Opinion
Civil Action No. 3:00-CV-1900-D
December 3, 2002
MEMORANDUM OPINION AND ORDER
In this litigation brought by plaintiffs The Bear Stearns Companies Inc. ("Bear Stearns") and EMC Mortgage Corporation ("EMC") against defendant Nye Lavalle ("Lavalle"), the court must decide five motions and an application for preliminary injunction. For the reasons that follow, the court enters a default judgment against Lavalle, grants part of the additional preliminary injunction relief for which plaintiffs apply, and decides the remaining motions in accordance with the principal rulings.
The court decides the following motions and preliminary injunction application: (1) plaintiffs' September 20, 2002 second motion to compel payment of sanctions award; (2) Lavalle' s October 15, 2002 motion for clarification of injunctive order; (3) Lavalle's October 15, 2002 motion for clarification of order regarding deposition and for dismissal of plaintiffs' amended complaint; (4) plaintiffs' November 11, 2002 motion for contempt and for sanctions and emergency motion to compel defendant's deposition; (5) Lavalle's November 20, 2002 emergency motion for protective order, for leave of court to file amendment to brief and scheduling order to brief court on a motion for sanctions and contempt upon motion of the defendant or direction of the court; and (6) plaintiffs' October 21, 2002 application for preliminary injunction.
I
Many of the relevant background facts of this case are recounted in the court's October 27, 2000 memorandum opinion that accompanied its preliminary injunction against Lavalle ("Injunction Opinion") and need not be repeated in detail. Additionally, those facts, coupled with the ones the court recites below, adequately explain today's decision concerning plaintiffs' pending preliminary injunction application. Because the court has decided, however, to enter a default judgment against pro se defendant Lavalle, it will set out in some detail the background facts and procedural history that are relevant to today's decisions concerning the other pending motions.
On several occasions during the course of this acrimonious litigation, plaintiffs have attempted to obtain discovery from Lavalle. On September 10, 2001 they filed a first motion to compel, in which they complained about Lavalle's failure to provide discovery. Following a hearing, which Lavalle did not attend, the magistrate judge on October 15, 2001 issued an order requiring Lavalle to comply fully with his discovery obligations and to pay sanctions of $450. See Mag. Judge Oct. 15, 2001 Order at 2. The order specified certain deadlines for Lavalle to comply with various aspects of the order.
When Lavalle did not comply, plaintiffs filed a November 13, 2001 motion for contempt and sanctions and December 5, 2001 supplemental motion for contempt. The magistrate judge set a hearing for December 11, 2001, which Lavalle did not attend. After the hearing, the magistrate judge filed a certification of facts and recommendation that the court issue an order for Lavalle's arrest and order him to appear on a date certain to show cause why he should not be held in civil and criminal contempt. The magistrate judge also recommended that Lavalle's bond be set at $2,500. See Mag. Judge Dec. 11, 2001 Order at 4-5. He also recommended that the court order Lavalle to pay the sum of not less than $2,610.00 in additional attorney's fees and expenses, that he be confined to a jail-type facility until he purges himself of contempt by complying fully with the magistrate judge's October 15, 2001 order, that he pay the sum of $2,610.00 and any additional attorney's fees awarded to plaintiffs at the contempt hearing, and that he be fined for criminal contempt in an amount not to exceed $500. Id. at 5.
Lavalle did not file objections to the magistrate judge's December 11, 2001 certification of facts and recommendation and, on January 4, 2002 the court by order directed the clerk of court to issue a warrant for Lavalle's arrest so that he can be brought before the court for a hearing on plaintiffs' November 13, 2001 motion for contempt and sanctions and December 5, 2001 supplement to motion for contempt and sanctions.
After all these proceedings were conducted, Lavalle filed motions to allow him leave to comply with any missed discovery time lines, to continue any pending hearings, to continue the trial of the case, or to reconsider, set aside, or stay. The magistrate judge on March 4, 2002 recommended that the court deny Lavalle's motion for reconsideration, without prejudice to his presenting evidence at a show cause hearing that established that he had not engaged in conduct that warrants holding him in civil or criminal contempt. See Mag. Judge Mar. 4, 2002 Order at 3. The court on March 13, 2002 filed an order denying Lavalle's motions to allow him leave of court for any time lines missed and for continuance of any pending hearings. The court set his motion for continuance of trial for a hearing.
Lavalle appeared at the hearing. After considering each side's positions, the court made oral rulings on the hearing record and entered a March 29, 2002 order that inter alia addressed Lavalle's noncompliance with discovery obligations and prior magistrate judge orders. The court recalled the arrest warrant; ordered that, no later than 15 days after the order was filed, Lavalle serve on plaintiffs' counsel full, complete, and legible responses, in the form required by Fed.R.Civ.P. 33(b) (except that he could not make objections because they had been waived), to all interrogatories that plaintiffs served on him on or about June 20, 2001 and that were the subject of a motion to compel decided by the magistrate judge; ordered that, no later than 21 days after the order was filed, Lavalle produce and serve by mail or by other reasonable means on plaintiffs' counsel, at his law office in Dallas, Texas, (a) photocopies of all documents that are responsive to plaintiffs' Fed.R.Civ.P. 34 requests for production of documents that they served on him on or about June 20, 2001 and that were the subject of a motion to compel decided by the magistrate judge, or (b) a sworn, written response that no such documents exist; and ordered that, no later than 7 days after this order was filed, Lavalle tender to plaintiffs' counsel the sum of $3,510, representing sanctions awarded by the magistrate judge and by the court.
Plaintiffs thereafter filed a motion requesting inter alia that the court order Lavalle to appear at the United States Courthouse in Dallas, Texas for his deposition and pay the sanctions awarded by the court in a March 29, 2002 order. By May 20, 2002 order the court granted the motion in relevant part. It held that plaintiffs had the right to take Lavalle's deposition in Dallas, the situs of the instant suit and that, because of the acrimony between the parties, it was necessary that the deposition be conducted at the United States Courthouse in Dallas, Texas. The court granted plaintiffs' motion to compel and ordered Lavalle to appear for his deposition at the United States Courthouse in Dallas, Texas, at the date and time on any business day that plaintiffs specified between May 28, 2002 and June 24, 2002. The court also granted plaintiffs' motion to compel Lavalle to pay the sanctions awarded by the court in its March 29, 2002 order. The court pointed out that, on March 29, 2002 Lavalle stated in open court that he was prepared to pay the court-ordered sanctions during the hearing. The court, however, allowed him seven days to do so. See Mar. 29, 2002 Order at 2, ¶ 4. Lavalle later submitted a check to plaintiffs' counsel that is payable to "Bear Stearns" but that references on the "For" line "The criminals at Bear Stearns EMC Mortgage." See Mot. Compel Ex. 6. He also advised plaintiffs' counsel that he was out of checks and would prefer to pay the sanctions by wire transfer. The court concluded that plaintiffs were entitled to receive payment of the sanctions awarded on March 29, 2002 in the form of a check or money order that contained no characterizations, assertions, or rhetoric. It ordered Lavalle, no later than May 28, 2002, to pay by check or money order, payable to Fulbright Jaworski, L.L.P., the sum of$3,510. The court also awarded plaintiffs their attorney's fees in bringing the motion, in an amount to be determined later, after submission of proof. Lavalle sought relief from this order, which the court denied on June 11, 2002.
When Lavalle failed to comply with the court's orders, plaintiffs moved on June 20, 2002 to compel, for contempt, and for sanctions. The court stated in a July 16, 2002 order that it would not consider holding defendant in contempt. It set the balance of the motion for a hearing on August 16, 2002. Lavalle failed to appear. In an order filed the same day, the court awarded plaintiffs reasonable and necessary attorney's fees in the sum of $6,265.00, as provided in the court's May 20, 2002 order. Concerning plaintiffs' June 20, 2002 motion to compel, for contempt, and for sanctions, the court ordered Lavalle to appear for his deposition on Friday, October 18, 2002 at 9:00 a.m. at the United States Courthouse, 1100 Commerce Street, Dallas, Texas, Chambers of Wm. F. Sanderson, Jr., United States Magistrate Judge. The order stated that
Lavalle's wilful failure to appear for his deposition as ordered will result in striking his pleadings and entering a default judgment without further notice.
Aug. 16, 2002 Order at 2 (emphasis in original). The court also awarded plaintiffs their reasonable and necessary attorney's fees in the sum of $4,447.50 and fees of $255.00 for the actual costs incurred for the videographer and court reporter, for a total of $4,702.50 for their fees incurred in connection with Lavalle's failure to attend his deposition noticed for May 29, 2002 and for prosecuting their June 20, 2002 motion to compel and for sanctions. The order stated that, if Lavalle did not pay this sum in full by the date of his October 18, 2002 deposition, the award would be enforceable against him by judgment or by other appropriate court order. The court also denied defendant's June 28, 2002 motion for protective order and return of money in court registry.
When Lavalle failed to pay the sanctions award, plaintiffs filed their September 20, 2002 second motion to compel payment of sanctions award that is the subject of today's decision. When he failed to appear as ordered for his deposition, plaintiffs sought and obtained leave to file a second supplemental complaint seeking a temporary restraining order and preliminary injunction. The court denied the application for a temporary restraining order, but the preliminary injunction application is now pending and is decided today. They also filed on November 11, 2002 their motion for contempt and for sanctions and emergency motion to compel defendant's deposition that is now pending for decision.
During approximately the same time frame, Lavalle has filed the October 15, 2002 motion for clarification of injunctive order, October 15, 2002 motion for clarification of order regarding deposition and for dismissal of plaintiffs' amended complaint, and November 20, 2002 emergency motion for protective order, for leave of court to file amendment to brief and scheduling order to brief court on a motion for sanctions and contempt upon motion of the defendant or direction of the court that are now ripe for decision.
II
The court is authorized to sanction parties who do not obey discovery orders. See Fed.R.Civ.P. 37(b)(2). It has afforded Lavalle ample notice and opportunity to comply with several orders, including ones that required him to appear for his deposition. The court's August 16, 2002 order explicitly warned Lavalle that his wilful failure to appear for his deposition as ordered would result in striking his pleadings and entering a default judgment without further notice. This relief is explicitly authorized by Rule 37(b)(2)(C). The court finds that Lavalle wilfully failed to appear as ordered on October 18, 2002 for his deposition. He has also consistently and wilfully engaged in a pattern of ongoing behavior in which he has failed to comply with the court's orders. His pleadings are therefore stricken and a default judgment is entered against him.
The court sets a hearing on plaintiffs' damages for Friday, January 24, 2003 at 2:00 p.m. Lavalle is entitled to attend this hearing if he desires to oppose the relief requested. The court is setting the hearing with substantial advance notice to Lavalle so that he can make appropriate arrangements to attend if he intends to do so. In addition to awarding damages on the merits of plaintiffs' claims, the court will also incorporate in its judgment all attorney's fees and costs heretofore awarded to plaintiffs that remain unpaid, and additional attorney's fees and costs that plaintiffs establish by evidence that they have since incurred in bringing the prior discovery motions, and it will also incorporate in a permanent injunction the relief granted in the court's preliminary injunction filed October 27, 2000 ("First Injunction") and the preliminary injunction filed today.
Accordingly, plaintiffs' September 20, 2002 second motion to compel payment of sanctions award is granted to the extent set forth in this ruling and is denied to the extent plaintiffs seek an order compelling Lavalle to make a payment rather than a judgment that they must collect according to usual lawful means. Plaintiffs' November 11, 2002 motion for contempt and for sanctions and emergency motion to compel defendant's deposition is granted to the extent set forth and is otherwise denied.
The court denies Lavalle's October 15, 2002 motion for clarification of order regarding deposition and for dismissal of plaintiffs' amended complaint and his November 20, 2002 emergency motion for protective order, for leave of court to file amendment to brief and scheduling order to brief court on a motion for sanctions and contempt upon motion of the defendant or direction of the court. Neither motion has merit.
III
Plaintiffs have filed an application for injunctive relief in addition to what the court granted in the First Injunction. Lavalle has filed an October 15, 2002 motion for clarification of that injunction. The application is before the court on Rule 43(e) materials. The court grants the application in part and sets out its findings of fact and conclusions of law. See Rule 52(a).
A
A preliminary injunction is an extraordinary remedy that should be granted only when the movant clearly demonstrates: (1) a substantial likelihood of prevailing on the merits; (2) a substantial threat of irreparable injury if the injunction is not granted; (3) that the threatened injury outweighs any harm that may result from the injunction to the nonmovant; and (4) that granting the injunction will not disserve the public interest. See Jones v. Bush, 122 F. Supp.2d 713, 718 (N.D.Tex.) (Fitzwater, J.) (citing Ruscitto v. Merrill Lynch, Pierce, Fenner Smith, Inc., 777 F. Supp. 1349, 1353 (N.D.Tex.) (Fitzwater, J.), aff'd, 948 F.2d 1286 (5th Cir. 1991) (per curiam) (table)), aff'd, 244 F.3d 134 (5th Cir. 2000) (per curiam) (table), cert. denied, 531 U.S. 1062 (2001). "A preliminary injunction `is an extraordinary and drastic remedy, not to be granted routinely, but only when the movant, by a clear showing, carries the burden of persuasion.'" Id. (quoting White v. Carlucci, 862 F.2d 1209, 1211 (5th Cir. 1989); Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 997 (5th Cir. 1985)).
B
Lavalle has established additional web sites that he desires to use or is currently using to collect information against and post messages regarding plaintiffs. One web site — "EMCMortgageComplaints.Com" — is also the subject of plaintiffs' current preliminary injunction application. Plaintiffs also ask the court to enjoin Lavalle's use of an e-mail address, "EMCForclosure@aol.com."
The web sites that are the subject of his request for clarification are: EMCMortgageComplaints.Com; EMCMortgageFrauds.Com; EMCMortgageScams.Com; EMCMortgageCriminals.Com; BearStearnsShareholders.Com; BearStearnsComplaints.Com; BearStearnsFrauds.Com; BearStearnsCriminals.Com.
Plaintiffs' prior preliminary injunction application also asked the court to prohibit Lavalle's use of various domain names and an e-mail address.
The First Injunction enjoined Lavalle from using certain specific domain names and "any domain name that incorporates plaintiffs' names or marks, and any domain name that is confusingly similar to plaintiffs' names or marks." Consistent with 15 U.S.C. § 1125, the First Injunction does not prohibit Lavalle "from registering, trafficking in, or using a domain name, e-mail address, or other form of communication that incorporates plaintiffs' names or marks but that is unmistakably critical of plaintiffs and thus does not present a likelihood of confusion." Although Lavalle is permitted to use a web site to criticize Bear Stearns, see Bally Total Fitness Holding Corp. v. Faber, 29 F. Supp.2d 1161, 1165 (C.D.Cal. 1998), he may not do so by using a domain name that is deceptive, confusingly similar, or identical to those whom he is criticizing, see Morrison Foerster v. Wick, 94 F. Supp.2d 1125, 1131 (D.Colo. 2000). This is so because, "even if users will easily recognize, upon reaching defendants' web site, that it is only a parody, the use of plaintiffs' mark as the site's domain name . . . creates initial interest confusion[.]" OBH, Inc. v. Spotlight Magazine, Inc., 86 F. Supp.2d 176, 191 (W.D.N.Y. 2000). This type of trademark infringement is particularly problematic on the Internet because a common way to locate a company's web site is to type in an acceptable version of the corporate name, followed by the suffix ".com.," See Sporty's Farm v. Sportsman's Mkt., 202 F.3d 489, 493 (2d Cir. 2000).
Although Lavalle will not violate the First Injunction by using web sites that contain the names of Bear Stearns and EMC accompanied by words or descriptions that are unmistakably critical of EMC or Bear Stearns, his use of the web sites EMCMortgageComplaints.Com, BearStearnsShareholders.Com, and BearStearnsComplaints.Com can be reasonably viewed to be so "deceptive, confusingly similar, or identical" as to be prohibited by 15 U.S.C. § 1125. This is so because a corporation might establish an Internet web site for the use of its shareholders, or might provide an electronic means to facilitate the communication of comments and complaints that it desires to solicit regarding its business operations. The use of a company's trademark with words such as "complaints," "shareholders," or other words that are not unmistakably critical cannot be said to lessen the initial-interest confusion against which the law protects. See OBH, Inc., 86 F. Supp.2d at 191. The court therefore clarifies that the First Injunction enjoins the use or posting of MCMortgageComplaints.Com, BearStearnsShareholders. Coin, and BearStearnsComplaints.Com by Lavalle, his officers, agents, servants, employees, and attorneys, and all those in active concert or participation with him who receive actual notice of this order by personal service or otherwise. In view of this clarification, the court need not grant plaintiffs' current preliminary injunction application to the extent such relief is requested, and plaintiffs are not entitled to additional relief concerning web sites that are unmistakably critical of Bear Stearns and EMC (i.e., EMCMortgageFrauds.Com; EMCMortgageScams. Coin; EMCMortgageCriminals.Com; BearStearnsFrauds. Coin; and BearStearnsCriminals.Com).
C
Plaintiffs also apply for relief enjoining Lavalle from using the e-mail address "EMCForeclosure@aol.com." The court concluded in its October 27, 2000 memorandum opinion that the Anticybersquatting Consumer Protection Act ("ACPA") did not apply to e-mail addresses and pertained only to domain names. See Oct. 27, 2000 Mem. Op. at 6 n. 4. Therefore, it denies plaintiffs' request to the extent made under the ACPA.
Plaintiffs also seek to enjoin use of this e-mail address under the trademark infringement provisions of the Lanham Act, 15 U.S.C. § 1114(1), and for trademark dilution under 15 U.S.C. § 1125(c). To establish trademark infringement, plaintiffs must prove that, without their consent, Lavalle did "use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive." 15 U.S.C. § 1114(1)(a). Plaintiffs have satisfied the requirements of § 1114(1)(a).
Because the court is deciding plaintiffs' application under 15 U.S.C. § 1114(1), it need not proceed under 15 U.S.C. § 1125(c). Were the court to reach § 1125(c), the result and relief granted would likely be substantially similar to the holdings today.
First, plaintiffs are the owners of the "EMC Mortgage" mark. As the court wrote in its memorandum in support of the First Injunction:
"Marks are categorized as generic, descriptive, suggestive, or arbitrary or fanciful." Lawfinders Assocs., lnc. v. Legal Research Ctr., 65 F. Supp.2d 414, 425 (N.D.Tex. 1998) (Fitzwater, J.) (citing Union Nat'l Bank of Tex., Laredo, Tex. v. Union Nat'l Bank of Tex., Austin, Tex., 909 F.2d 839, 844 (5th Cir. 1990)), aff'd, 193 F.3d 517 (5th Cir. 1999) (per curiam) (table). "Fanciful and arbitrary marks are the strongest types of marks." Id. (citing Little Caesar Enters., Inc. v. Pizza Caesar, Inc., 834 F.2d 568, 571 (6th Cir. 1987)); Minturn Adver., Inc. v. Hermsen Design Assocs., inc., 728 F. Supp. 430, 432 (N.D. Tex. 1990) (Fitzwater, J.)). "[A]rbitrary and fanciful terms or phrases are those which are either coined words or words which are not suggestive of the product or service." Id. at 426 (quoting Union Nat'l Bank, 909 F.2d at 845). "The marks `Kodak' and `Xerox' are such marks." Id. (quoting Minturn Adver., 728 F. Supp. at 432). "A `fanciful' mark is a combination of letters or other symbols signifying nothing other than the product or service to which the mark has been assigned . . . ." Id. (quoting Worthington Foods, Inc. v. Kellogg Co., 732 F. Supp. 1417, 1433 (S.D.Ohio 1990)). "Arbitrary `refers to ordinary words which do not suggest or describe the services involved.'" Id. (quoting Union Nat'l Bank, 909 F.2d at 845). "The greatest protection extends to marks that are purely arbitrary or fanciful and bear no relation to the products or services sold under the mark." Id. (quoting Minturn Adver., 728 F. Supp. at 432). "Bear Stearns" and "EMC" are trademarks and/or service marks that qualify as "marks" under the [Anticybersquatting Consumer Protection Act]. "Bear Stearns" and "EMC" are distinctive because they are arbitrary marks that do not of themselves indicate anything about the products and services they denote. Cf EMC Corp. v. Hewlett-Packard Co., 59 F. Supp.2d 147, 152 (D.Mass. 1999) (holding that another EMC Corp.'s trademark EMC symbol was protected from infringement in the computer industry).
Oct. 27, 2002 Mem. Op. at 8-9. Because the term "EMC" is fanciful and is not itself descriptive of the services provided by the company, EMC Mortgage is considered a strong mark. See Exxon Corp. v. Tex. Motor Exch., 628 F.2d 500, 504 (5th Cir. 1980). Thus EMC is afforded more protection than other, more descriptive and general terms would have.
Lavalle's use of an e-mail address that contains the strong mark "EMC," together with a more general term similar to the "Mortgage" portion of the mark, is likely to cause confusion or mistake, or to deceive consumers in the marketplace, regarding the products and services. See, e.g., Sunbeam Furniture Corp. v. Sunbeam Corp., 191 F.2d 141, 144-45 (9th Cir. 1951); Classified Ventures, L.L.C. v. Softcell Mktg., Inc., 109 F. Supp.2d 898, 900-01 (N.D.Ill. 2000) (holding that unauthorized use of service mark "cars.com" in sender's address of "spam" e-mail message was likely to and actually did cause confusion by recipients that "cars.com" was actual sender of the solicitation). Lavalle's use of the e-mail address satisfies the use in commerce requirement. See Steele v. Bulova Watch Co., 344 U.S. 280, 283 (1952) ("It is well settled that the scope of `in commerce' as a jurisdictional predicate of the Lanham Act is broad and has a sweeping reach."). Further, Lavalle is offering a service, specifically, the collection of information regarding plaintiffs and the use of such information in various ways, that brings his actions under § 1114(1)(a).
Because each of these tests is met, the court finds that there is a substantial likelihood of success on the merits. The court further finds that there is a substantial likelihood of irreparable injury to plaintiffs if the injunction is not granted, the threatened injury outweighs any damage the order might cause to the defendant and the injunction will not disserve the public interest. Therefore, the court grants a preliminary injunction enjoining Lavalle from using the e-mail address "EMCForeclosure@aol.com" and any e-mail address that incorporates the strong mark "EMC." The injunction does not, however, enjoin Lavalle from using plaintiffs' marks in a way that makes it unmistakable that Lavalle is not the owner of the marks or from using their marks in an e-mail address that is unmistakably critical of one or both plaintiffs.
For the foregoing reasons, a preliminary injunction will be filed today.