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A.V. BY VERSACE, INC. v. GIANNI VERSACE

March 31, 2004.

A.V. BY VERSACE, INC., Plaintiff -against- GIANNI VERSACE, S.p.A. and ALFREDO VERSACE, Defendants; GIANNI VERSACE, S.p.A., Plaintiff -against- ALFREDO VERSACE and FOLDOM INTERNATIONAL (U.S.A.), INC., Defendants


The opinion of the court was delivered by: PETER LEISURE, District Judge Page 2

OPINION AND ORDER

[EDITORS' NOTE: THIS PAGE CONTAINED ATTORNEYS' NAME] Page 3

  On August 28, 2003, the Court found defendant Alfredo Versace in contempt for numerous violations of the Court's orders in this action. See A.V. by Versace, Inc. v. Gianni Versace, S.P.A., 279 F. Supp.2d 341 (S.D.N.Y. August 28, 2003). Unfortunately, that finding was just the most recent in a series of contempt findings against Alfredo Versace in this case. Because previous contempt orders and monetary sanctions had no effect on Alfredo Versace's conduct, the Court found that a term of civil commitment was warranted to coerce compliance with its orders. Hoping that Alfredo Versace would recognize the gravity of the situation, the Court offered him a final chance to purge his contempt before ordering his imprisonment, and gave him explicit instructions as to how he could do so. Alfredo Versace has failed to meet those requirements. The Court now orders him to surrender to the United States Marshall for the Southern District of New York, who shall hold him in confinement until he complies with the requirements of the August 28 Opinion and Order and thereby purges his contempt.

  BACKGROUND

  In essence, this consolidated action and the related case, Gianni Versace, S.p.A. v. Versace, No. 01 Civ. 964, involve allegations of trademark infringement by Alfredo Versace of trademarks owned by Gianni Versace, S.p.A. ("Gianni Versaci"). For the purposes of this Order, however, there is no need to recount the baroque history of this case; the factual background of the dispute between Gianni Versace and Alfredo Versace and the various parties involved has been extensively covered in the Court's prior decisions. See Gianni Versace, S.p.A. v. Versace, No. 01 Civ. 9645, 2003 WL 22023946 (S.D.N.Y. Aug. 27, 2003); Gianni Versace, S.p.A. v. Versace, No. 01 Civ. 9645, 2003 Page 4 WL 470340 (S.D.N.Y. Feb. 25, 2003); A.V. by Versace, Inc. v. Gianni Versace, S.p.A., 96 Civ. 9721, 98 Civ. 0123, 2002 WL 2012618 (S.D.N.Y. Sept. 3, 2002); A.V. by Versace, Inc. v. Gianni Versace, S.p.A., 191 F. Supp.2d 404 (S.D.N.Y. 2002); A.V. by Versace, Inc. v. Gianni Versace, S.p.A., 160 F. Supp.2d 657 (S.D.N.Y. 2001); A.V. by Versace, Inc. v. Gianni Versace, S.p.A., 126 F. Supp.2d 328 (S.D.N.Y. 2001); A.V. by Versace, Inc. v. Gianni Versace, S.p.A., 87 F. Supp.2d 281 (S.D.N.Y. 2000); A.V. by Versace, Inc. v. Gianni Versace, S.p.A., 96 Civ. 9721, 1998 WL 832692 (S.D.N.Y. Dec. 1, 1998). Nor is it necessary to recount each of the prior decisions finding Alfredo Versace in contempt, as these were thoroughly discussed in the Court's August 28 decision. See 279 F. Supp.2d at 343-45. Rather, a brief history of Alfredo Versace's contumacious behavior will suffice.

  On February 4, 1998, the Court granted Gianni Versace's request for a preliminary injunction enjoining Alfredo Versace from, inter alia, using or licensing the use of various "Infringing Marks" that incorporated the name "Versace" and further enjoining the use of any other trademarks confusingly similar to those of Gianni Versace, Although the injunction barred Alfredo Versace from using his name as a trademark, it allowed him to use his name to identify goods that he has designed by use of the phrase "Designed by Alfredo Versace," as long as the goods so identified prominently displayed the disclaimer: "not affiliated with or authorized by Gianni Versace S.p.A." Alfredo Versace was also required to withdraw any pending trademark registrations consisting of, in part or in whole, any of the Infringing Marks. In addition, the preliminary injunction required Alfredo Versace to provide a copy of the injunction to all past and present Page 5 licensees and distributors. On January 4, 2001, this Court clarified that the preliminary injunction applied extraterritorially.

  Alfredo Versace was first cited for civil contempt on March 6, 2000, for violating the preliminary injunction by using offshore Internet sites to advertise and distribute his products in the United States. See A.V. by Versace, Inc., 87 F. Supp.2d at 294-95. As a result of this violation, the Court ordered him to pay Gianni Versace the sum of one-third of its costs and attorneys' fees incurred in making the contempt motion. See id. at 296. In addition, Alfredo Versace was ordered to take all reasonable steps to remove all Infringing Marks from the Internet and file an affidavit of his attempts in this regard within thirty days of the decision. Id.

  Alfredo Versace was next sanctioned on January 9, 2002, for his long-term refusal to obey the Court's discovery orders. Magistrate Judge Theodore H. Katz ordered him to pay Gianni Versace's costs and attorneys' fees incurred in attempting to secure compliance with those discovery orders, and recommended that both Alfredo Versace's Answer in No. 98 Civ. 0123, and his Answer and Cross-Claim in the related action, No. 96 Civ. 9721, be stricken. On March 21, 2002, this Court adopted Judge Katz's Opinion and Order and Report and Recommendation in its entirety, essentially causing a default for Alfredo Versace in the instant consolidated action. See A.V. by Versace, 191 F. Supp.2d at 404-05.

  On September 3, 2002, the Court again found Alfredo Versace in contempt for continued violations of the preliminary injunction. See A. V. by Versace, 2002 WL 2012618. The Court found that Alfredo Versace had been involved in the sale of watches, jeans and handbags in a manner that clearly violated the preliminary injunction; Page 6 that he had failed to comply with the March 6, 2000 decision, and that there were still Infringing Marks on the Internet that he took no steps to disable; and that he was involved in a clothing venture with a company called L'Abbigliamento, Ltd. that used Infringing Marks without the required disclaimer. As a result, the Court again ordered him to take all reasonable steps to remove from the Internet all references to "Alfredo Versace" that did not comply with the preliminary injunction and all references to the Infringing Marks. He was required to file an affidavit within thirty days of the Opinion and Order, describing his efforts and noting any references he was unable to remove. The Court also awarded Gianni Versace a compensatory fine equal to any profits made by Alfredo Versace via activities in violation of the preliminary injunction. In order to facilitate this fine, Alfredo Versace was ordered to produce within sixty days a detailed statement, prepared by a certified public accountant, of all net profits he derived from sales and licensing in violation of the preliminary injunction throughout the world from February 4, 1998, until the date of the decision. The Court also awarded Gianni Versace all of its attorneys' fees and costs in connection with bringing the contempt motion. To coerce compliance with these conditions, the Court stated that Alfredo Versace would pay a fine of $2,000 each day he failed to comply with the decision. On October 25, 2002, having received none of the required affidavits or reports in response to the September 3 decision, the Court imposed the $2,000 fine, running from each day after October 3, 2002. In addition, as part of the September 3, 2002, the Court ruled that it would modify the preliminary injunction to bar Alfredo from using the surname "Versace" in any commercial context. The modified injunction was signed on January 27, 2003. Page 7

  Finally, on August 28, 2003, the Court issued its most recent contempt decision finding that Alfredo Versace remained in contempt for his failure to obey the Court's previous orders and for additional violations of the preliminary injunction. Furthermore, it gave him explicit instructions on the steps necessary to purge this contempt. Recognizing that previous contempt orders and monetary sanctions had failed to motivate him, the Court stated that it would order a conditional jail term if he did not comply with the terms of the Opinion and Order within 60 days. A.V. by Versace, 279 F. Supp.2d at 355-56. As discussed in more detail below, the August 28 Order required Alfredo Versace to 1) pay the outstanding fines and judgments or submit documentation establishing that he is unable to do so; 2) withdraw all applications for registrations of Infringing Marks filed or granted after February 4, 1998, and submit an affidavit detailing these efforts; 3) submit an accountant's report detailing his financial activity, and that of all the entities he controls, from February 4, 1998 through September 3, 2002, delineating the profits earned from activities that violated the preliminary injunction; and 4) submit an affidavit describing all his uses of the name "Versace Boutique" and the current status of those uses. Id.

  On October 24, 2003, the Court received a letter from David E. Jacoby, Esq., counsel for Gianni Versace, indicating that the parties had consented to an extension of the Court's 60-day deadline for these submissions to November 24, with the condition that Alfredo Versace be required to submit information detailing his finances through October 31, 2003. The Court memo-endorsed this letter and scheduled a hearing on Alfredo Versace's compliance with the requirements of the August 28 Opinion and Order for December 18, 2003. Because of Court and attorney conflicts, this hearing was later Page 8 rescheduled for January 7, 2004. Alfredo Versace took full advantage of these delays and, despite the fact that his submissions were due November 24, did not present any documentation to the Court or to Gianni Versace until January 6, 2004. The documents submitted January 6 included an affidavit by Alfredo Versace listing three trademarks that he has withdrawn and two that have apparently lapsed or are void because of government restrictions; a "review" by Maria Estela Lorenzo, C.P.A., of Versace Boutique Ltd., Inc.'s cash flow from July 15, 1998 through November 30, 2003; a check register apparently corresponding to three bank accounts held by Versace Boutique Ltd.; and four letters from Mr. Carmen apparently withdrawing various trademarks in different countries. In response, Gianni Versace sent a letter to the Court the same day arguing that Alfredo Versace's submissions completely failed to meet the requirements of the August 28 Opinion and Order. (See Letter from David E. Jacoby, Esq. of 1/6/04, attached for filing by the Clerk.)

  On January 7, the Court held a hearing to determine whether Alfredo Versace had purged his contempt. At that hearing, fully aware of Gianni Versace's position that his efforts continued to be unsatisfactory, Alfredo Versace once again requested more time to submit additional documentation and affidavits to meet the requirements of the August 28 decision. The Court granted this request, giving him until February 6, 2004. This deadline was later extended to February 17, 2004, at Alfredo Versace's request, due to the purported illness of one of his attorneys. As of February 17, and indeed, since that date, however, the Court has received no additional submissions, and it will not delay any further the determination of whether Alfredo Versace has purged his contempt as required by the August 28 Opinion and Order. Accordingly, Alfredo Versace's Page 9 compliance with the terms of that decision will be determined solely on the basis of his January 6 submissions and the arguments advanced by his attorneys at the January 7 hearing.

  DISCUSSION

  In the August 28 decision the Court found that Alfredo Versace remained in contempt for violating the previous orders of the Court. The Court found that he had failed to pay any of the outstanding fines and judgments levied against him; that there was a substantial question as to whether he had withdrawn his infringing trademark applications and registrations as required by the preliminary injunction and the Court's previous orders; and that he had failed to submit the accountant's report required by the September 3, 2002 decision. Furthermore, the Court found that he had engaged in new contumacious violations of the modified preliminary injunction by distributing bottled water "Designed by Alfredo Versace," and by continuing to use the business name "Versace Boutique." The Court declined, however, to find Alfredo Versace in contempt for failing to take all ...


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