The Holding Company LLC v. Pacific West Distributors

District Court, C.D. California·Decided August 15, 2024·No. 2:24-cv-00986·Unknown

Opinion

O

United States District Court Central District of California

THE HOLDING COMPANY LLC, Case № 2:24-cv-00986-ODW (JDEx)

Plaintiff,

v. ORDER GRANTING IN PART

PACIFIC WEST DISTRIBUTORS et al., PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT [25] Defendants. Plaintiff The Holding Company LLC (“Holding”) moves for entry of default judgment against Defendants Pacific West Distributors, Stephen Scott Brown, and Herbal Solutions, LLC (“Defendants”), on Holding’s Complaint for federal copyright infringement and California trademark infringement. (Mot. Default J. (“Motion” or “Mot.”), ECF No. 25.) For the reasons that follow, the Court GRANTS IN PART Holding’s Motion. Over the past three years, Holding developed various intellectual properties to promote a lifestyle brand. (Compl. ¶¶ 2, 15, ECF No. 1.) Holding registered at least six of them as copyrights and trademarks with the United States Copyright Office and California Secretary of State: (1) POW (2D artwork), U.S. Copyright Registration No. VA 2-350-434, (Compl. ¶ 24, Ex. 3-A); (2) SAVAGE PATCH (2D artwork), U.S. Copyright Registration No. VA 2-350-438, (Compl. ¶ 32, Ex. 4-A); (3) WHAM! (2D artwork), U.S. Copyright Registration No. VA 2-350-456, (Compl. ¶ 40, Ex. 5-A); California trademark, International Class 34 for goods, (Compl. ¶ 72, Ex. 9); (4) WHOA! (2D artwork), U.S. Copyright Registration No. VA 2-350-455, (Compl. ¶ 48, Ex. 6-A); (5) GOON BERRIES (2D artwork), U.S. Copyright Registration No. VA 2-350-036, (Compl. ¶ 56, Ex. 7-A); and (6) THREAT!!! (2D artwork), U.S. Copyright Registration No. Pending, (Compl. ¶ 64, Ex. 8-A). Defendants collaboratively operate a cannabis business under the tradename “Jokes Up Ice Kream,” with an ostensible focus on sales in California. (Compl. ¶ 16.) At some point, Holding and Defendants discussed the possibility of Holding licensing its copyrights and trademark to Defendants, but the parties were unable to reach an agreement. (Id. ¶ 17.) Sometime after the failed negotiations, Holding discovered that Defendants were selling cannabis products using Holding’s copyrights and trademark without Holding’s permission. (Id. ¶¶ 3, 18.) On May 17, 2023, and June 9, 2023, Holding sent Defendants two cease and desist letters informing Defendants of their infringement and demanding that Defendants stop. (Id. ¶¶ 19–20, Exs. 1–2.) Holding received no response. (Id. ¶ 20.) Defendants continued selling their infringing products and began asserting ownership of Holding’s copyrights and trademark. (Id. ¶¶ 20–21.) Holding brings this action to stop Defendants’ infringement. (Id. ¶ 4.) It asserts seven causes of action, six for federal copyright infringement and one for California trademark infringement, and seeks a permanent injunction, damages, and attorneys’ fees. (Id. ¶¶ 23–78, Prayer for Relief.) Despite acknowledging the lawsuit through counsel, Defendants failed to properly appear and the Clerk entered their default. (See Decl. Seungjai Oh ISO Mot. (“Oh Decl.”) ¶¶ 2–3, ECF No. 25-1; Proof Service, ECF Nos. 10–12; Default, ECF No. 18.) Two weeks later, on March 25, 2024, Defendants attempted to filed Answers; however, a defaulted defendant may not appear unless default is set aside and the Court struck Defendants’ impermissible filings. (Mins. Default, ECF No. 23.) At no time have Defendants sought to set aside the defaults. Holding now moves for entry of default judgment against Defendants. (Mot. 1.) Federal Rule of Civil Procedure (“Rule”) 55(b) authorizes a district court to grant a default judgment after the Clerk enters default under Rule 55(a). However, before a court can enter a default judgment against a defendant, the plaintiff must satisfy the procedural requirements in Rule 54(c) and 55, and Central District Civil Local Rules 55-1 and 55-2. Even if these procedural requirements are satisfied, “[a] defendant’s default does not automatically entitle the plaintiff to a court-ordered judgment.” PepsiCo, Inc., v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002). Instead, “[t]he district court’s decision whether to enter a default judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Generally, after the Clerk enters a default, the defendant’s liability is conclusively established, and the well-pleaded factual allegations in the plaintiff’s complaint “will be taken as true” except those pertaining to the amount of damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987) (per curiam) (quoting Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977)). The court need not make detailed findings of fact in the event of default, except as to damages. See Adriana Int’l Corp. v. Thoeren, 913 F.2d 1406, 1414 (9th Cir. 1990). Holding satisfies the procedural requirements for default judgment and establishes that entry of default judgment against Defendants is substantively appropriate on four of its seven causes of action. However, the Court finds that only some of Holding’s requested relief is warranted. Local Rule 55-1 requires that the movant establish: (1) when and against which party default was entered; (2) the pleading as to which default was entered; (3) whether the defaulting party is a minor or incompetent person; (4) that the Servicemembers Civil Relief Act does not apply; and (5) that the defaulting party was properly served with notice, if required under Rule 55(b)(2). In turn, Rule 55(b)(2) requires written notice on the defaulting party if that party “has appeared personally or by a representative.” Holding meets these requirements. On March 13, 2024, the Clerk entered default against Defendants as to Holding’s Complaint. (See Default.) Holding asserts that Defendants are not minors or incompetent persons, and the Servicemembers Civil Relief Act does not apply. (Mot. 8.) Finally, Holding served Defendants with written notice of the Motion, per Rule 55(b)(2). (Proof Service Mot., ECF No. 26.) Thus, Holding satisfies the procedural requirements for entry of default judgment. In evaluating whether entry of default judgment is warranted, courts consider the “Eitel factors”: (1) the possibility of prejudice to plaintiff; (2) the merits of plaintiff’s substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake; (5) the possibility of a material factual dispute; (6) whether the default was due to excusable neglect, and (7) the strong policy favoring decisions on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). “Of all the Eitel factors, courts often consider the second and third factors to be the most important.” Vietnam Reform Party v. Viet Tan-Vietnam Reform Party, 416 F. Supp. 3d 948, 962 (N.D. Cal. 2019) (internal quotation marks omitted). Accordingly, the Court considers these two factors first. 1. Second & Third Eitel Factors The second and third Eitel factors require a plaintiff to “state a claim on which the [plaintiff] may recover.” PepsiCo, 238 F. Supp. 2d at 1175 (alteration in original). Although well-pleaded allegations are taken as true, “claims which are legally insufficient[] are not established by default.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). Plaintiff raises seven causes of action, six for federal copyright infringement under 17 U.S.C. § 501, and one for California trademark infringement under Californ

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