Opinion
Case No. 3:18-cv-00283-SB
03-10-2021
STAY FROSTY ENTERPRISES, LLC, Plaintiff, v. AMAZON.COM, INC. et al., Defendants.
FINDINGS AND RECOMMENDATION
BECKERMAN, U.S. Magistrate Judge.
Plaintiff Stay Frosty Enterprises ("Stay Frosty") filed this copyright infringement action against a long list of defendants, including defendant Milcoins.com LLC ("Milcoins"). Stay Frosty now moves for default judgment against Milcoins pursuant to FED. R. CIV. P. 55(b)(2). (ECF No. 116.) This Court has federal question jurisdiction under 28 U.S.C. § 1331. For the reasons explained below, the Court recommends that the district judge deny Stay Frosty's motion for default judgment.
BACKGROUND
Stay Frosty is an Oregon limited liability company with its principal place of business in Oregon. (Compl. ¶ 1.) Stay Frosty designs "original works of art . . . that are primarily marketed via the internet[.]" (Id.) Stay Frosty "fabricates, advertises and sells apparel bearing their unique, copyrighted, work of art designs[,]" including "challenge" coins, which "are collectable military coins generally distributed to active military personnel[.]" (Compl. ¶ 22.)
Milcoins is a Connecticut limited liability company with its principal place of business in Connecticut. (Compl. ¶ 13.) Milcoins sells challenge coins, several of which are "strikingly similar" to Stay Frosty's designs. (Compl. ¶¶ 193-94.) Milcoins did not receive "permission or consent" to use Stay Frosty's designs. (Compl. ¶ 195.)
Prior to filing this action, Stay Frosty sent several demands to Milcoins, but did not receive a response. (Pl.'s Mem. in Supp. Mot. for Default J. ("Supp. Mot.") at 3.) On June 22, 2018, Stay Frosty served Milcoins with a summons and complaint through an authorized process server. (Decl. of James Mills Ex. 1.) Milcoins returned a waiver of service form (ECF No. 49), but never responded to the complaint nor otherwise appeared to defend this action. (Supp. Mot. at 1.)
The Clerk of Court entered default against Milcoins on May 28, 2019. (ECF No. 107.) Stay Frosty now moves the Court pursuant to FED. R. CIV. P. 55(b)(2) to enter default judgment against Milcoins.
DISCUSSION
I. STANDARD OF REVIEW
Pursuant to FED. R. CIV. P. 55(a), the Clerk of Court must enter an order of default if a party against whom affirmative relief is sought has failed timely to plead or otherwise defend an action. See FED. R. CIV. P. 55(a) ("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."). "The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true." Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (citations omitted).
After the Clerk of Court enters default, the plaintiff may "apply to the court for a default judgment." FED. R. CIV. P. 55(b)(2). "The district court's decision whether to enter a default judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (citations omitted).
II. PERSONAL JURISDICTION
In its motion for default judgment, Stay Frosty did not address the issue of the Court's personal jurisdiction over Milcoins, and therefore the Court ordered Stay Frosty to show cause why the Court should not dismiss this action against Milcoins for lack of personal jurisdiction. (See Order, ECF No. 120; see also Tuli v. Republic of Iraq, 172 F.3d 707, 712-13 (9th Cir. 1999) (holding that a court "has an affirmative duty" to assure itself that it has personal jurisdiction over a defendant before entering a default judgment).) The Court cautioned that "[f]ailure to file a timely and satisfactory response will result in the dismissal of this action against Milcoins.com, LLC." (Order, ECF No. 120.)
In its response to the Court's order, Stay Frosty relies on the allegations in its complaint that the Court has personal jurisdiction over Milcoins, and argues that the Court should not raise a personal jurisdiction defense on Milcoins' behalf because Milcoins waived service of process and chose not to appear to defend this action. (Pl.'s Resp. to Order to Show Cause, at 2-3.)
For the reasons set forth below, the Court finds that Stay Frosty has not met its burden of demonstrating that this Court has personal jurisdiction over Milcoins.
A. Legal Standards
Federal district courts "ordinarily follow state law in determining the bounds of their jurisdiction over [a defendant]." Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (quoting Daimler AG v. Bauman, 571 U.S. 117, 125 (2014)). "Oregon law authorizes personal jurisdiction over defendants to the full extent permitted by the United States Constitution." Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015) (citation omitted). The Court must therefore inquire whether its exercise of jurisdiction over Milcoins would "comport[] with the limits imposed by federal due process." See id. ("[The court] therefore inquire[s] whether the District of Oregon's exercise of jurisdiction over [defendant] 'comports with the limits imposed by federal due process.'" (quoting Daimler, 571 U.S. at 125)).
"Due process requires that the defendant 'have certain minimum contacts' with the forum state 'such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'" Picot, 780 F.3d at 1211 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (simplified)). "The strength of contacts required depends on which of the two categories of personal jurisdiction a litigant invokes: specific jurisdiction or general jurisdiction." Ranza, 793 F.3d at 1068 (citation omitted). Stay Frosty has made no meaningful effort to allege that the Court has general jurisdiction over Milcoins.
The Ninth Circuit employs the following three-prong test to determine if a defendant has sufficient minimum contacts to be subject to specific personal jurisdiction:
(1) [t]he non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;Picot, 780 F.3d at 1211 (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004)). "The plaintiff bears the burden of satisfying the first two prongs of the [specific jurisdiction] test. If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not established in the forum state." Morrill v. Scott Fin. Corp., 873 F.3d 1136, 1142 (9th Cir. 2017) (quoting Schwarzenegger, 374 F.3d at 802).
(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.
B. Analysis
1. Prong One
Under the first prong, Stay Frosty must show that Milcoins purposefully directed its activities toward Oregon or purposefully availed itself of the privilege of conducting activities in Oregon. "A purposeful availment analysis is most often used in suits sounding in contract." Schwarzenegger, 374 F.3d at 802. "A purposeful direction analysis, on the other hand, is most often used in suits sounding in tort." Id. Purposeful direction is the proper analytical framework here, because Stay Frosty has alleged copyright infringement. See Mavrix Photo, Inc. v. Brand Techs, Inc., 647 F.3d 1218, 1228 (9th Cir. 2011) ("Because Mavrix has alleged copyright infringement, a tort-like cause of action, purposeful direction 'is the proper analytical framework.'") (citation omitted).
The purposeful direction "test, often referred to as the 'effects' test, derives from Calder v. Jones, 465 U.S. 783 [(1984).]" Axiom Foods, Inc. v. Acerchem Int'l, Inc., 874 F.3d 1064, 1069 (9th Cir. 2017). Under this test, the "defendant must have '(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.'" Id. (quoting Wash. Shoe Co. v. A-Z Sporting Goods Inc., 704 F.3d 668, 673 (9th Cir. 2012) (simplified)).
Even if Milcoins committed intentional acts, Stay Frosty has failed to meet its burden of alleging that Milcoins expressly aimed its acts at the forum state of Oregon. See generally Walden v. Fiore, 571 U.S. 277, 284 (2014) ("For a State to exercise jurisdiction consistent with due process, the defendant's suit-related conduct must create a substantial connection with the forum State."). Stay Frosty alleges that Milcoins sold infringing products on its nationally accessible website. The Ninth Circuit has "struggled with the question whether tortious conduct on a nationally accessible website is expressly aimed at any, or all, of the forums in which the website can be viewed." Mavrix, 647 F.3d at 1229. The Ninth Circuit has "made clear that 'maintenance of a passive website alone cannot satisfy the express aiming prong.'" Id. (citation omitted).
However, the Ninth Circuit has "held that operating even a passive website in conjunction with 'something more'—conduct directly targeting the forum—is sufficient." Id. (quoting Rio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019-21 (9th Cir. 2002)). In assessing "whether a nonresident defendant has done 'something more,' [the Ninth Circuit has] considered several factors, including the interactivity of the website, . . . the geographic scope of defendant's commercial ambitions, . . . and whether the defendant individually targeted a plaintiff known to be a forum resident." Id. (citations omitted). The Ninth Circuit recently explained that "while a theory of individualized targeting may remain relevant to the minimum contacts inquiry, it will not, on its own, support the exercise of specific jurisdiction, absent compliance with what Walden requires." Axiom, 874 F.3d at 1070. Walden requires a plaintiff to show that the defendant's "suit-related conduct" created a "substantial connection" with the forum state. Id. (citation omitted).
In addition to its allegations that Milcoins sells challenge coins nationwide via its website (Compl. ¶¶ 13, 192), Stay Frosty also vaguely alleges that the Court has personal jurisdiction over all of the named defendants. (See Compl. ¶ 16 ("This Court has in personam jurisdiction over each Defendant because they conduct business within Oregon, the forum state, and have committed acts of copyright infringement in this District. Defendants advertise and sell clothing and coins from their on-line stores directed at customers nationwide, including Oregon. The Defendants have systematic and continuous contacts with the State of Oregon and have purposefully availed themselves the privilege of conducting activities in Oregon by soliciting and/or conducting business transactions in Oregon. The Plaintiff has suffered damages in the State of Oregon from the Defendants' acts.").) Although the Court must accept factual allegations as true on a motion for default judgment, Stay Frosty pleads only conclusory jurisdictional allegations and "the Court need not accept as true a legal conclusion that personal jurisdiction exists." Avid Life Media, Inc. v. Digisec Media AS, No. LA CV12-08602 JAK (FMOx), 2014 WL 12588285, at *8 (C.D. Cal. Jan. 24, 2014); see also Warren v. Fox Fam. Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) ("We do not . . . necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations.") (simplified). Aside from these conclusory allegations, Stay Frosty has alleged no facts to allow the Court to conclude that Milcoins expressly targeted Oregon.
Notably absent from Stay Frosty's complaint is any specific allegation that Milcoins sold infringing products in Oregon or to Oregon entities or residents, or any allegation regarding the percentage of Milcoins' sales in Oregon. Courts have found that a defendant's acts are not expressly aimed at the forum state where, as here, the plaintiff fails to present any allegations or evidence demonstrating that the defendant sold infringing products in the forum state. See Premier Fabrics, Inc. v. Walters & Mason Retail, Inc., No. 18-2126, 2018 WL 6164766, at *5 (C.D. Cal. Aug. 1, 2018) (holding that the plaintiff failed to establish that the defendant expressly aimed its conduct at California and emphasizing that, although the defendant offered goods for sale on its website, there were no allegations or evidence showing that the defendant ever "shipped any of the allegedly infringing goods to any person or entity in California"); Adobe Sys. Inc. v. Cardinal Camera & Video Ctr., Inc., No. 15 -2991, 2015 WL 5834135, at *5 (N.D. Cal. Oct. 7, 2015) (holding that the plaintiff failed to establish that the defendant expressly aimed its conduct at California, stating that the plaintiff alleged little information about the defendant's website "beyond its bald assertion that the website is 'interactive' and its allegation that the website features infringing [] products for sale," emphasizing that the plaintiff had "not pleaded any facts that would suggest that any of the 1.2% of [the defendant's] sales shipped to California were, in fact, [the plaintiff's] products, much less infringing [] products," and noting that district courts in Oregon and California have found no personal jurisdiction over a defendant with 1.6% and 10% of its sales directed at the forum state); Star Fabrics, Inc. v. Neiman Marcus Grp., LLC, No. 14-7170, 2014 WL 12591288, at *4 (C.D. Cal. Dec. 5, 2014) (holding that the plaintiff failed to establish that the defendant's acts were expressly aimed at California because none of the garments that the defendant sold that allegedly infringed the plaintiff's copyright were shipped by the defendant to any person or entity in California).
Consistent with the authorities above, the Court concludes that Stay Frosty has failed to establish that Milcoins expressly aimed its conduct at Oregon, and therefore Stay Frosty has failed to satisfy prong one of the specific personal jurisdiction test.
2. Prong Two
"The second requirement for the Court to exercise specific personal jurisdiction 'is that the claim asserted in the litigation arises out of the defendant's forum related activities.'" Cougar Sport, 169 F. Supp. 3d at 1092 (quoting Panavision Int'l v. Toeppen, 141 F.3d 1316, 1322 (9th Cir. 1998)). "The Ninth Circuit applies a 'but for' test under which the Court must determine whether the plaintiff would not have suffered injury 'but for' the defendant's forum-related conduct." Id.
Stay Frosty has not alleged that Milcoins sold any infringing products in Oregon or to any Oregon resident or entity. Therefore, Stay Frosty has failed to demonstrate that it would not have suffered injury but for Milcoins' forum-related conduct, and has not satisfied prong two of the specific personal jurisdiction test. Accordingly, the Court concludes that it does not have personal jurisdiction over Milcoins.
For the same reasons discussed here, earlier in this action the Court transferred venue of Stay Frosty's claims against defendant Teespring, Inc. ("Teespring"), another nationally accessible website, because the Court lacked personal jurisdiction over Teespring. (See Findings & Recommendation, at 7-12; Order, at 1-2.)
3. Waiver
Stay Frosty argues that Milcoins has waived any objection to personal jurisdiction by waiving service of process and then failing to appear to defend against this action. (Pl.'s Resp. to Order to Show Cause, at 2-3.) However, the Federal Rules of Civil Procedure expressly provide that "[w]aiving service of a summons does not waive any objection to personal jurisdiction or to venue." FED. R. CIV. P. 4(d)(5); see also ECF No. 53 (Milcoins acknowledged in its Waiver of the Service of Summons form that it "will keep all defenses or objections to the lawsuit, the court's jurisdiction, and the venue of the action"). Although Stay Frosty argues that the Court should not assert the defense on Milcoins' behalf because Milcoins should have appeared to challenge personal jurisdiction, the Court cannot enter default judgment against a defendant over which it has no personal jurisdiction.
The only authority Stay Frosty cites has no relevance here. See Sec. & Exch. Comm'n v. Blazon Corp., 609 F.2d 960, 965 (9th Cir. 1979) (holding that the defendants "acquiesce[d] to the jurisdiction of the court by a stipulation" acknowledging the jurisdiction of the court, and noting that "[a] defendant cannot waive his right to assert a lack of subject matter jurisdiction, but he can confer jurisdiction over his person upon a court otherwise lacking that jurisdiction by expressly consenting to it"). Milcoins has not expressly consented to personal jurisdiction here.
III. DEFAULT JUDGMENT
"When entry of judgment is sought against a party who has failed to plead or otherwise defend, a district court has an affirmative duty to look into its jurisdiction over both the subject matter and the parties." Tuli, 172 F.3d at 712 (citation omitted); see also High Tech Pet Prods., Inc. v. Juxin Pet Prod. Co., Ltd., No. 1:10-cv-00547, 2013 WL 1281619, at *2 (E.D. Cal. Mar. 27, 2013) ("As a preliminary matter, this Court must determine whether it has personal jurisdiction over the five corporate and one individual defendant against whom the Clerk has entered default. In most circumstances, a defect in personal jurisdiction is a defense that may be asserted or waived by a party. However, when entry of judgment is sought against a party who has failed to plead or otherwise defend, a district court has an affirmative duty to look into its jurisdiction over both the subject matter and the parties.") (simplified).
It is well settled that "[a] court should deny default judgment if it lacks personal jurisdiction over the defendant." Dytch v. Bermudez, No. 17-cv-02714-EMC, 2018 WL 2230945, at *2 (N.D. Cal. May 16, 2018) (citing Tuli, 172 F.3d at 712); see also Tuli, 172 F.3d at 712 ("To avoid entering a default judgment that can later be successfully attacked as void, a court should determine whether it has the power, i.e., the jurisdiction, to enter the judgment in the first place.").
In light of Stay Frosty's failure plausibly to allege or otherwise demonstrate that this Court has personal jurisdiction over Milcoins, the Court recommends that the district judge deny Stay Frosty's motion for default judgment and dismiss this action against Milcoins without prejudice so that Stay Frosty may refile in a different jurisdiction. See Wood v. Santa Barbara Chamber of Com., Inc., 705 F.2d 1515, 1522 (9th Cir. 1983) ("Since the court found that it lacked personal jurisdiction over any of the [out of state] publishers, it was correct in not entering default judgment."); Melendez v. Vaiana, No. EDCV 16-2516 JGB (SPx), 2017 WL 8183139, at *8 (C.D. Cal. Oct. 19, 2017) (denying motion for default judgment on ground that the court lacked personal jurisdiction over the defaulting defendant).
CONCLUSION
For the reasons stated, the Court recommends that the district judge DENY Stay Frosty's motion for default judgment (ECF No. 116), and dismiss this action against Milcoins without prejudice.
SCHEDULING ORDER
The Court will refer its Findings and Recommendation to a district judge. Objections, if any, are due within fourteen (14) days. If no objections are filed, the Findings and Recommendation will go under advisement on that date. If objections are filed, a response is due within fourteen (14) days. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will go under advisement.
DATED this 10th day of March, 2021.
/s/_________
HON. STACIE F. BECKERMAN
United States Magistrate Judge