Opinion
02 Civ. 3138 (LTS) (AJP).
July 9, 2003.
REPORT AND RECOMMENDATION
By Opinion and Order dated June 12, 2003, Judge Swain granted plaintiff's motion for a default, entered an injunction against defendant, and referred the matter to me for an inquest as to damages and attorney's fees. (Dkt. No. 29: 6/12/03 Opinion Order.)
For the reasons set forth below, the Court recommends denial of any damage award but further recommends awarding plaintiff the full amount of attorney's fees (and costs) sought of $19,532.51.
FACTS
"Where, as here, 'the court determines that defendant is in default, the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.'"Chen v. Jenna Lane, Inc., 30 F. Supp.2d 622, 623 (S.D.N.Y. 1998) (Carter, D.J. Peck, M.J.) (quoting 10A C. Wright, A. Miller M. Kane, Federal Practice Procedure: Civil 3d § 2688 at 58-59 (3d ed. 1998)).
Accord, e.g. Schruefer v. Winthorpe Grant. Inc., 99 Civ. 9365, 2003 WL 21511157 at *1 (S.D.N.Y. July 2, 2003) (Peck, M.J.); Joy Lud Distribs. Int'l, Inc. v. Contini, 00 Civ. 5011, 2003 WL 554616 at * 1 (S.D.N.Y. Feb. 28, 2003) (Peck, M.J.); Rolex Watch U.S.A., Inc. v. Brown, 01 Civ. 9155, 2002 WL 1226863 at *1 (S.D.N.Y. June 5, 2002) (Peck, M.J.); King Vision Pay-Per-View Corp. v. Drencia Rest. Corp., 01 Civ. 9777, 2002 WL 1000284 at *1 (S.D.N.Y. May 15, 2002) (Peck, M.J.);Ainbinder v. Bernice Mining Contracting, Inc., 01 Civ. 2492, 2002 WL 461576 at *2 (S.D.N.Y. Mar. 26, 2002) (Peck, M.J.); Sterling Nat'l Bank v. A-1 Hotels Int'l, Inc., 00 Civ. 7352, 2002 WL 461574 at *3 (S.D.N.Y. Mar. 26, 2002) (Peck, M.J.); King Vision Pay-Per-View Corp. v. Papacito Lidia Luncheonette, Inc., 01 Civ. 7575, 2001 WL 1558269 at *1 (S.D.N.Y. Dec. 6, 2001) (Peck, M.J.); Trustees of the Pension Welfare Funds of the Moving Picture Mach. Operators Union. Local 306 v. Gordon's Film Co. (New York) Int'l Inc., 00 Civ. 8452, 2001 WL 1415145 at * (S.D.N.Y. Nov. 13, 2001) (Peck, M.J.);Coast To Coast Fabrics, Inc. v. Tracy Evans, Ltd., 00 Civ. 4417, 2001 WL 5037 at *1 (S.D.N.Y. Jan. 2, 2001) (Peck, M.J.);Starbucks Corp. v. Morgan, 99 Civ. 1404, 2000 WL 949665 at * 1 (S.D.N.Y. July 11, 2000) (Peck, M.J.); King Vision Pay-Per-View, Ltd. v. New Paradise Rest., 99 Civ. 10020, 2000 WL 378053 at * 1 (S.D.N.Y. Apr. 11, 2000) (Peck, M.J.);Independent Nat'l Distrib., Inc. v. Black Rain Communications Inc., 94 Civ. 8464, 1996 WL 238401 at *2 (S.D.N.Y. Apr. 4, 1996) (Keenan, D.J. Peck, M.J.).
The complaint asserts that since 1994, plaintiff has used "the trade name and service mark EASTERN FREIGHT WAYS in commerce in connection with freight transportation services," and owns a registered service mark in the name. (Dkt. No. 1: Compl. ¶¶ 7, 11.) The complaint further alleges that defendant "is using the tradename and service mark EASTERN MOTOR FREIGHT" for similar services, without plaintiff's permission, and that the defendant's name is confusingly similar to plaintiff's name. (Compl. ¶¶ 14, 19.) The complaint asserts claims for, inter alia, trademark infringement and false designation of origin under the Lanham Act (Compl. ¶¶ 20-24, 25-29) and seeks injunctive relief, treble damages, punitive damages and attorney's fees (Compl., "Wherefore" clauses).
By decision dated October 16, 2002 (Dkt. No. 22), I granted the motion of defense counsel to withdraw for defendant's failure to pay his fees. Eastern Freight Ways v. Eastern Motor Freight. Inc., 02 Civ. 3138, 2002 WL 31324128 at *1 (S.D.N.Y. Oct. 16, 2002) (Peck, M.J.). I also directed defendant to retain new counsel, since a corporation can only appear by counsel. Id. (citing Promotica of America, Inc. v. Johnson Grossfield, Inc., 98 Civ. 7414, 2000 WL 424184 at *2 (S.D.N.Y. Apr. 18, 2000) (Peck, M.J.) ( cases cited therein)).
When defendant failed to retain counsel, Judge Swain granted plaintiff's motion for a default judgment, entered a permanent injunction against defendant, and referred the matter back to me for an inquest as to damages and attorney's fees. (Dkt. No. 29: 6/12/03 Opinion Order.) The Court set a schedule for submissions from both parties on the inquest. (Dkt. Nos. 31-32: 6/18/03 6/27/03 Scheduling Orders.) Both the regular and certified mail copies of those Orders sent to defendant were returned to the Court by the Post Office, undelivered to and unclaimed by defendant.
ANALYSIS
The Second Circuit has approved the holding of an inquest by affidavit, without an in-person court hearing, "'as long as [the Court has] ensured that there was a basis for the damages specified in the default judgment.'" Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997) (quoting Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989)). Damages
Accord, e.g. Schruefer v. Winthorpe Grant, Inc., 99 Civ. 9365, 2003 WL 21511157 at *1 (S.D.N.Y. July 2, 2003) (Peck, M.J.); Joy Lud Distribs. Int'l, Inc. v. Contini, 00 Civ. 5011, 2003 WL 554616 at *1 (S.D.N.Y. Feb. 28, 2003) (Peck, M.J.); Rolex Watch U.S.A., Inc. v. Brown, 01 Civ. 9155, 2002 WL 1226863 at *2 (S.D.N.Y. June 5, 2002) (Peck, M.J.); King Vision Pay-Per-View Corp. v. Drencia Rest. Corp., 01 Civ. 9777, 2002 WL 1000284 at *1 (S.D.N.Y. May 15, 2002) (Peck, M.J.);Ainbinder v. Bernice Mining Contracting, Inc., 01 Civ. 2492, 2002 WL 461576 at *2 (S.D.N.Y. Mar. 26, 2002) (Peck, M.J.); Sterling Nat'l Bank v. A-1 Hotels Int'l, Inc., 00 Civ. 7352, 2002 WL 461574 at *3 (S.D.N.Y. Mar. 26, 2002) (Peck, M.J.); King Vision Pay-Per-View Corp. v. Papacito Lidia Luncheonette, Inc., 01 Civ. 7575, 2001 WL 1558269 at *1 (S.D.N.Y. Dec. 6, 2001) (Peck, M.J.); Trustees of the Pension Welfare Funds of the Moving Pictures Mach. Operators Union. Local 306 v. Gordon's Film Co. (New York) Int'l Inc., 00 Civ. 8452, 2001 WL 1415145 at *1 (S.D.N.Y. Nov. 13, 2001) (Peck, M.J.); Coast To Coast Fabrics, Inc. v. Tracy Evans, Ltd., 00 Civ. 4417, 2001 WL 5037 at *1 (S.D.N.Y. Jan. 2, 2001) (Peck, M.J.); Starbucks Corp. v. Morgan, 99 Civ. 1404, 2000 WL 949665 at *2 (S.D.N.Y. July 11, 2000) (Peck, M.J.); King Vision Pay-Per-View. Ltd. v. New Paradise Rest., 99 Civ. 10020, 2000 WL 378053 at * 1 (S.D.N.Y. Apr. 11, 2000) (Peck, M.J.); Chen v. Jenna Lane, Inc., 30 F. Supp.2d 622, 624 (S.D.N.Y. 1998) (Carter, D.J. Peck, M.J.); see also, e.g. Semi Conductor Materials, Inc. v. Agriculture Inputs Corp., 96 Civ. 7902, 1998 WL 388503 at *8 (S.D.N.Y. June 23, 1998) (Kaplan, D.J. Peck, M.J.).
As damages, plaintiff seeks the defendant's profits from use of the infringing mark. (Dkt. No. 33: Plf. Inquest Br. at 4.) In support, plaintiff submitted a Dunn Bradstreet ("DB") report indicating that defendant made gross profits of $1 million in 2000, and plaintiff seeks $3.5 million for the period January 2000 to June 2003, since defendant has not put forth any evidence of its costs. (Plf. Inquest Br. at 6-7; Dkt. No. 34: Sloane 7/7/03 Aff. ¶¶ 3-4 Exs. A-B.)
The problem with plaintiff's damages request, however, is that the very DB report that plaintiff relies on for defendant's profits also reports defendant's operating expenses for 2000, which exceeded operating sales revenue, for a net operating loss. (Sloane 7/7/03 Aff. Ex. A: DB Report at 3.)
The DB Report stated: "From JAN 01 2000 to DEC 31 2000 annual sales $947,091; gross profit $947,091; operating expenses $959,056. Operating income (11,965) . . ." (Id.).
Even if the Court otherwise were willing to award millions of dollars in damages based on a DB report, the Court declines plaintiff's invitation to award damages of $3.5 million based on "profit" information in the DB Report which ignores expense and net operating loss information in the same report. The Court sympathizes with plaintiff that defendant did not respond to plaintiff's discovery demands. But while that gives plaintiff some leeway in proving damages, it does not open the door so wide as to allow one to drive a truck through the gap in proof. Moreover, other damage theories (such as plaintiff's damages instead of defendant's profits) were available for plaintiff to pursue in the absence of information from defendant, but plaintiff chose not to pursue other damage theories.
For these reasons, the Court should not award plaintiff damages.
Attorney's Fees
Plaintiff is entitled to attorney's fees. In support of the amount of fees, plaintiff has provided it's counsel's affidavit and a copy of counsel's contemporaneous time printouts. (Dkt. No. 35: Beran 7/7/03 Aff. Ex. A.) Based on that affidavit and the Court's "'own knowledge of private firm hourly rates in the community,'" Schruefer v. Winthorpe Grant, Inc., 99 Civ. 9365, 2003 WL 21511157 at *3 (S.D.N.Y. July 2, 2003) (Peck, M.J.) (quoting Miele v. New York State Teamsters Conference Pension Ret. Fund, 831 F.2d 407, 409 (2d Cir. 1987)), the Court finds plaintiff's counsel's hourly rates to be reasonable and appropriate, and the time spent and costs incurred also to be reasonable. Accordingly, the Court should award plaintiff the full amount sought for attorney's fees and costs, $19,532.51.
CONCLUSION
For the reasons stated above, the Court should decline to award plaintiff damages but should award plaintiff attorney's fees (and costs) of $19,532.51.
FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections (and any responses to objections) shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Laura Taylor Swain, 40 Centre Street, Room 1205, and to my chambers, 500 Pearl Street, Room 1370. Any requests for an extension of time for filing objections must be directed to Judge Swain. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993), cert. denied, 513 U.S. 822, 115 S.Ct. 86 (1994); Roldan v. Racette, 984 F.2d 85, 89 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir.), cert. denied, 506 U.S. 1038, 113 S.Ct. 825 (1992); Small v. Secretary of Health Human Servs., 892 F.2d 15, 16 (2d Cir. 1989); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72, 6(a), 6(e).