Medline Ind. v 9121-3140 Quebec et al CV-09-301-JL 3/5/2010 UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE
Medline Industries, Inc.
v. Civil N o . 1:09-cv-301-JL Opinion N o . 2010 DNH 040 9121-3140 Quebec, Inc., et a l .
O R D E R
This case involves the assessment of damages and other
remedies following the entry of default under Fed. R. Civ. P.
55(a) against the defendants, Thomas Wong and 9121-3140 Quebec,
Inc. Plaintiff Medline Industries, Inc. sued the defendants for
violations of the Telemarketing and Consumer Fraud Abuse
Prevention Act, 15 U.S.C. §§ 6101 et seq., and the Lanham Act, 15
U.S.C. §§ 1051 et seq. This court has jurisdiction under 28
U.S.C. §§ 1331 (federal question) and 1338 (trademark).
On November 2 4 , 2009, this court entered an order granting
Medline’s motion for judgment on the pleadings, or alternatively,
for entry of default and instructed Medline to proceed under Fed.
R. Civ. P. 55 or other appropriate authority to establish
damages. After reviewing the parties’ submissions and
supplemental briefing, the court grants Medline’s request for
permanent injunction, damages, and attorneys’ fees and costs, and
awards Medline a judgment in the amount of $173,338.35 in damages
and $16,343.07 in attorneys’ fees and costs. I. APPLICABLE LEGAL STANDARD
If a defendant fails to answer or otherwise defend the
claims brought against him, the court will enter default in the
plaintiff’s favor. See Fed. R. Civ. P. 55(a). Once default is
entered, the defendant is “taken to have conceded the truth of
the factual allegations in the complaint as establishing the
grounds for liability as to which damages will be calculated.”
Ortiz-Gonzalez v . Fonovisa, 277 F.3d 5 9 , 62-63 (1st Cir. 2002)
(quotation omitted); see also Franco v . Selective Ins. Co., 184
F.3d 4 , 9 n.3 (1st Cir. 1999); Brockton Sav. Bank v . Peat,
Marwick, Mitchell & Co., 771 F.2d 5 , 13 (1st Cir. 1985). Upon
entry of default, “[d]iscretion as to the judgment or the need
for a hearing on damages is vested with the district court.”
Ortiz-Gonzalez, 277 F.3d at 64 (citing Pope v . United States, 323
U.S. 1 , 12 (1944)). “It is a familiar practice and an exercise
of judicial power for a court upon default, by taking evidence
when necessary or by computation from facts of record, to fix the
amount which the plaintiff is lawfully entitled to recover and to
give judgment accordingly.” Pope, 323 U.S. at 1 2 .
II. BACKGROUND
By virtue of the default, the facts alleged in Medline’s
complaint are “taken as true.” Brockton Sav. Bank, 771 F.2d at
13. Medline is a leading manufacturer and distributor of medical
2 products and has used the trademark MEDLINE in connection with
its products since 1968. Medline owns numerous trademark
registrations for the MEDLINE mark issued by the United States
Patent and Trademark Office and enjoys a strong reputation and
customer goodwill as a provider of high-quality medical products.
Beginning in 2006, Wong initiated the “Medline Savings”
campaign, under which telemarketers offered “pharmaceutical
discount packages” to consumers throughout the United States.
The telemarketers told the consumers, many of whom were elderly,
that if they agreed to purchase the packages, a one-time charge
of $398 would appear on their bank statements under the name
Medline Savings. After the $398 was debited, Wong fulfilled the
orders by sending a “pharmaceutical discount package” bearing the
name “Medline” or “Medline Savings” that was actually nothing
more than promotional materials and an application form for a
Canadian pharmaceutical website. Wong committed these acts
without Medline’s consent and with full knowledge of Medline’s
prior use and ownership of the MEDLINE mark. Wong, his company
9121-3140 Quebec, Inc., and the other parties involved in the
fraudulent “Medline Savings” campaign generated at least
$1,000,000 from the scheme.
3 On September 4 , 2009, Medline filed its complaint against
the defendants in this court.1 On October 2 3 , 2009, defendants
filed a document purporting to be an answer that was actually a
letter to the court detailing defendants’ financial condition and
attempts to settle the matter with Medline’s counsel. During the
preliminary pretrial conference on November 2 4 , 2009, Wong
expressed that he did not wish to defend the case and admitted
that regardless of any desire to defend i t , he had no defense.
This court then entered the November 2 4 , 2009 order granting
Medline’s motion for judgment on the pleadings, o r , in the
alternative, for entry of default. Medline subsequently filed a
motion for assessment of damages, costs, and attorneys’ fees,
which has been fully briefed by both parties, including
supplemental briefing requested by the court on the issue of
trademark counterfeiting and treble damages.
1 Medline previously sued the defendants, and various other parties in the United States District Court for the Northern District of Illinois for their involvement in the “Medline Savings” campaign, but defendants were dismissed for lack of personal jurisdiction. After defendants’ dismissal, the remaining defendants defaulted and judgment was entered against them, awarding Medline over $4,000,000 in damages and attorneys’ fees.
4 III. ANALYSIS
Medline seeks injunctive relief, monetary relief, and costs
and attorneys’ fees under the Telemarketing and Consumer Fraud
and Abuse Prevention Act, 15 U.S.C. § 6101 et seq., and the
Lanham Act, 15 U.S.C. § 1051 et seq. Because Medline seeks
treble damages and only the Lanham Act provides for them, the
court will analyze Medline’s requests under the Lanham Act.
A. Injunctive relief
Medline seeks a permanent injunction under the Lanham Act.
See 15 U.S.C. § 1116. Defendants have not objected to and are
“more than happy to agree to” this request. Thus, Medline’s
request is granted and the defendants are hereby permanently
enjoined from using the trademark MEDLINE, or any other
confusingly similar trademark, in connection with the sale,
offering for sale, advertisement or promotion of any goods or
services not originating with Medline, including but not limited
to defendants’ telemarketing activities.
B. Attorneys’ fees and costs
The Lanham Act provides that “the court in exceptional cases
may award reasonable attorneys fees to the prevailing party.” 15
U.S.C. § 1117(a). A case may be considered exceptional where the
acts of infringement were “malicious, fraudulent, deliberate, or
5 willful,” and attorneys’ fees may be awarded “when equitable
considerations justify such awards.” Tamko Roofing Prods., Inc.
v . Ideal Roofing Co., 282 F.3d 2 3 , 31 (1st Cir. 2002) (quoting S .
Rep. 93-1400, at 5 (1974), reprinted in 1974 U.S.C.C.A.N 7132,
7133) (quotation omitted). Courts look at the totality of the
circumstances when determining if a case is exceptional, and a
showing of bad faith or fraud is not required as a precondition
to an award of attorneys’ fees. Id. at 32-33.
Wong argues that he did not deliberately use Medline’s
trademark and contends that his and 9121-3140 Quebec’s
involvement in the “Medline Savings” campaign consisted only of
receiving sales commissions. Taking the factual allegations in
the complaint as true, however, see Brockton Sav. Bank, 771 F.2d
at 1 3 , this case qualifies as exceptional under § 1117(a). The
defendants do not, and, by virtue of their default, cannot deny
their involvement in a sophisticated scheme that defrauded senior
citizens using Medline’s trademark. Wong’s arguments and
unsupported conclusory statements that the use of Medline’s
trademark “was not in my control” and that it was “simply not
true” that he deliberately used the trademark cannot overcome the
factual allegations in Medline’s complaint, and therefore Medline
is entitled to attorneys’ fees and costs.
In determining the amount of attorneys’ fees, this court
applies the “lodestar method”: multiplying the hours reasonably
6 spent on the case by the hourly rate prevailing in the community.
Holder v . Gienapp, 2007 DNH 089, 1 (DiClerico, D.J.) (citing
Bogan v . City of Boston, 489 F.3d 4 1 7 , 426 (1st Cir. 2007)). The
party seeking the expenses bears the burden of showing their
reasonableness. See id. Under the lodestar method, “a court
usually should begin with the attorneys’ contemporaneous billing
records. The court should then subtract hours that are
duplicative, unproductive or excessive and multiply the
reasonable hours billed by the prevailing attorney rate in the
community.” Bogan, 489 F.3d at 426 (citing Gay Officers Action
League v . Puerto Rico, 247 F.3d 2 8 8 , 295 (1st Cir. 2001)).
Medline contends that it is entitled to $19,466 in
attorneys’ fees and $1,694.07 in costs, totaling $21,160.07. In
support of these figures, Medline’s lead and local counsel
submitted declarations and detailed billing records. These
records show that Medline’s counsel expended a total of 77.1
hours on this matter. The court finds that these hours were
reasonably spent.
As for the hourly rate, the court must fix the rate
“according to the prevailing market rates in the relevant
community, that is those prevailing in the community for similar
services by lawyers of reasonably comparable skill, experience
and reputation.” Grendel’s Den, Inc. v . Larkin, 749 F.2d 945,
955 (1st Cir. 1984) (quotation omitted). In the billing records
7 submitted by Medline’s Chicago counsel, the hourly rates were
listed at $420, $260 and $250. 2 Attorney Marvel submitted a
declaration stating that “based on my experience . . . it is my
belief that these rates are reasonable and customary for
attorneys in the Chicago area who provide legal services in
complex intellectual property matters.” In the billing records
submitted by Medline’s local counsel, the hourly rates were
listed at $240 and $210. Attorney Kevin E . Verge submitted a
declaration stating that “[i]t is my belief that these rates are
reasonable and customary for attorneys in New Hampshire who
provide legal services in similar complex matters.”
“While an attorney may inform the court’s analysis by
providing evidence of [their] customary billing rate and of
prevailing rates in the community, the court is not obligated to
adopt that rate. Moreover, the court is entitled to rely upon
its own knowledge of attorney’s fees in its surrounding area in
arriving at a reasonable hourly rate.” Andrade v . Jamestown
Hous. Auth., 82 F.3d 1179, 1190 (1st Cir. 1996) (citations
omitted). Here, the hourly rates submitted by Medline’s counsel
are slightly higher than the prevailing rates in this community
for similar services by comparable attorneys. See, e.g., N.H.
2 Attorney Janet A . Marvel only charged $420 per hour for 1.5 hours of work. The remainder of her time was billed at $250 per hour.
8 Bar Ass’n, 2006 Statistical Supplement 4 , 11 (2006) (survey
results from 2004-2005 indicating that the most typical hourly
rate charged by Merrimack County attorneys was between $151 and
$175). This is a fairly complex case, though, and some time has
passed since the cited survey. On balance, this court concludes
that an hourly rate of $190 is reasonable and appropriate for the
work done in this case.3 Multiplying that rate by the reasonable
number of hours spent by Medline’s counsel (77.1) yields an
attorneys’ fee award of $14,649. Coupled with the $1,694.07 in
costs, Medline’s total award of attorneys’ fees and costs is
$16,343.07.
C. Disgorgement of profits
Medline seeks an accounting of defendants’ profits, instead
of actual damages. Under § 1117(a) of the Lanham Act, a
prevailing plaintiff is “entitled . . . to recover (1)
defendant’s profits.” 15 U.S.C. § 1117(a). When determining
whether to award a plaintiff an accounting of defendant’s
profits, “[m]echanical rules are of little aid in [the]
3 The fact that Wong did not argue for a lower rate or even object to the rates that Medline’s counsel submitted further substantiates the court’s ruling. See Tamko Roofing Prods., 282 F.3d at 34 (“[G]iven [defendant’s] failure to furnish the district court with any reasons why [plaintiff’s] fee application should have been pared down, we do not think that this is an issue that requires further review.”).
9 analysis.” Tamko Roofing Prods., 282 F.3d at 3 8 . “An accounting
of profits is never automatic,” and courts “carefully retain the
right to withhold the remedy i f , in view of the overall facts and
equities of the case, it is not appropriate.” 5 J. Thomas
McCarthy, McCarthy on Trademarks and Unfair Competition § 30:59
(4th ed. 1994 & Supp. 2009); see also Champion Spark Plug C o . v .
Sanders, 331 U.S. 125, 131 (1947) (“[T]he rule governing an
accounting of profits . . . does not stand for the proposition
that an accounting will be ordered merely because there has been
an infringement.”).
“An accounting of defendant’s profits may be awarded in a
trademark infringement action subject to the principles of
equity.” Tamko Roofing Prods., 282 F.3d at 35 (quotation
omitted). Equity must take into account the purposes served by
the Lanham Act, specifically “where the owner of a trade-mark has
spent energy, time, and money in presenting to the public the
product, he is protected in his investment from its
misappropriation by pirates and cheats.” Id. at 38 (quoting S .
Rep. N o . 1333 (1946), reprinted in 1946 U.S.C.C.S. 1274, 1274).
Here, it is within the “equitable nature of the court’s remedial
power,” id, to award Medline profits because defendants willfully
infringed Medline’s trademarks.
10 In default judgment cases in the trademark context, if the
plaintiffs plead willfulness in their complaint, the court has
the option to imply a finding of willfulness into the damages
calculation. See Malletier v . Carducci Leather Fashions, Inc.,
648 F. Supp. 2d 5 0 1 , 504 (S.D.N.Y. 2009) (“[B]y virtue of its
default, [defendant] has admitted [plaintiff’s] allegation that
it acted knowingly and intentionally or with reckless disregard
or willful blindness to [plaintiff’s] rights.”); Techs., S.A. v .
Cyrano, Inc., 460 F. Supp. 2d 1 9 7 , 204 (D. Mass. 2006)
(“[Plaintiff] pled that [defendant’s] violation was deliberate
and knowing. A default judgment of willfulness, therefore, could
be appropriate.”); Tiffany (NJ) Inc. v . Luban, 282 F. Supp. 2d
123, 124 (S.D.N.Y. 2003) (“By virtue of the default, the
[defendant’s] infringement is deemed willful.”). A finding of
willfulness is appropriate here. Taking the factual allegations
in the complaint as true, defendants knew of the MEDLINE
trademark and intentionally used the mark as part of the
fraudulent “Medline Savings” campaign. They conducted the
campaign with the hope of deceiving consumers into believing that
they were purchasing a product or service sold or endorsed by
Medline, and succeeded in doing s o . Indeed, their actions led
law enforcement officials and consumers to contact Medline about
the “Medline Savings” scheme, believing it was responsible.
11 Additionally, the First Circuit has articulated three
justifications for awarding an accounting of defendant’s profits:
“(1) as a rough measure of the harm to plaintiff; (2) to avoid
unjust enrichment of the defendant; or (3) if necessary to
protect the plaintiff by deterring a willful infringer from
further infringement.” Tamko Roofing Prods., 282 F.3d at 3 6 .
Medline is entitled to an accounting of defendants’ profits under
the second recognized rationale: to prevent the defendants’
unjust enrichment. If Wong were not required to pay anything as
a result of his default, he would be unjustly enriched from the
“Medline Savings” campaign. In light of these reasons, Medline
is entitled to an award of defendants’ profits.
D. Amount of profit award
Without the benefit of discovery, Medline has presented
evidence establishing that the defendants received at least
$115,558.90 from the “Medline Savings” campaign. Under
§ 1117(a), Medline is required to prove defendants’ sales, while
the burden is on the defendants to prove any deductions from that
figure. 15 U.S.C. § 1117(a). “If the infringer provides no
evidence from which the court can determine the amount of any
cost deductions, there is no obligation for the court to make an
estimate.” 5 McCarthy, supra, § 30:66. Any doubts about the
12 actual amount of profits are resolved against the infringer. Id.
Medline presented transaction records obtained from Wong’s
financial managers showing every incoming and outgoing payment
related to the “Medline Savings” campaign.4 These statements
show that defendants received at least $115,558.90 from the
campaign. See Ex. A to Piccolo Decl. Wong’s only argument for
deduction is that while the financial statements indicated he
received $115,558.90, “this obviously does not mean the company
generated a profit” of that amount. While this argument has some
superficial, common-sense appeal, Wong presents no facts to
support i t , and thus has not sustained his burden. On this
record, and under this standard, the court cannot conclude that
the amount of Medline’s award of profits is any less than
$115,558.90.
Wong also argues that the amount he and his company received
from the “Medline Savings” campaign is actually $82,594.83
because the campaign allegedly ended on April 2 0 , 2007. He bases
this argument on items called the “customer database and lead
lists”--documents he claims Medline possesses but did not use to
calculate its profits figure. Wong did not present copies of
4 Medline did not obtain these records through traditional discovery. It obtained them through a subpoena issued to the Denarius Financial Group during the previous suit in the U.S. District Court for the Northern District of Illinois. See supra note 1 .
13 these documents in any of his filings regarding the damages
assessment. In his surreply, Wong included a table of the
“record of funds received through the Medline Savings Campaign
for 9121-3140 Quebec Inc” that lists the last payment date as
April 2 0 , 2007. Defs.’ Surreply at 2 . Wong does not explain
where the table came from. He merely alleges that “[s]ometime I
believe in July or August of 2008, my lawyer at that time sent
plaintiff on behalf of 9121-3140 Quebec Inc., the customer
database and lead lists . . . . Plaintiff seems to have
forgotten this.” Id. at 1 . Wong asserts that the last date that
9121-3140 Quebec Inc. received a sales commission was April 4 ,
2007. He presents no evidence or sworn testimony to support
either this assertion or the existence of the customer database
and lead lists. Because Wong claims to rely on the customer
database and lead lists, yet does not produce copies of them in
support of his arguments, and because he makes only a bare
assertion that the “Medline Savings” campaign ended on April 2 0 ,
2007, Wong has failed to demonstrate that the campaign ended on
April 2 0 , 2007.
Medline calculated the $115,558.90 figure based on
transaction records it obtained from Wong’s financial managers,
and the defendants’ default put Medline in the position of
proving profit-based damages without traditional discovery. The
transaction records show that 9121-3140 Quebec Inc. and Wong
14 received payments as late as August 2007. Medline had no way of
knowing exactly when the “Medline Savings” campaign ended and
Wong has failed to show that it ended on April 2 0 , 2007.
Therefore, Medline’s conservative calculation of defendants’
profits, in the amount of $115,558.90, is proper.
Finally, Wong contends that he should not be held jointly
and severally liable with 9121-3140 Quebec for the infringement.
“[T]he law is well settled that a director, officer, or employee
of a corporation can be held jointly and severally liable with
the corporation if that person has direct involvement in the
infringing activities of the corporation.” Foxworthy v . Custom
Tees, Inc., 879 F. Supp. 1200, 1206 (N.D. G a . 1995) (emphasis
omitted); see also AARP v . Am. Family Prepaid Legal Corp., 604 F.
Supp. 2d 785, 799-800 (M.D.N.C. 2009)(“In trademark infringement
cases, a non-resident employee-defendant may be held jointly and
severally liable with that corporation if the individual
defendant has direct involvement in the infringing activities of
the corporation.”) (quotation omitted). Thus, because Wong
played a key role in the infringing activities, he can be held
jointly and severally liable for the infringement.
15 E. Treble Damages
In its memorandum in support of assessment of damages, costs
and attorneys’ fees, Medline requested that the award of
defendants’ profits be trebled under 15 U.S.C. § 1117(b). See
Pl.’s Mem. at 8 . In a one-sentence request, Medline stated
“[w]here a defendant knowingly infringes a mark, as Wong has done
here, the plaintiff is entitled to a trebling of this
disgorgement. 15 U.S.C. § 1117(b).”5 Because Medline appeared
to be relying on a subsection of § 1117 involving use of a
counterfeit mark, and because Medline did not elaborate beyond
one sentence about why it believed trebling was warranted, the
court asked for supplementary briefing on the issue in an order
dated January 2 8 , 2010. In its supplementary memorandum, Medline
clarified that it was not alleging trademark counterfeiting and
requested that the court treble the award under § 1117(a).
The specific enhancement provision of § 1117(a) states:
In assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount. If the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case.
5 Section 1117(b) is a remedies provision of the Lanham Act that provides mandatory trebling of an award when the defendant intentionally uses a counterfeit mark. 15 U.S.C. § 1117(b).
16 15 U.S.C. § 1117(a). While our court of appeals has not yet
addressed the issue, the Federal Circuit has explicitly held that
an award of defendant’s profits cannot be trebled under
§ 1117(a). See Nutting v . RAM Sw., Inc., 69 Fed. Appx. 4 5 4 , 458
(Fed. Cir. 2003) (“The statute permits a court to award up to
three times the plaintiff’s ‘actual damages’ only; this language
does not apply to an award of defendant’s profits.”); Thompson v .
Haynes, 305 F.3d 1369, 1380 (Fed. Cir. 2002) (“As for profits,
however, the court is not authorized to award up to three times
the amount proved.”); see also Dialogo, LLC v . Bauza, 549 F.
Supp. 2d 1 3 1 , 137 (D. Mass. 2008) (“[T]he Federal Circuit has
made clear that, even if enhancement were appropriate, the amount
to be trebled under [§1117(a)] of the Lanham Act cannot include
lost profits.” (citing Thompson v . Haynes, 305 F.3d at 1380)).
But see PepsiCo v . Triunfo-Mex, Inc., 189 F.R.D. 4 3 1 , 432 (C.D.
Cal. 1999) (“[Section] 1117(a) confers authority on the court to
treble defendant's profits . . . . ” ) ; Taylor Made Golf Co., Inc.
v . Carsten Sports, Ltd., 175 F.R.D. 6 5 8 , 663 (S.D. Cal. 1997)
(“Pursuant to 15 U.S.C. § 1117(a), the Court trebles the $200,000
in estimated profits by the Defendant . . . . ” ) . The court finds
the Federal Circuit’s reasoning persuasive and declines to treble
the award of $115,558.90 of defendants’ profits.
Nonetheless, the court still may enhance an award of profits
under § 1117(a) as it sees fit. In cases involving knowing and
17 willful infringement, courts may enhance damages accordingly.
See Taco Cabana Int’l, Inc. v . Two Pesos, Inc., 932 F.2d 1113,
1127 (5th Cir. 1991) (“We must respect the fact that section 35
endows the district court with considerable discretion in
fashioning an appropriate remedy for infringement. An
enhancement of damages may be based on a finding of willful
infringement, but cannot be punitive.”). Wong deliberately used
Medline’s trademark to deceive elderly consumers into buying
fraudulent pharmaceutical discount coupons. Medline’s reputation
has been harmed and the goodwill associated with the MEDLINE
trademark has suffered as a result of this scheme. Therefore,
the court elects to use its discretionary power under § 1117(a)
to enhance the award of defendants’ profits by 50 percent,
resulting in a total award of $173,338.35.
IV. CONCLUSION
For the foregoing reasons, Medline’s motion for assessment
of damages, costs and attorneys’ fees6 is GRANTED. The court
awards Medline attorneys’ fees and costs in the amount of
$16,343.07, and $173,338.35 in defendants’ profits. The court
permanently enjoins defendants from using the trademark MEDLINE,
or any other confusingly similar trademark, in connection with
6 Document n o . 1 5 .
18 the sale, offering for sale, advertisement or promotion of any
goods or services not originating with Medline, including but not
limited to defendants’ telemarketing activities. The clerk shall
enter judgment accordingly and close the case.
SO ORDERED.
_____________
United States District Judge
Dated: March 5 , 2010
cc: Janet Marvel, Esq. James M . Monahan, Esq. Christopher H.M. Carter, Esq. Kevin E . Verge, Esq. Thomas Wong, pro se