The opinion of the court was delivered by: BRIEANT
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 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 request
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 investigation which produced numerous video and audio recorded conversations among the alleged contemnors and members of the investigatory team. Based, in part, on the products of those recordings, Bainton requested and was granted, on April 29, 1983, an Order to Show Cause (for both civil and criminal contempt) against defendants Sol Klayminc, Barry Dean Klayminc, Gerald Young, David Rochman, Robert Pariseault, Nathan Helfand and George Cariste. The show cause order provided for the seizure of enumerated collections of counterfeit Vuitton goods, which had been identified during the course of the investigations, as well as equipment, promotional literature and records related to the manufacture and distribution of counterfeit Vuitton products.
Numerous pre-trial motions have since been made by the defendants, and on October 31, 1983, Bainton and attorneys representing each of the defendants appeared before the Court for oral argument. Post-argument briefs and letters were entertained by the Court, and the motions were fully submitted as of March 13, 1984. All of these motions will be addressed in this memorandum decision and where common legal issues are raised by two or more defendants, their motions will be considered together.
Motions to Revoke the Special Prosecutors' Appointment and Dismiss the Order to Show Cause.
The most significant challenge presented concerns the propriety of Judge Lasker's appointment of Mr. Bainton on March 31, 1983 as special prosecutor, and the nature and extent of his activities once invested with that authority.
The appointment of one of the attorneys in a civil action to prosecute a criminal contempt arising from a violation of the Court's orders in such an action is a long-standing practice the validity of which, in principle, is not subject to question. The most oft-quoted passage pertaining to this practice appears in a 1935 case arising in this Circuit, McCann v. New York Stock Exchange, 80 F.2d 211, where Judge Learned Hand held:
"Criminal prosecutions . . . are prosecuted either by the United States or by the court to assert its authority. The first are easily ascertainable; they will be openly prosecuted by the district attorney. In the second the Court may proceed sua sponte without the assistance of any attorney, as in the case of a disorder in the courtroom; there can be little doubt about the kind of proceeding when it is done. But the judge may prefer to use the attorney of a party, who will indeed ordinarily be his only means of information when the contempt is not in his presence. There is no reason why he should not do so, and every reason why he should.. . ." 80 F.2d at 214.
Our Court of Appeals has recently endorsed this time honored procedure in Musidor B.V. v. Great American Screen, 658 F.2d 60 (2d Cir. 1981), cert. denied, 455 U.S. 944, 71 L. Ed. 2d 656, 102 S. Ct. 1440 (1982), where it rejected a due process challenge to a criminal contempt conviction secured by a special prosecutor appointed under circumstances very similar to those in this case. In Musidor, as in the instant proceeding, the Court has entered an injunction against dealing in counterfeit T-shirts displaying the trademarks of three rock music groups, and when it became evident that violations of the injunction had occurred, the district court, acting pursuant to Rule 42(b), F.R.Crim.P., appointed the plaintiff's attorney, who had obtained the original injunction, to prosecute the charges. Rejecting the defendants' challenges, after their conviction, to the validity of this procedure, the Court of Appeals quoted approvingly from the McCann decision, and observed that the Advisory Committee on Rules had relief upon McCann in establishing Rule 42 of the Federal rules of Criminal Procedure.
Id. at 64.
The Court restated the rationale underlying the practice, and rejected the argument that criminal contempts invariably must be prosecuted by the United States Attorney:
"Neither Rule 42 nor the Due Process Clause requires the court to select counsel from the staff of the United States Attorney to prosecute a criminal contempt. The practicalities of the situation -- when the criminal contempt occurs outside the presence of the Court but in civil litigation -- require that the Court be permitted to appoint counsel for the opposing party to prosecute the contempt. There is no fund out of which to pay other counsel in such an event, nor would it be proper that he be paid by the opposing party. This is not the kind of case for which legal aid societies public defenders are available. In short, we follow the above quoted statement by Judge Hand in McCann. " Id. at 65.
see also Universal City Studios v. Broadway Intern., 705 F.2d 94 (2d Cir. 1983): "[T]he plain implication of the Rule is that the [contempt] proceedings are to be prosecuted either by the federal prosecutor or by a private attorney specifically designed to do so." Id. at 97. This practice has been endorsed and followed in other Circuits as well. See e.g., Frank v. United States, 384 F.2d 276 (10th Cir. 1967), aff'd on other grounds, 395 U.S. 147, 23 L. Ed. 2d 162, 89 S. Ct. 1503 (1969); United States ex rel. Brown v. Lederer, 140 F.2d 136, 138 (7th Cir. 1944), cert. denied, 322 U.S. 734, 88 L. Ed. 1568, 64 S. Ct. 1047 (1944); In re C.B.S., Inc., 570 F. Supp. 578 (E.D. La. 1983).
Defendant Barry Klayminc, acknowledging that under McCann and Musidor, the appointment of private counsel is an acceptable, even "preferred" practice, urges this Court to distinguish or reject Musidor in light of decisions which have accorded defendants in criminal contempt cases procedural and constitutional protections enjoyed by other criminal defendants, discussed below. Even were this Court to disavow Musidor, defendants fail to demonstrate how the procedure provided for by Rule 42 is necessarily inconsistent with any of their due process rights.
In considering defendants' due process challenge to the Rule 42 proceeding approved in this case, and the special prosecutors' actions once invested with that authority, we must keep in mind the still unique status of criminal contempt. While defendants are correct in asserting that we are a long way from the common law treatment of alleged contemnors, which permitted procedures otherwise prohibited in ordinary prosecutions for crime, criminal contempt continues to be characterized by procedures which distinguish it from ordinary statutory offenses. In this century, the Supreme Court has reduced this distinction to a great extent, having ruled, for example, that the standard of proof for criminal contempt is the same as that in any criminal action [(Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 55 L. Ed. 797, 31 S. Ct. 492 (1911)]; that an alleged contemnor is entitled to assistance of counsel [(Cooke v. United States, 267 U.S. 517, 69 L. Ed. 767, 45 S. Ct. 390 (1925)]; and the right to a public trial before an unbiased judge [(In re Oliver, 333 U.S. 257, 92 L. Ed. 682, 68 S. Ct. 499 (1948)]. Most recently, in Bloom v. Illinois, 391 U.S. 194, 20 L. Ed. 2d 522, 88 S. Ct. 1477 (1968), the Supreme Court repudiated the longstanding exemption criminal contempts enjoyed from the constitutional requirements of a jury trial.
While it is certainly true that distinctions between contempt and other crimes have eroded, it is not the case, as defendants suggest, that in Bloom the Supreme Court swept away the last justification for according criminal contempt a special status. Before Bloom it had been undisputed that contempt had been treated differently under federal law:
While contempt may be an offense against the law and subject to appropriate punishment, certain it is that since the foundation of our government, proceedings to punish such offenses have been regarded as sui generis and not "criminal prosecutions' within the Sixth Amendment or common ...