In re Alb-Gold Teigwaren GmbH
| Decision Date | 30 August 2019 |
| Docket Number | 19-mc-1166 (MKB) (ST) |
| Parties | In Re Application of ALB-GOLD Teigwaren GmbH for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Discovery for Use in a Foreign Proceeding. |
| Court | U.S. District Court — Eastern District of New York |
ALB-GOLD Teigwaren GmbH ("ALB-GOLD") has submitted an application pursuant to 28 U.S.C. § 1782, requesting that the Court issue subpoenas duces tecum allowing it to take discovery from multiple respondents for use in a foreign proceeding. For the reasons discussed herein, ALB-GOLD's request is GRANTED in part and DEFERRED in part to allow for a brief period of jurisdictional discovery.
ALB-GOLD is a German pasta manufacturer. ALB-GOLD seeks discovery from five Respondents: (i) Interpage Co., Inc. ("Interpage"), a grocery import-export company based in Brooklyn, NY;1 (ii) Grigori Vernikov, the owner of Interpage;2 (iii) Alex's Meat Distributors Corp. ("Alex's Meat"), a grocery distributor based in Brooklyn, NY; (iv) Vladimir Oterin, the owner of Alex's Meat; and (v) Inna Vernikov, Mr. Vernikov's daughter and the apparent drafter of a settlement agreement between Interpage and Alex's Meat.
This application arises from the arbitration of a contract dispute between ALB-GOLD and Interpage. The two companies entered into a five-year Exclusive Importation and Sales Agreement(the "Distribution Agreement") on January 2, 2013. See Declaration of Karl Geercken, Esq. ("Geercken Decl."), Exh. 2 (the "Arbitration Award") ¶¶ 30-37, ECF No. 3-2 at 1-93. The Distribution Agreement provided that ALB-GOLD's pasta would be sold in the United States exclusively under Interpage's private label "Delicious Wonders." Id. ¶ 31. The Distribution Agreement set annual targets for the sale of ALB-GOLD's pasta by Interpage. In the first year, the target was 144 net tons of pasta. Id. ¶ 35. In each subsequent year, the annual targets would increase. Id. Over the course of the five-year period covered by the Distribution Agreement, Interpage's targeted sales totaled 960 net tons of pasta. Id.
As the end of the first year of the agreement approached, it became clear that Interpage had failed to meet the minimum sales target. Id. ¶¶ 175-76. Consequently, at an unspecified date in the first half of December 2013, a representative for ALB-GOLD informed Mr. Vernikov by telephone that ALB-GOLD would stop supplying Interpage with pasta for the United States market.3 Id. ¶ 44.
Shortly after this phone call, on December 16, 2013, Interpage claims that it entered into a separate agreement to supply Alex's Meat, a grocery distributor, with Delicious Wonders pasta.4 See Geercken Decl., Exh. 3 (the "Alex's Meat Agreement"), ECF No. 3-2 at 94-104; see also Arbitration Award ¶¶ 46-47. Pursuant to this agreement, Interpage would supply Alex's Meat with 960 net tons of Delicious Wonders pasta over a five year period, for which Alex's Meat would pay a total of $2,896,000. Arbitration Award ¶ 47. As such, by virtue of entering into the Alex's MeatAgreement, Interpage seemingly could have satisfied the entirety (or almost the entirety) of its sales targets in the Distribution Agreement with ALB-GOLD in one fell swoop.
On December 17, 2013, the day after the Alex's Meat Agreement was executed, Mr. Vernikov learned from the freight forwarder responsible for receiving shipments from ALB-GOLD that an order of pasta placed by Interpage on November 7, 2013 had not arrived. Id. ¶ 48. ALB-GOLD indeed did not fulfill this order, and it did not regularly provide Interpage with pasta for sale in the U.S. market after this point in time. Interpage, however, despite having had an agreement to buy 960 tons of pasta from ALB-GOLD and an agreement to sell 960 tons of pasta to Alex's Meat, did not notify ALB-GOLD of the existence of the Alex's Meat Agreement for almost four years, until it filed a notice of claim to initiate arbitration against ALB-GOLD on October 18, 2017. Id. ¶¶ 57, 193-94.
Instead, between January 2014 and May 2015, Interpage supplied Alex's Meat with pasta that was made by another manufacturer but sold under the Delicious Wonders label. Id. ¶¶ 201, 270. At the arbitration hearing, Mr. Vernikov and Mr. Oterin testified that this pasta was of inferior quality and an inadequate substitute, id. ¶ 270, but Alex's Meat nonetheless accepted it over the course of this period. From May 21, 2015 to March 3, 2017, however, Interpage's use of the Delicious Wonders label was enjoined pursuant to an order issued as part of a trademark action in this District, leading the company to cease selling the pasta. Id. ¶¶ 51-52, 54; see also Threeline Imports, Inc. v. Vernikov, 239 F. Supp. 3d 542, 546 (E.D.N.Y. 2017).
On November 13, 2016, Interpage and Alex's Meat entered into a Settlement Agreement (the "Alex's Meat Settlement Agreement"), which was ostensibly intended to resolve Interpage's nonperformance of the Alex's Meat Agreement. Arbitration Award ¶ 53. According to the testimony of Mr. Vernikov at the arbitration hearing, this settlement was drafted by his daughter,Ms. Inna Vernikov, Esq. Id. ¶ 243. Pursuant to the settlement, Interpage agreed to pay Alex's Meat $2,209,600 in damages for failure to supply pasta. Id. ¶ 53. This figure, however, did not credit Interpage for any of the substitute Delicious Wonders pasta that it provided to Alex's Meat between January 2014 and May 2015. Id. ¶ 282; ALB-GOLD's Memorandum in Support of § 1782 Application ("Memo ISO") 11-12, ECF No. 2.
Additionally, the Alex's Meat Agreement contained clauses that, ALB-GOLD argues, provided Interpage with "powerful defenses" to its enforcement. See Arbitration Award ¶¶ 228, 254-58. Those defenses included a clause that reads, "The Seller has the right to unilaterally withdraw this contract, notifying the Buyer not less than 20 days before the schedule [sic] termination date," id. ¶ 254, and a force majeure clause allowing cancellation of the agreement in the events of actions that the parties "could not neither expect nor prevent [sic]," id. ¶ 257. Interpage apparently did not assert those defenses prior to entering into the Alex's Meat Settlement Agreement.
ii. Interpage and ALB-GOLD arbitrate their disputes
On October 18, 2017, Interpage submitted a request for arbitration against ALB-GOLD. Id. ¶ 57. Interpage alleged (among other disputes not relevant here) that ALB-GOLD breached the Distribution Agreement by ceasing to ship pasta beginning with the November 7, 2013 order. Id. The majority of the damages claimed by Interpage stemmed from its inability to fulfill its obligations under the Alex's Meat Agreement, which Interpage claimed foreseeably and reasonably resulted in the damages it agreed to pay under the Alex's Meat Settlement Agreement. Id. ¶¶ 200-02, 227.
At the arbitration, ALB-GOLD offered several arguments in response. It submitted that the 2013 Alex's Meat Agreement "defies credibility" because it is commercially implausible that adistributor of Alex's Meat's size would order 960 tons of egg pasta over a 5 year period, and because Interpage never informed ALB-GOLD of this deal even though it would have almost single-handedly satisfied Interpage's delivery targets (indeed, mirrored the exact volume of the combined annual targets) under the Distribution Agreement. Id. ¶ 228. ALB-GOLD also argued that the 2016 Alex's Meat Settlement Agreement was fraudulent and the product of collusion between Interpage and Alex's Meat. Id.
The Arbitral Tribunal (hereinafter the "Tribunal") did not find that either the Alex's Meat Agreement or the Alex's Meat Settlement Agreement was the product of fraud or collusion. The Tribunal noted that it "examined with great attention" ALB-GOLD's allegations to this effect. Id. ¶ 241. However, it found that ALB-GOLD had not discharged its burden to prove that either agreement was fraudulent.5 Id. On November 27, 2018, the Tribunal ordered ALB-GOLD to pay Interpage $1,414,927 in consequential damages arising from the Alex's Meat Settlement Agreement. Id. ¶ 380.
iii. The instant application under 28 U.S.C. § 1782
ALB-GOLD filed the instant application to take discovery pursuant to 28 U.S.C. § 1782 on May 1, 2019. See Application, ECF No. 1. ALB-GOLD requests that the Court issue subpoenas duces tecum against the five aforementioned entities, requiring them to submit to depositions at ALB-GOLD's counsel's Manhattan offices. See Geercken Decl., Exhs. 6-10 ("Proposed Subpoenas"), ECF No. 3-2 at 113-65. ALB-GOLD avers that it intends to use evidence discovered through these subpoenas in an application to the Swiss Federal Supreme Court for "revision" of the arbitral award. Memo ISO 1, 15.
The Honorable Margo K. Brodie referred ALB-GOLD's application to the undersigned for disposition. Order dated May 2, 2019. On May 7, 2019, an attorney appearing on behalf of Interpage requested leave from the Court to file a response in opposition to ALB-GOLD's petition, which the Court granted. See Letter from Interpage, ECF No. 5; Order dated May 7, 2019. Interpage filed its response on May 17, 2019.6 Memorandum in Opposition to § 1782 Petition ("Opp'n"), ECF No. 12.
An application for discovery made pursuant to 28 U.S.C. § 1782 requires the district court to undertake two inquiries: "first, whether the district court is authorized to grant the request; and second, if so, whether the district court should exercise its discretion to do so." In re Application of Gemeinshcaftspraxis Dr. Med. Schottdorf, No. M19-CV-88 (BSJ), 2006 WL 3844464, at *4(S.D.N.Y. Dec. 29, 2006) (quoting In re Application of Grupo Qumma, S.A., No. M8-CV-85 (DC), 2005 WL 937486, at *1 (S.D.N.Y. Apr. 22, 2005)); see also Schmitz v. Bernstein, Liebhard & Lifshitz, LLP, 376 F.3d 79, 83-84 (2d Cir. 2004).
A district court has the authority to grant a § 1782 request for discovery when: 1) the party subject to the request resides in or is found in the district of the district court;...
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