The saga continues in the lawsuit between New York’s Empire Merchants and Breakthru Beverage. In our blog on September 21, 2016, we had reported that Empire Merchants filed federal fraud charges against a long list of defendants including, Breakthru, Reliable Churchill, and several Maryland retailers.
Empire had alleged through its complaint that from 2009 to 2016, the defendants collectively conspired and acted in a criminal scheme for a period of time to smuggle wine and spirits, worth millions of dollars, into New York to avoid New York’s high excise taxes and circumvent Empire’s distribution rights within New York.
Breakthru has filed a motion to dismiss the complaint claiming its subsidiary, Reliable, was just doing its job and filling orders.
According to Wine & Spirits Daily, Empire has responded to Breakthru’s claims in a subsequent memorandum on February 22, claiming that Reliable was knowingly involved in the scheme and even “instructed [the Maryland retailers] how to remove ‘routing stickers’ identifying the Maryland origin of the alcohol with ‘heat guns’ and blowtorches.” Moreover, Reliable allegedly told them “if they bought in bulk, then it would provide label-free pallets to facilitate the scheme.”
Empire has requested that the court rule against Breakthru’s motion to dismiss.
In response, Breakthru and Reliable subsequently filed another memorandum last week in support of its motion to dismiss. Breakthru claims Empire is “now panicking over its doomed standalone corporate strategy, has turned to desperate litigation tactics to try to enhance its bargaining position in what it realizes is an inevitable sale to, or merger into, a larger organization-with Breakthru and RNDC being the likely two options.”
We now wait for the judge to rule on the motion or call for oral arguments.
By: Oren Cytrynbaum