US EX REL. VUITTON ET FILS SA v. Karen Bags, Inc.

• Decision Date: 24 January 1985
• Docket Number: No. 83 Cr. Misc. 1,p. 22-CLB.,83 Cr. Misc. 1
• Citation: 602 F. Supp. 1052
• 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

602 F. Supp. 1052

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.

January 24, 1985.

COPYRIGHT MATERIAL OMITTED

J. Joseph Bainton, New York City, Specially Appointed, for U.S.

Reboul, MacMurray, Hewitt, Maynard & Kristol, New York City, for plaintiffs.

William 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 Young.

Mitchell B. Craner, New York City, for defendant George Cariste.

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

MEMORANDUM AND ORDER

Post-Trial Motions

BRIEANT, District Judge.

As is set forth more fully in this Court's Memorandum Decision and Order dated April 9, 1984, United States v. Karen Bags, Inc., 592 F.Supp. 734 (S.D.N.Y.1984) (hereinafter "Prior Order"), familiarity with which is assumed, these criminal cases arise out of the sales of counterfeit Louis Vuitton products and the campaign waged by Vuitton et Fils S.A. ("Vuitton") to protect its trademark and profits. On July 22, 1982, Sol Klayminc was sentenced before Magistrate Bernikow in this district, for criminal contempt, a crime based on Sol Klayminc's continuing to sell, or offer for sale, counterfeits in violation of an injunction issued in December 1978. As part of the settlement agreement in an underlying civil action, Vuitton et Fils S.A. v. Karen Bags, Inc., et al. (78 Civ. 5863), Sol Klayminc, his wife Sylvia, his son Barry, and the family-owned corporate defendants agreed to entry of a permanent injunction, which was then issued on consent by Judge Lowe of this Court on July 30, 1982. Undeterred, Sol Klayminc again became a criminal defendant charged with disobeying the July 1982 injunction.

After conducting a civil investigation, and concluding that wrongdoing by the Klaymincs and others had continued (Affidavit of J. Joseph Bainton, Esq., sworn to March 30, 1983), attorneys for Vuitton sought permission to investigate and prosecute the defendants named herein for their allegedly criminal acts in violation of the July 1982 injunction. 18 U.S.C. § 401(3). On March 31, 1983, Judge Lasker granted attorney Bainton's application to be appointed Special Prosecutor. Rule 42(b), F.R.Crim.P. The criminal actions proceeded, step by step, to trial by jury.¹

This Court conducted a nine-day trial which concluded on May 24, 1984. The trial jury returned verdicts of guilty against defendants Sol Klayminc, Barry Klayminc, Gerald Young, George Cariste, and Nathan Helfand. All these defendants now move the Court to set aside the verdicts, Rule 29(c), F.R.Crim.P., to dismiss the Order to Show Cause under which the United States initially accused the defendants of criminal contempt, and/or to order a new trial. Barry Klayminc and Nathan Helfand also move for a "due process" hearing. The Court will treat separately the various challenges to the convictions obtained by the Government's Special Prosecutor.

Due Process

Barry Klayminc and other defendants who are deemed to have joined in his motion argue that the prosecution of these cases violated defendants' due process rights under the Fifth Amendment to the United States Constitution. The grounds for this argument include (1) erroneous appointment of Vuitton's private attorney as a special prosecutor; (2) outrageous conduct by government agents; (3) excessive and improperly supervised investigative techniques; and (4) "targeting" of defendants who were "urged" to violate the law. (Defendant Barry Klayminc's Memorandum of Law, filed August 3, 1984; Defendant Gerald Young's Memorandum of Law, filed August 1, 1984).

Many of defendants' due process claims were presented to the Court in pre-trial motions and have been addressed in the Court's Prior Order, 592 F.Supp. at 740-49. Nevertheless, counsel for Barry Klayminc has insisted by motion and by letters received as recently as December 10, 1984, that the "sting" operation conducted by the Special Prosecutor is marred by unconstitutional features.

Defendants' first contention, concerning the propriety of the appointment pursuant to Rule 42(b), F.R.Crim.P., is discussed fully in the Prior Order. The appointment was authorized under the principles enunciated in Musidor B.V. v. Great American Screen, 658 F.2d 60 (2d Cir. 1981), cert. denied, 455 U.S. 944, 102 S.Ct. 1440, 71 L.Ed.2d 656 (1982). Once the appointment was approved by Judge Lasker, and upheld as lawful in this Court's Prior Order, no purpose is served for defendant Klayminc to continue to state that "it was actually a private party that conducted the sting. The fact that it was a private party that conducted the operation and not the government, while it goes a long way toward explaining the shortcomings of the investigation, at the same time makes those short-comings sic more offensive and less tolerable." (Defendant Barry Klayminc's Memorandum of Law, filed August 3, 1984 at 25). There is no merit to this argument. It was not a private party conducting the sting; it was a specially appointed prosecutor acting on behalf of the United States.

Contrary to defendants' view, this Court is not persuaded that any new information has been discovered at or after trial that impugns the integrity of the Special Prosecutor or highlights any alleged conflict of interest rendering the appointment invalid. Barry Klayminc points to tape-recorded conversations between the government agent (Mel Weinberg, of Abscam fame) and the defendants which display an "unseemly curiosity" regarding the defamation action filed by Sol Klayminc in state court against attorney Bainton. In addition Barry Klayminc points to similar conversations in which the pending bankruptcy concerning Debtor Sol Klayminc is discussed. These conversations, it is argued, reveal abuses by the Special Prosecutor who utilized the government investigation to advance his own interests and the interests of his private client, Vuitton.

Taken in proportion to the whole of the extensive tape recordings made during the sting, the conversations to which defendants object are no more and no less than portions of a continuing Runyonesque dialogue between the undercover agent and the defendants. There is no basis for inferring that Bainton was using the government investigation "to seek out and attempt to eliminate personal enemies." Records in the Supreme Court of the State of New York, County of New York reveal that although Sol Klayminc did begin a defamation action against Bainton (by serving a summons and complaint in December 1982), that action was never pursued in any fashion and was eventually closed by the filing of a stipulation of discontinuance in July 1984. The Court declines to find that the defamation suit would motivate the Special Prosecutor to engage in misconduct or that it did. See Prior Order, 592 F.Supp. at 746.

Likewise, the bankruptcy action in which Vuitton opposed the discharge of Sol Klayminc, did not create such a conflict of interest that would rise to the level of a due process violation. Simply because Vuitton's civil proceedings to recover damages and lost profits coincided with the criminal investigation does not require that the Special Prosecutor be disqualified. The taped conversations concerning the bankruptcy do not provide a basis for finding the "demonstrable level of outrageousness" of the sort discussed in Hampton v. United States, 425 U.S. 484, 495, n. 7, 96 S.Ct. 1646, 1653, n. 7, 48 L.Ed.2d 113 (1976) (Powell, J. concurring). Even assuming that the taped conversations did concern subjects not relevant to the purpose of the undercover operation, as did much of Weinberg's conversational play acting, the standards for reversing a conviction or for dismissal of the charging instrument require much more offensive instances of prosecutorial misconduct than are alleged here. See Wright v. United States, 732 F.2d 1048, 1055-58 (2d Cir.1984).

The remaining arguments underlying defendants' due process claim involve subjects somewhat related to prosecutorial conflict of interest. These arguments concern the propriety of the government agents' conduct and whether the agents acted without proper governmental supervision. Defendants contend that the unsupervised nature of the investigation resulted in ambiguous and unreliable evidence which was presented to the trier of fact.

One of the agents employed by the Special Prosecutor was Melvin Weinberg. Video and audio tapes of meetings and conversations between Weinberg and the various defendants formed the bulk of the government's evidence at trial. In his petition for a post-trial evidentiary hearing, defendant Barry Klayminc questions (1) the extent to which the government initiated rather than detected criminal activity; (2) the excessiveness of the sting; and (3) the lack of procedural safeguards in the investigative techniques. Barry Klayminc undoubtedly is correct when he states that: "But for the actions of Mel Weinberg, and those behind them, there would be no issue before the court today." The difficulty with defendant's position, however, is that he must distinguish between infiltration by an undercover agent which constitutes "effective law enforcement work," United States v. Corcione, 592 F.2d 111, 115 (2d Cir.), cert. denied, 440 U.S. 985, 99 S.Ct. 1801, 60 L.Ed.2d 248 (1979), and governmental conduct which "creates a substantial risk that the `guilty' verdict is not a reliable evaluation...