Court Opinion

ID: 805505
Source: CourtListenerOpinion
Date Created: 2012-07-30 20:07:08+00
Date Added: 2024-06-11T18:00:15.990075
License: Public Domain

NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                _____________

                                     No. 11-2677
                                    _____________

                          WORLD ENTERTAINMENT INC;
                            CARMEN TOMASSETTI

                                            v.

      ANDREA BROWN; GRAND ENTERTAINMENT PRODUCTIONS, LLC;
                         JIM DI RENZO,

                Andrea Brown; Grand Entertainment Productions LLC,
                                                Appellants
                                 _____________

                    On Appeal from the United States District Court
                       for the Eastern District of Pennsylvania
                                (D.C. No. 2-09-cv-5365)
                     District Judge: Honorable Norma L. Shapiro
                                    _____________

                     Submitted Under Third Circuit L.A.R. 34.1(a)
                                    July 9, 2012

             Before: FUENTES, HARDIMAN, and ROTH, Circuit Judges

                             (Opinion Filed: July 30, 2012)
                                   _____________

                              OPINION OF THE COURT
                                  _____________

FUENTES, Circuit Judge.

      From 2001-2008, Andrea Brown was the lead singer of CTO Tribeca, one of

Plaintiff-Appellee World Entertainment, Inc.’s bands. Eventually, Brown left the

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company and formed her own company and band. However, she continued to use World

Entertainment, Inc.’s registered trademark “CTO.” World Entertainment, Inc. and its

president filed this action against Brown and her company, asserting myriad claims under

federal and state law. Brown ignored service of the summons and complaint and failed to

answer or otherwise appear before the District Court. After the appropriate amount of

time, the District Court entered default against her. After a hearing as to damages, the

District Court awarded World Entertainment $429,997. Brown appeals, and we will

affirm.

                                                 I.

          Because we write primarily for the parties, we set forth only the facts relevant to

our conclusion. World Entertainment, Inc. (“World”) is a Philadelphia-based production

company, specializing in weddings, bar/bat mitzvahs and other special events. Each of

World’s band names bears its federally registered trademark “CTO,” and many also end

with the name of a New York City locale. Andrea Brown was the lead singer of CTO

Tribeca, one of World’s bands. In 2008, Brown entered into her own contract with a

World client. She then sent emails to the President of World, Carmen Tomassetti, and

several World employees, accusing Tomassetti of committing a federal crime by invading

her personal email account, and claiming he illegally and immorally took credit for other

people’s work.

          Brown subsequently left World and formed Grand Entertainment Productions

(“Grand”) and a band called Tribeca Grand, comprised of former CTO Tribeca members.

To promote her band, Brown superimposed “Tribeca Grand” over the “CTO” mark in a

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video featuring CTO Tribeca that World had produced, and then released the video on the

Internet. She used “CTO” in Internet metatags1 and paid Google AdWords, an

advertising product, and Yahoo! for the phrase “CTO Tribeca” so Grand would come up

under Internet searches. Brown also posted on the Internet that World was “phony” and

that they lied to get business. Appellee’s Appendix (“App.”) at 112. Despite these

actions, Brown acknowledged that World was the owner of “the trademarked name CTO

Tribeca.” Appellees App. at 29.

       In February 2009, counsel for Tomasetti and World (“Plaintiffs”) sent Brown two

cease and desist letters demanding she stop using the names “CTO” and “Tribeca.” She

ignored both requests. Plaintiffs then filed a complaint in the United States District Court

on November 13, 2009 against Brown and Grand, alleging trademark infringement and

unfair competition under the Lanham Act, 15 U.S.C. § 1125, and tortious interference

with contractual relations, defamation, unjust enrichment, and breach of contract under

state law.

       The process server, who recognized Brown from previously serving her one of the

cease and desist letters, testified that, on November 24, 2009, when Brown saw him at the

door of her house to serve her the complaint, she shut the door, locked it, and closed her

garage. Appellee’s App. at 88. The process server knocked again and, after no answer,

placed the service papers at the door. Brown alleges she was never served. However,

she admitted in a sworn affidavit submitted in opposition to World’s damages claims that

1
 A “metatag” is a code “not visible to web users embedded in a website to attract search
engines seeking a corresponding keyword.” Network Automation, Inc. v. Advanced Sys.
Concepts, Inc., 638 F.3d 1137, 1146 (9th Cir. 2011).

                                          3
she was served on that date and called her attorney immediately after the service.

Appellant’s App. at 168. She also allegedly provided her attorney with a copy of the

pleadings shortly thereafter. Neither Brown nor her attorney took action and on April 6,

2010, the District Court entered default for Plaintiffs.

       On May 7, 2010, Brown filed a motion to set aside the default, arguing only that

her defense to Plaintiffs’ violation of trademark claim was meritorious because “the

trademark that is referred to is basically a reference to a geographical location which

cannot be trademarked.” Appellee’s App. at 55. The registered trademark at issue,

however, is “CTO.” Brown did not provide a response to the other twelve counts of the

complaint. Pointing to Brown’s culpable conduct in refusing to accept service and failing

to answer the complaint, as well as her failure to set forth a complete and meritorious

defense, the Court denied Brown’s motion. After a damages hearing, the Court found in

favor of World in the amount of $429,9972 and issued a permanent injunction enjoining

Brown from using “CTO,” but not “Tribeca.” Brown continued to infringe upon the

“CTO” trademark through the time of the damages hearing, and is allegedly continuing to

infringe upon it. Brown appealed the Court orders, arguing the Court erred in finding she

received service of process, in failing to vacate the default judgment, and in assessing

damages.3

2
 In relevant part, World’s damages include $176,496 for infringing World’s trademark
and $184,959 for attorneys’ fees.
3
 The District Court had jurisdiction pursuant to 28 U.S.C. § 1331 for Plaintiffs’ Lanham
Act claims and supplemental jurisdiction pursuant to 28 U.S.C. § 1367 for Plaintiffs’

                                           4
                                              II.

       Our review of a District Court’s legal determinations is plenary, VFB LLC v.

Campbell Soup Co. et al., 482 F.3d 624, 630 (3d Cir. 2007), while our review of its

factual determinations is for clear error, Fed. R. Civ. P. 52(a). We review the District

Court’s refusal to set aside entry of default for an abuse of discretion. Harad v. Aetna

Cas. & Sur. Co., 839 F.2d 979, 981 (3d Cir. 1988). We also review the District Court’s

award of equitable remedies under the Lanham Act for an abuse of discretion. Banjo

Buddies, Inc. v. Renofsky, 399 F.3d 168, 173 (3d Cir. 2005).

                                              A.

       First, Brown argues that she was not properly served because the process server

left the papers at her door and there was no proof she was aware of them, and therefore

entry of default judgment was improper. Because a face-to-face encounter and in-hand

delivery are not always necessary for proper service of process under Rule 4 of the

Federal Rules of Civil Procedure, Brown’s argument lacks merit. See Gambone v. Lite-

Rock Drywall Corp., 124 F. App’x 78, 79 (3d Cir. 2005) (holding that leaving papers on

doorstep after slamming door and announcing service was sufficient); 4A Charles Alan

Wright & Arthur R. Miller, Federal Practice and Procedure § 1095 (3d ed. 2002).

Leaving papers in the defendant’s physical proximity is usually sufficient if (1) defendant

actively evades service, and (2) there is clear evidence that the defendant actually

state law claims. We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291 as
an appeal of a final order of the District Court.

                                          5
received the papers at issue when allegedly served. See Gambone, 124 F. App’x at 79,

80.

       Here, both of these requirements are easily met. Shutting and locking the door

after recognizing the process server, and then shutting the garage, and failing to answer

the door after the server knocked again amounts to active evasion of service.4 See id. at

80. That Brown called her attorney seeking representation after the service and admitted

in a sworn affidavit that she was served show that she actually received the papers when

they were served. Thus, Brown was not denied proper service.

                                               B.

       Further, the District Court did not abuse its discretion in denying Brown’s motion

to vacate the entry of default against her. A court may set aside entry of default for good

cause. Fed. R. Civ. P. 55(c). We have identified three factors a district court must

consider in denying a motion to set aside a default: “(1) whether the plaintiff will be

prejudiced; (2) whether the defendant has a meritorious defense; (3) whether the default

was the result of the defendant’s culpable conduct.” United States v. $55,518.05 in

United States Currency, 728 F.2d 192, 195 (3d Cir. 1984). To show a meritorious

defense, a plaintiff must assert defenses that would constitute a complete defense to the

action. Id. Failure to establish a meritorious defense weighs heavily against setting aside

the default. See id. at 197 (declining to consider prejudice and culpability when the

4
  The District Court credited the testimony of World’s process server at the evidentiary
hearing, noting that Brown’s descriptions of the occurrence were vague and she did not
remember details. This finding of fact is not clearly erroneous. See Fed. R. Civ. P.
52(a)(6).

                                           6
defendant failed to establish a meritorious defense). As to the third consideration,

showing “willfulness” or “bad faith” on part of the defendant leading to the entry of

default suffices to show culpable conduct. Hritz v. Woma Corp., 732 F.2d 1178, 1182-

1183 (3d Cir. 1984).

       Brown established neither a complete nor meritorious defense. In her motion,

Brown only provided a defense to one of the thirteen counts of Defendants’ complaint,

and this one defense was irrelevant. She stated that her defense was meritorious because

Defendants’ trademark rests on a geographical location that cannot be trademarked;

however, as the District Court pointed out, the Defendants’ claim rests on their registered

trademark, “CTO.” The District Court never enjoined Brown from using the

geographical term “Tribeca” because it decided the equities weighed against it.         Not

only did Brown fail to establish a threshold meritorious defense to Plaintiffs’ claims, but

she also engaged in culpable conduct that resulted in the default. The District Court did

not abuse its discretion in determining that Brown’s intentional refusal to accept service

and respond to the complaint in a timely manner was culpable conduct because her

behavior showed willful disregard for responding to Plaintiffs’ legal communications.

See Nationwide Mut. Ins. Co., 175 F. App’x 519, 523 (3d Cir. 2006) (finding reckless,

willful disregard for repeated legal communications can satisfy the culpable conduct

standard). Not only did she fail to respond, but she also continued to infringe Plaintiffs’

trademark despite Plaintiffs’ cease and desist letters, the entry of default, and her

acknowledgment in writing that the “CTO” trademark belonged to Plaintiffs. Therefore,

                                           7
the District Court properly considered the applicable factors and did not abuse its

discretion in denying Brown’s motion to vacate entry of default.

                                              C.

       Lastly, the District Court did not err in assessing Brown’s damages. Under the

Lanham Act, the plaintiff is 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). The

District Court applied the correct five-factor test in determining whether to disgorge

Grand’s profits. The factors

       include, but are not limited to (1) whether the defendant had the intent to
       confuse or deceive, (2) whether sales have been diverted, (3) the adequacy
       of other remedies, (4) any unreasonable delay by plaintiff in asserting his
       rights, (5) the public interest in making the misconduct unprofitable, and
       (6) whether it is a case of palming off.

Banjo Buddies, 399 F.3d at 175.

       The District Court did not abuse its discretion in disgorging Grand’s profits

because World’s sales were diverted to Grand, World’s lost profits would be difficult to

calculate, and there are no other adequate remedies. Plaintiffs showed that Brown was

using their protected trademark in advertising through search engine phrase matching,

and thus diverting internet traffic to Grand’s website. Further, the District Court

determined that Plaintiffs’ damages were greater than Grand’s profits, but it would be too

speculative to calculate the losses caused solely by Grand’s infringement. The Court also

held that it was equitable to assume the losses Grand caused Plaintiff could not exceed

Grand’s profits, and thus awarded those to Plaintiffs. In making this determination, the

District Court relied heavily on Grand’s own documentation. Lastly, without

                                          8
disgorgement, Plaintiffs would be effectively uncompensated given the fact that Brown

continued to infringe Plaintiffs’ trademark despite Court orders enjoining her. This,

combined with the speculative nature of determining World’s loses, demonstrates that no

other equitable remedies would be adequate. See id. at 176 (finding no other adequate

remedies when plaintiff’s losses would be speculative and not disgorging profits would

leave plaintiff wholly uncompensated). Thus, the District Court did not abuse its

discretion in making these determinations.

         Finally, the District Court did not abuse its discretion in awarding attorneys’ fees

to Plaintiffs. Under the Lanham Act, attorneys’ fees are available in exceptional cases,

15 U.S.C. § 1117(a), which involve culpable conduct, such as “bad faith, fraud, malice,

or knowing infringement.” Securacomm Consulting, Inc. v. Securacom, Inc., 224 F.3d

273, 280 (3d Cir. 2000). Brown exhibited bad faith and knowing infringement when she

continued to violate Plaintiffs’ trademark despite cease and desist letters, the entry of

default, and her acknowledgment in writing that the “CTO” trademark belonged to

Plaintiff. Thus, the District Court did not abuse its discretion in its determination of

damages.5

                                                 III.

         For the foregoing reasons, we will affirm the order and judgment of the District

Court.

5
  With respect to libel, Brown only argues that the District Court made no analysis of the
issue and thus damages are inappropriate. This argument lacks merit because the District
Court did analyze the issue. Appellant’s App. at 13. Further, Brown provides no
arguments against the award of costs, and thus waives this issue. See Travitz v. Ne. Dept.
ILGWU Health & Welfare Fund, 13 F.3d 704, 711 (3d Cir. 1994).

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