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Journey Group Companies v. Sioux Falls Construction, LLC

United States District Court, D. South Dakota, Southern Division

April 12, 2017

JOURNEY GROUP COMPANIES d/b/a SIOUX FALLS CONSTRUCTION, a South Dakota Corporation, Plaintiff,
v.
SIOUX FALLS CONSTRUCTION, LLC, a South Dakota Limited Liability Company. and LORENA DE JESUS, aka LORENA ZAMORA, aka LORENA FLEY, an individual, Defendants.

          MEMORANDUM OPINION AND ORDER GRANTING MOTION FOR DEFAULT JUDGMENT AND PERMANENT INJUNCTION

          Lawrence L. Piersol United States District Judge.

         Plaintiff Journey Group Companies d/b/a Sioux Falls Construction has filed a Motion for Default Judgment and Permanent Injunction. (Doc. 17.) The Court has reviewed the accompanying pleadings, including the Affidavit of Sander J. Morehead, and the applicable law. For the following reasons, the motion will be granted.

         BACKGROUND

         The following undisputed facts are taken from Plaintiff Sioux Falls Construction's Amended Complaint (doc. 12), and are assumed to be true for purposes of deciding this motion. See Taylor v. City of Ballwin, Mo., 859 F.2d 1330, 1333 n.7 (8th Cir. 1988) (upon entry of default the defaulting defendant "is deemed to have admitted all well pleaded allegations in the complaint.").

         Plaintiff Sioux Falls Construction has offered quality construction services in South Dakota and the surrounding region for over a century. It has continuously used the service mark "Sioux Falls Construction" ("the Mark") in advertising and otherwise promoting its construction services with great success and consumer recognition. The Mark has come to be recognized by those in the construction industry and those who seek construction services as an indication of the source and quality of Sioux Falls Construction's services.

         The Mark is registered with the United States Patent & Trademark Office ("USPTO"), both as a design mark and a word mark for "building and highway construction services." Sioux Falls Construction has also registered the "Sioux Falls Construction" name with the South Dakota Secretary of State on its Fictitious Name Registration system.

         Defendant Sioux Falls Construction, LLC ("SFC") is a limited liability company organized by Defendant Lorena De Jesus ("De Jesus") on January 4, 2016 under South Dakota law. It is believed that, prior to forming SFC in early 2016, De Jesus did business as L&J Construction in Minnesota, and never did business as Sioux Falls Construction before that time. According to its website, SFC offers construction services including roofing and siding services. SFC and De Jesus began promoting and advertising construction services in interstate commerce in conjunction with the Mark under the name "Sioux Falls Construction, LLC." De Jesus created a website for SFC at the domain www.siouxfallsconstructionsd.com ("the Pirated Domain"), which Sioux Falls Construction believes De Jesus or SFC purchased on or about March 29, 2016. De Jesus and SFC also created a Facebook page for SFC. SFC's first post on its Facebook page occurred on or about March 31, 2016. SFC and De Jesus intentionally misrepresented to consumers at the Pirated Domain and on SFC's Facebook page that they have operated as "Sioux Falls Construction" and provided construction services under that name since 1987.

         SFC's and De Jesus's use of Sioux Falls Construction's mark includes use of the Mark on the Pirated Domain as well as displaying the Mark on the sides of SFC's commercial vehicles, and use of the Mark on its business cards. SFC is doing business, advertising and promoting its construction services in interstate commerce using "Sioux Falls Construction" as its name to trade on the long-standing reputation Sioux Falls Construction has built in the Mark, and De Jesus has been personally involved in SFC's use of "Sioux Falls Construction."

         On June 28, 2016, Sioux Falls Construction's attorneys sent by certified mail, return receipt requested, and by e-mail, a letter to De Jesus and SFC advising them that they were infringing upon Sioux Falls Construction's registered service mark. De Jesus represented that SFC would cease and desist using the Mark in conjunction with its construction business. However, SFC and De Jesus continued to conduct business in association with the Mark, confusing both consumers and potential consumers. For instance, Sioux Falls Construction was contacted by both potential consumers and Sioux Falls, South Dakota, city officials who were confused as to whether Sioux Falls Construction was responsible for SFC commercial trucks with the Mark on the sides of the trucks. Sioux Falls city officials have called Sioux Falls Construction and noted that vehicles bearing the Mark were located at job sites lacking a proper building permit.

         Despite repeated subsequent contacts between Sioux Falls Construction's counsel and SFC and De Jesus demanding that they cease and desist use of the Mark, SFC and De Jesus nevertheless continued to conduct business in association with the "Sioux Falls Construction" name.

         After being notified of Sioux Falls Construction's rights in the Mark, including Sioux Falls Construction's Registrations regarding that Mark, SFC and De Jesus fraudulently obtained a South Dakota state registration for the mark "Sioux Falls Construction LLC" under SDCL Ch. 37-6 on September 12, 2016, by misrepresenting to the South Dakota Secretary of State's Office that it had valid rights in the Mark.

         As a result of SFC and De Jesus' actions, Sioux Falls Construction instituted this action alleging trademark infringement, cybersquatting, trademark dilution, counterfeit trademark and unfair competition under the Lanham Act, and state law claims for false representations under the Deceptive Trade Practices Act and for cancellation of state registration of the mark "Sioux Falls Construction, LLC." Sioux Falls Construction seeks permanent injunctions, statutory damages and attorney fees.

         The initial Complaint was filed on September 2, 2016. A Summons was obtained from the Clerk of Courts the same day, and Sioux Falls Construction began efforts to serve De Jesus both individually and as Registered Agent of SFC. Service of the Summons and Complaint was accomplished on both Defendants on October 18, 2016. (Docs. 6 and 7.) Defendants were required to serve an answer within 21 days. Fed.R.Civ.P. 12(a)(1)(A)(i). They failed to do so. After its motion to amend was granted, Plaintiff filed an Amended Complaint on November 30, 2016. (Doc. 12.) Defendants failed to file an answer or otherwise respond to the Amended Complaint, and Plaintiff moved for entry of default on December 21, 2016. (Doc. 13.) The Clerk of Court entered default against Defendants on the same day. (Doc. 16.) Plaintiff now moves for entry of default judgment. (Doc. 17.)

         DISCUSSION

         Under Rule 55, "[w]hen a party 'has failed to plead or otherwise defend' against a pleading listed in Rule 7(a), entry of default under Rule 55(a) must precede grant of a default judgment under Rule 55(b)." Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781, 783 (8th Cir. 1998). "Entry of a default under Federal Rule of Civil Procedure 55(a) is not, as such, entry of a judgment; it merely permits the plaintiff to move for a default judgment under Rule 55(b)(2), assuming that the default is not set aside under Rule 55(c)." Inman v. American Home Furniture Placement, Inc., 120 F.3d 117, 118 n.2 (8th Cir. 1997). Thus, Rule 55 requires two steps before entry of a default judgment: "first, pursuant to Fed.R.Civ.P. 55(a), the party seeking a default judgment must have the clerk enter the default by submitting the required proof that the opposing party has failed to plead or otherwise defend; second, pursuant to Fed.R.Civ.P. 55(b), the moving party may seek entry of judgment on the default under either subdivision (b)(1) or (b)(2) of the rule." Dahl v. Kanawha Inv. Holding Co., 161 F.R.D. 673, 683 (N.D.Iowa 1995). In this case, the Clerk of Court has entered default pursuant to Rule 55(a), completing the first step in the process toward default judgment, and Plaintiff has now moved for a default judgment under Rule 55(b)(2).

         Upon entry of default by the Clerk of Court, the defaulting defendant "is deemed to have admitted all well pleaded allegations in the complaint." Taylor v. City of Ballwin, Mo., 859 F.2d 1330, 1333 n.7 (8th Cir. 1988) (quoting Caribbean Produce Exchange v. Caribe Hydro-Trailer, Inc., 65 F.R.D. 46, 48 (D. Puerto Rico 1974)). The next question is whether the facts in the Amended Complaint are sufficient to establish liability. Sioux Falls Construction argues that it has pled admitted facts that establish Defendants' liability for: 1) violating Sioux Falls Construction's rights under the Lanham Act including 15 U.S.C. §§1114 and 1125; 2) a counterfeit trademark under 15 U.S.C. § 1116; and 3) cybersquatting in violation of 15 U.S.C. § 1125(d). Plaintiff also asserts that the admitted facts establish that SFC's state trademark registration for "Sioux Falls Construction, LLC" should be cancelled.[1]

         A. Liability

         1. Trademark Infringement

         Plaintiff alleges that Defendants are liable for trademark infringement under 15 U.S.C. §§1114 and 1125(a)(1). To establish a claim for trademark infringement, a plaintiff must show that it owns a valid protectable trademark and that a defendant's unauthorized use of the trademark creates a likelihood of confusion. Cmty. of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ's Church, 634 F.3d 1005, 1009 (8th Cir. 2011). By default, Defendants admit both that Plaintiff owns the registered mark "Sioux Falls Construction, " and that Defendants intentionally used the Mark despite Plaintiffs demands that they not do so. Accordingly, the first two elements of trademark infringement are established.

         With respect to the third prong of this analysis, the Eighth Circuit has consistently considered the following six factors in determining whether a likelihood of confusion exists: (1) the strength of the owner's mark; (2) the similarity between the owner's mark and the alleged infringer's mark; (3) the degree to which the products compete with each other; (4) the alleged infringer's intent to "pass off its goods as those of the owner; (5) incidents of actual confusion; and (6) the type of product, its costs, the conditions of purchase, and the degree of care to be exercised by potential customers of the trademark holder. See Mutual of Omaha Ins. Co. v. Novak, 836 F.2d 397, 399 (8th Cir. 2000); General Mills, Inc. v. Kellogg Co., 824 F.2d 622, 626 (8th Cir. 1987); SquirtCo. v. Seven-Up Co., 628 F.2d 1086, 1091 (8th Cir. 1980). No single factor is dispositive. See Mutual of Omaha, 836 F.2d at 399 n.3 ("These are not necessarily the only factors that might be relevant in a particular case. The ultimate inquiry always is whether, under all the circumstances, there exists a likelihood of confusion between the plaintiffs trademark and the allegedly infringing use."). Actual confusion is positive proof of the likelihood of confusion. See SquirtCo., 628 F.2d at 1091.

         Here, Sioux Falls Construction alleges that Defendants used the mark "Sioux Falls Construction" on their website, Facebook page, commercial vehicles and business cards for marketing its construction services in Sioux Falls and the surrounding area. (Doc. 12, Amended Complaint at ¶ 20.) Plaintiff further alleges that the use of the Mark confuses consumers. (Id. at ¶ 22.) For example, "Sioux Falls Construction has been contacted by both potential consumers and Sioux Falls, South Dakota, city officials who were confused as to whether Sioux Falls Construction was responsible for SFC commercial trucks with the 'Sioux Falls Construction' Mark on the sides of the trucks." (Id. at ¶ 23.) Furthermore, city officials called Sioux Falls Construction and indicated that vehicles bearing the "Sioux Falls Construction" Mark were located at job sites lacking proper building permits. (Id. at ΒΆ 24.) These facts alleged in the Amended Complaint are uncontested due to Defendants' default. Since the two ...


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