Bongo Apparel, Inc. v Iconix Brand Group, Inc. (2008 NY Slip Op 50000(U))

Bongo Apparel, Inc. v Iconix Brand Group, Inc.

2008 NY Slip Op 50000(U) [18 Misc 3d 1108(A)]

Decided on January 2, 2008

Supreme Court, New York County

Fried, 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This opinion is uncorrected and will not be published in the printed Official Reports.

The instant action arises out of various disputes relating to the execution and performance of two license agreements, granting plaintiff Bongo Apparel, Inc. (BAI), use of the "BONGO" fashion brand trademark (the Bongo mark) in the design, manufacture, distribution, and sale of certain jeans wear and active wear. Defendant Iconix Brand Group, Inc. (Iconix), formerly known as Candie's Inc. (Candie's), the alleged owner of the Bongo brand, and defendant IP Holdings, LLC (IPH), its wholly-owned subsidiary, now move, pursuant to 3211 (a) (1), (a) (5), and (a) (7), to dismiss the first through thirteenth causes of action in plaintiff's amended complaint.

Iconix, a Delaware corporation headquartered in New York, is the owner of numerous fashion brands, including the Bongo brand. Iconix allegedly is in the business of licensing and marketing these fashion brands to various manufacturers and retailers through its subsidiary, IPH, a Delaware limited liability company headquartered in Delaware. IPH is the actual owner and licensor of certain trade names and trademarks associated with these fashion brands, including [*2]the Bongo mark.

According to plaintiff's amended complaint, in January of 2004, Neil Cole, the Chief Executive Officer and President of Iconix, approached James Tate, a vice president of non-party TKO Apparel Licensing, Inc. (TKO), to ascertain whether TKO would be interested in acquiring the license to use the Bongo mark in connection with the design, manufacture, distribution and sale of certain types of women's jeans wear and active wear (the Articles). TKO allegedly was then in the business of acquiring brand licenses for the purpose of designing, manufacturing and selling apparel. At the time, the license to produce the Articles was held by non-party Unzipped Apparel, LLC. (Unzipped), another wholly-owned subsidiary of Iconix. Unzipped was then being managed by non-parties Hubert Guez and Sweet Sportswear, LLC (Sweet). Cole allegedly was dissatisfied with the Guez/Sweet management, and wanted TKO to execute a new license to acquire use of the Bongo mark. Cole also allegedly wanted TKO to assume management responsibility for the Bongo product line over the next six months, at which time the Guez/Sweet management agreement was to expire.

On June 9, 2004, following extensive negotiations, IPH and TKO executed the license agreement, which granted TKO, with certain exceptions, "the exclusive right and license" to use the Bongo mark for production and sale of the Articles between August 2, 2004 and December 31, 2007 (the License Agreement) (see Meyer Affirm., Exh. B). The License Agreement required TKO, as licensee, to meet certain minimum sales targets and make various royalty payments, as set forth in the agreement. In turn, IPH, as licensor, agreed that it

Plaintiff alleges that, prior to execution of the License Agreement, and in order to assuage Tate's expressed concerns about (a) obtaining cooperation from Guez during the discussed six-month transition period, and (b) retaining the current sales staff of Unzipped, Cole made certain representations and warranties to Tate that served as inducement for, and subsequently became part of, the License Agreement. Specifically, Cole allegedly represented that he would make all efforts to effect a smooth transition, and agreed to the inclusion of the following "Smooth Transition" clause in their agreement:

[t]he Parties will work together in good faith and use commercially reasonable efforts to minimize any discounts, deductions, set-offs or other claims made by purchasers of Articles that arise from transactions or other business conducted by any Manager or licensee of the BONGO jeans wear business prior to the Term arising from the transfer of the License hereunder. The [*3]Parties will use all commercially reasonable efforts to effect a smooth transition of the BONGO jeans wear business, including facilitating discussions and the transfer of information to factories, agents, retailers and other business partners who are involved in the BONGO jeans wear business. It is the goal of the Parties that there be no material detrimental impact on the business, its market share or its goodwill, resulting solely from the transition of the business by Licensor to Licensee.

(id., Section 1.5). Cole also represented that he would make efforts to maintain staff integrity during the transition, and agreed to the inclusion of certain incentive provisions, to encourage key sales people, such as Gary Bader, the then-President of Sales at Unzipped, to remain with the Bongo brand through the discussed six-month transition period (id., Section 12.1[i-j]).

Plaintiff alleges, however, that almost immediately after execution of the License Agreement, defendants began to renege on their key promises and breach these provisions of the agreement. Specifically, plaintiff alleges that, despite the discussion of a six-month transition period, Cole began pressuring TKO to take over the management of the Bongo mark from Guez right away. Plaintiff further alleges that, despite the License Agreement's Smooth Transition clause, and over Tate's vehement objections, in early August of 2004, Cole unilaterally terminated Guez as manager of Unzipped. Cole also allegedly interfered with Bongo's production by contacting Sweet's factories and financiers to inform them of the impending termination. Additionally, in October 2004, following a disagreement with Bader regarding Cole's plans to start shipping Bongo brand merchandise to Kohl's Department Stores (Kohl's), Cole allegedly embarked on a campaign to harass and intimidate Bader into resigning.

The complaint alleges that, as a result of Cole's actions, BAI, an affiliate of TKO, was forced to execute an agreement with Iconix in September 2004, to assume the immediate management of Unzipped (the Management Agreement). Additionally, Cole's interference with Sweet's financiers allegedly caused them to stop funding production of the Bongo line and to begin liquidating Sweet's obligations. As a result, BAI was forced to advance Iconix a $2.5 million loan in order to keep the Bongo brand alive. Plaintiff alleges that the ensuing disruptions and production delays forced BAI not only to pay higher production and freight costs to produce and ship Bongo goods, but to lower its prices. BAI alleges that, notwithstanding its attempts to salvage its customer relationships, the ensuing turmoil caused it to lose the confidence of many of Unzipped's customers, leading them to cancel orders. BAI further alleges that Cole's decision to ship Bongo merchandise to Kohl's, damaged Unzipped's relationship with its largest customer, JC Penney, and, combined with the foregoing production delays, caused JC Penney to begin pulling its business from the Bongo brand. Plaintiff alleges that the resulting losses caused further damage to BAI, which, by assignment dated November 10, 2004, had assumed all of TKO's rights and obligations under the License Agreement.

Allegedly, to help ameliorate some of these problems, in late 2004, Cole approached Tate about developing and adding a young men's Bongo line to BAI's current business. To induce BAI to take on this new Bongo line, Cole allegedly represented to Tate that two other experienced business figures, Kenneth Cole and Charles Mamiye, would be executing licenses to produce other products under the Bongo mark. Believing that the introduction of these additional products would create more exposure, and enhance the prospects for a new Bongo line, Tate allegedly agreed to enter into the new license. On December 15, 2004, however, the day on [*4]which this second license agreement was to be executed, Tate allegedly learned that Mamiye might not be executing its proposed license and expressed his concerns to Cole. After receiving assurances from Cole that Mamiye would be acquiring the license, BAI executed the second license agreement, which granted BAI the exclusive right to use the Bongo mark in connection with the design, manufacture, and distribution of men's jeans wear and active wear (the Men's License Agreement) (see id., Exh. C).

Plaintiff alleges that, as part of the Men's License Agreement, Iconix agreed to develop and place national or institutional advertising for the new Men's Bongo line, from royalties paid by BAI. Plaintiff alleges, however, that in breach of this provision of their agreement, defendants failed to begin fulfilling this contractual obligation until late 2005. Subsequently, BAI also discovered that Mamiye had not executed a license agreement to produce other Bongo products, as had been promised by Cole.

In addition to the various license breaches, BAI alleges that, by January 2005, Iconix also had breached its Management Agreement with BAI, by becoming delinquent in paying the monthly management fees due to BAI under that agreement. Plaintiff further alleges that, by March and/or April of 2005, defendants had become delinquent in paying back the $2.5 million loan that BAI had advanced to Iconix, to help fund production of the women's Bongo line.

On May 27, 2005, after some discussion among the parties regarding the various problems, BAI's attorneys sent defendants a letter demanding (1) payment of monies due under the Management Agreement; (2) indemnification for damages caused, inter alia, by IPH's alleged breach of the License Agreement's Smooth Transition clause (in unilaterally terminating Guez); (3) a reduction in the minimum sales goals set forth in the License Agreement, as provided under Section 5.3 of that agreement (due to the complications and problems created, among other things, by the firing of Guez, and the departure of key employees, including Bader); and (4) a reduction in various royalty payments allegedly due from BAI under the License Agreement (see Lewin Affirm., Exh. D).

On August 26, 2005, following extensive negotiations, the parties executed an "Amendment to License and Settlement and Release Agreement" (the Settlement Agreement), wherein the parties agreed

Plaintiff alleges that, "[b]efore the Settlement Agreement was executed, in or about late August 2005," (Lewin Affirm., Exh. A: Amended Complaint, ¶ 127), Tate heard rumors that Iconix was negotiating with Kohl's, which had then become plaintiff's largest customer, to permit Kohl's to manufacture and sell its own Candie's brand of young women's line of clothing. Tate allegedly confronted Cole, concerned that this clothing line would be competitive with the Bongo brand. Cole allegedly represented to Tate that the proposed Candie's line would not compete directly with the Bongo brand or affect BAI's sales, and additionally promised that BAI would be given the private label production for the new Candie's line at Kohl's. Plaintiff alleges that, in [*6]reliance on these representations, BAI did not raise the issue of the Candie's deal in the course of the settlement negotiations. BAI, however, was not awarded the private label production for the new Candies' line, and alleges that it later learned that the Candie's line would be competitive with, and cut deeply into the sales of, the Bongo brand. BAI alleges that, had it known the truth, it would not have entered into the Settlement Agreement.

Plaintiff alleges that defendants' competitive conduct did not end with the grant of the Candies' license to Kohl's, but that, after execution of the Settlement Agreement, and in further breach of the License Agreement, Iconix began acquiring and marketing other competing clothing brands, including the "Rampage" and "Mudd" brands. BAI alleges that, due to defendants' actions in acquiring and marketing these competing brands, it terminated the License Agreement in April 2006. Additionally, BAI alleges that it terminated the Mens' License Agreement in April 2006, due to defendants' failure to promote the new Men's line of the Bongo brand.

On June 13, 2006, plaintiff commenced the instant action, asserting fourteen causes of action against Iconix and IPH, based on defendants' alleged chain of fraudulent representations, broken promises, breaches of contract, and acts of unfair competition.

In its first cause action, plaintiff asserts a claim for fraud in the inducement of the Settlement Agreement, based on Cole's alleged misrepresentations that BAI would receive the private label production of the goods manufactured with respect to the Candies' deal with Kohl's, and that the goods produced thereby would not be competitive with the Bongo brand. In its second cause of action, plaintiff asserts a claim for fraud in the inducement of both the License Agreement and Settlement Agreement, based on Cole's representation that Iconix would make all efforts to effect a smooth transition from Sweet and Unzipped to TKO. Plaintiff alleges that it only recently has discovered written evidence that, in the months preceding the execution of the License Agreement, Cole had been planning privately to fire Guez, and thus had no intention of honoring the Smooth Transition clause when this representation was made. Plaintiff alleges that, had it known of Cole's undisclosed intent, it would not have entered into the License Agreement, or executed the subsequent Settlement Agreement, as the consideration that BAI received, thereunder, for the resulting damage, was insufficient to make it whole .

In its third cause of action, plaintiff asserts a claim against Iconix for violations of Article 33 of New York's General Business Law, which regulates the offer and sale of franchises in this state (see GBL § 680 et seq.). Plaintiff alleges that the License Agreement falls within the statute's definition of a franchise, and that Iconix violated sections 683 and 687 (2) (a)-(c) and (3) of this statute by, respectively, failing to make the disclosures required therein, and engaging in fraudulent conduct through "multiple misrepresentations" it made to BAI in connection with the offer and sale of this alleged franchise (Lewin Affirm., Exh. A, ¶ 188) .

Plaintiff's fourth, fifth, and sixth causes of action each assert a breach of section 12.1 (d) of the License Agreement, based on defendants' alleged competitive conduct in granting the Candies' license to Kohl's (fourth cause of action); acquiring, and selling competitive products under, the Rampage brand (fifth cause of action); and, acquiring, and selling competitive products under, the Mudd brand (sixth cause of action). Plaintiff additionally asserts a seventh cause of action, seeking a declaratory judgment that plaintiff properly terminated the License Agreement due to defendants' acquisition and sale of these competitive brands; and, an eleventh [*7]cause of action, alleging unfair competition based on defendants' alleged bad-faith scheme to weaken, and then enter into direct competition with, the Bongo brand, via these competitive deals and acquisitions.

Plaintiff's eighth, ninth, tenth and thirteen causes of action all arise directly out of Cole's actions in unilaterally terminating Guez and Sweet, notifying their factories and financiers of that termination, and harassing and forcing Bader's resignation. In its eighth cause of action, plaintiff alleges that defendants violated the License Agreement's covenant of good faith and fair dealing by harassing and intimidating Bader into resigning. In its ninth cause of action, plaintiff alleges that defendants breached the Smooth Transition provision of the License Agreement, by failing to use commercially reasonable efforts to effect a smooth transition of the Bongo brand to BAI, and by the manner and timing of Cole's unilateral termination of Guez. In its tenth and the thirteenth causes of action, plaintiff alleges that defendants breached the License Agreement's covenant of good faith and fair dealing by, respectively, contacting Guez's factories and financiers about the termination, and predetermining to fire Guez.

In its twelfth cause of action, plaintiff alleges that defendants breached section 7.2 of the License Agreement and Men's License Agreement, by failing to use all of the advertising royalties paid by BAI to advertise and market the Bongo brand. Finally, in its fourteenth and last cause of action, plaintiff alleges that defendants breached the Settlement Agreement by failing and refusing to issue all of the promised warrants for the purchase of Iconix stock.

Defendants now move to dismiss all, or portions, of plaintiff's first thirteen causes of action. Defendants argue that dismissal of plaintiff's second, third, fourth, eighth, ninth, tenth, thirteenth, as well as portions of plaintiff's eleventh and twelfth, causes of action, is warranted, as all of the claims therein relate to BAI's women's Bongo jeans wear business, and arise out of actions which occurred prior to August 26, 2005; thus, all of these claims were encompassed, and thus settled and released, by the Settlement Agreement. Defendants contend that since BAI does not seek to rescind the Settlement Agreement, but to enforce the agreement and recover damages based on defendants' alleged fraudulent inducement, it is precluded from suing directly on these underlying claims. Alternatively, defendants argue that plaintiff's tenth and thirteenth causes of action, for breach of the License Agreement's covenant of good faith and fair dealing, should be dismissed as redundant of plaintiff's ninth cause of action, for breach of the License Agreement, and that plaintiff's eleventh cause of action, for unfair competition, should be dismissed for failure to plead the requisite elements of such claim.

Defendants argue that plaintiff's first cause of action, and that portion of plaintiff's second cause of action, which alleges fraudulent inducement of the Settlement Agreement, should be dismissed as barred by the disclaimers and releases in that agreement. Alternatively, defendants argue that plaintiff's first cause of action should be dismissed, pursuant to CPLR 3016 (b), for failure to plead the elements of fraud with sufficient particularity. Defendants contend that plaintiff's pleadings, with respect to the elements of materiality and justifiable reliance, are too vague, ambiguous, and contradictory to sustain this cause of action, as plaintiff has failed to specify when, exactly, the alleged misrepresentations were made; or when certain events, such as the issuance of the Candie's/Kohl's license, the launch of Candie's products at Kohl's stores, and the resulting reduction in sales of Bongo products, actually occurred.

Finally, defendants argue that plaintiff's third, fourth, fifth, sixth, seventh, eighth, ninth, [*8]tenth, twelfth, and thirteenth causes of action should be dismissed, insofar as they are asserted against defendant Iconix, because the documentary evidence establishes that Iconix was not a signatory on either the License Agreement or Men's License Agreement.

Plaintiff, BAI responds that defendants' motion to dismiss its claims should be denied, because its allegations, that the Settlement Agreement was induced by fraud, revives its claim for damages on what defendants allege are settled claims. In any event, plaintiff argues that the Settlement Agreement was intended to be very narrow in scope, and was limited to only the four issues that had been raised in the May 27, 2005 Demand Letter, as those were the only items that were in dispute at the time. Plaintiff also contends that the Settlement Agreement covers only those "claims of which [plaintiff] was aware" as of the date of execution (Meyer Affirm., Exh. A, ¶ 22); therefore, it does not preclude plaintiff from asserting any causes of action of which it became aware only after it executed the Settlement Agreement. At the very least, plaintiff argues, the Settlement Agreement contains ambiguities as to its scope, allowing extrinsic evidence to be considered as to the parties' intentions.

Plaintiff argues that the motion to dismiss its first cause of action should be denied, because the fraud claim is pled with sufficient particularity. Plaintiff argues that the motion to dismiss, against defendant Iconix, those causes of action alleging breaches of the License Agreement and Men's License Agreement, should be denied, because Iconix was always the real party in interest and, by its actions, clearly manifested an intent to be bound by the two license agreements. Finally, plaintiff argues that dismissal of its eleventh cause of action is not warranted, because all that is required to plead an unfair competition claim is a bad-faith scheme to pirate the efforts of another, and the complaint's allegations sufficiently allege a scheme to weaken BAI and "pirate" its valuable store relationships and good will.

For the reasons that follow, defendants' motion to dismiss is granted to the extent of dismissing plaintiff's first, second, third, fourth, eighth, ninth, tenth, eleventh, and thirteenth causes of action in their entirety, and plaintiff's fifth, sixth, seventh and twelfth causes of action, insofar as they are asserted against defendant Iconix.

It is well-established under New York law that a party seeking to recover damages upon learning that it has been fraudulently induced to settle a meritorious claim, may either rescind the settlement agreement and sue on the underlying wrong, or ratify the settlement agreement and sue for fraud (Slotkin v Citizens Cas. Co. of New York, 614 F2d 301, 312 [2d Cir 1979]; cert. denied 449 US 981 [1980], citing Strong v Strong, 102 NY 69, 73 [1886]; Byrnes v National Union Ins. Co., 34 AD2d 872 [3d Dept 1970]; Inman v Merchants Mut. Cas. Co., 274 App Div 320, 323-24 [3d Dept 1948]). A plaintiff that chooses to stand on the settlement agreement, retain the benefits thereof, and sue for fraud, will be precluded from suing directly on the claims that were settled and released in that agreement (Byrnes, 34 AD2d at 872, citing Frehe v Schildwachter, 289 NY 250 [1942]; Gilbert v Rothschild, 280 NY 66 [1939]). Thus, absent rescission of the Settlement Agreement, which plaintiff does not seek, the allegations that plaintiff was fraudulently induced to execute the Settlement Agreement will not revive plaintiff's claim for damages on those claims that were settled and released in that agreement .

Plaintiff has identified no provision of the Settlement Agreement that would indicate that the parties intended to limit the Settled Matters solely to the four items listed in plaintiff's May 27, 2005 demand letter. Rather, the Settlement Agreement expressly provides, without such [*9]limitation, that the parties agreed to settle "all issues that have arisen among the Parties relating to or arising out of" the License Agreement, the Management Agreement, the operation of the Licensed Business, the termination of Guez, and the facts and circumstances related to these agreements and activities and the Parties' rights and obligations in connection therewith" (see Meyer Affirm., Exh. A: Whereas Clause ). Additionally, and notwithstanding the parties' reservation of rights with respect to claims not related to the Settled Matters, the parties also expressly agreed that it was their intention to settle "all claims among the Parties that exist as of the date hereof," and to forever waive and release their rights to pursue " any claims of which [they] were aware of as of the date hereof," and that were not raised in connection with the Settlement Agreement (id., ¶ 22).

Here, it is clear, both from the allegations in plaintiff's amended complaint, as well as from full text of the May 27, 2005 demand letter, that defendants' alleged breach of the Smooth Transition clause of the License Agreement, Cole's unilateral termination of Guez, Cole's contact and interference with Sweet's financiers and factories, and Cole's alleged harassment and forced resignation of Bader, were all issues that had arisen among these parties, or of which plaintiff was aware. Therefore, any claims that plaintiff might have relating to, or arising out of, these matters, were settled and released by the Settlement Agreement, or forever waived. Accordingly, plaintiff's eighth, ninth, tenth and thirteenth causes of action, alleging breaches of contract and/or the covenant of good faith and fair dealing with respect to these issues, are dismissed in their entirety.

Plaintiff argues that its second and third causes of action, sounding in fraud, are not precluded by the Settlement Agreement, because BAI did not become aware of the fact that Cole had never intended to abide by his promise, to make all efforts to effect a smooth transition, until well after the execution of the Settlement Agreement.^[FN1] Plaintiff alleges that it only recently had discovered written evidence that Cole was planning to fire Guez at the time this promise was made, and thus had never intended to honor the Smooth Transition clause. Nevertheless, as both of these claims ultimately arose out of, and relate to, defendants' breach of the Smooth Transition clause and the firing of Guez, they, too, are included in the definition of Settled Matters, and are barred by the Settlement Agreement, regardless of when plaintiff may have discovered Cole's prior intent.

Plaintiff's second cause of action, alleging fraud in the inducement of the License Agreement, would be dismissed in any event, as it is duplicative of plaintiff's claim that [*10]defendants breached the Smooth Transition clause in the License Agreement, which clearly was settled and released in the Settlement Agreement. A breach of contract claim will not be converted into a cause of action for fraud merely by alleging that defendant did not intend to fulfill the contract when made (Coppola v Applied Elec. Corp., 288 AD2d 41 [1st Dept 2001]). To plead fraud in connection with the formation of a contract, plaintiff must allege a promissory representation, made with a preconceived and undisclosed intent not to honor it, that is collateral or extraneous to, and gives rise to a legal duty independent of, the contract itself (id.; see also Raytheon Co. v AES Red Oak, LLC, 37 AD3d 364 [1st Dept 2007]; Cinque v Schieferstein, 292 AD2d 197 [1st Dept 2002]). As Cole's representation, to effect a smooth transition, became part of the License Agreement, embodied in the Smooth Transition clause, plaintiff has failed to allege the breach of any duty separate from, and not constituting elements of, the contract itself.

Additionally, that portion of plaintiff's second cause of action, alleging fraud in the inducement of the Settlement Agreement, based on the same alleged misrepresentation, also fails to state a cause of action. Plaintiff has alleged no facts from which justifiable reliance on this representation can be inferred, as the complaint specifically alleges that BAI knew that the representation was false and the Smooth Transition had been breached, prior to executing that agreement.

That portion of plaintiff's third cause of action, to the extent that it seeks to assert a claim for violation of GBL § 683, mandating the disclosure requirements in connection with the offer and sale of a franchise, is dismissed, as well. Other than Cole's alleged misrepresentation with respect to the Smooth transition clause, which is a Settled Matter, the complaint is devoid of allegations identifying any particular violation of this provision.

Plaintiff's fourth cause of action, alleging breach of the License Agreement by defendants' licensing of the Candie's brand to Kohl's, is also dismissed, as it, too, must be considered a Settled Matter. Plaintiff argues that dismissal is not warranted, because BAI did not learn of the breach until after the Settlement Agreement was executed, on August 26, 2005. Plaintiff contends that, although it had been aware of some talk of this deal prior to execution of the Settlement Agreement, it had no reason to believe that the license would be competitive, based on Cole's alleged misrepresentations that the Candie's deal would not compete with the Bongo brand or affect its sales; thus, the issue was not raised prior to the Settlement Agreement.

The complaint alleges, however, that Tate did raise the issue of the competitiveness of the Candie's deal prior to the execution of the Settlement Agreement, when, having

However, defendants' motion to dismiss such portion of plaintiff's twelfth cause of action, that complains of a failure to use all advertising royalty due under the License Agreement prior to August 26, 2005, is denied. Although plaintiff purports to assert this cause of action as to both the License Agreement and the Men's License Agreement, the only detailed factual allegations made with respect to this provision, concern the use of royalties in connection with the Men's License Agreement (see id., ¶¶ 103- 107). It is not clear that this claim, as asserted with respect to the License Agreement, had arisen among the parties prior to the execution of the Settlement Agreement; thus, dismissal of any portion of this claim, as precluded by the Settlement Agreement, is premature.

Defendants' motion to dismiss plaintiff's first cause of action, for fraudulent inducement of the Settlement Agreement, is granted. The elements of a cause of action for fraudulent inducement are "a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury" (Lama Holding Co. v Smith Barney Inc., 88 NY2d 413, 421 [1996]; New York Univ. v Continental Ins. Co., 87 NY2d 308 [1995]). Notwithstanding the lenient standard for reviewing the sufficiency of a complaint pursuant to CPLR 3211 (see Leon v Martinez, 84 NY2d 83 [1994] ), each element of a claim for fraud must be pleaded with sufficient particularity (CPLR 3016 [b]; see Raytheon Co. v AES Red Oak, LLC, 37 AD3d at 365; Brown v Wolf Group Integrated Communications, Ltd., 23 AD3d 239 [1st Dept 2005]).

The complaint alleges that "[b]efore the Settlement Agreement was executed, in or about late August 2005" (Amended Complaint, ¶ 127), Cole represented to Tate that the goods produced under the Candie's license would not compete with Bongo brand or affect the sales of BAI, and promised that BAI would receive private label production under that license. Plaintiff alleges that these representations and promises were knowingly false when made, intended to induce reliance, and that plaintiff relied on them to its detriment. Plaintiff further alleges that its reliance was reasonable, "because those representations were made by a business partner' allegedly attempting to resolve differences, ... and BAI had no means to verify their accuracy particularly due to Cole's plausible excuses and explanations" (Amended Complaint, ¶ 173). However, the complaint fails to plead when, or in what context, these misrepresentations actually were made, or when the offending Candie's license was executed, and the goods produced [*12]thereunder were launched and began to affect Bongo sales. Nor are plaintiff's factual allegations, when read as whole, sufficient to support an inference that the representations were made to induce the execution of the Settlement Agreement, or that plaintiff's alleged reliance thereon was reasonable.

Plaintiff contends that its allegation, that the representations were made prior to execution of the Settlement Agreement, sufficiently identifies the approximate time that the representations were made. However, while the allegations seem to suggest that Cole's misrepresentations were made proximate to the execution of the agreement, a careful reading of the pleadings indicates that the alleged misrepresentations were made much earlier, and well prior to either the execution of the agreement, or the period of negotiation that led the settlement. Rather, the allegations indicate that the misrepresentations actually were made prior to the execution of the Candie's license (id., ¶¶ 130-133), and that the Candie's license was executed no later than February or March of 2005 (id., ¶¶ 139-140), well before the Settlement Agreement. Additionally, the allegations indicate that plaintiff was made aware, by no later than February or March of 2005, that it was not to get the private label production for the Candie's launch, when Cole informed Tate that the production was being out-sourced by Kohl's regular sources, but that Cole " was pushing' for BAI to get the private label once everything stabilized (post launch)" (id., ¶¶ 137-140).

The allegations in the complaint also indicate that, by the date the Settlement Agreement was executed, the goods produced under the Candie's license had launched and were having an impact on Bongo sales. As noted earlier, the complaint alleges that the goods produced under the Candie's license launched at Kohl's in July 2005, causing sales of the Bongo brand to plummet (id., ¶ 149). The complaint further alleges that, after the Candie's launch, "[t]here followed a drastic reduction in the purchase of the Bongo Brand ... in May, June, July and August, 2005 ... as the Bongo Brand's sales at Kohl's shrunk dramatically" (id., ¶ 154). Plaintiff alleges that it later learned that the sales drop was due directly to the Candie's launch, based on conversations with Kohl's executives (id., ¶148). Although plaintiff does not allege when these conversations occurred, the fact that they did occur would seem to belie plaintiff's allegation that its reliance was reasonable because it had no means to verify the accuracy of Cole's representations.

Defendants' motion to dismiss plaintiff's fourth, fifth, sixth, seventh, and twelfth causes of action, insofar as these claims are asserted against defendant Iconix, is granted. Each of these causes of action relates to, or arises out of, a breach of the License and/or Men's License Agreement. The documentary evidence establishes that Iconix was not a signatory on either agreement, but that the agreements were executed solely by IPH, its subsidiary (see Meyer Affirm., Exhs. B and C).To impose contractual liability on a corporate parent, it is necessary to show more than mere dominion and control of its subsidiary; a plaintiff also must show that the subsidiary was used as an instrumentality of wrongdoing , which resulted in plaintiff's injury (see Sheridan Broadcasting Corp. v Small, 19 AD3d 331 [1st Dept 2005], citing TNS Holdings, Inc. v MKI Sec. Corp., 92 NY2d 335 [1998]). The complaint's allegations that IPH is a wholly-owned and controlled subsidiary of Iconix, whose sole purpose was to hold the legal title to certain trademarks, including the Bongo mark, are insufficient to impose contractual liability on Iconix, absent allegations to support an inference that IPH was utilized by Iconix to commit fraud, malfeasance or other inequity (see TNS Holdings, Inc., at 339; Brainstorms [*13]Internet Mktg., Inc. v USA Networks, Inc., 6 AD3d 318 [1st Dept 2004]). Our courts have held that no inference of abuse arises "where a corporation was formed for legal purposes or is engaged in legitimate business" (TNS Holdings, at 340), as "it is perfectly legal to incorporate for the express purpose of limiting ... liability" (Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 140 [1993]).

Nevertheless, plaintiff argues that dismissal of this cause of action is not warranted, as Iconix always was the real party in interest and manifested an intent to be bound to these agreements by its actions in, inter alia, negotiating these agreements. However, as plaintiff acknowledges that it was aware, when it executed these agreements, that it was contracting with IPH, and there are no allegations suggesting that plaintiff entered into these agreements involuntarily (see TNS Holdings, at 340), this contention also fails to provide a sufficient basis to impose contractual liability on Iconix.

Defendants' motion to dismiss plaintiffs eleventh cause of action, for unfair competition, also is granted. While there is no complete list of activities which constitute unfair competition under New York law,^[FN2] the essence of an unfair competition claim is that one may not act in bad faith to misappropriate the skill, expenditures, and labor of another (see Electrolux Corp. v Val-Worth, Inc., 6 NY2d 556, 567 [1959]; Krinos Foods, Inc. v Vintage Food Corp., 30 AD3d 332 [1st Dept 2006]). The tort functions to protect "property rights of commercial value ... from any form of commercial immorality" (Metropolitan Opera Assn. v Wagner-Nichols Recorder Corp., 199 Misc 786, 796 (Sup Ct, NY County 1950], affd 279 App Div 632 [1st Dept 1951]). "The general principle ... evolved from all of the cases is that commercial unfairness will be restrained when it appears that there has been a misappropriation, for the commercial advantage of one person, of a benefit or property right belonging to another" (Telecom Intl. Am., Ltd. v AT & T Corp., 280 F3d 175, 197 [2d Cir 2001], quoting Dior v Milton, 9 Misc 2d 425, 431 [Sup Ct, NY County], affd 2 AD2d 878 [1st Dept 1956]).

Plaintiff's allegations, that defendants were engaged in a bad-faith scheme to pirate its valuable store relationships and goodwill, fail to state a claim of unfair competition, as they fail to allege the bad faith misappropriation of a commercial advantage or property which belonged exclusively to BAI (LoPresti v Massachusetts Mut. Life Ins. Co., 30 AD3d 474 [2d Dept 2006], Eagle Comtronics v Pico Prods., 256 AD2d 1202 [4th Dept 1998]; see also H.L. Hayden Co. of N.Y.v Siemens Med. Sys., Inc., 879 F2d 1005, 1025 [2d Cir 1989]). Additionally, under New York's unfair competition law, a defendant misappropriates a plaintiff's goodwill when it sells its product through misleading the public into thinking that the product is sponsored by or derived from plaintiff or plaintiff's product (Davis & Co. Auto Parts, Inc. v Allied Corp., 651 F Supp 198, 203 [SD NY 1986]; citing American Footwear Corp. v General Footwear Co., 609 F2d 655, 662 [2d Cir 1979], cert denied 445 US 951 [1980]). Here, plaintiff does not allege that defendants sought to capitalize on the Bongo name and/or reputation. In any event, it appears that, under both the license agreements at issue, any goodwill associated with the Bongo mark [*14]belonged exclusively to the Licensor.^[FN3]

ORDERED that defendants' motion to dismiss is granted to the extent of severing and dismissing plaintiff's first, second, third, fourth, eighth, ninth, tenth, eleventh, and thirteenth causes of action in their entirety, and plaintiff's fifth, sixth, seventh and twelfth causes of action, solely to the extent that these causes of action are asserted against defendant Iconix Brand Group, Inc.; and it is further

ORDERED that defendants are directed to serve an answer to the complaint within 10 days after service of a copy of this order with notice of entry.

Dated:_______________________