US ex rel. Vuitton Et Fils SA v. Karen Bags

• Decision Date: 09 April 1984
• Docket Number: p. 22-CLB.,No. 83 Cr. Misc. 1,83 Cr. Misc. 1
• Citation: 592 F. Supp. 734
• Parties: UNITED STATES of America, ex rel. VUITTON ET FILS S.A., and Louis Vuitton S.A., Plaintiffs, v. KAREN BAGS, INC., Jade Handbag Co., Inc., Sol N. Klayminc and Jak Handbag Inc., Defendants and Alleged Criminal Contemnors, and Barry Dean Klayminc, Gerald J. Young, George Cariste, S.M.E., S.A., Crystal, S.A., David Rochman, Robert G. Pariseault, Esq. and Nathan Helfand, Additional Alleged Criminal Contemnors.
• Court: U.S. District Court — Southern District of New York

592 F. Supp. 734

UNITED STATES of America, ex rel. VUITTON ET FILS S.A., and Louis Vuitton S.A., Plaintiffs, v. KAREN BAGS, INC., Jade Handbag Co., Inc., Sol N. Klayminc and Jak Handbag Inc., Defendants and Alleged Criminal Contemnors and Barry Dean Klayminc, Gerald J. Young, George Cariste, S.M.E., S.A., Crystal, S.A., David Rochman, Robert G. Pariseault, Esq. and Nathan Helfand, Additional Alleged Criminal Contemnors.

No. 83 Cr. Misc. 1, p. 22-CLB.

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

April 9, 1984.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

J. Joseph Bainton, Robert P. Devlin, Specially Appointed Attys. (Reboul, MacMurray, Hewitt, Maynard & Kristol, New York City), for United States.

William P. Weininger, Samuel & Weininger, New York City, for defendant Sol Klayminc.

James A. Cohen, Washington Square Legal Services, Inc., New York City, for defendant Barry Klayminc.

Leonard Comden, Wasserman, Comden & Casselman, Encino, Cal., for defendant Gerald J. Young.

Mitchell B. Craner, Guazzo, Silagi, Craner & Perelson, P.C., New York City, for defendant George Cariste.

Charles J. Rogers, Jr., Providence, R.I., for defendant Robert G. Pariseault.

Thomas R. Matarazzo, Brooklyn, N.Y., for defendant Nathan Helfand.

Allen B. Bickart, Phoenix, Ariz., for defendant David Rochman.

MEMORANDUM AND ORDER

BRIEANT, District Judge.

Increasingly in recent years, amid considerable evidence that the production and distribution of counterfeit apparel, accessories and novelty gifts, ranging from "E.T." jewelry to "Grateful Dead" T-Shirts, has reached epic proportions, owners of trademarks and licenses in these items have fought back, bringing numerous suits to restrain the marketing of counterfeit goods. One of the more active litigants in this respect has been Vuitton et Fils S.A., which is well known as a leading manufacturer of haute couture leather goods. In order to protect its trademark and profits from retailers of bogus handbags and related items, Vuitton has brought upwards of 80 suits in this Circuit alone. See Matter of Vuitton et Fils, S.A., 606 F.2d 1 (2d Cir.1979).

The criminal contempt proceedings challenged in this case arise out of one such effort by Vuitton — a civil action commenced in December, 1978 entitled Vuitton et Fils S.A. v. Karen Bags, Inc., et al., 78 Civ. 5863. In that action, the complainant sought injunctive relief and damages for trademark infringement and unfair competition allegedly committed by several defendants, including Sol Klayminc, Jade Handbag Co., Inc. ("Jade"), and Karen Bags, Inc. ("Karen"). Shortly after the complaint was filed, the defendants consented to the entry of a preliminary injunction and further proceedings were stayed pending resolution in another court of the validity of the disputed trademark.

After determining, in July 1981, the alleged criminal contemnor Sol Klayminc, his wife Sylvia, and the family-owned companies Jade and Karen were continuing to sell counterfeit Vuitton products in violation of the injunction issued in December, 1978, Vuitton made an ex parte request for an order directing Klayminc and several others to show cause why they should not be cited for civil and criminal contempt. Vuitton also moved to have its own attorney, Joseph Bainton, appointed to prosecute the alleged criminal contempt on behalf of the United States. Both applications were granted by Order dated July 8, 1981. The Court subsequently directed that the criminal contempt be referred to a United States Magistrate for trial as a petty offense. At the conclusion of a trial held before Magistrate Leonard A. Bernikow, Sol Klayminc and the corporate defendants Jade and Karen were convicted of criminal contempt.

The underlying civil action was disposed of through a settlement agreement dated July 13, 1982 which provided that the aforementioned criminal contemnors, as well as Sylvia Klayminc, the Klayminc's son Barry, and another Klayminc company, Jak Handbag, Inc. would pay Vuitton $100,000.00 plus interest over a specified period. The Klaymincs and the affiliated firms agreed to the issuance of the permanent injunction sought in the complaint. The permanent injunction was entered by Judge Lowe of this Court on July 30, 1982 and provided, in part, that the defendants refrain from producing, distributing or simulating goods in violation of Vuitton trademarks. Subsequently, the Magistrate, having been apprised of the terms of the terms of the civil settlement, sentenced Sol Klayminc to one year of probation for his criminal contempt conviction.

According to an affidavit filed in conjunction with the motion for the order to show cause which is at issue here, during the early part of 1983, Vuitton, along with the owners of certain other well known apparel and luggage trademarks, was contacted by a Florida investigation firm and invited to participate in and pay for a "sting" operation. Essentially, the sting involved employees of the security firm posing as merchants interested in buying and selling counterfeit trademarked wares on a large scale. Two of the operatives who undertook prominent roles in the subsequent operation of the sting were a former FBI agent, Gunnar Askeland, and Melvin Weinberg, who had also participated in the so-called "Abscam" operation of recent memory.

During the course of the investigation, alleged criminal contemnor Nathan Helfand, who had arranged for Weinberg and Askeland to purchase counterfeit trademarked goods, brought to their attention an individual named Sol (allegedly Sol Klayminc) who told Helfand that he had been "burned" by Vuitton "to the tune of $100,000," and that notwithstanding this undoubtedly unpleasant experience, he was still in the business of marketing counterfeit Vuitton wares.

Encouraged by Askeland and Weinberg, Helfand entered into further discussions with "Sol" regarding the marketing of counterfeit Vuitton and Gucci wares. During the course of these discussions, Sol allegedly told Helfand that Vuitton products could be obtained from a man in New Jersey named "George." Based upon other information, Vuitton believed George to be alleged criminal contemnor George Cariste, who previously had evidently been identified to Vuitton as a primary supplier of counterfeit Vuitton merchandise.

In an affidavit sworn to on March 30, 1983, Mr. Bainton advised the Court in detail about the alleged instances of wrongdoing which its civil investigation had uncovered, and requested that he and another attorney, Robert P. Devlin, be specially appointed to represent the Government in connection with the prosecution of the criminally contumacious conduct and "to continue the investigation and, in due course, the prosecution of what appears to be a massive international conspiracy to violate this Court's permanent injunction." Bainton's application was accompanied by several exhibits which appeared to support his allegations against several of the accused. In addition, Bainton, correctly observing that an attorney specially appointed to represent the Government in a criminal contempt proceeding "stands in somewhat different shoes than a United States attorney," outlined some of the steps that he would take in further investigating and prosecuting the alleged contempt if his application was granted:

"On the assumption that this application would be granted, preliminary arrangements have been made for a meeting among Sol, Barry, Askeland, and Weinberg at the Plaza Hotel in New York City, at noon on Tuesday, April 5, 1983 .... In a technical fashion similar to that employed in the Abscam operation, the meeting among those individuals will be video-taped so that at some later time there can be no question as to what was said to whom and by whom. We expect that Sol will repeat the highly incriminatory statements he made last week at dinner with Helfand and on other occasions over the telephone to Helfand .... Sol has also been requested to bring to the meeting 25 of his better counterfeit Vuitton satchel purses ...."

Recognizing that it is generally deemed unethical for an attorney to participate in the surreptitious recordings of conversations, Bainton noted that he would not be similarly constrained if his application to be appointed special prosecutor were granted.

In an order dated the next day, Judge Lasker of this Court, finding that there was probable cause to believe that the named alleged criminal contemnors were "knowingly engaged in a course of conduct criminally contumacious of this Court's final consent judgment and permanent injunction filed July 30, 1982," granted attorney Bainton's application to be appointed, along with Devlin, "in connection with the further investigation" of the alleged contempt and "the ultimate prosecution therefor." In addition, the Court specifically granted Bainton and Devlin permission to undertake the investigation which they had proposed in their application. Judge Lasker ordered that both Bainton's affidavit and the Court's own order of authorization be kept under seal.

Six days later, on April 6, 1983, Bainton and Devlin, acting pursuant to Judge Lasker's request¹ appeared before me to notify the assigned judge about the granting of Bainton's March 31st application. Bainton also advised the Court that their investigation had revealed that Klayminc and others had continued to deal with counterfeit Vuitton goods. The Court suggested that Mr. Bainton bring the investigation to the official attention of the United States Attorney's Office in this district, and that if requested, he comply with any requests for further information or cooperation which might be made by that office. Mr. Bainton agreed to do so and by letter dated April 6, 1983 made available the evidence which his investigation had uncovered to the Chief of the Criminal Division of the U.S. Attorney's Office for this district.

Once appointed to prosecute the alleged criminal contemnors, Mr. Bainton directed an...