Budget Blinds, Inc. v. WhiteBudget Blinds, Inc. v. White
Lead Opinion
OPINION OF THE COURT
In this appeal, we consider whether a federal district court properly relied on
I.
Budget Blinds, Inc. (“BBI”) is a California corporation that franchises mobile window covering businesses throughout the United States. According to an affidavit that BBI’s Chief Operating Officer filed with the District Court for the Central District of California, BBI was founded in 1992 and had about 800 territories and 570 licensees nationwide as of October 17, 2005, the date of the affidavit. BBI owns and licenses two trademarks that it has registered with the Principal Register of the United States Patent and Trademark Office: (1) the name “Budget Blinds” (registered on December 21, 1993); and (2) a service mark consisting of the words “Budget Blinds” in a specific font and configuration (registered on February 18, 2003).
Valerie White owns a New Jersey corporation called “Val U Blinds, Inc.” that focuses on the design and installation of window blinds. According to an affidavit that White filed with the District Court for the District of New Jersey, she operates this business from a home office in her basement and garage, and her sales are limited to areas of New Jersey. The affidavit further states that she conducted business from 1988 to June 1, 2004 as “Budget Blinds” or “Budget Blinds of NJ,” and that she registered her business as a New Jersey domestic corporation in Sep
In a letter to Valerie White dated November 25, 2003, BBI’s Legal Manager stated that White’s use of the name “Budget Blinds” was a violation of BBI’s “federal, state, and common law trademark rights” and was likely to cause public confusion about the origin of White’s goods. White’s attorney Ronald J. Nelson responded in a letter dated December 1, 2003 that White had used the name “Budget Blinds” since 1988, prior to BBI’s first use of the name. Nelson’s letter added that White had established “Budget Blinds” as a common law trademark in the New Jersey counties served by her business and that BBI’s franchisees in this area were infringing her rights by using the name. In a letter to Nelson dated February 12, 2004, BBI’s counsel questioned the existence of a common law trademark and stated that “BBI is prepared to bring a lawsuit in California pursuant to the Lanham Act to enjoin your client’s infringing activities” if the parties could not reach a mutually-agreeable resolution.
After several additional communications, the parties entered a Settlement Agreement on April 14, 2004. Under the Agreement, BBI would pay White and Budget Blinds of NJ, Inc. (referred to as “the Corporation” in the Agreement) $160,000 “for the purchase and transfer of any and all interest, claim, or ownership in or relating to the trade name and service mark ‘Budget Blinds’ ” and any confusingly similar names or marks. Section 4 of the Agreement provided that after June 1, 2004, White and the Corporation “shall not operate or do business” under the trade name and service mark “Budget Blinds” “or any other name or in any manner that might tend to give the general public the impression that White [or her business] is in any way associated or affiliated with BBI, or any of the businesses conducted by it or other franchisees or licensees of the Marks.” Among other things, Section 4 required White to change her existing corporation’s name from “Budget Blinds of New Jersey, Inc.” to “BB of NJ, Inc.,” to conduct all future business using a new corporation to be established under the name “Val U Blinds, Inc.,” and to remove the “Budget Blinds” trade name and mark, as well as confusingly similar names or marks, from her company’s advertising, signs, letterheads, stationery, printed matter, and other forms. Most importantly for purposes of this litigation, Section 4(f) of the Agreement also instructed White to take specific steps to disassociate her company’s telephone number from the name “Budget Blinds.” At the time of the Agreement, the Yellow Pages directories for Burlington, Gloucester, and Camden Counties listed a phone number for White’s company next to the name “Budget Blinds.”
Promptly after execution of this Agreement, White, the Corporation and Val-U Blinds shall direct Verizon ... in writing, with a copy to counsel for BBI ..., (i) that all of the said three advertisements shall not be renewed in the said three county editions, or elsewhere; and (ii) that customers calling directory assistance in any of those three counties (or anywhere else) on or after June 1, 2004, should no longer be given [the phone number for White’s company] or any other number related to or affiliated with White, the Corporation, or Yal-U Blinds in response to an inquiry for the telephone number of “Budget Blinds.” From time-to-time thereafter, upon the reasonable request of BBI, White, the Corporation and Val-U Blinds shall provide similar written directions to other directory publishers (including publishers of Internet-based “directories”) identified by BBI.
In addition to these substantive provisions, the Agreement stated that White and her corporations “hereby irrevocably appoint BBI as their respective lawful attorney-in-fact with authority to file any document in the name of and on behalf of White, the Corporation or Yal-U Blinds for the purpose of taking any of the actions required by this Section 4 upon the event of a Default.” Finally, the Agreement contained a choice-of-law clause: “This Settlement Agreement will be governed by and construed under the laws of the State of California.”
White says that she made a good-faith effort to comply with her obligations under the Agreement, including those in Section 4(f) related to her telephone number. The record contains a letter dated May 5, 2004 from White’s attorney to Verizon Customer Service directing Verizon “not to renew or republish their existing advertisements in all Yellow Pages (including Burlington, Gloucester, Camden and Middlesex County editions) in which they have used the phrase ‘Budget Blinds’ in whole or in part.” The letter also directs Verizon “to instruct Directory Assistance, beginning June 1, 2004, to answer all inquiries for ‘Budget Blinds’ by not providing the telephone numbers of my client....” The record includes similar letters addressed to YellowPages.com and Verizon.com, both of which are dated June 4, 2004.
Nonetheless, Verizon reprinted the listing that provided the phone number for White’s company under the name “Budget Blinds” in the updated print editions of its Yellow Pages directories for Burlington, Gloucester, and Camden Counties and the corresponding online directories. In a letter dated February 1, 2005, BBI’s counsel informed White’s counsel that the continuing existence of these listings was a violation of the Agreement, and that “it appears that the only way to remedy this violation is for your client to assign to BBI or to a franchisee designated by BBI” the telephone number for White’s company. In response, White’s counsel proposed setting up a recording that would give callers to this telephone number a choice between connecting to White’s company or to the local BBI franchisee. BBI rejected this proposal in a letter dated February 23, 2005, reiterating its demand that White assign the number to BBI and stating that it would deem White and her company to be in breach of the Agreement “as long as there is any circumstance under which a person looking in a current telephone book and calling a number listed under the name ‘Budget Blinds’ will reach your clients.” In a letter dated March 9, 2005, White’s counsel informed BBI that, although White would do everything that she considered “reasonably possible to mitigate fully the effects of the unauthorized re-printing,” she would not surrender the phone number itself.
BBI filed a Complaint against White, Val U Blinds, Inc., and Budget Blinds of NJ, Inc.
On October 7, 2005, the District Court for the Central District of California entered a default judgment against the Defendants, granting BBI the injunctive relief that it requested in its Complaint and $83,083.51 in monetary relief.
On April 5, 2006, the District Court for the District of New Jersey issued an Opinion and Order in response to the parties’ motions. See Budget Blinds v. White, No. 05-CV-388,
Even though the briefs of both parties had focused on personal jurisdiction, the New Jersey District Court did not decide this issue, explaining in a footnote that “[t]he Court need not pass on whether the California district court actually possessed personal jurisdiction over White for purposes of a
On May 5, 2006, BBI filed a timely notice of appeal of the portion of the District Court’s Order that vacated the California default judgment. On June 29, 2006, the New Jersey District Court stayed BBI’s application for fees and costs pending resolution of this appeal. The District Court had jurisdiction over the registration and enforcement of a foreign judgment pursuant to
On May 17, 2006, the Defendants filed a notice of cross-appeal of the part of the Order that awarded fees and costs to BBI. Although neither party questioned the existence of appellate jurisdiction over this portion of the Order, we note that the District Court has not quantified the amount of attorneys’ fees, and “[i]t has long been the rule in this circuit that this court lacks jurisdiction to examine the merits of an attorneys’ fee award where the award has not been quantified.” Frangos,
II.
The power of a court to invoke
We decline to establish a categorical rule stating that registering courts lack the power to use
A.
Several circuits have either held, or stated in dicta, that the power of a federal district court to set aside another district court’s judgment is limited.
In Indian Head National Bank v. Brunelle,
The Seventh Circuit went further in Board of Trustees v. Elite Erectors, Inc.,
Several other circuits have suggested in dicta that
We are persuaded by the reasoning of the First, Second, Fifth, Seventh, Ninth, and Tenth Circuits to the extent that they conclude that
B.
Although the text of
We have explained that a showing of extraordinary circumstances involves a showing that without relief from the judgment, “an ‘extreme’ and ‘unexpected’ hardship will result.” Mayberry,
In the instant case, the New Jersey District Court did not mention the “extraordinary circumstances” requirement in its opinion. We acknowledge that our decision in Harad may have contributed to this error by sending confusing signals to the District Court regarding the standards for vacating a default judgment. In Har-
A closer look at Harad reveals that its test was not intended to apply to
We require the district court to consider the following factors in exercising its discretion in granting or denying a motion to set aside a default underRule 55(c) or a default judgment underRule 60(b)(1) : (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.
$55,518.05 in U.S. Currency, 728 F.2d at
Appellees assert that Emcasco Insurance Co. v. Sambrick,
We acknowledge that default judgments are generally disfavored in our circuit. See $55,518.05 in U.S. Currency,
Finally, our own review of the record does not suggest that the circumstances of this case are “extraordinary” as we have defined this term in our case law. The Defendants acknowledge that their decision not to contest the California judgment was the result of a deliberate choice. Thus, the default judgment cannot be said to have created an “unexpected hardship.” Cf. Boughner,
III.
We next confront a question that parallels the one we addressed about
The Seventh Circuit is an outlier on this issue. As we discussed above, the Seventh Circuit concluded in Elite Erectors that the registering court “was free to disregard the judgment, without formally annulling it under
Finally, we do not think a registering court seriously threatens the interest in comity when it vacates a rendering court’s default judgment under
IV.
We now reach the question that the parties originally asked the District Court to address: whether the California district court possessed personal jurisdiction over the Defendants. We have the power to resolve this issue ourselves, rather than remand it to the District Court, because we conduct de novo review of jurisdictional issues raised under
A. Personal Jurisdiction in California
“In a diversity action, [a California federal district court] may exercise personal jurisdiction over a non-resident defendant if jurisdiction is proper under California’s long-arm statute and if that exercise of jurisdiction accords with federal constitutional due process principles.” Fireman’s Fund Ins. Co. v. Nat’l Bank of Coops.,
(1) The nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or results from the defendant’s forum-related activities; and (3) exercise of jurisdiction must be reasonable.
BBI asserts that White has purposefully-availed herself of the privilege of conducting activities in California and thereby has invoked the benefits of California law. BBI bases its argument on the Settlement Agreement as well as the Defendants’ alleged trademark infringement.
1. Purposeful Availment Through The Settlement Agreement
The mere existence of a contract is insufficient to establish minimum contacts. Burger King Corp. v. Rudzewicz,
First, BBI points out that the Agreement contains a choice-of-law clause stating that it “will be governed by and construed under the laws of the State of California.” Br. of Appellant 39. As Burger King points out, a choice-of-law provision “standing alone would be insufficient to confer jurisdiction,” but combined with other factors, it may reinforce a party’s “deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there.”
Second, BBI points out that the Defendants negotiated the Settlement Agreement by telephone and mail with California-based BBI and its attorneys. Br. of Appellant 40. Interpreting California law, the Ninth Circuit has said that, ordinarily, use of the mails and telephone “simply do not qualify as purposeful activity invoking the benefits and protection of the [forum] state.” Roth v. Garcia Marquez, 942 F.2d 617, 622 (9th Cir.1991) (quoting Thos. P. Gonzalez Corp. v. Consejo Nacional De Produccion De Costa Rica,
Third, BBI asserts that the Defendants established minimum contacts “by accepting BBI’s settlement payment which was wired from a California bank to defendants.” Br. of Appellant 41. To underscore the importance of this payment, BBI cites a case from the Southern District of Mississippi, Medical Assurance Co. of Mississippi v. Jackson,
Despite some superficial similarities, Jackson is distinguishable. Although White and her attorney, like Moore and Jackson, accepted payment from a bank located in the forum state in exchange for accepting a settlement agreement, they did not initiate the transaction by threatening to sue a California company.
Fourth, BBI argues that the parties contemplated future consequences. Among other things, the Agreement states that the Defendants “hereby irrevocably appoint BBI as their respective lawful attorney-in-fact with authority to file any document in the name of and on behalf of [the Defendants] for the purpose of taking any of the actions required by [Section 4 of the Agreement] upon the event of a default.” We agree that the attorney-in-fact provision suggests that the parties contemplated future consequences to some extent. Still, a large gulf exists between the future contacts contemplated by this provision and the extensive future contacts contemplated by the Burger King contract. Whereas the Burger King defendant “entered into a carefully structured 20-year relationship that envisioned continuing and wide-reaching contacts with Burger King in Florida,” id. at 480,
In sum, we question whether any of the factors that BBI cites (the choice of law clause, the mail and telephone negotiations, the acceptance of the settlement check, and the attorney-in-fact provision) would individually support purposeful availment. The combined force of these factors, however, may be sufficient. On the other hand, White has asserted that
2. Purposeful Availment Through Trademark Infringement
BBI contends that the Defendants’ alleged trademark infringement created personal jurisdiction in California because the Defendants purposefully directed their activities toward that forum. Br. of Appellant 42. Relying on the “effects test” of Calder v. Jones, 465 U.S. 783,
BBI contends that trademark infringement “is treated as an intentional tort for jurisdictional purposes.” The first case that BBI cites for this proposition is Sebastian Int’l, Inc. v. Russolillo, No. 00-03476 CM,
BBI also contends that the Defendants’ behavior was “expressly aimed at the forum state.” We do not find it immediately obvious why the failure to change New Jersey telephone listings and to surrender a New Jersey telephone number is behavior “expressly aimed” at California. But BBI relies on language in Bancroft & Masters v. Augusta National,
Finally, BBI contends that the “brunt of the harm” to its reputation and profits is felt in California because California is its principal place of business.
C. Does The Cause of Action Arise Out of Forum-Related Activities?
The next prong of the three-part test for specific jurisdiction is whether the cause of action arises out of forum-related activities. Although this is a distinct requirement, in this case the analysis is identical to the “purposeful availment” analysis. BBI has not asserted that White or her company has any connection to California aside from those associated with the causes of action for breach of contract and trademark infringement. Thus, if the first prong is satisfied, then the second prong is satisfied as well.
D. Fair Play and Substantial Justice, a.k.a. Reasonableness
If the District Court finds that the first two prongs are satisfied, it must consider whether “minimum requirements inherent in the concept of ‘fair play and substantial justice’ may defeat the reasonableness of jurisdiction even if the defendant has purposefully engaged in forum activities.” Burger King,
(1) the extent of the defendants’ purposeful interjection into the forum state’s affairs; (2) the burden on the defendant of defending in the forum; (3) the extent of conflict with the sovereignty of the defendants’ state; (4) the forum state’s interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiffs interest in convenient and effective relief; and (7) the existence of an alternative forum.
Harris Rutsky,
V.
We will vacate the April 5, 2006 Order of the District Court for the District of New Jersey, including the assessment of fees and costs. We remand this case so that the District Court may decide the question that the parties asked it to decide over two years ago: whether to set aside the California default judgment for lack of personal jurisdiction.
Notes
. The Agreement refers to these listings as "advertisements/' a term whose connotations may be misleading. According to the Agreement itself, the "advertisements” consisted simply of her company's name and phone number in an alphabetical list with other companies' names and numbers.
. The Complaint does not reflect the fact that white had already changed the name from
. BBI’s Complaint does not explicitly demand that White surrender the phone number to BBI or one of its franchisees. Instead, it requests that White and her company be enjoined and restrained from violating the Agreement, "which requires, in summary, without limitation, that the Defendants discontinue the use and/or display of the Budget Blinds Marks or similar marks or trade names, in any manner whatsoever.”
. This amount reflects $68,613.75 for treble damages and $14,469.76 for attorneys' fees and costs. BBI's proposed order requested $105,954.76 in monetary relief, which would have reflected an additional $22,871.25 in compensatory damages, but the California district court deleted this amount from the final Order.
. Our review is plenary when we review determinations under
. The First Circuit pointed to the following language in the advisory committee notes to the 1946 amendment that created
Two types of procedure to obtain relief from judgments are specified in the rules as it is proposed to amend them. One procedure is by motion in the court and in the action in which the judgment was rendered. The other procedure is by a new or independent action to obtain relief from a judgment, which action may or may not be begun in the court which rendered the judgment.
. Despite this conclusion, the Seventh Circuit did not explicitly overrule its earlier decision in In re Joint Eastern & Southern Districts Asbestos Litigation,
. In an earlier decision, the Ninth Circuit indicated that at least some
. We do not consider in this opinion whether a registering court ever has the power to set aside judgments under
. We also do .not think that the language of the advisory committee, as discussed in Indian Head,
. When the judgment is not a default judgment, an additional interest exists: efficient judicial administration resulting from the rendering court's greater familiarity with the facts. See Indian Head,
. Any such set of facts would probably be sufficient to form the basis of an "independent equitable action” within the meaning of the exception that the First Circuit described in Indian Head. See
. Our circuit uses the terms “extraordinary circumstances” and “exceptional circumstances” interchangeably when discussing
. In Boughner, we invoked
. $55,518.05 in U.S. Currency cited three cases as its authority for this test.
. Emcasco involved a suit by an insurance company (EMCASCO) against an insured (Louis Sambrick) for a declaratory judgment stating that the insurance policy did not cover personal injuries that Sambrick had allegedly inflicted on two other people.
.In support of its four-factor test, Emcasco cites nine cases. See
. In In re Universal Display & Sign Co.,
. BBI argues only that “specific jurisdiction” exists and does not seek to prove the existence of “general jurisdiction.”
. White's attorney did respond to BBI’s warnings of a lawsuit with hints of a counter-suit. Nonetheless, it was BBI that set events in motion.
.Of course, even if White could prove that she refused to consent to personal jurisdiction in California during the contract negotiations, this would not matter if the events surrounding the contract otherwise indicate that she has purposely availed herself of that forum. In this case, however, BBI suggests that we can interpret the choice-of-law clause as probative of White’s acquiescence to litigation in a California court, since California courts are more familiar with California law than other courts. If White specifically objected to a clause consenting to personal jurisdiction, this counsels us against such an interpretation of the choice-of-law clause.
. At oral argument, BBI said that the District Court would be unable to consider this evidence on remand because it would violate the parol evidence rule. But the issue here is not how to interpret the contract, but whether personal jurisdiction exists. This requires an inquiry into "prior negotiations,” Burger King,
. BBI provides a misleading description of Panavision, saying that it held that the "effects test" is "satisfied where plaintiff alleged infringement of trademark due to defendant's
We agree that simply registering someone else’s trademark as a domain name and posting a web site on the Internet is not sufficient to subject a party domiciled in one state to jurisdiction in another.... [Tjhere must be ‘something more’ to demonstrate that the defendant directed his activity toward the forum state. Here, that has been shown.
Panavision,
. Not all circuits have adopted this approach. For example, the Tenth Circuit requires that "the forum state itself must be the 'focal point of the tort’,” an approach that it has described as “somewhat more restrictive” than Bancroft. Dudnikov v. Chalk & Vermilion Fine Arts,
. The Ninth Circuit has overruled the "brunt of the harm” requirement, replacing it with a "jurisdictionally sufficient amount of harm” requirement. Yahoo! Inc. v. La Ligue Contre Le Racisme,
Concurrence Opinion
concurring in part and dissenting in part.
This case arises out of the context of a
Under the circumstances before us, one may only seek to collaterally vacate a default judgment obtained in another jurisdiction based on a challenge to the underlying validity of the judgment. Sheet Metal Workers’ Nat’l Pension Fund v. Elite Erectors, Inc.,
However, the opinion does not stop there, but goes further to hold that registering courts may also consider
This is not surprising, in light of the general rule that notwithstanding the rule’s silence on the topic, applications for
Furthermore, even if one agrees with the substance of the majority’s legal conclusion — one that is at odds with the Brunette decision — -that registering courts have the power to vacate foreign judgments under certain unspecified “extraordinary circumstances” pursuant to
[I]t is inappropriate to consider the merits of an attack on a judgment when that attack is made in the course of a subsequent action in which the judgment is relied on as a basis of claim or defense. To consider the merits of the attack in such a context is to contravene the general principle that relief from a judgment should be sought in the court that rendered the judgment.
RESTATEMENT (SECOND) OF JüDGMENTS § 80 cmt. a ¶ 2 (1982).
Accordingly, although I concur with the majority’s ultimate disposition of the case, I respectfully dissent from its pronouncements on the general availability of
. As the majority points out, only the Seventh Circuit has held that registering courts lack such authority. See Sheet Metal Workers' Nat'l Pension Fund v. Elite Erectors, Inc.,
. We have never expressly spoken on this issue, but our prior decisions have certainly assumed the existence of such power on the part of enforcement courts. See In re Universal Display & Sign Co.,
. There is no question, of course, that regardless of whether a request for vacatur is labeled as one pursuant to
In any event, I note that no grounds to support an independent equitable action exist here, since defendant’s affidavit makes clear that her default was intentional. App. vol. 2 at 56, ¶¶ 15-16 (attesting she did not appear in California action on advice of counsel); see 12 Moore’s Federal Practice § § 60.81-60.82 (independent equitable relief requires, inter alia, that no adequate remedy is available at law and that the judgment sought to be vacated is "manifestly unconscionable”); see also Somportex,
. In my view, the reason why Harad v. Aetna Casualty and Surety Company,