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2d FOR EDUCATIONAL USE ONLY
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(Cite as: 2001 WL 1568317 (S.D.N.Y.))
Only the Westlaw citation is currently available.
United States District Court, S.D. New York.
PALAZZETTI IMPORT/EXPORT, INC., Plaintiff,
v.
Gregory P. MORSON and the Morson Group, d/b/a the
Morson Collection, Defendants.
No. 98 CIV. 722(FM).
Dec. 6, 2001.
Debra J. Guzov, Esq., Guzov, Steckman & Ofsink,
LLC., New York.
Dan L. Johnston, Esq., New York.
MEMORANDUM OPINION AND ORDER
MAAS, Magistrate J.
I. Introduction
*1 This breach of contract action arises out of a licens-
ing agreement pursuant to which plaintiff Palazzetti Im-
FN1
port/Export, Inc. licensed defendant Gregory P.
FN2
Morson to use the “Palazzetti” name in connection
with a furniture store in Boston, Massachusetts. The
case was tried before a jury over the course of three
days, commencing on July 16, 2001. Following several
hours of deliberations, the jury returned a verdict in fa-
vor of Palazzetti in the amount of $1,661,981.
FN1. Plaintiff Palazzetti Import/Export, Inc. is
hereinafter referred to as “Palazzetti.”
FN2. The defendants hereinafter are referred to
collectively as the “Defendants,” Gregory P.
Morson as “Mr. Morson,” and The Morson
Group, d/b/a “The Morson Collection,” as “The
Morson Group.”
The Defendants have now moved for judgment as a
matter of law (“JMOL”) under Rule 50(b), or, in the al-
ternative, a new trial under Rule 59, of the Federal
Rules of Civil Procedure. For the reasons set forth be-
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low, I have determined that both motions should be
denied. The Clerk of the Court is therefore directed to
enter judgment against the Defendants consistent with
this Memorandum Opinion and Order and close this
case.
II. Factual and Procedural History
A. Palazzetti
Palazzetti is a corporation engaged in the business of
importing furniture for sale to architects, decorators,
and retail customers through furniture showrooms. (Tr.
FN3
27-33). The Palazzetti collection consists of high-
end “modern classic” furniture created by “famous de-
signers” during the period from 1900 through 1950. (Id.
at 28).
FN3. “Tr.” refers to the uncertified draft tran-
script of the trial furnished to the Court by
Palazzetti as part of its opposition papers.
Following the opening of its first showroom in New
York City in 1982, Palazzetti has, at various times, op-
erated showrooms in several cities, primarily in the
Northeast, but also in Texas and California. (Id. at
30-48). By the time of the trial, the Palazzetti empire
had been reduced to one showroom in New York City
and another in Manhassett, New York. Except for a
showroom operated by the Defendants in Boston, all of
the Palazzetti showrooms in the United States were
either wholly owned or controlled by Palazzetti's prin-
FN4
cipal, Sergio Palazzetti.
FN4. Sergio Palazzetti is hereinafter referred to
as “Mr. Palazzetti.”
B. The “Boutique” License
In the spring of 1994, Mr. Morson's then fiancé, Caro-
lyn Hontoria, began working for Palazzetti as a sales-
person in the New York showroom. (Id. at 150, 253).
She and Mr. Morson subsequently spoke with Mr.
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Palazzetti about opening a Palazzetti store in Boston.
(Id. at 217-18, 254-56). Those discussions led to a July
18, 1995 “Palazzetti Boutique License” agreement
between Palazzetti and Mr. Morson (“License”), pursu-
ant to which Mr. Morson (or a corporate assignee that
he controlled) was granted the right to use the Palazzetti
name for a furniture store in the Boston metropolitan
area for a period of ten years, commencing with the
opening of the store. (License §§ 2, 4, 5, 11). The Li-
cense granted Mr. Morson exclusivity in that area. (Id. §
13).
In exchange for the License, Mr. Morson agreed to pay
an initial fee of $100,000. (Id. § 3). Mr. Morson also
agreed that the majority of the inventory on the show-
room floor and no less than sixty percent of the Boston
store's annual sales would be derived from Palazzetti's
product line, which was to be offered to Mr. Morson or
his assignee “at wholesale costs no greater than those
amounts charged to all other retail
establishments.”(Id. §§ 6, 10). As a consequence, in ad-
dition to the $100,000 fee, the License afforded Palazz-
etti the opportunity to realize substantial additional in-
come based upon its sales of furniture to Mr. Morson or
his assignee.
*2 The License gave Mr. Morson or his assignee the
right to renew for additional ten-year periods, with the
renewal fee fixed as “an amount equal to one and one
half percent (1.5%) of the total amount of sales, net of
discounts, for the immediately preceding ten (10) year
period.”(Id. § 4).
Pursuant to the License, any declaration of a default had
to be in writing, with the allegedly defaulting party hav-
ing a thirty-day period to cure. (Id. § 16). The License
stated that any “[u]ncured defaults of the License[e]
may result in the revocation of the License.”(Id.) The
very next sentence of the License provided, however,
that any “[u]ncured defaults of the Licensor shall en-
titled [sic] Licensee to damages, equity or
FN5
both.”(Id.).
FN5. The License is riddled with typographical
and grammatical errors. In context, it seems
clear that the reference to “defaults of the Li-
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cense” in the prior sentence must have been in-
tended to address defaults of the “License[e].”
Finally, the License provided that the law of the State of
New York would control. (Id. § 18).
C. Subsequent Events
After Mr. Morson entered into the License Agreement,
he and Carolyn moved to Boston, where they negotiated
a ten-year lease for a store which was opened on June
13, 1996. (Tr. 237, 256). Although the Morsons contin-
ued to operate that Palazzetti store until late 1997, the
relationship was not a happy one. In brief, the Defend-
ants contend that Palazzetti breached the terms of the
License by continually failing to supply furniture in a
timely manner due to its cash flow problems. Palazzetti,
on the other hand, maintains that the Defendants
breached the License terms by purchasing furniture dir-
ectly from Palazzetti's suppliers, soliciting business out-
side their designated territory, and, most importantly,
sending a December 17, 1997 letter to Mr. Palazzetti.
(Pl.Ex. R). In that letter, Mr. Morson suggested that Mr.
Palazzetti had defrauded him by failing to disclose be-
fore the License was executed that Palazzetti's financial
problems would make it impossible to deliver furniture
on time. (Def.Ex. R). Mr. Morson also threatened legal
action unless, by December 22, 1997, Mr. Palazzetti ac-
cepted one of the following two options:
FIRST, WE WILL CONTINUE TO USE THE
PALAZZETTI NAME BUT WE WILL ONLY BUY
DIRECTLY FROM THE MANUFACTURERS. WE
WILL IN EFFECT BE COMPLETELY INDEPEND-
ENT, LIKE THE PALAZZETTI IN
FN6
CANADA. WE WILL ONLY ACCEPT ORDERS
FROM YOU WHICH YOU HAVE NOTIFIED U.S.
FN7
ARE ALREADY IN THE WATER. AND YOU
WILL EITHER PROMPTLY REFUND THE LI-
CENSE FEE OR PROVIDE A CREDIT AGAINST
OUTSTANDING INVOICES FOR AN AMOUNT
NO LESS THAN $100,000.00.
FN6. Apart from this reference, there was no
evidence at trial concerning a Canadian branch
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of Palazzetti.
FN7. The reference to goods “in the water”
relates to furniture ordered by the Defendants
which had been shipped to Palazzetti in New
York by its suppliers but which had not yet ar-
rived.
SECOND, WE WILL CHANGE OUR STORE
NAME AND SET UP OUR OWN FURNITURE
LINES TO CARRY. IN ADDITION, WE WILL
SEEK FULL LEGAL RECOURSE FOR OUR LI-
CENSE FEE AND ALL OTHER DAMAGES IN-
CURRED OFFSET INITIALLY BY OUTSTAND-
ING ACCOUNTS PAYABLE. FURTHER, ALL
OPEN PURCHASE ORDERS WILL BE CAN-
CELLED EFFECTIVE IMMEDIATELY.
(Id.). At trial, during his cross examination of Mr.
Palazzetti, the Defendants' counsel conceded that at
least the first of these options was “outside of the
[L]icense ....” (Tr. 104).
*3 Rather than accepting one of the proposed alternat-
ives, Palazzetti directed its counsel, Debra Guzov, Esq.,
to send Mr. Morson a letter dated December 19, 1997.
Pursuant to that letter, Palazzetti terminated the Li-
cense, contending that Mr. Morson was “in breach of
the [License]” as a consequence of “the facts set forth in
[Mr. Morson's December 17th letter].” (Tr. 288; Def.
FN8
Ex. R).
FN8. The letter also contended that Defendants
breached the License by advertising outside its
assigned territory and purchasing furniture dir-
ectly from Palazzetti's suppliers. However, be-
cause Palazzetti failed to provide the Defend-
ants with written notice of default, and a thirty-
day period to cure, it cannot recover damages
on these grounds. (License § 16).
Within a matter of weeks after receiving the Guzov let-
ter, the Defendants changed the name of the Boston
store to “The Morson Collection” and began selling
their own lines of furniture comparable to the furniture
that they previously had purchased from
FN9
Palazzetti. (Tr. 288-89). After a period of transition,
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the store became profitable. (Id. at 304-05). It remained
a successful enterprise at the time of trial. (Id.).
FN9. When the License was terminated, the
Defendants had $174,000 in orders for Palazz-
etti furniture still outstanding. (Tr. 289). The
Defendants filled some of these orders by ob-
taining the merchandise directly from Palazz-
etti's manufacturer. (Id.). Consequently, there
was a brief period of time in which the Defend-
ants distributed both lines of furniture.
D. Evidence of Morson's Intent
In determining whether Mr. Morson's letter constituted
an anticipatory repudiation of the License, as Ms.
Guzov in effect alleged, the jury was afforded an unusu-
al insight into his thinking. Prior to trial, the Defend-
ants' counsel inadvertently turned over to his adversary
two privileged letters that Mr. Morson had sent to Eric
Davis, Esq., an attorney who represented the Defend-
ants during the course of their dealings with Mr. Palazz-
etti. When Mr. Morson was confronted with those docu-
ments at his deposition, counsel permitted him to an-
swer many questions about them without interposing an
objection or directing him not to answer. As a con-
sequence, former Magistrate Judge Grubin held that the
attorney-client privilege was waived as to both docu-
ments. See Palazzetti Import/Export, Inc. v. Morson,
No. 98 Civ. 0722, 2000 WL 1015921, at * 1 (S.D.N.Y.
July 21, 2001).
At trial, the Court therefore received into evidence a
November 13, 1997 letter from Mr. Morson to Mr. Dav-
is, which was one of the two documents as to which
Morson's attorney-client privilege was waived. (Tr. 70;
Pl.Ex. 12). In that letter, Mr. Morson complained about
Palazzetti's late deliveries, which he attributed to its fin-
ancial problems, and suggested that a lawsuit could deal
Mr. Palazzetti “a crippling blow which he may not be
able to recover from.”(Tr. 242-44). Mr. Morson also
outlined the options that later were set forth in his
December 17, 1997 letter to Mr. Palazzetti. (Id. at
FN10
244-45).
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FN10. The Defendants conceded the authenti-
city of the November 13th letter in the Joint
Pretrial Order. (See Jt. PTO at 58). They never-
theless complain in the JMOL motion that it
was improperly received over their objection
that it was “privileged, irrelevant, and that no
proper foundation had been laid.”(JMOL Mo-
tion ¶ 19). Their privilege objection had previ-
ously been addressed by Judge Grubin whose
decision was the law of the case. See Christi-
anson v. Colt Indus. Operating Corp., 486 U.S.
800, 815-16, 108 S.Ct. 2166, 2177, 100
L.Ed.2d 811 (1988); In re PCH Assocs., 949
F.2d 585, 593 (2d Cir.1991). The only other
objection voiced at trial was that “no proper
foundation has been laid at this point for the
relevance of this exhibit.”(Tr. 70). The letter
obviously was relevant, however, to Mr. Mor-
son's state of mind at the time that he sent his
December 17th letter to Mr. Palazzetti. Al-
though the letter was received during Mr.
Palazzetti's testimony, Mr. Morson sub-
sequently was questioned extensively about it.
Indeed, Mr. Morson's own attorney had him
read the entire letter to the jury. (Tr. 234-37,
239-45).
E. Damages
At trial, Palazzetti sought to recover three categories of
damages allegedly arising out of the Defendants' repudi-
ation of the License. First, Palazzetti contended that it
was owed $92,147.96 for goods sold and delivered. The
Defendants conceded the validity of this claim (at least
as a set off) in their counsel's summation. (See Tr.
421)(“[W]e agree we owe Mr. Palazzetti the $92,000
....”).
Second, Palazzetti claimed to be owed $174,000 for fur-
niture that was in transit to the United States at the time
of Morson's repudiation. At the close of Palazzetti's
case, I granted the Defendants' oral JMOL motion as to
this aspect of Palazzetti's alleged damages because
Palazzetti had failed to establish how it eventually had
disposed of most of this furniture, leaving the jury to
speculate as to what Palazzetti's actual loss was. (Id. at
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167-68, 325-26).
*4 Finally, by far the largest component of Palazzetti's
alleged damages consisted of lost profit, which it sought
to prove principally through the testimony of Professor
Seymour Barcun, an economics expert. The direct and
cross examination of this witness consumed fewer than
a dozen pages of the uncertified trial transcript. (Id. at
186-97). Insofar as lost profits are concerned, Professor
Barcun testified that he assumed, based solely on the
amended complaint, that the arrangement between
Palazzetti and the Defendants was intended to last ten
years. (Id. at 195-97). He therefore projected the
$95,068 in profit that Palazzetti realized from its last six
months of sales to the Defendants over the remaining
eight and one-half year term of the License, assuming a
five percent annual growth rate. (Id. at 190-91). Accord-
ing to Professor Barcun, this calculation established that
Palazzetti's lost profits totaled $1,792,228, or
$1,569,833 after discounting to present value. (Id. at
191-92).
The Defendants' damages presentation was even more
terse. More specifically, Carolyn Morson testified that,
in addition to the $100,000 license fee, the Defendants'
had lost “something like [$]78,000, 76,000, something
like that” due to their inability to deliver certain lines of
furniture to customers, an additional sum of “roughly ...
20 something thousand dollars” due to customer cancel-
lations, and three or four thousand dollars because
Palazzetti itself had fulfilled some of their outstanding
orders. (Id. at 290-91).
F. Issues Presented to the Jury
Although the Joint Pretrial Order contemplated a multi-
week trial in which the jury would be asked to consider
claims and counterclaims alleging breach of contract,
accounts stated, unfair competition, tortious interfer-
ence, defamation, and violations of the Lanham Act and
the New York General Business Law, the issues in the
case, and therefore the length of the trial, shrank dra-
matically as time went on. Ultimately, because the De-
fendants' liability therefor was undisputed, the jury was
instructed, without objection, to return a verdict in favor
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of Palazzetti on the $92,147.96 account stated claim.(Id.

at 453). The only other issues presented to the jury, as
summarized on an agreed verdict sheet, were as fol-
lows:

2(a). Do you find that the Licensing

Agreement was breached or anticip-
atorily repudiated?
(Answer yes or no.) ____________________
If you have answered “yes” to question 2(a), answer question 2(b):
2(b). Which party do you find breached ____________________
or repudiated the Licensing Agree-
ment? (Insert either
“Morson” or “Palazzetti.”)
If you answered “Morson” in response to question 2(b), answer question 2(c);
if you answered “Palazzetti” in response to question 2(b), answer question
2(d):
2(c). What amount, if any (exclusive of
any amount awarded in response to
question 1), do you award to
Palazzetti as damages?
$____________________
2(d). What amount, if any, do you award
to Morson as damages?
$____________________
store. Second, they maintain that there was no basis for
*5 (See id. at 472-73). the jury to award damages against Mr. Morson individu-
ally on the account stated claim.
After more than five hours of deliberations over the
course of two days, the jury found that the Defendants
had anticipatorily repudiated the License, and that A. Rule 50(b)
Palazzetti was therefore entitled to recover $1,569,833
in lost profits (the precise sum suggested by Professor 1. Standard of Review of Jury Verdict
Barcun) and an additional $92,147.96 on the account
When reviewing a jury verdict pursuant to Rule 50(b),
stated claim. (Id.).
both trial and appellate courts apply the same standard.
DiSanto v. McGraw-Hill, Inc./Platt's Div., 220 F.3d 61,
III. Discussion 64 (2d Cir.2000). JMOL consequently may not be gran-
ted “unless the evidence, viewed in the light most favor-
The Defendants advance two basic arguments in support able to the opposing party, is insufficient to permit a
of their motion. First, they contend that there was no reasonable juror to find in [its] favor.” DiSanto, 220
evidence from which a jury reasonably could have F.3d at 64 (quoting Galdieri-Abrosini v. Nat'l Realty &
found that they breached the terms of the License be- Dev. Corp., 136 F.3d 276, 289 (2d Cir.1998)). As the
cause it imposed no obligation on them to operate a Second Circuit has cautioned:

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In deciding such a motion, the court must give defer-
ence to all credibility determinations and reasonable
inferences of the jury, and it may not itself weigh the
credibility of witnesses or consider the weight of the
evidence. Thus, judgment as a matter of law should
not be granted unless
(1) there is such a complete absence of evidence
supporting the verdict that the jury's findings could
only have been the result of sheer surmise and con-
jecture, or
(2) there is such an overwhelming amount of evid-
ence in favor of the movant that reasonable and fair
minded [persons] could not arrive at a verdict
against [it].
Id. (citations omitted; brackets in original). In short, a
JMOL motion faces “a high bar.” Lavin McEleney v.
Marist College, 239 F.3d 476, 479 (2d Cir.2001).
2. Compliance with the Rule
Before turning to the merits of the Defendants' motion,
there is a procedural issue that merits discussion. Dur-
ing the trial, the Defendants made their JMOL motion
both at the close of Palazzetti's case and after the jury
returned its verdict, but not at the close of all of the
evidence. (Tr. 200, 474). Pursuant to Rule 50, however,
“a motion for directed verdict at the close of all the
evidence is a prerequisite for [JMOL].” Cruz v. Local
Union No. 3 of Int'l Bhd. of Elec. Workers, 34 F.3d
1148, 1155 (2d Cir.1994) (quoting Hilord Chem. Corp.
v. Ricoh Elec., Inc., 875 F.2d 32, 37 (2d Cir.1989)); see
also Pahuta v. Massey-Ferguson, Inc., 170 F.3d 125,
129 (2d Cir.1999) (“the moving party must renew the
motion both at the close of the evidence and within ten
days after entry of judgment”) (citing 9A Charles Alan
Wright and Arthur R. Miller, Federal Practice and Pro-
cedure, §§ 2536, 2537 (2d ed.1995)). The Second Cir-
cuit case law regarding the consequence of a party's
failure to move for a directed verdict at the close of all
of the evidence is not fully in accord. Compare Cruz,
34 F.3d at 1155 (“this procedural requirement may not
be waived as a mere technicality”) with Gibeau v. Nel-
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lis, 18 F.3d 107, 109 (2d Cir.1994) (holding that failure
of the nonmoving party to raise this procedural defense
resulted in its waiver). In LNC Investments, Inc. v. First
Fidelity Bank, 126 F.Supp.2d 778, 784-85
(S.D.N.Y.2001), Judge Haight recognized the “tension
between these two lines of Second Circuit authority,”
concluding that “the better course for me to follow is to
consider the motion on its merits.”Given Palazzetti's
failure to raise this defense, I, too, think it is best to
reach the merits of the Defendants' motion.
3. Defendants' Obligations Under the License
*6 As noted above, the main argument advanced by the
Defendants in support of their JMOL motion is that the
License did not impose any obligation to operate a
Palazzetti store in Boston for any set period of time.
Rather, in their view, the License merely afforded them
an option to operate a Palazzetti store under specified
conditions in exchange for a $100,000 payment. They
contend that they chose to operate such a store for one
and one-half years, after which the relationship with
Palazzetti became untenable and they exercised their
contractual right not to remain in business using the
Palazzetti name. Palazzetti disagrees with this analysis,
arguing that New York law imposes upon the Defend-
ants, as an exclusive licensee, an implied duty to exploit
with due diligence the subject matter of the License.
In support of its claim, Palazzetti relies on Justice Car-
dozo's famed opinion in Wood v. Lucy, Lady Duff-
Gordon, 222 N.Y. 88, 90, 118 N.E. 214, 214 (1917),
and its progeny. In Wood, the defendant was “a creator
of fashions” who, in exchange for one half of all profits
gained through the relationship, granted the plaintiff an
exclusive license to sell products with her endorsement.
The plaintiff sued for damages when he learned that the
defendant had been endorsing other products without
his knowledge in violation of their agreement. Id. Seek-
ing to overcome this claim, the defendant-licensor ar-
gued that the agreement imposed no obligation upon the
plaintiff-licensee and therefore was unenforceable for
want of mutual consideration. Id. In his landmark de-
cision, Justice Cardozo concluded that there was an im-
plied obligation that the plaintiff-licensee would use
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reasonable efforts to exploit the defendant's product
line, and that the contract was therefore enforceable. Id.
at 91, 118 N.E. at 214.
In subsequent cases, courts often have suggested that a
duty to use reasonable efforts to exploit a license should
be implied only when the resulting royalties, as in
Wood, constitute the sole consideration that the licensor
will receive. See, e.g., Emerson Radio Corp. v. Orion
Sales, Inc., 253 F.3d 159, 168 (3d Cir.2001) (applying
New Jersey law); HML v. Gen. Foods Corp., 365 F.2d
77, 80 (3d Cir.1966) (applying New York law); see also
Vacuum Concrete Corp. v. Am. Machine & Foundry
Co., 321 F.Supp. 771, 773 (S.D.N.Y.1971) (stating that
an implied covenant will not be found when unneces-
sary to give effect to the terms of the contract). Accord-
ingly, when a licensor is awarded either a substantial
advance payment or a guaranteed minimum royalty,
courts typically have declined to imply a duty to exploit
the subject matter of the license. E.g., Emerson, 253
F.3d at 169 (affirming grant of summary judgment on
implied obligation claim where licensor received
“substantial minimum royalty payment totaling $4 mil-
lion per year for three years”); Permanence Corp. v.
Kennametal, Inc., 908 F.2d 98, 102 (6th Cir.1990)
(“The key provisions of the contract ... which militate
against implying a convenant to use best efforts are
Kennametal's obligation to pay $150,000 in order to ex-
ercise the option for the exclusive license and the
$150,000 in additional advance royalties paid under the
exclusive license.”); Beraha v. Baxter Health Care
Corp., 956 F.2d 1436, 1442 (7th Cir.1992) (“We find
the reasoning in Permanence persuasive); cf. Havel v.
Kelsey-Hayes Co., 83 A.D.2d 380, 383, 445 N.Y.S.2d
333, 336 (4th Dep't 1981) (indicating in dicta that “a
guaranteed stipulated minimum payment is relevant in
determining the intent of the parties on the question of
whether the covenant should be implied”).
*7 Notwithstanding this line of cases, courts have, on
occasion, implied a covenant requiring a licensee to ex-
ploit a license even when the licensor has received a
guaranteed minimum royalty or upfront fee. See, e.g.,
Reback v. Story Prods., Inc., 15 Misc.2d 681, 683, 181
N.Y.S.2d 980, 982 (Sup.Ct. N.Y. County 1958)
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(holding that the sale of exclusive motion picture, tele-
vision, and radio rights in exchange for a “minimum
guarantee” of $100,000 in royalties rendered the agree-
ment “instinct with an obligation on the part of defend-
ant to do more than merely pay the minimum guaran-
tee”); Mech. Ice Tray Corp., 144 F.2d 720, 725 (2d
Cir.1944) (finding that parties “expected the defendant
to make and sell trays on which royalties would have
become due and not merely to pay a guaranteed minim-
um royalty”). Indeed, even in Wood, in the course of de-
termining that an obligation to exploit the defendant's
name should be implied, Justice Cardozo looked not
just to the absence of any payment, but to many circum-
stances, including a recital that the plaintiff possessed a
business organization “adapted” to the marketing of the
defendant's products, the plaintiff's obligation to
provide a monthly accounting of all sales, and his prom-
ise to exercise his judgment with regard to registering
trademarks, patents, and copyrights as he saw neces-
sary. See Wood, 222 N.Y. at 91-92, 118 N.E. at 214-15.
Thus, the issue in this case is ultimately whether the
written License and all of the surrounding circum-
stances indicate that a promise on the part of the Mr.
Morson is “fairly to be implied.” See Fakhoury Enters.,
Inc. v. J.T. Distribs., No. 94 Civ. 2729, 1997 WL
291961, at *5 (S.D.N.Y. June 2, 1997) (quoting Wood,
222 N.Y. at 91, 118 N.E. at 24)). There are a number of
circumstances from which the jury could reasonably
conclude that the Defendants, rather than having simply
purchased an option, had a continuing obligation to ex-
ploit the License.
First, pursuant to the License, Mr. Morson had the right
to renew for an unlimited number of ten-year periods in
exchange for a fee that was purely a function of the Bo-
ston store's sales during the prior period. If the Defend-
ants' interpretation were correct, the License would
have required a minimum payment of $100,000 for the
first ten years, but then could have been renewed for ad-
ditional ten-year periods for substantially less. For ex-
ample, after operating a Palazzetti store for only eight-
een months, the Defendants could have renewed the Li-
cense in eight and one-half years (and therefore could
have locked Palazzetti out of the Boston market for an
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additional ten years) simply by tendering a fee equal to
one and one-half percent of their net purchases during
that period. Then, after continuing not to operate a
Palazzetti store for an additional ten years, the Defend-
ants presumably could have sought to lock Palazzetti
out of the Boston market for another ten-year period
FN*
without having to pay any money at all.
FN* There is, of course, an issue whether such
an attempt at extending the License would fail
for lack of consideration. See generally Weiner
v. McGraw Hill, Inc., 57 N.Y.2d 458, 468, 457
N.Y .S.2d 193, 197 (1982).
*8 Second, the initial term of the License was fixed as a
period of ten years, which was to commence with the
opening of the store. If the parties contemplated that
Mr. Morson might not operate a store, the License pre-
sumably would have commenced on the date that the
$100,000 fee was paid (or earlier) so that Mr. Morson
would be unable to sit on his rights for a lengthy period
before activating the License by beginning to operate a
Palazzetti store.
Third, the License obligated Palazzetti to advertise the
location of Mr. Morson's store as part of its national and
regional publicity campaigns, in exchange for which
Mr. Morson or his assignee was to make an annual con-
tribution of $5,000 payable quarterly. (License § 8).
This provision also suggests that the parties to the Li-
cense in fact contemplated that the Defendants would
operate a Palazzetti store rather than simply having the
option to do so.
Fourth, within a matter of months after signing the Li-
cense, Mr. Morson entered into a lease for the Boston
store. Although the License did not place any limita-
tions on the length of that lease, Mr. Morson agreed to a
ten-year term.
Finally, although the $100,000 initial fee for the license
was not inconsiderable, Palazzetti earned an additional
$100,000 from its sales of furniture to the Defendants
during the last six months of their relationship alone, a
period when the Defendants contended that numerous
orders were being lost due to customer cancellations. As
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Mr. Palazzetti explained in testimony which went un-
challenged by the Defendants:
The value of the territory that was involved in the li-
cense was worth a lot more than $100,000 in ten
years. Obviously, I could have opened a store there
and make [sic] a lot of money, much more than
$100,000 worth of profit. Therefore, the [L]icense ...
was done in a way that there would be a smaller
amount up front and then obviously Palazzetti would
make a profit selling furniture throughout the period
of ten years.
(Tr. 381-82).
These facts and circumstances, taken together, permit
the inference that, at the time that they entered into the
License, the parties expected that Mr. Morson or his as-
signee would exercise reasonable diligence to operate a
Palazzetti store for a period of ten years. Additionally,
the $100,000 initial license fee, when compared to the
possible profits over the life of the license, could be
viewed as insubstantial. While these obviously are not
the only factual conclusions that could be drawn from
the evidence, they are reasonable ones. Accordingly, the
Defendants have failed to meet their heavy burden un-
der Rule 50(b).
4. Other Contract Issues
Although the Defendants' JMOL motion with respect to
the License claim was predicated solely on the premise
that Mr. Morson had no obligation to exploit the Li-
cense, two subsidiary issues not specifically raised by
the parties merit brief discussion.
First, the License claim was presented to the jury pursu-
ant to instructions which required the jurors to find
either that Palazzetti breached or that the Defendants
anticipatorily repudiated the terms of the License. With
respect to the Defendants' potential liability, the jury
was instructed that “an anticipatory repudiation occurs
when a party [ ] whose performance under the contract
is not yet due [ ] unequivocally advises the other party
that it intends not to perform the contract.”(Id. at 456).
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*9 Under New York law, when a party repudiates its
contractual obligations prior to the agreed time for per-
formance, the other party is entitled to claim damages
for a total breach. See Norcon Power Partners, L.P. v.
Niagara Mohawk Power Corp., 92 N.Y.2d 458, 462-63,
682 N.Y.S.2d 664, 667 (1998). The renunciation,
however, must rise to the level of a clear and unquali-
fied refusal to perform the entire contract. DeLorenzo v.
BAC Agency, Inc., 256 A.D.2d 906, 908, 681 N.Y.S.2d
846, 848 (3d Dep't 1998). The renunciation can consist
of an attempt to advance an unwarranted interpretation
of the contract or an indication that the renouncing party
will perform only if certain “extracontractual” condi-
tions are satisfied. SPI Communications, Inc. v. WTZA-
TV Assocs. Ltd. P'ship, 229 A.D.2d 644, 645, 644
N.Y.S.2d 788, 790 (3d Dep't 1996). Once a party has re-
pudiated a contract, the other party may bring suit im-
mediately without satisfying conditions precedent that
might otherwise apply. Lace v. Shapiro, 249 N.Y. 68,
72-73, 162 N.E. 586, 588 (1928); Sunshine Steak, Salad
& Seafood, Inc. v. W.I.M. Realty, Inc., 135 A.D.2d 891,
522 N.Y.S.2d 292 (3d Dep't 1987); see also Long Is-
land Rail Road Co. v. Northville Inds. Corp., 41 N.Y.2d
455, 463, 393 N.Y.S.2d 925, 930 (1977) (injured party
may recover damages for total breach with stream of fu-
ture payments discounted to present value).
Mr. Morson's December 17th letter expressed an inten-
tion not to perform further pursuant to the License un-
less Palazzetti agreed to one of two “options,” both of
which were contrary to the original License terms. The
jury could have concluded that the letter was a mere
bargaining ploy rather than an unequivocal renunciation
of the License because the letter contained language in-
dicating that these were the options that Mr. Morson
was putting forth “at this time.” On the other hand, from
the tenor and text of the letter that Mr. Morson had sent
to his counsel less than one month earlier, the jury also
could have reasonably concluded that the Defendants
had no intention of performing further under the Li-
cense. Here, as the verdict sheet makes apparent, the
jury reached the second conclusion. Accordingly, be-
cause the jury found that Mr. Morson anticipatorily re-
pudiated the License, there is no basis to grant JMOL
on the theory that Palazzetti failed to provide written
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notice of Mr. Morson's default.
The second issue relates to the remedies available under
the License in the event of a default. As noted above,
the License provides that in the event of a default by the
licensee, the licensor “may” revoke the License, but
provides no other remedies. (License § 16). Nonethe-
less, under New York law, contractual remedies are
deemed to be nonexclusive absent some indication of
contrary intent. See, e.g., In re Hale Desk Co., 97 F.2d
372, 373 (2d Cir.1938) ( “whether the provision for
damages in a contract should be treated as an exclusive
remedy is to be determined by the intent of the parties
as revealed in all the facts of the particular case”); Papa
Gino's of Amer., Inc. v. Plaza at Latham Assocs., 135
A.D.2d 74, 76, 524 N.Y.S.2d 536, 538 (3d Dep't 1988)
(“a liquidated damages clause does not bar the equitable
relief of specific performance unless there is explicit
language that it is to be the sole remedy”); see
alsoN.Y.U.C.C. § 2-719(b) (resort to a remedy is
“optional unless the remedy is expressly agreed to be
exclusive, in which case it is the sole remedy”). Accord-
ingly, Palazzetti was free to seek monetary damages if,
as the jury found, Mr. Morson unequivocally repudiated
the License.
5. Mr. Morson's Liability on the Account Stated Claim
*10 Mr. Morson also has moved for JMOL with regard
to the account stated claim against him because the
transactions from which the account stated arises al-
legedly were executed by The Morson Group rather
than by him in his individual capacity. This motion
must be denied on at least two grounds. First, pursuant
to the License, Mr. Morson was granted permission to
do business as Palazzetti in the Boston area and to as-
sign his rights to a corporate entity in which he held “a
majority of the outstanding shares.”(License § 11).
When he was recalled as a witness to testify about his
relationship to The Morson Group, Mr. Morson testified
that he orally assigned his interest in the License to that
entity in December 1995. (Tr. 375). Mr. Palazzetti,
however, testified that he was never informed of this as-
signment. (Id. at 384). More importantly, the invoices
which gave rise to the account stated claim each are ad-
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dressed to “Palazzetti-Boston,” not to The Morson
Group. The Palazzetti store in Boston was, of course,
the business entity that Mr. Morson individually had
sought a license to operate.
In addition, during the trial, the Defendants never
sought to distinguish Mr. Morson from The Morson
Group with respect to the account stated claim. Indeed,
during his JMOL motions at trial, counsel for the De-
fendants never addressed the theory that Mr. Morson
was not individually liable. (Id. at 200, 474). Rather, in
his summation, the Defendants' counsel stated that “we
owe Mr. Palazzetti the $92,000 .... We agree that we
owe that ....”(Id. at 421). In keeping with that conces-
sion, the Defendants' counsel also did not object to the
Court's instructions to the jury which referred to Mr.
Morson and The Morson Group collectively as
“Morson” and directed that a verdict be entered for
Palazzetti on the account stated claim because “Morson
concedes that it owes these sums.”(Id. at 405, 453). The
Defendants similarly did not object to the verdict sheet,
which asked whether Palazzetti was entitled to recover
$92.147.96 “from Morson” on the account stated claim.
In sum, there is no factual or legal basis for the conten-
tion that Mr. Morson is not individually liable on the
account stated claim.
B. Rule 59
The Defendants also have moved, in the alternative, for
a new trial pursuant to Rule 59 of the Federal Rules of
Civil Procedure. Insofar as pertinent, that Rule provides
that a new trial may be granted in an action tried before
a jury “for any of the reasons for which new trials have
heretofore been granted in actions at law in the courts of
the United States.”Fed.R.Civ.P. 59(a)(1). The Rule im-
poses a lower threshold for the granting of a new trial
than for JMOL because the trial judge may reassess the
trial evidence and need not view it in the light most fa-
vorable to the nonmovant. United States v. Landau, 155
F.3d 93, 104 (2d Cir.1998). Accordingly, a motion for a
new trial may be granted even when the jury's verdict is
supported by substantial evidence. Caruolo v. John
Crane, Inc., 226 F.3d 46, 54 (2d Cir.2000). The trial
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Page 10
court therefore has substantial discretion in ruling on a
motion for a new trial. Metromedia Co. v. Fugazy, 983
F.2d 350, 363 (2d Cir.1992); Caruolo, 226 F.3d at
54.Nevertheless, the Second Circuit has held that a new
trial motion “ordinarily should not be granted unless the
trial court is convinced that the jury has reached a seri-
ously erroneous result or that the verdict is a miscar-
riage of justice. Lightfoot v. Union Carbide Corp., 110
F.3d 898, 911 (2d Cir.1997) (quoting Hugh v. Jacobs,
961 F.2d 359, 365 (2d Cir.1992)) (emphasis supplied).
*11 Had this case been tried without a jury, I might well
have reached a different conclusion. For example, the
evidence that the parties contemplated a ten-year rela-
tionship was, in my view, far from overwhelming. In
addition, although the jury evidently adopted Professor
Barcun's damages analysis in its entirety, it rested on
the same shaky assumption that Mr. Morson was con-
tractually required to remain in business as a Palazzetti
store for at least ten years.
Nonetheless, I am unable to say that the jury necessarily
erred in its determination of the liability and damages
issues that were presented for its consideration. The
evidentiary support for the jury's finding that the De-
fendants repudiated an agreement whereby they were to
run a Palazzetti store in the Boston area has been set
forth in the discussion of their JMOL motion. On the is-
sue of damages, by the time of trial the Boston store had
been in operation for more than five years. The jury
consequently could reasonably have concluded that, but
for their repudiation of the License, the Defendants
would have operated a Palazzetti store for a minimum
of five years.
Although there was less evidence that Mr. Palazzetti
and the Defendants had agreed that the store would re-
main open for an additional five years, I am unable to
say that such a finding is necessarily erroneous.
Moreover, Professor Barcun did provide a reasoned
basis for the jury to find that Palazzetti would have
earned profits of more than $1.7 million over the re-
maining eight and one-half years of the initial License
term. Although Professor Barcun's analysis was rather
cursory, it is settled law that the Defendants are not en-
titled to avoid responsibility for the monetary damages
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that they caused simply because their repudiation of the

License has injected an element of uncertainty into the
calculation of Palazzetti's damages. See Bloor v. Fal-
staff Brewing Corp., 601 F.2d 609, 615 (2d Cir.1979);
Contemporary Mission, Inc. v. Famous Music Corp.,
557 F.2d 918, 926 (2d Cir.1977).

Although it is not without a degree of reluctance, I

therefore decline to exercise my discretion to set aside
the verdict and require a new trial.

IV. Conclusion

For the foregoing reasons, Defendants' motions for

judgment as a matter of law or, in the alternative, for a
new trial are denied. The Clerk of the Court is directed
to enter judgement against the Defendants consistent
with this Memorandum Opinion and Order and close
this case.

SO ORDERED.

S.D.N.Y.,2001.
Palazzetti Import/Export, Inc. v. Morson
Not Reported in F.Supp.2d, 2001 WL 1568317
(S.D.N.Y.)

END OF DOCUMENT

© 2009 Thomson Reuters/West. No Claim to Orig. US Gov. Works.