Coach, Inc. et al v. Envy

Filing 20

ORDER Vacating the Clerk's Entry of Default; ORDER DENYING Plaintiff's 14 Motion for Default Judgment Without Prejudice, signed by Magistrate Judge Gary S. Austin on 1/10/2012. (Bradley, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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COACH INC., and COACH SERVICES,
INC,

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Plaintiffs,
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v.
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ENVY, an unknown business entity, and
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DOES 1-10 inclusive,
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Defendants.
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____________________________________ )

1:11-cv-1029 LJO GSA
ORDER VACATING THE CLERK’S
ENTRY OF DEFAULT
ORDER DENYING PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT
WITHOUT PREJUDICE

(Doc. 14)

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I.

Introduction

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On November 28, 2011, Plaintiffs, Coach Inc., and Coach Services Inc., (“Plaintiffs”)
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filed an Application for Default Judgment against Defendant, Envy (“Defendant”) in this action.
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(Docs. 14-15). Defendant did not file an opposition to the application. The hearing scheduled
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for January 6, 2012 was vacated and the matter was taken under submission pursuant to Local
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Rule 230 (c) and (g). Upon a review of the pleadings, Plaintiff’s Motion for Default Judgment is
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DENIED WITHOUT PREJUDICE.
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II.

Procedural History

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On April 9, 2010, Plaintiffs filed a complaint alleging that Coach Inc. is a Maryland
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corporation with its principal place of business located in New York, New York. (Doc. 1 at ¶ 5).
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Similarly, Coach Services, a wholly owned subsidiary of Coach, is a Maryland corporation with

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its principal place of business in Jacksonville, Florida. Id. Plaintiffs allege that Coach

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manufactures, markets, and sells fine leather and mixed material products, including handbags,

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wallets, and accessories. Id. at ¶ 10. Coach owns the “COACH” trademark and various

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composite trademarks and assorted components (collectively, “Coach Marks”). Id. ¶ at 11.

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Additionally, Coach owns various copyright registrations, including the Horse and Carriage Mark

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and the Op Art Mark. Id. at ¶ 12. Coach has been manufacturing and selling interstate commerce

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high quality leather products under the Coach Marks for a long period. Plaintiffs contend that

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through this longstanding use, advertising, and registration, the Coach Marks have attained a

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high degree of consumer recognition and constitute famous marks. Id. at ¶ 11.
Plaintiffs allege that counterfeit Coach branded products were observed for sale and

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purchased from Envy, a retail store located at the Vintage Fair Mall, at 3401 Dale Toad in

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Modesto, California. Id. ¶¶ at 17, 18. Plaintiffs further allege that Coach representatives have

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inspected the Coach-brand merchandise and confirmed that the merchandise is counterfeit.

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Moreover, Defendant is not authorized by Coach to manufacture, distribute, advertise, offer for

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sale, and/or sell merchandise bearing any of Coach’s trademarks and/or copyrighted works. Id. at

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¶¶ 19, 20.

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Plaintiffs’ complaint asserts claims for: (1) trademark counterfeiting; (2) federal

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trademark infringement; (3) false designation of origin and false advertising; (4) federal

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trademark dilution; (5) trademark dilution in violation of the California Business and Professions

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Code; (6) common law unfair competition; and (7) copyright infringement. Id. at ¶¶ 21–83.

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Plaintiffs seeks the following: an award of Defendant’s profits and all damages sustained by

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Plaintiffs as a result of Defendant’s illicit acts; damages pursuant to 15 U.S.C. 1117(a)-(c), 17

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U.S.C.,§ 504(b) and (c), and 17 U.S.C. § 505; punitive damages; injunctive relief; as well as

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interest, costs, and attorney's fees. Id. at pgs. 16–17.

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Plaintiffs assert that they served Defendant with a copy of the complaint on June 28,

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2011. (Doc. 9). The Clerk of the Court entered default on September 15, 2011. (Doc. 12).

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Plaintiffs filed the instant application on November 28, 2011, and seek judgment in the amount

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of $100,000.00 in statutory damages, injunctive relief, and costs. (Doc. 14). However, as

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explained below, the Court finds the service of the summons and complaint is deficient.

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Accordingly, the Clerk’s entry of default is VACATED and Plaintiffs’ application for default

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judgment is DENIED WITHOUT PREJUDICE.

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III.

Discussion

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1.

Service of the Summons and Complaint

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“[A] court must first assess the adequacy of the service of process on the party against

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whom default judgment is requested.” Bricklayers and Allied Craftworkers Local Union No. 3 v.

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Palomino, WL 2219595 at * 2 (N.D. Cal. June 2, 2010) (citations omitted). “[B]efore a federal

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court may exercise personal jurisdiction over a defendant, the procedural requirement of service

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of summons must be satisfied.” Omni Capital Int'l., Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104,

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(1987), superseded by statute on other grounds, Futures Trading Practices Act of 1992, Pub.L.

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No. 102-546, § 211, 106 Stat. 3590, 3607-08 (1992); see also Direct Mail Specialists, Inc. v.

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Eclat Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir.1988) (stating that a federal court

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does not have jurisdiction over a defendant unless the defendant has been properly served under

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Fed. R. Civ. P. 4). Where the party seeking default judgment has not shown that the defendant

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has been provided with adequate notice of an action, “it is inappropriate to conclude that the

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defendant ‘has failed to plead or otherwise defend’ ” under Fed. R. Civ .P. 55(a). See Downing v.

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Wanchek, No. 2009 WL 256502, at *3 (E.D.Cal. Jan.30, 2009).

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In the request for a Motion for Default Judgment, Plaintiffs contend that Defendant was

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properly served and default was issued. (Doc. 14-1 at pg. 2). However, a review of the current

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docket reveals this is mistaken. Federal Rule of Civil Procedure 4(h) in relevant section provides

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that service of a corporation, partnership, of association, can be achieved in several ways

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including:1

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(A) in manner prescribed by Rule 4(e)(1) for serving an individual; or
(B) by delivering a copy of the summons and of the complaint to an officer, a managing
or general agent, or any other agent authorized by appointment or by law to receive
service of process and - if the agent is one authorized by statute and the statute so requires
- by also mailing a copy of each to the defendant ...
Fed. R, Civ. P. 4(h).

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Federal Rule of Civil Procedure 4(e) provides that serving a summons upon an individual
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may be effectuated by following the state law where the district court is located. Fed. R. Civ. P.
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4(e).
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Under California law, service on an unknown business entity, (which is the case here)
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may be accomplished by the following :
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CCP 415.95 Service of Summons on a business organization, form unknown
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(a) A summons may be served on a business organization, form unknown, by
leaving a copy of the summons and complaint during usual office hours with the
person who is apparently in charge of the office of that business organization, and
by thereafter mailing a copy of the summons and complaint by first-class mail,
postage prepaid, to the person to be served at the place where a copy of the
summons and complaint was left. Service of a summons in this manner is deemed
complete on the 10th day after the mailing.
CCP § 415.95.

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Here, the proof of service indicates that Envy was served by leaving the summons at

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Defendant’s place of business with “Ninehra Babazade Ehsaralahn-store clerk (E IND., F., 21,

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BLK, 5'4 130 lbs).” (Doc. 9). There is no indication that the store clerk is authorized to receive

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service under F.R. Civ.P. 4(h). Similarly, service was not effectuated under CCP § 415.95 as

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there is no evidence that the summons and complaint were subsequently mailed pursuant to the

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statute.2 Accordingly, the Clerk’s entry of default was improper and will be VACATED.

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Plaintiffs shall properly serve the summons and complaint, file proof of the service, and request

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default from the Clerk no later than 30 days from the issuance of this order.

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It is questionable whether this provision applies since the complaint names Envy as an unknown business

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The proof of service also does not have a caption at the top of the document. (Doc. 9).

entity.

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2. Remedies

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Factors which courts should consider in exercising discretion as to the entry of a default

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judgment include: (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff’s

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substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the

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action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due

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to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure

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favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-1472 (9th Cir. 1986).

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The Court must also conduct a damages award analysis. See, Fed. R. Civ. P. 55(a)(2).

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In the application, Plaintiffs have requested damages based on the trademark infringement

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and counterfeiting claim pursuant to 15 U.S.C. § 1117(a)-(c). Under § 1117(a), a registered mark

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holder may recover: (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3)

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the costs of the action, subject to the principles of equity. Section 1117(c) permits a plaintiff to

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elect statutory damages, instead of actual damages and profits, in cases involving the use of a

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counterfeit mark in connection with the sale of goods. Plaintiffs who elect statutory damages

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may recover “not less than $1,000 or more than $200,000 per counterfeit mark per type of goods

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or services sold, offered for sale, or distributed, as the court considers just.” 15 U.S.C. §

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1117(c)(1). Additionally, in cases where the defendant's conduct is willful, a court may enhance

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the statutory damages award to an amount “not more than $2,000,000 per counterfeit mark per

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type of goods or services sold, offered for sale, or distributed, as the court considers just.” 15

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U.S.C. § 1117(c)(2). If a plaintiff elects to recover statutory damages, the court has wide

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discretion in determining the amount of statutory damages to be awarded. Coach Inc. v. Diana

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Fashion, 2011 WL 6182332 *5-6 ( N.D. Cal. December 13, 2011) (citing Chanel, Inc. v. Lin,

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2010 WL 2557503 (N.D.Cal. May 7, 2010) (citing Columbia Pictures Television, Inc. v. Krypton

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Broad. of Birmingham, 259 F.3d 1186, 1194 (9th Cir.2001)).

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Section 1117(c) does not give any specific guidance as to how a court should determine
an appropriate statutory damages award. However, when determining the appropriate amount of

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statutory damages to award under § 1117(c), some courts have considered factors that are applied

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under a corresponding section of the Copyright Act including: (1) the expenses saved and the

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profits reaped by the defendant; (2) the revenues lost by the plaintiff; (3) the value of the

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copyright; (4) the deterrent effect on others besides the defendant; (5) whether the defendant's

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conduct was innocent or willful; (6) whether a defendant has cooperated in providing particular

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records from which to assess the value of the infringing material produced; and (7) the potential

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for discouraging the defendant. See, e.g., Microsoft Corp. v. Nop, 549 F.Supp.2d 1233, 1237–38

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(E.D.Cal.2008); Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 125 (S.D.N.Y.2003) (quoting

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Fitzgerald Pub. Co., Inc. v. Baylor Pub. Co., 807 F.2d 1110, 1117 (2d Cir.1986); See also,

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Microsoft Corp. v. PC Express, 183 F.Supp.2d 448, 454 (D.P.R.2001) (listing same factors).
Here, Plaintiffs have requested a judgement of $100,000.00 in statutory damages under

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15 U.S.C.§ 1117(c). However, they have not provided the Court with any evidence that this

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damages award is proper. The only evidence Plaintiff has submitted is a declaration from its

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counsel, Brent Blakely, that provides generic information regarding the service of the complaint,

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as well as other general information regarding the application for default judgment. (Doc. 14 -1

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at pgs. 2-3). Similarly, the complaint only makes broad allegations that an investigator obtained

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products containing the counterfeit reproductions of the word mark “COACH,” in addition to

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Coach’s other trademarks from Envy. (Doc. 1, ¶¶ 17-20). There is no evidence, for example,

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regarding what products in particular were obtained, the value of the items, the presence of other

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products in the store, or how the introduction of these products into the market specifically

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effected Coach’s profit. Plaintiffs’ statements that they do not have information as to how many

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goods were sold, or the amount of revenues lost by Plaintiffs because Defendant failed to appear

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in this action, is not sufficient to support a $100,000.00 damage request. (Doc. 14 at pg. 12).

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Plaintiffs are reminded that it is their burden to establish the relief they are seeking.

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Finally, it appears that Plaintiff are only seeking judgment based on trademark

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counterfeiting which is the first cause of action. Any Amended Motion for Default Judgment

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shall address whether Plaintiff will be dismissing any causes of action that are not addressed in

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the amended pleading. Plaintiffs shall file the appropriate dispositive documents dismissing any

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causes of action it no longer intends to pursue.

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IV.

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Based on the foregoing, Plaintiff’s Motion for Default Judgment is DENIED WITHOUT

Conclusion

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PREJUDICE. It is further order that Plaintiff shall file proof of proper service of the summons

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and complaint on Defendant and request an entry of default within thirty (30) days of the date of

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this order. Similarly, Plaintiff shall file an amended Motion for Default Judgment remedying the

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deficiencies outlined above within sixty (60) days from the date of this order. Plaintiff is advised

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that any causes of action not adequately addressed in the second Motion for Default Judgment

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will result in dismissal of those claims for failure to prosecute.

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IT IS SO ORDERED.
Dated:
6i0kij

January 10, 2012

/s/ Gary S. Austin
UNITED STATES MAGISTRATE JUDGE

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