SATA GmbH & Co. KG v. ZHEJIANG REFINE WUFU AIR TOOLS CO., LTD., et al.
Case No. 2:15-cv-02111-GMN-CWH
UNITED STATES DISTRICT COURT DISTRICT OF NEVADA
September 14, 2016
C.W. Hoffman, Jr., United States Magistrate Judge
Presently before the court is Defendant Prona Tools Inc.‘s (“Prona“) Motion to Quash Service of Summons (ECF No. 21), filed on December 11, 2015. Plaintiff SATA GmbH & Co. KG (“SATA“) filed a response (ECF No. 22) on December 28, 2015. Defendant Prona filed a reply (ECF No. 23) and an errata (ECF No. 24) to its reply on January 7, 2016.
Also before the court is Defendant Zhejiang Refine Wufu Air Tools Co., Ltd.‘s (“WUFU“) Motion to Set Aside and Vacate Entry of Default (ECF No. 26), filed on March 17, 2016. Plaintiff SATA filed a response (ECF No. 32) on April 1, 2016. Defendant WUFU filed a reply (ECF No. 34) on April 11, 2016.
Also before the court is Defendant WUFU‘s Motion to Dismiss and Quash for Insufficient Service of Process (ECF No. 27), filed on March 17, 2016. Plaintiff SATA filed a response (ECF No. 31) on April 1, 2016. Defendant WUFU filed a reply (ECF No. 35) on April 11, 2016.
Also before the court is Plaintiff SATA‘s Motion for Default Judgment (ECF No. 30), filed on April 1, 2016. Defendant WUFU filed a response (ECF No. 37) on April 18, 2016. Plaintiff SATA filed a reply (ECF No. 38) on April 28, 2016.
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Plaintiff SATA is a German corporation that produces paint spray guns, airbrushes, workplace safety and security equipment, and other related products. (Compl. (ECF No. 1) at 1, 3-6.) Defendant WUFU is a Chinese company that offered goods for sale at the Automobile Aftermarket Products Expo in Las Vegas, Nevada, in November of 2015. (Id. at 1, 7-8.) Defendant Prona is a Canadian-based distribution company for a Taiwanese manufacturer that offered goods for sale at the Specialty Equipment Market Association (“SEMA“) trade show, another automotive aftermarket industry trade show, in Las Vegas, Nevada, in November of 2015. (Id. at 1-2, 9-10.) Plaintiff SATA alleges that at these trade shows, Defendants WUFU and Prona offered for sale counterfeit paint spray guns and related products that infringe on Plaintiff SATA‘s United States trademarks and design patents. (Id. at 2.)
On November 4, 2015, Plaintiff SATA brought a complaint alleging claims for trademark counterfeiting under
A. Service on Defendant WUFU
On November 5, 2016, the final day of the Automobile Aftermarket Products Expo, SATA‘s process server delivered the summons and complaint to Della Chen, who was dismantling WUFU‘s booth. (Decl. of Della Chen (ECF No. 27-1) at ¶¶ 4-5; Decl. of Roy McMahan (ECF No. 31-1) at ¶ 8.) Ms. Chen is an export sales representative for WUFU and her title is “Business Manager,” though it is not an officer-level position. (Decl. of Della Chen at ¶ 1.) Ms Chen staffed
In contrast, both SATA‘s process server and attorney state that when they arrived at the booth, Ms. Chen stated that she was expecting the documents because someone from WUFU had informed her that a lawsuit had been filed the day before. (Decl. of Roy McMahan at ¶ 9; Decl. of Steven Caloiaro (ECF No. 30-6) at ¶¶ 3-5.) SATA‘s attorney states that Ms. Chen agreed to accept service of process. (Decl. of Steven Caloiaro at ¶ 4.) WUFU‘s process server and attorney further state that upon accepting the documents, Ms. Chen requested that the documents be emailed to an address that she provided to SATA‘s attorney. (Decl. of Roy McMahan at ¶¶ 7, 10; Decl. of Steven Caloiaro at ¶¶ 6-7.) SATA provides to the court the email that was sent at Ms. Chen‘s request. (Mot. for Default J. (ECF No. 30), Ex. E.)
WUFU did not answer or otherwise respond to the complaint by its deadline, and SATA moved for entry of clerk‘s default, which the clerk entered. (Mot. for Entry of Clerk‘s Default (ECF Nos. 16, 18); Default (ECF No. 19).) WUFU now moves to set aside the clerk‘s entry of default and to dismiss the complaint and quash service of process for improper service. (Mot. to Set Aside Clerk‘s Entry of Default (ECF No. 26) [“Mot. to Set Aside Default“]; Mot. to Dismiss &
B. Service on Defendant Prona
Defendant Prona‘s general manager, Jason Jiang—who is named in SATA‘s proof of service—was not in the United States on the day of service. Mr. Jiang provides a declaration stating that on November 6, 2016, he was in Toronto, Canada, at a woodworking exposition and that he did not accept service in this matter. (Decl. of Jason Jiang (ECF No. 21-3) at ¶¶ 7-8.) He provides photographs of himself at Prona‘s booth at the woodworking exposition, a copy of Prona‘s registration for the woodworking exposition, and a copy of his identification badge for the woodworking exposition. (Id. at Exs. A-C.) To corroborate Mr. Jiang‘s statements, Prona provides the declaration of non-party Eric Chung, the president of Golden Hill Woodworking Machinery Ltd., who states that his company had a vendor booth at the woodworking exposition that was near Prona‘s booth and that he met and spoke to Mr. Jiang numerous times on November 6, 2015. (Decl. of Eric Chung (ECF No. 21-2) at ¶¶ 1, 3-5.)
The individual who greeted the process server at Prona‘s booth at the SEMA show on November 6, 2015, was Jierong Cao, a representative of Guangzhou Prona Air Tool Co. Ltd.,1 a supplier for Prona that is based in China. (Decl. of Jierong Cao (ECF No. 21-1) at ¶¶ 3-8.) Mr. Cao is not an employee of Prona. (Id. at ¶ 14; Decl. of Jason Jiang (ECF No. 21-3) at ¶ 10.) Mr. Cao was stationed at Prona‘s booth during the trade show to answer inquiries regarding products manufactured by Guangzhou, though at its booth Prona also presented products that were not manufactured by Guangzhou. (Decl. of Jierong Cao at ¶ 6.)
According to Mr. Cao, on November 6, 2015, a group of 4 to 5 individuals who introduced themselves as Plaintiff SATA‘s representatives came to Prona‘s booth at the SEMA show and asked to see managers or officers in charge of the booth. (Id. at ¶ 7.) Nobody from Prona was
In contrast, SATA‘s process server states that when he approached Prona‘s booth with other SATA representatives and asked to speak to the manager or officer in charge, a man wearing a SEMA convention name tag bearing the name “Jason Jiang” greeted them. (Decl. of Roy McMahan (ECF No. 22-2) at ¶¶ 7-8.) When the process server explained that he was there for the purpose of service, “the individual stated that he was not Mr. Jiang and very quickly flashed a Chinese passport.” (Id. at ¶ 9.) The process server states that he did not handle the passport and that in the brief time he saw it, he was unable to discern what it said. (Id.) According to the process server, he asked to see the passport again to determine the individual‘s identity, but he declined. (Id.) The process server further states that:
[t]he individual I spoke with did not identify who Jason Jiang was, and simply kept repeating that he was not Mr. Jiang, and that Mr. Jiang was unavailable. He stated that he did not want to take the papers. Based upon the contradiction between his name tag and his statement, I believed he was either Mr. Jiang or a person of authority attempting to evade service.
(Id. at ¶ 10.) The process server believed the man he served was a managing agent with responsibility for Prona because he came forward when the process server asked for a representative in charge and because of the process server‘s observations of his interactions with other Prona employees. (Id. at ¶ 11.) Additionally, the process server stated that service occurred on the final date of the trade show, that the booths were in the process of being dismantled, and that in his professional experience, “[i]ndividuals associated with the foreign company will often attempt to evade service by claiming that they have no authority to accept service on behalf of the
SATA‘s counsel states that several weeks after the SEMA trade show, Mr. Jiang contacted him on behalf of Prona on multiple occasions regarding resolving the lawsuit, and Mr. Jiang never indicated that he was not the person who was served at the SEMA trade show. (Decl. of Steven A. Caloiaro (ECF No. 22-1) at 2.) Prona now moves to quash service of process on the grounds of improper service. (Mot. to Quash Service of Summons (ECF No. 21) [“Mot. to Quash“].)
II. WUFU‘S MOTION TO DISMISS AND TO QUASH
WUFU moves to dismiss the complaint and quash service of process, arguing that Ms. Chen is not an officer, a managing or general agent, or otherwise have actual or apparent authority to receive service for WUFU. WUFU further argues that Ms. Chen‘s presence at a trade show is insufficient to render her an agent for service of process. Rather, WUFU argues that the court must examine Ms. Chen‘s role and responsibilities at WUFU to determine whether she was sufficiently integrated in the organization to render service fair, reasonable, and just. Given that WUFU has more than 500 employees, that Ms. Chen‘s job responsibilities exclusively deal with promoting WUFU‘s products for export sales, that she has never received service of process, and that the office director did not understand what the documents were demonstrates that Ms. Chen did not have actual authority to accept the documents. Additionally, WUFU argues that the process server thought Ms. Chen was a translator and asked her to pass the documents to WUFU and therefore could not have believed she had the apparent authority to accept service.
SATA responds that it properly served Ms. Chen on behalf of WUFU and that it also served WUFU by email at Ms. Chen‘s request, arguing that each of these methods of service satisfies Rule 4. SATA further argues that Ms. Chen had authority to accept service of process because WUFU told her to expect service, which indicates that WUFU considered her capable of accepting service. WUFU further argues that Ms. Chen was a business manager who was trusted to be the company‘s sole representative at the trade show and that she was so integrated with the organization that she knew to give the summons and complaint to a superior. In the alternative, SATA argues the court should quash service rather than dismissing the complaint because WUFU has not been prejudiced and received actual notice of the summons and complaint.
“A federal court does not have jurisdiction over a defendant unless the defendant has been served properly under Fed. R. Civ. P. 4.” Direct Mail Specialists, Inc. v. Eclat Computerized Tech., Inc., 840 F.2d 685, 688 (9th Cir. 1988).
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(1) in a judicial district of the United States:
(A) in the manner prescribed by
Rule 4(e)(1) for serving an individual; or(B) by delivering a copy of the summons and complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process[.]
Here, considering the totality of the evidence, and liberally construing
Given that the court finds that personal service on Ms. Chen was sufficient under Rule 4, the court
III. WUFU‘S MOTION TO SET ASIDE DEFAULT
WUFU moves to set aside the clerk‘s entry of default, arguing that there was no culpable conduct on its part that led to the entry of default, that it has meritorious defenses to SATA‘s claims, and that setting aside the default will not prejudice SATA. Specifically, WUFU argues that it is a Chinese company that does not have a sophisticated understanding of United States law and that WUFU did not believe that service on Ms. Chen was effective. WUFU represents that when it became aware that SATA claimed service had been completed and the clerk entered a default, WUFU promptly retained American counsel and moved to set aside the default.
With respect to its defenses, WUFU argues that its paint spray guns are not counterfeit SATA products and do not infringe on SATA‘s trademarks because SATA‘s trademarks are invalid due to lack of secondary meaning and/or functionality. WUFU further argues that there is no likelihood of confusion between the trade dresses of the parties’ products. WUFU also argues that its paint spray guns do not infringe SATA‘s patents because the patents are invalid due to obviousness and/or functionality. Finally, WUFU argues SATA will not be prejudiced by setting aside the default because no evidence has been lost any discovery will be no more difficult.
SATA responds that WUFU received actual notice of the lawsuit and intentionally decided not to file a response, thereby attempting to interfere with the court‘s judicial decision making and to manipulate the legal process. SATA argues that WUFU is not an unsophisticated litigant, but is a Chinese conglomerate doing business in numerous foreign jurisdictions across several continents and that WUFU is sophisticated enough to file, prosecute, and maintain a U.S. trademark. SATA further argues that WUFU‘s defenses are not meritorious. Regarding prejudice, SATA argues that it is unable to determine whether evidence has been lost and that it has been forced to expend significant legal expenses in litigating the motion to set aside default. Finally, SATA argues that if the court sets aside the clerk‘s entry of default, it should condition setting aside the default on WUFU paying SATA‘s attorney‘s fees and costs associated with the motion to set aside the default judgment.
To determine whether the plaintiff would be prejudiced if the default judgment is set aside, “[t]he standard is whether his ability to pursue his claim will be hindered.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). Setting aside a default must do more than simply delay resolution of the case to be considered prejudicial to the plaintiff. TCI, 244 F.3d at 701. Similarly, requiring a plaintiff to adjudicate a claim on the merits does not constitute prejudice. Id. Rather, the delay must result in some tangible harm, such as “loss of evidence, increased difficulties of discovery, or greater opportunity for fraud or collusion.” Id. (quotation omitted).
To satisfy the “not extraordinarily heavy” burden of presenting a meritorious defense, the defendant seeking to vacate a default must present specific facts that would constitute a defense. Id. at 700. There must be some possibility that the suit would have a different outcome at trial than the result achieved by default. Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986).
Finally, “a defendant‘s conduct is culpable if he has received actual or constructive notice of the filing of the action and intentionally failed to answer.” TCI, 244 F.3d at 697 (emphasis and quotation omitted). However, if the defendant offers a good faith explanation for its neglectful failure to answer, and that explanation negates any intent to take advantage of the plaintiff, interfere with judicial decision making, or otherwise manipulate the legal process, such failure is not “intentional.” Id. at 697-98. For example, where the defendants received actual notice of the
This test is “at bottom an equitable one, taking account of all relevant circumstances surrounding the party‘s omission.” Brandt v. Am. Bankers Ins. Co. of Fla., 653 F.3d 1108, 1111 (9th Cir. 2011) (quotation omitted). The court has discretion to determine whether to set aside a default. O‘Connor v. State of Nev., 27 F.3d 357, 364 (9th Cir. 1994). The court‘s discretion is especially broad when considering a motion to set aside an entry of default, as opposed to a default judgment. Id. Generally, cases should be decided on the merits, rather than by default. See, e.g., Mesle, 615 F.3d at 1091. The court has the discretion to condition the setting aside of a default under
Here, WUFU has demonstrated good cause to set aside the default. WUFU‘s failure to answer was not culpable. WUFU has a good faith explanation for its failure to answer the complaint by the deadline because WUFU contends that service of process on Ms. Chen was improper. WUFU represents that when it became aware that SATA claimed service had been completed and the clerk entered a default, WUFU promptly retained American counsel and moved to set aside the default. This explanation negates an intent to take advantage of SATA, interfere with judicial decision making, or otherwise manipulate the legal process. Additionally, SATA does not point to any evidence of tangible harm caused by the delay except the attorney‘s fees and costs it has incurred in litigating the motion for to set aside the clerk‘s default. WUFU also has presented several potentially meritorious defenses in its motion to set aside default. Because WUFU has raised these defenses, there is at least some possibility that the outcome of SATA‘s claims will be different at trial than the outcome by default.
SATA would not be prejudiced if the default was set aside because discovery has not commenced and SATA has not otherwise been hindered in pursuing its claims. Although SATA argues WUFU‘s failure to respond to the complaint was culpable and resulted in delay, it does not
However, the court in its discretion declines to condition setting aside the default on WUFU‘s payment of SATA‘s attorney‘s fees and costs incurred in litigating the motion to set aside default. Although the court ultimately found that service on Ms. Chen was proper under Rule 4, WUFU set forth good faith legal arguments regarding the sufficiency of service, particularly in light of the parties’ competing declarations regarding the circumstances surrounding service at the trade show. The court therefore finds that it was not unfair for SATA to have to litigate the default.
Finally, given that the court will grant WUFU‘s motion to set aside default, the court will deny SATA‘s motion for default judgment as moot.
IV. PRONA‘S MOTION TO QUASH
Defendant Prona moves to quash service of process, arguing that service was improper. Specifically, Prona argues its general manager, Jason Jiang, was in Toronto, Canada on the date that he purportedly was served with the summons and complaint in Las Vegas, Nevada. Prona further argues that Mr. Cao, who is an independent sales representative of a third party, was not a Prona employee and did not have actual or apparent authority to accept service on Prona‘s behalf. Prona argues that because Mr. Cao informed SATA‘s representatives that he did not work for Prona and showed them his passport, SATA‘s representatives could not have reasonably believed that Mr. Cao had authority to accept service. Given that SATA did not serve the summons and complaint on a manager, officer, or other person who had the authority to accept service for Prona, Prona argues that service was improper and requests that the court quash service and dismiss the case against Prona.
Plaintiff SATA responds that because Mr. Cao represented himself as the person in charge at Prona‘s booth, was wearing a name tag that said “Jason Jiang,” and never stated his name or identified who the real Mr. Jiang was, its process server reasonably believed that Mr. Cao was
Prona replies that when a plaintiff relies on apparent authority to validate service of process, it is the plaintiff‘s burden to show that the process server had cause to believe that the served party was authorized to accept service. Plaintiff argues that the process server‘s belief regarding apparent authority must be supported by due diligence. Prona further argues that in determining whether apparent authority exists, the court must focus on the acts of the principal. Viewing the events at issue in the context of a booth at an industry trade show, where all visitors to a booth would be greeted, Prona argues that the fact Mr. Cao approached the SATA representatives is an insufficient basis for the process server to believe he had authority for Prona. As for the fact Mr. Cao was wearing Mr. Jiang‘s badge, Prona argues that the fact Mr. Cao stated he was not Mr. Jiang and showed the SATA representatives his passport should have prompted the process server to do further investigation to ascertain who should be served. Also, Prona argues that the process server‘s belief that Mr. Cao was actually Mr. Jiang and was trying to evade service is belied by the fact Mr. Cao cooperated to the point of producing his passport for inspection. Finally, Prona argues that the fact Mr. Jiang ultimately learned of the lawsuit and contacted SATA regarding settlement does not cure SATA‘s failure to properly serve Prona.3
It is undisputed that Mr. Cao is not an officer or managing or general agent of Prona. The fact that Mr. Cao greeted SATA‘s process server at Prona‘s booth and was wearing a SEMA trade
Having decided to quash service, the court in its discretion will extend the time for SATA to serve Prona under
V. CONCLUSION
IT IS THEREFORE ORDERED that Defendant Zhejiang Refine Wufu Air Tools Co., Ltd.‘s Motion to Dismiss and Quash for Insufficient Service of Process (ECF No. 27) is DENIED.
IT IS FURTHER ORDERED that Defendant Zhejiang Refine Wufu Air Tools Co., Ltd.‘s Motion to Set Aside and Vacate Entry of Default (ECF No. 26) is GRANTED.
IT IS FURTHER ORDERED that the Clerk‘s entry of default against Defendant Zhejiang Refine Wufu Air Tools Co., Ltd. (ECF No. 19) is VACATED.
IT IS FURTHER ORDERED that Plaintiff SATA‘s Motion for Default Judgment (ECF No. 30) is DENIED.
IT IS FURTHER ORDERED that Plaintiff SATA GmbH & Co. KG must serve Defendant Prona within 90 days from the date of this order.
DATED: September 14, 2016
C.W. Hoffman, Jr.
United States Magistrate Judge