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SAVAGE UNIVERSAL CORP. v. GRAZIER CONSTRUCTION

August 12, 2004.

SAVAGE UNIVERSAL CORP., Plaintiff,
v.
GRAZIER CONSTRUCTION, INC., et al., Defendants.



The opinion of the court was delivered by: GERARD E. LYNCH, District Judge

OPINION AND ORDER

This case involves allegations by plaintiff Savage Universal Corp. ("Savage Universal") that defendant Greg Grazier and various corporate defendants of which Grazier is principal (the "Grazier Corporations") infringed Savage Universal's trademark and trade name by using them to direct internet users to websites owned by Grazier or the Grazier Corporations, which sold competing products and also disparaged Savage Universal and its products. Defendant Grazier has moved to dismiss this action for insufficiency of service of process and for lack of personal jurisdiction. For the reasons that follow, the motion will be denied.

  BACKGROUND

  Plaintiff Savage Universal is a New York corporation which sells various photography supplies, including glassine envelopes. Savage Universal holds a registration for its trademark SAVAGE and accompanying logo design, for use in connection with glassine envelopes, photographic background paper, mat mounts for photos, and other types of photographic paper supplies. The trademark has been in continuous commercial use since 1937. (Declaration of Sylvester Hank ¶¶ 2-4, Ex. A.) Savage Universal sells its branded products primarily to specialty retailers and had sales of over $12 million in 2003, approximately 10% of which were in New York. (Hank Decl. ¶¶ 6-7.) Defendant Grazier is an Oregon resident who owns and operates a number of small businesses, including Panda Productions and Micro-Tech Industries, as well as serving as the sole officer, owner and employee of several Oregon corporations, including Grazier Construction, Inc., and Precision Landscapes and Yard Care, Inc. (Affidavit of Gregory P. Grazier 1-4.) One of the web-based businesses operated by Grazier through Micro-Tech Industries is located at www.theglassinewebshop.com and sells glassine paper sleeves, envelopes, and bags to internet customers. (See, e.g., Hank Decl. Ex. F.) Through the website, customers can email Grazier directly, place orders (including custom printing), and make payment through credit cards, Paypal, or direct cash deposits via wire transfer. (Id.)

  In or around July 2003, Grazier began a commercial relationship with Savage Universal, placing several large orders for glassine envelopes on behalf of his company Micro-Tech Industries. (Hank Decl. ¶ 11.) In the course of this relationship, the parties communicated by phone, fax, and e-mail. Although the parties dispute many of the specifics of the conflict, both sides agree that, over the course of the next several weeks, the dealings between Grazier and Savage Universal were marked by arguments, complaints, mistakes and misunderstandings. The undisputed end result was one very dissatisfied customer in the person of defendant Grazier. (Hank Decl. ¶¶ 12-16; Grazier Aff. 3, Exs. C & E.) In January 2004, Savage Universal became aware that, in early August 2003, defendant Grazier or the Grazier Corporations had purchased and registered six internet domain names that incorporated Savage Universal's trademarks or trade names: savagepaper.biz, savagepaper.info, savageuniversalcorp.com, savageuniversalcorp.net, savageuniversalcorporation.com, and savageuniversal.com (collectively, the "Grazier Websites"). (Hank Decl. ¶ 17, Exs. E-1 — E-6.) Savage Universal first learned of these websites when employees in the sales and mail order departments received inquiries about the Grazier Websites from Savage Universal customers who had been directed to one or more of the Grazier Websites in the course of searching on the internet for Savage Universal's legitimate website. (Id. ¶ 18.) At that time, both savageuniversal.com and savagepaper.info pointed to a website operated by Grazier at http://home.onemain.com/~gpg/DiscontinuedItems.htm, which contained strong criticism of Savage Universal's business practices and pricing, and allowed viewers to click through to www.theglassinewebshop.com by selecting the phrase "Just visit our Glassine Home Page and SEE the SAVINGS." (Id. ¶¶ 18-21, Exs. F-G.) The savagepaper.biz domain name pointed directly to www.theglassinewebshop.com, where, as noted above, Grazier offered a substantial variety of glassine products for sale to internet customers via orders placed directly on the website. (Id. ¶ 18.)

  On January 28, 2004, Savage Universal's counsel sent a cease-and-desist letter via e-mail and express mail to Grazier, Micro-Tech Industries and Panda Productions. (Id. ¶ 22, Ex. H.) Savage Universal did not receive any direct acknowledgment or response to these communications, but by February 2, 2004, all six of the Grazier Websites pointed to a website located at http://home.onemain.com/~gpg/SavagePaperInfoSite.htm, where viewers were greeted with the words "Hello and Welcome to My Savage Paper Info Site About Scoundrels and Savages Who Sell Glassine Envelopes, Sleeves, Preservers & Paper at Unreasonable Prices and Questionable Authenticity." (Id. ¶ 23, Ex. I.) The site goes on to inform viewers that "This Site is The One `They' Don't want you to Know about. . . . There's no need for Cheating and Overpricing, but the fact is, There Is. You'll even find a few links to follow at the bottom of the page, for some better prices." (Id.) The links offered at the bottom of this webpage did not point directly to Grazier's theglassinewebshop page, but rather allowed viewers to link to pre-programmed searches on sites such as Google and Yahoo!, which brought up lists of web-based glassine product suppliers, with theglassinewebshop typically listed at or near the top. (Id.)

  On February 10, 2004, Savage Universal commenced this litigation, alleging trademark infringement, trademark dilution, unfair competition, false designation of origin, and cybersquatting under the Lanham Act, 15 U.S.C. §§ 1501 et seq. and New York state law regarding trademarks, unfair competition, deceptive business practices, and defamation and trade libel. (May 13, 2004 Declaration of Barry Magidoff, Ex. A.) On February 24, 2004, Savage Universal made an ex parte application for a Temporary Restraining Order and an Order to Show Cause for a preliminary injunction, which was granted the same day.

  Between February 25 and February 28, 2004, a process server hired by plaintiff made numerous attempts, including stake-outs at various times of day, to serve defendants at the address listed by Grazier with the Oregon Secretary of State — 93262 Bear Creek Ranch Road, Junction City, Oregon. (Magidoff Decl. ¶ 4, Ex. B; Declaration of Tim McNamara, Exs. A-E.) Grazier has identified this address as his residence in numerous communications with the Court, including on the record at a hearing on July 27, 2004, although he has provided evidence that the address is not valid for U.S. Mail service. (Grazier Aff., Ex. A.) On February 27, 2004, plaintiff mailed copies, by both first class and express mail, of the Summons and Complaint and all papers associated with the Temporary Restraining Order and Order to Show Cause to both the Bear Creek Ranch Road address and another address that Grazier had provided to the Oregon Secretary of State: P.O. Box 724, Springfield, Oregon. (Magidoff Decl., ¶ 5, Ex. C.) Although the original Order to Show Cause had specified personal service, on March 2, 2004, at the plaintiff's request and upon a showing that personal service was not feasible, the Order was amended nunc pro tunc to allow service by "any legally authorized means."

  On March 8, 2004, having received no response from any defendant, the Court granted the preliminary injunction, enjoining defendants and anyone affiliated with them from, inter alia, (i) using plaintiff's trademark or trade name, or any reproduction, copy or colorable imitation thereof, as a domain name or in any other fashion that is intended to or is likely to cause others to believe that the defendants' websites are connected with plaintiff or supply plaintiff's genuine merchandise; (ii) making any transfer of the identified domain names; and (iii) directing defendants to deposit the registrations for any infringing domain names with the Court during the pendency of the lawsuit, and contact the relevant search engine companies to remove any and all references to the infringing websites or domain names. (Magidoff Decl., Ex. D.) Following the entry of the Preliminary Injunction Order, plaintiff served copies of the Order on defendants at the two addresses noted above, by both first class mail and express mail. (Magidoff Decl. ¶ 10.) Plaintiff also sent copies of the Order to Grazier's email address and fax number and left a phone message describing the Order at an answering machine connected to Grazier's last known phone number. (Id.) The express mail packages were all returned to plaintiff marked "refused by addressee," and the fax machine stopped receiving mid-way through the attempted transmission by plaintiff; the first class mail packages were not returned. (Id. ¶¶ 11, 15.)

  By March 16, 2004, Grazier clearly had some actual notice of the pendency of this action, as Grazier's website at http://home.onemain.com/~gpg/SavagePaperInfoSite.htm, still accessible by means of "savagepaper.info," had been updated to inform viewers that the Grazier Website domain names were now for sale for a total of $6.6 million, and that, in addition to any revenue from selling the domain names, Grazier was soliciting donations for his "legal defense fund." (Id., Ex. K.) The site also contained the following message: "Because Savage Universal Corp. has decided to destroy me and my small businesses with an excessive & unlawful use of legal process, taking advantage of my medical and financial hardships, as well as their filing legal action in a State (New York) far from where we even did any real business, deliberately and maliciously utilizing the disadvantage of distance by misleading the Court when all business with them was actually done here in Oregon, in their desperate attempt to eliminate my competition, I am left no choice but to liquidate these domain names. . . ." (Id.) By March 18, 2004, Grazier had added specific references to the lawsuit's pendency in the "United States District Court Southern District of New York," and to the affidavit of Sylvester Hank, which was submitted by plaintiff in support of its application for the order to show cause, and served on defendants as described above. (July 27, 2004 Declaration of Barry Magidoff, Ex. B.)

  On April 7, 2004, the Clerk of this Court certified that none of the defendants in this action had filed an answer or otherwise moved in response to the complaint as provided in the Federal Rules of Civil Procedure, and were therefore in default. (Magidoff Decl. ¶ 31, Ex. R.) On May 18, 2004, plaintiff moved for an order to show cause as to why a default judgment should not be entered against all defendants, which was granted the same day. On May 19, 2004, plaintiff moved for the entry of a contempt order. The papers for both the May 18 Order and the May 19 Motion were served on defendants by first class mail, express mail, and facsimile on May 19, 2004. (7/27 Magidoff Decl., Ex. A.) The May 18 Order directed defendants to respond by June 4, 2004.

  On June 3, 2004, the Court received a letter by facsimile from Grazier, noting that he had "recently been informed by the plaintiff's attorney, Mr. Barry Magidoff, that a motion for default judgment and for contempt has been filed with the court." (7/27 Magidoff Decl., Ex. C.) Grazier claimed in this correspondence that he had "never received copies of any such motion and had no knowledge of it until Mr. Magidoff's letter."*fn1 (Id.) Grazier further noted that his "Oregon attorney" had complained to Magidoff that Grazier was never properly served, and that settlement discussions were ongoing. (Id.)

  In response to this correspondence, the Court issued an Order dated June 4, 2004, extending the defendants' time to answer or move in response to the Complaint, and to respond to plaintiff's motion for a contempt order, to June 28, 2004, and setting a hearing on both matters for July 1, 2004. The June 4 Order also directed plaintiff to provide an additional set of all relevant papers to Grazier by U.S. Postal Service Express Mail at the address provided by Grazier in his letter to the Court: P.O. Box 724, Springfield, OR 97477. Plaintiff complied with these instructions on June 10, 2004. (Id., Ex. E.) On June 23, 2004, the Court received a letter by facsimile from James Coons, the Oregon attorney acting on Grazier's behalf, informing the Court that settlement negotiations between the parties were ongoing, and respectfully requesting that the deadline for defendants' response to pending motions be further extended to July 23, 2004, to allow for additional time to reach a consensual resolution. Coons never formally entered an appearance in the case, but the request for additional time was granted and the date for the hearing was re-set to July 27, 2004 at 4:30 p.m.

  On July 22, 2004, the Court received another letter from Coons, informing the Court that settlement negotiations had broken down, and that Grazier would like to represent himself at the July 27 Hearing, and requesting permission for Grazier to participate by phone. The Court granted that request, though with some reservations. As noted on the record at the July 27 Hearing, the telephone facilities available in the Courtroom are less than ideal for conducting a hearing, consisting simply of a standard speakerphone on the Judge's bench, amplified by microphones designed for live testimony. Requests for telephonic participation are granted rarely, as an exception to the normal rule of live attendance, and typically only as a courtesy to those litigants truly unable to be present in court, e.g. due to incarceration or serious physical illness or handicap. Nevertheless, this courtesy was extended to Grazier, and the hearing took place on July 27, with plaintiff's counsel physically present in the courtroom and Grazier present by telephone from Oregon. At the Hearing, Grazier again asserted that he had never been ...


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