Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-00973/USCOURTS-azd-2_04-cv-00973-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1125 Trademark Infringement (Lanham Act)

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

9969 INDUSTRIES, INC., 

Plaintiff, 

v.

SIKKTOYS, L.L.C., et al., 

Defendants. 

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No. CIV-04-0973-PHX-SMM

ORDER

Pending before the Court are no less than nine Motions, all filed in just over the past

month. They are: Plaintiff's Fourth Motion for Order to Show Cause, for Order of Civil

Contempt, and for Sanctions [Doc. No. 138], filed December 14, 2005; Defendants' Motion for

Order to Show Cause Against Attorney Jon R. Kniss To Turn Over Files to Defendants and For

Determination of Liability For All Sanctions and Judgment Awarded Against Defendants [Doc.

No. 145], filed December 29, 2005; Defendants' Motion for Entry of Mutual Confidentiality and

Protective Order [Doc. No. 151], filed January 4, 2006; Defendants' Rule 60(b)(6) Motion for

Relief from Judgment [Doc. No. 164], filed January 13, 2006; Defendants' Rule 62(b) Motion

for Stay of Execution Pending Resolution of Defendants' Rule 60(b)(6) Motion for Relief of

Judgment and Motion for Expedited Hearing of Rule 60(b)(6) Motion [Doc. No. 165], filed

January 13, 2006; Plaintiff's Ex Parte Motion for Court to Consider Plaintiff's Reply in Support

of Its Fourth Motion for Order to Show Cause in Excess of 11 Pages [Doc. No. 167], filed

January 17, 2006; Plaintiff's Motion for Expedited and Immediate Ruling on Plaintiff's Fourth

Case 2:04-cv-00973-SMM Document 179 Filed 01/20/06 Page 1 of 7
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For all the above reasons, the Court proceeds without hearing oral argument on the

pending Motions.

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Motion for Order to Show Cause and for Civil Contempt [Doc. No. 169], filed January 17,

2006; Defendants' A.R.S. § 10-502 Motion for Stay of Execution Pending Plaintiff Obtaining

Authority to Transact Business in Arizona [Doc. No. 170], filed January 17, 2006; and

Plaintiff's Motion for Summary Denial Without Oral Argument [Doc. No. 172], filed January

17, 2006. After careful review of all pertinent filings, the Court issues the following Order.

DISCUSSION

A. Defendants' Rule 60(b)(6) Motion for Relief from Judgment and Rule 62(b) 

 Motion for Stay of Execution Pending Resolution of Defendants' Rule 60(b)(6)

 Motion

 As a preliminary matter, the Court notes that Plaintiff filed a Response to Defendants'

Rule 62(b) Motion for Stay of Execution Pending Resolution of Defendants' Rule 60(b)(6)

Motion for Relief of Judgment and Motion for Expedited Hearing of Rule 60(b)(6) Motion

[Doc. No. 171], and additionally, Plaintiff moved that the Court summarily deny Defendants'

Rule 60(b)(6) and Rule 62(b) Motions in its Motion for Summary Denial Without Oral

Argument. Although no Reply has yet been filed, the Court finds that a Reply brief is not

necessary. Both parties have provided their substantive arguments on this issue: Defendants in

their Motion, and Plaintiff responded to Defendants' substantive arguments in its Response to

the Rule 62(b) Motion. Therefore, Court has been provided sufficient briefing from which to

rule. Also, the exigency with which these briefs have been filed compels the Court to issue a

ruling in an expeditious manner.1

 

The Court now turns to the substance of Defendants' Rule 60(b)(6) Motion.

Defendants contend that because their former counsel, Jon Kniss, was grossly negligent,

Defendants are entitled to relief from this Court's Default Judgment under Rule 60(b)(6) of the

Federal Rules of Civil Procedure. In support of their argument, Defendants rely on the Ninth

Circuit's decision in Community Dental Services v. Tani, 282 F.3d 1164 (9th Cir. 2002). While

the Court is cognizant of the attorney gross negligence grounds for setting aside a default

Case 2:04-cv-00973-SMM Document 179 Filed 01/20/06 Page 2 of 7
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judgment under Tani, the Court need not reach whether "gross negligence" existed here.

Instead, pursuant to Tani, the Court declines to grant Defendants' Motion because Defendants

themselves have engaged in culpable conduct. See id. at 1172.

"A proper finding of culpable conduct by [a party] would be sufficient to justify [a]

district court's refusal to grant a Rule 60(b) motion." Id.; Cassidy v. Tenorio, 856 F.2d 1412,

1415 (9th Cir. 1988) ("a finding that . . . the defendant's own culpable conduct prompted the

default is sufficient to justify the district court's refusal to vacate a default judgment"). In this

case, the Court granted default judgment in favor of Plaintiff based on Defendants' "numerous

violations" of the Court's Orders. (5/23/05 Order at p. 23, lines 25-26.) 

Specifically, the Court found in its default judgment Order that "Defendant Ondrejko has

violated the Court's Preliminary Injunction Order and Civil Contempt Order of January 5th by

retaliating against, intimidating, and harassing Plaintiff, its employees and its associates." (Id.

at lines 22-25.) (emphasis added) The January 5, 2005 Order had come on the heels of a January

3, 2005 hearing at which Mr. Ondrejko had personally appeared. At that hearing, the Court

encouraged the parties to "act professionally and responsibly, even though [they may not] like

the order that's been entered" and that "the order to be entered is to be followed, and there will

be consequences if we find that there have been violations of the court order." (Trans. of 1/3/05

Hr'g at p. 28, lines 7-11.) In addition, the Court notes that it had previously ordered Defendants

not to engage in retaliatory conduct against Plaintiff before its January 5, 2005 Order. In an

August 31, 2004 Order, the Court enjoined Defendants from "taking any illegal retaliatory

action against Plaintiff, its employees, agents, and/or representatives as a result of the entry of

this Order." (8/31/04 Order at p. 14, lines 16-17.) The Court's January 5, 2005 Order reiterated

and expanded upon its August 31, 2004 Order when it ordered Defendants to "refrain from all

acts of harassment and intimidation of Plaintiff, its employees, and its associates, and order its

employees to refrain from all acts of harassment and intimidation of Plaintiff." (1/5/05 Order

at p. 18, lines 8-10.) Despite those clear Orders, Defendants nevertheless engaged in retaliatory

Case 2:04-cv-00973-SMM Document 179 Filed 01/20/06 Page 3 of 7
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The Court incorporates by reference its previous recitations of Defendants' conduct and

need not repeat it here.

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While the Court recognizes that it also told Defendant Ondrejko he needed to work with

his lawyer (Id. at line 10.), the Court emphasizes that it thereafter specifically addressed Mr.

Ondrejko about his duty to produce documents and warned him of the consequences if he failed

to do so, as outlined above.

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Because the Court has ruled on Defendants' Rule 60(b)(6) Motion, the Court will deny

Defendants' Rule 62(b) Motion for Stay of Execution Pending Resolution of Defendants' Rule

60(b)(6) Motion for Relief of Judgment and Motion for Expedited Hearing of Rule 60(b)(6)

Motion [Doc. No. 165] as moot. Additionally, the Court will deny Plaintiff's Motion for

Summary Denial Without Oral Argument [Doc. No. 172] on the same basis.

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conduct which the Court has detailed at great length in prior Orders.2

 That conduct, in addition

to other failures, ultimately led to a default judgment imposed by this Court.

 Another grounds on which the Court found extraordinary circumstances warranting

default judgment to be entered was Defendants' failure to comply with discovery-related Orders.

(5/23/05 Order at p. 23, lines 21-22.) Although Defendant may argue he was not aware of such

Orders, the Court notes that it addressed Defendant Ondrejko personally at a January 3, 2005

hearing about the consequences of his failure to produce discovery-related documents. (Trans.

of 1/3/05 Hr'g at p. 27, lines 11-17.) Indeed, the Court warned Mr. Ondrejko that if he failed

to produce those documents, the Court could order their production, and Defendants' Answer

could be stricken and default judgment could be entered against Defendants if they defied Court

Orders.3

 (Id.) Thus, the Court personally alerted Defendant Ondrejko to the possible

consequences of failing to cooperate in discovery and the pendency of a forthcoming Court

Order in January 2005.

In light of the above discussion, the Court finds that the default judgment was imposed

because of Defendants' own wilful, bad faith, and predatory conduct, and was not "based solely

on [Defendants' attorney's] conduct." See Tani, 282 F.3d at 1172. The Court will therefore

deny Defendants' Motion to set aside the default judgment against them [Doc. No. 164].4

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This Motion is fully briefed. Defendants filed their Motion on January 17, 2006,

Plaintiffs responded on January 18, 2006 [Doc. No. 173], and Defendants filed their Reply on

January 19, 2006 [Doc. No. 174].

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Also, jurisdiction over Plaintiff's state law claims in this matter is proper under 28

U.S.C. § 1367, but this is not of import to the Court's analysis.

7

The Court is concerned that learned counsel did not discuss the appropriate standard for

cases based on federal question jurisdiction.

8

In its Response to the instant Motion, Plaintiff requested sanctions under Rule 11 of the

Federal Rules of Civil Procedure. The Court declines to award such sanctions.

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B. Defendants' A.R.S. § 10-502 Motion for Stay of Execution Pending Plaintiff 

 Obtaining Authority to Transact Business in Arizona5

Defendants also argue that the execution of the Court's judgment should be stayed

pursuant to A.R.S. § 10-502(C) because Plaintiff is in violation of A.R.S. § 10-502(A) by failing

to obtain authorization of the Arizona Corporation Commission to transact business in the State

of Arizona. However, because this case is predicated upon a federal question,6

 rather than

diversity of citizenship, this Court is not obligated to apply Arizona's door-closing statute. See

Angel v. Bullington, 330 U.S. 183, 192 (1947) ("[W]here resort is had to a federal court not on

grounds of diversity of citizenship but because a federal right is claimed, the limitations upon

the courts of a State do not control a federal court sitting in the State.") (citing Holmberg v.

Armbrecht, 327 U.S. 392 (1946)).7 Thus, the Court will deny the instant Motion.8 

Because both Motions to stay the execution of the judgment have been denied, Plaintiff's

collection efforts, including the Judgment-Debtor Examination scheduled for January 23, 2006

before Magistrate Judge David K. Duncan, may go forward.

C. Plaintiff's Fourth Motion for Order to Show Cause/Civil Contempt

The Court next addresses Plaintiff's Fourth Motion for Order to Show Cause, for Order

of Civil Contempt, and for Sanctions [Doc. No. 138] (hereinafter "Fourth Motion"), Plaintiff's

Ex Parte Motion for Court to Consider Plaintiff's Reply in Support of Its Fourth Motion for

Order to Show Cause in Excess of 11 Pages [Doc. No. 167], and Plaintiff's Motion for

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Expedited and Immediate Ruling on Plaintiff's Fourth Motion for Order to Show Cause and for

Civil Contempt [Doc. No. 169]. For good cause appearing, the Court will grant Plaintiff's

Motion to Consider Plaintiff's Reply in Support of its Fourth Motion for Order to Show Cause

[Doc. No. 167]. Furthermore, while the Court recognizes the Fourth Motion is now fully

briefed, the Court will deny Plaintiff's Motion for Expedited and Immediate Ruling on Plaintiff's

Fourth Motion for Order to Show Cause and for Civil Contempt [Doc. No. 169]. The Fourth

Motion was fully briefed as of January 17, 2006, and remains under consideration by the Court.

D. Defendants' Motion for Order to Show Cause against Attorney Kniss

Defendants' Motion for Order to Show Cause Against Attorney Jon R. Kniss To Turn

Over Files to Defendants and For Determination of Liability For All Sanctions and Judgment

Awarded Against Defendants [Doc. No. 145] is not fully briefed. Plaintiff responded to

Defendants' Motion for Order to Show Cause Against Attorney Kniss with a Motion for

Summary Denial Without Oral Argument [Doc. No. 172] on January 17, 2006. The Court will

deny Plaintiff's Motion for Summary Denial Without Oral Argument and instead set forth the

following Briefing Schedule with respect to this Motion: 

• Plaintiff's Response to Defendants' Motion for Order to Show Cause Against Attorney

Kniss shall be due January 24, 2006. Defendants' Reply, if any, shall be due thereafter

as per Rule 7.2(d) of the Rules of Practice of the United States District Court for the

District of Arizona ("Local Rules"). No extensions shall be granted.

E. Defendants' Motion for Entry of Mutual Confidentiality and Protective Order

Defendants' Motion for Entry of Mutual Confidentiality and Protective Order [Doc. No.

151] is also pending. The parties shall adhere to the normal briefing periods as set forth in Local

Rule 7.2.

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CONCLUSION

For the reasons set forth above,

IT IS ORDERED that Plaintiff's Response to Defendants' Motion for Order to Show

Cause Against Attorney Kniss [Doc. No. 145] shall be due January 24, 2006. Defendants'

Reply, if any, shall be due thereafter as per Local Rule 7.2(d). No extensions shall be granted.

IT IS FURTHER ORDERED that Defendants' Rule 60(b)(6) Motion for Relief from

Judgment [Doc. No. 164] is DENIED.

IT IS FURTHER ORDERED that Defendants' Rule 62(b) Motion for Stay of Execution

Pending Resolution of Defendants' Rule 60(b)(6) Motion for Relief of Judgment and Motion

for Expedited Hearing of Rule 60(b)(6) Motion [Doc. No. 165] is DENIED as moot.

IT IS FURTHER ORDERED that Plaintiff's Ex Parte Motion for Court to Consider

Plaintiff's Reply in Support of Its Fourth Motion for Order to Show Cause in Excess of 11 Pages

[Doc. No. 167] is GRANTED.

IT IS FURTHER ORDERED that Plaintiff's Motion for Expedited and Immediate

Ruling on Plaintiff's Fourth Motion for Order to Show Cause and for Civil Contempt [Doc. No.

169] is DENIED.

IT IS FURTHER ORDERED that Defendants' A.R.S. § 10-502 Motion for Stay of

Execution Pending Plaintiff Obtaining Authority to Transact Business in Arizona [Doc. No.

170] is DENIED.

IT IS FURTHER ORDERED that Plaintiff's Motion for Summary Denial Without Oral

Argument [Doc. No. 172] is DENIED.

 DATED this 20th day of January, 2006.

Case 2:04-cv-00973-SMM Document 179 Filed 01/20/06 Page 7 of 7