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In re Application of ALB-Gold Teigwaren GmbH

United States District Court, E.D. New York

January 10, 2020

In Re Application of ALB-GOLD Teigwaren GmbH for an Pursuant to 28 U.S.C. § 1782 to Conduct Discovery for Use in a Foreign Proceeding.



         ALB-GOLD Teigwaren GmbH (“ALB-GOLD”) submitted an application under 28 U.S.C. § 1782, requesting the Court's assistance in obtaining discovery from Interpage Co., Inc. (“Interpage”), Gregory Vernikov (the owner of Interpage), Alex's Meat Distributors Corp. (“Alex's Meat”), Vladimir Oterin (the owner of Alex's Meat), and Inna Vernikov (Mr. Vernikov's daughter). Mot. Compel Disc., ECF No. 1. On August 30, 2019, this Court issued a Memorandum and Order granting the motion with respect to Alex's Meat, Mr. Oterin, and Ms. Vernikov. Mem. & Order, ECF No. 19. This Court deferred ruling with respect to Interpage and Mr. Vernikov to allow a brief period of jurisdictional discovery to determine whether the statutory requirements under § 1782 had been met. Following that period, ALB-GOLD filed a renewed motion for discovery, see ECF No. 23, and Interpage filed a response in opposition, see ECF No. 37. After carefully reviewing the record and the parties' briefing, this Court GRANTS ALB-GOLD's Motion for Discovery for Use in a Foreign Proceeding.

         A. Factual Background

         ALB-GOLD is a German pasta manufacturer that is presently seeking discovery to use in an application to revise a foreign arbitration award. ALB-GOLD's discovery application in this Court arises from the Swiss arbitration of a contract dispute between ALB-GOLD and Interpage. The two companies allegedly entered into a five-year Exclusive Importation and Sales Agreement (the “Distribution Agreement”) on January 2, 2013. See Declaration of Karl Geercken, Esq. (“Geercken Decl.”), Ex. 2 (the “Arbitration Award”) ¶¶ 30-37, ECF No. 3-2 at 1-93. The Distribution Agreement provided that ALB-GOLD's pasta would be sold in the United States exclusively under Interpage's private label “Delicious Wonders.” Arbitration Award ¶ 31. The Distribution Agreement set annual targets for the sale of ALB-GOLD's pasta by Interpage. Id. ¶ 35. In the first year, the target was 144 net tons of pasta. Id. In each subsequent year, the annual targets would increase. Id. Over the five-year period covered by the Distribution Agreement, Interpage would have sales targets in the total amount of 960 net tons of pasta. Id.

         Near the end of the first year of the Agreement, it became clear that Interpage would not meet its sales goal for the year. Id. ¶¶ 175-77. As a result, at an unspecified date in the first half of December 2013, a representative for ALB-GOLD called Mr. Vernikov to inform him that ALB-GOLD would stop supplying pasta to Interpage for the United States market. Id. ¶ 44.

         Shortly after this phone call, on December 16, 2013, Interpage claims that it entered into a separate agreement to supply Alex's Meat Distributors Corp (“Alex's Meat”), a grocery distributor, with Delicious Wonders pasta. Id. ¶ 46; see also Ex. 3 to Geercken Decl. (the “Alex's Meat Agreement”), ECF No. 3-2 at 94-104. Under this Agreement, Interpage would supply Alex's Meat with 960 net tons of Delicious Wonders pasta over a five-year period for a total purchase price of $2, 896, 000. Arbitration Award ¶ 47. The agreement was proposed by Interpage and drafted by Mr. Vernikov's daughter, who is a lawyer. Id. ¶ 243. This single contract for 960 net tons would thus seemingly fulfill the entirety of Interpage's sales targets for the five-year contractual period with ALB-GOLD.

         On December 17, 2013, the day after the Alex's Meat Agreement was executed, Mr. Vernikov learned from the freight forwarder responsible for receiving shipments from ALB-GOLD that an order of pasta placed by Interpage on November 7, 2013 had not arrived. Id. ¶ 48. ALB-GOLD indeed did not fulfill this order, and it did not regularly provide Interpage with pasta for sale in the U.S. market after this point in time. Interpage, however, despite having had an agreement to buy 960 tons of pasta from ALB-GOLD and an agreement to sell 960 tons of pasta to Alex's Meat, did not notify ALB-GOLD of the existence of the Alex's Meat Agreement for almost four years, until it filed a notice of claim to initiate arbitration against ALB-GOLD on October 18, 2017. Id. ¶¶ 57, 193-94.

         Instead, between January 2014 and May 2015, Interpage supplied Alex's Meat with pasta that was made by another manufacturer but sold under the Delicious Wonders label. Id. ¶¶ 201, 270. At the arbitration hearing, Mr. Vernikov and Mr. Oterin testified that this pasta was of inferior quality and an inadequate substitute, id. ¶ 270, but Alex's Meat nonetheless accepted it over the course of this period. From May 21, 2015 to March 3, 2017, however, Interpage's use of the Delicious Wonders label was enjoined pursuant to an order issued as part of a trademark action in this District, leading the company to cease selling the pasta. Id. ¶¶ 51-52, 54; see also Threeline Imports, Inc. v. Vernikov, 239 F.Supp.3d 542, 546 (E.D.N.Y. 2017).

         On November 13, 2016, Interpage and Alex's Meat entered into a Settlement Agreement (the “Alex's Meat Settlement Agreement”), which was ostensibly intended to resolve Interpage's nonperformance of the Alex's Meat Agreement. Arbitration Award ¶ 53. According to Mr. Oterin's testimony during the arbitration proceeding, Mr. Vernikov's daughter also drafted the Alex's Meat Settlement Agreement. See Geercken Decl. at 171-72. Under the settlement, Interpage agreed to pay Alex's Meat $2, 209, 600 in damages for failure to supply pasta. Arbitration Award ¶ 53. This figure, however, did not credit Interpage for any of the substitute Delicious Wonders pasta that it provided to Alex's Meat between January 2014 and May 2015. Id. ¶ 282; Mem. Supp. Ex Parte Appl. (“Pet'rs Mem.”), ECF No. 2, at 11-12.

         On October 18, 2017, Interpage submitted a request for arbitration against ALB-GOLD. Arbitration Award ¶ 57. Interpage alleged (among other disputes not relevant here) that ALB-GOLD breached the Distribution Agreement by ceasing to ship pasta beginning with the November 7, 2013 order. Id. ¶¶ 200-02. The majority of the damages claimed by Interpage stemmed from its inability to fulfill its obligations under the Alex's Meat Agreement, which Interpage claimed foreseeably and reasonably resulted in the damages it agreed to pay under the Alex's Meat Settlement Agreement. Id. ¶¶ 200-02, 227.

         At the arbitration, ALB-GOLD offered several arguments in response. It submitted that the 2013 Alex's Meat Agreement “defies credibility” because it is commercially implausible that a distributor of Alex's Meat's size would order 960 tons of egg pasta over a 5-year period, and because Interpage never informed ALB-GOLD of this deal even though it would have almost single-handedly satisfied Interpage's delivery targets (indeed, mirrored the exact volume of the combined annual targets) under the Distribution Agreement. Id. ¶ 228. ALB-GOLD also argued that the 2016 Alex's Meat Settlement Agreement was fraudulent and the product of collusion between Interpage and Alex's Meat. Id.

         The Arbitral Tribunal (hereinafter the “Tribunal”) did not find that either the Alex's Meat Agreement or the Alex's Meat Settlement Agreement was the product of fraud or collusion. The Tribunal noted that it “examined with great attention” ALB-GOLD's allegations to this effect. Id. ¶ 241. However, it found that ALB-GOLD had not discharged its burden to prove that either agreement was fraudulent.[1] Id. On November 27, 2018, the Tribunal ordered ALB-GOLD to pay Interpage $1, 414, 927 in consequential damages and $624, 000 in lost profits arising from the Alex's Meat Settlement Agreement. Id. ¶ 380.

         On May 1, 2019, ALB-GOLD filed an application to take discovery pursuant to 28 U.S.C. § 1782. See Application, ECF No. 1. In its initial application, ALB-GOLD requested that the Court issue subpoenas duces tecum against the five aforementioned entities, requiring them to submit to depositions at the Manhattan office of ALB-GOLD's counsel. See Exs. 6-10 to Geercken Decl. (“Proposed Subpoenas”), ECF No. 3-2 at 113-65. ALB-GOLD stated that it intends to use evidence discovered through these subpoenas in an application to the Swiss Federal Supreme Court for revision of the arbitral award. Pet'rs Mem. at 1, 15.

         The Honorable Margo K. Brodie referred ALB-GOLD's application to me for disposition. See Order dated May 2, 2019. On May 7, 2019, an attorney appearing on behalf of Interpage requested leave from the Court to file a response in opposition to ALB-GOLD's petition, which the Court granted. See Letter from Interpage, ECF No. 5; Order dated May 7, 2019. Interpage filed its response on May 17, 2019. See Mem. Opp'n § 1782 Petition (“Opp'n”), ECF No. 12.

         On August 30, 2019, this Court issued a Memorandum and Order, granting in part and deferring a ruling in part on ALB-GOLD's application to take discovery. See Mem. & Order, ECF No. 19. The Court granted the application to allow ALB-GOLD to take discovery from Mr. Oterin, Alex's Meat, and Ms. Vernikov. See Mem. & Order. The Court found that statutory factors under § 1782 had been met: all three Respondents “reside or are found in this District”; “the discovery ALB-GOLD seeks against the respondents is ‘for use in a proceeding in a foreign or international tribunal[]'”; and ALB-GOLD is an interested party. Id. at 15, 16, 21. After evaluating the discretionary factors set forth in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264 (2004), the Court granted ALB-GOLD's request with respect to Mr. Oterin, Alex's Meat, and Ms. Vernikov and issued so-ordered subpoenas to that effect. See Mem. & Order at 26.

         The Court deferred ruling with respect to Mr. Vernikov and Interpage to allow a brief period of jurisdictional discovery to determine whether the jurisdictional and statutory requirements for a § 1782 application had been met. See Mem. & Order. Following that period of discovery, ALB-GOLD filed a Renewed Motion to Compel Discovery. See ECF No. 23. On November 6, 2019, this Court granted Mr. Vernikov's counsel's Motion to Withdraw as Attorney. See ECF No. 35. ...

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