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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1982
- **Citation:** 459 U.S. 833

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_0149%3A2. Public record. Not legal advice.