HVN CLOTHING, INC. et al., Plaintiffs, -v- LOMEWAY E-COMMERCE (LUXEMBOURG) LIMITED, d/b/a ZAFUL, Defendant.
22-CV-27 (JMF)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
October 21, 2022
Case 1:22-cv-00027-JMF Document 52
JESSE M. FURMAN, United States District Judge
JESSE M. FURMAN, United States District Judge:
In this case, Plaintiffs HVN Clothing, Inc. and Harley Viera-Newton sued Defendant Lomeway E-Commerce (Luxembourg) Limited, which does business as Zaful (“Zaful“), for copyright and trademark violations. After the Court entered a preliminary injunction, the parties reached agreement by e-mail on the terms of a settlement. The parties contemplated memorializing their agreement in a formal settlement agreement, but they never did because Zaful balked. Plaintiffs now move to enforce the terms of the parties’ agreement. See ECF No. 46. For the reasons that follow, the Court GRANTS Plaintiffs’ motion.
RELEVANT FACTS
Plaintiffs sell high-end swimwear and women‘s clothing under a federally registered HVN mark and using a popular HVN Cherry Print in which HVN owns the registered copyright. See ECF No. 12, at 2-4. On January 3, 2022, they brought this lawsuit, alleging claims against Zaful under the Copyright Act, the Lanham Act, and New York State law. See ECF No. 1 (“Compl.“); see also ECF No. 47 (“Pl.‘s Mem.“), at 2. Three days later, Plaintiffs moved for a temporary restraining order and preliminary injunction, see ECF No. 11, each of which the Court
In the weeks that followed, counsel for Zaful appeared and the parties began to discuss settlement terms by e-mail. See ECF No. 48-3; ECF No. 48-4 (“Counsel E-Mails“), at 4-6; see also Pl.‘s Mem. 3; ECF No. 50 (“Def.‘s Opp‘n“), at 1. On February 17, 2022, Plaintiffs’ counsel sent defense counsel an e-mail proposing settlement on the following terms:
- Payment by Defendant to Plaintiff . . . of $150,000.00 on or before February 28, 2022.
- Mutual release of all parties, along with [several affiliates of Zaful] . . . cover[ing] conduct through and including the date of the Agreement.
- Defendant‘s consent to a judgment and permanent injunction on terms substantially similar to the Preliminary Injunction now in place. . . .
- Plaintiff will agree, promptly upon agreement to these terms in principle, to notify Apple by email that the parties have resolved their differences in principle and that Plaintiff has no objection to Apple‘s reinstatement of the ZAFUL App. . . .
Counsel E-Mails 3. Significantly, Plaintiffs’ counsel stated that “[i]f these terms are acceptable to your client, . . . we will have an enforceable agreement.” Id. At the same time, he asked defense counsel to prepare “definitive documentation” and expressed hope that this could be “done in a few days.” Id. He noted, however, “that the parties’ obligations under points 1 and 4 above are effective upon email agreement, and not contingent on the final documentation.” Id.
Later the same day, Zaful‘s counsel responded with “only” one proposed “edit“: addition of “another affiliate” to the mutual release. Id. at 2. Zaful‘s counsel stated that, “with that” one edit, Zaful “accepts and we can start making arrangements for the payment. If Plaintiff is set, please inform Apple of the agreement in principle to get that ball rolling.” Id. The next day, February 18, 2022, Plaintiffs’ counsel responded that “Plaintiffs agree” and thanked defense
Thereafter, the parties began to exchange drafts of a formal settlement agreement. Zaful‘s counsel shared an initial draft on February 28, 2022. ECF No. 48-7. Plaintiffs provided comments and proposed edits the next day, March 1, 2022. ECF No 48-8. On March 1, 2022, and again on March 8, 2022, Zaful requested additional time to “finalize settlement.” ECF Nos. 36, 39. Plaintiffs consented to both requests. Pl.‘s Mem. 4-5. On March 10, 2022, Zaful‘s counsel shared a revised draft of a “proposed settlement agreement, which include[d] Plaintiff‘s edits and Defendant‘s input.” ECF 48-9, at 2. It proposed several new changes, id. at 21-24, the vast majority of which Plaintiffs’ counsel “accept[ed] insofar as possible” later the same day, ECF 48-10, at 2. Plaintiffs’ counsel took issue with only two of Zaful‘s proposed edits: first, a provision prohibiting Plaintiffs from filing suit against Zaful “if Defendant removes the alleged [infringing] product within three (3) calendar days“; and, second, a provision permitting the recovery of attorney‘s fees for breach of the agreement. ECF 48-10, at 2, 51-52. Most relevant for present purposes, Plaintiffs’ counsel accepted all of Zaful‘s proposed edits to the language of the proposed releases in the draft settlement agreement. See id. at 51.
But Zaful did not accept this final proposal. Instead, on March 15, 2022, before responding to Plaintiffs’ March 10, 2022 e-mail, Zaful filed an Answer and asserted
DISCUSSION
It is well established that “[a] district court has the power to enforce summarily, on motion, a settlement agreement reached in a case that was pending before it.” Meetings & Expositions, Inc. v. Tandy Corp., 490 F.2d 714, 717 (2d Cir. 1974) (citations omitted). Indeed, “[i]t is an elementary principle of contract law that a party‘s subsequent change of heart will not unmake a bargain already made.” Omega Eng‘g, Inc. v. Omega, S.A., 432 F.3d 437, 445 (2d Cir. 2005). Put differently, “[w]hen a party makes a deliberate, strategic choice to settle, a court cannot relieve him of that . . . choice simply because his assessment of the consequences was incorrect” and he later develops a case of settler‘s remorse. Powell v. Omnicom, 497 F.3d 124, 128 (2d Cir. 2007). “[T]he mere fact that the parties 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, 404 F.2d 495, 499 (2d Cir. 1968). So too, a preliminary settlement
The Second Circuit has identified four factors that a court should consider in determining whether the parties “intended to be bound in the absence of a document executed by both sides“:
(1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing.
Winston v. Mediafare Ent. Corp., 777 F.2d 78, 80 (2d Cir. 1985). These factors – known as the Winston factors – “may be shown by oral testimony or by correspondence or other preliminary or partially complete writings.” Id. at 81 (internal quotation marks omitted). Although the Second Circuit has described the first factor as the most important, see, e.g., Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 72 (2d Cir. 1989), no single factor is dispositive, see, e.g., Ciaramella v. Reader‘s Dig. Ass‘n, 131 F.3d 320, 323 (2d Cir. 1997). Ultimately, all four factors must be considered in light of the entire context of the case, mindful that the parties’ objective intent controls. See Winston, 777 F.2d at 81; see also, e.g., Klos v. Polski Linie Lotnicze, 133 F.3d 164, 168 (2d Cir. 1997) (noting that it is the parties’ “objective intent . . . that controls” because a court cannot divine their “secret or subjective intent“).
Applying these standards here, the Court concludes that Plaintiffs are entitled to an order enforcing the parties’ settlement notwithstanding Zaful‘s apparent change of heart. As Zaful itself concedes, the second Winston factor strongly supports that conclusion, as “both parties partially performed” the preliminary agreement, Def.‘s Opp‘n 7, Zaful by paying Plaintiffs $150,000 and Plaintiffs by reporting the parties’ agreement to Apple. The fourth factor weighs heavily in favor of enforcement as well because the parties’ agreement was, in fact, committed to writing – in the form of the parties’ e-mails of February 17 and 18, 2022. See Counsel E-Mails
So too, the third Winston factor – whether the parties had “agreed on all material terms,” Ciaramella, 131 F.3d at 325 – favors enforcement. The parties’ e-mails of February 17 and 18, 2022, contained all material terms of the settlement, including the monetary and injunctive relief, Plaintiffs’ commitment to contact Apple, and a mutual release. In arguing otherwise, Zaful contends that the parties did not actually agree on the precise terms of the release, Def.s’ Opp‘n 7-9, but the record as a whole demonstrates otherwise. The February 17 and 18, 2022 e-mails specified the who (namely, the parties and several named affiliates of Zaful) as well as the what and when (namely, all “conduct through and including the date of the Agreement“) of the release. Counsel E-mails 2-3. And although the parties thereafter negotiated the specific language of the release in the formal agreement, the terms of Zaful‘s final version (sent on March 10, 2022) – to which Plaintiffs assented – aligned with the terms of the parties’ original e-mail agreement. Compare Counsel E-Mails 2-3, with ECF No. 48-10, at 51. It follows that the third Winston factor also favors enforcement of the parties’ agreement. See, e.g., Galanis v. Harmonie Club N.Y., No. 13-CV-4344 (GHW), 2014 WL 4928962, at *10 (S.D.N.Y. Oct. 2, 2014) (finding that the parties had “reached an agreement as to all of the material terms” where their oral agreement and their later draft formal agreement were “substantively consistent“).
The cases cited by Zaful in support of its argument on the third Winston factor are easily distinguished. In Grgurev v. Licul, No. 15-CV-9805 (GHW), 2016 WL 6652741 (S.D.N.Y. Nov. 10, 2016), for example, “none of the initial emails exchanged . . . detailed or even mentioned – the scope of release.” Id. at *6. In Velazquez v. Yoh Servs., LLC, No. 17-CV-0842 (CM), 2017 WL 4404470 (S.D.N.Y. Sept. 25, 2017), the parties agreed by e-mail to “a full general release of all Defendants and affiliates” and a “release of [Plaintiffs‘] claims.” Id. at *1. In refusing to enforce the parties’ agreement, however, the court made no mention of the release; instead, it relied on the imprecision of a different term and other evidence of “an intent to further negotiate the details.” Id. at *3. In Benicorp Ins. Co. v. Nat‘l Med. Health Card Sys., Inc., 447 F. Supp. 2d 329 (S.D.N.Y. 2006), the plaintiff‘s counsel expressed explicit disagreement about the terms of the release in conversation with the defendant‘s counsel, who admitted that, “before [the defendant] purportedly ‘accepted’ [the plaintiff‘s] ‘offer,’ it was aware that the parties had very different understandings as to the scope of [the plaintiff‘s] proffered release.” Id. at 338. And finally, in Hand v. N.Y.C. Hous. Pres. & Dev., No. 11-CV-1076 (RRM) (JO), 2017 WL 9481012 (E.D.N.Y. June 27, 2017), report and recommendation adopted, No. 11-CV-1076 (RRM) (JO), 2017 WL 4296751 (E.D.N.Y. Sept. 25, 2017), the moving party sought to add several materials terms to the parties’ initial agreement. See id. at *4.
That leaves only the first, and admittedly most important, Winston factor: whether there was an express reservation of the right not to be bound in the absence of a writing. Winston, 777 F.2d at 80. It is the closest call, if only because Plaintiffs’ February 17, 2022 e-mail stated that two of the four material terms would be “effective upon email agreement, and not contingent upon documentation,” Counsel E-Mails 3, arguably creating a negative implication that the other two terms were not binding absent the formal agreement. But “[c]ontracts of preliminary
In any event, even if first factor weighed in Zaful‘s favor, it would weigh only slightly in its favor and not enough to tip the balance of the other three factors. See, e.g., Powell, 497 F.3d at 131 (affirming a decision to enforce a settlement where “at least three of the four factors favor[ed]” enforcement); Garra v. Metro-N. Commuter R.R., No. 17-CV-1293 (ALC) (SN), 2021 WL 1536499, at *13 (S.D.N.Y. Feb. 12, 2021) (enforcing an agreement despite finding that “the presence of terms remaining to be negotiated . . . weighs strongly in favor of non-enforcement“), report and recommendation adopted, No. 17-CV-1293 (ALC) (AN), 2021 WL 117254 (S.D.N.Y. Mar. 29, 2021); Jackson v. N.Y.C. Dep‘t of Educ., No. 10-CV-9193 (DLC), 2012 WL 1986593, at *2 (S.D.N.Y. June 4, 2012) (enforcing a settlement where “three of [the Winston] factors weigh in favor of enforcing the settlement agreement” and “[t]he fourth factor is essentially neutral, and does not outweigh the conclusion suggested by the other factors“); Pretzel Time, Inc. v. Pretzel Int‘l, Inc., No. 98-CV-1544 (RWS), 2000 WL 1510077, at *4 (S.D.N.Y. Oct. 10, 2000) (enforcing an agreement where “three of four [factors] favor enforce[ment]); cf. Hand, 2017 WL 9481012, at *4 (declining to enforce a settlement where “the first factor only minimally favor[ed]” enforcement “and all of the others favor[ed]” non-enforcement). Thus, Plaintiffs’ motion to enforce the parties’ settlement is GRANTED. The Court will give the parties two weeks to negotiate and execute definitive settlement documents, including a proposed consent judgment and permanent injunction “on terms substantially similar to the Preliminary Injunction.” Counsel E-Mails 3. If the parties have not done so by **November 4, 2022**, the Court will sign and enter the proposed Judgment and Permanent Injunction attached to Plaintiffs’ Notice of Motion, see ECF No. 46-1, which contains “terms substantially similar to the Preliminary Injunction,” Counsel E-Mails 3.
CONCLUSION
For the reasons stated above, Plaintiffs’ motion to enforce the parties’ settlement is GRANTED.1 If the parties have not executed definitive settlement documents and filed an
The Clerk of Court is directed to terminate ECF No. 46.
SO ORDERED.
Dated: October 21, 2022
New York, New York
JESSE M. FURMAN
United States District Judge