Peter Kiewit Sons', Inc. v. Wall Street Equity Group, Inc. et al
FINDINGS OF FACT AND CONCLUSIONS OF LAW - Judgment will be entered for Kiewit, and against West, the Wall Street Equity Group, and the Wall Street Group of Companies, jointly and severally, in the amount of $913,099.46., etc... A separate judgment will be entered. Ordered by Judge John M. Gerrard. (JAB)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
PETER KIEWIT SONS', INC.,
WALL STREET EQUITY GROUP,
INC., ET AL.,
FINDINGS OF FACT AND
CONCLUSIONS OF LAW
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.
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 business2 owners sell their businesses to larger companies.
According to the record, West's legal name remains Steven Watstein. E22 at 87-88. To be
clear, just in case it should come up: West and Watstein are the same person, and this
Court's judgment is directed at West regardless of what name he is using.
The Court is using the term "small business" loosely here: the businesses targeted here
generally seem to have had, at least arguably, multi-million dollar valuations. (Which
makes sense, if the defendants' sales pitch was to seem credible, and if the defendants were
to make any money from them.) But they also generally seem to have been closely-held and
small for the relevant industry, construction. See generally, 13 C.F.R. § 121.201. What
really matters, for purposes of this case, is their size relative to Kiewit.
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
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
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.
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,
Kiewit holds a service mark, but while the distinction between a trademark and a service
mark may be relevant for registration purposes, it is not particularly relevant for purposes
of an infringement analysis. See id. at 633.
[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, and was
likely to (and actually did) cause confusion about Kiewit's "sponsorship" of
the defendants' services. Compare Masters, 631 F.3d at 474. Kiewit has
established its mark infringement claim.
(b) 15 U.S.C. § 1125(a)(1)(B): False Advertising
To establish a Lanham Act false advertising claim, a plaintiff must
prove (1) a false statement of fact by the defendant in a commercial
advertisement about its own or another's product; (2) the statement actually
deceived or has the tendency to deceive a substantial segment of its audience;
(3) the deception is material, in that it is likely to influence the purchasing
decision; (4) the defendant caused its false statement to enter interstate
commerce; and (5) the plaintiff has been or is likely to be injured as a result
of the false statement, either by direct diversion of sales from itself to
defendant or by a loss of goodwill associated with its products. Buetow v.
A.L.S. Enters., 650 F.3d 1178, 1182 (8th Cir. 2011); Clorox Co., 140 F.3d at
1180. The false statement necessary to establish such a violation usually falls
into one of two categories: a commercial claim that is literally false as a
factual matter; or a claim that may be literally true or ambiguous but which
implicitly conveys a false impression, is misleading in context, or is likely to
deceive consumers. Clorox Co., 140 F.3d at 1180.
For purposes of this analysis, the Court finds that Kiewit has at least
proved that the defendants made statements that conveyed a false
impression. The defendants' solicitations distinctly gave the impression that
Kiewit was already an interested purchaser that had engaged the defendants
to broker a sale.4 The defendants' claim that Kiewit was a potential buyer
both conveyed the implied message and deceived its recipients. See id. at
But there are other problems with Kiewit's false advertising claim.
First, to be "commercial advertising or promotion," a defendant's statements
must be disseminated sufficiently to the relevant purchasing public within an
industry. Porous Media Corp. v. Pall Corp., 173 F.3d 1109, 1121 (8th Cir.
1999) (citing Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1384 (5th Cir.
1996)). The required level of circulation and the relevant purchasing public
will vary according to the specifics of the industry. Id. The speech must target
a class or category of purchasers or potential purchasers, not merely
particular individuals. Podiatrist Ass'n, Inc. v. La Cruz Azul de Puerto Rico,
Inc., 332 F.3d 6, 19-20 (1st Cir. 2003). Although the Act is not limited to
traditional advertising campaigns, and may encompass more informal types
of promotion, it cannot be stretched so broadly as to encompass all forms of
commercial speech. See, Neuros Co., Ltd. v. KTurbo, Inc., 698 F.3d 514, 52122 (7th Cir. 2012); Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc.,
314 F.3d 48, 57 (2d Cir. 2002); Coastal Abstract Serv., Inc. v. First Am. Title
Ins. Co., 173 F.3d 725, 735 (9th Cir. 1999); Seven-Up Co., 86 F.3d at 1384.
The touchstone is whether a defendant's representations were part of an
organized attempt to penetrate the relevant market. Fashion Boutique, 314
F.3d at 57. For instance, an advertisement read by millions (or even
thousands in a trade magazine) is advertising, while a person-to-person pitch
by an account executive is not. Neuros Co., 698 F.3d at 521.
Missing for Kiewit are allegations or evidence showing such widespread
dissemination. To be sure, the defendants' promotional efforts were
extensive. But each of the letters in evidence that mentions Kiewit makes
reference to a previous telephone call, meaning that the letters were
individual follow-ups to previous contact with potential customers. And the
hearing testimony suggested that as well. Filing 417 at 44. There may have
been a lot of letters, and they may have been form letters, but they do not
suggest a concerted effort to penetrate a marketplace. See Fashion Boutique,
314 F.3d at 58 (collecting cases).
The other problem with Kiewit's claim will require a bit more
explanation, but can generally be labeled as standing. When the case was
filed—and, in fact, when it was submitted—there was a circuit split on
The evidence suggests that in conversation, the defendants' representatives were less
ambiguous than the letters that are in the record. But there is substantial doubt about
whether such private assurances would satisfy the "commercial advertisement" element of
the claim, as discussed below. So, the Court is limited to the letters on this issue.
standing to bring a claim under the Lanham Act. Syngenta Seeds, Inc. v.
Bunge N. Am., Inc., ___ F.3d ___, 2014 WL 3882886, at *5 (8th Cir. Aug. 8,
2014). And the Eighth Circuit had held that for a false statement to be
actionable under the Lanham Act, it must be commercial speech that was
made by a competitor of the plaintiff. Id. (citing Aviation Charter, Inc. v.
Aviation Research Grp./US, 416 F.3d 864, 871 (8th Cir. 2005)). It is readily
apparent that the defendants were not commercial competitors of Kiewit. So,
when this case was submitted to the Court, this claim was DOA.
But since then, the Supreme Court has administered CPR. In Lexmark
Int'l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1391 (2014), the
Court expressly rejected the requirement that challenged commercial speech
be made by a competitor. See Syngenta, 2014 WL 3882886, at *5. Instead, the
Court explained that a plaintiff's right to sue under a particular statute
depends on whether the plaintiff comes within the "zone of interests"
protected by the law involved, and that the statutory cause of action is
limited to plaintiffs whose injuries are proximately caused by violations of the
statute. Lexmark, 134 S. Ct. at 1387-88, 1390. The Court held that to come
within the zone of interests for false advertising under the Lanham Act, the
plaintiff must allege an injury to a commercial interest in reputation or sales.
Id. at 1390. And to satisfy the proximate cause requirement, the plaintiff
must show economic or reputational injury flowing directly from the
deception wrought by the defendant's advertising, "and that that occurs when
deception of consumers causes them to withhold trade from the plaintiff." Id.
at 1391 (emphasis supplied).5
Kiewit's resuscitated false advertising claim is, therefore, still shortlived. It is arguably possible to get from the defendants' false claim about an
association with Kiewit to a reputational injury to Kiewit, by virtue of
associating Kiewit with disreputable defendants. But the defendants'
"customers" are unlikely to be Kiewit's customers, and it is difficult to
imagine how the defendants' false representations—even if they reflected
poorly on Kiewit—could result in an actual commercial injury to Kiewit
capable of clearing the bar set by the Supreme Court in Lexmark. Kiewit
asserted a legal conclusion of injury from false advertising, but no facts
The Supreme Court's holding was specifically phrased as requiring "a plaintiff suing
under § 1125(a)" to show a commercial injury, Lexmark, 134 S. Ct. at 1391, raising a
question as to whether the standing requirements the Court applied to a false advertising
claim brought pursuant to § 1125(a)(1)(B) might also apply to a mark infringement claim
brought pursuant to § 1125(a)(1)(A). But the rest of the Court's reasoning is particular to
false advertising claims, and there is no sound basis to imply a sea change in trademark
infringement law from an ambiguous citation in Lexmark.
demonstrating such a claim. See Ahmed v. Hosting.com, ___ F. Supp. 2d ___,
2014 WL 2925292, at *6-7 (D. Mass. June 27, 2014).
(c) 15 U.S.C. § 1125(c): Dilution by Tarnishment
Federal law allows the owner of a famous mark to enjoin a person from
using a mark or trade name in commerce that is likely to cause dilution by
blurring or dilution by tarnishment of the famous mark. Tiffany (NJ) Inc. v.
eBay, Inc., 600 F.3d 93, 111 (2d Cir. 2010). The cause of action is intended to
prevent the power and value of the mark from being whittled away through
unauthorized use by others. Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144,
167 (4th Cir. 2012). Only dilution by tarnishment is at issue here.
To prevail on a dilution claim, the plaintiff must show that it owns a
famous mark, that the defendant is using a mark in commerce that dilutes
the famous mark, that the defendant began using the mark after the
plaintiff's became famous, and that the defendant's use is likely to cause
dilution. Rosetta Stone, 676 F.3d at 168; Coach Servs., Inc. v. Triumph
Learning LLC, 668 F.3d 1356, 1372 (Fed. Cir. 2012). Dilution by tarnishment
is an association, arising from the similarity between a mark or trade name
and a famous mark, that harms the reputation of the famous mark. 15 U.S.C.
§ 1125(c)(2)(C); Rosetta Stone, 676 F.3d at 167; Coach, 668 F.3d at 1372;
Tiffany, 600 F.3d at 111. It generally arises when the plaintiff's mark is
linked to products of shoddy quality, or is portrayed in an unwholesome or
unsavory context likely to evoke unflattering thoughts about the owner's
product. Tiffany, 600 F.3d at 111. And the plaintiff has a right to injunctive
relief "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 evidence and allegations are sufficient to at least establish a
prima facie case of dilution by tarnishment. (Damages are another question.)
The allegation that Kiewit's mark is famous is admitted. The defendants
used the plaintiff's mark to promote their own services in what could fairly be
described, from the perspective of their customers, as a scam. Because actual
economic injury is expressly not required, the reputational injury of being
seen as complicit in such a scheme is sufficient, for purposes of liability at
least, to establish Kiewit's claim for relief.
2. STATE LAW CLAIMS
Kiewit's supplemental state law claims are common law trademark
infringement; common law unfair competition; violation of the Nebraska
Uniform Deceptive Trade Practices Act (UDTPA), Neb. Rev. Stat. § 87-301 et
seq.; and violation of the Nebraska Consumer Protection Act (CPA), Neb. Rev.
Stat. § 59-1601 et seq. These claims will require less discussion, in large part
because many of them are coextensive with Kiewit's Lanham Act claims.
To begin with, a claim for mark infringement under Nebraska common
law is the same as under the Lanham Act. See, Two Men and a Truck/Int'l,
Inc. v. Thomas, 908 F. Supp. 2d 1029, 1036-37 (D. Neb. 2012); ADT Sec.
Servs., Inc. v. A/C Sec. Sys., Inc., 736 N.W.2d 737, 763-67 (Neb. Ct. App.
2007); see also Neb. Rev. Stat. § 87-127. A claim for common law unfair
competition is substantially identical. Heaton Distrib. Co. v. Union Tank Car
Co., 387 F.2d 477, 483 (8th Cir. 1967).
Under the UDTPA, a person engages in a deceptive trade practice
when, in the course of business, he causes a likelihood of confusion or
misunderstanding as to the source, sponsorship, approval, or certification of
goods or services, or causes likelihood of confusion or misunderstanding as to
affiliation, connection, or association with another. See, Neb. Rev. Stat. § 87302; Prime Home Care, LLC v. Pathways to Compassion, LLC, 809 N.W.2d
751, 764 (Neb. 2012); Stenberg v. Consumer's Choice Foods, Inc., 755 N.W.2d
583, 591-92 (Neb. 2008); Reinbrecht v. Walgreen Co., 742 N.W.2d 243, 247
(Neb. Ct. App. 2007). That claim is, on these facts, substantially coextensive
with Kiewit's federal mark infringement claim. See Prime Home Care, 809
N.W.2d at 764.
For the same reasons explained above with respect to Kiewit's federal
mark infringement claim, the Court finds that Kiewit has sufficiently
established its claims for common law infringement, common law unfair
competition, and violation of the UDTPA. The CPA, however, has another
requirement, that Kiewit does not meet. Even assuming that Kiewit has
shown that the defendants engaged in conduct prohibited by the CPA, the
ambit of that statute is limited to "unfair or deceptive acts or practices that
affect the public interest." Nelson v. Lusterstone Surfacing Co., 605 N.W.2d
136, 141 (Neb. 2000); see also, Eicher v. Mid Am. Fin. Inv. Corp., 748 N.W.2d
1, 12 (Neb. 2008); Arthur v. Microsoft Corp., 676 N.W.2d 29, 36 (Neb. 2004).
The CPA is not available to address a private wrong where the public interest
is unaffected. Nelson, 605 N.W.2d at 142; see, Eicher, 748 N.W.2d at 12;
Arthur, 676 N.W.2d at 37. Specifically, the conduct at issue must directly or
indirectly affect the people of Nebraska. Arthur, 676 N.W.2d at 37-38.
And that is where Kiewit's proof fails, because there is nothing to
suggest that the defendants reached into Nebraska with their solicitations, or
that if they did, it was more than an isolated transaction. Compare Nelson,
605 N.W.2d 136. Kiewit alleged that the defendants "supply advertisements
containing representations which are likely to deceive the general public,"
filing 126 at 9, but neither alleged nor proved that any of that occurred in
Nebraska—and a CPA claim requires a showing that not just one, but many
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Nebraska citizens are affected by a defendant's practices. See, Eicher, 748
N.W.2d at 12; Arthur, 676 N.W.2d at 38. Kiewit has made no such showing.
To summarize: Kiewit's causes of action are established with respect to
mark infringement and dilution by tarnishment under the Lanham Act,
common law infringement and unfair competition, and violation of the
UDTPA. Three different aspects of damages require discussion: compensatory
damages, costs and attorney fees, and injunctive relief. And then, the Court
must determine whether to pierce the corporate veil and find the individual
defendants liable for the award.
1. COMPENSATORY DAMAGES
As with liability, it is helpful to begin the discussion of damages with
the Lanham Act. For trademark infringement, a plaintiff shall be entitled to
recover the defendant's profits, any damages sustained by the plaintiff, and
the costs of the action. 15 U.S.C. § 1117(a). An accounting of profits may be
based upon unjust enrichment, damages, or deterrence of a willful infringer.
Masters, 631 F.3d at 471.6 Disgorgement exists to deter would-be infringers
and to safeguard against unjust enrichment. Id. at 473. Proof of actual
confusion on the part of consumers is not required in a case of this kind. Id.
at 473-74. And the absence of actual damages does not preclude an award of
defendant's profits. Id. at 474-75. In assessing damages the Court may also
enter judgment, according to the circumstances of the case, for
any sum above the amount found as actual damages, not
exceeding three times such amount. If the court shall find that
the amount of the recovery based on profits is either inadequate
or excessive the court may in its discretion enter judgment for
such sum as the court shall find to be just, according to the
circumstances of the case. Such sum in either of the above
circumstances shall constitute compensation and not a penalty.
15 U.S.C. § 1117(a)(3).
As suggested above, there is little basis in this case to conclude that
Kiewit has suffered actual economic losses as a result of the defendants'
The Eighth Circuit has noted a circuit split on whether a Lanham Act plaintiff must prove
willful infringement to be eligible for money damages. Id. at 472 n.2. Even assuming that
willful infringement is necessary, the Court finds ample evidence of willfulness in this case.
The defendants were told not to use the Kiewit mark, and continued to do so anyway. And
there is obviously no basis to conclude that they employed the mark accidentally.
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conduct. And that also means that the treble damages provision of 15 U.S.C.
§ 1117(a)(3) is off the table: awarding three times the damages that the
plaintiff can actually prove presupposes that the plaintiff can prove some
damages. See, Thompson v. Haynes, 305 F.3d 1369, 1380 (Fed. Cir. 2002);
Badger Meter, Inc. v. Grinnell Corp., 13 F.3d 1145, 1157 (7th Cir. 1994);
Caesars World, Inc. v. Venus Lounge, Inc., 520 F.2d 269, 274 (3d Cir. 1975);
Bowmar Instrument Corp. v. Cont'l Microsystems, Inc., 497 F. Supp. 947, 961
(S.D.N.Y. 1980). Under § 1117(a)(3), "damages" are to be treated separately
from "profits." Thompson, 305 F.3d at 1380.
But the Court may enter judgment for an amount that the Court finds
to be just, in the event that recovery based on profits is inadequate or
excessive. 15 U.S.C. § 1117(a)(3). Under this method, the benchmark is the
likely benefit accruing to the defendant on account of its infringement.
Badger Meter, 13 F.3d at 1157. The Court's primary function in making such
an award is to make violations of the Lanham Act unprofitable to the
infringing party. See, BASF Corp. v. Old World Trading Co., Inc., 41 F.3d
1081, 1092 (7th Cir. 1994); Playboy Enters., Inc. v. Baccarat Clothing Co.,
Inc., 692 F.2d 1272, 1274 (9th Cir. 1982).
The Court finds an enhanced profit award to be appropriate in this
case, based both on the Lanham Act and broader evidentiary principles.
First, the Court finds that it would be unjust to limit its award solely to
proven profits because that would reward the defendants for successfully
concealing and destroying evidence. The Court has no doubt that the
defendants' actual profit resulting from use of the Kiewit mark7 was
substantially greater than that for which direct evidence was obtained.
Second, it is well established that sanctions for spoliation of evidence
are appropriate where there is an intentional destruction of evidence
indicating a desire to suppress the truth. See, Hallmark Cards, Inc. v.
Murley, 703 F.3d 456, 460 (8th Cir. 2013); Sherman v. Rinchem Co., Inc., 687
F.3d 996, 1006 (8th Cir. 2012); Greyhound Lines, Inc. v. Wade, 485 F.3d 1032,
1035 (8th Cir. 2007). The Court finds that the defendants intentionally
destroyed evidence in bad faith, indicating a desire to suppress the truth, and
that Kiewit was prejudiced. See Hallmark, 703 F.3d at 460-61. To be clear:
the Court is not imposing a monetary sanction for spoliation. But if this case
had gone to a jury trial, an adverse inference instruction would have been
To the extent that it might be unclear, the Court will make this specific finding: the Court
finds that the defendants' profits from this business model were directly attributable to the
use of the Kiewit mark. The business model was primarily based on collecting valuation
fees, not brokering sales. The evidence before the Court from identified victims of the
defendants' misrepresentations makes clear that the purported interest of Kiewit was
determinative in persuading the victims to engage the defendants' services.
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warranted. See id. Similarly, in this case, the Court infers that the evidence
destroyed by the defendants would have been adverse or detrimental to them.
But the evidence that actually made it to court provides a starting
point for calculating an award. There is direct evidence of $124,910 paid to
the defendants based on solicitations known to have contained the Kiewit
mark.8 See E246.9 Four other businesses are known to have paid the
defendants based on such solicitations, but the amounts are unknown. E246.
Kiewit suggests using the average amount paid to the defendants from
businesses whose payments are known, filing 412 at 1, and the Court finds
that to be a reasonable means for estimating those amounts. From that,
Kiewit and the Court arrive at a subtotal of $174,874. Filing 412 at 2.
Kiewit suggests tripling that amount to, in part, recover profits that
were likely accrued from unknown businesses that paid the defendants based
on solicitations containing the Kiewit mark. Filing 412 at 2. That is
reasonable almost to a fault: the Court finds that to be a conservative
amount. The Court particularly notes the incomplete, but valuable records
provided by Humberto Garcia, and attached to his deposition. E28, exhibits
1-3. Those records suggest substantially higher profits, both directly and
indirectly. They suggest that at least dozens of businesses were contacted and
paid the defendants, which is why they were on a "do not call" list circulated
to the defendants' employees. The Court infers from the type of businesses on
the list, and the consistency of the defendants' solicitations, that the Kiewit
mark was used in many if not all of those sales. And the Court also infers
that the Kiewit mark was used based on the destruction of any records which
would show otherwise. Based on the number of businesses that apparently
paid the defendants, and the likelihood that the Kiewit mark was used to
solicit those payments, the Court finds that the defendants' profits were
almost certainly greater than three times the amount paid by known
customers of the defendants.10 The Court will award $524,622 for disgorged
The Court is aware that many of the letters at issue were written on letterhead bearing
the names of companies besides the two corporate defendants in this case. For reasons that
will be explained in more detail below, in the context of piercing the corporate veil, the
Court does not find any purported corporate distinctions to be meaningful in this case. All
of these solicitations are attributable to these defendants, regardless of what stationary
they were printed on.
The Court cites, for convenience, to Kiewit's summary of the evidence. But the Court has
examined the record thoroughly and found that summary to be accurate. See, generally,
The Court notes that it is a defendant's burden, in calculating profits, to prove any
operating costs to be deducted from revenues realized during a period of trademark
infringement. Tonka Corp. v. Tonk-A-Phone, Inc., 805 F.2d 793, 794 (8th Cir. 1986).
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profits pursuant to § 1117(a)(1) and (3), as a remedy for the defendants'
willful trademark infringement—and the Court stops there in no small part
because Kiewit conservatively elected not to ask for more.11 See AARP v.
Sycle, 991 F. Supp. 2d 234 (D.D.C. 2014).
The method adopted by Nebraska courts to calculate damages for
common law mark infringement is not just effectively, but purposefully
identical to the Lanham Act. ADT Sec. Servs., 736 N.W.2d at 763-67.
Accordingly, the Court's award of disgorgement is the same for Kiewit's
common law claims, which are coextensive theories of recovery for this
purpose. But money damages are not available for Kiewit's dilution claim, or
for violation of the UDTPA. Money damages are available for dilution by
tarnishment only if, among other things, the defendant "willfully intended to
harm the reputation of the famous mark." 15 U.S.C. § 1125(c)(5)(B)(ii). The
defendants plainly intended to take advantage of Kiewit's reputation, but
there is nothing to suggest they wished Kiewit any harm. And the UDTPA
provides no private right of action for damages. Reinbrecht, 742 N.W.2d at
247; see Consumer's Choice, 755 N.W.2d at 587. So, the Court will award
disgorgement of $524,622 for Kiewit's Lanham Act mark infringement claim
and its common law claims.
2. COSTS AND ATTORNEY FEES
Under the Lanham Act, a prevailing plaintiff is entitled, subject to the
principles of equity, to recover the costs of the action. 15 U.S.C. § 1117(a)(3).
In addition, in "exceptional cases," a court may award reasonable attorney
fees to the prevailing party. Id.; see, B & B Hardware, Inc. v. Hargis Indus.,
Inc., 716 F.3d 1020, 1027 (8th Cir. 2013); First Nat. Bank in Sioux Falls v.
First Nat. Bank S.D., 679 F.3d 763, 771 (8th Cir. 2012); Devon Park, 634 F.3d
at 1013. Where a defendant's conduct was willful and deliberate, a court may
well determine that it is the type of exceptional case for which an award of
attorney fees is appropriate. First Nat. Bank, 679 F.3d at 771; Devon Park,
634 F.3d at 1013.
This is such a case. The defendants willfully and deliberately used the
Kiewit mark, after receiving a cease-and-desist letter and promising to
comply with its demand. See Devon Park, 634 F.3d at 1013-14. The
defendants plainly acted in bad faith, see id., and have compounded that with
Which is not to say that Kiewit was wrong to do so. Kiewit's good-faith, reasonable
attempt to estimate an appropriate amount of damages is acknowledged and understood by
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their conduct during litigation.12 This is a profoundly exceptional case, and
fees will be awarded. Kiewit has submitted evidence of $388,477.46 in costs
and fees incurred. E247. The Court has examined the underlying records,
E208-11, finds that amount to be fair and reasonable, and will enter its
In addition, the UDTPA provides that costs shall be allowed to a
prevailing party and that attorney fees may be allowed. Neb. Rev. Stat. § 87303; Consumer's Choice, 755 N.W.2d at 593. The Court's award of costs and
attorney fees is also supported by the UDTPA. See id.
3. INJUNCTIVE RELIEF
Kiewit's prayer for injunctive relief is straightforward. Injunctive relief
is the preferred remedy in resolving trademark disputes. Masters, 631 F.3d at
471. To obtain a permanent injunction, a plaintiff must show (1) its actual
success on the merits; (2) that it faces irreparable harm; (3) that the harm to
it outweighs any possible harm to others; and (4) that an injunction serves
the public interest. Devon Park, 634 F.3d at 1012. Such proof is present here.
Kiewit's success on the merits was established above. Kiewit is
presumed to face irreparable harm, because a likelihood of confusion has
been established. See id. There is nothing to suggest that anyone would be
harmed by an injunction, and preventing the defendants from misleading
more people is clearly in the public interest. See id. at 1012-13. Therefore, the
Court will enter a permanent injunction on the terms prayed for by Kiewit.
Filing 126 at 10.
4. CORPORATE VEIL
Kiewit urges the Court to pierce the corporate veil of the Wall Street
entities and hold West liable for the defendants' damages.14 Kiewit suggests
An award of attorney fees under Fed. R. Civ. P. 11 (or 28 U.S.C. § 1927 against the
defendants' former counsel) might have been warranted even absent the Lanham Act's
That amount includes $82,909.60 for fees and costs previously awarded by the Magistrate
Judge. Filings 306 at 9 and 329 at 8. The Court's examination of the billing records
indicates that the costs and attorney fees billed on the discovery matters that formed the
basis of the Magistrate Judge's fee award are encompassed in the amounts for which Kiewit
now seeks compensation. Compare E208-11 with filings 267 and 267-1.
At the hearing, Kiewit essentially abandoned any claim against Friedman in an
individual capacity. Filing 417 at 64. The Court agrees with Kiewit that Friedman testified
truthfully at the hearing, and credits his testimony that his actions in connection with
Kiewit's claims were performed in his capacity as an employee of the corporate defendants,
and at the behest of West. The Court will not pierce the corporate veil to reach Friedman.
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that Nebraska corporate law standards be applied to make that
determination. Filing 406 at 30. Alternatively, Kiewit suggests that the law
of Florida (where the corporate defendants are incorporated) is effectively the
same, and can be applied interchangeably. Filing 406 at 31 n.3. But the law
is a bit more complicated than that.
There is, in fact, significant disagreement about whether federal courts
should borrow state law or apply federal common law when piercing a
corporate veil to attach shareholder liability for a corporation's violation of a
federal law. NLRB v. Bolivar-Tees, Inc., 551 F.3d 722, 728 n.3 (8th Cir. 2008)
(citing United States v. Bestfoods, 524 U.S. 51, 63 n.9 (1998)). But in the
Eighth Circuit, the federal common law standard is applied. Id. at 727-28.
That standard requires the Court to determine whether (1) there was such
unity of interest and lack of respect given to the separate identity of the
corporation by its shareholders that the personalities and assets of the
corporation and the individual are indistinct, and (2) adherence to the
corporate fiction would sanction a fraud, promote injustice, or lead to an
evasion of legal obligations. Id. at 728.
When assessing the first prong to determine whether the shareholders
and the corporation have failed to maintain their separate identities, the
Court must consider the degree to which the corporate legal formalities have
been maintained, and the degree to which individual and corporate assets
and affairs have been commingled. Id. A non-exhaustive list of factors to
(1) whether the corporation is operated as a separate entity; (2)
the commingling of funds and other assets; (3) the failure to
maintain adequate corporate records; (4) the nature of the
corporation's ownership and control; (5) the availability and use
of corporate assets, the absence of same, or under capitalization;
(6) the use of the corporate form as a mere shell, instrumentality
or conduit of an individual or another corporation; (7) disregard of
corporate legal formalities and the failure to maintain an arm'slength relationship among related entities; (8) diversion of the
corporate funds or assets to noncorporate purposes; and . . .
(9) transfer or disposal of corporate assets without fair
Id. No one factor is determinative, and not all of these factors must be
present. But nearly all of them are. Even according to West's testimony, he
As a result, there is no basis for liability against Friedman, and the claims against him in
his individual capacity will be dismissed.
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was the sole shareholder and investor in all of his corporate entities. E34 at
15-19, 23. The companies had no bylaws and followed no corporate
formalities. Filing 417 at 41-43; E34 at 76. Dozens of companies incorporated
at West's direction were run from the same, relatively small office space, and
were effectively operated as a single entity. Filing 417 at 40-44. There is
evidence that West's personal expenses were paid from his companies, and
that he deliberately structured his affairs so that he had no personal assets
and was "judgment-proof." E34 at 98, 101-02, 106, 119; E35 at 162, 198, 20915, 256-58, 266. There is evidence that an ownership dispute in Florida began
when West directed the issuance of corporate stock to an associate
specifically to evade a Kiewit judgment.15 And, in fact, the Wall Street Group
of Companies was dissolved 14 days after this suit was filed. E22 at 28. The
"Wall Street Private Equity Group" was formed a couple of weeks after that.
E22 at 31-32.
When assessing the second prong to determine whether adherence to
the corporate fiction would sanction a fraud, promote injustice, or lead to an
evasion of legal obligations, the Court must consider causation and
culpability. Bolivar-Tees, 551 F.3d at 729. A corporation's inability to pay its
debt alone is not sufficient to support a finding of injustice—it is only when
the shareholders disregard the separateness of the corporate identity and
when that act of disregard causes the injustice or inequity or constitutes the
fraud that the corporate veil may be pierced. Id. Additionally, the
shareholders who will be held personally liable for the corporation's debt
must share in some level of culpability for the injustice. Id.
The Court has little difficulty finding such evidence here. As explained
above, the corporate structures at issue here seem to have been specifically
intended and operated by their sole shareholder, West, to shield him from
responsibility for his wrongdoing.16 And there is no doubt that West does not
To be sure, the testimony from hearings on the Florida matter was highly contentious. It
is tempting to say that everyone is lying. But the Court need not resolve that matter for
present purposes: if West's former associates are telling the truth, they rescued the
companies from West treating them like his personal piggybank—meaning that they were
West's alter ego when all the events underlying this case took place. And if West is telling
the truth, he was the sole owner and proprietor of the companies, and his description of his
management style also suggests that they were alter egos.
As noted, there is information before the Court suggesting that the ownership of West's
corporate entities may be disputed in Florida. But legal stock ownership is not dispositive
in equity. Legal ownership, while relevant, does not preclude a finding of alter ego when
control of the corporation is otherwise established. See, Century Hotels v. United States, 952
F.2d 107, 110-11 (5th Cir. 1992); Dow Chem. Pac. Ltd. v. Rascator Maritime S.A., 782 F.2d
329, 343 (2d Cir. 1986); Shades Ridge Holding Co., Inc. v. United States, 888 F.2d 725, 729
(11th Cir. 1989); Labadie Coal Co. v. Black, 672 F.2d 92, 97 (D.C. Cir. 1982); Establissement
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just share culpability for the injustice—he is the sole shareholder of that as
well. The Court will pierce the corporate veil and hold West responsible for
the full measure of damages awarded in this case.17
Of course, as mentioned above, the award in this case is based not only
on the Lanham Act, but Kiewit's state law claims. Federal courts hearing
state law claims, under diversity or supplemental jurisdiction, apply the
forum state's choice of law rules to select the applicable state substantive
law. McCoy v. Iberdrola Renewables, Inc., ___ F.3d ___, 2014 WL 3703945, at
*8 (7th Cir. July 28, 2014); Paulsen v. CNF, Inc., 559 F.3d 1061, 1080 (9th
Cir. 2009); Mastro v. Potomac Elec. Power Co., 447 F.3d 843, 857 (D.C. Cir.
2006); Doty v. Sewall, 908 F.3d 1053, 1063 (1st Cir. 1990). And under
Nebraska's choice of law rules, when determining whether to pierce a
corporate veil, the local law of the state of incorporation is applied. Johnson
v. Johnson, 720 N.W.2d 20, 30 (Neb. 2006).
So, that leads back to Florida. And Florida law on veil-piercing is
effectively the same as federal law: there must be proof that the corporate
form was nonexistent and that the shareholders were in fact alter egos of the
corporation, and the corporate form was used fraudulently or for an improper
purpose, and that the fraudulent or improper use of the corporate form
caused injury to the plaintiff. Beltran v. Miraglia, 125 So. 3d 855, 858 (Fla.
Dist. Ct. App. 2013); Gasparini v. Pordomingo, 972 So. 2d 1053, 1055 (Fla.
Dist. Ct. App. 2008); Priskie v. Missry, 958 So. 2d 613, 614 (Fla. Dist. Ct. App.
2007). Based on the same factual findings as above, the Court finds that
piercing the corporate veil to attach liability to West is also appropriate for
Kiewit's state law claims.
IV. PREJUDGMENT INTEREST
Kiewit also asks for prejudgment interest. But the Court can find no
sound basis to award it.
Tomis v. Shearson Hayden Stone, Inc., 459 F. Supp. 1355, 1366 n.13 (S.D.N.Y. 1978);
Medlock v. Medlock, 642 N.W.2d 113, 126 (Neb. 2002). At all times relevant to this case,
West had such control.
The Court notes, should it become relevant, that a nonparty may be bound by an
equitable judgment sustaining an alter ego action if the party's interests are so closely
affiliated with the nonparty's interests that the interests are merged. See, e.g., G.M.
Leasing Corp. v. United States, 429 U.S. 338, 350-51 (1977); Valley Finance, Inc. v. United
States, 629 F.2d 162, 169-70 (D.C. Cir. 1980); In re 1438 Meridian Place, N. W., Inc., 15 B.R.
89, 95-96 (Bkrtcy. D.C. 1981); Medlock, 642 N.W.2d at 130. To the extent that West has
other corporate alter egos besides the two which have been haled into court in this case,
those alter egos are as bound by this decision as West himself is.
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Under federal law, prejudgment interest is to be awarded when the
amount of the underlying liability is reasonably capable of ascertainment and
the relief granted would otherwise fall short of making the claimant whole
because he or she has been denied the use of money which was legally due.
Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 752 (8th Cir. 1986).
Awarding prejudgment interest is intended to serve at least two purposes: to
compensate prevailing parties for the true costs of money damages incurred,
and, where liability and the amount of damages are fairly certain, to promote
settlement and deter attempts to benefit unfairly from the inherent delays of
litigation. Id. Prejudgment interest should ordinarily be granted unless
exceptional or unusual circumstances exist making the award of interest
inequitable. Id.; see Masters, 631 F.3d at 475.
In this case, there is a substantial question whether the amount of the
liability was "reasonably capable of ascertainment," given the extensive
discussion above regarding the determination of damages.18 The Court
acknowledges, as Kiewit points out, that whatever uncertainty presently
exists is the defendants' fault. But it is also important to note that the
damages awarded in this case consist of disgorgement, which distinguishes
this situation from one in which the award is compensation for an injury
inflicted on the plaintiff by the defendant. And the Court has already
bolstered the damages award as a result of the defendants' spoliation of
evidence. It is the Court's determination that under the circumstances of this
case, the defendants' liability was not reasonably capable of ascertainment,
and the Court's award is sufficient to make Kiewit whole.
And the Court reaches the same conclusion under Nebraska law, which
arguably sets an even higher bar for determining when a claim is liquidated
and prejudgment interest is recoverable. See Countryside Co-op v. Harry A.
Koch Co., 790 N.W.2d 873, 889 (Neb. 2010). A claim is liquidated only where
there is "no reasonable controversy" and "no dispute" as to the plaintiff's right
to recover or the amount of the recovery. Id. And the evidence must furnish
data which, if believed, makes it possible to compute the amount exactly,
"without reliance on opinion or discretion." Lincoln Benefit Life Co. v.
Edwards, 243 F.3d 457, 463 (8th Cir. 2001) (quotation omitted). That
standard cannot be met here.
For the foregoing reasons, the Court will enjoin the defendants from
further use or dilution of the plaintiff's mark, and will award compensatory
And, the Court notes that had the defendants played it straight during this litigation,
there might still have been injury and causation issues relevant to determining damages.
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damages, costs, and attorney fees in the total amount of $913,099.46, payable
jointly and severally by West and the Wall Street entities. In addition, based
on the defendants' evasive business practices and the unlikelihood of a valid
appeal (given their default), the Court finds good cause, pursuant to 28
U.S.C. § 1963, to authorize immediate registration of the judgment in any
district where the defendants may be located.
IT IS ORDERED:
Judgment will be entered for Kiewit, and against West, the
Wall Street Equity Group, and the Wall Street Group of
Companies, jointly and severally, in the amount of
Kiewit's claims against Friedman are dismissed with
West, the Wall Street Equity Group, the Wall Street Group
of Companies, and any entity under West's control, are
permanently enjoined from:
Using the Kiewit mark or any substantially similar
mark in connection with representations to their
clients and potential clients and otherwise infringing,
diluting, and disparaging the Kiewit mark.
Making any representations which suggest that they
have some association, approval, or authorization
from Kiewit, or that Kiewit is an interested buyer in
the businesses represented by or associated with
Engaging in unfair competition or deceptive trade
A separate judgment will be entered.
Kiewit may immediately register the Court's judgment in
the Southern District of Florida, or any other district court
where the defendants or their assets may be found.
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Dated this 29th day of September, 2014.
BY THE COURT:
John M. Gerrard
United States District Judge
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