U.S. ex rel. Vuitton et Fils S.A. v. Klayminc

• Decision Date: 16 December 1985
• Docket Number: 1305,1354,D,1312,Nos. 1294,1351,s. 1294
• Citation: 780 F.2d 179
• Parties: , 228 U.S.P.Q. 409 UNITED STATES of America ex rel. VUITTON ET FILS S.A., and Louis Vuitton S.A., Appellee, v. Barry Dean KLAYMINC, Nathan Helfand, George Cariste, Sol N. Klayminc, and Gerald J. Young, Appellants. ockets 85-1068, 85-1075 to 85-1078.
• Court: U.S. Court of Appeals — Second Circuit

Page 179

780 F.2d 179

54 USLW 2348, 228 U.S.P.Q. 409

UNITED STATES of America ex rel. VUITTON ET FILS S.A., and Louis Vuitton S.A., Appellee, v. Barry Dean KLAYMINC, Nathan Helfand, George Cariste, Sol N Klayminc, and Gerald J. Young, Appellants.

Nos. 1294, 1305, 1312, 1351, 1354, Dockets 85-1068, 85-1075

to 85-1078.

United States Court of Appeals Second Circuit.

Argued June 14, 1985.

Decided Dec. 16, 1985.

James A. Cohen (Washington Square Legal Services, Inc., New York City, Paul Davison, Samia Fam, Lauren G. Gross, Michael Abelson, Carla Hinton, Legal Interns, New York University School of Law, of counsel), for appellant Barry Dean Klayminc.

Thomas R. Matarazzo, Brooklyn, N.Y., for appellant N. Helfand.

Mitchel B. Craner, New York City, for appellant G. Cariste.

William P. Weininger, New York City (Samuel & Weininger, New York City, Walter Kraslow, New York City, of counsel), for appellant Sol N. Klayminc.

Leonard J. Comden, Tarzana, Cal. (Wasserman, Comden & Casselman, Tarzana, Cal., of counsel), for appellant G. Young.

J. Joseph Bainton, New York City (Robert P. Devlin, Steven H. Reisberg, Karen J. Pordum, Law Student, New York City, of counsel), for appellee.

Before LUMBARD, OAKES and WINTER, Circuit Judges.

LUMBARD, Circuit Judge.

Sol Klayminc and four confederates appeal their convictions on a jury verdict for criminal contempt under 18 U.S.C. Sec. 401(3) (1982), based upon violations, or the aiding and abetting of violations, of a permanent injunction of the Southern District, filed July 30, 1982, which prohibited infringement of the trademark of Louis Vuitton S.A., the well-known French manufacturer of high fashion handbags and other leather goods. The appellants received sentences ranging from six months to five years. Central to their appeals is the claim that the district court's appointment of Vuitton's attorneys as special prosecutors under Fed.R.Crim.P. 42(b) violated appellants' due process right to a disinterested prosecutor and that the court exceeded its authority by approving the special prosecutors' use of a "sting" operation fashioned along the lines of Abscam.

We find that the district court acted within its discretion in appointing Vuitton's attorneys to prosecute, and that it was within the court's authority to approve a sting operation. As none of the other claims of error require reversal of any of the convictions, we affirm the judgments of the district court.

Because Judge Brieant has discussed the case extensively in two opinions, United States ex rel. Vuitton et Fils S.A. v. Karen Bags, Inc., 592 F.Supp. 734 (S.D.N.Y.1984) ("Vuitton I "), and United States ex rel. Vuitton et Fils S.A. v. Karen Bags, Inc., 602 F.Supp. 1052 (S.D.N.Y.1985) ("Vuitton II"), and because we agree with his rulings, we briefly recapitulate the history of Vuitton's efforts to protect its trademark from infringement by counterfeiters.

Vuitton first brought suit in the District Court for the Southern District in December, 1978, against Sol Klayminc and his family-owned businesses, Karen Bags, Inc. and Jade Handbag Co., Inc., alleging that they were manufacturing imitation Vuitton goods for sale and distribution. Vuitton obtained a preliminary injunction the same month. Sol's wife, Sylvia, his son Barry, and Jak Handbag, Inc., another family owned business, were subsequently joined as defendants. Proceedings were then stayed to await the outcome of litigation in the Ninth Circuit regarding the validity of Vuitton's trademark. After the trademark was found valid in Vuitton et Fils S.A. v. J. Young Enterprises, 644 F.2d 769 (9th Cir.1981) the parties, in July 1982, entered into a settlement agreement pursuant to which the defendants agreed to pay Vuitton $100,000 in damages. Defendants also consented to the issuance of a permanent injunction which enjoined them from, inter alia, "manufacturing ... selling, offering for sale ... any product bearing any simulation ... of Vuitton's Registered Trade-Mark 297,594."

In early 1983, Vuitton, Gucci Shops, Inc., the manufacturers of Calvin Klein jeans and certain other owners of prestigous trademarks were contacted by Kanner Security Group, Inc., a Florida investigation firm whose principals are former FBI agents. Kanner proposed a plan to ferret out possible infringers by means of a "sting operation" subsequently dubbed "Bagscam"; the firm was subsequently retained. The main operatives in this sting operation were Melvin Weinberg and Gunner Askeland, a former FBI agent, both of whom had been involved in Abscam. Operating under the supervision of Vuitton attorney J. Joseph Bainton, Weinberg and Askeland posed as purchasers of counterfeit goods (using the assumed names "Mel West" and "Chris Anderson") and in this way they penetrated a network of counterfeiters that included Sol and Barry Klayminc and the other appellants.

Weinberg, posing as "Mel West", had a number of telephone conversations with appellant Nathan Helfand in which Weinberg explained that he and Askeland were interested in buying counterfeit goods. Helfand told Weinberg that he would talk to a man named "Sol" who had been in trouble with Vuitton in the past, but was planning to produce counterfeit Vuitton and Gucci goods in Haiti.

Helfand had a dinner meeting with Sol and Sylvia Klayminc in Florida on March 27, 1983 at which they discussed the sale by Sol of counterfeit Vuitton and Gucci wares and the possible investment by Weinberg and Askeland in the Haitian factory. Sol signed a memorandum describing in detail the present and proposed nature of the operation at the factory and another memorandum detailing the anticipated cost to Weinberg and Askeland of the counterfeited goods. At this meeting Sol also delivered to Helfand some sample counterfeit Vuitton bags for Weinberg's and Askeland's inspection. Sol explained to Helfand that additional imitation Vuitton products purchased from Sol could be picked up from a man named "George" (appellant George Cariste) in New Jersey. Sol also stated that his son, Barry, had a 25 percent interest in the Haitian operation. From the reported conversations it was apparent that both he and his confederates were aware of the permanent injunction.

On March 31, 1983, Bainton requested the court to appoint him and his associate Robert P. Devlin as special prosecutors in a criminal contempt proceeding pursuant to Fed.R.Crim.P. 42(b). Bainton's affidavit recited in detail the developments summarized above, which Helfand had reported to Askeland and Weinberg. Bainton pointed out that both he and Devlin had previously been appointed by the court to prosecute Sol Klayminc for criminal contempt. ¹

Judge Lasker, acting in place of Judge Brieant (the assigned judge who was absent), found on the strength of Bainton's affidavit that there was probable cause to believe that the alleged criminal contemnors were knowingly in violation of the court's permanent injunction; he appointed Bainton and Devlin to prosecute the case in an order dated March 31, 1983.

Desiring to sew up the case, but concerned about the ethical prohibition against private attorneys making surreptitious recordings, see 20th Century Wear, Inc. v. Sanmark-Stardust, Inc., 747 F.2d 81, 93 n. 17 (2d Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 1755, 84 L.Ed.2d 818 (1985); ABA Comm. on Ethics and Professional Responsibility, Formal Op. 337 (1974), Bainton also sought the court's permission to continue the undercover investigation and videotape the results. He detailed in his affidavit the next step in the investigation: a meeting arranged to take place at the Plaza Hotel in New York on April 5, 1983, among Sol, Barry, Askeland, and Weinberg to which Sol had been requested to bring twenty-five counterfeit Vuitton bags. The court's order empowered counsel to undertake "further investigation" of the alleged counterfeiting and to follow through with the activities detailed in Bainton's affidavit.

When Judge Brieant returned, Bainton, on April 6, apprised him of Judge Lasker's order and the continuing investigation. Judge Brieant suggested that Bainton bring the investigation to the attention of the United States Attorney's Office. By letter dated that same day, Bainton informed Lawrence Pedowitz, the Chief of the Criminal Division of the United States Attorney's Office for the Southern District, of the investigation and offered to make any tape recordings or other evidence available to his office. ² Pedowitz did not take any action, but simply wished Bainton good luck. Judge Brieant noted that the United States Attorney's Office was again contacted about the case on the eve of trial, but indicated no desire to enter the case.

Thus, approved by court order, "Bagscam" went into full operation. Over the course of a month, numerous video and audio tape recordings were made of meetings and phone calls between appellants and the investigatory team. These recordings later enabled the jurors to see and hear a graphic account of the meeting at the Plaza Hotel on April 5 and the sale, for $25.00 apiece, of 25 imitation Vuitton bags to "Mel" by Sol. Mel later put up $5,000 to help Sol get his Haitian factory going to make more "L's" or "LV's", as the counterfeit bags were known.

Based, in part, on his April 26, 1983 report to Judge Brieant describing the contents of the recordings, Bainton requested, and the judge signed, an Order to Show Cause why the five appellants, as well as several corporate entities and two other individuals, David Rochman and Robert Pariseault, should not be cited for civil and criminal contempt for either violating or aiding and abetting the violation of the July 30, 1982 permanent injunction.

The defendants filed pre-trial motions opposing the Order to Show Cause and the appointment of Bainton and Devlin as special prosecutors. Oral argument was heard October 31, 1983. On April 9, 1984, Judge Breiant denied all the pre-trial motions. Vuitton I, supra. Rochman and ...