Opinion
CIVIL ACTION NO. 16-11830-DPW
04-28-2017
CORE BRANDS, LLC, Plaintiff, v. DESIGNER AUDIO VIDEO, DEPENDABLE AUDIO, ELECTRONICS DROP SHIP, INC., ELEGANT ELECTRONICS, INC., CONSUMER AV GROUP, INC., THE HOUSE OF AUDIO NJ, INC., AND JOHN DOE, Defendants.
REPORT AND RECOMMENDATION RE: PLAINTIFF'S MOTION FOR TRUSTEE PROCESS ATTACHMENT UPON PAYPAL, INC.
(DOCKET ENTRY # 14) BOWLER, U.S.M.J.
On February 20, 2017, plaintiff Core Brands, LLC ("plaintiff" or "Core Brands") filed a motion for trustee process attachment of "goods, effects and credits" of defendants Designer Audio Video ("Designer AV") and Dependable Audio ("DA") in the possession, custody, or control of PayPal, Inc. ("PayPal") in the amount of $200,000. (Docket Entry # 14). Although not labeled as an ex parte motion, the motion does not attach a certificate of service.
In the event of a default for failure to appear, Fed.R.Civ.P. 5(a) does not require service. See Fed.R.Civ.P. 5(a)(2). On the other hand, a judgment debtor has an interest in the attachment proceedings and Massachusetts law, which applies to post-judgment collection proceedings except to the extent a federal statute governs, see Fed.R.Civ.P. 69(a), requires notice. See Mass.R.Civ.P. 4.2; Smith v. Solomon & Solomon, P.C., 714 F.3d 73, 74 (1st Cir. 2013).
BACKGROUND
On September 7, 2016, Core Brands filed a complaint against Designer AV, DA, defendant Electronics Drop Ship, Inc. ("Electronics Drop Ship"), defendant Elegant Electronics, Inc. ("Elegant Electronics"), defendant Consumer AV Group, Inc. ("Consumer AV"), defendant House of Audio NJ, Inc. ("House of Audio"), and defendant John Doe (collectively "defendants"). The complaint alleges that Designer AV, DA, and Electronics Drop Ship sold "a variety of electronics equipment" and acted as "unauthorized reseller[s] of Core Brands products." (Docket Entry # 1). Elegant Electronics is "a prior registrant" of a website that Designer AV ("Designer AV website") uses to resell electronics equipment, according to the complaint. Consumer AV is purportedly a prior registrant of the Designer AV website and a website that DA uses to resell electronics equipment ("DA website"). (Docket Entry # 1). The complaint also alleges that House of Audio, "a former authorized Core Brands dealer," is involved with Designer AV, DA, and Electronics Drop Ship. (Docket Entry # 1).
Count I of the complaint alleges that defendants engaged in "trademark infringement - unfair competition" in violation of the Lanham Act, 15 U.S.C. § 1051. (Docket Entry ## 1, ¶¶ 36-37). Count II alleges trademark infringement based on counterfeiting in violation of the Lanham Act, 15 U.S.C. § 1147(1)(b). Count III alleges a violation of Massachusetts General Laws chapter 93A ("chapter 93A") as a result of defendants' sales of Core Brands' products. (Docket Entry # 1).
The complaint requests that the court "[p]reliminarily and permanently enjoin [d]efendants," and instruct defendants to "pay Core Brands the actual damages and profits realized" and "the costs and attorney's fees incurred." (Docket Entry # 1). The complaint also seeks treble damages based on defendants' knowing and willful conduct under chapter 93A, section 11. (Docket Entry # 1).
On October 11, 2016, plaintiff filed a motion for an order for alternative service of process. (Docket Entry # 4). Because defendants conduct only online business and Core Brands was unable to locate defendants after a diligent search, the court allowed the motion for alternative service through electronic means using the email addresses provided on defendants' websites. See Fed.R.Civ.P. 4(e)(1); see also Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 308, 314 (1950) (alternative service satisfies due process when it is "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections"). Thereafter, defendants failed to respond to the properly served summons and complaint.
At plaintiff's request, notices of default issued against DA, Designer AV, and Electronics Drop Ship. Plaintiff filed a notice to voluntarily dismiss the remaining defendants on December 28, 2016. Plaintiff also filed a motion for a default judgment and permanent injunctive relief as to DA, Designer AV, and Electronics Drop Ship. (Docket Entry # 12). On January 24, 2017, the court granted plaintiff's motion for a default judgment and entered a default judgment against these defendants. (Docket Entry # 13, ¶ 1). Under the Order, all goods and advertising with infringing markings were to be "recalled, impounded, or destroyed pursuant to 15 U.S.C. § 1118," plaintiff was awarded damages of $200,000 from each defendant pursuant to 15 U.S.C. § 1117(c)(1), and plaintiff was awarded costs and reasonable attorneys' fees in bringing the action. (Docket Entry # 13).
On February 20, 2017, plaintiff filed the post-judgment motion for an ex parte trustee summons and attachment on the goods, effects, and credits of Designer AV and DA "that are in the possession, custody, or control of [PayPal] in the amount of $200,000.00 per [d]efendant." (Docket Entry # 14).
DISCUSSION
In accordance with Fed.R.Civ.P. 64, ex parte trustee process is governed by Mass.R.Civ.P. 4.2(g) ("Rule 4.2(g)"). Even though the Massachusetts Rules of Civil Procedure allow for ex parte trustee attachment at the start of a civil action, they do not exclude the process post-judgment. See Commercial Printers of Connecticut, Inc. v. Letter-Men Publishing Company, 1998 WL 45402, at *1-3 (D.Mass. May 5, 1998). As such, trustee process is available where, as here, the court granted plaintiff's motion for a default judgment and permanent injunctive relief. See id.; accord Latorraca v. Taniki Fin. Corp., 2010 WL 3245365, at *2 (1st Cir. Aug. 18, 2010) (though attachment generally takes place pre-judgment, "'there appears to be no prohibition against a plaintiff seeking approval of a trustee attachment after judgment has entered'") (quoting Jordan L. Shapiro et al., Massachusetts Practice: Collection Law § 5:54 (3d ed.) (unpublished).
Under trustee process, the trustee holds the tangible property or credits of the defendant for the benefit of the plaintiff. Arlington Trust Co. v. Le Vine, 197 N.E. 195 (Mass. 1935). The attached property must be under the actual possession, as opposed to mere constructive possession, of the trustee. Brown v. Floersheim Mercantile Co., 92 N.E. 494 (Mass. 1910).
Rule 4.2(g) provides for ex parte trustee process upon a showing that "there is a reasonable likelihood that the plaintiff will recover judgment in an amount equal to or greater than the amount of the trustee process over and above any liability insurance known or reasonably believed to be available." Mass.R.Civ.P. 4.2(g). Logic nevertheless dictates that not all procedures governing ex parte trustee process at the commencement of a suit govern ex parte trustee attachment post-judgment. See generally McCahey v. L.P. Investors, 774 F.2d 543, 548 (2d Cir. 1985) ("law of pre-judgment remedies, while suggestive, does not automatically govern post-judgment remedies"). Indeed, as posited in Latorraca, "It is not clear what, if anything, must be shown to obtain a post-judgment trustee attachment, since the plaintiff will have already prevailed on the merits of the underlying claim." Latorraca v. Taniki Fin. Corp., 2010 WL 3245365, at *2; see also McCahey v. L.P. Investors, 774 F.2d at 548. Thus, "'Once plaintiff has in fact recovered judgment, it appears that the plaintiff would be able to satisfy the requirement of showing a "reasonable likelihood" of recovery.'" Latorraca v. Taniki Fin. Corp., 2010 WL 3245365, at *2 (quoting Jordan L. Shapiro et al., Massachusetts Practice: Collection Law § 5:54 (3d ed.), in parenthetical); see generally Ortiz-Gonzalez v. Fonovisa, 277 F.3d 59, 62-63 (1st Cir. 2002) ("defaulting party 'is taken to have conceded the truth of the factual allegations in the complaint as establishing the grounds for liability as to which damages will be calculated'"); Eisler v. Stritzler, 535 F.2d 148, 153 (1st Cir. 1976) ("default judgment on the well-pleaded allegations in plaintiff's complaint established . . . defendant's liability"); Quinones v. MSA Records, Inc., 2010 WL 4273932, at *2 (D.P.R. Oct. 29, 2010), as amended (Nov. 2, 2010).
Accordingly, the default judgment established plaintiff's entitlement to recover the amount of $200,000 from DA, Designer AV, and Electronics Drop Ship as well as costs and reasonable attorneys' fees. The ruling therefore encompasses a reasonable likelihood of success that plaintiff will recover this amount. Hence, it is illogical to require plaintiff to establish a likelihood of success on the merits.
Rule 4.2(c) requires service on defendant of "a copy of the trustee summons in cases where attachment has been approved ex parte." Mass.R.Civ.P. 4.2(c). Rule 4.2(h) allows a defendant to file a motion to dissolve or modify the trustee process and provides a hearing at which plaintiff has the burden to justify "any finding in the ex parte order." Mass.R.Civ.P. 4.2(h).
In the event plaintiff seeks a trustee summons in the future and does not serve Designer AV or DA with the filings, plaintiff should address whether Fed.R.Civ.P. 5(a)(2) precludes such service in light of the default by Designer AV and DA. See fn. 1.
Under Rule 4.2(g), issuance of a trustee summons prior to notifying and providing a hearing for the defendant is not constitutionally required. See Dionne v. Bouley, 757 F.2d 1344, 1352 (1st Cir. 1985) (finding it "consistent with Mathews not to require notice or hearing before a post-judgment attachment").
Notably, Massachusetts law limits trustee process to trustees that maintain a usual place of business in Massachusetts. See Mass. Gen. Laws ch. 246, § 1 ("individual who is not an inhabitant of the commonwealth, or a foreign corporation or association, shall not be so summoned unless he or it has a usual place of business in the commonwealth") (emphasis added); Mass. Gen. Laws ch. 246, ("[n]o person shall be held to answer as a trustee in an action in a district court . . . in any county other than that where he . . . has a usual place of business") (emphasis added); Smith v. Solomon & Solomon, P.C., 714 F.3d at 75-76. The statutory requirements of trustee process "are strictly enforced." Mass.R.Civ.P. 4.2, Reporter's Notes. Here, PayPal has a registered agent in Massachusetts. (Docket Entry # 14-2). Plaintiff, however, fails to show that PayPal has a usual place of business in Massachusetts. Rather, plaintiff cites to a factual finding made in a May 2013 Report and Recommendation in Bose Corporation v. Ejaz, Civil Action No. 11-10629-DJC, No. 70 (D.Mass. May 10, 2013), which was supported by an affidavit in that case. (Docket Entry # 14, pp. 3-4). The facts in Bose do not establish the facts in this case let alone the usual place of business of PayPal in April 2017.
The opinion is attached to the motion for trustee process. (Docket Entry # 14-1).
Although the foregoing results in a recommendation to deny the motion without prejudice, plaintiff also fails to provide a "certificate . . . of the amount of any liability insurance which [it] knows or has reason to believe will be available to satisfy any judgment against the defendant in the action." Mass.R.Civ.P. 4.2(g); see McCahey v. L.P. Investors, 774 F.2d at 548. In addition, plaintiff fails to provide sufficient support for a finding that one of the three statutory conditions for ex parte trustee process exist. See Mass.R.Civ.P. 4.2(g)(i)-(iii).
CONCLUSION
In accordance with the foregoing discussion, this court RECOMMENDS that the motion for trustee attachment (Docket Entry # 14) be DENIED without prejudice.
Any objections to this Report and Recommendation must be filed with the Clerk of Court within 14 days of receipt of the Report and Recommendation to which objection is made and the basis for such objection should be included. See Fed.R.Civ.P. 72(b). Any party may respond to another party's objections within 14 days after service of the objections. Failure to file objections within the specified time waives the right to appeal the order.
/s/ Marianne B. Bowler
MARIANNE B. BOWLER
United States Magistrate Judge