NINA Y. WANG, Magistrate Judge.
This matter comes before the court on Plaintiff Big O Tires, LLC's Renewed Motion for Default Judgment Against All Defendants ("the Renewed Motion for Default Judgment" or "Renewed Motion") [#39, filed Feb. 27, 2017],
Plaintiff Big O Tires, LLC ("Plaintiff" or "Big O"), is a Nevada company that transacts business in Colorado and has an address at 5025 Florence Street, Unit A, Denver, Colorado 80238. [#1 at ¶ 1]. Big O offers franchises of retail tire and automotive stores [id. at ¶ 8], and initiated this action against Defendants C&S Tires, Inc. ("C&S"), Craig A. Brady ("Mr. Brady"), and Sheri E. Brady ("Ms. Brady") (collectively, "Defendants"), former Big O franchisees on March 28, 2016. [#1]. In the Complaint, Big O asserts four causes of action: (1) trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1114(1) against all Defendants; (2) unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1) against all Defendants; (3) breach of contract against C&S; and (4) breach of the guaranty agreements contained in Schedule 3 to the Agreement against Mr. Brady and Ms. Brady. [#1]. In the Complaint, Big O averred that Defendants owed it $6,424.20 for product purchases, royalties, and the national advertising fund. [Id. at ¶ 23].
Big O served the summons and Complaint on Defendants on March 31, 2016, making a responsive pleading due on or before April 21, 2016. [#10, #11, #12]. None of the Defendants answered or otherwise responded. Big O then moved for the entry of default on April 25, 2016 [#13], which was denied for being non-compliant with Rule 55 of the Federal Rules of Civil Procedure. [#19]. Big O filed a second Motion for Entry of Default, and the Clerk of the Court entered default against each of the Defendants on May 5, 2016. [#23]. Big O then filed its original Motion for Default Judgment on June 28, 2016, seeking $6,327.60 for product purchases, royalties, and the national advertising fund [#24 at ¶ 25]; damages for trademark infringement in the amount of $7,800.00 in reasonable royalties for trademark infringement for the period between March 31, 2015 and May 5, 2015; attorney fees in the amount of $12,341.00 and costs of $566.39; and pre-judgment interest in the amount of $1,182.65, for a total of $28,217.54 as of the filing of the instant Motion; and certain injunctive relief.
After the original Motion for Default Judgment was referred to the undersigned Magistrate Judge for Recommendation [#25], this court set an evidentiary hearing on the Motion for Default Judgment [#26, #27, #28]. At the hearing, the court admitted exhibits 4, 5, 6, 7, 8, 9, 10, 11 and 12 of the Amended Exhibit List [#31-1], and took testimony from James A. Bull, a Division Vice President of Big O. [#33; #34 at 3:10-12]. After review of the operative pleading and Motion for Default Judgment, this court respectfully recommended that the original Motion for Default Judgment be denied without prejudice on January 17, 2017. [#38]. This court found that it could not recommend default judgment because evidence presented as to the calculation of damages provided by Big O through its Motion for Default Judgment and the testimony at the hearing was insufficient to establish a precise quantum of damages. [Id. at 20-21]. This court further declined to address any liability on the part of Defendants Craig Brady and Sheri Brady as individual guarantors, reserving that issue for a renewed motion for default judgment, if any. [Id. at 24-25].
On February 27, 2017, Big O filed this Renewed Motion for Default Judgment. In reviewing the Renewed Motion for Default Judgment, this court determined that it was not compliant with Local Rule 54.3, which requires that a request for an award of attorney's fees include, for each person for whom fees are claimed, a summary of relevant qualifications and experience, and Big O has also not provided any information as to why the requested billing rates were reasonable. Rather than simply recommend denial of any attorney's fees and costs, see Reg'l Dist. Council v. Mile High Rodbusters, Inc., 82 F.Supp.3d 1235, 1246 (D. Colo. 2015) (declining to entertain requests for attorneys' fees for two attorneys for whom "a summary of relevant qualifications and experience" was not submitted), this court requested that Plaintiff supplement its Renewed Motion for Default Judgment with the missing information. [#42]. Big O submitted its Supplement on May 22, 2017. [#44].
Pursuant to Rule 55(b) of the Federal Rules of Civil Procedure, a party may apply to the court for a default judgment after a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend against the action. Fed. R. Civ. P. 55(a), (b)(2). A court may conduct hearings to conduct an accounting; determine the amount of damages; establish the truth of any allegation by evidence; or investigate any other matter. Fed. R. Civ. P. 55(b)(2).
There is no right to a default judgment, and whether to enter a default judgment is within the discretion of the court. Bixler v. Foster, 596 F.3d 751, 762 (10th Cir. 2010) (citing Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) ("[A] defendant's default does not in itself warrant the court in entering a default judgment.")). In determining whether a default judgment is warranted, the court must first consider whether it has jurisdiction over the subject matter and the defendants. See Williams v. Life Sav. & Loan, 802 F.2d 1200, 1202-03 (10th Cir. 1986); CrossFit, Inc. v. Jenkins, 69 F.Supp.3d 1088, 1093 (D. Colo. 2014). It is well established that a judgment is void if the court that enters it lacks jurisdiction over either the subject matter of the action or the parties to the action. United States v. 51 Pieces of Real Prop., 17 F.3d 1306, 1309 (10th Cir. 1994). Plaintiff bears the burden of establishing jurisdiction.
The court then must consider whether the well-pleaded factual allegations in the complaint support a judgment on the claims against the defaulting defendants. 10A Charles A. Wright, Arthur R. Miller & Mary K. Kane, Federal Practice and Procedure § 2688, at 63 (3d ed. 1998) ("a party in default does not admit mere conclusions of law"); see also Nishimatsu Constr. Co., 515 F.2d at 1206-08 (vacating district court's entry of default judgment because the pleadings were insufficient to support the judgment). "There must be a sufficient basis in the pleadings for the judgment entered." Nishimatsu Constr. Co., 515 F.2d at 1206. The well-pleaded facts of a complaint are deemed true, as are any undisputed facts set forth in affidavits and exhibits. See Grady v. Swisher, No. 11-cv-02880-WYD-KLM, 2014 WL 3562794, at *12 (D. Colo. July 18, 2014); Samuels v. Feiner Trinh, Int'l, LLC, No. 10-cv-02574-MEH, 2012 WL 3545275, at *1 (D. Colo. Aug. 15, 2012). The court may also take evidence at a hearing to establish the truth of any allegation. Fed. R. Civ. P. 55(b)(2)(B). In addition, the entry of default does not establish the amount of damages that is reasonable. Damages may be awarded only if the record adequately reflects the basis for the award as supported by the evidence in the record. Klapprott v. United States, 335 U.S. 601, 612 (1949); Mathiason v. Aquinas Home Health Care, Inc., 187 F.Supp.3d 1269 (D. Kan. 2016).
The following facts are drawn from the Complaint and Demand for Injunctive Relief; information and filings on the court's Electronic Court Filing ("ECF") docket; and evidence presented at the August 1 hearing.
The court first considers whether it has subject matter jurisdiction over this action. Plaintiff asserts causes of action arising under federal law, namely violations of the Lanham Act for trademark infringement and unfair competition. See [#1 at 4-7]. Therefore, to the extent that there are viable federal claims in this action, the court has subject matter jurisdiction over the federal claims pursuant to 28 U.S.C. § 1331, 28 U.S.C. §§ 1338(a) and (b), and 15 U.S.C. § 1121; and supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367(a).
The court now turns to the issues of personal jurisdiction and venue. A plaintiff bears the burden of establishing personal jurisdiction. Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1069 (10th Cir. 2008) (citing Intercon, Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000)). Under Tenth Circuit standards, the personal jurisdiction inquiry involves two parts. First, this court considers whether an applicable statute governs service of process. Id. Next, the court considers whether exercise of personal jurisdiction comports with the constitutional requirements of the Due Process clause. Id. The federal Lanham Act does not provide for nationwide service. See 15 U.S.C. § 1051 et seq. Accordingly, this court looks to the Colorado long-arm statute to determine whether personal jurisdiction is proper. CrossFit, 69 F. Supp. 3d at 1094.
Colorado's long-arm statute is codified at Colo. Rev. Stat. § 13-1-124, and "confers the maximum jurisdiction permissible consistent with the Due Process Clause." Pandaw Am., Inc. v. Pandaw Cruises India Pvt. Ltd., 842 F.Supp.2d 1303, 1308 (D. Colo. 2012) (citing Archangel Diamond Corp. v. Lukoil, 123 P.3d 1187, 1193 (Colo. 2005)). To determine whether the exercise of personal jurisdiction comports with constitutional due process, the court analyzes whether Defendants have sufficient minimum contacts with Colorado, such that having to defend an action here would not "offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
Personal jurisdiction may be general or specific. Matthys v. Narconon Fresh Start, 104 F.Supp.3d 1191, 1199 (D. Colo. 2015). General jurisdiction arises when a defendant's contacts with a forum state are so continuous and systematic to essentially render it "at home" in a state. See Daimler AG v. Bauman, 134 S.Ct. 746, 761 (2014). Specific jurisdiction is jurisdiction particular to the instant action. "To determine whether the exercise of specific personal jurisdiction comports with due process, the court asks `(1) whether the defendant purposefully directed its activities at residents of the forum state; (2) whether the plaintiff's injury arose from those purposefully directed activities; and (3) whether exercising jurisdiction would offend traditional notions of fair play and substantial justice.'" Matthys, 104 F. Supp. 3d at 1199 (quoting Newsome v. Gallacher, 722 F.3d 1257, 1264 (10th Cir. 2013)).
While Big O avers that "Defendants have transacted business in Colorado," [#1 at ¶ 7], there were no factual allegations contained in the Complaint or presented at the evidentiary hearing that established that any of the Defendants have continuous and systematic contacts with Colorado that would make them "essentially at home" in Colorado and subject to general personal jurisdiction. Thus, the court turns to whether specific personal jurisdiction exists. The original Franchise Agreement indicates that Big O's principal place of business is in Colorado. [#1-2 at 8]. The original Franchise Agreement also provides that the agreement is executed by Big O in Colorado. [Id. at § 29.01]. Nevertheless, there are no factual allegations that any injury to Big O occurred in Colorado; C&S' franchise was located in Henderson, Nevada [#1 at ¶ 17] and Defendants' tortious conduct occurred in Nevada. While tortious conduct in a foreign state which causes injury in Colorado may be deemed to be an act committed in Colorado so as to satisfy Colorado's long-arm statute, Floyd's 99 Holdings, LLC v. Jude's Barbershop, Inc., 898 F.Supp.2d 1202, 1206 (D. Colo. 2012) (citing D&D Fuller CATV Const., Inc. v. Pace, 780 P.2d 520, 524 (Colo. 1989)), indirect economic injury borne by a corporation by virtue of the location of its headquarters is insufficient to confer specific personal jurisdiction. Grynberg v. Ivanhoe Energy, Inc., 666 F.Supp.2d 1218, 1234 (D. Colo. 2009), as corrected (Jan. 28, 2010). Indeed, it is unclear from the record whether Big O even suffered indirect economic injury in Colorado. Big O is now owned by TBC Corporation, a company based out of Palm Beach Gardens, Florida. [#34 at 4:1-4]. The Second Amendment makes no mention of a principal place of business for Big O in Colorado. [#1-2 at 85]. The cease and desist letters directed at Defendants originated out of Florida, not Colorado. [#1-3, #1-4].
Nevertheless, it is well-settled that a party may consent to personal jurisdiction and venue by agreeing to a forum selection clause. Burger King v. Rudzewicz, 471 U.S. 462, 473 n.14 (1985). The forum selection clause provides, in pertinent part: "Big O and Franchisee consent to personal and subject matter jurisdiction and venue in Denver, Colorado." [#1-2 at 40 § 29.01]. The following paragraph entitled "Jurisdiction" further provides "the parties consent to the exclusive jurisdiction of either the Colorado state courts or the United States Federal District Court for the District of Colorado for any litigation relating to this Agreement or the operation of the Franchise Business thereunder." [Id. at 40 § 29.02]. These terms remained unchanged in the First Amendment to the Franchise Agreement and, therefore, were "ratified, confirmed and reaffirmed by the Parties" on or about June 23, 2009. [Id. at 69 ¶ 19]. These terms also remained unchanged in the Second and Third Amendments. [Id. at 60-84]. Each of the individual Defendants agreed to be bound by the terms of the Franchise Agreement through the execution of their respective Guaranties that were reaffirmed again on March 23, 2010, in connection with the execution of the Second Amendment to the Franchise Agreement [Id. at 45, 86-87], and again with the Third Amendment to the Franchise Agreement [#37-9].
Read together, this court concludes that forum selection clauses are mandatory as they require the "exclusive jurisdiction" in either the state or federal court of Colorado for any litigation related to the Franchise Agreement or the operation of the franchise business. See K & V Sci. Co. v. Bayerische Motoren Werke Aktiengesellschaft ("BMW"), 314 F.3d 494, 500 (10th Cir. 2002); Excell, Inc. v. Sterling Boiler & Mech., Inc., 106 F.3d 318, 321 (10th Cir. 1997). Colorado courts as well as the Tenth Circuit follow the general rule that forum selection clauses will be enforced unless a party seeking to avoid its effect proves that enforcement would be unfair or unreasonable. See Milk `N' More, Inc. v. Beavert, 963 F.2d 1342, 1346 (10th Cir. 1992) (holding that clear mandatory forum selection clauses "are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be unreasonable under the circumstance"); Edge Telecom, Inc. v. Sterling Bank, 143 P.3d 1155, 1158-59 (Colo. App. 2006). Therefore, this court concludes that it has personal jurisdiction over Defendants and venue is proper in this District. See Big O Tires, LLC v. Felix Bros., Inc., 724 F.Supp.2d 1107, 1114-15 (D. Colo. 2010).
"Trademark infringement is a type of unfair competition; the two claims have virtually identical elements and are properly addressed together as an action brought under 15 U.S.C. § 1125(a)(1)(B), commonly known as section 43 of the Lanham Act." Utah Lighthouse Ministry v. Found. for Apologetic Info. & Research, 527 F.3d 1045, 1050 (10th Cir. 2008). Both claims require the same elements: (1) a protectable interest in the Marks; (2) the use of identical or similar Marks in commerce; and (3) the likelihood of confusion arising from the use of an identical or similar Mark. Derma Pen, LLC v. 4EverYoung Ltd., 773 F.3d 1117, 1120 (10th Cir. 2014). If trademark infringement is established, a plaintiff may recover defendant's profits,
In this case, Big O has established a protectable interest in the Marks by submitting proof of federal registration of each of them. [#24-2 at 7-16; #37-2]. See also 15 U.S.C. § 1115; Drexel Enterprises, Inc. v. Richardson, 312 F.2d 525, 527 (10th Cir. 1962) (observing that registration of a trademark is prima facie evidence of the validity of the mark and of the registrant's exclusive right to use it as specified in the certificate). Therefore, this court concludes that Plaintiff satisfies the first element of the test for trademark infringement and unfair competition.
With respect to the third element, "[i]t is well-settled doctrine that a terminated franchisee's continued use of its former franchisor's trademarks, by its very nature, constitutes trademark infringement." Steak n Shake Enterprises, Inc. v. Globex Co., LLC, 110 F.Supp.3d 1057, 1077 (D. Colo. 2015), aff'd, No. 16-1010, 2016 WL 4743685 (10th Cir. Sept. 12, 2016). Indeed, when a franchisee continues to use protected marks after the termination of their agreement, "the potential for consumer confusion is greater than in the case of a random infringer." See id. This danger of confusion has been determined to satisfy the likelihood of confusion test for trademark infringement. IHOP Franchising, LLC v. Tabel, No. 13-2641-KHV-TJJ, 2014 WL 1767199, at *9 (D. Kan. Apr. 15, 2014), report and recommendation adopted, No. CIV.A. 13-2641-KHV, 2014 WL 1767191 (D. Kan. Apr. 30, 2014) (citing Burger King Corp. v. Mason, 710 F.2d 1480, 1493 (11th Cir. 1983)). Therefore, to the extent that Plaintiff establishes that C&S continued its business as Big O Tires and used the Marks after the expiration of the Franchise Agreement on March 31, 2015, the third element of the test for trademark infringement would be satisfied.
Thus, the operative inquiry facing this court is whether there are sufficient facts, taken as true, to establish that C&S continued the use of Big O's trademarks after March 31, 2015 and, for the purposes of assessing damages, the scope and duration of the continued use until at least May 1, 2015. The Complaint avers the following facts:
Mr. O'Neil similarly stated in his Declaration, "Defendants continued to use the Marks and Trade Dress at the Henderson store and online after the Agreement had expired on March 31, 2015 at least until May 4, 2015." [#24-2 at ¶ 20]. At the evidentiary hearing, Mr. Bull testified that Defendants' did not shut down their operation as of March 31, 2015; that as of the April 15, 2015 letter, Big O was aware of his continuing operation, holding himself and representing himself as Big O; that Defendants continued to use the trademark through April until sometime in the month of May; and that Duane Freshnock, the franchise business consultant, verified such continuing action. [#34 at 21:11-14; 22:10-19; 23:7-11]. As part of the Renewed Motion for Default Judgment, Big O supplied an April 27, 2015 letter from Mr. Brady to Big O that indicates states:
[#39-5]. The letter, however, is hearsay and is insufficient to overcome Mr. Bull's testimony under oath. Oceanic Trading Corp. v. Vessel Diana, 423 F.2d 1, 4 (2d Cir.1970) (setting aside default judgment where it was based entirely upon hearsay evidence); Breaking the Chain Found., Inc. v. Capitol Educ. Support, Inc., 589 F.Supp.2d 25, 32 (D.D.C. 2008) (observing that "unless there are very unusual circumstances to justify it, the evidentiary material offered in support of a final [default] judgment should consist of material within the personal knowledge of the affiant and not hearsay."). Therefore, the facts to which Mr. Bull testified stand uncontroverted before the court, and this court must accept such factual allegations as true. See Coosemans Denver, Inc. v. Red Tomato Specialty Produce, Inc., No. 08-CV-01074-MSK-CBS, 2009 WL 229645, at *1 (D. Colo. Jan. 29, 2009) (deeming well-pled facts as uncontested). Accordingly, the court concludes that C&S continued operating its business as Big O Tires at 828 South Boulder Highway, Henderson, Nevada after March 31, 2015 until at least May 4, 2015, based on the unconverted factual assertions and testimony.
As discussed before, a final default judgment cannot be entered against a party until the amount of damages has been ascertained. See Llewellyn v. Shearson Fin. Network, Inc., No. 08-cv-00179-MSK-KLM, 2009 WL 497865, at *2 (citing Herzfeld v. Parker, 100 F.R.D. 770, 773 (D. Colo. 1984)). Adopting the May 4, 2015 date used by Big O in its original Motion for Default Judgment [#24 at 8; #24-2 at ¶ 20] and the Renewed Motion [#39 at 8 ¶ 11],
Ongoing royalties normally received by the franchisor for a holdover period can be an accurate measure of trademark damages. See Ramada Inns, Inc. v. Gadsden Motel Co., 804 F.2d 1562, 1566-67 (11th Cir. 1986); La Quinta Corp v. Heartland Props. LLC, 603 F.3d 327, 341 & n.10 (6th Cir. 2010); KFC Corp. v. Lilleoren, 821 F.Supp. 1191, 1193 (W.D. Ky. 1993). In calculating trademark damages, courts have included both general royalties and contributions to advertising fees, so long as the same damages are not captured elsewhere. See Century21 Real Estate, LLC v. Destiny Real Estate Props., No. 4:11-CV-38 JD, 2011 WL 6736060, at *6 (N.D. Ind. Dec. 19, 2011). Under Schedule B of the First Amendment to the Franchise Agreement, there is a matrix applied to each franchisee. [#1-2 at 71-78]. Mr. Bull testified that a five percent royalty to gross sales would apply to C&S [#34 at 31:10-32:5]; a four percent fee applied for the local marketing fund [id. at 33:16-18]; and a .85 percent fee for a national advertising fund [id. at 33:19-25].
The Franchise Agreement required Defendant to file monthly reports together with payments of royalty fees and advertising contributions. [#1-2 at 26, § 16.03]. Mr. Bull testified that Defendants did not file a report during the month of April [#34 at 32:18-22]. The Declaration of Katarina Schickedanz, a financial analyst for Big O Tires, indicates that C&S reported the following gross revenues from March 2014 to February 2015:
[#39-1 at 2]. In reviewing the Franchise Agreement, this court did not find any provision that addressed how royalties or fees should be calculated in the absence of a monthly report. Accordingly, in absence of reported gross revenue for March or April 2015, this court finds that an average over the past twelve months, i.e., $104,663.00, is an appropriate base upon which to calculate royalties.
Using $104,663.00 as a base for calculating royalties, this court finds that the calculation of $11,523.83, as reflected by Ms. Schnickedanz's Declaration, is appropriate. The number is derived by annualizing $104,663.00 and multiplying it by the royalty rate (9.85%), and dividing it by 365 days in a year, yielding a daily rate of $338.94 per day. There are thirty-four days at issue, bringing the total to $11,523.83. Accordingly, this court respectfully RECOMMENDS that judgment be entered in the amount of $11,523.83 for Big O's claim of trademark infringement.
Big O also moves for default judgment as to its contract claims, Claim III against C&S for breach of contract of the Franchise Agreement, and Claim IV against Mr. Brady and Ms. Brady in their individual capacities as guarantors of the Franchise Agreement. [#24 at 10]. Under Colorado law, to prevail on a breach of contract claim, the party seeking to recover must prove the following elements: (1) the existence of a contract; (2) performance by the plaintiff or some justification for nonperformance; (3) failure to perform the contract by the defendant; and (4) resulting damages to the plaintiff. W. Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992).
The Complaint adequately pleads the existence of a contract and incorporates the Franchise Agreement and two of its amendments by attaching them. [#1 at ¶ 14; #1-2]. At the evidentiary hearing, Plaintiff offered and the court admitted as evidence the Third Amendment to the Franchise Agreement, which is executed by C&S and guaranteed by Mr. Brady and Ms. Brady. [#37-9]. This court has reviewed each of the contractual documents, noted the signatures of Mr. Brady as President of C&S, and the signatures of Mr. Brady and Ms. Brady, individually as guarantors. [#1-2 at 42, 45, 47, 69, 86, 87; #37-9 at 2-3]. The Third Amendment provides that the Franchise Agreement will terminate on March 31, 2015. [#37-9 at 1]. Thus, the court concludes that there is a valid and enforceable contract. The court further finds, based on Mr. O'Neil's unconverted affidavit, Big O permitted C&S to carry out the franchise business during the effective period of the Agreement [#24-2 at ¶ 30]. In reviewing the Franchise Agreement, this court did not find any post-termination obligations on the part of Big O. [#1-2 at 34 § 20]. Therefore, this court concludes that Big O performed its duties under the Franchise Agreement.
The court now turns to the last two elements, i.e., the non-performance by defendant and resulting damages. With regard to non-performance, Big O alleges that C&S breached its post-termination obligations as set out in §§ 20.01(a), 20.01(b), 20.01(e), and 20.01(h) of the Franchise Agreement. Those sections set forth C&S' post-termination obligations, including:
As discussed above, the unconverted facts pled that C&S continued to operate as Big O Tires after the expiration of the Franchise Agreement on March 31, 2015. In addition, the Complaint avers that C&S did not sign over the telephone numbers or provide the customer lists by the May 4, 2015 deadline. [#1 at ¶ 22]. Mr. O'Neil attested that as of the date of the Motion for Default Judgment (June 28, 2016), Defendants had still not taken the action required to transfer and assign all telephone numbers associated with the former franchise located at 828 South Boulder Highway, Henderson, Nevada. [#24-2 at ¶¶ 24-25]. Nor had Defendants provided customer lists to Big O. [Id. at ¶ 25]. Taking these unconverted facts as true, this court finds that C&S breached §§ 20.01(a), 20.01(e), 20.01(h) of its Franchise Agreement with Big O.
In its Recommendation for the original Motion for Default Judgment, this court found it was precluded from recommending that default judgment be entered as to the breach of contract claim due to the lack of foundation for the calculation for either the royalties owed or the products ordered but not paid for by C&S. [#38 at 21-22]. As discussed above, this court finds that $11,523.83 is an appropriate amount of damages arising from the trademark infringement. Upon review of the Declaration of Rhonda Ceballos [#39-2], this court finds that the ledger is properly supported by invoices but for four charges: (1) the April 14, 2015 charge of $35.00 for insufficient funds; (2) the April 21, 2015 charge of $35.00 for insufficient funds; (3) the April 6, 2015 credit for $1000; and (4) the January 12, 2015 credit for $2.11. [Id. at 7; #39-2]. Given the totality of these missing invoices in favor of Defendants, this court finds that $6327.60 is due and owing for product purchases; the Complaint adequately alleges that C&S failed to pay for these product purchases [#1 at ¶ 41], and the court's own analysis confirms that this amount is distinct from the trademark royalties due and owing. [#39-2, #39-3]. The Franchise Agreement also provides for late fees in the amount of "interest equal to the lesser of the daily equivalent of eighteen percent (18%) per annum of such overdue amount per year, or the highest rate then permitted by applicable law, for each day such amount is past due." [#1-2 at 18, § 8.04]. Plaintiff claims $2,482.94 in interest, for the period through March 31, 2017, and interest accruing at $4.34 a day after March 31, 2017. [#39 at 10 ¶ 18, #39-6 at 1]. Indeed, the amount of interest calculated and sought on this same sum in the original Motion for Default Judgment was $1,182.65, as reflected by the ledger. [#34 at 43:18-21; #39-3]. Although the court assumes that this amount is determined by the particular due date for each individual invoice reflected at [#39-3 at 1], Plaintiff provides no explanation for this calculation, and this court cannot independently reconcile it. [#39 at 10 ¶ 18; #39-2].
In order not to further delay this Recommendation, this court simply RECOMMENDS judgment be entered in the amount of $6327.60, with prejudgment interest rate on that amount at 18% per annum from April 1, 2015, until the date of the judgment.
In Claim IV, Big O seeks judgment against Mr. Brady and Ms. Brady as individuals based on their execution of personal guaranties to the Franchise Agreement. The original Franchise Agreement contained a "Guaranty of Franchisee's Agreement," as Schedule 3, in which the guarantor guarantees that "C&S Tires, Inc., a Nevada Corporation ("Franchisee") will perform during the term of the Franchise Agreement each and every covenant, payment, agreement and undertaking on the part of Franchisee contained and set forth in or arising out of such Franchise Agreement." [#1-2 at 45; #1-2 at 45-48]. Mr. Brady and Ms. Brady separately affirmed their guaranties through a Third Amendment to the Franchise Agreement. [#37-9].
This court finds that the trademark infringement damages and the breach of contract damages both arise out the Franchise Agreement. Although Big O did not seek the unpaid royalties under its breach of contract claim, Defendants were barred under the Franchise Agreement from utilizing Big O's Marks after the termination of the Franchise Agreement. [#1-2 at 18, § 9.02]. Accordingly, this court respectfully RECOMMENDS that Mr. Brady and Ms. Brady be held jointly and severally liable for the trademark infringement damages and the breach of contract damages.
In its Renewed Motion for Default Judgment, Big O continues to seek that telephone number (702) 565-9393 be assigned and that C&S' customer list be made available for inspection and copying. Both forms of relief are contemplated by the Post Termination Obligations as set forth in the Franchise Agreement. [#1-2 at 34, § 20.01(e), (h)]. It is uncontroverted that Defendants have neither assigned the telephone number, nor provided Big O a copy of their customer list, despite endeavoring to do so in Mr. Brady's own correspondence. Compare [#1 at ¶ 22, #24-2 at ¶ 23, #34 at 23:12-16] with [#39-5]. Therefore, this court respectfully RECOMMENDS that injunctive relief in form demanded by the Franchise Agreement, i.e.:
Big O also seeks post-judgment interest in the amount of 18% per annum. [#39 at 11]. As an initial matter, this rate is not appropriately applied to the trademark infringement damages (either prejudgment or post-judgment), because they do not arise under the contract. Indeed, Big O specifically disclaimed such royalties under their breach of contract claim. [#39 at 9 ¶ 15; #34 at 42:25-44:16]. Therefore, any post-judgment interest at the rate of 18% per annum is limited to the damages ascribed to the breach of contract, with the principal amount of $6327.60. In the absence of a contractually determined rate, this court respectfully RECOMMENDS that both pre-judgment and post-judgment interest at the statutory rate as set by 28 U.S.C. § 1961 as to the trademark infringement claim be applied. See Electrology Lab., Inc. v. Kunze, 169 F.Supp.3d 1119, 1160-61 (D. Colo. 2016).
Finally, the court considers Big O's request for attorney's fees in the amount of $13,854.50 and costs in the amount of $569.39, for a total of $14,423.69, pursuant to § 27.02 of the Franchise Agreement. [#39 at 10; #44]. That section provides:
[#37-2 at 39, § 27.02]. Section 27.01 contemplates actions by Big O to enforce the obligations of Franchisee upon termination or expiration of the Franchise Agreement. [Id. at § 27.01(a)(ii)]. Having determined that C&S breached the Agreement, and Mr. Brady and Ms. Brady have breached their respective guaranties, this court finds that Big O is entitled to reasonable attorney's fees and costs. In calculating a reasonable attorney's fee, this court applies the lodestar principles stated in Robinson v. City of Edmond, 160 F.3d 1275, 1281 (10th Cir. 1998). "The lodestar calculation is the product of the number of attorney hours reasonably expended and a reasonable hourly rate." Id. (internal quotations and citation omitted).
The first step in calculating a fee award is to determine the number of hours reasonably spent by counsel for the party seeking the fees. The burden of proof lies with the prevailing party seeking fees. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). In determining what is a reasonable time in which to perform a given task, an attorney submitting billing entries should consider the following factors: (1) the complexity of the case; (2) the number of reasonable strategies pursued; (3) the responses necessitated by the maneuvering of the other side; and (4) "the potential duplication of services" caused by the presence of multiple attorneys when one would suffice. Reg'l Dist. Council, 82 F. Supp. at 1246 (citing Ramos v. Lamm, 713 F.2d 546, 554 (10th Cir. 1983) (overruled on other grounds by Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 725, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987))). The court then exercises its discretion to determine whether the attorney exercised appropriate billing judgment. Reg'l Dist. Council., 82 F. Supp. 3d at 1245. Then, the court considers what a reasonable billing rate is for the attorneys who seek reimbursement of their fees. A reasonable billing rate has been defined as a rate that is reasonable and within the realm of rates charged by other lawyers of similar skill and experience in the Denver metropolitan area. Duran v. Koehler, No. 10-CV-01569-REB-KMT, 2014 WL 4197578, at *3 (D. Colo. Aug. 25, 2014) (citing Ramos, 713 F.2d at 555).
Once a plaintiff carries his burden of establishing an appropriate amount of hours spent and a reasonable billing rate, those numbers are multiplied together to generate a lodestar amount. See Robinson, 160 F.3d at 1281. While the court may adjust the lodestar amount upward or downward to account for the specific factors presented by the case, including the success of the party seeking fees, the lodestar amount is generally presumed to be reasonable. See Hensley v. Eckerhart, 461 U.S. 424, 424 (1983); Robinson, 160 F.3d at 1281. Courts need not account for each and every hour; the goal is to do "rough justice" using the Court's overall sense of a lawsuit. Madrid v. Stellar Recovery, Inc., No. 15-CV-02553-MSK-NYW, 2016 WL 3220977, at *2 (D. Colo. June 3, 2016).
In reviewing the entries this court finds that the majority of the entries properly reflect "costs and expenses of enforcement and collection including, but not limited to, court costs and reasonable attorneys' fees, including the fair market value of any time expended by legal counsel employed by Big O." A limited number of entries are either unwarranted, duplicative of other entries, or fail to provide adequate description for this court to assess their appropriateness:
Accounting for these exclusions, this court finds that a reasonable time in the amount of 18.2 hours was expended by Mr. Bruno, and a reasonable time in the amount of 44.9 hours was expended by Ms. Akin.
Instead, this court looks to sources such as the Colorado Bar Association's Economic Survey Snapshot and other case law in this District. The most recent CBA Economic Survey is from 2012, with data from 2011.
Using the lodestar method, this court calculates $5,915.00 in fees for Mr. Bruno's work in this action, and $9,204.50 for Ms. Akin, for a total of $15,119.50. But Big O has only sought $13,854.50, having already discounted their billings. See e.g., [#37-1 at 3]. This court finds that the amount of $13,854.50 is a reasonable amount for fees, further corroborated by the award of a similar amount in a similar case out of the Eastern District of California. Big O Tires, LLC v. Brown, No. 1:09CV01469OWWDLB, 2009 WL 3698508, at *4 (E.D. Cal. Nov. 4, 2009). The court further finds that costs in the amount of $569.19 is also reasonable, noting that the bulk of those costs are attributable to the filing fee in this court and service on Defendants. [#37-1 at 3]. Accordingly, this court respectfully RECOMMENDS that the default judgment include the amount of $14,423.69 for attorney's fees and costs.
For the foregoing reasons, this court respectfully
(1) Plaintiff Big O Tires, LLC's Renewed Motion for Default Judgment Against All Defendants [#39] be
(2) Default Judgment be
