Appendix — S. A. R. L. de Gestion Pierre Cardin v. Morse

Al

UNITED STATES COURT OF APPEALS

FOR THE

SECOND CIRCUIT

At a stated Term of the United States

Court of Appeals for the Second Circuit,

held at the United States Courthouse in

the City of New York, on the eighth day

of March one thousand nine hundred and

eighty-two.

Present:

HONORABLE IRVING R. KAUFMAN,

HONORABLE LAWRENCE W. PIERCE,

Circuit Judges,

HONORABLE CHARLES S. HAIGHT, JR.,

District Judge, sitting by

designation.

MARVIN W. MORSE, :

Plaintiff-Appellant, : 81-7644

Vv. :

S.A.R.L. de GESTION PIERRE $

CARDIN,

Detendant-Appellee.

SWANK, INC., PIERRE CARDIN,

MAX J. BELLEST and :

COORDINATING OFFICE, INC.,

Defendants.

A2

Docket No. 81-7644

N.B. Since this statement

does not constitute a formal

opinion of this court and is

not uniformly available to all

parties, it shall not be

reported, cited or otherwise

used in unrelated cases before

- this or any other court.

Appeal from the United States Dis-

trict Court for the Southern District of

New York.

This cause came on to be heard on

the transcript of record from the United

States District Court for the Southern

District of New York, and was argued by

counsel.

ON CONSIDERATION WHEREOF, it is now

hereby ordered, adjudged, and decreed

that the judgment of said District Court

be and it hereby is affirmed.

l. It was proper for Judge Tenney

to deny S.A.R.L.'s motion for a

directed verdict and its motion

for judgment n.o.v. unless the

facts and inferences so favored

S.A.R.L. that reasonable men

could not have arrived at a

pay segpes png | or the ques-

tion was one of law. Saeee

Vv. 427 F.2d 1 r.

19 ° ewing the evidence in

the light most favorable to

Morse, the party opposing the

A3

Docket No. 81-7644

motion, Samuels v. Health and

Hospitals rp., 59

1 ( Cir. 1979), Judge Tenney

properly found that sufficient

factual issues of intent to be

bound to a contract and inclu-

sion of essential terms remained

to bar a directed verdict. In

the March 10 letter, Duquesnoy

stated that Mr. Cardin agreed

to Morse's conditions concern-

ing royalties and duration

gave permission for supplying

to commence, and set a July

date for the commencement of

performance. On the basis of

these facts, it was reasonable

for the jury to conclude that

the parties had agreed to the

essential terms of a contract.

Questions of intent to be bound

only to an integrated writing

translated into English, and of

future negotiations concerning

proliferated sources of supply

were properly decided by the

trier of fact, since the intent

of the parties as expressed in

their Gos reeponsence was un-

A4

Docket No. 81-7644

3.

Lost profits a ye awarded

when they are the direct and

proximate result of a breach of

contract, even if performance

re = ane. arch

v. singer

881

ate is75) aff'd, 542

24 111 (24 cis. pense cert.

, 422 U.S. 987 (1976) .

-A.R.L. may only acess in

its opposition to damages if it

shows that having heard Morse's

expert Dinnerman testify as to

projected profit on cigarette

lighter sales, the jury's award

of $435,000 was based on specu-

lation and guesswork. Bigelow

v. u n

32 The

fact that Morse s business was

not yet firmly established, and

might experience reversals in

the future is no bar to a damage

award. . pret ph E. op. 885,

’

. 1976), afta, 552

F.2d 447 (2a Cir. 19 ince

Dinnerman was closely acquainted

with high-priced cigarette

lighter marketing and sales,

relied on figures derived

independently of those supplied

Morse, the judgment based on

the jury verdict must stand.

AS

Docket No. 81-7644

4.

Since there was no evidence

from which the jury could con-

clude that Duquesnoy actually

knew that the Swank license

included cigarette lighters, a

finding of fraud must be based

upon proof of such recklessness

as constitutes a gross failure

to ye HE nse a9 veer

Trust on

(19

, ince a copy

of the Swank agreement was on

file in Duquesnoy's office, and

Duquesnoy had ready access to

superiors who were aware of the

Swank license, the jury's find-

ing of reckless indifference is

reasonable. Judge Tenney's

instructions, which stressed

that even a finding of gross

negligence would not support a

finding of fraud, were more

than adequate to inform the

jury of the requisite state of

mind.

Since innocent misrepresenta-

tion, rather than representa-

tion or pet by one party

is a prerequisite to a finding

of mutual mistake, mutual mis-

take did not occur here as a

eT oem)

auss 473 F. ’

r.

2).

Docket No. 81-7644

Accordingly, the judgment en-

tered on the jury verdict is

affirmed.

TRVING R. KAUFMAN

Circuit Judges,

S/

CHARLES S. HAIGHT, JER.;

District judge.

oe We ee

Bl

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

x

MARVIN W. MORSE, :

Plaintiff, : 77 Civ.

5185 (CHT)

3

~against-

SWANK, INC., PIERRE CARDIN,

S.A.R.L. DE GESTION PIERRE :

CARDIN, MAX J. BELLEST, and

COORDINATING OFFICE, INC., :

Defendants. :

For Plaintiff: SOLIN & BREINDEL P.C.

530 Fifth Avenue

New York, New York 10036

Of Counsel: HOWARD BREINDEL, ESQ.

ROBERT ARONSON, ESQ.

For Defendants Pierre Cardin and S.A.R.L.

De Gestion Pierre Cardin:

GREENBAUM, WOLFF & ERNST

437 Madison Avenue

New York, New York 10022

Of Counsel: SYDNEY J. SCHWARTZ, ESQ.

LISA S. ROTHBLUM, ESQ.

——--

TENNEY, J.

After a jury trial and a verdict for

the plaintiff Marvin W. Morse, the de-

fendant S.A.R.L. de Gestion Pierre Cardin

("Cardin") has brought a motion for a

judgment notwithstanding the verdict or,

in the alternative, for an order setting

aside the verdict and granting a new

trial. For the reasons set forth below,

the motion is denied.

On a motion for judgment n.o.v., the

Court must apply the same standards as

are applicable to a motion for directed

verdict. 5A J. Moore, Federal Practice

q 50.07[2]), at 50-76 (1980). The Court

may grant the motion only when the evi-

dence is "‘such that without weighing the

credibility of the witnesses there can be

but one reasonable conclusion as to the

verdict,'* Epoch Producing Corp. v.

Killiam Shows, Inc., 522 F.2d 737, 742

B3

(24 Cir. 1975), cert. denied, 424 U.S.

955 (1976), quoting Brady vy. Southern Ry.

plained more fully in National Auto

Brokers v. General Motors Corp., 572 F.2d

953, 956 (2d Cir. 1978), cert. denied,

439 U.S. 1072 (1979):

If the facts and inferences

point so strongly and over-

whelmingly in favor of one

party that the Court believes

that reasonable men could not

arrive at a contrary verdict,

granting of the motions is

proper. On the other hand, if

there is substantial evidence

opposed to the motions, that

is, evidence of such quality

and weight that reasonable and

fair-minded men in the exercise

of impartial judgment might

reach different conclusions,

the motions should be denied,

and the case submitted to the

jury. A mere scintilla of

evidence is insufficient to

present a question to the jury.

572 F.2d at 956, quoting Boeing Co. v.

Shipman, 411 F.2d 365, 374 (Sth Cir.

1969). See also Armstrong v. Commerce

Tankers Corp., 423 F.2d 957, 959 (2d

B4

Cir.), cert. denied, 400 U.S. 833 (1970);

Northeastern Tel. Co. v. American Tel. &

Tel. Co., 497 F. Supp. 230, 239 (S.D.N.Y.

1980). In addition, in interpreting the

trial record, the Court is “bound to

view the evidence in the light most

favorable to [the party opposing the

motion] and to give [him] the benefit of

all inferences which the evidence fairly

supports, even though contrary infer-

ences might reasonably be drawn."

tinenta v rbide &

Carbon Corp., 370 U.S. 690, 696 (1962);

Samuels v. Health and Hospitals Corp.,

591 F.2d 195, 198 (2d Cir. 1979).

Finally, “since the grant of the motion

would deprive a litigant of the oppor-

tunity of having the issues determined

by a jury, the motion should be ‘cau-

tiously and sparingly granted.‘ 9

Wright & Miller, Federal Practice and

Procedure § 2524, at 542." Lee v.

Joseph E. Seagram & Sons, Inc., 413 F.

Supp. 693, 696 (S.D.N.¥. 1976), aff'd,

552 F.2d 447 (2d Cir. 1977).

In this case, the plaintiff's re-

maining theories at the time of trial

rested upon breach of contract and

fraudulent misrepresentation. From the

summer of 1976 through March 1977, Morse

negotiated with a representative of

Cardin about an exclusive license to

sell premium quality cigarette lighters

bearing the Pierre Cardin name and

trademark. Morse alleged that the

parties had agreed upon all of the

essential terms of their contract,

making their agreement binding and en-

forceable. The defendant conceded that

Morse and Cardin had negotiated an

agreement on several important terms of

their contract, but asserted that many

essential terms, including the require-

ment of a written instrument, were never

finalized, thereby leaving the parties’

agreement incomplete and unenforceable.

In addition, the defendant argued that

the parties labored under a mutual mis-

take as to the availability of the li-

cense for cigarette lighters, thereby

precluding any enforceable contract on

the subject. (The license for selling

Cardin lighters in the United States had

already been given to Swank, Inc., a

distributor of men's and women's fur-

nishings. The license was included in a

1967 agreement between Swank and Cardin.)

On the claim of fraud, Morse alleged

that Cardin's representative, Herve

Duquesnoy, intentionally or recklessly

misrepresented the availability of the

license, thereby causing Morse to incur

certain financial expenses in reliance

B7

on Duquesnoy's conduct. In response,

the defendant argued that Duquesnoy's

mistake was innocent, or at most negli-

gent, but that there was no evidence

whatsoever of recklessness or inten-

tional misrepresentation.

After deliberating on the issues

posed, the jury returned a verdict for

the plaintiff. In its answers to special

interrogatories, the jury said that the

parties had reached an agreement on all

essential terms, thereby forming an

enforceable contract, that there was no

mutual mistake, and that Duquesnoy had

fraudulently or recklessly misled Morse.

On the issue of damages, the jury awarded

$453,000. This amount must have repre-

sented lost profits on the license con-

tract, since the plaintiff asked for

only one dollar's damages if the jury

found fraud, and since the Court in-

structed the jury not to reimburse the

Plaintiff for his expenses if it found

that the contract would have been prof-

itable.

In its memorandum in support of the

motion for judgment n.o.v., the defend-

ant makes five general points. First,

Cardin argues that, as a matter of law,

there was no contract between the par-

ties. Second, Cardin asserts that there

was no evidence whatsoever for a finding

of fraudulent misrepresentation. Third,

Cardin argues that, as a matter of law

and equity, the Court should rescind the

contract, if any, on the ground of inno-

cent mutual mistake. Fourth, Cardin

states that the plaintiff's evidence on

damages was insufficient to permit an

award for lost profits. Fifth, Cardin

argues that Morse is not the real party

in interest. In response, the plaintiff

refutes each of the defendant's posi-

tions and asserts that the verdict is

supported by adequate evidence and

should be allowed to stand. The Court

will treat each argument in the order

presented,

Ex n ntract

The existence of a contract turned

on whether the parties had agreed on all

of its essential terms and on whether

the writings received in evidence ade-

quately reflected the agreement. “The

law is clear that although the parties

may intend to enter into a contract, if

essential terms are omitted from their

agreement, or if some of the terms in-

cluded are too indefinite, no legally

enforceable contract will result."

V'Soske v. Barwick, 404 F.2d 495, 590

(24 Cir. 1968), cert. denied, 394 U.S.

921 (1969). In addition, the license

B10

contract, if any, was subject to New

York's statute of frauds because it

would require more than one year to

perform. N.Y. Gen. Oblig. Law § 5-

701(1). New York law does not require

that the parties’ written memorializa-

tion be in one unified document, how-

ever. “It may be pieced together out of

separate writings, connected with one

another either expressly or by the

internal evidence of subject-matter and

occasion,” Marks v. Cowdin, 226 N.Y.

138, 145 (1919), and these writings need

not all bear the signature of the party

to be bound, “provided that they clearly

refer to the same subject matter or

transaction." Crabtree v. Elizabeth

Arden Sales Corp., 305 N.¥. 48, 55, 110

N.E.2d 551, 554 (1953). On the other

hand, the writings, taken together, must

contain xll of the essential terms of

Bll

the agreement without reference to parol

evidence, id. Furthermore, even after

the parties “have reached agreement on

the material terms of a contract, it may

or may not become binding at that point

depending solely on the intention of the

parties,” Bardo Sales, Inc. v. Miller-

Wohl Co., 440 F.2d 962, 964 (24 Cir.

1971), and “the question of intent in

this situation is uniquely one of fact."

Id. at 965.

The defendant contends that, in the

course of their negotiations, the par-

ties never resolved their positions on

many essential terms, including markets,

withholding taxes, advertising costs,

discounts, trademark control, selection

of manufacturers, and an English trans-

lation of Cardin's standard license

agreement. Memorandum of Law in Support

of Defendant's Motion for Judgment Not-

B12

withstanding the Verdict or, in the

Alternative, for a New Trial ("Defend-

ant's Memorandum of Law") at 12-26. To

substantiate its stance, the defendant

reviewed the case's crucial documents,

four letters between Morse and Duquesnoy.

The first was a letter from Duquesnoy to

Morse, dated December 6, 1977, in which

Duquesnoy enclosed a draft agreement (in

French), which Morse should study and

comment upon. Plaintiff's Exh. 22.

Duquesnoy wrote: "I hereby give you the

conditions we require to grant a license

for the lighters PIERRE CARDIN": a

three-year duration, from January l,

1977 through December 31, 1979; a 10%

royalty rate “on turnovers achieved, tax

free"; and guaranteed minimum royalties

of 60,000, 70,000, and 80,000 dollars

for the first, second, and third years,

respectively. Duquesnoy closed by men-

=.

B13

tioning the possibility of renewal

"according to the royalties you will

reach."

The second document was a letter

from Morse to Duquesnoy, dated February

28, 1977. Plaintiff's Exh. 23. The

body of the letter, in pertinent part,

read as follows:

It was a pleasure speaking with

you today and gaining further

understanding of our Pierre

Cardin lighter project. Your

contract did not indicate to us

that we could have the proper

protection and long range busi-

ness pr ts. As I mentioned

on the te ~ gery we are very

disappointed with the response

from Prince of Japan in giving

us new quotations and we are

afraid to make a contract with

you while having only one sup-

plier.

My partners have agreed in

principal to form a new company

and have not as yet picked the

name because we have not gone

far enough due to the problem

set forth in our tele e

conversation. The names of the

partners are listed below and

we all agree to your pr sal

to a guaranteed minimum for the

B14

first year of business for

$60,000.00 royalty, the second

year $70,000.00, and $80,000.00

for the third year. For this

guaranteed royalty our requests

as set forth to you today are

as follows: .

l.- That we are allowed to buy

from more than one source.

All products carrying the

Pierre Cardin label will

of course be approved by

you first. If we find a

manufacturer of sufficient

quality here in the U.S.

or anywhere else in the

world, we can submit sam-

ples to you for approval.

2.- Assignment of the Pierre

Cardin on cigarette

lighters for exclusive use

in the U.S. by us we &

This is to prevent other

firms from capitalizing on

our investment in adver-

tising.

' 3.- Negotiations and contract

in English so that we may

know everything we are

agreeing to.

4.- A renewal clause in a

contract to permit us to

exploit our investment

over more than 3 years.

5.- Proposed new target date

of responsibility to begin

on July 1, 1977.

B15

We look forward to your early

letter giving us the names and

addresses of all firms present-

ly manufacturing Pierre Cardin

cigarette lighters throughout

the world so that we may con-

tact them for prices and de-

livery.

Two of the pernaars are very

active in the watch business.

They request that I inquire as

to the status of your Pierre

Cardin watches and clocks here

in the U.S. If these items are

available, we know of factories

in Switzerland and in the far

east that can produce high

quality products that can be

sold. We would be interested

in distributing this product

also.

In response, Duquesnoy wrote to

Morse on March 10, 1977, saying that he

had spoken to Mr. Cardin personally

about “the project with your house” and

that Mr. Cardin “agrees on the condi-

tions you propose to us," indicating the

minimum royalties, the royalty rate of

10%, and a three-year duration commen-

cing July 1, 1977, with a renewal if

B16

Morse reached one million dollars in the

third year. Plaintiff's Exh. 25. 2/

Regarding suppliers, Duquesnoy named

three Japanese companies, Bronica

Trading Company, Yoshinaga Prince &

Company, and Kojima Precision Parts

Company. Morse could get his supplies

of lighters “from them and them only."

Duquesnoy closed by saying: "As soon as

you have contacted them [the Japanese

companies] and have actually organized

this supplying, will you be kind enough

to let me know about it, very quickly,

so that I can ask to [sic] our lawyer in

New York, to start the wording of our

contract which will begin on lst July,

1977."

As soon as Morse received this let-

ter, he replied with the following,

Plaintiff's Exh. 26: 2/

B17

Thank tt for your letter of

March 10th. We are pleased

that you agree with our five

points set forth in the letter

of February 28th.

We take note that you have

given us the names of three

manufacturers in Japan as li-

censees for the Pierre Cardin

cigarette lighters. If you

will recall our telephone con-

versation you did mention that

there were manufacturers in

Italy and France that are pres-

ently manufacturing under your

name. We would like to have

these names to contact and

inspect their line.

We also ask if you would permit

us to find other manufacturers

of quality cigarette lighters

such as Maruman in Japan and

more important firms in Taiwan

and South Korea where there

would be no import duty for us

to pay and therefore allowing

us to have highly competitive

hp for a more complete

ne.

We also mentioned in our letter

in the last paragraph that we

have partners interested in

clocks and watches. We have

not noticed any Pierre Cardin

clocks being advertised here

and we are presently importing

Citizen clocks for sale. We

know that Citizen has a Pierre

Cardin clock and watches and

B18

assume that there are other

manufacturers in Europe using

this name. We are anxious to

proceed with the fullest pos-

sible line and feel that the

cigarette lighter, watches and

mini alarm clocks can be sold

in the same boutique.

Once again we hope to visit you

in Paris to complete verbal

negotiations if it would be a

benefit. Please let us hear

from you at your earliest con-

venience.

In arguing that these documents are

legally insufficient to evidence a con-

tract, the defendant points out the

numerous items which were never fully

resolved. For example, on March 14,

Morse asked Cardin to “permit us to find

other manufacturers” because he was

still displeased with the quality and

import duties of the Japanese suppliers.

Plaintiff's Exh. 26. And in the same

letter he said: “Once again we hope to

visit you in Paris to complete verbal

negotiations if it would be a benefit."

_

B19

In both the February 28 and March 14

letters, Morse spoke about a license

agreement for watches and clocks as well

as lighters. Most important, according

to the defendant, the parties never

negotiated or signed an integrated con-

tract. Defendant's Memorandum of Law at

16-18. It was well known in the indus-

try, and to Morse personally, that only

Pierre Cardin could sign license agree-

ments for his company. In addition,

since the parties had not sat down to

negotiate all of the fine points of

their arrangement, they left unresolved

many essential terms (which are men-

tioned in the French contract). In

short, the defendant contends that,

despite a preliminary agreement on

royalties and duration, the parties

could not, as a matter of law, have

formed a contract without agreeing on

numerous other factors and without sign-

ing an integrated document.

In response, the plaintiff argues

that the most important terms of the

agreement were royalties and duration

and that all other terms, although im-

portant, were not essential, as judged

from the parties' perspectives. Memo-

randum of Law of Plaintiff in Opposition

to Defendant's Motion for a Judgment

Notwithstanding the Verdict or for a New

Trial ("Plaintiff's Memorandum of Law")

at 9-20. On the adequacy of the under-

standing between Morse and Duquesnoy,

the jury was instructed that:

In order for you to find that a

contract existed, you must

first find that the parties had

agreed on all of the essen: ‘al

or principal elements of their

arrangement. An essential term

of a contract is one which

affects the rights and duties

of the parties in a substantial

and important way.

B21

Now to find that the parties

reached an agreement it is not

necessary to find that they

agreed on every element of the

contract. But you must find

that they agre on all of the

elements which they would have

considered important to their

rights and obligations.

Tr. at 468. Plaintiff's counsel, in his

summation, argued that the exhibits

"[show] what is essential to Mr. Cardin,

one thing, money, nothing else. ...

That is to say, the nature of the deal,

the duration and the price." Id. at

444. In refuting the importance of the

other factors mentioned by Cardin,

Plaintiff states that “the jury could

have concluded that these were not

essential terms." Plaintiff's Memoran-

dum of Law at 19 (first emphasis sup-

Plied). And despite the Court's own

opinion about the completeness of the

agreement, the plaintiff is correct that

the jury could have reached the conclu-

sion it did reach about which terms were

essential.

There is substantial evidence in the

case for inferring that the parties had

not reached a complete, enforceable

contract. For example, Morse's letter

of February 28, 1977 stated that he

wanted “[njegotiations and contract in

English so that we may know everything

we are agreeing to." Plaintiff's Exh.

23 (emphasis supplied). This suggests

that Morse and his co-venturers were

themselves concerned with detail and

with assuring that their business pros-

pects were fully spelled out, in English,

before any obligations were undertaken.

At trial, Morse testified that "I wanted

the documents in English, and of course

this [the letter of March 10, 1977] is

in English." Tr. at 83. It would seem

that the convenient coincidence that the

B23

March 10 letter was in Engligh is not

what Mr. Morse had in mind when he spoke

of “the documents in English." The

frequent references to draft contracts,

to phrasings, and to lawyers suggest

that more formal instruments were con-

templated. Besides, Morse himself had

asked for “negotiations and contract” in

English, Plaintiff's Exh. 23; the March

10 letter could have been part of those

English-language negotiations, leading

up to an English contract.

Most important, the matter of sup-

Pliers was very much unresolved. Cardin

recommended one Japanese firm. Morse

asked for others, to which Cardin re-

sponded by allowing three Japanese

firms, but “them only." Plaintiff's

Exh. 25 (emphasis in original). Morse

coolly responded: “We take note that

you have given us the names of three

B24

manufacturers in Japan." Plaintiff's

Exh. 26. In the next paragraph, he

continued, "We also ask if you would

permit us to find other manufacturers,"

including those from other countries,

Id. This was very important to the

project, for as Morse stated in a telex

dated March 26, 1977: “We want to

handle better quality merchandise than

that offered by Japan." Plaintiff's

Exh. 31. Nonetheless, plaintiff argued

at trial and on this motion that he was

only asking for permission to find al-

ternative sources; he was not demanding

other sources as a condition to the

deal. In the February 28, 1977 letter,

Morse wrote: "If we find a manufacturer

of sufficient quality here in the U.S.

or anywhere else in the world, we can

submit samples to you for approval."

Plaintiff's Exh. 23. Although the

choice of sources undoubtedly would have

affected Morse's performance of the

contract, and its sales and profit-

ability -- and probably would have

affected the decision whether to enter

the contract -- the jury apparently

believed the plaintiff when he stated

that he agreed to Cardin's restriction

on suppliers, so long as Morse could

submit other products for possible ap-

proval wv

On a motion for judgment n.o.v., the

Court must draw all inferences in favor

of the party opposing the motion.

Therefore, the jury's findings on the

existence of a contract must stand.

Similarly, the Court will not disrupt

the jury's finding that the written

correspondence was adequate to memorial-

ize the parties’ agreement. Indeed, if

one starts with the proposition that

only the royalty rates and the duration

were essential terms, then the letters

were fully adequate as contracts because

they stated and restated those terms.

On whether an integrated contract was

one of the essential terms, the jury

apparently believed the plaintiff's

testimony that a contract would merely

"incorporate the basic facts that we

have in [the correspondence of] February

28 and March 10" and “some minor

facts ... such as the dates and method

of payment of [Cardin's] royalties."

Tr. at 133-34. As in determining the

contract's essential terms, the parties’

intent governs the role of an integrated

instrument.

Two rules on this subject are

well established: first, if

the parties intend not to be

el until they have executed

a formal document ing

their agreement, they will not

be until then; and second,

the mere fact that the parties

B27

contemplate memorializing their

agreement in a formal document

does not prevent their informal

agreement from taking effect

prior to that event.

V'Soske v. Barwick, supra, 404 F.2d at

499 (citations omitted). These rules

were paraphrased in the jury's instruc-

tions, Tr. at 470, and the jury appar-

ently found that the parties intended to

be bound before the drafting and signing

of a complete agreement. This finding

will not be disturbed.

Often, when courts enforce unwritten

contracts which ordinarily would have

been reduced to writing, the parties

have at least begun their respective

performances. See, e.g., Metro-Goldwyn-

Mayer, Inc. v. Scheider, 40 N.Y¥.2d 1069,

392 N.Y¥.S.2d 252 (1976) (per curiam).

When this happens, the parties force-

fully demonstrate that they consider

their agreement sufficiently complete

and clear in its essentials that per-

formance can begin without a formal

signed document. In Metro~Goldwyn-Mayer,

Inc. v. Scheider, supra, the Court of

Appeals quoted with approval the trial

term's ruling that

where the parties have com-

pleted their negotiations of

what they regard as essential

elements, and performance has

begun on the good faith under-

standing that agreement on the

unsettled matter will follow,

the court will find and enforce

a contract even though the

parties have expressly left

these other elements for future

negotiation and agreement, if

some objective method of deter-

mination is available, inde-

pendent of either party's mere

wish or desire. Such objective

criteria may be found in the

agreement itself, commercial

practice or other usage and

custom. If the contract can be

rendered certain and complete,

by reference to something cer-

tain, the court will fill in

the gaps. [citations omitted]

75 Misc. 24 418, 422, 347 N.Y¥.S.2d 755,

761 (Sup. Ct. 1972).

In this case, there was no partial

performance. Indeed, Morse and his co-

venturers never even formed the corpora-

tion that was to undertake the distribu-

tion of Cardin lighters. But this ab-

sence is by no means fatal to Morse's

claims. Morse represented that the

Morse Typewriter Company would provide

the space and facilities needed for the

lighter business, and Morse himself

proposed to do most of the selling and

administration himself, leaving only

finance and overseeing to the other

investors. On this basis, the jury

could have found that the new company

would have been ready by July 1, 1977,

the starting date for the lighter li-

cense. After Morse received Duquesnoy's

letter of March 24th, ending the pro-

ject, the investors had no reason to

form the corporation and make capital

contributions.

Regarding the gaps in the parties’

agreement, the jury was instructed as

follows:

To contain the essential ele-

ments of the contract, the

writing or writings can either

state the parties’ agreement or

it may refer to other writings

or other nonwritten standards

for inferring what the parties

agreed to. But if any term is

to be supplied by inference,

the source of the inference

must be readily ascertained and

it must be objective.

In other words, the writings

must be complete enough and the

reference to other sources must

be certain enough that you can

understand the contract com-

pletely and fairly on the basis

of what the writing contains.

You must have confidence that

yeoe understanding of the con-

ract is in lete accordance

with the intention of the _

ties on all terms and condi-

tions which would be important

to them.

Tr. at 468-69. Presumably the jury

accepted and obeyed this instruction in

considering the completeness of the

terms and the completeness of the writ-

B31 4

ings. As such, and in accordance with

New York's preference for enforcement

rather than rescission of contracts, see

Lee v. Joseph BE. Seagram & Sons, Inc.,

Supra, 413 F. Supp. at 697-98, the jury

verdict on the existence of a contract

4/

must stand.

Amount of Damages

It is well-established that lost

profits are an appropriate element of

damages for breach of contract where

"the loss of prospective profits are the

Girect and proximate result of the

breach; profits were contemplated by the

parties when they entered the contract;

and there is a rational basis on which

to calculate profits." Perma Research &

Dev. Co. v. Singer Co., 402 F. Supp.

681, 898 (S.D.N.Y¥.), aff'd, 542 F.2d 111

(24 Cir. 1975); cert. denied, 429 U.S.

987 (1976); Freund v. Washington Square

B32

Press, Inc., 34 N.¥.2d 379, 357 N.Y¥.S.2d

857 (1974). Of course, our confidence

in the amount awarded for lost profits

is greatest when the business involved

has a track record or when the subject

matter of the contract is actually put

to its intended use by someone other

than the plaintiff. E.g., Western Geo-

physical Co. v. Bolt Assoc., 584 F.2d

1164 (24 Cir. 1978) (licensor wrongfully

abrogated license agreement and used the

license to generate its own profits,

which became strong evidence of the

profits lost). But the lack of a com-

plete track record is not fatal to a

Claim of lost profits. For Children,

Inc. v. Graphics Int'l, Inc., 352 F.

Supp. 1280 (S.D.N.¥. 1972). “The whole

matter is a question of the evidence."

William Goldman Theatres v. Loew's,

Inc., 69 F. Supp. 103, 105-106 (E.D. Pa.

B33

1946), aff'd, 164 F.2d 1021 (3d Cir.),

cert. denied, 334 U.S. 811 (1948).

"(I]t will be enough if the evidence

show the extent of the damages as a

matter of just and reasonable inference,

although the result be only approxi-

mate." Story Parchment Co. v. Paterson

Parchment Paper Co., 282 U.S. 555, 563

(1931). “Also, where there is a con-

tract and the breach thereof causes harm

to a plaintiff and the only difficulty

is in measuring the harm, the law will

not allow a defendant to escape liabil-

ity merely because the fixing of damages

is difficult or imprecise." Lee v.

Joseph E. Seagram & Sons, Inc., supra,

413 F. Supp. at 707. “The wrongdoer

should bear the risk of uncertainty that

his own conduct has created." Autowest,

Inc. v, Peugeot, Inc., 434 F.2d 556, 565

(24 Cir. 1970). The only restriction is

B34

that “the jury may not render a verdict

based on speculation or guesswork."

Bigelow v. RKO Radio Pictures, Inc., 327

U.S. 251, 264 (1946); Herman Schwabe,

Inc. v. United Shoe Machinery Corp., 297

F.2d 906, 909-10 (2d Cir.), cert. denied,

369 U.S. 865 (1962).

These principles were summarized and

described for the jury after the trial

on damages. Tr. at 775-78. The Court's

instructions stressed that a damage

award, if any, was intended only to

compensate the plaintiff, that the

Plaintiff had the burden of proof, that

the jury could interpret evidence but

could not speculate about damages, and

that punitive damages were not part of

the case. Upon reviewing these charges,

the Court finds that they completely and

accurately reflect the law on lost prof-

its, leaving only the sufficiency of the

B35

evidence as a basis for the defendant's

present motion.

The crux of the problem on damages

is that, while the Court found the de-

fendant's purported expert unqualified

to give his opinions about Morse's dam-

ages, Tr. at 709, the plaintiff offered

the testimony of Mr. George P. Dinnerman,

whom the Court found -- and still finds

-- qualified to testify on the issue of

lost profits. Dinnerman has had over

twenty years’ experience in sales and

sales management for several major im-

porters and distributors of cigarette

lighters. Although some question was

raised about the extent of his experi-

ence with high-priced lighters, see

defendant's Memorandum of Law at 43,

Dinnerman testified that the Ronson

Corporation, which he left in 1970, did

approximately 35% of its business in

B36

lighters priced between $40 and $90, Tr.

at 645, and since 1970 he has been

familiar with lighters “above the $30

range” which he called “the dividing

line insofar as classification,” Tr. at

646. In addition, he has had experience

with several of the particular lighter

models Morse intended to sell. Plain-

tiff's Memorandum of Law at 32. More

importantly, forecasting constituted a

substantial portion of Dinnerman's

responsibilities in his various posi-

tions, Tr. at 590, 594, 597, 602, 604,

606, and his projections covered large

geographic areas, eventually including

the entire continential United States,

with some contacts in international

markets. On the basis of his extensive

familiarity with forecasting and sales

of cigarette lighters, the Court was

convinced, and remains convinced, that

B37

Dinnerman is a qualified expert on the

subject.

The strength, accuracy, and admissi-

bility of his predictions of Morse's

lost profits is another matter. Most

generally, Cardin argues that “there is

no .. . competent evidence from which

any rational deduction by an expert can

be made. There is only self-serving

speculation based on hearsay, and on the

hopes and wishes of Morse, relied upon

by an ‘expert’ who had no experience in

the field of selling a designer lighter

at a similar price bracket in ten years,

and who made no independent evaluation

of the expenses, costs, and ultimate

marketing success." Defendant's Memo-

randum of Law at 51-52. As discussed

above, the Court was satisfied that

Dinnerman's background qualified him to

speak on the issue of damages in this

B38

case. Regarding any infirmity of his

predictions, see Plaintiff's Exh. 57,

the defendant had ample opportunity to

cross-examine the witness and did so.

The Court is not convinced, however,

that Dinnerman's testimony should be

excluded under Herman Schwabe, Inc. v.

United Shoe Machinery Corp., supra, 297

F.2d at 912, where the Second Circuit

warned against “an array of figures

conveying a delusive impression of

exactness in an area where a jury's

common sense is less available than

usual to protect it." In Herman Schwabe,

the expert used a market share for one

year (based upon an assumed total market)

and applied that figure to six years'

sales in many different markets. In

addition, that case arose under the

antitrust laws, where the question of

causation is immensely complicated be-

cause both legal and illegal practices

contributed to the defendant's market

share. Third, “[t]here was no showing

either that [the plaintiff] ever had

competed, or even that but for [the

defendant's] unlawful acts it would have

competed, as to all the 24 types [of

machines]; further, the evidence made it

Plain that as to some types with respect

to which it had competed the [plain-

tiff's] product was higher in cost or

lower in quality or delivery terms."

Id. at 911.

These facts are distinguishable from

Dinnerman's predictions for Cardin

lighters. After comparing the proposed

Cardin lighters with many other brands,

Dinnerman set out to evaluate only one

market, “the refillable market." He

assessed “what had been happening in the

refillable market over the past years,

B40

the impact that disposables had had upon

refillables on the low end refillables,

on the high end refillables, and came up

with an individual breakdown by units of

seven items that [he] was making [his]

forecast on.” Tr. at 608-09. He

"checked the number of retail outlets

where [he] thought these lighters could

be sold." Id. The additional factors

he considered were: Cardin's “very

strong consumer image,” Tr. at 612; its

status as a gift item in competition

with “jewelry and/or designer type

lighters,” id.; the selling network

available to Swank, Inc., which already

held the lighter license; the sales of

lighters in Canada, as reported by the

supplier of Cardin lighters, as well as

the 10-to-l ratio he had come to expect

between American and Canadian sales, Tr.

at 613-14; and government figures for

refillable lighters.

B41

What this indicates is that

Dinnerman, a man well acquainted with

products and markets closely related to

those Morse was considering, studied

numerous relevant elements which would

go into predicting market performance

for one product in one market. Unlike

in Herman Schwabe, Inc. v. United Shoe

Machinery Corp., supra, the defendant's

breach of contract was clearly the cause

of whatever losses the plaintiff suf-

fered, and the plaintiff (who already

had some experience selling Cardin

lighters and whose partners were

familiar with other jewelry products)

Clearly planned to enter the market,

where there was no other designer lighter

in direct competition. Tr. at 684.

Concededly, there were elements of

estimation in Mr. Dinnerman's predic-

tions. But estimation is endemic in the

B42

process of forecasting, and the Court is

satisfied that the expert placed enough

reasonably reliable, pertinent informa-

tion in front of the jury that they

could reach a rational verdict. Defend-

ant complains that Dinnerman's report

rested on two particularly objectionable

pieces of information. One was a telex

from the Japanese supplier of Cardin

lighters in Canada; the other was Morse's

own estimate of costs and sales, drawn

up in December 1976 in anticipation of

the license contract. The fact that

Dinnerman relied on the telex, Plain-

tiff's Exh. 61, is unobjectionable be-

cause he testified that the documents he

used in arriving at his projections were

of “the type that have been relied upon

by [him] in the past to make projections

of cigarette lighter sales and net prof-

its." Tr. at 611. Fed. R. Evid. 703.

a” fa

B43

The second document was admitted into

evidence as part of the testimony of a

fact witness. Plaintiff's Exh. 91, Tr.

at 523. As the Court informed the de-

fendant's counsel at that time, “you are

at liberty to cross-examine [Morse] on

it," id., which counsel did. In short,

the telex and Morse's projections were

properly included in Dinnerman's esti-

mates. Whether they support the expert's

conclusions was a matter for cross-

examination.

The defendant's numerous arguments

in the brief on this motion were also

more properly addressed to the jury

which had to weigh the evidence. These

arguments included the following:

Morse's sales should have been judged by

Swank's sales, even though Swank sold

hundreds of other Cardin products; the

calculations based upon the Canadian

B44

sales contained many potential sources

of error; overhead, salesmen, and dis-

counts would have inflated Morse's

costs; Morse's record in duty-free shops

indicates that his sales generally would

have been lower than predicted; and

businesses generaliy may fail. Defend-

‘ant's Memorandum of Law at 45-53. Much

of this was brought out in defendant's

cross~-examination of Dinnerman and in

the defendant's summation. Apparently

the jury somewhat agreed with the de-

fendant that Dinnerman's report, Plain-

tiff's Exh. 57, overstated Morse's pros-

pects because it returned a verdict of

$435,000, which was approximately one

quarter of the 1.8 million dollars pro-

jected. If defendant could have sub-

stantiated its contention that Morse

would have lost money on this venture,

it should have brought an expert

B45 4

similarly qualified to opine on the

subject of cigarette sales, instead of

bringing a Swank officer whose expertise

was in men's furnishings generaily and

whose familiarity with lighter sales

rested only on his knowledge of a few

sales figures. The fact that Dinnerman

was not effectively rebutted does not

mean that his estimates were irrational,

or that his information failed to give

the jury a rational basis for arriving

at a verdict. Once one accepts the

jury's finding that the parties had

concluded a contract, then the damage

award seems reasonable.

Fraudulen n n

The parties agree that the Court

correctly charged the jury on the ele-

ments constituting fraud. Defendant's

Memorandum of Law at 27; Plaintiff's

Memorandum of Law at 47-48. Fraud can

B46

rest upon knowledge or recklessness in

making a representation. The Court

agrees with the defendant that the jury

could not find knowledge on the part of

Duquesnoy. The evidence showed that

Duquesnoy was young, fairly inexperi-

enced, new to his job, and not fully

informed about the existing Cardin con-

tracts, including the contract with

Swank which already held a license for

cigarette lighters. But the jury could

have found that Duquesnoy was reckless

in representing to Morse that the li-

cense was still available.

In response to a question from the

jury, the Court explained that

""([sljcienter, which means knowledge,

- « » includes not only misrepresenta-

tions but also reckless indifference to

error, a pretense of knowledge, and the

misrepresentation of a material fact

B47

susceptible of accurate knowledge but

stated as true on personal knowledge of

the representer.'" Tr. at 497, quoting

Morse v. Swank, Inc., 459 F. Supp. 660,

667 (S.D.N.Y. 1978). The Court added:

"Now, that means that it is not negli-

gent, but it is something considerably

more than negligence.” Tr. at 497. On

the basis of these instructions, and in

light of the evidence in the case, the

jury could have reasonably concluded

that Duquesnoy was recklessly indiffer-

ent about the effect he had on Morse .5/

Duquesnoy testified by deposition that

he was unaware of Swank's license for

lighters, yet he was aware that Swank

held a license on cigarette cases. His

deposition, as a whole, gave the im-

pression that he was uncooperative and

evasive. In addition, another Cardin

employee, Eduoard St. Bris, with whom

Duquesnoy had close contact, was nego-

tiating with Swank about a line of

lighters at the same time that Duquesnoy

was negotiating with Morse. From all of

this, the jury could have drawn the

inference that Cardin's agent acted

recklessly.

Regarding damages, even if the find-

ing of fraudulent misrepresentation were

overturned, the verdict would not be

affected because Morse's counsel asked

for only nominal damages on this claim.

Tr. at 778.

Mutual Mistake

The problem of mutual mistake is the

thorniest in the case. But as the de-

fendant conceded: “Because the issue of

mutual mistake carries with it the re-

quirement of innocent misrepresentation,

- « « if the jury's verdict on fraud is

permitted to stand, the discussion of

B49

mutual mistake will no doubt be rendered

moot." Defendant's Memorandum of Law at

3*,

As a matter of equity, a contract

can be rescinded if both parties were

mistaken about a material fact.

The aaee concept of “mistake”

is similar to the legal concept

of "misrepresentation” in that,

under each, a party to a con-

tract may be relieved from his

obligations if he was unaware

of certain materia acts.

stake’, however, is only

such error as is thout

representation or deception

the other pert ° rans-

tracts § 1540 (3d ed. 1970).

Where the mistake is unilateral,

the contract is not voidable.

But where both parties assume a

certain state of facts to exist,

and contract on the faith of

that assumption, they can be

relieved from their obligations

if the assumption is erroneous.

See Baumann v. Florance, 267

App. Div. 113, 114, 44 N.Y.S.2d

706, 707 (3d Dept. 1943).

Leasco Corp. v. Taussig, 473 F.2d 777,

781 (24 Cir. 1972) (emphasis supplied) ;

Tinkess v. Burns, 24 A.D.2d 545, 261

N.Y¥.S.2d 472 (4th Dep't 1965) (rescission

available for “innocent misrepresenta-

tions" “unknown to the parties at the

time of the execution of the agreement").

Of course, a court should not deny

rescission and enforce a contract where

doing so would be unjust. As stated in

Baumann v. Florance, supra, “mutual

mistake as to a material fact will avoid

a contract regardless of the negligence

of either party unless a change in posi-

tion renders it unjust." 44 N.Y.S.2d at

707 (emphasis supplied). In other words,

negligence is excusable so long as the

parties can be made whole. "“"(M])istakes

by definition reflect oversight or some

lack of care and so the requirement that

the mistake occur in the exercise of

ordinary care may not be interpreted

narrowly. The question is whether the

mistake is of the variety considered

B51

excusable and each case must be con-

sidered on its own facts." Balaban-

Gordon Co. v. Brighton Sewer Dist., 41

A.D.2d 246, 342 N.¥.S.2d 435, 439 (4th

Dep't 1973).

Even though a finding of fraud is

not a requisite for the relief of re-

scission, see Tinkess v. Burns, supra, a

finding of fraud is sufficient to show

that Duquesnoy was not innocently mis-

taken. In addition, although Morse

appears to have been misled even before

he contacted Cardin's Paris office, the

jury's finding of fraadulent misrepre-

sentation or reckless indifference sug-

gests that Duquesnoy inexcusably failed

to inquire and to inform Morse about

Swank's existing license. The Court

expressed its opinion when it commented,

outside the hearing of the jury, that

"(ujJnfortunately this case [is] very

interesting because it's a comedy of

errors.” Tr. at 391. Shortly there-

after, the Court said, "It's not mutual

mistake, it's universal mistake." But

the jury apparently arrived at a differ-

ent conclusion about the innocence of

Cardin's business practices. According-

ly, the Court will defer to the fact-

finder's verdict and uphold its view

that there was no mistake. The Court's

charge on mistake was as follows:

{[I]£ both rties honestly

believed that the license was

still available and open to

negotiation, then you may find

that there was a mutual mis-

take. But if either Mr. Morse

or Mr. Duquesnoy knew that the

Cardin license for cigarette

lighters had been given to

Swank, then you may find that

there was no mutual mistake.

Tr. at 472-73. Furthermore, the Court

explained that negligence was not enough

to find that Duquesnoy “knew” of Swank's

license. Id. The Court will not assume

that the jury ignored this instruction.

rty in Interest

Defendant also argues that Morse is

not the real party in interest because

the assignment from two of his co-

venturers is inadequate, because a third

co-venturer who withdrew from the pro-

ject never gave him an assignment, and

because his co-venturers never formed

the corporation they promised to form.

Defendant's Memorandum of Law at 54-

56. In a Memorandum in this case, dated

October 11, 1978, the Court wrote: “New

York law .. . does not take a rigid

view of assignments. .... At best

the challenges to the assignment merely

point to factual matters unclear on the

record." Its view has not changed on

the subject.

First, the fact that the corporation

was never formed is neither a surprise

nor a bar to the assignment of claims.

This Court will not rule that, even

after Duquesnoy ended the project, the

co-venturers were required to capitalize

a $300,000 corporation just to pursue a

Gamage claim. Second, as the plaintiff

points out, the defendant never asked

for a jury charge directed to the "fac-

tual matters" which the Court found

"unclear on the record,” as of October

ll, 1978. See Plaintiff's Memorandum of

Law at 55. Despite the generality of

the assignment, the nature of the claims

referred to was quite clear. If the

defendant failed to specify its argu-

ments about the assignment's inadequacy

and failed to present its arguments to

the jury, the Court will not now rule

that, as a matter of law, the assignment

was inadequate.

New Trial

As an alternative to its motion for

a judgment notwithstanding the verdict,

the defendants seeks a new trial, an

option permitted by Fed. R. Civ. P.

50(b). Most of Cardin's arguments for a

new trial amount to recitations of points

it would like to make more forcefully to

the jury if given another chance. See

Defendant's Memorandum of Law at 57-

61. In addition, Cardin objects to

several specific defects it finds in the

conduct of the trial. More particular-

ly, Cardin objects to the introduction

of Plaintiff's Exh. 26, the March 14,

1977 letter from Morse to Duquesnoy.

This letter was surely admissible as it

bore on the parties’ intent, and the

Court expressly instructed the jury that

Duquesnoy could not be considered bound

by Morse's statements, Tr. at 470-72.

Also, Cardin objects to the admission

into evidence of several documents per-

taining to damages. Plaintiff's Exhs.

66-68, 91. As it did at trial, the

Court still finds these documents ad-

missible, although their weight was a

matter for the jury to decide. If

Cardin had offered more competent evi-

dence on the issue of damages, the jury

might not have believed Morse's case as

far as it did. But this observation

does not mean that the plaintiff's ex-

hibits should have been taken away from

the jury, nor that a new trial is needed

to remedy the shortcomings in the de-

fendant's case. Finally, Cardin argues

that the Court should have charged clear-

and-convincing evidence instead of pre-

ponderance-of-the-evidence on the issue

of fraud. Because Cardin failed to

object to the Court's instruction before

B57

the jury retired to deliberate, it can-

not now assign as error the Court's

charge on burden of proof. Fed. R. Civ.

Pp. Sl.

Conclusion

The defendant's motion for a judg-

ment notwithstanding the verdict or, in

the alternative, for a new trial is

denied.

So ordered.

Dated: New York, New York

August 5, 1981

*/ SL FEEL

MARVIN W. MORSE,

Plaintiff, 77 Civ. 5185

~against- (CHT)

SWANK, INC., et al.,

Defendants.

FOOTNOTES

1l/ Among its other arguments, Cardin

asserts that Duquesnoy lacked author-

ity to bind his company “absent a

final written singular document pre-

pared by attorneys, negotiated by

attorneys, approved by Pierre Cardin,

and signed by Cardin personally."

Defendant's Memorandum of Law at 23.

As buttressed by all of the evidence

describing the course of contact

between Morse and Duquesnoy, Plain-

tiff's Exhibit 25 lays to rest any

possible claim that Duquesnoy lacked

authority. The document specifically

states that en pag "saw Mr. Pierre

CARDIN concern Paya roject...

{He] agrees on t congit ons you

pr sed to us." Even if Duquesnoy

acked actual authority, he probably

en 0 apparent authority all along,

e certainly did after Morse

received the March 10th letter. See

n v

° , 3S

cr.

4/

The defendant objected to having this

document included with the three

other exhibits cee pe | creating a

contract. Plaintiff's Exh. 26 was

signed only oo and not by

Duquesnoy. Court pointed this

out out to the jury, Tr. at 471-72,

and allowed the document to be con-

sidered insofar as it bears upon the

parties’ intent to be bound.

On the issue of s sues 5608. the plain-

tiff's brief incl an odd state-

ment: “Obviously, Morse would not

have asked for permission if he did

not feel bound to a act which he

felt was still being negotiated

Law at 20 (second emphasis ——-!°

First, the Court does not weig

heavily Morse's use of the verb

"permit." One can demand permission

or request it. Second, Morse surely

did not mean that the contract it-

self was still under negotiation; he

must have meant that the permissibly

unfinished terms, such as the full

gee of possible suppliers, were

"still being negotiated."

In their memoranda, neither of the

parties mentioned the case of -

v —

pabiooal qlee 352 Poa 75 9] =

ii

FOOTNOTES

—r

1979). The plaintiff apparently

uncovered the precedent--a string

cite on pages 6 to 7 of the Plain-

tiff's Memorandum of Law quotes

almost verbatim a string cite, in-

cluding parentheticals, which ap-

pears in 592 F.2d at 56--but he did

not direct the Court's attention to

the context in which he found his

legal authoirty.

One might infer from this that Morse

considered the legal principles in

International Telemeter helpful to

his cause, but that he wanted to

avoid any application of its facts

to the facts in this case. The

Court finds that the facts of Inter-

national Telemeter are somewha

damaging to the plaintiff's posi-

tion, but that this case is ulti-

mately distinguishable.

In inser e ont Seems the

district and appeals courts enforced

a settlement agreement even though

it had never been delivered to the

Plaintiff and there was a consider-

able dispute about whether it had

been fully and properly executed by

the defendant. The facts were as

follows: The plainitff instigated a

patent infringement suit against

several defendants. After the reso-

iii

B61

FOOTNOTES

iv

lution of pretrial motions, the

remaining defendants were Tele-

prompter Corporation, Hamlin Inter-

national Corporation, and an indi-

vidual, Philip D. Hamlin. The par-

ties negotiated a settlement for

nine months, hashing out n merous

details until they had arrived at an

acceptable draft. Then, just before

the agreement was to have been exe-

cuted, the two Hamlin defendants

withdrew. Teleprompter advised the

plaintiff that the settlement should

proceed without the Hamlin defend-

ants. The drafts were revised to

remove the references to the Hamlin

defendants; several copies were de-

livered to Teleprompter, whose coun-

sel advised International Telemeter

that they had been signed; and then

Teleprompter's new management re-

fused to proceed with the agreement,

notifying the plaintiff that defend-

ant's counsel had been mistaken when

he advised them that the agreement

had been executed. At trial, the

district court found that the agree-

ment had been signed and that the

parties intended to be bound prior

to the signing and delivery of the

document. The court of a als

affirmed on the basis of those find-

iv

B62

FOOTNOTES

v

The facts of International Telemeter

are damaging to Morse in severa

ways. First, the case shows that

detailed negotiations are often

critical to the shape of a final

agreement. Second, when the courts

enforced the settlement agreement,

there was no ambiguity about its

terms because so many items had been

considered and defined. Third, in

holding the defendant to its agree-

ment, the courts could point to

letters from the defendant's repre-

sentatives stating that Teleprompter

would go ahead with the settlement

on the terms already worked out.

None of these factors is present in

Morse's case.

On the other hand, the standard

endorsed by the court of appeals is

broad enough to justify the jury's

verdict. The court wrote: “Whether

or not the parties have manifested

an intent to be bound must depend in

each case on all the circumstances."

592 F.2d at 56. In this case, the

plaintiff argued that the parties

intended to be bound before they

committed their arrangement to writ-

ing and that the general terms about

royalties and duration were suffi-

cient, according to their intention,

to complete the contract. The jury

agreed, and this Court will not

upset that verdict.

v

B63

FOOTNOTES

—S

In a concurring opinion in Inter-

national Telemeter, Judge Friendly

expressed some reservations about

the court's decision. He agreed

that negotiators should not be al-

lowed to withdraw right up until a

document is signed and delivered,

despite the parties’ completion of a

detailed agreement. But he wrote

that “when the parties have mani-

fested an intention that their rela-

tions should be embodied in an

elaborate signed contract, clear and

convincing proof [should be] required

to show that they meant to be bound

before the contract is signed and

delivered." 592 F.2d at 58. Such

proof “could consist in one party's

allowing the other to begin per form-

ance [citations omitted] or in un-

equivocal statements by the princi-

pals or authorized agents that a

complete agreement had been reached

and the writing was considered to be

of merely evidentiary significance."

Id. These suggestions, however, are

not yet the law of this circuit.

The Court finds highly farfetched

the plaintiff's suggestions about

Duquesnoy's “motives” in misleading

Morse. See Plaintiff's Memorandum

of Law at 52-53. Morse theorizes

that Cardin hoped to goad Swank into

vi

B64

FOOTNOTES

SS

exploiting its license for cigarette

lighters by opening negotiations

with a new licensee, namely Morse.

However, with the lighter license

already included in Swank's con-

tract, Duquesnoy could only invite a

lawsuit by negotiating a competing

contract with Morse. And as we can

all see, a lawsuit is exactly what

Cardin got.

On the other hand, the jury could

have believed Morse's unlikely

tale. In the depositions read to

the jury, Cardin and Duquesnoy gave

the impression that they were un-

cooperative, arrogant, and evasive

and that they knew nothing about the

subject matter of the suit. From

this, the gury might have decided

that they had hoped to strong-arm

Swank threatening to re-license

the right to distribute lighters to

Morse.

vii