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General Steel Domestic Sales, LLC v. Chumley

United States District Court, D. Colorado

February 27, 2014

GENERAL STEEL DOMESTIC SALES, LLC, d/b/a General Steel Corporation, a Colorado limited liability company, Plaintiff,
v.
ETHAN DANIEL CHUMLEY, individually, and ATLANTIC BUILDING SYSTEMS, LLC, a Delaware corporation, doing business as Armstrong Steel Corporation, Defendants.

ORDER

PHILIP A. BRIMMER, District Judge.

This matter is before the Court on the Motion for Award of Attorneys' Fees filed by plaintiff General Steel Domestic Sales, LLC, doing business as General Steel Corporation ("General Steel") [Docket No. 354]; the Motion for Leave to Supplement Motion for Award of Attorneys' Fees [Docket No. 355] filed by General Steel; Defendants' Motion for Award of Attorney's Fees and Costs Pursuant to Fed.R.Civ.P. 54(d)(2) and D.C.Colo.LCivR 54.3 [Docket No. 357] filed by defendants Atlantic Building Systems, LLC, doing business as Armstrong Steel Corporation ("Armstrong") and Ethan Chumley; and Defendants' Motion to Strike Plaintiff's Expert Report or for Alternative Relief [Docket No. 391].

I. GENERAL STEEL'S MOTION FOR ATTORNEY'S FEES

The Lanham Act provides that a court "in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(a). An award of fees falls within the district court's discretion. United Phosphorus, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219, 1232 (10th Cir. 2000). "The Lanham Act does not define what is an exceptional' case, but we have determined it occurs when a trademark infringement is malicious, fraudulent, deliberate, or willful." Id. The Tenth Circuit has upheld an award of fees where the lower court found that the defendant had deliberately labeled its product with plaintiff's mark, "even after repeated warnings to stop doing so, " had actually deceived plaintiff's customers, and had persisted in its infringement "even after agreeing to stop doing so in [a] settlement agreement." Id.

The "absence of actual damages is a factor in determining whether a case is exceptional, " although "such an absence does not preclude a fee award." Bishop v. Equinox Int'l Corp., 154 F.3d 1220, 1224 (10th Cir. 1998); see also VIP Foods, Inc. v. Vulcan Pet, Inc., 675 F.2d 1106, 1107 (10th Cir. 1982) (relying in part on lack of "ascertainable damage" in denying award of fees under the Lanham Act). "[T]he award of monetary relief pursuant to 15 U.S.C. § 1117 is subject to equitable considerations." Bishop, 154 F.3d at 1224 n.3.

General Steel argues that it is entitled to an award of attorney's fees because the Court "found that Defendants' Lanham Act violations were indeed willful." Docket No. 354 at 1 (citing Docket No. 346 at 31, 33, 36). General Steel requests an award of $666, 520 in fees. Docket No. 354 at 2.

Defendants counter that General Steel is not entitled to an award of attorney's fees because (a) it prevailed only with respect to a limited set of statements made by Armstrong; (b) General Steel failed to recover compensatory damages because it could not show actual injury; (c) Armstrong purposely distinguished its buildings from those of General Steel; and (d) the facts suggest that Armstrong's false comparative advertising was not undertaken in bad faith. Docket No. 375 at 2-3.

In entering a disgorgement award against Armstrong, the Court found that
Armstrong was not only asked by General Steel, but required by the major search engines, to stop using General Steel's name in its advertising. Nonetheless, Armstrong issued new advertisements falsely comparing itself to General Steel and falsely stating that it provides "general steel" buildings. It continued to disseminate these false advertisements even after General Steel brought an administrative claim before the World Intellectual Property Organization and after the close of discovery in this case, showing that enforcement proceedings are not sufficient to deter Armstrong from disseminating false advertising.

Docket No. 346 at 35-36. Thus, despite General Steel's failure to "put on evidence that it lost customers, revenue, or goodwill, or was otherwise harmed" by Armstrong's false statements, id. at 29, the Court concluded that "Armstrong's pattern of willful deception betrays a conscious desire to benefit from false statements, which in turn supports a disgorgement award to deter future misconduct." Id. at 36. The Court further found that the equities favored General Steel because Armstrong benefitted from its false advertising and because Mr. Chumley "played a lead role in creating and disseminating the false advertisements." Id. Accordingly, the Court awarded General Steel $243, 462.00. Id. at 38.

Although it is not preclusive of a fee award, General Steel's failure to present evidence that it suffered actual damage as a result of defendants' conduct weighs against it in the context of seeking attorney's fees. See VIP Foods, 675 F.2d at 1107. General Steel prevailed on only one of its asserted claims based on a limited number of false statements that defendants published on Armstrong's website. See generally, Docket No. 346. Since these statements were made in the context of comparative advertising, the Court presumed that they caused harm and awarded General Steel a considerable sum in disgorged profits. Id. at 30. However, given the narrow segment of the asserted claims on which General Steel prevailed, the failure to produce any evidence of damages, and the amount that General Steel has already recovered on the basis of defendants' willful conduct, the Court will not exercise its discretion to award General Steel attorney's fees under the Lanham Act. See Bishop, 154 F.3d at 1224.

II. DEFENDANTS' MOTION FOR ATTORNEY FEES

Defendants argue that they are entitled to attorney's fees because (1) General Steel asserted frivolous claims for dilution and false designation of origin in its initial complaint, Docket No. 357 at 15, ¶ 19; (2) General Steel never produced evidence of actual damages or developed a viable theory of damages as required to support its claim under the Colorado Consumer Protection Act ("CCPA"), id. at 8, ¶ 12; (3) General Steel pursued its CCPA claim in order to obtain information it could use to harass defendants, id. at 18, ¶ 22; and (4) General Steel failed to prosecute its trademark infringement claims insofar as it put on no evidence of actual consumer confusion. Id. at 16, ¶ 20. Defendants seek the attorney's fees expended in defending against General Steel's claims for dilution, false designation of origin, trademark infringement, and violation of the CCPA in the amount of $274, 594.09, as well as $3, 921.41 in costs. Id. at 21.

General Steel responds that (1) defendants did not prevail on the claims that General Steel voluntarily dismissed, Docket No. 377 at 4 n.1; (2) General Steel obtained evidence of lost consumers but was barred by the Court from presenting that evidence at trial, id. at 9; (3) there is no evidence that General Steel's CCPA claim was brought in bad faith, id. at 9-10; and ...


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