Sream, Inc. v. Blow & Tell Corp.
| Decision Date | 02 May 2019 |
| Docket Number | No. 2:18-cv-03056 JAM AC,2:18-cv-03056 JAM AC |
| Parties | SREAM, INC., ROOR INTERNATIONAL BV, Plaintiffs, v. BLOW AND TELL CORP., Defendant. |
| Court | U.S. District Court — Eastern District of California |
Pursuant to Local Rule 302(c)(19), this matter came before the court on May 1, 2019, for hearing of plaintiffs' motion for default judgment. ECF No. 23. Attorney Imran Vakil appeared telephonically on behalf of plaintiffs. Defendant did not appear, and the motion was taken under submission.
Upon review of the motion and the supporting documents, and good cause appearing, THE COURT FINDS AS FOLLOWS:
I. FACTUAL AND PROCEDURAL BACKGROUND
On November 26, 2018, plaintiffs Sream, Inc. ("Sream") and RooR International BV ("RIBV") (collectively "plaintiffs") brought a complaint against defendant Blow and Tell Corporation ("BATC" or "defendant")—a since dissolved California corporation—for trademark infringement in violation of 15 U.S.C. § 1114(1), trademark counterfeiting in violation of 15 U.S.C. § 1116, false designation of origin in violation of 15 U.S.C. § 1125(a), unfair competition in violation of California Business and Professions Code § 17200 et seq, and common law unfair competition. ECF No. 1 at 11-16. According to the complaint, plaintiff RIBV is the owner of three federally registered "RooR" trademarks ("RooR Marks"). Id. ¶¶ 6, 12, Ex. B. The marks were registered to their creator, Martin Birzle, in 1999, 2000, and 2009. Birzle retroactively assigned to RIBV all rights to the RooR Marks, and the assignment was duly recorded with the United States Patent and Trademark Office ("PTO") in January 2018. Id. ¶¶ 9-12, Exs. A & B. Plaintiff RIBV is thus the owner of the following three trademarks registered on the Principal Register of the PTO: U.S. Trademark Registration No. 2,235,638 for the word mark "RooR" and its logo in association with goods in international class 21, including glass bowls, beverageware, boxes, statues, and plates; U.S. Trademark Registration No. 2,307,176 for the word mark "RooR" and its logo in association with goods in international class 25, including various types of clothing, and class 34, including "smoker's articles, namely, cigarettes, cigars, tobacco pouches, humidors, tobacco spittoons, chewing tobacco, smoking tobacco and matches"; and U.S. Trademark Registration No. 3,675,839 for the word mark "RooR" and its logo in association with goods in international class 34, including "smoker's articles, namely, glass pipes, bongs, water pipes, water pipes of glass." Id. at 27-29 (Ex. B).
Since 2013, pursuant to a License Agreement, plaintiff Sream has been the exclusive licensee for the RooR Marks within the United States and has been granted all rights to sue to obtain damages and injunctive relief for infringement of the RooR Marks in this country. Id. ¶¶ 13-16. With this License Agreement, Sream manufactures glass water pipes under the RooR Marks and markets and distributes other smoker's articles in association with the RooR Marks. Id. Plaintiffs contend that Sream's RooR branded products are made from high-quality materials and offer a superior smoking experience. Id. ¶¶ 10, 17. Therefore, consumers are willing to pay higher prices for RooR branded products: a RooR branded water pipe sells for $300 or more, whereas an equivalent non-RooR product would sell for less than $100. Id. ¶ 20. This makes RooR branded products targets for counterfeiting by unauthorized store owners who can affix a nearly identical RooR logo to their products and reap "significant illegitimate profits." Id. ¶ 21.
Plaintiffs allege that (at the time they filed the complaint) defendant was a California corporation doing business as "Blow and Tell" and operating a retail smoke shop in Sacramento, California. Id. ¶ 7. Plaintiffs allege that defendant has engaged in the unauthorized sale of water pipes bearing one or more of the RooR Marks, which were neither made by plaintiffs nor by an authorized manufacturer. Id. ¶ 23. In the course of their investigation of this case, on December 9, 2015, plaintiffs' licensed private investigator traveled to defendant's store, where he observed "several pipes on the shelves with a ROOR logo that he believed to be fakes." ECF Nos. 1 ¶¶ 24-25; 23.2 ¶¶ 4-7 (Ex. D). The investigator made a test purchase of one glass water pipe with a RooR label, for $47.96, which was later verified to be counterfeit. Id. Photographs of the purchased pipe and receipt are attached to the complaint and to the investigator's declaration. ECF Nos. 1 at 31; 23.2 at 6-7. Between July 2016 and October 2018, plaintiffs' counsel sent five letters to BATC, informing it of the test purchase and demanding that defendant cease the sale of its infringing products and provide an accounting of its past sales of such products. Defendant failed to respond or otherwise cooperate. ECF No. 23.3 at 2.
A summons and complaint were served on defendant on December 4, 2018. ECF No. 4. On December 11, 2018, defendant filed with the California Secretary of State a request to dissolve BATC, and in subsequent court filings BATC's former owner has indicated that the corporation has been dissolved. ECF Nos. 6.1 at 5; 13; 20. On December 17, 2018, defendant's former owner—a non-lawyer—filed an answer on behalf of BATC. ECF No. 5. On plaintiffs' motion, the court struck the answer pursuant to D-Beam Ltd. P'ship v. Roller Derby Skates, Inc., 366 F.3d 972, 973-74 (9th Cir. 2004) (), and gave defendant until March 1, 2019 to retain counsel and file an answer on behalf of the corporation. ECF Nos. 6, 15. No answer has been filed, and no attorney has made an appearance on behalf of defendant. Plaintiffs moved for entry of default on March 4, 2019. ECF No. 20. The clerk entered default on March 6, 2019, and plaintiffs moved for default judgment the same day. ECF Nos. 21, 23. Defendant did not respond to the motion for default judgment and has not otherwise formally appeared in this case.
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II. DISCUSSION
Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend against the action. See Fed. R. Civ. P. 55(a). However, "[a] defendant's default does not automatically entitle the plaintiff to a court-ordered judgment." PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)); see Fed. R. Civ. P. 55(b) (). Instead, the decision to grant or deny an application for default judgment lies within the district court's sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court may consider the following factors:
(1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are ordinarily disfavored. Id. at 1472.
As a general rule, once default is entered, well-pleaded factual allegations in the operative complaint are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); see also Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002). Although well-pleaded allegations in the complaint are admitted by a defendant's failure to respond, "necessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)); accord DIRECTV, Inc. v. Huynh, 503 F.3d 847, 854 (9th Cir. 2007) () (citation and quotation marks omitted); Abney v. Alameida, 334 F. Supp. 2d 1221, 1235 (S.D. Cal. 2004) (). A party'sdefault conclusively establishes that party's liability, although it does not establish the amount of damages. Geddes, 559 F.2d at 560; cf. Adriana Int'l Corp. v. Thoeren, 913 F.2d 1406, 1414 (9th Cir. 1990) ().
The first Eitel factor considers whether the plaintiff would suffer prejudice if default judgment is not entered, and such potential prejudice to the plaintiff weighs in favor of granting a default judgment. See PepsiCo, Inc., 238 F. Supp. 2d at 1177. Here, plaintiffs would face prejudice if the court did not enter a default judgment. Defendant is no longer in business, so prospective injury is unlikely. However, absent entry of a default judgment, plaintiffs would be without recourse for recovery in light of defendant's failure to respond. Accordingly, the first Eitel factor favors the entry of default judgment.
The merits of plaintiffs' substantive claims and the sufficiency of the complaint are considered here together because of the relatedness of the two inquiries. The undersigned must consider whether the allegations in the complaint are sufficient to state a claim that supports the relief sought. See Dann...
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