Ringcentral Inc. v. Quimby

• Decision Date: 18 April 2011
• Docket Number: No. C 09–2693 RS.,C 09–2693 RS.
• Citation: 781 F.Supp.2d 1007
• Parties: RINGCENTRAL, INC., Plaintiff,v.Bill QUIMBY, et al., Defendants.
• Court: U.S. District Court — Northern District of California

781 F.Supp.2d 1007

RINGCENTRAL, INC., Plaintiff,

v.Bill QUIMBY, et al., Defendants.

No. C 09–2693 RS.

United States District Court, N.D. California,San Francisco Division.

April 18, 2011.

Aaron K. McClellan, James Francis Monagle, Peter Lee Weber, Murphy Pearson Bradley & Feeney, San Francisco, CA, for Plaintiff.Bill Quimby, Salt Point, NY, pro se.TollFreenumbers.Com, Inc., Salt Point, NY, pro se.

ORDER GRANTING MOTION TO VACATE DEFAULT JUDGMENT AND SET ASIDE DEFAULT

RICHARD SEEBORG, District Judge.

I. INTRODUCTION

Plaintiff RingCentral, Inc. obtained a default judgment of $432,888.29 against TollFreeNumbers.Com, Inc. and its principal, Bill Quimby, representing $200,000 in statutory penalties for each of two Lanham Act violations, plus attorney fees and costs. Defendants now move to vacate the default judgment and to set aside the underlying entry of default. In light of defendants' showing that their failure to respond to the complaint did not reflect a bad faith attempt to manipulate the legal process, and given a serious question as to whether imposition of the full statutory penalties would be warranted outside the default context, the motion will be granted.

II. BACKGROUND

RingCentral alleged, and for purposes of entering default judgment established, that it owns the marks “RingCentral” (“the Mark”) and “1800RingCentral” (“the 800 Mark”), both of which are registered with the U.S. Patent and Trademark Office. It turns out that the original registration of the Mark, dating to 1994, was cancelled in 2006, as a result of RingCentral's failure to file appropriate documentation with the PTO. RingCentral, however, re-registered the Mark in 2007, and that registration remains in effect. Moreover, although the original registration had been cancelled several years before this action was filed, it was in effect in 2003, when defendants registered the domain names www. 800 ring central. com and www. 1800 ring central. com.

RingCentral alleged that defendants used the www. 800 ring central. com and www. 1800 ring central. com domains to divert potential customers to their own website at www. tollfree numbers. com. In adopting the magistrate judge's Report and Recommendation to enter default judgment, the Court found that defendants had thereby infringed the Mark,¹ subjecting them to liability for statutory damages under the Lanham Act.

Defendants contend that, contrary to the allegations of the complaint, they are not direct competitors to RingCentral. Defendants assert that their sole business is assisting customers in locating and obtaining toll free “vanity” telephone numbers, which “spell[ ] out a word identifying the name of, or the goods or services provided by, the holder[s] of the number[s].” Defendants do not provide any “telecommunications services,” and instead refer their customers to other entities, including RingCentral, for such services. Defendants claim that the sole reason they registered the www. 800 ring central. com and www. 1800 ring central. com domains in the first instance was to further the business relationship they then believed they were developing with RingCentral under its “Affiliate program.” According to defendants, they never actually used the domains for any purpose, and did not forward any site visitors to their own website.

When defendants were served with summons and complaint in this action, Quimby sent a letter to the Court, on TollFreeNumbers.Com letterhead, that began with the sentence, “I, Bill Quimby, am responding to the law suit of RingCentral vs Bill Quimby and TollFreeNumbers.com (Case CV 09 2693).” The letter asserted that this action was frivolous, and demanded that RingCentral be required, as a symbolic gesture, to reimburse 88 cents in postage costs. Under Quimby's signature on the letter, the words “Bill Quimby, President of TollFreeNumbers.com” are typed.

The letter was docketed by the Clerk of the Court as an answer by both Quimby and TollFreeNumbers.com, but as the then-presiding magistrate judge later ruled, could not serve as an appearance by the corporation. When defendants both failed to respond to an order to show cause, their defaults were entered, followed by the default judgment now at issue.

III. DISCUSSION

A. Personal Jurisdiction

Defendants contend first that the judgment should be vacated because they were not subject to personal jurisdiction in this forum. A judgment entered in the absence of personal jurisdiction is void, and a court would lack discretion to decline to set it aside. See Walker & Zanger (West Coast) Ltd. v. Stone Design S.A., 4 F.Supp.2d 931, 934 (C.D.Cal.1997) (“where the court lacked personal jurisdiction over the defendant or the requirements for effective services were not satisfied, the default judgment is void and must be vacated.”). As to TollFreeNumbers.com, however, defendants have presented no facts or legal authority sufficient to call into question the analysis of the Report and Recommendation adopted by the Court that personal jurisdiction is appropriate under the “effects test” of Calder v. Jones, 465 U.S. 783, 788–89, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984).

As to Quimby, defendants argue that the Report and Recommendation “failed to notice” that the letter he sent was on the letterhead of TollFreeNumbers.com and signed in his “sole capacity” as its president. Defendants argue that the letter therefore cannot serve as a general appearance by Quimby individually that would support jurisdiction. The text of the letter, however, does not permit such a fine distinction. As noted, it begins with the sentence, “I, Bill Quimby, am responding ....” That sentence also makes clear that Quimby understood he was an individual defendant to the suit. Throughout the letter, Quimby uses personal, singular pronouns repeatedly. Among other things, Quimby stated, “I am asking they pay me $0.88,” (emphasis added), thereby affirmatively invoking the jurisdiction of the Court. While there is a reference to Quimby's corporate title below his signature, the signature block is not in a form clearly indicating that the corporation is the intended signatory, with the individual signing only on behalf of the entity. Under these circumstances, there is no basis to conclude that Quimby did not make a general appearance as an individual defendant.

B. Good Cause

Rule 55(c) of the Federal Rules of Civil Procedure provides that a court may set aside an entry of default for “good cause shown.” This “good cause” standard also governs vacating a default judgment under Rule 60(b). TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir.2001). A good cause analysis requires consideration of three factors: (1) whether the defendant engaged in culpable conduct that led to the default; (2) whether the defendant had a meritorious defense; and (3) whether reopening the default judgment would prejudice the plaintiff. Id.

Crucially, however, “judgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be decided on the merits.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir.1984); see also Latshaw v. Trainer Wortham & Co., Inc., 452 F.3d 1097, 1103 (9th Cir.2006); TCI Group, 244 F.3d at 695–96. The Ninth Circuit recently emphasized that the “rules for determining when a default should be set aside are solicitous towards movants, especially those whose actions leading to the default were taken without the benefit of legal representation.” U.S. v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1089 (9th Cir.2010). See also TCI Group, 244 F.3d at 695–98.

Here, RingCentral argues that defendants made an intentional, calculated, decision not to respond to the complaint (other than by Quimby's letter) and that they ignored the Court's order to show cause with full awareness of the potential consequences. For their part, defendants do...