In a decision that could be a predictor that the Russian government is likely to prevail in its long-running federal lawsuit to recover the trademarks to Stolichnaya vodka in the US, the judge hearing the case effectively conceded that the trademarks belong to the Russian government and those entities to which it has assigned the trademarks in denying a recent motion to dismiss the case against one defendant.
“The Russian Federation is a foreign government,” federal Judge Sidney Stein, of the New York Southern District Court in Manhattan, wrote in a July 29 decision that Gay City News found on August 11. “VVO-SPI was a Soviet state enterprise. Throughout this litigation, [the plaintiffs have] maintained that VVO-SPI transferred all of its rights in the Stolichnaya marks to the Russian Federation and that Russia is VVO-SPI’s successor as a matter of Russian law.”
In February, William Grant & Sons (WGS), a distiller and the US distributor of Stolichnaya from 2008 to 2013, filed a motion to dismiss the one count against it in the lawsuit, arguing that Federal Treasury Enterprise Sojuzplodoimport (FTE) and OAO Moscow Distillery Cristall, the two entities authorized by the Russian government to bring the lawsuit, did not have standing to sue because FTE had never produced “a written VVO-SPI/ Russian Federation assignment” showing it holds the rights to the vodka.
The motion was a variation on earlier efforts by WGS and Spirits International (SPI), the company that maintains that it is the owner of the Stolichnaya trademarks, to challenge FTE’s standing. As before, those efforts have been ineffective because a legal convention called the act of state doctrine bars US courts from reviewing decisions made by sovereign nations within their own borders.
“[T]his transfer between VVO-SPI and the Russian Federation ‘was the act of a foreign sovereign’ and ‘was also done within the boundaries of Russia,’” Stein wrote. “As such, it is not within the Court’s purview. For that reason, WGS’s argument fails.”
Stein, citing FTE’s allegations, also wrote that “during the collapse of the Soviet Union, VVO-SPI was illegally privatized and renamed ‘VAO-SPI.’ Through a series of transactions, the newly privatized VAO-SPI then transferred the marks to defendant Spirits International.”
Elsewhere in the decision, Stein wrote, “Stolichnaya, or Stoli… were allegedly stolen from the Russian government during the collapse of the Soviet Union.”
The vodka began life in the late 1930s or early ‘40s owned by the Union of the Soviet Socialist Republics (USSR). In 1969, the USSR transferred the rights in Stolichnaya to VVO-SPI, a government-chartered entity, and it registered the trademarks in the US. Stolichnaya was marketed as an authentic Russian vodka for decades.
When the USSR collapsed in the early ‘90s, enterprises that were previously government owned were supposed to be sold to private owners at market prices established by a commission, but many former government employees used their positions to effectively steal those businesses.
The allegation in the lawsuit is that Yuri Shefler and Alexey Oliynik, who own SPI, stole the vodka brand by paying what published reports have said was a mere $285,000 for it in 1997.
Efforts to recover the trademarks began in 2000 on orders from Vladimir Putin, now the president of the Russian Federation. Putin has transformed Russia into a vast kleptocracy by demanding tribute from businesses there while allowing those businesses to steal from the Russian people. Supposedly, Shefler and Putin had a falling out. Shefler fled the country and moved the Stolichnaya headquarters from Russia to Luxembourg.
Russia has sued to recover the trademarks in more than 30 countries and has been successful in the Netherlands and Austria. A lawyer for Russia wrote in one US court filing that comity among European Union states would require 13 other countries in the union to follow the Netherlands decision. Russia lost in Brazil and is appealing a loss in Australia. The legal fiction is that FTE and OAO Moscow Distillery Cristall are the plaintiffs in these lawsuits.
In 2013, Stolichnaya ran afoul of the LGBTQ community in the US and elsewhere after activists called for a boycott of Russian products, including Stoli, as it is now called in the US, after Russia enacted its anti-gay propaganda law that banned positive depictions of LGBTQ people or discussion of LGBTQ causes. The period surrounding that laws enactment was marked by widespread reports of violence and torture used against queer people in Russia.
In 2018, SPI, asserting its independence from Russian control, made overtures to the LGBTQ community by commemorating Harvey Milk, the first out gay elected official in California, on a Stoli label. Milk was assassinated in 1978. The labeling angered some of Milk’s friends, notably longtime activist Cleve Jones. In 2019, Stoli produced a Stonewall 50 commemorative label.
Should Russia win its US lawsuit, LGBTQ consumers might reject the vodka altogether. In addition to Russia’s hostility to LGBTQ people, Putin installed Ramzan Kadyrov as the head of Chechnya, a Russian republic. Kadyrov and others have engaged in the torture and killing of LGBTQ people and others there.
Other Americans might abandon the vodka over Russia’s interference in US elections and support for Donald Trump.
Initially, attorneys for SPI, FTE, and WGS did not respond to emails seeking comment, but after this story was published, Kelsie Docherty, an associate at Cravath, Swaine & Moore, which is representing Shefler, Oliynik, and SPI in the lawsuit, contacted Gay City News to dispute this article’s characterization of Stein’s decision.
“All of that comes from a paragraph where Stein was summarizing the plaintiff’s case,” Docherty said of one paragraph in the story that Gay City News has now been amended to reflect that the judge was explaining the allegations being made by FTE. “We would say that there isn’t an indicator of anything in the case.”
Docherty generally declined to discuss Stein’s central point, which is that the act of state doctrine bars US federal courts from ruling on actions taken by sovereign nations within their own borders. Docherty added that Stein has not decided who owns the trademarks to Stolichnaya.
“That is the central issue in the dispute and none of that has been decided,” she said.
Stein’s first two quotes in this story summarize the applicable law and the evidence that support his one-sentence conclusion that reviewing the transfer of the Stolichnaya rights “is not within the Court’s purview.”
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