MERSCORP Holdings, Inc. et al v. MERS, Inc, et al, No. 5:2016cv04380 - Document 30 (N.D. Cal. 2017)
Court Description: ORDER GRANTING 27 PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT; AND VACATING HEARING ON MOTION. Signed by Judge Beth Labson Freeman on 5/3/2017. (blflc1S, COURT STAFF) (Filed on 5/3/2017)
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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 MERSCORP HOLDINGS, INC., et al., 8 Plaintiffs, 9 v. 10 MERS, INC,, et al., Defendants. United States District Court Northern District of California 11 Case No. 16-cv-04380-BLF ORDER GRANTING PLAINTIFFS’ MOTION FOR DEFAULT JUDGMENT; AND VACATING HEARING ON MOTION [Re: ECF 27] 12 13 Plaintiffs MERSCORP Holdings, Inc. and Mortgage Electronic Registration Systems, Inc. 14 15 move for default judgment against Defendants MERS, Inc and Mortgage Electronic Registration 16 System, Inc. The Court hereby SUBMITS the motion for decision without oral argument and 17 VACATES the hearing scheduled for May 11, 2017. See Civ. L.R. 7-1(b). The motion is 18 GRANTED for the reasons discussed below. 19 I. BACKGROUND 20 Plaintiffs’ complaint alleges the following facts: Plaintiff Mortgage Electronic 21 Registration System, Inc., a wholly-owned subsidiary of MERSCORP Holdings, Inc., serves as 22 the beneficiary or mortgagee of record and nominee for the beneficial owner of mortgage loans 23 registered on the MERS® System database. Compl. ¶¶ 1-2, 11, ECF 1. While there have been 24 various iterations of their company names over time, Plaintiffs have continuously used the trade 25 names “MERSCORP” and “Mortgage Electronic Registration Systems, Inc.” in connection with 26 the above-described services since 1995. Id. ¶¶ 8-12 and n.1. Additionally, Plaintiff MERSCORP 27 Holdings, Inc. owns the federal trademark registration for the MERS® word mark, which was 28 issued in 1997. Id. ¶ 13. That federal registration has obtained incontestable status. Id. 1 Defendants MERS, Inc and Mortgage Electronic Registration System, Inc. (MERS) appear 2 to be bogus corporations with names that are confusingly similar to those of Plaintiffs 3 MERSCORP Holdings, Inc. and Mortgage Electronic Registration Systems, Inc. Compl. ¶¶ 15- 4 21. Plaintiffs filed this action on August 3, 2016, asserting claims for: (1) trademark infringement 5 under 15 U.S.C. § 1114; (2) false designation of origin under 15 U.S.C. § 1125(a); and (3) unfair 6 competition under California Business & Professions Code § 17200. Compl., ECF 1. Plaintiffs 7 obtained a temporary restraining order (“TRO”) on an ex parte basis shortly thereafter. Order 8 Granting TRO, ECF 15. The TRO enjoined Defendants from using Plaintiffs’ marks and trade 9 names and from maintaining active corporations with the names MERS, Inc or Mortgage Electronic Registration System, Inc. (MERS). TRO, ECF 16. The TRO also permitted Plaintiffs 11 United States District Court Northern District of California 10 to serve Defendants by publication. Id. Plaintiffs thereafter filed proof of service on Defendants 12 by publication. See POS, ECF 21. 13 On September 20, 2016, the Court issued a preliminary injunction against Defendants, 14 enjoining them from: (1) using Plaintiffs’ marks and trade names, or any confusingly similar 15 versions thereof, in commerce in the United States; (2) maintaining an active corporation with the 16 name MERS, Inc or Mortgage Electronic Registration System, Inc. (MERS) or any confusingly 17 similar name; and (3) assisting, aiding, or abetting any other person or entity in engaging in or 18 performing any of the above activities. Preliminary Injunction Order, ECF 23. The Court also 19 ordered that if Defendants failed to comply with the injunction within fourteen days, Plaintiffs 20 were appointed as authorized agents of Defendants for the limited purpose of preparing, executing, 21 and filing Certificates of Amendment of Articles of Incorporation with the California Secretary of 22 State to change Defendants’ corporate names. Id. 23 Defendants failed to comply with the preliminary injunction within fourteen days, after 24 which Plaintiffs prepared, executed, and filed Certificates of Amendment of Articles of 25 Incorporation with the California Secretary of State to change Defendant MERS, Inc’s corporate 26 name to “Jack Lyles, Inc.” and to change Defendant Mortgage Electronic Registration System, 27 Inc. (MERS)’s corporate name to “Connie Vargas, Inc.” Hilgard Decl. Exhs. B, C, ECF 27-2. 28 On January 17, 2017, Plaintiffs obtained a Clerk’s entry of default against Defendants. 2 1 Plaintiffs now move for default judgment against Defendants, seeking a permanent injunction on 2 the same terms as the preliminary injunction. Plaintiffs do not seek money damages. 3 II. LEGAL STANDARD Pursuant to Federal Rule of Civil Procedure 55, a court may grant default judgment against 4 5 a defendant who has failed to plead or otherwise defend an action. Fed. R. Civ. P. 55(b)(2). 6 “When entry of judgment is sought against a party who has failed to plead or otherwise defend, a 7 district court has an affirmative duty to look into its jurisdiction over both the subject matter and 8 the parties.” In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). The district court also must “assess the 9 adequacy of the service of process on the party against whom default is requested.” DFSB Kollective Co., Ltd. v. Bourne, 897 F. Supp. 2d 871, 877 (N.D. Cal. 2012) (internal quotation 11 United States District Court Northern District of California 10 marks and citation omitted). Even when those requirements are satisfied, the plaintiff is not automatically entitled to a 12 13 default judgment, and “[t]he district court’s decision whether to enter a default judgment is a 14 discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising that 15 discretion, this Court must consider the following seven factors articulated by the Ninth Circuit in 16 Eitel v. McCool (“Eitel factors”): “(1) the possibility of prejudice to the plaintiff, (2) the merits of 17 plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in 18 the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was 19 due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil 20 Procedure favoring decisions on the merits.” Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 21 1986). In evaluating the Eitel factors, well-pled allegations in the complaint are taken as true, 22 23 except those regarding damages. Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th 24 Cir. 1987). The Court may, in its discretion, consider evidence submitted with a motion for 25 default judgment to determine damages. Id. 26 27 28 III. DISCUSSION The Court is satisfied that it has both subject matter jurisdiction over the complaint and personal jurisdiction over Defendants and that service of process was adequate. Because the 3 1 complaint asserts claims for trademark infringement and false designation of origin under federal 2 statutes, the Court has subject matter jurisdiction under both 28 U.S.C. §1331, conferring subject 3 matter jurisdiction over civil actions arising under federal law, and 28 U.S.C. § 1338, conferring 4 subject matter jurisdiction over civil actions arising under federal statutes relating to trademarks. 5 The Court also has personal jurisdiction over Defendants because they are incorporated in 6 California. See Ranza v. Nike, Inc., 793 F.3d 1059, 1069 (9th Cir. 2015) (“The paradigmatic 7 locations where general jurisdiction is appropriate over a corporation are its place of incorporation 8 and its principal place of business.”). Finally, service of process was properly effect by 9 publication pursuant to this Court’s order. See POS, ECF 21. 10 The Court likewise is satisfied that the Eitel factors weigh in favor of granting Plaintiffs’ United States District Court Northern District of California 11 motion. With respect to the first factor, prejudice to the plaintiff, Plaintiffs would have no 12 recourse absent entry of default judgment because Defendants have elected not to respond to the 13 complaint. The second and third factors, addressing the merits of the plaintiff’s claims and the 14 sufficiency of the complaint, are satisfied if the plaintiff asserts claims upon which he may 15 recover. IO Group, Inc. v. Jordon, 708 F. Supp. 2d 989, 997 (N.D. Cal. 2010). This Court 16 previously determined that Plaintiffs are likely to succeed on the merits of their claims when it 17 issued the preliminary injunction. See Preliminary Injunction Order, ECF 23. With respect to the 18 fourth factor, the sum of money at stake, Plaintiffs do not seek money damages. The fifth factor, 19 the possibility of a dispute regarding material facts, and the sixth factor, whether the default was 20 due to excusable neglect, also weigh in favor of default judgment. Defendants have made no 21 effort to dispute the facts alleged in the complaint despite being served with the action by 22 publication and – presumably – being notified of their corporate name changes. Plaintiffs also 23 mailed a copy of the present motion to Defendants’ agents for service of process despite the fact 24 that no notice of the motion was required. See POS, ECF 28; Fed. R. Civ. P. 55(b)(2) (requiring 25 notice of motion for default judgment only when the party against whom default judgment is 26 sought has appeared in the case). Nothing in the record suggests that Defendants’ use of 27 Plaintiffs’ marks and trade names was the result of excusable neglect rather than intentional 28 misconduct. The seventh and final factor, the strong public policy favoring decisions on the 4 1 merits, does not preclude default judgment when the other Eitel factors favor it. PepsiCo, Inc. v. 2 California Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). Here, Defendants’ failure to 3 answer the complaint “makes a decision on the merits impractical, if not impossible.” Id. 4 Having concluded that the Eitel factors favor granting Plaintiffs’ motion, the Court next 5 must determine whether the permanent injunctive relief sought by Plaintiffs is appropriate. 6 “Injunctive relief is the remedy of choice for trademark and unfair competition cases, since there is 7 no adequate remedy at law for the injury caused by a defendant’s continuing infringement.” 8 Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175, 1180 (9th Cir. 1988). In order to obtain 9 permanent injunctive relief, “[a] plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to 11 United States District Court Northern District of California 10 compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and 12 defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved 13 by a permanent injunction.” eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). 14 Plaintiffs allege facts in their complaint, which are taken as true, establishing that 15 Defendants’ use of Plaintiffs’ marks and trade names has caused a significant amount of mail 16 intended for Plaintiffs to be diverted to Defendants. Compl. ¶¶ 16-23. That mail includes legal 17 documents and documents associated with Plaintiffs’ mortgage registration business. Id. 18 Plaintiffs manage a large volume of legal cases, and their ability to meet important deadlines is 19 impaired by the misdirected mail, process servers, and delivery personnel. Id. ¶ 23. Monetary 20 damages would not solve the ongoing impairment to Plaintiffs’ business and reputation. Because 21 it does not appear that either of the defendant companies is a going concern, it is unclear how a 22 preliminary injunction precluding Defendants from using Plaintiffs’ marks and trade names would 23 harm them. This is particularly true where, as here, Defendants’ corporate names already have 24 been changed pursuant to the authority granted to Plaintiffs in the preliminary injunction order. 25 And finally, public policy favors granting an injunction when there is a likelihood of consumer 26 confusion. See Playboy Enterprises, Inc. v. Baccarat Clothing Co., 692 F.2d 1272, 1275 (9th Cir. 27 1982) (“In addition to the harm caused the trademark owner, the consuming public is equally 28 injured by an inadequate judicial response to trademark infringement.”). 5 Accordingly, Plaintiffs’ motion for default judgment, including permanent injunctive 1 2 relief, is GRANTED. Plaintiffs have submitted a Proposed Judgment and Permanent Injunction 3 that is consistent with the present order and with the terms of the preliminary injunction previously 4 issued by the Court. The Court issues that Judgment and Permanent Injunction simultaneously 5 with the present order. 6 7 IV. ORDER Plaintiffs’ motion for default judgment is GRANTED. 8 9 10 United States District Court Northern District of California 11 Dated: May 3, 2017 ______________________________________ BETH LABSON FREEMAN United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6
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