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Century 21 Real Estate LLC v. Realtycomp.Com

United States District Court, N.D. California

March 6, 2015

REALTYCOMP.COM, et al., Defendants.


EDWARD M. CHEN, District Judge.

Plaintiff Century 21 Real Estate LLC (Century 21) "is one of the world's leading franchisors of real estate brokerages." Docket No. 20-12 at ¶ 3. Defendant is a former franchisee of Century 21 that sometimes did business as Century 21 ScottKeys Properties or Century 21 Scott Keys Properties. Id. at ¶ 1; see also Docket No. 1 at ¶ 6. Defendants Tjoman Subiono Buditaslim ( a.k.a. Joe Lim) (hereinafter Lim) and John Scott each signed a personal "Guaranty of Payment and Performance" in connection with RealtyComp's obligations under its Franchise Agreement with Century 21. Docket No. 1 at ¶ 18; see also Docket No. 20-17 (Franchise Agreement) at 48-49.

After Defendants failed to respond to Century 21's complaint, the Clerk of this Court entered default against the Defendants on December 10, 2014. See Docket No. 18. Century 21 thereafter moved this Court for entry of default judgment. See Docket No. 20. A hearing was held on March 5, 2015. Having considered the Plaintiff's brief and accompanying submissions, the Court hereby GRANTS the motion for default judgment.


On March 16, 2004, Defendant RealtyComp entered into a Franchise Agreement (the Agreement) with Century 21. Franchise Agreement at 46. Defendants Lim and Scott each signed the Agreement on behalf of RealtyComp as an "Authorized Officer and Individually." Id.

Under the Agreement, RealtyComp became a franchisee of Century 21 as a real estate brokerage business. Docket No. 20-16 at ¶ 4. According to the Agreement, Century 21 promised to (among other things) "grant a non-exclusive license to RealtyComp to utilize Century 21 trademarks and [its] marketing system." Id. at ¶ 5. In return, RealtyComp agreed (among other things) to pay to Century 21: (1) six percent of its gross revenues as "royalty fees"; and (2) two percent of its gross revenues for a "National Advertising Fund" (NAF). Id. "RealtyComp also agreed to permit Century 21 to audit its books and records at any reasonable time and agreed to pay, with interest, any sums determined to be owing based on [such an] audit." Id. Defendants Lim and Scott each signed "a Guaranty of Payment and Performance" in favor of Century 21, personally guaranteeing all of RealtyComp's obligations under the Agreement. See Franchise Agreement at 48-49 (providing that each "Guarantor does hereby, jointly and severally, to the extent herein provided, guaranty to CENTURY 21 the prompt payment and performance, when due of all obligations of Franchisee under [the] Franchise Agreement").

In addition to the Agreement, Defendants also entered into two "Account Balance Promissory Notes" (the Notes) in the amounts of $13, 876.72 and $15, 327.80 respectively. See Docket Nos. 20-18, 20-19 (Promissory Notes). Pursuant to the Notes, the Defendants promised to repay Century 21 the loaned amounts in eleven monthly installments of $500 commencing March 1, 2012, with a final balloon payment of $25, 128.70 due on February 15, 2013. Docket No. 20-16 at ¶ 8. Upon termination of the Franchise Agreement, the Notes "could be accelerated and [become] due immediately following termination." Id.

Finally, Defendant RealtyComp entered into a Security Agreement with Century 21 to secure its obligations under the Franchise Agreement and the Promissory Notes. See Docket No. 20-20 (Security Agreement). The Security Agreement grants Century 21 a security interest in certain collateral of RealtyComp, including "all accounts, accounts receivable, contract rights, leases, furniture... movable trade fixtures" and the like. Id.; see also Docket No. 20-16 at ¶ 10.

Sometime around October 2013, Century 21 learned that Defendants had "failed to report on closed transactions and pay fees when due, including royalty and NAF fees, constituting a breach of the [A]greement." Docket No. 20 at 5; see also Docket No. 20-16 at ¶¶ 12-13. Pursuant to Section 17M of the Agreement, Century 21 sent a "notice of intent to terminate and opportunity to cure" letter to Defendants stating that Defendants were in default, and giving Defendants until December 2, 2013, to cure the default by paying $47, 217.75 - the amount then due and owing Century 21 under the Agreement. Docket No. 20-16 at ¶ 13. Defendants failed to cure the default by December 2, 2013. Id. at ¶ 14. Consequently, Century 21 "exercised its rights under Sections 8, 9, 17B and 17M of the Franchise Agreement to terminate the [A]greement." Id. Century 21 sent a "Termination Letter" to Defendants on December 17, 2013. Id. That letter advised Defendants that the Agreement was terminated effective December 23, 2013, for "failing to pay fees when due and failing to report on closed transactions." Id. As of the date of termination, Century 21 claims that Defendants owed it $59, 589.94, "consisting of $49, 632.23 in unpaid fees and billings due on the Notes, plus $9, 957.71 in lost future profits as set forth in Section 19A of the Franchise Agreement." Id. at ¶ 15.

Section 18 of the Agreement is entitled "Procedures After Termination, " and lays out a number of steps a terminated franchisee must take after its relationship with Century 21 ends. See Franchise Agreement at 30-32. For instance, RealtyComp agreed to "[i]mmediately and permanently discontinue the use of all CENTURY 21 Marks... [p]romptly destroy, or surrender to [Century 21], all stationary, letterheads, forms, [etc.]... containing CENTURY 21 Marks... [and] [i]mmediately and permanently discontinue all advertising as a CENTURY 21 franchisee." See id.; see also Docket No. 20-12 at ¶ 15. According to a Vice President of Customer Relationships for Century 21, one of the "purposes of Section 18 is to prevent the irreparable harm that Century 21 will suffer in the event of the continued use of its CENTURY 21® Marks by an unauthorized former franchisee, or hold-over franchisee, of Century 21." Docket No. 20-12 at ¶ 16.

Century 21 claims that Defendants failed to comply with the requirements of Section 18 after their franchise was terminated. Inspection reports filed by Century 21 indicate that Defendants were still using Century 21 marks and advertising on January 23, 2014, see Docket No. 20-14, and April 18, 2014. Docket No. 20-15. Consequently, counsel for Century 21 sent Defendants a cease and desist letter on July 18, 2014, reminding Defendants that the Agreement had been terminated and explaining Defendants' contractual promise to "comply with their post-termination obligations including ceasing all further use of the trade name, trademarks, services marks and logos of Century 21." Docket No. 20-1 at ¶ 2. Apparently, the Defendants did not cease and desist in their use of Century 21's intellectual property, and so counsel for Century 21 sent a second cease and desist letter to Defendants on September 23, 2014. Id. at ¶¶ 2-3. When this second letter went unheeded, Century 21 filed this lawsuit to enforce the terms of the Agreement. See Docket No. 1.

In its complaint, filed on October 27, 2014, Century 21 asks this Court for both a money judgment and injunctive relief consistent with the Defendants' obligations under the relevant contracts. Specifically, Century 21 asks this Court for the following relief: (1) a monetary judgment in the amount of $99, 330.94, which includes amounts due and owing under the Franchise Agreement and Notes, and trebled damages for Defendants' continued trademark infringement; (2) an attorneys' fees award, including costs, in the amount of $9, 574.75; and (3) a permanent injunction prohibiting Defendants from further use of Century 21's intellectual property. Docket No. 20 at 21-21.


A. Adequacy of Service of Process

As a threshold matter in considering a motion for default judgment, the Court must first "assess the adequacy of the service of process on the party against whom default is requested." Board of Trustees of the N. Cal. Sheet Metal Workers v. Peters, No. C-00-0395 VRW, 2000 U.S. Dist. LEXIS 19065, at *2 (N.D. Cal. Jan. 2, 2001). Fed.R.Civ.P. 4(h)(1) authorizes service upon a corporation "by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and - if the agent is one authorized by statute to receive service and the statute so requires - by also mailing a copy of each to the defendant." Fed.R.Civ.P. 4(h)(1). Rule 4(h)(1) also states that a corporation may be served "in the manner prescribed by Rule 4(e)(1) for serving an individual, " which, in turn, allows for service "following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made." Fed.R.Civ.P. 4(e)(1).

Under California law, a summons and complaint may be served on a corporation by delivering a copy of the documents: (1) to the person designated as agent for service under certain provisions of the California Corporations Code; or (2) to the "president or other head of the corporation, a vice president, a secretary or assistant secretary, a treasurer or assistant treasurer, a general manager, or a person authorized by the corporation to receive service of process." Cal. ...

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