FILED: NEW YORK COUNTY CLERK 08/30/2016 12:53 PM INDEX NO. 654563/2016 NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 08/30/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK CAS MARKETING & LICENSING CO., Plaintiff, v. Index No. JAY FRANCO & SONS, INC., Defendant. Plaintiff CAS MARKETING & LICENSING CO. ( CAS Marketing ), by its attorneys Pincus Law LLC and Witman Stadtmauer, P.A., alleges for its Complaint against Defendant as follows: NATURE OF THE CASE 1. CAS Marketing has initiated this action to recover at least $500,000 in unpaid commissions ( royalties ) from Defendant. The actual measure of damages is uncertain, as Defendant has failed and refused to provide information and documents to which CAS Marketing is entitled. 2. At all relevant times, CAS Marketing has been in the business of assisting manufacturers in selecting and obtaining licenses to use trademarks owned by third parties (i.e. brands ). With the permission granted by a license to put these brands on their own products, manufacturers can enhance the sales of their products. 3. Defendant is a major manufacturer of bedding, bath, and beach products. In or around 2011, Defendant hired CAS Marketing to obtain licenses for various brands that Defendant wanted to use on its products. As a direct result of CAS Marketing s services, 1 1 of 9
Defendant acquired licenses for various well-known brands, which Defendant profitably has used and continues to use on its products. 4. For each licensed brand that Defendant has used and continues to use, Defendant agreed and promised to pay CAS Marketing quarterly commissions, i.e. royalties, calculated as a percentage of the revenue generated from the sale of Defendant s products using each particular licensed brand. Defendant also agreed and promised to provide CAS Marketing with quarterly written reports detailing how Defendant calculated the amount of royalties that were due and owing ( Royalty Reports ). 5. Beginning in or about 2013, Defendant not only began making royalty payments sporadically instead of every quarter as required, but also stopped providing CAS Marketing with the required Royalty Reports, thereby preventing CAS Marketing from determining whether these sporadic payments were in the correct amount. Moreover, Defendant stopping making any payments altogether after the September 2015 death of CAS Marketing s owner, Cheryl Stoebenau. 6. Despite due demand, Defendant has failed and refused to (i) provide the required quarterly Royalty Reports, (ii) pay CAS Marketing all the required quarterly royalties, and (iii) provide a reconciliation of the sporadic payments made since the last Royalty Report with a corresponding Royalty Report. 7. Yet, Defendant continues to enrich itself from the licenses that CAS Marketing obtained for it, and continues to use and profit from those licenses in manufacturing and selling its products. 2 2 of 9
PARTIES AND VENUE 8. Plaintiff CAS Marketing & Licensing Co.is a corporation organized under the laws of the State of Delaware, with its principal place of business at 845 West End Avenue, New York, New York 10025. 9. Defendant Jay Franco & Sons, Inc. is a corporation organized under the laws of the State of New York, with its principal place of business at 295 Fifth Avenue, Suite 312, New York, New York 10016. 10. Venue is proper in New York County under CPLR 503, as CAS Marketing and Defendant each have their principal place of business in New York County. FACTS Background 11. At all relevant times, CAS Marketing has been engaged in the business of enabling manufacturers to select and obtain licenses to put the trademarks ( brands ) of wellknown companies on their products, thereby enhancing the sales of those products. 12. Cheryl Stoebenau founded CAS Marketing in 1986 and ran the company until her death from cancer on September 4, 2015. At the time of her death, Ms. Stoebenau was CAS Marketing s sole shareholder, director, officer, and employee. 13. Shortly before her death, the Licensing Industry Merchandisers Association ( LIMA ) inducted Ms. Stoebenau into its Licensing Hall of Fame, recognizing her as one of the industry s leading agents and praising her for helping to unite some of the industry s largest manufacturers with leading content providers and licensors. In its January 20, 2015 press release announcing Ms. Stoebenau s induction, LIMA recognized CAS Marketing s work with Defendant as one of her greatest contributions to the industry. 3 3 of 9
14. Defendant is a major manufacturer of bedding, bath, and beach products. According to its website, it has expansive production capabilities and its products are sold in mass merchants, department stores, and specialty retailers nationwide. 15. Defendant s website further boasts of its longstanding relationships with top licensors and joint ventures with suppliers. Defendant credits these relationships as the reason it is able to provide the hottest licensed brands and quality merchandise, priced right. Many of these relationships were procured for Defendant by CAS Marketing. CAS Marketing s Business Relationship with Defendant 16. Defendant first engaged CAS Marketing to perform licensing services in or around 2011. For each brand that Defendant obtained through CAS Marketing s services, Defendant promised and agreed to compensate CAS Marketing for as long as Defendant used that brand on the products that it manufactures and sells. Such compensation was to be in the form of a commission, or royalty, the amount of which was to be calculated each quarter as a percentage of Defendant s sales of the products bearing that brand. These commissions were required to be paid quarterly. 17. Thus, once Defendant obtained a license to use a certain brand, there was nothing further that CAS Marketing was required to do to earn a quarterly commission. Defendant s obligation to continue paying quarterly commissions was not tied to any further services to be performed by CAS Marketing, but rather was based solely on the amount of Defendant s sales of each particular branded product. Simply put, for each licensed brand, Defendant was obligated to continue paying commissions each quarter to CAS Marketing so long as Defendant continued to manufacture and sell products with that brand on them. Such an arrangement is standard in the licensing industry. 4 4 of 9
18. Defendant also promised and agreed to provide CAS Marketing with quarterly Royalty Reports, setting forth the sales figures for each branded product and how Defendant calculated the quarterly commissions that were due and owing, 19. CAS Marketing successfully obtained a number of licenses for Defendant s benefit, enabling Defendant to put the brands of prominent companies on its products. Defendant has profited and continues to profit from the manufacture and sales of these products. 20. In or around 2013, Defendant began making sporadic commission payments instead of the required quarterly commission payments, and also stopped providing CAS Marketing with the required quarterly Royalty Reports. Moreover, even these sporadic payments were not accompanied with a corresponding Royalty Report. While Defendant promised to provide a reconciliation of the sporadic payments with a corresponding Royalty Report, Defendant never did so. 21. For nearly two years until her death, even while ill with cancer, Ms. Stoebenau tried in vain on CAS Marketing s behalf to obtain its rightful commissions, the missing Royalty Reports, and a reconciliation of Defendant s sporadic payments. 22. Following Ms. Stoebenau s death, Defendant stopped making payments to CAS Marketing altogether. Despite due demand on CAS Marketing s behalf, Defendant has failed and refused to pay any outstanding commissions, let alone provide any of the required Royalty Reports or the promised reconciliations. Nonetheless, Defendant continues to profit from the use of licensed brands that CAS Marketing obtained for Defendant to use on its products. 23. As a result of Defendant s conduct, CAS Marketing has been damaged in an amount not yet ascertained, but equal to at least $500,000. 5 5 of 9
FIRST CAUSE OF ACTION (Breach of Contract) 24. CAS Marketing repeats and realleges the allegations contained in paragraphs 1 through 23 of this Complaint, as if set forth at length herein. 25. CAS Marketing and Defendant entered into the agreement described herein, under which CAS Marketing procured various licensed brands for Defendant, which Defendant has used and continues to use on the products it manufactures and sells. 26. By procuring the aforesaid licensed brands for Defendant to use, CAS Marketing performed all of its obligations under the agreement. So long as Defendant uses those licensed brands on the products it manufactures and sells, the agreement obligates Defendant to pay CAS Marketing quarterly commissions based on Defendant s sales of the branded products, and provide quarterly Royalty Reports to explain and support the calculation of those commissions. 27. Defendant has failed and refused to pay CAS Marketing the quarterly commissions that are due and owing or to provide the required quarterly Royalty Reports. 28. As a direct and proximate result of Defendant s breach, CAS Marketing has suffered damages in the amount of at least $500,000 plus interest, costs, and disbursements. SECOND CAUSE OF ACTION (Promissory Estoppel) 29. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through 28 of this Complaint, as if set forth at length herein. 30. Defendant made clear and unambiguous promises to CAS Marketing that, in consideration for obtaining licenses for Defendant to use various brands on the products that Defendant manufactures and sells, Defendant would (a) pay CAS Marketing quarterly 6 6 of 9
commissions calculated as a percentage of Defendant s sales of the branded products, and (b) provide quarterly Royalty Reports to explain and support those calculations. 31. In reasonable and foreseeable reliance on Defendant s promises, CAS Marketing obtained various licenses for Defendant to use brands on the bedding, bath, and beach products that Defendant manufactures and sells, and Defendant has used and continues to use those brands on its products, and earned a profit from doing so. 32. Despite CAS Marketing s successful efforts in reliance on Defendant s promises, Defendant has refused to pay CAS Marketing the quarterly commissions due and owing or provide CAS Marketing with quarterly Royalty Reports, including Royalty Reports for the sporadic payments that Defendant began making in or around 2013. 33. As a direct and proximate result of its reasonable and foreseeable reliance on Defendant s promises, CAS Marketing has suffered damages in the amount of at least $500,000, plus interest, costs and disbursements. THIRD CAUSE OF ACTION (Unjust Enrichment) 34. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through 33 of this Complaint, as if set forth at length herein. 35. As a result of CAS Marketing s services, Defendant obtained various licensed brands to use on the products it manufactures and sells, and has profited as a result. 36. CAS Marketing performed these services in good faith, at Defendant s behest, and with the expectation of compensation in the form of quarterly commissions. 37. It is against equity and good conscience for Defendant to retain the entirety of those profits without paying CAS Marketing the quarterly commissions that are due and owing based on the sale of the aforesaid branded products. 7 7 of 9
38. As a direct and proximate result of Defendant s conduct, CAS Marketing has suffered damages in the amount of at least $500,000, plus interest, costs, and disbursements. FOURTH CAUSE OF ACTION (Quantum Meruit) 39. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through 38 of this Complaint, as if set forth at length herein. 40. As a result of CAS Marketing s services, Defendant obtained various licensed brands to use on the products it manufactures and sells, and has profited as a result. 41. CAS Marketing performed these services in good faith, at Defendant s behest, and with the expectation of compensation in the form of quarterly commissions. 42. Defendant accepted the licensing services rendered by CAS Marketing, and as a direct result has been able to use licensed brands that enhance the sales of its products as well as its profits. 43. CAS Marketing is entitled to the reasonable value of the services that it rendered for Defendant, and by reason of Defendant s conduct, has been damaged in the amount of at least $500,000. WHEREFORE, CAS Marketing demands judgment against Defendant as follows: a. At least $500,000 in damages, plus interest, costs, and disbursements; b. Such other, further or different relief as the Court deems just or proper. [SIGNATURES TO FOLLOW] 8 8 of 9
Dated: August 30, 2016 9 9 of 9