Xiem Studio, LLC v. Kevin X. Nguyen & Xiem Tools, LLC

• Decision Date: 18 June 2015
• Docket Number: No. 4:14-CV-1366-CEJ,4:14-CV-1366-CEJ
• Court: U.S. District Court — Eastern District of Missouri
• Parties: XIEM STUDIO, LLC, Plaintiff, v. KEVIN X. NGUYEN and XIEM TOOLS, LLC, Defendants.

XIEM STUDIO, LLC, Plaintiff, v. KEVIN X. NGUYEN and XIEM TOOLS, LLC, Defendants.

No. 4:14-CV-1366-CEJ

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

June 18, 2015

MEMORANDUM AND ORDER

This matter is before the Court on plaintiff's motion for default judgment, pursuant to Fed. R. Civ. P. 55(b)(2).

I. Procedural History

Plaintiff Xiem Studio, LLC filed the instant case on August 6, 2014. Service was achieved on defendants Kevin X. Nguyen and Xiem Tools, LLC (XT) on August 15, 2014. Under Rule 12(a)(1)(A)(i), Fed. R. Civ. P., defendants were each required to file an answer or other responsive pleading within twenty-one days of being served with the complaint. Because both defendants failed to do so, the Clerk of Court entered default against them on October 28, 2014. Plaintiff filed a motion for default judgment on May 11, 2015. Despite having been given ample opportunity to do so, neither defendant has responded to this litigation.

II. Legal Standard

Pursuant to Fed. R. Civ. P. 55, default judgment is appropriate when "a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise . . . ."Granting default judgment is within a district court's discretion. See Weitz Co. LLC v. MacKenzie House, LLC, 665 F.3d 970, 977 (8th Cir. 2012).

When a party defaults, "the factual allegations of a complaint (except those relating to the amount of damages) are taken as true, but 'it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law.'" Murray v. Lene, 595 F.3d 868, 871 (8th Cir. 2010) (quoting 10A Charles Alan Wright et al., Federal Practice and Procedure: Civil § 2688, at 63 (3d ed. 1998)). "The court may conduct hearings or make referrals . . . when, to enter or effectuate judgment, it needs to: (A) conduct an accounting; (B) determine the amount of damages; (C) establish the truth of any allegation by evidence; or (D) investigate any other matter." Fed. R. Civ. P. 55(b)(2). However, where "'the findings and judgment regarding damages in the instant case are capable of being computed on the basis of facts of record' . . . the district court need not hold an evidentiary hearing on the issue of damages." Taylor v. City of Ballwin, Mo., 859 F.2d 1330, 1333 (8th Cir. 1988) (quoting Pope v. United States, 323 U.S. 1, 12 (1944)).

III. Discussion

Plaintiff's eight-count complaint alleges the following: (1) Trademark infringement in violation of 15 U.S.C. § 1125(a). (2) Infringement of a registered trademark in violation of 15 U.S.C. § 1114. (3) Unfair competition in violation of 15 U.S.C. § 1125(a). (4) Unfair competition under Missouri common law. (5) Conversion of plaintiff's funds, assets, and inventory. (6) Replevin of plaintiff's inventory. (7) Breach of Nguyen's fiduciary duties. (8) Misappropriation ofunspecified trade secrets. The first six claims are asserted against both defendants, while the last two are raised against Nguyen alone.

Taken as true, the facts alleged in the complaint support liability against defendants on all but the theft of trade secrets claim, which is not alleged with sufficient specificity for the Court to fashion recovery. Accordingly, plaintiff can recover for trademark infringement of a registered trademark, which embraces the same remedies as infringement of an unregistered trademark, and the federal and state law unfair competition claims. See KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 117 (2004); Sensient Technologies Corp. v. SensoryEffects Flavor Co., 613 F.3d 754, 760 (8th Cir. 2010); ConAgra, Inc. v. George A. Hormel, & Co., 990 F.2d 368, 371 (8th Cir. 1993); Gen. Mills, Inc. v. Kellogg Co., 824 F.2d 622, 626 (8th Cir. 1987); Kuper Indus., LLC v. Reid, No. 8:15-CV-42-JMGJ, 2015 WL 412518, at *3 (D. Neb. Jan. 30, 2015); Sensient Technologies Corp. v. SensoryEffects Flavor Co., 636 F. Supp. 2d 891, 898 (E.D. Mo. 2009) aff'd, 613 F.3d 754 (citing Mo. Rev. Stat. § 417.056).

Plaintiff can also recover the funds and assets Nguyen converted. See Mackey v. Goslee, 244 S.W.3d 261, 264 (Mo. Ct. App. 2008); Gadberry v. Bird, 191 S.W.3d 673, 675-76 (Mo. Ct. App. 2006). However, because plaintiff has succeeded on its trademark infringement claim—for which the value of the inventory is the measure of damages in this case—plaintiff cannot also recover that value in conversion or the inventory itself by replevin. See Grogan v. Garner, 806 F.2d 829, 839 (8th Cir. 1986). Finally, plaintiff has established that it is entitled to equitable remedies for Nguyen's breach of fiduciary duties. W. Blue Print Co., LLC v. Roberts, 367 S.W.3d 7, 15 (Mo. 2012) (en banc); Robinson v. Lagenbach, 439S.W.3d 853, 860 (Mo. Ct. App. 2014); Waters v. G & B Feeds, Inc., 306 S.W.3d 138, 146-47 (Mo. Ct. App. 2010); Moore v. Moore, 189 S.W.3d 627, 633 (Mo. Ct. App. 2006).

a. Remedies

Plaintiff seeks a permanent injunction preventing defendants and their associates from infringing on plaintiff's registered trademark, United States Trademark Registration No. 3,541,844, which covers, inter alia, branding ceramics-making tools with the word "Xiem." Plaintiff also requests defendants be enjoined from operating a website, xiemtoolsusa.com (the infringing website), on which they sell ceramics-making tools branded with the plaintiff's exact logo (the inventory Nguyen converted) or their own similar logo that incorporates the word "Xiem." Additionally, plaintiff requests defendants be enjoined from engaging in unfair competition with plaintiff by manufacturing, distributing, selling, or offering for sale any ceramics-making tool in a manner that is likely to cause confusion, mistake, or deception in the marketplace.

Plaintiff also requests damages to compensate it for defendants' infringing activities and unfair competition, as well as reasonable attorneys' fees and costs. Because defendants' continued infringement is purportedly willful, wanton, and deliberate, plaintiff requests that damages be trebled, pursuant to 15 U.S.C. § 1117. Plaintiff also seeks to recover the value of the funds and assets Nguyen converted. Finally, plaintiff requests a declaration that Nguyen has effectively withdrawn as a member of plaintiff because he breached his fiduciary duties.

i. Permanent Injunction

"It is well-established that a party is entitled to equitable relief only if there is no adequate remedy at law." Taylor Corp. v. Four Seasons Greetings, LLC, 403 F.3d 958, 967-68 (8th Cir. 2005) (citing Morales v. Trans World Airlines, Inc., 504 U.S. 374, 381 (1992)). But "by enacting the Lanham Act, Congress apparently intended to encourage competitors to seek injunctions as a method of combating false advertising, and, in such cases that ultimately prove to have merit, injunctive relief is not to be issued reluctantly." United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1178-79 (8th Cir. 1998) (citing Black Hills Jewelry Mfg. Co. v. Gold Rush, Inc., 633 F.2d 746, 753 n.7 (8th Cir. 1980)). "It is generally said that once infringement of a trademark is shown, the owner of the mark is entitled to injunctive relief. Indeed, when the infringement is clear and deliberate, such relief is denied only in the most unusual of cases." U.S. Jaycees v. Cedar Rapids Jaycees, 794 F.2d 379, 382 (8th Cir. 1986).

"To determine whether permanent injunctive relief is warranted, [courts] balance three factors: (1) the threat of irreparable harm to the moving party; (2) the balance of harm between this harm and the harm suffered by the nonmoving party if the injunction is granted; and (3) the public interest." Taylor Corp., 403 F.3d at 967.

The threat of irreparable harm to plaintiff is conclusively established in this case because a trademark holder "certainly has the right to control the use of its [trademarked] materials, and irreparable harm inescapably flows from the denial of that right." Id. Moreover, plaintiff would suffer irreparable harm without a permanent injunction against defendants' infringing activity because "in trademarklaw, injury is presumed once a likelihood of confusion has been established." Cmty. of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ's Church, 634 F.3d 1005, 1012 (8th Cir. 2011) (citing Mut. of Omaha Ins. Co. v. Novak, 836 F.2d 397, 403 n.11 (8th Cir. 1987), and 15 U.S.C. § 1116(a), which authorizes injunctions for violations of 15 U.S.C. § 1125).

Defendants will not be harmed significantly by an injunction because they retain many other methods of advertising their wares. And balanced against the harm that plaintiff will suffer if defendants continue to infringe on plaintiff's intellectual property, it is apparent that the Court should favor plaintiff's property rights over defendants' ability to market products using infringing marks. Novak, 836 F.2d at 402. Finally, protecting property rights, including plaintiff's trademark, is obviously in the public interest. See Anheuser-Busch, Inc. v. Balducci Publications, 28 F.3d 769, 776 (8th Cir. 1994).

Therefore, an injunction is warranted, and the Court will issue a permanent injunction against both defendants that prevents them from infringing on the plaintiff's trademark or engaging in unfair competition with plaintiff that is likely to cause confusion in the marketplace.

ii. Damages

"Although injunctive relief is often the preferred remedy in resolving trademark disputes, it is not the exclusive remedy." Masters v. UHS of Del., Inc., 631 F.3d 464, 471 (8th Cir. 2011). "'[A]ll Lanham Act remedies are equitable in nature,'" and "the Lanham Act contemplates that a disgorgement or accounting of profits may be appropriate to remedy unfair infringement." Id. (quoting Minn. Pet Breeders, Inc. v. Schell & Kampeter, Inc., 41 F.3d 1242, 1247 (8th Cir. 1994), andciting 15 U.S.C. § 1117(a)). "If the court grants an...