Court Opinion

ID: 4528894
Source: CourtListenerOpinion
Date Created: 2020-04-27 07:00:26.22064+00
Date Added: 2024-06-11T09:26:48.701383
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                       ____________________
No. 19‐1799
QUINCY BIOSCIENCE, LLC,
                                                  Plaintiff‐Appellee,
                                 v.

ELLISHBOOKS, et al.,
                                            Defendants‐Appellants.
                       ____________________

         Appeal from the United States District Court for the
            Northern District of Illinois, Eastern Division.
        No. 1:17‐cv‐08292 — Sharon Johnson Coleman, Judge.
                       ____________________

    ARGUED FEBRUARY 19, 2020 — DECIDED APRIL 24, 2020
                ____________________

   Before WOOD, Chief Judge, and FLAUM and RIPPLE, Circuit
Judges.
    RIPPLE, Circuit Judge. Quincy Bioscience, LLC (“Quincy”)
filed this civil action against Ellishbooks, related individuals,
and entities (collectively “Ellishbooks”) alleging claims for
trademark infringement, false advertising, dilution, and un‐
fair competition under the Lanham Act, 15 U.S.C. §§ 1114,
1125, as well as claims under Illinois statutory and common
law. The operative complaint alleged that Ellishbooks en‐
2                                                            No. 19‐1799

gaged in the unauthorized and unlawful sale of Quincy’s
products bearing the Prevagen® trademark. Ellishbooks did
not file a responsive pleading to the complaint. After entry
of a default judgment, the district court awarded damages
and permanent injunctive relief to Quincy.
    Ellishbooks now challenges the district court’s judgment
on several grounds. These arguments have been waived and,
in any event, are meritless. We therefore affirm the judgment
of the district court.
                                     I.
                           BACKGROUND
  Quincy develops, markets, and sells dietary supple‐
ments, which its customers use for the support of cognitive
           1
function. It packages its Prevagen® product “in a single fac‐
ing box, which contains a bottle of dietary supplements
sealed with a plastic safety overwrap and a product infor‐
mation sheet. Both the box and the sheet contain valuable
information regarding the product which is not present on
                            2
the bottle label … .” Prevagen® is marketed and sold
through brick‐and‐mortar stores and on Internet websites.
Quincy registered its Prevagen® trademark in 2007 and has
used it continually since that time.

1 The facts are those alleged in Quincy’s first amended complaint be‐
cause, “[u]pon default, the well‐pled allegations of the complaint relating
to liability are taken as true.” Wehrs v. Wells, 688 F.3d 886, 892 (7th Cir.
2012).
2 R.10 ¶15.
No. 19‐1799                                                            3

    Ellishbooks, which was not authorized to sell Prevagen®
products, sold dietary supplements identified as Prevagen®
on Amazon.com. These products included items that (1)
were in altered or damaged packaging that lacked the prod‐
uct information sheets found in Prevagen® products sold by
authorized sellers; (2) lacked the appropriate purchase codes
or other markings that identify the appropriately authorized
retail seller of the product; and (3) contained Radio Frequen‐
cy Identification tags and security tags from retail pharmacy
stores. Ellishbooks “knew or had reason to know that at least
some of the PREVAGEN® products [it] sold were at one
                                                           3
time stolen from retail outlets across the country.”
   Quincy brought this action against Ellishbooks, alleging
violations of the Lanham Act and violations of Illinois statu‐
                            4
tory and common law. It sought preliminary and perma‐
nent injunctive relief to prevent Ellishbooks from using the
Prevagen® mark, from using any symbol or mark calculated
to represent the Prevagen® mark, and from falsely repre‐
senting that it was associated with Quincy. It also requested
an accounting of any profits Ellishbooks had derived from

3 Id. ¶ 30.

4 Specifically, Count I alleged trademark infringement under 15 U.S.C.
§ 1114; Count II alleged false designation of origin and unfair competi‐
tion under 15 U.S.C. § 1125(a)(1)(A); Count III alleged false advertising
under 15 U.S.C. § 1125(a)(1)(B); Count IV alleged dilution under 15
U.S.C. §1125(c); Count V alleged dilution under the Illinois Trademark
Registration and Protection Act, 765 ILCS 1036/65; Count VI alleged un‐
fair competition under Illinois common law; Count VII alleged violation
of the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/2;
and Count VIII alleged unjust enrichment. See generally R.10.
4                                                             No. 19‐1799

Prevagen® products. Finally, it sought damages, lost profits,
statutory damages, treble damages, and attorneys’ fees.
    Ellishbooks did not answer the complaint, and, conse‐
                                                                 5
quently, Quincy filed a motion for entry of default. The dis‐
trict court granted Quincy’s motion. Quincy then moved for
                                 6
entry of default judgment. Ellishbooks opposed the motion
on two grounds: (1) that it had not been served properly
                                            7
with the summons and complaint; and (2) that it listed and
sold on Amazon.com goods that were “different and distinct
                                                        8
from those produced and sold by [Quincy].” With respect to
the second ground, Ellishbooks stated that its “products
[we]re not listed or identified as Prevagen, as alleged by
[Quincy], but [we]re instead listed and sold under a different
                                                9
name and with different packaging.”
    The district court granted the motion for a default judg‐
ment. It detailed the myriad ways Quincy had attempted to
effectuate personal service, observed that Ellishbooks “de‐
liberately [had] obfuscated their place of business and

5 See Fed. R. Civ. P. 55(a) (“When a party against whom a judgment for
affirmative relief is sought has failed to plead or otherwise defend, and
that failure is shown by affidavit or otherwise, the clerk must enter the
party’s default.”).
6 See Fed. R. Civ. P. 55(b)(2) (setting forth the requirements for entry of a
default judgment by a court).
7 See R.23 at 2.

8 Id. at 11.

9 Id.
No. 19‐1799                                                                5

sought to evade service,” and noted that, having failed in
other efforts, “Quincy mailed service to Elishbook Corpora‐
tion’s registered agent at the listed address in accordance
                            10
with New Jersey law.” The district court therefore conclud‐
ed that Quincy had effected “legally adequate service,” and
                                                                      11
the court had personal jurisdiction over the defendants.
    The district court noted that Ellishbooks also had re‐
quested that the default be vacated on substantive grounds.
The court explained that, “[i]n order to have a default vacat‐
ed, a party must establish good cause for their default, quick
action to correct it, and a meritorious defense to the plain‐
                     12
tiff’s complaint.” Apart from its allegations about lack of
service, however, Ellishbooks had “identified no circum‐
                                                                           13
stances capable of establishing good cause for [its] default.”
Consequently, the district court concluded that Ellishbooks
had “failed to establish that the default against [it] should be
            14
vacated.” After entering a default judgment in favor of
Quincy, the district court scheduled a prove‐up hearing to
determine the amount of damages to be awarded.
   Quincy filed a motion for leave to take pre‐hearing dis‐
covery with respect to damages. On the same day, Ellish‐

10 R.28 at 3.

11 See id. at 3–4.

12 Id. at 4 (citing Parker v. Scheck Mech. Corp., 772 F.3d 502, 505 (7th Cir.
2014)).
13 Id.

14 Id.
6                                                 No. 19‐1799

books’s counsel filed a motion to withdraw. The district
court granted both motions and ordered Rachel Steinharter,
the registered agent for Ellishbooks, to be present at the next
hearing. Ms. Steinharter did not appear at the hearing, nor
did she appear for the rescheduled hearing.
    Ellishbooks retained new counsel, Robert DeWitty, who
represented Ellishbooks at the prove‐up hearing. Prior to the
prove‐up hearing, Quincy had subpoenaed and submitted to
the court documents from Amazon.com establishing that El‐
lishbooks had “received $480,968.13 in sales from products
                                     15
sold as Prevagen® brand products.” At the prove‐up hear‐
ing, Mr. DeWitty offered argument against the award of
some damages, but he failed to counter any of Quincy’s evi‐
dence. The district court consequently entered judgment in
favor of Quincy in the amount of $480,968.13, plus costs. The
court’s order, however, did not address Quincy’s request for
a permanent injunction. Consequently, Quincy moved to
amend the judgment under Federal Rule of Civil Procedure
59 to include injunctive relief. The court held a hearing on
the motion, but counsel for Ellishbooks did not appear. The
court then granted Quincy’s motion to amend, and it “per‐
manently enjoined [Ellishbooks] from (1) infringing upon
Plaintiff’s PREVAGEN® trademark; and (2) selling stolen

15 R.63 at 3.
No. 19‐1799                                                            7

                                                        16
products bearing the PREVAGEN® trademark. Ellishbooks
                    17
timely appealed.
                                   II.
                              DISCUSSION
    Ellishbooks now raises three challenges to the district
                         18
court’s judgment. First, it asserts that the district court
failed to make “factual findings on decisive issues” as re‐
                                                             19
quired by Federal Rule of Civil Procedure 52(a). Second, it
maintains that the district court clearly erred in holding that
it (Ellishbooks) knew or had reason to know that a portion of
the Prevagen® products were stolen. Finally, it submits that
the district court erred in entering a permanent injunction
when Quincy had not established that Ellishbooks knew that
a portion of the Prevagen® products were stolen.
                                   A.
    Ellishbooks’s contentions require limited discussion.
First, it is not clear which order Ellishbooks believes falls

16 R.69 at 2.

17 Following the filing of the notice of appeal, we ordered a limited re‐
mand for the parties to seek an injunction that complies with Federal
Rule of Civil Procedure 65(d)(1)(C), which requires every order granting
an injunction to describe the acts being restrained in reasonable detail.
See App. R.2. A new final judgment was entered on August 1, 2019, fol‐
lowing a hearing at which Ellishbooks again failed to appear.
18 The district court had jurisdiction over this action under 28 U.S.C.
§§ 1331, 1338. Our jurisdiction is secure under 28 U.S.C. § 1291.
19 Appellants’ Br. 8.
8                                                         No. 19‐1799

short of the procedural mark. Federal Rule of Civil Proce‐
dure 52(a) did not govern the district court’s ruling on the
motion for a default judgment. Rule 52(a) only applies to ac‐
tions that are tried on the facts without a jury or with an ad‐
visory jury; it does not apply when a court rules on “any
other motion.” Fed. R. Civ. P. 52(a). If Ellishbooks’s argu‐
ment relates to the district court’s order awarding damages,
it misses the mark. Whether Quincy was entitled to damages
under the Lanham Act did not depend on whether the
Prevagen® products were stolen; consequently, there was no
reason for the court to make such findings in support of its
         20
award.
   At bottom, Ellishbooks seems to contend that the district
court failed to make sufficient findings of fact to support its
order enjoining Ellishbooks from selling stolen Prevagen®
products. It maintains that, given the “inconclusive” repre‐
sentations from Quincy’s counsel as to the origin of the
Prevagen® products Ellishbooks sold, “a factual finding was
necessary for establishing the elements of receipt of stolen
                               21
goods under Illinois law.” We cannot accept this character‐
ization of the proceedings or the conclusion Ellishbooks
reaches.

20 See Appellee’s Br. 11 (noting that, “[w]hile Ellishbooks indirectly
raised the stolen products issue at the March 12, 2019 prove‐up hearing
in defense against Quincy’s claim for increased damages, it did not chal‐
lenge liability for unjust enrichment from sales of such goods” (citation
omitted)).
21 Appellants’ Br. 9.
No. 19‐1799                                                          9

   Here, the district court granted Quincy’s motion for de‐
fault. “Upon default, the well‐pled allegations of the com‐
plaint relating to liability are taken as true … .” Wehrs v.
Wells, 688 F.3d 886, 892 (7th Cir. 2012). The complaint alleges
that, “[u]pon information and belief, Defendants knew or
had reason to know that at least some of the PREVAGEN®
products Defendants have sold were at one time stolen from
                                       22
retail outlets across the country.” By reason of the default,
this allegation was established: the defendants sold
Prevagen® products that they knew or had reason to know
were stolen. Indeed, the district court’s order granting
Quincy’s Rule 59 motion affirmatively states that this fact
                     23
“has been found.” It repeated this finding in a subsequent
       24
order.
    Far from throwing this fact into doubt, the exchange be‐
tween the court and counsel during the prove‐up hearing
confirms that there is no evidence contrary to this (estab‐
lished) allegation, and consequently no further comment by
the district court was required. During the prove‐up hear‐

22 R.10 ¶ 30.

23 “[I]t has been found that Defendants Ellishbooks and Elishbooks Cor‐
poration have committed trademark infringement and false advertising
in violation of the Lanham Act, 15 U.S.C. §§ 1114, 1125(a)(1)(A), with
respect to Plaintiff’s PREVAGEN® trademark. Defendants knew or had
reason to know that at least some of the products bearing Plaintiff’s
PREVAGEN® trademark were stolen and that sales of these products
injured Plaintiff and unjustly enriched Defendants.” R.69 at 1.
24 R.82 at 1–2.
10                                                             No. 19‐1799

     25
ing, Quincy explained that it had sought receipts from El‐
lishbooks to establish the origin of the Prevagen® products
that Ellishbooks resold; Ellishbooks, however, could pro‐
duce receipts accounting for only twenty percent of those
                26
products. In response to defense counsel’s argument that
Quincy had not established the origin of the other eighty
percent of the products, the court asked defense counsel if
                                                         27
that was “because your client stonewalled?” When counsel
responded that Ellishbooks had “respond[ed] to several of
their discovery issues,” the court made it clear that “[s]everal
is not good enough in court. … You can’t just pick and

25 “Although upon default, the well‐pleaded allegations of a complaint
relating to liability are taken as true, allegations in a complaint relating to
the amount of damages suffered ordinarily are not.” United States v.
DiMucci, 879 F.2d 1488, 1497 (7th Cir. 1989) (citing Dundee Cement Co. v.
Howard Pipe & Concrete Prods., 722 F.2d 1319, 1323 (7th Cir. 1983)). Feder‐
al Rule of Civil Procedure 55(b)(2) provides that “[t]he court may con‐
duct hearings … when, to enter or effectuate judgment, it needs to: … (B)
determine the amount of damages … .” “A judgment by default may not
be entered without a hearing on damages unless the amount claimed is
liquidated or capable of ascertainment from definite figures contained in
the documentary evidence or in detailed affidavits.” DiMucci, 879 F.2d at
1497. Here, there were no specific allegations in the complaint regarding
the amount of damages, and, consequently, the district court scheduled a
prove‐up hearing. We express no opinion on whether, in light of the af‐
fidavit and documentary evidence supplied by Quincy prior to the hear‐
ing, see supra note 15 and accompanying text, such a hearing was neces‐
sary.
26 See R.88 at 15.

27 Id. at 18.
No. 19‐1799                                                    11

                                                         28
choose and say, oh, I will give you a few things here.” De‐
fense counsel acknowledged the truth of this statement, and
                                                          29
the court concluded, “And that’s what happened here.” El‐
lishbooks came forward with no evidence to challenge the
fact, established by way of default, that it knew or had rea‐
son to know that some of the Prevagen® products it sold
were stolen. Indeed, the fact that it could not account for the
origin of eighty percent of the Prevagen® products it sold
provides an additional basis for the district court’s conclu‐
sion.
    By reason of Ellishbooks’s default, it was established that
Ellishbooks knew or had reason to know that some of the
Prevagen® products it resold were stolen. The district court
was entitled to rely on that fact in issuing its injunction.
                               B.
   Ellishbooks also maintains that the district court clearly
erred in holding that it knew or had reason to know some of
the Prevagen® products it sold were stolen. As we already
have explained, however, this fact was alleged in Quincy’s
                          30
first amended complaint and established by Ellishbooks’s
default. Although Ellishbooks opposed Quincy’s motion for
entry of a default judgment, it did not do so on the ground it

28 Id. at 18–19.

29 Id. at 19.

30 R.10 ¶ 30.
12                                                        No. 19‐1799

               31
now asserts. It also failed to raise this argument in response
to Quincy’s Rule 59 motion, which explicitly requested that
the court enjoin Ellishbooks from “selling stolen products
                                             32
bearing the Prevagen® trademark”; indeed, Ellishbooks
failed to file any response to the Rule 59 motion. Having
failed to present this argument to the district court, Ellish‐
books has waived it for purposes of appeal. See, e.g., Fednav
Int’l Ltd. v. Cont’l Ins. Co., 624 F.3d 834, 841 (7th Cir. 2010)
(“[A] party has waived the ability to make a specific argu‐
ment for the first time on appeal when the party failed to
present that specific argument to the district court.”).
                                   C.
    Finally, Ellishbooks contends that the district court erred
in permanently enjoining it from selling stolen Prevagen®
products because Quincy had not established that it ever
sold stolen products. Again, however, the fact that the prod‐
ucts were stolen was alleged in the complaint and estab‐
lished by the default. Ellishbooks had numerous opportuni‐
ties to contest this fact, to counter this evidence, and to argue
that it should not form the basis of injunctive relief. Because
Ellishbooks failed to present this argument before the dis‐
trict court, this argument also is waived for purposes of this
appeal.

31 Ellishbooks argued only that it had not been properly served and that
it “list[ed] and s[old] products on Amazon that [we]re different and dis‐
tinct from those produced and sold by [Quincy].” R.23 at 2, 11; see also
supra p.5.
32 R.66 ¶14.
No. 19‐1799                                               13

                        Conclusion
   For the reasons set forth in this opinion, the judgment of
the district court is affirmed.
                                                 AFFIRMED