Her, Inc. v. Barlow (In re Barlow)

• Decision Date: 26 September 2012
• Docket Number: Adversary No. 11–2445.,Bankruptcy No. 11–52415.
• Parties: In re David E. BARLOW and Maria E. Barlow, Debtors. HER, Inc., et al., Plaintiff v. David E. Barlow, Defendant.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio

478 B.R. 320

57 Bankr.Ct.Dec. 16

In re David E. BARLOW and Maria E. Barlow, Debtors.HER, Inc., et al., Plaintiff

v.David E. Barlow, Defendant.

Bankruptcy No. 11–52415.

Adversary No. 11–2445.

United States Bankruptcy Court,

S.D. Ohio,

Eastern Division.

Sept. 26, 2012.

Bradley K. Baker, Columbus, OH, for Plaintiffs.

Michael T. Gunner, Hillard, OH, for Defendant.

MEMORANDUM OPINION ON PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

JOHN E. HOFFMAN, JR., Bankruptcy Judge.

I. Introduction

The issue before the Court is whether a debt owed by David E. Barlow (“Barlow”) arising from a federal district court's award of statutory damages and attorneys' fees to the targets of his “cybersquatting” activity constitutes a nondischargeable debt “for willful and malicious injury by the debtor to another entity or to the property of another entity.” 11 U.S.C. § 523(a)(6). Cybersquatting includes the act of registering or using a domain name that is identical or confusingly similar to another entity's trademark or service mark (or personal name that is protected as a mark) with the bad faith intent of making a profit. In 1999, Congress enacted the Anticybersquatting Consumer Protection Act (“ACPA”) in order “to curb the proliferation” of the practice, which has been described as “the Internet version of a land grab.” Audi AG v. D'Amato, 469 F.3d 534, 548 (6th Cir.2006) (internal quotationmarks omitted). The United States District Court for the Southern District of Ohio (“District Court”) has held Barlow—the defendant in this adversary proceeding and one of the debtors in the underlying Chapter 7 bankruptcy case—liable for cybersquatting under a provision of the ACPA that is codified at 15 U.S.C. § 1125(d)¹ and for infringement of federally registered service marks under § 32 of the Lanham Act, 15 U.S.C. § 1114(1). See HER, Inc. v. RE/MAX First Choice, LLC, No. 2:06–CV–492, slip op. at 3 (S.D.Ohio Dec. 1, 2011) (“District Court Opinion”).² The District Court awarded the plaintiffs—HER, Inc. (“HER”), Real Living, Inc., Harley E. Rouda, Jr., Harley E. Rouda, Sr. and Kaira Sturdivant Rouda (collectively, “Plaintiffs”)—a judgment against Barlow consisting of statutory damages in the amount of $120,000, attorneys' fees in the amount of $172,356, and costs incurred (collectively, “Debt”). See District Ct. Op. at 3–4.

The Plaintiffs commenced this adversary proceeding seeking to obtain a declaration that the Debt is nondischargeable under § 523(a)(2) and (a)(6) and that Barlow is not entitled to receive a Chapter 7 discharge. Pending before the Court is the Motion, as well as the response to the Motion filed by Barlow (“Response”) (Doc. 15) and the Plaintiffs' reply (Doc. 16) to the Response. For the reasons explained below, the Court concludes that the Plaintiffs are entitled to summary judgment on their § 523(a)(6) nondischargeability claim.³

II. Jurisdiction

The Court has jurisdiction to hear and determine this adversary proceeding pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. This is a core proceeding. See28 U.S.C. § 157(b)(2)(I).

III. Procedural Background

After Barlow commenced his current bankruptcy case by filing a voluntary petition for relief under Chapter 7 of the Bankruptcy Code,⁴ the Plaintiffs filed a motion for relief from the automatic stay to request that the District Court issue the District Court Opinion (Doc. 20) (“Stay Relief Motion”).⁵ In the Stay Relief Motion, the Plaintiffs explained that the District Court had issued a prior opinion and order (“Prior Opinion”) awarding them statutory damages and attorneys' fees based on the same activities that are the subject of the District Court Opinion; that the Prior Opinion was issued during the pendency of a Chapter 11 case previously commenced by Barlow; and that this potentially rendered the Prior Opinion voidable because its issuance—along with the original judgment establishing the Debt—arguably constituted a technical violation of the automatic stay even though Barlow had not provided notice of the bankruptcy case to the Plaintiffs or to the District Court.⁶See Stay Relief Mot. at 2. The Court entered an agreed order granting the requested relief from the automatic stay.

The Plaintiffs filed their complaint commencing this adversary proceeding (Adv. Doc. 1) before the District Court Opinion was issued, and Barlow filed an answer in which he took the position that the Prior Opinion was void because it was entered while his Chapter 11 case was pending. See Adv. Doc. 3 ¶ 20. Thereafter, pursuant to the relief from stay granted by this Court, the District Court issued the District Court Opinion, stating that it superseded and replaced the Prior Opinion. See District Ct. Op. at 1 n. 1. Following a pretrial conference, this Court entered an agreed order establishing a briefing schedule on the issues of whether the District Court Opinion “contains findings of fact necessary for the Court to find, as a matter of law, that there was fraud, misrepresentation or a willful and malicious injury” and whether the District Court Opinion “has preclusive effect under 11 U.S.C. § 523(a)(2) and (6).” Adv. Doc. 8 at 2. The Plaintiffs then filed the Motion.

IV. Undisputed Facts

On May 2, 2008, the District Court entered an opinion and order (“Liability Opinion”) (Compl., Ex. B) finding that the Plaintiffs were entitled to judgment on certain of their claims. According to the Liability Opinion, Barlow opposed the Plaintiffs' request for judgment and sought judgment on a counterclaim, which was denied by the District Court. The District Court also noted that “[b]y agreement of the parties, the record [supporting the Liability Opinion] consists of the testimony and exhibits admitted at the preliminary injunction hearing as well as the deposition of David E. Barlow.” Liability Opinion at 2. ⁷ In the Liability Opinion, the District Court ruled in favor of the Plaintiffs on their claims for relief under the ACPA and § 32 of the Lanham Act, permanently enjoined Barlow from using domain names incorporating the Plaintiffs' personal names and registered marks and stated that the Court would “enter final Judgment following consideration of the Plaintiffs' request for statutory damages and attorneys' fees.” Compl., Ex. B at 19.

It is undisputed that the District Court Opinion replaced and superseded the Prior Opinion (in which the District Court had previously awarded the Plaintiffs statutory damages and attorneys' fees) and that the District Court Opinion provides as follows:

On May 2, 2008, this Court granted Plaintiffs' request for a Permanent Injunction and precluded Defendants from using domain names incorporating Plaintiffs' personal names and registered marks. It is undisputed that Defendants are and were direct competitors with Plaintiffs.

....

Barlow registered and used the internet domain name “ insidereal living.com” [and] an additional five domain names as follows: “ harley roudajr.com,” “ harleyerouda.com,” “ harley roudasr.com,” “ kairarouda.com,” and “ kairasturdiv antrouda.com.” (Stipulation, Doc. 9 at 2.) ⁸When a user visited one of these five website domains, he or she would be diverted to the website of HER's competitor, RE/MAX. (Tr. at 23:1–24:15; Pls.' Exh. 8.) Defendants stipulated that there was traffic on the websites but did not agree as to the amount of traffic each website attracted. (Tr. at 172–174:19.)

....

The Court concluded Defendants acted with a willful, intentional, malicious and bad faith intent to profit and that Barlow's website, “ www. insiderreal living. com” was designed with a “long-term financial motive in mind.” (Order, Doc. 65 at 9–13, 12.) The Court also concluded that the Defendants diverted at least some users to the website of HER's direct competitor, RE/MAX, in a manner that could harm the goodwill of Plaintiffs' marks and to achieve some commercial gain. ( Id.)

The Court concluded that Defendants acted intentionally with a bad faith intent to profit, and willfully and deliberately violated the ACPA and § 32 of the Lanham Act. Accordingly, Plaintiffs are entitled [to] an award of statutory damages under 15 U.S.C. § 1125(d) and attorneys' fees, and costs....

The ACPA authorizes a variety of remedies, including actual damages or statutory damages, attorneys' fees, injunctive relief, and transfer of the domain names. At any time before the entry of final judgment by the trial court, a plaintiff may elect to recover statutory damages in lieu of actual damages. Statutory damages, if elected, range from “not less than $1,000 and not more than $100,000” per domain name. 15 U.S.C. § 1117(d). The statutory damages provisions in the ACPA are designed to afford restitution and reparation for injury, but also to discourage wrongful conduct.... In this case, in their Motion for Judgment, Plaintiffs elected statutory damages.

Courts award significant statutory damages under the ACPA where a defendant willfully, intentionally and maliciously acted in bad faith with intent to profit. Courts view a violation of the ACPA as particularly flagrant when the defendant is a direct competitor of a plaintiff....

In its Opinion and Order permanently enjoining Defendants in this action, the Court delayed ruling on Plaintiffs' statutory damages until briefing was completed on the issue of attorneys' fees. Subsequently, Defendant Barlow filed for bankruptcy, which caused an automatic stay of this action pursuant to 11 U.S.C. § 362(a) of the Bankruptcy Code. The Court administratively closed the case until Defendant Barlow's bankruptcy proceeding was dismissed. Thereafter, Plaintiffs briefed the issues related to their claims for statutory damages and attorneys' fees. Again, Defendants did not oppose or respond to Plaintiffs' contentions regarding damages and fees.

Here, the Court has already determined that Defendants exhibited bad faith in their intent to divert potential customers to the RE/MAX website. Defendants...