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Peter Kiewit Sons', Inc. v. Wall Street Equity Group, Inc.

United States District Court, D. Nebraska

September 29, 2014

PETER KIEWIT SONS', INC., Plaintiff,
v.
WALL STREET EQUITY GROUP, INC., ET AL., Defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

JOHN M. GERRARD, District Judge.

This matter is before the Court for findings of fact and conclusions of law based upon the defendants' default (filing 385) and a hearing held pursuant to Fed.R.Civ.P. 55(b)(2)(B) to determine the amount of damages. For the reasons explained below, the Court awards damages to the plaintiff in the amount of $913, 099.46.

I. BACKGROUND

The plaintiff, Peter Kiewit Sons', Inc. (Kiewit), is a construction and mining company, and the owner of the service mark "Kiewit, " Registration No. 2, 569, 239. Filing 126 at 1. The primary defendant is Steven S. West, [1] a Florida businessman. Filing 126 at 1-2. Shepherd Friedman, the other individual defendant, is a business associate of West, and the corporate defendants Wall Street Equity Group, Inc. and Wall Street Group of Companies, Inc. are businesses controlled by Friedman and West. Filing 126 at 2. (Primarily West, as the evidence explained below will show.) Generally speaking, to the extent relevant here, the Wall Street entities claim to help small business[2] owners sell their businesses to larger companies.

As part of its operations, Kiewit from time to time acquires other companies in the United States or other parts of the world. Filing 417 at 8-9. That involves investigating and evaluating the potential acquisition. Filing 417 at 9. The first and only actual business conducted between Kiewit and the defendants occurred in the process of such an acquisition in 2008. Filing 417 at 10, 15. Jett Industries, the company being acquired, had responded to an advertisement placed by one of West's businesses (it's not clear which one) and West's company had initiated contact with Kiewit. Filing 417 at 11. Scott Schmidt, Kiewit's vice-president of strategy and development, concluded after speaking with them that West's company did not have any actual expertise in business acquisition, so Kiewit worked directly with Jett Industries to complete the sale. Filing 417 at 7, 12-13. West only appeared at the closing, apparently to collect his fee. Filing 417 at 13-14.

Later that year, a small business owner from Virginia contacted Kiewit and asked if Kiewit was interesting in buying his business. Filing 417 at 17. He explained to Schmidt

that he'd been contacted by Mr. West and that he was told Mr. West performed valuations of companies and that his valuation was the only one that Kiewit would accept and that Mr. West had a Kiewit executive in his board room waiting to talk to [the small business owner] as soon as [he] signed an engagement letter to engage Mr. West's firm to perform a valuation.

Filing 417 at 17. Wall Street Group sent the small business owner a letter, signed by Friedman, claiming to be the "leading private investment bank in America, " and suggesting that based on a "back of the envelope' evaluation" the business could be sold for approximately $20 million dollars. Filing 9 at 10. The letter specifically mentioned that the enclosed information included "[b]ackground on the buyer, Kiewit." Filing 9 at 10. The letter sought to schedule an interview, after which-if Wall Street Group chose to represent the business-the business would be expected to pay $20, 000 to $30, 000 to create an "appraisal and business profile." Filing 9 at 11.

Kiewit's in-house counsel sent Friedman a letter demanding that his company cease use of the Kiewit mark. Filing 9 at 12. In response, Kiewit received a letter from the "Office of General Counsel" of "West Acquisitions and Investment Groups, Inc.", denying that any of its affiliated entities had held themselves out as representing Kiewit. Filing 9 at 13. Kiewit considered the matter closed. Filing 417 at 22.

But in April 2010, Schmidt was contacted by the owner of a small construction company from Wyoming, who said he'd been contacted by another Wall Street entity, and been told "that they had a Kiewit executive sitting in their board room and they were ready to talk to me.'" Filing 417 at 23. That business also received a letter that was signed by West on behalf of Wall Street Equity, but was in all other respects substantially the same as the letter sent to the Virginia business. Filing 9 at 5-6. They also received an email from a @wallstreetmergers.com email address directing them to www.kiewit.com "[t]o learn more about the buyer." Filing 9 at 4.

In response, Kiewit filed this lawsuit. Filing 1. A protracted and ugly discovery process ensued that is well chronicled on the Court's docket. Generally summarized, the defendants engaged in evasion and outright deception in attempting to prevent Kiewit from discovering the scope of their activities. As reflected in the Magistrate Judge's findings, recommendation and order of May 18, 2012 (filing 263), West claimed to have only used Kiewit's mark on two occasions, and claimed to have no documentation suggesting otherwise, only to be caught lying. See, e.g., filing 263 at 29-33; see also filing 384 (adopting Magistrate Judge's findings regarding discovery abuses). Kiewit eventually obtained a number of effectively-identical letters using the Kiewit mark to solicit different businesses, and client lists and records suggesting that more letters had been sent that remained undiscovered.

What is known about the scope of West's activities, and what remains unknown, will be discussed in more detail below as it specifically relates to the calculation of damages. For background purposes, it suffices to state a couple of conclusions that the Court finds from the evidence. First, describing the defendants' conduct as "West's activities" is purposeful: West planned and instigated all the misconduct at issue in this case. Second, the scope of West's activities involving the Kiewit mark is widespread: it goes far beyond the instances that West admitted to, and far beyond that which is affirmatively shown by the evidence Kiewit was able to uncover in spite of West's attempts to conceal or destroy it. It involved dozens and perhaps hundreds of solicitations, and at least hundreds of thousands of dollars in fees paid by unsuspecting businesses.

The Magistrate Judge recommended that default be entered against all the defendants "as a sanction for severe and continuing discovery abuses, " and the Court adopted that recommendation. Filing 376 at 1; filing 384. A hearing was then held, pursuant to Fed.R.Civ.P. 55(b)(2), on the issue of damages-both the amount of damages to be awarded, and the apportionment of those damages among the defendants.

But the entry of default does not end the Court's inquiry as to damages or liability. When a default judgment is entered, facts alleged in the complaint-except as to damages-may not be later contested. Marshall v. Baggett, 616 F.3d 849, 852 (8th Cir. 2010); Murray v. Lene, 595 F.3d 868, 871 (8th Cir. 2010). It remains for the Court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law. Id. Therefore, although the allegations of the plaintiff's complaint are admitted, see id., it is still necessary for the Court to determine the plaintiff's damages based upon the evidence. See, Fed.R.Civ.P. 55(b)(2)(B); Brown v. Kenron Aluminum & Glass Corp., 477 F.2d 526, 531 (8th Cir. 1973). And even before that, it is incumbent upon the Court to ensure that the unchallenged facts constitute a legitimate cause of action before entering final judgment. Marshall, 616 F.3d at 852-53. That will require the Court to discuss the necessary elements of each of the plaintiff's theories of relief.

II. DISCUSSION-LIABILITY

Kiewit's complaint alleges three claims pursuant to different provisions of the Lanham Act, 15 U.S.C. § 1051 et seq., and four supplemental state law claims. For reasons that will become apparent, the Lanham Act claims are the most important, so the Court will start there.

1. LANHAM ACT

The Lanham Act, generally speaking, affords the holder of a trademark or service mark the right to control the quality of goods or services that are manufactured or sold using its service mark. See Mid-State Aftermarket Body Parts, Inc. v. MQVP, Inc., 466 F.3d 630, 633-34 (8th Cir. 2006).[3] And the Lanham Act protects persons engaged in commerce against false advertisement and unfair competition. United Indus. v. Clorox Co., 140 F.3d 1175, 1179 (8th Cir. 1998).

There are three specific provisions at issue here. First, a defendant may be liable for using a mark in commerce, in connection with goods or services, in a way that "is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person[.]" 15 U.S.C. § 1125(a)(1)(A). Second, a defendant may be liable if it, "in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities[.]" 15 U.S.C. § 1125(a)(1)(B). And finally,

[s]ubject to the principles of equity, the owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owner's mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.

15 U.S.C. § 1125(c)(1).

Kiewit's complaint asserts violations of all three provisions. Filing 126 at 4-7. The factual allegations of Kiewit's operative complaint, however, are relatively thin-the complaint does not, in fact, allege what the defendants are supposed to have actually done. But Fed.R.Civ.P. 55(b)(2) permits the Court, after an entry of default, to conduct a hearing not only to determine the amount of damages, but to "establish the truth of any allegation by evidence" and "investigate any other matter." As a result, for purposes of determining whether a cause of action is legitimate, Kiewit is entitled to both the admitted allegations of the complaint and all reasonable inferences from the evidence admitted at the hearing. See Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981).

(a) 15 U.S.C. § 1125(a)(1)(A): Mark Infringement

Mark infringement requires proof that the plaintiff has ownership or rights in the mark and that the defendant has used the mark in commerce, in connection with goods or services, in a manner likely to cause consumer confusion as to the source or sponsorship of the goods or services. Cmty. of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ's Church, 634 F.3d 1005, 1009 (8th Cir. 2011).

The term "used in commerce" means the bona fide use of a mark in the ordinary course of trade, and a mark is deemed to be in use in commerce when it is used or displayed in the sale or advertising of services and the services are rendered in commerce. 15 U.S.C. § 1127(2); Masters v. UHS of Del., Inc., 631 F.3d 464, 470 (8th Cir. 2011). The defendants plainly used Kiewit's mark in commerce here, in connection with goods or services: the mark was repeatedly employed in solicitations for the defendants' commercial valuation and brokerage services.

In evaluating a likelihood of confusion between a mark and an allegedly-infringing mark, courts generally consider such factors as the strength of the owner's mark, the similarity between the marks, the degree to which the allegedly-infringing service competes with the mark-owner's service, the alleged infringer's intent to confuse the public, and evidence of actual confusion. See Devon Park, 634 F.3d at 1009. No one factor controls, and because the inquiry is inherently case-specific, different factors may be entitled to more weight in different cases. Id.

Of course, in this case, the degree of similarity is not a relevant criterion, because only a single mark is at issue. See Masters, 631 F.3d at 473. And while the defendants were not in direct competition with Kiewit, the pleadings and record amply demonstrate the defendants' intent to confuse others. Confusion is relevant when it influences a purchasing decision. See Mid-State, 466 F.3d at 634. The defendants emphasized their purported relationship with Kiewit, making the possibility of a Kiewit purchase an important reason to purchase the defendants' services. And Kiewit was contacted by persons who had actually been misled, providing evidence of actual confusion. In sum, the pleadings and evidence show that the defendants' unauthorized use of the Kiewit mark was misleading, ...


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