The Upper Deck Co. v. Flores
| Decision Date | 28 October 2021 |
| Docket Number | 21cv1182-GPC(KSC) |
| Court | U.S. District Court — Southern District of California |
| Parties | THE UPPER DECK COMPANY, a Nevada corporation, Plaintiff, v. MIGUEL FLORES AND DOES 1-100, inclusive, Defendant. |
ORDER: 1) GRANTING DEFENDANT'S MOTION TO SET ASIDE DEFAULT;
2) GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND [DKT NOS. 8, 9.]
Before the Court is Defendant's motion to set aside default and motion to dismiss the first amended complaint. (Dkt. Nos. 8 9.) Oppositions to these motions were filed by Plaintiff. (Dkt. Nos. 11, 12.) Defendant filed a reply to his motion to set aside default but did not file a reply to the motion to dismiss. (Dkt. Nos. 13, 14.) The Court finds that the matter is appropriate for decision without oral argument pursuant to Local Civ. R. 7.1(d)(1). Based on the reasoning below, the Court GRANTS Defendant's motion to set aside default and GRANTS in part and DENIES in part Defendant's motion to dismiss with leave to amend.
This trademark infringement case was removed to this Court on June 28, 2021. (Dkt. No. 1, Not. of Removal.) After removal, on June 29, 2021, Plaintiff The Upper Deck Company (“Plaintiff” or “Upper Deck”) filed a first amended complaint (“FAC”) alleging eight causes of action for 1) false affiliation/endorsement, false advertising, and unfair competition under 15 U.S.C. § 1125(a); 2) trademark dilution under 15 U.S.C. § 1125(c); 3) trademark infringement and counterfeiting under 15 U.S.C. § 1114; 4) deprivation of rights of publicity pursuant to California Civil Code section 3344; 5) commercial misappropriation/violation of rights of publicity under California common law; 6) violation of California's Unfair Competition Law (“UCL”) under California Business & Professions Code section 17200 et seq.; 7) violation of California common law unfair competition;[1] and 8) unjust enrichment/quasi-contract. (Dkt. No. 4, FAC.)
According to the FAC, Upper Deck is a leading manufacturer of trading cards, holds exclusive licensing agreements with various professional athletes and maintains trademarked logos, designs and word marks. (Dkt. No. 4, FAC ¶ 2.) It has been one of the leading trading card manufacturers for over 30 years and has remained at the forefront of the industry since its inception around 1989. (Id. ¶¶ 7, 9, 10.) Upper Deck exclusively owns a No. of trademarks and tradenames which are collectively referred to as the “Upper Deck Trademarks.” (Id. ¶ 11.) Relevant to this case, Upper Deck owns the green diamond “UPPER DECK” logo, USPTO No. 2498524. (Id.)
Plaintiff uses the “Upper Deck Trademarks” in its usual course of business in connection with its manufacture, marketing, and sale of sports trading cards in interstate commerce. (Id. ¶ 12.) The green diamond logo was Plaintiff's main logo displayed on its products from 1988 to 2008 and is still used today. (Id. ¶ 16.) Upper Deck also holds exclusive licenses and non-exclusive licenses with certain major sports leagues and athletes including retired athletes such as Michael Jordan. (Id. ¶ 17.)
Defendant Miguel Flores (“Defendant” or “Flores”) markets products for sale online throughout the United States through eBay. (Id. ¶ 3.) It is alleged that Defendant is advertising and selling counterfeit trading cards (“Cards”) with the Upper Deck Trademarks and Jordan's likeness in interstate commerce without permission via his eBay store using the seller name “migflo3800”. (Id. ¶¶ 19, 22.) Defendant's products, including the trading cards, are counterfeits that were not created or distributed by or on behalf of Upper Deck and feature Upper Deck Trademarks as well as Jordan's name, image, likeness and/or autograph for which Plaintiff holds a license and assignment related to the use of Jordan's publicity rights on trading cards. (Id. ¶ 24.)
Many of Defendant's products are illegally reprinted versions of authentic trading cards previously produced by Upper Deck that were created without its permission, consent, authority or approval. (Id. ¶ 25.) Even though Defendant's Cards were graded as “Facsimile Reprint” by GMA Grading, GMA Grading has recently acknowledged that reprint cards are counterfeits that “appears to use non-licensed images, logos, or likenesses” and has stopped providing grading to these counterfeit cards as of March 13, 2021. (Id.)
The FAC was filed on June 29, 2021, (Dkt. No. 4), and Defendant had until July 14, 2021 to file a response. Because no response was filed by Defendant, a request for default by Plaintiff was filed on July 16, 2021 which was entered on August 10, 2021. (Dkt. Nos. 6, 7.) On the same day, Defendant filed its motion to set aside default and motion to dismiss. (Dkt. Nos. 8, 9.)
“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). A court's discretion to set aside a default is “especially broad” where no default judgment has been entered. O'Connor v. Nevada, 27 F.3d 357, 364 (9th Cir. 1994).
The court may set aside an entry of default for “good cause.” Fed.R.Civ.P. 55(c). Three factors govern the inquiry into “good cause” under Federal Rule of Civil Procedure (“Rule”) 55(c). United States v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010). “Those factors, which courts consistently refer to as the Falk factors, are: (1) whether the plaintiff will be prejudiced, (2) whether the defendant has a meritorious defense, and (3) whether culpable conduct of the defendant led to the default.” Brandt v. Am. Bankers Ins. Co. of Florida, 653 F.3d 1108, 1111 (9th Cir. 2011) (citing Falk, 739 F.2d at 463). “This standard, which is the same as is used to determine whether a default judgment should be set aside under Rule 60(b), is disjunctive, such that a finding that any one of these factors is true is sufficient reason for the district court to refuse to set aside the default.” Mesle, 615 F.3d at 1091.
Defendant moves to set aside the default arguing he did not engage in culpable conduct by intentionally failing to answer for the purpose of taking advantage of the opposing party, interfering with judicial decision making or manipulating the legal process. (Dkt. No. 8 at 7-8.) Instead, he explains that defense counsel's excusable neglect resulted in the default due to events concerning his personal life. (Dkt. No. 8-1, Anderson Decl.[3]) These include the death of his mother on June 5, 2021, his mother's funeral on June 9, 2021, time off from work due to family and personal issues due to his mother's death, his child's surgery on July 11, 2021, the demands and deadlines of his other cases, and his own personal health issues requiring medical care since July 1, 2021. (Dkt. No. 8 at 5-6; Dkt. No. 8-1, Anderson Decl. ¶¶ 16-18.) Further, defense counsel states that due to COVID, he laid off most of his staff and accepted this case in June 2021 before all his personal and health issues arose. (Id. ¶ 15.) He also explains that he defaulted because he needed additional time to prepare a complicated motion to dismiss which was filed on the same date as the motion to set aside default which demonstrates he had no intention of delaying the action. (Dkt. No. 8 at 5; Dkt. No. 8-1, Anderson Decl. ¶ 13.) Plaintiff responds that because Defendant was represented by counsel, he is subject to the sophisticated party culpability standard and his reasons strain credibility. (Dkt. No. 11 at 20.) But under either the sophisticated or unsophisticated party standard, Plaintiff asserts that Defendant's conduct was culpable. (Id. at 20-21.)
A defendant's conduct is culpable if he has “received actual or constructive notice of the filing of the action and intentionally failed to answer.” TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001) (emphasis in original). Cases have used “intentional” to mean “willful, deliberate, or evidence of bad faith.” See Id. The term “intentionally” does not mean the court can treat a party as culpable “simply for having made a conscious choice not to answer; rather, to treat a failure to answer as culpable, the movant must have acted with bad faith, such as an intention to take advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal process.” Mesle, 615 F.3d at 1092 (internal quotations omitted). “Neglectful failure to answer as to which the defendant offers a credible, good faith explanation negating any intention to take advantage of the opposing party, interfere with judicial decision-making, or otherwise manipulate the legal process is not ‘intentional' under default cases.” TCI Grp., 244 F.3d at 697-98.
The standard on culpability depends on whether the party is “legally sophisticated.” Mesle, 615 F.3d at 1093. Where a party is not legally sophisticated, the Ninth Circuit has “held that a defendant's conduct was culpable . . . where there is no explanation of the default inconsistent with a devious, deliberate, willful, or bad faith failure to respond.” TCI Grp., 244 F.3d at 698. But where a legally sophisticated party is concerned, “conduct may be considered culpable if the defendant has received actual or constructive notice” and failed to answer. Mesle, 615 F.3d at 1093. This is because “[w]hen considering a legally sophisticated party's culpability in a default, an understanding of the consequences of its actions may be assumed, and with it, intentionality.” Id. In the context of culpability under the good cause standard, defense counsel's conduct is...
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