BEAUTY PLUS TRADING CO. v. BEE SALES CO.

Filing 33

MEMORANDUM OPINION. Signed by Judge Esther Salas on 2/21/17. (cm )

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

BEAUTY PLUS TRADING CO.,
Plaintiff,
v.
BEE SALES CO.,
Defendant.

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Civil Action No. 15-8502 (ES) (MAH)
MEMORANDUM OPINION

SALAS, DISTRICT JUDGE
This matter is before the Court upon a motion to vacate default by Defendant Bee Sales
Co. (“Defendant” or “Bee Sales”). (D.E. No. 15). Plaintiff Beauty Plus Trading Co. (“Plaintiff”
or “Beauty Plus”) opposes the motion. (D.E. No. 23). The Court decides this matter without oral
argument. See Fed. R. Civ. P. 78(b). For the reasons below, the Court GRANTS Defendant’s
motion to vacate default.
1.

Factual & Procedural Background. Plaintiff manufactures and sells a variety of

high quality hair products. (D.E. No. 4, Amended Complaint (“Am. Compl.”) ¶ 9). On March 23,
2015, Plaintiff filed a trademark application for “Havana Mambo.” (D.E. No. 9, Young Hwang
Declaration (“Hwang Declaration”) ¶¶ 3-4). On May 12, 2015, Plaintiff released one of its most
successful hair extensions under the name “Havana Mambo.” (Id. ¶ 12).
In the fall of 2015, Plaintiff became aware that Defendant was selling a line of hair
extensions under the name “Super Senegal Mambo” throughout the United States. (Id. ¶ 6). On
October 26, 2015, Plaintiff sent a cease-and-desist letter to Defendant demanding that Defendant
stop selling hair extensions under the “Super Senegal Mambo” mark because it was confusingly
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similar to Plaintiff’s “Havana Mambo” mark. (D.E. No. 9, William W. Stroever Declaration
(“Stroever Declaration”) ¶¶ 3-4). Defendant did not respond to Plaintiff’s cease and desist letter.
(Id.)
On December 8, 2015, Plaintiff filed the first Complaint to initiate this action, asserting
claims for unfair competition and trademark infringement under federal, state law, and common
law. (D.E. No. 1). Also on December 8, the United States Patent and Trademark Office issued a
Federal Trademark Registration Number for the “Havana Mambo” mark: 4,858,434 (the “‘434
Registration”).

(Am. Compl. ¶ 10). On December 11, 2015, Plaintiff filed the Amended

Complaint incorporating the new ‘434 Registration and adding a claim for infringement of a
federally registered trademark. (Id.).
On December 14, 2015, Plaintiff served Bee Sales with the Summons and Amended
Complaint in Niles, Illinois. (D.E. No. 5). But Defendant failed to timely plead or otherwise
respond to the Complaint. And, on February 2, 2016, Plaintiff requested that the Clerk of Court
enter default against Defendant. (D.E. No. 8). On February 4, 2016, the Clerk of Court entered
default. Thereafter, on April 22, 2016, Plaintiff moved for default judgment against Defendant.
(See D.E. No. 9).
On June 30, 2016, Defendant’s counsel entered an appearance. (D.E. No. 12). Defendant
then filed a letter with the Court indicating that no answer was filed due to an administrative
oversight and that Defendant would move to vacate default. (D.E. No. 13). On July 11, 2016,
Defendant filed a motion to vacate default pursuant to Federal Rule of Civil Procedure 55(c). (D.E.
No. 15, Defendant’s Memorandum of Law in Support of Motion to Vacate Default (“Def. Mov.
Br.”)). Thereafter, the Court permitted Plaintiff to serve Defendant with requests for written
discovery regarding Defendant’s assertions of excusable neglect in the pending motion to vacate.

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(D.E. No. 22). On October 24, 2016, Plaintiff filed its opposition. (D.E. No. 23, Plaintiff’s
Memorandum of Law in Opposition to Defendant’s Motion to Vacate (“Pl. Opp. Br.”)). On
November 1, 2016, Defendant submitted its reply. (D.E. No. 24). On November 7, 2016, the
Court granted Plaintiff’s request to file a sur-reply (D.E. Nos. 26, 28), and on November 10, 2016,
Plaintiff filed its sur-reply. (D.E. No. 30).
2.

Defendant’s Arguments. Citing Rule 55(c), Defendant argues that the Court

should vacate default because Defendant’s failure to answer the Complaint was inadvertent. (Def.
Mov. Br. at 7). According to Defendant, its Chief Executive Officer (“CEO”), after receiving the
Summons and Amended Complaint, mistakenly believed that the matter was resolved because
Defendant discontinued the allegedly infringing hair extension.

(D.E. No. 15, Steve Ahn

Declaration (“Ahn Declaration”) ¶¶ 2-5). The Chief Financial Officer (“CFO”) eventually realized
the error in early June 2016 and then contacted Plaintiff’s attorney. (See id. ¶ 4). Defendant also
notes that Plaintiff will not suffer prejudice because no evidence has been lost and because it no
longer sells the “Super Senegal Mambo” hair extension. (Def. Mov. Br. at 8).
Lastly, Defendant avers that it has meritorious defenses. (Id. at 7). Specifically, it argues
that it has a complete defense to the claim of trademark infringement or unfair competition because
“mambo” is a generic description of the hair extension and thus not protectable as a trademark.
(Id. at 8-9). In support, Defendant has provided the Court with screen-captures of internet catalogs
that appear to demonstrate the prevalent use of “mambo” in the moniker of hair extension products.
(Id. at 3-4). Defendant also claims that “there is no reasonable likelihood that a purchaser would
confuse” its discontinued hair extension with the Plaintiff’s product. (Id. at 9).
3.

Plaintiff’s Opposition. In opposition, Plaintiff argues that Defendant does not

have a meritorious defense because Defendant admitted that it purchased and sold the allegedly

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infringing hair extension in 2015 and that it stopped distributing it in November 2015. (Pl. Opp.
Br. at 7). Plaintiff also contends that Defendant “fail[ed] to support its general denials with facts
or evidence of any kind thereby falling well short of satisfying” the burden to allege specific facts.
(Id. at 7).
Moreover, Plaintiff also argues that Defendant acted in bad faith by failing to answer
Plaintiff’s Complaint or respond to the motion for entry of default. (Id. at 8). According to
Plaintiff, Defendant has shown a lack of urgency and promptness when responding to Plaintiff’s
filings and the Court’s orders. (Id. at 13). Plaintiff also argues that Defendant’s CFO made a
conscious and knowing decision not to respond to the complaint. (Id. at 11).
Finally, Plaintiff contends that it will be prejudiced for two reasons if default is vacated.
First, Plaintiff claims that it will be prejudiced “because of the delay in securing relief.” (Id. at
14). Second, Plaintiff argues that it would be prejudiced if the action proceeds to litigation because
Defendant admits that it sold the allegedly infringing product in 2015 and, therefore, “the parties
would arrive at the same point in which the case currently stands, in which the only remaining
issue in dispute is damages.” (Id. at 15).
4.

Legal Standard. Motions to vacate default are governed by Federal Rule of Civil

Procedure 55. See Fed. R. Civ. P. 55(c). Rule 55(c) provides that “[t]he [C]ourt may set aside an
entry of default for good cause.” Id. Although the decision to vacate default is largely a matter of
judicial discretion, the Third Circuit has “repeatedly stated [its] preference that cases be disposed
of on the merits whenever practicable.” Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984). 1
When determining whether to vacate default, the Court must consider three factors: “(1)
whether the plaintiff will be prejudiced; (2) whether the defendant has a meritorious defense; (3)

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Unless otherwise indicated, all internal citations and quotations marks are omitted, and all emphasis is added.

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whether the default was the result of the defendant’s culpable conduct.” United States v.
$55,518.05 in U.S. Currency, 728 F.2d 192, 195 (3d Cir. 1984). Where there is a close case, the
Third Circuit has instructed that “doubts should be resolved in favor of setting aside the default
and reaching a decision on the merits.” Gross v. Stereo Component Sys., Inc., 700 F.2d 120, 122
(3d Cir. 1983).
5.

Rule 55(c) Warrants Vacatur.
a.

First, the Court must consider the “threshold question” of whether

Defendant has a meritorious or litigable defense. $55,518.05 in U.S. Currency, 728 F.2d at 195.
The Court finds that Defendant has a meritorious defense for purposes of the three-part test
required for a Rule 55(c) analysis.
Defendant has provided the Court with specific facts to support its argument that Plaintiff’s
use of “mambo” may be found to be a generic description of a hair extension. (See Def. Mov. Br.
at 3-4); see also E.T. Browne Drug Co. v. Cococare Prods., Inc., 538 F.3d 185, 191 (3d Cir. 2008)
(explaining that generic terms are offered no protection under the Lanham Act because “a firstuser of a term cannot deprive competing manufacturers of the product of the right to call an article
by its name”). Specifically, Defendant has provided exhibits containing screen-captures from
online catalogs—including Plaintiff’s website—that indicate “mambo” may be used as a generic
term. (See D.E. No. 15, Exs. D, E, and G). Plaintiff ignores these exhibits, claiming that
“Defendant did not provide affidavits or facts in support of its conclusory statements and alleged
defenses.” (Pl. Opp. Br. at 7). However, “the defaulting party does not have to show that they
will prevail at trial; rather, all they must show is that, on its face, their defense is litigable.”
Glashofer v. N.J. Mfrs. Ins. Co., No. 15-3601, 2016 WL 4204549, at *3 (D.N.J. Aug. 9, 2016).
After all, if it can prove this defense, the Court sees no reason—nor has Plaintiff offered any—

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why Defendant would not be absolved of liability. See $55,518.05 in U.S. Currency, 728 F.2d at
195 (“The showing of a meritorious defense is accomplished when allegations of [a] defendant’s
answer, if established on trial, would constitute a complete defense to the action.”). Accordingly,
this factor weighs in favor of vacating default.
b.

Second, Plaintiff contends that it will be prejudiced because it will be forced

to continue litigating liability and because its relief has been delayed. However, a “[d]elay in
realizing satisfaction on a claim rarely serves to establish the degree of prejudice” sufficient to
warrant the denial of a motion to vacate default. Feliciano v. Reliant Tooling Co., 691 F.2d 653,
656-57 (3d Cir. 1982). Moreover, the Third Circuit has a policy of encouraging decisions on the
merits. See Sourcecorp Inc. v. Croney, 412 F. App’x 455, 459-60 (3d Cir. 2011) (“Default
judgments are disfavored in our Circuit . . . . [W]e have previously held that the costs associated
with continued litigation normally cannot constitute prejudice.”); Days Inn Worldwide, Inc., v.
B.K.Y.K.-II, Inc., No. 16-452, 2016 WL 6126939, at *3 (D.N.J. Oct. 19, 2016) (“Plaintiff has not
identified any special harm that it will suffer if the Court vacates its entry of default judgment.”).
Accordingly, since Defendant has demonstrated that Plaintiff will not be sufficiently prejudiced,
this factor weighs in favor of vacating default.
c.

Third, the Court is persuaded that the entry of default against Defendant

stemmed from at least some culpable conduct. “In assessing whether the entry of default was
caused by a defendant’s culpable conduct, the courts look at factors such as whether the entry was
caused by defendant or defendant’s attorney and whether the defendant responded to the entry with
reasonable promptness.” Perry v. Burns, No. 11-2840, 2013 WL 1285302, at *7 (D.N.J. Mar. 26,
2013). Here, Defendant’s CFO admitted he received the Amended Complaint, admitted it created
an obligation to respond, and admitted that he informed the CEO of the Amended Complaint.

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(D.E. No. 23, Steve Ahn Deposition (“Ahn Deposition”) at 15:11-17:17). Notwithstanding receipt
of the Amended Complaint, the Defendant’s CEO believed that the dispute had been resolved
because the allegedly infringing hair extension was discontinued. (Id. at 17:9-11). Five months
later, after receiving Plaintiff’s motion for default judgment, the CFO then waited another three
weeks to contact Plaintiff’s attorney because he “was very busy” and “forgot.” (Id. at 19:15-19).
“Where, as here, a defendant repeatedly and completely disregards communications regarding a
lawsuit against it and chooses not to defend itself until months after its deadline to file a responsive
pleading has passed, its conduct is willful and culpable.” Re Cmty. Holdings II, Inc. v. Ecullet,
Inc., No. 16-304, 2016 WL 58688072, at *6 (D.N.J. Oct. 7, 2016). Thus, this factor weighs against
vacating default because Defendant inexcusably failed to respond to Plaintiff’s filings and
summons.
6.

Conclusion.

Notwithstanding its culpable conduct, the Court believes that

Defendant has demonstrated the existence of a meritorious defense and the lack of prejudice to
Plaintiff. The Rule 55(c) analysis, therefore, weighs in favor of vacating default. Accordingly,
the Court will vacate the February 4, 2016 entry of default (D.E. No. 8), and this action may
proceed on the merits. An appropriate Order accompanies this Memorandum Opinion.

s/Esther Salas
Esther Salas, U.S.D.J.

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