Spirits Of The Cold War: America Takes Another Shot At Vodka Succession Dispute

Recently, the Southern District of New York (“District Court”) denied Federal Treasury Enterprise’s (“FTE”) motion for partial summary judgment seeking to prevent (collaterally estop) Spirits International et. al (collectively, “SPI”) from re-raising issues of trademark ownership that had been decided in Dutch and Russian Courts. Specifically, the District Court found that even if an international court is considered a “competent jurisdiction,” procedural differences in international litigation systems, like the presence of “American-style pre-trial discovery and live witness testimony” would render collateral estoppel neither fair nor reasonable. 

The dispute centers around the ownership of the “Stolichnaya” vodka trademark after the collapse of the Soviet Union, which resulted in messy, and often untraceable privatization of Soviet state assets in the early 1990s. Prior to the dissolution of the Soviet Union, Stolichnaya was owned by a Soviet state enterprise known as “VVO.” After the dissolution, a private company named “VAO” claimed to be the legal successor to VVO, which, if true, meant that ownership of the Stolichnaya mark transferred to VAO. If not true, the mark would transfer to the Russian Federation itself. SPI and FTE previously litigated this succession/ownership issue in Russian and Dutch courts, and both courts found that VAO was not the legal successor to VVO.

Because of those Dutch and Russian findings, FTE sought a finding from the District Court that those Dutch and Russian findings should prevent SPI from raising the same issues in a United States Court. Such a finding requires analysis of several factors, including whether the issue (1) was identical in the prior proceeding, (2) was actually litigated and decided, (3) was given a full and fair opportunity of litigation, and (4) was necessary to support a final judgment. Here, the parties only disputed the third factor. Specifically, SPI argued that limits in Dutch discovery and different procedural rules meant that SPI did not have a full and fair opportunity to litigate the succession / ownership issue. The Court disagreed. The Court found that the Dutch courts were competent and reputable, and procedural differences did not preclude a finding that there was a full and fair opportunity to litigate the issue. (The Court did reach the competency of Russian courts.) However, in its discretion, the Court found that this “is a case in which the procedural differences between the [foreign] courts and this Court are significant and could readily produce a different result[,]” making collateral estoppel “unfair.” Further, the Court found that the U.S.’s broader discovery rules “uncovered significant new evidence that was unavailable to SPI,” counseling against “hamstringing” SPI with the findings of the Dutch and Russian Courts.

International businesses should be aware: winning or losing overseas does not automatically guarantee the same result in U.S. jurisdictions. While it is entirely possible that a jury could find the same way as the Dutch and Russian courts, a difference as simple as being able to present live witness testimony or uncovering additional discovery may be sufficient to get your day in court in the U.S.

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