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Threeline Imports, Inc. v. Vernikov

United States District Court, E.D. New York

March 3, 2017

THREELINE IMPORTS, INC., Plaintiff,
v.
GRIGORIY VERNIKOV a/k/a GREGORY VERNIKOV, INTERPAGE INTERNATIONAL INC. d/b/a INTERPAGE CO. Defendants.

          MEMORANDUM & ORDER

          Ann M. Donnelly United States District Judge

         The plaintiff, Threeline Imports, Inc., initiated this action against defendants Grigoriy Vernikov and Interpage International Inc. d/b/a Interpage Co. for trademark infringement and counterfeiting pursuant to 15. U.S.C. §1114 on April 23, 2015. The defendants then asserted federal and state law counterclaims against the plaintiff, including for trademark infringement. The core of this action is the parties' dispute as to ownership of a trademarked chicken-and-egg logo that is used on certain imported pasta products.

         I held a bench trial as to liability on the parties' claims in January 2017. For the reasons set forth below, I find that the plaintiff did not prove at trial that it had valid rights to the chicken-and-egg logo, and therefore has not proved its Lanham Act infringement and counterfeiting claims against the defendants. On the other hand, I find that the defendants have established common law rights in the chicken-and-egg logo, and have shown that the plaintiff is liable to them for Lanham Act unfair competition, infringement and false designation of origin, as well as common law unfair competition and unjust enrichment. The Court will consider damages in the next phase of this case.

         PROCEDURAL HISTORY

         On the same day that it filed its complaint, the plaintiff moved for a preliminary injunction preventing the defendants from using its registered trademark, this chicken-and-egg logo:

         (IMAGE OMITTED)

         After holding an evidentiary hearing, the Honorable Brian M. Cogan granted the injunction on May 21, 2015.[1] The parlies engaged in extensive discovery, and then cross-moved for summary judgment on all claims in the case.[2]

         I issued my decision on the parties' motions for summary judgment on October 28, 2016. In that decision, I found that there were genuine issues of material fact as to the plaintiffs trademark infringement and counterfeiting claims and as to the defendants' cross-claims for trademark infringement, unjust enrichment, and unfair competition. I dismissed the defendants' claims for copyright infringement and tortious interference with business relations, as well as their claims pursuant to New York General Business law.

         A bench trial as to liability on the parties' remaining claims began on January 17, 2017.[3]The key question is whether two containers of pasta product bearing the chicken-and-egg logo that arrived at Threeline's warehouse in December of 2012 inured to the benefit of Grigory Vernikov, as owner of Interpage Co., or to Threeline.

         FINDINGS OF FACT

         Threeline Imports Inc., the plaintiff in this action, is an importer and distributor of food products, including confectionary products, candy, pasta, and grain products, from Europe and the former Soviet Union. (Tr. 32:15-17.)[4] Malvina Kerzhner is its president, and her husband, Leonid Kerzhner, is its general manager. (Tr. 31:21-23; 34:13-14, 34:23-24, 203:22-24.) After importing products into the country, Threeline, which was started in 2006, sells them to retailers and distributors across the United States. (Tr. 204:17-205:3.) In 1993, the defendant, Grigory Vernikov, started a corporation called Interpage International, an import/export company that imports confectionary products from the Ukraine, Russia, and the Baltic states. (Tr. 307:18- 308:2; 308:18-22; 310:15-17.)[5] He initially ran the company out of a warehouse space in Brooklyn. (Tr. 310:5-7, 311:8-16.)

         At trial, witnesses for the plaintiff included Malvina Kerzhner, Leonid Kerzhner, their son, Alexander Kerznher, and Roman Katsnelson. Grigory Vernikov, along with two representatives from third-party companies, Rafail Levin and Kristaps Koskins, testified for the defendants.[6] I did not find Ms. Kerzhner's trial testimony to be credible on any issue; as I will explain in more detail below, her testimony was plagued by internal inconsistencies, and sometimes changed from minute to minute. Further, her testimony has changed throughout the course of this litigation, apparently depending on what she thought would be most favorable to the plaintiffs position at that time. Moreover, in an effort to distort the record, she tampered with a spreadsheet that undercut the plaintiffs position, by deleting references to certain entities. While Leonid Kerzhner's testimony did not suffer from the same glaring inconsistencies as Ms. Kerzhner's did, it did little to advance the plaintiffs case. By contrast, I found Vernikov a credible witness. His testimony was consistent and credible, and he was able to provide details that were missing from the testimony of both Leonid and Malvina Kerzhner. His testimony was also supported by the record evidence.[7]

         Vernikov first met Leonid Kerzhner in 2002, when Kerzhner came to Interpage's warehouse to purchase food products on behalf of his employer at the time, a company called MegaFood. (Tr. 312:13-313:11.) Kerzhner continued to purchase food products from Interpage when he started working for a company called Trilini Imports[8] in around 2004, and in late 2004, he offered Vernikov space in Trilini Imports' warehouse. (314:5-17; 314:19-315:3; 316:5-13.) Although Mr. Vernikov was initially uninterested, he agreed to move Interpage to Trilini Import's warehouse when the rent on his warehouse went up in 2005. (Tr. 315:12-21 .)[9]According to Vernikov, the terms of this arrangement were that Interpage would occupy space in the warehouse rent-free. (Tr. 315:22-316:18.) In return, Vernikov sold goods that he imported through Interpage to Trilini, and then Threeline, at cost. (Tr. 322:19-323:12.) Vernikov also sold goods to other customers during this time period. (Tr. 317:20-23; 323:13-19; see also Def. Ex. W (reflecting sales by Interpage Co.).) It is undisputed that when Vernikov moved into Threeline's warehouse, Threeline was aware that Vernikov was running his own business under the name "Interpage." (Stipulated Statements of Fact ("Stip."), ECF 104, ¶ 7.)[10]

         Vernikov became an employee of Threeline in late 2008 or 2009, when he was going through some financial difficulties and needed the money. (Tr. 318:2-319:15; 206:1 -8.) According to Vernikov, when he spoke to Malvina and Leonid Kerzhner about working at Threeline, he "told them my terms, that I wanted to maintain my own business. I said that I agree to work for you but I want to also keep my business. They said, 'okay, no problem.'" (Tr. 319:5-20.) His title at Threeline was exporter/buyer, and his responsibilities included handling logistics, transportation of containers, making sure that labels were filled out, and working with customs and the FDA. (Tr. 320:11-12; 206:12.) When he was doing this work for Threeline, he also continued to sell goods to Threeline and his other customers through Interpage. (Tr. 319:24-320:2; 320:13-16; 323:25-324:4; Def. Ex. D (sales by Interpage Co. and Interpage International to other customers from 2008-2010).)

         In July 2011, Vernikov received a call from Claus Dorner, the commercial manager of a German pasta manufacturer called ALB-Gold. (Tr. 332:17-20.) Dorner explained that he had seen a pasta product at a food exhibition that had Vernikov's contact information on it, and proposed that Vernikov purchase pasta from ALB-Gold. (Tr. 332:20-23; see also Def. Ex. X at IPV00335 (email from Vernikov to Dorner stating, "I would like to remind you a few points from our cooperation. It was your idea back in 2011 and you have offered me to be your distributor, despite you [k]new that I was working with 'Tress' [another pasta manufacturer]"). Dorner sent Vernikov a catalog of ALB-Gold products, and invited him to attend the Amiga food exhibition in Paris. (Tr. 333:1-7; Def. Ex. BB.)

         Vernikov and Leonid Kerzhner attended the Amiga exhibition in Paris that year, where they met with ALB-Gold representatives, including Dorner. (Tr. 333:8-10.)[11] Vernikov spoke to Dorner, but Leonid "did not say a word." (Tr. 333:11-12.) Vernikov told Dorner that he would purchase from ALB-Gold certain types of pasta that the other company he worked with, Franz Tress, did not produce, and that he would be in touch. (Tr. 333:12-14.) After the meeting, Leonid advised Vernikov not to do business with ALB-Gold, and described Dorner as a "con artist" (Tr.333:20-334:15.)[12]

         In the summer of 2012, Leonid Kerzhner asked Vernikov for the ALB-Gold catalog. (Tr. 334:23-335:5.) Leonid said that he was interested in purchasing some ALB-Gold products, so Vernikov began negotiating with Dorner, who sent samples of the pasta. (Tr. 335:6-10.) Vernikov also began working on an exclusive contract with ALB-Gold for the distribution of its pastas in the United States, Canada, Israel, and the former USSR. (PL Ex. 16.) The contract was drafted by the Kerzhner's son, Alexander Kerzhner, a lawyer. (Tr. 338:10-16.)

         The contract, which was effective as of January 1, 2013, was between ALB-Gold and a company called "Interpage Co. Inc., " which is described as the distributor. (PL Ex. 16.) The agreement was signed by Claus Dorner on behalf of ALB-Gold, and by Gregory Vernikov as "President." (Id.) Atop Vernikov's signature is the corporate seal for "Interpage Co. New York State 1993." (Id., at 10.) In several places throughout its text, the contract refers to a brand called "Delicious Wonders." (Id., at 2, 3.)

         The parties dispute whether Vernikov entered the ALB-Gold contract on behalf of his own company, Interpage Co., or on behalf of a company with an almost identical name, Interpage Co., Inc ("ICI"). Roman Katsnelson, the Vice President of Trilini International, incorporated ICI in 2009 at Malvina Kerzhner's request. (Tr. 263:20-25, 267:8-268:3, 268:9- 11.) Leonid Kerzhner testified that he was aware of Vernikov's company, Interpage Co., [13] but that he and his wife decided to name their new company "Interpage Co., International" because "cans everywhere had the name Interpage, " and "we ha[d] to protect it somehow and secure" these product lines. (210:4-20.) Similarly, Ms. Kerzhner testified that she decided to give the company a name that was very similar to Mr. Vernikov's company because "our products and cans had the name 'Interpage' on them and they were already in line." (Tr. 52:20-22.) Mr. Katsnelson also testified that Ms. Kerzhner asked him to form ICI "to protect the line of products." (Tr. 268:1-3.) Mr. Katsnelson believed that Ms. Kerzhner came up with the name of the company, and explained that "[i]t's the same business as Threeline ... It's nothing special." (Tr. 269:6-7; 269:8-10.)[14]

         Malvina Kerzhner testified that in the normal course of business, the parties "did not distinguish between the Interpage Co. and Interpage Co. Inc" because "we did business as Interpage and Threeline at the same time." (Tr. 125:2-11.)[15] Similarly, Leonid Kerzhner testified that "[t]here was no difference at the time between Interpage or Interpage Co;" Vernikov would "sometimes use our company and we would sometimes use his company. And for many years, there were no issues." (Tr. 225:1-4; see also 209:10-210:7) Indeed, when asked why the last page of the ALB-Gold contract says "Interpage Co., " Leonid Kerzhner testified that this was because "they were all companies that worked for Threeline, " and "we never paid much attention; there were no issues raised whether it was Interpage or Interpage Co., Inc. or Threeline." (Tr. 226:21-227:18; see also Tr. 209:14-210:3.)

         By contrast, Vernikov testified that the use of "Interpage Co. Inc." on the first page of the ALB-Gold contract was a mistake that he had not noticed at the time, as Alexander Kerzhner, the Kerzhner's son, was its primary drafter. (Tr. 338:14-19; 283:7-10.)[16] Vernikov testified that he signed the contract on behalf of his own company, Interpage Co., not ICI, and said that it was Interpage Co.'s company seal that he stamped atop his signature. (Tr. 338:21-339:2.) The parties have stipulated that Vernikov was not a director, officer, shareholder, or employee of ICI (Stip. ¶ 15; see also 332:2-8); he was, however, the President of Interpage Co. (Tr. 331:23-24.)

         The only plausible inference from the Kerzhners' decision to create a company with a name almost identical to Mr. Vernikov's company is that they knew that products that they purchased through Vernikov's company and were selling to their customers included the "Interpage Co." name and label, and they wanted to claim ownership of those products. Further, although the Kerzhners both testified that none of the parties paid attention to which company name was used when entering into contracts, the evidence shows that the Kerzhners did enforce corporate distinctions when it was useful to them to do so. For example, when the Department of Human and Health Services was investigating a shipment of canned fish, Ms. Kerzhner signed an affidavit stating that,

Mr. Gregory Vernikov of Interpage is responsible for this shipment and I am only renting him office and goods space in the warehouse. It is true that the invoice and customs form have my firm's name as the cosignee and importer and the customs bond is my company's name. But I allowed him to use my bond because his bond is expired.

(See Def. Ex. PP, at IPV2038.)[17] In other words, Ms. Kerzhner attempted to enforce corporate distinctions when it was beneficial to her to do so. In addition, Ms. Kerzhner's testimony on the distinction between Interpage Co. and ICI-and whether there was one-was evasive, at best. The following excerpt from her trial testimony is illustrative:

Q: Do you dispute that any of the other payments that are in this Exhibit P were made on behalf of Interpage Co., Gregory Vernikov's Interpage Co.?
A: Interpage Co. was our company, part of Threeline. Why was I not supposed to pay? I don't understand:
The Court: Are you saying that the Interpage Co. that is on these invoices does not belong to Mr. Vernikov? Is that your testimony?
A: No, I do not want to say that. These are the documents that we used and the name Interpage was - the name we used alongside with Threeline.
The Court: But that's not my question. My question is: These invoices indicate that this is Interpage Inc., correct? Interpage Co. Sorry, Interpage Co. Correct?
A: Yes.
The Court: And that's not your company; is it? That's a pretty simple answer. Interpage Co., is that your company or not?
A: Interpage Co.?
The Court: Interpage Co., is that your company?
A: Interpage Co. is our company.
The Court: Correct. And that is not the - I'm talking about the company that is referred to in these documents, Interpage Co. Is that or is that not your company? It's either a "yes" or "no" answer? Is it your company or is it not?
A: No.

(Tr. 118:16-119:18.) And, despite his protestations that there were no distinctions among Threeline, Interpage Co., and ICI, Mr. Kerzhner also ultimately admitted that he knew that Interpage Co. and ICI were two different companies. (Tr. 210:4-10.) Further, Mr. Kerzhner conceded that no QuickBooks were maintained for ICI, and could not identify any transactions in which ICI engaged. (Tr. 128:7-22.)

         Moreover, Vernikov noted that the ALB-Gold contract included references to the Delicious Wonders brand and trademark, which he claimed to own. (Tr. 339:3-4; 340:17-22; see also PL Ex. 16.)[18] He testified that he branded the ALB-Gold pasta with the Delicious Wonders label because he wanted his company, Interpage, to own the product. (Tr. 339:14-17.)[19] Interpage Co. had sold Delicious Wonders products in the past. (Tr. 339:18-340:16; Def. Ex II; Def. Ex. HH.) Finally, the record evidence shows that even while Vernikov was a Threeline employee, Threeline was writing checks to "Interpage Co." for products purchased pursuant to exclusive contracts that Vernikov held with other companies, including Roshen. (Tr. 121:22-122:15; Def. Ex. R, at IPV00280.)

         Therefore, I do not find the Kerzhners' claim that the corporate form did not matter, and that Vernikov signed the ALB-Gold agreement on behalf of ICI, a Threeline affiliate company, to be credible. First, the parties stipulated that Vernikov did not hold any position at ICI; however, he signed the contract as the "President" of Interpage Co. This suggests that he signed the contract on behalf of his own company, Interpage Co., and not on behalf of Threeline. Further, I find that the Kerzhners created ICI in order to try to claim ownership of Interpage Co.'s products, and that the use of ICI on the first page of the ALB-Gold contract, which was drafted by their son, Alexander Kerzhner, was an attempt to advance that goal. Finally, I credit Vernikov's testimony that he signed the ALB-Gold contract on behalf of his own company over that of Ms. Kerzhner's, whose testimony on this issue was unreliable and shifting, at best. For these reasons, I find that Mr. Vernikov signed the contract with ALB-Gold on behalf of his company, Interpage Co., and not on behalf of Threeline or its affiliate, ICI.

         The Creation of the Labels

         After Vernikov placed the first order of pasta from ALB-Gold on December 4, 2012, he and Leonid Kerzhner began developing the label for the pasta's packaging. (Tr. 335:8-14.) Leonid Kerzhner testified that he wanted to create a "private label" because ALB-Gold also sold to several other distributors in the United States. (Tr. 216:11-16; see also Tr. 64:9-66:1.) He said that he asked Vernikov to create a label with a chicken on it, and Vernikov proposed several different versions of the label to him. (Tr. 218:7-15; see also Tr. 66:2-7; PL Ex. 6, PL Ex. 7.)[20]When he became frustrated that it was taking Vernikov too long to come up with a label that he liked, Kerzhner claims that he instructed his wife to create one. (Tr. 219:13-22.) He said that his wife found the logo on the internet, and that he then ordered Vernikov to ...


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