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Guggenheim Imposter Loses Default Appeal

The Second Circuit Court of Appeals in New York affirmed a default judgment against a defendant who used the famous Guggenheim family name for his own personal benefit.  Guggenheim Capital LLC v. Birnbaum, Case No. 11-3276-cv (2nd Cir. July 15, 2013) (available here).  Birnbaum solicited investors by representing himself as “David Guggenheim.”  Plaintiff Guggenheim Capital owns the rights and licenses to registered trademarks bearing the “Guggenheim” name.  Guggenheim sued Birnbaum for trademark infringement but Birnbaum never answered the complaint.  Birnbaum also failed to comply with the lower court’s discovery orders, disrupted his own deposition, and violated a preliminary injunction twice.  The trial court entered a default judgment against Birnbaum and he appealed. On appeal, the Second Circuit Court affirmed the default judgment.

Guggenheim is affiliated with the famous Guggenheim family and provides global investment services.  Guggenheim owns the common law rights and the registered trademarks for various “Guggenheim” marks, and licenses them to co-Plaintiff Guggenheim Partners, LLC (“Partners”).  Birnbaum has sought investors for investment opportunities since the 1970s by presenting himself as “David Guggenheim” but provided no evidence that he was related to the Guggenheim family,  Birnbaum also used counterfeit marks similar to Guggenheim’s famous marks.

On appeal, Birnbaum argued that the lower court abused its discretion by granting the default judgment against him.  First, the Second Circuit determined that the default judgment was a final judgment in the lower action, noting that the Plaintiffs had not pursued any action in the case since the default judgment, and that both parties agreed that the default judgment was a final judgment on the merits.  Second, the Second Circuit found that under Federal Rule of Civil Procedure 37, the lower court did not abuse its discretion by entering the default judgment.  Rule 37 states “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).  “The [lower] 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.”  Guggenheim Capital, Slip Op. P. 17.  Birnbaum’s behavior was willful, and the Second Circuit found that the lower court’s warnings to Birnbaum were sufficient.

Birnbaum then argued that the lower court abused its discretion (1) by denying him civil counsel for a 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.  The Second Circuit found that (a) Birnbaum was represented for most of the lower court proceedings and was not entitled to an attorney, since the case was a civil one and not criminal; (b) the lower court did not bar Birnbaum from asserting the Fifth Amendment right against self-incrimination, it simply stated that he would have to cite case law justifying invoking the privilege; and (c) Birnbaum was not substantially prejudiced by the denial of the stay.

The Second Circuit concluded that the default judgment against Birnbaum was also proper under Federal Rule of Civil Procedure 55, which states that a party defaults when he “has failed to plead or otherwise defend” the case at hand.  Fed. R. Civ. P. 55(a).  The Second Circuit noted that Birnbaum’s failure to plead or defend himself in the case was willful and therefore there was no good cause supporting Birnbaum’s actions.  As a result, the default judgment was proper.
Birnbaum alleged that his use of the Guggenheim name was fair use and that the lower court erred in not specifically addressing this defense.  However, the Second Circuit held that even if the lower court erred, Birnbaum had clearly failed to satisfy the elements of the fair use defense.  Birnbaum would have to show that his use of the Guggenheim name was not “use as a mark,” that his use of the mark was descriptive, and that his use was in good faith.  Birnbaum used counterfeit marks to solicit investors, and he offered services that were nearly identical to those offered by Guggenheim. Therefore, Birnbaum did not act in good faith.  Further, Birnbaum offered no evidence that he was related to the Guggenheim family.  As a result, the Second Circuit affirmed the default judgment.

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