ME SPE Franchising LLC v. NCW Holdings LLC et al, No. 2:2021cv00458 - Document 48 (D. Ariz. 2022)
Court Description: ORDER granting 46 Motion for Default Judgment. The Clerk shall enter judgment in favor of Plaintiff for all of the claims in its Complaint. (See document for further details). Signed by Judge Diane J Humetewa on 7/14/2022. (LAD)
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 ME SPE Franchising LLC, Plaintiff, 10 11 v. 12 NCW Holdings LLC, et al., 13 No. CV-21-00458-PHX-DJH ORDER Defendants. 14 15 Pending before the Court is Plaintiff ME SPE Franchising LLC’s Motion for Default 16 Judgment (Doc. 46). Defendants have not filed a response in opposition, and the time in 17 which to do so has passed. For the following reasons, the Court grants Plaintiff’s Motion. 18 I. Background 19 As alleged in the Complaint, Plaintiff is a franchisor of massage therapy and 20 personal health clinics. (Doc. 1 at ¶ 2). Plaintiff claims its franchise agreements with 21 Defendants have expired, and that Defendants are currently operating their businesses in 22 violation of the agreements and in violation of Plaintiff’s trademark rights. (Id. at ¶¶ 51– 23 81). 24 competition, and two breach of contract claims. (Id. at ¶¶ 51–81). The Complaint brings two claims under the Lanham Act, a claim of unfair 25 Defendants have appeared and filed an Answer. (Doc. 20). However, since the 26 Court permitted Defendants’ counsel to withdraw, Defendants have since failed to pursue 27 this matter or hire new counsel. The Court entered default against Defendants on January 28 5, 2022. (Doc. 42). And Plaintiff filed this Motion on March 30, 2022. 1 II. Legal Standard 2 Courts strongly prefer to decide cases on their merits, but they may use their 3 discretion to enter default judgment. Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986); 4 see also Fed. R. Civ. P. 55. If default judgment is sought against a party that failed to plead 5 or otherwise defend, courts must determine they have subject matter jurisdiction over the 6 matter and personal jurisdiction over the party. In re Tuli, 172 F.3d 707, 712 (9th Cir. 7 1999). If there is jurisdiction, courts must then consider several factors to determine 8 whether default judgment is appropriate: “(1) the possibility of prejudice to the plaintiff, 9 (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the 10 sum of money at stake in the action; (5) the possibility of a dispute concerning material 11 facts; (6) whether the default was due to excusable neglect, and (7) the strong policy 12 underlying the Federal Rules of Civil Procedure favoring decisions on the merits.” Eitel, 13 782 F.2d at 1471–72. Upon default, a complaint’s factual allegations are taken as true, 14 except for those relating to damages. Geddes v. United Fin. Grp., 559 F.2d 557, 560 15 (9th Cir. 1977). 16 III. Jurisdiction and Eitel Analysis 17 Because the Complaint contains federal causes of action, the Court has original 18 subject matter jurisdiction over this matter. 28 U.S.C. § 1331. The Court notes that 19 Defendants submitted to the Court’s personal jurisdiction in their Answer. (Doc. 20 at ¶ 20 14). Having found subject matter jurisdiction and personal jurisdiction over Defendants, 21 the Court proceeds to the Eitel factors. 22 a. Possibility of Prejudice to Plaintiff 23 Without a judgment against Defendants, Plaintiff would lack a remedy for its 24 damages. Therefore, this factor favors entry of default judgment. 25 b. Merits of Substantive Claim and Sufficiency of Complaint 26 “Under an Eitel analysis, the merits of plaintiff’s substantive claims and the 27 sufficiency of the complaint are often analyzed together.” Dr. JKL Ltd. v. HPC IT Educ. 28 Ctr., 749 F. Supp. 2d 1038, 1048 (N.D. Cal. 2010). Given that Defendants have filed an -2- 1 Answer indicates that the Complaint is at least sufficient to meet federal pleading 2 standards. Upon its own review the Court finds that the Complaint suffices to place 3 Defendants on notice of the claims. These factors favor entry of default judgment. 4 c. Sum at Stake 5 Here, the Court considers the amount of money at stake in relation to the seriousness 6 of a defendant’s conduct. See Pepsico, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1176 7 (C.D. Cal. 2002). “If the sum of money at stake is completely disproportionate or 8 inappropriate, default judgment is disfavored.” Gemmel v. Systemhouse, Inc., 2008 WL 9 65604, at *4 (D. Ariz. Jan. 3, 2008). Here, Plaintiff seeks permanent injunctive relief for 10 the infringement on its trademark, in addition to attorney fees and costs. The court finds 11 that the relief sought is proportional to the seriousness of the Defendant’s conduct, and the 12 factor favors entry of default judgment. 13 d. Possibility of Dispute 14 At this stage, the allegations are taken as true. See Geddes, 559 F.2d at 560. 15 Therefore, the possibility of dispute is low. This factor favors entering default judgment. 16 e. Excusable Neglect 17 Defendants have appeared in this matter, and yet they have not maintained their 18 defense. The possibility of excusable neglect is low. This factor favors entering default 19 judgment. 20 f. Policy Favoring Decisions on the Merits 21 The Court is unable to reach the merits of this case because Defendant has failed to 22 plead or otherwise defend this action. Therefore, this factor weighs against granting default 23 judgment. 24 Overall, the Court finds the Eitel factors support an entry of default judgment 25 against Defendant. 26 IV. Relief 27 Having found default judgment proper, the Court must determine what relief 28 Plaintiff is entitled to. “Injunctive relief is the remedy of choice for trademark and unfair -3- 1 competition cases, since there is no adequate remedy at law for the injury caused by a 2 defendant's continuing infringement.” Century 21 Real Est. Corp. v. Sandlin, 846 F.2d 3 1175, 1180 (9th Cir. 1988). Relief may not differ in kind or exceed what was demanded 4 in the pleadings. Fed. R. Civ. P. 54(c). This is so a defendant may know from the complaint 5 what the potential award may be, and the defendant may then decide whether a response is 6 worthwhile. See Silge v. Merz, 510 F.3d 157, 160 (2d Cir. 2007). 7 Plaintiff’s Complaint sought injunctive relief that (1) prohibited Defendants from 8 using Plaintiff’s trademark, (2) prohibited them from using Plaintiff’s confidential 9 information, (3) to return various business materials identifying Defendants’ clinics as part 10 of Plaintiff’s franchise, (4) prohibiting Defendants from having a beneficial interest in any 11 competitive business within 25 miles of the franchises for a period of 18 months, and (5) 12 requiring Defendants to submit a sworn affidavit evidencing compliance with the 13 injunction. (Doc. 1 at 18–19). The Complaint also sought an award of attorney fees and 14 costs. (Id. at 19). The injunctive relief that Plaintiff seeks in its Motion for Default 15 Judgment does not differ from what was sought in the Complaint. 16 Accordingly, 17 IT IS HEREBY ORDERED that Plaintiff’s Motion for Default Judgment (Doc. 18 46 is GRANTED. The Clerk shall enter judgment in favor of Plaintiff for all of the claims 19 in its Complaint. 20 IT IS FURTHER ORDERED entering the following injunction: 21 1. Defendants their agents, servants, and employees, and those people in active 22 concert or participation with them, are enjoined from: 23 a. Identifying themselves or any business they own, operate or are affiliated 24 with as a current or former Massage Envy clinic or as a Massage Envy 25 franchisee; 26 b. Using the Massage Envy System and any marks registered by or assigned 27 to MEF, or any trade name, trademark, service mark, logo, or other 28 commercial symbol that indicates or suggests a connection or association -4- 1 with the Massage Envy System or MEF (the “Marks”); and 2 c. Using any Mark, any colorable imitation of a Mark, a trademark, service 3 mark or commercial symbol that is confusingly similar to any Mark, or 4 other indicia of a Massage Envy clinic in any manner or for any purpose. 5 2. Defendants, their agents, servants and employees, and those people in active 6 concert or participation with them, are ordered to take all action required to 7 cancel all fictitious or assumed name or equivalent registrations relating to their 8 use of any Marks. 9 3. Defendants, their agents, servants and employees, and those people in active 10 concert or participation with them, are ordered to cease using MEF’s 11 confidential and proprietary information, including without limitation, 12 information relating to the development and operation of Massage Envy clinics 13 and any related methods, formats, specifications, standards, procedures, sales 14 and marketing, supplies, finances, or customer data (collectively, “Confidential 15 Information”). 16 17 4. Defendants, their agents, servants and employees, and those people in active concert or participation with them, are ordered to: 18 a. Immediately cease using any Confidential Information and return to MEF 19 all copies of MEF’s Operations Manual and other Confidential 20 Information, including, without limitation, any and all customer 21 membership agreements, customer account data, and customer 22 address/contact information; 23 b. Turn over to MEF all advertising, marketing, promotional materials, 24 forms, and other materials containing any Marks or otherwise identifying 25 or relating to a Massage Envy clinic; 26 c. Notify all search engines of the expiration of Defendants’ right to use all 27 domain names, websites, and other search engines associated directly or 28 indirectly with Defendants’ former Massage Envy clinics and authorize -5- 1 those 2 thereunder; and search engines to transfer to MEF or its designee all rights 3 d. Notify the telephone company and all telephone directory publishers of 4 the expiration of Defendants’ right to use any telephone, other numbers, 5 and telephone directory listings associated with the Marks, and authorize 6 the transfer of those assign their telephone numbers (including (484) 586- 7 6000 and (484) 572-2000), white and yellow page telephone references 8 and advertising, domain names, social media pages (including, but not 9 limited to, Facebook and Yelp) to MEF or its designee. 10 5. Defendants and their immediate family members are hereby enjoined, for a 11 period of eighteen (18) months from the date of this Order, from operating or 12 having any direct or indirect interest as a disclosed or beneficial owner, investor, 13 partner, director, officer, employee, consultant, representative, or agent in any 14 business that derives more than fifty thousand dollars ($50,000.00) of revenue 15 per year from the performance of massage or massage-related services, or any 16 business which grants franchises or licenses to operate such a business, (i) at 44 17 Greenfield in Ardmore, Pennsylvania; (ii) at 283 E. Swedesford Road in Wayne, 18 Pennsylvania; or (iii) within a 25-mile radius of any other Massage Envy clinic 19 in operation or under construction as of the date of this Order. 20 6. Defendants are ordered to file with the Court and to serve upon MEF’s counsel, 21 within 30 (thirty) days after service of this Order, a written report, under oath, 22 setting forth in detail the manner in which Defendants have complied with this 23 Order. 24 … 25 … 26 … 27 … 28 … -6- 1 2 3 IT IS FINALLY ORDERED that Plaintiff may file an application for fees and costs in accordance with Local Rule of Civil Procedure 54.2. Dated this 14th day of July, 2022. 4 5 6 7 Honorable Diane J. Humetewa United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7-
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