United States District Court, D. Colorado
GENERAL STEEL DOMESTIC SALES, LLC, doing business as General Steel Corporation, Plaintiff,
ETHAN DANIEL CHUMLEY; ATLANTIC BUILDING SYSTEMS, LLC, doing business as Armstrong Steel Corporation; GOTTFRID SWARTHOLM; and PRQ INTERNET KOMMANDITBOLAG (LIMITED PARTNERSHIP), doing business as PRQ Inet KB; Defendants,
JEFFREY KNIGHT, Third-Party Defendant
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
General Steel Domestic Sales, LLC, a Colorado limited
liability company, doing business as General Steel
Corporation, Plaintiff: Adam Ross Bialek, Wilson Elser
Moskowitz Edelman & Dicker, LLP-New York, New York, NY; Henry
L. Solano, Wilson Elser Moskowitz Edelman & Dicker,
LLP-Denver, Denver, CO; Patrick Donald Frye, David Samuel
Fein, Building Services Group, LLC, Corporate Legal
Department, Littleton, CO.
Ethan Daniel Chumley, individually, Atlantic Building
Systems, LLC, a Delaware corporation, doing business as
Armstrong Steel Corporation, Defendants: Craig Ruvel May,
Hugh Q. Gottschalk, Kenneth Edward Stalzer, Wheeler Trigg
O'Donnell, LLP, Denver, CO; John Mark Baird, Baird Quinn,
LLC, Denver, CO; Peter C. Lemire, Leyendecker & Lemire, LLC,
Greenwood Village, CO.
Compass Bank, Movant: Bill E. Kyriagis, Otten, Johnson,
Robinson, Neff & Ragonetti, P.C., Denver, CO.
Atlantic Building Systems, LLC, a Delaware corporation, Ethan
Daniel Chumley, individually, ThirdParty Plaintiffs, Counter
Claimants: Craig Ruvel May, Hugh Q. Gottschalk, Kenneth
Edward Stalzer, Wheeler Trigg O'Donnell, LLP, Denver, CO;
John Mark Baird, Baird Quinn, LLC, Denver, CO; Peter C.
Lemire, Leyendecker & Lemire, LLC, Greenwood Village, CO.
General Steel Domestic Sales, LLC, a Colorado limited
liability company, Counter Defendant: Adam Ross Bialek, Laura
Adriana Alos, Wilson Elser Moskowitz Edelman & Dicker,
LLP-New York, New York, NY; Henry L. Solano, Wilson Elser
Moskowitz Edelman & Dicker, LLP-Denver, Denver, CO; Patrick
Donald Frye, David Samuel Fein, Building Services Group, LLC,
Corporate Legal Department, Littleton, CO.
Jeffrey Knight, ThirdParty Defendant: Adam Ross Bialek,
Wilson Elser Moskowitz Edelman & Dicker, LLP-New York, New
York, NY; Henry L. Solano, Wilson Elser Moskowitz Edelman &
Dicker, LLP-Denver, Denver, CO.
Denver SEO, LLC, Interested Party: John Aaron Atkinson,
Atkinson Boyle, PLLC, Littleton, CO.
AND ORDER GRANTING IN PART AND DENYING IN PART MOTIONS FOR
S. Krieger, Chief United States District Judge.
MATTER comes before the Court on the Objections of Defendants
Atlantic Building Systems, Inc. and Mr. Chumley
(collectively, " Armstrong" ) (# 336) to the
Magistrate Judge's July 30, 2014 Minute Order (# 306)
denying, in part, Armstrong's Motions to Compel (# 212,
226), the Plaintiff's (" General" ) response (#
365), and Armstrong's reply (# 372); General's Motion
for Summary Judgment (# 486, 490), Armstrong's response
(# 495, 498), and General's reply (# 507, 509);
Armstrong's Motion for Summary Judgment (# 488),
General's response (# 493), and Armstrong's reply (#
508); and General's Motion to Restrict Access (# 516).
Court briefly summarizes the pertinent facts here and
elaborates as appropriate in its analysis.
to the Amended Complaint (# 101), General is a company
engaged in the sale and distribution of prefabricated steel
buildings. It briefly employed Defendant Ethan Chumley, but
terminated his employment in July 2005. Mr. Chumley
then founded Defendant Atlantic Building Systems, Inc., a
business that also engages in the sale and distribution of
prefabricated steel buildings in direct competition with
2011, Mr. Chumley purchased the internet domain name
generalsteelscam.com , and began hosting a website on it
that, General contends, contained false and defamatory
material directed at General and its employees. (The website
is registered overseas through Defendants PRQ and its
principal, Mr. Swartholm, although General contends that Mr.
Chumley maintains control over it.) General filed a complaint
with the international agency that oversees domain name
disputes and was successful in securing a ruling that
required Mr. Chumley to turn over the generalsteelscam.com
site to General. Mr. Chumley then registered a new domain,
steelbuildingcomplaints.com , which General contends repeats
the defamatory content that the predecessor website did.
Chumley promotes steelbuildingcomplaints.com through a
process known as " back-linking." In essence, he
(or, more accurately, his agents) creates hundreds or
thousands of placeholder websites that consist primarily of
links containing variations on the name " General
Steel," all of which link back to
steelbuildingcomplaints.com or to web pages belonging to
Armstrong. The practice of back-linking is designed to
manipulate the page-ranking algorithms of search websites
such as Google and Bing in order to increase the prominence
that the steelbuildingcomplaints.com website will have in
search results when a user searches using the terms "
General Steel" or its variants. (The practice is also
known as " Search Engine Optimization" or "
SEO." ) General contends that the prominent placement of
steelbuildingcomplaints.com in search results for "
General Steel" operates to discourage potential General
customers. Mr. Chumley also allegedly purchases advertising
space from search companies, so that user searches for "
General Steel" or its variants result in the display of
ads for Armstrong.
December 2012, Mr. Chumley allegedly began calling
General's customers, purporting to be an investigator
with the Colorado Attorney General's Office, inviting the
customers to file complaints against General. Mr. Chumley
also allegedly sent letters to General's customers from
the " Consumer Advocacy Alliance -- General Steel
Investigation Unit," a fictitious entity, inviting
customers to file claims or complaints against General.
on these allegations, General asserts six claims: (i) false
advertising under the Lanham Act, 15 U.S.C. §
1125(a)(1)(B) against the Defendants; (ii) violation of the
Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. §
1125(d), against Armstrong, relating to the registration and
use of the generalsteelscam.com website; (iii) common-law
libel against Armstrong; (iv) unjust enrichment against
Armstrong; (v) civil conspiracy against Armstrong; and (vi)
misappropriation of trade secrets, in violation of C.R.S.
§ 7-4-101 et seq. against Armstrong, relating
to these Defendants acquiring and using General's "
valuable customer information" and " customer lists
filed an Answer (# 117) in which it asserted counterclaims
against General and third-party claims against Jeffrey
Knight, General's principal. Armstrong alleges that
General maintains a network of websites containing "
blatantly false and misleading advertisements, stories,
testimonials" and other materials promoting General,
including false representations that General (and its
subsidiaries) actually manufacture steel buildings, that
General was founded in 1928 (rather than in 1995, as
Armstrong contends), that it
manufactures and supplies steel to the U.S. military and auto
industry, and so on. (Armstrong contends that, in doing so,
General is appropriating the history and corporate identity
of General Steel Industries, Inc., a
longstanding-but-unrelated entity.) Armstrong contends that,
through these false representations, General induces
customers to patronize it instead of its competitors.
Armstrong also alleges that General's own website
contains false or misleading promotional information,
including references to it repeatedly receiving " Best
In the Industry Awards" that do not actually exist, or
falsely identifying prominent companies as being
also alleges that General has misappropriated Armstrong's
trademarked logo. In certain electronic brochures, General
includes a modified version of Armstrong's logo,
replacing the phrase " Armstrong Steel" with the
phrase " Fraudulent Steel." Armstrong contends that
General also uses Armstrong's mark on its various
affiliated websites, such as in advertisements displaying
Armstrong's logo and reading " buy an Armstrong
Steel building!" ; in actuality, these advertisements,
when clicked, redirect the user to General's website.
(Armstrong also alleges that it also holds a copyright on the
logo, and that General's use of the logo also constitutes
asserts two claims: (i) copyright infringement, in violation
of 17 U.S.C. § 501 et seq., against both
General and Mr. Knight; and (ii) false advertising, in
violation of 15 U.S.C. § 1125(a)(1)(B), against both
General and Mr. Knight.
(# 486) and Armstrong (# 488) both seek summary judgment on
the claims asserted against them. The Court will address the
specific arguments raised in those motions more completely
below. Separately, there appears to be an outstanding
discovery dispute, in which Armstrong filed Objections (#
336) pursuant to Fed.R.Civ.P. 72(a) to an order by the
Magistrate Judge denying Armstrong's motions to compel (#
212, 213, 226) responses to certain interrogatories.
Court begins with Armstrong's Objections to the
Magistrate Judge's ruling. At issue are three
interrogatories posed by Armstrong to General: (i) "
Interrogatory 2," a request for the " names, home
address, and home telephone and cell number" of "
all individuals employed by General Steel in an
administrative or sales position" from 2009 to 2013;
(ii) " Interrogatory 10," a request for the names,
address, and telephone number of " every customer who
complained about alleged misrepresentations and/or deceptive
or fraudulent advertising or practices by General Steel"
from 2009 to 2013; and (iii) " Interrogatory 1," a
request that " with respect to the screen shots
disclosed by [Armstrong]" in Armstrong's own
production, that General state whether the " such screen
shot was authored and/or posted on the internet either by
General Steel or its agents," that it " state . . .
the identification of all letters, facsimiles, and emails
between General Steel and its employees regarding such
advertising, customer testimonials or blogs" ; that it
" state . . . the identification" of the same
information as between General and " third parties"
; that it " state . . . the identification of any false
information or fabricated customer testimonials or blogs with
regard to General Steel . . ., General Steel's charitable
contributions, industry awards given to General Steel, and
the number or identity of General Steel's current or
former customers" ; and that it " state . . . the
identification of all reports" concerning " the
number of links from such advertising to [a list of specific
refused to answer the interrogatory concerning its employees
on grounds of relevance, produced certain records of customer
complaints incident to a prior ruling of the Court but
opposed producing the remainder as irrelevant and overly
burdensome, and opposed the third interrogatory as vague,
overbroad, unduly burdensome, and compound.
moved to compel (# 212, 213, 226) responses to these
interrogatories. The Magistrate Judge heard those motions,
among many others, on July 30, 2014 (# 306). According to the
transcript of that hearing (# 259), the Magistrate Judge
denied the motions with regard to Interrogatory 1 without
hearing any argument from the parties; she merely stated
" I think it's way overbroad. I'm not going to
have the plaintiffs going through 9,419 pages looking at
stuff that's clearly irrelevant to respond to it. So that
is - - that's denied on the fact that it's
overbroad." Similarly, as to Interrogatories 2 and 10,
the Magistrate Judge denied the motions without hearing
argument, simply stating " General Steel's
objections are sustained on all of the other issues that were
raised. I think [these] interrogatories . . . are uniformly
overbroad, irrelevant, and a blatant fishing expedition to
obtain information about a competitor for purposes unrelated
to the case." Armstrong then filed the instant
Objections (# 336) to that ruling.
on non-dispositive issues by a Magistrate Judge are reviewed
by this Court pursuant to Fed.R.Civ.P. 72(a), and will be
reversed only if they are " clearly erroneous or
contrary to law."  28 U.S.C. § 636(b)(1)(A);
Hutchinson v. Pfeil, 105 F.3d 562, 566 (10th Cir.
1997); Ariza v. U.S. West Communications, Inc., 167
F.R.D. 131, 133 (D. Colo. 1996). Accordingly, Armstrong's
Objections will be overruled unless the Court finds that the
Magistrate Judge abused her discretion or, if after viewing
the record as a whole, the Court is left with a "
definite and firm conviction that a mistake has been
made." Ariza, 167 F.R.D. at 133,
citing Ocelot Oil Corp. v. Sparrow Indus.,
847 F.2d 1458, 1464 (10th Cir. 1988).
Court finds no clear error or incorrect application of law in
the Magistrate Judge's ruling. It agrees with the
Magistrate Judge that Armstrong's request in
Interrogatory 2 for the names, addresses, and phone numbers
of all of General's sales and administrative employees is
indeed overbroad and a " fishing expedition."
Armstrong argues that it " could contact former
employees informally to determine whether they had any
knowledge or information about" General's allegedly
false statements, or that it could use the list of employees
" to refresh a deponent's mind[ ] about whether
there were other employees that might have knowledge about
the topics above." Armstrong is free to inquire of
General's witnesses about the identities of other
employees at General who might have knowledge of particular
statements by General, but a wholesale request for the
identities of all of General's employees in certain
categories, simply in the hopes that interviewing them might
lead to additional discoveries, is indeed an overbroad
request properly characterized by the Magistrate Judge as a
10 presents a somewhat closer question. Armstrong requested
information about customers who complained to General about
" alleged misrepresentations and/or deceptive or
fraudulent advertising or practices" by General over a
certain time frame (along with certain subsidiary information
relating to each complaint). Facially, this request might be
pertinent to a claim by Armstrong that General has engaged in
false advertising by representing on its website that it has
a history of " 100% customer satisfaction" and
" zero unresolved customer issues." However
Interrogatory 10 is limited to specific types of complaints
that it seeks - only complaints in which a customer has
complained to General about " misrepresentations"
or " fraudulent advertising" by General. In a
previous discovery request, Armstrong already obtained
discovery of all customers who complained about General
increasing prices on customers after entering into a contract
with them (and abandoned a request for discovery of more
general customer complaints concerning the quality of
General's products). See generally (# 179).
Court finds that the Magistrate Judge did not err in denying
Armstrong's motion to compel the information requested in
Interrogatory 10. Armstrong's request is predicated on
General's advertising that it has a history of "
100% customer satisfaction" and " zero unresolved
customer issues." The most reasonable readings of those
advertising messages is that General is asserting that its
customers are completely satisfied with the products and
services that General provides, not a representation that
General's customers are satisfied with General's
advertising. (Arguably, there may be customers who purchased
a particular product or service from General because of
General's advertising, only to be dissatisfied with the
result, but once again, that dissatisfaction would ultimately
trace back to the quality of General's products or
services.) Thus, the universe of customer complaints that
would disprove General's promotion of complete customer
satisfaction would be comprised primarily of customers who
were dissatisfied with the products and services General
delivered, not customers whose sole basis of complaint to
General was about its advertising. In such circumstances, it
would not be inappropriate for the Magistrate Judge to
conclude that the probative value of customer complaints
about advertising have relatively little probative value. The
record as a whole reflects that General had previously
established that complying with a request of this type would
require it to search more than 2,000 customer files, most of
which are kept solely in paper form. Under the circumstances,
where the probative value of the requested information is
fairly low and the burden of producing it was significant, it
was not inappropriate for the Magistrate Judge to deny the
motion to compel a response to such an interrogatory.
the Court agrees with the Magistrate Judge that no response
to Interrogatory 1 was required. Besides being
clearly compound (requests for information about
General's charitable contributions have no apparent
connection to requests about General's web traffic data,
which has no apparent connection to the identity of the
author of various web pages, among others) and occasionally
incomprehensible, the interrogatory is overbroad. It is
apparently undisputed that the " screen shots" that
the interrogatory inquires about consists of nearly 10,000
pages containing approximately 14,000 individual articles or
blog posts. Although it may be appropriate for Armstrong to
inquire about the authorship of particular documents that
contain particular false representations allegedly made by or
on behalf of General, it was appropriate for the Magistrate
Judge to conclude that some 10,000 requests of this type were
overbroad. For example, in Armstrong's reply in support
of their Objections, it tenders a 7-page sample of the
articles and blog posts that are the subject of Interrogatory
1. Of the six articles shown, four are highlighted to
indicate that the primary objectionable content of the
article is a reference to General being a "
manufacturer" of steel buildings. If Armstrong's
intention is to show that General falsely advertised itself
as a " manufacturer" of steel buildings, it might
be appropriate for it to select several examples of General
doing so and inquire about the authorship, etc. of those
exemplars; it is a different matter to require General to
identify the author of more than 10,000 separate articles,
many of which are likely to be effectively identical. Such a
request is clearly overbroad. Although the Magistrate Judge
could have exercised her discretion to require Armstrong to
cull its request to a manageable size, her decision to deny
the motion to compel outright on the grounds of overbreadth
and burdensomeness was not an abuse of her discretion.
the Court overrules Armstrong's Objections and affirms
the Magistrate Judge's denial of its motions to compel.
Summary judgment motions
Standard of review
of the Federal Rules of Civil Procedure facilitates the entry
of a judgment only if no trial is necessary. See
White v. York Intern. Corp., 45 F.3d 357, 360 (10th
Cir. 1995). Summary adjudication is authorized when there is
no genuine dispute as to any material fact and a party is
entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a).
Substantive law governs what facts are material and what
issues must be determined. It also specifies the elements
that must be proved for a given claim or defense, sets the
standard of proof and identifies the party with the burden of
proof. See Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986);
Kaiser-Francis Oil Co. v. Producer's Gas Co.,
870 F.2d 563, 565 (10th Cir. 1989). A factual dispute is
" genuine" evidence presented in support of and
opposition to the motion is so contradictory that, if
presented at trial, a judgment could enter for either party.
See Anderson, 477 U.S. at 248. When
considering a summary judgment motion, a court views all
evidence in the light most favorable to the non-moving party,
thereby favoring the right to a trial. See
Garrett v. Hewlett Packard Co., 305 F.3d 1210, 1213
(10th Cir. 2002).
movant has the burden of proof on a claim or defense, the
movant must establish every element of its claim or defense
by sufficient, competent evidence. See Fed.R.Civ.P.
56(c)(1)(A). Once the moving party has met its burden, to
avoid summary judgment the responding party must present
sufficient, competent, contradictory evidence to establish a
genuine factual dispute. See Bacchus Indus.,
Inc. v. Arvin Indus., Inc.,
939 F.2d 887, 891 (10th Cir. 1991); Perry v.
Woodward, 199 F.3d 1126, 1131 (10th Cir. 1999). If there
is a genuine dispute as to a material fact, a trial is
required. If there is no genuine dispute as to any material
fact, no trial is required. The court then applies the law to
the undisputed facts and enters judgment.
moving party does not have the burden of proof at trial, it
must point to an absence of sufficient evidence to establish
the claim or defense that the non-movant is obligated to
prove. If the respondent comes forward with sufficient
competent evidence to establish a prima facie claim
or defense, a trial is required. If the respondent fails to
produce sufficient competent evidence to establish its claim
or defense, then the movant is entitled to judgment as a
matter of law. See Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91
L.Ed.2d 265 (1986).
Court begins with General's motion, which seeks summary
judgment on Armstrong's counterclaims.
counterclaim against General for false advertising is
asserted under the Lanham Act, 15 U.S.C. §
1125(a)(1)(B). That statute prohibits " any person who,
on or in connection with any goods or services . . . uses in
commerce any . . . false or misleading description of fact .
. . which in commercial advertising of promotion
misrepresents the nature, characteristics, qualities or
geographic origin of his or her or another person's
goods, services, or commercial activities." Armstrong
contends that General made numerous false representations of
fact in numerous contexts: (i) that it made thousands of
" blog posts" or published content on internet web
sites falsely representing that it was a "
manufacturer" of steel buildings, that it has been in
existence for more than 50 years, that it supplied steel to
the U.S. military during World War II, and so on; (ii) that
it sponsored " pay-per-click" advertisements on
search engines that stated that it was a manufacturer of
steel buildings; (iii) that it created internet "
directory listings" that identify it as a manufacturer
of steel buildings; (iv) that it made various false
statements on its own website to the effect that it had a
" history of 100% customer satisfaction" and "
zero unresolved customer issues" and published customer
testimonials containing false material; (v) that it published
an electronic " brochure" entitled "
Fraudulent Steel" that ....; and (vi) that its customer
representatives made various false representations about
General and Armstrong.
establish a Lanham Act claim such as this, Armstrong must
show: (i) that General made materially false or misleading
representations of fact; (ii) in connection with its
(iii) in commerce; (iv) that such representations were likely
to cause confusion or mistake as to the characteristics of
its goods or services; and (v) that such use caused injury to
Armstrong. World Wide Ass'n of Specialty Programs v.
Pure, Inc., 450 F.3d 1132, 1140 (10th Cir. 2006).
undisputed that the content comprising the allegedly false
" blog posts" and " pay-per-click" ads
were not created by General itself. Rather, General
contracted with an entity called JEMSU (or sometimes "
Denver SEO" ) by which JEMSU performed " search
engine optimization" designed to heighten General's
ranking in internet search engines like Google and Bing.
" Search engine optimization" services generally
involve creation of hundreds or thousands of websites, each
containing numerous short pieces of written content,
generally no more than a paragraph or two, that link back to
the website being promoted. Here, JEMSU's employees (or
contractors it hires) wrote the pieces, each containing one
or more links that point back to General's website. The
objective is for this network of websites to appear to the
algorithms used by search engines to be legitimate,
independent sources of content about General. In this case,
it is undisputed that, among the thousands of articles
published by JEMSU on General's behalf are many that make
a variety of false statements about General - that it
manufactures steel, steel buildings, and products like
automobile rims (when, in actuality, it manufactures nothing
and only serves as a seller of others' products), that it
has storied history dating back more than 50 years (when, in
fact, that history belongs to a different entity with a
similar name), and so on.
argues that JEMSU operated as an independent contractor,
creating and publishing the content without any control or
direction from General. Thus, General argues, it cannot be
held liable for any false representations contained in
content published by JEMSU.
general rule, a master is subject to liability for
torts committed by its servant if the
servant is acting in the scope of its designated authority;
by contrast, a master is not typically liable for tortious
acts committed by its servant if the servant is acting
outside the scope of authority. See Restatement
(Second) of Agency, § 219. General argues that JEMSU was
not its agent/ servant, but rather was an independent
contractor. In determining whether a person or entity is a
servant or independent contractor, the Court considers
numerous factors, including: (i) the extent of control which
the master may exercise over the work; (ii) whether the
person performing the work is engaged in a distinct
occupation; and (iii) whether the work is typically done
under direction or completed independently, among several
others. Restatement (Second) of Agency, § 220. The right
of the master to control is the most important of these
factors and is often determinative. Id. The
Restatement explains that a right to control sufficient to
create a master-servant relation can often appear attenuated,
and may even arise where there is " an understanding
that the employer shall not exercise control" over the
other party. It uses the example ...