Antitrust Law Daily Wrap Up, RICO—S.D. N.Y.: Designer jewelry manufacturer’s RICO claims against jewelry sales agents fail, (May 22, 2014)

By Linda O’Brien, J.D., LL.M.

Two Italian jewelry manufacturers failed to state RICO claims against sales agents that allegedly sold their jewelry without remitting the companies’ share of the proceeds, misused intellectual property related to the jewelry, and manufactured and sold unauthorized copies of the companies’ jewelry following their termination as sales agents, the federal district court in New York City has ruled (Helios International S.A.R.L. v. Cantamessa USA, Inc., May 21, 2014, Sweet, R.).

Helios International and Idea Italiana manufacture, sell, and distribute designer jewelry bearing the trademark, Cantamessa. Helios and Idea entered into agreements with Fabrizio Cantamessa and Robert Kheit to act as global sales agents for Cantamessa jewelry. Fabrizio Cantamessa was a designer for Cantamessa jewelry subject to Idea’s copyright registrations. Cantamessa and Kheit formed Cantamessa USA and opened a boutique in the U.S. to sell Cantamessa jewelry. After Cantamessa and Kheit failed to provide an accounting or return the companies’ merchandise, Helios and Idea terminated the agreements with Cantamessa and Kheit.

Helios and Idea filed suit against Cantamessa USA, Cantamessa, and Kheit, alleging conversion, copyright and trademark infringement, and violations of the Racketeering Influenced and Corrupt Organizations (RICO) Act. Helios and Idea alleged that the defendants sold jewelry and remitted only a portion of the payment due for the merchandise, requested jewelry for use in an exhibition and failed to return it after the exhibition, filed trademark applications with the U.S. Patent and Trademark Office claiming to own the Cantamessa name and logo, and removed an entire inventory of Cantamessa jewelry from a Helios warehouse. The defendants’ motion to dismiss the initial complaint was granted. After the plaintiffs filed an amended complaint, the defendants moved for dismissal of the plaintiffs’ RICO claims.

RICO claims. The court determined that Helios and Idea failed to state RICO claims because allegations of criminal copyright infringement did not constitute a predicate acts for RICO purposes. Helios and Idea alleged that Fabrizio Cantamessa fraudulently filed trademark applications in Italy to register Cantamessa trademarks in his own name and committed criminal copyright infringement by arranging for the production of certain pieces of Cantamessa jewelry and took delivery of those pieces. The court noted that the plaintiffs’ designation of certain individuals as previously unknown co-conspirators in the defendants’ scheme to steal the plaintiffs’ jewelry and counterfeit their jewelry designs was insufficient to alter the scope of the purported RICO conspiracy pleaded in the plaintiffs’ initial complaint.

Moreover, the plaintiffs’ claims that the defendants continued to sell Cantamessa jewelry after the termination of their agency agreements indicated a cause of action for breach of contract rather than a criminal racketeering scheme.

Finally, the plaintiffs’ claimed infringement of approximately 100 pieces of jewelry was not a large scale organized counterfeiting scheme that was cognizable claim for criminal copyright infringement. Even if the plaintiffs had adequately alleged the requisite elements of criminal copyright infringement, such allegations did not constitute a predicate act for a RICO claim, the court concluded.

The case is No. 12 Civ. 8205.

Attorneys: Carl W. Oberdier and Kellen G. Ressmeyer (Oberdier Ressmeyer LLP) for Helios International S.A.R.L. and Idea Italiana s.r.l. J. Christopher Jensen and Scott P. Ceresia (Cowan, Liebowitz & Latman) for Cantamessa USA, Inc., Fabrizio Cantamessa, and Robert Kheit.

Companies: Helios International S.A.R.L.; Idea Italiana s.r.l.; Cantamessa USA, Inc.

Cases: RICO NewYorkNews