United States District Court, C.D. California
GUOTAI USA, COMPANY, LTD.; JIANGSU GUOTAI LITIAN ENTERPRISES COMPANY, LTD; Third Party Plaintiffs,
J&COMPANY, LLC; JACOB ABIKZER; MILO HAIM; and DOES 50-100, Third Party Defendants.
ORDER DENYING MOTION FOR DEFAULT JUDGMENT
D. WRIGHT, II UNITED STATES DISTRICT JUDGE
case involves a trademark licensing agreement. Before the
Court is Third Party Plaintiffs Guotai USA Company Ltd. and
Jiangsu Guotai Litian Enterprises Company's motion for
default judgment against Third Party Defendants J&Company
Jeans, LLC and Jacob Abikzar. (ECF No. 85.) For the following
reasons, the Court DENIES the motion.
in the underlying lawsuit, JNCO Holdings, LLC (“JNCO
Holdings”) and JNCO, LLC (“JNCO”), are
owners of the JNCO mark. (Third Party Compl.
(“TPC”), Ex. 4 at 1, ECF No. 40.) This mark is
best known for its association with a particular line of
baggy jeans. (Id. ¶ 19.) Defendants in the
underlying lawsuit (and Third Party Plaintiffs in this
portion of the lawsuit), Guotai USA Company Ltd.
(“Guotai USA”) and Jiangsu Guotai Litian
Enterprises Company (“Litian”), are entities
operating in the fashion industry. (Id. ¶¶
1-2.) Defendant Isaac Cohen is the chief executive officer of
Guotai USA. (Cohen Decl. ¶ 2.) Third Party Defendant
Milo Haim is the managing member of JNCO Holdings and JNCO.
(TPC ¶ 19.) Third Party Defendant Jacob Abikzer is the
president of JNCO Holdings, JNCO, and J&Company Jeans,
LLC (“J&Company”). (Id.) He is also
Haim's nephew. (Id.) J&Company is
“engaged in the clothing business” and is a dba
of JNCO Holdings and JNCO. (Id. ¶ 3.) Third
Party Plaintiffs allege that JNCO Holdings, JNCO, Haim, and
J&Company are part of a “single enterprise”
and “always act for, and on behalf, of each
other.” (Id. ¶ 5.) Third Party Plaintiffs
further allege that JNCO Holdings, JNCO, and J&Company
are not “viable businesses and have no ability to pay
judgments entered against them.” (Id.)
case began when this enterprise failed to pay Litian for
garments. (Id. ¶ 13). By October 2013, the
enterprise had racked up $582, 586 in debt to Litian.
(Id.) The enterprise had no money to pay Litian and
entered into a licensing agreement with Litian for the JNCO
marks as a means of eventually making good on its debt.
(Id. ¶ 19.) In discussions leading up to the
licensing agreement, Haim and Abikzer told Isaac Cohen and
Litian management that the enterprise had never sold its
products to discount wholesalers or stores, that significant
money and effort had been expended to promote the JNCO marks,
and that the enterprise's reputation in the marketplace
was “impeccable.” (Id.)
point after signing the agreement, Third Party Plaintiffs
discovered that the representations Haim and Abikzer made
leading up to the agreement were false. (Id. ¶
22.) For instance, JNCO-marked garments had been sold at
discount stores such as TJ Maxx and Haim's reputation in
the fashion industry was such that buyers did not want to do
business with purveyors of garments bearing the JNCO mark.
(Id.) To date, Third Party Plaintiffs have expended
millions of dollars in reliance on the agreement.
(Id. ¶ 21.) These expenditures include, but are
not limited to, the hiring of a sales force, various forms of
promotion, and the lease of real property. (Id.
¶¶ 20, 26, Ex. 7.)
the parties' dealings did not end with the licensing
agreement. (Id. ¶ 24.) In August 2014, the
enterprise sought an additional $211, 500 in
“merchandise” from Third Party Plaintiffs.
(Id.) To induce Third Party Plaintiffs to extend
them this credit, Haim and Abikzer personally represented to
Isaac Cohen that “the invoice [for the garments] would
be paid” even though they knew the enterprise could not
pay the invoice amount. (Id. ¶¶ 57, 59.)
Haim also signed a guarantee to this effect on August 28,
2014. (Id. ¶ 57.) To date, “no money has
been paid” to Third Party Plaintiffs “on this
the same time, Guotai USA agreed to “take over”
the lease of a property on Rio Vista Avenue in Los Angeles
(“the Rio Vista property”) from the enterprise in
exchange for a $4, 000 per month rental subsidy.
(Id. at 26.) J&Company made the first two $4,
000 payments in July and August; however, thereafter, the
enterprise tendered checks that were returned by Third Party
Plaintiffs' bank for insufficient funds. (Id.)
By the time Third Party Plaintiffs negotiated a new lease
with the Rio Vista property's landlord in August 2016,
the enterprise owed $80, 000 in missed monthly payments.
April 5, 2016, Haim entered the Rio Vista property without
Third Party Plaintiffs' permission, and removed a
computer server that contained “all” of the
intellectual property licensed to Third Party Plaintiffs
under the agreement. (Id. ¶ 27.) This server
also contained Third Party Plaintiffs' own intellectual
property. (Id.) Third Party Plaintiffs have not been
able to recover or duplicate the intellectual property that
was on the server. (Id.)
stealing the server, Haim undertook additional activities to
“sabotage” the licensing agreement. (Id.
¶ 29.) On June 21, 2016, Third Party Plaintiffs entered
into an agreement with Kickfurther, a crowd-funding site.
(Id.) After the resulting crowd-funding campaign
raised $100, 000, Haim contacted employees of Kickfurther and
informed them that Third Party Plaintiffs did not have a
license to use the JNCO marks. (Id.) As a result,
Kickfurther “cancelled” the campaign and did not
pay out the $100, 000. (Id.) In addition, Haim
caused the JNCO website to “go off-line” several
times before permanently disconnecting it in April 2016.
filed this lawsuit on September 15, 2016, alleging, among
other things, that Defendants violated the licensing
agreement and diluted the JNCO marks by creating a competing
“J Crown” mark. (ECF No. 1.) Plaintiff's
Complaint makes no mention of the debts, bad checks, property
issues, the missing server, or disruptions of the licensing
agreement. (Id.) On October 31, 2016, Defendants
filed an answer and Guotai USA and Litian filed a
counterclaim. (ECF Nos. 38-39.) That same day, Guotai USA and
Litian also filed a Third Party Complaint against Haim,
Abikzer, and J&Company. (ECF No. 40.) The Third Party
Complaint contains nineteen causes of action including breach
of contract, intentional misrepresentation, negligent
misrepresentation, trespass, conversion, violation of
California Civil Code section 1719(a) for passing checks
without sufficient funds, and violation of California's
Unfair Competition Law (“UCL”). Haim filed an
answer to the Third Party Complaint on November 29, 2016,
denying liability as to all nineteen causes of action. (ECF
March 13, 2017, the Clerk of Court entered default against
J&Company and Abikzar at Third Party Plaintiffs'
request. (ECF Nos. 78-79.) On April 14, 2017, Third Party
Plaintiffs filed the pending motion for default judgment.
(ECF No. 85.)