Shaw v. Rolex Watch USA, Inc.

• Decision Date: 28 October 1991
• Docket Number: No. 86 Civ. 5244 (WCC).,86 Civ. 5244 (WCC).
• Citation: 776 F. Supp. 128
• Parties: Eleanor SHAW, Executor of the Estate of Leslie Shaw, Plaintiff, v. ROLEX WATCH U.S.A., INC. and Rolex Industries, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

776 F. Supp. 128

Eleanor SHAW, Executor of the Estate of Leslie Shaw, Plaintiff, v. ROLEX WATCH U.S.A., INC. and Rolex Industries, Inc., Defendants.

No. 86 Civ. 5244 (WCC).

United States District Court, S.D. New York.

October 28, 1991.

Soller, Shayne & Horn, New York City (Carl R. Soller, of counsel), for plaintiff.

Kane, Dalsimer, Sullivan, Kurucz, Levy, Eisele and Richard, New York City (David H.T. Kane, Siegrun D. Kane, of counsel), and Gibney, Anthony & Flaherty (Stephen F. Ruffino, William Lee Kinnally, Jr., of counsel), for defendants.

OPINION AND ORDER

WILLIAM C. CONNER, District Judge:

Plaintiff Leslie Shaw commenced this action against defendants Rolex Watch U.S.A., Inc. and Rolex Industries, Inc. (collectively "Rolex") on June 30, 1986, claiming that he suffered injuries resulting from defendants' alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) and (d). On June 5, 1990, Leslie Shaw died. Plaintiff Eleanor Shaw, executor of the Estate of Leslie Shaw, was substituted as plaintiff by Order entered November 2, 1990.

This action is presently before the Court on defendants' motion for summary judgment pursuant to Fed.R.Civ.P. 56(c).¹

Background

Plaintiff claims that Rolex Watch U.S.A., Inc. ("Rolex U.S.A."), a corporation organized under the laws of the State of New York, and Montres Rolex, S.A. ("Montres"), a Swiss corporation, are under common ownership and control. He alleges that defendants, through acts of mail and wire fraud, unlawfully conspired to submit to the United States Customs Service ("Customs") documents which fraudulently stated that Rolex U.S.A. was not owned or controlled by Montres, the Swiss owner of the "ROLEX" trademark. Am. Cplt. at ¶¶ 30-33. The allegedly false representations consisted of a statement filed by Rolex with Customs on January 7, 1983 and letters sent to Customs on April 12, 1983 and May 11, 1984. Am. Cplt. at ¶¶ 31-32. The purported aim of this conspiracy was to gain the protection of 19 U.S.C. § 1526(a), which allows the domestic owner of a registered trademark to prevent the unauthorized importation of products bearing that trademark (so-called "gray-market" goods).

To employ Section 1526, the trademark owner must record the trademark with Customs. 19 U.S.C. § 1526(a). Should someone other than the owner of the U.S. mark attempt to import the trademarked goods, Customs may seize the goods and hold them forfeit. 19 U.S.C. § 1526(b). Customs, however, will not apply the restrictions on importation set forth in 19 U.S.C. § 1526 when both the foreign and domestic trademark owners are under common ownership or control. See 19 C.F.R. § 133.21(c)(2).

On January 13, 1985, Shaw, by his agents, sought to import eight genuine Rolex watches. Am. Cplt. at ¶ 44. Customs seized the watches, and on August 8, 1985, plaintiff was indicted by a federal grand jury for, inter alia, smuggling, entry of goods by means of false statement, importing goods contrary to law, and making false statements. Plts. Exh. 7. Subsequent to the indictment, Shaw alleges that he was hospitalized for treatment of Ramsey Hunt Syndrome, a painful nervous disorder. After five months, during which plaintiff allegedly suffered severe emotional and physical distress, the indictment was dismissed. Am. Cplt. at ¶¶ 45-46. On May 23, 1986, Shaw entered into an agreement with Customs in which he obtained release of the eight Rolex watches for exportation in exchange for his waiver of certain rights in connection with the detention, seizure, and/or release by Customs of the watches.²

During the years of 1985-86, plaintiff's attorney, Mr. Soller, submitted material to Customs challenging the propriety of the Rolex recordation. Defs. Rule 3(g) Statement at ¶¶ 39-40. By letter dated June 16, 1986, Customs notified defendants' attorneys that it had "concluded that protection against the importation of genuine, so-called `gray market,' goods is not available to your client," because Rolex U.S.A. "is under common ownership or control, either beneficial and/or legal, with a foreign company owning the trademark abroad." Plts. Exh. 10. The letter stated that effective thirty days therefrom, Customs would not continue to protect Rolex U.S.A. against the importation of gray-market goods. Some copies of the letter bore a notation that the effective date may be delayed. Plts. Exh. 11.

In response to defendants' letter of June 25, 1986, Customs agreed to defer the effective date of removal of protection until August 16, 1986 in order to consider defendants' submissions bearing on the issue of its ownership structure. Plts. Exh. 12. Defendant Rolex U.S.A. did, in fact, submit information to Customs in 1986, including materials pertaining to the ownership of the trademark "ROLEX" in Switzerland and the U.S. and the corporate structure of the various Rolex companies. Defs. Rule 3(g) Statement at ¶¶ 42-43.

On June 7, 1988, plaintiff's attorney wrote to Customs asking them finally to implement their letter of June 16, 1986 and remove gray-market protection for the "ROLEX" trademark. Defs. Exh. D-0014. Customs responded by letter on September 16, 1988; however, the nature of the response was far from clear. Defs. Exh. D-0016.³ To date, defendants continue to receive protection against the importation of gray-market goods under the Customs Regulations.

Discussion

Subject Matter Jurisdiction

As a preliminary matter, we must address defendants' arguments that this Court either lacks subject matter jurisdiction or that it should decline to exercise its jurisdiction under the doctrine of "primary agency jurisdiction."

Exclusive Jurisdiction

Defendants characterize plaintiff's RICO action against Rolex as an action to protest Customs' exclusion of the eight watches from entry into the United States. Hence, they argue that Shaw's exclusive remedy lay in administrative action. It is true that Customs' decision to exclude merchandise is final under 19 U.S.C. § 1514(a)(4) unless a protest is filed in accordance with that section.⁴ It is also true that the Court of International Trade ("CIT"), formerly the Customs Court, has exclusive jurisdiction over civil actions commenced against the United States and agencies and officers thereof to contest the denial of a protest. See 28 U.S.C. § 1581(a).⁵ However, the fact that plaintiff would be required to challenge the exclusion of his merchandise through agency channels does not necessarily lead to the conclusion that this Court lacks subject matter jurisdiction over plaintiff's RICO action.

The Customs Act of 1980, which created the CIT, did not create new substantive law, it merely provided for exclusive jurisdiction over certain categories of cases in the CIT. In determining whether the CIT has jurisdiction over a matter "the focus must be solely on whether the claim falls within the language and intent of the jurisdictional grant to the CIT." See Vivitar Corp. v. United States, 761 F.2d 1552, 1559-60 (Fed.Cir.1985), cert. denied, 474 U.S. 1055, 106 S.Ct. 791, 88 L.Ed.2d 769 (1986). Plaintiff's RICO action seeking only money damages against Rolex does not fall within the scope of Section 1581(a) and hence does not properly lie within the exclusive jurisdiction of the CIT.⁶ Congress's overriding purpose in enacting 28 U.S.C. § 1581 was to establish uniformity and expertise in certain matters of international trade by consolidating jurisdiction over such matters in a single specialized court. See Olympus Corp. v. United States, 792 F.2d 315, 318 (2d Cir.1986), cert. denied, 486 U.S. 1042, 108 S.Ct. 2033, 100 L.Ed.2d 618 (1988). Those ends would not be served in this RICO action, since it primarily involves applying the standards for fraudulent misrepresentation — a function within the traditional competence of the district courts.⁷

In sum, this Court rejects defendants' contentions and finds that it has jurisdiction over this matter under the general federal question provision, 28 U.S.C. § 1331, and under RICO, 18 U.S.C. § 1962(c) et seq.

Primary Agency Jurisdiction

Defendants also assert that the Court must dismiss Shaw's RICO action under the doctrine of primary jurisdiction. However, defendants' assertion indicates a fundamental misunderstanding of that doctrine. The doctrine is a flexible one and is "`concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties.'" Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 303, 96 S.Ct. 1978, 1986, 48 L.Ed.2d 643 (1976) (quoting United States v. Western Pac. R.R. Co., 352 U.S. 59, 63, 77 S.Ct. 161, 164-65, 1 L.Ed.2d 126 (1956)). It is invoked when a court, having unquestioned jurisdiction over a case, determines that "it may be appropriate to refer specific issues to an agency for initial determination where that procedure would secure `uniformity and consistency in the regulation of business entrusted to a particular agency'" or where the special expertise of the agency is required for the resolution of technical issues. Nader, 426 U.S. at 303-04, 96 S.Ct. at 1986-87. In such an instance, the court will suspend the action pending administrative determination of the issues referred. Id. at 63-64, 77 S.Ct. at 164-65. See also J. Stein, G. Mitchell & B. Mezines, 5 Administrative Law § 47.011 (rev. ed. 1991).

Referral of the issues underlying this RICO action cannot be justified by the interest in promoting uniformity and accuracy of decisionmaking within an agency's area of expertise. The standards of fraudulent misrepresentation and omission to be applied in this RICO action are within the conventional competence of this Court. Cf. Nader, 426 U.S. 290, at 305-06, 96 S.Ct. 1978, at 1987-88 (1976) (referral of misrepresentation issue to the administrative agency not justified by the interest in informing the court's final decision with the expertise of that agency). Moreover, while Customs may...