Opinion
1:21-cv-06963 (GHW) (SDA)
04-06-2024
Sirius XM Radio Inc., Plaintiff, v. Aura Multimedia Corporation et al., Defendants.
THE HONORABLE GREGORY H. WOODS, UNITED STATES DISTRICT JUDGE:
REPORT AND RECOMMENDATION
STEWART D. AARON, UNITED STATES MAGISTRATE JUDGE.
On April 27, 2022, the Court granted the motion by Plaintiff Sirius XM Radio, Inc. (“Plaintiff” or “Sirius”) for a default judgment against Defendants Aura Multimedia Corporation (“Aura Multimedia Corp.”) and Aura Multimedia Technologies Company LLC (“Aura Multimedia Tech”) (together, the “Aura Defendants”) and deferred a decision on damages and other relief until the action was resolved as to the individual defendant, Clayton B. Burton, Jr. (“Burton”). See Sirius XM Radio Inc. v. Aura Multimedia Corp., No. 21-CV-06963 (GHW) (SDA), 2022 WL 21808323, at *1-2 (S.D.N.Y. Apr. 12, 2022), report and recommendation adopted, 2022 WL 19561763 (S.D.N.Y. Apr. 27, 2022). In January 2024, Plaintiff reached a settlement of its claims against Burton. (See Pl.'s 1/30/24 Ltr., ECF No. 115.)
For the reasons set forth below, I respectfully recommend that the Court enter judgment for Plaintiff against the Aura Defendants in the amount of $259,299.21 in damages, plus pre-judgment interest, on its breach of contract claim; $500,000.00 in statutory damages on its Lanham Act claims; and $50.00 in damages on its New York General Business Law (“GBL”) § 349 claim. I further recommend that injunctive relief be granted and that Plaintiff be awarded post-judgment interest.
BACKGROUND
The Court assumes familiarity with the relevant facts set forth in the Court's April 12, 2022 Report and Recommendation on Plaintiff's motion for a default judgment. See Sirius, 2022 WL 21808323, at *1-2. On April 27, 2022, District Judge Woods adopted the April 12, 2022 Report and Recommendation and granted Plaintiff's motion for a default judgment as to liability against the Aura Defendants on Plaintiff's breach of contract, Lanham Act, GBL § 349 and unfair competition claims. See Sirius, 2022 WL 19561763, at *1. On January 12, 2024, Plaintiff filed a letter regarding proposed damages. (1/12/24 Letter, ECF No. 111.) On January 16, 2024, the Court directed Plaintiff to file a letter setting forth its position as to the impact, if any, of the settlement with Burton on its entitlement to damages from the Aura Defendants, which Plaintiff did on January 30, 2024. (Pl.'s 1/30/24 Letter, ECF No. 115.) On February 2, 2024, Plaintiff filed under seal a copy of its confidential settlement agreement with Burton. (Settlement Agmt., ECF No. 117-1).
LEGAL STANDARDS
Although a party's default is viewed as a concession of all well-pled allegations of liability, it is not considered an admission of damages. “Even when a default judgment is warranted based on a party's failure to defend, the allegations in the complaint with respect to the amount of the damages are not deemed true.” Am. Jewish Comm. v. Berman, No. 15-CV-05983 (LAK) (JLC), 2016 WL 3365313, at *3 (S.D.N.Y. June 15, 2016) (quoting Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)), report and recommendation adopted, 2016 WL 4532201 (S.D.N.Y. Aug. 29, 2016). “The district court must instead conduct an inquiry in order to ascertain the amount of damages with reasonable certainty.” Id. Plaintiff “bear[s] the burden of establishing [its] entitlement to recovery and thus must substantiate [its] claims with evidence to prove the extent of [its] damages.” Hounddog Prods., L.L.C. v. Empire Film Grp., Inc., 826 F.Supp.2d 619, 627 (S.D.N.Y. 2011) (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)).
The decision on whether to hold a hearing on damages in the context of default judgment is left “to the discretion of the district court.” Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989); see also Fed R. Civ P. 55(b)(2) (“The court may conduct hearings . . . when, to enter or effectuate judgment, it needs to . . . determine the amount of damages”). “Where damages are susceptible to simple mathematical calculation and the plaintiff provides a sufficient basis from which to evaluate the fairness of the requested damages, no evidentiary hearing is necessary.” HSBC Bank USA, N.A. v. PAKS Holdings, LLC, No. 19-CV-10193 (PGG) (JLC), 2021 WL 667661, at *4 (S.D.N.Y. Feb. 22, 2021), report and recommendation adopted, 2021 WL 5042710 (S.D.N.Y. Oct. 28, 2021) (internal quotation marks omitted).
“A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” See Fed.R.Civ.P. 54(c); see also Silge v. Merz, 510 F.3d 157, 160 (2d Cir. 2007) (damages arising from default judgment are limited to those in “demand clause” of complaint). “A court may issue an injunction on a motion for default judgment provided that the moving party shows that (1) it is entitled to injunctive relief under the applicable statute and (2) it meets the prerequisites for the issuance of an injunction.” Hounddog Prods., 826 F.Supp.2d at 632.
DISCUSSION
As an initial matter, the Court finds that the documentary evidence submitted by Plaintiff is sufficient for the Court to determine damages. Moreover, no party has requested a hearing and the Aura Defendants have not contested Plaintiff's submissions. Accordingly, the Court does not find a hearing necessary and, instead, has conducted the inquest based solely on the materials filed by Plaintiff. See JTH Tax LLC v. Sanchez, No. 22-CV-06160 (AS) (JLC), 2023 WL 6813449, at *3 (S.D.N.Y. Oct. 16, 2023), report and recommendation adopted, 2023 WL 8936352 (S.D.N.Y. Dec. 27, 2023) (hearing unnecessary when plaintiff's submissions were uncontested and provided all information necessary to determine damages); Reilly v. Plot Commerce, No. 15-CV-05118, 2016 WL 6837895 (PAE) (BCM), at *2 (S.D.N.Y. Oct 31, 2016) (conducting inquest “based solely on materials submitted by plaintiff” when neither party requested hearing and defendant did not submit any written materials).
I. Breach of Contract Claim
Plaintiff seeks monetary damages on its breach of contract claim in the amount of $556,429.41, consisting of $259,299.21 in damages for eight unpaid invoices, $76,500.79 in prejudgment interest and $220,629.41 in what it refers to as “contractual interest.” (See Pl.'s 1/12/24 Letter at 2-3.)
“A party injured by breach of contract is entitled to be placed in the position it would have occupied had the contract been fulfilled according to its terms.” Merrill Lynch & Co., Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 185 (2d Cir. 2007) (applying New York law).“Where . . . the breach of contract was a failure to pay money, the plaintiff is entitled to recover the unpaid amount due under the contract plus interest.” Hounddog Prods., 826 F.Supp.2d at 629; see also SourceCode Commc'ns LLC v. In-telligent LLC, No. 21-CV-10519 (VSB) (RWL), 2022 WL 1946260, at *4 (S.D.N.Y. May 25, 2022), report and recommendation adopted, 2023 WL 2712342 (S.D.N.Y. Mar. 30, 2023) (“In New York, damages for a breach of contract claim based on a failure to pay is generally limited to recovery of the unpaid contract amount and accrued interest.”).
The 2016 Distribution Agreement provides that it is governed by New York law. (2016 Distribution Agmt., Wasby Decl. Ex. C, ECF No. 46-3, § 11.04.)
In addition, “[u]nder New York law, a plaintiff who prevails on a claim for breach of contract is entitled to prejudgment interest as a matter of right.” JTH Tax, 2023 WL 6813449, at *4; see also N.Y. C.P.L.R. § 5001(a) (“Interest shall be recovered upon a sum awarded because of a breach of performance of a contract.”). “[I]nterest shall be at the rate of nine per centum per annum.” N.Y. C.P.L.R. § 5004.
Plaintiff has submitted an affidavit from Dave Wasby, Vice President of Marine & Aviation Services & Music for Business at Sirius, and copies of eight unpaid invoices to support its claim for damages. (See Invoices, Wasby Decl. Ex. D, ECF No. 46-4.) Invoice No. 6501997, due April 6, 2020, required Aura Multimedia Corp. to pay $49,503.68. (Id. at 2.) A partial payment was made on this invoice leaving a remaining balance of $3,162.50.(Wasby Decl., ECF No. 46, ¶¶ 8-9.) Invoice No. 6502272, due June 6, 2020, required Aura Multimedia Corp. to pay $43,920.70. (Invoices at 3.) Invoice No. 6502332, due June 27, 2020, required Aura Multimedia Corp. to pay $41,912.04. (Id. at 4.) Invoice No. 6502586, due July 30, 2020, required Aura Multimedia Corp. to pay $41,027.63. (Id. at 5.) Invoice No. 6502651, due August 8, 2020, required Aura Multimedia Corp. to pay $40,038.29. (Id. at 6.) Invoice No. 6502754, due September 4, 2020, required Aura Multimedia Corp. to pay $39,273.80. (Id. at 7.) Invoice No. 6502908, due October 9, 2020, required Aura Multimedia Corp. to pay $40,596.75. (Id. at 8.) Invoice No. 6502914, due October 10, 2020, required Aura Multimedia Corp. to pay $9,367.50. (Id. at 9.) The Aura Defendants have not made any payments on these last seven invoices. (Wasby Decl. ¶ 9.) Thus, the principal amount outstanding is $259,299.21. I recommend that Plaintiff be awarded this principal amount. See Arch Insurance Co. v. Precision Stone, Inc., 584 F.3d 33, 40-41 (2d Cir. 2009) (“In a typical breach of contract case, a non-breaching party is entitled to the payment it is due under the terms of the contract, less the payment it has already received.”).
In a footnote, Plaintiff states that the remaining balance was $3,695.44. (See Wasby Decl. at 3 n.1.) However, Plaintiff's damages chart shows the remaining amount due under Invoice No. 6501997 as $3,162.50. (See 1/12/24 Letter at 2; see also Wasby Decl. ¶ 8.) Thus, the Court uses the lower amount.
The Court also recommends that Plaintiff be awarded prejudgment interest at the rate of nine percent per annum, as required by New York law. See N.Y. C.P.L.R. §§ 5001(a), 5004. When calculating the interest due, it “shall be computed from the earliest ascertainable date the cause of action existed.” N.Y. C.P.L.R. § 5001(b). Where, as here, damages are incurred on a number of separate occasions, “interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.” G-Concept Ltd. v. A.H. Schreiber Co. Inc., 2015 WL 3767263, at *2 (S.D.N.Y. June 17, 2015). “Which date to use is up to the Court's discretion.” Voice Tele Servs., 2019 WL 6497507, at *4. The Court recommends selecting July 8, 2020 as a single reasonable intermediate date from which prejudgment interest shall be calculated through the date that judgment is entered.
Plaintiff also seeks to recover what it refers to as “contractual interest,” pursuant to § 3.04(b) of the 2016 Distribution Agreement (Pl.'s 1/12/24 Letter at 2-3), but which under the terms of the contract are late fees. Section 3.04(b) of the 2016 Distribution Agreement provides, in relevant part, that “[a]ny payments that are not paid when due shall accrue late fees at a rate of 1.5% per month, compounded on a monthly basis, or the maximum amount allowed by law, whichever is less.” (2016 Dist. Agmt., Wasby Decl. Ex. C, ECF No. 46-3, §3.04(b).) In addition, § 3.04(b) provides that Sirius “will invoice [Aura Multimedia Corp.] for such interest on the subsequent invoice.” (See id.) However, Plaintiff never included late fees (or interest) on any of its invoices. (See Invoices, Wasby Decl. Ex. D.) Since Plaintiff failed to invoice Aura Multimedia Corp. for late fees as required by § 3.04(b), the Court finds that Plaintiff is not entitled to recovery of late fees under the Agreement. In any event, the Court finds that late fees would be duplicative of the award of pre-judgment interest. See Ultra Coachbuilders, Inc., v. Gen. Sec. Ins. Co., 229 F.Supp.2d 284, 289 (S.D.N.Y.2002) (“prejudgment interest . . . fully compensates [plaintiff] for the delay in payment”); see also See Voice Tele Servs. Inc. v. Blu-Dot Telecoms Ltd., No. 19-CV-05252 (JGK) (OTW), 2019 WL 6497507, at *3 (S.D.N.Y. Dec. 2, 2019) (“[t]o permit both interest awards would be to allow duplicative compensation for the delay in Plaintiff receiving its owed payment”).
II. Lanham Act Claims
Plaintiff's second through sixth claims for relief relate to the Aura Defendants' unauthorized use of Plaintiff's marks under the Lanham Act, including trademark counterfeiting, trademark infringement, false association, false advertising, trademark dilution and unfair and deceptive trade practices. (See Compl., ECF No. 1.)
A. Damages
Plaintiff seeks $536,662.40 in damages, consisting of $500,000.00in statutory damages under Lanham Act § 35(c), 15 U.S.C. § 1117(c), and $36,662.40 in prejudgment interest, calculated through the end of January 2024. (Pl.'s 1/12/24 Letter at 3-4.)
Plaintiff originally sought an award of $2,000,000.00 in statutory damages. (Pl.'s Mem. Support Mot. for Default J., ECF No. 43, at 20.)
Plaintiff and the Court discuss only the trademark counterfeiting claim “because a plaintiff is not entitled to duplicative recoveries for the same intellectual property theft under multiple theories of liability.” Kelly Toys Holdings LLC v. Guangzhou Lianqi Technology Co., Ltd., No. 21-CV-08111 (AS) (GWG), 2024 WL 1360919, at *3 (S.D.N.Y. Apr. 1, 2024) (internal quotation marks omitted).
Under the Lanham Act, at any time before final judgment is entered, a trademark owner may elect to recover an award of statutory damages, rather than actual damages, in cases of use of a counterfeit mark. See 15 U.S.C. § 1117(c); see also FoxMind Canada Enterprises Ltd. v. Beijing Hui Xin Zhi Xiang Shangmao Youxian Gongsi, No. 22-CV-09383 (JGK), 2024 WL 532056, at *4 (S.D.N.Y. Feb. 9, 2024) (Plaintiff “may elect, in lieu of actual damages and profits, an award of statutory damages . . . as the court considers just”) (quoting 15 U.S.C. § 1117(c)). “Statutory damages particularly are appropriate where actual damages are difficult to calculate.” Allstar Mktg. Grp., LLC v. 4utoto, No. 20-CV-08401 (PAE) (SDA), 2022 WL 938220, at *4 (S.D.N.Y. Mar. 2, 2022), report and recommendation adopted, 2022 WL 930638 (S.D.N.Y. Mar. 28, 2022) (citing Bus. Trends Analysts, Inc. v. Freedonia Grp., Inc., 887 F.2d 399, 406 (2d Cir. 1989)). “Indeed, the rationale underlying the Lanham Act's statutory damages framework is the practical inability to determine profits or sales made by counterfeiters.” Id. (internal quotation marks omitted); see also Sara Lee Corp. v. Bags of New York, Inc., 36 F.Supp.2d 161, 165 (S.D.N.Y. 1999) (“Statutory damages are most appropriate when infringer nondisclosure during fact finding leaves damages uncertain.”).
“The range of available statutory damages available for trademark counterfeiting is determined by whether or not the defendant's conduct was willful.” Hudson Furniture, Inc. v. Mizrahi, No. 20-CV-04891 (PAC) (RWL), 2024 WL 565095, at *3 (S.D.N.Y. Feb. 7, 2024). Where, as here, defendants have defaulted, they are considered to have committed a willful violation. See All-Star Mktg. Grp., LLC v. Media Brands Co., 775 F.Supp.2d 613, 621 (S.D.N.Y. 2011) (“Defendants have defaulted . . . and by virtue of their default are deemed to be willful infringers.”); see also GAKM Res. LLC v. Jaylyn Sales Inc., No. 08-CV-06030, 2009 WL 2150891, at *6 (S.D.N.Y. July 20, 2009) (noting that, for purposes of § 1117, “where a defendant defaults, that may be taken as evidence of willful infringement”).
Statutory damages may be awarded 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. § 1117(c). “District courts have wide discretion in awarding statutory damages.” Allstar Mktg. Grp., 2022 WL 938220, at *4.
“Section 1117(c) does not specify criteria for determining the amount of statutory damages that may be awarded” and instead “authorizes awards as the court considers just, thereby affording courts broad discretion to determine the amount of damages appropriate to achieve the Lanham Act's dual goals of compensation and deterrence.” Hudson Furniture, 2024 WL 565095, at *4 (internal quotation marks omitted). However, courts typically consider seven factors: “(1) expenses saved and profits reaped by the infringer/defendant; (2) the plaintiff's lost revenues; (3) the value of the trademark; (4) the need to deter other potential infringers; (5) whether the defendant's conduct was innocent or willful; (6) the cooperativeness of the defendant in providing records relevant to profits and losses; and (7) the need to deter the defendant from future misconduct.” Mattel, Inc. v. www.power-wheels-outlet.com, No. 21-CV-08108 (PAE) (GWG), 2022 WL 2900763, at *3 (S.D.N.Y. July 22, 2022), report and recommendation adopted, 2022 WL 3159317 (S.D.N.Y. Aug. 8, 2022).
Plaintiff does not address these factors and argues only that its “marks are strong and well known and the [Aura Defendants] continued to use them, without consent, in the face of a clear contract requiring cessation of use and a cease and desist letter sent by SiriusXM notifying them of their legal liability and instructing them to cease using the marks” and that the $500,000.00 in statutory damages “reflects both the [Aura Defendants'] actions and the need to deter similar acts of counterfeiting in the future.” (Pl.'s 1/12/24 Letter at 3.)
Because the Aura Defendants have not appeared in this action, Plaintiff likely lacks information regarding the first two factorsand, thus, these factors weigh in favor of Plaintiff. See Off-White LLC v. ^_^Warm House^_^Store, No. 17-CV-08872 (GBD) (GWG), 2019 WL 418501, at *5 (S.D.N.Y. Jan. 17, 2019) (“Plaintiff should not be deprived of its right to recover statutory damages simply because it is impossible to discern the expenses saved and profits reaped by the Defaulting Defendants.”). With respect to the third factor, Plaintiff has not presented evidence regarding the value of the trademarks at issue. “When presented with [ ] limited evidence as to the value of a trademark, courts have made either neutral findings as to factor three . . . or have found that the factor weighs against a substantial damages award.” Mattel, 2022 WL 2900763, at *3 (comparing cases). However, courts have inferred the value of a trademark from its well-known reputation. See Off-White, 2019 WL 418501, at *5. Sirius is a well-known brand, but given these conflicting considerations, the Court finds that the third factor neither weighs for or against Plaintiff. Factors four and seven, which relate to deterrence, plainly weigh in Plaintiff's favor. As set forth above, by virtue of their default the Aura Defendants are deemed to be willful infringers. Also by virtue of their default, they have not cooperated in this action. Thus, factors five and six also weigh in favor of Plaintiff.
Although Burton did appear in this action, only jurisdictional discovery occurred prior to Plaintiff and Burton engaging in mediation. It is unclear to the Court what, if any, discovery was exchanged in the course of mediation.
Weighing these factors, the Court finds that the statutory damage award of $500,000.00 requested by Plaintiff is just and achieves the Lanham Act's dual goals of compensation and deterrence. See Ontel Prod. Corp. v. Amico Int'l Corp., No. 07-CV-07356 (JGK) (FM), 2008 WL 4200164, at *5 (S.D.N.Y. Aug. 19, 2008), report and recommendation adopted, 2008 WL 4298504 (S.D.N.Y. Sept. 11, 2008) (awarding $500,000.00 in statutory damages under Lanham Act). Accordingly, I recommend that Plaintiff be awarded statutory damages of $500,000.00 for its Lanham Act claims.
B. Attorneys' Fees And Prejudgment Interest
Section 35(a) of the Lanham Act provides that courts “in exceptional cases may award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). In addition, “[w]here a plaintiff elects statutory damages, an award [of prejudgment interest] is within the discretion of the trial court and is normally reserved for exceptional cases.” Omega SA v. 375 Canal LLC, No. 12-CV-06979 (PAC), 2019 WL 2442434, at *3 (S.D.N.Y. June 12, 2019), aff'd, 984 F.3d 244 (2d Cir. 2021) (internal quotation marks omitted). “Awards of prejudgment interest in ‘exceptional cases' are evaluated under the same standard used by courts to determine the entitlement to attorneys' fees.” Id.
Where, as here, a plaintiff elects to recover statutory damages under § 1117(c), attorneys' fees are recoverable under the “exceptional cases” provision of §1117(a), not under the mandatory provision of § 1117(b). See Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 109 & n. 25, 111 (2d Cir. 2012).
An “exceptional case” is “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.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014). “District courts have ‘wide latitude as they engage in a case-by-case exercise of their discretion' to determine what qualifies as exceptional.” Stephen T. Greenberg, M.D., P.C. v. Perfect Body Image, LLC, No. 20-3912-CV, 2022 WL 275378, at *1 (2d Cir. Jan. 31, 2022) (quoting 4 Pillar Dynasty LLC v. N.Y.& Co., 933 F.3d 202, 215 (2d Cir. 2019)). “In that case-by-case exercise, courts consider the totality of the circumstances, including factors such as frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Id. (internal quotation marks omitted); see also Octane, 575 U.S. at 554 n.6 (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)); see also Manhattan Rev. LLC v. Yun, 765 Fed.Appx. 574, 578 (2d Cir. 2019) (district courts are “encourag[ed]” to apply “the Fogerty factors from the Copyright Act context” in exercising discretion as to fee requests under the Lanham Act).
In Octane, the Supreme Court construed an identical provision under the Patent Act. The Second Circuit has since adopted that construction in the context of the Lanham Act. See Sleepy's LLC v. Select Comfort Wholesale Corp., 909 F.3d 519, 530-31 (2d Cir. 2018).
Plaintiff argues that this case is exceptional because the Aura Defendants defaulted and, therefore, the infringement was willful. (Pl.'s Mem. Support Mot. for Default J. at 23 (citing Antetokounmpo v. Searcy, No. 20-CV-05055 (JGK) (KHP), 2021 WL 3233417, at *6 (S.D.N.Y. May 20, 2021), report and recommendation adopted, 2021 WL 3233005 (S.D.N.Y. June 23, 2021)).) However, the case cited by Plaintiff (i.e., Antetokounmpo) relies on the pre-Octane standard. Although Octane is more lenient in that fraud, bad faith or willful infringement are no longer required for a fee award under the Lanham Act, see Focus Prod. Grp. Int'l, LLC v. Kartri Sales Co., Inc. Marquis Mills, Int'l, Inc., No. 15-CV-10154 (PAE) (SDA), 2023 WL 3815276, at *3 (S.D.N.Y. June 5, 2023) (citing 4 Pillar Dynasty, 933 F.3d at 215-16 (precedents requiring showing of willfulness have been overtaken by Octane)), courts in this Circuit have interpreted Octane “to mean that default judgment does not necessarily make a case ‘exceptional.'” Linhope Int'l Ltd. v. Jianqing Ltd., No. 21-CV-00871 (VLB), 2023 WL 2473007, at *6 (D. Conn. Mar. 13, 2023) (citing Experience Hendrix, LLC v. Pitsicalis, No. 17-CV-01927 (PAE) (GWG), 2020 WL 3564485, at *15 (S.D.N.Y. July 1, 2020), report and recommendation adopted, 2020 WL 4261818 (S.D.N.Y. July 24, 2020) (“[M]erely defaulting does not make a case exceptional.”)); Travel Leaders Grp., LLC v. Corley, No. 19-CV-01595 (GBD) (JLC), 2019 WL 6647319, at *14 (S.D.N.Y. Dec. 5, 2019) ("[T]he Court shares the view of several district courts in other circuits that [a] failure to respond does not make the case exceptional, otherwise every default case would warrant attorney's fees, which is not supported by the statute.”) (internal quotation marks omitted)).
Considering the relevant factors and totality of the circumstances in this case, the Court finds that that the Aura Defendants' default does not render this case exceptional. Plaintiffs do not argue, nor can the Court ascertain, any other basis on which this case stands out from others in regard to its frivolousness or objective reasonableness. Notably, courts in this district have recognized that a defaulting defendant that never appeared “could not have litigated unreasonably because [it] did not litigate at all.” Linhope, 2023 WL 2473007, at *6 (citing Travel Leaders, 2019 WL 6647319, at *14). Rather, “most post-Octane cases awarding fees continue to involve substantial litigation misconduct.” Hockeyline, Inc. v. STATS LLC, No. 13-CV-01446 (CM), 2017 WL 1743022, at *5 (S.D.N.Y. Apr. 27, 2017); see also Experience Hendrix, 2020 WL 3564485, at *16 (recommending fee award where defendant originally appeared through counsel but then failed to participate in discovery despite multiple court orders). Accordingly, the Court recommends that Plaintiff's request for attorneys' fees and prejudgment interest on its Lanham Act claims be denied.
C. Injunctive Relief
Plaintiff also seeks injunctive relief in connection with its Lanham Act claims. Plaintiff seeks to permanently enjoin the Aura Defendants from using any of its marks without authorization and from holding themselves out as affiliated in any way with Plaintiff. (Pl.'s 1/12/24 Letter at 4.)
Section 34 of the Lanham Act authorizes the Court to enter an injunction “according to the principles of equity and upon such terms as the court may deem reasonable.” 15 U.S.C. § 1116(a). “In intellectual property actions, permanent injunctions generally are granted when there is a threat of continuing violations.” See Antetokounmpo, 2021 WL 3233417, at *7 (internal quotation marks and alterations omitted). “Once success on the merits is established, ‘[a] plaintiff seeking a permanent injunction . . . must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.'” Hudson Furniture, 2024 WL 565095, at *16 (quoting Salinger v. Colting, 607 F.3d 68, 77 (2d Cir. 2010)). “A permanent injunction must be narrowly tailored to fit specific legal violations and should not impose unnecessary burdens on lawful activity. But a party who has once infringed a trademark may be required to suffer a position less advantageous than that of an innocent party . . . and a court can frame an injunction which will keep a proven infringer safely away from the perimeter of future infringement.” Id. at *17 (quoting Lexington Furniture Industries, Inc. v. Lexington Company, AB, No. 19-CV-06239, 2022 WL 13848274, at *12 (S.D.N.Y. Oct. 24, 2022) (internal quotation marks and citations omitted)).
Plaintiff has established liability on its Lanham Act claims and, thus, Plaintiff has established success on the merits and its allegations in the Complaint establish irreparable injury. See Pitbull Prods., Inc. v. Universal Netmedia, Inc., No. 07-CV-01784 (RMB) (GWG), 2007 WL 3287368, at *6 (S.D.N.Y. Nov. 7, 2007). Although references to Plaintiff's marks were removed from the Aura Defendants' website after the filing of the Complaint in this action (see Pl.'s Mem. Support Mot. for Default J. at 17), prior to that, the Aura Defendants had used Plaintiff's marks without consent for at least one year, despite a cease-and-desist letter. (See Compl. ¶¶ 25-26.) Thus, the Aura Defendants' past behavior suggests that it “might continue to engage in infringing activities and counterfeiting unless enjoined by the Court, demonstrating the danger that monetary damages will fail to fully provide [Plaintiff] with relief.” See Rovio Ent., Ltd. v. Allstar Vending, Inc., 97 F.Supp.3d 536, 547 (S.D.N.Y. 2015). With respect to the balance of hardships, “[i]t is axiomatic that an infringer . . . cannot complain about the loss of ability to offer its infringing product.” Id. (quoting WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 287 (2d Cir.2012) (alteration in original)). Finally, “the public has an interest in not being deceived-in being assured that the mark it associates with a product is not attached to goods of unknown origin and quality.” Id. (quoting N.Y.C. Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F.Supp.2d 305, 344 (S.D.N.Y. 2010)). Thus, the relevant factors weigh in favor of granting Plaintiff a permanent injunction. I recommend that the Court enter an injunction enjoining the Aura Defendants from using any of Plaintiff's marks without authorization and from holding themselves out as affiliated in any way with Plaintiff.
III. GBL § 349 Claim
Plaintiff also seeks damages for its unfair and deceptive trade practices claim pursuant to GBL § 349 related to the Aura Defendants' unauthorized use of Plaintiff's marks. (Compl. ¶¶ 7882.) Plaintiff seeks $1,000 in statutory damages, injunctive relief and attorneys' fees. (Pl.'s 1/12/24 Letter at 4-5; see also Pl.'s Mem. Support Mot. for Default J. at 23.)
GBL § 349(h) “provides for the opportunity to recover the greater of actual damages or fifty dollars.” Grand Gen. Store, Inc. v. Royal Indem. Co., No. 93-CV-03741 (CSH), 1994 WL 163973, at *3 (S.D.N.Y. Apr. 22, 1994) (citing GBL § 349(h)); see also Allegra v. Luxottica Retail N. Am., 341 F.R.D. 373, 395 (E.D.N.Y. 2022). “The Act also provides the private litigant with the opportunity to treble his actual damages up to one thousand dollars, if the court, in its discretion, finds that the defendant ‘willfully or knowingly violated this section.'” Grand Gen. Store, Inc. 1994 WL 163973, at *3 (quoting GBL § 349(h)); see also Koch v. Greenberg, 14 F.Supp.3d 247, 262 (S.D.N.Y. 2014)). Here, Plaintiff has not submitted evidence of actual damages and therefore the Court cannot treble such damages. Accordingly, I recommend that Plaintiff be award $50.00 on its GBL claim.
However, the Court finds that an award of attorneys' fees under the GBL is not warranted. Plaintiff primarily relies upon the Lanham Act to support its request for attorneys' fees and, therefore, does not specifically address why fees are appropriate under the GBL. The decision of whether to award fees under the GBL “remains in the sole discretion of the court.” Indep. Living Aids, Inc. v. Maxi-Aids, Inc., 25 F.Supp.2d 127, 131 (E.D.N.Y. 1998). Courts may consider the purpose of the GBL in deciding whether to award fees. See id. at 132. Although the Court previously found that the Aura Defendants' conduct was sufficiently consumer-oriented to state a claim for relief, this case “is not within the heartland of the types of cases animating the fee-shifting provisions of the GBL,” as “it does not involve consumers who are vulnerable or disadvantaged,” or “conduct with a broad impact on consumers at large.” See Koch v. Greenberg, 14 F.Supp.3d 247, 280 (S.D.N.Y. 2014), aff'd, 626 Fed.Appx. 335 (2d Cir. 2015) (denying motion for fees under GBL); see also Diller v. Steurken, 185 Misc.2d 274, 278-79, 712 N.Y.S.2d 311, 314-15 (Sup. Ct. 2000) (discussing goals of GBL and declining to award attorneys' fees despite defendant's liability following default). Accordingly, I recommend that Plaintiff's request for attorneys' fees on the basis of its GBL § 349 claim be denied.
IV. Offset
After settling with Burton, Plaintiff reiterated its request for the above damages in a January 30, 2024 letter, asking that the settlement amount not offset these damages. (Pl.'s 1/30/24 Letter at 1-2). The Court finds that the Aura Defendants should not receive an offset for Plaintiff's settlement with Burton.
Generally, “when a plaintiff settles with one of several joint tortfeasors, the non-settling defendants are entitled to a credit for that settlement,” though nothing prohibits a plaintiff from recovering more than his actual losses. Johnson v. Dumphy, No. 09-CV-02758 (ILG) (SMG), 2011 WL 6101957, at *5 (E.D.N.Y. Nov. 14, 2011), report and recommendation adopted, 2011 WL 6111236 (E.D.N.Y. Dec. 7, 2011) (quoting McDermott, Inc. v. AmClyde, 511 U.S. 202, 208, 219 (1994)). However, “most courts in the Second Circuit . . . have held that a defendant in default may not invoke the benefits of the set-off rule.” Xochimitl v. Pita Grill of Hell's Kitchen, Inc., No. 14-CV-10234 (JGK) (JLC), 2016 WL 4704917, at *12 (S.D.N.Y. Sept. 8, 2016), report and recommendation adopted, 2016 WL 6879258 (S.D.N.Y. Nov. 21, 2016). A court may use its discretion in considering the circumstances and the amount of the settlement in deciding whether to apply an offset. See Johnson, 2011 WL 6101957, at *5. However, a “windfall should not accrue to the benefit of the party who has refused to participate in litigation.” RLI Ins. Co. v. King Sha Group, 598 F.Supp.2d 438, 447 (S.D.N.Y Feb. 10, 2009) (quoting Godfrey v. Soto, No. 06-CV-00428 (NG) (JO), 2007 WL 2693652, at *7 (E.D.N.Y. Sept. 10, 2007)); see also JTH Tax, 2023 WL 6813449, at *3.
In light of the circumstances here, the Court finds that a set-off is “neither required by law nor necessary to achieve a just result.” Johnson, 2011 WL 6101957, at *5. Therefore, I recommend that the Court decline to apply a set-off from the settlement with Burton in assessing damages against the Aura Defendants.
V. Post-Judgment Interest
Plaintiff is entitled to post-judgment interest. See Schipani v. McLeod, 541 F.3d 158, 165 (2d Cir. 2008) (holding that post-judgment interest is mandatory and calculated pursuant to federal statute); see also Bleecker v. Zetian Sys., Inc., No. 12-CV-02151 (DLC), 2013 WL 5951162, at *2 (S.D.N.Y. Nov. 1, 2013) (“Although the Complaint did not seek relief in the form of post-judgment interest, such relief is mandatory under federal law.”) (citing Westinghouse Credit Corp. v. D'Urso, 371 F.3d 96, 100 (2d Cir. 2004)). I recommend that Plaintiff be awarded post-judgment interest at the statutory rate pursuant to 28 U.S.C. § 1961(a) from the date of judgment to the date of payment.
CONCLUSION
For the foregoing reasons, I respectfully recommend that the Court enter judgment for Plaintiff against the Aura Defendants in the amount of $259,299.21 in damages plus prejudgment interest on its breach of contract claim at the rate of nine percent per annum from July 8, 2020 until the date that judgment is entered; $500,000.00 in statutory damages on its Lanham Act claims; and $50.00 in damages on its GBL claim. I further recommend that the Court order injunctive relief as set forth in Discussion Section II(C) supra, and that Plaintiff be awarded post-judgment interest.
No later than Monday, April 8, 2024, Plaintiff shall serve by mail upon the Aura Defendants a copy of this Report and Recommendation and file proof of service to the ECF docket.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d). A party may respond to another party's objections within fourteen days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Woods.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).