GONZALO P. CURIEL, District Judge.
Before the Court is Plaintiffs and Counter-Defendants Gina Champion-Cain, Luv Surf, L.P., ANI Commercial CA I, LLC, and ANI Commercial CA II, L.P.'s (collectively, "Plaintiffs'") motion requesting (1) an order dismissing Defendant Brian MacDonald; (2) default judgment against Defendant Lovesurf, Inc.; and (3) a permanent injunction against Defendant Lovesurf, Inc. Dkt. No. 175. To date, Defendant Lovesurf, Inc. has not retained counsel in accordance with Civil Local Rule 83.3 or timely filed a response to Plaintiffs' motion.
Based on the applicable law, the Court will (1)
Plaintiffs filed the instant action on October 23, 2014. Dkt. No. 1. Defendants Brian MacDonald and Lovesurf, Inc., while represented by counsel, filed an Amended Answer and Counterclaim on September 10, 2015. Dkt. No. 64. Plaintiffs filed an Amended Answer to the Counterclaim on September 21, 2015. Dkt. No. 66.
On July 29, 2016, defense counsel filed a motion to withdraw from representation of Defendants on the basis that Defendants had failed to pay any fees or expenses for five months, and had indicated no intention or ability to pay anything in the future. Dkt. No. 86. The Court conducted multiple hearings regarding defense counsel's withdrawal. Dkt. Nos. 104, 111, 123. Because trial was set for October 17, 2016, Dkt. No. 91, the Court conditioned defense counsel's withdrawal on filing motions in limine for Defendants and/or responding to Plaintiffs' motions in limine, Dkt. No. 111. After defense counsel duly complied, Dkt. Nos. 120, 121, the Court granted defense counsel's motion to withdraw from representation of Defendants on October 14, 2016, Dkt. No. 123. The Court then vacated the trial date and reset it to February 21, 2017. Id.
Subsequently, the Court confirmed at multiple hearings that Defendant Lovesurf, Inc. was still unrepresented. Dkt. Nos. 128, 142, 148. The Court specifically stated in its Order denying Plaintiffs' renewed motion for preliminary injunction:
Dkt. No. 131 at 2 n.1.
On January 17, 2017, Plaintiff moved to strike Defendant Lovesurf, Inc.'s Amended Answer, dismiss its Counterclaim, and enter default as to Defendant Lovesurf, Inc. Dkt. No. 132. At a status hearing on January 27, 2017, at which Defendant Brian MacDonald failed to appear, the Court granted Plaintiffs' motion and directed the Clerk of the Court to enter default as to Defendant Lovesurf, Inc. Dkt. Nos. 139, 140, 141.
Subsequently, the Court conducted an Order to Show Cause hearing regarding MacDonald's failure to appear at the January 27, 2017 status hearing. Dkt. No. 142. At the hearing, MacDonald orally represented to the Court that he had secured representation for Defendants, and that Defendant Lovesurf, Inc. had filed a petition for bankruptcy in the Central District of California.
On February 16, 2017, a day prior to the scheduled motion hearing on February 17, 2017, Plaintiffs notified the Court that the United States Bankruptcy Court for the Central District of California had dismissed Defendant Lovesurf, Inc.'s case (Case No. 8:17-bk-10394-CB) for failure to file requisite documents and vacated the automatic stay as to Defendant Lovesurf, Inc. Dkt. No. 147.
On February 17, 2017, the Court conducted a hearing on Plaintiffs' motion to strike and confirmed with MacDonald that Defendant Lovesurf, Inc., despite MacDonald's earlier statement, was still unrepresented by counsel. Dkt. Nos. 148, 149. Because corporations may not appear in this Court without an attorney, see CivLR 83.3, the Court granted Plaintiffs' motion to strike Defendant Lovesurf, Inc.'s Amended Answer and dismiss its Counterclaim, and directed the Clerk of the Court to enter default as to Defendant Lovesurf, Inc. Id. Default was accordingly entered as to Defendant Lovesurf, Inc. Dkt. No. 150.
MacDonald also informed the Court that he had filed a voluntary petition for bankruptcy in the Central District of California that same day. Dkt. No. 151. Accordingly, the jury trial set for February 21, 2017, one business day after the hearing, was vacated, Dkt. No. 148, and the instant case was stayed with respect to Defendant Brian MacDonald.
At the hearing, Plaintiffs requested that the Court conduct a default "prove-up" hearing in lieu of trial. The Court tentatively set a default "prove-up" hearing on February 22, 2017, but directed the parties to file briefing regarding the propriety of conducting a default "prove-up" hearing. Dkt. No. 148. After reviewing Plaintiffs' brief and the applicable law, the Court vacated the default "prove-up" hearing set for February 22, 2017 and directed Plaintiffs to file a formal motion for default judgment, in order to comply with the notice requirements under Federal Rule of Civil Procedure 55(b). Dkt. No. 153.
Subsequently, on February 24, 2017, Plaintiffs filed a motion for default judgment pursuant to Federal Rule of Civil Procedure 55(b) against Defendant Lovesurf, Inc., seeking $332,272 in damages and a permanent injunction. Dkt. No. 154. The Court issued a tentative ruling denying without prejudice Plaintiffs' motion, Dkt. No. 160, and conducted a hearing on March 24, 2017, Dkt. No. 160. At the hearing, the Court directed Plaintiffs to provide supplemental briefing in response to the Court's tentative ruling and regarding the possibility of preliminary injunctive relief. Id. Plaintiffs filed a supplemental brief on March 31, 2017. Dkt. No. 162. Plaintiffs clarified that they no longer sought damages at this time, then sought a permanent injunction or a preliminary injunction in the alternative against Lovesurf, Inc. Id.
On July 14, 2017, Karen Sue Naylor, the Bankruptcy Trustee for the Estate of Brian MacDonald, and Plaintiffs jointly moved the Court to dismiss MacDonald's individual counterclaims for infringement of registered trademark and trademark infringement with prejudice, pursuant to Federal Rule of Civil Procedure 41(a)(1). Dkt. No. 164. In light of the fact that Plaintiffs had entered into a settlement agreement with the Trustee for the Trustee to sell the counter-claims to Plaintiffs, the Court granted the joint motion to dismiss on July 25, 2017. Dkt. No. 165. On July 28, 2017, Plaintiffs filed a supplemental brief regarding new facts in support of plaintiffs' motion for default judgment and permanent or preliminary injunction. Dkt. No. 166. Plaintiffs asserted that the dismissal of Macdonald's Counter-Claims meant that there were no causes of action pending against Plaintiffs and argued that that there was no risk of inconsistent judgment if Plaintiffs' motion for default judgment/permanent injunction was granted. Id. at 3.
On September 15, 2017, this Court denied without prejudice Plaintiffs' motion for default judgment and a permanent injunction. Dkt. No. 167. The Court reasoned that the liability of all defendants must necessarily be uniform and that to hold otherwise would entail the risk of inconsistent and contradictory judgments between Defendants Brian MacDonald and Lovesurf, Inc. Dkt. No. 167. However, the Court also entered a preliminary injunction against Lovesurf, Inc., pending resolution of the entire case on the merits. Dkt. No. 168.
On May 31, 2018, this Court set an in-person status hearing for June 15, 2018. Dkt. No. 172. On June 7, 2018, the Court received an email from Brian MacDonald through its chambers e-file where Mr. MacDonald asserted that he would be out of town on Friday, June 15th, would not be able to attend the hearing and requested a "copy of the minutes after the hearing so [he] could respond accordingly." Dkt. No. 172. As a result, the Court set a telephonic conference for June 15, 2018 at 1:30 PM. On June 15, 2018, the Court held telephonic proceedings where Brian Macdonald did not appear. Dkt. No. 173. On June 19, 2018, Plaintiffs filed the instant motion. Dkt. No. 175. The Court issued a briefing schedule setting a deadline for response on July 5, 2018. Dkt. No. 176. No response was filed by either Brian MacDonald or Lovesurf, Inc. by that deadline. Plaintiffs filed a reply alerting the Court to Defendants' non-opposition on July 11, 2018. Dkt. No. 178.
This case involves trademark infringement issues between two competing businesses in the beachwear and surfing industries with similar phonetic names—"Luv Surf" (Plaintiffs) and "Lovesurf" (Defendant Lovesurf, Inc.). The Court has previously recited the operative facts of this case at length and will not repeat them here. See, e.g., Dkt. Nos. 55 (Order Denying Plaintiffs' Motion for Preliminary Injunction), 83 (Order Denying Plaintiffs'-Counterdefendants' Joint Motion for Partial Summary Judgment), 131 (Order Denying Plaintiffs' Renewed Motion for Preliminary Injunction).)
In his bankruptcy action (Case No. 17-bk-10585-CB), Brian MacDonald disclosed that Plaintiffs were creditors of his estate. See Dkt. No. 175-4, RJN, Ex. A, at 16.
Under the bankruptcy code, "[a] discharge in a case . . . operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived." 11 U.S.C. § 524. The discharge injunction is permanent, survives the bankruptcy case, and applies forever with respect to every debt that is discharged. In re Henry, 266 B.R. 457, 473 (C.D. Cal. 2001). Accordingly, Plaintiffs cannot pursue any claim against Mr. MacDonald individually because of the discharge order. See O'Loghlin v. County of Orange, 229 F.3d 871, 875 (9th Cir. 2000) (affirming the district court's dismissal of claims based on conduct that occurred before defendant's bankruptcy proceeding and discharge of claims); Johnson v. Johnson, No. 1:15-CV-01793 MJS, 2016 WL 5235047, at *8 (E.D. Cal. Sept. 21, 2016) ("Plaintiff may not pursue any claims for damages against Defendant arising from pre-bankruptcy discharge conduct."); Lake v. Delta Air Lines, Inc., No. SACV 10-1775 DOC EX, 2011 WL 3102486, at *4 (C.D. Cal. July 22, 2011).
Furthermore, because Plaintiffs' purchased Mr. MacDonald's counter-claims from the bankruptcy trustee—which resulted in the dismissal of the counter-claims—Mr. MacDonald also cannot pursue those claims. Given this posture, the Court will grant Plaintiffs' request to
The Court previously denied Plaintiffs' prior motion for default judgment and a permanent injunction because of the risk of inconsistent judgments. At the time the Court was considering the prior motion, a risk of inconsistent judgments between Defendant Lovesurf, Inc.—the subject of the default judgment motion—and Defendant MacDonald existed because the Court would have needed to resolve the question of first use in trademark law, thereby creating a risk of inconsistent judgments between Lovesurf and MacDonald. See Dkt. No. 167 at 9-10 ("Accordingly, the Court cannot enter a default judgment against Defendant Lovesurf, Inc. at this juncture without engendering the risk of inconsistent judgments between Defendants Brian MacDonald and Lovesurf, Inc."). The Court also denied a permanent injunction based on the same reasoning. Id. at 10. The Court has now dismissed Defendant Brian MacDonald—therefore no risk of inconsistent judgment between Brian MacDonald and Lovesurf, Inc. currently exists and a Frow
Federal Rule of Civil Procedure 55 provides that "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend . . . the clerk must enter the party's default." Fed. R. Civ. P. 55(a). After default is properly entered, a party seeking relief other than a sum certain must apply to the Court for a default judgment. Fed. R. Civ. P. 55(b). The Ninth Circuit has articulated seven factors which courts may consider determining whether entry of a default judgment is appropriate. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). These factors are:
Id. Upon default, the factual allegations in the complaint are taken as true, except those related to the amount of damages. See Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977); Fed. R. Civ. P. 8(b)(6). Allegations of damages must be proven. See Geddes, 559 F.2d at 560. The decision to grant or deny default judgment is within the discretion of the district court. Eitel, 782 F.2d at 1471.
Based on Defendants' failure to defend in the lawsuit, the Court now regards the facts alleged in the Complaint as true.
The first factor weighs in favor of entering default judgment in favor of Plaintiffs. Plaintiffs have stated valid causes of action and Lovesurf, Inc., the defaulting Defendant, has failed to participate in this action for failure to obtain counsel. Thus, Plaintiffs would continue to suffer injury from Lovesurf's use of the marks. Moreover, Plaintiffs lack other recourse to recover absent any answer from Lovesurf and this constitutes prejudice. See Dkt. No. 1, Compl. ¶ 48 ("Plaintiffs have no adequate remedy at law, and if Defendants' activities are not enjoined, Plaintiffs will continue to suffer irreparable harm and injury to its goodwill and reputation."). Accordingly, Plaintiffs' have suffered and would continue to suffer injury absent the imposition of a permanent injunction in this case. See LG Corporation v. Huang, 2017 WL 476539, at *5 (S.D. Cal. Feb. 6, 2017).
To warrant entering a default judgment, the complaint's allegations must be sufficient to state a claim upon which relief can be granted. Danning v. Levine, 572 F.2d 1386, 1388 (9th Cir. 1978). A complaint satisfies this standard when the claims cross "the line from conceivable to plausible." Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009). In the present case, Plaintiff has alleged trademark infringement against Defendant Lovesurf, Inc.
The Lanham Act provides "national protection of trademarks in order to secure to the owner of the mark the goodwill of his business and to protect the ability of consumers to distinguish among competing producers." Park `N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 198 (1985). To prevail on a claim of trademark infringement, a plaintiff must show: "(1) that it has a protectible ownership interest in the mark; and (2) that the defendant's use of the mark is likely to cause consumer confusion." Rearden LLC v. Rearden Commerce, Inc., 683 F.3d 1190, 1202 (9th Cir. 2012) (citation and internal quotation marks omitted).
Federal registration of a trademark is prima facie evidence that the registrant is the owner of the mark. 15 U.S.C. § 1115(a). "[T]he registrant is granted a presumption of ownership, dating to the filing date of the application for federal registration, and the challenger must overcome this presumption by a preponderance of the evidence." Sengoku Works Ltd. v. RMC Intern., 96 F.3d 1217, 1219 (9th Cir. 1996). This presumption is rebuttable. "[T]he non-registrant can rebut this presumption by showing that the registrant had not established valid ownership rights in the mark at the time of registration—in other words, if the non-registrant can show that he used the mark in commerce first, then the registration may be invalidated." Id. at 1220.
Here, Plaintiffs' Complaint alleges that Plaintiffs created and first began using in commerce the Luv Surf Marks in August 2011, before Defendant Lovesurf, Inc. was incorporated on April 5, 2013. Dkt. No. 1, Comp. ¶¶ 9, 16-18, 20-30, 35, 40. Plaintiffs have sufficiently alleged that they first used the disputed trademarks in commerce, prior to Lovesurf, Inc.'s existence. In addition, Plaintiffs registered the Luv Surf Cloud Logo Dkt. No. 124-17, Reg. No. 4,390,537 and the Luv Surf Heart Logo, Dkt. No. 124-27, Reg. No. 4,578,570, with the USPTO. Accordingly, Plaintiffs are granted a presumption of ownership of these marks. See 15 U.S.C. § 1115(a). Further, the Court has dismissed Lovesurf, Inc.'s counterclaim and stricken its answer, as a consequence of is default— Lovesurf, Inc. thus cannot rebut Plaintiffs' Complaint. Accordingly, the Court concludes that Plaintiffs have demonstrated a protectable ownership interest in the mark.
In analyzing whether there is a likelihood of confusion between the two marks at issue, courts consider eight factors known as the Sleekcraft factors. Rearden, 683 F.3d at 1199. These eight factors are (1) strength of the mark; (2) proximity of the goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; (6) type of goods and the degree of care likely to be exercised by the purchaser; (7) defendants' intent in selecting the mark; and (8) likelihood of expansion of the product lines. Id. (citing AMF Inc. v. Sleekcraft Boats, 559 F.2d 341, 348-49 (9th Cir. 1979), abrogated in part by Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792 (9th Cir. 2003)).
Plaintiffs' complaint adequately alleges that a likelihood of consumer confusion resulted from the use of the trademarks. Dkt. No. 1, Compl. ¶¶ 9, 27, 45-46. Here, Plaintiffs alleged that they have a valid trademark registration for the mark. The two marks are similar in appearance, in name, and in color. See Dkt. No. 1, Compl., Ex. D. Moreover, the parties have previously stipulated that they compete in the same industry and use the same channels of trade, and that their phonetically identical and stylistically similar ("Luv Surf" and "Lovesurf" marks with adjacent pink hearts) trademarks are confusingly similar to the consuming public and cannot coexist. Dkt. No. 124-37 at 2-3.
Accordingly, the Court finds that Plaintiffs' complaint, taking the facts as true as required in a motion for default judgment, adequately alleges trademark infringement. Consequently, the second and third Eitel factors weigh in favor of granting default judgment.
Here, Plaintiffs no longer seek any monetary damages and seek only a permanent injunction. See Dkt. No. 175-1 at 7 ("Plaintiffs do
Here, this factor turns on the degree of possibility that a dispute concerning material facts exists or may later arise. Here, Plaintiffs' allegations must be taken as true and the Defaulting Defendant Lovesurf has failed to defend as it has failed to acquire counsel. Accordingly, this factor favors Plaintiffs' as "there is no indication Defaulting Defendant[] will further defend against the action." See LG, 2017 WL 476539, at *9.
This factor turns on whether the Defaulting Defendant's default is the product of excusable neglect. Eitel, 782 F.2d at 1472. Here, there is no excusable neglect as Defendant Lovesurf is aware of the lawsuit, was properly served, and no attorney has appeared on its behalf. Accordingly, this factor favors a grant of default judgment. See LG, 2017 WL 476539, at *9; Landstar Ranger, Inc. v. Parth Enterprises, Inc., 725 F.Supp.2d 916, 922 (C.D. Cal. 2010) (finding this factor weighed in favor of default judgment where defendant "made no effort to defend itself.").
This factor, by its nature, is in favor of defendant because it encourages merits decision. Nonetheless, "[t]he fact that Rule 55(b) has been enacted . . . indicates that `this preference, standing alone, is not dispositive.'" Landstar Ranger, 725 F. Supp. 2d at 922. While this factor weighs in favor of Defendant overall, the Court finds that the timely administration of justice outweighs the strong policy in favor of merits decisions. See LG, 2017 WL 476539, at *10 ("[I]n the present case there is no indication that a merits decision is practicable . . . here the timely administration of justice outweighs the strong policy for merits decisions.").
Having considered the Eitel factors, the Court will
The Lanham Act "vests the district court with the power to grant injunctions according to principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the trademark owner." Reno Air Racing Ass'n v. McCord, 452 F.3d 1126, 1137 (9th Cir. 2006) (citing 15 U.S.C. § 1116) (internal citations omitted). A party seeking a permanent injunction must show: "(1) that it has suffered an irreparable injury; (2) that remedies available at law such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of the hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction." La Quinta Worldwide LLC v. Q.R.T.M., S.A. de C.V., 762 F.3d 867, 879 (9th Cir. 2014).
Plaintiffs' have demonstrated irreparable injury. Without a permanent injunction, Defendant Lovesurf, Inc. would continue to do business as "Lovesurf" and could actively sell products displaying the infringing "Lovesurf" brand and Lovesurf Marks. Such sale would lead to Plaintiffs' loss of profits and the potential for lost accounts with large retailers such as Nordstrom, Inc., Urban Outfitters, Inc., and others. Several retailers have asserted that they would refuse to do business with Plaintiff without an injunction in place. See Kramer Decl., Dkt. No. 154 ¶ 15. Accordingly, the Court finds that Plaintiffs' would suffer irreparable harm absent the imposition of a permanent injunction.
Next, as to inadequate remedies at law, the Court finds that a permanent injunction is a particularly appropriate remedy in this trademark infringement action. See Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175, 1178 (9th Cir. 1988) ("Injunctive relief is the remedy of choice for trade and unfair competition cases, since there is no adequate remedy at law for the injury caused by a defendant's continuing infringement. It is the remedy provided by federal and state trademark infringement statutes."). This is particularly true where there is no assurance that the infringing party will cease its misconduct. See LG, 2017 WL 476539, at *31-32; Herman Miller v. Alphaville Design, Inc., 2009 WL 3429739, at *8 (N.D. Cal. Oct. 22, 2009) (granting permanent injunction on default where the Court held that "[defendant's] refusal to answer or appear in this action makes it difficult for plaintiff to prevent further infringement. An injunction would serve to prevent [defendant] from continuing to infringe plaintiff's trademarks.").
Third, the balance of hardships weighs in favor of Plaintiffs. Refraining from willful trademark infringement imposes no hardship on the infringing party. See LG, 2017 WL 476539, at *12; Deckers Outdoor Corp. v. Ozwear Connection Pty Ltd., 2014 WL 4679001, at *13 (C.D. Cal. Sep. 18, 2014) (holding that there "is no hardship to a defendant when a permanent injunction would merely require the defendant to comply with [the] law" by refraining from trademark infringement). Plaintiffs, however, would suffer irreparable harm. Accordingly, the Court finds that the balance of hardships weighs in Plaintiffs' favor.
Finally, the issuance of a permanent injunction serves the public interest. "The public has an interest in avoiding confusion between two companies' products." Internet Specialties W., Inc. v. Millon-DiGiorgio Enters., Inc., 559 F.3d 985, 993 n.5 (9th Cir. 2009). Here granting a permanent injunction protects Plaintiffs' federally protected rights, which is in the public interest, and comes at no adverse effect on the public. See Amini Innovation Corp. v. KTY Int'l Mktg., 768 F.Supp.2d 1049, 1057 (C.D. Cal. 2011) ("Allowing such infringement of intellectual property discourages future innovation by failing to provide an adequate forum through which individuals and corporations can protect their own ideas."); Ozwear, 2014 WL 4679001, at *13 (same).
Accordingly, the Court will
Based on the foregoing, the Court will
1. Pursuant to 16 U.S.C. § 1116 and Federal Rule of Civil Procedure 65, Lovesurf and its officers, agents, servants, employees, attorneys, owners and representatives, and all other persons, firms or entities in active concert or participation with Lovesurf (the "Restrained Parties") shall be, and hereby are, permanently enjoined and restrained from:
2. No later than ten (10) days from the date of this Order, Lovesurf shall, at its own expense, give actual notice of this Order to its officers, agents, servants, employees, attorneys, resellers, owners and representatives, and all other persons, firms or entities in active cooperation or participation with Defendant.
3. The Court shall retain jurisdiction over this action to the extent necessary to enforce and interpret this order.
