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Crazy Dog T-Shirts, Inc. v. Design Factory Tees, Inc.

United States District Court, W.D. New York

July 26, 2017

CRAZY DOG T-SHIRTS, INC., Plaintiff,
v.
DESIGN FACTORY TEES, INC. and TONY RALLIS, Defendants.

          DEFAULT JUDGMENT AND PERMANENT INJUNCTION

          HON. FRANK P. GERACI, JR. CHIEF JUDGE UNITED STATES DISTRICT COURT

         INTRODUCTION

         Plaintiff Crazy Dog T-Shirts, Inc. (“Plaintiff”) initiated this action on December 11, 2015 to remedy alleged trademark infringement and unfair competition by Defendants Design Factory Tees, Inc. and Tony Rallis. Plaintiff seeks relief under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and New York General Business Law §§ 360-k, 360-l, and 360-m.

         The record demonstrates that Defendants were properly served, that Defendants failed to respond to Plaintiff's complaint, and that the Clerk of Court entered default against Defendants pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. After a hearing in which Defendants did not appear, the Court granted Plaintiff's motion for a preliminary injunction. See ECF No. 15.

         Plaintiff now moves for a default judgment against Defendants pursuant to Rule 55(b). ECF No. 16. For the reasons stated below, Plaintiff's motion is granted as to Defendant Design Factory Tees but denied as to Defendant Tony Rallis.

         DISCUSSION

         Once a default has been entered, the Court's role is to determine whether the facts alleged in the complaint are sufficient to state a claim for relief as to each cause of action for which the plaintiff seeks default judgment. See, e.g., Haley v. Hughes Network Sys., LLC, No. 12-CV-1079, 2013 WL 5937007, at *1 (W.D.N.Y. Nov. 1, 2013). In making that determination, the Court accepts the allegations in the complaint as true.[1] Id. (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)).

         At the same time, the Court does not simply accept at face value that a defendant is liable. Rather, “judgment against a defaulting party should be granted only after careful examination of the moving party's claim by the district court . . . Indeed, a defendant's default does not in itself warrant a court in entering a default judgment because there must be a sufficient basis in the pleadings for the judgment entered.” Bianco v. Seaway Industrial Services, Inc., No. 03-CV-0084, 2004 WL 912916, at *1 (W.D.N.Y. Apr. 1, 2004) (internal citations and quotations omitted); see also Enron Oil Corp. v. Masonori Diakuhara, 10 F.3d 90, 95-96 (2d Cir. 1993). The Second Circuit has cautioned district courts that “defaults are generally disfavored and are reserved for rare occasions, ” and when there is doubt as to the propriety of granting judgment by default, “the doubt should be resolved in favor of the defaulting party.” Enron Oil Corp., 10 F.3d at 96.

         Here, Plaintiff seeks a default judgment against Defendants with respect to its first cause of action, false designation of origin under 15 U.S.C. § 1125(a).

         I. Design Factory Tees

         Having considered the record in this case and the applicable legal authorities, the Court is satisfied that Plaintiff is entitled to a default judgment against Defendant Design Factory Tees. See ECF No. 16-2, at 5-10. Plaintiff's allegations, accepted as true, demonstrate that the unregistered mark CRAZY DOG TSHIRTS (“Plaintiff's Mark”) is entitled to protection under section 1125(a) and that Design Factory Tees's actions-namely, hijacking Plaintiff's listings on amazon.com and falsely implying to customers that shirts sold by Design Factory Tees originate from or are authorized by Plaintiff-constitute false designation of origin and are likely to cause confusion with Plaintiff's Mark. The Sports Auth., Inc. v. Prime Hosp. Corp., 89 F.3d 955, 960 (2d Cir. 1996); Coach Leatherware Co. v. AnnTaylor, Inc., 933 F.2d 162, 168 (2d Cir. 1991); Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961).

         II. Tony Rallis

         However, with respect to Defendant Tony Rallis, Plaintiff's allegations are insufficient. Courts in the Second Circuit have consistently held that a corporate officer may only be held personally liable for trademark infringement and unfair competition if that officer is “a moving, active, conscious force behind the corporation's infringement.” See, e.g., Innovation Ventures, LLC v. Ultimate One Distrib. Corp., 176 F.Supp.3d 137, 155 (E.D.N.Y. 2016). For example, a person who is the sole shareholder and employee of an infringing company would be personally liable for that company's infringement because he or she must have approved of the infringing act. Chloe v. Queen Bee of Beverly Hills, LLC, No. 06-cv-3140, 2011 WL 3678802, at *4 (S.D.N.Y. Aug. 19, 2011) (collecting cases).

         The only mention of Tony Rallis in Plaintiff's complaint is that he is, and at all relevant times was, a Maryland resident. ECF No. 1 ¶ 6. In its motion for default judgment, Plaintiff argues that Tony Rallis should be held personally liable for Design Factory Tee's infringement because (1) he is the sole listed agent of Design Factory Tees according to the Maryland Department of Assessments and Taxation Business Services; (2) he accepted service on behalf of Design Factory Tees; and (3) Plaintiff's counsel sent him a cease and desist letter on November 20, 2015. ECF No. 16-2, at 10-11. Plaintiff does not cite to anything in the record to support its first assertion. Id. But even if the Court were to accept that fact as true, Plaintiff has not shown that Tony Rallis was “a moving, active, conscious force” behind Design Factory Tees's infringement. See Carell v. Shubert Org., Inc., 104 F.Supp.2d 236, 271 (S.D.N.Y. 2000) (finding allegations insufficient to support personal liability where the individual was chairman of the infringing organization, credited on the allegedly infringing video, and copied on a letter threatening legal action); Flat Rate Movers, Ltd. v. FlatRate Moving & Storage, Inc., 104 F.Supp.3d 371, 383 (S.D.N.Y. 2015); Eu Yan Sang Int'l Ltd. v. S & M Enterprises (U.S.A.) Enter. Corp., No. 09-CV-4235, 2010 WL 3824129, at *2 (E.D.N.Y. Sept. 8, 2010) (‚ÄúThis Court has also found that a defendant is not deemed ...


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