Gucci America, Inc. v. Gold Center Jewelry
| Decision Date | 15 July 1998 |
| Docket Number | Nos. 98-7642,98-7726 and 98-7728,98-7644,s. 98-7642 |
| Parties | , 48 U.S.P.Q.2d 1371 GUCCI AMERICA, INCORPORATED, GUESS?, INC., Plaintiffs-Appellants-Cross-Appellees, v. GOLD CENTER JEWELRY, Gold Fortune Jewelry, Empire Jewelry, Gold "N" Ice, Gold Spot Jewelry, Golden Touch Bronx Corp., Manny's Joyeria Jewelry, Oro-uno Jewelry, Inc., Senobar Jewelry, John Does 1-8, Defendants, Home Boy 2000, Defendant-Appellee, Big Time Jewelry, Defendant-Appellee-Cross-Appellant. |
| Court | U.S. Court of Appeals — Second Circuit |
Milton Springut, Kalow, Springut & Bressler, New York City (Robert Tilewick, on the brief), for Appellants.
Bruce H. Lederman, Lederman Abrahams Lederman and Zarett, LLP, Massapequa, NY, for Appellee Home Boy 2000.
Noel W. Hauser, Noel Hauser and Associates, New York City, for Appellee Big Time Jewelry.
Before: CABRANES and REAVLEY, ** Circuit Judges, and COVELLO, *** District Judge.
This is an appeal from a decision of the United States District Court for the Southern District of New York, (Lewis A. Kaplan, Judge ), vacating and reducing the monetary portions of default judgments previously entered against the appellants, Gucci America, Inc. ("Gucci") and Guess?, Inc. ("Guess"). The appellants filed this appeal, arguing that the district court erred in reducing the amount of the original default judgments. The issue to be determined is whether the district court erred in setting aside default judgments based upon the notion that to have defaulted "willfully" for the purposes of our cases interpreting Federal Rule of Civil Procedure 60(b)(1), a defendant must have acted in bad faith. We reverse the decision of the district court and reinstate the original monetary award.
On February 26 and 27, 1997, Gucci and Guess sued the appellees, Home Boy 2000 ("Home Boy") and Big Time Jewelry ("Big Time"), for, inter alia, trademark infringement in violation of the Trademark Act of 1946, 15 U.S.C. § 1051, et seq., as amended by the Anticounterfeiting Protection Act of 1996, Pub.L. No. 104-153. The complaints, which sought both damages and injunctive relief, alleged that Home Boy and Big Time were selling counterfeits of Gucci and Guess name brand products. Home Boy and Big Time failed to answer the complaints and, on May 6, 1997, the district court entered default judgments against them. In those default judgments, the district court granted the injunctive relief sought in the appellants' complaints and retained jurisdiction over the cases for the purpose of calculating damages.
On September 17, 1997, Gucci and Guess filed their joint memorandum in support of an award of damages against the defaulting defendants. The memorandum indicated that Guess sought $25,000 in statutory damages from Home Boy and that each of the appellants sought $25,000 in statutory damages from Big Time. 1 Home Boy and Big Time received copies of the plaintiffs' memorandum, but failed to file a response.
Amirianfar was concededly served with the application for the entry of $25,000 judgments against Home Boy and ignored it. As a legal matter, he was on notice of the relief sought against him. Having considered [Amirianfar's] demeanor and all of the evidence in the case, however, the Court is not persuaded that his failure to respond to that application was the product of bad faith. And while it was deliberate in the sense that Amirianfar made a conscious decision to pay no attention to it and not to seek legal advice, the Court is satisfied that this was more a product of stupidity than of malice.
Id. at 409 (emphasis added). The district court thereafter vacated the monetary portion of the judgment against Home Boy and permitted it to file a memorandum on the issue of the amount of damages to be awarded.
In an opinion dated March 13, 1998, the district court concluded, after consideration of Home Boy's opposition, that the amount of damages to be awarded against Home Boy should be ten percent of its yearly profits. The court found Home Boy's yearly profits to be approximately $45,000 and, therefore, awarded damages against that defendant in the amount of $4,500. In addition, the court awarded attorney's fees in the amount of $3,500, for a total amended damages award against Home Boy of $8,000. See Guess, Inc. v. Gold Center Jewelry, 997 F.Supp. 409, 412 (S.D.N.Y.1998).
With respect to Big Time, the court noted, in its January 29, 1998 opinion, that Big Time "acknowledge[d] that its default with respect to the complaint was knowing and deliberate." Gucci America, Inc., 997 F.Supp. at 405. The district court also indicated that Big Time "[did] not deny having been served with plaintiffs' joint application for the imposition of statutory damages of $25,000 per trademark." Id. Nonetheless, the district court decided to grant Big Time a hearing on the issue of whether its failure to respond to the application for statutory damages was excusable.
On March 23, 1998, the district court held a hearing on Big Time's application to vacate the monetary portion of the judgments against it. At the hearing, Behzad Zarrin ("Zarrin"), the owner of Big Time, testified that he had received a copy of the complaint and that he had contacted an attorney shortly thereafter. He further testified that he was aware that his company was being sued, that he received the plaintiffs' brief on damages and that he was aware that the plaintiffs sought an award of damages. The court concluded that
the question of whether the default with respect to monetary relief here was willful is a very close one, certainly in the sense On the other hand, I am not entirely persuaded that he acted in bad faith at that point.... [T]he notion that [Zarrin] advances--namely, that there was not really going to be a problem here as long as he was not selling counterfeit goods and that he stopped [selling them]--is not manifestly unreasonable on its face. So I think, as I say, it is a very close call.
that Mr. Zarrin knew that relief was being sought against him of a monetary nature and deliberately decided not to contest it. It was willful in that sense.
The court vacated the monetary portion of the judgments against Big Time and set a briefing schedule with respect to the issue of the amount of damages to be awarded. On April 10, 1998, after consideration of the parties' briefs, the district court entered an order amending the amended judgments with respect to Big Time, to provide that each of the plaintiffs would recover monetary damages from Big Time in the amount of $7,500, which included $1,250 in attorneys' fees.
On May 6, 1998, Gucci and Guess filed this appeal, arguing that the district court erred in amending the monetary portions of the judgments. Big Time filed a cross appeal, arguing that the district court should have vacated the default judgments entered against Big Time in their entirety.
We reverse the order amending the amount of the judgments and remand to the district court for reinstatement of the original monetary awards against Home Boy and Big Time. The cross-appeal is dismissed.
"A 'district court's grant or denial of relief under Rule 60(b), unless rooted in an error or law, may be reversed only for abuse of discretion.' " DeWeerth v. Baldinger, 38 F.3d 1266, 1272 (2d Cir.1994) (quoting Twelve John Does v. District of Columbia, 841 F.2d 1133, 1138 (D.C.Cir.1988)). We conclude that the decision here involved an error of law.
Federal Rule of Civil Procedure 60(b)(1) provides, in relevant part, as follows:
(b) Mistakes; Inadvertence; Excusable Neglect; ... On motion and upon such terms as are just, the court may relieve a party or a party's legal...
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