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NEW YORK — Another Chinatown landlord is feeling the heat from LVMH Moët Hennessy Louis Vuitton’s legal department.
In a complaint filed in Manhattan federal court, Louis Vuitton Malletier — LVMH’s fashion and leather goods division — named landlord Richard E. Carroll as the lead defendant in a case involving the alleged sale of counterfeit goods out of seven Canal Street retail locations. More than 8,000 LVMH-branded goods were seized in raids at these locations. Also named in the complaint are five real estate companies, all of which it alleges Carroll is in charge of, as well as two retailers and several named individuals.
Carroll did not return a call seeking comment at press time. A representative at Canal Sound City, one of the named retailers, declined to comment.
According to intellectual property lawyers, the case reflects a growing trend where major design labels combat counterfeiters by holding landlords accountable for the actions of their tenants.
“The designers have gotten together and decided to make use of the landlord liability doctrine,” said Joseph C. Gioconda, a partner with Kirkland & Ellis LLP. “The concept is that the landlord becomes a contributory infringer when the landlord provides what is essentially a safe haven for people to engage in the sale of counterfeit goods.”
LVMH set out to address the landlord’s accountability from the first paragraph of its complaint, characterizing their role in the problem as an “unlawful alliance between certain real estate companies and their principal owners and the unscrupulous storefront retailers to whom they rent property.”
According to the complaint, Carroll and his companies — Mid-Center Equities Associates, Canal Funding Inc., Canal Venture Inc., EJP Realty Associates LLC and Transworld Equities Inc. — own and control seven Canal Street properties where the counterfeit LVMH products were seized.
Eight pages of the complaint, which was filed March 30, are devoted to a breakdown of the number and type of counterfeit goods seized in each location. The largest seizure occurred in June 2004 at 386 Canal, yielding more than 5,600 items, including nearly 1,000 Louis Vuitton watches and hundreds of scarves, bags, wallets and jewelry.
The suit contends that Carroll had been sent written notices from LVMH and “other trademark holders” about what was going on at his properties and should be held accountable for his “willful blindness” in allowing the activity to continue. LVMH alone sent six letters starting in October 2004, according to the complaint.
The complaint alleges violations on 11 counts, including trademark counterfeiting, contributory and vicarious trademark counterfeiting, and false designation of origin. An unspecified amount in damages is also being sought.
Similar suits have been filed by LVMH and Rolex. On March 2, 2004, the two companies filed separate lawsuits against Michael Marvisi, the owner of 365-367 Canal Street, and more than 30 John Doe retailers. By August 2004, federal court Judge Thomas P. Griesa ordered 29 John Doe defendants to each pay LVMH $16 million in statutory damages, a potential $464 million award. In the Rolex case Judge Griesa ordered three Doe defendants to each pay $10 million in statutory damages. While the likelihood of identifying the retailers and collecting damages is remote, the case to determine the landlord’s liability in the matter is proceeding.
“Certainly these landlord actions hold a tremendous amount of potential in terms of bringing pressure upon counterfeiting,” said Brian Brokate, a partner with Gibney, Anthony & Flaherty who represents Rolex. “They are proceeding at the civil level as well as the criminal level.”
According to Gioconda, proving a landlord is aware that illegal activities are occurring on their properties requires only that manufacturers notify the landlords in writing. In some cases, however, landlords can be held accountable if it was common knowledge that illegal activities were occurring, say on the streets of Chinatown for example. Gioconda also noted that it is easier to identify landlords, who also have a vested interest in the building. “The landlord has a lot more to lose,” said Gioconda. “When a landlord gets a letter from a lawyer, if you’re that landlord, your lawyer is going to tell you that you can no longer keep your head in the sand. That’s a big deal.” In theory, said Gioconda, the strategy could be employed to clean up entire blocks.