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Baskin-Robbins Franchising LLC v. Chun

United States District Court, N.D. California, San Jose Division

July 16, 2019

BASKIN-ROBBINS FRANCHISING LLC, et al., Plaintiffs,
v.
ALAN A. CHUN, Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT [RE: ECF 19]

          BETH LABSON FREEMAN, UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiffs' Motion for Default Judgment (“Motion”). Motion, ECF 19. Defendant Chun has not appeared in this action. The Court previously found this matter suitable for submission without oral argument pursuant to Civil Local Rule 7-1(b). ECF 26. For the reasons stated below, Plaintiffs' Motion is GRANTED IN PART and DENIED IN PART.

         I.BACKGROUND

         A. Factual Allegations

         Plaintiffs are Baskin-Robbins Franchising LLC and BR IP Holder LLC (collectively, “Plaintiffs” or “Baskin-Robbins”). Compl. ¶¶ 2-3, ECF 1. Defendant Alan A. Chun is an individual and the owner and operator of a retail Baskin-Robbins shop located in the County of San Mateo, California. Id. ¶ 4. This action arises out of Chun's alleged failure to comply with a franchising agreement between the parties. Id. ¶ 1.

         Baskin-Robbins Franchising LLC is the franchisor of the Baskin-Robbins franchise system. Compl. ¶ 11. BR IP Holder LLC owns the Baskin-Robbins trademarks, service marks, trade dress, etc., including federal registrations for the mark “Baskin-Robbins.” Id. ¶¶ 12-13. In July 2017, Chun and Plaintiffs entered into a Franchise Agreement that granted Chun a franchise to operate a Baskin-Robbins restaurant in Foster City, California. Id. ¶ 18; see also Franchise Agreement, Ex. 1 to Compl. Under the Franchise Agreement, Chun agreed to use Plaintiffs' proprietary marks only in the manner and to the extent specifically licensed by the agreement. See Franchise Agreement §§ 2.4, 9. Among other obligations, the Franchise Agreement required Chun to pay a “Continuing Franchise Fee Rate” of “5.9%[] of Gross Sales, ” and a “Continuing Advertising Fee Rate” of “5.0%[] of Gross Sales.” See Franchise Agreement “Contract Data Schedule”; Compl. ¶ 21.

         Plaintiffs allege that Chun breached the Franchise Agreement “by failing to pay the required fees, and/or other amounts owed to Plaintiffs.” Compl. ¶ 26. On June 25, 2018, Plaintiffs provided Chun with written notice of his material defaults under the Franchise Agreement and fifteen days to cure, as required by the Franchise Agreement. Id. ¶ 27; see also Notice to Cure, Ex. 2 to Compl. The Notice to Cure set forth outstanding “Franchise and Advertising Fees in the amount of $17, 157.56.” Notice to Cure at 1. Chun failed to cure his alleged breaches of the Franchise Agreement, and on August 27, 2018, Plaintiffs provided Chun with a written notice of termination of the Franchise Agreement. See Compl. ¶¶ 28-29; see also Notice of Termination, Ex. 3 to Compl.

         According to the Complaint, Chun has continued to operate the Baskin-Robbins restaurant in question, notwithstanding Chun's non-performance under the Franchise Agreement and Plaintiffs' subsequent termination of the Franchise Agreement. Compl. ¶ 30. Arising out of these allegations, Plaintiffs assert five causes of action against Chun: (1) breach of contract (the Franchise Agreement); (2) trademark infringement under federal and state law; (3) unfair competition under federal law; (4) unfair competition and false advertising under California law; and (5) trade dress infringement. See generally Compl.

         B. Procedural History

         Plaintiffs filed this lawsuit on September 6, 2018. See generally Compl., ECF 1. Defendant was served with the Complaint on September 10, 2018. See Certificate of Service, ECF 9. The Clerk entered Default on October 19, 2018. See ECF 16. Defendant has not appeared in this action, and Plaintiffs filed the instant Motion for Default Judgment on December 19, 2018, see Motion, ECF 19.

         II. LEGAL STANDARD

         Following an entry of default, Federal Rule of Civil Procedure 55(b)(2) permits a court to enter default judgment against a defendant who has failed to plead or otherwise defend. See Fed. R. Civ. P. 55(a) and 55(b)(2). “The district court's decision whether to enter a default judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising its discretion to enter default judgment, a district court considers seven factors set forth by the Ninth Circuit in Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986) (“Eitel 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 dispute concerning material facts; (6) whether default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.

         Upon default, all factual allegations in the complaint are taken as true, except those relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). Federal Rule of Civil Procedure 54(c) provides that “[a] default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.R.Civ.P. 54(c). “The purpose of this rule is to ensure that a defendant is put on notice of the damages being sought against it so that he may make a calculated decision as to whether or not it is in his best interest to answer.” See Alameda County Elec. v. Banister Elec., Inc., 2012 WL 3042696, at *1 (N.D. Cal. July 25, 2012) (citing In re Ferrell, 539 F.3d 1186, 1192-93 (9th Cir. 2008); Board of Trustees v. Total Air Balance Co., 2009 WL 1704677, at *3-5 (N.D. Cal. June 17, 2009)).

         If the plaintiff is seeking money damages, the plaintiff must “prove-up” her damages. See Orange County Elec. Indus. v. Moore Elec. Contracting, Inc., 2012 WL 4120348, at *3 (N.D. Cal. Sept. 18, 2012). In other words, the plaintiff must “provide evidence of its damages, and the damages sought must not be different in kind or amount from those set forth in the complaint.” Id. (internal quotation and citation omitted). “In order to ‘prove up' damages, a plaintiff is generally required to provide admissible evidence (including witness testimony) supporting damage calculations.” Cannon v. City of Petaluma, 2011 WL 3267714, at *2 (N.D. Cal. July 29, 2011).

         “When entry of judgment is sought against a party who has failed to plead or otherwise defend, a district court has an affirmative duty to look into its jurisdiction over both the subject matter and the parties.” In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). The Court discusses in turn jurisdiction and service of process, the Eitel factors, and Plaintiffs' requested relief. For the reasons discussed below, Plaintiffs' motion for default judgment is GRANTED IN PART and DENIED IN PART.

         III. JURISDICTION AND SERVICE OF PROCESS

         Before addressing the merits, the Court must first address its jurisdiction to enter default judgment against Mr. Chun. Subject matter jurisdiction is indisputably available under 28 U.S.C. §§ 1331, 1338, and 1367(a). This action arises under the Lanham Act, 15 U.S.C. §§ 1051 et seq., and presents federal questions of trademark infringement and unfair competition. The Court has supplemental jurisdiction over Plaintiffs' related state law claims pursuant to 28 U.S.C. § 1367. The Court must also have personal jurisdiction over a defendant, or else the entry of default judgment is void. Veeck v. Commodity Enterprises, Inc., 487 F.2d 423, 426 (9th Cir. 1973). Here, as discussed below, the Court is satisfied that (1) this Court has personal jurisdiction over Mr. Chun because he is a resident of this District, conducted business in this District, and the events giving rise to Plaintiffs' claims occurred in this District, and that (2) Mr. Chun has been properly served.

         A. Personal Jurisdiction

         The Court is bound to follow state law in determining the bounds of its jurisdiction over parties. See Fed. R. Civ. P. 4(k)(1)(A); Diamler AG v. Bauman, 571 U.S. 117, 125 (2014). California's “long arm” statute states that “[a] court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.” Cal. Code Civ. Proc. § 410.10. California's long arm is thus coextensive with the federal standard. Residency within the state is sufficient to establish general personal jurisdiction within the forum state, as are minimum business contacts. Burnham v. Superior Court, 495 U.S. 604, 610-11 (1990); International Shoe Co. v. State of Washington, Office of Unemp. Compensation & Placement, 326 U.S. 310, 316 (1945). The Court is satisfied that personal jurisdiction exists over Mr. Chun. Plaintiffs' complaint indicates that Mr. Chun is a California resident operating a business in Foster City, California. Compl. ¶¶ 9, 18a. In personam jurisdiction is thus appropriate.

         B. Service of Process

         “A federal court is without personal jurisdiction over a defendant unless the defendant has been served in accordance with Federal Rule of Civil Procedure 4.” Travelers Cas. & Sur. Co. of Am. v. Brenneke, 551 F.3d 1132, 1135 (9th Cir. 2009). Rule 4 is “flexible” and “should be liberally construed so long as a party receives sufficient notice of the complaint.” United Food & Comm. Workers Union v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir. 1984). What is required is “substantial compliance” with Rule 4, with “neither actual notice nor simply naming the defendant in the complaint” being sufficient. Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988) (quoting Benny v. Pipes, 799 F.2d 489, 492 (9th Cir. 1986), cert. denied, 484 U.S. 870 (1987)).

         The Court is satisfied that Plaintiffs have substantially complied with Rule 4. A Notice to Cure the breach of the Franchise Agreement was served to Mr. Chun at his place of business. Notice to Cure, Ex. 2 to Compl., ECF 1. A Notice of Termination was served to Mr. Chun on August 28, 2018, at his place of business. Notice of Termination, Ex. 3 to Compl. The Clerk of Court issued a summons on September 10, 2018. ECF 7. On September 10, 2018, Plaintiffs personally served Mr. Chun with the summons, complaint, and additional documents. See Certificate of Service, ECF 9. Accordingly, Plaintiffs have met the service of process requirements by substantial compliance with Rule 4.

         IV. EITEL FACTORS AS APPLIED TO EACH CAUSE OF ACTION

         For each cause of action, a plaintiff must sufficiently plead allegations for each element. See Golden West v. Bartley, 2017 WL 2335602, at *7 (N.D. Cal. May 30, 2017). The Court thus examines each cause of action in light of the Eitel factors to determine whether default judgment is appropriate.

         A. Merits of Plaintiffs' Claims and Sufficiency of the Complaint

         1. Breach of Contract

         “A claim for breach of contract is comprised of a contract, plaintiff's performance or excuse for nonperformance, defendant's breach, and the resulting damages to plaintiff.” Yelp Inc. v. Catron, 70 F.Supp.3d 1082, 1099 (N.D. Cal. 2014) (citing Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal.App.3d 1371, 1388 (1990)). Here, Chun entered into a franchise agreement with Baskin-Robbins on or about July 26, 2017. Compl. ¶ 18. Baskin-Robbins licensed Mr. Chun to use the Baskin-Robbins trademark, trade name, and trade dress under the terms of the Franchise Agreement. Id. ΒΆ 19. Plaintiffs claim performance of all ...


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