ORDER ADOPTING REPORT AND RECOMMENDATION
Plaintiff/counter-claim Defendant Mercer K. Ellington, by its Executor, Paul Ellington (“plaintiff’ or “Ellington Estate”) commenced the instant action against defendants Harbrew Imports Ltd. and Iconic Brands, Inc. (“defendants”) alleging that defendants used the name Duke Ellington and other registered trademarks of the Ellington Estate without authorization in the marketing and promotion of defendants’ product, “Duke Ellington XO Cognac,” in violation of Sections 43(a) and 43(c) of the Lanham Act, 15 U.S.C. §§ 1125(a) and 1125(c), and for related claims of unfair competition and dilution under New York state law.
(See
ECF No. 1, Complaint (“Compl.”).) Defendants initially answered the complaint and alleged several counterclaims against plaintiff. (ECF No. 8, Answer and Counterclaims to Complaint, filed Sept. 24, 2009.)
On March 4, 2011, the court referred the above motions to Magistrate Judge Andrew L. Carter, Jr. for a report and recommendation (“R & R”). (See Order dated March 4, 2011.) On August 25, 2011, Judge Carter issued an R & R recommending that the court grant the plaintiffs motion for default judgment and award statutory damages of $325,000 under 15 U.S.C. § 1117(c), and grant the permanent injunction and other relief cited in paragraphs 2-4 of the “complaint’s wherefore clause.” (ECF No. 62, R & R at 197-98.) In addition, Judge Carter recommended that defendants’ counterclaims and third-party complaint as to all third-party defendants be dismissed with prejudice. (Id.)
Notice of the Report and Recommendation was sent electronically to all parties via the court’s electronic filing system on August 25, 2011. Plaintiffs also served a copy of the Report and Recommendation on the defendants and filed a declaration of service on August 26, 2010. (ECF No. 63.) As set forth in the Report and Recommendation, the parties had a right to file written objections to the Report and Recommendation within fourteen days of the date of the R & R. (See R & R at 198.) The period for filing objections for all parties has now lapsed, and no objections to the Report and Recommendation have been filed.
A district court reviews those portions of a report and recommendation to which a party has timely objected under a
de novo
standard of review and “may accept, reject, or modify, in whole or in part, the findings or recommendations ...” 28 U.S.C. § 636(b)(1)(C). However, where no objections to the Report and Recommendation have been filed, the district court “need only satisfy itself that that there is no clear error on the face of the record.”
Urena v. New York,
Upon a careful review of the record and Judge Carter’s thoroughly researched and well-reasoned Report and Recommendation, the court finds no clear error in Judge Carter’s Report and Recommendation and hereby affirms and adopts the Report and Recommendation in its entirety as the opinion of the court pursuant to 28 U.S.C. § 636(b)(1). Accordingly, and for the reasons set forth above and based upon the findings of fact and conclusions of law set forth in the Report and Recommendation and adopted herein: (1) plaintiffs are awarded statutory damages of $325,000 under 15 U.S.C. § 1117(c); (2) defendants are permanently enjoined from using the Duke Ellington trademark, defendants must turn over to plaintiff all products,
inter alia,
bearing the Duke Ellington trademark and defendants must submit an affidavit within thirty days of the date of this order confirming that they have complied with the injunction; and (3) defendants’ counterclaims and third-party complaint as to all counterclaim defendants
By September 26, 2011, plaintiffs counsel shall submit a proposed Judgment and Permanent Injunction consistent with the Report and Recommendation and this Order.
SO ORDERED.
REPORT & RECOMMENDATION
Plaintiff/counter-claim Defendant Mercer K. Ellington, by its Executor, Paul Ellington (“Plaintiff’ or “Ellington Estate”) brings this action against Defendants Harbrew Imports Ltd. and Iconic Brands, Inc. under Sections 43(a) and 43(c) of the Lanham Act, 15 U.S.C. §§ 1125(a) and 1125(c), and for related claims of unfair competition and dilution under New York state law, based upon Defendants’ unauthorized use of the name DUKE ELLINGTON and other registered trademarks of the Ellington Estate in the marketing and promotion of Defendants’ product, “Duke Ellington XO Cognac.” On December 3, 2010, the Ellington Estate moved for an entry of default. By order dated March 4, 2011, the Honorable Kiyo A. Matsumoto, United States District Judge, referred to me Plaintiffs motion for default and other related motions to dismiss for failure to prosecute, and requested a report and recommendation. For the reasons set forth below, I respectfully recommend that the Court grant Plaintiffs default motion and award $325,000 in damages and other relief as specified below. I further recommend that the Court grant Plaintiffs and third-party defendant, CMG Worldwide, Inc.’s motion to dismiss under Fed.R.CivJP. 41(b).
I. Background
A. Factual Background
The following facts are drawn from the complaint, which was filed on August 5, 2009. This action arises under the Trademark Act of 1946, as amended, 15 U.S.C. §§ 1051,
et seq.
(“the Lanham Act”). (Compl. ¶ 1.) The Estate of Ellington is an estate existing under the laws of Florida.
(Id.
¶ 3.) Defendants Harbrew Imports Ltd. (“Harbrew”) and Iconic Brands, Inc. (“Iconic”) are corporations with a principal place of business in the Eastern District of New York.
(Id.
¶¶ 4-5.) On or around June 10, 2009, Harbrew was acquired by and became a wholly owned subsidiary of the company now named Iconic.
(Id.
¶ 6.) Defendants are purportedly in the business of “celebrity-branded liquor distribution.”
(Id.)
Mercer Ellington was the son of the late Edward Kennedy Ellington, commonly known as Duke Ellington.
(Id.
¶ 9.) Duke Ellington was, among other things, a famous composer and musician in American pop culture.
(Id.
¶¶ 10-11.) Duke Ellington died in 1974 and since his death, Plaintiff and Mercer Ellington made substantial efforts to continue his reputation and his legacy.
(Id.
¶ 12.) For example, Duke Ellington’s music appears in popular television programs such as
American Idol
and
The Sopranos. (Id.)
The complaint describes the effect of Duke Ellington’s legacy and his posthumous popularity.
(Id.
¶¶ 13-15.) Building on the success of Duke Ellington’s legacy, the Estate of Ellington licensed the DUKE ELLINGTON name and its related indicia, including his image and his signature, to a broad category of goods and services, including, but not limited to luxury watches, luxury pens, books, stationary, greeting cards, designer apparel, limited edition prints, calendars, note cards, and posters.
(Id.
¶ 16.) The Estate of Ellington owns several federal trademark regis
According to Harbrew’s website, Harbrew is a federally licensed importer and distributor of beverages. (Id. ¶ 20.) Harbrew specializes in celebrity-branded products, such as “Danny DeVito’s Limoneello,” a liqueur named after the Italian-American actor and “Bench 5,” a scotch named after baseball Hall of Earner Johnny Bench. (Id.) It appears that Defendant Iconic is now in the same business as Harbrew, based on Iconic’s similar website and the products it promotes. (Id. ¶ 21.) Plaintiff alleges that Harbrew once attempted to negotiate with Plaintiff a proposed licensing agreement where Harbrew would manufacture, distribute and promote a DUKE ELLINGTON branded liqueur, but no agreement was reached. (Id. ¶ 22.) Subsequently, without Plaintiffs authorization, Harbrew used the trademarked name and signature DUKE ELLINGTON and actively promoted and marketed a liqueur entitled “Duke Ellington XO Cognac.” (Id. ¶¶ 23-29.) These unauthorized activities appear to have begun in October 2006. (Id.)
Plaintiff now brings this suit against Defendants for claims arising under the Lanham Act and New York state law. It seeks relief for unfair competition under 15 U.S.C. § 1125(a) and New York common law, as well as for violations of trademark dilution, under 15 U.S.C. § 1125(c) and N.Y. General Business Law § 360-i. Plaintiff requests injunctive relief, monetary damages, and other such relief as the Court deems proper.
B. Procedural History
Plaintiff commenced this action on August 5, 2009. On September 24, 2009, Defendants answered the complaint and alleged several counterclaims against Plaintiff. Defendants also brought a third-party complaint against Steven D. Shaw, Jr.; SDS Enterprises LLC; Seth J. White; CMG Worldwide, Inc. (“CMG”); and EGS Development, Inc. Plaintiff answered the counterclaims on October 19, 2009 and filed a supplemental complaint pursuant to Fed.R.Civ.P. 14(a) against CMG. CMG answered the third-party complaint on December 18, 2009 and on January 11, 2010, requested a pre-motion conference to dismiss Plaintiffs supplemental complaint. The Court temporarily denied CMG’s request for a pre-motion conference on January 14, 2010.
Defendants’ counsel then requested to withdraw from the action and the request was granted on May 28, 2010. Defendants were warned several times that if they failed to obtain new counsel, they were in danger of default because a corporation cannot appear in federal court without legal representation. (Order dated 8/20/10.) Despite Defendants’ multiple promises to retain an attorney and the Court’s generous grants of extensions, they failed to hire counsel and stopped defending the action. (Orders dated 5/28/10; 6/30/10; 8/20/10; 9/7/10; 9/13/10.) On September 13, 2010, the Court set a briefing schedule for Plaintiffs motion for default judgment and third-party defendants’ motion to dismiss the third-party complaint for failure to prosecute. CMG filed its motion to dismiss for failure to prosecute on October 8, 2010 and Plaintiff filed its motion for default judgment on December 3, 2010. Plaintiff also requested that the Court dismiss Defendants’ counterclaims for lack of prosecution. The remaining third-party defendants failed to file any motion papers. Plaintiff and CMG served Defendants with copies of the motion and the Court gave Defendants ample time to respond. The Court’s records show that Defendants
II. Motion for Default
A.Jurisdiction
As a threshold issue, this Court has jurisdiction over the trademark claims under Section 39 of the Lanham Act, 15 U.S.C. § 1121, and 28 U.S.C. § 1338, which provide jurisdiction to district courts for actions arising out of trademark disputes.
See Phillip Morris USA Inc. v. Marlboro Express,
No. 03-CV-1161,
B.Legal Standard
Fed.R.Civ.P. 55 sets forth a two-step process in which first a default, and then a default judgment, is entered.
See Enron Oil Corp. v. Diakuhara,
It is well-settled that a corporation cannot appear in federal court without legal representation.
See Rowland v. California Men’s Colony,
While the defaulting party has essentially admitted to all the allegations found in the complaint, the Court has the “responsibility to ensure that the factual allegations, accepted as true, provide a proper basis for liability and relief.”
Rolls—Royce
pl
c v. Rolls
—Royce
USA, Inc.,
C.Liability
1. Unfair Competition
Section 43(a) of the Lanham Act prohibits “[a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which.... is likely to cause confusion ...” 15 U.S.C. § 1125(a)(1)(A). A party establishes liability under Section 43(a) of the Lanham Act if it can demonstrate “(1) that it has a valid trademark entitled to protection under the Act, and (2) defendant’s actions are ‘likely to cause confusion.’ ”
Phillip Morris,
In this case, Plaintiff has alleged sufficient facts in the complaint to establish liability for unfair competition, both under federal and state law. Plaintiff has alleged that it owns several valid trademark registrations for the name DUKE ELLINGTON. (Compl. ¶ 17.) The registrations of these marks with the United States Patent and Trademark Office constitute “prima facie evidence that the mark[s] [are] registered and valid, ... that the registrant owns the mark[s], and that the registrant has the exclusive right to use the mark[s] in commerce.”
Lane Capital Mgmt., Inc. v. Lane Capital Mgmt, Inc.,
Further, Plaintiff has demonstrated the necessary element of bad faith for the claim of unfair competition under N.Y. law in part because Plaintiff did try to enter into a licensing agreement with Defendants regarding the DUKE ELLINGTON trademarks, but such negotiations failed. (Compl. ¶ 22; Decl. of Richard J.J. Scarola, dated June 15, 2011 “Scarola Deck” ¶ 4.) However, despite the lack of authorization, Defendants used the trademarks. Moreover, Defendants did appear in the instant matter, temporarily defended the action, brought in additional parties to the lawsuit, promised to secure counsel, but then ceased participation. Because Defendants have stopped contesting the allegations in the complaint, Plaintiffs claims are deemed to be admitted for purposes of liability. Accordingly, I find that Defendants are liable for violations of unfair competition both under Section 43(a) of the Lanham Act and under New York common law.
2. Trademark Dilution
The Federal Trademark Dilution Act of 1995 (“FTDA”), as amended effective October 6, 2006 by the Trademark Dilution Revision Act (“TDRA”), “entitles the owner of a famous, distinctive mark to an injunction against the user of a mark that is ‘likely to cause dilution’ of the famous mark.”
Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 477
F.3d 765, 766 (2d Cir.2007) (citing 15 U.S.C. § 1125(c)(1)). To establish a violation of the Act, a plaintiff must show that: (1) its mark is famous; (2) the defendant’s use of the mark is made in commerce; (3) the defendant used the mark after the mark was famous; and (4) the defendant’s use of the mark is likely to dilute the quality of the mark by blurring or tarnishment.
See Gap, Inc. v. G.A.P. Adventures Inc.,
No. 07-CV-9614,
Whether a mark or trade name is likely to cause dilution by blurring depends on factors including the similarity between the mark and the famous mark, the distinctiveness and degree of recognition of the famous mark, and whether the user of the mark or trade name intended to create an association with the famous mark. 15 U.S.C. § 1125(c)(2)(B). The record here plainly shows that the Defendants’ continued unauthorized use of the actual DUKE ELLINGTON marks creates a risk of such dilution by blurring. The complaint alleges that Plaintiff owned valid marks, those marks are famous, and Defendants used those marks, in commerce and without authorization, after the marks became famous to market and promote their product. Further, the use of the marks hurt Plaintiffs goodwill and reputation and eroded the commercial appeal of the marks. (Compl. ¶ 43.)
D. Damages
The Estate of Ellington requests actual damages of $150,000, plus attorney’s fees and costs of $174,574.56, or, in the alternative, statutory damages in the amount of $325,000. (PI. Supp. Mot. 7.) Plaintiff also requests permanent injunctive relief and the turnover of infringing goods.
A defendant’s default is an admission of all well-pleaded allegations in the complaint except those relating to damages.
See Finkel v. Romanowicz,
1. Actual Damages
Section 35(a) of the Lanham Act provides for monetary relief and attorney’s fees in favor of a plaintiff who has successfully established a trademark violation. 15 U.S.C. § 1117. Under the statute, a plaintiff is entitled, subject to the principles of equity, to recover: (1) the defendant’s profits; (2) any damages sustained by the plaintiff; and (3) the costs of the action. 15 U.S.C. § 1117(a). In order for the Court to assess profits, a plaintiff must prove a defendant’s sales.
Id.
Here, this information is unavailable because Defendants have stopped defending the action before completing discovery. Plaintiff submits that the parties did try to negotiate a license to use the DUKE ELLINGTON trademarks in conjunction with a premium cognac beverage. (Scarola Decl. ¶ 4.) These negotiations progressed to the point where Harbrew had identified the particular cognac and the parties began to discuss the promotion of the beverage at trade shows, but the deal was ultimately
2. Statutory Damages
Plaintiff submits that if the Court declines to grant damages under Section 1117(a), it requests $825,000 in speculative damages under 15 U.S.C. § 1117(c). Section 1117(c) provides that:
the plaintiff may elect, at any time before final judgment is rendered by the trial court, to recover, instead of actual damages and profits under subsection (a) of this section, an award of statutory damages for any such use in connection with the sale, offering for sale, or distribution of goods or services in the amount of—
(1) not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just; or
(2) if the court finds that the use of the counterfeit mark was willful, not more than $2,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just.
“The lack of information regarding defendants’ sales and profits make statutory damages particularly appropriate for these kinds of default cases.”
Century 21 Real Estate LLC v. Paramount Home Sales, Inc.,
No. 06-CV-2861,
Courts are vested with broad discretion when determining statutory damages under the Lanham Act, in part because of the paucity of statutory guidance.
See Sara Lee Corp. v. Bags of New York, Inc.,
3. Attorney’s Fees
Plaintiff chose not to pursue attorney’s fees if the Court grants statutory damages. (PL Supp. Mot. 15.) I decline to recommend any attorney’s fees or costs because I agree with Plaintiff that the recommended statutory damages adequately compensate Plaintiff.
4. Injunctive Relief
In addition to damages, Plaintiff also seeks a permanent injunction restraining and enjoining Defendants from using the DUKE ELLINGTON trademarks. (Compl. at wherefore clause ¶ 2.) It also requests a turnover of all, inter alia, products bearing the DUKE ELLINGTON trademarks and an affidavit confirming that Defendants have complied with the injunction. (Compl. at wherefore clause ¶¶ 3-4.)
Section 34(a) of the Lanham Act provides Courts with the “power to grant injunctions, according to the principles of equity and upon such terms as the Court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark Office.” 15 U.S.C. § 1116(a);
see Phillip Morris U.S.A. Inc.,
(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and the defendant, a remedy in equity is warranted; and (4) that the public interest would not be dis-served by a permanent injunction.
Salinger v. Colting,
Plaintiff has already prevailed on the merits of the case. Furthermore, “proof of likelihood of confusion establishes both likelihood of success on the merits and irreparable harm.”
Brennan’s Inc. v. Brennan’s Rest.,
Moreover, under Section 1125(c), the owner of a distinctive famous mark is entitled, subject to the principles of equity, to an injunction against anyone who uses the mark in a way that is likely to cause “dilution by blurring” of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury. 15 U.S.C. § 1125(c)(1). Accordingly, I find that a permanent injunction as described in Plaintiffs complaint is appropriate. I also find appropriate the relief sought in paragraphs 3-4 of the complaint’s wherefore clause, i.e., the turnover of products bearing the DUKE ELLINGTON marks and an affidavit confirming compliance with the Court’s order.
III. Motion to Dismiss for Failure to Prosecute
Plaintiff moves to dismiss all counterclaims asserted by Defendants and third-party Defendant CMG moves to dismiss the third-party complaint against it under Fed.R.Civ.P. 41. The remaining third-party defendants have failed to file a motion despite the Court’s September 13, 2010 order. Fed.R.Civ.P. 41(b) provides:
If the plaintiff fails to prosecute or to comply with these rules or a court order, a defendant may move to dismiss the action or any claim against it. Unless the dismissal order states otherwise, a dismissal under this subdivision (b) and any dismissal not under this rule-except one for lack of jurisdiction, improper venue, or failure to join a party under Rule 19 — operates as an adjudication on the merits.
Rule 41(c) provides that Rule 41 “applies to a dismissal of any counterclaim, cross-claim, or third-party claim.”
See also Sear-Land Service, Inc. v. Banca De Republica De Dominica,
Dismissal under Rule 41(b) involves consideration of five factors: (1) the duration of Defendants’ failure to comply with Court orders or failure to prosecute; (2) notice to Defendants that failure to comply or continued delay would result in dismissal if its counterclaims and third-party complaint; (3) possible prejudice to Plaintiff and CMG; (4) the balance between the interest of managing the Court’s docket and the Defendants’ right to be heard; and (5) consideration of lesser sanctions.
See Shannon v. Gen. Elec. Co.,
All five factors favor dismissal. It is apparent that Defendants have stopped prosecuting their counterclaims and their third-party complaint. Despite repeated Court orders and promises from Defen
IY. Conclusion
For the foregoing reasons, I respectfully recommend that the Court grant Plaintiffs motion for a default judgment and award statutory damages of $325,000 under 15 U.S.C. § 1117(c). I also recommend that the Court grant the permanent injunction and other relief cited in paragraphs 2-4 of the complaint’s wherefore clause. Plaintiff should submit a proposed order of judgment setting forth the relief granted. Further, I recommend that Defendants’ counterclaims and third-party complaint as to all third-party defendants be dismissed with prejudice.
Pursuant to 28 U.S.C. § 636(b)(1) and Rules 6 and 72 of the Fed.R.Civ.P., the parties shall have fourteen (14) days from this date to file written objections to this Report and Recommendation on ECF. Extensions of time to file objections should be directed to Judge Matsumoto. Failure to file timely objections will preclude appellate review of any order of judgment that will be entered. Counsel for Plaintiff shall serve a copy of this Report and Recommendation on Defendants by certified mail, within three days of receipt, and should file proof of such service on ECF.
SO ORDERED.
Dated: August 25, 2011
Brooklyn, New York