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Coen Co., Inc. v. Pan International, Ltd.

United States District Court, N.D. California

January 20, 2015

COEN COMPANY, INC., et al., Plaintiffs,
v.
PAN INTERNATIONAL, LTD., Defendant

For Coen Company, Inc., John Zink Company, LLC, Plaintiffs: Christian Emile Mammen, LEAD ATTORNEY, David William Skaar, Steven Mark Levitan, Hogan Lovells U.S. LLP, San Francisco, CA.

For Pan International, Ltd., Defendant: David Herman Schwartz, LEAD ATTORNEY, Law Offices of David H. Schwartz, Inc., San Francisco, CA.

For Pan International, Ltd., LLC, Miscellaneous: Melvin Lee Smith, Jr., LEAD ATTORNEY, PRO HAC VICE, Law Offices of Mel Smith, Esq., Houston, TX; Michael Jansen, The Law Offices of Michael W. Jansen, Sacramento, CA.

ORDER GRANTING MOTION TO SET ASIDE ENTRY OF DEFAULT AND IMPOSING SANCTIONS AGAINST DEFENDANT Re: ECF No. 58

JON S. TIGAR, United States District Judge.

On October 15, 2014, the Clerk of the Court entered default against Defendant Pan International, Ltd. (" Defendant"), who had prior to that date failed to appear in this action. ECF No. 51. Plaintiffs Coen Company, Inc. and John Zink Company, LLC moved for entry of default judgment on November 3, 2014. ECF No. 53. Counsel for Defendant entered an appearance the following day. ECF No. 54. Currently before the Court is Defendant's motion to set aside the entry of default.[1] ECF No. 58. This matter came for a hearing on January 15, 2015.

I. BACKGROUND

A. Factual Background

The relevant factual background was described in detail in this Court's prior order denying Plaintiff's application for temporary restraining order and granting leave to conduct expedited discovery. ECF No. 32. Plaintiffs sell combustion and steam generation equipment. Declaration of Tim Webster (" Webster Decl.") ¶ 4, ECF No. 30-3. Zink has been the exclusive licensee of all of Coen's intellectual property, including its trademark registrations, since 2013. Id. ¶ ¶ 5, 15.

Between 1999 and 2008, Defendant was Coen's sole sales representative in the People's Republic of China. Id. ¶ 5. Coen officials understood Zhou Pei to be a " principal" with Defendant. Id. ¶ 6; Declaration of Shuxing (William) Li (" Li Decl.") ¶ 4, ECF No. 16-19. In 2006, Coen learned that an entity known as Beijing Fanying Technological Development Co., Ltd. (" Beijing S& T") had registered a " COEN Design" trademark (" the trademark") with the Chinese Trademark Office (" CTO").[2] Webster Decl. ¶ 6. Coen's President and CEO confronted Zhou Pei about these events and that she explained that Beijing S& T was her husband's company and that the registration had been filed to protect Coen's interests. Id.

Coen informed Defendant that Coen owned the intellectual property rights to the trademark, and in January 2007 Coen and Beijing S& T executed an application assigning the rights to the trademark and its accompanying registration (Chinese trademark registration number 422110, the " '110 Registration") to Coen. Webster Decl. ¶ ¶ 7-8. On or about October 24, 2008, Beijing S& T applied to the CTO to transfer the '110 Registration from Coen back to Beijing S& T. Fisher Decl. ¶ 7, and Exhibit A thereto. The application was signed by Carlos Bravo on behalf of Coen. Id. According to Coen, Mr. Bravo's employment with Coen terminated on November 2, 2007, and so at the time of the application he was no longer authorized to act for Coen in any capacity. Webster Decl. ¶ 9. Coen claims that it " had no knowledge, and never approved, of the assignment of any of its trademarks to [Defendant] or Beijing [S& T], and never received notice of any such assignment." Id. ¶ 17.

After their sales agreement terminated in January 2008, Coen and Defendant disputed a number of issues, including commissions, outstanding warranty retentions, service claims, amounts allegedly owed relating to the trademark and the '110 Registration, and amounts owed for retained goods. Id. ¶ 11. In March 2009, Defendant initiated a lawsuit against Coen in Yolo Superior Court, which was later transferred to San Mateo Superior Court. Id. ¶ 12, and Exhibit A thereto (Complaint in Pan International, Ltd. v. Coen Company, Inc., Case No. CIV 486308). In that action, Defendant alleged that it was " a Seychelles limited partnership and is in the business of importing and exporting goods to and from the Republic of China." ¶ 1 of Exh. A to Webster Decl.

Meanwhile, the CTO approved Beijing S& T's application for registration of the trademark in July 2009, and Beijing S& T recorded the '110 Registration with Chinese Customs in February 2010. Fisher Decl. ¶ ¶ 8-9.

In November 2010, Coen and Defendant entered into a settlement agreement to resolve the state-court lawsuit. Webster Decl. ¶ 14 and Exhibit B thereto. Under Paragraph 4 of the Settlement Agreement, Pan International, Ltd. agreed " to defend, indemnify, and hold Coen harmless from any future claims, liens, demands, causes of action, obligations, damages, or liabilities which are the subject of this Release." Exh. B to Webster Decl. Under Paragraph 7 of the Settlement Agreement, " the Parties covenant that they will not directly or indirectly encourage or aid, except as required by due legal process, the commencement or prosecution of, against Pan [International, Ltd.], Coen, or Coen Canada, any action or proceeding based upon any claims, liens, demands, causes of action, obligations, damages or liabilities which are the subject of this Agreement." Id. The settlement agreement was signed by Zhou Pei. Declaration of Mel Smith (" Smith Decl."), ECF No. 58-9 at ¶ 4.

Based on their course of dealing, Coen understands Defendant to be in a position to control, or at least to be affiliated with, Beijing S& T. Webster Decl. ¶ ¶ 6, 21; Li Decl. ¶ ¶ 4-5. The panintnl.com website describes the entities as " sister companies." Exhibits D-F to Declaration of Christian Mammen, ECF No. 16-5, 16-5, 16-7. In January 2013, a new entity, Pan International, Ltd., LLC (" PILL"), commenced business. Zhou Decl. ¶ 3 (emphasis added). Zhou Pei is a member of PILL, which registered as a Texas limited liability company in 2011. Id. ¶ 1.

On or about June 28, 2014, Coen received notice that the Chinese customs office had seized a shipment of Coen products before they could be shipped out of China. Webster Decl. ¶ 16.

B. Procedural History

Plaintiffs filed the complaint in this action on June 25, 2014, bringing four causes of action: for " Defense, Indemnity and to be Held Harmless Pursuant to ¶ 4 of the Settlement Agreement, " for breach of contract, for conversion, and for intentional interference with contractual relations. Complaint, ECF No. 30-12. The complaint names Pan International, Ltd. as the only Defendant. Id. On July 29, Plaintiffs served Zhou ...


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