Federal Treasury Enterprise Sojuzplodoimport v. Spirits International B.V.

Background

Federal Treasury Enterprise Sojuzplodoimport and OAO “Moscow Distillery Cristall,” referred to together as FTE, sued over the Stolichnaya, or “Stoli,” vodka trademarks. The opinion describes FTE as an entity chartered by the Russian Federation and Cristall as a Russian corporation and FTE licensee. William Grant & Sons USA and William Grant & Sons, Inc., referred to together as WGS, distribute Stolichnaya-branded vodka in the United States.

FTE alleged that a Soviet state enterprise, originally named V/O-SPI and later VVO-SPI, registered the marks in the United States. According to the complaint, VVO-SPI was illegally privatized during the collapse of the Soviet Union, became VAO-SPI, and transferred the marks to Spirits International. FTE further alleged that a Russian court later found the privatization unlawful and the transfer invalid. In 2008, Spirits International entered an agreement allowing WGS to distribute and sell Stolichnaya-branded vodka in the United States.

In earlier proceedings, the Second Circuit held that a formal assignment from the Russian Federation to FTE gave FTE the ability to sue for whatever rights the Russian Federation had in the marks. After the case returned to this court, WGS previously argued that VVO-SPI had already transferred its interest to PepsiCo; the court denied that motion because more factual development was needed. After discovery, WGS filed the motion addressed in this opinion.

Motion and legal standard

WGS moved under Federal Rule of Civil Procedure 12(b)(1), which concerns subject-matter jurisdiction, asking the court to dismiss Count I for lack of jurisdiction. WGS argued that FTE lacked “statutory standing,” meaning that FTE did not have a right to sue under the Lanham Act because it had not adequately shown the chain of ownership for the trademarks.

The court explained that statutory standing is different from subject-matter jurisdiction. A statutory-standing issue asks whether a plaintiff has a cause of action under a particular statute; it does not ordinarily affect the court’s power to hear the case. Because WGS’s argument did not challenge subject-matter jurisdiction, the court did not consider it under Rule 12(b)(1). Instead, the court construed the motion as one under Rule 12(c), a motion for judgment on the pleadings based on failure to state a claim. The Rule 12(c) standard is the same as the standard for a Rule 12(b)(6) motion to dismiss for failure to state a claim.

Analysis

FTE argued that the law-of-the-case doctrine barred WGS’s argument. That doctrine generally requires a court to follow an issue it previously decided in the same case. The court rejected this argument because neither the Second Circuit’s earlier decision nor this court’s prior ruling had decided whether the transfer of the marks from VVO-SPI to the Russian Federation was valid.

The court agreed with FTE, however, that the act-of-state doctrine barred review of that transfer. The doctrine prevents courts in one country from reviewing acts performed within that country by the government of another sovereign state. The court reasoned that VVO-SPI was a Soviet state enterprise, the Russian Federation was a foreign government, and FTE had consistently maintained that VVO-SPI transferred its rights to the Russian Federation and that Russia became VVO-SPI’s successor under Russian law.

Because the challenged transfer was an act of a foreign sovereign performed within Russia, the court concluded that it could not examine the transfer’s validity. WGS’s argument that FTE lacked the right to sue therefore failed.

Disposition

Judge Sidney H. Stein denied WGS’s motion to dismiss Count I as asserted against WGS. The opinion does not state that the case or Count I was dismissed.