Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-02195/USCOURTS-casd-3_16-cv-02195-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1114 Trademark Infringement (Lanham Act)

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

LIGHTS OUT HOLDINGS, LLC, a 

California limited liability company

Plaintiff,

v.

LIGHTS OUT APPAREL, LLC, a 

Maryland limited liability company; 

JACOB LAWSON, individuals d/b/a 

LIGHTS OUT BILLIARDS APPAREL 

Defendants.

Case No.: 16cv2195-JAH

ORDER (1) GRANTING 

DEFENDANTS’ MOTION TO SET 

ASIDE ENTRY OF DEFAULT [DOC. 

NO. 19] ; AND

(2) DENYING PLAINTIFF’S 

MOTION FOR DEFAULT 

JUDGMENT AS MOOT [DOC. NO. 

11] 

INTRODUCTION

Pending before the Court is Defendant Lights Out Apparel LLC (“Lights Out 

Apparel”) and Defendant Jacob Lawson’s (“Lawson”) (collectively, “Defendants”) motion 

to set aside entry of default and Plaintiff Lights Out Holding LLC’s (“Plaintiff”) motion 

for default judgment. See Doc. Nos. 11, 19. After a thorough review of the parties’ 

submissions and for the reasons set forth below, the Court GRANTS Defendants’ motion 

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to set aside entry of default and DENIES Plaintiff’s motion for default judgment as 

MOOT. 

BACKGROUND

Plaintiff filed the instant complaint on August 30, 2016. See Doc. No. 1. Plaintiff 

alleges seven causes of action for violations of: (1) Trademark Infringement, 15 U.S.C. § 

1114; (2) Federal Trademark Dilution, 15 U.S.C. § 1125(c); (3) Unfair Competition and 

False Designation of Origin, 15 U.S.C. § 1125(a); (4) Common Law Trademark 

Infringement; (5) California Trademark Dilution, Cal. Bus. & Prof. § 14247; (6) Unfair 

Competition, Cal. Bus. & Prof. § 17200; and (7) Violation of the Federal AntiCybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d). Id. Plaintiff claims

Defendants willfully infringed Plaintiff’s LIGHTS OUT mark by using the mark in 

connection with their own athletic apparel and related goods business in the State of 

Maryland under the names Lights Out Apparel and Lights Out Billiards Apparel. Id. 

Plaintiff alleges Defendants sell the aforementioned branded athletic clothing in Maryland 

as well as online, including to consumers within this district. Id. Plaintiff seeks damages 

and an injunction in connection with Defendants’ manufacture, distribution, and sale of 

apparel and related accessories with the allegedly infringing mark. Id. 

On August 30, 2016, Defendants were served with the summons and the complaint. 

See Doc. No. 3. On October 11, 2016, in accordance with Rule 55 of the Federal Rules of 

Civil Procedure, Plaintiff moved for an entry of default against Defendant Lights Out 

Apparel LLC and Defendant Jacob Lawson. See Doc. No. 9. Plaintiff petitioned for an 

award of statutory damages, reasonable attorneys’ fees and costs, and a permanent 

injunction, prohibiting Defendants’ use, or any other colorable variation of, Plaintiff’s 

LIGHTS OUT mark. See Doc. No. 11. On October 12, 2016, the Clerk of court entered 

default as to Defendant Jacob Lawson. See Doc. No. 12. 

Plaintiff filed the pending motion for default judgment against Defendant Lights Out 

Apparel LLC and Defendant Jacob Lawson on November 14, 2016. See Doc. No. 11. 

Defendants’ filed a motion to set aside the entry of default on December 15, 2016. See Doc. 

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No. 19. On January 31, 2017, the Court took the motions under submission without oral 

argument. See Doc. No. 28. On February 3, 2017, the parties filed a joint motion to suspend 

all proceedings pending settlement negotiations. The motion was granted on February 6, 

2017. See Doc. Nos. 29, 30. Plaintiff filed a status report on April 5, 2017, declaring a 

dissolution of settlement negotiations with Defendants. See Doc. No. 32.

DISCUSSION

1. Legal Standard

Federal Rules of Civil Procedure 55(c) provides that a court “may set aside an 

entry of default for good cause.” The district court has the discretion to determine 

whether a party demonstrates “good cause.” Madsen v. Bumb, 419 F.2d 4, 5 (9th Cir. 

1969). “A court's discretion is especially broad where, as here, it is entry of default that is 

being set aside, rather than a default judgment. Mendoza v. Wight Vineyard Mngmt., 783 

F.3d 941, 945 (9th Cir. 1986) (citing Meehan v. Snow, 652 F.2d 274, 276 (2d Cir. 1981)).

In evaluating whether a party has demonstrated good cause, a district court may consider 

the following factors, any of which is sufficient reason to grant the motion: (1) whether 

the plaintiff would be prejudiced by the setting aside of the default; (2) whether the 

defendant has a meritorious defense; and (3) the defendant’s culpability in the default. 

TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001). The Party 

seeking to vacate the entry of default bears the burden of demonstrating that these factors 

favor doing so. See TCI Grp. 244 F.3d at 679.

There is a strong preference for deciding cases on their merits, and therefore any 

doubts should be resolved in favor of setting aside the default. See Direct Mail Specialists 

v. Eclat Computerized Techs., 840 F.2d 685, 690 (9th Cir. 1988). 

2. Analysis

A. Prejudice

Defendants argue that Plaintiff will not be prejudiced by setting aside the entry of 

default because any delay incurred resolving the case on its merits would be nominal and 

does not impair Plaintiff’s ability to pursue its claim. See Doc. No. 19. 

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Plaintiff contends that setting aside the default will result in substantial additional 

expenses, including potential expenses for discovery, summary judgment, and trial

preparation. See Doc. No. 23. Furthermore, Plaintiff claims that given Defendants’ 

alleged misconduct, there is a risk of fraudulent misrepresentations concerning

Defendants’ sales and profits. See Doc. No. 23. Plaintiff points to Defendants’ failure to 

remove all mention of the alleged infringing mark from Defendants’ social media, online 

store, and merchandise, despite agreeing to do so after receiving Plaintiff’s cease and 

desist letter. See Doc. No. 11. Plaintiff also asserts that given Defendants’ past conduct, 

Defendants’ “could and likely would” resurface in the market online with the allegedly 

infringing mark, exposing consumers to the likelihood of confusion and increasing 

Plaintiff’s harm. See Doc. No. 23.

The standard for prejudice requires more than a delay in the resolution of the case; 

“rather, the standard is whether [Plaintiff's] ability to pursue his claim will be hindered.” 

TCI Grp., 244 F.3d at 701. For a delay to be prejudicial, it must “result in tangible harm 

such as loss of evidence, increased difficulties of discovery, or greater opportunity for 

fraud or collusions.” Id. Being forced to litigate on the merits cannot be considered 

prejudicial because the plaintiff would have had to litigate on the merits of the case had 

there been no default. Id. The fact that the Plaintiff may be denied a quick victory is not 

sufficient to deny relief from entry of default. Bateman v. U.S. Postal Serv., 231 F.3d 

1220, 1225 (9th Cir. 2000).

The Court finds that Plaintiff’s ability to pursue its claim will not be hindered and 

no prejudice to Plaintiff will result by setting aside the entry of default. Here, Plaintiff has 

not demonstrated that any tangible harm would result in vacating the entry of default and

incurring additional expenses in attorney’s fees or other potential expenses tied to 

litigation does not prejudice Plaintiff as those expenses would have occurred had the case 

been litigated on the merits. See TCI Group, 244 F.3d at 701 (noting that costs associated 

with litigating a case on the merits cannot be considered prejudicial for the purpose of 

vacating an entry of default.) Assuming, arguendo, that Plaintiff will suffer some 

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prejudice from the delay if Defendants continue their allegedly infringing use of the 

mark, delay in and of itself, does not overcome the strong policy in favor of deciding a 

case on its merits. See TCI Group, 244 F.3d at 700 (citing Falk v. Allen, 739 F.2d 461, 

463 (9th Cir. 1984)). Accordingly, the Court finds that Plaintiff’s ability to pursue its 

claim will not be hindered and no prejudice to Plaintiff will result by setting aside the 

entry of default. 

B. Meritorious Defense 

Defendants argue that they have not profited from their use of the LIGHTS OUT

mark. In addition, Defendants posit that the damages allegedly suffered by Plaintiff are 

dubious because they are necessarily limited in scope due to Defendants’ location in the

opposite end of the country. See Doc. No. 19. Plaintiff argues that the Defendants have 

not alleged facts sufficient to defend Plaintiff’s allegations. Plaintiff also argues that their 

mark has been registered with the U.S. Patent and Trademark Office’s Principal Register 

since 2004, which is prima facie evidence that the mark is inherently descriptive. See

Doc. No. 23. 

“A defendant seeking to vacate a default judgment must present specific facts that 

would constitute a defense. But the burden on a party seeking to vacate a default 

judgment is not extraordinarily heavy.” TCI Grp., 244 F.3d at 700 (citations omitted). All 

that is necessary to satisfy the “meritorious defense” requirement is to allege sufficient 

facts that, if true, would constitute a defense: “the question whether the factual allegation 

[i]s true” is not to be determined by the court when it decides the motion to set aside the 

default. Id. Rather, that question “would be the subject of the later litigation.” Id. There is 

a strong preference for deciding cases on their merits, thus whenever “timely relief is 

sought... and the movant has a meritorious defense,” a court must resolve any doubt in 

favor of setting aside the default. Mendoza, 783. F.2d at 945-46.

Although the burden of establishing a meritorious defense is not a high one, the 

Court does not at present possess enough information regarding the merits of Defendants’ 

defenses. This second factor does not weigh strongly in either direction. Plaintiff 

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correctly observes that the Motion to Vacate does not present any defenses, however, the 

Court still has discretion to set aside default and decide the case on the merits. See Brandt 

v. Am. Bankers Ins. Co. of Florida, 653 F.3d 1108, 1112 (9th Cir. 2011); see also Direct 

Mail, 840 F.2d at 690.

C. Culpability 

Defendants assert they are not culpable in the default because they abandoned the 

trademark application(s) related to LIGHTS OUT after receiving a cease and desist letter 

from Plaintiff prior to being served with the complaint. See Doc. No. 19. Defendants also 

contend that the default was the result of a mistaken belief that Defendants’ counsel was 

acting in the best interest of the Defendants during ongoing settlement discussions with 

Plaintiff. See Doc. No. 19.

Defendants assert their counsel was responsible for maintaining regular 

correspondence with Plaintiff between September to October in an effort to reach a 

settlement, as well as complying with any obligations and court deadlines, including 

filing a timely response to Plaintiff’s complaint. Id. However, in November, Defendant 

Lawson asserts that he learned that counsel did not file a timely response to Plaintiff’s 

complaint.

Plaintiff argues that after Defendants retained counsel and agreed to abandon their 

trademark applications, simultaneously removing all references to Plaintiff’s mark on

apparel, Defendants failed to honor their representations and continued to use the 

LIGHTS OUT mark. See Doc. No. 23. Plaintiff asserts that Defendants attempted to 

evade detection of their infringing activities by changing their website address to 

www.LOApparel.com, while continuing to market items with the LIGHTS OUT mark. 

See Doc. No. 23. Plaintiff also notes that Defendants waited until December 15, 2016, 

more than one month after the first entry of default to vacate the entry. See Doc. No. 23.

The Ninth Circuit has “typically held that a defendant's conduct was culpable for 

purposes of the [good cause] factors where there is no explanation of the default 

inconsistent with a devious, deliberate, willful, or bad faith failure to respond.” TCI Grp.,

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244 F.3d at 698. Thus, “a defendant's conduct is culpable if he has received actual or 

constructive notice of the filing of the action and intentionally failed to answer.” Id. at 

697 (emphasis in original) (quoting Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 

1392 (9th Cir. 1988)). In this context, “intentionally” means that “a movant cannot be 

treated as culpable simply for having made a conscious choice not to answer; rather, to 

treat a failure to answer as culpable, the movant must have acted with bad faith, such as 

an ‘intention to take advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal process.’ ” U.S. v. Signed Pers. Check No. 730 

of Yubran S. Mesle, 615 F.3d 1085, 1092–93 (9th Cir. 2010) (quoting TCI, 244 F.3d at 

697). Further, in analyzing culpability, the Court may consider a defendant's exigent 

personal matters, his mental state, and his lack of familiarity with legal matters. TCI Grp.,

244 F.3d at 699.

Here, Defendants do not demonstrate sufficient culpable conduct. The Court turns 

to the Defendants behavior to ascertain good faith. Namely, Defendants demonstrate 

good faith through their retention of counsel, who maintained regular correspondence

with Plaintiff’s counsel during the ongoing settlement discussions. Although Defendants 

had actual notice of the filing of the action, the record lacks indicia that Defendants acted 

in bad faith. As to Plaintiff’s argument that Defendants delay in filing the instant motion 

(nearly a month after the first entry was entered) demonstrates culpable conduct, the 

Court finds no harm in this short delay. The entry of default against Lawson was entered 

in October 12, 2016. See Doc. No. 10. The proposed order granting default judgment 

against Defendants was served on November, 22, 2016. See Doc. No. 15. Defendants 

filed a motion to set aside the default on December 15, 2016. See Doc. No. 19. The Court 

accepts Defendants’ claim that they believed their counsel would act in their best interest, 

including filing a timely response to Plaintiff’s complaint. The Court finds there was no 

intentional failure to respond.

Accordingly, the Court finds Defendants’ lacked devious, deliberate, willful, or 

bad faith failure necessary to find culpable conduct.

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CONCLUSION AND ORDER

For the foregoing reasons, IT IS HEREBY ORDERED that:

1. Defendant’s motion to set aside entry of default judgment (Doc. No. 19) is 

GRANTED; and

2. Petitioner’s motion for default judgment (Doc. No. 11) as MOOT. 

IT IS SO ORDERED.

 

DATED: July 21, 2017

 

_________________________________

JOHN A. HOUSTON

United States District Judge

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