Rolex Watch U.S.A., Inc. v. City Styles 313, LLC et al
MEMORANDUM: For the foregoing reasons, a default judgment has been entered against all Defendants, Plaintiff has been awarded $1,000,000 in statutory damages, $21,874.50 in fees, and $600 in costs, and a permanent injunction has been issued barring Defendants from selling counterfeit Rolex watches. The Clerk of Court is instructed to close this case. (Signed by Judge Alison J. Nathan on 11/29/2012) (mro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DOC #: _ _ _~_ _ __
Rolex Watch U.S.A., Inc.,
'NOV 2 9 2012
12 Civ. 4754 (AJN)
City Styles 313, LLC, et al.,
ALISON J. NATHAN, District Judge:
This memorandum addresses the Court's reasons for entering a Final Judgment and
Injunction by Default (Docket # 41) against Defendant Michael Anthony Leonard II
("Leonard"), awarding statutory damages of $200,000 per infringed mark, awarding attorneys'
fees and costs, and entering a permanent injunction.
Plaintiff, Rolex Watch U.S.A., Inc. ("Rolex"), discovered Defendants' website through
Facebook in April of2012 and purchased a Rolex watch through the site on May 17,2012.
7; Trezza Decl.
4). Plaintiff paid $250 for the watch. (Trezza Decl.
Soon after the watch was delivered to Plaintiff in June of 2012, Plaintiff determined that it was a
counterfeit. (Crowe Decl.
This action was commenced on June 18,2012. (See Docket # 1). The Court entered a
temporary restraining order ("TRO") on June 19,2012. (Docket # 18). The TRO required
Plaintiff to serve Defendants using traditional methods or, alternatively, to move for permission
to use alternative service. (Id at 8). On June 25,2012, Plaintiff moved for alternative service,
informing the Court that it had not been able to locate Leonard to serve him, but that it had
affixed copies of the complaint and the TRO to his actual place of business and home address
and mailed copies in the manner required by N.Y. C.P.L.R. § 308(4) to both addresses. (Docket
#'s 20-21). The Court then allowed Plaintiff to serve the summons and complaint on Defendants
via three email addresses, including the email address that Plaintiff had previously used to
communicate with Defendants when purchasing the counterfeit Rolex watch. (Docket # 23).
The summons and complaint were served on Leonard by email on June 25,2012. (Docket # 19).
Leonard did not submit a timely responsive pleading. On November 8, 2012, over three
months after a responsive pleading was due, Leonard emailed an "Affidavit of Fact Notice to
Dismiss from Subject Matter of Jurdiction [sic]," without providing any explanation for his
failure to submit a timely response to the complaint. (Docket # 37).
A. The Court Does Not Accept Defendant's Untimely Submission
The standard for accepting a late pleading is the same as for vacating a default judgment.
See, e.g., Gaungzi Nanning Baiyang Food Co. Ltd v. Long River Int'l, Inc., 2010 WL 1257573
(S.D.N.Y. Mar. 30,2010). Rule 55(c) empowers a court to set aside a default judgment upon a
showing of "good cause." The Second Circuit instructs that when weighing whether to vacate a
default judgment, a district court should consider three factors: "(1) whether the default was
willful, (2) whether the defendant demonstrates the existence of a meritorious defense, and (3)
whether, and to what extent, vacating the default will cause the non-defaulting party prejudice."
v. McNulty, 137 F.3d 732, 738 (2d Cir. 1998). It is "well established that default
judgments are disfavored" in the Second Circuit. Pecarsky v. Galaxiworldcom Ltd, 249 F.3d
167, 174 (2d Cir. 2001) ("A clear preference exists for cases to be adjudicated on the merits.").
As discussed below, each of the three factors identified by the Second Circuit weigh in
favor of entering a default judgment.
Willfulness is "something more than mere negligence, such as egregious or deliberate
conduct," though the degree of negligence may factor into the court's decision-making. New
York v. Green, 420 F.3d 99, 108 (2d Cir. 2005).
The summons that was served on Leonard stated: "[w]ithin 21 days after service of this
summons on you ... you must serve on the plaintiff an answer to the attached complaint or a
motion under Rule 12." (Docket # 19). Approximately four months later, Leonard emailed a
document to the Court moving to dismiss the case. (Docket # 37). Yet Leonard has not provided
the Court with any explanation for his untimely submission. The Court therefore infers that the
lateness was willful. See Schroeder v. Indorsky, 1991 WL 1611187 (S.D.N.Y. Aug. 12, 1991)
("A default is willful where a defendant chooses to ignore a complaint and fails to respond.");
see also Marziliano v. Heckler, 728 F.2d 151, 156 (2d. Cir. 1984) (the Secretary of Health and
Human Services was found to have defaulted willfully when he had knowledge that he was
required to respond and simply ignored this obligation) ("No explanation was ever offered for
[the] failure to inform the court and thereby avoid defaulting. The record thus amply supported a
finding that the default was willfuL")
The Existence of a Meritorious Defense
The Second Circuit has held that the absence of a meritorious defense is a sufficient basis
to deny acceptance of a late answer. Green, 420 F.3d at 108. "In order to make a sufficient
showing of a meritorious defense ... the defendant need not establish his defense conclusively,
but he must present evidence of facts that, if proven at trial, would constitute a complete
defense." McNulty, 137 F.3d at 740. This standard has been applied to allow consideration of
procedural defenses, such as personal jurisdiction, and not just factual defenses. See Knox v.
PLO, 248 F.R.D. 420,427 (S.D.N.Y. 2008).
In this case, Leonard moves to dismiss on the basis that this Court lacks subject matter
jurisdiction. However, nothing in Leonard's submission is convincing regarding this assertion.
The Court understands Leonard's motion as asserting that this Court lacks any authority to
preside over this Lanham Act case, or to preside over any case involving Leonard. (See Docket
# 37 at ("What you may think is law is actually public policy and I do not operate under public
policy unless I formally consent.")). Such an assertion is without merit.
The passage of time alone is an insufficient basis for a finding of prejudice. Badian v.
Elliott, 165 F. App'x 886, 891 (2d Cir. 2006). But "[w]hen delay creates ... discovery
difficulties or provides greater opportunity for fraud, a district court does not err in finding that
prejudice warrants" denial of a late answer. Id.
In this case, Leonard refused to respond to Plaintiffs requests for expedited discovery,
which this Court authorized as part ofthe TRO. (Docket # 18 at 5-6). Expedited discovery is
important in counterfeiting cases because it "may very well lead to evidence of continuing
infringement by this defendant or others; it may also lead to the discovery of future plans to
infringe or the discovery of additional infringing merchandise." Twentieth Century Fox Film
Corp. v. Mow Trading Corp., 749 F. Supp. 473, 475 (S.D.N.Y. 1990). Leonard's refusal to
appear in this case and resulting failure to respond to Plaintiffs requests for expedited discovery
establishes prejudice that cannot be undone.
B. Statutory Damages of $200,000 Are Awarded for Each Mark
Courts determining damages pursuant to 15 U.S.c. § 1117(c)(2) have considered the
(1) the expenses saved and the profits reaped; (2) the revenues lost by the
plaintiff; (3) the value of the [trademark]; (4) the deterrent effect on others
besides the defendant; (5) whether the defendant's conduct was innocent or
willful; (6) whether a defendant has cooperated in providing particular
records from which to assess the value of the infringing material produced;
and (7) the potential for discouraging the defendant.
See, e.g., Coach, Inc. v. Horizon Trading, 2012 WL 5451274, at *8 (S.D.N.Y. Nov. 7,
2012) (Engelmayer, J.).
On balance, the factors weigh in Plaintiffs favor. As for the first two factors, Plaintiff
presents no evidence as to how much money Defendants earned from selling counterfeit Rolex
watches or how much revenue Plaintiff lost as a result. But Plaintiff is in no position to provide
such a showing given that there has been no discovery. Nor have Defendants appeared in this
action to assert that the infringing activity is limited or insubstantial. Indeed, this lack of
cooperation weighs against Defendants on the sixth factors ("whether a defendant has cooperated
in providing particular records from which to assess the value of the infringing material
produced"). Additionally, the value of the trademark is likely to be quite high given the
worldwide recognition of the Rolex brand as a high-end manufacturer of watches.
Furthermore, "the goal of deterring similar conduct by other enterprises requires a
substantial award." All-Star Marketing, 775 F. Supp. 2d 613,623 (S.D.N.Y. 2011). Screen shots
presented to the Court show that on April 13, 2012, Defendants' website posted a message
stating: "Why pay retail anymore? Fastest Growing Small Business in Metro Detroit." (CompI.
Ex. 3). It is not clear to the Court whether this statement indicates the actual scope of
Defendants' counterfeiting operation-in which case it is quite large-or whether it is merely
self-aggrandizement-in which case it indicates a willfulness on the part of Defendants to grow
their counterfeiting operation. Either way, the statement suggests a need for a substantial award
to deter future infringement.
The Court's conclusion is bolstered by a declaration recently submitted by Plaintiff
indicating that on November 19, 20 12-nearly five months after Defendants were served with
notice of this case-Defendants were still selling counterfeit Rolex watches through their various
websites. (Docket # 38).
Given the willful nature of this conduct and the need for deterrence, the Court concludes
that an award of statutory damages of $200,000 per mark is appropriate, amounting to a total
award of$1,000,000. See Coach v. McMeins, 2012 WL 1071269 (S.D.N.Y. Mar. 9, 2012)
C. Plaintiff is Awarded Attorneys' Fees and Costs
Under the Lanham Act, "the court in exceptional cases may award reasonable attorney
fees to the prevailing party." 15 U.S.c. § 1117(a). Exceptional circumstances include willful
infringement, and thus a "finding of willfulness determines the right to attorneys' fees." Louis
Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 111 (2d Cir. 2012) (quoting Bambu Sales,
Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995)). Because the Court has concluded
that Defendants conduct was willful, an award of fees and costs is appropriate.
Plaintiffs' counsel requests $300 for the partners who worked on the case and $175 for
the associates, as well as between $80 and $195 for paralegal time. These hourly rates are well
within what is reasonable in this district. Harrell v. Van Der Plas, 08 Civ. 8252, 2009 WL
3756327, at *6 (S.D.N.Y. Nov. 9,2009) (Lynch, J.) ($400.00 per hour reasonable for an attorney
with approximately twenty years of experience in copyright and trademark cases); Diplomatic
Man, Inc. v. Brown, 05 Civ. 9069,2007 WL 2827125, at *2 (S.D.N.Y. Sept. 28, 2007) (Rakoff,
J.) ($440.00 per hour reasonable for an attorney with twenty-three years of experience in
intellectual property cases and $315.00 per hour reasonable for an eighth-year associate with
experience in intellectual property cases); Design Tex Grp., Inc. v. Us. Vinyl MIg. Corp., 04 Civ.
5002,2005 WL 2063819, at *4 (S.D.N.Y. Aug. 24,2005) (Rakoff, J.) ($395.00 to $485.00 per
hour reasonable for partners' work and $180.00 to $265.00 per hour reasonable for associates'
work). Upon review of plaintiffs' billing records, the Court finds the time spent on each task is
In short, the $21,874.50 requested by Plaintiff in attorneys' fees and $600 in costs is
D. A Permanent Injunction is Issued
"A permanent injunction is appropriate where the party seeking the injunction has
succeeded on the merits and show[ s] the absence of an adequate remedy at law and irreparable
harm if the relief is not granted." Patsy's Italian Restaurant, Inc. v. Banas, 658 F.3d 254, 272
(2d Cir. 2011). In determining the appropriateness of a permanent injunction, courts also
evaluate whether: (1) the plaintiff is likely to suffer irreparable injury in the absence of an
injunction; (2) remedies at law, such as monetary damages, are inadequate to compensate
plaintiff for that injury; (3) the balance of hardships tips in plaintiffs favor; and (4) the public
interest would not be disserved by the issuance of a preliminary injunction. See Salinger v.
Cotting, 607 F.3d 68,80 (2d Cir. 2010).
As for the first factor, the Court already made a finding of irreparable harm prior to enter
the preliminary injunction and the temporary restraining order. (See Docket # 18 at 3). The
Court concludes that given Defendants' persistence in selling counterfeit items some five months
after this action was commenced, Plaintiff is likely to suffer irreparable harm in the absence of
an injunction. Similarly, there are no adequate remedies at law because the permanent harm to
Plaintiff s reputation cannot be adequately monetized. Furthermore, "the public has an interest
in not being deceived-in being assured that the mark it associates with a product is not attached
to goods of unknown origin and quality." Coach, Inc. v. O'Brien, 2012 WL 1255276, at *17
(S.D.N.Y. April 13, 2012) (quoting New York City Triathlon, LLC v. NYC Triathlon Club, Inc.,
704 F. Supp. 2d 305, 344 (S.D.N.V. 2010)) (Oetken, J.). As for the balance of harms, Plaintiff
faces irreparable harm to its reputation in the absence of an injunction. By contrast, "[i]t is
axiomatic that an infringer ... cannot complain about the loss of ability to offer its infringing
product." WPIX, Inc. v. ivi, Inc., 691 F.3d 275,287 (2d Cir. 2012) (quoting WPIX, Inc. v. ivi,
765 F. Supp. 2d 594, 621 (S.D.N.V. 2011)). Thus the balance tips in Plaintiffs favor.
In short, the standard has been met for issuing the permanent injunction outlined in the
Final Judgment and Injunction by Default. (Docket # 41).
For the foregoing reasons, a default judgment has been entered against all Defendants,
Plaintiff has been awarded $1,000,000 in statutory damages, $21,874.50 in fees, and $600 in
costs, and a permanent injunction has been issued barring Defendants from selling counterfeit
Rolex watches. The Clerk of Court is instructed to close this case.
New York, New York
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?