United States District Court, E.D. New York
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.
MEMORANDUM AND ORDER
L. TISCIONE UNITED STATES MAGISTRATE JUDGE
Teigwaren GmbH (âALB-GOLDâ) submitted an application under 28
U.S.C. Â§ 1782, requesting the Court's assistance in
obtaining discovery from Interpage Co., Inc. (âInterpageâ),
Gregory Vernikov (the owner of Interpage), Alex's Meat
Distributors Corp. (âAlex's Meatâ), 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 Â§ 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
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.
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.
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.
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.
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).
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
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.
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
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. 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.
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.
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.
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.
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. ...