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Kerr Corporation v. Tri Dental

March 11, 2013


The opinion of the court was delivered by: David O. Carter United States District Judge



Before the Court is a Motion for Default Judgment (Dkt. 36) filed by Plaintiff Kerr Corporation ("Plaintiff"), unopposed by Defendants Tri Dental, Inc., and Ahn Luu ("Defendants"). A hearing was held on this matter on March 11, 2013. After considering the moving papers and oral argument, the Court GRANTS Plaintiff's Motion.

I. Background

Plaintiff Kerr Corporation is a manufacturer of "high technology dental restorative materials and consumables," and individual defendant Ahn Luu is a former executive of Kerr Corporation who founded corporate defendant Tri Dental, Inc. First Am. Compl. (FAC) (Dkt. 19) at 2. Plaintiff brought six claims against Defendants: 1) federal trademark counterfeiting in violation of 15 U.S.C. § 1116; 2) federal trademark infringement in violation of 15 U.S.C. § 1114; 3) federal unfair competition in violation of 15 U.S.C. 1125; 4) unfair competition in violation of California Business and Professions Code § 17200; 5) common law unfair competition; and 6) trademark dilution and injury to business reputation in violation of California Business and Professions Code § 14247. FAC at 7-11.

A.Facts Alleged by Plaintiff

Plaintiff has spent substantial time, money, and effort in promoting products under its KERR, REVOLUTION, PREMISE, MAXCEM ELITE, NEXUS, NX3, OPTIBOND, OPTIBOND FL, HERCULITE, HERCULITE XR, PRODIGY, and UNIDOSE marks (collectively, "the Marks"). FAC ¶ 23. After receiving complaints from dentists concerning the performance and quality of certain products, Plaintiff learned that these non-performing products were counterfeit --that is, the products were not manufactured by Kerr, but "bore spurious copies" of Kerr's protected trademarks. Pl's Mot. at 1. Through litigation with (among others) DC Dental Supply, LLC ("DCD"),*fn1 a counterfeit reseller, and through its own investigative efforts, Kerr identified the source of counterfeit products as Defendant Ahn Luu, a former Kerr employee, and the company he founded, Defendant Tri Dental Inc. Id.

Discovery obtained in the DCD Suit and Kerr's own investigation revealed alarge counterfeiting scheme. Invoices produced by DCD ("theInvoices") show that DCD purchased over $8 million in counterfeit products --over300,000 units of 156 products --from TDI. Charnowitz Decl. (Dkt. 36-10) Ex. A-C. These figures represent sales to only two of Defendants' customers -- DCD and an affiliate. Id. Kerr's independent investigation also revealed that Defendants contracted with Print 5K, a local printer in Fountain Valley, to print hundreds of thousands of unauthorized copies of the instruction booklets (called "Directions for Use" or "DFUs") included in the packaging for Kerr's dental products. Winn Decl. (Dkt. 36-5). Kerr never authorized TDI to print the DFUs. Pl's Mot. at 1.

B.Plaintiff's Motion for Default

On June 15, 2012, Plaintiff filed this lawsuit against Defendants to enjoin counterfeiting activities, to protect Kerr's trademarks and the public at large, to compensate Kerr for its injuries, and to punish Defendants for their willful infringement and endangering the public. See Compl. Despite proper service, Defendants have never appeared or responded. On August 23, 2012, Default was entered by the clerk against Defendant Ahn Luu. Entry of Default (Dkt. 31). On Augst 31, 2012, Default was entered by the clerk against Defendant TDI. Entry of Default (Dkt. 33). On February 4, 2013, Plaintiff moved for Default Judgment. Pl's Mot. (Dkt. 36). Defendants have not responded. A hearing on this motion was held on March 11, 2013.

In attached declarations and exhibits to the Motion, Plaintiff provided evidence to show the damages and acts that established Defendants' liability. Included in the declarations and exhibits is the declaration of David Charnowitz, President of DC Dental, Inc., who attached as exhibits a series of Purchase Invoices showing sales of Kerr-marked products sold to DC Dental and Kings Two Dental by Defendants, as well as sales invoices showing DC Dental's sale of Kerr-branded products obtained from Defendants. Charnowitz Decl. The declaration of Margaret E. Dayton, Plaintiff's counsel, includes a Summary Chart calculating all revenues established by the Purchase Invoices, and showing that Defendant's sales of Kerr-marked products totaled $8,036,305.00 to purchasers DC Dental and Kings Two Dental. Dayton Decl. (Dkt. 36-1) Ex. B. Dayton's declaration also states that Plaintiff has incurred $25,460.00 in attorney's fees in connection with this case, as well as costs of $1,252.50. Id.; Decl. of Alexander H. Cote ¶¶ 2, 7-10.

II. Legal Standard

Federal Rule of Civil Procedure 55 provides that the Court may, in its discretion, order default judgment following the entry of default by the Clerk. Fed. R. Civ. P. 55(b). Local Rule 55 sets forth procedural requirements that must be satisfied by a party moving for default judgment. Upon entry of default, the well-pleaded allegations of the complaint are taken as true, with the exception of allegations concerning the amount of damages. See, e.g., Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977). However, "necessary facts not contained in the pleading, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). Where the pleadings are insufficient, the Court may require the moving party to produce evidence in support of the motion for default judgment. See TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). A court may not enter a default judgment against an unrepresented minor, incompetent person, or person in military service. Fed. R. Civ. P. 55(b)(2); 50 App. U.S.C. § 520.

When a party applies for default judgment, "the court may conduct hearings or make referrals -- preserving any federal statutory right to a jury trial -- when, to enter or effectuate judgment, it needs to: (A) conduct an accounting; (B) determine the amount of damages; (C) establish the truth of any allegation by evidence; or (D) investigate any other matter." Fed. R. Civ. P. 55(b)(2).

III. Discussion

A. The Court's Discretion to Grant Default Judgment

In evaluating whether to enter a default judgment, courts consider seven factors: "(1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits." Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). In applying the Eitel factorsto the facts at issue here, the Court chooses to exercise its discretion in GRANTING Plaintiff's Motion for Default Judgment.

1. The Possibility of Prejudice to Plaintiffs

This factor requires the court to consider the harm to Plaintiffs if a default judgment is not granted. As described in section I of this Order, Defendants' past misconduct and current failure to litigate this case indicate that it is highly unlikely to correct past misbehavior or otherwise compensate Plaintiffs without a default judgment by the Court. Without this Court's intervention, Plaintiff will have suffered millions of dollars worth of harm at the hands of Defendants without any compensation and with no injunctive relief. Given the likely harm to Plaintiff, the evidence before this Court establishes "that Plaintiff will likely suffer great prejudice through the loss of sales and diminution of goodwill if default is not entered." Philip Morris USA, Inc. v. Castworld Products, Inc., 219 F.R.D. 494, 499 (C.D. Cal. 2003) (default judgment awarding $2 million in statutory damages in connection with the sale of counterfeit goods).

2 & 3. The Merits of Plaintiff's Substantive ...

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