Gen. Steel Domestic Sales, LLC v. Chumley
| Decision Date | 07 May 2013 |
| Docket Number | Civil Action No. 10-cv-01398-PAB-KLM |
| Parties | GENERAL STEEL DOMESTIC SALES, LLC, d/b/a General Steel Corporation, a Colorado limited liability company, Plaintiff, v. ETHAN DANIEL CHUMLEY, individually, and ATLANTIC BUILDING SYSTEMS, LLC, a Delaware corporation, doing business as Armstrong Steel Corporation, Defendants. |
| Court | U.S. District Court — District of Colorado |
ORDER
Plaintiff General Steel Domestic Sales, LLC, doing business as General Steel Corporation ("General Steel"), brings trademark, unfair advertising, and false advertising claims against defendant Atlantic Building Systems, LLC, doing business as Armstrong Steel Corporation ("Armstrong"), which is a competitor in the prefabricated steel building business, and defendant Ethan Daniel Chumley, who owns and runs Armstrong. As relief for its claims, General Steel requests an injunction and disgorgement of profits.
The Court has subject matter jurisdiction over plaintiff's trademark and false advertising claims pursuant to 28 U.S.C. § 1331 and exercises supplemental jurisdiction over plaintiff's state law unfair competition claim pursuant to 28 U.S.C. § 1367(a).
The Court presided over a trial to the court in this matter from July 9, 2012through July 11, 2012. Pursuant to Federal Rule of Civil Procedure 52(a)(1), the Court makes the following findings of fact and conclusions of law.
1. General Steel has a registered trademark on its logo, consisting of the outline of a building with horizontal lines and the words "General Steel Corporation" incorporated within it, see Ex. 2, and also on the word mark "GENERAL STEEL CORPORATION." See Ex. 1.1
2. General Steel and Armstrong are in the business of selling prefabricated steel buildings directly to consumers. The buildings range in size and purpose and can cost anywhere from $10,000 to $200,000.
3. General Steel was founded by Jeffrey Knight in 1995. Mr. Knight is General Steel's president. Mr. Knight testified that in the mid-1990s there were no well-known brands in the industry, despite it being a multibillion dollar industry. Starting in the late 1990s, Mr. Knight sought to achieve strong brand recognition for General Steel through radio advertisements aimed at directing consumers to the company's website. Since that time, the company has spent over $50 million in marketing, with seventy to eighty percent of that amount devoted to radio advertisements. At the peak of General Steel's radio advertising efforts, its advertisements reached 17 to 18 million people per week.
4. Sometime in 2002, the Colorado Attorney General's Office began investigating General Steel and filed a civil complaint against it in 2004. In December2004, a state court entered a permanent injunction against General Steel for violations of the Colorado Consumer Protection Act. A few other adverse court decisions have since been entered against General Steel concerning consumer protection issues. These decisions are available to consumers online, as were other negative comments on websites predating defendant Chumley's activities. Mr. Knight admitted that General Steel's sales peaked in 2002 and that it has experienced a steady decline in sales since then, including a decline in the years preceding the creation of Armstrong Steel. Mr. Knight attributed the decline after 2002 to the case arising out of the Attorney General's complaint.
5. Mr. Chumley began working as a salesperson for General Steel sometime in 2004. He worked at General Steel for approximately 9 months. The parties disagree over what led to his termination, but there is no dispute that he left as a disgruntled employee.
6. After leaving General Steel, Mr. Chumley took a job with Olympia Steel ("Olympia"), a prefabricated steel building company in Pittsburgh, Pennsylvania. While working at Olympia, Mr. Chumley sent an obscene email to numerous employees at General Steel under a pseudonym intended to mock certain General Steel employees against whom Mr. Chumley had a grudge. See Ex. 24. Furthermore, Mr. Chumley created or directed the creation of a website of gay pornography that he falsely attributed to an employee at General Steel. Although Mr. Chumley contends that a co-worker at Olympia who had no connection with General Steel created this site without any involvement by Mr. Chumley, the Court finds Mr. Chumley's testimony to beincredible on this point.
7. At some point during his employment with Olympia, Mr. Chumley moved to Colorado to open an Olympia office. He thereafter created defendant Atlantic Building Systems, LLC, which only later began doing business under the auspices of Armstrong Steel Corporation. Armstrong sold its first building in April 2009.
8. In his efforts to get Armstrong off the ground, Mr. Chumley engaged in an online advertising campaign through Google AdWords that targeted General Steel. For example, as of December 22, 2009, Armstrong had the following sponsored advertisement on Google: "General Steel buildings - Steel framed buildings | Armstrong Steel ... Checkout [sic] various Armstrong Steel buildings - Building frames for your general steel buildings like commercial steel buildings, industrial steel buildings. www.armstrongsteelbuildings.com/steel-metal-building-frames.php." Ex. 3 at GS00077.
9. Over the course of 2009 and 2010, Mr. Chumley was involved in the issuance of a number of internet press releases and internet articles that used false claims to publicize Armstrong's capabilities. Some of those articles contained quotes by a fictional individual named J.P. Remington, III, V.P. of International Affairs for Armstrong Steel. See, e.g., Ex. 13 at 000123. One such article falsely claimed that Armstrong established an "enrichment program . . . benefit[ting] the less fortunate children of the Middle East" by helping to rebuild schools in Iraq. See id. Armstrong also falsely claimed that, as of May 2010, it was required to "postpone international deliveries by one month to meet rising demand here in the U.S. for their steel buildings." Ex. 13 at 000131. 10. Emails purporting to be from J.P. Remington were sent to customers from Mr. Chumley's email address. See Ex. 41.
11. Although Mr. Chumley admits that much of the information in these articles was false, including their having been written by J.P. Remington, he denied any responsibility for the articles or the emails and instead blamed a former employee named Jon Abbotts for writing them. The Court does not find Mr. Chumley credible to the extent he contends that he was not involved or did not approve of these articles. Mr. Chumley forwarded emails purporting to be from J.P. Remington. Moreover, Mr. Chumley claims that he learned of Mr. Abbotts' activities late in 2009 or early 2010. Yet it is undisputed that Mr. Abbotts was not terminated until sometime in spring 2010.
12. On its website on February 1, 2010, Armstrong characterized itself as "one of the largest pre-engineered steel building manufacturers in North America." Ex. 12 at GS00080.2 Armstrong's February 1, 2010 website also informed visitors that "Armstrong Steel is a leading manufacturer of pre-engineered steel buildings and conventional metal buildings for commercial, industrial and religious building projects." Ex. 12 at GS00080. The website described Armstrong as "the leader in metal buildings and steel metal buildings." Ex. 12 at GS00088. According to Mr. Chumley, Armstrongsold approximately seventy buildings from the time of its founding through April 2010.
13. The February 1, 2010 webpage further stated that "[e]ach piece of steel we fabricate is representative of our experience, know-how and cutting-edge technology." Ex. 12 at GS00083. As of that date, Armstrong did not fabricate any steel.
14. The February 1, 2010 website stated that Armstrong had an "onsite, environmentally-controlled painting facility" which "applies the finishing touches to every piece of your steel building structure without adding cost to your metal building project." Ex. 12 at GS00084. It is undisputed that Armstrong did not have, and does not have, an on-site painting facility. The website also included the claim that "[o]ur facilities utilize laser precision engineering." Ex. 12 at GS00085. There is no evidence that Armstrong has onsite facilities that utilize laser precision engineering.
15. Upon searching for "general steel" in Google on February 27, 2010, an internet user would likely have seen Armstrong's sponsored advertisement reading Ex. 3 at GS00118.
16. In June 2010, Armstrong had an advertisement that read "General Steel Buildings Price an Armstrong Steel Building Online in Minutes Or Let Us Do It. www.ArmstrongSteelBuildings.com." Ex. 3 at GS00299. As of June 11, 2010, when somebody entered the search term "General steel buildings" into Google, Armstrong had advertisements that read "Before You BuyGeneral Price Armstrong Steel First Guaranteed Lower Prices! www.ArmstrongSteelBuildings.com," and "General Steel v Armstrong www.ArmstrongSteelBuildings.com Don't Buy a General Steel Building Without Pricing Armstrong First!" Ex. 3 at GS00249, GS00255, GS00257
17. General Steel commenced this lawsuit on June 16, 2010. See Docket No. 1. On July 14, 2010, Mr. Chumley emailed his online marketing consultant that he wished to expand the "General Steel" advertising campaign to the search engines Bing and Yahoo because defendants were "in litigation over it" and "may as well maximize." Ex. 7. Sometime later that same summer, the search engine companies told Armstrong to stop using "General Steel" in its advertising copy.
18. In August 2010, Armstrong began directing visitors to its home page to a webpage entitled "May the Best...
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