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J&J REACH TOOTHBURSH DIVERSION COMPLAINT

Executive Summary

J&J REACH TOOTHBURSH DIVERSION COMPLAINT v. DAL INTERNATIONAL, a Polish government company, and Quality King wholesalers of New York, has been granted a preliminary injunction by Newark Federal Judge Dickinson Debevoise. The Aug. 22 ruling restrains movement of J&J goods, which includes 600,000 toothbrushes and baby products, now in possession of Quality King. According to Debevoise's opinion, plaintiff J&J claims "that Dal fraudulently induced J&J Ltd. ]the company's U.K. subsidiary[ to sell Dal J&J's Reach brand toothbrushes and baby products by representing that Dal intended to sell these products in Poland, when in fact Dal intended to sell them for ultimate distribution in the United States." J&J also questions Quality King's "status of a bona fide purchaser." In his ruling, Debevoise says that "the evidence in the case at this point makes it likely that plaintiff will ultimately prevail on the merits on the issue of fraud." He adds that "while the evidence does not show that Quality King participated in the fraud, it cannot be held to be a bona fide purchaser. . .While undoubtedly there are many ways in which goods can move in the so-called 'gray market' in a perfectly lawful manner, it must be recognized that there is an unusual risk that goods passing into that market arrived there through trickery or other illegitimate means." The Newark judge points out that "it is plaintiff's policy to try to ensure that when it sells its products overseas, the products are resold for consumption only in the particular market for which the sale is made." He adds that Dal "assured" J&J "that the goods were being acquired for resale in Poland." Shipments of J&J Ltd. toothbrushes and other products in June 1985 were followed by a July request from Dal for a repeat order. "Subsequently," the opinion explains, "plaintiffs learned that the 80,000 dozen toothbrushes had been diverted and instead of being shipped to Poland, were being carried by vessel in the United States." The judge's decision noted that "during investigation and discovery. . .large quantities of toothbrushes and quantities of the other J&J products which were the subject of the Dal order were found in the warehouse of Quality King." Debevoise acknowledged that "there is a gap in the chain of title to possession of the goods as they flowed from Dal to Quality King, but there is evidence of the manner in which Quality King acquired the goods." He points out that two days after Quality King prepared a purchase order for 75,000 Reach toothbrushes from Cubro Trading Company of London, Dal asked J&J to confirm the availability of 80,000 dozen Reach toothbrushes of the same kind, medium compact head, medium long, soft compact and soft long. "There is no public interest consideration which would preclude injunctive relief. True, an injunction will prevent the public from buying genuine good quality products at lower prices, but on the other hand, in the long run the public will surely benefit from implementation of a rule of law which discourages fraudulent conduct." -- from Judge Dickinson Debevoise's Aug.22 opinion in J&J Products v. Dal International

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