URS Holdings. v. John Ripley

• Court: District Court, C.D. California
• Decided: February 25, 2022
• Docket: 2:17-cv-05398
• Status: Unknown

Opinion

Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 1 of 48 Page ID #:10295 'O' 1 JS-6 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 2:17cv05398-RSWL-AGRx 12 AECOM ENERGY & CONSTRUCTION, INC., ORDER re: 13 Plaintiff, 14 PLAINTIFF’S MOTION FOR SANCTIONS [398] v. 15 DEFENDANTS’ MOTIONS FOR 16 GARY TOPOLEWSKI, et al., SUMMARY JUDGMENT [395, 396] 17 Defendants. 18 Plaintiff AECOM Energy & Construction, Inc. 19 (“AECOM”) brought this Action for injunctive relief and 20 damages against Defendants Morrison Knudsen Corporation; 21 Morrison-Knudsen Company, Inc.; Morrison-Knudsen 22 Services, Inc.; Morrison-Knudsen International, Inc. 23 (collectively, “Corporate Defendants”); and Gary 24 Topolewski (“Defendant Topolewski”) (collectively, 25 “Defendants”). The Action arises out of Defendants’ 26 infringing use of the identity and goodwill of Morrison 27 Knudsen Corporation (“MK IP” or “MK brand”), which AECOM 28 1 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 2 of 48 Page ID #:10296

1 owns the rights to.

2 Currently before the Court is a Motion for

3 Sanctions filed by AECOM [398], a Motion for Summary 4 Judgment filed by Corporate Defendants [395], and a 5 Motion for Summary Judgment filed by Defendant 6 Topolewski [396]. Having reviewed all papers submitted 7 pertaining to the Motions, the Court NOW FINDS AND RULES 8 AS FOLLOWS: the Court GRANTS in part and DENIES in part 9 AECOM’s Motion for Sanctions and DENIES as moot 10 Defendants’ Motions for Summary Judgment. 11 12 /// 13 /// 14 /// 15 /// 16 /// 17 /// 18 /// 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 2 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 3 of 48 Page ID #:10297

1 I. BACKGROUND

2 A. Factual Background

3 The facts underlying this Action are stated at 4 length in this Court’s previous Order granting AECOM’s 5 Motion for Summary Judgment and Permanent Injunction. 6 See generally Order re: Pl.’s Mot. for Summ. J., ECF 7 Nos. 242, 243. The facts alleged by AECOM pursuant to 8 its Motion for Sanctions are as follows1: 9 Throughout the underlying discovery period, 10 Defendants showed no respect for this Court or for the 11 judicial process. Pl.’s Mot. for Sanctions 2:26-27, ECF 12 No. 398-1. Defendants have violated this Court’s 13 preliminary injunction order, ignored multiple discovery 14 deadlines, failed to respond to discovery requests, 15 served false discovery responses, failed to comply with 16 Court orders compelling discovery, and failed to appear 17 at depositions. Id. at 2:27-3:2. 18 19 /// 20 /// 21 /// 22 /// 23

24 1 The Court does not cite to the parties’ uncontroverted facts given that the Court DENIES as moot Defendants’ Motions for 25 Summary Judgment. The Court finds it more appropriate to rely on the facts as stated in AECOM’s Motion for Sanctions, as it relies 26 on various orders and court records that have been filed throughout this case. Accordingly, the Court cites only to the 27 facts contained in the moving papers pursuant to AECOM’s Motion 28 for Sanctions in summarizing the facts here. 3 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 4 of 48 Page ID #:10298

1 1. Defendants Violated the Court’s Preliminary and

2 Permanent Injunction Orders

3 On September 28, 2017, this Court granted AECOM’s 4 request for a preliminary injunction and enjoined 5 Defendants from using the MK name, including as a domain 6 name. Id. at 3:4-6. However, Defendants failed to 7 abide by the preliminary injunction, necessitating 8 multiple motions to compel. Id. at 3:9-10. Defendants 9 finally complied with the preliminary injunction after 10 over six months had passed and two motions for contempt 11 were filed. Id. at 3:18-19. 12 On November 8, 2018, this Court granted AECOM’s 13 motion for permanent injunction. Id. at 8:18-19. 14 However, Defendants resurrected two infringing websites 15 in direct violation of the permanent injunction. Id. at 16 4:11-15. As of March 2021 and May 2021, 17 www.morrisonknudsen.com and www.morrison-knudsen.com 18 were live and the domain registrations had been updated. 19 Id. at 4:18-20. AECOM notified Defendants twice before 20 the infringing websites were finally taken offline. Id. 21 at 4:15-22. 22 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 4 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 5 of 48 Page ID #:10299

1 2. Defendants Ignored Their Discovery Obligations

2 On December 4, 2017, during the initial discovery

3 period for this action, AECOM asked Defendants to 4 identify “revenue received by any Defendant or 5 affiliate” for every contract entered “under or using 6 the Morrison Knudsen name”; and “[f]or each Corporate 7 Defendant, . . . all revenue earned” since their 8 respective dates of inception. Id. at 5:2-7. Four 9 years, significant motion practice, and many court 10 orders later, Defendants have refused to produce 11 anything. Id. at 5:7-9. Defendants failed to respond 12 to discovery and to appear for depositions, served false 13 discovery responses, and have failed to produce 14 financial information. See id. at 5:12-7:11. 15 Defendants, to this day, still refuse to provide 16 any information about any contracts they entered or 17 revenue they received. Id. at 7:12-13. When the 18 Magistrate Judge compelled discovery of “all revenue” 19 for each Corporate Defendant for four years before the 20 filing of the Complaint, Defendants produced only a two- 21 page “income statement” that the Court found “plainly 22 inadequate.” Id. at 7:13-16. The Court stated 23 Defendants’ decision to produce only two pages of 24 financial information “created specially for this 25 litigation” merited compelling Corporate Defendants’ 26 corporate tax returns and bank statements. Id. at 7:16- 27 19. However, Corporate Defendants were suddenly unable 28 to find their bank statements, with Defendants claiming 5 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 6 of 48 Page ID #:10300

1 that the bank statements either did not exist or were

2 not in their possession. Id. at 8:1-4. AECOM then

3 filed a subsequent motion for contempt, which the Court 4 granted. Id. at 8:4-6. Afterwards, Corporate 5 Defendants, through their representative Mike Johnson 6 (who has never appeared for a deposition), averred that 7 it was his understanding that Corporate Defendants “have 8 no legal authority to obtain bank records without Henry 9 Blum’s2 authorization,” and that he had been “unable to 10 locate Henry Blum for over a year.” Id. at 8:7-10. 11 3. The Court Reopened Discovery on Damages 12 Following remand from the Ninth Circuit, the Court 13 reopened discovery on damages. Id. at 9:16-24. AECOM 14 served eleven third-party subpoenas, seeking: account 15 information for the infringing websites; account 16 information for telephone numbers published by 17 Defendants; and bank statements from financial 18 institutions believed to be used by Defendants, as well 19 as identification of the bank from which Defendants’ 20 previous counsel paid fee awards in this case. Id. at 21 9:25-10:7. Defendants objected to every subpoena, 22 effectively blocking AECOM from gaining information 23 about the sources of Defendants’ revenues. Id. at 10:3- 24 5. On December 17, 2021, the Magistrate Judge denied 25 Defendants’ motion to quash with respect to Corporate 26 2 Henry Blum is one of four defaulting defendants in this 27 action. See generally Default by Clerk, ECF No. 77; Order re: 28 Mot. for Default J., ECF No. 258. 6 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 7 of 48 Page ID #:10301

1 Defendants’ bank statements and service provider

2 information. Id. at 10:13-15. The Court noted “the

3 subpoena seeks information that the court already 4 ordered Defendants to produce,” i.e., bank statements 5 for Corporate Defendants. Id. at 10:14-17. At the 6 close of fact discovery, Defendants had not supplemented 7 any discovery responses, nor supplemented their document 8 productions. Id. at 10:18-19. 9 B. Procedural Background 10 On November 8, 2018, this Court granted [242, 243] 11 AECOM’s Motion for Summary Judgment against Defendants,3 12 finding willful infringement of the MK brand and 13 awarding AECOM $1,802,834,672 (“$1.8 billion”) in 14 damages.4 On February 21, 2019, Defendants filed a 15 Motion for Alteration, Amendment, or Reconsideration 16 [268] of the Court’s Order granting AECOM’s Motion for 17 Summary Judgment, which the Court denied [305] on April 18 24, 2019. 19 3 AECOM also named four additional individual defendants in 20 its Complaint: Bud Zulakoff, John Ripley, Todd Hale, and Henry 21 Blum (collectively, “Defaulting Defendants”). See generally Compl., ECF No. 1. On December 4, 2017, the court clerk entered 22 default as to these four individuals. See generally Default by Clerk. On November 9, 2018, AECOM filed a Motion for Default 23 Judgment against Defaulting Defendants. See generally Mot. for Default J., ECF No. 244. On January 24, 2019, the Court granted 24 AECOM’s motion, finding Defaulting Defendants jointly and severally liable for AECOM’s damages. See generally Order re: 25 Mot. for Default J. 26 4 The Court also granted AECOM’s request for a permanent injunction ordering Defendants to cease their use of the MK IP 27 and awarded AECOM its attorneys’ fees. See Order re: Pl.’s Mot. 28 for Summ. J. at 45:5-55:8. 7 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 8 of 48 Page ID #:10302

1 Defendants appealed the damages award, which the

2 Ninth Circuit reversed and remanded [339] on March 24,

3 2021.5 Following remand, this Court reopened discovery 4 on damages. On December 16, 2021,6 Defendants filed the 5 present Motions for Summary Judgment [395, 396]. On 6 December 17, 2021, AECOM filed the present Motion for 7 Sanctions [398]. On December 28, 2021, AECOM opposed 8 [403] Defendants’ Motions for Summary Judgment and 9 Defendants opposed [402, 405] AECOM’s Motion for 10 Sanctions. On January 4, 2022, Defendants filed their 11 replies in support of their Motions for Summary Judgment 12 [408, 409] and AECOM filed its Reply [411] in support of 13 its Motion for Sanctions. 14 15 /// 16 /// 17 /// 18 /// 19 /// 20 /// 21 /// 22 /// 23 5 Defendants also argued on appeal that AECOM lacked Article 24 III standing, which the Ninth Circuit rejected. See Ninth Cir. Mem. at 2-3, ECF No. 339. 25 6 Also on December 16, 2021, Magistrate Judge Rosenberg 26 granted in part and denied in part Defendants’ motions to quash AECOM’s third-party subpoenas, granted in part Defendants’ 27 alternative motions for a protective order, and denied AECOM’s 28 motion to compel [397]. 8 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 9 of 48 Page ID #:10303

1 II. DISCUSSION

2 A. Legal Standard

3 1. Evidentiary and Terminating Sanctions 4 Federal Rule of Civil Procedure (“Rule”) 37 5 “authorizes the district court, in its discretion, to 6 impose a wide range of sanctions when a party fails to 7 comply with the rules of discovery or with court orders 8 enforcing those rules.” Wyle v. R.J. Reynolds Indus., 9 Inc., 709 F.2d 585, 589 (9th Cir. 1983) (citation 10 omitted). Under Rule 37(b)(2)(A), “[i]f a party . . . 11 fails to obey an order to provide or permit discovery . 12 . . , the court where the action is pending may issue 13 further just orders,” which can include “directing that 14 the matters embraced in the order or other designated 15 facts be taken as established for the purposes of the 16 action, as the prevailing party claims” and “rendering a 17 default judgment against the disobedient party.” Fed. 18 R. Civ. P. 37(b)(2)(A)(i)-(vi). 19 Courts also have “the inherent authority to issue 20 sanctions in response to abusive litigation practices.” 21 Garrison v. Ringgold, 2020 WL 6537389, at *4 (S.D. Cal. 22 Nov. 6, 2020) (citing Leon v. IDX Sys. Corp., 464 F.3d 23 951, 958 (9th Cir. 2006) (“There are two sources of 24 authority under which a district court can sanction a 25 party who has despoiled evidence: the inherent power of 26 federal courts to levy sanctions in response to abusive 27 litigation practices, and the availability of sanctions 28 under Rule 37 . . . .”)); Neighborhood Assistance Corp. 9 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 10 of 48 Page ID #:10304

1 of Am. v. First One Lending Corp., 2013 WL 12142562, at

2 *2 (C.D. Cal. Mar. 26, 2013) (“A district court may

3 impose terminating sanctions pursuant to its inherent 4 power and pursuant to . . . Rule . . . 37.”). “It is 5 firmly established that the courts have inherent power 6 to dismiss an action or enter a default judgment to 7 ensure the orderly administration of justice and the 8 integrity of their orders.” Phoceene Sous-Marine, S.A. 9 v. U.S. Phosmarine, Inc., 682 F.2d 802, 806 (9th Cir. 10 1982) (citations omitted). 11 B. Discussion 12 1. AECOM’s Motion for Sanctions 13 As a preliminary matter, the Court first addresses: 14 (1) Defendant Topolewski’s requests for judicial notice 15 made in connection with his Opposition to AECOM’s Motion 16 for Sanctions; (2) Defendants’ evidentiary objections to 17 the Declaration of Yungmoon Chang (“Chang Declaration”) 18 submitted by AECOM in support of its Motion for 19 Sanctions; and (3) AECOM’s evidentiary objections to the 20 Declarations of Gary Topolewski (“Topolewski 21 Declaration”) and John Jahrmarkt (“Jahrmarkt 22 Declaration”) submitted in support of Defendant 23 Topolewski’s Opposition to AECOM’s Motion for Sanctions. 24 25 /// 26 /// 27 /// 28 /// 10 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 11 of 48 Page ID #:10305

1 a. Defendant Topolewski’s Requests for

2 Judicial Notice

3 A court may take judicial notice of an adjudicative 4 fact that is “not subject to reasonable dispute because 5 it: (1) is generally known within the trial court’s 6 territorial jurisdiction; or (2) can be accurately and 7 readily determined from sources whose accuracy cannot 8 reasonably be questioned.” Fed. R. Evid. 201(b). 9 Matters of public record may be judicially noticed, but 10 disputed facts contained therein may not. Khoja v. 11 Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 12 2018). “[A]ccuracy is only part of the inquiry under 13 Rule 201(b).” Id. “A court must also consider—and 14 identify—which fact or facts it is noticing from” the 15 documents. Id. 16 Defendant Topolewski seeks judicial notice of the 17 following four documents on file with the Nevada 18 Secretary of State: (1) filings for Majestic Services, 19 Inc. (formerly known as Morrison-Knudsen Services, Inc.) 20 from May 29, 2017 to present (“Exhibit A”); (2) filings 21 for Goodbrand Corporation (formerly known as Morrison 22 Knudsen Corporation) from October 22, 2014 to present 23 (“Exhibit B”); (3) filings for Northern Majestic 24 International Inc. (formerly known as Morrison Knudsen 25 International Inc.) from January 23, 2012 to present 26 (“Exhibit C”); and (4) filings for Goodbrand Company 27 Inc. (formerly known as Morrison-Knudsen Company, Inc.) 28 from August 4, 1998 to present (“Exhibit D”). See 11 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 12 of 48 Page ID #:10306

1 generally Topolewski’s Req. for Judicial Notice, ECF No.

2 406. Although Exhibits A-D may be judicially noticeable

3 as matters of public records, Defendant Topolewski does 4 not specify which facts he seeks to judicially notice 5 from the four filings. Further, the documents are not 6 pertinent or necessary to the Court’s resolution of the 7 present motion, and the Court does not rely upon them. 8 The Court therefore DENIES Defendant Topolewski’s 9 requests for judicial notice in their entirety. 10 b. Defendants’ Evidentiary Objections 11 Defendants lodged sixteen evidentiary objections to 12 the Chang Declaration submitted by AECOM in support of 13 its Motion for Sanctions. See generally Defs.’ Evid. 14 Objs., ECF No. 405-1. Many of Defendants’ objections 15 read as a continuation or reiteration of their arguments 16 in their briefs. See id. Nos. 8-16. Further, the Court 17 does not rely on the majority of the Chang Declaration 18 or its attached exhibits in ruling on AECOM’s Motion for 19 Sanctions. Regarding the portions of the Chang 20 Declaration to which Defendants’ object but the Court 21 does not rely, the Court DENIES as moot Defendants’ 22 evidentiary objections. See Muhammad v. Reese L. Grp., 23 APC, 2017 WL 2578915, at *2 (S.D. Cal. June 14, 2017) 24 (denying evidentiary objections as moot where the court 25 “did not rely on the . . . declarations and exhibits in 26 ruling on the . . . motion [for sanctions].”). 27 Accordingly, the Court DENIES as moot Defendants’ 28 evidentiary objections 1-7 and 15-16 because the Court 12 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 13 of 48 Page ID #:10307

1 does not rely on the objected-to information contained

2 within them in reaching its determination on the Motion

3 for Sanctions. 4 The Court does, however, rely on the press release 5 titled “Morrison Knudsen Awarded $36 Million Mine 6 Engineering Contract” in making its ruling on AECOM’s 7 Motion for Sanctions. See Chang Decl. ¶ 24; see also 8 Ex. 26 to Chang Decl. The Court also relies on the 9 Chang Declaration for the proposition that Defendants 10 “published at least two other press releases.” See 11 Chang Decl. ¶ 25; see also Exs. 27-28 to Chang Decl. 12 The Court reaffirms its previous order overruling 13 Defendants’ same objections to these press releases. 14 See Order re: Pl.’s Mot. for Summ. J. 49:21-25. 15 Further, the press releases are relevant to AECOM’s 16 Motion for Sanctions because they are relevant for 17 establishing evidentiary and terminating sanctions. In 18 sum, the Court OVERRULES Defendants’ evidentiary 19 objections 8-14, and DENIES as moot Defendants’ 20 evidentiary objections 1-7 and 15-16. 21 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 13 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 14 of 48 Page ID #:10308

1 c. AECOM’s Evidentiary Objections

2 AECOM objects to the Topolewski Declaration and

3 Jahrmarkt Declaration in their entirety. See Pl.’s 4 Evid. Objs., ECF No. 414. Given that the Court does not 5 rely on either declaration in reaching its ruling on 6 AECOM’s Motion for Sanctions, the Court DENIES as moot 7 AECOM’s evidentiary objections. See Muhammad, 2017 WL 8 2578915 at *2 (denying evidentiary objections as moot 9 where the court “did not rely on the . . . declarations 10 and exhibits in ruling on the . . . motion [for 11 sanctions].”). 12 d. Motion for Sanctions 13 AECOM moves this Court to impose evidentiary, 14 terminating, and monetary sanctions on Defendants. See 15 generally Pl.’s Mot. for Sanctions. The Court GRANTS in 16 part and DENIES in part AECOM’s Motion for Sanctions. 17 Each sanction request is examined in turn below. 18 i. Evidentiary Sanctions 19 AECOM requests, pursuant to Rule 37(b)(2)(A)(i), 20 that the Court take as established that Defendants 21 “performed the work referenced in, and collected the 22 amount listed in, the press release titled ‘Morrison 23 Knudsen Awarded $36 Million Mine Engineering 24 Contract.’”7 Id. at 12:9-12. AECOM argues that such an

25 7 In the alternative, AECOM asks that the Court “designate 26 as established that Defendants have earned as much as they claim to have spent in costs and expenses, trebled.” Id. at 14:9-11. 27 Given that the Court GRANTS AECOM’s primary evidentiary sanctions request and takes as true that Defendants collected on a $36 28 million contract, the Court need not address AECOM’s alternative 14 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 15 of 48 Page ID #:10309

1 evidentiary sanction is justified because Defendants

2 “have refused to produce any reliable information

3 regarding their financial records . . . .” Id. at 4 12:22-23. In light of Defendants’ flagrant discovery 5 abuse, the Court GRANTS AECOM’s request and takes as 6 true that Defendants performed and collected on a 7 contract for $36 million. 8 Under Rule 37(b)(2)(A), “[i]f a party . . . fails 9 to obey an order to provide or permit discovery . . . , 10 the court may “direct[] that the matters embraced in the 11 order or other designated facts be taken as established 12 for the purposes of the action, as the prevailing party 13 claims . . . .” Fed. R. Civ. P. 37(b)(2)(A)(i). “Rule 14 37 sanctions must be applied diligently both ‘to 15 penalize those whose conduct may be deemed to warrant 16 such a sanction, [and] to deter those who might be 17 tempted to such conduct in the absence of such a 18 deterrent.’” Guifu Li v. A Perfect Day Franchise, Inc., 19 281 F.R.D. 373, 390 (N.D. Cal. 2012) (quoting Nat'l 20 Hockey League v. Metro. Hockey Club, 427 U.S. 639, 643 21 (1976)). A “district court has great latitude in 22 imposing sanctions for discovery abuse.” Dahl v. City 23 of Huntington Beach, 84 F.3d 363, 367 (9th Cir. 1996). 24 As a condition precedent to imposing evidentiary 25 sanctions pursuant to Rule 37, Defendants must have 26 violated a Court Order. See Fed. R. Civ. P. 27

28 evidentiary sanctions request. 15 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 16 of 48 Page ID #:10310

1 37(b)(2)(A); Wanderer v. Johnston, 910 F.2d 652, 657

2 (9th Cir. 1990) (affirming sanctions where a party

3 repeatedly obstructed discovery and disobeyed court 4 orders). This condition precedent has been met here. 5 To date, Defendants still have not complied with this 6 Court’s June 27, 2018 Order compelling Defendants to 7 produce “all monthly, quarterly, and annual income 8 statements, balance sheets, and other financial 9 statements of any Corporate Defendants” and their 10 corporate tax returns and bank statements “for the 11 period beginning four years before the filing of the 12 complaint . . . .” Order re: Defs.’ Mot. to Quash 13 Subpoenas and/or for Protective Order at 2 (“Order re: 14 Mot. to Quash”), ECF No. 397. Thus, evidentiary 15 sanctions pursuant to Rule 37 may be appropriately 16 imposed. 17 “There are two limitations to the application of a 18 Rule 37(b)(2) sanction.” Guifu, 281 F.R.D. at 393. 19 “First, ‘any sanction must be just; second, the sanction 20 must be specifically related to the particular claim 21 which was at issue in the order to provide discovery.’” 22 Id. (quoting Ins. Corp. of Ireland, Ltd. v. Compagnie 23 des Bauxites de Guinee, 456 U.S. 694, 707 (1982)). 24 Here, taking as true that Defendants performed and 25 collected on a contract for $36 million is both just and 26 “specifically related” to this Court’s previous order 27 compelling Defendants to provide financial discovery. 28 The evidentiary sanction is appropriate for the reasons 16 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 17 of 48 Page ID #:10311

1 below.

2 a. The Evidentiary Sanction Is Just in

3 Light of the Circumstances of this 4 Case 5 AECOM cannot calculate its damages due to 6 Defendants’ repetitive discovery evasion. As this Court 7 has stated—and as the Ninth Circuit agreed on appeal— 8 “[t]he history of this litigation demonstrates a pattern 9 in which Defendants continuously refused to comply with 10 Plaintiff’s discovery requests, Court orders, and evaded 11 providing financial information.” Order re: Pl.’s Mot. 12 for Summ. J. 49:21-25; see also Ninth Cir. Mem. n.5 (“We 13 note that Defendants-Appellants failed to provide in 14 discovery any reliable evidence of their sales, profits, 15 or costs, despite court orders compelling them to do 16 so.”); Ninth Cir. Mem. (Friedland, J., concurring) 17 (“[T]he defining feature of this dispute has been what 18 the district court aptly described as Defendants- 19 Appellants’ ‘lengthy history of bad faith litigation 20 practices.’ Defendants-Appellants ignored multiple 21 discovery orders, refused to appear for depositions, and 22 ultimately failed to produce a single reliable business 23 record from which AECOM could calculate damages.”). To 24 decline to impose an evidentiary sanction of some sort 25 here would be manifestly unjust to AECOM and effectively 26 reward Defendants for their discovery abuse. Given 27 Defendants’ discovery evasion and violations of this 28 Court’s orders, designating that Defendants performed 17 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 18 of 48 Page ID #:10312

1 and collected on a $36 million contract is just. See

2 Compagnie des Bauxites, 456 U.S. at 708 (affirming a

3 sanction as “just” in light of a party’s refusal to 4 provide discovery and where the court was “[c]onfronted 5 with continued delay and an obvious disregard of its 6 orders”). 7 b. The Evidentiary Sanction Is 8 Specifically Related to the Order 9 Compelling Defendants to Provide 10 Financial Discovery 11 Establishing that Defendants collected $36 million 12 on a construction contract directly remedies the 13 prejudice AECOM has faced due to Defendants’ refusal to 14 produce their financial and tax statements. Because 15 AECOM has no sources of information from which to 16 calculate its damages, directing it as true that 17 Defendants collected $36 million based on the lowest of 18 the three publicly available press releases is a 19 narrowly tailored sanction. Cf. Guifu, 281 F.R.D. at 20 394 (finding that an evidentiary sanction deeming facts 21 alleged in a complaint as established for trial 22 “flow[ed] directly” from defendants’ refusal to produce 23 financial discovery and was “narrowly tailored to 24 directly address the prejudice from Defendants’ 25 conduct”). AECOM’s reliance on the press release is 26 justifiable given that Defendants have not produced any 27 reliable financial discovery. Thus, because the 28 evidentiary sanction sought here meets both requirements 18 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 19 of 48 Page ID #:10313

1 under Rule 37(b)(2), the Court GRANTS AECOM’s request to

2 designate as established that Defendants performed and

3 collected on a $36 million contract. 4 To be clear, the Court notes the somewhat 5 unconventional nature of this evidentiary sanction. In 6 analogous cases where a party has evaded discovery, 7 courts have instructed the jury that it may draw an 8 adverse inference against the party responsible for 9 withholding evidence. See Glover v. BIC Corp., 6 F.3d 10 1318, 1329 (9th Cir. 1993); Neighborhood Assistance 11 Corp., 2013 WL 12142562, at *3 (instructing the jury to 12 infer that financial evidence destroyed by defendants 13 “would have been favorable to the [p]laintiff and 14 unfavorable to the [d]efendants”). Other times, courts 15 have entered evidentiary sanctions “deem[ing] facts 16 alleged in the complaint established for trial, subject 17 to rebuttal by the non-moving party, where the moving 18 party was prejudiced because of the other party’s 19 discovery abuses.” Guifu, 281 F.R.D. at 393 (citing 20 General Atomic Co. v. Exxon Nuclear Co., 90 F.R.D. 290 21 S.D. Cal. 1981). To take either approach here would be 22 wholly insufficient to penalize and deter Defendants’ 23 discovery misconduct, however. See Nat'l Hockey League, 24 427 U.S. at 643 (noting that the rationale of Rule 37 25 sanctions is to both penalize and deter future 26 misconduct). Directing the jury to infer that 27 Defendants’ financial statements would have been 28 favorable to AECOM and unfavorable to Defendants would 19 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 20 of 48 Page ID #:10314

1 not bring AECOM closer to the truth behind Defendants’

2 profits. A vague adverse inference of this kind would

3 be inadequate here, as the jury would still be left with 4 the conundrum of fashioning a damages award based on 5 little to no information. 6 Nor would deeming facts in AECOM’s Complaint as 7 established for trial be sufficient. Unsurprisingly, 8 AECOM’s Complaint does not state a specific damages 9 amount. See generally Compl. At the time the Complaint 10 was filed, AECOM could not have known how much 11 Defendants profited from their infringement scheme, and 12 AECOM was justifiably relying on the judicial process to 13 uncover the true facts of this case. But Defendants 14 have so frustrated AECOM’s discovery efforts that now, 15 nearly five years after the filing of its Complaint, 16 AECOM is in no better position than where it started. 17 Perhaps AECOM puts it best: 18 “Without imposition of such sanctions, AECOM 19 will be forced to proceed to a damages trial on 20 a record that is incomplete solely due to Defendants’ recalcitrance. And Defendants 21 (despite being adjudicated willful infringers) 22 may escape paying any damages at all. Such an outcome would reward Defendants for their 23 flagrant disregard, and incentivize every other 24 wrongdoer, in every type of case, to avoid paying damages simply by withholding financial 25 information. This could hardly be more unjust. 26 As the Ninth Circuit has noted, ‘[i]t seems scarcely equitable . . . for an infringer to 27 reap the benefits of a trade-mark he has 28 stolen, force the registrant to the expense and 20 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 21 of 48 Page ID #:10315

delay of litigation, and then escape payment of 1 damages on the theory that the registrant

2 suffered no loss. To impose on the infringer nothing mor e serious than an injunction when he 3 is caught is a tacit invitation to other 4 infringement.’” 5 6 Pl.’s Mot. for Sanctions 2:10-20 (quoting Maier Brewing 7 Co. v. Fleischmann Distilling Corp., 390 F.2d 117, 123 8 (9th Cir. 1968)). Accordingly, deeming that Defendants 9 performed and collected on a $36 million contract is 10 necessary and appropriate here, especially in light of 11 the Court’s “great latitude in imposing sanctions for 12 discovery abuse.” See Dahl, 84 F.3d at 367. 13 14 /// 15 /// 16 /// 17 /// 18 /// 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 21 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 22 of 48 Page ID #:10316

1 c. The Evidentiary Sanction Is Not

2 Speculative and Does Not Run Afoul of

3 the Law of the Case 4 Defendants argue that the evidentiary sanction 5 sought here is speculative and runs afoul of the law of 6 the case. See MK Defs.’ Opp’n to Mot. for Sanctions 7 (“MK Defs.’ MFS Opp’n”) 12:18-14:28, ECF No. 402; 8 Topolewski’s Opp’n to Mot. for Sanctions (“Topolewski’s 9 MFS Opp’n”) 18:7-21:4, ECF No. 405.8 Both arguments are 10 unavailing and are examined in turn below. 11 Defendants assert that the $36 million inference 12 requested by AECOM must be “supported by a chain of 13 logic, rather than [by] mere speculation dressed up in 14 the guise of evidence.” Id. at 13:1-3 (citation 15 omitted). They argue AECOM has not shown a “chain of 16 logic” but rather, “merely speculates that because 17 Defendants failed to produce bank records, they have 18 spoliated evidence or committed fraud.” Id. at 13:14- 19 16. But AECOM has, indeed, shown a “chain of logic” 20 here to support the $36 million inference it is 21 requesting. What other “chain of logic” could there be? 22 Why else would Defendants go to the great lengths of 23 ignoring multiple discovery requests and violating court 24 8 Corporate Defendants’ and Defendant Topolewski’s 25 Oppositions to AECOM’s Motion for Sanctions are virtually identical both in substance and in form. See generally MK Defs.’ 26 MFS Opp’n; Topolewski’s MFS Opp’n. Accordingly, the Court treats them as the same and cites to Corporate Defendants’ Motion for 27 arguments made in both. For arguments only made by Defendant 28 Topolewski, the Court cites to his Opposition only. 22 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 23 of 48 Page ID #:10317

1 orders compelling discovery if their infringement scheme

2 was not highly profitable to begin with? Had Defendants

3 truly operated at a loss and made no profits—which they 4 assert in their Motions for Summary Judgment—they would 5 not have evaded discovery in the first place and could 6 have simply turned over the records reflecting as much. 7 AECOM’s $36 million evidentiary sanction request is more 8 than well-supported here. The “chain of logic” 9 underlying Defendants’ shady litigation tactics points 10 to only one conclusion: that Defendants’ widespread 11 infringement scheme was highly profitable and Defendants 12 are withholding evidence of their true finances. Any 13 speculation concerning the $36 million amount here is 14 due to Defendants’ own wrongdoing, and AECOM’s use of 15 the publicly available press release is justified given 16 that Defendants have not produced any reliable financial 17 statements to date. 18 Moreover, establishing that Defendants performed 19 and collected on a $36 million contract does not run 20 afoul of the law of this case. Defendants argue that 21 because the Ninth Circuit held AECOM could not use the 22 publicly available press releases to support a damages 23 award, AECOM cannot now use the press release regarding 24 a $36 million contract to request sanctions in the same 25 amount. MK Defs.’ MFS Opp’n 13:21-14:28. Defendants 26 are mistaken, however. Unlike in its previous motion 27 for summary judgment, here, AECOM does not seek to use 28 the press release to establish Defendants’ sales as a 23 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 24 of 48 Page ID #:10318

1 matter of law under Section 1117(a) of the Lanham Act.

2 Pl.’s Reply to Mot. for Sanctions (“Pl.’s MFS Reply”)

3 14:13-15, ECF No. 411. Rather, AECOM seeks to use the 4 press release to sanction Defendants under Rule 37. Id. 5 at 14:17-19. Moreover, the Ninth Circuit contemplated 6 such an evidentiary sanction, stating that “[o]ur 7 decision does not preclude the district court on remand 8 from considering whether a discovery sanction is 9 appropriate should AECOM seek such relief, such as a 10 sanction focused on the evidentiary inferences that may 11 be drawn from the [D]efendants’ refusal to produce 12 relevant financial records.” Ninth Cir. Mem. n.5; see 13 also Ninth Cir. Mem. (Friedland, J., concurring) at 3 14 (“I share the majority’s opinion that the district court 15 could consider entering discovery sanctions.”). The 16 Court finds that the evidentiary sanction sought here is 17 indeed appropriate and infers no more than is necessary 18 to remedy Defendants’ discovery abuses. Using the press 19 release regarding a $36 million contract to support an 20 evidentiary sanction here is proper and does not run 21 afoul of the law of this case. 22 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 24 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 25 of 48 Page ID #:10319

1 d. The Evidentiary Sanction Is

2 Additionally Authorized Under the

3 Court’s Inherent Authority 4 Even if this evidentiary sanction was somehow 5 improper under Rule 37, the Court’s decision is 6 authorized under its inherent powers. Courts have 7 “inherent authority to issue sanctions in response to 8 abusive litigation practices.” Garrison, 2020 WL 9 6537389 at *4 (citing Leon, 464 F.3d at 958 (“There are 10 two sources of authority under which a district court 11 can sanction a party who has despoiled evidence: the 12 inherent power of federal courts to levy sanctions in 13 response to abusive litigation practices, and the 14 availability of sanctions under Rule 37 . . . .”)). 15 This includes the “inherent power to sanction parties 16 and their attorneys, a power born of the practical 17 necessity that courts be able ‘to manage their own 18 affairs so as to achieve the orderly and expeditious 19 disposition of cases.’” Van Osten v. Home Depot, 20 U.S.A., Inc., 2021 WL 3471581, at *14 (S.D. Cal. May 4, 21 2021) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 43 22 (1991)). Given Defendants’ “history of bad faith 23 litigation tactics” and the reasons stated above, an 24 evidentiary sanction based on the Court’s inherent 25 powers establishing that Defendants collected on a $36 26 million contract is justified and necessary for the 27 “expeditious disposition” of this case. See id. (noting 28 that courts may impose sanctions pursuant to their 25 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 26 of 48 Page ID #:10320

1 inherent powers where a party has “willfully disobeyed a

2 court order, or where the party has acted in bad faith,

3 vexatiously, or for oppressive reasons”). This 4 litigation began in 2017 and Defendants, through their 5 evasive behavior, have dragged this case on for far too 6 long. Thus, on this separate and additional basis of 7 authority, taking as established that Defendants 8 collected $36 million from a construction contract is 9 proper. 10 In sum, the Court GRANTS AECOM’s request for an 11 evidentiary sanction and deems that Defendants performed 12 and collected on a $36 million contract. 13 ii. Terminating Sanctions 14 There may be no better case to grant terminating 15 sanctions than in this one. “A terminating sanction, 16 whether default judgment against a defendant or 17 dismissal of a plaintiff’s action, is very severe.” 18 Connecticut Gen. Life Ins. Co. v. New Images of Beverly 19 Hills, 482 F.3d 1091, 1096 (9th Cir. 2007) (citing 20 Jorgensen v. Cassiday, 320 F.3d 906, 912 (9th Cir. 21 2003)). “Only willfulness, bad faith, and fault justify 22 terminating sanctions.” Id. (internal quotation marks 23 and citation omitted). The Ninth Circuit also uses a 24 five-part test, with three subparts to the fifth part, 25 to determine whether a case-dispositive sanction is 26 just: “(1) the public’s interest in expeditious 27 resolution of litigation; (2) the court’s need to manage 28 its dockets; (3) the risk of prejudice to the party 26 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 27 of 48 Page ID #:10321

1 seeking sanctions; (4) the public policy favoring

2 disposition of cases on their merits; and (5) the

3 availability of less drastic sanctions.” Malone v. U.S. 4 Postal Serv., 833 F.2d 128, 130 (9th Cir. 1987). 5 Because courts may grant terminating sanctions under 6 either Rule 37 or their inherent powers, this Court need 7 not engage in a Rule 37 analysis and GRANTS terminating 8 sanctions pursuant to its inherent powers. See 9 Anheuser-Busch, Inc. v. Natural Beverage Distributors, 10 69 F.3d 337, 348 (9th Cir. 1995) (affirming terminating 11 sanctions under the district court’s inherent powers and 12 thus declining to address whether sanctions were 13 appropriate under Rule 37). 14 a. Defendants’ Discovery Misconduct Was 15 Willful 16 Disobedient conduct is willful if it is within the 17 offending party’s control. Stars’ Desert Inn Hotel & 18 Country Club, Inc. v. Hwang, 105 F.3d 521, 525 (9th Cir. 19 1997); Fair Hous. of Marin v. Combs, 285 F.3d 899, 905 20 (9th Cir. 2002). As AECOM aptly states, “the record is 21 replete with examples of Defendants’ willful disregard 22 for the judicial process.” Pl.’s Mot. for Sanctions 23 18:22-23. Willfulness, fault, and bad faith on the part 24 of Defendants have been repeatedly demonstrated 25 throughout this litigation. Defendants have failed to 26 respond to AECOM’s discovery requests; failed to appear 27 at depositions; failed to comply with Court orders 28 compelling them to provide discovery; violated the 27 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 28 of 48 Page ID #:10322

1 preliminary and permanent injunction orders; and ignored

2 multiple deadlines to name a few. In doing so,

3 Defendants have effectively precluded AECOM from 4 uncovering the truth behind their profits. Cf. Ninth 5 Cir. Mem. (Friedland, J., concurring) at 3 (“Defendants- 6 Appellants had stonewalled AECOM’s every effort to 7 ascertain information about their finances . . . .”). 8 Defendants’ flagrant discovery abuse was clearly within 9 their control, a point which Corporate Defendants do not 10 dispute, and intended to keep their profits from being 11 discovered. Accordingly, the Court concludes that 12 Defendants’ discovery misconduct was willful for the 13 purposes of imposing terminating sanctions. See 14 Garrison, 2020 WL 6537389 at *5 (finding willfulness 15 where a defendant’s failures to file discovery 16 responses, comply with orders compelling discovery, and 17 attend his deposition were in his control). 18 Defendant Topolewski’s attempt to distance himself 19 from Corporate Defendants is unavailing. As this Court 20 has found, he was extensively involved with Corporate 21 Defendants despite his current statements to the 22 contrary. See Order re: Defs.’ Mot. for Reconsideration 23 25:16-20, ECF No. 305 (“Holding Topolewski personally 24 liable is not manifestly unjust because he is liable 25 jointly and severally for his direct involvement in the 26 extensive fraud committed in forming the Corporate 27 Defendants.”). Defendant Topolewski himself has also 28 failed to comply with his discovery obligations which 28 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 29 of 48 Page ID #:10323

1 were in his control. He failed to appear for his first

2 deposition, arrived late to his second deposition and

3 left early, and failed to respond to discovery requests 4 propounded on him. See Pl.’s MFS Reply 8:9-10. 5 Accordingly, it is proper for the Court to refer to 6 Defendants as a collective and find that Defendant 7 Topolewski’s conduct, too, was willful and bind him to 8 this Order. See Garrison, 2020 WL 6537389 at *5. 9 b. The Malone Factors Support Terminating 10 Sanctions 11 In determining whether to impose terminating 12 sanctions, “the key [Malone] factors are prejudice and 13 the availability of lesser sanctions.” See Davidson v. 14 Barnhardt, 2013 WL 6388354, at *6 (C.D. Cal. Dec. 6, 15 2013) (citing Wanderer v. Johnston, 910 F.2d 652, 656 16 (9th Cir. 1990)); Valley Eng’rs Inc. v Elec. Eng’g Co., 17 158 F.3d 1051, 1057 (9th Cir. 1998) (noting that when 18 considering evidentiary, issue, or terminating 19 sanctions, factors three and five “are decisive”). Put 20 another way, “[w]hat is most critical for case- 21 dispositive sanctions, regarding risk of prejudice and 22 of less drastic sanctions, is whether the discovery 23 violations ‘threaten to interfere with the rightful 24 decision of the case.’” Valley Eng’rs, 158 F.3d at 1057 25 (quoting Adriana Int’l. Corp. v. Lewis & Co., 913 F.2d 26 1406, 1412 (9th Cir. 1990)). Thus, a district court 27 need not make explicit findings regarding each of the 28 five factors. Connecticut Gen. Life Ins., 482 F.3d at 29 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 30 of 48 Page ID #:10324

1 1096; see also Wanderer, 910 F.2d at 656 (noting that in

2 most cases, courts have found that the first two Malone

3 factors weigh in favor of terminating sanctions and the 4 fourth factor weighs against terminating sanctions). 5 Given that Malone factors three and five are “key” and 6 “decisive” in assessing terminating sanctions, and given 7 that explicit findings regarding each of the five 8 factors are not required, the Court focuses only on 9 factors three and five in making its determination. 10 i. Factor 3: Prejudice 11 “When assessing prejudice, courts consider whether 12 the other party’s actions ‘impair’ the ability of the 13 party seeking sanctions ‘to go to trial or threaten to 14 interfere with the rightful decision of the case.’” 15 Sec. & Exch. Comm'n v. Blockvest, LLC, 2020 WL 1910355, 16 at *15 (S.D. Cal. Apr. 20, 2020) (quoting In re 17 Phenylpropanolamine (PPA) Prod. Liab. Litig., 460 F.3d 18 1217, 1227 (9th Cir. 2006) (internal quotations and 19 citations omitted)). There is undoubtedly a high risk 20 of prejudice to AECOM here due to Defendants’ discovery 21 misconduct. Defendants’ obstructionist, recalcitrant, 22 and contumacious behavior over the course of this 23 litigation has made it impossible for AECOM to ever 24 discover the truth behind Defendants’ profits. See 25 Anheuser-Busch, 69 F.3d at 352 (“Dismissal is 26 appropriate where a ‘pattern of deception and discovery 27 abuse ma[k]e[s] it impossible’ for the district court to 28 conduct a trial ‘with any reasonable assurance that the 30 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 31 of 48 Page ID #:10325

1 truth would be available.’”); see also Valley Eng’rs,

2 158 F.3d at 1058 (“Where a party so damages the

3 integrity of the discovery process that there can never 4 be assurance of proceeding on the true facts, a case 5 dispositive sanction may be appropriate.”); Connecticut 6 Gen. Life Ins., 482 F.3d at 1097 (affirming terminating 7 sanctions and finding prejudice where defendants had 8 engaged in a “pattern of deception and discovery abuse 9 that made it impossible for the district court to 10 conduct another trial with any reasonable assurance that 11 the truth would be available.”). The only financial 12 discovery that Defendants have produced consists of “two 13 pages of Income Statements” that the Magistrate Judge 14 deemed “patently insufficient,” “plainly inadequate,” 15 and “created specially for this litigation.” Order re: 16 Pl.’s Mot. for Contempt 13:3-4, 6-8; 16:4-7, ECF No. 17 154. Otherwise, Defendants have yet to produce any 18 reliable discovery of their finances in direct violation 19 of this Court’s orders. AECOM has clearly been 20 prejudiced as a result of Defendants’ bad faith 21 discovery tactics. See Garrison, 2020 WL 6537389 at *5 22 (noting that a failure to produce documents as ordered 23 establishes sufficient prejudice) (citing Adriana Int’l 24 Corp., 913 F.2d at 1412). 25 Defendants’ assertion that AECOM’s inability to 26 find the “true facts” on damages is “its own fault” 27 flies in the face of this Court. See MK Defs.’ MFS 28 Opp’n 11:7-8. Contrary to what Defendants argue, AECOM 31 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 32 of 48 Page ID #:10326

1 was not required to re-serve discovery requests on

2 Defendants post-remand. Rather, Defendants had—and

3 still have—an ongoing duty to supplement their prior 4 discovery responses. See Woods v. Google, 2014 WL 5 1321007, at *4 (N.D. Cal. Mar. 28, 2014) (“The Court can 6 definitively state that the Rule 26(e) duty to 7 supplement or correct incomplete or incorrect responses 8 does, in fact, extend beyond the discovery cutoff 9 date.”); Hernandez v. Polanco Enters., Inc., 19 F. Supp. 10 3d 918, 933 (N.D. Cal. 2013) (“Federal Rule of Civil 11 Procedure 26(e) places litigants under an affirmative 12 duty to supplement non-deposition discovery responses, 13 even after the discovery cut-off date.”). 14 Additionally, it is not AECOM’s “fault” that it 15 cannot calculate its damages; Defendants still have not 16 complied with this Court’s June 27, 2018 Order 17 compelling Defendants to produce “all monthly, 18 quarterly, and annual income statements, balance sheets, 19 and other financial statements of any Corporate 20 Defendants” and their corporate tax returns and bank 21 statements “for the period beginning four years before 22 the filing of the complaint . . . .” Order re: Defs.’ 23 Mot. to Quash Subpoenas and/or for Protective Order at 2 24 (“Order re: Mot. to Quash”), ECF No. 397. Defendants’ 25 argument that AECOM has prejudiced itself by not re- 26 serving discovery after remand is plainly nonsensical 27 given that it is Defendants who have continued to skirt 28 their discovery obligations. It is due to Defendants’ 32 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 33 of 48 Page ID #:10327

1 fault that AECOM may never learn the true facts on

2 damages in this case.

3 Similarly ludicrous is Defendants’ argument that 4 AECOM “repeatedly blames its inability and refusal to 5 conduct discovery on Defendants’ objections to its 6 subpoenas, thus asking the Court to sanction them for 7 exercising that procedural right.” See MK Defs.’ Opp’n 8 11:15-17. This argument is distracting and beside the 9 point. As stated, AECOM’s inability to conduct 10 discovery is a direct result of Defendants’ discovery 11 abuse. While Defendants indeed have a procedural right 12 to object to third-party subpoenas pursuant to Rule 45, 13 this does not forgive or explain their refusal to 14 produce discovery that the Court had already ordered 15 them to produce. AECOM likely would not have had to 16 subpoena third-party banks after remand had Defendants 17 provided financial discovery in the first place. 18 Indeed, in granting in part and denying in part 19 Defendants’ Motions to Quash Subpoenas and/or for a 20 Protective Order, Magistrate Judge Rosenberg stated that 21 “[t]o the extent the subpoena seeks [third-party] bank 22 statements for a [Corporate Defendant], the subpoena 23 seeks information that the court already ordered 24 Defendants to produce.” Order re: Mot. to Quash at 2-3 25 (emphasis added). Defendants face terminating sanctions 26 not because they filed motions to quash third-party 27 subpoenas, but because they—as of current—still have not 28 produced any financial statements in direct violation of 33 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 34 of 48 Page ID #:10328

1 court orders. See id. at 2 (noting on December 16, 2021

2 that the financial documents that Defendants were

3 ordered to produce “were not in fact produced.”). 4 As a final attempt to escape the inevitability of 5 terminating sanctions, Defendants argue that their 6 discovery misconduct from 2018 is too remote in time. 7 See MK Defs.’ Opp’n 7:21-24 (“Very simply, the landscape 8 of the case has changed too excessively to justify the 9 extreme sanctions requested without any effort to 10 conduct discovery more recently than three and a half 11 years ago.”). Defendants cite no authority limiting the 12 scope of sanctions to only the discovery period after 13 remand, and the Court finds none. What is clear, 14 however, is that AECOM has been prejudiced by 15 Defendants’ shady discovery tactics and Defendants can 16 no longer hide from their day of reckoning. The Court 17 finds that the prejudice factor weighs in favor of 18 terminating sanctions. 19 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 34 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 35 of 48 Page ID #:10329

1 ii. Factor 5: Availability of Lesser

2 Sanctions

3 The fifth factor asks the Court to consider: (1) 4 the feasibility of less drastic sanctions and why such 5 alternative sanctions would be inappropriate; (2) 6 whether alternative sanctions were implemented before 7 ordering dismissal; and (3) whether the spoliating party 8 was warned of the possibility of dismissal before 9 dismissal was ordered. Leon, 464 F.3d at 960. “It is 10 appropriate to reject lesser sanctions where the court 11 anticipates continued deceptive misconduct.” 12 Connecticut Gen. Life Ins., 482 F.3d at 1097; see also 13 Jerry Beeman & Pharmacy Servs., Inc. v. Caremark Inc., 14 322 F. Supp. 3d 1027, 1039 (C.D. Cal. 2018) (“The Court 15 finds that lesser sanctions would have no effect on the 16 sustained, deceptive behavior by Plaintiffs' counsel 17 during this litigation.”); Computer Task Group, Inc. v. 18 Brotby, 364 F.3d 1112, 1116-17 (9th Cir. 2004) (noting 19 that terminating sanctions may be appropriate if lesser 20 sanctions would not deter future wrongdoing). 21 Lesser sanctions are not available here. 22 Defendants have shown a complete and total disregard for 23 the judicial process over the lifetime of this case, and 24 the Court anticipates that Defendants will only continue 25 their obstructive behaviors. This is especially true 26 given that Defendants, as noted above, have yet to 27 produce any financial discovery despite court orders 28 compelling them to do so. As AECOM states, “Defendants 35 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 36 of 48 Page ID #:10330

1 have made clear in every way possible that they do not

2 intend to permit discovery of financial information.

3 Nor have multiple findings for contempt, multiple orders 4 to compel, or the imposition of daily sanctions for 5 noncompliance, dissuaded Defendants from doing 6 otherwise.” Pl.’s Mot. for Sanctions 22:17-20. Indeed, 7 Magistrate Judge Rosenberg expressed her skepticism 8 regarding Defendants’ failure to produce their bank 9 records, stating “I honestly don’t know why a 10 corporation would not be able to get access to its own 11 bank statements. I mean, that’s, I must say, peculiar.” 12 Transcript of Telephonic Hearing Re: Defs.’ Mot. to 13 Quash 16:24-17:1, ECF No. 389. Thus, the Court finds 14 that “lesser sanctions would have no effect on the 15 sustained, deceptive behavior” by Defendants and rejects 16 lesser sanctions.9 Jerry Beeman, 322 F. Supp. 3d at 17 1039; see also Nevijel v. N. Coast Life Ins. Co., 651 18 F.2d 671, 674 (9th Cir. 1981) (“[T]he district court 19 need not exhaust [all sanctions short of dismissal] 20 before finally dismissing a case . . . [dismissal] 21 requires only that possible and meaningful alternatives 22 be reasonably explored, bearing in mind the drastic 23 foreclosure of rights that dismissal effects.”). 24 9 Moreover, the Court is already granting AECOM’s 25 evidentiary sanction request and taking as true that Defendants’ collected on a contract for $36 million. In light of this 26 inference and considering that only damages are at issue for trial, terminating the case at this stage is even more 27 appropriate. There is no need to impose lesser sanctions and 28 proceed to trial. 36 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 37 of 48 Page ID #:10331

1 The conclusion would be the same even if the Court

2 were to engage in a more exacting inquiry of all three

3 sub-parts of the fifth factor. First, less drastic 4 sanctions are not feasible and would be inappropriate 5 for the reasons stated above. Defendants have continued 6 their deceptive behavior after remand by refusing to 7 provide their financial records and less drastic 8 sanctions would likely be ineffective to coerce them 9 into compliance. Second, alternative sanctions have 10 already been implemented in this case to no avail. See 11 generally Order re: Pl.’s Mot. for Contempt, ECF No. 210 12 (ordering Defendants to supplement discovery and 13 awarding AECOM attorney’s fees and costs incurred in 14 filing the motion). Third, and finally, Defendants have 15 been explicitly warned of the possibility of case- 16 dispositive sanctions. To quote Judge Friedland’s 17 concurrence from the Ninth Circuit’s Memorandum: 18 “I share the majority’s opinion that the 19 district court could consider entering 20 discovery sanctions. In my view, appropriate sanctions could even include a default judgment 21 against Defendant-Appellants, if the district 22 court deems it justified.” 23 24 Ninth Cir. Mem. (Friedland, J., concurring) at 3 25 (emphasis added). 26 In sum, Defendants’ discovery misconduct 27 “threaten[s] to interfere with the rightful decision of 28 th[is] case” and terminating sanctions are more than 37 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 38 of 48 Page ID #:10332

1 justified. See Valley Eng’rs, 158 F.3d at 1057 (“What

2 is most critical for case-dispositive sanctions,

3 regarding risk of prejudice and of less drastic 4 sanctions, is whether the discovery violations ‘threaten 5 to interfere with the rightful decision of the case.’”) 6 (quoting Adriana Int’l. Corp., 913 F.2d at 1412). Due 7 to Defendants’ recalcitrant behavior, AECOM may never 8 have access to the true facts of Defendants’ profits. 9 See Connecticut Gen. Life Ins., 482 F.3d at 1097 (“The 10 most critical factor to be considered in case- 11 dispositive sanctions is whether ‘a party’s discovery 12 violations make it impossible for a court to be 13 confident that the parties will ever have access to the 14 true facts.’”) (quoting Valley Eng’rs, 158 F.3d at 15 1058). Considering that Defendants’ discovery 16 misconduct is willful and the Malone factors favor case- 17 dispositive sanctions, terminating sanctions are even 18 more appropriate here. Accordingly, the Court GRANTS 19 Plaintiff’s request for terminating sanctions and enters 20 default judgment against Defendants10 in the amount of 21 $36 million. See id. (affirming terminating sanctions 22 in the form of default judgment where defendants had so 23 frustrated the discovery process that plaintiffs could 24 not determine their damages). 25 ///

26 10 Defaulting Defendants (Bud Zulakoff, John Ripley, Todd Hale, and Henry Blum) are also bound to this ruling, having been 27 previously held jointly and severally liable for AECOM’s damages. 28 See generally Order re: Mot. for Default J. 38 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 39 of 48 Page ID #:10333

1 iii. Monetary Sanctions

2 AECOM also requests two forms of monetary

3 sanctions. See generally Pl.’s Mot. for Sanctions. 4 First, AECOM requests a compensatory sanction of $9 5 million “based on a fine of $10,000 per day that this 6 case has been pending in this Court,” coupled with a 7 $10,000 per day fine going forward for any future 8 violations of the permanent injunction. Id. at 16:11- 9 13, 25:24. Second, AECOM asks this Court to award 10 attorneys’ fees and costs incurred following remand from 11 the Ninth Circuit. Id. at 24:11-22. 12 a. $9 Million Compensatory Sanction and 13 $10,000 Per Day Coercive Sanction 14 “A court may wield its civil contempt powers for 15 two separate and independent purposes: (1) to coerce the 16 defendant into compliance with the court’s order; and 17 (2) to compensate the complainant for the losses 18 sustained.” Shell Offshore Inc. v. Greenpeace, Inc., 19 815 F.3d 623, 629 (9th Cir. 2016) (internal quotations 20 omitted) (quoting United States v. United Mine Workers 21 of America, 330 U.S. 258, 303-04 (1947)). In asking for 22 a $9 million sanction award “based on a fine of $10,000 23 per day that this case has been pending,” AECOM 24 essentially requests that the Court hold Defendants in 25 civil contempt and: (1) enter a coercive sanction in the 26 amount of $10,000 per day for future violations of the 27 permanent injunction; and (2) enter a compensatory 28 sanction of $9 million by retroactively applying the 39 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 40 of 48 Page ID #:10334

1 $10,000 per day coercive sanction over the lifetime of

2 this case, which is approximately 900 days according to

3 AECOM. See id. at 16:11-14. The Court DENIES both 4 requests. 5 Turning first to the $10,000 per diem coercive 6 sanction request, case authority does not support an 7 entry of coercive sanctions for prospective violations 8 of an injunction without a corresponding concurrent 9 violation. See, e.g., Shell, 815 F.3d at 629-630. Put 10 another way, a violation of an injunction is a condition 11 precedent to holding a party in civil contempt and 12 imposing coercive sanctions. Id. Here, it does not 13 appear that Defendants are violating the permanent 14 injunction order. In fact, it seems Defendants have 15 complied with the permanent injunction since June 2021, 16 after AECOM notified Defendants that two infringing 17 websites were live. See Mot. for Sanctions 4:17-22. 18 Indeed, all of the cases AECOM relies on involved 19 concurrent violations of an injunction which justified 20 coercive sanctions to ensure future compliance with the 21 injunction. See Hook v. Arizona Dep't of Corr., 107 22 F.3d 1397, 1400 (9th Cir. 1997) (holding disobedient 23 party in civil contempt for violating injunction and 24 consent decree and imposing coercive $10,000 per day 25 fine for future noncompliance); CBS Broad. Inc. v. 26 FilmOn.com, Inc., 814 F.3d 91, 96 (2d Cir. 2016) 27 (holding defendants in contempt for violating injunction 28 and issuing $10,000 per day fine for “any further 40 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 41of48 Page ID #:10335

1] failure” to comply with the injunction); Matter of 24] Search of Content Stored at Premises Controlled by 3 | Google Inc., 2017 WL 4700056, at *1 (N.D. Cal. Oct. 19, 4] 2017) (holding a company in civil contempt for 5 | noncompliance with a court order and imposing a $10,000 6 | per day sanction to ensure compliance); JPMorgan Chase 7 | Bank, N.A. v. PT Indah Kiat Pulp & Paper Corp. Tbk, 854 8] F. Supp. 2d 528, 537 (N.D. Ill. 2012) (ordering 9 | defendants to comply with a court order by April 20, 10 | 2012 and imposing daily sanctions for noncompliance each 11] day thereafter); U.S. Philips Corp. v. KXD Tech., Inc., 12 | 2007 WL 4984153, at *2 (C.D. Cal. July 27, 2007) (noting 13 ]— that in a parallel case, the court had ordered 14 | defendants to pay civil contempt damages for violation 15] of a preliminary injunction and imposed per diem 16 J sanctions at $10,000 per day). Given that Defendants 17 | are complying with the permanent injunction, the Court 18 | declines to hold Defendants in civil contempt at this 19 | time and DENIES AECOM’s coercive sanction request for 20 | future violations of the permanent injunction. 21 The Court similarly DENIES AECOM’s request that it 22 | be awarded $9 million in compensatory sanctions by 23 | retroactively applying the $10,000 per diem coercive 24 | sanction over the course of this litigation. Even if 25 | the Court were to grant the above coercive sanction 26 | request, AECOM has not provided any authority in support 27] of retroactively applying the $10,000 per day sanction. 28 | Rather, and as Defendants point out, AECOM’s cited cases Al

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1 J and other cases that the Court has found support only 2] the future application of coercive sanctions. See e.g., 3 | Hook, 107 F.3d at 1404; see also JPMorgan Chase, 854 F. 4] Supp. at 532 (“The court declines to impose sanctions 5 | for the past conduct of the defendants, but will impose 6] a sanction of $5,000 per day for each day after April 74920, 2012, and $10,000 for each day after May 20, 2012, 8 | that the defendants have not complied with the 9 | citations.”) (emphasis added). While “[c]ompensatory 10 J sanctions are backward looking and are designed to 11] compensate the complainant for damages caused by past 12 J acts of disobedience,” Aug. Tech. Corp. v. Camtek, Ltd., 13 ] 542 F. App'x 985, 991 (Fed. Cir. 2013) (citation and 14 J internal quotation marks omitted), they must still be 15 | Limited to the “actual losses sustained as a result of 16] the contumacy.” Shuffler, 720 F.2d at 1148; see also 17 | United Mine Workers, 330 U.S. at 304 (noting that 18 | compensatory fines must “be based upon evidence of 19 | complainant’s actual loss”). AECOM has not provided 20 | justification for the $10,000 figure, nor has it shown 21] any proof of actual losses sustained from Defendants’ 22 | discovery evasion. AECOM’s $9 million compensatory 23 | sanction request, based on the retroactive application 24 4 of the $10,000 per diem coercive sanction, is therefore 25 | DENIED. 26 In sum, the Court DENIES AECOM’s requests for a 27 | $10,000 per diem coercive sanction for future violations 28 | of the permanent injunction and a $9 million 42

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1 compensatory sanction.

2 b. Attorneys’ Fees Following Remand

3 AECOM additionally requests its costs and fees 4 incurred following remand from the Ninth Circuit 5 pursuant to two bases of authority: (1) the Lanham Act; 6 and (2) Rule 37. Pl.’s Mot. for Sanctions 24:11-21. In 7 opposition, Defendants argue that attorneys’ fees and 8 costs are improper under the Lanham Act. See MK Defs.’ 9 MFS Opp’n 18:26-19:14. Defendants also assert that an 10 award of attorneys’ fees against Defendant Topolewski is 11 improper under the Lanham Act. Id. at 19:8-14; see also 12 Topolewski’s MFS Opp’n 24:1-6. Defendants do not 13 address the recovery of such fees under Rule 37. See MK 14 Defs.’ MFS Opp’n 18:26-19:14. 15 The Court has inherent authority to award 16 attorneys’ fees here and need not turn to the Lanham Act 17 or Rule 37. See Chambers, 501 U.S. at 45 (“[A]n 18 assessment of attorneys’ fees is undoubtedly within a 19 court’s inherent power . . . .”) (citation omitted); 20 Roadway Exp., Inc. v. Piper, 447 U.S. 752, 765 (1980) 21 (“There are ample grounds for recognizing . . . that in 22 narrowly defined circumstances federal courts have 23 inherent power to assess attorney's fees against 24 counsel.”). A court may assess attorneys’ fees when a 25 party has “acted in bad faith, vexatiously, wantonly, or 26 for oppressive reasons.” Alyeska Pipeline Service Co. 27 v. Wilderness Society, 421 U.S. 240, 258-59 (1975) 28 (quoting F.D. Rich Co. v. United States ex rel. 43 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 44 of 48 Page ID #:10338

1 Industrial Lumber Co., 417 U.S. 116, 129 (1974)).

2 To make AECOM whole for “expenses caused by

3 [Defendants’] obstinancy,” the Court finds that awarding 4 AECOM all of its attorneys’ fees and costs following 5 remand is appropriate here. See Hutto v. Finney, 437 6 U.S. 678, n.14 (1978). As outlined above, Defendants 7 have engaged in a years-long effort to prohibit AECOM 8 from ever discovering their financial posture. To 9 reiterate, the Ninth Circuit agreed on appeal that “the 10 defining feature of this dispute has been . . . 11 [Defendants’] ‘lengthy history of bad faith litigation 12 practices.’” Ninth Cir. Mem. at 2 (Friedland, J., 13 concurring). Since remand, Defendants have not changed 14 their behavior given that they still have not produced 15 their financial statements in direct violation of court 16 orders. Order re: Mot. to Quash at 2 (noting that 17 Defendants had not produced financial discovery after 18 remand despite being compelled to do so in 2018). 19 Further, Defendant Topolewski cannot escape the 20 attorneys’ fees and costs award given his own extensive 21 involvement in the infringing activity and willful 22 evasion of his discovery obligations. Awarding AECOM 23 its attorneys’ fees and costs is plainly appropriate 24 here in light of Defendants’ bad faith, flagrant, and 25 egregious discovery misconduct. See Universal Oil Prod. 26 Co. v. Root Ref. Co., 328 U.S. 575, 580 (1946) (“No 27 doubt, if the court finds . . . that fraud has been 28 practiced upon it, or that the very temple of justice 44 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 45 of 48 Page ID #:10339

1 has been defiled, the entire cost of the proceedings

2 could justly be assessed against the guilty parties.

3 Such is precisely a situation where ‘for dominating 4 reasons of justice’ a court may assess counsel fees as 5 part of the taxable costs.” (citation omitted)). The 6 Court GRANTS AECOM’s request for attorneys’ fees and 7 costs incurred after remand and orders AECOM to provide 8 supplemental briefing to establish the amount of 9 reasonable attorneys’ fees and costs. 10 2. Defendants’ Motions for Summary Judgment 11 On March 24, 2021, the Ninth Circuit reversed this 12 Court’s $1.8 billion damages award to AECOM. See 13 generally Ninth Cir. Mem. The only issue on remand is 14 that of damages, and Defendants seek summary judgment on 15 the sole ground that evidence in the record does not 16 show that Defendants profited from their infringing use 17 of the MK IP.11 See generally MK Defs.’ Mot. for Summ. 18 J. (“MK Defs.’ MSJ”), ECF No. 395; Def. Topolewski’s 19 Mot. for Summ. J (“Topolewski’s MSJ”), ECF No. 396. 20 AECOM argues in opposition that circumstantial evidence 21 in the record, namely Defendants’ behavior over the 22 course of this litigation, leads to the conclusion that 23 Defendants did profit from their use of the MK IP. 24 Pl.’s Opp’n to Mot. for Summ. J. (“Pl.’s Opp’n to MSJ”)

25 11 Corporate Defendants’ and Defendant Topolewski’s Motions for Summary Judgment (collectively, “Motions for Summary 26 Judgment”) are virtually identical both in substance and in form. See generally MK Defs.’ Mot. for Summ. J. (“MK Defs.’ MSJ”), ECF 27 No. 395; Def. Topolewski’s Mot. for Summ. J (“Topolewski’s MSJ”), ECF No. 396. Accordingly, the Court treats them as the same and 28 cites to Corporate Defendants’ Motion for arguments made in both. 45 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 46 of 48 Page ID #:10340

1 6:17-7:24, ECF No. 403. In light of the above

2 disposition on AECOM’s Motion for Sanctions, the Court

3 DENIES as moot Defendants’ Motions for Summary Judgment. 4 Still, engaging briefly on the merits, the Court 5 notes that basic logic would have that there is a 6 triable issue as to Defendants’ profits precluding an 7 entry of summary judgment. Defendants’ argument that 8 they are entitled to summary judgment because AECOM 9 cannot prove profits is preposterous. Defendants’ bad 10 faith litigation tactics alone belie their nonsensical 11 statement. Defendants would not have violated—and be in 12 current violation of—this Court’s orders compelling them 13 to produce financial discovery if their infringement 14 scheme was not highly profitable. To grant summary 15 judgment in favor of Defendants here would reward 16 Defendants for their discovery abuse and encourage 17 future parties to do the same to escape judgment. 18 Frivolous as Defendants’ Motions for Summary Judgment 19 are, the Court—perhaps too charitably—does not require 20 Defendants to show cause why their Motions for Summary 21 Judgment are not in violation of Rule 11(b) at this 22 time. Fed. R. Civ. P. (“On its own, the court may order 23 an attorney, law firm, or party to show cause why 24 conduct specifically described in the order has not 25 violated Rule 11(b).”). Defendants’ Motions for Summary 26 Judgment are DENIED as moot. 27 28 /// 46 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 47 of 48 Page ID #:10341

1 III. CONCLUSION

2 Based on the foregoing, the Court GRANTS in part and

3 DENIES in part AECOM’s Motion for Sanctions. 4 Specifically, the Court: (1) GRANTS AECOM’s request for 5 an evidentiary sanction and deems as true that 6 Defendants performed and collected on a contract for $36 7 million; (2) GRANTS AECOM’s request for terminating 8 sanctions and enters default judgment against Defendants 9 in the amount of $36 million; (3) DENIES AECOM’s request 10 for a $10,000 per diem coercive sanction for future 11 violations of the permanent injunction; (4) DENIES 12 AECOM’s $9 million compensatory sanction request based 13 on the retroactive application of the $10,000 per diem 14 coercive sanction; and (5) GRANTS AECOM’s requests for 15 attorneys’ fees and costs incurred following remand from 16 the Ninth Circuit. The Court orders AECOM to provide 17 supplemental briefing to establish the amount of 18 reasonable attorneys’ fees and costs. AECOM shall 19 prepare and file a proposed judgment thereafter. 20 Defendants’ Motions for Summary Judgment are DENIED 21 as moot in light of the disposition on AECOM’s Motion 22 for Sanctions. 23 24 /// 25 /// 26 /// 27 /// 28 /// 47 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 48 of 48 Page ID #:10342 1 Having been previously found jointly and severally

2 liable for AECOM’s damages, Defaulting Defendants are 3 also bound to this Order. 4 Defendants are still ordered to comply with this 5 Court’s previous permanent injunction issued on January 6 24, 2019. 7 IT IS SO ORDERED. 8 9 10 11 12 /s/ Ronald S.W. Lew 13 DATED: February 25, 2022 _____________________________ HONORABLE RONALD S.W. LEW 14 Senior U.S. District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 48