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Baykeeper Inc. v. Shinnecock Baykeeper

February 22, 2006

BAYKEEPER INC., ET AL., PLAINTIFFS,
v.
SHINNECOCK BAYKEEPER, INC., ET AL., DEFENDANTS.



MEMORANDUM & ORDER

On January 18, 2005, Magistrate Judge James Orenstein issued a Report and Recommendation ("R&R") recommending that this court grant the motions of Defendants First Coastal Corporation ("First Coastal") and Aram Terchunian ("Terchunian") (collectively "Defendants") to vacate the Clerk's notations of default entered against them in the above-referenced matter. The plaintiffs submitted a timely statement of objections to the R&R, thereby requiring this court to make a de novo review of all portions of the R&R to which the plaintiffs specifically objected. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). Having so reviewed Judge Orenstein's R&R, I adopt his recommendations in their entirety for the reasons set forth below and grant the Defendants motion to vacate the entry of default.

I. Background

A. Factual Allegations

The Plaintiffs in this matter, Baykeeper, Inc. ("Baykeeper"), Waterkeeper Alliance, Inc. ("Waterkeeper"), and Peconic Baykeeper, Inc. ("Peconic") filed a complaint on September 30, 2005 alleging trademark infringement and unfair competition in violation of the Lanham Act, 15 U.S.C. § 1051 et seq., and New York trademark law in connection with the alleged infringement of plaintiffs' registered trademark and service mark BAYKEEPER(r), and for copyright infringement in violation of 17 U.S.C. § 501, et seq., in connection with the alleged unauthorized copying of Peconic's website. (Plaintiff's Complaint ("Compl.") ¶ 1).

Baykeeper and Peconic are both not-for-profit organizations that provide "environmental advocacy and educational services aimed at protecting the nation's waters" and specifically the South Shore Estuaries of Long Island. (Compl. ¶ 2). Baykeeper and Peconic are both part of Waterkeeper Alliance, a grassroots alliance of more than 125 organizations dedicated to "preserving and protecting waterways from pollution." (Id. ¶ 3). On behalf of Baykeeper, Waterkeeper oversees the administration of trademark licenses to use BAYKEEPER(r). (Id. ¶ 3). Peconic has had a license to use the mark PECONIC BAYKEEPER since at least 1997 and is the only organization licensed to use the BAYKEEPER mark in connection with the South Shore Estuary, which includes Shinnecock Bay. (Id. ¶ 3).

The Plaintiffs allege that the Defendants are owners of, or are affiliated with a restaurant located in Shinnecock Bay. This restaurant has proposed a "large-scale marina development" project, to which Peconic is opposed because of the potential negative effects such a project will have on the ecosystem of Shinnecock Bay. (Id. ¶ 4). The Plaintiffs allege that the Defendants have illegally used the BAYKEEPER mark for activities related to this development project. (Id. ¶ 5). In addition, Plaintiffs allege that Defendants are using the mark SHINNECOCK BAYKEEPER by incorporating a not-for-profit organization of that name purported to support the ecology of the Shinnecock Bay waters. (Id. ¶ 7). Plaintiffs also allege that Defendant Terchunian, who heads First Coastal, has purchased several internet domains that incorporate the term "Shinnecock Baykeeper" in their domain names and that resemble Peconic's website in such a way that is confusingly similar and discredits the BAYKEEPER mark. (Id. ¶¶ 6-7). Plaintiffs allege that Defendants' use of the SHINNECOCK BAYKEEPER mark constitutes trademark infringement, unfair competition, and copyright infringement in violation of federal and state laws.

B. Procedural History

The initial complaint was filed against six named defendants, all of whom failed to answer. Motions for Entry of Default were filed by the Plaintiffs against First Coastal and Terchunian on November 1 and 2, 2005, respectively. (See Docket Entries ("DE") 9, 11). The Clerk of the Court entered Notations of Default against both for failure to answer the complaint on November 10, 2005. (DE 13, 14). On November 18, 2005, Attorney Joseph Prokop informed the court by letter that he would be representing the Defendants in this matter and that he requested an extension of time to file answers on behalf of the four remaining defendants who had not yet had Notations of Default entered against them. (DE 17). Prokop explained that the request was based on the fact that he had just recently been retained as counsel for the Defendants. He further explained that the Defendants had initially planned to defend themselves on a pro se basis and that they had in fact filed a timely request for an extension to answer on October 26, 2005.*fn1 He attached to his letter a copy of the October 26, 2005 letter to the court from Defendant Larry Hoffman on behalf of all Defendants indicating Defendants' need to find counsel for representation and requesting additional time to answer the complaint. (DE 17). Prokop also informed the court in his November 18, 2005 letter that he would be moving separately to vacate the defaults entered against First Coastal and Terchunian. As to the remaining Defendants, Judge Orenstein exercised his discretion to order an extension of time in which to answer pursuant to Fed. R. Civ. P. 6(b)(2) and granted the Defendants' requests for extensions of time to file answers by Order dated October 29, 2005. (DE 19).

With respect to the Notations of Default entered against First Coastal and Terchunian, Propkop filed motions to vacate on December 9, 2005. (DE 27, 28). I referred those motion to Judge Orenstein for a Report and Recommendation. (DE 29).

C. Judge Orenstein's R&R

Judge Orenstein concluded that the Defendants had made a proper showing of "good cause" to justify the setting aside of an entry of default pursuant to Fed. R. Civ. P. 55(c). Judge Orenstein properly considered the following: (1) whether the default was willful; (2) whether the defendants have a meritorious defense; and (3) whether the plaintiffs would be prejudiced if the entry of default was set aside. See Brien v. Kullman Indus., Inc., 71 F.3d 1073, 1077 (2d Cir. 1995).

With respect to the willfulness of the default, Judge Orenstein concluded that the Defendants' default could not be deemed willful inasmuch as the record reflected that the Defendants "made several attempts to secure an extension of time to respond, and that their failure to secure such relief is largely attributable to their lack of counsel." (R&R at 6). Orenstein also found that he was unable to determine on the record before him that the Defendants would be unable to mount a meritorious defense. (Id.). Specifically, Judge Orenstein found that they had put forth a meritorious defense that the plaintiffs may have sued the wrong defendants and that the plaintiffs might be barred from bringing suit due to a previous proceeding. (Id.). Finally, on the question of prejudice, Judge Orenstein found that based on the record, Plaintiffs would suffer "no cognizable prejudice" by any delay that would result in vacating the entries of default.*fn2 (Id. at 7). For these reasons, Judge Orenstein recommended that this court grant Defendants' motion to vacate the Clerk's notations of default. (Id.).

D. Plaintiffs' Objections to the R&R

The Plaintiffs raise four objections to the R&R. (See DE 43, Plaintiffs' Objections to R&R ("Pls. Obj.")). First, the Plaintiffs maintain that Judge Orenstein based his conclusion that the Defendants did not willfully default on a "misreading of the undisputed factual record." (Pls. Obj. at 2). Specifically, the Plaintiffs allege that Defendants made "no attempt whatsoever" to reach Plaintiffs' counsel to seek an extension of time to answer until after their twenty day period to do so expired on October 18, 2005. ...


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