Guggenheim Capital, LLC v. Birnbaum , 722 F.3d 444 ( 2013 )

11-3276-cv
Guggenheim Capital, LLC v. Birnbaum
U NITED S TATES C OURT OF A PPEALS
FOR THE S ECOND C IRCUIT
August Term 2012
(Argued: April 12, 2013 Decided: July 15, 2013)
Docket No. 11-3276-cv
_____________________
G UGGENHEIM C APITAL , LLC, G UGGENHEIM P ARTNERS , LLC,
Plaintiffs-Appellees,
V.
D AVID B IRNBAUM , AKA D AVID B. G UGGENHEIM ,
Defendant-Appellant,
C ATARINA P IETRA T OUMEI , AKA L ADY C ATARINA P IETRA T OUMEI , AKA
C ATARINA F REDERICK , V LADIMIR Z URAVEL , AKA V LADIMIR G UGGENHEIM , AKA
V LADIMIR Z. G UGGENHEIM , AKA V LADIMIR Z. G UGGENHEIM B ANK , E LI
P ICHEL , T HEODOR P ARDO , J OHN D OES , 1-10, D ABIR I NTERNATIONAL ,
L TD .,
Defendants. *
_____________________
*
The Clerk of the Court is directed to conform the
caption to the above.
Before:
K EARSE and C HIN , Circuit Judges, and
H ALL , District Judge. **
_____________________
Appeal from a default judgment entered by the
United States District Court for the Southern District of
New York (Gardephe, J.) against defendant-appellant for his
failure to comply with court orders. We conclude that the
district court did not abuse its discretion in entering the
default judgment.
A FFIRMED .
_____________________
J OHN J. D ABNEY (Rita Weeks, Kevin M. Bolan,
on the brief), McDermott Will &
Emery LLP, Washington, District of
Columbia, and Boston, Massachusetts,
for Plaintiffs-Appellees.
R ONALD D. C OLEMAN , Goetz Fitzpatrick LLP,
New York, New York, for Defendant-
Appellant.
_____________________
**
The Honorable Janet C. Hall, of the United States
District Court for the District of Connecticut, sitting by
designation.
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C HIN , Circuit Judge
Defendant-appellant David Birnbaum solicited
investors to buy various financial products while
presenting himself as "David B. Guggenheim." Plaintiffs-
appellees are entities with rights or licenses to
registered trademarks bearing the "Guggenheim" name. They
filed suit alleging trademark infringement and other
federal and state law claims. Birnbaum never answered the
complaint, failed to comply with the district court's
discovery orders, disrupted his own deposition, and
violated -- on at least two occasions -- a preliminary
injunction precluding use of the "Guggenheim" mark.
Finally, upon plaintiffs' request, the district court
entered a default judgment against Birnbaum. Birnbaum
appeals. As we conclude that the district court was within
its discretion to enter a default judgment pursuant to both
Rule 37 and Rule 55 of the Federal Rules of Civil
Procedure, we affirm.
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BACKGROUND
A. The Facts
1. The Parties
Plaintiff-appellee Guggenheim Partners, LLC
("Partners") provides global investment services and
various financial products. It and its predecessors-in-
interest have provided similar services for the past fifty
years. With investment assets exceeding $110 billion, it
is a well-known financial services entity. Partners is a
wholly-owned subsidiary of plaintiff-appellee Guggenheim
Capital, LLC ("Capital" and, together with Partners, the
"Guggenheim LLCs").
The Guggenheim LLCs are affiliated with the well-
known Guggenheim family. Capital owns (and licenses to
Partners) the common law rights and the registered
trademarks for various "Guggenheim" marks. In light of the
longstanding market presence of the Guggenheim LLCs,
potential investors identify the registered "Guggenheim"
marks with the financial services provided by the
Guggenheim LLCs (and their predecessors-in-interest).
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Birnbaum is a New York resident who, since the
1970s, has sought investors for investment opportunities by
presenting himself as "David B. Guggenheim." He claims a
relationship with the Guggenheim family on his mother's
side, but provided no evidence to corroborate the
relationship during the proceedings below.
2. Initial Court Orders
On November 22, 2010, the Guggenheim LLCs filed a
complaint against Birnbaum alleging trademark infringement
pursuant to 15 U.S.C. § 1114(1)(a), other federal trademark
claims pursuant to 15 U.S.C. §§ 1114 and 1125, violations
of the Racketeer Influenced and Corrupt Organizations Act
("RICO") pursuant to 18 U.S.C. § 1962(c), and various state
law claims. 1 The district court (Marrero, J.) granted, ex
parte, an order authorizing expedited discovery and
temporarily restraining Birnbaum from "us[ing] the
Guggenheim Capital, LLC and Guggenheim Partners, LLC names
1
On January 11, 2011, the Guggenheim LLCs filed a First
Amended Complaint to add Dabir International, Ltd. as a
defendant. They then filed a Second Amended Complaint on
January 14, 2011 to incorporate allegations about defendants'
attempt to file a trademark under the "Guggenheim" name with the
U.S. Patent and Trademark Office.
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and trademarks in any way relevant to this matter." Order
2, Nov. 22, 2010, ECF No. 3. The Guggenheim LLCs had also
requested a preliminary injunction; on December 17, 2010,
after a hearing at which Birnbaum appeared but filed no
opposition, the district court (Gardephe, J.) converted the
temporary restraining order into a preliminary injunction.
3. Violations of Discovery Orders
After the complaint was filed, although Birnbaum
appeared in the litigation, he did not respond to the
expedited discovery requests. The district court gave
Birnbaum an extension, but Birnbaum did not meet this first
extension either. At a conference on January 13, 2011, the
district court warned Birnbaum that he must comply wi th the
court's discovery orders and also put this order in
writing.
Despite Birnbaum's non-compliance, the district
court granted him two more extensions to answer or amend
his responses to the interrogatories and to produce the
documents requested by the Guggenheim LLCs. Birnbaum,
again, provided no substantive responses, responding to
each request by invoking the Fifth Amendment privilege . On
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February 1, 2011, the district court again warned Birnbaum
about his behavior, by directing him to show cause as to
"why contempt sanctions should not be imposed for his
failure to respond to Plaintiffs' discovery requests as
ordered by this Court." Order to Show Cause, Feb. 1, 2011,
ECF No. 58. On February 7, 2011, Birnbaum responded,
requesting a stay and asserting that, because he had
justifiably invoked privilege, the court was precluded from
imposing civil contempt sanctions.
On February 8, 2011, the Guggenheim LLCs tried to
depose Birnbaum, but he refused to answer any questions.
During a telephone conference that same day, the district
court directed Birnbaum to participate in discovery in
accordance with its instructions. Moreover, in an order
issued two days later, the district court reiterated the
warning, stating that "[a]ny further improper disruption of
the deposition will not be tolerated, and sanctions will be
imposed on the Defendant and his counsel in the event that
the conduct that took place on February 8, 2011 is
repeated." Order 2-3, Feb. 10, 2011, ECF No. 66.
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4. Violations of Preliminary Injunction
Notwithstanding the issuance of the temporary
restraining order and preliminary injunction, Birnbaum
continued using the "Guggenheim" name and mark. In mid-
December, Birnbaum met with a potential investor while
posing as "David B. Guggenheim," chairman of "Guggenheim
Bank." At a December 30, 2010 contempt hearing, the
district court stated that its "patience is wearing thin
here. It's wearing very thin." Default J. Against Defs.
David Birnbaum & Dabir Int'l Ltd. 3, ECF No. 103 (internal
quotation marks omitted). The district court then warned
Birnbaum that if he continued to use the "Guggenheim" name,
"the consequences [were] going to be very very severe."
Id. (internal quotation marks omitted).
Weeks later, Birnbaum again solicited an investor
while presenting himself as "David Guggenheim," this time
in connection with an oil transaction. The district court
issued another order to show cause as to "why contempt
sanctions should not be imposed for [Birnbaum's] alleged
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failure to comply with this Court's preliminary injunction
order." 2 Order to Show Cause, Mar. 7, 2011, ECF No. 85.
B. Entry of Default Judgment
On February 14, 2011, rather than filing an
answer, Birnbaum moved to dismiss the complaint for failure
to state a claim. The district court granted the motion,
in part, dismissing a cyberpiracy claim, but allowed most
of the claims to proceed. Birnbaum did not thereafter file
an answer to the remaining claims, as the district court
had directed.
At an April 4, 2011 show cause hearing, which
addressed Birnbaum's violation of the preliminary
injunction, the Guggenheim LLCs requested a default
judgment due to his "willful contempt over and over and
over and over again." Hr'g Tr. 4:18-19, Apr. 4, 2011, ECF
2
Furthermore, the district court learned that a company
had filed an application with the U.S. Patent and Trademark
Office to register the "Guggenheim" name for an alleged vodka
company. The application, however, also described the alleged
vodka company as a financial services entity. Birnbaum asserted
below that one of his co-defendants, on behalf of a corporate
entity that shared Birnbaum's home address, had submitted the
application without his knowledge. The district court appears
to have credited Birnbaum's response as the default judgment
does not attribute this to Birnbaum personally.
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No. 99-4. The district court provided Birnbaum with an
opportunity to respond, but Birnbaum, who was no longer
represented by counsel, invoked his Fifth Amendment
privilege. 3 It then described Birnbaum's "overall
obstruction of the discovery process" and observed that his
conduct persisted "despite several orders I have issued,
despite admonitions, despite warnings that it has to stop."
Id. at 8:11-12, 8:16-17.
On April 14, 2011, the Guggenheim LLCs moved for a
default judgment pursuant to Rule 55, as well as injunctive
relief, statutory damages, and costs and attorneys' fees.
Birnbaum filed no opposition. Three months later, on July
15, 2011, the district court entered a default judgment
against Birnbaum, permanently enjoined him from using the
"Guggenheim" name or mark, awarded the Guggenheim LLCs
statutory damages in the amount of $1.25 million pursuant
to 15 U.S.C. § 1117(c), and ordered him to pay reasonable
costs and attorneys' fees.
This appeal followed.
3
Birnbaum had requested pro bono counsel for the
hearing, but the application was denied on the basis that
Birnbaum had not established a meritorious defense.
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DISCUSSION
On appeal, Birnbaum contends that the district
court abused its discretion by granting a default judgment
in favor of the Guggenheim LLCs. For the reasons described
below, we reject this argument. Before we reach the merits
of his argument, however, we first address our jurisdiction
to hear this claim.
A. Jurisdiction
1. Applicable Law
"Issues relating to subject matter jurisdiction
may be raised at any time, even on appeal, and even by the
court sua sponte." Cave v. E. Meadow Union Free Sch.
Dist., 514 F.3d 240, 250 (2d Cir. 2008). We have subject
matter jurisdiction over appeals from the "final decisions"
of U.S. district courts. 28 U.S.C. § 1291. Thus, we must
"determine whether the district court intended the judgment
to represent the final decision in the case." Bankers
Trust Co. v. Mallis, 435 U.S. 381, 385 n.6 (1978).
Section 1291 does not "permit appeals, even from
fully consummated decisions, where they are but steps
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towards final judgment in which they will merge." Cohen v.
Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949).
A decision, however, is final if it "'ends the litigation
on the merits and leaves nothing for the court to do but
execute the judgment.'" Leftridge v. Conn. State Trooper
Officer # 1283, 640 F.3d 62, 66 (2d Cir. 2011) (quoting
Catlin v. United States, 324 U.S. 229, 233 (1945)). We
have also concluded that a decision is final when "the
court clearly intends to close the case, i.e., to enter a
final judgment." Ellender v. Schweiker, 781 F.2d 314, 318
(2d Cir. 1986) (treating court's decision on collateral
issues as final judgment though it did not reference order
adjudicating all claims on merits); cf. also Houbigant,
Inc. v. IMG Fragrance Brands, LLC, 627 F.3d 497, 498 (2d
Cir. 2010) (per curiam) (no final judgment where a
particular case was marked "closed" but district court
continued resolving related and consolidated cases); Vona
v. Cnty. of Niagara, 119 F.3d 201, 206 (2d Cir. 1997)
(holding order was appealable judgment because case was
marked "closed," indicating that district court intended
order to be final judgment).
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2. Application
The complaint alleged, in addition to federal and
state trademark claims, a RICO violation and fraud. The
district court's default judgment specifically identified
that the action had been brought under the Lanham Act and
RICO, but only ruled on the federal and state trademark
claims. 4 Hence, although neither party briefed the issue,
at first glance, it appears that two claims may have
survived the district court's default judgment, raising a
question as to the finality of that judgment.
At oral argument on appeal, both parties indicated
that they understood the default judgment to be the final
decision on the merits as to all of the claims raised by
the Guggenheim LLCs. The district court, moreover,
intended the same; after making certain ancillary rulings,
it terminated all outstanding motions and ordered the case
closed. Cf. Ellender, 781 F.2d at 317 (concluding that
judgment was final appealable decision when clerk was
informed that judgment closed the case). The docket
4
Separately, the district court had dismissed the
cyberpiracy claim.
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reflects no further involvement by the district court in
this case. Cf. Houbigant, Inc., 627 F.3d at 498.
We further note that, in the nearly two years
since the district court entered its default judgment,
aside from defending the appeal, the Guggenheim LLCs have
declined to further prosecute any claims (to the extent any
remained outstanding). Hence, they would suffer no
prejudice by our treating the default judgment as final.
Mindful that we are directed to give a "practical rather
than a technical construction" to section 1291, Cohen, 337
U.S. at 546, we conclude that the default judgment entered
against Birnbaum dismissed the RICO and fraud claims
against Birnbaum without prejudice. 5 Hence, the judgment
5
The district court never made the requisite findings
of "(1) conduct, (2) of an enterprise, (3) through a pattern
(4) of racketeering activity" needed to prove a civil RICO
violation. Lundy v. Catholic Health Sys. of Long Island Inc.,
711 F.3d 106, 119 (2d Cir. 2013) (quotation omitted) (requiring,
in addition, injury to business or property resulting from RICO
violation). Nor did the default judgment address each of the
elements of fraud under New York law: (1) a false
representation as to a material fact; (2) intent to deceive
plaintiff; (3) justifiable reliance by plaintiff; and
(4) pecuniary loss. See, e.g., Ross v. Louise Wise Servs.,
Inc., 8 N.Y.3d 478, 488 (2007).
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was a final decision, and we have subject matter
jurisdiction over this appeal.
B. Default Judgment Under Rule 37
Turning to the merits, we conclude that,
notwithstanding Birnbaum's arguments to the contrary, in
light of Birnbaum's numerous discovery violations, the
district court did not abuse its discretion by entering a
default judgment pursuant to Rule 37. 6
1. Applicable Law
"If a party . . . fails to obey an order to
provide or permit discovery," the district court may impose
sanctions, including "rendering a default judgment against
the disobedient party." Fed. R. Civ. P. 37(b)(2)(A)(vi).
Certain Rule 37 remedies -- dismissing a complaint or
6
The Guggenheim LLCs only moved for a default judgment
pursuant to Rule 55. Most of the orders disregarded by
Birnbaum, however, were discovery orders, and the district
court's default judgment decision applied a standard applicable
in a Rule 37 context. The Guggenheim LLCs' memorandum in
support of their motion for default judgment also cited to the
same Rule 37 case as the default judgment decision. See Am.
Cash Card Corp. v. AT&T Corp., 184 F.R.D. 521, 524 (S.D.N.Y.
1999). Moreover, both parties, at oral argument, discussed the
default judgment, in part, as a discovery sanction. Hence, we
address the district court's entry of default judgment under
Rule 37, in addition to Rule 55.
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entering judgment against a defendant -- are severe
sanctions, but they may be appropriate in "extreme
situations," as "when a court finds willfulness, bad faith,
or any fault on the part of the" noncompliant party. Bobal
v. Rensselaer Polytechnic Inst., 916 F.2d 759, 764 (2d Cir.
1990) (internal citation and quotation marks omitted).
We generally review an entry of a default judgment
for abuse of discretion. See Nat'l Hockey League v. Metro.
Hockey Club, Inc., 427 U.S. 639, 642 (1976) (per curiam)
("The question, of course, is not whether . . . the Court
of Appeals[] would as an original matter have dismissed the
action; it is whether the District Court abused its
discretion in so doing."); see also S. New Eng. Tel. Co. v.
Global NAPs Inc., 624 F.3d 123, 143 (2d Cir. 2010). When
assessing a district court's exercise of its discretion
pursuant to Rule 37, we generally look to "(1) the
willfulness of the non-compliant party; (2) the efficacy of
lesser sanctions; (3) the duration of the . . .
noncompliance; and (4) whether the non-compliant party had
been warned" that noncompliance would be sanctioned.
Agiwal v. Mid Island Mortg. Corp., 555 F.3d 298, 302 (2d
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Cir. 2009) (per curiam) (quotation omitted); see also Bambu
Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 852-53 (2d
Cir. 1995).
2. Application
a. Entry of Default Judgment
The district court found that Birnbaum's
intransigence spanned months, and that less serious
sanctions would have been futile. Birnbaum raises no
legitimate challenge to these findings, and we find no
error in these conclusions or findings of fact,
particularly in light of his failure to answer the
complaint or oppose the motion for default judgment. See
Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 246
(2d Cir. 2004) ("[A] default is an admission of all well -
pleaded allegations against the defaulting party.").
Hence, we focus on the willfulness of Birnbaum's default
and the sufficiency of the warnings he received.
i. Willfulness
The district court found that Birnbaum had
willfully disobeyed its discovery orders. It made this
finding after recounting numerous extensions provided to
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permit Birnbaum's participation throughout the discovery
process. It further noted that Birnbaum had not complied
with written and oral discovery-related court orders,
before it found that Birnbaum had "a demonstrated history
of willful non-compliance with court orders." Default J.
9, ECF No.103; see also Shcherbakovskiy v. Da Capo Al Fine,
Ltd., 490 F.3d 130, 135 (2d Cir. 2007) (noting "district
courts possess 'wide discretion' in im posing sanctions
under Rule 37" but declining to enter default judgment
without explanation supporting the sanction). But see Cine
Forty-Second St. Theatre Corp. v. Allied Artists Pictures
Corp., 602 F.2d 1062, 1066 (2d Cir. 1979) (failure to
comply may be excused if defendant made "good faith efforts
to comply" or if compliance was "thwarted by circumstances
beyond his control"). Given Birnbaum's sustained
recalcitrance, this finding was not clearly erroneous.
ii. Warnings for Non-Compliance
Birnbaum contends that he was not sufficiently
warned of the consequences of a default judgment. He
argues that a more thorough warning was necessary as he
appeared without counsel during the April 4, 2011 hearing
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when the default judgment was discussed. In light of the
record as a whole, this argument is without merit.
Our Rule 37 precedents hold that a court abuses
its discretion if it dismisses a case without first warning
a pro se party of the consequences of failing to comply
with the court's discovery orders. See Valentine v. Museum
of Modern Art, 29 F.3d 47, 48, 50 (2d Cir. 1994) (per
curiam). We have no analogous precedent in the default
judgment context, but even entries of default judgments
against counseled clients require sufficient notic e. See
Reilly v. NatWest Mkts. Grp. Inc., 181 F.3d 253, 270 (2d
Cir. 1999) ("Due process requires that courts provide
notice and an opportunity to be heard before imposing any
kind of sanctions." (alteration, citation, and internal
quotation marks omitted)). See generally Sieck v. Russo,
869 F.2d 131, 133, 134 (2d Cir. 1989) (affirming entry of a
default judgment against defendants who were warned that " a
default judgment will be entered against them" if they
failed to appear (internal quotation marks omitted)). Both
dismissal and entry of default judgment, however, are
serious, case-terminating, Rule 37 sanctions; hence, a
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court is similarly obliged to provide adequate notice of a
default judgment as a sanction against a party proceeding
pro se. 7
In light of this obligation, we must assess
whether the district court's warnings -- which mentioned
sanctions, but never the phrase "default judgment" -- were
sufficient. By comparison, in Valentine v. Museum of
Modern Art, we concluded that a district court had
sufficiently warned the pro se defendant where the court
read and explained relevant portions of Rule 37 on the
record before ultimately dismissing the case. 29 F.3d at
48. Here, the district court's warnings were not so
specific, but it warned Birnbaum regularly and often;
throughout the case, Birnbaum received six separate
warnings. First, at a January 13, 2011 conference, the
district court verbally warned Birnbaum that he had to
participate in discovery as ordered, then issued a written
order outlining Birnbaum's discovery obligations . Second,
7
We have previously acknowledged this principle in non-
precedential decisions. See, e.g., Robertson v. Dowbenko, 443
F. App'x 659, 660-61 (2d Cir. 2011) (summary order); SEC v.
Setteducate, 419 F. App'x 23, 24-25 (2d Cir. 2011) (summary
order).
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in a February 1, 2011 order to show cause, the district
court directed Birnbaum to explain "why contempt sanctions
should not be imposed for his failure to respond to
Plaintiffs' discovery requests as ordered by this Court."
Order to Show Cause, ECF No. 58. Third, in a February 8,
2011 telephone call, the district court orally chastised
Birnbaum for practices relating to his deposition. Fourth,
by its February 10, 2011 order, the district court
emphasized that sanctions would be imposed for " [a]ny
further improper disruption of the deposition." Order 2-3,
ECF No. 66. Fifth, the Guggenheim LLCs requested their
default judgment in open court, with Birnbaum present.
Sixth, after describing Birnbaum's numerous efforts to
delay the proceedings, the district court stated that "we
have reached the point in the proceedings where I need to
take action." Hr'g Tr. 8:19-20. And finally, Birnbaum was
served with a copy of the Guggenheim LLCs' order to show
cause for default judgment, and a proposed default judgment
was filed on the docket. 8 Birnbaum did not oppose the
default judgment.
8
Moreover, we note that in non-discovery contexts, the
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Viewed as a whole, Birnbaum cannot credibly argue
that he was not sufficiently warned that serious sanctions
were imminent. See S. New Eng. Tel. Co., 624 F.3d at 144
("The district court is free to consider 'the full record
in the case in order to select the appropriate [Rule 37]
sanction.'" (citation omitted)). This conclusion is
reinforced by the fact that Birnbaum was not a pro se
litigant in the traditional sense. While unrepresented
during the final April 4 hearing, he was counseled for most
of the proceedings below and also had an attorney in the
parallel criminal case at the time he received the district
court's final warning. We therefore conclude that the
numerous warnings Birnbaum received -- both while
represented by counsel and not -- were, collectively,
sufficient to place him on notice of the pending default
judgment. And, we similarly conclude that the district
district court (1) warned Birnbaum that if he continued to use
the "Guggenheim" name, "the consequences [were] going to be very
very severe," Hr'g Tr. 3:19, ECF No. 99-4, and, (2) by a March
7, 2011 order to show cause, directed him to respond as to "why
contempt sanctions should not be imposed for his alleged failure
to comply with this Court's preliminary injunction order," Order
to Show Cause, ECF No. 85.
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court's decision to enter a default judgment against
Birnbaum was not an abuse of its discretion.
b. Further Allegations of Abuse of Discretion
Birnbaum further contends that the district court
abused its discretion by (1) denying him civil counse l for
the April 4, 2011 hearing, (2) sanctioning him for invoking
the Fifth Amendment privilege, and (3) denying a stay of
the civil case pending resolution of a related criminal
charge of wire fraud. None of these arguments undermines
our conclusion that the district court's entry of default
judgment was no abuse of discretion.
First, it is well-settled that, except when faced
with the prospect of imprisonment, a litigant has no legal
right to counsel in civil cases. See Hodge v. Police
Officers, 802 F.2d 58, 60 (2d Cir. 1986); In re Di Bella,
518 F.2d 955, 958-59 (2d Cir. 1975) (witness threatened
with jail time entitled to counsel in civil contempt
proceeding). Thus, although, as described above, he was
represented for most of the proceedings, Birnbaum was not
entitled to counsel in this civil case.
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Second, the district court never prohibited
Birnbaum from invoking the Fifth Amendment. Rather, it
merely indicated that, when asserting this right, Birnbaum
had to cite supporting case law to justify invoking the
privilege. As the Fifth Amendment privilege is not
absolute, Birnbaum would still be obliged to provide, inter
alia, exculpatory responses or non-incriminating responsive
documents. See, e.g., Fisher v. United States, 425 U.S.
391, 409-11 (1976) (Fifth Amendment "protects a person only
against being incriminated by his own compelled testimonial
communications"); Kastigar v. United States, 406 U.S. 441,
444-45 (1972) (privilege applies in civil proceedings only
to disclosures reasonably believed to be used against
defendant in a criminal case). Given Birnbaum's history of
ignoring district court directives, unilateral failure to
cooperate at depositions, and failure to provide the
requested discovery, the district court's instruction was
not an abuse of discretion.
Third, the district court was well within its
discretion to deny a stay. Although the Constitution, in
certain cases, may require that civil proceedings be stayed
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pending the resolution of a parallel criminal case, "a
plausible constitutional argument would be presented only
if, at a minimum, denying a stay would cause substantial
prejudice to the defendant." Louis Vuitton Malletier S.A.
v. LY USA, Inc., 676 F.3d 83, 100 (2d Cir. 2012) (citation
and internal quotation marks omitted). Granted, two
factors favored granting a stay: (1) any testimony offered
by Birnbaum during the civil suit could have undermined an
attempt to invoke the Fifth Amendment privilege in the
criminal case, and (2) the criminal prosecution would have
similarly protected the interests of consumers and the
Guggenheim LLCs. See id. at 101.
Other factors, however, favored denying the stay.
Although a criminal complaint had been filed in the case ,
Birnbaum was never indicted. 9 See id. at 101. In addition,
he had repeatedly failed to comply with the district
court's discovery orders (not to mention the preliminary
injunction) by the time the criminal complaint was filed.
See id. at 102 ("plainly dilatory tactics" preceding
9
The criminal complaint against Birnbaum for wire fraud
was filed on January 26, 2011; it was dismissed on September 9,
2011.
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criminal indictment weighed against granting stay).
Moreover, the Guggenheim LLCs had a strong inter est in
resolving the civil case -- to prevent additional investors
from being duped by "David B. Guggenheim" or "David
Guggenheim" and to limit the negative impact on their
brand. See id. at 103-04. Finally, the court was entitled
to manage its docket. See id. at 104.
Birnbaum had no absolute right to "a stay of civil
proceedings pending the outcome of criminal proceedings,"
Kashi v. Gratsos, 790 F.2d 1050, 1057 (2d Cir. 1986)
(quotation omitted), and he has not met the "heavy" burden
of demonstrating an abuse of discretion, see Louis Vuitton
Malletier S.A., 676 F.3d at 100. "A party who flouts
[discovery] orders does so at his peril." Update Art, Inc.
v. Modiin Publ'g, Ltd., 843 F.2d 67, 73 (2d Cir. 1988).
And, as the district court made findings that satisfied the
four Agiwal factors, viewing the record as a whole, we
conclude that it did not abuse its discretion by entering a
default judgment against Birnbaum as a discovery sanction
under Rule 37.
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C. Default Judgment Under Rule 55
Even if we were to assume that default judgment
under Rule 37 was, for some reason, improper, we conclude
that the entry of the default judgment under Rule 55 was
certainly supported by the record.
1. Applicable Law
Under Rule 55, a party defaults when he "has
failed to plead or otherwise defend" the case at hand.
Fed. R. Civ. P. 55(a). "We have embraced a broad
understanding of the phrase 'otherwise defend.'" City of
N.Y. v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 129 (2d Cir.
2011); see also Au Bon Pain Corp. v. Artect, Inc., 653 F.2d
61, 65 (2d Cir. 1981) (defendant failed to "otherwise
defend" by "failing to appear for a deposition, dismissing
counsel, giving vague and unresponsive answers to
interrogatories, and failing to appear for trial ");
Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 917-19
(3d Cir. 1992) (affirming Rule 55 default judgment against
defendants who filed answer and actively litigated pretrial
discovery but did not comply with discovery orders or
appear for trial), cited with favor in Mickalis Pawn Shop,
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645 F.3d at 130. A party may apply to the district court
for entry of a default judgment against a party that has
defaulted. Fed. R. Civ. P. 55(b)(2) (further requiring
written notice to opposing party who has appeared in case) .
As under Rule 37, we review the district court's
grant of a default judgment under Rule 55 for abuse of
discretion. See, e.g., Commercial Bank of Kuwait v.
Rafidain Bank, 15 F.3d 238, 243 (2d Cir. 1994). A party
challenging the entry of a default judgment must satisfy
the "good cause shown" standard in Rule 55(c). See id.;
see also Fed. R. Civ. P. 55(c) ("The court may set aside an
entry of default for good cause, and it may set aside a
default judgment under Rule 60(b)."). This standard
requires a court to weigh (1) the willfulness of default,
(2) the existence of any meritorious defenses, and (3)
prejudice to the non-defaulting party. Davis v. Musler,
713 F.2d 907, 915 (2d Cir. 1983); cf. New York v. Green,
420 F.3d 99, 108 (2d Cir. 2005) (applying Rule 55(c)
standard when reviewing decision on motion for
reconsideration).
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2. Application
We conclude that because the default was willful
and Birnbaum presented no meritorious defense, entry of
default judgment under Rule 55 did not constitute an abuse
of discretion.
a. Willfulness of Default
Birnbaum does not deny that he received the
complaint, the court's orders, or the notice of default
judgment, or that he never answered the complaint.
Likewise, he does not contend that his non-compliance was
due to circumstances beyond his control. These and other
circumstances support an inference of willful default. See
Commercial Bank of Kuwait, 15 F.3d at 243 (agreeing that
"inference of willful default [was] justified" where
defendants received actual notice of complaint and were not
prevented by outside factors from timely answering
(internal quotation marks omitted)).
We concluded above that the district court did not
clearly err in finding that Birnbaum had willfully violated
its discovery orders. Support for a finding of willful
default is equally strong under Rule 55, where the willful
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violations of the district court's discovery orders may be
construed as a failure to defend. See Mickalis Pawn Shop,
645 F.3d at 130. Furthermore, Birnbaum's two separate
attempts to solicit investors while presenting himself as
"David B. Guggenheim," in violation of the district court's
preliminary injunction, reflect a general disregard for the
orders of the district court and provide context for the
willfulness of his discovery violations. We therefore
conclude that the district court was presented with a
plethora of evidence to support its finding that Birnbaum
willfully defaulted.
b. Meritorious Defense
Birnbaum contends that his use of the name
"Guggenheim" constitutes fair use of his rightful name.
Because his conduct plainly fails to satisfy the elements
of a legitimate fair use defense, even if the district
court erred by not specifically addressing this defense, we
conclude that his asserted defense fails.
The Federal Rules of Civil Procedure provide that, in a
responsive pleading, a party must "state in short and plain
terms its defenses to each claim asserted against it."
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Fed. R. Civ. P. 8(b)(1)(A). Moreover, the party must
"admit or deny the allegations asserted against it by an
opposing party." Id. 8(b)(1)(B). When a responsive
pleading is required, a failure to deny allegations will
result in those allegations (except to the extent they
relate to damages) being deemed admitted. Id. 8(b)(6); see
also, e.g., Cotton v. Slone, 4 F.3d 176, 181 (2d Cir.
1993); Au Bon Pain Corp., 653 F.2d at 65.
To the extent a complaint alleges trademark
infringement, a defendant may rebut the claim by asserting
various statutory defenses. See 15 U.S.C. § 1115(b). When
an alleged infringer asserts the fair use defense, he
asserts, in relevant part, that
the use of the name . . . charged to be an
infringement is a use, otherwise than as a mark,
of the party's individual name in his own
business, . . . which is descriptive of and used
fairly and in good faith only to describe the
goods or services of such party.
Id. § 1115(b)(4). "[R]esolution of a fair-use defense
requires the court to focus on the defendant's (actual or
proposed) use." JA Apparel Corp. v. Abboud, 568 F.3d 390,
403 (2d Cir. 2009). In so doing, a court reviews whether a
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particular use was "(1) other than as a mark, (2) in a
descriptive sense, and (3) in good faith." EMI Catalogue
P'ship v. Hill, Holliday, Connors, Cosmopulos Inc. ("EMI"),
228 F.3d 56, 64 (2d Cir. 2000); see also 815 Tonawanda
Street Corp. v. Fay's Drug Co., 842 F.2d 643, 648 (2d Cir.
1988) (noting that surnames, for trademark analysis
purposes, are treated as descriptive terms).
Even if we assumed that the district court erred
by not explicitly assessing the merits of Birnbaum's fair
use defense, any such error would be harmless. As part of
the conjunctive test to assess fair use, a reviewing court
must determine whether, in part, a challenged use was "in
good faith." EMI, 228 F.3d at 64. The district court,
after examining documentary evidence of Birnbaum's attempt
to solicit investors, concluded that he had employed
counterfeit marks similar to Plaintiffs' famous
"Guggenheim" marks. It further concluded that Birnbaum
acted in bad faith by deciding "to offer and sell services
that are identical or nearly identical to those offered
under Plaintiffs' famous Guggenheim Marks," thereby
intending to confuse the public. Default J. ¶ 50.
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Finally, the district court held that Birnbaum's use of the
marks was "a bad faith attempt to trade off of the goodwill
and reputation of Plaintiffs' famous marks." Id. ¶ 51.
These findings are not clearly erroneous.
Birnbaum seems to suggest that his use of the
"Guggenheim" name, which predated the registration of the
earliest of the "Guggenheim" marks in 2006, undermines the
district court's finding of bad faith. We do recognize
"that one's surname given at birth creates associations
attached to that name which identify the individual."
Brennan's, Inc. v. Brennan's Rest., L.L.C., 360 F.3d 125,
131 (2d Cir. 2004); see also Taylor Wine Co. v. Bully Hill
Vineyards, Inc., 569 F.2d 731, 734 (2d Cir. 1978)
(recognizing that courts historically deferred to
individual use of own name in trade). We nevertheless
acknowledge "the unfairness of letting one person trade on
the reputation or the name of another." Brennan's, Inc.,
360 F.3d at 131.
"Guggenheim," however, is not Birnbaum's surname.
Birnbaum presented no evidence below supporting his
assertion that he was, indeed, related to the Guggenheim
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family, and the district court found that "David B.
Guggenheim" and "David Guggenheim" were both aliases .
Birnbaum's bald assertions to the contrary are not
sufficient to render those findings clearly erroneous. Cf.
Shechter v. Comptroller of the City of N.Y., 79 F.3d 265,
270 (2d Cir. 1996) ("[D]efenses which amount to nothing
more than mere conclusions of law . . . have no efficacy."
(quotation omitted)). As we have concluded in the past,
"it would end all protection to trade names, if all one had
to do in order to pirate them, was to change one's own name
to that of one's intended victim, or to one near enough to
his to be no more than a deceptive variant." Societe
Vinicole de Champagne v. Mumm, 143 F.2d 240, 241 (2d Cir.
1944) (per curiam). And, as Birnbaum has "abandon[ed] his
family name, and [chosen] another for his convenience, it
is reasonable to charge him with whatever prejudice to
others that may cause; certainly when, as here, he knows
what that prejudice will be." Id. Hence, we conclude that
his defense of fair use was destined to fail because the
district court found that Birnbaum had not used the mark in
good faith. See EMI, 228 F.3d at 66; see also TCPIP
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Holding Co. v. Haar Commc'ns Inc., 244 F.3d 88, 103-04 (2d
Cir. 2001) (viewing EMI factors as conjunctive and
declining to consider whether finding of bad faith would
have also precluded fair use due to Court's holding that
defendant's use of name was "as a mark").
* * *
We recognize that "the most severe in the spectrum
of sanctions provided by statute or rule must be available
to the district court in appropriate cases." Nat'l Hockey
League, 427 U.S. at 643 (noting both penalization and
general deterrence rationales for severe sanctions). In
this "appropriate" case, the district court did not abuse
its discretion by entering a default judgment against
Birnbaum.
CONCLUSION
For the foregoing reasons, we AFFIRM the judgment
of the district court.
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