## Facts

- Two related but rival Zegna-family companies operated in the high-end textiles and clothing market, including in the United States and Italy.
- Prior U.S. trademark litigation ended in 1987 with a so-ordered settlement agreement regulating use of the “ZEGNA” name.
- The agreement included (1) a broad arbitration clause covering disputes about interpretation or implementation of the agreement and (2) a no-contest clause limiting challenges to the agreement’s validity.
- After changes in Italian trademark law, one party commenced an arbitration in Milan in 1996 seeking reformation of the 1987 agreement to expand permissible name use in Italy.
- The opposing party returned to federal court seeking civil contempt and a permanent injunction to enforce the 1987 agreement and stop the Milan arbitration.
- The party pursuing arbitration cross-moved to compel arbitration in Italy and to stay the federal proceedings.

## Issues

1. Whether the Milan proceeding seeking reformation based on changed Italian law was a dispute concerning interpretation or implementation of the 1987 agreement within the scope of the arbitration clause.
2. Whether initiating the Milan arbitration violated the agreement’s no-contest provision so as to support civil contempt and immediate judicial enforcement.
3. Whether the federal action should be stayed pending completion of the arbitration.

## Decision

- The court denied the motion for civil contempt and summary enforcement of the 1987 agreement.
- The court granted the cross-motion to compel arbitration in Italy under the agreement’s arbitration clause.
- The court stayed the federal proceedings pending a ruling by the arbitral tribunal.

## Legal Principles

- A broadly worded arbitration clause requiring arbitration of disputes regarding interpretation or implementation of an agreement can encompass a request to reform the agreement due to subsequent legal changes affecting the parties’ rights and obligations.
- A no-contest clause aimed at preventing attacks on an agreement’s validity does not necessarily bar a party from invoking the contractually designated arbitral forum to seek relief concerning how the agreement should operate.
- Civil contempt is unavailable absent a clear violation of a court order; pursuing dispute resolution through the agreement’s arbitration mechanism does not, without more, warrant contempt sanctions.
- When an agreement mandates arbitration, a stay of parallel federal proceedings is appropriate to allow arbitration to proceed and to reduce the risk of inconsistent determinations.

## Conclusion

The court treated the controversy over possible reformation of the 1987 settlement as an arbitrable dispute, compelled arbitration in Italy, and stayed the federal case, finding that commencement of the arbitration did not justify contempt or immediate injunctive enforcement.


Ermenegildo Zegna Corp. v. Lanificio Mario Zegna S.p.A., No. 96 Civ. 6280 (PKL), 1996 WL 721079 (S.D.N.Y. Dec. 12, 1996)