North Atlantic Operating Company, Inc., et al. v. Babenko, et al.

Filing 210

ORDER GRANTING 189 Plaintiffs' Motion for Preliminary Injunction and Other Relief. Signed by District Judge Terrence G. Berg. (AChu)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
NORTH ATLANTIC OPERATING
COMPANY, INC., and NATIONAL
TOBACCO COMPANY, L.P.,
Plaintiffs,
v.

Case No. 15-14013
HON. TERRENCE G. BERG
HON. DAVID R. GRAND

JINGJING HUANG1, et al.,
Defendants.

/

ORDER GRANTING PLAINTIFFS’ MOTION FOR A
PRELIMINARY INJUNCTION AND OTHER RELIEF (DKT. 189)
Plaintiffs have filed this action pursuant to the Lanham and Copyright Acts
as well as Michigan state law alleging that Defendants manufacture, distribute, or
sell counterfeit versions of ZIG-ZAG® brand cigarette paper products.2 (See dkt.
188.) On May 6, 2016, the Court granted Plaintiffs leave to file their First Amended
Complaint to remove those Defendants that had been dismissed from this case and
to add four new Defendants (the “DHGate.com Defendants”)3 identified by Plaintiffs
through discovery obtained from existing Defendants. (Dkt. 185.) The Court also

This case was originally captioned as North Atlantic Operating Company, Inc., et al. v. Dmitriy
Babenko, et al. On February 22, 2016, Dmitriy Babenko was dismissed from this action. (Dkt. 133.)
Accordingly, the Court directs the Clerk’s Office to amend the case caption to read North Atlantic
Operating Company, Inc., et al. v. JingJing Huang et al.
1

This Court detailed the initial facts and procedural circumstances of this case in its November 19,
2015 order, familiarity with which is assumed. (Dkt. 12).
2

The newly-named DHGate.com Defendants are: Dhgate Seller Jackyhu, Dhgate Seller Kathy0577,
Dhgate Seller CNGZSS, and Dhgate Seller CNGZSS1. (See Dkt. 188.)
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issued an order permitting service of process on the newly-named DHGate.com
Defendants by alternative means. (Id.)
On May 13, 2016, Plaintiffs filed their Amended Complaint and exhibits
(Dkt. 188), requested summons for the DHGate.com Defendants, and filed a motion
for a preliminary injunction and other relief with respect to the DHGate.com
Defendants. (Dkt. 189.) In support of their motion, Plaintiffs filed a declaration by
John Hood, an investigator for a private security firm, and documentation of many
transactions between the original Defendants and the DHGate.com Defendants
involving the sale of allegedly counterfeit ZIG-ZAG® brand products. (See dkt. 191.)
On May 19, 2016, Plaintiffs served the DHGate.com Defendants with the
Amended Complaint, the motion for injunctive relief, “and all related documents
filed in the matter via email, DHGate messenger, and courier.” (See dkts. 193-196.)
In their motion, Plaintiffs seek: (1) a preliminary injunction against the
DHGate.com Defendants pursuant to Federal Rule of Civil Procedure 65 that
enjoins further trade in counterfeit products and freezes the DHGate.com
Defendants’ access to their online accounts and any assets in those accounts; and (2)
permission to serve limited, expedited discovery upon certain third parties to
ascertain with greater certainty the identities and addresses of the DHGate.com
Defendants and the location of their operations.4 (Dkt. 189, pp. 5, 14.)

Plaintiffs also requested in their motion authorization to serve the DHGate.com Defendants by
alternative means. (Dkt. 189, p. 5.) Because the Court granted Plaintiffs leave to serve these
Defendants by alternative means in its May 6, 2016 Order, Plaintiffs stated at the motion hearing on
June 29, 2016 that it is not necessary for the Court to revisit this issue.
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On May 27, 2016, a hearing on Plaintiffs’ motion was scheduled for June 15,
2016 and Plaintiffs were ordered to serve the notice of hearing on the DHGate.com
Defendants “by email or other electronic means, and by overnight courier, when
practicable, to the degree necessary to ensure and effectuate service.” (Dkt. 199, p.
3.) On June 1, 2016, the hearing was rescheduled for June 29, 2016 (Dkt. 200) and
Plaintiffs served the DHGate.com Defendants with this updated notice on June 9,
2016 (Dkt. 201).
The hearing on Plaintiffs’ motion for injunctive relief was held as scheduled
on June 29, 2016 in Detroit, Michigan. None of the DHGate.com Defendants or
their representatives appeared or otherwise responded to Plaintiffs’ motion or to
the amended complaint. The Court considers Plaintiffs’ motion to be unopposed.
At the hearing, Plaintiffs’ Counsel summarized the efforts made to serve
each of the DHGate.com Defendants and to verify that the methods of service used
were viable. The Court heard testimony from John Hood regarding his
communications with the DHGate.com Defendants via email, DHGate messaging,
and other electronic means. Plaintiff’s Counsel also represented to the Court that
the DHGate.com Defendants had been served at their physical addresses via
FedEx. The Court is satisfied that Plaintiffs’ Counsel has made good faith efforts to
serve and to communicate with each of the DHGate.com Defendants, and that
Plaintiffs’ Counsel is pursuing a process which adequately respects the due process
rights of the DHGate.com Defendants.

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The Court also conducted a detailed review on the record of the evidence in
support of the motion, questioning Plaintiffs’ Counsel as to the circumstances
pertaining to each newly-named Defendant. At the hearing, Plaintiffs’ Counsel
explained that the DHGate.com Defendants had been identified by many of the
original seller Defendants as the suppliers who provided counterfeit products to the
original seller Defendants for resale. The Court then received and reviewed
summary exhibits of the evidence of the DHGate.com Defendants’ commercial
transactions with the original seller Defendants as well as with John Hood. (Dkts.
207, 208.) Finally, Plaintiffs’ Counsel presented evidence in support of each of the
factors to be considered before injunctive relief can be granted: irreparable and
imminent injury, likelihood of success on the merits, harm to the non-moving
parties, and impact on thepublic interest. See 4 C. Wright & A. Miller, Federal
Practice and Procedure § 2951 at 507-08; see also McPherson v. Michigan High Sch.
Athletic Ass’n, 119 F.3d 453, 459 (6th Cir. 1997) (en banc). This evidence has not
been controverted, though the DHGate.com Defendants were invited to do so.
Pursuant to Federal Rule of Civil Procedure 65(a), the Court will therefore
grant Plaintiffs a preliminary injunction and other requested relief as specified
below for the reasons stated on the record. Although injunctive relief is an
extraordinary remedy, there is a sufficient basis for granting it against the
DHGate.com Defendants, who offer no evidence, or response of any kind, that would
suggest otherwise.

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Plaintiffs’ request for other relief will also be granted. In addition to
preliminary injunction, Plaintiffs also request an expedited discovery order.
Plaintiffs request to serve limited, expedited discovery upon necessary third parties
in order to establish with greater certainty the DHGate.com Defendants’ identities
and addresses as well as the locations of their counterfeiting operations. (Dkt. 189,
pp. 26-29.) Pursuant to Federal Rule of Civil Procedure 26(d)(1), parties can begin
discovery before their Rule 26(f) conference if a district court authorizes them to do
so upon a showing of good cause. Fed. R. Civ. P. 26(d)(1). Within this Circuit,
district courts have found good cause for granting expedited discovery when the
true identities of the defendants are unknown, when the moving party alleges
infringement, when the scope of the discovery sought is narrow, and when
expedited discovery would substantially contribute to moving the case forward. See,
e.g., Arista Records, LLC v. Does 1-4, 2007 WL 4178641, *1 (W.D. Mich. Nov. 20,
2007).
Although Plaintiffs have thus far identified the DHGate.com Defendants by
their DHGate.com usernames, Plaintiffs wish to serve discovery upon the
DHGate.com Defendants’ third-party providers including DHGate.com and DHPay
requesting: (1) the names and addresses of these Defendants and the locations of
their operations, including identifying information associated with Defendants’
online accounts; (2) any and all known Internet websites on which the DHGate.com
Defendants trade in ZIG-ZAG® products; (3) any and all known domain names
registered by the DHGate.com Defendants; and (4) any and all financial accounts

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owned or controlled by the DHGate.com Defendants. (Dkt. 189, p. 27.) Given the
limited scope and time-sensitive nature of this discovery request, and Plaintiffs’
offer to post a $10,000 bond with the Court to compensate for any damages suffered
as a result of any wrongful restraint under this order, the Court will grant this
relief.
With respect to the DHGate.com Defendants, having read and considered
the papers and arguments of counsel, and good cause appearing, Plaintiffs’ motion
for injunctive and other relief (Dkt. 189) is GRANTED.A preliminary injunction is
an extraordinary form of relief, and with this in mind, the Court enters the
following orders:
PRELIMINARY INJUNCTION
IT IS HEREBY ORDERED, pursuant to Federal Rule of Civil Procedure
65, that Defendant DHGate Seller jackyhu, Defendant DHGate Seller kathy0577,
Defendant DHGate Seller cngzss, and Defendant DHGate Seller cngzss1 (together,
the “DHGate Defendants”), as well as their agents, their servants, their employees,
and their officers, and all other persons in active concert or participation with them
(the “Enjoined Parties”) are enjoined and restrained from directly or indirectly,
anywhere in the world:
1. Importing, shipping, manufacturing, distributing, delivering, advertising,
promoting, making, purchasing, offering for sale, selling, or otherwise
disposing of, in any manner, any counterfeit or infringing ZIG-ZAG® brand
cigarette paper products, including, but not limited to, ZIG-ZAG® 11/4 Size

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French Orange (“ZIG-ZAG® Orange”), or any cigarette paper products
bearing:
(i)

infringing or counterfeit versions of the ZIG-ZAG® Trademarks,

the NAOC® Trademarks, the NAOC© Copyright, and/or the ZIGZAG® Orange Trade Dress (as these terms are defined in North
Atlantic’s First Amended Complaint in the above-captioned action),
which appear alone or in combination on all cartons and booklets of
ZIG-ZAG® Orange cigarette paper products distributed by North
Atlantic in the United States; and/or
(ii)

the false statement that such products are “Distributed by

North Atlantic Operating Company, Inc.” or otherwise under the
control or supervision of North Atlantic, when they are not;
2. Importing, shipping, manufacturing, distributing, delivering, advertising,
promoting, making, purchasing, offering for sale, selling, passing off, or
otherwise disposing of, in any manner, any purported North Atlantic
products that are not actually produced, imported, or distributed under the
control or supervision of North Atlantic and/or approved for sale in the
United States by North Atlantic, in connection with the ZIG-ZAG® or
NAOC® Trademarks or the NAOC© Copyright, or inducing or enabling
others to commit any of the aforesaid actions;

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3. Committing any acts calculated to cause purchasers to believe that
counterfeit or infringing ZIG-ZAG® cigarette paper products, including ZIGZAG® Orange, originate with North Atlantic, when they do not;
4. In any way infringing or damaging the ZIG-ZAG® or NAOC® Trademarks,
the NAOC© Copyright, or the ZIG-ZAG® Orange Trade Dress;
5. Attempting, causing, or assisting in any of the above-described acts,
including, but not limited to, enabling others in the above-described acts, or
passing on information to others to allow them to do so;
6. Destroying, altering, deleting, or otherwise disposing of any documents,
records, or electronically stored information concerning the import,
manufacture, distribution, advertisement, promotion, making, purchase, offer
to sell, or sale of any product that has been or is intended to be sold in
packaging containing the ZIG-ZAG® or NAOC® Trademarks, the NAOC©
Copyright, or the ZIG-ZAG® Orange Trade Dress;
7. Forming or causing to be formed any corporation or other entity that engages
in any of the above-described acts;
8. Accessing, using, linking to, transferring, selling, exercising control over, or
otherwise exerting ownership over their respective DHGate seller accounts
and any other online marketplace account that is being used to offer, sell, and
distribute, or is the means by which the Enjoined Parties could continue to
offer, sell, and distribute, any counterfeit or infringing ZIG-ZAG® Orange
products;

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9. Accessing, using, linking to, transferring, selling, exercising control over, or
otherwise exerting ownership over all online payment accounts associated
with the Enjoined Parties’ respective online marketplace accounts through
which they are or have been offering, selling, and distributing counterfeit or
infringing ZIG-ZAG® Orange products; and
10. Accessing, transferring, or disposing of any assets, subject to any of the
Enjoined Parties’ provision of accounting of any assets over $1,000 and
uncontradicted documentary proof that such particular assets are not
proceeds of counterfeiting activities.
IT IS FURTHER ORDERED that the Enjoined Parties shall immediately
turn over to North Atlantic, or any person or entity designated by it, all counterfeit
ZIG-ZAG® Orange cigarette paper products, or any products bearing counterfeit or
infringing versions of the ZIG-ZAG® or NAOC® Trademarks, the NAOC©
Copyright, the ZIG-ZAG® Orange Trade Dress, and/or the false statement that such
products are “Distributed by North Atlantic Operating Company, Inc.”, in their
possession custody or control.
IT IS FURTHER ORDERED that the Enjoined Parties shall produce to
North Atlantic, within fourteen (14) days after service of this Order, a written
report under oath providing:
1. Their true names and physical addresses;
2. All websites and online marketplace accounts on any platform that they
own and/or operate;

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3. A list of their financial accounts, including, but not limited to, DHPay,
Western Union, American Express, Visa, MasterCard, and merchant bank
accounts;
4. A list summarizing the dates, quantities, names, and addresses of all
suppliers and/or manufacturers from whom they have acquired ZIG-ZAG®
Orange over the preceding twenty-four (24) months; and
5. A list summarizing the dates, quantities, names, and addresses of all
customers to whom they have distributed ZIG-ZAG® Orange over the
preceding twenty-four (24) months.
EXPEDITED DISCOVERY
IT IS FURTHER ORDERED that any third party in privity with or
providing services to any of the Enjoined Parties, or in connection with any of the
DHGate Defendants’ online merchant accounts or related financial accounts,
including, but not limited to, DHGate.com, Alibaba.com, eBay.com, Bonanza.com,
Rakuten.com, internet service providers, web hosts, sponsored search engine or adword providers, DHPay, PayPal, Western Union, Visa, MasterCard, American
Express, banks, and other payment processing service providers (collectively, “Third
Party Providers”) shall, within ten (10) days after service of this Order, provide to
North Atlantic expedited discovery, including copies of all documents and records in
such person’s or entity’s possession or control, relating to:
1. The identities and addresses of the Enjoined Parties, and the locations
and identities of their operations, including, without limitation,

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identifying information associated with their DHGate accounts, DHPay
accounts, and any and all other online marketplace accounts, merchant
accounts, and payment accounts;
2. Any and all known Internet websites on which the Enjoined Parties trade
in ZIG-ZAG® cigarette paper products;
3. Any and all known domain names registered by the Enjoined Parties or
any of them;
4. Any and all financial accounts owned or controlled by the Enjoined
Parties, including such accounts residing with or under the control of any
banks, savings and loan associations, merchant account providers,
payment processors and providers, credit card associations, or other
financial institutions which receive or process payments or hold assets on
the Enjoined Parties’ behalf, including, without limitation, DHPay,
PayPal, Western Union, Visa, MasterCard, and American Express.
IT IS FURTHER ORDERED that Third Party Providers, specifically
including, but not limited to, DHGate and DHPay, shall, within three (3) days after
service of this Order:
A. Freeze access of each and every Enjoined Party to any and all of their
online accounts used in connection with the trade of counterfeit ZIGZAG® cigarette paper products, by temporarily disabling these accounts
and making them inactive and non-transferable pending further order
from this Court;

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B. Disable and cease displaying any advertisements used by or associated
with the Enjoined Parties in connection with the sale of counterfeit or
infringing ZIG-ZAG® cigarette paper products; and
C. Take all steps necessary to prevent Internet links, whether or not active,
to the Enjoined Parties’ online marketplace accounts from displaying in
search results, including, but not limited to, removing links to these
accounts from any search index.
IT IS FURTHER ORDERED that the Enjoined Parties shall be temporarily
restrained and enjoined from transferring or disposing of any money, assets, or other
gains obtained as a result of trade in counterfeit ZIG-ZAG® cigarette paper products
until further ordered by this Court.
IT IS FURTHER ORDERED that Third Party Providers, specifically
including, but not limited to, DHPay, banks, payment processors, and other financial
institutions who receive actual notice of this Order, shall immediately locate all
accounts and funds owned or operated by or otherwise associated with the Enjoined
Parties and each of their merchant websites, and that such accounts be frozen,
disabled, restrained and enjoined from transferring or disposing of any money or
other of the Enjoined Parties’ assets, without prior approval of the Court, except as to
an Enjoined Party that files with the Court and serves upon Plaintiffs’ counsel:
1.

An accounting of any of all of such Enjoined Party’s assets located in

the United States having a value of one thousand dollars ($1,000) or more, and the
location and identity thereof; and

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2.

Uncontradicted documentary proof accepted by North Atlantic that

particular assets are not proceeds of such Enjoined Party’s counterfeiting activities,
in which case those particular assets shall be released to such Enjoined Party.
IT IS FURTHER ORDERED that upon three (3) business days’ written
notice to the Court and North Atlantic’s counsel, any of the Enjoined Parties may,
upon proper showing, appear and move for the dissolution or modification of the
provisions of this Order concerning the restriction upon transfer of the Enjoined
Parties’ assets.
IT IS FURTHER ORDERED that North Atlantic post an undertaking
within five (5) business days of the entry of this Order with the Clerk of the Court
in the form of a bond, cash or check in the sum $10,000.00 as security for the
payment of such costs and damages as may be incurred or suffered by any party as
a result of a wrongful restraint hereunder.
ALTERNATIVE SERVICE
IT IS FURTHER ORDERED that, good cause having been shown, North
Atlantic may continue to serve upon the DHGate Defendants and upon any
necessary third party the documents filed in this matter, including the Complaint,
Summons, this Order and any and all other Orders and supporting briefs herein, by
email or other electronic means, and/or by overnight courier, when practicable, to
the degree necessary to ensure and effectuate service.

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OPPOSITION, REPLY PAPERS, AND SERVICE
IT IS FURTHER ORDERED THAT service of this Order and copies of the
papers in support thereof, shall be made on the DHGate Defendants no later than
July 11, 2016.
IT IS FURTHER ORDERED that opposition papers, if any, be filed by the
DHGate Defendants with this Court and served by either personal service, notice of
electronic filing, facsimile, or email upon North Atlantic’s counsel, Honigman Miller
Schwartz and Cohn LLP, at their offices at 315 E. Eisenhower Parkway, Suite 100,
Ann Arbor, Michigan 48108, and Venable LLP, at their offices at 1270 Avenue of
the Americas, 25th Floor, New York, New York 10020, on or before July 15, 2016
and reply papers shall be filed and served in the equivalent manner on or before
July 20, 2016.
IT IS FURTHER ORDERED that the Enjoined Parties shall be deemed to
have actual notice of the issuance and terms of the preliminary injunction, which
shall extend through the pendency of this action, and any act by any of the Enjoined
Parties in violation of any of the terms of the preliminary injunction may be
considered and prosecuted as contempt of this Court.
SO ORDERED.
s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE

Dated: July 8, 2016

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Certificate of Service
I hereby certify that this Order was electronically submitted on July 8, 2016, using
the CM/ECF system, which will send notification to each party.
By: s/A. Chubb
Case Manager

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