Opinion
20 Civ. 4718 (VB) (PED)
05-18-2021
RAY PADULA HOLDINGS, LLC, Plaintiff, v. WALMART MARKETPLACE VENDOR NO. 10001029424, Defendant.
REPORT AND RECOMMENDATION
TO THE HONORABLE VINCENT L. BRICCETTI, United States District Judge:
I. INTRODUCTION
On June 19, 2020, plaintiff Ray Padula Holdings, LLC (“RPH”) commenced this action alleging trademark infringement and counterfeiting of plaintiff's federally registered trademarks in violation of the Lanham Act, 15 U.S.C. § 1114, unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a) and common-law unfair competition. Dkt. #1 (Verified Complaint). Defendant Walmart Marketplace Vendor No. 10001029424 was served on July 20, 2020. Dkt. #16. Defendant failed to timely answer, move or otherwise respond to the complaint. On September 18, 2020, Your Honor entered a default judgment as to liability (Dkt. #27) and referred this matter to me to conduct an inquest concerning RPH's damages, attorneys' fees and costs. Dkt. #28.
On September 18, 2020, I entered a Scheduling Order directing plaintiff to serve and file proposed findings of fact and conclusions of law by October 16, 2020 and directing defendant to submit any responsive materials by October 30, 2020. Dkt. #29. The Scheduling Order also stated the following:
The Court hereby notifies the parties that it may conduct this inquest based solely upon the written submissions of the parties. See Fustock v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989). To the extent that any party seeks an evidentiary hearing on the issue of damages (or other monetary relief), such party must set forth in its submission the reason why the inquest should not be conducted based upon the written submissions alone, including a description of what witnesses would be called to testify at a hearing and the nature of the evidence that would be submitted.Dkt. #29, ¶ 5. On September 21, 2020, plaintiff filed proof of service upon defendant of the following papers: Default Judgment as to Liability (Dkt. #27); Order Referring Case to Magistrate Judge (Dkt. #28); and Scheduling Order for Damages Inquest (Dkt. #29). Dkt. #30. On October 16, 2020, plaintiff filed the requisite papers, including Proposed Findings of Fact and Conclusions of Law (Dkt. #31), a Memorandum of Law (Dkt. #32), the supporting Declaration of Ray Padula (Dkt. #33) and the supporting Declaration of Bradley Corsello with attached exhibits (Dkt. #35).
Pursuant to the Court's orders (Dkt. #15, #27), defendant was served via the email address “reinaldodvaldesmorfa@aol.com.”
The Corsello Declaration refers to two documents produced by non-party Walmart, Inc.: an 860-page Excel spreadsheet containing defendant's Walmart Marketplace listings; and a 304-page transaction report of defendant's sales. In lieu of filing full versions of both exhibits (in an effort to limit the court's expenditure of time and resources), plaintiff's counsel summarized the sales transactions and provided the first and last pages of the Excel spreadsheet. Dkt. #35, ¶¶ 15-16 (and Exh. H). On May 7, 2021, at the request of the undersigned, plaintiff's counsel filed full and complete versions of both exhibits. Dkt. #40-1 (Excel spreadsheet), #40-2
To date, defendant has not filed any opposition nor has he contacted the Court in any way. Plaintiff has not requested an evidentiary hearing on the issue of damages. Because plaintiff's inquest submissions provide a basis for damages, no hearing was required. Fustock, 873 F.2d at 40. On the basis of RPH's written submissions, I recommend (for the reasons that follow) that Your Honor enter judgment in favor of RPH in the amount of $5,043,189.47.
II. FINDINGS OF FACT
RPH is a New York limited liability company with its principal place of business at 135 Pinelawn Road, Melville, New York 11747. Dkt. #1, ¶ 5. RPH is one of the leading global providers of hundreds of consumer lawn and garden products across multiple product categories. Dkt. #33, ¶ 4. RPH products are used in millions of homes, and the RAY PADULA brand and product line is one of the most sought-after lawn and garden brands by consumers throughout North America. Dkt. #33, ¶ 5. RPH sells its products to leading retailers and garden centers, including Home Depot, Menards, Kmart, Sears, Walmart, and Target. Dkt. #33, ¶ 6. The RAY PADULA brand generates tens of millions of dollars in retail sales per season, across all major lawn and garden consumer product categories. Dkt. #33, ¶ 10.
RPH owns all right, title and interest in and to U.S. Trademark Registration Nos. 4, 435, 685 for “RAY PADULA” and Design and 4, 439, 286 for “RAY PADULA” (collectively the “RAY PADULA Trademarks”), and the common law rights in those marks, for goods including garden hoses and related products. Dkt. #1, ¶ 8 (and Exh. A); Dkt. #33, ¶ 8. Since 2009, RPH has continuously used the RAY PADULA Trademarks on all its goods in commerce (in conjunction with the “®” designation). Dkt. #33, ¶¶ 8-9. The RAY PADULA brand generates over 100 million brand impressions throughout North America per year, through the company's social media platforms, social media paid advertising, features in national retailer print circulars, other social media and participation in national retailer's advertising (including digital, print and television). Dkt. #33, ¶ 11.
The Mark consists of the wording “Padula” underneath the wording “Ray” with a stylized water drop above the letters “U” and “L.” Dkt. #1, Exh. A.
“The Mark consists of standard characters without claim to any particular font, style, size, or color.” Dkt. #1, Exh. A.
Non-party Walmart, Inc. owns and operates an e-commerce platform called Walmart Marketplace, which enables third-parties to list and sell items on the website (located at “Walmart.com”). Dkt. #35, ¶¶ 3-4. According to Walmart, Inc., the website reaches over 100 million unique visitors each month. Dkt. #35, ¶ 4 (and Exh. A). RPH does not sell, and has never sold, goods on Walmart Marketplace, nor has it authorized anyone to do so.
Defendant is an individual or business entity having a Walmart Marketplace vendor account, ID number 10001029424, for selling goods to U.S. customers on Walmart Marketplace. Dkt. #1, ¶ 6. Defendant is believed to be located in China. Dkt. #35, ¶ 2. Defendant opened the Walmart Marketplace account using the following information:
Vendor: RAY PAINTING CORP.
Application Contact Person: Reinaldo D Valdes Morfa
Application Contact Email: reinaldodvaldesmorfa@aol.com
Application Contact Phone: 6197602777
Customer Service Email: walmartcs@raypadula.com
Customer Service Phone: 8664462063
Legal Street Address: 135 Pinetown Road, Melville, NY 11747
Return Address: RAY PAINTING CORP., 112 Melrich Rd, Cranbury, N.J. 08512 Dkt. #35, ¶¶ 5-7 (and Exh. B). All of the information provided by defendant to open the account, except the application contact email address, is false: Ray Painting Corp. is a small house painting business in Florida, owned by Mr. Reinaldo D. Valdes Morfa (who has no knowledge of defendant or the Walmart Marketplace account); the customer service phone number and street address are plaintiff's; the customer service email address is a non-existent account at plaintiff's domain “raypadula.com”; the contact phone number is inactive; the return address is an unrelated commercial property. Dkt. #1, ¶¶ 16-18; Dkt. #35, ¶ 9 (and Exhs. C, D). Defendant used the same false information to establish a payment processing account with non-party Payoneer Inc., and linked that account to two bank accounts: (1) a bank account in a Bank of China branch located in Jingjiang, China under the name Yanping Liu; and (2) an account with Resource One Credit Union in the name of Ray Painting Corp. Dkt. #35, ¶¶ 10-12 (and Exh. E). In response to a subpoena, Resource One Credit Union responded that the account did not exist, and the account number was associated with a closed checking account owned by a third-party individual.
According to records produced by Walmart, Inc., defendant completed the Walmart Marketplace “outboarding process” by September 17, 2019 and began to publish items for sale in the Marketplace on September 24, 2019. Dkt. #35, ¶ 14 (and Exh. G). In total, defendant created approximately 61, 000 listings on Walmart Marketplace., all of which contained “Raypadula” in the item title (e.g. “Raypadula Garden Gloves Digging Planting with 4 ABS Plastic Claws Gardening Gloves Green” and “Raypadula Pipe Garden Hose Coupling Water Stop Connection Valve Fitting Children”). Dkt. #35, ¶ 15 (and Exh. H); Dkt. #40-1. Defendant offered thirty-two types of goods on Walmart Marketplace under the counterfeit mark “Raypadula”: garden goods; posters; auto parts and accessories; motorcycle parts and accessories; appliance parts; key chains; stickers; hand tools; pet supplies; jewelry; jewelry parts and findings; clothing; hats; hair accessories; toys; personal care products; hair care products; nail supplies; dental products; kitchen tools and bake ware; calendars; backpacks; mobile device accessories; home decor; sporting goods; exercise equipment; bath goods; protective gear; musical instruments; stationery; knitting goods; and camping goods. Dkt. #1, ¶ 14; Dkt. #40-1. RPH did not license or authorize defendant to use the mark RAY PADULA (or any variation thereof) in commerce. Dkt. #1, ¶ 24.
From December 24, 2019 to July 6, 2020, defendant completed 22, 885 sales transactions resulting in sales of 24, 087 items. Dkt. #35, ¶ 16; Dkt. #40-2. On or about April 22, 2020, plaintiff's counsel placed six test purchases of products from defendant's Walmart Marketplace listings. Dkt. #1, ¶ 22 (and Exh. C). The goods were received in New Rochelle, New York; they were not genuine RAY PADULA goods and were inferior quality, generic goods, labeled and packaged for the Chinese market. Dkt. #1, ¶¶ 21-22 (and Exh. D).
Walmart, Inc. produced an Excel spreadsheet containing summaries of 258 consumer complaints about items purchased from defendant on Walmart Marketplace, including:
• Never got item.
• Item arrived crushed in a padded envelope rather than a box; unusable.
• It does not work.
• Item is defective.
• I opened the first bag to find a large piece of lint material and human hair. I was pretty shocked and disgusted to find that inside the bag. Clearly the bag has been previously used. I have never encountered this in my life.
• Product came damaged and missing pieces.
• Poor quality.
• I opened the package and they look used and are broken.
• Dirty; previously used.
• Horrible product.
• It was delivered leaking and broken.
• The electrical cord is not made for U.S. outlets.
• Terrible taste, odd flavor.
• Really terrible quality and size for the price.
• The item looks nothing like the picture.
• These are pitiful!!!!!!Dkt. #35, ¶ 18 (and Exh. J). Beginning in late March 2020, RPH began to receive emails (fifteen to twenty each day) and telephone calls (twenty to thirty each day) from angry consumers regarding orders they had placed with defendant on Walmart Marketplace, complaining that they had not received goods they had ordered and paid for and/or that the goods received were shoddy and substandard in quality. Dkt. #1, ¶ 11; Dkt. #33, ¶ 13; Dkt. #35, ¶ 19 (and Exh. M). Upon investigating, RPH's president (Ray Padula) was shocked to see an “endless number” of listings on Walmart.com under the RAY PADULA trademark for garden goods and numerous other products RPH does not make or sell. Dkt. #33, ¶ 14. RPH's counsel reported defendant's fraud to Walmart, Inc., who suspended defendant's Marketplace account. Dkt. #1, ¶ 23; Dkt. #33, ¶ 15; Dkt. #35, ¶ 5. According to Walmart, Inc. records, as of July 14, 2020 (at which point defendant's account was frozen), defendant's net earnings on Walmart Marketplace totaled $227,282.73: $39,793.84 settled plus $187,488.89 unpaid. Dkt. #35, ¶ 17 (and Exh. I).
On August 7, 2020, RPH received a “Sixty Day Notice of Violation” from a California non-profit alleging that certain products sold by defendant on Walmart Marketplace contained toxic chemicals prohibited by California Proposition 65. Dkt. #33, ¶ 19; Dkt. #35, ¶ 20 (and Exh. K). The non-profit sent the Notice to Walmart, Inc. (one of plaintiff's major customers), the California Attorney General, fifty-eight California District Attorneys and the City Attorneys of Los Angeles, San Diego, San Jose and San Francisco. Dkt. #35, ¶ 20 (and Exh. K). Plaintiff's counsel responded to the non-profit's counsel and explained that the products were not RPH products, and that RPH was the victim of a counterfeiter and identity thief. Dkt. #35, ¶ 20 (and Exh. L).
III. STANDARD FOR INQUEST ON DAMAGES
When a defendant defaults, the court must accept all well-pleaded factual allegations in the complaint as true, except those pertaining to the amount of damages. Finkel v. Romanowicz, 577 F.3d 79, 83 n. 6, 84 (2d Cir. 2009); Fed.R.Civ.P. 8(b)(6). “Nonetheless, even after default has been entered, district courts retain the discretion to require proof of necessary facts and need not agree that the alleged facts constitute a valid cause of action.” U.S. ex rel. Nat. Dev. & Const. Corp. v. U.S. Env't Universal Servs., Inc., No. 11 Civ. 730, 2014 WL 4652712, at *2 (S.D.N.Y. Sept. 2, 2014)(quotation and citation omitted); see also Fed. R. Civ. P. 55(b)(2). In other words, because a defaulting defendant does not admit conclusions of law, Amer. Trans. Ins. Co. v. Bilyk, No. 19 Civ. 5171, 2021 WL 216673, at *4 (E.D.N.Y. Jan. 21, 2021), the court “is also required to determine whether the [plaintiff's] allegations establish [the defendant's] liability as a matter of law.” Finkel, 577 F.3d at 84. “A default, then, only establishes a defendant's liability if those allegations are sufficient to state a cause of action against the defendant.” Taizhou Zhongneng Import and Export Co., LTD. v. Koutsobinas, 509 Fed.Appx. 54, 56 (2d Cir. 2013).
Similarly, a defendant's default does not constitute an admission of damages. Bricklayers & Allied Craftworkers Loc. 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC, 779 F.3d 182, 189 (2d Cir. 2015). On an inquest for damages, the plaintiff bears the burden of proof and must introduce admissible evidence to establish, with reasonable certainty, a basis for the amount of damages it seeks. House v. Kent Worldwide Mach. Works, Inc., 359 Fed.Appx. 206, 207 (2d Cir. 2010); Yunjian Lin v. Grand Sichuan 74 St Inc., No. 15 Civ. 2950, 2020 WL 3072290, at *2 (S.D.N.Y. June 10, 2020). The plaintiff is entitled to all reasonable inferences from the evidence it presents. House, 359 Fed.Appx. at 207.
IV. LANHAM ACT LIABILITY
“To establish a defendant's liability for trademark infringement under the Lanham Act § 32 (15 U.S.C. § 1114(1)), a plaintiff must show that (1) the plaintiff registered its mark, (2) the defendant, without the plaintiff's consent, (3) used in commerce (4) a reproduction of the plaintiff's mark as part of the sale, distribution, or advertisement of a good, (5) where such use was likely to cause confusion.” Am. Soc'y for Prevention of Cruelty to Animals v. J.C. Clothing Drive, Inc., No. 19 Civ. 4401, 2020 WL 93884, at *2 (E.D.N.Y. Jan. 7, 2020) (quotation marks and citation omitted). “To prevail under the Lanham Act § 43(a) (15 U.S.C. § 1125(a)(1)), a plaintiff must show (1) that it owns a protectable trademark and (2) that the defendant's mark is likely to confuse consumers as to the source or sponsorship of the plaintiff's product.” Id. (quotation marks and citation omitted). In analyzing claims under either statute, “[c]ourts ask whether the allegedly infringed mark is entitled to protection and, if so, whether use of the allegedly infringing mark is likely to cause consumer confusion as to the origin or sponsorship of the products to which it is attached.” Shenzhen Smoore Tech. Ltd. v. Anuonuo Int'l Trade Co., No. 19 Civ. 9896, 2020 WL 7390518, at *6 (S.D.N.Y. Oct. 23, 2020) (quoting Cross Com. Media, Inc. v. Collective, Inc., 841 F.3d 155, 168 (2d Cir. 2016), report and recommendation adopted (unreported), 1:19-cv-09896 Dkt. #86 (S.D.N.Y. Nov. 12, 2020).
“If the allegedly infringed mark is registered, the first prong is satisfied by showing that it is valid and registered, owned by the registrant, and that the registrant has the exclusive right to use the mark in commerce.” BBK Tobacco & Foods, LLP v. Galaxy VI Corp., 408 F.Supp.3d 508, 520 (S.D.N.Y. 2019) (quotation marks and citation omitted). “A plaintiff may satisfy this standard by producing a valid certificate of registration.” Id. “The likelihood-of-confusion prong turns on whether ordinary consumers are likely to be misled or confused as to the source of the product in question because of the entrance in the marketplace of the junior user's mark.” Spin Master Ltd. v. Alan Yuan's Store, 325 F.Supp.3d 413, 421 (S.D.N.Y. 2018) (quotation marks and citation omitted). Courts evaluate consumer confusion by balancing eight factors set forth in Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir.1961):
(1) strength of the trademark; (2) similarity of the marks; (3) proximity of the products and their competitiveness with one another; (4) evidence that the senior user may “bridge the gap” by developing a product for sale in the market of the alleged infringer's product; (5) evidence of actual consumer confusion; (6) evidence that the imitative mark was adopted in bad faith; (7) respective quality of the products; and (8) sophistication of consumers in the relevant market.Int'l Info. Sys. Sec. Certification Consortium, Inc. v. Sec. Univ., LLC, 823 F.3d 153, 160 (2d Cir. 2016) (citation omitted). However, “because counterfeits, by their very nature, cause confusion, ” in cases like the one at bar “where the alleged infringement involves counterfeit goods, a detailed analysis of the Polaroid factors is unnecessary.” BBK Tobacco & Foods, 408 F.Supp.2d at 521 (quotation marks and citations omitted).
The Lanham Act defines “counterfeit mark” as “a counterfeit of a mark that is registered on the principal register in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered.” 15 U.S.C.A. § 1116(d)(1)(B)(I) (West).
V. LANHAM ACT DAMAGES
A plaintiff alleging trademark infringement/counterfeiting under the Lanham Act may recover actual damages consisting of “(1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.” 15 U.S.C.A § 1117(a) (West). Additionally, “[i]n assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount.” Id. Moreover, “[t]the court in exceptional cases may award reasonable attorney fees to the prevailing party.” Id. For purposes of evaluating whether an award of reasonable attorney fees is warranted, an “exceptional” case “is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Sleepy's LLC v. Select Comfort Wholesale Corp., 909 F.3d 519, 530 (2d Cir. 2018) (quoting Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 134 S.Ct. 1749, 188 L.Ed.2d 816 (2014)). A court exercising its broad discretion to award attorneys' fees pursuant to Octane Fitness must “engage in a ‘case-by-case exercise of their discretion, considering the totality of the circumstances' in determining whether the case is ‘one that stands out from others,' so as to warrant an award of fees.” 4 Pillar Dynasty LLC v. New York & Co., Inc., 933 F.3d 202, 216 (2d Cir. 2019) (quoting Octane Fitness, 572 U.S. at 554, 134 S.Ct. 1749).
Further, pursuant to 15 U.S.C. § 117(b):
In assessing damages under subsection (a) for any violation of section 1114(1)(a) of this title . . ., in a case involving use of a counterfeit mark or designation (as defined in section 1116(d) of this title), the court shall, unless the court finds extenuating circumstances, enter judgment for three times such profits or damages, whichever amount is greater, together with a reasonable attorney's fee, if the violation consists of --
(1) intentionally using a mark or designation, knowing such mark or designation is a counterfeit mark (as defined in section 1116(d) of this title), in connection with the sale, offering for sale, or distribution of goods or services.15 U.S.C.A. § 1117(b) (West).
Alternatively, in a case involving counterfeit marks:
[T]he plaintiff may elect, at any time before final judgment is rendered by the trial court, to recover, instead of actual damages and profits . . . an award of statutory damages for any such use in connection with the sale, offering for sale, or distribution of goods or services in the amount of --
(1) not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just;
or
(2) if the court finds that the use of the counterfeit mark was willful, not more than $2,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just.15 U.S.C.A. § 1117(c) (West). “Statutory damages against a defendant who acted willfully are intended to serve the dual role of compensating a plaintiff for injuries and deterrming wrongful conduct by the defendant and others.” Shenzhen Smoore, 2020 WL 7390518, at *7. “To determine the appropriate amount of [statutory] damages, courts examine seven factors: (1) expenses saved and profits reaped by the defendant; (2) the plaintiff's lost revenues; (3) the trademark's value; (4) the deterrent effect on others; (5) whether the defendant's conduct was innocent or willful; (6) whether the defendant cooperated by providing records from which to determine the value of the infringing material produced; and (7) the potential for discouraging the defendant.” Gen. Sci. Corp. v. Eclipse Loupes & Prod. LLC, No. 19 Civ. 1666, 2021 WL 242267, at *2 (W.D.N.Y. Jan. 25, 2021) (citing Fitzgerald Pub. Co. v. Baylor Pub. Co., 807 F.2d 1110, 1117 (2d Cir. 1986). Finally, a court awarding statutory damages under section 1117(c) may also award reasonable attorneys' fees “so long as the ‘exceptional case' requirement of section 1117(a) is met.” Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 109 (2d Cir. 2012).
VI. ANALYSIS
A. Legal Basis for Defaulting Defendant's Liability
Plaintiff has produced valid certificates of registration for its marks and, thus, has demonstrated that its marks are entitled to protection. See BBK Tobacco & Foods, 408 F.Supp.3d at 520. Further, taking plaintiff's allegations as true, defendant created approximately 61, 000 listings on Walmart Marketplace, all of which contained “Raypadula” in the item title.
Because defendant's counterfeit designation “Raypadula” is essentially identical to plaintiff's registered mark, ordinary consumers were “likely misled or confused as to the source of the product in question.” See Spin Master, 325 F.Supp.3d at 421. Indeed, plaintiff received numerous complaints (calls and emails) from angry consumers regarding orders they had placed with defendant on Walmart Marketplace. Finally, defendant is “deemed to have acted willfully, merely by virtue of [its] default, and consequent failure to controvert the evidence of willful misconduct alleged in the complaint.” Shenzhen Smoore, 2020 WL 7390518, at *7. Accordingly, plaintiff's written submissions provide a sound legal basis for finding the defaulting defendant liable for willful counterfeiting and infringement of plaintiff's trademarks.
B. Damages
Plaintiff seeks an award of $5 million in either actual or statutory damages. Dkt. #32, at 13-16. There is no need to evaluate actual damages in this case; an analysis of the factors relevant to determining statutory damages collectively support an award of statutory damages in the amount plaintiff seeks.
All citations to page numbers herein reflect ECF pagination.
As to the first factor (expenses saved and profits reaped by defendant), Walmart, Inc. records show that defendant's illegal activities netted $227,282.73; the record is devoid of any evidence concerning expenses saved by defendant. As to factor two, plaintiff estimates its lost revenues as follows:
For our business purposes, we figure that a customer is worth at least $100 per season. The 22, 885 consumers who purchased Defendant's infringing, junk products may be lost for two years, before our marketing and advertising restores our goodwill with them. With those reasonable assumptions, the value of 22, 885 lost customers works out to be $4,577,000 (calculated as 22, 885 times 100 times 2).Dkt. #33, ¶ 21. Plaintiff's “estimate” of lost revenue is clearly speculative and, therefore, factor two is neutral. The third factor-the value of plaintiff's marks-weighs in favor of increased statutory damages. Plaintiff has established that its brand has achieved national recognition and success, and that the RAY PADULA Trademarks are of great value to plaintiff. The remaining factors-willfulness and deterrence-also weigh in favor of significant statutory damages. Defendant's conduct was unequivocally willful, as set forth above, and its counterfeiting activity was extensive. The sole purpose of defendant's Marketplace account was, obviously, to hold itself out as plaintiff, with no pretense of legitimacy. “A substantial award is necessary to discourage defendant[ ] from continuing to engage in [its] illicit conduct. In addition, defendant[‘s] willful misconduct and failure to appear in this litigation merit a finding that a slight damage award is unlikely to deter [defendant] from continuing [its] illegal business.” Gen. Sci. Corp., 2021 WL 242267, at *2 (quotation marks and citation omitted).
Because defendant's conduct was willful, the Court may award “not more than $2,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just.” 15 U.S.C.A. § 1117(c) (West). Defendant sold thirty-two types of goods under the counterfeit mark. Plaintiff requests statutory damages in the amount of $5 million - which equates to an award of $156,250 per type of goods sold, which is well beneath the statutory limit. Further, an award of $156,250 per type of goods sold is a reasonable and appropriate amount in light of the factors discussed above. More specifically, the sheer scale and visibility of defendant's infringing conduct - 61, 000 counterfeit listings on a high-profile retailer's website (where the retailer is one of plaintiff's principal outlets) - warrants a substantial statutory damage award, in excess of damage awards in cases where the infringing conduct is limited to fewer types of counterfeit goods marketed on less-visible platforms Accordingly, I respectfully recommend that Your Honor award plaintiff $5,000,000.00 in statutory damages.
C. Attorneys' Fees and Costs
Plaintiff seeks attorneys' fees in the amount of $42,218.78 and costs in the amount of $970.69. Dkt. #32, at 13. As noted above, a court awarding statutory damages under section 1117(c) may also award reasonable attorneys' fees “so long as the ‘exceptional case' requirement of section 1117(a) is met.” Louis Vuitton, 676 F.3d at 109. “Willful infringement is an exceptional circumstance warranting the award of attorney's fees.” Malletier v. Artex Creative Int'l Corp., 687 F.Supp.2d 347, 359 (S.D.N.Y. 2010) (quotation marks and citation omitted). Here, considering the totality of the circumstances (including defendant's willfulness and the scope of its illicit conduct), I conclude that an award of reasonable attorneys' fees and costs is appropriate.
“The district court retains discretion to determine . . . what constitutes a reasonable fee.” Millea v. Metro-North R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011) (quoting LeBlanc-Sternberg v. Fletcher, 143 F.3d 748, 758 (2d Cir.1998)). To determine whether the rate and hours requested are reasonable, the court must “bear in mind all of the case-specific variables that [the Second Circuit] and other courts have identified as relevant to the reasonableness of attorney's fees.” Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cty. of Albany, 493 F.3d 110, 190 (2d Cir. 2007), amended on other grounds, 522 F.3d 182 (2d Cir. 2008). These factors include:
(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the level of skill required to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the attorney's customary hourly rate; (6) whether the fee is fixed or contingent; (7) the time limitations imposed by the client or the circumstances; (8) the amount involved in the case and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.Id. at 186 n.3 (citing Johnson v. Ga. Highway Express, Inc., 488 F.3d 714, 717-19 (5th Cir. 1974)). The reasonable fee is calculated by multiplying the attorney's reasonable billing rate by the reasonable number of hours spent working on the case. See Simmons v. N.Y.C. Transit Auth., 575 F.3d 170, 174 (2d Cir. 2009) (discussing Arbor Hill). See also Arbor Hill, 522 F.3d at 186-90 (emphasis in original) (rather than a two-step calculation that adjusts the product of the attorney's fees and hours by certain case-specific variables, “[t]he focus of the district court is no longer on calculating a reasonable fee, but rather on setting a reasonable hourly rate, taking account of all the case-specific variables”).
Here, plaintiff claims a lodestar figure of $42,218.78, based upon 105.55 hours of legal work performed by two attorneys, each charging $400.00 per hour. Dkt. #35, ¶ 23.
1. Reasonable hourly rate
The hourly rate for an attorney should reflect “what a reasonable, paying client would be willing to pay.” Arbor Hill, 522 F.3d at 184. That rate must be “in line with those [rates] prevailing in the community for similar services by lawyers of reasonable comparable skill, experience, and reputation.” Reitner v. MTA N.Y.C. Transit Auth., 457 F.3d 224, 232 (2d Cir. 2006) (alteration in original) (internal quotation marks omitted) (quoting Blum v. Stenson, 465 U.S. 886, 896 n.11 (1984)). “[T]he range of rates plaintiff's counsel actually charge their clients . . . is obviously strong evidence of what the market will bear.” Doe v. Unum Life Ins. Co of Am, No. 12 Civ. 9327, 2016 U.S. Dist. LEXIS 10706, at *14-15. (S.D.N.Y. Jan. 28, 2016), report and recommendation adopted, No. 12 Civ. 9327, 2016 U.S. Dist. LEXIS 21928 (quoting Rozell v. Ross-Holst, 576 F.Supp.2d 527, 544 (S.D.N.Y. 2008) (internal quotation marks omitted). The Court must also bear in mind that “a reasonable, paying client wishes to spend the minimum necessary to litigate the case effectively.” Arbor Hill, 522 F.3d at 190.
Two attorneys from Notaro, Michalos & Zaccaria P.C. “NMZ”) represented plaintiff in this action: John Zaccaria and Bradley Corsello. Mr. Zaccaria is a partner at NMZ's New York offices and has over twenty years of IP litigation experience. Dkt. #35, ¶ 23. Mr. Corsello also has over twenty years of IP litigation experience, and is a senior associate at NMZ's New York office. Id. The requested billing rate for both attorneys ($400/hour) is well within the rates approved in intellectual property cases in the Southern District of New York and, moreover, is not unreasonable. See, e.g., Beastie Boys v. Monster Energy Co., 112 F.Supp.3d 31, 55-56 (S.D.N.Y. 2015) (awarding $675 per hour for partners); Sprint Commc'ns Co. L.P. v. Chong, No. 13 Civ. 3846, 2014 WL 6611484, at *6-7 (S.D.N.Y. Nov. 21, 2014) (finding rate of $480 per hour reasonable and in line with prevailing rates for attorneys with over twenty years' experience); OZ Mgmt. LP v. Ozdeal Inv. Consultants, Inc., No. 09 Civ. 8665, 2010 WL 5538552, at *3 (S.D.N.Y. Dec. 6, 2010), report and recommendation adopted, 2011 WL 43459 (S.D.N.Y. Jan. 5, 2011) (approving $657 per hour rate for partners and $400 per hour rate for associates); Malletier v. Artex Creative Int'l Corp., 687 F.Supp.2d 347, 361 (S.D.N.Y.2010) (“The hourly rates of $390.00 to $470.00 charged by the associates and junior partner representing Vuitton fall at the very top of the spectrum of reasonable hourly rates for associates.”).
2. Reasonable number of hours expended
In assessing the number of hours for which compensation should be awarded, “[t]he relevant issue [ ] is not whether hindsight vindicates an attorney's time expenditures, but whether, at the time the work was performed, a reasonable attorney would have engaged in similar time expenditures.” Danaher Corp. v. Travelers Indem. Co., No. 10 Civ. 0121, 2015 WL 409525, at *3 (quoting Grant v. Martinez, 973 F.2d 96, 99 (2d Cir. 1992)) (alteration in original). “A court should exclude from the . . . calculation ‘excessive, redundant or otherwise unnecessary hours.'” Id. (quoting Quaratino v. Tiffany & Co., 166 F.3d 422, 425 (2d Cir. 1997)). In addition, “the Court may reduce the fees requested for billing entries that are vague and do not sufficiently demonstrate what counsel did.” Doe v. Unum Life Ins. Co. of Am., No. 12 Civ. 9327, 2016 U.S. Dist. LEXIS 10706, at *18 (S.D.N.Y Jan. 28, 2016). Finally, “[a] trial judge . . . may limit the hours allowed for specific tasks . . . on the basis of [the court's] assessment of what is appropriate for the scope and complexity of the particular litigation.” N.Y. State Ass'n for Retarded Children v. Carey, 711 F.2d 1136, 1146 (2d Cir. 1983). The Second Circuit has cautioned that “attorney's fees are to be awarded with an eye to moderation, seeking to avoid either the reality or the appearance of awarding windfall fees.” Id. at 1139. The Court can accomplish this “by making specific deductions or ‘by making an across-the-board reduction in the amount of hours.'” Danaher Corp, 2015 WL 409525, at *3 (quoting Luciano v. Olsten Corp., 109 F.3d 111, 117 (2d Cir. 1997)).
Here, plaintiff has submitted contemporaneous time records demonstrating the hours spent on this litigation. Dkt. #35, Exh. N. The billing records reflect a total of 105.55 hours expended on the instant litigation (5.1 attributable to Mr. Zaccaria and 100.45 attributable to Mr. Corsello). The hours are adequately documented, and I am persuaded that compensation for all of these hours is justified. As the billing records indicate, counsel's services included: pre-suit and post-suit communications with Walmart, Inc. and other third parties concerning defendant's activity; legal research; drafting the pleadings, motions and legal memoranda; and conducting third-party discovery related to Walmart, Inc., Payoneer, Resource One Credit Union and other entities. Additionally, as noted above, defendant did not submit any opposition to plaintiff's requested amount of attorneys' fees. At bottom, I conclude that the general overall number of hours expended on this litigation is not unreasonable.
3. Costs
Plaintiff seeks an award of costs in the amount of $970.69, representing reimbursement for court filings fees, service of process fees, postage and courier fees, and copies. Dkt. 35, ¶ 25. Plaintiff provided a contemporaneous record that specifies the date and cost of these additional charges. Dkt. #35, Exh. O. “These are the types of routine costs typically awarded when a defendant defaults.” Malletier, 687 F.Supp.2d 347 at 364-65.
Accordingly, I respectfully recommend that Your Honor award plaintiff attorneys' fees in the amount of $42,218.78 and costs in the amount of $970.69.
D. Asset Freeze and Transfer
Plaintiff seeks an Order (1) freezing the balance due in defendant's Walmart Marketplace account and (2) transferring that asset to plaintiff. Dkt. #32, at 14. Assuming plaintiff will have a money judgment entered against the defaulting defendant, “a post-judgment asset freeze would be available pursuant to Federal Rule of Civil Procedure 69 and C.P.L.R. § 5222.” Off-White LLC v. Baoding Springru Trade Co., No. 19 Civ. 674, 2020 WL 1646602, at *8 (S.D.N.Y. Apr. 3, 2020), report and recommendation adopted, 2020 WL 3050553 (S.D.N.Y. June 8, 2020).Plaintiff's Verified Complaint seeks the equitable remedy of an accounting of profits. Dkt. #1, Prayer for Relief ¶ 3. “Equitable remedies such as an asset freeze may be sought as part of an action for an accounting of profits.” Off-White, 2020 WL 1646602, at *8 (citing Gucci Am. Inc. v. Bank of China, 768 F.3d 122, 131 (2d Cir. 2014)). Although plaintiff “now seeks statutory damages in lieu of an accounting, an asset restraint is nonetheless appropriate to ensure that defendant[ ] do[es] not hide assets. Id. (citing Tiffany (NJ) LLC v. Forbse, No. 11 Civ. 4976, 2015 WL 5638060, at *3-4 (S.D.N.Y. Sept. 22, 2015)). Further, “courts in this district routinely order transfers of infringing defendants' frozen assets to plaintiffs in similar trademark infringement cases, relying on the authority to issue injunctive relief under Rule 64 of the Federal Rule of Civil Procedure, § 1116(a) of the Lanham Act, and this Court's inherent equitable power to issue remedies ancillary to its authority to provide final relief.” Id., at *9 (quotation marks and citation omitted). Accordingly, I respectfully recommend that plaintiff is entitled to an Order freezing the balance due in defendant's Walmart Marketplace account and transferring that asset to plaintiff.
Pursuant to Rule 69(a)(1) of the Federal Rules of Civil Procedure (“FRCP”), “[t]he procedure on execution - and in proceedings supplementary to and in aid of judgment or execution - must accord with the procedure of the state where the court is located . . . .” Fed.R.Civ.P. 69(a)(1). Section 5222 of the New York Civil Practice Law and Rules (“CPLR”) permits a judgment creditor to serve a restraining notice on a judgment debtor, which prohibits the judgment debtor from “mak[ing] or suffer[ing] any sale, assignment, transfer or interference with any property in which [it] has an interest, ” except in limited circumstances (not applicable here). N.Y. C.P.L.R. § 5222(b).
FRCP Rule 64 provides that “[a]t the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgment.” Fed.R.Civ.P. 64. CPLR Section 5225 authorizes courts to compel a nonparty to surrender a judgment debtor's property. N.Y. C.P.L.R. § 5225. Section 34(a) of the Lanham Act provides that the Court has the “power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of” a trademark owner's rights. 15 U.S.C. § 1116(a).
VII. CONCLUSION
For the reasons stated above, I conclude-and respectfully recommend Your Honor should conclude-that plaintiff be awarded damages against the defaulting defendant in the total amount of $5,043,189.47, consisting of:
1. An award of statutory damages in the amount of $5,000,000.00;
2. An award of attorneys' fees in the amount of $42,218.78; and
3. An award of costs in the amount of $970.69.
Plaintiff also seeks post-judgment interest on any damages award. Dkt. #32, at 21. Post-judgment interest is awarded on any money judgment recovered in a civil case, measured “from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield . . for the calendar week preceding the date of the judgment, . . . “computed daily to the date of payment” and “compounded annually.” 28 U.S.C. § 1961(a)-(b). Accordingly, plaintiff shall be awarded post-judgment interest in an amount to be determined according to the statutory formula.
Additionally, I respectfully recommend that Your Honor enter an Order freezing the balance due in defendant's Walmart Marketplace account and transferring that asset to plaintiff
Plaintiffs counsel is directed to serve a copy of this Report and Recommendation on defendant and file proof of service promptly.
NOTICE
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report and Recommendation to serve and file written objections. See also Fed. R. Civ. P. 6(a). Such objections, if any, along with any responses to the objections, shall be filed with the Clerk of the Court with extra copies delivered to the chambers of the Honorable Vincent L. Briccetti, at the Honorable Charles L. Brieant Jr. Federal Building and United States Courthouse, 300 Quarropas Street, White Plains, New York 10601, and to the chambers of the undersigned at the same address.
Failure to file timely objections to this Report and Recommendation will preclude later appellate review of any order of judgment that will be entered.
Requests for extensions of time to file objections must be made to Judge Briccetti.