Joint Stock Soc. v. Heublein, Inc., Civil Action No. 95-749-RRM.

• Decision Date: 02 August 1996
• Docket Number: Civil Action No. 95-749-RRM.
• Citation: 936 F. Supp. 177
• Parties: The JOINT STOCK SOCIETY "TRADE HOUSE OF DESCENDANTS OF PETER SMIRNOFF, OFFICIAL PURVEYOR TO THE IMPERIAL COURT" and The Russian American Spirits Company, Plaintiffs, v. HEUBLEIN, INC. and International Distillers & Vintners Ltd., Defendants. HEUBLEIN, INC., Third-Party Plaintiff, v. William N. WALKER and Jerome S. Mann, Third-Party Defendants.
• Court: U.S. District Court — District of Delaware

936 F. Supp. 177

The JOINT STOCK SOCIETY "TRADE HOUSE OF DESCENDANTS OF PETER SMIRNOFF, OFFICIAL PURVEYOR TO THE IMPERIAL COURT" and The Russian American Spirits Company, Plaintiffs, v. HEUBLEIN, INC. and International Distillers & Vintners Ltd., Defendants.

HEUBLEIN, INC., Third-Party Plaintiff, v. William N. WALKER and Jerome S. Mann, Third-Party Defendants.

Civil Action No. 95-749-RRM.

United States District Court, D. Delaware.

August 2, 1996.

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Josy W. Ingersoll, James P. Hughes and John P. Shaw, Young, Conaway, Stargatt & Taylor, Wilmington, DE; Maxim H. Waldbaum, Claudia Cantarella, and Zuan-Thao Nguyen, Fried, Frank, Harris, Shriver & Jacobsen, New York City, for plaintiffs.

Allan M. Terrell, Francis DiGiovanni and Jeffrey L. Moyer, Richards, Layton & Finger, Wilmington, DE; Stephen R. Lang, Paul Dennis Connuck, Patricia Anne Kuhn, and Adina O. Broder, Whitman, Breed, Abbott & Morgan, New York City, for defendants.

OPINION

McKELVIE, District Judge.

This is a trademark and unfair competition case. Plaintiff The Joint Stock Society "Trade House of Descendants of Peter Smirnoff, Official Purveyor to the Imperial Court" (the "Society") is a Russian corporate entity with its principal place of business in Moscow. Plaintiff The Russian American Spirits Company ("RASCO") is a Delaware corporation with its principal place of business in Connecticut. Defendant Heublein, Inc. ("Heublein") is a Connecticut corporation with its principal place of business in Connecticut. Defendant International Distillers & Vintners Ltd. ("IDV") is a United Kingdom limited liability corporation with its principal place of business in London, England. Third-party defendant William N. Walker is the president of RASCO. Third-party defendant Jerome S. Mann is a liquor industry consultant to RASCO.

On December 8, 1995, plaintiffs filed a complaint alleging that defendants' use of the trademark and trade name Smirnoff® compositions and derivatives thereof, and the Smirnoff family crest, insignia, emblems, and medals, constitute false designation of origin and false advertising in violation of § 43(a)(1) of the Lanham Act, 15 U.S.C. § 1125(a)(1). Plaintiffs also claim that defendants fraudulently secured the registration of these trademarks and trade names in the United States Patent and Trademark Office in violation of § 38(b) of the Lanham Act, 15 U.S.C. § 1120. Plaintiffs seek to cancel defendants' registered trademarks and trade names based on the above alleged violations pursuant to §§ 14 and 37 of the Lanham Act, 15 U.S.C. §§ 1064 and 1119, and they seek injunctive relief pursuant to § 34 of the Lanham Act, 15 U.S.C. § 1116. Finally, plaintiffs allege that defendants' actions constitute deceptive acts and practices and unfair competition in violation of the Delaware Uniform Deceptive Trade Practices Act, 6 Del.C. §§ 2531-36 et seq. (the "Deceptive Trade Practices Act"). On December 15, 1996, plaintiffs filed an amended complaint containing the same allegations.

On January 19, 1996, defendants filed their answer, counterclaims, and Heublein's third-party complaint against third-party defendants Walker and Mann. Defendants also filed a motion to transfer this case to the United States District Court for the District of Connecticut pursuant to 28 U.S.C. § 1404(a). In their counterclaims and in Heublein's third-party complaint, defendants claim that plaintiffs and third-party defendants have made false and deceptive claims about Heublein's advertising and use of the Smirnoff® labels, symbols, and marks in violation of § 43 of the Lanham Act. In addition, defendants allege that plaintiffs and third-party defendants have tortiously interfered with Heublein's business and economic relations. Finally, defendants assert that these acts of plaintiffs and third-party defendants constitute unfair and deceptive acts and trade practices, false advertising, unfair competition, trade libel, and slander of title in violation of the Deceptive Trade Practices Act and Delaware common law.

On February 1, 1996, defendants filed their first amended answer, counterclaims, and third-party complaint. On March 5, 1996, plaintiffs filed an answer to defendants' counterclaims. On that same date, third-party defendants Walker and Mann filed a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure ("FRCP"), insufficient service of process pursuant to FRCP 12(b)(5), and failure to state a claim pursuant to FRCP 12(b)(6). On July 23, 1996, defendants filed their second amended answer, counterclaims, and third-party complaint.

This is the court's decision on defendants' motion to transfer and third-party defendants' motion to dismiss.

I. FACTUAL BACKGROUND

The parties have fully briefed the issues before the court. Defendants have submitted the affidavit of Paul F. Curtis and the declaration of Frederick J. Ledrew in support of their motion to transfer. Defendants have also submitted the affidavit of Paul Dennis Connuck in opposition to third-party defendants' motion to dismiss for lack of personal jurisdiction. Third-party defendants Walker and Mann have each submitted declarations in support of their motion to dismiss. On May 1, 1996, the court held an oral argument on the parties' motions. The following facts are drawn from the oral argument, the parties' briefs, the Curtis and Connuck affidavits, the Walker, Mann, and Ledrew declarations, plaintiffs' amended complaint, defendants' second amended answer, counterclaims, and third-party complaint, and plaintiffs' answer to defendants' counterclaims.

A. What Is the Basis of Plaintiffs' Claims?

An understanding of the plaintiffs' claims requires a brief lesson on Russian history. Around 1860, Piotr Arsenyevitch Smirnov ("P.A. Smirnov") founded a trade house called "P.A. Smirnov in Moscow" that distilled and sold vodka and other spirits. P.A. Smirnov's vodka won a number of prestigious awards in Russia and internationally, which ultimately resulted in P.A. Smirnov receiving the title of the "Official Purveyor to the Russian Court." In 1894, P.A. Smirnov reorganized his trade house into a partnership entitled "P.A. Smirnov's Partnership of Distillery, Russian & Foreign Wine Cellars and Spirits" (the "Partnership"). It appears that the partnership included the elder three of P.A. Smirnov's five sons, Piotr, Nikolai, and Vladimir, and P.A. Smirnov's cousin, Nikolai Venediktovich Smirnov. It is not clear whether P.A. Smirnov's two youngest sons, Sergei and Alexey, ever held or retained any interest in the Partnership.

In 1898, P.A. Smirnov died. The events that occurred after his death form the basis of this dispute. By plaintiffs' account, Vladimir and Nikolai divested themselves of their interest in the partnership, leaving Piotr to run the business. By defendants' account, Vladimir retained an interest in the Partnership. The parties do not dispute that Piotr died in 1910 and left his share of the business to his wife, Eugenia Ilnichna Smirnova. In 1914, Russia declared prohibition, and the business of the Partnership declined. By 1918, Russia had nationalized all facilities for the production of alcoholic beverages, and the Partnership ceased to operate. Eugenia subsequently married an Italian citizen and settled in Nice, France. It is not clear whether she subsequently used the Smirnov name in connection with the sale of vodka or other alcoholic beverages.

Vladimir fled to Constantinople where he established a vodka distillery under the name "Supplier to the Imperial Russian Court, Pierre Smirnoff Sons." On January 10, 1920, Vladimir obtained a certificate from the Russian Diplomatic Mission in Constantinople proclaiming him the proprietor of the "the former Supplier to the Imperial Court, Piotre Smirnoff, located in the city of Constantinople." Around 1924, Vladimir moved to Poland and established a partnership dedicated to the manufacture and sale of alcoholic beverages under the name "Pierre SmirnoffFls." Pierre SmirnoffFls opened offices in Paris, France, and Prague, in the former country of Czechoslovakia. Vladimir subsequently moved to Paris and then Nice, where Eugenia was living.

On August 21, 1933, Pierre Smirnoff Fls entered into a written agreement with Rudolph Kunett, formerly known as Rudolph Kukhesh, an American businessman and Russian emigre. In consideration for 54,000 francs, Pierre SmirnoffFls disclosed the recipes for its alcoholic beverages and granted Kunett the entire, exclusive, and irrevocable right to the name, business, trademarks, and goodwill of "Smirnoff" in North America. Kunett assigned his rights to himself and Messrs. Benjamin B. McAlpin, Jr., Donald M. McAlpin, and Townsend M. McAlpin. These individuals assigned their rights to Ste Pierre Smirnoff Fls, Inc., a New York Corporation. About March of 1934, Ste Pierre SmirnoffFls, Inc. commenced production and sales of vodka in the United States.

Ste Pierre Smirnoff Fls, Inc. soon applied for and received a number of United States trademark registrations based on the Smirnoff name and insignia used in connection with the sale of vodka. Ste Pierre Smirnoff Fls, Inc. thereafter sold its rights to Ste Pierre Smirnoff Fls, Incorporated, a Connecticut corporation formed by G.F. Heublein & Bro. On or about November 30, 1954, Ste Pierre SmirnoffFls, Incorporated assigned all of its rights to G.F. Heublein & Bro. In 1955, G.F. Heublein & Bro. changed its name to Heublein, Inc. Since that time, Heublein has become, through extensive advertising and promotion, a leading seller of vodka and other distilled spirits in the United States and internationally. In fact, Heublein has averaged approximately $300 million a year in vodka sales over the past decade. Delaware accounts for one-third of 1% of those sales, which amounts to approximately $1 million a year. Heublein has 6 sales...