Teddys Red Tacos, Corp. v. Theodore Vasquez ( 2020 )

1 'O' 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 Case No. 2:19-cv-03432- 12 TEDDY’S RED TACOS CORP., a RSWL-ASx California limited 13 liability company, ORDER re: Defendant and 14 Plaintiff, Counter-Claimant’s Motion to Strike Counter- 15 v. Defendants’ Answer, or in the Alternative Dismiss 16 the Answer, and Enter THEODORO VAZQUEZ SOLIS dba 17 TEDDY’S RED TACOS, an Default [51] individual, TEDDY’S 18 ORIGINAL RED TACOS dba 19 TEDDY’S RED TACOS, an unknown business entity, 20 WAEL KHALIL dba TEDDY’S RED TACOS, an individual, 21 SILENT PARTNER ENTERPRISES 22 LLC dba TEDDY’S RED TACOS, a California limited 23 liability company, and DOES 1 through 50, 24 inclusive, 25 Defendants. 26 27 28 1 THEODORO VAZQUEZ SOLIS, an individual, 2 Counter-Claimant, 3 v. 4 5 TEDDY’S RED TACOS CORP. dba TEDDY’S RED TACOS, a 6 corporation, NANCY GOMEZ, an individual, JORGE 7 GOMEZ, an individual, and 8 DOES 1 through 50, inclusive, 9 Counter-Defendants. 10 11 Currently before the Court is Defendant and 12 Counter-Claimant Theodoro Vazquez Solis’s (“Vazquez”) 13 Motion to Strike Counter-Defendants’ Answer, or in the 14 Alternative Dismiss the Answer, and Enter Default 15 Against Counter-Defendants (the “Motion”) [51]. Having 16 reviewed all papers submitted pertaining to the Motion, 17 the Court NOW FINDS AND RULES AS FOLLOWS: the Court 18 DENIES Vazquez’s Motion. 19 I. BACKGROUND 20 A. Factual Background 21 This case arises out of a trademark dispute. 22 Plaintiff and Counter-Defendant Teddy’s Red Tacos Corp. 23 (“Plaintiff” or “Teddy’s Red Tacos”) claims that it owns 24 the trademark for “Teddy’s Red Tacos” in association 25 with goods and services under U.S. Trademark 26 Registration No. 88285172 (“Teddy’s Mark”). Decl. of 27 Shahrokh Sheik ¶ 2, ECF No. 51. Vazquez disputes this, 28 and contends that Plaintiff’s claim is a fraudulent, 1 competing application for Teddy’s Mark pending with the 2 U.S. Patent and Trademark Office, and that Vazquez is 3 the sole owner of Teddy’s Mark under Registration No. 4 88435730. Countercl. ¶ 13, ECF No. 14. 5 Vazquez opened the first Teddy’s Red Tacos taco 6 stand in October 2016. Id. ¶ 15. Vazquez claims that 7 given his success, in or about June 2018, Jorge Gomez 8 approached him to partner in a new restaurant location 9 at 9532 Whittier Blvd., Pico Rivera, California, 90660 10 (the “Pico Location”), wanting to use Teddy’s Mark, 11 Vazquez’s “secret red birria sauce,” and Vazquez’s 12 recipes (the “Mixes”). Id. ¶ 17. Jorge Gomez claimed 13 to have already invested $120,000 into the Pico 14 Location. Id. ¶ 18. 15 Vazquez alleges that he and Jorge Gomez, along with 16 Gomez’s wife, Nancy Gomez (the “Gomezes”), orally agreed 17 that if Vazquez provided a contribution of (1) $67,375, 18 (2) the Mixes, and (3) a limited, nonexclusive, 19 revocable license to use Teddy’s Mark for the Pico 20 Location, together they would create an entity to 21 equally own and share profits (the “Agreement”). Id. ¶ 22 19. 23 Plaintiff was formed on August 27, 2018, when Nancy 24 Gomez filed the Articles of Corporation, naming Nancy 25 Gomez and Vazquez as 50% shareholders. Id. ¶ 22. 26 Vazquez claims he satisfied his monetary contribution by 27 giving the Gomezes a truck valued at $50,000, a $7,375 28 check, and $10,000 in cash. Id. ¶ 23. By September 5, 1 2018, a Statement of Information was filed naming Nancy 2 Gomez and Vazquez as the only officers and directors of 3 Plaintiff. Id. ¶ 24. The Pico Location opened in late 4 October 2018. Id. ¶ 25. 5 Vazquez claims that, around March 12, 2019, the 6 Gomezes locked him out of the Pico Location and stopped 7 making payments to him in breach of the Agreement. Id. 8 ¶ 26. Vazquez claims that the Gomezes continue to use 9 Teddy’s Mark without his permission and serves fake 10 Mixes, attempting to pass them off as the original 11 Mixes. Id. ¶ 27. 12 B. Procedural Background 13 On April 26, 2019, Plaintiff filed its Complaint 14 [1] alleging trademark infringement-related claims. On 15 June 25, 2019, Vazquez answered [13] and filed a 16 Counterclaim [14] against Teddy’s Red Tacos, Nancy 17 Gomez, and Jorge Gomez (collectively, “Counter- 18 Defendants”). On August 13, 2019, Counter-Defendants 19 filed their Answer [24] to Vazquez’s Counterclaim [14]. 20 Vazquez filed a Motion for Preliminary Injunction [20], 21 which the Court denied [30] on October 10, 2019. 22 On December 30, 2019, the Court granted [34] 23 Plaintiff and Counter-Defendants’ Counsel’s Motion to 24 Withdraw [31]. The Court ordered Plaintiff and Counter- 25 Defendants to file a notice of appearance of new counsel 26 by January 31, 2020. See Order re Motion to Withdraw as 27 Counsel of Record Without Substitution for Plaintiff and 28 Counter-Defendants (“December 30, 2019 Order”) 8:10-13, 1 ECF No. 34. Plaintiff and Counter-Defendants have not 2 filed a notice of appearance of new counsel to date. 3 On July 2, 2020, the Court denied without prejudice 4 [44] Vazquez’s Motion to Dismiss Claims and Enter 5 Default Against Counter-Defendants [37]. On August 12, 6 2020, the Court struck [45] Plaintiff’s Complaint [1]. 7 Vazquez filed the instant Motion [51] on August 31, 8 2020. Counter-Defendants failed to respond. 9 II. DISCUSSION 10 A. Legal Standards 11 “District courts have inherent power to control 12 their dockets. In the exercise of that power they may 13 impose sanctions including, where appropriate, default 14 or dismissal.” Thompson v. Hous. Auth. of City of L.A., 15 782 F.2d 829, 831 (9th Cir. 1986). Accordingly, a court 16 may strike an answer or enter default against a party as 17 a sanction. See, e.g., Dreith v. Nu Image, Inc., 648 18 F.3d 779, 788 (9th Cir. 2011); Adriana Int’l Corp. v. 19 Thoeren, 913 F.2d 1406, 1412 (9th Cir. 1990). Before 20 doing so, however, a court must consider five factors: 21 “(1) the public’s interest in expeditious resolution of 22 litigation; (2) the court’s need to manage its docket; 23 (3) the risk of prejudice to the other party; (4) the 24 public policy favoring the disposition of cases on their 25 merits; and (5) the availability of less drastic 26 sanctions.” Hester v. Vision Airlines, Inc., 687 F.3d 27 1162, 1169 (9th Cir. 2012) (citing Dreith, 648 F.3d at 28 788). 1 B. Discussion 2 Vazquez requests that the Court strike, or 3 alternatively dismiss, Counter-Defendants’ Answer and 4 enter default against Counter-Defendants for failure to 5 serve timely discovery responses, failure to prosecute, 6 and failure to obey court orders. Mot. to Strike 7 Counter-Defs.’ Answer, or in the Alternative Dismiss the 8 Answer, and Enter Default (“Mot.”) 1:3-9, ECF No. 51. 9 Vazquez cites to Federal Rule of Civil Procedure 10 (“Rule”) 37(b)(2)(A)(iii) in support of his motion to 11 strike, asserting that this rule allows the Court to 12 sanction a party who fails to obey court orders or 13 respond to discovery. Id. at 4:11-16. However, 14 Vazquez’s reliance on Rule 37(b)(2)(A)(iii) is 15 inapposite. Rule 37(b)(2)(A)(iii) authorizes the Court 16 to strike a pleading “[i]f a party . . . fails to obey 17 an order to provide or permit discovery,” and Vazquez 18 does not allege that Counter-Defendants failed to obey a 19 discovery order in this Action. Because this rule 20 clearly requires the violation of a discovery order as a 21 prerequisite for sanctions, the Court DENIES Vazquez’s 22 motion to strike on this basis. 23 In the alternative, Vazquez argues that the Court 24 should dismiss Counter-Defendants’ Answer under Rule 25 41(b). Id. at 6:5-9. Specifically, Vazquez contends 26 that Counter-Defendants’ Answer arises from the same set 27 of facts as Plaintiff’s Complaint, and “[s]ince the 28 Complaint has been struck, so should the Answer.” Id. 1 at 6:9-18. Rule 41(b) is also inappropriate for 2 obtaining the relief Vazquez seeks, as it applies to 3 dismissal of actions or claims. See Fed. R. Civ. P. 4 41(b) (“If the plaintiff fails to prosecute or to comply 5 with these rules or a court order, a defendant may move 6 to dismiss the action or any claim against it.” 7 (emphasis added)). Here, Vazquez seeks dismissal of 8 Counter-Defendants’ Answer—not the Action or claims. 9 Therefore, the Court DENIES the motion to dismiss. 10 The Court acknowledges, however, that Counter- 11 Defendants have been entirely absent from this Action 12 for the past year. Counter-Defendants have failed to 13 respond to any discovery requests, numerous attempts to 14 meet and confer, Vazquez’s previous motion to dismiss 15 and request for terminating sanctions, and the instant 16 Motion. Mot. 1:10-17. Counter-Defendants also failed 17 to meet requirements related to the Rule 16 Final 18 Pretrial Conference, thereby stalling litigation and 19 prompting Vazquez to seek court intervention. Id. at 20 5:17-20. 21 Additionally, Local Rule 83-2.2.2 provides that 22 “[n]o organization or entity of any other kind,” 23 including corporations, “may appear in any action or 24 proceeding unless represented by an attorney.” Case law 25 is in accord. See, e.g., Reading Int’l, Inc. v. 26 Malulani Grp., Ltd., 814 F.3d 1046, 1053 (9th Cir. 2016) 27 (citing In re Highley, 459 F.2d 554, 555 (9th Cir. 28 1972)); D-Beam Ltd. P’ship v. Roller Derby Skates, Inc., 1 366 F.3d 972, 973-74 (9th Cir. 2004) (citations 2 omitted). Plaintiff and Counter-Defendants’ counsel 3 withdrew in December 2019, and Teddy’s Red Tacos has 4 failed to obtain counsel since that date. This is so 5 despite Teddy’s Red Tacos having been expressly warned 6 that if it failed to file a notice of appearance of new 7 counsel by January 31, 2020, “the Court may strike its 8 pleadings, dismiss its claims against Defendants, and 9 enter default on Counter-Claimant Vazquez’s claims.” 10 December 30, 2019 Order 8:15-20. 11 Vazquez’s Counterclaim against Teddy’s Red Tacos 12 cannot move forward because Teddy’s Red Tacos, as a 13 corporation, cannot proceed pro se. Further, Teddy’s 14 Red Tacos violated the Court’s December 30, 2019 Order 15 when it failed to retain new counsel and file a notice 16 of appearance. The Court therefore finds that the 17 public’s interest in expeditious litigation and the 18 Court’s need to manage its docket weigh heavily in favor 19 of striking the Answer as to Teddy’s Red Tacos and 20 entering default. The Court also finds that Teddy’s Red 21 Tacos’s failure to obtain new counsel, coupled with its 22 unresponsiveness in this Action, has prejudiced Vazquez 23 by not only delaying this litigation but also making it 24 impossible for Vazquez to obtain a decision on the 25 merits. No alternative sanction would be of any effect 26 in this Action, where Teddy’s Red Tacos has made no 27 ascertainable effort to retain counsel or defend itself 28 for a year. These factors all weigh in favor of 1 striking the Answer as to Teddy’s Red Tacos and entering 2 default, and together they outweigh the public policy 3 favoring disposition of cases on their merits here. 4 Accordingly, the Court STRIKES Teddy’s Red Tacos 5 from Counter-Defendants’ Answer and ENTERS DEFAULT 6 against Teddy’s Red Tacos. See Forever 21, Inc. v. 7 Nat’l Stores Inc., No. 2:12-cv-10807-ODW(JCGx), 2014 WL 8 12579815, at *1-2 (C.D. Cal. June 19, 2014) (striking 9 answer and entering default where the defendant- 10 corporation failed to obtain new counsel); Emp. 11 Painters’ Tr. v. Ethan Enters., Inc., 480 F.3d 993, 998 12 (9th Cir. 2007) (“[W]e have recognized default as a 13 permissible sanction for failure to comply with local 14 rules requiring representation by counsel.”). 15 With respect to the remaining Counter-Defendants, 16 Nancy Gomez and Jorge Gomez have likewise failed to 17 participate in this Action even though, as individuals, 18 they are deemed and permitted to appear pro se. See 19 Mot. 1:10-17, 5:17-20; December 30, 2019 Order 8:13-15; 20 Local Rule 83-2.2.1-.2. Therefore, based on the Court’s 21 inherent power to manage its docket, the Court ORDERS 22 Nancy Gomez and Jorge Gomez to show cause by December 23 18, 2020, as to why the Court should not strike their 24 Answer. If Nancy Gomez or Jorge Gomez fails to show 25 good cause, the Court will strike that Counter- 26 Defendant’s Answer and enter default. 27 /// 28 /// 1 III. CONCLUSION 2 Based on the foregoing, the Court DENIES Vazquez’s 3 Motion. The Court STRIKES Teddy’s Red Tacos from 4 Counter-Defendants’ Answer and DIRECTS the Clerk of 5 Court to enter default as to Teddy’s Red Tacos. 6 The Court ORDERS Nancy Gomez and Jorge Gomez to 7 show cause by December 18, 2020, as to why the Court 8 should not strike their Answer. If Nancy Gomez or 9 Jorge Gomez fails to show good cause, the Court will 10 strike that Counter-Defendant’s Answer and enter 11 default. 12 IT IS SO ORDERED. 13 14 DATED: December _10_, 2020 /_s_/ R_o_n_a_ld_ S_._W_._ L_e_w____________ HONORABLE RONALD S.W. LEW 15 Senior U.S. District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28