1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 GS HOLISTIC, LLC, Case No. 22-cv-07628-JSW Plaintiff, 8

ORDER ADOPTING, IN PART,

9 v. REPORT AND RECOMMENDATION ON PLAINTIFF'S MOTION FOR 10 XOTIC SMOKES INC, et al., DEFAULT JUDGMENT Defendants. Re: Dkt. Nos. 48, 55, 58 11 12 13 Now before the Court is the Report and Recommendation ("Report") issued by Magistrate 14 Judge Cousins regarding the motion for default judgment filed by Plaintiff GS Holistic, LLC 15 (“Plaintiff”). (Dkt. No. 55, Report.) The Court finds the Report well-reasoned and thorough. 16 Having carefully considered Plaintiff’s papers, relevant legal authority, and the record in this case, 17 the Court hereby ADOPTS the Report in part. 18 BACKGROUND 19 Plaintiff filed its complaint on December 3, 2022 claiming trademark infringement, 20 counterfeiting, and false designation of origin and unfair competition under the Lanham Act by 21 Xotic Smokes, Inc. (“Xotic Smokes”) as well as Messrs. Murad Alhamdani, Hashem Alhamdani, 22 and Entesar Dargan (the “Individual Defendants”). (Dkt. No. 1, Complaint (“Compl.”).) One 23 Defendant, Hashem Alhamdani, has made one appearance in this case, but did not answer or 24 otherwise respond to the Complaint. The remaining Defendants have not appeared or participated. 25 After Defendants failed to appear, Plaintiff moved for default judgment. (Dkt. No. 33, 26 Stricken Motion for Default Judgment.) Plaintiff later struck and refiled its motion on December 27 27, 2023. (Dkt. No. 48, Motion for Default Judgment (“Mot.”).) 1 for default judgment against the remaining defendants, award modified statutory damages and 2 costs in full, and deny Plaintiff’s request for injunctive and equitable relief. (Report, at 3 1:21-23.) Plaintiff timely filed objections to the Report on April 1, 2024. (Dkt. No. 58, 4 Objections to Report.) 5 ANALYSIS 6 A. Legal Standard on a Motion for Default Judgment. 7 To determine if the motion for default judgment should be granted, the Court considers the 8 following Eitel factors: 9 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) 10 the sum of money at stake in the action[,] (5) the possibility of a dispute concerning material facts[,] (6) whether the default was due 11 to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 12 13 Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986) (citation omitted). In analyzing these 14 factors, courts accept as true all “well-pleaded factual allegations.” Cripps v. Life Ins. Co. of N. 15 Am., 980 F.2d 1261, 1267 (9th Cir. 1992). “However, necessary facts not contained in the 16 pleadings, and claims which are legally insufficient, are not established by default.” Id. “[A] 17 defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law.” 18 DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (internal quotation marks and 19 citation omitted). 20 A court considering a motion for default judgment must confirm that it has subject matter 21 jurisdiction over the case, personal jurisdiction over the parties, and that the defendant has been 22 adequately served. In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). 23 1. Jurisdiction and Service. 24 The Court adopts the Magistrate Judge’s analysis and conclusions on subject matter 25 jurisdiction, personal jurisdiction, and service of process. 26 2. Plaintiff’s Motion for Default Judgment Satisfies the Eitel Factors as to Xotic 27 Smokes, but Fails to Satisfy the Factors as to the Individual Defendants. 1 The Court ADOPTS the Report’s conclusion that Plaintiff has shown infringement of one 2 of its three marks by Xotic Smokes. For the reasons stated below, however, the Court departs 3 from the Report and denies, without prejudice, Plaintiff’s motion for a judgment against the 4 Individual Defendants. 5 Plaintiff fails to demonstrate individual liability as required by the second and third Eitel 6 factors. The second and third Eitel factors evaluate the merits of Plaintiff’s substantive claim and 7 the sufficiency of its complaint. “Because the second and third factors are so closely related, the 8 Court examines them together.” Elec. Frontier Found. v. Glob. Equity Mgmt. (SA) Pty Ltd., 290 9 F. Supp. 3d 923, 941 (N.D. Cal. 2017). In analyzing these factors, a defendant is held to admit all 10 well-pleaded factual allegations, but not legal conclusions. DIRECTV, 503 F.3d at 854. 11 Plaintiff alleges that all three Individual Defendants are personally liable for the actions of 12 Xotic Smokes. In this Circuit, “personal liability on the part of corporate officers has typically 13 involved instances where the defendant was the ‘guiding spirit’ behind the wrongful conduct, or 14 the ‘central figure’ in the challenged corporate activity.” Facebook, Inc. v. Power Ventures, Inc., 15 844 F.3d 1058, 1069 (9th Cir. 2016) (quoting Davis v. Metro Prods., Inc., 885 F.2d 515, 523 n.10 16 (9th Cir. 1989)) (internal quotation marks and ellipsis omitted). In Facebook, for example, the 17 Ninth Circuit held an individual defendant personally liable for tortious conduct because he 18 “controlled and directed” the relevant corporate actions, because he “admitted” that the tortious 19 conduct was his idea, and because it was “undisputed” that he was “the guiding spirit and central 20 figure” of the infringing actions. Id. In another case, the Ninth Circuit found individual 21 defendants personally liable where they personally formed a corporation that used an infringing 22 name and where one defendant misleadingly testified at a U.S. Air Force hearing under the 23 infringing name. Comm. for Idaho’s High Desert, Inc v. Yost, 92 F.3d 814, 823 (9th Cir. 1996). 24 Here, Plaintiff alleges that the Individual Defendants “authorized, directed, and/or 25 participated in XOTIC SMOKES’s offer for sale…of the Counterfeit goods” and that they were “a 26 moving active, and/or conscious force behind XOTIC SMOKES’s infringement.” (Compl., ¶ 32.) 27 Plaintiff states that “Defendants sold goods that bore all three of Plaintiff’s marks,” but fails to 1 Individual Defendants’ personal participation in the alleged trademark infringements. (See Mot., 2 at 15:27-28.) 3 Plaintiff’s ownership and control allegations are mere legal conclusions that do not support 4 a finding of individual liability. “The fact that [an Individual Defendant] is an owner, officer or 5 managing agent of [Xotic Smokes], standing alone, does not make [him] liable for the wrongful 6 conduct of the corporation because the case law requires active, guiding participation.” Deckers 7 Outdoor Corp. v. Fortune Dynamic, Inc., No. CV 15-769 PSG (SSX), 2015 WL 12731929, at *9 8 (C.D. Cal. May 8, 2015) (granting motion to dismiss trademark dress infringement and unfair 9 competition claims against individual defendant where the complaint’s “conclusory pleading [was] 10 insufficient to state a claim for relief.”). Plaintiff has failed to plead or argue which—if any—of 11 the three Individual Defendants personally participated in the infringing conduct and how they did 12 so. 13 Accordingly, the Court denies, without prejudice, Plaintiff’s motion for default judgment 14 against the Individual Defendants. Plaintiff may renew its motion only if it can buttress that 15 motion with new, specific factual allegations that would support a finding that the Individual 16 Defendants should be held personally liable for the actions of Xotic Smokes. 17 B. The Damages Recommended by the Magistrate Judge Are Appropriate. 18 Plaintiff objects to the Magistrate Judge’s determination that damages in the amount of 19 $5,000 are appropriate and argues that the judgment should be entered in the amount of $150,000. 20 According to Plaintiff, a $5,000 award is “neither sufficient to compensate Plaintiff for the alleged 21 infringement nor high enough to deter Defendants from future wrongful conduct.” (Objections to 22 Report, at 5:13-14.) The Court considers and rejects both objections below. 23 Courts have discretion to award statutory damages between $1,000 and $200,0000 for each 24 trademark infringement, or up to $2,000,000 for willful violations. 15 U.S.C. § 1117(c). “In 25 determining the appropriate amount of statutory damages to award on default judgment, courts in 26 this district have considered whether the amount of damages requested bears a plausible 27 relationship to Plaintiff’s actual damages.” Yelp Inc. v. Catron, 70 F. Supp. 3d 1082, 1102 (N.D. 1 more than nine times the sale price, $552.94, of the single product bearing the infringing mark 2 which Xotic Smokes sold to Plaintiff’s investigator. (See Compl., ¶ 30.) 3 Further, “[w]hile a plaintiff in a trademark or copyright infringement suit is entitled to 4 damages that will serve as a deterrent, it is not entitled to a windfall.” Yelp, 70 F. Supp. 3d at 5 1102. Although statutory damages should help deter infringement, the decisionmaker is “guided 6 by what is just in a particular case, considering the nature of the infringement, the circumstances 7 of the infringement and the like[.]” Dream Games of Arizona, Inc. v. PC Onsite, 561 F.3d 983, 8 992 (9th Cir. 2016). The court “may consider plaintiff’s conduct during litigation.” Id. 9 Here, Plaintiff’s general pleadings and arguments make it difficult to determine what 10 award would be sufficient to deter Xotic Smokes from infringing on Plaintiff’s trademarks in the 11 future. However, “[w]hen plaintiffs only show proof of a few of defendant’s sales, district courts 12 limit the damages award to e.g. five or ten thousand dollars per infringement[.]” Schluter Systems, 13 L.P. v. Telos Acquisition Company 10, LLC, No. 23-cv-03856-EMC, 2024 WL 1659888 at *14 14 (N.D. Cal. April 16, 2024). For example, where a plaintiff requested more than three million 15 dollars in statutory damages but presented evidence that defendants sold only three units of 16 counterfeit software, a court determined that $1,000 per infringed trademark was appropriate. 17 Microsoft Corp. v. Ricketts, No. C 06-06712 WHA, 2007 WL 1520965 at *4 (N.D. Cal. May 24, 18 2007). In another case, a court found that awarding $50,000 per violation was “reasonable” where 19 the plaintiff plausibly alleged that (1) the individual defendant had sold more than one thousand 20 copies of infringing software, and (2) the plaintiff had e-mail correspondence detailing specific 21 infringing acts and an intention to continue those acts. Adobe Systems, Inc. v. Taveira, No. C 08- 22 2436 PJH, 2009 WL 506861 at *1 (N.D. Cal. 2009). 23 Here, Plaintiff alleges only one infringing mark, requests an award of more than two- 24 hundred and fifty times the sales price, and presents no evidence as to the specific nature or 25 circumstances of the infringement. Therefore, the Court ADOPTS the Magistrate Judge’s 26 conclusions and reasoning as to Plaintiff’s statutory award under 15 U.S.C section 1117(c)(1). 27 C. Plaintiff is Not Entitled to Pre-Suit Investigation Fees. ] Plaintiff’s demand for $1,782.34 in costs, including the filing fee, process server fee, and pre-suit 2 || investigation fees. (Report, at 9:16-19.) The plain language of 15 U.S.C. section 1117(a) states 3 || that Plaintiff may recover “the costs of the action.” But Plaintiff does not provide any caselaw or 4 || argument to support its position that “the costs of the action” under 15 U.S.C. section 1117(a) 5 includes pre-suit investigation fees incurred before the court case (“the action”) has begun. See 6 || GS Holistic, LLC v. MSA Bossy Inc., No. 22-CV-07638-JSC, 2023 WL 3604322, at *6 (N.D. Cal. 7 || May 22, 2023) (“Plaintiff does not cite any authority for shifting the cost of pre-suit investigation 8 || to Defendants.”). The Court therefore awards Plaintiff $1,164.40: the costs of Plaintiff's filing fee 9 || ($402.00) and process server fee ($762.40), but not pre-suit investigation fees ($617.94). 10 CONCLUSION 11 The Court ADOPTS the Report’s analysis and conclusions on subject matter jurisdiction, 12 || personal jurisdiction, and service of process. The Court ADOPTS the Report’s denial of 13 Plaintiff's requests for injunctive and equitable relief. The Court also ADOPTS, IN PART, the 14 || Report’s analysis and conclusions on the Eite/ factors. 3 15 Accordingly, the Court GRANTS Plaintiffs motion for default judgment against Xotic a 16 Smokes, Inc. The Court awards Plaintiff $5,000 in statutory damages and $1,164.40 in costs. 2 17 The Court DENIES, WITHOUT PREJUDICE, Plaintiff's motion for default judgment Z 18 against the Individual Defendants. Plaintiff may file a renewed motion as relates to the Individual 19 || Defendants within 30 days of this Order. 20 IT IS SO ORDERED. 21 Dated: June 21, 2024 22 ftete

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