Thursday, September 13, 2018
Bar Properly Issued on Upstart Company Purporting to Be Once-Mighty Outfit
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has affirmed the issuance of a preliminary injunction barring use by a Century City outfit of the name “Morrison Knudsen”—a civil engineering company founded in 1912 in Boise, Idaho which gained worldwide stature—because, though it no longer has an independent existence, rights to its trademarks are owned and used by an active corporation.
Morrison Knudsen had sales exceeding $1 billion by 1990 but fell on hard times, through bad investments, was sold in 1996, and the successor to its purchaser was eventually bought by plaintiff AECOM Energy and Construction, Inc., reportedly for $6 billion.
A three-judge Ninth Circuit panel decided the appeal on Tuesday notwithstanding that the plaintiff’s motion for summary judgment and for a permanent injunction is set to be heard next Tuesday. The panel’s memorandum opinion affirms a Sept. 28, 2017 decision by U.S. District Court Senior Judge Ronald S.W. Lew of the Central District of California.
Lew barred use of the words “Morrison Knudsen” by the defendants, finding that AECOM had shown a likelihood of success of its claims, under the federal Lanham Act and state law, and had demonstrated that it would be irreparably harmed if the conduct were not halted. The jurist noted:
“MK was a renowned multinational construction and engineering firm responsible for many notable projects, including the Hoover Dam, the San Francisco-Oakland Bay Bridge, and the Trans-Alaska Pipeline….In 2014, after MK had already gone through a series of mergers and name changes, Plaintiff acquired MK….Plaintiff is an engineering and construction firm that has also worked on many notable projects, including the new World Trade Center and the Los Angeles Chargers’ new stadium.”
The judge continued:
“Plaintiff alleges that, beginning in 2008, Defendants undertook an elaborate scheme to pass themselves off as MK and take advantage of MK’s good reputation.”
He said this entailed use of the names of dissolved entities such as “Morrison Knudsen Services, Inc.” and setting up a website with the domain name “www.morrison-knudsen.com.” The website recited Morrison Knudsen’s history, as if it were that of the defendant companies.
Rejecting the defense that the marks had been abandoned, Lew pointed out:
“Plaintiff continues to use MK’s logo and corporate history in many of its promotional materials.”
Lew enjoined the defendants from “using, displaying, or otherwise exploiting” Morrison Knudsen trademarks, or employing “Morrison Knudsen” in its domain name. He forbade the defendants “making any statement or representation or performing any act likely to lead members of the public to believe” that their business “is in any manner, directly or indirectly, associated, affiliated or connected with, or licensed, sponsored, authorized or approved” by AECOM.
The judge also precluded the defendants from “conducting business, including selling any product or service, under the names Morrison-Knudsen Services, Inc.; Morrison Knudsen Corporation; Morrison Knudsen International Inc.; Morrison-Knudsen Company, Inc.; or any other related entities.”
While the defendants argued that if a preliminary injunction were granted, AECOM should be required to post a bond in the amount “of at least $5 million,” Lew said they “have not cited to any authority to support this bond amount,” and set it at $50,000.
Ninth Circuit Decision
The Ninth Circuit panel—comprised of Circuit Judges Ronald M. Gould and Jay S. Bybee, along with District Court Judge Marco A. Hernandez of the District of Oregon, sitting by designation—agreed with Lew in all respects. Like Lew, it brushed aside the abandonment contention as being groundless.
The opinion says Lew did not abuse his discretion in finding that the plaintiff is likely to prevail under the portion of the Lanham Act that prohibits use of words in commerce that are “likely to cause confusion, or to cause mistake, or to deceive” as to the company with which goods or services should be associated. It declares:
“Here, Defendants displayed the MK marks and Morrison Knudsen’s history on their public website, which constitutes use in commerce….Further, AECOM has shown a likelihood of confusion. Defendants have appropriated the same MK marks and Morrison Knudsen corporate history that AECOM uses, and Defendants have used these marks and history in the same market—the construction market—in which AECOM operates.”
The opinion embraces Lew’s view of the claim under the portion of the act proscribing statements “in commercial advertising or promotion” which misrepresent “the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,” saying:
“Here, Defendants have held themselves out to the public as Morrison Knudsen through use of the MK marks and Morrison Knudsen’s corporate history. Such statements are literally false: Defendants are neither the original Morrison Knudsen nor its successor….Because they are literally false, we need not consider the impact on the buying public.”
The opinion notes, with respect to the “materiality” of the misrepresentation that, according to evidence presented, even a former employee of AECOM thought the Century City enterprise doing business as Morrison Knudsen was his ex-employer and steered business to it.
AECOM sued under a provision of the Lanham Act relating to “cyberpiracy,” a claim Lew also found likely to prevail. “Cyberpiracy” includes using, in bad faith, a domain name that is “identical or confusingly similar” to a registered mark of another or otherwise seeking to profit from someone else’s mark.
The opinion notes that the domain name of the defendants’ website “is identical to the Morrison Knudsen mark” and the bad faith “is clear” from the conduct. It adds:
“Defendants revived dissolved Morrison Knudsen entities without permission to do so from that company’s successor, despite stating under penalty of perjury that such authority existed. Defendants contacted the United States Patent and Trademark Office…and changed the mailing address associated with the MK marks to their own address, with no authority to do so. Defendants transferred one MK mark to themselves, again with no authority to do so….And Defendants, through their website, have misappropriated Morrison Knudsen’s history as their own (it is not).”
The panel said that the state-law claims parallel those under federal law and, like Lew, the judges saw no need for a separate discussion of them.
The case is AECOM Energy and Construction, Inc. v. Morrison Knudsen Corporation, No. 17-56513.
Found in Contempt
Not reflected in the opinion is that on Jan. 11, Lew, on motion of the plaintiff, found the defendants in civil contempt for failing to abide by the preliminary injunction.
They were directed to file an affidavit within 21 days of AECOM posting its bond setting forth how it changed the names containing the words, “Morrison Knudsen.” The affidavit was filed one week late and in it, it was revealed that “Morrison Knudsen Corporation” was changed to “MK Corporation”; “Morrison Knudsen Company, Inc.” to “MK Company Inc.”; “Morrison Knudsen Services, Inc.” to “MK Services Inc.”; “Morrison Knudsen International Inc.” to “MK International Inc.”
“Defendants have failed to comply with the Court’s Order. Instead of changing their corporate names to names that clearly departed from Morrison Knudsen and the MK brand, Defendants simply abbreviated Morrison Knudsen to MK….Defendants made no effort to distance themselves from the MK brand and are continuing to operate a business under confusingly similar names….
“Defendants argue that a lay person would not think MK is related to Morrison Knudsen because MK could stand for anything….However, the Morrison Knudsen trademarks, ownership over which Defendants attempted to deceptively take, include the MK initials….Additionally, Defendants used the initials MK throughout their website to refer to Morrison Knudsen…, and MK has been a common way of referring to Morrison Knudsen since at least the 1950s….Defendants’ use of the initials MK to refer to Morrison Knudsen prior to the Court’s Order, the presence of the MK initials in the MK trademark, and the consistent use of the MK initials to refer to Morrison Knudsen throughout history make it clear that no reasonable person could argue that the use of the MK initials does not infringe upon the Morrison Knudsen name. Accordingly, Plaintiff has met its burden to show by clear and convincing evidence that Defendants violated the Court’s Order.”
The judge decreed that the defendants would pay a contempt fine of $500 a day until the names of the companies were properly altered and would pay AECOM’s attorney fees, to be set later. On Feb. 16, he set those fees at $21,815.80.
New Contempt Adjudication
Then, on May 10, Lew again found the defendants in contempt, this time for failing to abide by the order to pay attorney fees. He said:
“Plaintiff requests that the Court award Plaintiff its attorneys’ fees and costs incurred in filing the instant Motion. It ultimately took Defendants six months to comply with the Court’s Preliminary Injunction Order, which required Defendants to remove Morrison Knudsen from their corporate names. Such compliance only occurred after Plaintiff filed two separate contempt motions. Further, Plaintiff tried to meet and confer with Defendants regarding Defendants’ failure to pay the court-ordered attorneys’ fees award, and Defendants offered nothing other than stating that they could not pay the award, an argument they abandoned upon responding to Plaintiff’s Motion. Plaintiff therefore had no choice but to file another contempt motion. Defendants’ litigation tactics and frequent refusal to comply with the Court’s orders have increased Plaintiff’s costs of litigation.”
The judge desisted from finding the defendants in contempt by virtue of shifting the content of the www.morrison-knudsen.com. website to www.morrison-knudsen.net because the content had been removed from the new website, with a notice on it saying, “under construction.”
On July 3, Lew ordered the defendants to pay an additional $32,874 for the work by AECOM’s attorneys, Diana M. Torres and Yungmoon Chang of Kirkland & Ellis LLP, on the second motion for a contempt order.
Defendants, in addition to corporate entities using the name “Morrison Knudsen,” included Bud Zukaloff, John Ripley, Todd Hale, and Henry Blum. A default judgment against them was entered on Dec. 4, 2017.
Remaining as an individual defendant is Gary Topolewski, a vice president of the company that purported to be Morrison Knudsen.
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