URS Holdings. v. John Ripley

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 2:17cv05398-RSWL-AGRx CONSTRUCTION, INC., ORDER re: Plaintiff, SANCTIONS [398] v. DEFENDANTS’ MOTIONS FOR GARY TOPOLEWSKI, et al., SUMMARY JUDGMENT [395, 396] Defendants. Plaintiff AECOM Energy & Construction, Inc. (“AECOM”) brought this Action for injunctive relief and damages against Defendants Morrison Knudsen Corporation; Morrison-Knudsen Company, Inc.; Morrison-Knudsen Services, Inc.; Morrison-Knudsen International, Inc. (collectively, “Corporate Defendants”); and Gary Topolewski (“Defendant Topolewski”) (collectively, “Defendants”). The Action arises out of Defendants’ infringing use of the identity and goodwill of Morrison Knudsen Corporation (“MK IP” or “MK brand”), which AECOM 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 Defendants’ Motions for Summary Judgment. /// /// /// /// /// /// /// /// /// /// /// /// /// /// /// /// /// 2 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 3 of 48 Page ID #:10297

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, Defendants showed no respect for this Court or for the judicial process. Pl.’s Mot. for Sanctions 2:26-27, ECF No. 398-1. Defendants have violated this Court’s preliminary injunction order, ignored multiple discovery deadlines, failed to respond to discovery requests, served false discovery responses, failed to comply with Court orders compelling discovery, and failed to appear at depositions. Id. at 2:27-3:2. /// /// /// ///

1 The Court does not cite to the parties’ uncontroverted facts given that the Court DENIES as moot Defendants’ Motions for Summary Judgment. The Court finds it more appropriate to rely on the facts as stated in AECOM’s Motion for Sanctions, as it relies on various orders and court records that have been filed throughout this case. Accordingly, the Court cites only to the facts contained in the moving papers pursuant to AECOM’s Motion 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 over six months had passed and two motions for contempt were filed. Id. at 3:18-19. On November 8, 2018, this Court granted AECOM’s motion for permanent injunction. Id. at 8:18-19. However, Defendants resurrected two infringing websites in direct violation of the permanent injunction. Id. at 4:11-15. As of March 2021 and May 2021, www.morrisonknudsen.com and www.morrison-knudsen.com were live and the domain registrations had been updated. Id. at 4:18-20. AECOM notified Defendants twice before the infringing websites were finally taken offline. Id. at 4:15-22. /// /// /// /// /// /// 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 orders later, Defendants have refused to produce anything. Id. at 5:7-9. Defendants failed to respond to discovery and to appear for depositions, served false discovery responses, and have failed to produce financial information. See id. at 5:12-7:11. Defendants, to this day, still refuse to provide any information about any contracts they entered or revenue they received. Id. at 7:12-13. When the Magistrate Judge compelled discovery of “all revenue” for each Corporate Defendant for four years before the filing of the Complaint, Defendants produced only a two- page “income statement” that the Court found “plainly inadequate.” Id. at 7:13-16. The Court stated Defendants’ decision to produce only two pages of financial information “created specially for this litigation” merited compelling Corporate Defendants’ corporate tax returns and bank statements. Id. at 7:16- 19. However, Corporate Defendants were suddenly unable 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 locate Henry Blum for over a year.” Id. at 8:7-10. 3. The Court Reopened Discovery on Damages Following remand from the Ninth Circuit, the Court reopened discovery on damages. Id. at 9:16-24. AECOM served eleven third-party subpoenas, seeking: account information for the infringing websites; account information for telephone numbers published by Defendants; and bank statements from financial institutions believed to be used by Defendants, as well as identification of the bank from which Defendants’ previous counsel paid fee awards in this case. Id. at 9:25-10:7. Defendants objected to every subpoena, effectively blocking AECOM from gaining information about the sources of Defendants’ revenues. Id. at 10:3- 5. On December 17, 2021, the Magistrate Judge denied Defendants’ motion to quash with respect to Corporate 2 Henry Blum is one of four defaulting defendants in this action. See generally Default by Clerk, ECF No. 77; Order re: 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 On November 8, 2018, this Court granted [242, 243] AECOM’s Motion for Summary Judgment against Defendants,3 finding willful infringement of the MK brand and awarding AECOM $1,802,834,672 (“$1.8 billion”) in damages.4 On February 21, 2019, Defendants filed a Motion for Alteration, Amendment, or Reconsideration [268] of the Court’s Order granting AECOM’s Motion for Summary Judgment, which the Court denied [305] on April 24, 2019. 3 AECOM also named four additional individual defendants in its Complaint: Bud Zulakoff, John Ripley, Todd Hale, and Henry Blum (collectively, “Defaulting Defendants”). See generally Compl., ECF No. 1. On December 4, 2017, the court clerk entered default as to these four individuals. See generally Default by Clerk. On November 9, 2018, AECOM filed a Motion for Default Judgment against Defaulting Defendants. See generally Mot. for Default J., ECF No. 244. On January 24, 2019, the Court granted AECOM’s motion, finding Defaulting Defendants jointly and severally liable for AECOM’s damages. See generally Order re: Mot. for Default J. 4 The Court also granted AECOM’s request for a permanent injunction ordering Defendants to cease their use of the MK IP and awarded AECOM its attorneys’ fees. See Order re: Pl.’s Mot. 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 Sanctions. On January 4, 2022, Defendants filed their replies in support of their Motions for Summary Judgment [408, 409] and AECOM filed its Reply [411] in support of its Motion for Sanctions. /// /// /// /// /// /// /// /// 5 Defendants also argued on appeal that AECOM lacked Article III standing, which the Ninth Circuit rejected. See Ninth Cir. Mem. at 2-3, ECF No. 339. 6 Also on December 16, 2021, Magistrate Judge Rosenberg granted in part and denied in part Defendants’ motions to quash AECOM’s third-party subpoenas, granted in part Defendants’ alternative motions for a protective order, and denied AECOM’s 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

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 omitted). Under Rule 37(b)(2)(A), “[i]f a party . . . fails to obey an order to provide or permit discovery . . . , the court where the action is pending may issue further just orders,” which can include “directing that the matters embraced in the order or other designated facts be taken as established for the purposes of the action, as the prevailing party claims” and “rendering a default judgment against the disobedient party.” Fed. R. Civ. P. 37(b)(2)(A)(i)-(vi). Courts also have “the inherent authority to issue sanctions in response to abusive litigation practices.” Garrison v. Ringgold, 2020 WL 6537389, at *4 (S.D. Cal. Nov. 6, 2020) (citing Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006) (“There are two sources of authority under which a district court can sanction a party who has despoiled evidence: the inherent power of federal courts to levy sanctions in response to abusive litigation practices, and the availability of sanctions 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. 1982) (citations omitted). B. Discussion 1. AECOM’s Motion for Sanctions As a preliminary matter, the Court first addresses: (1) Defendant Topolewski’s requests for judicial notice made in connection with his Opposition to AECOM’s Motion for Sanctions; (2) Defendants’ evidentiary objections to the Declaration of Yungmoon Chang (“Chang Declaration”) submitted by AECOM in support of its Motion for Sanctions; and (3) AECOM’s evidentiary objections to the Declarations of Gary Topolewski (“Topolewski Declaration”) and John Jahrmarkt (“Jahrmarkt Declaration”) submitted in support of Defendant Topolewski’s Opposition to AECOM’s Motion for Sanctions. /// /// /// /// 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 disputed facts contained therein may not. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). “[A]ccuracy is only part of the inquiry under Rule 201(b).” Id. “A court must also consider—and identify—which fact or facts it is noticing from” the documents. Id. Defendant Topolewski seeks judicial notice of the following four documents on file with the Nevada Secretary of State: (1) filings for Majestic Services, Inc. (formerly known as Morrison-Knudsen Services, Inc.) from May 29, 2017 to present (“Exhibit A”); (2) filings for Goodbrand Corporation (formerly known as Morrison Knudsen Corporation) from October 22, 2014 to present (“Exhibit B”); (3) filings for Northern Majestic International Inc. (formerly known as Morrison Knudsen International Inc.) from January 23, 2012 to present (“Exhibit C”); and (4) filings for Goodbrand Company Inc. (formerly known as Morrison-Knudsen Company, Inc.) 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. b. Defendants’ Evidentiary Objections Defendants lodged sixteen evidentiary objections to the Chang Declaration submitted by AECOM in support of its Motion for Sanctions. See generally Defs.’ Evid. Objs., ECF No. 405-1. Many of Defendants’ objections read as a continuation or reiteration of their arguments in their briefs. See id. Nos. 8-16. Further, the Court does not rely on the majority of the Chang Declaration or its attached exhibits in ruling on AECOM’s Motion for Sanctions. Regarding the portions of the Chang Declaration to which Defendants’ object but the Court does not rely, the Court DENIES as moot Defendants’ evidentiary objections. See Muhammad v. Reese L. Grp., APC, 2017 WL 2578915, at *2 (S.D. Cal. June 14, 2017) (denying evidentiary objections as moot where the court “did not rely on the . . . declarations and exhibits in ruling on the . . . motion [for sanctions].”). Accordingly, the Court DENIES as moot Defendants’ 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 “published at least two other press releases.” See Chang Decl. ¶ 25; see also Exs. 27-28 to Chang Decl. The Court reaffirms its previous order overruling Defendants’ same objections to these press releases. See Order re: Pl.’s Mot. for Summ. J. 49:21-25. Further, the press releases are relevant to AECOM’s Motion for Sanctions because they are relevant for establishing evidentiary and terminating sanctions. In sum, the Court OVERRULES Defendants’ evidentiary objections 8-14, and DENIES as moot Defendants’ evidentiary objections 1-7 and 15-16. /// /// /// /// /// /// /// 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 and exhibits in ruling on the . . . motion [for sanctions].”). d. Motion for Sanctions AECOM moves this Court to impose evidentiary, terminating, and monetary sanctions on Defendants. See generally Pl.’s Mot. for Sanctions. The Court GRANTS in part and DENIES in part AECOM’s Motion for Sanctions. Each sanction request is examined in turn below. i. Evidentiary Sanctions AECOM requests, pursuant to Rule 37(b)(2)(A)(i), that the Court take as established that Defendants “performed the work referenced in, and collected the amount listed in, the press release titled ‘Morrison Knudsen Awarded $36 Million Mine Engineering Contract.’”7 Id. at 12:9-12. AECOM argues that such an

7 In the alternative, AECOM asks that the Court “designate as established that Defendants have earned as much as they claim to have spent in costs and expenses, trebled.” Id. at 14:9-11. Given that the Court GRANTS AECOM’s primary evidentiary sanctions request and takes as true that Defendants collected on a $36 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 . . . , the court may “direct[] that the matters embraced in the order or other designated facts be taken as established for the purposes of the action, as the prevailing party claims . . . .” Fed. R. Civ. P. 37(b)(2)(A)(i). “Rule 37 sanctions must be applied diligently both ‘to penalize those whose conduct may be deemed to warrant such a sanction, [and] to deter those who might be tempted to such conduct in the absence of such a deterrent.’” Guifu Li v. A Perfect Day Franchise, Inc., 281 F.R.D. 373, 390 (N.D. Cal. 2012) (quoting Nat'l Hockey League v. Metro. Hockey Club, 427 U.S. 639, 643 (1976)). A “district court has great latitude in imposing sanctions for discovery abuse.” Dahl v. City of Huntington Beach, 84 F.3d 363, 367 (9th Cir. 1996). As a condition precedent to imposing evidentiary sanctions pursuant to Rule 37, Defendants must have violated a Court Order. See Fed. R. Civ. P.

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 corporate tax returns and bank statements “for the period beginning four years before the filing of the complaint . . . .” Order re: Defs.’ Mot. to Quash Subpoenas and/or for Protective Order at 2 (“Order re: Mot. to Quash”), ECF No. 397. Thus, evidentiary sanctions pursuant to Rule 37 may be appropriately imposed. “There are two limitations to the application of a Rule 37(b)(2) sanction.” Guifu, 281 F.R.D. at 393. “First, ‘any sanction must be just; second, the sanction must be specifically related to the particular claim which was at issue in the order to provide discovery.’” Id. (quoting Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707 (1982)). Here, taking as true that Defendants performed and collected on a contract for $36 million is both just and “specifically related” to this Court’s previous order compelling Defendants to provide financial discovery. 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 Plaintiff’s discovery requests, Court orders, and evaded providing financial information.” Order re: Pl.’s Mot. for Summ. J. 49:21-25; see also Ninth Cir. Mem. n.5 (“We note that Defendants-Appellants failed to provide in discovery any reliable evidence of their sales, profits, or costs, despite court orders compelling them to do so.”); Ninth Cir. Mem. (Friedland, J., concurring) (“[T]he defining feature of this dispute has been what the district court aptly described as Defendants- Appellants’ ‘lengthy history of bad faith litigation practices.’ Defendants-Appellants ignored multiple discovery orders, refused to appear for depositions, and ultimately failed to produce a single reliable business record from which AECOM could calculate damages.”). To decline to impose an evidentiary sanction of some sort here would be manifestly unjust to AECOM and effectively reward Defendants for their discovery abuse. Given Defendants’ discovery evasion and violations of this 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 Financial Discovery Establishing that Defendants collected $36 million on a construction contract directly remedies the prejudice AECOM has faced due to Defendants’ refusal to produce their financial and tax statements. Because AECOM has no sources of information from which to calculate its damages, directing it as true that Defendants collected $36 million based on the lowest of the three publicly available press releases is a narrowly tailored sanction. Cf. Guifu, 281 F.R.D. at 394 (finding that an evidentiary sanction deeming facts alleged in a complaint as established for trial “flow[ed] directly” from defendants’ refusal to produce financial discovery and was “narrowly tailored to directly address the prejudice from Defendants’ conduct”). AECOM’s reliance on the press release is justifiable given that Defendants have not produced any reliable financial discovery. Thus, because the 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 1318, 1329 (9th Cir. 1993); Neighborhood Assistance Corp., 2013 WL 12142562, at *3 (instructing the jury to infer that financial evidence destroyed by defendants “would have been favorable to the [p]laintiff and unfavorable to the [d]efendants”). Other times, courts have entered evidentiary sanctions “deem[ing] facts alleged in the complaint established for trial, subject to rebuttal by the non-moving party, where the moving party was prejudiced because of the other party’s discovery abuses.” Guifu, 281 F.R.D. at 393 (citing General Atomic Co. v. Exxon Nuclear Co., 90 F.R.D. 290 S.D. Cal. 1981). To take either approach here would be wholly insufficient to penalize and deter Defendants’ discovery misconduct, however. See Nat'l Hockey League, 427 U.S. at 643 (noting that the rationale of Rule 37 sanctions is to both penalize and deter future misconduct). Directing the jury to infer that Defendants’ financial statements would have been 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 was filed, AECOM could not have known how much Defendants profited from their infringement scheme, and AECOM was justifiably relying on the judicial process to uncover the true facts of this case. But Defendants have so frustrated AECOM’s discovery efforts that now, nearly five years after the filing of its Complaint, AECOM is in no better position than where it started. Perhaps AECOM puts it best: “Without imposition of such sanctions, AECOM will be forced to proceed to a damages trial on a record that is incomplete solely due to Defendants’ recalcitrance. And Defendants (despite being adjudicated willful infringers) may escape paying any damages at all. Such an outcome would reward Defendants for their flagrant disregard, and incentivize every other wrongdoer, in every type of case, to avoid paying damages simply by withholding financial information. This could hardly be more unjust. As the Ninth Circuit has noted, ‘[i]t seems scarcely equitable . . . for an infringer to reap the benefits of a trade-mark he has 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 necessary and appropriate here, especially in light of the Court’s “great latitude in imposing sanctions for discovery abuse.” See Dahl, 84 F.3d at 367. /// /// /// /// /// /// /// /// /// /// /// /// /// /// /// 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 unavailing and are examined in turn below. Defendants assert that the $36 million inference requested by AECOM must be “supported by a chain of logic, rather than [by] mere speculation dressed up in the guise of evidence.” Id. at 13:1-3 (citation omitted). They argue AECOM has not shown a “chain of logic” but rather, “merely speculates that because Defendants failed to produce bank records, they have spoliated evidence or committed fraud.” Id. at 13:14- 16. But AECOM has, indeed, shown a “chain of logic” here to support the $36 million inference it is requesting. What other “chain of logic” could there be? Why else would Defendants go to the great lengths of ignoring multiple discovery requests and violating court 8 Corporate Defendants’ and Defendant Topolewski’s Oppositions to AECOM’s Motion for Sanctions are virtually identical both in substance and in form. See generally MK Defs.’ MFS Opp’n; Topolewski’s MFS Opp’n. Accordingly, the Court treats them as the same and cites to Corporate Defendants’ Motion for arguments made in both. For arguments only made by Defendant 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 to only one conclusion: that Defendants’ widespread infringement scheme was highly profitable and Defendants are withholding evidence of their true finances. Any speculation concerning the $36 million amount here is due to Defendants’ own wrongdoing, and AECOM’s use of the publicly available press release is justified given that Defendants have not produced any reliable financial statements to date. Moreover, establishing that Defendants performed and collected on a $36 million contract does not run afoul of the law of this case. Defendants argue that because the Ninth Circuit held AECOM could not use the publicly available press releases to support a damages award, AECOM cannot now use the press release regarding a $36 million contract to request sanctions in the same amount. MK Defs.’ MFS Opp’n 13:21-14:28. Defendants are mistaken, however. Unlike in its previous motion for summary judgment, here, AECOM does not seek to use 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 sanction focused on the evidentiary inferences that may be drawn from the [D]efendants’ refusal to produce relevant financial records.” Ninth Cir. Mem. n.5; see also Ninth Cir. Mem. (Friedland, J., concurring) at 3 (“I share the majority’s opinion that the district court could consider entering discovery sanctions.”). The Court finds that the evidentiary sanction sought here is indeed appropriate and infers no more than is necessary to remedy Defendants’ discovery abuses. Using the press release regarding a $36 million contract to support an evidentiary sanction here is proper and does not run afoul of the law of this case. /// /// /// /// /// /// 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 two sources of authority under which a district court can sanction a party who has despoiled evidence: the inherent power of federal courts to levy sanctions in response to abusive litigation practices, and the availability of sanctions under Rule 37 . . . .”)). This includes the “inherent power to sanction parties and their attorneys, a power born of the practical necessity that courts be able ‘to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.’” Van Osten v. Home Depot, U.S.A., Inc., 2021 WL 3471581, at *14 (S.D. Cal. May 4, 2021) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991)). Given Defendants’ “history of bad faith litigation tactics” and the reasons stated above, an evidentiary sanction based on the Court’s inherent powers establishing that Defendants collected on a $36 million contract is justified and necessary for the “expeditious disposition” of this case. See id. (noting 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. In sum, the Court GRANTS AECOM’s request for an evidentiary sanction and deems that Defendants performed and collected on a $36 million contract. ii. Terminating Sanctions There may be no better case to grant terminating sanctions than in this one. “A terminating sanction, whether default judgment against a defendant or dismissal of a plaintiff’s action, is very severe.” Connecticut Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 1096 (9th Cir. 2007) (citing Jorgensen v. Cassiday, 320 F.3d 906, 912 (9th Cir. 2003)). “Only willfulness, bad faith, and fault justify terminating sanctions.” Id. (internal quotation marks and citation omitted). The Ninth Circuit also uses a five-part test, with three subparts to the fifth part, to determine whether a case-dispositive sanction is just: “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to manage 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, 69 F.3d 337, 348 (9th Cir. 1995) (affirming terminating sanctions under the district court’s inherent powers and thus declining to address whether sanctions were appropriate under Rule 37). a. Defendants’ Discovery Misconduct Was Willful Disobedient conduct is willful if it is within the offending party’s control. Stars’ Desert Inn Hotel & Country Club, Inc. v. Hwang, 105 F.3d 521, 525 (9th Cir. 1997); Fair Hous. of Marin v. Combs, 285 F.3d 899, 905 (9th Cir. 2002). As AECOM aptly states, “the record is replete with examples of Defendants’ willful disregard for the judicial process.” Pl.’s Mot. for Sanctions 18:22-23. Willfulness, fault, and bad faith on the part of Defendants have been repeatedly demonstrated throughout this litigation. Defendants have failed to respond to AECOM’s discovery requests; failed to appear at depositions; failed to comply with Court orders 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 dispute, and intended to keep their profits from being discovered. Accordingly, the Court concludes that Defendants’ discovery misconduct was willful for the purposes of imposing terminating sanctions. See Garrison, 2020 WL 6537389 at *5 (finding willfulness where a defendant’s failures to file discovery responses, comply with orders compelling discovery, and attend his deposition were in his control). Defendant Topolewski’s attempt to distance himself from Corporate Defendants is unavailing. As this Court has found, he was extensively involved with Corporate Defendants despite his current statements to the contrary. See Order re: Defs.’ Mot. for Reconsideration 25:16-20, ECF No. 305 (“Holding Topolewski personally liable is not manifestly unjust because he is liable jointly and severally for his direct involvement in the extensive fraud committed in forming the Corporate Defendants.”). Defendant Topolewski himself has also 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 Sanctions In determining whether to impose terminating sanctions, “the key [Malone] factors are prejudice and the availability of lesser sanctions.” See Davidson v. Barnhardt, 2013 WL 6388354, at *6 (C.D. Cal. Dec. 6, 2013) (citing Wanderer v. Johnston, 910 F.2d 652, 656 (9th Cir. 1990)); Valley Eng’rs Inc. v Elec. Eng’g Co., 158 F.3d 1051, 1057 (9th Cir. 1998) (noting that when considering evidentiary, issue, or terminating sanctions, factors three and five “are decisive”). Put another way, “[w]hat is most critical for case- dispositive sanctions, regarding risk of prejudice and of less drastic sanctions, is whether the discovery violations ‘threaten to interfere with the rightful decision of the case.’” Valley Eng’rs, 158 F.3d at 1057 (quoting Adriana Int’l. Corp. v. Lewis & Co., 913 F.2d 1406, 1412 (9th Cir. 1990)). Thus, a district court need not make explicit findings regarding each of the 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. i. Factor 3: Prejudice “When assessing prejudice, courts consider whether the other party’s actions ‘impair’ the ability of the party seeking sanctions ‘to go to trial or threaten to interfere with the rightful decision of the case.’” Sec. & Exch. Comm'n v. Blockvest, LLC, 2020 WL 1910355, at *15 (S.D. Cal. Apr. 20, 2020) (quoting In re Phenylpropanolamine (PPA) Prod. Liab. Litig., 460 F.3d 1217, 1227 (9th Cir. 2006) (internal quotations and citations omitted)). There is undoubtedly a high risk of prejudice to AECOM here due to Defendants’ discovery misconduct. Defendants’ obstructionist, recalcitrant, and contumacious behavior over the course of this litigation has made it impossible for AECOM to ever discover the truth behind Defendants’ profits. See Anheuser-Busch, 69 F.3d at 352 (“Dismissal is appropriate where a ‘pattern of deception and discovery abuse ma[k]e[s] it impossible’ for the district court to 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 conduct another trial with any reasonable assurance that the truth would be available.”). The only financial discovery that Defendants have produced consists of “two pages of Income Statements” that the Magistrate Judge deemed “patently insufficient,” “plainly inadequate,” and “created specially for this litigation.” Order re: Pl.’s Mot. for Contempt 13:3-4, 6-8; 16:4-7, ECF No. 154. Otherwise, Defendants have yet to produce any reliable discovery of their finances in direct violation of this Court’s orders. AECOM has clearly been prejudiced as a result of Defendants’ bad faith discovery tactics. See Garrison, 2020 WL 6537389 at *5 (noting that a failure to produce documents as ordered establishes sufficient prejudice) (citing Adriana Int’l Corp., 913 F.2d at 1412). Defendants’ assertion that AECOM’s inability to find the “true facts” on damages is “its own fault” flies in the face of this Court. See MK Defs.’ MFS 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. 3d 918, 933 (N.D. Cal. 2013) (“Federal Rule of Civil Procedure 26(e) places litigants under an affirmative duty to supplement non-deposition discovery responses, even after the discovery cut-off date.”). Additionally, it is not AECOM’s “fault” that it cannot calculate its damages; Defendants still have not complied with this Court’s June 27, 2018 Order compelling Defendants to produce “all monthly, quarterly, and annual income statements, balance sheets, and other financial statements of any Corporate Defendants” and their corporate tax returns and bank statements “for the period beginning four years before the filing of the complaint . . . .” Order re: Defs.’ Mot. to Quash Subpoenas and/or for Protective Order at 2 (“Order re: Mot. to Quash”), ECF No. 397. Defendants’ argument that AECOM has prejudiced itself by not re- serving discovery after remand is plainly nonsensical given that it is Defendants who have continued to skirt 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 discovery is a direct result of Defendants’ discovery abuse. While Defendants indeed have a procedural right to object to third-party subpoenas pursuant to Rule 45, this does not forgive or explain their refusal to produce discovery that the Court had already ordered them to produce. AECOM likely would not have had to subpoena third-party banks after remand had Defendants provided financial discovery in the first place. Indeed, in granting in part and denying in part Defendants’ Motions to Quash Subpoenas and/or for a Protective Order, Magistrate Judge Rosenberg stated that “[t]o the extent the subpoena seeks [third-party] bank statements for a [Corporate Defendant], the subpoena seeks information that the court already ordered Defendants to produce.” Order re: Mot. to Quash at 2-3 (emphasis added). Defendants face terminating sanctions not because they filed motions to quash third-party subpoenas, but because they—as of current—still have not 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 conduct discovery more recently than three and a half years ago.”). Defendants cite no authority limiting the scope of sanctions to only the discovery period after remand, and the Court finds none. What is clear, however, is that AECOM has been prejudiced by Defendants’ shady discovery tactics and Defendants can no longer hide from their day of reckoning. The Court finds that the prejudice factor weighs in favor of terminating sanctions. /// /// /// /// /// /// /// /// /// 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 appropriate to reject lesser sanctions where the court anticipates continued deceptive misconduct.” Connecticut Gen. Life Ins., 482 F.3d at 1097; see also Jerry Beeman & Pharmacy Servs., Inc. v. Caremark Inc., 322 F. Supp. 3d 1027, 1039 (C.D. Cal. 2018) (“The Court finds that lesser sanctions would have no effect on the sustained, deceptive behavior by Plaintiffs' counsel during this litigation.”); Computer Task Group, Inc. v. Brotby, 364 F.3d 1112, 1116-17 (9th Cir. 2004) (noting that terminating sanctions may be appropriate if lesser sanctions would not deter future wrongdoing). Lesser sanctions are not available here. Defendants have shown a complete and total disregard for the judicial process over the lifetime of this case, and the Court anticipates that Defendants will only continue their obstructive behaviors. This is especially true given that Defendants, as noted above, have yet to produce any financial discovery despite court orders 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 corporation would not be able to get access to its own bank statements. I mean, that’s, I must say, peculiar.” Transcript of Telephonic Hearing Re: Defs.’ Mot. to Quash 16:24-17:1, ECF No. 389. Thus, the Court finds that “lesser sanctions would have no effect on the sustained, deceptive behavior” by Defendants and rejects lesser sanctions.9 Jerry Beeman, 322 F. Supp. 3d at 1039; see also Nevijel v. N. Coast Life Ins. Co., 651 F.2d 671, 674 (9th Cir. 1981) (“[T]he district court need not exhaust [all sanctions short of dismissal] before finally dismissing a case . . . [dismissal] requires only that possible and meaningful alternatives be reasonably explored, bearing in mind the drastic foreclosure of rights that dismissal effects.”). 9 Moreover, the Court is already granting AECOM’s evidentiary sanction request and taking as true that Defendants’ collected on a contract for $36 million. In light of this inference and considering that only damages are at issue for trial, terminating the case at this stage is even more appropriate. There is no need to impose lesser sanctions and 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 already been implemented in this case to no avail. See generally Order re: Pl.’s Mot. for Contempt, ECF No. 210 (ordering Defendants to supplement discovery and awarding AECOM attorney’s fees and costs incurred in filing the motion). Third, and finally, Defendants have been explicitly warned of the possibility of case- dispositive sanctions. To quote Judge Friedland’s concurrence from the Ninth Circuit’s Memorandum: “I share the majority’s opinion that the district court could consider entering discovery sanctions. In my view, appropriate sanctions could even include a default judgment against Defendant-Appellants, if the district court deems it justified.” Ninth Cir. Mem. (Friedland, J., concurring) at 3 (emphasis added). In sum, Defendants’ discovery misconduct “threaten[s] to interfere with the rightful decision of 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 most critical factor to be considered in case- dispositive sanctions is whether ‘a party’s discovery violations make it impossible for a court to be confident that the parties will ever have access to the true facts.’”) (quoting Valley Eng’rs, 158 F.3d at 1058). Considering that Defendants’ discovery misconduct is willful and the Malone factors favor case- dispositive sanctions, terminating sanctions are even more appropriate here. Accordingly, the Court GRANTS Plaintiff’s request for terminating sanctions and enters default judgment against Defendants10 in the amount of $36 million. See id. (affirming terminating sanctions in the form of default judgment where defendants had so frustrated the discovery process that plaintiffs could not determine their damages). ///

10 Defaulting Defendants (Bud Zulakoff, John Ripley, Todd Hale, and Henry Blum) are also bound to this ruling, having been previously held jointly and severally liable for AECOM’s damages. 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 attorneys’ fees and costs incurred following remand from the Ninth Circuit. Id. at 24:11-22. a. $9 Million Compensatory Sanction and $10,000 Per Day Coercive Sanction “A court may wield its civil contempt powers for two separate and independent purposes: (1) to coerce the defendant into compliance with the court’s order; and (2) to compensate the complainant for the losses sustained.” Shell Offshore Inc. v. Greenpeace, Inc., 815 F.3d 623, 629 (9th Cir. 2016) (internal quotations omitted) (quoting United States v. United Mine Workers of America, 330 U.S. 258, 303-04 (1947)). In asking for a $9 million sanction award “based on a fine of $10,000 per day that this case has been pending,” AECOM essentially requests that the Court hold Defendants in civil contempt and: (1) enter a coercive sanction in the amount of $10,000 per day for future violations of the permanent injunction; and (2) enter a compensatory 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 another way, a violation of an injunction is a condition precedent to holding a party in civil contempt and imposing coercive sanctions. Id. Here, it does not appear that Defendants are violating the permanent injunction order. In fact, it seems Defendants have complied with the permanent injunction since June 2021, after AECOM notified Defendants that two infringing websites were live. See Mot. for Sanctions 4:17-22. Indeed, all of the cases AECOM relies on involved concurrent violations of an injunction which justified coercive sanctions to ensure future compliance with the injunction. See Hook v. Arizona Dep't of Corr., 107 F.3d 1397, 1400 (9th Cir. 1997) (holding disobedient party in civil contempt for violating injunction and consent decree and imposing coercive $10,000 per day fine for future noncompliance); CBS Broad. Inc. v. FilmOn.com, Inc., 814 F.3d 91, 96 (2d Cir. 2016) (holding defendants in contempt for violating injunction 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, 2012 and imposing daily sanctions for noncompliance each 11] day thereafter); U.S. Philips Corp. v. KXD Tech., Inc., 2007 WL 4984153, at *2 (C.D. Cal. July 27, 2007) (noting ]— that in a parallel case, the court had ordered defendants to pay civil contempt damages for violation 15] of a preliminary injunction and imposed per diem J sanctions at $10,000 per day). Given that Defendants are complying with the permanent injunction, the Court declines to hold Defendants in civil contempt at this time and DENIES AECOM’s coercive sanction request for future violations of the permanent injunction. The Court similarly DENIES AECOM’s request that it be awarded $9 million in compensatory sanctions by retroactively applying the $10,000 per diem coercive sanction over the course of this litigation. Even if the Court were to grant the above coercive sanction request, AECOM has not provided any authority in support 27] of retroactively applying the $10,000 per day sanction. 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 J sanctions are backward looking and are designed to 11] compensate the complainant for damages caused by past J acts of disobedience,” Aug. Tech. Corp. v. Camtek, Ltd., ] 542 F. App'x 985, 991 (Fed. Cir. 2013) (citation and J internal quotation marks omitted), they must still be Limited to the “actual losses sustained as a result of 16] the contumacy.” Shuffler, 720 F.2d at 1148; see also United Mine Workers, 330 U.S. at 304 (noting that compensatory fines must “be based upon evidence of complainant’s actual loss”). AECOM has not provided justification for the $10,000 figure, nor has it shown 21] any proof of actual losses sustained from Defendants’ discovery evasion. AECOM’s $9 million compensatory sanction request, based on the retroactive application 4 of the $10,000 per diem coercive sanction, is therefore DENIED. In sum, the Court DENIES AECOM’s requests for a $10,000 per diem coercive sanction for future violations 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 award of attorneys’ fees against Defendant Topolewski is improper under the Lanham Act. Id. at 19:8-14; see also Topolewski’s MFS Opp’n 24:1-6. Defendants do not address the recovery of such fees under Rule 37. See MK Defs.’ MFS Opp’n 18:26-19:14. The Court has inherent authority to award attorneys’ fees here and need not turn to the Lanham Act or Rule 37. See Chambers, 501 U.S. at 45 (“[A]n assessment of attorneys’ fees is undoubtedly within a court’s inherent power . . . .”) (citation omitted); Roadway Exp., Inc. v. Piper, 447 U.S. 752, 765 (1980) (“There are ample grounds for recognizing . . . that in narrowly defined circumstances federal courts have inherent power to assess attorney's fees against counsel.”). A court may assess attorneys’ fees when a party has “acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 258-59 (1975) (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 defining feature of this dispute has been . . . [Defendants’] ‘lengthy history of bad faith litigation practices.’” Ninth Cir. Mem. at 2 (Friedland, J., concurring). Since remand, Defendants have not changed their behavior given that they still have not produced their financial statements in direct violation of court orders. Order re: Mot. to Quash at 2 (noting that Defendants had not produced financial discovery after remand despite being compelled to do so in 2018). Further, Defendant Topolewski cannot escape the attorneys’ fees and costs award given his own extensive involvement in the infringing activity and willful evasion of his discovery obligations. Awarding AECOM its attorneys’ fees and costs is plainly appropriate here in light of Defendants’ bad faith, flagrant, and egregious discovery misconduct. See Universal Oil Prod. Co. v. Root Ref. Co., 328 U.S. 575, 580 (1946) (“No doubt, if the court finds . . . that fraud has been 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. 2. Defendants’ Motions for Summary Judgment On March 24, 2021, the Ninth Circuit reversed this Court’s $1.8 billion damages award to AECOM. See generally Ninth Cir. Mem. The only issue on remand is that of damages, and Defendants seek summary judgment on the sole ground that evidence in the record does not show that Defendants profited from their infringing use of the MK IP.11 See generally MK Defs.’ Mot. for Summ. J. (“MK Defs.’ MSJ”), ECF No. 395; Def. Topolewski’s Mot. for Summ. J (“Topolewski’s MSJ”), ECF No. 396. AECOM argues in opposition that circumstantial evidence in the record, namely Defendants’ behavior over the course of this litigation, leads to the conclusion that Defendants did profit from their use of the MK IP. Pl.’s Opp’n to Mot. for Summ. J. (“Pl.’s Opp’n to MSJ”)

11 Corporate Defendants’ and Defendant Topolewski’s Motions for Summary Judgment (collectively, “Motions for Summary Judgment”) are virtually identical both in substance and in form. See generally MK Defs.’ Mot. for Summ. J. (“MK Defs.’ MSJ”), ECF No. 395; Def. Topolewski’s Mot. for Summ. J (“Topolewski’s MSJ”), ECF No. 396. Accordingly, the Court treats them as the same and 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 faith litigation tactics alone belie their nonsensical statement. Defendants would not have violated—and be in current violation of—this Court’s orders compelling them to produce financial discovery if their infringement scheme was not highly profitable. To grant summary judgment in favor of Defendants here would reward Defendants for their discovery abuse and encourage future parties to do the same to escape judgment. Frivolous as Defendants’ Motions for Summary Judgment are, the Court—perhaps too charitably—does not require Defendants to show cause why their Motions for Summary Judgment are not in violation of Rule 11(b) at this time. Fed. R. Civ. P. (“On its own, the court may order an attorney, law firm, or party to show cause why conduct specifically described in the order has not violated Rule 11(b).”). Defendants’ Motions for Summary Judgment are DENIED as moot. /// 46 Case 2:17-cv-05398-RSWL-AGR Document 417 Filed 02/25/22 Page 47 of 48 Page ID #:10341

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 for a $10,000 per diem coercive sanction for future violations of the permanent injunction; (4) DENIES AECOM’s $9 million compensatory sanction request based on the retroactive application of the $10,000 per diem coercive sanction; and (5) GRANTS AECOM’s requests for attorneys’ fees and costs incurred following remand from the Ninth Circuit. The Court orders AECOM to provide supplemental briefing to establish the amount of reasonable attorneys’ fees and costs. AECOM shall prepare and file a proposed judgment thereafter. Defendants’ Motions for Summary Judgment are DENIED as moot in light of the disposition on AECOM’s Motion for Sanctions. /// /// /// /// /// 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. 8 9 /s/ Ronald S.W. Lew DATED: February 25, 2022 _____________________________ HONORABLE RONALD S.W. LEW Senior U.S. District Judge 48