Ahava (Usa), Inc. v. J.W.G., Ltd.

• Decision Date: 09 October 2003
• Docket Number: No. 03 CIV. 653.,03 CIV. 653.
• Citation: 286 F.Supp.2d 321
• Parties: AHAVA (USA), INC., Plaintiff, v. J.W.G., LTD. Defendant.
• Court: U.S. District Court — Southern District of New York

286 F.Supp.2d 321

AHAVA (USA), INC., Plaintiff, v. J.W.G., LTD. Defendant.

No. 03 CIV. 653.

United States District Court, S.D. New York.

October 9, 2003.

Marc P. Misthal, Gottlieb, Rackman & Reisman, New York, NY, for Ahava.

Ralph Fucetola, Newton, NJ, for JWG, Ltd.

DECISION AND ORDER

MARRERO, District Judge.

By order dated June 19, 2003, the Court granted plaintiff Ahava (USA), Inc. ("Ahava") a default judgment (the "Judgment") against defendant J.W.G., Ltd. ("JWG"). In a Proposed Findings of Fact and Conclusions of Law Regarding Damages (the "Motion"), Ahava moved for damages, attorney's fees and costs against JWG, and submitted the declaration (the "Declaration") of Marc P. Misthal, an attorney for Ahava, in support. For the reasons set forth below, the Court finds JWG liable to Ahava in the amount of $57,488.34, and directs entry of judgment against it in that amount.

I. BACKGROUND

Ahava sells certain health and beauty care products (the "Products") manufactured by Dead Sea Laboratories, Ltd. ("DSL") in Israel under the trademarked brand name AHAVA. Since August of 1991, Ahava has been the only authorized distributor of the Products in the United States and has entered into two exclusive American distribution agreements with DSL, one in 1994 and the other in 2002. As a result, on January 9, 2003, DSL assigned the registered U.S. trademark for the Products (the "Trademark") to Ahava.

After an evidentiary hearing held before the Court on February 28, 2003 and a subsequent Decision and Order, dated March 17, 2003,¹ that outlined the Court's findings, reasoning and conclusions, Ahava moved for default judgment against JWG. In the Judgment, the Court found that JWG was selling the Products to American consumers through its website, www.judaicawebstore.com (the "Website"), in violation of certain federal and state laws. The Judgment decreed, inter alia, that JWG was permanently enjoined from selling the Products through the Website to consumers in the United States. In a letter dated July 8, 2003 (the "Letter"), JWG denied having submitted to the jurisdiction of this Court and indicated its intention to continue selling the Products to American consumers in violation of the Judgment. Because the Letter clearly raised the possibility that the permanent injunction ordered in the Judgment was being and would continue to be violated, the Court called for the parties to appear before the Court on Friday, August 1, 2003 for an evidentiary hearing (the "Hearing") to determine whether JWG was violating any of the terms of the Judgment. The Court also ordered JWG to show cause by August 1, 2003 why Ahava's motion to hold JWG in contempt of Court should not be granted.

JWG did not attend the Hearing, but Ahava did and presented further evidence that JWG was continuing to violate the terms of the Judgment. At the close of the Hearing, the Court agreed to consider a subsequent motion and proposed relief by Ahava to find JWG in contempt of court. In a letter dated August 6, 2003, Ahava enclosed a proposed contempt order (the "Proposed Order") requiring that JWG cease any activities barred by the Judgment within ten days of the Court entering the Proposed Order, and that JWG remit to Ahava its gross profits earned from the sale of the Products to customers in the United States and pay Ahava's attorneys' fees and costs incurred in connection with the motion for contempt. The Proposed Order further requested that a fine of $1,000 per day be imposed upon JWG if JWG did not cease conducting the barred activities. On August 18, 2003, the Court granted the Proposed Order.

On September 5, 2003, Ahava submitted the Motion requesting an order requiring JWG to pay Ahava $297,488.34 in monetary damages, attorneys' fees and costs. The Court considers the Motion below.

II. DISCUSSION

A. STANDARD FOR DEFAULT JUDGMENT DAMAGES

When the Court enters a default judgment, it must "accept[] as true all of the factual allegations of the complaint," Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir.1981), but "the amount of damages are not deemed true." Credit Lyonnais Securities (USA) v. Alcantara, 183 F.3d 151, 152 (2d Cir.1999). The Court must "conduct an inquiry in order to ascertain the amount of damages with reasonable certainty." Id. This inquiry "involves two tasks: determining the proper rule for calculating damages on such a claim, and assessing plaintiff's evidence supporting the damages to be determined under this rule." Id. In calculating damages, the Court "need not agree that the alleged facts constitute a valid cause of action." Au Bon Pain, 653 F.2d at 65.

Accordingly, the Court will consider to what extent Plaintiffs, via the Motion and the Declaration, have demonstrated "with reasonable certainty" that they are legally entitled to damages. The Court has wide discretion in this regard. See Sony Corp. v. Elm State Elecs., Inc., 800 F.2d 317, 321 (2d Cir.1986) (reviewing default damages for abuse of discretion).

B. PLAINTIFFS' ALLEGED DAMAGES

Ahava first requests damages from JWG, alleging that JWG's sales of the Products have been willful and have not ceased despite this Court's various orders. Section 35 of the Lanham Act (the "Act"), 15 U.S.C. § 1117, permits prevailing plaintiffs to recover defendant's profits, any damages sustained by the plaintiff, and costs of the action. See George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir.1992). There are "three categorically distinct rationales" for awarding profits under the Lanham Act: "(1) the defendant is unjustly enriched; (2) the plaintiff sustained damages from the infringement; or (3) the award of profits is necessary to deter a willful infringer from doing so again." Gidatex, S.r.L. v. Campaniello Imports, Ltd., 82 F.Supp.2d 136, 141 (S.D.N.Y.2000) (citing Basch, 968 F.2d at 1537). Under each of these rationales, "a plaintiff must prove that an infringer acted with willful deception." Id. (quoting Basch, 968 F.2d at 1540).

Ahava contends that it is owed an award of JWG's profits from the unauthorized sale of the Products in order to deter JWG's willful infringement of the Trademark. The Court has determined that JWG's conduct and infringement has been willful, given that, among other things, JWG has expressed in the Letter its refusal to abide by the Court's orders to refrain from continued infringement.

However, the only evidence Ahava presents to demonstrate the amount of sales JWG made of the Products is a newspaper article from the Jewish Forward, dated March 14, 2003, which states, in an interview with JWG's President Arik Bar-El, that JWG "sells $30,000 [of the Products] worldwide every month." ("Judge Bars Web Site's Sales of Dead Sea Balms," attached as Exhibit D to Declaration) (emphasis added). The complaint Ahava filed in this action, and the Court's rulings on the matter until this date, have considered only JWG's sales to American consumers. The number cited in the Jewish Forward article provides no breakdown between American consumers and foreign consumers, and thus the Court concludes that Ahava has not demonstrated this measure...