ArcelorMittal USA LLC v. Arillotta et al
Filing
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MEMORANDUM OPINION AND ORDER granting in part and denying in part 14 Motion for Default Judgment. Default judgment shall be entered against Defendants Arillotta, NMC, and Global on Counts I, III, and IV of the Complaint. Defendants Arillotta, N MC, and Global along with their officers, agents,and employees are permanently enjoined from: (1) forging contracts with ArcelorMittal; (2) presenting forged contracts to any other company; (3) misrepresenting an association or affiliation with Arcel orMittal; (4) misusing ArcelorMittals registered trademarks; and (5) continuing to contact ArcelorMittal employees. Reasonable attorneys fees, expenses, and costs will be awarded pending my receipt of ArcelorMittals bills and/or a hearing on the mat ter. This case remains pending as to Counts II and V against all defendants, and Counts I, II, and IV against Arillotta Enterprises, LLC, with leave for ArcelorMittal to refile its request if it can establish therequired elements consistent with this order. Signed by Chief Judge Philip P Simon on 11/17/2015. (rmn)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
ARCELORMITTAL USA, LLC
Plaintiff,
v.
ALBERT ARILLOTTA,
GLOBAL DEMOLITION AND
RECYCLING, LLC,
NMC METALS CORPORATION, and
ARILLOTTA ENTERPRISES, LLC.,
Defendants.
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NO. 2:15-CV-00239
MEMORANDUM OPINION AND ORDER
ArcelorMittal USA LLC (“ArcelorMittal”) seeks a default judgment against
Albert Arillotta (“Arillotta”); Global Demolition and Recycling, LLC (“Global”); NMC
Metals Corp., LLC (“NMC”); and Arillotta Enterprises, LLC on the grounds that
Defendants failed to respond to or participate in this litigation in any way. (DE 14.) For
the reasons outlined below, the motion is granted-in-part and denied-in-part, and I will
order that ArcelorMittal produce its legal bills for my in camera review to determine its
attorney fee award.
Background
ArcelorMittal filed its complaint in this matter on June 18, 2015. (DE 1.)
ArcelorMittal served the summons and complaint on Arillotta and each of his
defendant companies on July 11, 2015. (DE’s 6-9.) Arillotta and the defendant
companies failed to appear, plead, or otherwise defend the lawsuit as provided by the
Federal Rules of Civil Procedure. Accordingly, ArcelorMittal filed an Application for
Clerk to Enter Default of Defendants on August 11, 2015 (DE 10), which the clerk
entered on August 18, 2015 (DE 11). As a result, ArcelorMittal filed this motion for
default judgment (DE 14), to which Arillotta and the defendant companies have not
responded, despite being served with the motion twice (DE 16). ArcelorMittal seeks
injunctive relief and an award of attorneys fees of $46,004.62. (DE 14.) ArcelorMittal has
moved for default judgment for only Counts I-IV of its complaint, so I will not address
Count V.
According to the allegations in the complaint – which I must take as true at this
point – in October of 2012, ArcelorMittal sought proposals for the installation of a pig
iron casting machine at its Burns Harbor steelmaking facility. (DE 1 at 3.) Arillotta, on
behalf of his company Arillotta Enterprises, Inc., submitted a proposal for the
construction and installation of the pig iron casting machine. (Id.) ArcelorMittal did not
accept Arillotta’s proposal, nor did it expressly or implicitly give any permission for
Arillotta to represent that he had any affiliation with ArcelorMittal. (Id.)
Some time later, Arillotta contacted a third party – Economy Industrial – to enter
into an agreement in which Economy Industrial would help Arillotta design and
manufacture a pig iron casting machine. (Id. at 4.) Arillotta represented that NMC
Metals Corporation – a company in which Arillotta is both President and Director (Id. at
2)– had entered into a contract with ArcelorMittal to install a pig iron casting machine.
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(Id. at 4.) This was untrue. (Id.) To support the lie, Arillotta created a false contract
between NMC and ArcelorMittal that contained the forged signatures of Michael
Rippey, purportedly as the “North American President,” and Louis Schorsh,
purportedly the“World Wide President” of “ArcelorMittal Europe.” (DE 1 at 4.)
Economy Industrial then agreed to manufacture and sell a pig iron casting machine to
NMC. (Id.) Ultimately, Arillotta was unable to pay Economy Industrial for its work,
but claimed that ArcelorMittal would wire the payment. (Id. at 4-5.) Arillotta knew that
Michael Rippey and Louis Schorsh did not accept or sign his proposal to install a pig
iron casting machine and further knew that ArcelorMittal would not pay Economy
Industrial for any work under its contract with NMC. (Id. at 5.) Economy Industrial
eventually learned that NMC did not have a contract with ArcelorMittal and as a result
of Arillotta’s failure to pay, it made demands upon ArcelorMittal. (Id.)
The misrepresentations didn’t end there. Arillotta reached out to additional
companies, misrepresenting his and his companies’ relationships with ArcelorMittal.
For example, in January of 2015, while attempting to get financing from Versant
Funding LLC, Arillotta misrepresented that “ArcelorMittal USA Burns Harbor” had
agreed to purchase $2,244,442.50 of pig iron from NMC. (DE 1 at 5.) To support this lie,
Arillotta fabricated an invoice and purchase order between ArcelorMittal and NMC for
the pig iron, and further forged Mike Rippey’s signature on the purchase order. (Id. at
5-6.)
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Arillotta also tried to defraud another third party, CapitalPlus Equity, LLC, into
giving him a loan by representing that Global Recycling & Demolition LLC had entered
into a $7,500,000 contract with “ArcelorMittal USA” to demolish a power plant on its
property in Cleveland, Ohio. (DE 1 at 6.) Here again, Arillotta provided CapitalPlus
with forged purchase orders, proposals and invoices allegedly executed between Global
and ArcelorMittal. (Id.)
ArcelorMittal alleges that each of the misrepresentations made by Arillotta were
made individually and in his capacity as principal, employee and agent of the
defendant companies, Arillotta Enterprises, Global Recycling & Demolition, LLC and
NMC Metals Corporation. (Id.) Importantly, the false contracts, purchase orders, and
invoices all bear ArcelorMittals’ name and/or trademarks. (Id.)
Discussion
I may enter default judgment under Rule 55(b)(2) once the clerk has entered a
default against the defendant under Rule 55(a). E.g., Wolf Lake Terminals v, Mut. Marine
Ins. Co., 433 F. Supp. 2d 933, 941 (N.D. Ind. 2005). Under Rule 55(a), the clerk is to
default a party against whom a judgment is sought when that party has failed to plead
or otherwise defend. Fed. R. Civ. P. 55(a). This entry is recognition of the fact that a
party is in default for a failure to comply with the rules. Since the Clerk has already
entered default against Defendant here (DE 11), I may enter a default judgment under
Rule 55(b)(2).
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While Federal Rule of Civil Procedure 55(b) gives district courts the power to
enter default judgment, they must exercise discretion when doing so. See O’Brien v. R.J.
O’Brien & Assocs., Inc., 998 F.2d 1394, 1398 (7th Cir. 1993); Davis v. Hutchins, 321 F.3d
641, 646 (7th Cir. 2003). “As a general rule, a default judgment establishes, as a matter of
law, that defendant[] [is] liable to plaintiff as to each cause of action alleged in the
complaint.” O’Brien, 998 F.2d at 1404 (citation and internal quotation marks omitted).
All well-pled allegations in the complaint are presumed true when ruling on a request
for default judgment. Black v. Lane, 22 F.3d 1395, 1399 (7th Cir. 1994). Thus, if the
complaint establishes the requisite elements of liability on a claim, a plaintiff is entitled
to relief for that claim. See In re Catt, 368 F.3d 789, 793 (7th Cir. 2004) (“Once the default
is established . . . the plaintiff must still establish the entitlement to the relief he seeks.”).
Courts may consider a number of factors when deciding a motion for default
judgment. Those factors include the amount of money potentially involved, whether
material issues of fact or issues of substantial public importance are present, whether
the default is largely technical, whether plaintiff has been substantially prejudiced by
the delay involved, and whether the grounds for default are clearly established or are in
doubt. 10A Wright et al., Fed. Prac. & Proc. Civ. 3d § 2685 (3d ed. 2007); see Cameron v.
Myers, 569 F. Supp. 2d 762, 764 (N.D. Ind. 2008).
In this case, the grounds for default regarding most of ArcelorMittal’s claims are
clearly established. First, the default is not simply a technicality, as Arillotta and the
defendant companies have not pleaded or appeared in this matter since the complaint
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was filed in June 2015. Arillotta and the defendant companies have shown no intention
of responding to the complaint, nor participating in this case in any way, despite being
served with the complaint in July 2015 and being served with this motion in September
2015. Arillotta and the defendant companies cannot be allowed to completely ignore
this suit. Second, the amount of money requested does not strike me as outlandish,
although the exact amount of attorneys fees still needs to be established. Importantly,
ArcelorMittal isn’t actually seeking any monetary damages beyond its attorneys fees
and expenses. These factors weigh in favor of default judgment.
My next task, then, is to determine whether ArcelorMittal’s alleged facts meet the
elements required for each of its legal claims. In re Catt, 368 F.3d at 793. In support of
its claims, ArcelorMittal attached the alleged false contract, invoices, and purchase
orders created by Arillotta. [DE 1-1, 1-2, 1-3.] ArcelorMittal claims that Arillotta and the
defendant companies’ deliberate misrepresentation constitute:
(1) False designation or origin and false endorsement in violation of Section 43(1)
of the Lanham Act, 15 U.S.C § 1125 (a);
(2) Tarnishment and dilution of ArcelorMittal’s famous marks in violation of
Section 43(c) of the Lanham Act, 15 U.S.C. § 1125 (c);
(3) Deception as defined by Indiana Code 35-43-5-3(a)(2);
(4) Forgery as defined by Indiana Code 35-43-5-2(b); and
(5) Willful deceptive trade practices under the Uniform Deceptive Trade
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Practices Act.
(DE 1 at 7-10.)
ArcelorMittal has not moved on Count V, willful deceptive trade practice under
the Uniform Deceptive Trade Practices Act, so I will not address that claim. I’ll discuss
each of the remaining counts in turn.
False Designation or Origin and False Endorsement
Under Section 43(a) of the Lanham Act, Defendants will be liable to Arcelormittal
if it can show that Defendants used its name in commerce so as to “deceive as to . . . the
origin, sponsorship, or approval” of Defendants’ goods or services. 15 U.S.C. §
1125(a)(1). As a threshold matter, to state a claim under Section 43(a), a plaintiff must
show that it has a protectable mark. Meridian Mut. Ins. Co. v. Meridian Ins. Group, 128
F.3d 1111, 1115 (7th Cir. 1997). Registration is prima facie evidence of a valid,
protectable mark. Promatek Indus., LTD v. Equitrac Corp., 300 F.3d 808, 812 (7th Cir.
2002). “False endorsement occurs when a person’s identity is connected with a product
or service in such a way that consumers are likely to be misled about that person’s
sponsorship or approval of the product or service.” Stayart v. Yahoo! Inc., 651 F.Supp.2d
873, 880 (E.D.Wis. 2009.) In other words, ArcelorMittal wins if it can show that
Defendants falsely used ArcelorMittal’s name in an effort to convince others that
ArcelorMittal sponsored or approved of Defendants’ services.
Here, there is no question that ArcelorMittal at least presumptively has a
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protectable mark, as “ArcelorMittal” is a registered trademark. (DE 15-2.)
ArcelorMittal alleges, and I must take as true, that Defendant Arillotta individually and
on behalf of Defendant NMC prepared a false contract -- forging the signatures of two
of ArcelorMittal’s employees – that demonstrated a relationship between the parties
that didn’t exist. ArcelorMittal further alleges that Arillotta misrepresented to another
company that Defendant Global had entered into a contract with it, again providing
forged purchase orders and invoices between Global and ArcelorMittal. Clearly the
contracts, purchase orders, and invoices in both instances indicated to others that
ArcelorMittal sponsored or approved of Defendants’ services, or else it wouldn’t have
entered into such agreements. And each of these documents bore ArcelorMittal’s marks.
As ArcelorMittal’s claims meet the required elements, I will grant it default judgment
on this count against Arillotta, NMC, and Global.
I will not, however, grant default judgment against Arillotta Enterprises, LLC.
Although ArcelorMittal alleges generally that “Arillotta and the other defendant
companies acted in concert and actively participated in committing the wrongful acts
alleged herein” (DE 1 at 2), it doesn’t actually allege any specific wrongdoing on
Arillotta Enterprises’ part. The only allegation is that Arillotta Enterprises submitted
the initial rejected proposal. There is no allegation nor indication that its name appears
on any of the forged or false documents, or that it was actually involved in some other
way in the misrepresentations beyond the conclusory statement above. Without more, I
can’t enter default judgment against this entity.
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Tarnishment and Dilution
To demonstrate trademark dilution under the Section 43(c) of the Lanham Act,
ArcelorMittal must show that Defendants used its famous mark or trade name in
commerce in such a way as to “cause dilution of the distinctive quality of the mark.” 25
U.S.C. § 1125(c)(1). One way of showing dilution is to demonstrate the mark has been
tarnished such that “a junior mark’s similarity to a famous mark causes consumers
mistakenly to associate the famous mark with the defendant’s inferior or offensive
product.” Eli Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456, 466 (7th Cir. 2000).
ArcelorMittal alleges that the same false contracts, purchase orders and invoices
discussed above have tarnished its mark because its registered trademarks “are now
associated with Defendants’ fraudulent activity.” (DE 15 at 11.) But that’s not what a
tarnishment claim is geared towards. Instead, tarnishment requires that Defendants’
use of ArcelorMittal’s mark has caused someone to associate some inferior product or
service of Defendants’ with ArcelorMittal. I don’t see how that’s happened here.
Defendants didn’t claim ArcelorMittal’s services to be their own; instead, they claimed
that ArcelorMittal wanted Defendants’ services, which is covered by the claim above.
And even if tarnishment can cover this type of conduct, I fail to see how ArcelorMittal’s
trademark has been tarnished by Defendants or is likely to be. ArcelorMittal presents
no evidence of this, and my sense is that the individuals and companies who view
Defendants negatively because of the fraud they’ve committed are also aware that
ArcelorMittal was a victim of that fraud. Of course Defendants’ actions are abhorrent,
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but without something to indicate that ArcelorMittal’s mark is likely to be harmed, I
can’t enter judgment here because there’s nothing to support that element beyond
ArcelorMittal’s say-so.
Deception and Forgery under Indiana Law
ArcelorMittal is allowed to bring a civil action against a defendant who has
committed criminal deception and forgery. Ind. Code § 34-24-3-1. Under Indiana law,
criminal deception is defined as “knowingly or intentionally mak[ing] a false or
misleading written statement with intent to obtain property, employment, or
educational opportunity.” Ind. Code. § 35-43-5-3(a)(2). Forgery is defined as, in
relevant part, as “possess[ing] a written instrument in such a manner that it purports to
have been made: (1) by another person; (2) at another time; (3) with different provisions;
or (4) by authority of one who did not give authority.” Ind. Code. § 35-43-5-2(d).
Clearly, the false contracts, purchase orders, and invoices discussed above bearing
forged signatures of ArcelorMittal employees constitute such behavior. ArcelorMittal
states unequivocally that it entered into no agreements with Defendants, nor provided
any authority to Defendants to represent they had any relationship with ArcelorMittal.
It also flatly denies that any of its employees signed the documents allegedly bearing
their signatures. I will therefore enter default judgment against Arillotta, NMC, and
Global on the deception and forgery counts. I will not, however, enter default judgment
against Arillotta Enterprises for the same reasons previously discussed above.
Claim for Attorneys’ Fees
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ArcelorMittal seeks attorneys’ fees pursuant to the Indiana Code and the
Lanham Act. (DE 15 at 13.) The Indiana statute on deception and forgery requires the
recovery of reasonable attorneys’ fees. Ind. Code § 34-24-3-1. “Reasonable attorney fees
and expenses under Ind. Code § 34-24-3-1 is mandatory....” Integrity Sales & Service, Inc.
v. Crabbe, No. 1:14-cv-367, 2015 WL 631468, at *4 (N.D. Ind. Feb. 12, 2015). Since I am
entering default judgment against Arillotta, NMC, and Global on the deception and
forgery counts, ArcelorMittal is entitled to reasonable attorneys fees and expenses on
these counts. Further, the Lanham Act allows for recovery of attorney fees in exceptional
cases. 15 U.S.C.A § 1117(a) (emphasis added). “ ‘[E]xceptional’ cases encompass cases
in which the acts of infringement are ‘malicious, fraudulent, deliberate, or willful.’ ”
BASF Corp. v. Old World Trading Co., Inc., 41 F.3d 1081, 1099 (7th Cir.1994). Here, based
on uncontested allegations of Arillotta and defendant companies’ deliberate
misrepresentations, I find this is an “exceptional case” in which reasonable attorneys’
fees should be awarded.
Normally, upon considering a motion for default judgment, a court must have a
hearing to determine damages. See Dundee Cement Co. v. Howard Pipe & Concrete Prods.,
Inc., 722 F.2d 1319, 1323 (7th Cir.1983). In cases where damages are capable of
ascertainment from definite figures contained in the documentary evidence or in
detailed affidavits, however, such a hearing is unnecessary. See O'Brien, 998 F.2d at 1404
(citing Dundee Cement Co., 722 F.2d at 1323). ArcelorMittal submits an affidavit from its
attorney containing a statement of the amount billed for each task for which
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ArcelorMittal seeks fees, along with the reasonable hourly rates for senior partners,
junior partners, and associates. (DE 15-6.) However, ArcelorMittal has not provided me
with the hours spent on each task nor whether a senior partner, junior partner, or
associate performed the tasks. It does, however, state that it is willing to provide its
detailed bills to me for an in camera review. Since I can’t ascertain the reasonableness of
those fees without the bills, I therefore ORDER ArcelorMittal to provide me with its
detailed billing for my review. Those bills should hopefully allow me to determine a
reasonable fee award without conducting a hearing. If after that review, however, I still
am not able to determine a reasonable fee award, I will schedule a hearing by separate
order.
Conclusion
For the foregoing reasons, Plaintiff’s Motion for Entry of Default Judgment (DE
14) is GRANTED-IN-PART and DENIED-IN-PART. Default judgment shall be
entered against Defendants Arillotta, NMC, and Global on Counts I, III, and IV of the
Complaint. Defendants Arillotta, NMC, and Global along with their officers, agents,
and employees are permanently enjoined from: (1) forging contracts with ArcelorMittal;
(2) presenting forged contracts to any other company; (3) misrepresenting an
association or affiliation with ArcelorMittal; (4) misusing ArcelorMittal’s registered
trademarks; and (5) continuing to contact ArcelorMittal employees. Reasonable
attorneys’ fees, expenses, and costs will be awarded pending my receipt of
ArcelorMittal’s bills and/or a hearing on the matter. This case remains pending as to
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Counts II and V against all defendants, and Counts I, II, and IV against Arillotta
Enterprises, LLC, with leave for ArcelorMittal to refile its request if it can establish the
required elements consistent with this order.
SO ORDERED.
ENTERED: November 17, 2015
s/Philip P. Simon
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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