Court Signals Putin Likely to Regain US Stoli Rights
Federal judge fi nds no US jurisdiction over sovereign government-approved legal actions
BY DUNCAN OSBORNE
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, fi led 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.
“This 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
Should Russia ultimately prevail in securing the US rights to Stoli,
these two men — Vladimir Putin and his Chechen puppet Ramzan
Kadyrov — could be key factors in Americans, and specifi cally
LGBTQ folks, turning away from the brand.
of the Soviet Union.”
REUTERS
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 VVOSPI,
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 Shefl
er 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, Shefl er and Putin
had a falling out. Shefl er fl ed 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 fi ling 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 fi ction is that FTE and
LEGAL
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 fi rst out gay elected offi cial 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 Shefl er, 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 refl ect
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 fi rst 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.”
GayCityNews.com | August 27 - September 9, 2020 21
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