Opinion
7:23-CV-00005-M
05-23-2024
Alyssa Nobriga, et al., Plaintiffs, v. La Kumbala Lounge & Restaurant, Inc., et al., Defendants.
MEMORANDUM & RECOMMENDATION
Robert T. Numbers, II United States Magistrate Judge.
This matter is before the court on Plaintiffs' motion for default judgment. They claim that Defendants La Kumbala Lounge & Restaurant, Inc., and Sergio Umana Portillo have failed to defend against the case. Defendants did not respond to Plaintiffs' motion.
Plaintiffs filed a Complaint, which the Defendants did not answer. D.E. 1. Plaintiffs moved for an entry of default, which the court granted. D.E. 25, 29. Plaintiffs now move for default judgment on four of the eight claims alleged in the Complaint. D.E. 33. They contend that default judgment is the suitable relief for the Defendants' failure to appear, plead, or otherwise defend against their claims.
After considering the record, the undersigned concludes that the Plaintiffs have shown they are entitled to the relief they seek. The Defendants have not refuted the Plaintiffs' evidence on their claims for false advertisement, false association, misappropriation, and unfair and deceptive trade practices.
The undersigned finds that default judgment on four of the claims is the appropriate relief to address the Defendants' disregard of the case. Their default by failing to appear, plead, or otherwise defend against the action by responding to the Complaint and Summonses prejudices the Plaintiffs, the judicial process, and the administration of justice. The Defendants have created a situation that warrants default judgment against them.
I. Background
Plaintiffs are twelve professional models. Compl. ¶ 30, D.E. 1. Each Plaintiff earns her livelihood licensing her identity, image, and likeness (collectively “Images”) advertising products and services. Id.
The modeling industry places value on the Plaintiffs professional reputation for modeling, a critical factor to booking contracts and establishing their individual brands. Id. ¶ 31. To maintain and further their brands, each Plaintiff is selective in selecting the companies and brands for which they model. Id.
A professional model's agency negotiates her fee. Id. ¶ 85. This involves consideration of the reputation and experience, how the client will use the images (“usage”), and how long the client may use the images (“term”). Id. Most terms are from one to three years, and lifetime terms rarely occur. Id. ¶ 86.
Defendant La Kumbala Lounge & Restaurant, Inc. owned La Kumbala Lounge & Restaurant (“Kumbala” or the “Club”), a restaurant and night club in Wilmington, North Carolina. Id. ¶ 25. Defendant Sergio Portillo is the corporation's President. Id. ¶¶ 9, 26.
The Defendants owned, operated, and controlled the Club's social media accounts, including Kumbala Facebook, Twitter, and Instagram accounts. Id. ¶¶ 75, 76. It used these accounts to post advertisements for the Club. Id. Many of its advertisements contained images of the Plaintiffs, which the Defendants had misappropriated and altered to make it appear that the Plaintiffs worked at or endorsed the Club. Id. ¶¶ 32, 39, 42, 45, 48, 51, 54, 57, 60, 63, 66, 69, 72. For each Plaintiff, such appearance was false, and occurred without any Plaintiff's knowledge, consent, or authorization, and without remuneration to any Plaintiff. Id. ¶¶ 33, 34, 78, 79, 81.
Plaintiffs filed suit against the Defendants for false advertising, false association, misappropriation, unfair and deceptive trade practices. It seeks compensatory and punitive damages and injunctive relief.
The Complaint brought additional claims for negligence, conversion, unjust enrichment, and quantum meruit. But the motion for default judgment does not request relief on those causes of action.
Plaintiffs served the Complaint and Summonses on the Defendants. But the Defendants did not respond. So the Plaintiffs moved for an entry of default against them. D.E. 25. Defendants did not respond to that motion, and the Clerk of Court entered default against them. D.E. 29.
Plaintiffs have moved the court to enter default judgment against Defendants. D.E. 33. They maintain that the Defendants have disregarded this litigation. Id. And Plaintiffs request attorneys' fees and costs associated with the motion. Id.
II. Analysis
Plaintiffs ask the court to enter default judgment against Defendants for failing to appear, respond, and defend against the action. Defendants filed no response. The court should grant the Plaintiffs' motion because the Defendants have not appeared in, responded to, or defended this action and all the requirements for entry of default judgment are satisfied. And the Plaintiffs have shown entitlement to relief on four claims asserted in their Complaint.
A. Jurisdiction
1. Subject Matter
The court has subject matter jurisdiction over this dispute pursuant to 28 U.S.C. § 1331 because Plaintiffs' bring their false advertising and false association claims the Lanham Act, 28 U.S.C. § 1125(a)(1). Under 28 U.S.C. § 1367(a), the court has supplemental subject matter jurisdiction over their claims for common law misappropriation claim and the unfair and deceptive trade practices claim under state law. See N.C. Gen. Stat. § 75-1.1 et seq. And it is appropriate to exercise supplemental jurisdiction because these two claims “derive from [the same] common nucleus of operative fact” as the federal claims. United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966).
2. Personal Jurisdiction
The court has personal jurisdiction over Defendant La Kumbala Lounge & Restaurant, Inc. because it is a corporation formed under North Carolina laws with its principal place of business in North Carolina. Compl. ¶ 7. The corporation operates La Kumbala Lounge & Restaurant, located in Wilmington, North Carolina. Id. ¶ 8. Defendant Sergio Amana Portillo is the president of the corporation. Id. ¶ 9.
The Defendants were served with the Complaints and Summons in February 2023. D.E. 17, 18, 26, 27. Defendants have answered, responded, or otherwise moved against the Complaint. To the extent that the Defendants could have maintained any defense to personal jurisdiction, they have waived any such defense by their litigation conduct. See Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703 (1982).
B. Motion for Default Judgment
The Federal Rules allow the court to enter default judgment upon a party has defaulted by failing to appear, plead, or defend. Fed.R.Civ.P. 55(b). Rule 55 sets forth the process for obtaining such relief.
The Fourth Circuit has noted there is a strong interest in merits-based adjudications. Colleton Preparatory Acad., Inc. v. Hoover Universal, Inc., 616 F.3d 413, 417 (4th Ci. 2010). Here, though, Defendants' total indifference to the action has undermined that “strong interest.” They have failed to appear, answer or defend against the Complaint, or respond to the pleadings.
Defendants unresponsiveness and refusal to participate in the litigation has halted the adversary process. SEC v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005). In sum, Defendants' inaction extinguishes the prospect of a merits-based adjudication. This warrants the entry of default judgment against them.
1. Entry of Default
“Prior to obtaining a default judgment under either Rule 55(b)(1) or Rule 55(b)(2), there must be an entry of default as provided by Rule 55(a).” 10A Charles Alan Wright, et al., Federal Practice & Procedure § 2682 (4th ed. 2023); Ironhorse v. Stomel, No. 7:21-CV-27-D, 2022 WL 495191, at *2 (E.D. N.C. Jan. 19, 2022). “When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a).
Plaintiffs served the Complaint and Summonses on the Defendants. D.E. 15-18. As noted above, Defendants entered no appearance and did not plead or otherwise respond to the Complaint. In support of their motion for entry of default, Plaintiffs submitted a Declaration from Stephen Chamberlin setting forth their claimed damages. D.E. 33-1. The Clerk of Court entered default against the Defendants. D.E. 29.
2. Default Judgment
Once default has been entered, a party may seek a default judgment. Fed.R.Civ.P. 55(b). The “interlocutory entry of default pursuant to Federal Rule of Civil Procedure 55(a) provides notice to the defaulting party prior to the entry of default judgment by the court.” Epic Tech, LLC v. Raleigh Startup Sols. LLC, No. 5:23-CV-136-D, 2023 WL 9051298, at *6 (E.D. N.C. Dec. 29, 2023) (quoting Hummel v. Hall, 868 F.Supp.2d 543, 547 (W.D. Va. 2012)).
Here, the Defendants have not made an appearance or responded to the Complaint. The Clerk entered default against them. Plaintiff seek default judgment on four claims in their Complaint. And the undersigned finds Plaintiffs are entitled to that relief.
C. The Complaint Supports the Relief Plaintiffs Seek
After the entry of default, the well-pleaded factual allegations in the complaint are considered admitted. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001). Having determined that it is appropriate to enter a default judgment against a defendant, a court must ensure that, as a factual matter, the plaintiff is entitled to judgment in its favor. This requires a determination of “whether the well-pleaded allegations in [the operative] complaint support the relief sought.” Id. If facts as alleged in the Complaint entitle Plaintiffs to relief, Defendants, by their default, cannot now controvert them successfully. See Trans World Airlines, Inc. v. Hughes, 449 F.2d 51, 64 (2d Cir. 1971), rev'd on other grounds, Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363 (1973).
1. Findings of Fact
The undersigned finds the verified, unchallenged Complaint states the following well-pled facts.
Plaintiffs are twelve women who have earned their livelihoods as professional models. Compl. ¶ 30. They license their images to advertise products and services. Id.
There is a high value on a model's goodwill and reputation within the industry. Id. ¶ 31. A professional model's agency negotiates her fee based on several factors including her reputation, earning capacity, experience, and the market's demand for that particular model. Id. ¶85
Also relevant to a model's fee for photo rights include the usage and the term. Id. A lifetime term is rare, with more common terms being one to three years. Id. ¶ 86.
To establish and maintain their brands, Plaintiffs are selective about the companies for whom they model. Id. Plaintiffs use their own social media pages “to market to potential clients, grow their fan base, and build and maintain their brand[s].” Id. ¶ 36.
The Complaint sets forth each Plaintiff's career and background. Compl. ¶¶ 38-73. And it identifies each Plaintiff in Defendants' postings. Compl., Ex A-L.
Defendant La Kumbala Lounge and Restaurant sells food an alcohol at its establishment in Wilmington, North Carolina. Id. ¶¶ 25, 74. Its atmosphere is “sexually charged.” Id. ¶ 74. Defendant Portillo is the President of the La Kumbala corporation. Id. ¶ 26. Portillo directed, supervised, participated in, and is responsible for the acts and omissions alleged in the Complaint. Id.
Defendants own, operate, and control La Kumbala's social media accounts on Facebook, Instagram, and Twitter. Id. ¶ 75. Defendants use these platforms to promote the Club and attract patrons for financial gain. Id. ¶¶ 76, 77.
“Defendants” refers to La Kumbala and Portillo.
Now known as “X.
Defendants used and distributed Plaintiffs' images. Id. ¶¶ 32, 78. They intentionally altered them to give the appearance that Plaintiffs worked at, endorsed, or were associated with La Kumbala. Id. But this was false. Id. ¶ 33. No plaintiff has ever been affiliated with La Kumbala. Id. ¶ 80.
Defendants knew that they were violating Plaintiffs' privacy and publicity rights by creating a false impression with potential customers that they worked at or endorsed the Club. Id. ¶ 87. The misappropriation of Plaintiffs' images occurred without their knowledge, consent, permission, or authorization. Id. ¶¶ 34, 81, 91.
In some cases, Defendants misappropriated Plaintiffs' advertising ideas by seizing images from Plaintiffs' social media pages. Id. ¶ 36. And Defendants misappropriated images from other sources violating copyrights and licenses they never held. Id. ¶ 37.
Defendants have not paid Plaintiffs for using their Images. Id. ¶¶ 35, 82, 92. And their improper use of the images has caused Plaintiffs monetary damages and harmed their reputations, given the negative connotations a false association with La Kumbala suggests. Id. ¶¶ 36, 89.
2. Conclusions of Law
The well-pleaded allegations set out in the Complaint and the Declaration support the relief sought on four claims. See, e.g., United States ex rel. Wilson v. Graham Cty. Soil & Water Conservation Dist., No. 2:01-CV-00019, 2016 WL 910191, at *2 (W.D. N.C. Mar. 9, 2016); Am. Dairy Queen Corp. v. YS & J Enters., Inc., No. 5:14-CV-151-BR, 2014 WL 4055550, at *2 (E.D. N.C. Aug. 14, 2014); Arista Records LLC v. Gaines, 635 F.Supp.2d 414, 416 (E.D. N.C. 2009). Moreover, the court has discretion under Rule 55(b)(2) to enter a judgment after a default has been entered. United States v. A Perfect Fit for You, Inc., No. 4:17-CV-174-D, 2019 WL 6049940, at *3 (E.D. N.C. Nov. 14, 2019); see Fed.R.Civ.P. 55(b)(2). And the Defendants are liable for damages based on the Entry of Default, the allegations of the Complaint, and Chamberlin's Declaration, as explained in the above Findings of Fact.
a. Lanham Act Claims
Plaintiff cites the Lanham Act for two causes of action: false advertising and false association. The Lanham Act provides civil liability for damages resulting by:
[a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which -
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities[.]15 U.S.C. §1125(a)(1).,
“The Lanham Act does not ‘. . . expressly incorporate a limitations period for § 43(a) claims.'” Geiger v. Abarca Fam. Inc., No. 3:21-CV-771, 2022 WL 4242838, at *14 (E.D. Va. July 29, 2022) (quoting Belmora LLC v. Bayer Consumer Care AG, 987 F.3d 284, 293 (4th Cir. 2021)). Laches may bar § 43(a) claims filed outside the analogous state law statute of limitations period. Geiger, 2022 WL 4242838, at *14 (quoting Belmora, 987 F.3d at 294). But given that laches is an affirmative defense under Rule 8(c), Defendants failure to appear or respond to the suit waives any relief under it.
The Complaint does not state when the Club used Plaintiffs' images in advertising and social media. Plaintiffs attach to their Complaint pictures which bear dates on which their images were posted on social media, between March 2015 and May 2021. So the attachments appeared on social media between two and eight years before Plaintiffs filed the Complaint in January 2023. But the dates that the Defendants posted the exhibits to social media fails to establish when Plaintiffs learned of the advertisements. The Complaint contends that Defendants unauthorized use of Plaintiffs' images continued through the filing of the Complaint in January 2023. Compl. ¶ 111. And Plaintiffs assert that the Defendants posted their images in a “hidden, inherently undiscoverable, and inherently unknowable” manner that “‘pushed' down in time from immediate visibility” on social media. Id. ¶ 110. So their claims can be considered timely.
i. False Advertising
False advertising claims fall under the second paragraph of §1125(a)(1). A false advertising claim requires a plaintiff to show five elements:
(1) the defendant made a false or misleading description of fact or representation of fact in a commercial advertisement about his own or another's product;
(2) the misrepresentation is material, in that it is likely to influence the purchasing decision;
(3) the misrepresentation actually deceives or has the tendency to deceive a substantial segment of its audience;
(4) the defendant placed the false or misleading statement in interstate commerce; and
(5) the plaintiff has been or is likely to be injured as a result of the misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with its products.PBM Prods., LLC v. Mead Johnson & Co., 639 F.3d 111, 120 (4th Cir. 2011)). The absence of any one of these five elements is fatal to the claim. Id. So Plaintiffs must identify one challenged action satisfying all five Lanham Act requirements. See Johnson & Johnson Vision Care, Inc. v. 1-800 Contacts, Inc., 299 F.3d 1242, 1248 (11th Cir. 2002) (rejecting argument that challenged statements should be evaluated “in concert” to determine whether any or all violated Lanham Act).
On the first factor, the Fourth Circuit has not yet defined “commercial advertisements.” Valencia v. Midnite Rodeo, LLC, No. 3:22-CV-665, 2023 WL 7031561, at *8 (W.D. N.C. Sept. 13, 2023). But a case with a near-identical background, another court concluded that a night club's social media posts with models' images qualified as commercial advertisements. Id. (Rule 12(b)(6) motion). And the Complaint contends that the advertisements “create the false impression” that Plaintiffs worked at, endorsed, or were associated with the Club. Compl. ¶¶ 74-80, 93. Such claims sufficiently constitute allegations of a false or misleading representation of fact under the Lanham Act.
Second, the Complaint must show that the misrepresentation was material to influencing potential customers. Plaintiffs have alleged the Defendants' use of their images was material to inducing consumers to patronize the Club. Id. ¶ 95. Customarily, advertisements seek to “attract[] clients or customers” and in the “hopes to make a profit, directly or indirectly.” Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC, 80 F.4th 466, 472-73 (4th Cir. 2023) (quoting Sandusky Wellness Ctr., LLC v. Medco Health Sols., Inc., 788 F.3d 218, 224 (6th Cir. 2015)). The ads feature each Plaintiff prominently in the postings. Compl., Ex. A-L. And the Defendants repeated use of the Plaintiffs' images in their posting suggests that they successfully attracted business and customers. So a reasonable inference can be drawn that the unauthorized images influenced customers' decisions to patronize La Kumbala.
As to the third factor, the Complaint contends that the advertisements misled consumers about Plaintiffs' affiliation with the Club. Id. ¶ 97. It asserts that the Defendants knew that advertisements would cause consumers confusion about Plaintiff's association with the Club. Id. ¶ 98. Potential customers would think that Plaintiffs worked there, sponsored it, or had any type of relationship with the business. Id. And Plaintiffs claim that such confusion did, in fact, occur. Id. ¶ 99. So the Complaint sufficiently alleges the third element.
Fourth, posting the advertisements on social media constitutes placement in interstate commerce. See ISK Biocides, Inc. v. Pallet Mach. Grp. Inc., No. 3:21-CV-386, 2022 WL 122923, at *6 (E.D. Va. Jan. 12, 2022) (defendant placed false statement in interstate commerce by posting misrepresentation on a public Facebook page) (citing Geiger v. C&G of Groton, Inc., 424 F.Supp.3d 276, 293 (D. Conn. 2019) (“Alleging the images were posted on social media adequately alleges that the Defendants put the images into interstate commerce.”)). The Complaint alleges that the Defendants placed the advertisements with Plaintiffs' images on social media sites, including the Club's website as well as its Twitter, Facebook, and Instagram accounts. Id. ¶¶ 36, 75, 76, 92. So it satisfies the fourth element.
And for the fifth factor, the Complaint alleges that false advertisements have harmed them both by depriving them of income owed to them and divesting Plaintiffs of their rights by using their images without their permission or consent. Id. ¶ 88, 91-93. And they claim injury to their careers and reputations by the “negative connotations” of an being associated association with La Kumbala. Id. ¶ 89. Having identified the injury to them, Plaintiffs sufficiently allege the fifth and final element of a false advertisement claim. So the well-pleaded allegations support a claim for false advertising.
Both the Club as a corporation and Portillo as its president are liable for Lanham Act violations. Valencia v. Midnite Rodeo, LLC, No. 3:22-CV-665, 2023 WL 7031561, at *7 (W.D. N.C. Sept. 13, 2023) (citing Dao Travels, LLC v. Charleston Black Cab Co., No. 2:14-CV-1967, 2015 WL 631137, at *5 (D.S.C. Feb. 13, 2015) (“It is well-established that individual corporate officers and directors can be held personally liable for violations of the Lanham Act.”). The Fourth Circuit has stated that “[a] corporate official may be held personally liable for tortious conduct committed by him, though committed primarily for the benefit of the corporation” in unfair trade practices cases. Polo Fashions, Inc. v. Craftex, Inc., 816 F.2d 145, 149 (4th Cir. 1987).
ii. False Association
Subsection A of the Lanham Act creates liability for statements as to “affiliation, connection, or association” of goods, describes the cause of action known as “false association.” Belmora, 819 F.3d at 706. False association claims occur when a defendant uses an “identifying likeliness” in a manner “to deceive the public into believing that [the plaintiff] endorsed, sponsored, or approved of the defendant's product.'” Silver v. Lejarza, 415 F.Supp.3d 687, 702 (M.D. N.C. 2019) (quotations and citations omitted). This requires a showing that consumers were likely to be confused that Plaintiffs' approved or endorsed the product. Id. (citing Mktg. Prods. Mgmt. LLC v. Healthandbeautydirect.com, Inc., 333 F.Supp.2d 418, 430 (D. Md. 2004).
The Complaint contends that the Defendants' use of the images “created the false impression with the public that Plaintiffs' were affiliated with, connected [to], or associated with La Kumbala or worked at, sponsored, or approved” the Club's goods, services, or activities. Compl. ¶ 101. Plaintiffs allege that the Defendants knew not only that the use of Plaintiffs' images would confuse consumers but did, in fact, confuse consumers, about Plaintiffs' approval and association with the Club and its goods. Id. ¶¶ 104, 105. Plaintiffs maintain that the false endorsement of the Club and its products has damaged them. Id. ¶ 106.
So the well-pled allegations support a claim for false association.
b. Misappropriation
Under a common law right to privacy, Plaintiffs also allege misappropriation. A prima facie claim for misappropriation must allege: (1) an unauthorized use of plaintiff's name or likeness by defendant (2) in connection with an “advertisement or other commercial enterprise.” RE Carroll Mgmt. Co. v. Dun & Bradstreet, Inc., No. 1:23-CV-483, 2023 WL 9169727, at *4 (M.D. N.C. Dec. 12, 2023) (citations omitted).
The statute of limitations for misappropriation or invasion of privacy claims in North Carolina is three years. Losing v. Food Lion, LLC, 185 N.C.App. 278, 284, 648 S.E.2d 261, 265 (N.C. Ct. App. 2007). The Complaint does not state when the cause of action accrued. But it contends that Defendants' unauthorized use of Plaintiffs' images continued through the filing of the Complaint in January 2023. Compl. ¶ 111. So the undersigned finds their claim is timely.
Here, the Complaint asserts that the Defendants used Plaintiffs' images without their consent. Compl. ¶ 107. They misappropriated Plaintiffs' likenesses by publishing their images as part of Defendants' advertising on La Kumbala's website and related social media accounts. Id. ¶ 108. And Defendants' designed their advertising campaigns to attach business and generate revenue for the Club. Id. ¶ 109. And Defendants use of Plaintiffs' images attracted customers and generated business for La Kumbala. Id. ¶ 113.
The Complaint thus contains sufficient well-pled allegations to establish a misappropriation claim which allows Plaintiffs to recover damages.
c. Unfair and Deceptive Trade Practices
To state a claim of Unfair and Deceptive Trade Practices under North Carolina law, a plaintiff must allege “(1) an unfair or deceptive act or practice, (2) in or affecting commerce, and (3) which proximately caused injury to plaintiffs.” Walker v. Fleetwood Homes of N.C., Inc., 362 N.C. 63, 71-72, 653 S.E.2d 393, 399 (2007) (quotation omitted). The statute of limitations for a UDTPA claim is four years. N.C. Gen. Stat. § 75-16.2. But courts apply a more lenient standard “[f]or UDTPA claims based on fraud or misrepresentation[.]” Valencia, 2023 WL 7031561, at *5 (citations and quotations omitted). Such claims accrue “at the time the fraud is discovered or should have been discovered with the exercise of reasonable diligence.” Id.
As noted above, the undersigned finds the claim timely. The Complaint alleges that Defendants posted Plaintiffs' images in a manner to elude detection. Compl. ¶ 110. And their unauthorized use of Plaintiffs' images continued through the filing of the Complaint in January 2023. Id. ¶ 111.
As to the first element, the North Carolina Supreme Court has explained that an unfair practice “offends established public policy” or “is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.” Walker, 362 N.C. at 72, 653 S.E.2d at 399 (quotation omitted). And a deceptive practice is one that “has the capacity or tendency to deceive.” Id. (quotation omitted).
The Complaint claims that by publishing Plaintiffs' images on La Kumbala's website and social media accounts, Defendants gave consumers a false impression that Plaintiffs were employed by or associated with the Club. Compl. ¶¶ 120, 121. Defendants engaged in unfair and deceptive acts or practices because they intended that the advertisements mislead the public. Id. ¶ 122.
For the second factor, the statute defines commerce to “include[] all business activities, however denominated[.]” N.C. Gen Stat. §75-1.1(b). “Business activities” is “connotes the manner in which businesses conduct their regular, day-to-day activities, or affairs, such as the purchase and sale of goods, or whatever other activities the business regularly engages in and for which it is organized.” In re ES2 Sports & Leisure, LLC, 544 B.R. 833, 847 (Bankr. M.D. N.C. 2015) (quoting HAJMM Co. v. House of Raeford Farms, Inc., 328 N.C. 578, 594, 403 S.E.2d 483, 493 (1991)).
It excludes certain professional services not at issue here.
On the second element, the advertisements involved La Kumbala's day-to-day business activities of promoting it establishment and soliciting patrons. Compl. ¶¶ 74, 76, 120. And the Defendants placed the advertisements in commerce by publicizing them on their website and social media. Id. ¶¶ 75, 76, 78. So the Complaint alleges that the false advertisements affected commerce.
Plaintiffs asserts that the advertisements harmed them. Id. ¶ 132. As noted above, Plaintiffs' damages arise from Defendants' use of their images without their consent, failing to compensate them, and divesting them of their rights to control the use of their images. Id. ¶ 88, 91-93. The Complaint also contends that the advertisements offend public policy, misappropriate Plaintiffs' property rights in their own images, breach copyright and/or licenses others may hold in some images, and invade Plaintiffs' privacy for Defendants' commercial benefit. Id. ¶ 127. The Complaint also claims that the false advertisements injured each Plaintiffs' reputation and ability to market herself as a model. Id. ¶ 131. And Plaintiffs allege there is no benefit to Defendants' advertising practices apart from Defendants' own commercial interests. Id. ¶ 130.
The well-pled allegations thus support a claim for unfair and deceptive trade practices. So they are entitled to damages on this cause of action.
“Courts have held that a violation of the Lanham Act necessarily encompasses a violation of North Carolina's UDTPA.” Design Res., Inc. v. Leather Indus. of Am., No. 1:10-CV-157, 2014 WL 4159991, at *13 (M.D. N.C. Aug. 19, 2014); see Djarum v. Dhanraj Imports, Inc., 876 F.Supp.2d 664, 668 (W.D. N.C. 2012) (“North Carolina's [UDTPA] prohibits the same type of activity that the Lanham Act prohibits[.]”).
D. Damages
A court may enter a default judgment with or without a hearing in order to award damages. Fed.R.Civ.P. 55(b)(2)(B). But if the damages sought are not “a liquidated sum or one capable of mathematical calculation,” the court must hold a hearing. W. Sur. Co. v. Beck Elec. Co., No. 3:06 CV-383, 2008 WL 345821, at *6 (W.D. N.C. Feb. 5, 2008) (quoting United Artists Corp. v. Freeman, 605 F.2d 854, 857 (5th Cir. 1979)).
Well-pled factual allegations can establish a defendant's liability in the context of default judgment. Ryan, 253 F.3d at 780 (4th Cir. 2001). But a complaint's allegations on the amount of damages suffered are not controlling. Joe Hand Promotions, Inc. v. Coaches Sports Bar, 812 F.Supp.2d 702, 703 (E.D. N.C. 2011) (citing Lawbaugh, 359 F.Supp.2d at 421).
When the court “determines that liability is established and default judgment is warranted, then it must make an independent determination of the appropriate amount of damages.” United States v. John Hudson Farms, Inc., No. 7:18-CV-7-FL, 2018 WL 4119950, at *5 (E.D. N.C. Aug. 29, 2018). The court “may rely [] on affidavits or documentary evidence in the record to determine the appropriate sum.” J & J Sports Prods., Inc. v. Romenski, 845 F.Supp.2d 703, 706 (W.D. N.C. 2012).
Having determined Plaintiffs are entitled to prevail on four claims in the Complaint, the court must determine what that relief entails. Plaintiffs submitted a declaration by Stephen Chamberlin setting forth the damages they incurred on the claims asserted in his Complaint. Decl., D.E. 48-1.
Chamberlin has been a model and talent agent since 1989. Id. ¶ 1. He founded one agency that he took public. Id. And he owns and directs another company that sources and manages models worldwide. Id. Chamberlin also works as an agent and scout for two other companies and regularly quotes, negotiates, and oversees rates, work, and career development for talent represented by various agencies. Id.
Chamberlin has represented hundreds of top models. Id. ¶ 2. He is familiar with the modeling market and understands the particular factors that drive pricing for certain work. Id.
Chamberlin evaluated Defendants' use of Plaintiffs' images and assessed the fair market value of each image's posting. Id. ¶ 6. He considered several factors including the images, advertisements, media used, as well as each Plaintiff's earning history, experience, recognition, and market demand. Id. ¶ 7.
Chamberlin outlines the damages Plaintiffs have incurred through 2023. Id. at 13. Chamberlin places Plaintiffs' actual damages at $990,000. Id. ¶ 40.
Chamberlin breaks down this sum among the 12 Plaintiffs based on their modeling rate, the manner that the Defendants used their images, and the number of years they used Plaintiffs' images. D.E. 48-1 at 24.
Because the Defendants have failed to appear or respond, the claimed damages are uncontested. And the Declaration offers sufficient facts to establish the damages Plaintiffs incurred with sufficient certainty for the court to issue a judgment.
The Lanham Act allows Plaintiffs to recover damages as well as the costs of bringing the suit. 15 U.S.C. §1117(a). And a court may award treble damages. Id.
The Lanham Act allows Plaintiffs' greatest compensatory damage award because it does not limit their recovery to the three and four-year statutes of limitations respectively applicable to their misappropriation and UDTPA claims. So the court will examine compensatory damages for Plaintiffs' Lanham Act claims alone.
“Lanham Act damages may be awarded even when they are not susceptible to precise calculations[.]” Ramada Inns, Inc. v. Gadsden Motel Co., 804 F.2d 1562, 1565 (11th Cir. 1986) (alteration added); see also PODS Enters., LLC v. UHaul Int'l, Inc., 126 F.Supp.3d 1263, 1282 (M.D. Fla. 2015); Kestenbaum v. Falstaff Brewing Corp., 514 F.2d 690, 698 (5th Cir. 1975) (A “wrong doer may not complain of inexactness where his actions preclude precise computation of the extent of the injury.”) (citing Eastman Kodak Co. v. S. Photo Co., 274 U.S. 359, 379 (1927)).
To recover damages for Counts One and Two under the Lanham Act, Plaintiffs must show not only false advertising by the Defendants, but also that their statements caused Plaintiffs actual damage. See PBM Prods., 639 F.3d at 122 (summary judgment properly awarded to defendant in Lanham Act case because plaintiff could not prove that allegedly false statements caused any damages); Xoom, Inc. v. Imageline, Inc., 323 F.3d 279, 286 (4th Cir. 2003) (Lanham Act plaintiff must “prove actual damages and a causal link between those damages and the Lanham Act violation”), abrogated on other grounds by Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010). A core requirement is that a plaintiff “show economic or reputational injury flowing directly from the deception wrought by the defendant's advertising[.]” Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 134 (2014). So the evidence must establish that “the plaintiff has been or is likely to be injured as a result of the [alleged] misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with its product.” Design Res., Inc. v. Leather Indus. of Am., 789 F.3d 495, 501 (4th Cir. 2015) (quoting PBM Prods., 639 F.3d at 120).
Chamberlin calculated the damages to each Plaintiff by reviewing La Kumbala's promotional materials, researching the Plaintiffs' professional backgrounds, and reviewing supporting documentation showing their earning history, including experience, name recognition, and social media profiles. D.E. 48-1 at ¶ 7. Chamberlin then established separate rates of compensation for the use of each Plaintiff's image in an advertisement and its social media distribution. He identifies the damages below calculation for each Plaintiff:
Name
Rate
Types of Uses
FMV
Years Used
Damages [FMV x Years]
Nobriega
$5,000
2
$10,000
6
$6,0000
Ratchford
$15,000
2
$30,000
4
$120,000
Sampedro
$10,000
2
$20,000
5
$100,000
Mitcheson
$7,500
2
$15,000
6
$90,000
Burciaga
$10,000
2
$20,000
5
$100,000
Killings
$7,500
2
$15,000
6
$90,000
Davalos
$5,000
3
$15,000
7
$105,000
Terrell
$5,000
2
$10,000
6
$60,000
Mayes
$5,000
2
$10,000
6
$60,000
Guerra
$10,000
2
$20,000
4
$80,000
Voronina
$7,500
2
$15,000
5
$75,000
Cozzens
$5,000
2
$10,000
5
$50,000
The total damages are $990,000.
Damages are calculated through the filing of the Complaint.
Chamberlin's Declaration establishes that Plaintiffs are entitled to the requested $990,000 in actual damages under the Lanham Act. This court agrees with other courts addressing similar claims by some of the same Plaintiffs which have found that Chamberlin's “fair market value” determination to be an adequate method of calculating damages for a defendant's unauthorized use of the identity or persona of a plaintiff. See Canas v. Babe's S., Inc., No. 3:21-CV-942, 2023 WL 2885197, at * (N.D. Fla. Feb. 22, 2023) (Chamberlin's methodology for calculating damages sufficient to establish damages for default judgment on claims brought by models against club under Lanham Act), adopted, 2023 WL 4352078 (July 5, 2023); Sampedro v. Anyado Grp., LLC, No. 22-CV-1402, 2023 WL 1398577, at *9 (D.D.C. Jan. 31, 2023) (finding affidavit by Chamberlin offered a reasonable calculation of damages); Cerny v. Costa Verde Corp., 21-cCV-10927, 2022 WL 3566818, at *3 (D. Mass. Aug. 18, 2022); Hinton v. Completely Innocent LLC, 21-CV-1019, 2022 WL 80049, at *5 (D. Ariz. Jan. 7. 2022) (concluding, at the default judgment stage, that Chamberlin's affidavit offered a “thorough, well-founded, and sufficient evidence of the actual damages”); Lundberg v. One Three Five, Inc., 19-CV-692, 2020 WL 9809978, at *2 (W.D. Pa. July 6, 2020), adopted, 2020 WL 9809977 (W.D. Pa. July 22, 2020), vacated on other grounds by 2021 WL 1224507 (W.D. Pa. Apr. 1, 2021); Sampedro v. Club Caribbean LLC, 19-cv-12921, 2020 WL 13441623, at *1 (E.D. Mich. Apr. 9, 2020); Souza v. Nowhere Bottle & Soc. Club, Inc., No. 19-24692-CIV, 2020 WL 13420543, at *7 (S.D. Fla. Feb. 27, 2020) (Chamberlin's fair market value determination an adequate method of calculating damages for defendant's unauthorized use of the identity or persona of many of the same plaintiffs); Moreland v. A-QB, LLC, No. 6-19-CV-372, 2019 WL 6727870, at *3 (W.D. Tex. Dec. 11, 2019); Taylor v. Trapeze Mgmt., LLC, No. 0:17-CV-62262, 2019 WL 1977514, at *4-5 (S.D. Fla. Feb. 28, 2019); see also Bogart, LLC v. Ashley Furniture Indus., Inc., No. 3:10-CV-39, 2012 WL 3745833, at *16-17 (M.D. Ga. Aug. 28, 2012) (crediting an expert's calculation of damages from the misappropriation of a celebrity's publicity rights based on a “hypothetical licensing negotiation”).
One court found there were deficiencies in Chamberlin's calculation, when compared to other available methods and evidence. Gibson v. SCE Grp., Inc., 15-CV-8168, 2022 WL 901591, at *2-5 (S.D.N.Y. March 25, 2022). But that case is distinguishable because it involved a cross-motions for summary judgment, not default judgment sought here.
So Plaintiffs are entitled to default judgment against Defendant for $990,000.
Although requested in the Complaint, Plaintiffs' present motion for default judgment does not ask for the court to award punitive damages. Mem. in Supp. of Mot. for Default. J. at 7., D.E. 48.
E. Injunctive Relief
Plaintiffs ask the court to grant permanent injunctive relief barring the Defendants from using Plaintiffs' images for any purpose.
The Lanham Act authorizes a court to grant injunctive relief to prevent instances of false advertising or false association. 15 U.S.C. § 1116(a). In considering whether to impose a permanent injunction, courts consider whether the injured party has established “
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.eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006); see also Christopher Phelps & Assocs., LLC v. Galloway, 492 F.3d 532 (4th Cir. 2007). A district court has discretion of whether to grant or deny permanent injunctive relief. eBay Inc., 547 U.S. at 391.
Considering these elements, the court finds that Plaintiffs have shown entitlement to an order permanently enjoining the Defendants from continuing to use their Images in advertising for its club without Plaintiffs' authorization. As noted above, Plaintiffs have prevailed, by default, on the merits of their claims.
Defendants' use of Plaintiffs' Images implies that they work at, endorse, or are affiliated with La Kumbala. The association adversely affects Plaintiffs' personal and professional reputations, thus satisfying the irreparable harm element.
Plaintiffs contend that Defendants continued to publicize the Images on various occasions through different mediums, continuing through the Complaint's filing. So monetary damages alone are inadequate to compensate for the ongoing injuries and an injunction is necessary to stop the harmful association.
Balancing the hardships face by each side, the court finds greater hardship to Plaintiffs if the court does not allow injunctive relief requiring Defendants to discontinue their unlawful use of their Images. And it concludes that Defendants will experience no hardship if the court requires them to cease the unlawful acts in which they engaged. ceasing the admitted allegations establish that defendant has “republicized Plaintiff[s'] image and likeness on various occasions, via
Finally, public interest favors preventing Defendants from their unlawful use of Plaintiffs' Images and protecting them against false advertising, false association, misappropriation, and unfair trade practices.
Having established that they should prevail on the four claims, injunctive relief is appropriate. So Defendants are permanently enjoined from using Plaintiffs' images.
III. Conclusion
The Defendants have defaulted here by failing to appear or otherwise respond. After the entry of default, the Defendants refusal to participate continued. The court may construe their unresponsiveness as conceding to the substance of Plaintiffs' claims. The undersigned recommends that the court grant Plaintiffs' motion and enter a default judgment against Defendants on Counts One through Four of the Complaint.
Should the court agree with the recommendation to enter default judgment against Defendants, Plaintiffs are entitled to damages from Defendants, jointly and severally, in the amount of $990,00, as outlined in Section D(1) above. So the court should enter a judgment awarding them that amount.
Plaintiffs are also entitled to injunctive relief against Defendants permanently enjoining them from using Plaintiffs' images. And they are also entitled to recover their attorney's fees and costs. 15 U.S.C. § 1117(a); N.C. Gen. Stat. § 75-16.1
The Clerk of Court must serve a copy of this Memorandum and Recommendation (“M&R”) on each party who has appeared in this action. Any party may file a written objection to the M&R within 14 days from the date the Clerk serves it on them. The objection must specifically note the portion of the M&R that the party objects to and the reasons for their objection. Any other party may respond to the objection within 14 days from the date the objecting party serves it on them. The district judge will review the objection and make their own determination about the matter that is the subject of the objection. If a party does not file a timely written objection, the party will have forfeited their ability to have the M&R (or a later decision based on the M&R) reviewed by the Court of Appeals.