Citizens of Humanity, LLC v. Danemar, S.A.

CITIZENS OF HUMANITY, LLC, Plaintiff, Cross-defendant and Appellant, v. DANEMAR, S.A., Defendant, Cross-complainant and Appellant DANIELLE ELBAZ et al., Defendants and Respondents.

B224966

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION ONE

Dated: October 25, 2012

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County

Super. Ct. No. BC412629)

APPEALS from a judgment of the Superior Court of Los Angeles County, Ralph W. Dau, Judge. Affirmed in part and reversed in part.

Browne Woods George, Edward A. Woods, Peter W. Ross, Benjamin D. Scheibe; Law Offices of Gary Freedman and Gary Freedman for Plaintiff, Defendant and Appellant Citizens of Humanity, LLC.

Law Offices of Steven Soloway and Steven Soloway for Defendant and Appellant, Danemar, S.A., and for Defendants and Respondents, Danielle Elbaz and Marc Elbaz.

Plaintiff and appellant Citizens of Humanity (COH) engaged defendant and appellant Danemar, S.A., and its owners, Danielle and Marc Elbaz, to be the exclusive distributor of COH's designer jeans and clothing in Spain and Portugal. COH eventually terminated the parties' written agreement and sued Danemar and the Elbazes for failure to satisfy the contract's minimum purchase requirements. Danemar filed a cross-complaint.

A jury found against Danemar, but in favor of the Elbazes on COH's breach of contract claim, and awarded damages. The jury also awarded damages to Danemar on its cross-complaint. COH moved unsuccessfully for a new trial, arguing that the damages award of approximately $48,000 was inadequate.

COH appealed, arguing there was insufficient evidence to support the jury's determination that the Elbazes had no individual liability for breach of the distribution agreement they signed, and the judgment and cost award in their favor must be reversed. We agree.

Danemar also appeals from the judgment arguing the trial court erred when it excluded evidence that the minimum purchase requirements were only suggested "targets," and that COH's sole remedy for breach was termination of the distribution agreement. Danemar also maintains the trial court erred when it refused to instruct the jury on Danemar's claim for intentional interference with contract, and when it instructed the jury that Danemar was entitled only to lost profits for orders to be shipped prior to termination of the agreement. None of Danemar's contentions has merit.

FACTUAL BACKGROUND

COH designs and manufactures high-end jeans and denim apparel. In 2004, Danemar, a Spanish corporation, became COH's exclusive distributor in Spain and Portugal. That relationship continued through 2007 through a series of year-long contracts, each of which required Danemar to meet a minimum purchase requirement. Danemar never satisfied the minimum quantity purchase requirements in any annual distribution agreements, though it came "very close" to doing so in 2007. Before 2009, COH never told Danemar that it owed COH damages or would be responsible for profitsCOH would have made but for Danemar's failure to purchase the minimum quantities specified in any distribution agreement.

According to Margarita Puig, a Danemar employee and the brand manager responsible for COH sales in Spain and Portugal, Danemar was unable to satisfy the annual minimums because COH consistently failed timely to provide Danemar with its seasonal samples of the COH collections in time to allow Puig to display the collection for Danemar's customers during Madrid Fashion Week. Fashion Week, held twice yearly, is when buyers for Spanish clothing companies head to Madrid showrooms to view designers' sample collections and spend most of their budgets for an upcoming season's collections. Because COH consistently provided its sample collections in a piecemeal fashion (Puig usually had only 15 of 80 pieces from a collection Danemar was obligated to show in its entirety), and never in time for Fashion Week, Puig was forced to travel all over Spain after finally receiving the sample collection to try to obtain orders after many buyers already had depleted their budgets for the upcoming season. Puig complained several times to COH that its untimely delivery of samples rendered Danemar unable to properly market the COH product line or to sell and take orders; COH promised to deliver the samples earlier in the future but did not. Puig testified that the only sample collection Danemar received on time was one COH delivered in early 2009 shortly before it terminated the 2008/09 distribution agreement at issue here. Puig also testified that when COH terminated the agreement she was still in the process of selling the Fall/Winter 2009 line, and was not required to submit Danemar's first quarter orders until late March or early April 2009. According to defendant and respondent Danielle Elbaz, who owns Danemar with her husband, defendant and respondent Marc Elbaz, fashion shifts markedly from season to season, especially in the market encompassing the products COH offers, viz., high fashion, expensive jeans. Customers may find one season's collection very appealing, and not like another collection at all.

On January 1, 2008, COH entered the two-year distribution agreement at issue here (Agreement). The Agreement is contained in a letter addressed collectively to Danemar and Marc and Danielle Elbaz, and begins with the salutation "Dear Danielle."Unlike prior distribution agreements the Agreement is signed by the Elbazes as individuals, and by Marc Elbaz on behalf of Danemar (only Danemar was a signatory to the parties' prior contracts). The Agreement consistently uses the undefined term "you" in setting out the rights and obligations contained therein, and establishes an exclusive distributorship for the "Territory" of Spain and Portugal for 2008 and 2009. The Agreement also provides that:

"2. The minimum quantities you will purchase for the Territory for the shipping period ending December 31, 2008 will be 12,000 women's bottoms and 1,000 men's bottoms. The minimum quantities you will purchase for 2009 will be 14,000 women's bottoms and 1,500 men's bottoms. For 2008 and 2009, at least 20% of such minimum quantities must be purchased for delivery to you by March 31st of each year, at least 45% of such minimum quantities (on a year-to-date basis) must be purchased for delivery to you by June 30th of each year and at least 75% of such minimum quantities (on a year-to-date basis) must be purchased for delivery to you by September 30th of each year. [¶] . . .[¶]

"8. You will sell only to top quality specialty and department retail stores . . . with a first class image, product selection and reputation and selling only the highest quality apparel products. You must obtain our prior written approval before selling to any retailer with three or more retail locations . . . .

"9. The maximum price you will sell Citizens of Humanity products for is as follows: (a) Basic styles at 1.38 x (COH's normal US wholesale selling price x .95) x 1.12; and (b) Fashion styles at 1.53 x (COH's normal wholesale selling price x .95) x 1.12.. . . [¶] . . . [¶]

"14. Any disputes arising out of our agreement shall be resolved exclusively in the state or federal courts located in Los Angeles County, California and the parties agree that such courts shall have sole and exclusive jurisdiction to resolve such disputes. This agreement and the rights of the parties arising from this agreement shall be governed exclusively by the laws of the State of California applicable to agreements to be performed wholly within the State of California. [¶] . . . [¶] "16. Failure to abide by any of the provisions of this agreement will be grounds for immediate termination of this agreement.

"17. This agreement sets forth our entire agreement regarding the distributorship for COH products for the years 2008 and 2009, and it supersedes all prior agreements and discussions with regard to those years. There are no promises or agreements that have been made to you by COH or any person acting on behalf of COH which are not set forth in this agreement, and you were not induced to enter into this agreement by any statement or promise not set forth in this agreement. This agreement may only be modified by a written agreement signed by you and an authorized officer of COH. [¶] . . . [¶]

"Agreed: Jerome Dahan, President

"CITIZENS OF HUMANITY, LLC

Agreed:_________________

Danielle Elbaz

"Agreed:_________________

"Marc Elbaz

"Agreed:_________________

"DANEMAR, S.A."

Gary Freedman (Freedman), COH's General Counsel and Chief Operating Officer whose law office drafted the Agreement, testified that there was no discussion between the parties regarding the reason for the inclusion of separate signature lines for the individual Elbazes, or the integration clause contained in paragraph 17 of the Agreement. Before signing the Agreement, Danielle Elbaz asked Puig if she thought she would be able to satisfy the specified "objective of quantities." Danielle Elbaz has been involved in the fashion industry in Spain for at least 40 years as both buyer and distributor. She testified that COH never explained why she or her husband had been asked to sign the Agreement, and never told them they were assuming personal liability under the Agreement. Danielle Elbaz simply signed the document presented to her by her husband. She never asked that any language be added to or deleted from the Agreement.

In 2008, respondents purchased 5,749 fewer units than the minimum specified in the Agreement. Respondents also failed to purchase the minimum number of units required for the first quarter of 2009. In late 2008 and again at a meeting in earlyFebruary 200...