Best Brands Consumer Products v. Versace 19.69 Abbigliamento Sportivo S.R.L.

Background

Best Brands brought claims for a declaration, breach of contract, unjust enrichment, fraud, and breach of warranty against Versace 19.69 and Valero Enterprises. The court had previously held an inquest hearing, and Magistrate Judge Aaron issued a report recommending judgment against Versace 19.69 and Valero, jointly and severally, for $90,882.71 in damages and $807.64 in costs, plus $2,720 in attorneys’ fees against Versace 19.69. The report also recommended nine-percent annual prejudgment interest beginning February 11, 2015, when Best Brands paid the royalty advance.

Best Brands and Versace 19.69 objected to parts of the report. Valero did not object. The district court reviewed the challenged portions of the report anew and reviewed the remaining portions for clear error. The court had also previously granted Versace 19.69’s motion to strike Best Brands’s reply brief and did not consider that brief.

Best Brands’s Objections

Best Brands argued that it was entitled to a declaration that the agreement was terminated or that Versace 19.69 did not own rights in the trademark. The court held that the complaint did not demand a declaration that the agreement was terminated. Because a judgment following a default cannot provide a type of relief not demanded in the pleadings, the court overruled Best Brands’s objection to the report’s rejection of that relief.

Best Brands also sought attorneys’ fees for this lawsuit and for responding to a subpoena separately issued by Gianni Versace. The court agreed with the report that the agreement’s indemnification provision covered the subpoena-related fees but did not contain the unmistakably clear language required under New York law to cover attorneys’ fees in a direct dispute between the contracting parties. The provision also applied to actions brought against Best Brands, while Best Brands initiated the present action against Valero. The court therefore overruled Best Brands’s objections concerning attorneys’ fees.

Versace 19.69’s Objections

Versace 19.69 argued that the report relied on facts that were not adequately pleaded and that its failure to return the royalty advance could not establish breach. The court explained that Versace 19.69’s default admitted the complaint’s well-pleaded facts. It agreed that Best Brands had shown a contract, its own performance through payment of the royalty advance, Versace 19.69’s breach by failing to return the advance, and resulting damages. The court held that these facts established liability as a matter of law and overruled Versace 19.69’s objections concerning the pleaded facts and breach of contract.

Versace 19.69 also challenged prejudgment interest. The court held that the earliest ascertainable date the claim arose was the date of breach. Under the agreement, the advance had to be repaid if use of the licensed property infringed a third party’s rights. Based on the allegations and a decision from the Northern District of California, the court concluded that Versace 19.69 did not have rights to the property it purported to license. The repayment obligation therefore arose immediately when Versace 19.69 received the advance. The court overruled the objection to prejudgment interest.

Disposition

The court adopted Magistrate Judge Aaron’s report and recommendation in its entirety and confirmed the damages, costs, prejudgment interest, and attorneys’ fees. Best Brands was awarded $90,882.71 in damages and $807.64 in costs against Versace 19.69 and Valero jointly and severally. The Clerk was directed to calculate nine-percent annual prejudgment interest beginning February 11, 2015. Best Brands was also awarded $2,720 in attorneys’ fees against Versace 19.69. The court granted the motions to withdraw filed by Scott Richman and Michael Gabriel, directed the Clerk to enter judgment and terminate open motions, and closed the case.