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Lights Out Holdings, LLC v. Lights Out Apparel, LLC

United States District Court, S.D. California

July 21, 2017

LIGHTS OUT HOLDINGS, LLC, a California limited liability company Plaintiff,
v.
LIGHTS OUT APPAREL, LLC, a Maryland limited liability company; JACOB LAWSON, individuals d/b/a LIGHTS OUT BILLIARDS APPAREL Defendants.

          ORDER (1) GRANTING DEFENDANTS' MOTION TO SET ASIDE ENTRY OF DEFAULT [DOC. NO. 19]; AND 2) DENYING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT AS MOOT [DOC. NO. 11]

          JOHN A. HOUSTON United States District Judge.

         INTRODUCTION

         Pending before the Court is Defendant Lights Out Apparel LLC (“Lights Out Apparel”) and Defendant Jacob Lawson's (“Lawson”) (collectively, “Defendants”) motion to set aside entry of default and Plaintiff Lights Out Holding LLC's (“Plaintiff”) motion for default judgment. See Doc. Nos. 11, 19. After a thorough review of the parties' submissions and for the reasons set forth below, the Court GRANTS Defendants' motion to set aside entry of default and DENIES Plaintiff's motion for default judgment as MOOT.

         BACKGROUND

         Plaintiff filed the instant complaint on August 30, 2016. See Doc. No. 1. Plaintiff alleges seven causes of action for violations of: (1) Trademark Infringement, 15 U.S.C. § 1114; (2) Federal Trademark Dilution, 15 U.S.C. § 1125(c); (3) Unfair Competition and False Designation of Origin, 15 U.S.C. § 1125(a); (4) Common Law Trademark Infringement; (5) California Trademark Dilution, Cal. Bus. & Prof. § 14247; (6) Unfair Competition, Cal. Bus. & Prof. § 17200; and (7) Violation of the Federal Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d). Id. Plaintiff claims Defendants willfully infringed Plaintiff's LIGHTS OUT mark by using the mark in connection with their own athletic apparel and related goods business in the State of Maryland under the names Lights Out Apparel and Lights Out Billiards Apparel. Id. Plaintiff alleges Defendants sell the aforementioned branded athletic clothing in Maryland as well as online, including to consumers within this district. Id. Plaintiff seeks damages and an injunction in connection with Defendants' manufacture, distribution, and sale of apparel and related accessories with the allegedly infringing mark. Id.

         On August 30, 2016, Defendants were served with the summons and the complaint. See Doc. No. 3. On October 11, 2016, in accordance with Rule 55 of the Federal Rules of Civil Procedure, Plaintiff moved for an entry of default against Defendant Lights Out Apparel LLC and Defendant Jacob Lawson. See Doc. No. 9. Plaintiff petitioned for an award of statutory damages, reasonable attorneys' fees and costs, and a permanent injunction, prohibiting Defendants' use, or any other colorable variation of, Plaintiff's LIGHTS OUT mark. See Doc. No. 11. On October 12, 2016, the Clerk of court entered default as to Defendant Jacob Lawson. See Doc. No. 12.

         Plaintiff filed the pending motion for default judgment against Defendant Lights Out Apparel LLC and Defendant Jacob Lawson on November 14, 2016. See Doc. No. 11. Defendants' filed a motion to set aside the entry of default on December 15, 2016. See Doc. No. 19. On January 31, 2017, the Court took the motions under submission without oral argument. See Doc. No. 28. On February 3, 2017, the parties filed a joint motion to suspend all proceedings pending settlement negotiations. The motion was granted on February 6, 2017. See Doc. Nos. 29, 30. Plaintiff filed a status report on April 5, 2017, declaring a dissolution of settlement negotiations with Defendants. See Doc. No. 32.

         DISCUSSION

         1. Legal Standard

         Federal Rules of Civil Procedure 55(c) provides that a court “may set aside an entry of default for good cause.” The district court has the discretion to determine whether a party demonstrates “good cause.” Madsen v. Bumb, 419 F.2d 4, 5 (9th Cir. 1969). “A court's discretion is especially broad where, as here, it is entry of default that is being set aside, rather than a default judgment. Mendoza v. Wight Vineyard Mngmt., 783 F.3d 941, 945 (9th Cir. 1986) (citing Meehan v. Snow, 652 F.2d 274, 276 (2d Cir. 1981)). In evaluating whether a party has demonstrated good cause, a district court may consider the following factors, any of which is sufficient reason to grant the motion: (1) whether the plaintiff would be prejudiced by the setting aside of the default; (2) whether the defendant has a meritorious defense; and (3) the defendant's culpability in the default. TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). The Party seeking to vacate the entry of default bears the burden of demonstrating that these factors favor doing so. See TCI Grp. 244 F.3d at 679.

         There is a strong preference for deciding cases on their merits, and therefore any doubts should be resolved in favor of setting aside the default. See Direct Mail Specialists v. Eclat Computerized Techs., 840 F.2d 685, 690 (9th Cir. 1988).

         2. Analysis

         A. Prejudice

         Defendants argue that Plaintiff will not be prejudiced by setting aside the entry of default because any delay incurred resolving the case on its merits would be nominal and does not impair ...


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