GS Holistic, LLC v. Cigarette Outlet Smoke Shop ( 2024 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 GS HOLISTIC, LLC No. 1:23-cv-00281-TLN-CKD 12 Plaintiff, ORDER 13 v. 14 CIGARETTE OUTLET SMOKE SHOP, et al., 15 Defendants. 16 17 Presently pending before the court is plaintiff GS Holistic, LLC’s (“plaintiff’s”) motion 18 for default judgment against defendant Maher Nagi d/b/a Cigarette Outlet Smoke Shop 19 (“defendant”).1 (ECF No. 29.) To date, defendant has not opposed plaintiff’s motion. 20 For the reasons set forth below, the court DENIES plaintiff’s motion without prejudice. 21 I. Relevant Background 22 Plaintiff is a Delaware company with its principal place of business in California. (ECF 23 No. 11 at ¶ 5.) Plaintiff makes and sells smoking products and is the registered owner of three 24 “Stündenglass” trademarks: 25 • U.S. Trademark Registration Number 6,633,884 for the standard character mark 26 27 1 Plaintiff’s motion was filed on December 8, 2023, and a motion hearing was set for January 31, 28 2024 before the undersigned. (ECF No. 29, 30.) 1 “Stündenglass” in association with goods further identified in registration in 2 international class 011. 3 • U.S. Trademark Registration Number 6,174,292 for the design plus words mark “S” 4 and its logo in association with goods further identified in the registration in 5 international class 034. 6 • U.S. Trademark Registration Number 6,174,291 for the standard character mark 7 “Stündenglass” in association with goods further identified in registration in 8 international class 034. 9 (Id. at ¶¶ 9, 11.) 10 Plaintiff alleges that on October 18, 2022, defendant sold a glass infuser affixed with a 11 Stündenglass Mark to plaintiff’s investigator. (Id. at ¶¶ 29-30.) Plaintiff states that “[i]mages 12 and/or the physical unit” of the glass infuser “were inspected by [plaintiff’s] agent to determine 13 its authenticity.” (Id. at ¶ 31.) Upon inspection, plaintiff determined the glass infuser “was a 14 Counterfeit Good with an Infringing Mark affixed to it.” (Id.) While the FAC states “[t]he marks 15 … are identical with, or substantially indistinguishable from, the Stündenglass Trademarks,” 16 plaintiff does not explain how it drew this conclusion. Further, the FAC does not state which of 17 the three Stündenglass Marks was affixed to the glass diffuser, or if all three were used. The FAC 18 also does not contain any facts about defendant’s use of the mark, such as its attributes or 19 characteristics, that would help the court infer similarities between the two marks. 20 Plaintiff’s FAC alleges claims of trademark infringement (15 U.S.C. § 1114), and false 21 advertising (15 U.S.C. § 1125(a)). (Id. at 13-15.) Defendant was served but failed to respond, 22 after which the clerk entered default. (ECF Nos. 17, 23, 24.) Plaintiff moved for default 23 judgment on December 8, 2023, seeking an award of $150,000 in statutory damages, an 24 injunction, and costs of $1,249.10. (ECF No. 29 at 20.) Defendant has not appeared or filed any 25 response to plaintiff’s motion. 26 ////// 27 ////// 28 ////// 1 II. Legal Standard – Default Judgment 2 Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party 3 against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend 4 against the action. See Fed. R. Civ. P. 55(a). However, “[a] defendant's default does not 5 automatically entitle the plaintiff to a court-ordered judgment.” PepsiCo, Inc. v. Cal. Sec. Cans, 6 238 F.Supp.2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th 7 Cir. 1986)); see Fed. R. Civ. P. 55(b) (governing the entry of default judgments). Instead, the 8 decision to grant or deny an application for default judgment lies within the district court's sound 9 discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). 10 In making this determination, the court may consider the following factors: (1) the 11 possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the 12 sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a 13 dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) 14 the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the 15 merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are 16 ordinarily disfavored. Id. at 1472. 17 As a general rule, once default is entered, well-pleaded factual allegations in the operative 18 complaint are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. 19 v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (per curiam) (citing Geddes v. United Fin. 20 Group, 559 F.2d 557, 560 (9th Cir. 1977) (per curiam)); see also Fair Housing of Marin v. 21 Combs, 285 F.3d 899, 906 (9th Cir. 2002). Although well-pleaded allegations in the complaint 22 are admitted by a defendant's failure to respond, “necessary facts not contained in the pleadings, 23 and claims which are legally insufficient, are not established by default.” Cripps v. Life Ins. Co. 24 of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 25 (9th Cir. 1978)); accord DIRECTV, Inc. v. Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (“[A] 26 defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law”) 27 (citation and quotation marks omitted); Abney v. Alameida, 334 F.Supp.2d 1221, 1235 (S.D. Cal. 28 2004) (“[A] default judgment may not be entered on a legally insufficient claim.”). 1 III. Analysis 2 The court denies plaintiff’s motion for default judgement because plaintiff has not 3 satisfied the second and third Eitel factors; i.e., the merits of plaintiff’s substantive claim and the 4 sufficiency of the complaint. See Eitel, 782 F.2d at 1471-72. See also GS Holistic, LLC v. 5 Raven Smoke Shop, Inc., 2023 WL 5504964, at *5 (C.D. Cal. July 10, 2023) (denying motion for 6 default judgment based on inadequate pleadings); Abney, 334 F. Supp. 2d at 1235 (“[A] default 7 judgment may not be entered on a legally insufficient claim.”) 8 To state a claim for trademark infringement or false designation of origin, plaintiff must 9 adequately allege 1) the existence of a valid trademark, 2) the defendant used the mark, and 3) the 10 defendant’s use of the mark is likely to cause confusion. Applied Info. Scis. Corp. v. eBay, Inc., 11 511 F.3d 966, 969 (9th Cir. 2007). See Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 632 (9th 12 Cir. 2008) (using the same likelihood of confusion test to analyze trademark infringement and 13 false designation of origin). Here, the only well-pleaded element of either claim is the existence 14 of a valid trademark. This is because registration of a mark on the Principal Register in the Patent 15 and Trademark Office constitutes prima facie evidence of the validity of the registered mark, and 16 plaintiff alleges three registered trademarks. (See ECF No. 11 at ¶ 11.) Applied Info., 511 F.3d at 17 970 (internal citation omitted). 18 As for the second element, the FAC’s allegation of defendant’s use of the mark is tenuous 19 at best. Plaintiff does not allege any facts about the specific mark that defendant used, such as 20 which mark defendant used, or any of its characteristics or attributes. Instead, plaintiff states 21 “[u]pon receipt, images and/or the physical unit of the product purchased from [defendant] were 22 inspected by GS’s agent to determine its authenticity. The inspection of the purchased item 23 confirmed that the Glass Infuser [defendant] sold to GS’s investigator was a Counterfeit Good 24 with an Infringing Mark affixed to it.” (Id. at ¶ 31.) This is a vague and conclusory statement, 25 that the court does not accept as true. Paulsen v. CNF Inc., 559 F.3d 1061, 1071 (9th Cir. 2009) 26 (the court is not required to accept as true “legal conclusions merely because they are cast in the 27 form of factual allegations”). 28 Even if the court can infer defendant’s use of the mark, plaintiff’s motion must be denied 1 because plaintiff has not adequately shown likelihood of confusion. Courts determine likelihood 2 of confusion using the following Sleekcraft factors: (1) strength of the mark; (2) proximity of the 3 goods; (3) similarity of the marks; (4) evidence of actual confusion; (5) marketing channels used; 4 (6) type of goods and degree of care consumers are likely to exercise in purchasing them; (7) 5 intent of the defendant in selecting the mark; and (8) likelihood that the parties will expand their 6 product lines. See AMF Incorporated v. Sleekcraft Boats, 599 F.2d 341, 348–54 (9th Cir. 1979). 7 Plaintiff’s motion for default judgment makes little to no effort to apply the Sleekcraft 8 factors to the sparse facts of this case. (ECF No. 29 at 14-15.) Instead, plaintiff simply repeats 9 the vague and conclusory statements from the FAC and asserts that they demonstrate likelihood 10 of confusion. (See ECF No. 29 at 15, “an investigator for plaintiff purchased this item and upon 11 inspection, [plaintiff] determined the product was a counterfeit good”… and “ “defendant’s 12 infringement was willful.”) While courts need not engage in the Sleekcraft analysis if the 13 plaintiff alleges the use of a counterfeit mark, plaintiff has not adequately pleaded that defendant 14 used a counterfeit mark. See Louis Vuitton Malletier, S.A. v. Akanoc Sols., Inc., 658 F.3d 936, 15 945 (9th Cir. 2011) (“The late comer who deliberately copies the dress of his competitors already 16 in the field ... raises a presumption that customers will be deceived.” (citation omitted)). To plead 17 a counterfeiting claim, a plaintiff must establish (1) a non-genuine mark identical to or 18 substantially indistinguishable from the plaintiff's registered, genuine mark, where (2) the 19 plaintiff's genuine mark was registered for use on the same goods to which the infringer applied 20 the non-genuine mark. Louis Vuitton, 658 F.3d at 946. 21 Plaintiff alleges in a conclusory fashion that “an investigator for the [p]laintiff purchased 22 this item and upon inspection, [p]laintiff determined that the product was a counterfeit good.” 23 (ECF No. 11 at ¶¶ 30-31.) “Threadbare recitals of the elements of a cause of action, supported by 24 mere conclusory statements” do not meet the requirements of a “well-pleaded” standard. 25 Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009). The complaint contains no factual allegations 26 from which the court can infer plaintiff’s use of a counterfeit, such as the specific genuine mark 27 used by defendants, the similarities of the marks; nor does plaintiff provide pictures or other 28 evidence for the court to compare the two marks. Therefore, plaintiff has not adequately plead 1 | the third element, and has not adequately alleged trademark infringement or false designation of 2 || origin claims. See Applied Info. Scis. Corp., 511 F.3d at 969. 3 Accordingly, the court finds that plaintiff's allegations are insufficient for the purposes of 4 | default judgment. Bailey v. HVSN Enters. Inc., 2021 WL 794501, at *2 (C.D. Cal. Mar. 2, 2021) 5 || (‘[N]ecessary facts not contained in the pleadings, and claims which are legally insufficient, are 6 || not established by default”) (cleaned up). See also GS Holistic, LLC v. Alien Smoke Shop, 2023 7 || WL 3402589, at *1 (C.D. Cal. Mar. 17, 2023) (“[T]he court has discretion to require some proof 8 | of the facts that must be established in order to determine liability.”) 9 ORDER 10 Accordingly, it is HEREBY ORDERED that: 11 1. The motion for default judgment, ECF No. 29, is DENIED without 12 prejudice. 13 2. The defaults previously entered against defendants are hereby 14 VACATED. (ECF No. 24). 15 | Dated: February 9, 2024 fi 20 } Kt | / , a he 16 CAROLYN K DELANEY 17 UNITED STATES MAGISTRATE JUDGE 18 |} 21, gscho.0281 19 20 21 22 23 24 25 26 27 28