Albert Kirakosian et al v. J and L D Sunset Wholesale and Tobacco et al

Filing 146

MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: RE: DEFENDANTS MOTION TO VACATE DEFAULT JUDGMENT AND DEFAULT (J&L D Sunset Wholesale & Tobacco) 139 . Court GRANTS defendants motion tovacate default judgment and default and orders defendant to respond in 14 days of the date of this order. (lc)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL

‘O’

Case No.

2:16-cv-06097-CAS-PLAx

Title

KIRAKOSIAN ET AL. V. J&L D SUNSET WHOLESALE & TOBACCO

Present: The Honorable

Date

November 26, 2018

CHRISTINA A. SNYDER

Catherine Jeang

Laura Elias

N/A

Deputy Clerk

Court Reporter / Recorder

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendant:

Johanna Ardalan

Gary Kurtz

Proceedings:

I.

DEFENDANT’S MOTION TO VACATE DEFAULT JUDGMENT
AND DEFAULT (Dkt. 139, filed October 9, 2018)

INTRODUCTION AND BACKGROUND

On August 15, 2016, plaintiffs Albert Kirakosian (“Kirakosian”) and Kiraco, LLC,
dba Apple on Top (“Kiraco”) filed this action against seventeen hookah retailers,
including the instant defendant J&L D Sunset Wholesale & Tobacco, Inc. Dkt. 1. The
gravamen of plaintiffs’ complaint is that defendant infringed upon Kirakosian’s patent
and trademark rights by selling or offering to sell counterfeit hookah products. Id. On
November 10, 2016, plaintiffs represent that they served the summons and complaint on
defendant. Dkt 23. On November 30, 2016, plaintiffs submitted proof of service to the
Court. Id. After defendant failed to file an answer or otherwise respond, the Clerk of
Court entered default against defendant on January 19, 2017. Dkt. 58. Plaintiffs moved
for default judgment against defendant on July 14, 2017, dkt. 114, and on September 11,
2017, the Court granted plaintiffs’ motion for default judgment, awarding plaintiffs
$100,000 in statutory damages for trademark infringement and $5,600 in attorneys’ fees,
dkt. 127.
Defendant filed the instant motion to vacate the default judgment and default on
October 9, 2018. Dkt. 139 (“Mot.”). Plaintiffs filed an opposition on November 5, 2018.
Dkt. 144. (“Opp’n”). Defendant filed a reply on November 8, 2018. Dkt. 145 (“Reply”).
The Court held a hearing on November 26, 2018. Having carefully considered the
parties’ arguments, the Court finds and concludes as follows.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:16-cv-06097-CAS-PLAx

Title

KIRAKOSIAN ET AL. V. J&L D SUNSET WHOLESALE & TOBACCO

II.

Date

‘O’
November 26, 2018

LEGAL STANDARD

Under Rule 60(b), the court may grant reconsideration of a final judgment and any
order based on: “(1) mistake, surprise, or excusable neglect; (2) newly discovered
evidence; (3) fraud; (4) a void judgment; (5) a satisfied or discharged judgment; or (6)
extraordinary circumstances which would justify relief.” School Dist. No. 1J,
Multnomah County, Or. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir.1993). Any Rule
60(b) motion must be brought within a reasonable time and, in certain circumstances, no
later than one year after entry of judgment or the order being challenged. See Fed. R. Civ.
P. 60(c)(1). “Rule 60(b) is meant to be remedial in nature and therefore must be liberally
applied.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)
Rule 60(b)(4) provides for relief from judgment on the basis that a judgment is
void. “Rule 60(b)(4) applies only in the rare instance where a judgment is premised
either on a certain type of jurisdictional error or on a violation of due process that
deprives a party of notice or the opportunity to be heard.” United Student Aid Funds,
Inc. v. Espinosa, 559 U.S. 260, 270 (2010). An incorrectly decided judgment is not itself
sufficient to render a judgment void. Id.
Under Rule 60(b)(6), the so-called catch-all provision, the party seeking relief
“must demonstrate both injury and circumstances beyond his control that prevented him
from proceeding with the action in a proper fashion.” Latshaw v. Trainer Wortham &
Co., Inc., 452 F.3d 1097, 1103 (9th Cir. 2006). In addition, the Ninth Circuit further
requires that “[t]o receive relief under Rule 60(b)(6), a party must demonstrate
extraordinary circumstances which prevented or rendered him unable to prosecute his
case.” Lal v. California, 610 F.3d 518, 524 (9th Cir. 2010). This Rule must be “used
sparingly as an equitable remedy to prevent manifest injustice and is to be utilized only
where extraordinary circumstances prevented a party from taking timely action to prevent
or correct an erroneous judgment.” Id. (quoting United States v. Washington, 394 F.3d
1152, 1157 (9th Cir. 2005)). The Court considers three factors when evaluating whether
there is good cause to vacate a default judgment: (1) whether defendant's culpable
conduct led to the default; (2) whether defendant has a meritorious defense; and (3)
whether reopening the default judgment would prejudice plaintiff. Falk v. Allen, 739
F.2d 461, 463 (9th Cir. 1984). Because these factors are disjunctive, the district court

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Date

‘O’

Case No.

2:16-cv-06097-CAS-PLAx

November 26, 2018

Title

KIRAKOSIAN ET AL. V. J&L D SUNSET WHOLESALE & TOBACCO

may deny a motion to vacate “if any of the three factors [are] true.” American Ass'n of
Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000).
III.

DISCUSSION

Defendant argues that the default judgment should be set aside under Rule 60(b)(4)
and 60(b)(6) because plaintiffs never properly served defendant, and thus the Court
lacked jurisdiction over defendant. Mot. at 3. Defendant states that while plaintiffs
report to have processed service on defendant’s agent, Jeries Dababneh (“Dababneh”), on
November 10, 2016, at 9297 9th Street, Rancho Cucamonga, CA (“9th Street Address”),
defendant contends that defendant did not occupy that space at that time. Id. at 4.
Instead, defendant states that it leased a new location as of December 1, 2014, and that an
unrelated business was occupying the 9th Street Address in November of 2016. Id.
Defendant includes a declaration from the new tenant at the 9th Street Address, stating
that no one served process on November 10, 2016. See Declaration of Briggita D.
Pumerantz (“Pumerantz Decl.”). Defendant further contends that vacating the default is
proper because plaintiffs would not be prejudiced if the judgment and default are set
aside; because defendant has a meritorious defense; and because defendant is not at fault
for causing the default. Mot. at 6–9.
In response, plaintiffs argue that they properly served defendant. Opp’n at 1.
Plaintiffs state that their process server, Roger Tran (“Tran”), attempted to serve
defendant at the 9th Street Address, because that was the address defendant provided to
the Secretary of State as the address for its registered agent, Dababneh. Id. at 1–2.
However, plaintiffs claim that, after finding that defendant was no longer at the 9th Street
Address, Tran traveled to defendant’s new address at 8687 Hellman Ave, Suite B,
Rancho Cucamonga (“Hellman Avenue Address”). Id. at 2. Plaintiffs state that the two
addresses are roughly 472 feet apart. Id., Ex. A. A copy of defendant’s lease confirms
that the Hellman Avenue Address is its new location, although Dababneh stated in his
declaration that the new address is 8697 Hellman Avenue. See Mot., Ex. 1 (“Lease”);
Declaration of Jeries Dababneh (“Dababneh Decl.”). At the new address, Tran declares
that he requested to speak with Dababneh, and when a man came forward to speak with
Tran, Tran pretended to be a delivery man and asked the man to sign for a package.
Opp’n at 2; Declaration of Roger Tran (“Tran Decl.”) ¶ 4b. After that, Tran declares that
he served the summons and complaint on Dababneh. Tran Decl. ¶ 4c.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Date

‘O’

Case No.

2:16-cv-06097-CAS-PLAx

November 26, 2018

Title

KIRAKOSIAN ET AL. V. J&L D SUNSET WHOLESALE & TOBACCO

In addition to Tran’s sworn declaration, plaintiffs present Tran’s alleged
contemporaneous notes from the day of service. See Opp’n, Ex. A-2 (“Contemp.
Notes”). These notes list both the 9th Street Address and the Hellman Avenue Address
for defendant. Id. Both addresses are typed. Id. Next to the 9th Street Address is a
handwritten note stating that “subject/corp is no longer at location.” There is a signature
next to the Hellman Ave address, which Tran believes is Dababneh’s signature. Tran
Decl. ¶ 4b. There are also times noted next to each location, which Tran asserts are the
times that he arrived at each location: 10:58 AM at the 9th Street Address, and 11:08 AM
at the Hellman Ave Address. Id. The notes are not dated.
In its reply, defendant includes declarations from Dababneh and three employees
from the Hellman Avenue Address location. Each state that Tran did not serve process at
the Hellman location on November 10, 2016. See Declaration of Jeries Dababneh
(“Dababneh Decl. 2”) ¶ 2; Declaration of Jeris Juwainat ¶¶ 2 – 4; Declaration of Nidal
Dababneh ¶¶ 2 – 4; Declaration of Lina Dababneh ¶¶ 4 – 5. Dababneh also declares that
the alleged signature on Tran’s contemporaneous notes does not match his signature.
Dababneh Decl. 2 ¶ 3. In addition, defendant asserts that it properly updated its address
with the Secretary of State. Reply at 5. Finally, defendant notes that the proof of
service, signed under penalty of perjury by Tran on January 6, 2017, and filed with this
Court on January 13, 2017, lists the 9th Street Address, not the Hellman Avenue Address.
Reply at 2 (citing Dkt. 57-1 “Jan. Serv.”). Defendant argues that, “If he had actually
completed service at a different address, one would expect Mr. Tran to have noted the
different address on his proof of service.” Reply at 2. Accordingly, defendant argues
that inconsistencies in Tran’s declaration and his signed proof of service cast doubt on the
validity of service, which favors granting defendant’s instant motion. Id. at 4.
“A signed return of service constitutes prima facie evidence of valid service which
can be overcome only by strong and convincing evidence.” O'Brien v. R.J. O'Brien &
Associates, Inc., 998 F.2d 1394, 1398 (7th Cir.1993) (quotation omitted). Here, of course,
the January 2017 signed return of service reflects the wrong address. Indeed, when
plaintiffs first filed for default, the Court entered a notice of deficiency because the proof
of service listed no address. See Dkt. 56. Plaintiffs subsequently provided an updated
proof of service, which identifies the 9th Street Address. See Jan. Serv. In other proofs of
service filed with the Court, plaintiffs also listed no address for defendant. See dkt. 23;
dkt. 24.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Date

‘O’

Case No.

2:16-cv-06097-CAS-PLAx

November 26, 2018

Title

KIRAKOSIAN ET AL. V. J&L D SUNSET WHOLESALE & TOBACCO

At oral argument, the Court asked why plaintiffs listed the 9th Street Address on its
service of process. Plaintiffs’ counsel responded that she could not explain why an
incorrect address was provided, as she is from a new law firm which had taken over the
case since the time service was processed. However, she pointed to Tran’s
contemporaneous notes as evidence that he served process at the Hellman Avenue
Address. Counsel for defendant argued that the Court should question the credibility of
these notes. Defense counsel noted that it seemed odd that Tran would have notes with
the Hellman Avenue Address typed on it, even though in his declaration Tran stated that
he “learned that the new address was close by” only when he visited the 9th Street
Address. See Tran Decl. ¶ 4(b). At oral argument, counsel for defendant also conceded
that defendant had not updated its address with the Secretary of State. Defendant’s
assertion to the contrary in its reply brief was an error. See Reply at 5.
The Court finds that vacating the default judgment is proper in this case. Plaintiffs
could not explain why the improper address was provided to the Court as evidence of
service, nor have plaintiffs explained how Tran knew of the Hellman Avenue Address, in
order to include it on his allegedly contemporaneous notes before he attempted service.
Assessing the Falk factors, the Court thus first finds that defendant’s culpable conduct did
not lead to default in this case. Falk, 739 F.2d at 463. The Court admonishes defendant
to maintain its correct listing with the Secretary of State, as is required by law. See Cal.
Corp. Code §§ 1505, 12570 (West). However, 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.” Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir.
1988); Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 815 (9th Cir. 1985) (“The
question of whether [defendant’s] conduct was culpable and led to the default judgment
turns on whether or not it received actual or constructive notice of the filing of this
action.”). Here, on the record before the Court, it is not clear that defendant received
actual or constructive notice. Accordingly, the Court cannot conclude that his conduct
was culpable.
Regarding the second Falk factor, the Court finds that defendant provides a
meritorious defense. “All that is necessary to satisfy the ‘meritorious defense’
requirement is to allege sufficient facts that, if true, would constitute a defense[,]” and
“the court does not assess the veracity of these facts when deciding whether to set aside
the default judgment.” Anyang Xinyi Elec. Glass Co. v. B & F Int'l (USA) Inc., No. CV
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Date

‘O’

Case No.

2:16-cv-06097-CAS-PLAx

November 26, 2018

Title

KIRAKOSIAN ET AL. V. J&L D SUNSET WHOLESALE & TOBACCO

15-00862-BRO (AJWx), 2016 WL 7435482, at *5 (C.D. Cal. Aug. 4, 2016) (quoting
United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1094
(9th Cir. 2010)). Here, defendant provides a sworn declaration stating that it never sold
products that infringed plaintiffs’ patent and trademark rights. Reply at 7 (quoting
Dababneh Decl. ¶ 6). This satisfies the meritorious defense factor.
Finally, setting aside the default will not prejudice plaintiffs. “To be prejudicial,
the setting aside of a judgment must result in greater harm than simply delaying
resolution of the case.” Mesle, 615 F.3d at 1095 (quoting TCI Grp. Life Ins. Plan v.
Knoebber, 244 F.3d 691, 701 (9th Cir. 2001), as amended on denial of reh'g and reh'g en
banc (May 9, 2001)). Plaintiffs suggest that “there will be serious evidentiary issues in
getting records and other evidence that [plaintiffs] should have been given access to for
discovery when [they] first filed the case,” opp’n at 6, but plaintiffs do not provide a basis
for this concern, nor identify which evidence they believe to be inaccessible. Effectively,
delayed resolution appears to be the only consequence of setting aside the default
judgment. The third Falk factor thus also does not militate against vacating the default
judgment and default.
The Court thus finds that (1) defendant’s conduct was not culpable, (2) defendant
provides a meritorious defense, and (3) setting aside the default judgment would not
prejudice plaintiff. These findings, coupled with the strong public policy of deciding
cases on the merits, Falk, 739 F.2d at 463, demonstrate there is good cause to set aside
the default judgment. The Court thus GRANTS defendant’s motion to vacate default
judgment and default.
IV.

CONCLUSION

In accordance with the foregoing, the Court GRANTS defendant’s motion to
vacate default judgment and default and orders defendant to respond in fourteen (14)
days of the date of this order.
IT IS SO ORDERED.
00
Initials of Preparer

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16
CMJ

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