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Ninth Circuit Scraps $1.8 Billion Award for Infringement
Majority Faults Judge for Basing Disgorgement-Damages on Value Announced in News Releases of Contracts Awarded to Infringer; Does Not Allude to His Reason: Defendant’s Failure to Produce Countervailing Evidence
By a MetNews Staff Writer
A District Court judge improperly based a $1.8 billion award in a trademark infringement case on no more than the value of three contracts being granted to the infringer, as announced in press releases, the Ninth U.S. Circuit Court of Appeals yesterday in reversing a summary judgment and remanding the matter, but the two-judge majority did not recite only cursorily the reasoning set forth by the judge in his order.
Comprising the majority were Judges Mark J. Bennett and Paul J. Watford. Judge Michelle T. Friedland wrote an opinion concurring in the result.
Bennett and Watford said in their memorandum opinion that three press releases announcing contract awards were not sufficient evidence of amounts actually received by Morrison Knudsen Corporation (“MK”), which used the name of a company that had merged into plaintiff AECOM Energy and Construction, Inc. Under 15 U.S.C. §1117(a), a part of the Lanham Act, disgorgement from an infringer must be equated with “sales,” they declared.
The opinion says:
“Defendants-Appellants failed to dispute the accuracy of the press releases or AECOM’s calculation of SI .8 billion in damages based on the press releases. Thus, the district court reasoned that Defendants-Appellants had failed to raise a genuine factual dispute as to the amount of damages and awarded AECOM $1.8 billion in damages.
“Defendants-Appellants argue that the press releases failed to satisfy AECOM’s burden of proving Defendants-Appellants’ sales under § 1117(a) because the press releases ‘merely announce construction projects have been awarded.’ and fail to show that Defendants-Appellants completed any of the projects or received any revenue from the projects. We agree. The press releases, viewed in the light most favorable to Defendants-Appellants, merely show that Defendants-Appellants had been awarded contracts: they do not show whether Defendants-Appellants completed (or even started) the projects or whether Defendants-Appellants received any payments under the contracts, much less almost $2 billion. Thus, AECOM failed to carry its burden of establishing Defendants-Appellants’ sales arising from their infringing activity, and the district court erred in granting the damages award.”
A footnote mentions:
“Our decision does not preclude the district court on remand from considering whether a discovery sanction is appropriate should AECOM seek such relief, such as a sanction focused on the evidentiary inferences that may be drawn from the defendants’ refusal to produce relevant financial records. We express no opinion on whether any such sanction would be appropriate.”
In his Nov. 8, 2018, order granting summary judgment in favor of AECOM for $1.8 billion—though the amount was redacted from the publicly filed version of the opinion—Senior District Court Judge Ronald S.W. Lew pointed to the requirement in §1117(a) that the “plaintiff shall be required to prove defendant’s sales only,” adding:
“[D]efendant must prove all elements of cost or deduction claimed.”
The judge explained:
“The press releases were the only evidence Plaintiff could rely on because Defendants have not provided adequate documentation of their revenue, profits, or costs, despite repeated requests for such information throughout discovery. The history of this litigation demonstrates a pattern in which Defendants continuously refused to comply with Plaintiffs discovery requests, Court orders, and evaded providing financial information.”
He noted:
“Defendants refused to produce any documents created after January 1,2017, even though the Court clearly ordered them to do so….Despite several orders and ample time to provide further financial information, Defendants did not submit any additional financial documents.”
Lew went on to say:
“In light of the significant amount of damages Plaintiff is seeking, the Court is more hesitant to rely solely on the press releases than it would be if there was a lesser amount at stake. However, Defendants do not offer any evidence or argument disputing Plaintiff’s calculation of REDACTED, or offer any alternative calculation. Plaintiff clearly stated as an uncontroverted fact in its [statement of uncontroverted facts] that ‘Defendants have claimed to earn revenue totaling REDACTED’ by issuing the three press releases.”
He noted that nowhere in the defendant’s opposition was the amount of the contracts disputed or a denial that the sums mentioned were received.
“Defendants did not raise a genuine issue as to the accuracy of the press releases, or as to the amount the press releases state that Defendants were ‘awarded,’” Lew said. “The Court finds this telling.”
Friedland’s View
Friedland said she concurs in the judgment because “it appears that the district court did not understand that it had discretion to reduce the disgorgement award under 15 U.S.C. § 1117(a).”
She came to Lew’s assistance, however, in elaborating on the bases for his award, saying:
“…I respectfully disagree with my colleagues’ conclusion that a summary judgment ruling granting some damages amount to AECOM was inappropriate—and, indeed, I believe that the damages amount the district court entered was within the range of options available for the court to consider in exercising its discretion. As the majority mentions only in passing…, the defining feature of this dispute has been what the district court aptly described as Defendants-Appellants’ ‘lengthy history of bad faith litigation practices.’ Defendants- Appellants ignored multiple discovery orders, refused to appear for depositions, and ultimately failed to produce a single reliable business record from which AECOM could calculate damages. Unsurprisingly, AECOM’s reliance on the publicly available press releases to meet its burden under § 1117(a) was the direct result of Defendants-Appellants’ tactics.”
Friedland added:
“Critically. Defendants-Appellants failed to contest the press releases as evidence of then* revenue. As the moving party on summary judgment. AECOM had the burden to prove that it was entitled to a disgorgement award….AECOM submitted the press releases into evidence, and its statement of uncontroverted facts in support of its motion for summary judgment included the fact that Defendants-Appellants had claimed to earn revenue totaling $1.802 billion. Given that Defendants-Appellants had stonewalled AECOM’s every effort to ascertain information about then finances, it was reasonable for AECOM to assert that the publicly available press releases accurately reflected Defendants-Appellants’ revenues—and Defendants-Appellants still had the opportunity to contest that assertion in opposition to summary judgment, as the local rules required them to do if they believed Plaintiffs asserted undisputed fact was untrue….But when Defendants-Appellants then filed a statement of genuine disputes of material facts in opposition to AECOM’s motion, they raised no objection the asserted revenue fact. Nor did they otherwise deny winning the contracts or contest that they had received the revenue anticipated by the awards.”
Accordingly, the jurist said, Lew was entitled to draw the inference he did.
Earlier Opinion
The Ninth Circuit on Sept. 11, 2018 affirmed Lew’s Sept. 28, 2017 order granting a preliminary injunction to AECOM. The memorandum opinion says:
“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.”
Lew told of that history in granting the preliminary injunction, saying:
“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.”
Yesterday’s opinion came in AECOM Energy and Construction v. Morrison Knudsen Corporation, Inc., 19-55588.
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