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Farm Fresh Direct by a Cut Above, LLC v. Downey

United States District Court, D. Maryland

October 6, 2017

STEVEN DOWNEY, et al., Defendants.


          Ellen L. Hollander United States District Judge

         I. Background

         On June 26, 2017, plaintiff Farm Fresh Direct Direct By a Cut Above LLC (“Farm Fresh Direct”) filed suit against defendants Steven Downey; Clipper City Lending LLC (“Clipper City”); Farm Fresh Direct Home Food Services, LLC (“Farm Fresh Home”); and Jessica Sinsky. ECF 1. Plaintiff alleged, inter alia, unfair competition in violation of the Lanham Act, as amended, 15 U.S.C. § 1125(a). Id. The docket reflects service on the defendants. See ECF 6 through ECF 9. Downey subsequently filed for bankruptcy, and the case is stayed as to him, under 11 U.S.C. § 362(a)(1).[1]

         Sinsky filed an Answer on July 24, 2017. ECF 10. In an Order of July 26, 2017 (ECF 11) and again in an Order of August 15, 2017 (ECF 16), I explained that an individual may only represent herself and that all corporate entities and limited liability companies must be represented by counsel. However, I extended until July 31, 2017, the time for Clipper City to respond to the Complaint. ECF 11 at 2. That date coincided with the response deadline for Farm Fresh Home. Id.

         On July 31, 2017, just a week after Sinsky filed her Answer, she moved to dismiss the Complaint. ECF 12. Plaintiff opposed the motion. ECF 14. No reply has been filed. See Docket. That motion remains pending.

         No attorney has entered an appearance for Clipper City or Farm Fresh Home. See Docket. Thus, they have not responded to the suit. Accordingly, on August 15, 2017, I directed plaintiff to move for Clerk's entry of default as to Farm Fresh Home and Clipper City, or show cause why such action is not appropriate. ECF 16. That same day, plaintiff moved for Clerk's entry of default as to Farm Fresh Home and Clipper City. ECF 17. The Clerk entered default as to Clipper City on September 7, 2017 (ECF 19), and as to Farm Fresh Home on September 27, 2017. ECF 20.

         On September 28, 2017, plaintiff filed a two-page Motion for Default Judgment, solely against Farm Fresh Home. ECF 21 (“Motion”). Plaintiff asks the Court, inter alia, to enjoin the use of the “Farm Fresh Direct” name by Farm Fresh Home and its agents, employees, and entities acting in concert with Farm Fresh Home. Id. at 2. Plaintiff also asks the Court to order Farm Fresh Home “to provide a financial accounting of its activities from the date of its incorporation to and including the date it produces the accounting[.]” Id. And, citing “11 U.S.C. § 1125(a)” (an inapplicable provision of the Bankruptcy Code), [2] plaintiff also seeks to recover damages suffered by plaintiff, costs of $808, and attorneys' fees of $14, 570. ECF 21 at 1-2. No billing records or affidavits have been submitted.

         Plaintiff appears to rely on 15 U.S.C. § 1117(a) (emphasis added to indicate those portions quoted by plaintiff in ECF 21 at 1-2):

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. The court shall assess such profits and damages or cause the same to be assessed under its direction. In assessing profits the plaintiff shall be required to prove defendant's sales only; defendant must prove all elements of cost or deduction claimed. In assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount. If the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case. Such sum in either of the above circumstances shall constitute compensation and not a penalty. The court in exceptional cases may award reasonable attorney fees to the prevailing party.

         No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I shall deny the Motion, without prejudice, and with leave to amend.

         II. Default Judgment Standard

         Upon a showing that a party against whom judgment is sought has failed to plead or otherwise defend, the clerk must enter the party's default onto the docket. Fed.R.Civ.P. 55(a). After the clerk has entered a default, the plaintiff may seek a default judgment. See Fed. R. Civ. P. 55(b). When the “plaintiff's claim is for a sum certain or a sum that may be made certain by computation, ” and it is supported by an affidavit, the clerk must enter a default judgment. Fed.R.Civ.P. 55(b)(1). However, a mere “generalized statement of the amount due in [the] plaintiff's complaint” does not establish a “sum certain” for the purposes of Rule 55(b)(1). 10A Wright And Miller, Kane, Marcus, Spencer & Steinman, Federal Practice And Procedure § 2683 (4th ed. 2017 Update) (“Wright and Miller”); see Monge v. Portofino Ristorante, 751 F.Supp.2d 789, 789 (D. Md. 2010). In that circumstance, “the party must apply to the court for a default judgment.” Rule 55(b)(2).

         Entry of default judgment “is left to the discretion of the court.” SEC v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005). To be sure, it is the “'strong policy'” of the Fourth Circuit to decide cases on their merits. Id. (citation omitted); see United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993); Tazco, Inc. v. Director, Office of Workers' Compensation Program, 895 F.2d 949, 950 (4th Cir. 1990); Disney Enters. v. Delane, 446 F.Supp.2d 402, 405 (D. Md. 2006). That policy is not absolute, however. Default judgment may be “'appropriate when the adversary process has been halted because of an essentially unresponsive party.”' Entrepreneur Media, Inc. v. JMD Entertainment Group, LLC, 958 F.Supp.2d 588, 593 (D. Md. 2013) (citations omitted).

         Farm Fresh Home never responded to the suit. Therefore, plaintiff's factual allegations, other than those pertaining to damages, are deemed admitted. See Fed. R. Civ. P. 8(b)(6); see also Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001) (stating that the court accepts as true the well pleaded factual allegations in the Complaint as to liability). But, the court must determine whether the undisputed factual allegations constitute a legitimate cause of action. Id. at 780-81; see also Wright and Miller § 2688.1 (“[L]iability is not deemed established simply because of the default . . . and the court, in its discretion, may require some proof of the facts that must be established in order to determine liability.”).

         If the court is satisfied that liability has been established, it must then determine the appropriate amount of damages. Ryan, 253 F.3d at 780-81. Allegations “relating to the amount of damages” are not deemed admitted based on a defendant's failure to respond to a suit. Fed R. Civ. P. 8(b)(6); see Ryan, 253 F.3d at 780 (“'[D]efault is not treated as an absolute confession by the defendant of his liability and of the plaintiff's right to recover.'”) (citation omitted); see also Monge, 751 F.Supp.2d at 794 (same); Trs. of the Elec. Welfare Trust Fund v. MH Passa Elec. Contracting, Inc., No. DKC-08-2805, 2009 WL 2982951, at *1 (D. Md. Sept. 14, 2009) (“Upon default, the well-pled allegations in a complaint as to liability are taken as true, although the allegations as to damages are not.”); Pentech Fin. Servs., Inc. v. Old Dominion Saw Works, Inc., No. 6:09cv00004, 2009 WL 1872535, at *1 (W.D. Va. June 30, 2009) (“Upon default judgment, Plaintiff's factual allegations are accepted as true for all purposes excluding determination of damages.”).

         Rather, a court must make an independent determination regarding allegations as to damages. See Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 154 (2d Cir. 1999). In so doing, the court may conduct an evidentiary hearing or require an accounting. Fed.R.Civ.P. 55(b)(2). However, the court may also make a determination of damages without a hearing, so long as there is an adequate evidentiary basis in the record to support an award of the requested damages. See Adkins v. Teseo, 180 F.Supp.2d 15, 17 (D.D.C. 2001) (“[T]he court may rely on detailed affidavits or documentary evidence to determine the appropriate sum.”); Monge, 751 F.Supp.2d at 795 (same); Pentech Fin. Servs., Inc., 2009 WL 1872535, at *2 (concluding that there was “no need to convene a formal evidentiary hearing on the issue of damages” because plaintiff submitted affidavits and records establishing the amount of damages); JTH Tax, Inc. v. Smith, Civil No. 2:06CV76, 2006 WL 1982762, at *3 (E.D. Va. June 23, 2006) (“If the defendant does not contest the amount pleaded in the complaint and the claim is for a sum that is certain or easily computable, the judgment can be entered for that amount without further hearing.”).

         Notably, under Fed.R.Civ.P. 54(c), “[a] default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” See In re Genesys Data Techs, Inc., 204 F.3d 124, 132 (4th Cir. 2000) (“When a Complaint demands a specific amount of damages, courts have generally held that a default judgment cannot award additional damages.”). This is meant to enable the defendant to decide, on the basis of the suit, whether to expend the resources to defend the action. Monge, 751 F.Supp.2d at 796.

         III. Discussion

         A. Default Judgment as ...

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