Washington v. Kellwood Company
714 F. App'x 35
| 2d Cir. | 2017Background
- SP (Daryl K. Washington and Sunday Players, Inc.) licensed Kellwood in 2003 as exclusive manufacturer, licensee, and promoter of SP’s athletic compression wear.
- SP sued Kellwood for breach, alleging Kellwood failed to market and promote the products as required by the License Agreement.
- A jury found Kellwood liable and awarded $4.35 million in damages; the district court later vacated the damages award and entered judgment notwithstanding the verdict for $1.00 nominal damages, denying a new trial.
- Key contested evidentiary issues included lay opinion testimony about marketing, exclusion of profitability evidence for Kellwood’s performance-apparel division, and exclusion of SP’s damages expert methodologies (market forecasts, projections, and valuation dates).
- Central legal question: whether Kellwood had an enforceable duty to use reasonable efforts to market SP’s products despite a contract clause requiring marketing expenditures equal to 3% of net sales, and whether SP proved damages with the required certainty under New York law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court erred in admitting lay marketing opinion testimony | Lay witness permitted to opine on reasonableness of marketing efforts | Admission was improper because witness lacked expert qualification | Admission was not reversible error; testimony rationally based on perception and any cure for mislabeling was given by jury instruction |
| Whether district court erred by excluding Kellwood’s performance-apparel profitability evidence | Exclusion unfairly prevented rebuttal of Kellwood’s conduct evidence | Evidence was tangential and not probative of marketing reasonableness | Exclusion was not an abuse of discretion |
| Whether a 3%‑of‑net‑sales marketing-spend clause eliminated Kellwood’s duty to use reasonable efforts to market SP’s products | Clause capped spending but did not define required efforts; SP relied on implied reasonable-efforts obligation | Clause meant minimal spend sufficed; low sales absolved further marketing duties | Court held New York law implies reasonable efforts into exclusive-license agreements; the 3% clause set a minimum, not the exclusive measure of performance; jury had legally sufficient basis to find breach |
| Whether SP proved damages (lost profits or business value) with reasonable certainty | SP offered expert projections tying SP to Under Armour comparators, MTV forecast, and renewal assumptions to support lost profits and business value | Kellwood argued projections speculative, comparator inappropriate, and valuation timeframe wrong | District court did not err: expert methods speculative; lost-profits and business-value awards lacked reasonable certainty; $1 nominal damages affirmed |
Key Cases Cited
- Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918 (2d Cir.) (exclusive-licensee must use reasonable efforts to promote licensor's products)
- Zilg v. Prentice-Hall, Inc., 717 F.2d 671 (2d Cir.) (reasonable-efforts obligations in license agreements)
- Bank of China, N.Y. Branch v. NBM LLC, 359 F.3d 171 (2d Cir.) (harmless-error review for lay testimony arguably based on specialized knowledge)
- United States v. Agrawal, 726 F.3d 235 (2d Cir.) (jury presumed to follow curative instructions)
- Morse v. Fusto, 804 F.3d 538 (2d Cir.) (standard of review for Rule 50(b) motions)
- In re Pfizer Inc. Sec. Litig., 819 F.3d 642 (2d Cir.) (abuse of discretion standard for exclusion of expert methodology)
- Schonfeld v. Hilliard, 218 F.3d 164 (2d Cir.) (requirement that lost-profits damages be shown with reasonable certainty; valuation of nascent businesses)
- Weisgram v. Marley Co., 528 U.S. 440 (U.S.) (appellate authority to order judgment as a matter of law when evidence is insufficient after excision of erroneously admitted testimony)
- Amorgianos v. Nat’l R.R. Passenger Corp., 303 F.3d 256 (2d Cir.) (appellate review principles when evidence is insufficient post‑exclusion)
- Lexington Prods. Ltd. v. BD Commc’ns, Inc., 677 F.2d 251 (2d Cir.) (nominal damages inappropriate where damages are provable with reasonable certainty)