Jay Franco & Sons, Inc. v G Studios, LLC

[*1] Jay Franco & Sons, Inc. v G Studios, LLC 2006 NY Slip Op 50731(U) [11 Misc 3d 1087(A)] Decided on March 24, 2006 Supreme Court, New York County Lehner, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 24, 2006
Supreme Court, New York County

Jay Franco and Sons, Inc., Plaintiff,

against

G Studios, LLC, Defendant.



602236/05

Edward H. Lehner, J.

The issue presented on this motion by defendant to stay this action pursuant to CPLR 7503 is whether the broad arbitration provision in an unsigned proposed contract between the parties for the licensing of defendant's cartoon trademark should be enforced.

In July 2003 the parties commenced negotiations for the licensing of defendant's "Earth 2 Jane" mark (the "Trademark") for bedding, beach and bath products to be manufactured by plaintiff. The negotiations between counsel for the parties were handled by e-mail communications from New York and California. The proposed contract, which contained a broad arbitration clause, provided for a $70,000 "advance payment." On October 10, 2003 plaintiff sent defendant an e-mail stating "we expect to have the contract along with the advance payment go out this Friday." In December 2003, plaintiff sent defendant a check for $70,000, and defendant then sent plaintiff a revised agreement changing the date thereof to December 23, 2003. On February 12, 2004, Joe Franco of plaintiff sent defendant an e-mail stating with respect to the proposed contract, which had not been executed, that "I will be sending this out when I get back to the office Friday. You got the deal." Thereafter defendant sent plaintiff an "Earth 2 Jane" style guide. At various times in March defendant sent plaintiff a series of e-mails acknowledging plaintiff's "gesture" of sending the $70,000, but which clearly indicated the need for an executed agreement, stating in an e-mail dated March 24, 2004 that: "I am not comfortable initiating our licensor-licensee relationship without a signed license agreement ... (and) I would like you to know that I take your non-responsiveness as a sign of personal disrespect and I would not like to start our business relationship that way." On March 17, 2004, defendant had sent an e-mail asking "are you planning to send the signed license agreement this week or are you not interested in proceeding with E2J? Please let me know ASAP." In a March 5, 2004 e-mail defendant stated that the absence of a signed agreement was a "serious" matter.

The proposed contract was never executed and, by letter dated May 7, 2000, plaintiff's counsel advised defendant that it would not proceed with the transaction and demanded the return of the $70,000. It asserts that it never used the style guide and did not manufacture any products employing the Trademark. The style guide was returned to defendant enclosed in a letter from plaintiff's counsel dated June 17, 2004.

When defendant declined to return the $70,000, plaintiff commenced the instant action in [*2]June 2005 to recover that sum, asserting that defendant made certain fraudulent representations as to its ability to cause the California department store known as Mervyn's to stock product using the Trademark.

By notice of motion dated October 11, 2005, defendant has moved to stay this action based on the arbitration provision in the unsigned contract. However, no demand for arbitration has ever been served by defendant. Asserting that defendant never answered the complaint, plaintiff has cross-moved for a default judgment.

Discussion

As to the enforceability of a contractual provision for the arbitration of a dispute, the Court of Appeals wrote in Marlene Industries Corp. v. Carnac Textiles, Inc., 45 NY2d 327 (1978), at p. 333 that: "It has long been the rule in this State that the parties to a commercial transaction will not be held to have chosen arbitration as the forum for the resolution of their disputes in the absence of an express, unequivocal agreement to that effect; absent such an explicit commitment neither party may be compelled to arbitrate"

But, while CPLR 7501 requires that an agreement to require a controversy to be resolved by arbitration be in writing, there is no requirement that the writing be signed. See, God's Battalion of Prayer Pentecostal Church, Inc. v. Miele Associates, LLP, ___ NY3d ___, NYLJ, Mar. 24, 2006, p. 19, c. 3; Flores v. The Lower East Side Service Center, Inc., 4 NY3d 363 (2005); Tsadilas v. Provident National Bank, 13 AD3d 190 (2004); Metropolitan Arts & Antiques Pavilion, Ltd. v. Rogers Marvel Architects, PLLC., 287 AD2d 372 (1st Dept. 2001); Rudolph & Beer, L.L.P. v. Roberts, 260 AD2d 274 (1st Dept. 1999).

However, for an unsigned contract to be enforceable, there must be "objective evidence establishing that the parties intended to be bound," and in determining this intention there must be an examination of "the totality of circumstances" [Flores v. Lower East Side Service Center, Inc., supra at pp. 369-370]. In TNS Holdings, Inc. v. MKI Securities Corp., 92 NY2d 335 (1998), it was stated that "unless the parties have subscribed to an arbitration agreement it would be unfair to infer such a significant waiver on the basis of anything less than a clear indication of intent" (p. 339). See also, Rudolph & Beer, L.L.P. v. Roberts, supra p. 276.

Here, as indicated above, defendant made numerous demands of plaintiff for the return of an executed agreement and inquired of plaintiff as to whether the failure to return an executed agreement indicated an intent not to proceed with the proposed transaction. Such demands and inquiries, and plaintiff's failure to comply with the repeated requests for a signed agreement, which defendant indicated was a matter of "serious" concern, demonstrate that the parties did not deem themselves bound by the proposed agreement absent the execution thereof.

Here, no steps were taken to proceed with the manufacture of product employing the Trademark as contemplated by the proposed agreement. If manufacturing had commenced and royalty checks paid, the situation would be different, plaintiff acknowledging that under such circumstances the unsigned contractual provision for arbitration could be enforced (tr. p. 19). In this regard, see, God's Battalion of Prayer Pentecostal Church, Inc. v. Miele Associates, LLP, supra (a case decided just this week in which the Court of Appeals ruled that an arbitration provision in an [*3]unsigned contract is enforceable because "both parties operated under its terms"); Liberty Management & Construction, Ltd. v. Fifth Avenue and Sixty-Sixth Street Corporation, 208 AD2d 73 (1st Dept. 1995); Tsadilas v. Providian National Bank, supra (use of credit card demonstrates consent to arbitration provision in agreement sent to user); Brower v. Gateway 2000, Inc., 246 AD2d 246 (1st Dept. 1998)(use of computer indicates consent to arbitration provision in agreement included in package containing the computer); Ranieri v. Bell Atlantic Mobile, 304 AD2d 353 (1st Dept. 2003).

Since the court concludes that defendant has not established that the parties intended to be bound by the proposed agreement, or raised a triable issue with respect thereto, its motion to stay this action is denied. The cross-motion of plaintiff for a default judgment is also denied as clearly by moving for a stay it is evident that defendant was not abandoning any defenses it may have. An answer to the complaint shall be served within 20 days of service of a copy of this order.

It is noted that even if California law applied herein, as is suggested by defendant, the result would be the same as it appears that such law is similar to that discussed above. See, Banner Entertainment, Inc. v. The Superior Court of Los Angeles County, 62 Cal. App. 4th 348 (1998).

This decision constitutes the order of the court.

Dated: March 24, 2006________________

J.S.C.