SI03, Inc. v. Musclegen Research, Inc.

Filing 59

MEMORANDUM AND ORDER re: 53 MOTION for Relief from Default Judgment (Doc. 29) and Permanent Injunction (Doc. 28) filed by Defendant Musclegen Research, Inc. IT IS HEREBY ORDERED that Defendant Musclegen Research, Inc.'s Motion fo r Relief (ECF No. 53) is GRANTED. IT IS FURTHER ORDERED that the Default Judgement (ECF No. 29) is VACATED. Defendant Musclegen Research, Inc. is granted fourteen days from the date of this Memorandum and Order to file an answer or otherwise respond to Plaintiff SI03, Inc.'s Complaint. Signed by District Judge Ronnie L. White on 12/9/19. (CSG)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
SOUTHERN DIVISION
SI03, INC.,
Plaintiff,
v.

MUSCLEGEN RESEARCH, INC., et al.,
Defendants.

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No. 1:16CV274 RLW

MEMORANDUM AND ORDER
This matter is before the Court on Defendant Muscle gen Research, Inc.' s Motion for
Relief. (ECF No. 53) Defendant argues the Court should vacate the Default Judgment and
permanent injunction entered December 12, 2017 pursuant to Federal Rule of Civil Procedure
60(b) because it was not properly served before the judgment and injunction were entered and it
did not receive notice of the case until October 22, 2018. Plaintiff SI03, Inc. opposes the motion.
After careful consideration, the Court grants the motion and vacates the Default Judgment and
permanent injunction (ECF No. 29) previously entered in this case.
BACKGROUND
On November 22, 2016, Plaintiff SI03, Inc. filed suit against Defendant Muscle gen 1
Research, Inc., a North Carolina corporation, alleging false advertising under the Lanham Act,
15 U.S.C. § l 125(a) (Count I); unfair competition under Missouri common law (Count II); and
unjust enrichment under Missouri common law (Count III). (ECF No. 1) On November 26,
2016, Plaintiffs first attempt to serve Defendant via process server at the address listed on the
North Carolina Secretary of State's website was unsuccessful. (ECF No. 5) The address listed

1

The Court notes that styling of Defendant's corporate name is inconsistent within the record:
some filings use "Musclegen" and others use "MuscleGen." The Court will use "Musclegen"
except when a direct quote from the record uses "MuscleGen."

on the North Carolina Secretary of State's website, 2044 Muirfield Village Way, Raleigh, NC
27604, was the personal residence of Defendant's registered agent, Dr. Brian Parks. 2 According
to Dr. Parks, however, he had paid a service called "MyCorporation" to change the address for
Defendant and all of its corporate officers on the North Carolina Secretary of State's website to
P.O. Box 607, Willow Springs, NC 27592. (Deel. of Dr. Brian M. Parks if 16, ECF No. 50-1)
Evidently, MyCorporation had failed to make Dr. Parks's requested change of address.
After Plaintiffs first attempt at service failed, it attempted substituted service on
Defendant via the North Carolina Department of the Secretary of State, which sent the service
documents via certified mail with return receipt requested to 2044 Muirfield Village Way. On
December 24, 2016, the service documents were signed for by an individual at the 2044
Muirfield Village Way address. (ECF Nos. 8 & 7) According to Dr. Parks, that individual is the
current homeowner of 2044 Muirfield Village Way who has no association with Defendant and
did not know Dr. Parks. (Deel. of Dr. Brian M. Parks if 16, ECF No. 50-1) Because the
documents had been delivered to the address on record for Defendant and were ostensibly
received by a representative of Defendant as evidenced by a signature, the North Carolina
Department of the Secretary of State confirmed to Plaintiff on January 4, 2017 that service upon
Defendant was successful. (ECF No. 8, at 6)
On April 18, 2017, Plaintiff filed for the Clerk of Court to enter default pursuant to
Federal Rule of Civil Procedure 55(a) (ECF No. 13), which was entered on April 19, 2017 (ECF
No. 14). The Clerk of Court noted, "The record reflects service of summons and the complaint
upon said Defendant on January 4, 2017, by service upon the North Carolina Secretary of State
in accordance with North Carolina law." (Id.)

2

Dr. Parks is also a co-founder of Defendant and its Chief Operating Officer.

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On May 18, 2017, Plaintiff filed a Motion for Default Judgment and Entry of Permanent
Injunction. (ECF No. 19) Because Defendant had not been notified of the Clerk of Court's entry
of default, the Court ordered copies of the Clerk's Entry of Default be mailed through regular
mail and certified mail to Defendant via the North Carolina Secretary of State and to Dr. Parks at
P.O. Box 607, Willow Springs, NC 27592. (ECF No. 20) The Court notes that it discovered this
address, which was the address Dr. Parks says he paid MyCorporation to change on the Secretary
of State's website, after conducting its own Internet search. The North Carolina Secretary of
State received the copies on May 23, 2017. (ECF No. 22) The copies sent to Dr. Parks,
however, were returned as unclaimed on June 15, 2017, and the envelope notes two attempts at
delivery were made on May 23 and 29, 2017 before the documents were returned on June 7,
2017. (ECF No. 24)
On October 6, 2017, Plaintiff filed a Renewed Motion for Default Judgment and Entry of
Permanent Injunction. (ECF No. 25) On October 18, 2017, the Court ordered copies of the
renewed motion, as well as copies of other filings, to be mailed to Defendant and noted:
While MuscleGen was served through the North Carolina Secretary of State, a
recent Internet search by the Court revealed a new mailing address on
MuscleGen's website. Out of an abundance of caution, the Court will make one
last attempt to notify Defendant MuscleGen of the Complaint and pending
motions for default judgment seeking injunctive and monetary relief.
(ECF No. 26) (emphasis added) Accordingly, copies were mailed via regular and certified mail
to MuscleGen Research, Inc., 2425 Kildaire Farm Road, Suite 407, Cary, NC 28518. (Id.) On
November 8, 2017, the documents were received and signed for by "Sam Steger." (ECF No. 27)
According to Dr. Parks, an employee named Samantha Steger worked for Defendant from June
2017 until February 2018, "when she was terminated for cause." (Deel. of Dr. Brian M.

Parks~

18, ECF No. 50-1) Dr. Parks further asserts that "[i]f Ms. Steger did sign for those documents,

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she never passed them along to any other Musclegen employee." (Id) On December 12, 2017,
the Court entered a Default Judgment and permanent injunction in favor of Plaintiff. (ECF Nos.
28 & 29)
According to Dr. Parks, he first learned of this case once some of Defendant's clients
made "passing comments about a lawsuit against Musclegen" after the Court entered its Default
Judgment and permanent injunction. (Deel. of Dr. Brian M. Parks iJ 5, ECF No. 50-1) He then
searched online and "learned that this Court had entered an injunction against Musclegen, but
had not ordered a fine or made any other demand on Musclegen." (Id.) Dr. Parks states that,
after reviewing the language in the Court's Default Judgment and permanent injunction, he
"believed that Musclegen was not in violation of it" as Defendant had changed its business
practice at issue. (Id.) Conceding his lack of legal knowledge, Dr. Parks avers Defendant did
not think they needed to take any action in this matter because they believed they were not in
violation of the injunction. (Id.)
According to Plaintiff, its counsel attempted to contact Defendant on January 11, 2018.
(ECF No. 55-2) Once the permanent injunction's deadline passed for Defendant to recall certain
products, Plaintiffs counsel sent a letter via email to Defendant at the email address
[e-mail]. (ECF Nos. 55-2, -3) That same date, Plaintiffs counsel received a
response email from someone named "Gina Travino," who identified herself as "Customer
Service Representative" for "Musclegen Research, MedFit RX, Skin Fit and Muscle Mud
Coffee." (ECF No. 55-3) "Gina Travino" stated: "Our legal counsel will respond. We have just
received noticed [sic] before Christmas as all correspondences were sent to the wrong address.
Countersuit to follow." (Id.) According to Dr. Parks, "Gina Travino" is a pseudonym used by a
third-party company in India, Habliss, that Defendant hired to handle customer service

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responses. (Deel. of Dr. Brian M.

Parks~~

20-21, ECF No. 50-1) Dr. Parks further attests that

Habliss did not inform Defendant about the communication with Plaintiffs counsel and, after
Habliss repeatedly failed to forward certain documents to Defendant's employees, Defendant
ceased doing business with it. (Id.)
Plaintiff filed a Motion for Contempt on April 5, 2018 (ECF No. 35), and Renewed
Motion for Contempt on August 13, 2018 (ECF No. 36), claiming Defendant was violating the
permanent injunction and moving for sanctions. On September 5, 2018, the Court issued an
Order for Defendant to respond to Plaintiffs Motion for Contempt no later than October 3, 2018.
(ECF No. 37) The Court ordered the Clerk of Court to serve a copy of the September 5, 2018
Order via regular mail and UPS to MuscleGen Research, Inc., 2425 Kildaire Farm Road, Suite
407, Cary, NC 28518. (Id.) On October 18, 2018, after nothing had been filed to indicate
service was successful, the Court issued an Amended Order on October 18, 2018 and ordered
Plaintiff to effect service by special process server. (ECF No. 39) Plaintiff submitted an
affidavit of service indicating service was successful on October 22, 2018. (ECF No. 40)
Dr. Parks attests that when Defendant's president was served on October 22, 2018, "that
was the first time that MusClegen understood that there might be further action with respect to
the injunction." (Deel. of Dr. Brian M.

Parks~

24, ECF No. 50-1) The Amended Order of

October 18, 2018 ordered Defendant to respond to Plaintiffs Motion for Contempt no later than
fourteen days after service was completed. (ECF No. 39) Accordingly, Defendant's response
was due no later than November 5, 2018. Defendant's first activity in the case was the entry of
appearance of its initial counsel on November 20, 2018. (ECF No. 41) Defendant's initial
counsel filed a motion to withdraw as counsel on January 3, 2019 (ECF No. 42) and Defendant's
current counsel entered their appearance on February 5, 2019. (ECF Nos. 43 & 44) Defendant's

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current counsel requested an additional fourteen days to respond to Plaintiffs Motions for
Contempt, which the Court granted. (ECF No. 46, 47) Defendant timely filed its Response in
Opposition to Plaintiffs Motions for Contempt in which it argues all attempts at service prior to
October 22, 2018 were unsuccessful and it only learned of the case on October 22. (ECF No. 50,
at 9) Upon consideration of the procedural posture of this case, the Court found it was
appropriate to deny Plaintiffs Motions for Contempt without prejudice so Defendant, with the
aid of its current counsel, could fully address its concerns regarding previous attempts at service
and any impact on this Court's previous orders and judgments.
On March 19, 2019, Defendant filed the instant Motion for Relief in which it moves for
the Court to grant relief from the Default Judgment and permanent injunction pursuant to Rule
60(b). (ECF No. 53) Plaintiff opposes the motion. (ECF No. 55)
DISCUSSION
Defendant argues the Court should vacate the Default Judgment and permanent
injunction entered December 12, 2017 because it was not properly served before the judgment
and injunction were entered and it did not receive notice of the case until October 22, 2018.
Pursuant to Federal Rule of Civil Procedure 60, the Court may set aside a void judgment. Fed.
R. Civ. P. 60(b)(4). "[A] default judgment entered without service of process and personal
jurisdiction is void and can be attacked at any time." Allstate Ins. Co. v. Bass, No. 4:11-CV1910-JAR, 2014 WL 2765286, at *2 (E.D. Mo. June 18, 2014) (citing Printed Media Servs., Inc.
v. Solna Web, Inc., 11F.3d838, 841 (8th Cir. 1993)). "If a defendant is improperly served, a
federal court lacks jurisdiction over the defendant." Printed Media Servs., Inc., 11 F.3d at 843
(8th Cir. 1993).

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Rule 4(h) provides that a corporation in the United States can be served either by
delivering a copy of the summons and a complaint to an officer, a managing or general agent, or
any other agent authorized by appointment or law to receive service. Rule 4(e) further provides
that service upon an individual can be accomplished by "following state law for serving a
summons in an action brought in courts of general jurisdiction in the state where the district court
is located or where service is made." Fed. R. Civ. P. 4(e)(l). Under North Carolina law, where
Defendant is incorporated and where service has repeatedly been attempted, when an entity that
is required to maintain a registered agent in North Carolina fails to do so, or "when its registered
agent cannot with due diligence be found at the registered office, ... the Secretary of State
becomes an agent of the entity upon whom any such process, notice or demand may be served."
N.C. Gen. Stat. § 55D-33(b). Accordingly, a plaintiff who first fails to effect service on a
registered agent of a North Carolina corporation may deliver copies of the complaint and
summons to the North Carolina Secretary of State. Then, "the Secretary of State shall
immediately mail one of the copies thereof, by registered or certified mail, return receipt
requested, to the entity at its principal office or, ifthere is no mailing address for the principal
office on file, to the entity at its registered office." Id. That statute makes clear: "Service on an
entity under this subsection is effective for all purposes from and after the date of the service on
the Secretary of State." Id. (emphasis added).
Defendant cites examples of cases where courts applying North Carolina's practically
identical Rule 60(b) have denied requests for relief from judgments where defendants claimed to
have been improperly served because they failed to keep current contact information with the
Secretary of State. See, e.g., Builders Mut. Ins. Co. v. Doug Besaw Enters., Inc., 775 S.E.2d 681,
685 (N.C. Ct. App. 2015); S.C. Ins. Co. v. Hallmark Enters., Inc., 364 S.E.2d 678, 681 (N.C. Ct.

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App. 1988); Royal Bus. Funds Corp. v. S. E. Dev. Corp., 232 S.E.2d 215, 219 (N.C. Ct. App.
1977). In other cases, however, courts have granted relief from a judgment when the failure of
service was not the defendant's fault. See Huggins v. Hallmark Enters., Inc., 351 S.E.2d 779,
783 (N.C. Ct. App. 1987) (finding a judgment void because the North Carolina Secretary of State
mailed documents to the wrong address). Here, Defendant argues it was the conduct of a third
party- MyCorporation - that caused it to not receive service through the first several attempts.
Defendant asserts it was not attempting to evade service. See Advanced Wall Sys., Inc. v.

Highlande Builders, LLC, 605 S.E.2d 728, 731 (N.C. Ct. App. 2004). Rather, it claims it acted
in good faith in assuming MyCorporation completed the service for which it was paid to
perform. Additionally, Defendant blames the conduct of the third-party customer service
company for the continued delay in Defendant's notice of the matter.
In response, Plaintiff first argues that Defendant's Rule 60(b) motion is time-barred.
Rule 60(b) provides
On motion and just terms, the court may relieve a party or its legal representative
from a final judgment, order, or proceeding for the following reasons:
( 1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable diligence, could not
have been discovered in time to move for a new trial under Rule 59(b);
(3) fraud (whether previously called intrms1c
misrepresentation, or misconduct by an opposing party;

or

extrinsic),

(4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged; it is based on
an earlier judgment that has been reversed or vacated; or applying it
prospectively is no longer equitable; or
(6) any other reason that justifies relief.
Rule 60(c) further provides: "A motion under Rule 60(b) must be made within a reasonable
time--and for reasons ( 1), (2), and (3) no more than a year after the entry of the judgment or
order or the date of the proceeding." Fed. R. Civ. P. 60(c)(l). Because Defendant's motion

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was filed more than a year after the Default Judgment that it seeks to set aside was entered,
Plaintiff contends the motion should be denied. The one-year time limit in Rule 60( c), however,
explicitly applies to motions brought pursuant to Rule 60(b)(l), (2), and (3). Defendant's motion
seeks relief under Rule 60(b)(4) and (6). Accordingly, the timeliness of the motion is judged by
a broader reasonableness standard based on the specifics of the case. The Court finds that
Defendant's Rule 60(b) Motion was brought within a reasonable time after the Court denied
Plaintiffs Motions for Contempt without prejudice and explicitly noted Defendant could fully
address concerns related to prior attempts at service.
Plaintiff also argues that the Default Judgment and permanent injunction in this case are
not void because service via the North Carolina Secretary of State was effective "for all
purposes." See N.C. Gen. Stat. § 55D-33(b). According to Plaintiff, it is immaterial that
Defendant hired a third party to change its address on file because it is a corporation's
responsibility to ensure that its address on file with the Secretary of State is correct. See Smith ex
rel. Strickland v. Jones, 645 S.E.2d 198, 201 (N.C. Ct. App. 2007) ("Defendant's failure to
attend to its obligations under Chapter 55D and properly maintain a registered office is the sole
reason why substitute service on the Secretary of State was necessary."). Plaintiff also notes that
the Court ordered copies of the Clerk's Entry of Default be mailed through regular mail and
certified mail to Defendant via the North Carolina Secretary of State and to Dr. Parks at the
address to which Defendant claims MyCoporation was hired to change, albeit after the Court
discovered it by conducting its own Internet search. (ECF No. 20) The copies sent to Dr. Parks,
however, were returned as unclaimed and the envelope notes two attempts were made before
being returned. (ECF No. 24)

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"The district court has wide discretion in ruling on a Rule 60(b) motion .... " Jones v.

Swanson, 512 F.3d 1045, 1049 (8th Cir. 2008). Defendant maintains that the first time it
received official notice of this case was on October 22, 2018, after which it retained its initial
counsel who entered an appearance less than a month later on November 20, 2018. While
Defendant's first substantive filing was submitted long after the Court ordered it to respond to
the then-pending Motion for Contempt, Defendant's actions since then and the arguments
presented by Defendant's current counsel demonstrate its good faith effort to respond in this
matter and challenge what it believes to be the deficient service of process in this case.
Defendant correctly notes that Plaintiff could have found an alternative address and
contact information on Defendant's website, as the Court did, after the first initial attempts at
service to the address on file with the North Carolina Secretary of State failed. However, if
Plaintiff had discovered the new address as listed on the website, Defendant may have still
argued it did not receive them ifthe same events transpired as when the Court mailed documents
to the correct address and they were received and signed for by an employee of Defendant who
appears to have not passed those documents along to others. Nevertheless, in light of the Eighth
Circuit's "strong judicial policy against default judgments," Oberstar, 987 F.2d at 504, the Court
finds that relief pursuant to Rule 60(b) is justified in this case. Even though Defendant has not
cited an example of a court finding cause to vacate a default judgment after a third party failed to
update a corporation's address on file with a Secretary of State's office, the Court finds the case
law discussed is sufficiently analogous to this case to suggest Defendant's requested relief is
appropriate as it was not purposefully evasive or inexcusably neglectful. Further, Plaintiff is
unlikely to be prejudiced if the Default Judgment is vacated because minimal, if any, discovery

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has taken place. Consequently, the Court vacates the Default Judgment and permanent
injunction and will permit the parties to resume litigation on the merits.
Accordingly,
IT IS HEREBY ORDERED that Defendant Musclegen Research, Inc. 's Motion for
Relief (ECF No. 53) is GRANTED.
IT IS FURTHER ORDERED that the Default Judgement (ECF No. 29) is VACATED.
Defendant Musclegen Research, Inc. is granted fourteen days from the date of this Memorandum
and Order to file an answer or otherwise respond to Plaintiff SI03, Inc.' s Complaint.
Dated

this~day of December, 2019.

~/.Mi&J

RONNIE L. WHITE
UNITED STATES DISTRICT JUDGE

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