Summary
awarding $400 in costs after taking judicial notice of $400 filing fee
Summary of this case from Landstar Sys., Inc. v. Am. Landstar Logistics Corp.Opinion
19-CV-1595 (GBD) (JLC)
12-05-2019
TRAVEL LEADERS GROUP, LLC and TZELL TRAVEL, LLC, Plaintiffs, v. GREG CORLEY, also known as Brian P. Sumwalt also known as Robert Gregory Corley also known as Aaron Dixon also known as Susi Feltch also known as Diane Bosch, and NORTH TEXAS TRAVEL GROUP LLC, d/b/a The Travel Group LLC Defendants.
Honorable George B. Daniels, United States District Judge.
REPORT & RECOMMENDATION
JAMES L. COTT, United States Magistrate Judge.
On February 21, 2019, plaintiffs Travel Leaders Group, LLC and Tzell Travel, LLC filed a complaint alleging that defendants Greg Corley and North Texas Travel Group LLC, doing business as The Travel Group LLC, falsely advertised that they were affiliated with plaintiffs, engaged in unfair competition, and misappropriated plaintiffs' name or likeness. Defendants have failed to answer the complaint or otherwise appear in this action. Accordingly, on June 21, 2019, Judge Daniels entered a default judgment against defendants on the issue of liability and referred this matter to me for an inquest on damages. For the reasons set forth below, I recommend that plaintiffs' request for damages be denied but that a permanent injunction be entered against defendants. In addition, I do not 1 recommend the award of attorneys' fees or costs, as the present case is not “exceptional” under 15 U.S.C. § 1117(a), and plaintiffs have not substantiated their costs. However, should the reviewing court disagree with this assessment and find the case to be “exceptional, ” I recommend an award of $11,425.01 in fees and $400 in costs.
I. BACKGROUND
A. Facts
The facts presented below are summarized from the well-pleaded allegations of the February 21, 2019 complaint. In light of defendants' default, the Court accepts as true all well-pleaded allegations included in plaintiffs' complaint, except as to damages. See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) (“It is an ‘ancient common law axiom' that a defendant who defaults thereby admits all ‘well-pleaded factual allegations contained in the complaint.”) (quoting Vt. Teddy Bear Co., Inc., v. 1-900 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)).
Plaintiff Travel Leaders Group, LLC (“TLG”) is a Delaware limited liability company with a home office address in Wilmington, Delaware and a principal executive office address in New York, New York. Complaint (“Compl.”), Dkt. No. 6, ¶ 5. TLG is a travel agency that provides services across the globe including, inter alia, “pricing, customization, travel management, negotiation, [and] personalized luxury travel.” Id. ¶ 17. Plaintiff Tzell Travel, LLC (“Tzell”) is a New York limited liability company headquartered in New York, New York with offices across 20 2 states. Id. ¶ 7. As a subsidiary of TLG, Tzell is “one of TLG's most well-known and respected portfolio companies, providing personalized VIP, corporate, entertainment, and luxury travel services.” Id. ¶ 17. Tzell is also “ranked first among the nation's largest corporate travel management companies, according to Business Travel News.” Id. ¶ 7.
Defendant North Texas Travel Group LLC, doing business as The Travel Group (“The Travel Group”), is a Texas limited liability company purporting to offer travel services with a principal place of business in Dallas, Texas. Id. ¶ 8. Defendant Greg Corley, operating under many aliases, is an individual and registered agent of North Texas Travel Group LLC and a resident of Collin County, Texas. Id. ¶¶ 9-11.
On its website operating under the trade name The Travel Group LLC, the North Texas Travel Group LLC claims to have a “long time affiliation with the travel industry's leading luxury network, Tzell Travel Group” and to be a “Tzell Travel Group affiliate.” Id. ¶¶ 18-19. However, neither defendant has any affiliation with TLG or Tzell. Id. ¶ 20. In response to defendants' fraudulent claims and use of a “trade name substantially similar to TLG, ” plaintiffs served defendants with cease and desist demands on September 18, 2018 and January 9, 2019. Id. ¶¶ 21-22. Defendants did not respond to either demand. Id. ¶ 22.
B. Procedural History
On February 21, 2019, plaintiffs commenced this action under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and Texas common law. Id. ¶¶ 23-42. On 3 March 6, 2019, plaintiffs filed affidavits of service establishing that they had served a copy of the summons and complaint on Greg Corley on February 26, 2019 (Dkt. No. 13) and on North Texas Travel Group LLC on February 28, 2019 (Dkt. No. 12).
Given that defendants did not answer or otherwise respond to the complaint, on May 7, 2019, plaintiffs requested an adjournment sine die of the initial pre-trial conference scheduled for the following day, which was granted on May 8, 2019. Dkt. Nos. 14, 17. In their May 7 letter, plaintiffs also informed the Court that they had notified both defendants via letters sent on April 30, 2019 of their intention to file a motion for default judgment. Id. Following plaintiffs' request, the Clerk of Court entered a certificate of default on May 13, 2019. Dkt. No. 20.
On June 4, 2019, plaintiffs submitted a motion for default judgment, accompanied by a declaration from plaintiffs' counsel, Adam C. Ford, Esq., and attached exhibits, requesting an award of damages “and such further relief as the Court deems just and proper.” Dkt. No. 21; Affidavit of Adam C. Ford dated June 4, 2019 (“Ford Aff.”), Dkt. No. 22. After defendants failed to answer, appear, or otherwise move with respect to the complaint, Judge Daniels entered a default judgment against them (Order dated June 21, 2019, Dkt. No. 24) and referred this case to me to conduct an inquest into damages (Order Referring Case to Magistrate Judge dated June 21, 2019, Dkt. No. 23). I then directed plaintiffs to file Proposed Findings of Fact and Conclusions of Law, supported by one or more affidavits, concerning all damages and any other monetary relief permitted under the entry of 4 default by July 15, 2019. Scheduling Order for Damages Inquest dated June 21, 2019, Dkt. No. 25.
In their July 15, 2019 submission, plaintiffs did not include any affidavits. See Proposed Findings of Fact and Conclusions of Law (“FOF”) dated July 15, 2019, Dkt. No. 27. Additionally, plaintiffs' filing raised questions as to whether the Court could permissibly exercise personal jurisdiction over the non-appearing defendants, given that they are Texas-based entities. Order dated July 16, 2019, Dkt. No. 28 (citing Compl. ¶¶ 8-11). Accordingly, on July 16, 2019, I issued an order directing plaintiffs to file: (1) a sworn affidavit from someone with personal knowledge of the alleged misconduct, setting forth the facts which establish liability, the proposed damages amount, and the facts which establish that the Court has personal jurisdiction over defendants; (2) a sworn affidavit from counsel providing information on each attorney (year admitted to the bar, etc.) who worked on the case and their hourly rate, and why the No. of attorneys involved are entitled to the fees; and (3) documentary evidence justifying an award of costs. Id.
On July 23, 2019, plaintiffs filed their supplemental submissions, including two affidavits in support of their request for damages. Second Affidavit of Adam C. Ford dated July 23, 2019 (“Ford Supp. Aff.”), Dkt. No. 30; Affidavit of Sara Altschul dated July 23, 2019 (“Altschul Aff.”), Dkt. No. 29. Plaintiffs seek $300,000 in statutory damages, $27,587.29 in attorneys' fees and costs, and an injunction barring defendants from continuing to misappropriate defendants' name and likeness. Ford Supp. Aff. (Wherefore Clause); Altschul Aff. ¶¶ 8-11; FOF at 10. 5
II. DISCUSSION
A. Personal Jurisdiction
1. Legal Standards
“Where a plaintiff's filings raise questions as to whether a district court may permissibly exercise personal jurisdiction over a non-appearing defendant, the court may consider sua sponte whether the plaintiff has set forth facts justifying the assertion of personal jurisdiction.” Hood v. Ascent Med. Corp., No. 13-CV-0628 (RWS) (DF), 2016 WL 1366920, at *6 (S.D.N.Y. Mar. 3, 2016), adopted by 2016 WL 3453656 (S.D.N.Y. June 20, 2016), aff'd, 691 Fed.Appx. 8 (2d Cir. 2017). See generally Sinoying Logistics Pte Ltd. v. Yi Da Xin Trading Corp., 619 F.3d 207, 213 (2d Cir. 2010) (“Because personal jurisdiction can be waived by a party, a district court should not raise personal jurisdiction sua sponte when a defendant has appeared and consented [. . .] to the jurisdiction of the court. But when a defendant declines to appear, [. . .] before a court grants a motion for default judgment, it may first assure itself that it has personal jurisdiction over the defendant.”) (internal citation omitted).
In a federal question action like this one where the statute does not provide for nationwide service, the personal jurisdiction rules of the forum state apply. See Schentag v. Nebgen, No. 17-CV-8734 (GHW), 2018 WL 3104092, at *15 (S.D.N.Y. June 21, 2018) (citing PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997)). Accordingly, New York law applies. 6
New York's long-arm statute provides that a court may exercise personal jurisdiction over any non-domiciliary who commits a tortious act outside of the state that causes injury to any person or property in New York if that entity “expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.” CPLR § 302(a)(3)(ii). Jurisdiction under this provision has five elements:
(1) the defendant committed a tortious act outside New York; (2) the cause of action arose from that act; (3) the tortious act caused an injury to a person or property in New York; (4) the defendant expected or should reasonably have expected the act to have consequences in New York; and (5) the defendant derived substantial revenue from interstate or international commerce.Penguin Grp. (USA) Inc. v. Am. Buddha, 16 N.Y.3d 295, 302 (2011).
The first two elements are generally straightforward. The third element requires a determination of the “situs-of-injury, ” or the location of the “original event which caused the injury [. . .] as distinguished from the initial tort or the ultimate economic injury.” Hood, 2016 WL 1366920 at *12 (quoting DiStefano v. Carozzi N. Am., Inc., 286 F.3d 81, 84-85 (2d Cir. 2001)). The New York Court of Appeals has determined that, in “copyright infringement cases involving the uploading of a copyrighted printed literary work onto the internet, ” the situs of injury is the location of the copyright holder. Penguin, 16 N.Y.3d at 302. This 7 reasoning has been extended to trademark cases. See, e.g., Alibaba Group Holding Ltd. v. Alibabacoin Foundation, No. 18-CV-2897 (JPO), 2018 WL 2022626, at *7-8 (S.D.N.Y. Apr. 30, 2018). Two critical factors inform the situs-of-injury determination in this context. First, in trademark cases involving digital piracy, “the crux of [a plaintiff's] claimed injury cannot be easily circumscribed to a specific location where it lost business: instead, the alleged injury [. . .] involves online infringement that is dispersed throughout the country and . . . the world.” Id. at *8 (quoting Penguin, 16 N.Y.3d at 305) (internal quotations omitted). Second, “in trademark cases and copyright cases alike, ” the injury suffered--“‘public confusion as to source,' Silverman v. CBS Inc., 870 F.2d 40, 480 (2d Cir. 1989)--is abstract, intangible, and often irreparable.” Id. (citing Malletier v. Burlington Coat Factory Warehouse Corp., 426 F.3d 532, 537 (2d Cir. 2005); Penguin, 16 N.Y.3d at 306).
Recognizing that a “situs of injury” determination for purposes of CPLR § 302(a)(3)(ii) in a copyright infringement case requires “analysis of state law and policy considerations that [a federal court of appeals] is ill-suited to make, ” the Second Circuit certified the following question to the New York Court of Appeals in 2010: “In copyright infringement cases, is the situs of injury [. . .] the location of the infringing action or the residence or location of the principal place of business of the copyright holder?” Penguin Group (USA) Inc. v. American Buddha, 609 F.3d 30, 34 (2d Cir. 2010). After narrowing the scope of the question to “copyright infringement cases involving the uploading of a copyrighted printed literary work onto the internet” the New York Court of Appeals found the situs of injury to be the “location of the copyright holder.” Penguin, 16 N.Y.3d at 302.
The fourth element, whether a defendant expects or should reasonably expect the act to have consequences within the forum state, is an “objective rather than subjective [test].” Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 241 (2d Cir. 1999). The requirement of foreseeability “relates to forum consequences generally and not to the specific event which produced injury within the state.” Am. Network, Inc. v. Access Am./Connect Atlanta, 975 F.Supp. 494, 497 (S.D.N.Y. 1997); Parker Waichman Alonso LLP v. Orlando Firm, P.C., No. 09-CV-7401 (CM), 2010 WL 8 1956871, at *10 (S.D.N.Y. May 14, 2010). In analyzing this element, “New York courts require some discernible effort by the defendant to directly or indirectly serve the New York market.” Parker Waichman Alonso LLP, 2010 WL 1956871, at *10 (citing Kernan, 175 F.3d at 241).
The fifth requirement, that a defendant derived substantial revenue from interstate or international commerce, is “designed to preclude the exercise of jurisdiction over nondomiciliaries who might cause direct, foreseeable injury within the State but ‘whose business operations are of a local character.'” Mickalis Pawn Shop, LLC, 645 F.3d at 150 (quoting Ingraham v. Carroll, 90 N.Y.2d 592, 599, 665 N.Y.S.2d 10, 687 N.E.2d 1293 (1997)). “There is no specific dollar threshold at which revenue becomes ‘substantial' for purposes of CPLR § 302(a)(3)(ii).” City of New York v. A-1 Jewelry & Pawn, Inc., 501 F.Supp.2d 369, 417 (E.D.N.Y. 2007). Courts in this District have found that dismissal under CPLR § 302(a)(3)(ii) for lack of personal jurisdiction “is inappropriate even where there is no proof that a defendant derives substantial revenue from interstate or international commerce, where that knowledge is peculiarly under the control of [the defendant], and may come to light in the course of [s]ubsequent discovery.” Energy Brands Inc. v. Spiritual Brands, Inc., 571 F.Supp.2d 458, 468 (S.D.N.Y. 2008) (citing Mfg. Tech., Inc. v. Kroger Co., No. 06-CV-3010 (JSR), 2006 WL 3714445, at *3 (S.D.N.Y. Dec. 31, 2006) (internal quotation omitted) (alterations in original)).
Beyond meeting the requirements of the forum state's long-arm statute, a court's exercise of personal jurisdiction must always comport with the Due Process 9 Clause of the United States Constitution. Eades v. Kennedy, PC Law Offices, 799 F.3d 161, 168 (2d Cir. 2015). This constitutional inquiry “requires a finding that (1) a defendant has ‘certain minimum contacts' with the relevant forum, and (2) that the exercise of jurisdiction is reasonable in the circumstances.” In re Terrorist Attacks on Sept. 11, 2001, 714 F.3d 659, 673 (2d Cir. 2013) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
Minimum contacts are established “where the defendant purposefully avails itself of the privilege of doing business in the forum.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75 (1985) (citing Hanson v. Denckla, 357 U.S. 235, 253 (1958)). A defendant may be said to have purposely availed itself of this privilege based on its maintenance of an interactive website in combination with other relevant forum contacts. See Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 171 (2d Cir. 2010) (finding minimum contacts inquiry met where defendant “offer[ed] bags for sale to New York consumers on the Queen Bee website and [sold] bags--including at least one counterfeit Chloé bag—to New York consumers”); Hypnotic Hats, Ltd. v. Wintermantel Enterprises, LLC, No. 15-CV-6478 (ALC), 2016 WL 7451306, at *4 (S.D.N.Y. Dec. 27, 2016) (finding minimum contacts where defendants marketed and sold their products nationwide through websites and directly solicited New York customers via email). An interactive website has “significant commercial elements, which typically are found to constitute the transaction of business.” Vandermark v. Jotomo Corp., 42 A.D.3d 931, 839 N.Y.S.2d 670, 671 (4th Dep't 2007). 10
The reasonableness inquiry depends on several factors, including “the burden on the defendant, the interests of the forum State, and the plaintiff's interest in obtaining relief, [as well as] the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies.” Asahi Metal Indus. Co. v. Superior Court of California, Solano Cty., 480 U.S. 102, 113 (1987) (quoting World-Wide Volkswagen v. Woodson, 444 U.S. 286, 292 (1980) (internal citations omitted)). “Where the other elements for jurisdiction have been met, dismissals on reasonableness grounds should be ‘few and far between.'” Gucci Am., Inc. v. Frontline Processing Corp., 721 F.Supp.2d 228, 246 (S.D.N.Y. 2010) (quoting Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 575 (2d Cir. 1996)).
2. Analysis
Here, the personal jurisdiction rules of the forum state apply. Plaintiffs bring this action under section 43 of the Lanham Act, 15 U.S.C. § 1125(a). As “the Lanham Act does not provide for nationwide service of process, [plaintiffs] must establish personal jurisdiction under New York's long-arm statute.” Alibaba Group Holding Ltd., 2018 WL 2022626, at *6 (quoting Chanel, Inc. v. Doubinine, No. 04-CV-4099 (CPS), 2008 WL 4449631, at *1 (E.D.N.Y. Oct. 2, 2008)) (internal citations omitted).
Plaintiffs have pled sufficient facts to satisfy all five elements under CPLR § 302(a)(3)(ii). Elements one and two are satisfied based on facts alleged in the pleadings that defendants engaged in false advertising from their principal place of 11 business in Dallas, Texas. Compl. ¶ 8. See Gucci Am., 721 F.Supp.2d at 241 (“Trademark infringement is a tort for jurisdictional purposes, and the situs of this tort is considered to be where the website, or servers which maintain the website, are located.”).
Plaintiffs have also met their burden of establishing that defendants' tortious acts caused injury to persons or property in New York. TLG's principal executive office and Tzell's headquarters are in Manhattan. Compl. ¶¶ 5, 7. Plaintiffs allege several forms of injury throughout their pleadings, including that defendants obtained business “at Plaintiffs' expense” based on the false claim that The Travel Group is affiliated with plaintiffs and that plaintiffs “have suffered and continue to suffer substantial monetary damages, including reputational damages.” Id. ¶¶ 31- 32, 37, 42. Plaintiffs also contend that defendant Corley, acting on behalf of The Travel Group, “fraudulently instruct[ed] that commissions earned by Tzell Travel for booking a hotel in Zurich, Switzerland be sent to The Travel Group on November 27, 2018 and be paid to Corley's company.” Altschul Aff. ¶ 15. Courts have consistently concluded that under CPLR § 302(a)(3)(ii) of the New York long-arm statute, “[t]he torts of copyright and trademark infringement cause injury in the state where the allegedly infringed intellectual property is held.” McGraw-Hill Companies, Inc. v. Ingenium Techs. Corp., 375 F.Supp.2d 252, 256 (S.D.N.Y. 2005); see also, e.g., Design Tex Grp., Inc. v. U.S. Vinyl Mfg. Corp., No. 04-CV-5002 (JSR), 2005 WL 357125, at *1 (S.D.N.Y. Feb. 14, 2005) (“[B]ecause the plaintiffs (and their 12 intellectual property) are based in New York, the injury is felt within the state no matter where the infringement takes place.”).
Furthermore, defendants expected or should reasonably have expected their acts to have consequences in New York, in part because they promote themselves as affiliated with a “New York-based travel agency, that specifically serves New York customers.” Altschul Aff. ¶ 14. The Travel Group's website boasts a “longtime affiliation” with the “Tzell Travel Group.” Compl., Exh. A. Asserting an affiliation with a New York-based travel agency is a “tangible manifestation” of the Texas-based defendants' efforts to reach customers in New York. See Am. Network, 975 F.Supp. at 498. Additionally, The Travel Group's website proclaims that the company is “one of the top full service, Certified Minority-Female Owned travel agencies in the United States.” Exh. A. These claims of prominence within a national market and a shared network with a New York-based travel agency give rise to the “reasonable inference” that defendants' acts would have consequences in New York. See Am. Network, 975 F.Supp. at 498 (finding that defendant's publication of website home page stating that it could help customers “across the U.S.” made consequences in New York reasonably foreseeable).
As to element five, no evidence has been produced as to the revenue sources of defendants, as they have failed to appear. However, the dictates of common sense lead the Court to conclude that an agency providing domestic and international travel services would derive substantial revenue from interstate or international commerce. Plaintiffs have supported this proposition with “first-hand 13 knowledge” that defendants, for example, received payments from a hotel booking in Zurich, Switzerland due to their fraudulent misrepresentations. Exh. A.; Altschul Aff. ¶ 15.
Having determined the applicability of New York's long-arm statute, the Court further finds that the exercise of personal jurisdiction in this case is consistent with due process. Plaintiffs have alleged facts sufficient to demonstrate that defendants “purposefully availed [themselves] of the privilege of doing business in the forum state and could reasonably anticipate being haled into court there.” Burger King Corp., 471 U.S. at 474-75. Defendants falsely promoted themselves as being affiliated with Tzell, a New York-based company, in order to attract customers based on Tzell's “status” and “connections.” Exh. A.; Altschul Aff. ¶ 15. The Travel Group's website establishes that it serves customers nationwide, as evidenced by its claim to be one of the “top full service [. . .] travel agencies in the United States.” Exh. A. Additionally, its website is “relatively interactive” and allows residents of any state, including New Yorkers, to contact the company and make online bookings directly. See, e.g. Gucci Am., 721 F.Supp.2d at 245 (finding minimum contacts where company “consider[ed] itself to be a nationwide service provider, operate[d] a website that can be viewed in New York, [did] business with internet merchants [. . .] who [sold] goods into New York, and even [had] some New York-based clients who they earn revenue from (however insubstantial).”). 14
See Corporate Travel of The Travel Group LLC, https://northtexastravelgroup.com /corporate-travel/ (last visited Dec. 3, 2019) (“Our online booking engine powered by Concur makes booking corporate travel quick and easy with powerful easy-to-use features for even the least experienced travelers.”). The Court may consider this material “for purposes of determining whether the Court has personal jurisdiction [. . .] because the materials are judicially noticeable, i.e., not subject to reasonable dispute.” Trisvan v. Heyman, No. 16-CV-84 (MKB), 2017 WL 1133344, at *1, n.3 (E.D.N.Y. Mar. 24, 2017). See also Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 84 (2d Cir. 2013) (noting that “in deciding a pretrial motion to dismiss for lack of personal jurisdiction a district court has considerable procedural leeway” and may consider material outside pleadings).
Finally, the Court's exercise of personal jurisdiction is reasonable. The burden on defendants would presumably be a “general inconvenience” of coming to New York as out-of-state litigants. Parker Waichman Alonso LLP, 2010 WL 1956871, at *12. However, the nature of defendants' company as a travel agency lessens the degree of hardship associated with traveling to New York. Additionally, defendants have “failed to present any evidence to demonstrate that, in this modern age and for a litigant with obvious familiarity with internet communication, litigation in New York would present so great an inconvenience as to constitute a deprivation of due process.” Savage Universal Corp. v. Grazier Const., Inc., No. 04-CV-1089 (GEL), 2004 WL 1824102, at *11 (S.D.N.Y. Aug. 13, 2004). Balanced against plaintiffs' interest in resolving a matter that has already been decided by default judgment and New York's “manifest interest in providing effective means of redress for its residents, ” the reasonableness factors do not preclude the Court's exercise of personal jurisdiction over defendants. Eades, 799 F.3d at 169 (quoting Chloe, 616 F.3d at 173). 15
B. Default Judgment and Liability
In cases of default judgment, the “court is required to accept all of the [plaintiffs'] factual allegations as true and draw all reasonable inferences in [plaintiffs'] favor, [. . .] but it is also required to determine whether the [plaintiffs'] allegations establish [the defendants'] liability as a matter of law.” Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009); see also Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981) (“[A] district court has discretion under Rule 55(b)(2) once a default is determined to require proof of necessary facts and need not agree that the alleged facts constitute a valid cause of action . . . .” (citation omitted)). “In other words, because a defendant's default only establishes its liability based on the well-pleaded allegations of the complaint, the court must still scrutinize the plaintiff's pleading and find the claims sufficiently pleaded.” Vera v. Donado Law Firm, No. 17-CV-3123 (LGS) (DF), 2019 WL 3306117, at *4 (S.D.N.Y. June 19, 2019), adopted by No. 17-CV-3123 (LGS), 2019 WL 3302607 (S.D.N.Y. July 23, 2019). See also Galeana v. Lemongrass on Broadway Corp., 120 F.Supp.3d 306, 313 (S.D.N.Y. 2014) (“[S]ince the allegations in the complaint must be ‘well-pleaded,' we are required to examine whether those factual allegations, if deemed true, establish liability.”) (citing Finkel, 577 F.3d at 84)).
In their Proposed Findings of Facts and Conclusions of Law, plaintiffs request damages relating to their claims against defendants for violation of the Lanham Act, but not for the remaining causes of action under Texas common law, including unfair competition and misappropriation of name or likeness. FOF at 3. 16 Therefore, in evaluating whether defendants have established a valid cause of action, the Court considers defendants' liability as to violation of the Lanham Act alone. See Coach Servs., Inc. v. K Ya Int'l, Inc., No. 09-CV-4656 (RMB) (JCF), 2010 WL 2771897, at *2 (S.D.N.Y. June 10, 2010) (“In connection with this inquest, the plaintiff has requested damages only for trademark infringements in violation of the Lanham Act, and therefore liability need only be considered with respect to that claim.”), adopted by 2010 WL 2771907 (S.D.N.Y. July 12, 2010).
While plaintiffs have styled their cause of action under the Lanham Act to be “False Advertising under 15 U.S.C. § 1125(a)-Lanham Act Section 43(a), ” facts alleged in their submissions suggest that plaintiffs seek relief not only for false advertising but also for trademark infringement under § 1125(a). See, e.g., Compl. ¶ 2 (“Plaintiffs seek an order enjoining Defendants from continuing to operate their misleading website https://northtexastravelgroup.com, which repeatedly uses the trade name, ‘The Travel Group, '”), ¶ 21 (“Defendants have sought financial gain for themselves and their associates by using a trade name substantially similar to TLG. . .”); Altschul Aff. ¶ 6 (same); FOF at 3 (same), 4 (“Plaintiffs are entitled to an injunction and enjoining Defendants from using the name ‘The North Texas Travel Group' or any name resembling Travel Leaders Group. . .”). Accordingly, out of an abundance of caution, the Court will analyze defendants' liability for both false advertising and trademark infringement under 15 U.S.C. § 1125(a). 17
1. Liability for False Advertising
“To establish a false advertising claim under Section 43(a) of the Lanham Act, a plaintiff must prove five elements: 1) the defendant has made a false or misleading statement; 2) the false or misleading statement has actually deceived or has the capacity to deceive a substantial portion of the intended audience; 3) the deception is material in that it is likely to influence purchasing decisions; 4) there is a likelihood of injury to [the] plaintiff, such as declining sales or loss of goodwill; and 5) the goods traveled in interstate commerce.” Coty Inc. v. Excell Brands, LLC, 277 F.Supp.3d 425, 461 (S.D.N.Y. 2017) (quoting Johnson & Johnson Vision Care, Inc. v. CIBA Vision Corp., 348 F.Supp.2d 165, 177-78 (S.D.N.Y. 2004)). An advertisement is “literally false” when “the message [is] unambiguous, ” and in such cases “consumer deception is presumed.” Merck Eprova AG v. Gnosis S.p.A., 901 F.Supp.2d 436, 450 (S.D.N.Y. 2012).
Here, plaintiffs have established each element of false advertising with respect to the defendants' erroneous claim of affiliation with Tzell, a company with which the North Texas Travel Group has never been affiliated. Therefore, the first and second elements are met, as defendants' advertisement of a “long time affiliation” with the “Tzell Travel Group” is a literally false statement, and deception of the public is presumed. Compl., Exh. A. See, e.g., Time Warner Cable, Inc. v. DIRECTV, 497 F.3d 144, 153 (2d Cir. 2007) (““When an advertisement is shown to be literally or facially false, consumer deception is presumed, and the court may grant relief without reference to the advertisement's [actual] impact on 18 the buying public.”) (internal quotations omitted). Third, because consumers choose to purchase travel agency services based on quality and likelihood of satisfaction, this “deception is material in that it is likely to influence purchasing decisions.” Coty Inc., 277 F.Supp.3d at 463 (quoting Johnson, 348 F.Supp.2d at 178). Fourth, plaintiffs are likely to suffer injury in the form of lost sales to consumers deceived into believing they are purchasing services from an affiliate of Tzell. Additionally, Tzell's reputation is likely to be injured when those consumers receive potentially sub-par services from a company they associate with Tzell. Finally, as previously established, any travel agency such as defendants', which offers services to customers around the country, necessarily implicates goods that have traveled in interstate commerce. Therefore, plaintiffs have sufficiently pled a false advertising cause of action.
The gravamen of plaintiffs' false advertising cause of action concerned Tzell. Compl. ¶ 26 (“The website explicitly claims ‘Our long time affiliation with the travel industry's leading luxury network, Tzell Travel Group, has given the Travel Group access to the world.' Similarly, the website falsely states, ‘As a Tzell Travel Group affiliate, we also offer VIP courtesies. . . .'”). Additionally, plaintiffs have not alleged that defendants falsely claimed to be affiliated with TLG, other than in an entirely conclusory fashion. Compl. ¶¶ 28, 31. Therefore, the Court has analyzed the false advertising claim solely with respect to Tzell, and not TLG.
2. Liability for Trademark Infringement
In the Second Circuit, trademark infringement claims arising under § 1125(a) are analyzed under the two-prong test described in Gruner + Jahr USA Publ'g v. Meredith Corp., 991 F.2d 1072 (2d Cir. 1993). See Time, Inc. v. Petersen Publ'g Co. L.L.C., 173 F.3d 113, 117 (2d Cir. 1999) (applying Gruner test to claims 19 brought under § 1125(a)). The Gruner test “looks first to whether the plaintiff's mark is entitled to protection, and second to whether defendant's use of the mark is likely to cause consumers confusion as to the origin or sponsorship of the defendant's goods.” Virgin Enters. v Nawab, 335 F.3d 141, 146 (2d Cir. 2003) (citing Gruner, 991 F.2d at 1074).
First, “[a] mark is entitled to protection when it is inherently distinctive.” Time, Inc. 173 F.3d at 117. Inherently distinctive marks include those which are “suggestive, arbitrary, or fanciful.” Arrow Fastener Co. v. Stanley Works, 59 F.3d 384, 391 (2d Cir. 1995). “A fanciful mark is a name that is made-up to identify the trademark owner's product like EXXON for oil products and KODAK for photography products.” Gruner, 991 F.2d at 1076. A mark that is “merely descriptive [. . .] qualifies for protection only if it has acquired secondary meaning, i.e., if it has become distinctive of the [. . .] goods in commerce.” Time, Inc. 173 F.3d at 117 (citing 15 U.S.C. § 1052(f)). A “merely descriptive” mark can be demonstrated to have acquired secondary meaning through registration in the United States Patent and Trademark Office. See 15 U.S.C. §§ 1065, 1115(b); Park ‘N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 193 (1985) (“Registration allows a merely descriptive mark to become incontestable on the basis of lack of secondary meaning.”). For unregistered marks, “[t]he crucial question” in determining secondary meaning is “whether the public is moved in any degree to buy an article because of its source.” Genesee Brewing Co. v. Stroh Brewing Co., 124 F.3d 137, 143 n.4 (2d Cir. 1997). In making this determination, courts may consider 20 such factors as “(1) length and exclusivity of use; (2) advertising expenditures; (3) consumer studies linking the product to product source; (4) sales success; (5) unsolicited media coverage of the product; (6) attempts to plagiarize.” Universal Church, Inc. v. Universal Life Church/ULC Monastery, No. 14-CV-5213 (NRB), 2017 WL 3669625, at *11 (S.D.N.Y. Aug. 8, 2017), (citing Thompson Med. Co. v. Pfizer Inc., 753 F.2d 208, 217 (2d Cir. 1985)), aff'd sub nom. Universal Church, Inc. v. Toellner, 752 Fed.Appx. 67 (2d Cir. 2018).
Second, to analyze the likelihood of confusion, courts in the Second Circuit use a “non-exclusive list” of the well-known Polaroid factors:
[T]he strength of the senior user's mark; the similarity of the parties' marks; the proximity of the parties' areas of commerce; the likelihood that the senior user will bridge the gap separating their areas of activity; the existence of actual consumer confusion; whether the junior user acted in bad faith or was otherwise reprehensible in adopting the mark; the quality of the junior user's product; and the sophistication of the relevant consumer group.Guthrie Healthcare Sys. v. ContextMedia, Inc., 826 F.3d 27, 37 (2d Cir. 2016) (citing Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir. 1961)).
Here, plaintiffs have not demonstrated that the Travel Leaders Group mark is entitled to protection. Travel Leaders Group is a “merely descriptive” mark that, unlike Tzell, is not registered with the United States Patent and Trademark Office. 21 Moreover, plaintiffs have not established secondary meaning through evidence such as advertising expenditures, consumer studies, or sales success. Plaintiffs submitted no evidence to support this conclusion, nor did they present any arguments for the same. Thus, on this record, defendants cannot be found liable for trademark infringement as to the Travel Leaders Group mark.
Plaintiffs state that the Travel Leaders Group owns more than 60 trademarks, including both Travel Leaders Group and Tzell, FOF at 7, but have not submitted any trademark certificates of registration or registration numbers. Having taken judicial notice of the trademarks registered by Travel Leaders Group in the United States Patent and Trademark Office's Trademark Electronic Search System (“TESS”), the Court finds that “Tzell” is a registered trademark, while “Travel Leaders Group” is not. Trademark Electronic Search System (TESS), The United States Patent and Trademark Office, https://www.uspto.gov/trademarks-application-process/search-trademark-database (last visited Dec. 3, 2019). See Telebrands Corp. v. Del Labs., Inc., 719 F.Supp.2d 283, 287 n.3 (S.D.N.Y. 2010) (“The Court may properly take judicial notice of official records of the United States Patent and Trademark Office and the United States Copyright Office.”) (citations omitted).
Conversely, the Tzell mark is entitled to protection. Not only is “Tzell” a registered trademark, but it is also a made-up word, and so is inherently distinctive as a “fanciful mark, ” similar to EXXON and KODAK. See Gruner, 991 F.2d at 1076.
Further, plaintiffs satisfy the “likelihood of confusion” element under a balancing of the Polaroid factors with respect to Tzell. “Tzell” is a strong mark. See, e.g., Cadbury Beverages, Inc. v. Cott Corp., 73 F.3d 474, 479 (2d Cir. 1996) (“[W]hen a mark is registered and fanciful, the plaintiff has met its burden on the question of strength.”) (internal quotation omitted). It is also an award-winning travel service provider that has been in business worldwide for more than five decades. Compl ¶ 30. From this longevity and international reach, it may be inferred that “the public has come to identify [Tzell] with [. . .] particular product[s].” W.W.W. Pharmaceutical Co., Inc. v. Gillette Co., 984 F.2d 567, 573 (2d Cir. 1993), 22 superseded on other grounds by Deere & Co. v. MTD Prods., Inc., 41 F.3d 39 (2d Cir. 1994).
Defendants' claimed affiliation with “Tzell Travel Group, ” although technically distinct from both Tzell Travel, LLC, and Travel Leaders Group, LLC, is intended to confuse consumers into falsely associating the defendant company with Tzell. Moreover, as a travel agency, defendants operate in the same area of commerce as plaintiffs, including by providing “Corporate Travel” services similar to those provided by Tzell. Compl. ¶¶ 6-7, 17; Exh. A. Defendants' bad faith in adopting the protected mark is evidenced by the fact that they purposely claimed an affiliation with Tzell to use plaintiffs' reputation to their advantage. See Exh. A (“Tzell Travel Group has given the Travel Group access to the world” by providing “access to more than 1, 300 of the world's premier travel providers”). On the basis of the Polaroid factors, the Court concludes that plaintiffs have demonstrated a likelihood of consumer confusion.
Accordingly, to the extent that the complaint can be construed to include a cause of action for trademark infringement under § 1125, plaintiffs have stated a valid cause of action as to Tzell, but not as to Travel Leaders Group.
3. Willfulness
Furthermore, defendants' trademark infringement is willful. As an initial matter, defendants' infringement is deemed willful “[b]y virtue of the default[.]” Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 124 (S.D.N.Y. 2003). See, e.g., Chloe v. Zarafshan, No. 06-CV-3140 (RJH) (MHD), 2009 WL 2956827, at *7 23 (S.D.N.Y. Sept. 15, 2009) (“Willfulness may be established by a party's default because an innocent party would presumably have made an effort to defend itself.”). Moreover, defendants' willfulness is apparent from the similarity between the marks, defendants' failure to take action after receiving cease and desist demands (Compl. ¶ 22), and defendants' leveraging of plaintiffs' marks on their website to boast an affiliation with an extensive network of travel providers (Exh. A).
C. Damages
Having found defendants to be in violation of § 1125(a), the Court must “conduct an inquiry in order to ascertain the amount of damages with reasonable certainty.” Am. Jewish Comm. v. Berman, No. 15-CV-5983 (LAK) (JLC), 2016 WL 3365313, at *3 (S.D.N.Y. June 15, 2016), adopted by 2016 WL 4532201 (S.D.N.Y. Aug. 29, 2016) (quoting Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). This inquiry “involves two tasks: determining the proper rule for calculating damages on such a claim, and assessing plaintiffs' evidence supporting the damages to be determined under this rule.” Credit Lyonnais, 183 F.3d at 155. A court “may conduct hearings or make referrals” to “determine the amount of damages” under Fed.R.Civ.P. 55(b)(C); moreover, the Second Circuit has held that an inquest into damages may be conducted on the basis of documentary evidence alone, “as long as [the court has] ensured that there was a basis for the damages specified.” Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989). 24
1. Statutory Damages
Plaintiffs seek $300,000 in statutory damages under 15 U.S.C. § 1117(c)(1). FOF at 8-10. Under the Lanham Act, statutory damages are only available for trademark infringement claims “involving the use of a counterfeit mark (as defined in section 1116(d) . . .).” 15 U.S.C. § 1117(c). Here, plaintiffs pled a cause of action alleging false advertising under § 1125, rather than § 1114, and do not allege that defendants violated the Lanham Act by using a counterfeit mark. See, e.g., Momentum Luggage & Leisure Bags v. Jansport, Inc., No. 00-CV-7909 (DLC), 2001 WL 135702, at *1 (S.D.N.Y. Feb. 16, 2001) (“Section 35(a) has its own damages provisions, however, and they do not include statutory damages. A reading of the 25 plain language of Section 35 makes clear that statutory damages are only available under Section 35(c), 15 U.S.C. § 1117(c).”) (citing Edward G. Biester, III, Anticounterfeiting Consumer Protection Act Introduces RICO to IP, 4 No. 5 Andrews Intell. Prop. Litig. Rep. 3 (Oct. 1, 1997)) (“With the passage of the ACPA, litigants may choose statutory damages in the place of actual damages in Lanham Act cases involving use of a counterfeit mark. The ACPA, however, does not provide for statutory damages in all trademark infringement actions, only those involving use of a counterfeit mark as defined in 15 U.S.C. § 1116(d).”).
Section 1116(d) includes those actions arising under § 1114, the provision defining trademark infringement of registered marks. See § 1116(d)(1) (“In the case of a civil action arising under section 1114(1)(a) of this title or section 220506 of Title 36 with respect to a violation that consists of using a counterfeit mark. . .”). “Counterfeit mark” within § 1116(d)(2) is defined as:
(i) a counterfeit of a mark that is registered on the principal register in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered; or (ii) a spurious designation that is identical with, or substantially indistinguishable from, a designation as to which the remedies of this chapter are made available by reason of section 220506 of Title 36.§ 1116(d)(1)(B). In the Second Circuit, courts view counterfeiting as “the ‘hard core' or ‘first degree' of trademark infringement that seeks to trick the consumer into believing he or she is getting the genuine article, rather than a colorable imitation.” Gucci Am., Inc. v. Guess, Inc., 868 F.Supp.2d 207, 242 (S.D.N.Y. 2012) (quoting 4 McCarthy on Trademarks § 25:10). Hence, courts apply the counterfeiting provision to “products that are stitch-for-stitch copies of those of another brand.” Id.
Additionally, in plaintiffs' prayer for relief, they sought damages “as the Court may deem just and appropriate and as is permitted under 15 U.S.C. § 1117(a).” Compl. at 8 (Prayer for Relief). As described below, § 1117(a) is the provision for actual, rather than statutory, damages. “A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.R.Civ.P. 54(c). See also Silge v. Merz, 510 F.3d 157, 160 (2d Cir. 2007) (“By limiting damages to what is specified in the “demand for judgment, ” the rule ensures that a defendant who is considering default can look at the damages clause, satisfy himself that he is willing to suffer judgment in that amount, and then default without the need to hire a lawyer.”). Given that plaintiffs only pled a cause of action under § 1125(a) of the Lanham Act and sought relief under § 1117(a), they are not entitled to statutory damages, which are only available in cases alleging the use of a counterfeit mark. Damages in this case, if any, are properly awarded only under § 1117(a), rather than § 1117(c). 26
2. Actual Damages
Section 35(a) of the Lanham Act provides that, in cases of violation of § 1125(a), “subject to the principles of equity, [plaintiffs are entitled] to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. . . .” 15 U.S.C. § 1117(a). To recover damages under § 1117(a), “a plaintiff must establish either actual consumer confusion or deception resulting from the violation, or that the defendant's actions were intentionally deceptive thus giving rise to a rebuttable presumption of consumer confusion.” Scores Holding Co. Inc. v. CJ NYC Inc., No. 17-CV-0020 (RA), 2017 WL 2297014, at *3 (S.D.N.Y. May 24, 2017) (quoting George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir. 1992)) (citations and quotation marks omitted).
A plaintiff seeking to recover a defendant's profits “bears the burden of proffering evidence concerning the defendant's revenue, ” although the “defendant must prove all elements of cost or deduction claimed.” Conan Properties Int'l LLC v. Sanchez, No. 17-CV-162 (FB), 2018 WL 4522099, at *35 (E.D.N.Y. June 8, 2018) (quoting § 1117(a)) (internal quotations omitted), adopted as modified, 2018 WL 3869894 (E.D.N.Y. Aug. 15, 2018). In the alternative, a plaintiff seeking to recover its own lost profits “must proffer evidence of a decline in its net profits, [. . .] as well as proof that the defendant ‘actually caused the loss of those profits.'” Id. (quoting Victoria Cruises, Inc. v. Changjiang Cruise Overseas Travel Co., 630 F.Supp.2d 255, 262-63 (E. D. N.Y.2008)). Additionally, a plaintiff may recover damages as to “market reputation and lost profits [. . .] calculated by estimating the plaintiff's 27 revenues lost as a result of unlawful conduct and subtracting any expenses associated with the lost revenues.” Merck Eprova AG v. Brookstone Pharm., LLC, 920 F.Supp.2d 404, 428 (S.D.N.Y. 2013) (citing GTFM, Inc. v. Solid Clothing, Inc., 215 F.Supp.2d 273, 305 (S.D.N.Y. 2002)).
Here, plaintiffs have not offered any evidence as to defendants' profits nor their own lost profits, as they erroneously sought statutory damages under 15 U.S.C. § 1117(c) rather than actual damages under § 1117(a). Plaintiffs sought such relief under the theory that “[d]efendants' default has precluded obtaining necessary discovery regarding the full damages [d]efendants' misconduct has caused.” Altschul Aff ¶ 8. In cases of default, however, courts in this District allow parties to approximate calculations for damages sustained so long as they can provide a “reasonable basis for [the] computation.” Zarafshan, 2009 WL 2956827 at *5. Moreover, plaintiffs could have provided evidence of their own lost profits. Given that plaintiffs have not provided any evidence or approximations of the calculations necessary to award actual damages and have now had two opportunities to develop the record, I do not recommend an award of damages. See Conan Properties Int'l LLC, 2018 WL 4522099, at *36 (“[A]n award of actual damages under the Lanham Act must be based on an evidentiary showing, not sheer speculation that plaintiffs suffered a financial loss.”) (citing Hilton v. UK Fragrances, Inc., No. 12-CV-6346 (JFB)(AKT), 2014 WL 794304, at *6-8 (E.D.N.Y. Feb. 25, 2014) (collecting cases denying damages against defaulting defendants for insufficient proof)). 28
D. Injunctive Relief
1. Legal Standards
In addition to statutory damages, plaintiffs also seek to enjoin defendants “from using the name ‘North Texas Travel Group' or any name resembling Travel Leaders Group and from false [sic] claiming to be affiliated with Tzell or any other Travel Leaders Group affiliate.” FOF at 4. See also Compl. at 8 (Prayer for Relief).
In the Second Circuit, where a party seeks injunctive relief under the Lanham Act, courts apply the four-factor test articulated by the Supreme Court in the patent action eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 390 (2006). See, e.g., Salinger v. Colting, 607 F.3d 68, 78 n.7 (2d Cir. 2010) (extending eBay test to “preliminary injunctions in the context of copyright cases” and noting it saw “no reason that eBay would not apply with equal force to an injunction in any type of case”); U.S. Polo Ass'n, Inc. v. PRL USA Holdings, Inc., 800 F.Supp.2d 515, 540 (S.D.N.Y. 2011) (applying Salinger's extension of Ebay test to trademark action), aff'd, 511 Fed.Appx. 81 (2d Cir. 2013) (summary order). Under the Ebay standard, permanent injunctive relief should issue where the plaintiff has actually succeeded on the merits and: (1) plaintiff is “likely to suffer irreparable injury in the absence of an injunction”; (2) remedies at law, such as monetary damages, are inadequate to compensate plaintiff for that injury; (3) the “balance of hardships” tips in plaintiff's favor; and (4) the “public interest would not be disserved” by the issuance of a preliminary injunction. See Salinger, 607 F.3d at 80 (quoting eBay, 547 U.S. at 391). “The Court may issue a permanent injunction in the context of a default 29 judgment where these requirements are met.” CrossFit, Inc. v. 2XR Fit Sys., LLC, No. 2:13-CV-1108 (KM), 2014 WL 972158, at *9 (D.N.J. Mar. 11, 2014); see also Hilton v. Int'l Perfume Palace, Inc., No. 12-CV-5074 (JFB) (GRB), 2013 WL 5676582, at *12 (E.D.N.Y. Oct. 17, 2013). Further, in false advertising cases involving literal falsity, courts within this Circuit may “enjoin the use of the claim without reference to the advertisement's impact on the buying public.” Coty, 277 F.Supp. at 461 (quoting Tiffany (NJ) Inc., 600 F.3d at 112) (internal quotations omitted).
2. Application
As a prerequisite to injunctive relief, plaintiffs have established success on the merits as “the defendants' default constitutes an admission of liability.” Pitbull Prods., Inc. v. Universal Netmedia, Inc., No. 07-CV-1784 (RMB) (GWG), 2007 WL 3287368, at *6 (S.D.N.Y. Nov. 7, 2007) (citing Dunkin' Donuts, Inc. v. Peter Romanofsky, Inc., No. 05-CV-3200 (SJ) (MJA), 2006 WL 2433127, at *6 (E.D.N.Y. Aug. 8, 2006)).
Under the first eBay factor, the Court has already found that the defendants' advertisement of affiliation with Tzell is “literally false, ” and thus is not required to analyze the impact of the advertisement on the public. As to the trademark infringement claim, courts in this District have found that “[i]rreparable harm [in cases involving trademark infringement] . . . when the party seeking the injunction shows that it will lose control over the reputation of its trademark . . . because loss of control over one's reputation is neither calculable nor precisely compensable.” 30 U.S. Polo Ass'n, 800 F.Supp.2d at 540 (internal quotation omitted). “Although a likelihood of confusion does not create a presumption of irreparable injury, a particularly strong likelihood of confusion should weigh in favor of finding irreparable injury.” Marks Org., Inc. v. Joles, 784 F.Supp.2d 322, 334 (S.D.N.Y. 2011). Here, as previously discussed, plaintiffs have established a strong likelihood of confusion with respect to Tzell and, as such, have demonstrated that they are likely to suffer irreparable harm in the absence of an injunction.
Moreover, defendants' default weighs in favor of plaintiffs in the context of the second and third factors. The second factor, the inadequacy of other remedies at law, “is satisfied where the record contains no assurance against defendant's continued violation of plaintiffs' [trademark].” Montblanc-Simplo GmbH v. Colibri Corp., 692 F.Supp.2d 245, 259 (E.D.N.Y. 2010) (applying Ebay test to trade dress action after entry of default). In cases where a default judgment is entered, “[a] court may infer from a defendant's default that it is willing to or may continue its infringement.” Pearson Educ., Inc. v. Vergara, No. 09-CV-6832 (JGK)(KNF), 2010 WL 3744033, at *4 (S.D.N.Y. Sept. 27, 2010) (citations omitted), adopted by Order at Dkt. No. 21 (S.D.N.Y. May 11, 2011). The third eBay factor, involving a balancing of hardships, also favors plaintiffs where, as here, the “defaulting defendant has not identified any hardships for the Court to consider.” Hounddog Prods., LLC, v. Empire Film Grp., Inc., 826 F.Supp.2d 619, 633 (S.D.N.Y. 2011). See also Pearson Educ., Inc., 2010 WL 3744033, at *5. 31
Finally, the fourth eBay factor instructs consideration of the public interest. “The consuming public has a protectable interest in being free from confusion, deception and mistake.” U.S. Polo Ass'n, Inc., 800 F.Supp. 2d, at 541. See also NYC Triathlon v. NYC Triathlon Club, Inc., 704 F.Supp.2d 305, 344 (S.D.N.Y. 2010) (“[T]he public has an interest in not being deceived - in being assured that the mark it associates with a product is not attached to the goods of unknown origin and quality.”). Here, the public has an interest in being able to rely on the quality of services and benefits of the exclusive products and negotiated rates associated with Tzell. As such, the fourth factor, like the others, favors injunctive relief.
Accordingly, I recommend granting a permanent injunction enjoining defendants and their employees, agents, successors, and assigns, and all those acting in concert or participating therewith, from falsely claiming to be affiliated with Tzell and from imitating, copying or making unauthorized use of Plaintiffs' “Tzell” mark as a trademark, trade name, or domain name, either standing alone or as part of any other name or mark.
As stated previously in this Report, plaintiffs have not alleged with any specificity a cause of action that defendants falsely claimed to be affiliated with TLG, nor have they established that the Travel Leaders Group mark is entitled to protection. Therefore, defendants cannot be found liable for false advertising or trademark infringement with respect to TLG. As such, the Court recommends injunctive relief as related to Tzell, but not to TLG.
E. Attorneys' Fees and Costs
Plaintiffs seek attorneys' fees and costs in the amount of $27,587.29. FOF at 10; Altschul Aff. ¶ 9. The Lanham Act allows prevailing plaintiffs to recover for 32 “the costs of the action” and, “in exceptional cases, ” reasonable attorneys' fees. § 1117(a). Until 2018, the Second Circuit viewed all cases involving willful infringement as exceptional ones warranting the award of attorneys' fees. Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995). Since that time, however, whether to award attorneys' fees under the Lanham Act is an inquiry to be determined on a case-by-case basis according to the standards set out by the Supreme Court in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014) (Patent Act case). See 4 Pillar Dynasty LLC v. New York & Company, Inc., 933 F.3d 202, 215 (2d Cir. 2019) (abrogating “willfulness” standard set by Bambu Sales in favor of Octane Fitness test); Sleepy's LLC v. Select Comfort Wholesale Corp., 909 F.3d 519, 531 (2d Cir. 2018) (extending Octane Fitness standard to cases arising under the Lanham Act).
The “exceptional” case under Octane Fitness is “simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, 572 U.S. at 554. The Octane Fitness test instructs courts to evaluate the “totality of circumstances” in each case. Id. To make this determination, courts may assess the relevant factors of “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in some circumstances to advance considerations of compensation and deterrence.” Id. at 554, n.6 (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534, n.19 (1994)). 33
Here, plaintiffs mistakenly rely on the old Bambu willfulness standard in their contention that defendants' conduct is exceptional under § 1117(a) because “defendants acted willfully” (FOF at 9), made “blatantly false statements” (Compl. ¶ 33), and because defendant Corley used “multiple aliases to carry out his scheme” (Id.). While these arguments support the conclusion that the infringement was willful, none of them suggest that this fairly routine case involving false advertising and/or trademark infringement “stands out” with respect to either the strength of plaintiffs' litigating position or the unreasonable manner in which the case was litigated. Indeed, “false or misleading representation of fact” is an element of the statute itself. See § 1125(a).
Nor does plaintiffs' argument speak to an unreasonable manner in which the case was litigated. In fact, defaulting defendants could not have litigated 34 unreasonably because they did not litigate at all. Although the Second Circuit has not directly addressed whether a default is considered “unreasonable” conduct under the Octane Fitness standard, the 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.” Hunter Residential Servs., LLC v. AAA Randpro Plumbing, Inc., No. 8:16-CV-1311 (CEH) (TGW), 2017 WL 1987247, at *6 (M.D. Fla. Feb. 21, 2017). See also, e.g., Whirlpool Corp. v. Glob. Purification, LLC, No. 2:16-CV-463 (JRG), 2017 WL 2099771, at *4 (E.D. Tex. May 15, 2017); RCI TM Corp. v. R&R Venture Group, LLC, No. 6:13-CV-945, 2015 WL 668715, at *11 (M.D. Fla. Feb. 17, 2015). As one court put it succinctly: “Failing to answer a complaint does not constitute unreasonable litigation conduct; it is simply the absence of litigation conduct. Indeed, a default is a boon to the plaintiff, relieving it of the need to prove liability for the claims alleged in the complaint.” Vivint, Inc. v. Christensen, No. 218-CV-313 (JNP)(PMW), 2019 WL 131857, at *3 (D. Utah Jan. 8, 2019). But see Crossfit, Inc. v. Quinnie, 232 F.Supp.3d 1295, 1314 (N.D.Ga. 2017) (awarding attorneys' fees following default judgment where “the substantive strength of [plaintiff's] litigating position stands out from others”); CarMax Auto Superstores, Inc. v. StarMax Fin., Inc., 192 F.Supp.3d 1279, 1284 (M.D. Fla. 2016) (awarding attorneys' fees where defendants defaulted but continued to infringe plaintiffs' trademark). 35
Courts in the Second Circuit generally determine cases to be exceptional under the Octane Fitness standard when litigants have acted unreasonably or in bad faith. See, e.g., John Wiley & Sons, Inc. v. Book Dog Books, LLC, 327 F.Supp.3d 606, 642 (S.D.N.Y. 2018) (finding exceptional case where defendants “took unreasonable positions throughout th[e] litigation” and violated court's discovery orders); River Light V, L.P. v. Lin & J Int'l, Inc., No. 13-CV-3669 (DLC), 2015 WL 3916271, at *10 (S.D.N.Y. June 25, 2015) (awarding attorneys' fees where “defendants engaged in intentional infringement, perpetrated fraud and spoliation, pursued counterclaims grounded in that fraud, and have continued to sell their infringing merchandise throughout this litigation, all with the intent to deceive and profit at the expense of the administration of justice”); Worldwide Home Prod., Inc. v. Bed, Bath & Beyond, Inc., No. 11-CV-3633 (LTS) (MHD), 2015 WL 1573325, at *2 (S.D.N.Y. Apr. 9, 2015) (finding exceptional case where there was “no genuine dispute of material fact as to inequitable conduct” during litigation); Cognex Corp. v. Microscan Sys., Inc., No. 13-CV-2027 (JSR), 2014 WL 2989975, at *4 (S.D.N.Y. June 30, 2014) (finding patent case to be exceptional based on, inter alia, defendants' “unreasonable litigation tactics that have wasted the [c]ourt's time and have required plaintiffs to expend significant resources”).
Upon consideration of the totality of the circumstances under the Octane Fitness standard, I recommend that plaintiffs' motion for attorneys' fees be denied because the case does not stand out as exceptional under § 1117(a). Should the reviewing court, in its discretion, find the case to be exceptional, however, I recommend the calculation of attorneys' fees as follows.
1. Reasonable Hourly Rate
A reasonable fee award is calculated by multiplying “the number of hours reasonably expended on the litigation” by a “reasonable hourly rate.” Hensley v. Eckerhart, 461 U.S. 424, 433 (1983); see also Millea v. Metro-North R.R., 658 F.3d 154, 166 (2d Cir. 2011); Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cty. Of Albany & Albany Cty. Bd. of Elections, 522 F.3d 182, 183 (2d Cir. 2008)); Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 553 (2010).
“The reasonable hourly rate is the rate a paying client would be willing to pay, ” bearing in mind that “a reasonable, paying client wishes to spend the minimum necessary to litigate the case effectively.” Arbor Hill, 522 F.3d at 190. The reasonable rate, which varies by practice area and location, is generally determined using “the market rates prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.” Restivo v. Hessemann, 846 F.3d 547, 590 (2d Cir. 2017) (quoting Gierlinger v. Gleason, 160 F.3d 858, 882 (2d Cir. 1998)) (internal quotations omitted). The applicant for attorneys' fees has the burden of producing satisfactory evidence to demonstrate “that the requested rates are in line with those prevailing in the 36 community.” Blum v. Stevenson, 465 U.S. 886, 896 n.11 (1984). A court's determination may “include judicial notice of the rates awarded in prior cases and the court's own familiarity with the rates prevailing in the district.” De La Paz v. Rubin & Rothman, LLC, No. 11-CV-9625 (ER), 2013 WL 6184425, at *10 (S.D.N.Y. Nov. 25, 2013) (quoting Farbotko v. Clinton Cty., 433 F.3d 204, 209 (2d Cir. 2005)).
In this case, plaintiffs seek an hourly rate of $625 for Adam C. Ford, the attorney supervising the matter. In his affidavit, Ford details that he has been a member of the bar for 17 years and appears to be a named partner at the firm, but does not offer any information concerning his experience litigating cases in the field of intellectual property. Ford Supp. Aff. ¶ 1 (identifying himself only as “associated with the firm of Ford O'Brien LLP”). Other courts in this District have awarded partners in small law firms that specialize in trademark and copyright law between $400-$500 per hour, with higher award amounts for those who have a demonstrated expertise in the field. See, e.g., Held & Hines LLP v. Hussain, No. 16-CV-5273 (JSR) (SN), 2019 WL 5722128, at *4 (S.D.N.Y. Aug. 7, 2019) (awarding $400 to partners), adopted as modified, 2019 WL 4727465 (S.D.N.Y. Sept. 27, 2019); Barcroft Media, Ltd. v. Fashion In Me Inc., No. 16-CV-7574 (LGS) (DF), 2018 WL 4565889, at *6 (S.D.N.Y. June 5, 2018) (awarding $500 per hour to a partner with 24 years' experience), adopted by 2018 WL 4568727 (S.D.N.Y. July 25, 2018); Melodrama Publ'g, LLC v. Santiago, No. 12-CV-7830 (JSR) (FM), 2015 WL 2380521, at *4 (S.D.N.Y. May 19, 2015) (awarding $425 per hour for named partners with 21 years' experience). Given that Ford is a named partner with 17 37 years of experience, the Court believes a reasonable rate for Ford to be $425 per hour.
Plaintiffs request an hourly rate of $500 for partner Robert Landy, who was admitted to the New York bar 14 years ago. Ford Supp. Aff. ¶ 2. Given that he has less experience than Ford, does not appear to be an intellectual property specialist, and is not a named partner, the Court recommends awarding a rate of $400 per hour to Landy.
Plaintiffs seek an hourly rate of $395 for both managing attorney Katherine Jaskot, who was admitted to the New York bar in 2001, and associate Matthew Ford, who was admitted to the bar in 2009. Id. The Court has determined that rates of $375 and $300 are reasonable for Jaskot and Ford, respectively, as courts in this District have awarded between $200-$450 to associates in similar cases. See, e.g., Plus Enters. LLC v. Sun Trading Int'l, LLC, No. 16-CV-8987 (VB) (FED), 2017 WL 6492117, at *9 (S.D.N.Y. Nov. 29, 2017) (approving $230 and $260 rates for associates in small law firm), adopted by 2017 WL 6496541 (S.D.N.Y. Dec. 15, 2017); Genger v. Genger, No. 14-CV-5683 (KBF), 2015 WL 1011718, at *2 (S.D.N.Y. Mar. 9, 2015) (“New York district courts have . . . recently approved rates for law firm associates in the range of $200 to $450 per hour.”).
Associate Camille Raad was admitted to the bar this year. Although plaintiffs request an hourly rate of $275 for Raad (Ford Supp. Aff. ¶ 2), the Court finds $250 to be a reasonable hourly rate for a newly-practicing attorney who has not submitted any evidence of expertise in the field of intellectual property. See, e.g., Held & Hines LLP, 38 2019 WL 5722128, at 4 (awarding $250 per hour to associate with less than two years' experience).
Finally, plaintiffs request $135 per hour for paralegal Christina Merante. Ford Supp. Aff. ¶ 2. Upon examination of similar cases in this Circuit, I find $100 to be the reasonable rate for a paralegal in this case. See, e.g., Held & Hines LLP, 2019 WL 5722128, at 4 (awarding legal assistant $100 per hour); Filo Promotions, Inc. v. Bathtub Gins, Inc., 311 F.Supp.3d 645, 652 (S.D.N.Y. 2018) (same).
2. Reasonable Hours Expended
Defendants have submitted time records with details including dates, description of the services rendered, and hours expended. Dkt. No. 27-1. Having carefully reviewed the records, the Court finds the requested hours to be excessive. First, many of the entries billed to managing attorneys and associates reflect administrative work. See, eg. Dkt. No. 27-1 (managing attorney Jaskot “Filed Notice of Appearance with the SDNY; Appearance for pre-trial conference before Judge Daniels [. . .]” 5/8/2019; associate Raad “updated declaration with docket numbers and called the court re filing procedure” 5/22/2019; associate Raad “called chambers to confirm that there is no appearance” 6/24/2019; managing attorney Jaskot “Review[ed] Magistrate rules; Filed memorandum with New York Southern District via ECF” 7/15/2019). “Filing a document is plainly a task that could have been performed by a junior associate or paralegal, billing at a lower hourly rate.” Pastor v. Alice Cleaners, Inc., No. 16-CV-7264 (JLC), 2017 WL 5625556, at *8 (S.D.N.Y. Nov. 21, 2017) (citing Almanzar v. 1342 St. Nicholas Ave. Rest. Corp., No. 39 14-CV-7850 (VEC) (DF), 2016 WL 8650464, at *19 (S.D.N.Y. Nov. 7, 2016), adopted by 2017 WL 1194682 (S.D.N.Y. Mar. 30, 2017)). Furthermore, some of these administrative tasks are billed for either excessive hours or events that did not occur. For example, managing attorney Jaskot billed two hours on May 8, 2019 to file a Notice of Appearance and “Appearance for [a] pre-trial conference” that was adjourned by Judge Daniels at plaintiffs' request. Dkt. No. 27-1. Jaskot also billed one-and-a-quarter hours on July 15, 2019 to review court rules and file a memorandum of law. Id.
Second, the total number of hours is disproportionate to the norm in a standard trademark infringement case resolved by default judgment. In total, counsel and support staff for plaintiffs billed 78.25 hours for a relatively straightforward case decided without discovery, motion practice, or conferences. Id. For this case, counsel submitted documents including, inter alia, the complaint; motion for default judgment and supporting memorandum and affidavit; and proposed findings of fact and conclusions of law with supporting affidavits. Dkt. Nos. 6, 21-22, 27, 28-29. In similar cases and even those that involved more work product, courts in this Circuit have found reasonable hours to be fewer than half the number billed by plaintiffs' counsel. See, e.g., Int'l Council of Shopping Centers, Inc. v. Info Quarter, LLC, No. 17-CV-5526 (AJN), 2019 WL 2004029, at *6 (S.D.N.Y. May 7, 2019) (36.7 hours was reasonable in default trademark infringement case); Sub-Zero, Inc. v. Sub Zero NY Refrigeration & Appliances Servs., Inc., No. 13-CV- 40 2548 (KMW) (JLC), 2014 WL 1303434, at *10 (S.D.N.Y. Apr. 1, 2014) (23.5 hours in same); Mamiya Am. Corp., 2011 WL 1322383, at *12 (37.7 hours in same).
Finally, the invoice contains an excessive number of entries that are vague or “block-billed, ” making it difficult to determine the amount of time expended on a given task. Sprint Commc'ns Co. L.P. v. Chong, No. 13-CV-3846 (RA), 2014 WL 6611484, at *8 (S.D.N.Y. Nov. 21, 2014); Skanga Energy & Marine Ltd. v. Arevenca S.A., No. 11-CV-4296 (DLC)(DF), 2014 WL 2624762, at *3 (S.D.N.Y. May 19, 2014) (“Vague and ‘block-billed' time records are insufficient to substantiate a party's claimed expenditure of time.”); Thai-Lao Lignite (Thailand) Co., Ltd. v. Gov't of Lao People's Democratic Republic, No. 10-CV-5256 (KMW) (DF), 2012 WL 5816878, at *10 (S.D.N.Y. Nov. 14, 2012) (citing Green v. City of New York, 403 Fed.Appx. 626, 630 (2d Cir. 2010)) (“[A]t times, courts have reduced or even disallowed requested attorneys' fees where the supporting time records were not broken out with sufficient detail to enable it to determine the reasonableness of the time spent on particular tasks.”). “Courts in this Circuit have recognized a district court's authority to make across-the-board percentage cuts in hours, as opposed to an item-by-item approach, to arrive at the reasonable hours expended.” Williams v. Epic Sec. Corp., 368 F.Supp.3d 651, 656-57 (S.D.N.Y. 2019) (citing Leevson v. Aqualife USA, Inc., 296 F.Supp.3d 503, 526 (E.D.N.Y. 2017)). “In making its determination of the percentage reduction to be used, the Court is guided by rough justice principles . . . . ‘[T]rial courts may take into account their overall sense of a suit, and may use estimates in calculating and allocating an attorney's time.'” Id. at 660 41 (quoting Errant Gene Therapeutic, LLC v. Sloan-Kettering Inst. for Cancer Research, 286 F.Supp.3d 585, 588 (S.D.N.Y. 2018)).
Given plaintiffs' unnecessary use of senior attorneys for administrative tasks, billing of hours that are excessive and/or erroneous, and block-billed time records, the Court concludes that it is appropriate to apply an across-the-board reduction to the requested amount by 50 percent. See, e.g., Lora v. Grill on 2nd LLC, No. 18-CV-4949 (JMF), 2018 WL 5113953, at *1-2 (S.D.N.Y. Oct. 19, 2018) (“In light of the seeming lack of complexity of the legal and procedural issues at play and counsel's time and labor, the Court finds that the fee request should be reduced by 50%.”). Accordingly, if the reviewing court should find that the instant case is exceptional under § 1117(a), I recommend awarding a total of $11.425.01 in attorneys' fees, calculated as follows:
Name
Hourly Rate
Hours
Total
Adam C. Ford
$425
0.875 (1.75 less 50%)
$371.88
Robert Landy
$400
0.75 (1.5 less 50%)
$300.00
Katherine Jaskot
$375
12.125 (24.25 less 50%)
$4,546.88
Matthew Ford
$300
3.625 (7.25 less 50%)
$1,087.50
Camille Raad
$250
19.625 (39.25 less 50%)
$4,906.25
Cristina Merante
$100
2.125 (4.25 less 50%)
$212.50
$11,425.01
3. Costs
Plaintiffs also seek costs but do not provide an exact amount and simply lump together the fees and costs in their requested award. By the Court's calculations, time records show total disbursements in the amount of $2,414.80. See Dkt. No. 27-1. These disbursements include legal research, transportation, court filing fee, process server fees, and meals, among others. Id. The Court takes 42 judicial notice of the $400 filing fee. See, e.g., Soto v. Los Corbaticas Deli Grocery II Corp., No. 18-CV-3602 (JGK) (JLC), 2018 WL 4844018, at *9 (S.D.N.Y. Oct. 5, 2018), adopted by 2018 WL 6173713 (S.D.N.Y. Nov. 23, 2018). However, plaintiffs have not submitted any underlying documentation for the remaining costs, despite the Court giving them a second opportunity to do so. Costs should not be awarded without proper documentation. See, e.g., Pastor v. Alice Cleaners, Inc., No. 16-CV-7264 (JLC), 2017 WL 5625556, at *9 (S.D.N.Y. Nov. 21, 2017). The Court thus recommends an award of $400 in costs.
III. CONCLUSION
For the reasons stated herein, I recommend that plaintiffs' request for an award of damages be denied but that a permanent injunction be entered enjoining defendants from falsely claiming an affiliation with Tzell, as described above. I further recommend that plaintiffs' motion for attorneys' fees and costs be denied. However, if it is determined that an award of attorneys' fees is appropriate, I recommend an award of $11.425.01 in fees plus $400 in costs.
PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMEDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report and Recommendation to file any written objections. See Fed. R. Civ. P. 6. A party may respond to any objections within fourteen (14) days after being served. Such objections, and any responses to objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable George B. Daniels 43 and to the chambers of the undersigned, United States Courthouse, 500 Pearl Street, New York, New York 10007. Any requests for an extension of time for filing objections must be directed to Judge Daniels.
FAILURE TO FILE OBJECTIONS WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72. See Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010). 44