Rio Properties, Inc. v. Rio Intern. Interlink

• Decision Date: 20 March 2002
• Docket Number: No. 01-15784.,No. 01-15466.,01-15466.,01-15784.
• Citation: Rio Properties, Inc. v. Rio Intern. Interlink, 284 F.3d 1007 (9th Cir. 2002)
• Parties: RIO PROPERTIES, INC., Plaintiff-Appellee, v. RIO INTERNATIONAL INTERLINK, Defendant-Appellant. Rio Properties, Inc., Plaintiff-Appellee, v. Rio International Interlink, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

284 F.3d 1007

RIO PROPERTIES, INC., Plaintiff-Appellee, v.RIO INTERNATIONAL INTERLINK, Defendant-Appellant.

Rio Properties, Inc., Plaintiff-Appellee, v.Rio International Interlink, Defendant-Appellant.

No. 01-15466.

No. 01-15784.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 17, 2002.

Filed March 20, 2002.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Jerome A. DePalma, Las Vegas, Nevada, for the defendant-appellant.

Steve Morris and Denise Michaelides, Morris Pickering & Sanner, Las Vegas, Nevada, David J. Stewart, Alston & Bird, LLP, Atlanta, Georgia, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Nevada; Philip M. Pro, District Judge, Presiding.D.C. No. CV-99-01653-PMP.

Before: GOODWIN, SNEED, and TROTT, Circuit Judges.

TROTT, Circuit Judge.

Las Vegas hotel and casino operator Rio Properties, Inc.("RIO") sued Rio International Interlink("RII"), a foreign Internet business entity, asserting various statutory and common law trademark infringement claims.The district court entered default judgment against RII for failing to comply with the court's discovery orders.RII now appeals the sufficiency of the service of process, effected via email and regular mail pursuant to Federal Rule of Civil Procedure 4(f)(3), the district court's exercise of personal jurisdiction, and ultimately, the entry of default judgment and the award of attorneys' fees and costs.We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm the district court's decision.

BACKGROUND

RIO owns the RIO All Suite Casino Resort, the "Best Hotel Value in the World" according to Travel and Leisure Magazine, not to mention the "Best Overall Hotel in Las Vegas," according to the Zagat Survey of Resorts, Hotels and Spas.In addition to its elegant hotel, RIO's gambling empire consists of the Rio Race & Sports Book, which allows customers to wager on professional sports.To protect its exclusive rights in the "RIO" name, RIO registered numerous trademarks with the United States Patent and Trademark Office.When RIO sought to expand its presence onto the Internet, it registered the domain name, www.playrio.com.At that address, RIO operates a website that informs prospective customers about its hotel and allows those enticed by Lady Luck to make reservations.

RII is a Costa Rican entity that participates in an Internet sports gambling operation, doing business variously as Rio International Sportsbook, Rio Online Sportsbook, or Rio International Sports.RII enables its customers to wager on sporting events online or via a 1-800 telephone number.Far from a penny ante operation, RII grosses an estimated $3 million annually.

RIO became aware of RII's existence by virtue of RII's advertisement in the Football Betting Guide '98 Preview. RIO later discovered, in the Nevada edition of the Daily Racing Form, another RII advertisement which invited customers to visit RII's website, www.riosports.com. RII also ran radio spots in Las Vegas as part of its comprehensive marketing strategy.

Upon learning of RII, RIO fired off an epistle demanding that RII cease and desist from operating the www.riosports.com website.Although RII did not formally respond, it promptly disabled the objectionable website.Apparently not ready to cash in its chips, RII soon activated the URL http://www.betrio.com to host an identical sports gambling operation.Perturbed, RIO filed the present action alleging various trademark infringement claims and seeking to enjoin RII from the continued use of the name "RIO."

To initiate suit, RIO attempted to locate RII in the United States for service of process.RIO discovered that RII claimed an address in Miami, Florida when it registered the allegedly infringing domain names.As it turned out, however, that address housed only RII's international courier, IEC, which was not authorized to accept service on RII's behalf.Nevertheless, IEC agreed to forward the summons and complaint to RII's Costa Rican courier.

After sending a copy of the summons and complaint through IEC, RIO received a telephone call from Los Angeles attorney John Carpenter("Carpenter") inquiring about the lawsuit.Apparently, RII received the summons and complaint from IEC and subsequently consulted Carpenter about how to respond.Carpenter indicated that RII provided him with a partially illegible copy of the complaint and asked RIO to send him a complete copy.RIO agreed to resend the complaint and, in addition, asked Carpenter to accept service for RII; Carpenter politely declined.Carpenter did, however, request that RIO notify him upon successful completion of service of process on RII.

Thus thwarted in its attempt to serve RII in the United States, RIO investigated the possibility of serving RII in Costa Rica.Toward this end, RIO searched international directory databases looking for RII's address in Costa Rica.These efforts proved fruitless however; the investigator learned only that RII preferred communication through its email address, email@betrio.com, and received snail mail, including payment for its services, at the IEC address in Florida.

Unable to serve RII by conventional means, RIO filed an emergency motion for alternate service of process.RII opted not to respond to RIO's motion.The district court granted RIO's motion, and pursuant to Federal Rules of Civil Procedure 4(h)(2) and 4(f)(3), ordered service of process on RII through the mail to Carpenter and IEC and via RII's email address, email@betrio.com.

Court order in hand, RIO served RII by these court-sanctioned methods.RII filed a motion to dismiss for insufficient service of process and lack of personal jurisdiction.The parties fully briefed the issues, and the district court denied RII's motion without a hearing.RII then filed its answer, denying RIO's allegations and asserting twenty-two affirmative defenses.

As the case proceeded, RIO propounded discovery requests and interrogatories on RII.RIO granted RII two informal extensions of time in which to respond.Nonetheless, RII's eventual responses were almost entirely useless, consisting largely of the answer "N/A," ostensibly meaning "Not Applicable."After additional futile attempts to elicit good faith responses from RII, RIO brought a motion to compel discovery.In granting RIO's motion, the district court warned that in the event RII failed to comply, monetary sanctions would be an insufficient remedy and that "preclusive sanctions" would be awarded.When RII failed to comply with the district court's discovery order, RIO moved for terminating sanctions.Although RII belatedly complied, in part, with RIO's discovery request, the district court granted RIO's motion for sanctions and entered default judgment against RII.Citing RII's reprehensible conduct and bad faith, the district court additionally directed RII to pay reasonable attorneys' fees and costs to RIO in the amount of $88,761.50 and $7,859.52 respectively.

RII now appeals the sufficiency of the court-ordered service of process, the district court's exercise of personal jurisdiction as well as the propriety of the default judgment, and the award of attorneys' fees and costs.

DISCUSSION

I ALTERNATIVE SERVICE OF PROCESS

A.Applicability of Rule 4(f)(3)

We review for an abuse of discretion the district court's decision regarding the sufficiency of service of process.Walker v. Sumner,14 F.3d 1415, 1422(9th Cir.1994).Federal Rule of Civil Procedure 4(h)(2)¹ authorizes service of process on a foreign business entity in the manner prescribed by Rule 4(f)² for individuals.The subsection of Rule 4(f) relevant to our decision, Rule 4(f)(3),³ permits service in a place not within any judicial district of the United States "by ... means not prohibited by international agreement as may be directed by the court."

As obvious from its plain language, service under Rule 4(f)(3) must be (1) directed by the court; and (2) not prohibited by international agreement.No other limitations are evident from the text.In fact, as long as court-directed and not prohibited by an international agreement, service of process ordered under Rule 4(f)(3) may be accomplished in contravention of the laws of the foreign country.SeeMayoral-Amy v. BHI Corp.,180 F.R.D. 456, 459 n. 4(S.D.Fla.1998).But seeFed.R.Civ.P. 4(f)(2) advisory committee notes (stating that under Rule 4(f)(2), "[s]ervice by methods that would violate foreign law is not generally authorized").

RII argues that Rule 4(f) should be read to create a hierarchy of preferred methods of service of process.RII's interpretation would require that a party attempt service of process by those methods enumerated in Rule 4(f)(2), including by diplomatic channels and letters rogatory, before petitioning the court for alternative relief under Rule 4(f)(3).We find no support for RII's position.No such requirement is found in the Rule's text, implied by its structure, or even hinted at in the advisory committee notes.

By all indications, court-directed service under Rule 4(f)(3) is as favored as service available under Rule 4(f)(1)⁴ or Rule 4(f)(2).SeeForum Fin. Group, LLC v. President & Fellows,199 F.R.D. 22, 23-24(D.Me.2001).Indeed, Rule 4(f)(3) is one of three separately numbered subsections in Rule 4(f), and each subsection is separated from the one previous merely by the simple conjunction "or."Rule 4(f)(3) is not subsumed within or in any way dominated by Rule 4(f)'s other subsections; it stands independently, on equal footing.Moreover, no language in Rules 4(f)(1) or 4(f)(2) indicates their primacy, and certainly Rule 4(f)(3) includes no qualifiers or limitations which indicate its availability only after attempting service of process by other means.

The advisory committee notes ("advisory notes") bolster our analysis.Beyond stating that service ordered...