Prestige Administration Incorporated v. Crescent Manufacturing Company LLC et al

Filing 60

ORDER denying 59 Motion for Default Judgment. (See document for further details). Signed by Senior Judge Frederick J Martone on 5/21/13. (LAD)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiff,
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vs.
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Crescent Manufacturing Co., LLC; Tier )
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One Warranty LLC; Choice
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Manufacturing Co. Inc.,
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Defendants.
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No. CV-12-0039-PHX-FJM

Prestige Administration, Inc.,

ORDER

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I
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Plaintiff Prestige Administration is the manufacturer and distributor of a coolant
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additive product under the “Autolife” trademark. It is alleged that US Fidelis marketed and
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sold vehicle service contracts (“VSCs”)1 and engine additive products with associated

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warranties (“EAWs”) carrying the infringing Autolife trademark to automobile owners.
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While US Fidelis is alleged to have sold the infringing products, the administration of claims
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under the warranties was performed by administrators such as Crescent Manufacturing
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Company, LLC (“Crescent”) and Choice Manufacturing Company, Inc. (“Choice”). Prestige
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filed this action asserting claims against Crescent and Choice for vicarious liability for US
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A VSC is a contract where covered costs of repairing a vehicle under warranty are
paid by a third party.

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Fidelis’ trademark infringement under the Lanham Act, 15 U.S.C. § 1117(a), and state law

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claims of trademark infringement, fraudulent misrepresentation, injury to business

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representation, tortious interference with contract, and fraud.

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Crescent was served on February 9, 2012 (doc. 30), and Choice was served on

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February 16, 2012 (doc. 45). Neither party responded to the complaint and the clerk entered

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default against both entities (docs. 36, 51). We now have before us Prestige’s motion for

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entry of default judgment against Crescent in the amount of $84,314,283.92 and against

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Choice in the amount of $22,015,112.00 (doc. 59).

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II

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Plaintiff’s motion for default judgment is supported only by a declaration by Robert

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Konzen, Vice President of Prestige. Konzen bases his estimate of damages on the gross sales

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of VSCs and EAWs sold by US Fidelis and administered by Crescent and Choice. Konzen

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avers that Crescent was the Administrator for approximately 37,812 VSCs/EAWs, Decl. ¶

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21, with gross sales of $84,314.283.92. Choice administered a total of 9,873 EAWs sold by

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US Fidelis, with gross sales of $22,015,112.00. Decl. ¶ 22.

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We will consider the following factors in ruling on a motion for default judgment

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under Rule 55(b)(2), Fed. R. Civ. P.: (1) the possibility of prejudice to the plaintiff; (2) the

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merits of plaintiff’s substantive claim; (3) the sufficiency of the complaint; (4) the sum of

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money at stake in the action; (5) the possibility of a dispute concerning material facts; (6)

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whether the default was due to excusable neglect; and (7) the strong policy underlying the

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Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d

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1470, 1471-72 (9th Cir. 1986). These factors do not support Prestige’s motion for default

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judgment in an amount exceeding $100,000,000.00.

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III

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Under the Lanham Act, 15 U.S.C. § 1117(a), a plaintiff is entitled to recover, subject

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to principles of equity, (1) defendant’s profit; (2) any damages sustained by plaintiff, and (3)

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the cost of the action. The plaintiff is only required to prove defendant’s sales. The

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“defendant must prove all elements of cost or deduction claimed.” Id. Prestige contends that
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it is entitled to recover the gross sales of all the VSCs and EAWs administered by Crescent

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and Choice because they have failed to appear or defend, or offer evidence of deductions.

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US Fidelis was the main player in this story, but it is not a defendant in this case.

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Instead, it is the subject of a confirmed liquidation plan in a bankruptcy proceeding in the

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United States Bankruptcy Court for the Western District of Missouri, 10-41902-705. Mepco

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was also a significant defendant until we granted its motion to dismiss on the basis of res

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judicata (doc. 54). Prestige has already asserted similar, if not identical, claims against US

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Fidelis, Crescent Manufacturing2, Mepco, and others in this court in 2009. See Prestige

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Admin. v. US Fidelis, Inc., 09-CV-1804-PHX-DGC (D. Ariz. Aug. 28, 2009) (“Prestige I”).

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It was during these proceedings that US Fidelis filed for bankruptcy.

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Also during these proceedings, Prestige informed the district court that it had entered

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into a voluntary order, affirmed by the bankruptcy court, that permanently enjoined Prestige

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from litigating against US Fidelis or Crescent Manufacturing. See Prestige I, doc.98

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(Prestige’s Status Report). Accordingly, Judge Campbell dismissed the claims against

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Crescent as moot. Id. doc. 100. Not only is that agreement and resulting judgment res

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judicata as to the claims presented against Crescent here, but this action appears to be a

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violation of the permanent injunction. Prestige’s motion for default judgment against

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Crescent is denied.

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Finally, we conclude that the allegations in the complaint are insufficient to support

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Prestige’s motion for entry of default judgment against Choice. The vast majority of the

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allegations contained in the 52-page complaint are asserted against US Fidelis and Mepco

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and have nothing to do with Choice. Choice is specifically listed as a defendant in Count 3

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only. The general references to “defendants” in other counts of the complaint are too broad

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to state a plausible claim against Choice. And although specific allegations are asserted

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against Choice in Count 3, the relief requested has no application to Choice. See Compl. ¶

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120 (requesting “the imposition of a constructive trust on any reserve accounts, as well as an

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US Fidelis and Crescent are alleged to have common ownership.
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order requiring Defendant Mepco to return wrongfully converted funds from such

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accounts”). For purposes of the present motion, we conclude that the complaint fails to

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allege sufficient allegations to state a plausible claim against Choice, a claims administrator

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and not the seller of the infringing VSCs and EAWs, that would support a default judgment

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in excess of $22 million. The sufficiency of the complaint, the merits of the substantive

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claims, and the exorbitant judgment sought all weigh against entering default judgment

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against Choice.

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IV
IT IS ORDERED DENYING Prestige’s motion for default judgment (doc. 59).
DATED this 21st day of May, 2013.

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