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News | 09.24.13

Material Breach May Have Voided Confidential Settlement Agreement, Court Finds

In a ruling from the bench in favor of high-end fashion jewelry retailer and Morrison Cohen client Madison Avenue Diamonds LLC, the Commercial Division of the Supreme Court, New York County, has ordered that trial preparation proceed on claims that could void the retailer's obligation to make further payments under a confidential settlement agreement.

The settlement agreement was entered into in connection with a dispute between the retailer and a jewelry supplier, KGK Jewelry LLC, over materials delivered to the retailer by the supplier.  After the supplier failed to abide by a requirement of the settlement agreement that it timely deliver certain computer files in a required format, the retailer filed a lawsuit seeking a declaration that the supplier has materially breached the settlement agreement, and that payments due from the retailer under the agreement were no longer required.  The supplier responded by initiating its own action, claiming that it was still entitled to $2.375 million under the settlement agreement.  Both parties moved to dismiss, and the supplier cross-moved for summary judgment.

The court consolidated the two cases and denied all of the motions, including the supplier's summary judgment motion.  With respect to the retailer's allegation that the untimely delivery of the computer files was a material breach that nullified any further payment obligations under the settlement agreement, the court held that “a material breach is . . . serious business.”  It then ordered discovery to proceed so that the merits of the parties' claims could be determined.

Morrison Cohen represents the retailer, Madison Avenue Diamonds LLC.

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