Wednesday, August 8, 2012

Stephens Media Wins $200,000 Default Judgment Over Alleged Trademark Infringement of “Best of Las Vegas”

[After all these years, they still have do not have a category for “Best Las Vegas Trademark Attorney Blog” – or perhaps my dearth of blog posting in 2012 took me out of the running this year]

Back in 2009 (when I had much more time to blog on a more regular basis), I wrote about the three separate trademark infringement lawsuits filed by Stephens Media LLC (“Stephens Media”), the owner of the Las Vegas newspaper The Las Vegas Review Journal, against three separate companies over their alleged use of the term “BEST OF LAS VEGAS.”   See previous blog entry here.

In the case against one of the companies, CitiHealth LLC (“CitiHealth”), on August 6, 2012, U.S. District Court Judge Miranda Du issued a decision on a motion for default judgment filed by Stephens Media.  See Stephens Media LLC v. CitiHealth LLC, 2012 U.S. Dist. LEXIS 109431 (D. Nev. August 6, 2012).  What is interesting is how long it took for the case to get to this point.

The complaint against CitiHealth was originally filed on December 2, 2009, and related to the company’s publication of a magazine in December 2008 called “Healthy Living Las Vegas” that included the phrase on the cover “Best of Las Vegas.”  When CitiHealth failed to answer the complaint, a default was entered by the Clerk on March 24, 2010.  So why didn’t Stephens Media seek a default judgment at that time?  Well, the complaint was originally filed by Steve Gibson and his former firm Gibson Lowry and Burris.  Steve Gibson is also better known as the CEO of Righthaven LLC, the copyright enforcement company established by Gibson and Stephens Media to file lawsuits against websites that infringed on copyrights associated with Las Vegas Review Journal articles.  [I certainly don’t have the time or energy to go into all of the details of the Righthaven-saga in this post and will instead defer to those websites (here and here) that have tracked all things Righthaven and which will give any interested party the necessary background to understand what may have caused Mr. Gibson to be a little distracted during 2010 and 2011 as well as what may have caused  a rift between Mr. Gibson and Stephens Media].

Over a year went by without any follow-up after the entry of default against CitiHealth.  Finally, on May 24, 2012, the Court issued a Order to Show Cause, as to why the case should not be dismissed for failure to prosecute.  Six days later, Stephens Media filed a Motion to Substitute Attorney and subsequently informed the Court that that it had retained new counsel and intended to seek a preliminary injunction and default judgment.  On July 2, 2012, through new counsel Gordon Silver, Stephens Media filed the Motion for Default Judgment.  On July 13, 2012, Kenneth Shepherd, the co-owner of CitiHealth, notified both the Court and Stephens Media’s counsel that Healthy Living no longer exists and has not existed for the past 3 years and that CitiHealth had dissolved on May 9, 2012 and that the co-owners of the company had had filed for personal bankruptcy.

The Court nevertheless proceeded to analyze Stephens Media’s motion for default judgment under the Eitel factors established by the Ninth Circuit:

"The Ninth Circuit has identified the following factors as relevant to the exercise of the court's discretion in determining whether to grant default judgment: (1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff's substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to the excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471--72 (9th Cir. 1986); see also Trustees of Elec. Workers Health and Welfare Trust v. Campbell, No. 07-724, 2009 WL 3255169 (D. Nev. Oct. 7, 2009)."
Despite CitiHealth's dissolution, the Court found that CitiHealth's failure to appear in this action and the likelihood that it will never respond to this action creates a high possibility of prejudice to Plaintiff in the absence of a default judgment.  The Court found that the Complaint did sufficiently state claims for relief (under the Rule 8 liberal pleading standards).

With respect to the amount of money at stake, Stephens Media sought $200,000 pursuant to 15 U.S.C. § 1117(c)(1) for non-willful trademark infringement of one mark (i.e., the Trademark Act’s statutory damages provision for use of “counterfeit” marks).  Without much discussion, the Court stated that “[b]ecause Stephens demonstrates a basis for its requested monetary relief, the fourth Eitel factor favors Stephens.”   [Comment:  counterfeit use, really?  And even so, court has discretion to award statutory damages ranging  from $1000 to $200,000—did the circumstances really merit the “maximum”?]

The Court found that the sufficiency of the Complaint was such that no genuine dispute of material facts would prejudice granting the motion.  The Court also found that CitiHealth had sufficient notice of the complaint and therefore it is unlikely that CitiHealth's failure to respond and subsequent default resulted from excusable neglect.  Finally, the Court, while recognizing the preference to have cases decided on the merits, found that CitiHealth's failure to answer Stephens Media's Complaint makes a decision on the merits impractical, if not impossible.

In the end, the Court entered a default judgment  awarding $200,000 against CitiHealth as well as a permanent injunction against CitiHealth and its officers against any further use of the “Best of Las Vegas” mark.  The Court also gave Stephens Media 30 days to file a motion for attorneys fees.

While its highly unlikely that Stephens Media will be able to collect on its $200,000 default judgment, one wonders if Stephens Media, should it be able to collect such funds, would be willing to pump that money into back into Righthaven LLC so that Righthaven can pay the money that it owes to its creditors (including multiple defendants that the Nevada District Court found were wrongly sued by Righthaven for copyright infringement).   That’s probably even more highly unlikely.     

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