When Chevron U.S.A. filed a federal trademark infringement lawsuit in 2018 against a company led by a former Pittsburgh Steeler, the oil and gas giant wasn’t sure what it would find on the other side of the litigation.
What was uncovered helped Chevron secure a $15.6 million judgment last week, but not before the case took a few crazy detours: threats by the court to involve the U.S. Marshal service, a bankruptcy proceeding that revealed potentially sanctionable actions and a company laptop containing discoverable information allegedly stolen in the parking lot of a ‘breastaurant.’
And even though the case resulted in an internal investigation, six discovery-related hearings, two summary judgment rulings and a jury trial, Chevron and its lawyers at King & Spalding are still scratching their heads.
“In my view they really did have something to hide,” Chevron’s lead attorney, Craig Stanfield, said of the defendants. “We probably still don’t know everything. We seemingly couldn’t get anything without the act of the court — and them fighting — to get it.”
Evidently, U.S. District Judge David Hittner of the Southern District of Texas agreed with Chevron last week, when he increased a Feb. 26 jury award from $1.1 million to a $15.6 million final judgment.
“It is uncertain whether Chevron discovered the full extent of the unlawful, fraudulent scheme giving rise to this litigation, as well as all profits wrongfully obtained by infringement of Chevron’s trademarks,” the judge wrote in a 29-page ruling. “The unnecessarily prolonged course of discovery … plus the trial defendants’ arguments and positions taken in the case, demonstrate exceptionality in this case.”
But trademark infringement was the least of it. Chevron alleged that Houston-based Sariel Petroleum and a group of individual defendants had been involved in a brazen scheme to dupe third parties into entering contracts with them by using fake Chevron letterheads, logos, email addresses, domain names and even bank accounts bearing the globally recognized Chevron name.
The group was led by Arael Doolittle, an owner of Sariel who Stanfield said was a right-tackle for the Pittsburgh Steelers in the mid-1980s. Other defendants included fellow Sariel owners Tracy Martinez and Bryan Martinez, as well as Alvin Diaz, Arnold Salinas, Ken Watson, Rodney Shank and Michael Szucs, all of whom described themselves as “consultants” for Sariel.
Other than Salinas, Stanfield said none of the defendants had a background in oil and gas before partaking in the Sariel scheme. He said Doolittle testified that he learned the ins and outs of the industry from the late Houston Oilers owner Bud Adams through their NFL connection, but Stanfield “is not sure that is accurate.”
Chevron also sued Sariel Enterprises, an affiliated company formed in 2017 by Houston lawyer Jason B. Ostrom, who also served as the company’s registered agent.
Chevron filed its lawsuit in 2018 after being approached by Houston-based Twin Eagle, a wholesale energy and midstream services company that was questioning the authenticity of a suspicious letter it had received on a Chevron letterhead, court documents show.
Twin Eagle received the letter because it was a potential business partner with Canada-based Avalant International Limited, which had entered a joint venture with Sariel Petroleum to ship rail cars loaded with fuel to Avalant customers in Mexico. Avalant had deposited $1.2 million into a joint bank account with Sariel, in exchange for which Sariel said it would provide Chevron petroleum products through its relationship with the company.
Dated Sept. 5, 2017, the letter was designed to confirm an existing business correspondence with Chevron and was signed by a Chevron “distillates trader” named Leny Rodriguez. Upon receiving the letter, Chevron conducted an internal investigation and discovered nobody named Leny Rodriguez was currently employed with the company.
Chevron also discovered more questionable correspondence sent under Chevron’s letterhead. A different letter was signed by defendant Diaz claiming to be a “distillates trader.” Diaz was also communicating with Avalant under a chevronus.com email address.
Later speaking on behalf of Chevron, the defendants told Avalant they could not meet the shipment due to Hurricane Harvey.
Chevron also discovered that the defendants had opened bank accounts at Wells Fargo and BBVA Compass using the name “Chevron USA Products.”
Later in the litigation, Chevron discovered more companies Sariel had been in contact with, though not before going through a hellacious discovery battle.
Sixth time’s the charm
Because of what Chevron regarded as bad-faith tactics to avoid the production of documents, Stanfield said the court had to conduct six hearings and issue eight discovery-related orders. Documents were destroyed. Depositions were delayed by more than a year. Facts were misrepresented — even perjured, according to Stanfield.
At the fourth discovery hearing in December 2018, Doolittle told the court that he could not comply to a previous order to image electronic devices used for Sariel business because his company laptop had been stolen in the parking lot of a Twin Peaks restaurant, a ‘breastaurant’ chain similar to Hooters.
In court filings Chevron questioned the credibility of Doolittle’s story, noting that he did not file a police report or take pictures of the vehicle the laptop allegedly was stolen from, and that claims by Doolittle that he reported the theft to the Twin Peaks manager were not substantiated by the restaurant.
Eventually, a little headway was made last spring after U.S. Magistrate Judge Peter Bray, who presided over every discovery hearing, ordered the defendants and their lawyers to choose deposition dates on the record.
But on the eve of those depositions, Sariel filed for bankruptcy, delaying matters in the case.
Stanfield said the bankruptcy ended up working to Chevron’s advantage because it “broke open” much of the discovery his side was seeking. After gaining cooperation with the trustee, Chevron’s legal team obtained thousands of documents that the company said should have been produced months earlier.
One of those documents was a January 2018 email in which Diaz’s lawyer, Marcellous McZeal, laid out a defense strategy to Diaz and Doolittle in which he and his co-counsel, Dwight Jefferson, would be “fighting to preclude your sworn testimony.”
Stanfield said Chevron eventually deposed the defendants in June and July in 2019, but only after Judge Bray threatened to send the U.S. Marshals after them if they failed to show up. Before the depositions were taken, McZeal and Jefferson moved to withdraw from the case, but the court denied it.
‘Chevronus’
By the time the case went to trial in February, the only defendants remaining before the jury were Doolittle, Diaz and Sariel Petroleum. The sister entity, Sariel Enterprises, as well as Szucs and Watson, never appeared in the case, so Judge Hittner entered a default judgment against them.
Chevron voluntarily dismissed Salinas, Shank, Bryan Martinez and Tracy Martinez. On summary judgment, Judge Hittner granted Chevron’s trademark infringement, unfair competition and trademark dilution claims against Diaz, Doolittle and Sariel Petroleum.
The issues that remained before the jury were disgorged profits, enhanced damages and willfulness.
Stanfield said the key moment at trial was when Doolittle testified. He was Chevron’s first witness and was on the stand for five or six hours.
When Stanfield asked about the chevronus.com domain name – which Chevron claimed was bought to perpetrate the scheme – Doolittle answered that it did not refer to Chevron, but “chevronous” – which he pronounced before the jury as “sha-vrown-us.”
And when another Chevron lawyer, Christie Cardon, asked Doolittle whether he disputed that he opened a fake bank account with Wells Fargo, he replied it wasn’t fake.
Stanfield said even the judge interjected at that point: “You mean it was legitimate?”
“Well they let me open it,” Doolittle replied.
Stanfield said he never had to confront a witness with their previous testimony as often as he did with Doolittle.
“By the time he got off the stand, I think the jury understood exactly what was going on,” Stanfield said. “I think he was probably our most important witness.”
Although Chevron asked jurors to award $3 million in disgorged profits, they scaled it down to $1.1 million in their Feb. 26 verdict. The jury deadlocked on enhanced damages, but determined that Sariel Petroleum, Doolittle and Diaz each infringed Chevron’s trademarks maliciously, fraudulently, deliberately and willfully.
Both Jefferson and McZeal considered the verdict a win at the time.
Jefferson did not respond to interview requests for this story, but in a Feb. 28 press release issued by his law firm, Coats Rose, Jefferson called the verdict “good” for his client.
“Faced with the liability findings made by the court pre-trial, and the finding of willfulness at trial, the jury’s award of only a small fraction of the disgorgement of profits sought, is significant,” said Jefferson, a former Harris County district judge who represented Sariel and Doolittle at trial.
McZeal, who represented Diaz, told The Texas Lawbook that although “no client is pleased with million-dollar jury verdicts,” Diaz was pleased “in light of the overwhelming odds.
“The court of course entered judgment reflective of its discretion for how the case should resolve itself and that’s where we are … I accept the court’s ruling,” said McZeal, a partner at Grealish McZeal in Houston.
‘Joint tortfeasors’
Although the jury deadlocked on enhanced damages and fell $2 million short in Chevron’s request for disgorged profits, Judge Hittner made up for it in last week’s findings of facts and conclusions of law.
He first boosted the $1.1 million in disgorged profits to $3.2 million based on “competent evidence” put on by Chevron. But after doing so, he mused that $3.2 million “would not result in a just remedy.”
He reasoned that since the jury still found that the defendants had maliciously, willfully, fraudulently and deliberately infringed on Chevron’s trademarks, enhanced disgorged profits were warranted. He tripled the figure to $9.6 million under the Lanham Act.
He pointed to the defendants’ conduct as another reason for enhanced damages, citing their “consistent failures to meaningfully participate in the litigation … for example, failing to timely and adequately engage in required discovery [and] necessitating six discovery-related hearings before the magistrate judge.”
Judge Hittner ruled that the defaulting defendants — Sariel Enterprises, Szucs and Watson — and the trial defendants — Diaz, Doolittle and Sariel Petroleum — are jointly and severally liable “as joint tortfeasors” to Chevron for the $9.6 million.
He also hit each defaulting defendant with $2 million for willful trademark counterfeiting, bringing the total award to $15.6 million. And, he ruled that the amount is not dischargeable in a bankruptcy proceeding.
Judge Hittner also permanently enjoined the defendants from infringing on Chevron’s trademarks, accessing any bank account under the name “Chevron USA Products,” using the chevronus.com domain name or misrepresenting products that are not associated with Chevron.
Due to the extraordinary nature of the case, the judge also awarded attorneys’ fees. Stanfield said he will file the application next.
After what Chevron had uncovered from the bankruptcy trustee, it filed a motion for sanctions against the defendants and their attorneys. Judge Hittner denied the motion at the time but left them the option to renew the motion after his findings of fact. If Chevron decides to refile its motion for sanctions, Judge Hittner said in his order that he would allow Jefferson and McZeal to re-plead their motions to withdraw.
In addition to Stanfield and Cardon, the King & Spalding trial team also included Abby Parsons, Kathleen McCarthy and Bruce Hurley. Chevron senior counsel David Clark also played an important role at trial.