E. & J. Gallo Winery v. Cantine Rallo, S.P.A.

• Decision Date: 17 August 2005
• Docket Number: No. 1:04-CV-5153 OWW DLB.,1:04-CV-5153 OWW DLB.
• Citation: 430 F.Supp.2d 1064
• Court: U.S. District Court — Eastern District of California
• Parties: E. & J. GALLO WINERY, Plaintiff, v. CANTINE RALLO, S.P.A., Defendant.

430 F.Supp.2d 1064

E. & J. GALLO WINERY, Plaintiff, v. CANTINE RALLO, S.P.A., Defendant.

No. 1:04-CV-5153 OWW DLB.

United States District Court, E.D. California.

August 17, 2005.

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Kathyleen A. O'Brien, Esq. Morrison & Foerster LLP, Los Angeles, CA, D. Greg Durbin, Esq., McCormick, Barstow, Sheppard, Wayte & Carruth, Fresno, CA, Brian McCracken Daucher, Esq., Sheppad Mullin Richter & Hampton LLP, Century City, CA, for Plaintiff.

Ellen McGinty King, Esq. White and Case, Palo Alto, CA, Jacqueline M. Lesser, Esq., White and Case, New York City, for Defendant.

ORDER RE: REQUEST FOR RECONSIDERATION OF MAGISTRATE JUDGE'S RULING, PURSUANT TO LOCAL RULE 72-303(c) and 28 U.S.C. § 636(b)(1)(A)

WANGER, District Judge.

I. INTRODUCTION

E. & J. Gallo Winery ("Plaintiff" or "E & J Gallo") filed a complaint for trademark infringement in this court on January 22, 2004. Doc. 1. After the summons and complaint were allegedly served upon Cantine Rallo ("Defendant") by service on January 28, 2004, on a designated representative under 15 U.S.C. § 1051(e), default was entered on March 19, 2004. See Doc. 6. The district court granted Plaintiff's proposed judgment of permanent injunction on March 24, 2004. Doc. 7. On July 12, 2004, Defendant moved to vacate the default judgment. See Does. 8-11. Magistrate Judge Dennis L. Beck issued Findings and Recommendations ("F & R"), recommending that the motion to vacate be granted on the grounds that the judgment was void because service was improper. Magistrate Judge Beck rejected Defendant's alternative argument that default should be set aside for excusable neglect under Federal Rule of Civil Procedure 60(b)(1). See Doc. 36, filed Sept 22.2004.

Plaintiff timely objected to the F & R and seeks review in the district court. Doc. 36, filed Sept. 22, 2004. Defendant opposes Plaintiff's objections, Doc. 39, filed Oct. 13, 2004, and moves for "conditional reconsideration" of the part of the F & R concerning Rule 60(b)(1), Doc. 34, filed Sept. 22, 2004.

II. FACTUAL BACKGROUND

Cantine Rallo has been producing Marsala wine since 1860 and has been selling wine in the United States for more than fifty years. Doc. 11, Declaration of Francesco Vesco, at ¶ 1-2. In 1962, Rallo obtained a trademark for the mark Rallo and associated design. Doc. 39 at 1.

Rallo allowed its trademark to lapse, however, and again applied to register the mark in 2001. Id. Rallo engaged an Italian patent and trademark agent, Luciana Perrotta, to pursue the renewal of their trademark. Doc. 31, Ex. A, Deposition of John Egbert, at 8.¹ Perrotta, in turn, maintained a business relationship with John Egbert, a Houston attorney specializing in patent and trademark litigation. Perrotta retained Egbert to help with the registration of the Rallo trademark. Id. at 17.

Egbert, acting upon Perrotta's instructions, filed an application with the Patent and Trademark Office (PTO) to register the Rallo trademark. See Id. at 34-35. As part of the application process, in accordance with PTO regulations and Egbert's regular.practice, Egbert designated himself the "domestic representative" for service of process pursuant to 15 U.S.C. § 1051(e). Id. at 23-24. Egbert assumed the status of domestic representative in March 2001. Id. at 37. The PTO approved Rallo's application on December 30, 2002. See Doc. 39 at 1.

On October 29, 2003, E & J Gallo initiated a proceeding before the PTO to oppose Rallo's trademark application. Egbert Depo., at 39-40. E & J Gallo served the administrative opposition on Egbert. Id. Egbert, in turn, provided a copy of the relevant documents to Perrotta. Id. 40. Egbert asserts that, along with copies of the documents, it was his normal practice to send a communication to his client (in this case, Perrotta) indicating that an answer would be due in the near future. Id. at 40. With respect to these documents, and every other filing received by Egbert concerning the Rallo trademark, Egbert simply sent copies of documents and communications directly to Perrotta. Egbert had no way of knowing when, whether, or in what form those documents were passed along to Rallo. Id. 40. Perrotta then instructed Egbert to respond to E & J Gallo's administrative opposition. Egbert complied with this request. Id. at 43.

On January 23, 2004, Egbert received a letter from E & J Gallo warning Rallo of the strength of the E & J Gallo mark and demanding that Rallo cease and desist using the Rallo mark. Id. at 44. Again, Egbert asserts that his normal practice would have been to forward this letter directly to Perrotta.²

While the administrative opposition proceeding was pending, E & J Gallo filed this action ("the district court complaint"). In the district court complaint, E & J Gallo alleges, among other things, that Rallo's use of its trademark infringes upon trademarks belonging to E & J Gallo, in violation of federal statute and state law. Doc. 1. Egbert was served a copy of the district court complaint on January 28, 2004. Egbert Depo., at 56.³ Although Egbert did not believe he was the proper person to be served with the district court complaint, he nevertheless forwarded it on to Perrotta. Id. at 59. Neither Perrotta nor Rallo ever advised Egbert to take any action with respect to the district court complaint. On March 11, 2004, Egbert sent Perrotta an opinion letter concerning the possibility default judgment could be entered in the district court case. Id. at 69.

Egbert then received from E & J Gallo a petition to suspend proceedings in the trademark application proceeding because of the pending district court case. Id. at 69-70. This was also forwarded to Perrotta. Id. at 71.

On March 1, 2004, E & J Gallo served a second cease and desist letter addressed to Rallo upon Egbert. This letter warned of E & G Gallo's intent to seek entry of default in the district court case. Doc. 18, Declaration of Matthew A. Berliner, Ex. D. Eghert again sent this document to Perrotta. However, Egbert acknowledges that, at this time, his communications with Perrotta were "very sketchy and distant and far between and uninformative." Egbert Depo., at 81. Egbert speculates that Rallo might have "severed their relationship with Perrotta during this time." Id. This was only supposition, however, as Rallo never gave Egbert any direct notification that Perrotta was no longer representing Rallo. Again, Rallo never sent Egbert any instructions to take action with respect to the district court case or the March 1 cease and desist letter.

On March 16, 2004, E & J requested entry of default and default judgment. Doc. 5. The relevant documents were served on Egbert, who transmitted them to Perrotta. Egbert Depo., at 63. Egbert never received a response from Perrotta, nor did he ever have a conversation with Perrotta about the subject.

Default was entered on March 19, 2004, and default judgment granted on March 24. Docs. 6 & 7. Egbert forwarded documents reflecting these actions to Perrotta. Egbert Depo., at 101-102.

Rallo acknowledges receipt of a copy of the Summons and Complaint but claims that Egbert never informed it that this was a separate proceeding that required a separate response. Vesco Decl., at ¶ 4-5. Rallo claims to have first become aware of the default judgment when one of its United States distributors, Distillerie Stock, contacted Rallo and informed it of the permanent injunction. Id.

In early April 2004, Egbert received a copy of E & J Gallo's motion for summary judgment in the administrative proceeding before the PTO. Egbert Depo. at 93-94. Presumably, this motion was based on the entry of default judgment and permanent injunction in the district court case. Egbert again sent these documents to Perrotta, but received no response or instructions regarding the administrative proceeding. Id. at 95.

On April 19 2004, Sergio Ardito, who represented himself as a translator for Rallo, contacted Egbert to inquire about finding counsel to represent Rallo in the Eastern District of California. Id. at 63. Egbert sent a letter in response the same day, suggesting two law firms in the Fresno area. Egbert Depo., Ex. B.

Rallo retained Jonathan Moskin of White & Case in New York to represent it in the district court matter. On July 1, 2004, Moskin sent a letter to E & J Gallo acknowledging the entry of judgment by default and seeking an informal resolution to the matter (presumably in the form of a stipulation to set aside default) "without the need for protracted proceedings." Doc. 10., Declaration of Jonathan Moskin, Ex. E. This request was, obviously, not successful, and Rallo filed its motion to set aside the default judgment on July 12, 2004. Doc. 8.

Apparently, Rallo also failed to timely file a response to E & J Gallo's motion for summary judgment in the administrative proceeding, and the motion was granted without opposition. On July 16, 2004, Rallo moved the Trademark Trial and Appeal Board ("TTAB") for relief from this ruling. Rallo submitted a copy of the Magistrate Judges' F & R setting aside the default in the district court case and urged the administrative tribunal to do the same. See Doc. 46. E & J Gallo objected that the F & R was not a final order and that the matter was still pending. On December 27, 2004, the TTAB issued an order permitting Rallo to clarify the status of the pending civil case. Rallo failed to respond to this order. On March 17, 2005, the TTAB denied Rallo's motion for relief from judgment. E & J Gallo filed a copy of the TTAB's decision with the district court On April 14, 2005, Doc. 45, and served a copy of such on Rallo's counsel, Doc. 46. This was, apparently, the first Rallo's counsel had heard of the TTAB's December 27, 2004 order or of the denial of its motion for relief from judgment. See Doc. 52, filed Apr. 22, 2005. Rallo promptly moved to have its motion for relief from judgment reinstated on the grounds that its...