APi Group, Inc. et al v. Global Distribution Services, Inc. et al

Filing 37

MEMORANDUM OPINION AND ORDER granting Plaintiffs' Motion for Attorney's Fees; Defendants shall pay Plaintiffs $11,796.00 on or before July 31, 2012 (Written Opinion). Signed by Judge Ann D. Montgomery on 07/10/2012. (TLU)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
APi Group, Inc.; and A.P.I. Garage Door, Inc.,
d/b/a Twin City Garage Door Company,
Plaintiffs,
MEMORANDUM OPINION
AND ORDER
Civil No. 11-3560 ADM/AJB

v.
Global Distribution Services, Inc., d/b/a
Twin City’s Choice Overhead Garage Door, Inc.;
and Mobile Motion, Inc.,

Defendants.
______________________________________________________________________________
Keri A. McWilliams, Esq., and Cynthia A. Moyer, Esq., Fredrikson & Byron, PA, Minneapolis,
MN, on behalf of Plaintiffs.
Jeffrey C. Brown, Esq., Sapientia Law Group, Minneapolis, MN, on behalf of Defendants.
______________________________________________________________________________
I. INTRODUCTION
This matter is before the undersigned United States District Judge for consideration of
costs and attorney’s fees from Defendants Global Distribution Services, Inc. (“Global
Distribution Services”) and Mobile Motion, Inc. (“Mobile Motion”) to Plaintiffs APi Group, Inc.
and A.P.I. Garage Door, Inc. (collectively, “Plaintiffs”) as contemplated by the Court’s prior
Order dated May 23, 2012 [Docket No. 32] (the “May 23, 2012 Order”). For the reasons set
forth below, APi is awarded $11,796.00.
II. BACKGROUND
On December 8, 2011, Plaintiffs filed their Complaint [Docket No. 1] alleging
cybersquatting, false designation of origin, false advertising, violation of the Minnesota
Deceptive Trade Practices Act, unfair competition, and common law trademark infringement by
Defendants. As of November 17, 2011, the registered agent for Global Distribution Services in

Minnesota was Bob Rudd, and Global Distribution Services’ registered office address in
Minnesota was an address on Concord Street in South St. Paul, Minnesota. May 18, 2012 Decl.
of Keri McWilliams [Docket No. 29], Ex. A. On December 15, 2011, Plaintiffs sent a process
server to that address, the process server found the address to be occupied by a storage facility
and was unable to locate Bob Rudd. May 18, 2012 Decl. of Keri McWilliams ¶¶ 5-6. On
December 16, 2011, Plaintiffs effected substitute service of process on the Secretary of State of
Minnesota for Global Distribution Services. March 15, 2012 Decl. of Keri A. McWilliams in
Supp. of Application for Entry of Default Against Global Dist. Servs., Inc. & Mobile Motion,
Inc. [Docket No. 6] Ex. B.
On November 17, 2011, Mobile Motion’s registered address was one in Hermosa Beach,
CA. March 15, 2012, McWilliams Decl., Ex. C. On December 19, 2011, a process server was
unable to locate Mobile Motion at its registered address. May 18, 2012 Decl. of Keri
McWilliams ¶ 9. Another address for Mobile Motion was discovered and service of process was
attempted to no avail. Id. ¶¶ 10-11. A process server then attempted to serve Mobile Motion’s
president at his home address in a gated community but was unsuccessful. Id. ¶ 13. On
December 28, 2011, copies of the Summons and Complaint in this matter were left with a person
at the address listed on Mobile Motion’s website, but the address was not actually a place of
business of Mobile Motion but rather was a UPS store. March 15, 2012 McWilliams Decl. ¶¶
11-13, Ex. E. That same day, copies of the Summons and Complaint were mailed to that
address. May 18, 2012 McWilliams Decl. ¶ 14, March 15, 2012 McWilliams Decl., Ex. F.
On March 15, 2012, more than three months later and having received no Answer from
Defendants, Plaintiffs applied for entry of default against Defendants and the Clerk entered
default against them. On March 28, 2012, still having received no Answer, Plaintiffs filed a
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Motion for Default Judgment and Injunctive Relief [Docket No. 8]. Plaintiffs mailed their
motion papers to Global Distribution Services at its Minnesota address and another business
address in Las Vegas, Nevada, and mailed their motion papers to Mobile Motion at all addresses
at which service was attempted. May 18, 2012 McWilliams Decl. ¶ 15. On April 9, 2012,
Defendants acknowledged receipt of the motion papers through counsel not licensed in
Minnesota. Id. ¶ 16. On April 14, 2012, Defendants made a settlement offer to Plaintiffs but did
not file a response to the default motion or an Answer. Id. ¶ 17. On April 25, 2012, Defendants’
local counsel sent a letter [Docket No. 14] to the Court seeking guidance on how best to respond
to the pending motions and file an Answer given that all relevant deadlines had passed and local
counsel had just been retained. On May 4, 2012, Defendants filed Motions to Set Aside Default
and [for] Leave to Answer Out of Time [Docket No. 17].
Mobile Motion avers it did not file an Answer or respond to the Motion for Default
Judgment earlier because it was “confused” why the Complaint was filed given that a prior
arbitration regarding similar facts was resolved in its favor. Decl. of Doran Kim [Docket No.
22] ¶ 3. Mobile Motion further avers it did nothing to protect its rights because it “assumed”
Global Distribution Services would handle this matter. Id. Global Distribution Services avers it
did not respond to the Complaint of Motion for Default Judgment because it was also “confused”
by the prior arbitration and because it did not believe it had been properly served. Decl. of
Brandon Campbell [Docket No. 23] ¶ 2.
By Order dated May 23, 2012, Plaintiffs’ Motion for Default Judgment was denied and
Defendants’ Motions to Set Aside Default and [for] Leave to File Answer Out of Time were
granted. However, in response to Defendants’ motions, Plaintiffs made an alternative request
that if their motion for default judgment was not granted and the default was set aside, that they
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be awarded costs and fees associated with the belabored service of process and motions required
because of Defendants’ failure to timely respond. The Court granted that request but provided
Defendants an opportunity to respond to the cost and fees claimed by Plaintiffs. Plaintiffs have
now submitted an itemized Bill of Costs and Defendants have submitted a letter-brief in
opposition.
III. DISCUSSION
Setting aside an entry of default is governed by Rule 55(c) of the Federal Rules of Civil
Procedure (“FRCP”). Rule 55(c) provides that an entry of default may be set aside for “good
cause.” Fed. R. Civ. P. 55(c). “When examining whether good cause exists, the . . . court should
weigh whether the conduct of the defaulting party was blameworthy or culpable, whether the
defaulting party has a meritorious defense, and whether the other party would be prejudiced if
the default were excused.” Stephenson v. El-Batrawi, 524 F.3d 907, 912 (8th Cir. 2008).
In granting Defendants’ motion at the conclusion of oral argument, the focus was on the
later factor. The Court determined little prejudice to Plaintiffs was incurred beyond the financial
costs expended. With respect to the first factor, Defendants were clearly culpable, but after
weighing the equities, and considering the disfavor the law places on default judgment, see In re
Jones Truck Lines, Inc., 63 F.3d 685, 688 (8th Cir. 1995) (“The entry of default judgment is not
favored by the law . . . “) (citation omitted), this matter was allowed proceed on the merits.
The award of fees and costs was done under this Court’s inherent equitable power to
sanction bad faith conduct. Chambers v. NASCO, Inc., 501 U.S. 32, 45–46 (1991) (noting
federal courts’ inherent power to assess attorney’s fees against party that has acted in “bad faith,
vexatiously, wantonly, or for oppressive reasons”). At first blush, it may seem contradictory to
make a finding of bad faith on one hand while not allowing the blameworthiness of Defendants
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to defeat their attempt to set aside the default. However, such a result is equitable. While the
blameworthiness of Defendants was not to the level that the sanction of default judgment was
warranted, the lesser sanction of restoring Plaintiffs to the position they would occupy but for
Defendants’ culpable conduct is just. “Bad faith” is a somewhat nebulous concept. In other
contexts, courts have likened bad faith with gross negligence or recklessness. Reliastar Life Ins.
Co. v. IOW Re, Inc., 303 F.3d 874, 882 (8th Cir. 2002) (holding bad faith in context of insurance
claims is deliberate deception, gross negligence, or recklessness); Perkins v. Spivey, 911 F.2d
22, 36 (8th Cir. 1990) (noting that for 28 U.S.C. § 1927 and Rule 11 purposes, bad faith by
attorney could be established by showing intentional or reckless disregard of the attorney’s
duties).
Here, Defendants were reckless in their response to notice of this lawsuit. There is no
dispute that both Defendants were aware of this litigation. They merely chose not to respond
because they were “confused” that this litigation dealt with the same internet domain name as a
prior arbitration. Decl. of Doran Kim ¶ 3; Decl. of Brandon Campbell ¶ 2. In addition to being
confused, Mobile Motion assumed Global Distribution Services would handle the litigation.
Decl. of Doran Kim ¶ 3. For its part, in addition to its confusion, Global Distribution Services
made the legal conclusion, apparently without advice from counsel that they had not been
properly served. Decl. of Brandon Campbell ¶ 2. Such conduct by these relatively sophisticated
parties who have previously litigated is reckless.
Therefore, it is an appropriate sanction to reimburse Plaintiffs for the costs and fees
caused by Defendants’ recklessness. Because this sanction was arrived at for a finding of bad
faith, which party was the “prevailing party” on the default motion is immaterial. See
Chambers, 501 U.S. at 53 (“[T]he imposition of sanctions under the bad-faith exception depends
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not on which party wins the lawsuit, but on how the parties conduct themselves during the
litigation.”). Therefore, Defendants’ arguments that they should not reimburse Plaintiffs for
arguing an unsuccessful motion or for bringing a motion that was lost on the merits are
unavailing. Defendants’ reckless conduct in not responding to this lawsuit caused Plaintiffs’
counsel to expend time researching, drafting, and arguing the Application for Entry of Default,
Motion for Default Judgment, and their eventual response to Defendants’ motions. Plaintiffs are
awarded $10,543.00 in fees to compensate them for that litigation. Furthermore, Defendants’
reckless conduct in not maintaining updated registered address and agent information caused
protracted attempts to effect service of process and Plaintiffs are awarded those costs in the
amount of $1,253.00. However, Plaintiffs will not be reimbursed for internet-based research.
Under Eighth Circuit precedent, computer-aided research, like all other forms of legal research,
are considered to be subsumed within an attorney’s fees. Standley v. Chilhowee R-IV School
Dist., 5 F.3d 319, 325 (8th Cir. 1993) (citing Leftwich v. Harris-Stowe State College, 702 F.2d
686, 695 (8th Cir. 1983)). Therefore, Plaintiffs’ total award amounts to $11,796.00.
IV. CONCLUSION
Based upon all the files, records, and proceedings herein, IT IS HEREBY ORDERED
that Defendants shall pay Plaintiffs $11,796.00 on or before July 31, 2012.
BY THE COURT:

s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: July 10, 2012.

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