Gibralter, LLC v. DMS Flowers, LLC

Opinion

1 2 3

4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10

11 GIBRALTER, LLC, et al., Case No. 1:24-cv-00174-CDB

12 Plaintiffs, ORDER GRANTING DEFENDANT DANIEL ANDRADE’S MOTION TO SET ASIDE 13 v. DEFAULT AND DENYING PLAINTIFFS’ MOTION TO COMMENCE DISCOVERY 14 DMS FLOWERS, LLC, et al., (Docs. 31, 37) 15 Defendants. 16 ORDER SETTING SCHEDULING CONFERENCE 17

18 Pending before the Court is: (1) the motion of Plaintiffs Gibralter, LLC and Divinely, Inc. 19 (“Plaintiffs”) for leave to seek discovery upon entry of default and prior to Rule 26(f) conference, filed 20 June 27, 2024, and (2) the motion of Defendant Daniel Andrade to “set aside default judgment,” filed 21 July 3, 2024. (Docs. 31, 37). Plaintiffs filed an opposition to Defendant Andrade’s motion to set aside 22 default judgment and Defendant Andrade replied. (Docs. 41, 43). For the reasons set forth herein, the 23 Court will grant Defendant Andrade’s motion to set aside default judgment and deny Plaintiffs’ 24 motion for leave to seek discovery upon entry of default and prior to Rule 26(f) conference. 25 Background 26 Plaintiff Gibralter, LLC (“Gibralter”) is the owner of the United States Trademark number 27 5540108 for standard character mark “BLOOMINGFUL” (hereinafter referred to as “MARK”), issued 28 by the U.S. Patent and Trademark Office on August 14, 2018. (Doc. 1 at ¶ 14 & Exhibit 1). Gibralter 1 granted Plaintiff Divinely, Inc. (“Divinely”), and its designated affiliates, if any, the sole and exclusive 2 right to use the MARK. Id. at ¶ 15. Divinely sells florals under the MARK, nationally and 3 internationally, from a storefront and online. Id. at ¶ 16. Divinely has been using the MARK 4 continuously since at least as early as January 1, 2018, throughout the United States and 5 internationally. Id. at ¶ 31. 6 Plaintiffs allege that Defendants began their infringing use of the MARK at least as early as 7 May 16, 2023, when they filed “Bloomingful Flowers, LLC” with the California Secretary of State. 8 Id. at ¶ 35. In a “crossclaim” against an entity named Telefora, Defendant Daniel Andrade 9 (“Andrade”) alleges that he purchased a business called “All My Love Fresh Flowers” in June 2023. 10 (Doc. 39 at ¶ 8). Upon purchasing the business, Andrade “changed the name to ‘Bloomingful’ while 11 in escrow.” Id. at ¶ 9. Plaintiff claims he was unaware that “Bloomingful” was a trademarked name, 12 and he advertised the Grand Opening of his new store through various media, including radio. (Docs. 13 1 at ¶ 40; 39 at ¶ 9). Andrade claims his business model involves receiving orders from Teleflora, a 14 corporation doing business in Bakersfield. Id. at ¶¶ 4, 14. Andrade alleges Teleflora also advertised 15 his business name on the internet. Id. at 14. 16 Andrade claims that around the time of the Grand Opening in June 2023, he “was informed 17 that he could not use the name ‘Bloomingful.’” (Doc. 39 at ¶ 10). Andrade acknowledges that 18 Gibralter owns the trademark for “Bloomingful.” Id. at ¶ 18. Andrade claims he promptly changed 19 the business name to DMS LLC. Id. at ¶ 11; see (Doc. 1 at ¶ 18) (“As of November 9, 2023, DMS 20 Flowers, LLC is a California Limited Liability Company and on information and belief is the new 21 business name of Bloomingful Flowers LLC…”). Andrade alleges he obtained a new EIN number, 22 opened a new bank account, and registered a new domain name for his business. (Doc. 39 at ¶¶ 12- 23 13). 24 Plaintiffs allege that on or about September 9, 2023, they became aware of Defendants’ 25 infringement of the MARK. (Doc. 1 at ¶ 45). Plaintiffs sent a cease and desist letter to Bloomingful 26 Flowers, LLC, on September 19, 2023. Id. at ¶ 46. Plaintiffs assert that on September 22, 2023, 27 Defendant Maria Pantoja (“Pantoja”) acknowledged receipt of the letter and assured Plaintiffs that 28 Bloomingful Flowers, LLC and its principals would discontinue the use of the MARK. Id. On 1 October 12, 2023, Plaintiffs contacted Defendants and again demanded they cease and desist from 2 using the MARK. Id. at ¶ 47. 3 Andrade claims Teleflora was supposed to remove the previous name from their 4 advertisements when informed of the trademark issue. (Doc. 39 at ¶ 14). Andrade asserts he 5 “specifically requested that Teleflora make this change around December 12, 2023.” Id. at ¶ 16. 6 Andrade claims Teleflora complied with his request around February 24, 2024. Id. 7 On February 6, 2024, Plaintiffs initiated this action with the filing of a complaint against 8 Defendants Andrade, Samantha Andrade, Pantoja, and DMS Flowers, LLC. (Doc. 1). Plaintiffs assert 9 claims against Defendants for (1) federal trademark infringement, (2) federal unfair competition, (3) 10 federal trademark dilution, (4) unfair and deceptive trade practices, (5) common law trademark 11 infringement and unfair competition, (6) state trademark dilution and injury to business reputation, and 12 (7) violation of anti-cybersquatting consumer protection act-cyberpiracy. Id. at 1, 9-16. Plaintiffs 13 allege liability against Defendants Andrade, Samantha Andrade, and Pantoja as owners, business 14 partners, shareholders, members, managers, or holding other positions of authority with Defendant 15 DMS Flowers, LLC. Id. at ¶¶ 19-21. 16 In May 2024, Plaintiffs filed executed proofs of service of summons for all Defendants (see 17 Docs. 14-15, 22-23) reflecting that Andrade was personally served on May 22, 2024. See (Doc. 22). 18 Andrade acknowledges he was served on May 22, 2024. See (Doc. 43 at 10) (“I was not personally 19 served the documents by process server until May 22, 2024). 20 On May 25, 2024, Plaintiffs filed a request for entry of default as to Defendants DMS Flowers, 21 LLC, and Maria Pantoja. (Doc. 24). The Clerk of the Court entered default against Defendants DMS 22 Flowers, LLC, and Maria Pantoja on May 28, 2024. (Doc. 25). On June 13, 2024, Plaintiffs filed a 23 request for entry of default as to Defendants Daniel Andrade, and Samantha Andrade. (Doc. 27). 24 That same day, the Clerk of the Court entered default against Defendants Daniel Andrade and 25 Samantha Andrade. (Doc. 29). 26 Andrade claims he received the complaint by mail on June 18, 2024. (Doc. 43 at 10). Plaintiff 27 asserts he “did not understand the significance of the 21-day period referenced in the documents.” Id.; 28 see (Doc. 2) (“[You are Hereby Summoned] and required to serve…an answer to the complaint which 1 is served on you with this summons, within 21 days after service of this summons on you, exclusive of 2 the day of service. If you fail to do so, judgment by default will be taken against you for the relief 3 demanded in the complaint.”). Andrade claims on June 19, 2024, he began contacting various law 4 offices seeking advice and spoke to several lawyers but did not understand their explanations. (Doc. 5 43 at 10). Andrade asserts “[he] believed [he] had more time to respond” and “[a]lthough [he] knew 6 [he] needed to file an answer [he] did not know how to write it.” Id. 7 Andrade claims that on June 20, 2024, he “connected” with a paralegal named Amy, who was 8 able to explain the process to him. Id. at 11. Andrade notes that “[w]ith help from others 9 knowledgeable in writing legal documents, the Answer was completed on June 22, 2024.” Id. 10 Thereafter, Andrade learned that he was already in default and sought additional help to write a 11 motion to vacate the default. Id. Andrade appears to claim his papers were ready to be filed around 12 June 24, 2024, but he was unable to do so because he did not know how to file documents and lacked 13 access to the ECF filing system. See id. (“On June 24, 2024, I sought help to learn how to file the 14 Answer at the courthouse.”). 15 On June 27, 2024, Plaintiffs moved for leave to seek discovery upon entry of default and prior 16 to Rule 26(f) conference. (Doc. 31). On July 3, 2024, Andrade filed a motion to “set aside default 17 judgment,” an answer to Plaintiffs’ complaint, and a “crossclaim complaint” against Teleflora, a 18 corporation doing business in Bakersfield, California. (Docs. 37-39).1 On July 15, 2024, Plaintiffs 19 filed an opposition to Andrade’s motion to set aside default, and Andrade filed a reply on August 5, 20 2024. (Docs. 41, 43). 21 Legal Standard 22 Andrade asks the Court to set aside a default judgment entered against him. (Doc. 37). 23 However, Plaintiff has neither moved for nor been awarded a default judgement – as this stage of the 24 25

26 1 Plaintiffs assert Andrade failed “to submit a [d]eclaration under penalty of perjury as to any scarce facts he does allege.” (Doc. 41 at 7). However, “[u]nless a rule or statute specifically states 27 otherwise, a pleading need not be verified or accompanied by an affidavit.” Fed. R. Civ. P. 11(a). Plaintiffs do not identify any purported requisite rule or statute. Moreover, the Court notes Andrade 28 addressed this omission by filing a declaration attached to his reply in support of his contentions. (Doc. 43 at 10-11). 1 litigation, the Clerk of the Court has only entered defaults against the Defendants. (Docs. 25, 29). 2 Thus, the Court shall address Andrade’s request under Federal Rule of Civil Procedure 55(c). 3 A clerk’s entry of default may be set aside for “good cause.” Fed. R. Civ. P. 55(c). “To 4 determine ‘good cause,’ a court must ‘consider three factors: (1) whether [the party seeking to set 5 aside the default] engaged in culpable conduct that led to the default; (2) whether [it] had [no] 6 meritorious defense; or (3) whether reopening the default judgment would prejudice the other party.” 7 United States v. Signed Pers. Check No. 730 of Yubran S. Mesle (hereinafter, “Mesle”), 615 F.3d 1085, 8 1091 (9th Cir. 2010). Although the “good cause” standard is the same that applies to motions to set 9 aside default judgment under Rule 60(b), “the test is more liberally applied in the Rule 55(c) context.” 10 Id. at 1091 n.1 (internal quotations and citations omitted); see Brady v. United States, 211 F.3d 499, 11 504 (9th Cir. 2000) (finding the district court’s discretion is “especially broad” when setting aside 12 entry of default, rather than default judgment). 13 “[D]efault judgments are generally disfavored; whenever it is reasonably possible, cases should 14 be decided on their merits.” Schwab v. Bullock’s Inc., 508 F.2d 353, 355 (9th Cir. 1974); see Falk v. 15 Allen, 739 F.2d 461, 463 (9th Cir. 1984) (“[J]udgment by default is a drastic step appropriate only in 16 extreme circumstances; a case should, whenever possible, be decided on the merits.”). 17 Discussion 18 1. Culpable Conduct 19 “[A] defendant’s conduct is culpable if he has received actual or constructive notice of the 20 filing of the action and intentionally failed to answer.” Mesle, 615 F.3d at 1092 (emphasis in original) 21 (quoting TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001), overruled on other 22 grounds as stated in Delgado v. Dempsey’s Adult Care Homes, LLC, No. 22-15176, 2023 WL 23 3034263, at *1 (9th Cir. Apr. 21, 2023)). “Intentional” conduct in this sense means “willful, 24 deliberate, or…[in] bad faith,” rather than neglectful. TCI Grp., 244 F.3d at 697-98. A “[n]eglectful 25 failure to answer as to which the defendant offers a credible, good faith explanation negating any 26 intention to take advantage of the opposing party, interfere with judicial decision-making, or otherwise 27 manipulate the legal process is not ‘intentional.’” Id. at 697. 28 1 Andrade argues his failure to timely respond to the complaint was not willful, deliberate, or in 2 bad faith. (Doc. 43 at 5). Instead, Andrade claims he was not properly served with the summons and 3 complaint and lacked notice of the lawsuit. Id. at 6, 8. Andrade argues that service of process was 4 defective because he “was not aware of the lawsuit until after the default judgment [sic] was entered, 5 indicating that proper service may not have been affected [sic].” Id. at 8. He further claims he “did 6 not receive any notice of the lawsuit or the impending default judgment [sic] in a timely manner.” Id. 7 Andrade asserts this defective service and lack of notice constitutes excusable neglect. Id. at 6. 8 Further, Andrade argues that upon learning of the default, he acted promptly to address the matter. Id. 9 The Court finds Andrade’s contentions are without merit. Andrade admits he was personally 10 served with the documents on May 22, 2024. Id. at 10. Thus, service of the summons and complaint 11 was properly effectuated and Andrade had notice of the lawsuit. The Court finds that Andrade was 12 solely responsible for the delay. Indeed, the record demonstrates that for almost a month, Andrade, 13 with notice of the complaint as of May 22, 2024, seemingly took no action to timely respond. Id. 14 Thereafter, Andrade continued to delay his response for two weeks in an effort to obtain legal 15 assistance and counsel. Id. 16 Andrade’s response to Plaintiffs’ complaint and his separate motion to set aside default were 17 not filed until several weeks after default was entered. Despite this delay, the Court cannot conclude 18 based on the record that such a delay was willful or in bad faith. It appears when Andrade learned that 19 a default had been entered against him (id. at 10-11), he promptly took action to set aside the default. 20 See Falk, 739 F.2d at 464 (declining to find five-month delay in moving to set aside default culpable 21 in light of the defendant’s difficulty in obtaining assistance from legal services); Williams v. Dawley, 22 No. 09-799 FCD-EFB, 2008 WL 3540360, at *2 (E.D. Cal. Aug. 12, 2008) (holding parties’ diligence 23 in working to set aside default supported a finding of good cause). 24 Plaintiffs contend Andrade’s “allegation of prompt action is just not true.” (Doc. 41 at 16). In 25 support, Plaintiffs focus on Andrade’s failure to stop using the MARK, even after he knew he could 26 not use the name and was warned by Plaintiffs of his alleged infringement. Id. at 17-18. The Court 27 finds Plaintiffs’ arguments unpersuasive. Plaintiffs highlight that Andrade purportedly had notice of 28 an impending lawsuit, but the relevant inquiry when entertaining a motion to set aside default is 1 whether Plaintiff intentionally failed to answer when he had notice of the actual lawsuit. The parties 2 agree that Andrade was served with the complaint on May 22, 2024, and as discussed above, Andrade 3 attempted to set aside the default within weeks of being formally served. 4 Additionally, the Court notes that while delayed, Andrade has appeared in this action and has 5 displayed a willingness to cooperate fully going forward. (Doc. 43 at 9, 11). Accordingly, the Court 6 finds that this factor weighs in favor of setting aside the entry of default. 7 2. Meritorious Defense 8 In order to have an entry of default set aside, a defendant must also present specific facts that 9 would constitute a meritorious defense. TCI Grp., 244 F.3d at 700. However, the burden on defendant 10 is not extraordinarily heavy. Id. Indeed, a defense is considered meritorious if “there is some 11 possibility that the outcome of the suit after a full trial will be contrary to the result achieved by the 12 default.” Haw. v. Carpenters' Tr. Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986) (“Stone”); see 13 Audio Toys, Inc. v. Smart AV Pty Ltd., No. CV 06-6298-SBA, 2007 WL 1655793, at *3 (N.D. Cal. 14 June 7, 2007) (movant “need only assert a factual or legal basis that is sufficient to raise a particular 15 defense; the question of whether a particular factual allegation is true is resolved at a later stage.”) 16 (citing TCI Grp., 244 F.3d at 700). 17 Andrade claims he has meritorious defenses to Plaintiff’s claims. Id. at 6. Specifically, 18 Andrade asserts “[a]s outlined in Defendant’s proposed Answer, [he] denies the allegations of 19 trademark infringement and asserts valid defenses including lack of confusion, abandonment of 20 trademark by Plaintiffs, and other affirmative defenses.” Id. at 6-7; (Doc. 43 at 5-9). Cf. (Doc. 1 ¶ 12, 21 alleging consumer confusion) with (Doc. 37 ¶ 12, denying consumer confusion). Defendant 22 Andrade’s answer denies the allegations of Plaintiff’s complaint and contains the following 23 affirmative defenses: 24 (1) no cause of action stated, (2) laches, (3) estoppel, (4) waiver, (5) failure to mitigate, (6) punitive damages unwarranted, (7) offset, (8) good faith, (9) undiscovered affirmative defense, 25 (10) non-economic general damages, (11) statute of limitations, (12) conduct was justified, (13) no causation, (14) standing, (15) failure of consideration, (16) innocent misrepresentation, 26 (17) due care, (18) lack of damages, and (19) no contractual fraud. 27 28 (Doc. 38). 1 In response, Plaintiffs argue that by virtue of Andrade’s allegations in his cross-complaint 2 against Teleflora, he has admitted to Plaintiffs’ ownership of the MARK and his infringement. (Doc. 3 41 at 12). 4 Whether the parties’ goods and services present a likelihood of consumer confusion represents 5 a quintessential fact issue that rarely is amenable to judgment as a matter of law without the benefit of 6 discovery. E.g., Yaros v. Kimberly Clark Corp., No. 17cv1159-GPC(BGS), 2018 WL 3729520, at *5 7 (S.D. Cal. Aug. 6, 2018); Stanislaus Custodial Deputy Sheriffs’ Ass’n v. Deputy Sheriff’s Ass’n of 8 Stanislaus Cnty., No. CV F 09-1988 LJO SMS, 2010 WL 2218813, at *10 & n.3 (E.D. Cal. June 1, 9 2010). Given the low burden a party must satisfy to demonstrate entitlement to setting aside default 10 (Stone, 794 F.2d at 513) and given Andrade’s defense in part of lack of consumer confusion, the Court 11 finds that this factor weighs in favor of setting aside the entry of default. 12 3. Prejudice 13 “To be prejudicial, the setting aside of an entry of default must result in greater harm than 14 simply delaying the resolution of the case.” TCI Grp., 244 F.3d at 701 (quoting Falk, 739 F.2d at 15 463); Thompson v. Am. Home Assur. Co., 95 F.3d 429, 433-34 (6th Cir. 1996). “Merely being forced 16 to litigate on the merits cannot be considered prejudicial” for purposes of setting aside the default. 17 TCI Grp., 244 F.3d at 701. Rather, the standard is “whether [a plaintiff’s] ability to pursue his claim 18 will be hindered.” Falk, 739 F.2d at 463; see Thompson, 95 F.3d at 433-34 (to be considered 19 prejudicial, “the delay must result in tangible harm such as loss of evidence, increased difficulties of 20 discovery, or greater opportunity for fraud or collusion”). 21 Andrade argues that setting aside his default will not prejudice Plaintiffs as the case is in its 22 early stages and Plaintiffs will not be unduly burdened by litigating the matter on its merits. (Doc. 43 23 at 7). In response, Plaintiffs contend continued litigation would prejudice it and would also consume 24 valuable court resources when Andrade “has admitted the essential elements of the Complaint.” (Doc. 25 41 at 14). Plaintiffs argue Andrade is “trying to infringe upon the Plaintiffs’ right to have a default 26 against the Defendant and have this case much closer to a final resolution and much closer to an 27 injunction to stop the current and continuing infringing use.” Id. Plaintiffs conclude they are 28 prejudiced because they will have to “spend time, spend money, and be subjected to the continued 1 infringement when there is no obvious likelihood of being able to collect on a judgment and/or 2 likelihood the Defendant will respect the rights of the parties or the Orders of the Court.” Id. at 16. 3 Prejudice such as loss of a “quick victory” is insufficient to justify denial of relief. Bateman v. 4 U.S. Postal Serv., 231 F.3d 1220, 1225 (9th Cir. 2000). “Having to try a case on the merits is not by 5 itself sufficient prejudice” - the delay must result in tangible harm, such as loss of evidence or more 6 difficult discovery. Audio Toys, 2007 WL 1655793, at *3. While the Court acknowledges Plaintiffs’ 7 allegation there is a current and continuing infringement of its MARK resulting in prejudice (Doc. 41 8 at 16), as set forth above, determining the existence of a likelihood of consumer confusion invariably 9 requires discovery and development of the factual record – a reality Plaintiffs appear to concede in 10 seeking to delay moving for default judgment and, instead, to engage in discovery. See (Docs. 31, 34). 11 In sum, the Court finds that this factor weighs in favor of setting aside the entry of default. 12 * * * * * 13 On balance, given the disfavor generally accorded to resolving actions on default and given 14 that the Mesle factors weigh in Andrade’s favor, the Court finds that default should be set aside. 15 Further, Plaintiffs’ motion to commence discovery (Doc. 31) will be mooted once the parties appear 16 for scheduling conference and the Court enters its scheduling order. 17 The Court acknowledges Andrade’s attempt to join non-party Teleflora to this action by way of 18 his “cross complaint” asserting various causes of action against Teleflora generally relating to 19 Plaintiffs’ trademark infringement allegations. See (Doc. 39). However, Teleflora is not currently a 20 party to this action. Joinder of parties is governed by Rule 19 and 20 of the Federal Rules of Civil 21 Procedure. See Fed. R. Civ. P. 13(h). Plaintiffs and Andrade will be directed to meet/confer in 22 connection with their preparation of a joint scheduling report (see Doc. 3 at 2) and address in that 23 report their respective views concerning whether Teleflora must be or should be added to the action. 24 Conclusion and Order 25 For the forgoing reasons, it is HEREBY ORDERED that Defendant Daniel Andrade’s motion 26 to set aside default (Doc. 37) is GRANTED and Plaintiffs’ motion to conduct discovery (Doc. 31) is 27 DENIED. 28 1 It is FURTHER ORDERED that the case is set for scheduling conference on November 21, 2 || 2024, at 10:00am. The parties shall appear at the conference remotely via Zoom video conference, 3 || and the parties may obtain the Zoom ID and password from the Courtroom Deputy prior to the 4 ||conference. A joint scheduling conference statement shall be filed in compliance with the procedures 5 || set forth in the Order Setting Mandatory Scheduling Conference (see Docs. 3 & 3-2) except that said 6 || report also shall be emailed to Courtroom Deputy Clerk Cori Boren (cboren @caed.uscourts.gov). Tt 7 || parties SHALL address in the joint report their respective views concerning whether Teleflora must t 8 || or should be added to the action. See Fed. R. Civ. P. 19, 20. 9 || IT IS SO ORDERED. Dated: _ October 15, 2024 | Wr Pr 11 UNITED STATES MAGISTRATE JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28