. 3957 (NRB).
July 19, 2005
Claudia Ray, Esq, Barry Goldstein, Esq, Patricia G. Corley, Esq, Samantha Hetherington, Esq, O'Melveny Myers LLP, New York, Counsel for Le Tigre LLC and LT2 LLC.
Helen Davis Chaitman, Esq, Elizabeth A. Adinolfi, Esq, Phillips Nizer LLP, New York.
Philip E. Klein, Esq, Solomon Liss, Esq, Klein Liss, LLP, New York, Counsel for FeliNESIco and Nesi Apparel Group, LLC.
MEMORANDUM
Yesterday afternoon we heard oral arguments on Le Tigre LLC ("LT") and LT2 LLC's ("LT2") (collectively, "Le Tigre") proposed temporary restraining order and order to show cause. Le Tigre is seeking our intervention in response to sales to store locations, and high levels of discount sales, that it believes are inconsistent with the License Agreement and with our May 18, 2005 order. Le Tigre also brings to our attention a July 15, 2005 letter from Vincent Nesi, Jr., President of Sales for FeliNESIco to Ryan O'Sullivan, CEO of LT2 LLC, explaining that FeliNESIco planned to deny Le Tigre representatives access to the LE TIGRE booth at the New York Project trade show that began yesterday on Monday, July 18, 2005. July 15, 2005 Letter from Vincent Nesi, Jr. to Ryan O'Sullivan, attached as Ex. A to July 18, 2005 Letter from Claudia Ray. In this regard, Le Tigre asks us to direct Nesi Apparel Group, LLC ("NAG") and FeliNESIco (collectively, "the Nesi parties") not to interfere with its access to the LE TIGRE booth at the show.
We assume familiarity with the facts of the dispute, which we described in greater detail in our May 18, 2005 opinion.
We address the trade show issue first. We will not become involved in this sideshow as it is simply outside the breach of contract issues presented by the pleadings. We are not in a position to adjudicate the quotidian disputes between business partners under the guise of contract interpretation. The parties will simply have to determine for themselves the degree of civility that best serves their economic interests.
Next, we will address the issues surrounding Le Tigre's proposed temporary restraining order and order to show cause. The oral argument focused on two distinct issues. First, Le Tigre complains of the high level of discount sales by FeliNESIco since we issued our May 18, 2005 order limiting sales to discount stores to discontinued styles, irregulars, broken sized inventory, and end-of-season sales, and limiting discounts on those sales to 40% without Le Tigre's consent. Second, Le Tigre argues that the License Agreement requires that FeliNESIco sell LE TIGRE merchandise within the "channels of distribution" it has "previously approved." Le Tigre claims that FeliNESIco sells LE TIGRE merchandise outside the approved channels of distribution at stores that are insufficiently upscale or which feature "urban" or other styles of apparel inconsistent with LE TIGRE's desired "preppy" image. As in May, Le Tigre's concern is to protect against the loss of the LE TIGRE products' cachet from excessive discounted sales at the retail level and at locations inconsistent with its desired image as chic and upscale. Although we have invited further briefing from the Nesi parties on these issues, we will address them in a preliminary fashion below.
The issue of discounted sales appears to be essentially moot. The Nesi parties assert that they have booked very few additional discounted sales for future shipment and have offered a variety of explanations (not accepted by Le Tigre) to support the unusual volume of recent discounted sales. Thus, at this time, it does not appear to be necessary to resolve the potential issue of whether discounted sales should be limited to a percentage of total sales. Not only does this issue seem to lack immediacy, but more importantly it blends into the second issue, namely, whether FeliNESIco's sales to particular stores are violative of the contract.
In this regard and perhaps others, at the close of the oral argument, the Nesi parties requested leave to make additional submissions with Le Tigre having the opportunity to respond. There was also discussion of the mutual appointment of an individual familiar with the industry to resolve the numerous disputes that arise between the parties concerning the daily conduct of their business. If such an agreement is not reached, the only alternative that the Court can propose is an evidentiary hearing on August 11, 2005 to determine the meaning of "channels of distribution" so as to resolve where the products can be sold and the role that the licensor has in specific outlet selection. The parties are free to call fact and expert witnesses, but each side is limited to three hours including direct and cross examination.
IT IS SO ORDERED.