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General Steel Domestic Sales, LLC v. Chumley

United States District Court, D. Colorado

May 24, 2016

GENERAL STEEL DOMESTIC SALES, LLC, doing business as General Steel Corporation, Plaintiff,
v.
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,
v.
JEFFREY KNIGHT, Third-Party Defendant.

          OPINION AND ORDER DENYING PRETRIAL MOTIONS

          MARCIA S. KRIEGER, CHIEF UNITED STATES DISTRICT JUDGE

         THIS MATTER comes before the Court pursuant to several pretrial motions filed by the parties in anticipation of a jury trial to begin on June 20, 2016. The Court assumes the reader’s familiarity with the issues in the case, the proceedings to date, and the contents of the motions in question. The Court addresses the motions seriatim.

         A. Docket # 606: General Steel’s Renewed Motion for Default Judgment against Defendants Swarthold and PRQ, Defendants Chumley and Armstrong’s response (#609), and General Steel’s reply (# 612)

         This motion seeks entry of a default judgment against two Defendants who have never appeared or defended in this action, but who are the nominal registrant and host, respectively, of the internet website at issue in General Steel’s claims. The Court has previously refused to enter a default judgment against these Defendants prior to trial, relying in part upon principles articulated in Frow v. de la Vega, 82 U.S. 552 (1872), and the continuing need for trial of the claims against Mr. Chumley and Armstrong that stem from the same underlying facts as those against the defaulting Defendants.

         This motion is presently referred to the Magistrate Judge for a recommendation, and thus, this Court declines to take it up at this time. It is sufficient to note that the question of whether judgment should enter against the defaulting Defendants has no bearing on the claims to be tried beginning on June 20, 2016, nor would entry of a default judgment relieve any of the parties to that trial of any evidentiary burdens or otherwise expedite the trial proceedings. Accordingly, there is no reason to expedite determination of the motion for default judgment. The Court will take this motion up in the ordinary course of business.

         B. Docket # 614: General Steel’s Motion for Ruling on Application of Issue Preclusion . . ., Defendants Chumley and Armstrong’s response (# 617), and General Steel’s reply (# 623)

         Through this motion, General Steel seeks to apply the doctrine of collateral estoppel derived from factual findings made by Judge Brimmer at the conclusion of a bench trial in a prior case between the same parties, General Steel Domestic Sales, LLC v. Chumley, D.C. Colo. Case No. 10-cv-01398-PAB-KLM. General Steel identifies 17 factual findings made by Judge Brimmer and requests that “the jury should be instructed that the matters set forth [in those findings] are fixed facts that they must consider.”[1] The findings by Judge Brimmer cover a wide range of subjects, including: (i) Mr. Chumley sending an obscene e-mail to employees at General Steel; (ii) Mr. Chumley creating a website of gay pornography that he falsely attributed to an employee at General Steel; (iii) various actions by Mr. Chumley, directed at search engines like Google and Bing, designed to return advertisements for Armstrong when users entered searches for phrases such as “General Steel” and that Armstrong continued to perform those actions even after search engine representatives asked it to cease; (iv) Mr. Chumley, under a pseudonym, issued false press releases promoting Armstrong (and which, the Court notes, make no reference whatsoever to General Steel); (v) Armstrong used General Steel’s corporate logo on its own webpage, along with the text “may the best building win”; and (vi) Mr. Chumley “was responsible for creating” a website called generalsteelscam.com and that he published articles under false names on that website, with the intent of harming General Steel.

         To obtain the relief it seeks, General Steel must overcome two separate legal hurdles. First, it must show that the matters to which Judge Brimmer’s findings are directed are relevant to issues in and otherwise admissible in this trial; second, General Steel must show that Judge Brimmer’s findings on those points meet all the necessary elements of collateral estoppel. For reasons that will become clear momentarily, the Court undertakes its analysis of this issue in reverse order.

         To establish that a prior factual finding collaterally estops its opponent from challenging that finding in a later proceeding, the party asserting the doctrine must show: (i) that the issue previously decided is identical with the one presented in the instant action (i.e. the “same issue”); (ii) that the party against whom the doctrine is invoked was a party in the prior action (i.e. the “same party”); (iii) that the prior action was fully and finally adjudicated on its merits; and (iv) that the party against whom the doctrine is invoked had a full and fair opportunity to litigate the issue in the prior action. Stan Lee Media, Inc. v. Walt Disney Co., 774 F.3d 12929, 1297 (10th Cir. 2014).

         There is no dispute that Mr. Chumley and Armstrong are the same parties in this case as they were in the case before Judge Brimmer. There is no dispute that that the case before Judge Brimmer proceeded to a final judgment on the merits. There is no dispute that Mr. Chumley and Armstrong had a full and fair opportunity to litigate the enumerated issues in that case. There is substantial question, however, as to whether the same factual issues are present in both cases.

         For the “same issue” element to be established, the factual finding in the prior action must have been “essential to the judgment.” Id., citing Arizona v. California, 530 U.S. 398, 414 (2000). Thus, the mere fact that Judge Brimmer made certain factual findings is not sufficient; General Steel must show that the factual finding in question is one that was essential to an adverse judgment that was entered against Mr. Chumley and Armstrong. The Court need not comprehensively recite the nature of the claims and findings in Judge Brimmer’s May 7, 2013 Order. It is sufficient to observe that the factual findings that General Steel recites above are findings that Judge Brimmer made with regard to a trademark infringement claim by General Steel that Judge Brimmer ultimately resolved in Mr. Chumley and Armstrong’s favor. That is to say, Judge Brimmer found that Mr. Chumley and Armstrong made inappropriate uses of General Steel’s trademarked name and logo when purchasing advertising on search engine results involving General Steel’s name and on comparative advertising on Armstrong’s website, but that such use did not amount to actionable trademark infringement because General Steel failed to show that such use was likely to mislead consumers. Thus the judgment on this claim was entered in favor of Mr. Chumley and Armstrong, and the specified factual findings were not essential to it.

         Although Judge Brimmer did enter a judgment in favor of General Steel on its claim of false advertising, such judgment related to Armstrong falsely advertising features of its own products - that it falsely claimed to fabricate its own steel and that it falsely claimed that galvanized fasteners were a standard feature of its product. Clearly, this judgment did not turn on the findings enumerated above.

         Because the factual findings were not essential to either judgment entered by Judge Brimmer, they cannot act as established facts in this matter. Thus, General Steel may not rely upon the doctrine of collateral estoppel to present facts to the jury or in the event General Steel seeks to put on evidence to establish such facts at trial in this matter, to prevent Mr. Chumley and Armstrong from disputing them.

         It is at this point that the Court circles back to the first issue raised in General Steel’s motion: whether the enumerated findings are relevant and admissible in this action. The Court declines to consider that question at this time. Whether couched in terms of Fed.R.Evid. 401, 403, or 404(b), questions of relevance and undue prejudice are inextricably bound up with the precise content of the evidence to be offered and the entire context of the trial record as it exists when those questions are raised. As the Court has previously advised the parties, it will not consider such matters in a vacuum, outside of the trial context.[2] Thus, the Court makes no findings as to whether some or all of factual issues that Judge Brimmer previously addressed will warrant the admission of evidence at trial; it holds only ...


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