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Overstock.com, Inc. v. Visocky

United States District Court, E.D. Virginia, Alexandria Division

December 7, 2018

OVERSTOCK.COM, INC., Plaintiff,
v.
VIKTOR VISOCKY, et al. Defendants.

          REPORT AND RECOMMENDATION

          THERESA CARROLL BUCHANAN UNITED STATES MAGISTRATE JUDGE.

         THIS MATTER comes before the Court on Plaintiffs Motion for Default Judgment and Incorporated Memorandum in Support (Dkt. 116). After no representative for Defendant responded to Plaintiffs motion or appeared at the hearing on November 16, 2018, the matter was taken under advisement.[1] For the reasons stated below, the undersigned U.S. Magistrate Judge recommends that Plaintiffs Motion for Default Judgment be GRANTED.

         I. INTRODUCTION

         A. Background

         On November 21, 2017, Overstock.com, Inc. ("Plaintiff) filed its Complaint against Viktor Visocky ("Mr. Visocky"), Otto Srams ("Mr. Srams"), seventeen domain names, and John Does 1-10. The lawsuit alleged trademark infringement in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114; violations of the Computer Fraud and Abuse Act (the "CFAA"), 18 U.S.C. § 1030(a)(5)(C); copyright infringement in violation of the Copyright Act, 17 U.S.C. §§ 101 et seq.; false design of origin, unfair competition, and trade dress infringement in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); and trademark infringement and unfair competition in violation of Virginia law. (Dkt. 1.) With approval of the Court, on January 20, 2018, Plaintiff filed its First Amended Complaint, adding Edward M. Kaufman ("Mr. Kaufman"), Olga Korischenko ("Ms. Korischenko"), Alexander Bekoev ("Mr. Bekoev"), and twenty-two additional domain names as defendants. (Dkt. 37.) Then, with approval of the Court, on February 26, 2018, Plaintiff filed its Second Amended Complaint, adding fourteen additional domain names as defendants. (Dkt. 70.) Finally, again with approval of the Court, on April 9, 2018, Plaintiff filed its Third Amended Complaint, adding ten additional domain names as defendants. (Dkt. 88.) In all, Plaintiff named sixty-three listed domain names (the "Infringing Websites")[2] in its Third Amended Complaint. Despite amending its complaint three times to add more defendants, at no point did Plaintiff add new claims.

         On July 20, 2018, Plaintiff moved for Default Judgment against all Defendants (Dkt. 104). On August 23, 2018, the undersigned issued a Report and Recommendation, granting in part and denying in part Plaintiffs Motion (Dkt. 108). Specifically, the undersigned recommended default judgment against all Defendants who were natural persons, with the exception of Mr. Kaufman. Mr. Kaufman, a natural person, is alleged to reside in the United States and to be a California resident. Therefore, serving Mr. Kaufman via email, as Plaintiffs had done, was insufficient. The undersigned recommended that Plaintiff be granted the ability to properly serve Mr. Kaufman and again pursue default judgment against him. On October 17, 2018, the district judge adopted the undersigned's Report and Recommendation, (Dkts. 112-13), and instructed Plaintiff that "[t]o proceed against Kaufman, plaintiff must first reinitiate the proper procedure for obtaining an entry of default and subsequently move for default judgment against him" (Dkt. 112 at 7). Now, Plaintiff again moves for Default Judgment against Mr. Kaufman, seeking entrance of a permanent injunction. (Mot. Default. J. at 16.)

         B. Jurisdiction and Venue

         Before the Court can render default judgment, it must have both subject-matter jurisdiction and personal jurisdiction over the defaulting party, and venue must be proper.

         1. Subject-Matter Jurisdiction

         The Court has subject-matter jurisdiction over the claims in this lawsuit. A federal district court has original jurisdiction when an action involves a civil action "arising under the Constitution, laws, or treatises of the United States." 28 U.S.C. § 1331. In this case, Plaintiff has asserted claims pursuant to the Lanham Act, the CFAA, and the Copyright Act, all of which are federal statutes. (3d Am. Compl. ¶¶ 7, 239-76.) Further, a federal district court has "supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy." 28 U.S.C. § 1367(a). In this case, Plaintiff has asserted claims of common law trademark infringement and unfair competition, which are clearly part of the same case or controversy as the federal claims. (3d Am. Compl. ¶¶ 277-82.) Accordingly, the Court has subject-matter jurisdiction over all claims in this action.

         2. Personal Jurisdiction

         The Court has personal jurisdiction over Defendant in this action. In order for the Court to exercise personal jurisdiction, the standards of both federal due process and the forum state's long-arm statute and must be satisfied. See Tire Eng'g & Distrib., LLC v. Shandong Linglong Rubber Co., 682 F.3d 292, 301 (4th Cir. 2012). Federal due process permits personal jurisdiction where a defendant has "certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). Virginia's long-arm statute, Virginia Code § 8.01-328.1, "extends the jurisdiction of its courts as far as federal due process permits." ePlus Tech., Inc. v. Aboud, 313 F.3d 166, 176 (4th Cir. 2002). With federal due process and Virginia's long-arm statute requiring the same standards, essentially only one personal jurisdiction inquiry is required. See id. The inquiry to find personal jurisdiction requires either specific jurisdiction "based on conduct connected to the suit" or general jurisdiction based on "continuous and systematic" activities in the forum state. Tire Eng'g & Distrib., 682 F.3d at 301 (quoting ALS Scan, Inc. v. Dig. Serv. Consultants. Inc., 293 F.3d 707, 711 (4th Cir. 2002)).

         Personal jurisdiction can exist over a nonresident defendant based on that defendant's Internet contacts with the forum. A state may exercise personal jurisdiction over a nonresident defendant when that defendant"(1) directs electronic activity into the State, (2) with the manifested intent of engaging in business or other interactions within the State, and (3) that activity creates, in a person within the State, a potential cause of action cognizable in the State's courts." ALS Scan, 293 F.3d at 714. However, a state may not exercise personal jurisdiction over a nonresident defendant when that defendant engages in "passive Internet activity" such as "simply plac[ing] information on the Internet." Id.

         Though Mr. Kaufman is not a resident of Virginia, Virginia may exercise personal jurisdiction over Mr. Kaufman based on his Internet contacts. Mr. Kaufman has interacted with a domain name registry located in Virginia in order to maintain all of the Infringing Websites that end in ".com." (3d Am. Compl. ¶¶ 11, 153.) Further, Mr. Kaufman sought to use the Infringing websites, which function as interactive e-commerce websites, to phish for consumers' personal and financial data. (Id. ¶¶ 11, 53-54, 190-91, 196.) Therefore, Defendants directed electronic activity into Virginia with the intent to engage in business and other interactions, and such activity created potential causes of action.

         3. Venue

         Venue in this action is proper in this Court. Venue in a court is proper when the action is brought in a judicial district in which any defendant resides if all defendants are residents of the same state or in which a substantial part of the events or omissions giving rise to the action occurred. See 28 U.S.C. § 1391(b). In this case, venue in this Court is proper because a substantial part of the events giving rise to Plaintiffs claims, particularly the harm felt by Plaintiff and the instrumentalities used in maintaining the Infringing Websites, occurred in this Court's judicial district. (3d Am. Compl. ¶ 7.)

         C. Service of Process

         Before the Court can render default judgment, it must be satisfied that a defaulting party has been properly served. As a general rule, a defendant must be served with the summons and complaint filed with a federal court. See Fed.R.Civ.P. 4. However, various avenues exist to serve a defendant.

         Federal Rule of Civil Procedure 4(e)(1) allows service on an individual within a judicial district of the United States pursuant to state law for service in the state where the district court overseeing the lawsuit sits or state law for service in the state where service is made. Under Virginia law, a plaintiff may make service of process on a nonresident of Virginia via the Secretary of the Commonwealth if a court in Virginia can exercise personal jurisdiction over the defendant. Va Code. § 8.01-329(A). In order to properly effectuate service on the Secretary, a plaintiff must file an affidavit with the court, "stating either (i) that the person to be served is a nonresident or (ii) that, after exercising due diligence, the party seeking service has been unable to locate the person to be served. In either case, such affidavit shall set forth the last known address of the person to be served." Id. § 8.01-329(B). Service via the Secretary of the Commonwealth is "effective on the date when service is made on the Secretary." Id. § 8.01-329(C).

         In this case, Mr. Kaufman is a nonresident. Additionally, Plaintiff could not locate Mr. Kaufman's whereabouts. (Weigand Decl. ¶ 2.) Therefore, pursuant to the statute, Plaintiff took steps to properly effectuate service on Mr. Kaufman through the Secretary of the Commonwealth. Plaintiff "provided copies of the summons and Third Amended Complaint to the Secretary, filed an affidavit with this Court reflecting service on the Commonwealth, and filed a copy of the return envelope showing" that Mr. Kaufman's California address did not in fact exist. (Mot. Default J. at 9; Weigand Decl. ¶¶ 1-4.) On September 6, 2018, the Secretary served Mr. Kaufman at the California address, and filed a certificate of compliance on September 12, 2018 (Dkt. 110). The documents forwarded to Mr. Kaufman by the Secretary were later returned as undeliverable. (Weigand Decl. ¶¶ 3-4, Ex. A.)

         Although the Secretary could not successfully serve Mr. Kaufman, service of process is still proper in this instance. The Fourth Circuit has previously held that if a plaintiff complies "with the statutory provisions [of Virginia law] ... [then] sufficiency of process [is] not affected by the failed delivery of notice from the Secretary to the putative defendant." Equip. Fin. Servs., Inc. v. Traverse Comput. Brokers, 973 F.2d 345, 347 (4th Cir. 1992) (holding service of process was sufficient under Virginia's long-arm statute even though service was returned by the post office as undeliverable); see also Aremeni v. Trans Union LLC, Inc., No. 3:15-cv-00066, 2016 WL 4098540, at *4 (W.D. Va. July 28, 2016); cf Steed v. Commonwealth, 397 S.E.2d 281, 284 (Va. Ct. App. 1990) (holding that the trial court obtained jurisdiction over nonresident defendant "once the affidavit of compliance was filed by the Commissioner of the Division of Motor Vehicles, and the fact that he did not actually receive notice ... did not affect the validity of that proceeding"). Therefore, service of process on Mr. Kaufman via the Secretary was proper and effective as of September 5, 2018, the date of Plaintiff s service on the Secretary.

         D. Grounds for Default Judgment

         The entry of default judgment may be appropriate when a defendant has failed to appear in a case. See Fed.R.Civ.P. 55. To date, Mr. Kaufman has failed to appear personally or by representative or otherwise participate in these proceedings. On October 23, 2018, Plaintiff filed its Request for Clerk's Entry of Default (Dkt. 114), seeking an entry of default for Mr. Kaufman. On October 30, 2018, the Clerk of the Court issued the Entry of Default (Dkt. 115) for Mr. Kaufman. On that same day, Plaintiff filed its Motion for Default Judgment. The Court then held a hearing on Plaintiffs Motion for Default Judgment on November 16, 2018, at which no representative for Mr. Kaufman appeared. Finding the matter uncontested, the Court took the matter under advisement to issue this Report and Recommendation.

         II. FINDINGS OF FACT

         Upon a full review of the pleadings and the record in this case, the undersigned finds that Plaintiff has ...


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