Crazy Dog T-Shirts, Inc. v. Design Factory Tees, Inc. et al

Filing 17

DECISION AND ORDER: Plaintiff's motion for default judgment 16 is GRANTED as to Defendant Design Factory Tees, Inc. but DENIED as to Defendant Tony Rallis. The Clerk of Court is directed to enter judgment against Defendant Design Factory Tees, Inc. in accordance with this decision and order. SO ORDERED. Signed by Hon. Frank P. Geraci, Jr. on 07/26/2017. (ZS)-CLERK TO FOLLOW UP-

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
CRAZY DOG T-SHIRTS, INC.,
Plaintiff,
Case # 15-CV-6740-FPG
v.
DEFAULT JUDGMENT
and PERMANENT
INJUNCTION

DESIGN FACTORY TEES, INC. and
TONY RALLIS,
Defendants.

INTRODUCTION
Plaintiff Crazy Dog T-Shirts, Inc. (“Plaintiff”) initiated this action on December 11,
2015 to remedy alleged trademark infringement and unfair competition by Defendants Design
Factory Tees, Inc. and Tony Rallis. Plaintiff seeks relief under Section 43(a) of the Lanham
Act, 15 U.S.C. § 1125(a), and New York General Business Law §§ 360-k, 360-l, and 360-m.
The record demonstrates that Defendants were properly served, that Defendants failed
to respond to Plaintiff’s complaint, and that the Clerk of Court entered default against
Defendants pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. After a hearing in
which Defendants did not appear, the Court granted Plaintiff’s motion for a preliminary
injunction. See ECF No. 15.
Plaintiff now moves for a default judgment against Defendants pursuant to Rule 55(b).
ECF No. 16. For the reasons stated below, Plaintiff’s motion is granted as to Defendant Design
Factory Tees but denied as to Defendant Tony Rallis.

DISCUSSION
Once a default has been entered, the Court’s role is to determine whether the facts alleged
in the complaint are sufficient to state a claim for relief as to each cause of action for which the
plaintiff seeks default judgment. See, e.g., Haley v. Hughes Network Sys., LLC, No. 12-CV-1079,
2013 WL 5937007, at *1 (W.D.N.Y. Nov. 1, 2013). In making that determination, the Court
accepts the allegations in the complaint as true. 1 Id. (citing Greyhound Exhibitgroup, Inc. v.
E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)).
At the same time, the Court does not simply accept at face value that a defendant is liable.
Rather, “judgment against a defaulting party should be granted only after careful examination of
the moving party’s claim by the district court . . . Indeed, a defendant’s default does not in itself
warrant a court in entering a default judgment because there must be a sufficient basis in the
pleadings for the judgment entered.” Bianco v. Seaway Industrial Services, Inc., No. 03-CV-0084,
2004 WL 912916, at *1 (W.D.N.Y. Apr. 1, 2004) (internal citations and quotations omitted); see
also Enron Oil Corp. v. Masonori Diakuhara, 10 F.3d 90, 95-96 (2d Cir. 1993). The Second
Circuit has cautioned district courts that “defaults are generally disfavored and are reserved for
rare occasions,” and when there is doubt as to the propriety of granting judgment by default, “the
doubt should be resolved in favor of the defaulting party.” Enron Oil Corp., 10 F.3d at 96.
Here, Plaintiff seeks a default judgment against Defendants with respect to its first cause
of action, false designation of origin under 15 U.S.C. § 1125(a).
I.

Design Factory Tees
Having considered the record in this case and the applicable legal authorities, the Court is

satisfied that Plaintiff is entitled to a default judgment against Defendant Design Factory Tees.

1

In contrast, the Court does not accept Plaintiff’s allegations as true for the purpose of establishing the amount
of damages. Id. Plaintiff does not seek damages as part of its motion for default judgment. See ECF No. 16.

2

See ECF No. 16-2, at 5-10.

Plaintiff’s allegations, accepted as true, demonstrate that the

unregistered mark CRAZY DOG TSHIRTS (“Plaintiff’s Mark”) is entitled to protection under
section 1125(a) and that Design Factory Tees’s actions—namely, hijacking Plaintiff’s listings on
amazon.com and falsely implying to customers that shirts sold by Design Factory Tees originate
from or are authorized by Plaintiff—constitute false designation of origin and are likely to cause
confusion with Plaintiff’s Mark. The Sports Auth., Inc. v. Prime Hosp. Corp., 89 F.3d 955, 960
(2d Cir. 1996); Coach Leatherware Co. v. AnnTaylor, Inc., 933 F.2d 162, 168 (2d Cir. 1991);
Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961).
II.

Tony Rallis
However, with respect to Defendant Tony Rallis, Plaintiff’s allegations are insufficient.

Courts in the Second Circuit have consistently held that a corporate officer may only be held
personally liable for trademark infringement and unfair competition if that officer is “a moving,
active, conscious force behind the corporation’s infringement.” See, e.g., Innovation Ventures,
LLC v. Ultimate One Distrib. Corp., 176 F. Supp. 3d 137, 155 (E.D.N.Y. 2016). For example, a
person who is the sole shareholder and employee of an infringing company would be personally
liable for that company’s infringement because he or she must have approved of the infringing act.
Chloe v. Queen Bee of Beverly Hills, LLC, No. 06-cv-3140, 2011 WL 3678802, at *4 (S.D.N.Y.
Aug. 19, 2011) (collecting cases).
The only mention of Tony Rallis in Plaintiff’s complaint is that he is, and at all relevant
times was, a Maryland resident. ECF No. 1 ¶ 6. In its motion for default judgment, Plaintiff argues
that Tony Rallis should be held personally liable for Design Factory Tee’s infringement because
(1) he is the sole listed agent of Design Factory Tees according to the Maryland Department of
Assessments and Taxation Business Services; (2) he accepted service on behalf of Design Factory
Tees; and (3) Plaintiff’s counsel sent him a cease and desist letter on November 20, 2015. ECF

3

No. 16-2, at 10-11. Plaintiff does not cite to anything in the record to support its first assertion.
Id. But even if the Court were to accept that fact as true, Plaintiff has not shown that Tony Rallis
was “a moving, active, conscious force” behind Design Factory Tees’s infringement. See Carell
v. Shubert Org., Inc., 104 F. Supp. 2d 236, 271 (S.D.N.Y. 2000) (finding allegations insufficient
to support personal liability where the individual was chairman of the infringing organization,
credited on the allegedly infringing video, and copied on a letter threatening legal action); Flat
Rate Movers, Ltd. v. FlatRate Moving & Storage, Inc., 104 F. Supp. 3d 371, 383 (S.D.N.Y. 2015);
Eu Yan Sang Int’l Ltd. v. S & M Enterprises (U.S.A.) Enter. Corp., No. 09-CV-4235, 2010 WL
3824129, at *2 (E.D.N.Y. Sept. 8, 2010) (“This Court has also found that a defendant is not deemed
a ‘moving, active, conscious force’ if the only allegation made by the plaintiff is that the defendant
holds a particular title without alleging that the defendant authorized or approved any allegedly
infringing action.”) (quoting Kuklachev v. Gelfman, No. 08–CV–2214, 2009 WL 804095, at *5
(E.D.N.Y. Mar. 25, 2009)) (internal quotations and alterations omitted).
There is no sufficient basis in Plaintiff’s complaint, or anywhere else in the record currently
before the Court, to hold Tony Rallis personally liable for the trademark infringement committed
by Design Factory Tees. Therefore, Plaintiff’s motion for default judgment must be denied with
respect to Defendant Tony Rallis.
III.

Relief
Plaintiff requests that the Court (1) issue a permanent injunction restraining and enjoining

Design Factory Tees from using any marks which are confusingly similar to Plaintiff’s Mark; (2)
order Design Factory Tees to deliver up for destruction all infringing materials; and (3) award
Plaintiff its attorney fees and costs. ECF No. 16-2, at 11-14. The Lanham Act provides for such
relief. See 15 U.S.C. §§ 1116(a) (injunctions), 1118 (destruction of infringing articles), 1117(a)
(attorney fees and costs).

4

Based upon Plaintiff’s well-pleaded allegations against Design Factory Tees and Design
Factory Tees’s failure to appear, Plaintiff is entitled to a permanent injunction, destruction of
infringing articles, and recovery of its costs. 2 U.S.A. Famous Original Ray’s Licensing Corp. v.
Famous Ray’s Pizza Buffet Inc., No. 12-cv-8753, 2013 WL 5363777, at *5-9 (S.D.N.Y. Sept. 26,
2013), report and recommendation adopted, No. 12 CIV. 8753, 2013 WL 5664058 (S.D.N.Y. Oct.
17, 2013) [hereinafter “Famous Original Ray’s”]; Prot. One Alarm Monitoring, Inc. v. Exec. Prot.
One Sec. Serv., LLC., 553 F. Supp. 2d 201, 206 (E.D.N.Y. 2008); All-Star Mktg. Grp., LLC v.
Media Brands Co., 775 F. Supp. 2d 613, 621 (S.D.N.Y. 2011).
Reasonable attorney fees are to be awarded “in exceptional cases,” that is, cases involving
instances of bad faith or willful infringement. Louis Vuitton Malletier S.A. v. LY USA, Inc., 676
F.3d 83, 111 (2d Cir. 2012). By virtue of Design Factory Tees’s default, it is a willful infringer
and Plaintiff is therefore also entitled to recover reasonable attorney fees. Famous Original Ray’s,
2013 WL 5363777, at *6-8.
With respect to the amount of attorney fees to award, “District Courts have considerable
discretion in determining what constitutes reasonable attorney’s fees in a given case.” MPC
Franchise, LLC v. Tarntino, No. 11-CV-6310 CJS, 2015 WL 471355, at *6 (W.D.N.Y. Feb. 4,
2015) (quoting K.L. v. Warwick Valley Cent. Sch. Dist., 584 F. App’x 17, 18 (2d Cir. 2014)). After
considering all relevant factors, the district court’s role is to determine what a reasonable client
would be willing to pay to litigate the case effectively.

Arbor Hill Concerned Citizens

Neighborhood Ass’n v. Cty. of Albany & Albany Cty. Bd. of Elections, 522 F.3d 182, 190 (2d Cir.
2008) (discussing the relevant factors).

2

Plaintiff’s Cost Report indicates that it incurred $673.98 in costs. ECF No. 16-1, Ex. F. The Court has
reviewed that report and finds that Plaintiff’s calculation of costs is appropriate.

5

Here, Plaintiff submitted a Time Report of billed and unbilled hours worked by Plaintiff’s
counsel on this case. ECF No. 16-1, Ex. F. The Time Report indicates a total of 71.6 hours of
work performed by three different partners, two associates, and a paralegal. Id. The hourly rates
cited in the Time Report are as follows: $390, $360, and $300 for the partners; $235 and $230 for
the associates; and $175 for the paralegal. Id. Plaintiff requests a total of $19,137.50 in attorney
fees. Id.
Having taken into account the nature of this case, the fact that some of the work included
in the Time Report was not actually billed to Plaintiff, 3 decisions by other courts within this district
regarding what hourly rates are appropriate, 4 and all other relevant factors that courts consider
when making a fee award, the Court concludes that the attorney fees shall be reduced to $16,021.
This sum represents the requested $19,137.50 minus $2,825 in unbilled fees and with a reduction
in the paralegal hourly rate from $175 per hour to $120 per hour.
CONCLUSION
Plaintiff’s motion for default judgment (ECF No. 16) is GRANTED as to Defendant
Design Factory Tees, Inc. but DENIED as to Defendant Tony Rallis. Accordingly, it is hereby

ORDERED, that Defendant Design Factory Tees, Inc., as well as its members, officers,
directors, agents, servants, employees, and all others acting on its behalf, is enjoined and
restrained from any further acts of trademark infringement and unfair competition and, more
particularly, from, in any manner, directly or indirectly:
i.

Using the mark CRAZY DOG TSHIRTS and any other marks which are
confusingly similar to or otherwise violate Plaintiff’s Mark;

3

The Time Report includes a total of $2,825 in unbilled fees. See id.
See, e.g., MPC Franchise, LLC, 2015 WL 471355, at *8; Granite Music Corp. v. Center Street Smoke House,
Inc., 786 F. Supp. 2d 716, 738-39 (W.D.N.Y. 2011); Costa v. Sears Home Improvement Prod., Inc., 212 F. Supp. 3d
412, 420 (W.D.N.Y. 2016).
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ii.

Using the mark CRAZY DOG TSHIRTS and any other marks which are
confusingly similar or otherwise violate Plaintiff’s Mark in connection with the
sale or offering for sale of t-shirts;

iii.

Otherwise using or exploiting the mark CRAZY DOG TSHIRTS and any other
marks which are confusingly similar to or otherwise violate Plaintiff’s Mark in
connection with t-shirts;

iv.

Assisting, aiding or abetting any other person or entity from engaging or
performing any of the activities referred to above; and

v.

Acting in concert with any other person or entity in using or exploiting the mark
CRAZY DOG TSHIRTS and any other marks which are confusingly similar
or otherwise violate Plaintiff’s Mark in connection with t-shirts,

ORDERED, that Defendant Design Factory Tees, Inc. is directed to deliver up for
destruction all products and all promotional and/or advertising materials of any kind bearing or
using or otherwise exploiting the mark CRAZY DOG TSHIRTS or any other marks which are
confusingly similar to or otherwise violate Plaintiff’s Mark, and
ORDERED, that Plaintiff is awarded $16,021 in attorney fees and $673.98 in costs for
a total of $16,694.98, and Defendant Design Factory Tees, Inc. is directed to pay that sum to
Plaintiff within 14 days.

IT IS SO ORDERED.
Dated: July 26, 2017
Rochester, New York
______________________________________
HON. FRANK P. GERACI, JR.
Chief Judge
United States District Court

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