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The North Face Apparel Corp. v. Moler

United States District Court, S.D. New York

July 16, 2015

THE NORTH FACE APPAREL CORP., Plaintiff,
v.
REBECCA MOLER et al., Defendants.

REPORT AND RECOMMENDATION

GABRIEL W. GORENSTEIN, Magistrate Judge.

The North Face Apparel Corp. ("North Face") brought this action alleging claims arising out of the unauthorized manufacturing and sale of goods bearing copies of North Face's registered trademarks. The defendants are Arthur F. Moler (d/b/a S.C. Liquidations, Inc. and Authenbag), Rebecca Moler (d/b/a S.C. Liquidations, Inc. and Authenbag), To Phuc Hau (a/k/a Steven and/or Pham The Quang), Calvin Bui (d/b/a North Face Initiative, LLC and North Face Depot), Son Tran (d/b/a North Face Initiative, LLC, and North Face Depot), Phan Kim Dong, Web Coast Concepts, Inc. (d/b/a TNF Deals, 70Cut, and www.tnfdeals.com) ("Web Coast"), John Melwak, and Presco, Inc. ("Presco"). Three of the defendants, Hau, Bui, and Dong (collectively, the "defendants"), have defaulted and the case is before the Court for a calculation of damages.

I. BACKGROUND

North Face filed the original complaint in this action on August 31, 2012. See Complaint, dated Aug. 31, 2012, and filed Nov. 27, 2012 (Docket # 14) (previously filed under seal as Docket # 3). On September 4, 2012, North Face was granted a Temporary Restraining Order, Seizure Order, Expedited Discovery Order, and Order to Show Cause for Preliminary Injunction (Docket # 13) ("TRO") (previously filed under seal as Docket # 2). Hau was served on September 7, 2012, along with a copy of the TRO. See Affidavit of Service, filed Apr. 17, 2013 (Docket # 41). On November 30, 2012, North Face filed an amended complaint naming additional defendants, including Bui. See Amended Complaint, filed Nov. 30, 2012 (Docket # 28). Bui was served on December 18, 2012. See Affidavit of Service, filed Dec. 19, 2012 (Docket # 29). On May 3, 2013, North Face filed a second amended complaint naming additional defendants, including Dong. See Second Amended Complaint, filed May 3, 2013 (Docket # 46) ("Compl."). Dong was served on May 9, 2013. See Affidavit of Service, filed May 14, 2013 (Docket # 53).

North Face alleges claims for federal trademark counterfeiting, see Compl. ¶¶ 31-35, federal trademark infringement, id. ¶¶ 36-39, unfair competition and false designation of origin, id. ¶¶ 40-45, common law trademark and trade name infringement, ¶¶ 46-51, unfair competition under New York state common law, id. ¶¶ 52-58, and unlawful deceptive acts and practices under N.Y. Gen. Bus. L. § 349, id. ¶¶ 59-63. Defendants failed to respond to the complaints, and the Clerk has issued certificates of default. See Clerk's Certificate of Default, filed Oct. 4, 2013 (Docket # 84); Clerk's Certificate of Default, filed Oct. 7, 2013 (Docket # 85); Clerk's Certificate of Default, filed Nov. 14, 2013 (Docket # 91).

On March 13, 2015, Judge Koeltl issued an Order to show cause why judgment by default should not be entered against defendants. See "[Proposed] Order to Show Cause for a Default Judgment and Permanent Injunction Order, " filed Mar. 16, 2015 (Docket # 111), at 2-3. Defendants' answering papers were required to be filed by March 25, 2015, id. at 3, but they failed to respond. North Face filed papers in support of an entry of default judgment and permanent injunction. See Affidavit of Charles A. LeGrand in Support of Order to Show Cause for Default Judgment and Permanent Injunction, filed Mar. 26, 2015 (Docket # 113) ("LeGrand Aff."); Declaration of Randall Rabenold in Support of Order to Show Cause for Default Judgment and Permanent Injunction, filed Mar. 26, 2015 (Docket # 114) ("2015 Rabenold Decl."). Defendants sought a judgment of $22, 000, 000 and a permanent injunction. LeGrand Aff. ¶¶ 64, 69. On March 27, 2015, Judge Koeltl issued an Order finding that North Face is entitled to a default judgment against defendants.[1] See Order, filed Mar. 27, 2015 (Docket # 116). The matter has been referred to the undersigned for an inquest as to damages. See Order of Reference to a Magistrate Judge, filed Mar. 27, 2015 (Docket # 115).

On March 30, 2015, the Court gave defendants until May 14, 2015, to oppose North Face's request for a judgment in the amount of $22, 000, 000 against them, see Scheduling Order, filed Mar. 30, 2015 (Docket # 117) ("March 30 Order"), ¶¶ 1-2, but they never filed a response.

Because the default order entered in this case establishes defendants' liability, see Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995) (citation omitted), the only remaining issue is whether North Face has supplied adequate support for the relief it seeks. See Kuruwa v. Meyers, 823 F.Supp.2d 253, 256 (S.D.N.Y. 2011), aff'd, 512 F.Appx. 45 (2d Cir. 2013); accord GAKM Res. LLC v. Jaylyn Sales Inc., 2009 WL 2150891, at *2 (S.D.N.Y. July 20, 2009). The Second Circuit has held that a damages inquest may be held on the basis of documentary evidence alone "as long as [the court has] ensured that there was a basis for the damages specified in [the] default judgment." Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989); accord Action S.A. v. Marc Rich & Co., Inc., 951 F.2d 504, 508 (2d Cir. 1991). The March 30 Order notified the parties that the Court would conduct the inquest based upon the written submissions of the parties unless a party sought an evidentiary hearing. See March 30 Order ¶ 3. No party has requested an evidentiary hearing. Moreover, because North Face's submissions provide a basis for an award of damages, no hearing is required.

II. FINDINGS OF FACT AND CONCLUSIONS OF LAW

In light of defendants' default, North Face's properly pleaded allegations, except those related to damages, are accepted as true. See, e.g., City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) ("It is an ancient common law axiom' that a defendant who defaults thereby admits all well-pleaded' factual allegations contained in the complaint.") (quoting Vt. Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)); Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) ("In light of [defendant's] default, a court is required to accept all... factual allegations as true and draw all reasonable inferences in [plaintiff's] favor.") (citation omitted). Thus, the Court's findings of fact are based on the allegations in North Face's second amended complaint regarding liability and the admissible evidence regarding damages contained in its submissions.

A. Facts Relating to Liability

North Face is a Delaware corporation with its principal place of business in Wilmington, Delaware. Compl. ¶ 1. Hau is an individual believed to be doing business or residing in Ho Chi Minh City, Vietnam. Id. ¶ 4. Bui is an individual whose physical address is unknown. Id. ¶ 5. Dong is an individual believed to reside and/or do business from Vietnam. Id. ¶ 7.

North Face is the owner of federally registered trademarks and service marks and owns common law rights in these and other marks for use in connection with apparel, backpacks, and other products, and common law rights in various marks consisting of or incorporating the letters "TNF." Id. ¶¶ 18-19 (collectively, "North Face Marks"). North Face sells "high quality technical and casual outdoor apparel, equipment, including backpacks, and other products" (the "North Face Products") using its North Face Marks. Id. ¶ 20. The North Face Marks are "widely promoted, " id. ¶ 21, and North Face "maintains control standards for all" North Face Products, which are distributed through a "worldwide network of authorized licensees, distributors, and retailers, " id. ¶ 22. "In 2010 alone, ... North Face spent many millions of dollars advertising and promoting the North Face Products, which prominently bear the... North Face Marks." Id. ¶ 23.

Defendants have "manufactured, imported, distributed, offered for sale and/or sold counterfeit goods... bearing counterfeits of the North Face Marks" (the "Counterfeit Products"), and "they continue to do so." Id. ¶ 25. Bui operates "at least two retail websites, using domain names that infringe the North Face Marks, and purporting to sell genuine... North Face® branded goods, but which in fact sell Counterfeit Products." Id. ¶ 26. Dong also "owns and uses [a] domain name... in connection with her infringing activities." Id. Defendants also offer Counterfeit Products for sale on "pages set up on online retail marketplaces such as eBay and Amazon." LeGrand Aff. ¶ 23; see Compl. ¶ 27. The Counterfeit Products sold by defendants are not genuine North Face Products, and North Face did not "manufacture, inspect or package the Counterfeit Products and did not approve the Counterfeit Products for sale or distribution." Id. ¶ 29. Defendants' use of the North Face Marks "on or in connection with the advertising, marketing, distribution, offering for sale and sale of the Counterfeit Products is likely to cause and has caused confusion, mistake and deception by and among consumers and is irrevocably harming [North Face]." Id. ¶ 30.

B. Facts Relating to Damages

North Face has purchased samples from defendants that North Face subsequently determined to be Counterfeit Products. Declaration of Rick Griffin, filed Nov. 27, 2012 (Docket # 16), ¶¶ 12-13; Declaration of Brandon Blucher, dated Nov. 8, 2012 and filed July 15, 2015 (Docket # 119) ("Nov. 8 Blucher Decl."), ¶¶ 9-11. North Face has also identified "no less than ...


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