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Zwack v. Bros.

decided: October 2, 1956.

JOHN ZWACK, BELA ZWACK AND DORA ZWACK, AS CO-PARTNERS DOING BUSINESS AS J. ZWACK & COMPANY, APPELLEES,
v.
KRAUS BROS. & CO., INC., APPELLANT.



Author: Hincks

Before CLARK, Chief Judge, and HINCKS and WATERMAN, Circuit Judges.

HINCKS, Circuit Judge.

This is an appeal from a decree entered in the Southern District of New York in favor of plaintiffs*fn1 in an action for the collection of a pre-existing indebtedness and for damages and an accounting of damages and profits resulting from trade-mark infringement and unfair competition. The defendant's appeal not only challenges the decree on its merits but also assigns as errors various rulings on evidence and two preliminary orders, viz., (1) denying its motion to dismiss for failure to join indispensable parties, and (2) granting plaintiffs' motion to bar the defendant from transmitting John Zwack's pre-trial deposition to Hungary. The decree was entered on October 6, 1950 upon an opinion by Judge Palmieri reported in 133 F.Supp. 929. Contemporaneously, findings of fact and conclusions of law were filed which have not been published.

The plaintiffs allege themselves to be partners owning the Hungarian firm, J. Zwack & Co., a manufacturer and exporter of liqueurs, which, they contend, on or about November 18, 1948, was confiscated by the Hungarian government, now the registered owner of the firm in Hungary. The defendant is a New York corporation which since 1934 has been the exclusive distributing agent for J. Zwack & Co. in the United States under an agreement and extensions thereof running until 1960.

During the course of the war in Europe, commerce under the agreement was suspended and funds which were owed by defendant to the Zwack firm were blocked in the United States. At the close of the war amicable business relations were again established. Shortly before the alleged confiscation in 1948, the plaintiff, John Zwack, fled from Hungary and immediately thereafter notified the defendant not to deal with the firm under its new confiscatory ownership. By agreement with the pre-confiscated firm, the defendant had registered in its name in the United States certain trade-marks bearing the name of the Zwack firm.

The judge, in his conclusions of law, ruled in substance

(1) that in 1948 the plaintiffs' plant, assets and business in Hungary had been "nationalized" by the Hungarian government without consideration and by coercion and duress; and that the nationalization "offends the morals and violates the public policy of the United States and will be given no extra-territorial effect in the United States by the courts of the United States";

(2) that the situs of moneys which became due from the defendant to the plaintiffs in 1940 and the situs of certain trade-marks registered in the United States Patent Office and elsewhere in the United States by and in the name of the defendant while acting as the agent of the plaintiffs in the United States, was in the United States;

(3) that "the continuance of business relations with the Hungarian Government" after the confiscation and notice thereof to the defendant was "a breach of its exclusive agency agreement with the plaintiff" and "was a wrongful act of defendant for which it is accountable to the plaintiff";

(4) that it was also unlawful for the defendant after notice of the confiscation to continue to import and sell in the United States goods bearing the plaintiffs' name, trade-marks and labels;

(5) that "plaintiff was in a position to manufacture in and/or import Zwack products into the United States"*fn2 and "had arranged for the necessary financing therefor,"*fn3 and that the defendant's use, after notice of the expropriation of plaintiffs' name and label made it impossible for plaintiffs to manufacture in or import into the United States;

(6) that the plaintiff was entitled to a decree

(a) for the moneys ($17,685.56) which had become due from the defendant in 1940;

(b) to damages resulting from its inability to manufacture in the United States ...


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