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Sebastian International, Inc. v. Russolillo, United States
District Court Civil Action No. 00-03476-CM
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Conkle & Olesten represents Sebastian International in this action
against numerous businesses involved in sales of diverted Sebastian professional
hair care products, including Quality King Distributors, Damian Christopher,
CVS, Rite Aid and others. Several important published decisions have
been entered in this action, including the following:
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Adjudicated: Retailers of
diverted professional hair care products can be liable for interference
with the manufacturer's contractual relations with distributors and salons.
(Published at 162 F.Supp. 2d 1198; 2001 WestLaw 1091857)
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Conkle & Olesten has obtained an adjudication for its
client, Sebastian International, Inc. that retailers such as CVS and Rite
Aid, who sell diverted Sebastian hair care products, may be liable for
interference with Sebastian's contractual relations under California law.
The retailers claimed they had no liability for interference because they
"merely purchased the products on the open market." The Court held
that retailers can be liable if they knew with "substantial certainty"
that a "necessary consequence" of their actions would be that the manufacturer's
performance of its contractual relations with distributors and salons would
be made more expensive or burdensome.
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Adjudicated: Sales of diverted
hair care products with manufacturers' codes removed, altered or covered
violates California criminal law (Published at 151 F.Supp. 2d 1215; 2001
WestLaw 793324)
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Transactions in gray market hair care products violate California
Penal Code Section 537e, which prohibits the purchase, sale, possession
or disposal of any personal property with its manufacturer's codes removed,
covered, altered or obliterated. The United States District Court
held in favor of Conkle & Olesten's client, Sebastian International,
that Section 537e applies to prohibit such decoding of any and all personal
property. Sebastian contends that product diversion involving such
decoded product constitutes unfair competition.
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Adjudicated: Gray market
product diverters may be liable for racketeering, even if wire and mail
communications were not themselves fraudulent. (Published at 128 F.Supp.
2d 630; RICO Bus. Disp. Guide 9995 )
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The United States District Court for the Central District
of California agreed with Conkle & Olesten and its client, Sebastian
International, that a defendant in a racketeering (RICO) case need not
have itself made false statements in wire or mail communications.
A defendant may be liable if someone involved in the fraudulent scheme
used mail, telephone, fax or private or public carrier in furtherance of
the plan. The decision is a major blow to those who engage
in racketeering activities, including fraudulent product diversion in interstate
or foreign commerce.
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