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JUUL Labs, Inc. v. Jaidenzeigler

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

June 11, 2019

JUUL LABS, INC. Plaintiff,
v.
JAIDENZEIGLER, et al., Defendants.

          REPORT AND RECOMMENDATION

          THERESA CARROLL BUCHANAN, UNITED STATES MAGISTRATE JUDGE.

         THIS MATTER comes before the Court on Plaintiff Juul Labs, Inc.'s ("Plaintiff) Motion for Default Judgment Against Defendant Nat Caruso ("Caruso") (Dkt. 72). After representatives for Caruso failed to respond to Plaintiffs motion or to appear at the hearings held on May 10, 2019 and June 7, 2019, 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

         On November 5, 2018, Plaintiff commenced this action against Caruso as well as several other co-defendants. Approximately one month later, Plaintiff filed its First Amended Verified Complaint. The First Amended Complaint alleges trademark infringement and counterfeiting in violation of 15 U.S.C. § 1114; false designation of origin in violation of 15 U.S.C. § 1125(a); and trademark dilution in violation of 15 U.S.C. § 1125(c). (Am. Compl. ¶¶ 49-70.) Over the course of the next several months, Caruso's various co-defendants were dismissed from the case. (Dkts. 53, 56, 61-62, 67.) Now, Caruso is the only remaining defendant. Plaintiff moves for an entry of default judgment against Caruso, seeking an award of monetary damages and a permanent injunction.

         A. Jurisdiction and Venue

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

         The Court has subject-matter jurisdiction over this action. 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 asserts trademark infringement claims against Caruso pursuant to the Lanham Act, a federal statute. (Am. Compl. ¶ 9.) Accordingly, the Court has subject-matter jurisdiction.

         The Court has personal jurisdiction over Caruso in this action. For personal jurisdiction over a defendant, the standards of both federal due process and the forum state's long-arm statute 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 7 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)). Caruso targeted business activities toward consumers in the United States, including Virginia and this judicial district. (Am. Compl. ¶¶ 11, 19; Mem. Supp. at 5-7.) Therefore, Caruso has maintained sufficient contacts with Virginia based on conduct connected to this case for personal jurisdiction to be proper in Virginia courts, and so the Court has personal jurisdiction over Caruso under the specific jurisdiction inquiry.

         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 a substantial part of the events or omissions giving rise to the action occurred. See 28 U.S.C. § 1391(b)(2). In this case, venue in this Court is proper because Caruso conducted business with consumers in this Court's judicial district, by targeting sales to Virginia residents, by operating an online store available to consumers in this district, and shipping counterfeit products to consumers in this district. (Am. Compl. ¶¶ 11, 19; Mem. Supp. at 5-6.)

         B. Service of Process

         Before the Court can render default judgment, it must be satisfied that all defaulting parties have been properly served. As a general rule, a defendant must be served with the summons and complaint filed with a federal court. Pursuant to Federal Rule of Civil Procedure 4(e)(2), an individual within a judicial district of the United States may be served by delivering a copy of the summons and complaint to the individual personally. On December 3, 2018, a summons was issued for Nat Caruso at 1824 80th Street, Apartment IF, Brooklyn, New York 11214. (Dkt. 39 at 25.) The return of service indicates that Plaintiffs private process server personally served Caruso at that address on December 6, 2018. (Dkt. 49.)

         Based on the foregoing, the undersigned finds that Caruso was properly served with the summons and complaint.

         C. 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, Caruso has not appeared or otherwise participated in these proceedings. On March 21, 2019, Plaintiff filed its initial Request for Entry of Default as to Caruso. (Dkt. 64.) On March 25, 2019, Plaintiff file an Amended Request for Entry of Default as to Caruso. (Dkt. 68.) One day later, the Clerk of the Court issued the Entry of Default for Caruso. (Dkt. 71.) On April 30, 2019, Plaintiff filed its Motion for Default Judgment. United States Magistrate Judge Ivan D. Davis then held a hearing on Plaintiffs Motion for Default Judgment on May 10, 2019, at which no representative for Caruso appeared. Approximately eleven (11) days later, it came to the undersigned's attention that Plaintiff did not properly serve Caruso with the Motion for Default Judgment, including the corresponding Notice of Hearing. As a result, the Court ordered Plaintiff to serve Caruso with the Motion and supporting documents and to re-notice the Motion for a hearing. (Dkt. 77.) Plaintiff subsequently complied with that order. (Dkts. 78-79.) On June 7, 2019, United States Magistrate Judge Davis again held a hearing on Plaintiff's Motion for Default Judgment, at which no representative for Caruso appeared. Finding the matter uncontested, the undersigned 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 established the following facts.

         Plaintiff is a Delaware corporation with its principal place of business in San Francisco, California. (Am. Compl. ¶ 12.) Plaintiff sells JUUL, an electronic nicotine delivery system designed for and directed to existing adult smokers who seek an alternative to smoking traditional, combustible cigarettes. (Id. ¶ 14.) The system involves (1) a main device which contains the system electronics and (2) individual pods containing e-liquid that is vaporized when a user inhales a puff. (Id.) Plaintiff owns trademarks for JUUL and has valid and subsisting U.S. Certificates of Trademark registration numbers ("Marks"). (Id. ¶¶ 16-17.) Plaintiffs Marks have acquired considerable brand loyalty, are associated with superior quality products, and are considered by some to be a dominating force in the e-cigarette industry. (Id. ¶¶ 18, 62-63.) Plaintiff uses and advertises its marks throughout the United States, expending significant effort in developing the Marks in the United States. (Id. ¶ 18.) Plaintiff greatly values the reputation and consumer goodwill associated with the Marks. (Id.)

         Caruso is an individual residing in Brooklyn, New York. (Id. ¶ 27.) Caruso offered to sell and has sold counterfeit pods to consumers within the Commonwealth of Virginia and this judicial district. (Id. ¶¶ 19, 33.) These goods are cheap, low quality, and potentially harmful imitations of genuine pods. (Id. ¶ 39.) Caruso sold, and might continue to sell, these counterfeit products on online marketplaces, such as eBay. (Id. ¶ 19.) In promoting his counterfeit products on the marketplace, Caruso employs counterfeit versions of Plaintiff s Marks, using similar or the same pictures and descriptions of the Pods. (Id. ¶ 33.) The counterfeit pods are packaged using virtually identical packaging as Plaintiffs genuine products and Caruso even offered customer service. (Id. ¶ 40.) Caruso also used other indicia of authenticity and security that consumers associate with Plaintiffs products by displaying the Visa, MasterCard, and/or PayPal logos. (Id.) Caruso also deceives consumers by using Plaintiffs Marks within the content, text, and/or meta tags of his website to attract various search engines looking for relevant consumer searches for Plaintiffs products. (Id. ¶ 41.)

         Plaintiff has not licensed or authorized Caruso to use its Marks. (Id. ¶ 40.) Caurso's use of Plaintiffs Marks in connection with the advertising, distribution, offering for sale, and sale of counterfeit pods is likely to cause and has caused confusion, mistake, and deception among consumers. (Id. ¶ 47.)

         III. EVALUATION OF PLAINTIFF'S COMPLAINT

         When a defendant has defaulted, the well-pleaded allegations of facts set forth in the plaintiffs complaint are deemed admitted. JTH Tax, Inc. v. Grabert, 8 F.Supp.3d 731, 736 (E.D. Va. 2014) (citing Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001)). Before entering default judgment, however, the Court must evaluate the plaintiffs complaint against the standards of Federal Rule of Civil Procedure 12(b)(6) to ensure that the complaint properly states aclaim. GlobalSantaFe Corp. v. Globalsantafe.com, 250F.Supp.2d610, 612n.3 (E.D. Va. 2003). As such, it is appropriate to evaluate Plaintiffs complaint against the standards of Federal Rule of Civil Procedure 12(b)(6).

         Plaintiff asserts three separate claims against Caruso. Plaintiff alleges one count of Trademark Infringement and Counterfeiting, one count of False Designation of Origin, and one count Trademark ...


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