World Entertainment Inc v. Andrea Brown

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 11-2677
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WORLD ENTERTAINMENT INC;
CARMEN TOMASSETTI
v.
ANDREA BROWN; GRAND ENTERTAINMENT PRODUCTIONS, LLC;
JIM DI RENZO,
Andrea Brown; Grand Entertainment Productions LLC,
Appellants
_____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-09-cv-5365)
District Judge: Honorable Norma L. Shapiro
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Submitted Under Third Circuit L.A.R. 34.1(a)
July 9, 2012
Before: FUENTES, HARDIMAN, and ROTH, Circuit Judges
(Opinion Filed: July 30, 2012)
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OPINION OF THE COURT
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FUENTES, Circuit Judge.
From 2001-2008, Andrea Brown was the lead singer of CTO Tribeca, one of
Plaintiff-Appellee World Entertainment, Inc.’s bands. Eventually, Brown left the
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company and formed her own company and band. However, she continued to use World
Entertainment, Inc.’s registered trademark “CTO.” World Entertainment, Inc. and its
president filed this action against Brown and her company, asserting myriad claims under
federal and state law. Brown ignored service of the summons and complaint and failed to
answer or otherwise appear before the District Court. After the appropriate amount of
time, the District Court entered default against her. After a hearing as to damages, the
District Court awarded World Entertainment $429,997. Brown appeals, and we will
affirm.
I.
Because we write primarily for the parties, we set forth only the facts relevant to
our conclusion. World Entertainment, Inc. (“World”) is a Philadelphia-based production
company, specializing in weddings, bar/bat mitzvahs and other special events. Each of
World’s band names bears its federally registered trademark “CTO,” and many also end
with the name of a New York City locale. Andrea Brown was the lead singer of CTO
Tribeca, one of World’s bands. In 2008, Brown entered into her own contract with a
World client. She then sent emails to the President of World, Carmen Tomassetti, and
several World employees, accusing Tomassetti of committing a federal crime by invading
her personal email account, and claiming he illegally and immorally took credit for other
people’s work.
Brown subsequently left World and formed Grand Entertainment Productions
(“Grand”) and a band called Tribeca Grand, comprised of former CTO Tribeca members.
To promote her band, Brown superimposed “Tribeca Grand” over the “CTO” mark in a
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video featuring CTO Tribeca that World had produced, and then released the video on the
Internet. She used “CTO” in Internet metatags1 and paid Google AdWords, an
advertising product, and Yahoo! for the phrase “CTO Tribeca” so Grand would come up
under Internet searches. Brown also posted on the Internet that World was “phony” and
that they lied to get business. Appellee’s Appendix (“App.”) at 112. Despite these
actions, Brown acknowledged that World was the owner of “the trademarked name CTO
Tribeca.” Appellees App. at 29.
In February 2009, counsel for Tomasetti and World (“Plaintiffs”) sent Brown two
cease and desist letters demanding she stop using the names “CTO” and “Tribeca.” She
ignored both requests. Plaintiffs then filed a complaint in the United States District Court
on November 13, 2009 against Brown and Grand, alleging trademark infringement and
unfair competition under the Lanham Act, 15 U.S.C. § 1125, and tortious interference
with contractual relations, defamation, unjust enrichment, and breach of contract under
state law.
The process server, who recognized Brown from previously serving her one of the
cease and desist letters, testified that, on November 24, 2009, when Brown saw him at the
door of her house to serve her the complaint, she shut the door, locked it, and closed her
garage. Appellee’s App. at 88. The process server knocked again and, after no answer,
placed the service papers at the door. Brown alleges she was never served. However,
she admitted in a sworn affidavit submitted in opposition to World’s damages claims that
1
A “metatag” is a code “not visible to web users embedded in a website to attract search
engines seeking a corresponding keyword.” Network Automation, Inc. v. Advanced Sys.
Concepts, Inc., 638 F.3d 1137, 1146 (9th Cir. 2011).
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she was served on that date and called her attorney immediately after the service.
Appellant’s App. at 168. She also allegedly provided her attorney with a copy of the
pleadings shortly thereafter. Neither Brown nor her attorney took action and on April 6,
2010, the District Court entered default for Plaintiffs.
On May 7, 2010, Brown filed a motion to set aside the default, arguing only that
her defense to Plaintiffs’ violation of trademark claim was meritorious because “the
trademark that is referred to is basically a reference to a geographical location which
cannot be trademarked.” Appellee’s App. at 55. The registered trademark at issue,
however, is “CTO.” Brown did not provide a response to the other twelve counts of the
complaint. Pointing to Brown’s culpable conduct in refusing to accept service and failing
to answer the complaint, as well as her failure to set forth a complete and meritorious
defense, the Court denied Brown’s motion. After a damages hearing, the Court found in
favor of World in the amount of $429,9972 and issued a permanent injunction enjoining
Brown from using “CTO,” but not “Tribeca.” Brown continued to infringe upon the
“CTO” trademark through the time of the damages hearing, and is allegedly continuing to
infringe upon it. Brown appealed the Court orders, arguing the Court erred in finding she
received service of process, in failing to vacate the default judgment, and in assessing
damages.3
2
In relevant part, World’s damages include $176,496 for infringing World’s trademark
and $184,959 for attorneys’ fees.
3
The District Court had jurisdiction pursuant to 28 U.S.C. § 1331 for Plaintiffs’ Lanham
Act claims and supplemental jurisdiction pursuant to 28 U.S.C. § 1367 for Plaintiffs’
4
II.
Our review of a District Court’s legal determinations is plenary, VFB LLC v.
Campbell Soup Co. et al., 482 F.3d 624, 630 (3d Cir. 2007), while our review of its
factual determinations is for clear error, Fed. R. Civ. P. 52(a). We review the District
Court’s refusal to set aside entry of default for an abuse of discretion. Harad v. Aetna
Cas. & Sur. Co., 839 F.2d 979, 981 (3d Cir. 1988). We also review the District Court’s
award of equitable remedies under the Lanham Act for an abuse of discretion. Banjo
Buddies, Inc. v. Renofsky, 399 F.3d 168, 173 (3d Cir. 2005).
A.
First, Brown argues that she was not properly served because the process server
left the papers at her door and there was no proof she was aware of them, and therefore
entry of default judgment was improper. Because a face-to-face encounter and in-hand
delivery are not always necessary for proper service of process under Rule 4 of the
Federal Rules of Civil Procedure, Brown’s argument lacks merit. See Gambone v. Lite-
Rock Drywall Corp., 124 F. App’x 78, 79 (3d Cir. 2005) (holding that leaving papers on
doorstep after slamming door and announcing service was sufficient); 4A Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure § 1095 (3d ed. 2002).
Leaving papers in the defendant’s physical proximity is usually sufficient if (1) defendant
actively evades service, and (2) there is clear evidence that the defendant actually
state law claims. We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291 as
an appeal of a final order of the District Court.
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received the papers at issue when allegedly served. See Gambone, 124 F. App’x at 79,
80.
Here, both of these requirements are easily met. Shutting and locking the door
after recognizing the process server, and then shutting the garage, and failing to answer
the door after the server knocked again amounts to active evasion of service.4 See id. at
80. That Brown called her attorney seeking representation after the service and admitted
in a sworn affidavit that she was served show that she actually received the papers when
they were served. Thus, Brown was not denied proper service.
B.
Further, the District Court did not abuse its discretion in denying Brown’s motion
to vacate the entry of default against her. A court may set aside entry of default for good
cause. Fed. R. Civ. P. 55(c). We have identified three factors a district court must
consider in denying a motion to set aside a default: “(1) whether the plaintiff will be
prejudiced; (2) whether the defendant has a meritorious defense; (3) whether the default
was the result of the defendant’s culpable conduct.” United States v. $55,518.05 in
United States Currency, 728 F.2d 192, 195 (3d Cir. 1984). To show a meritorious
defense, a plaintiff must assert defenses that would constitute a complete defense to the
action. Id. Failure to establish a meritorious defense weighs heavily against setting aside
the default. See id. at 197 (declining to consider prejudice and culpability when the
4
The District Court credited the testimony of World’s process server at the evidentiary
hearing, noting that Brown’s descriptions of the occurrence were vague and she did not
remember details. This finding of fact is not clearly erroneous. See Fed. R. Civ. P.
52(a)(6).
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defendant failed to establish a meritorious defense). As to the third consideration,
showing “willfulness” or “bad faith” on part of the defendant leading to the entry of
default suffices to show culpable conduct. Hritz v. Woma Corp., 732 F.2d 1178, 1182-
1183 (3d Cir. 1984).
Brown established neither a complete nor meritorious defense. In her motion,
Brown only provided a defense to one of the thirteen counts of Defendants’ complaint,
and this one defense was irrelevant. She stated that her defense was meritorious because
Defendants’ trademark rests on a geographical location that cannot be trademarked;
however, as the District Court pointed out, the Defendants’ claim rests on their registered
trademark, “CTO.” The District Court never enjoined Brown from using the
geographical term “Tribeca” because it decided the equities weighed against it. Not
only did Brown fail to establish a threshold meritorious defense to Plaintiffs’ claims, but
she also engaged in culpable conduct that resulted in the default. The District Court did
not abuse its discretion in determining that Brown’s intentional refusal to accept service
and respond to the complaint in a timely manner was culpable conduct because her
behavior showed willful disregard for responding to Plaintiffs’ legal communications.
See Nationwide Mut. Ins. Co., 175 F. App’x 519, 523 (3d Cir. 2006) (finding reckless,
willful disregard for repeated legal communications can satisfy the culpable conduct
standard). Not only did she fail to respond, but she also continued to infringe Plaintiffs’
trademark despite Plaintiffs’ cease and desist letters, the entry of default, and her
acknowledgment in writing that the “CTO” trademark belonged to Plaintiffs. Therefore,
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the District Court properly considered the applicable factors and did not abuse its
discretion in denying Brown’s motion to vacate entry of default.
C.
Lastly, the District Court did not err in assessing Brown’s damages. Under the
Lanham Act, the plaintiff is entitled to recover “(1) defendant’s profits, (2) any damages
sustained by the plaintiff, and (3) the costs of the action.” 15 U.S.C. § 1117(a). The
District Court applied the correct five-factor test in determining whether to disgorge
Grand’s profits. The factors
include, but are not limited to (1) whether the defendant had the intent to
confuse or deceive, (2) whether sales have been diverted, (3) the adequacy
of other remedies, (4) any unreasonable delay by plaintiff in asserting his
rights, (5) the public interest in making the misconduct unprofitable, and
(6) whether it is a case of palming off.
Banjo Buddies, 399 F.3d at 175.
The District Court did not abuse its discretion in disgorging Grand’s profits
because World’s sales were diverted to Grand, World’s lost profits would be difficult to
calculate, and there are no other adequate remedies. Plaintiffs showed that Brown was
using their protected trademark in advertising through search engine phrase matching,
and thus diverting internet traffic to Grand’s website. Further, the District Court
determined that Plaintiffs’ damages were greater than Grand’s profits, but it would be too
speculative to calculate the losses caused solely by Grand’s infringement. The Court also
held that it was equitable to assume the losses Grand caused Plaintiff could not exceed
Grand’s profits, and thus awarded those to Plaintiffs. In making this determination, the
District Court relied heavily on Grand’s own documentation. Lastly, without
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disgorgement, Plaintiffs would be effectively uncompensated given the fact that Brown
continued to infringe Plaintiffs’ trademark despite Court orders enjoining her. This,
combined with the speculative nature of determining World’s loses, demonstrates that no
other equitable remedies would be adequate. See id. at 176 (finding no other adequate
remedies when plaintiff’s losses would be speculative and not disgorging profits would
leave plaintiff wholly uncompensated). Thus, the District Court did not abuse its
discretion in making these determinations.
Finally, the District Court did not abuse its discretion in awarding attorneys’ fees
to Plaintiffs. Under the Lanham Act, attorneys’ fees are available in exceptional cases,
15 U.S.C. § 1117(a), which involve culpable conduct, such as “bad faith, fraud, malice,
or knowing infringement.” Securacomm Consulting, Inc. v. Securacom, Inc., 224 F.3d
273, 280 (3d Cir. 2000). Brown exhibited bad faith and knowing infringement when she
continued to violate Plaintiffs’ trademark despite cease and desist letters, the entry of
default, and her acknowledgment in writing that the “CTO” trademark belonged to
Plaintiff. Thus, the District Court did not abuse its discretion in its determination of
damages.5
III.
For the foregoing reasons, we will affirm the order and judgment of the District
Court.
5
With respect to libel, Brown only argues that the District Court made no analysis of the
issue and thus damages are inappropriate. This argument lacks merit because the District
Court did analyze the issue. Appellant’s App. at 13. Further, Brown provides no
arguments against the award of costs, and thus waives this issue. See Travitz v. Ne. Dept.
ILGWU Health & Welfare Fund, 13 F.3d 704, 711 (3d Cir. 1994).
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