Painaway Australia PTY Limited Acn 151 146 977 v. Natures Investments Holding PTY Ltd.

Northern District of California, cand-4:2015-cv-03276

Order by Magistrate Judge Donna M. Ryu denying {{18}} Motion for Default Judgment.(dmrlc1, COURT STAFF)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 PAINAWAY AUSTRALIA PTY LIMITED 7 ACN 151 146 977, Case No. 15-cv-03276-DMR 8 Plaintiff, ORDER DENYING PLAINTIFF'S 9 v. MOTION FOR DEFAULT JUDGMENT 10 NATURES INVESTMENTS HOLDING Re: Dkt. No. 18 PTY LTD., dba MaxRelief USA, 11 Defendant. 12 Northern District of California United States District Court 13 In this false advertisement action, Plaintiff Painaway Australia Pty Limited CAN 151 146 14 977 ("Painaway") moves the court pursuant to Federal Rule of Civil Procedure 55(b)(2) for entry 15 of default judgment against Defendant Natures Investments Holding Pty Ltd., doing business as 16 MaxRelief USA ("MaxRelief"). [Docket No. 18.] Plaintiff asks for a permanent injunction and 17 an award of attorneys' fees and costs. For the reasons stated below, the court DENIES Plaintiff's 18 motion for default judgment without prejudice.1 19 I. BACKGROUND 20 Plaintiff is an Australian company specializing in a number of arthritis and pain relief 21 products including sprays, creams, and roll-on products sold under the brand name "Painaway." 22 1 23 A magistrate judge generally must obtain the consent of the parties to enter dispositive rulings and judgments in a civil case. See 28 U.S.C. § 636(c)(1). However, in cases such as this one, 24 where the plaintiff has consented but not served the defendant, (see discussion below regarding efficacy of service), "all parties have consented pursuant to 28 U.S.C. § 636(c)(1)," and a 25 magistrate judge therefore "'may conduct any or all proceedings in a jury or nonjury civil matter and order the entry of judgment in that case.'" Gaddy v. McDonald, No. CV 11-08271 SS, 2011 26 WL 5515505, at *1 n.2 (C.D. Cal. Nov. 9, 2011) (quoting § 636(c)(1)) (citing United States v. Real Property, 135 F.3d 1312, 1317 (9th Cir. 1995)); Third World Media, LLC v. Doe, No. C 10- 27 04470 LB, 2011 WL 4344160, at *3 (N.D. Cal. Sept. 15, 2011); see also Neals v. Norwood, 59 F.3d 530, 532 (5th Cir. 1995) (holding that magistrate judge had jurisdiction to dismiss action as 28 frivolous without consent of defendants because defendants had not yet been served and therefore were not parties). 1 Compl. ¶¶ 1, 6. Plaintiff's products are manufactured and distributed throughout Australia, and 2 are available in other countries including the United States. Compl. ¶ 6. Plaintiff alleges that it is 3 Australia's market leader for these products and has been for a number of years. Compl. ¶ 6. 4 Plaintiff asserts that Defendant MaxRelief is also an Australian company that produces a 5 pain relief spray and cream. Compl. ¶ 1. According to Plaintiff, Defendant sells its products in 6 the United States, including New York and Pennsylvania. Compl. ¶¶ 1, 3. Plaintiff alleges that 7 Defendant markets and advertises its MaxRelief products on its website,, 8 which contains the statement that MaxRelief USA is "Australia's #1 Pain Relief Spray, now 9 available in the USA!". Compl. ¶ 1, Ex. A.2 Plaintiff asserts that this advertising is false and 10 misleading because MaxRelief is not sold in Australia. Compl. ¶¶ 1, 11. Plaintiff contends that it 11 "will lose sales in the United States and elsewhere as a direct result of the false and misleading 12 claim" made by Defendant about its product. Compl. ¶ 12. Northern District of California United States District Court 13 On July 14, 2015, Plaintiff filed this lawsuit asserting a single claim for violation of section 14 43(a) of the Lanham Act, 15 U.S.C. § 1125, alleging that Defendant's false advertising claims 15 constitute false and misleading descriptions of fact in interstate commercial advertising and 16 promotion. Plaintiff seeks a permanent injunction preventing Defendant from advertising and 17 promoting MaxRelief as Australia's #1 Pain Relief Spray, along with "financial compensation" for 18 its injuries, and attorneys' fees and costs. 19 Plaintiff served Defendant with the summons and complaint by substitute service on July 20 20, 2015. [Docket No. 10.] Defendant did not file a responsive pleading or otherwise appear. 21 Plaintiff requested entry of default on August 14, 2015 and August 18, 2015, which the clerk 22 declined. [Docket Nos. 11-14.] On August 26, 2015, the clerk entered Defendant's default. 23 [Docket No. 17.] Plaintiff filed the present motion for default judgment on September 11, 2015. 24 The court subsequently ordered Plaintiff to submit supplemental briefing, which Plaintiff timely 25 filed. [Docket Nos. 21, 23.] The court has determined that this matter is suitable for resolution 26 27 2 Exhibit A to the complaint, which appears to be a page from Defendant's website, contains a 28 slightly different statement from that alleged in the complaint: "Australia's #1 Pain Relief Spray and Cream Now Available in the USA!" 2 1 without oral argument. See N.D. Cal. Civ. L.R. 7-1(b). 2 II. LEGAL STANDARDS 3 Federal Rule of Civil Procedure 55(b)(2) permits a court to enter a final judgment in a case 4 following a defendant's default. Shanghai Automation Instrument Co. v. Kuei, 194 F. Supp. 2d 5 995, 999 (N.D. Cal. 2001). Whether to enter a judgment lies within the court's discretion. 6 Pepsico, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. 7 Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)) ("A defendant's default does not automatically 8 entitle the plaintiff to a court-ordered judgment.") 9 Before assessing the merits of a default judgment, a court must ensure the adequacy of 10 service on the defendant, as well as confirm that it has subject matter jurisdiction over the case and 11 personal jurisdiction over the parties. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). If the 12 court finds these elements satisfied, it turns to the following factors ("the Eitel factors") to Northern District of California United States District Court 13 determine whether it should grant a default judgment: 14 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) 15 the sum of money at stake in the action[,] (5) the possibility of a dispute concerning material facts[,] (6) whether the default was due 16 to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decision on the merits. 17 Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986) (citation omitted). In this analysis, "the 18 well-pleaded allegations of the complaint relating to a defendant's liability are taken as true." 19 Pepsico, Inc., 238 F. Supp. 2d at 1175 (citing Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 20 917-18 (9th Cir. 1987)). Nevertheless, default does not compensate for essential facts not within 21 the pleadings and those legally insufficient to prove a claim. Cripps v. Life Ins. Co. of N. Am., 980 22 F.2d 1261, 1267 (9th Cir. 1992). 23 III. ANALYSIS 24 Plaintiff served Defendant with the summons and complaint by substitute service at The 25 Postal Chase, 3053 Fillmore Street, San Francisco, CA, on July 20, 2015. [Docket No. 10.] 26 According to Plaintiff, The Postal Chase is a private mail company that provides post office boxes 27 to paying holders. Pl.'s Mot. at ¶ 2. This court must assess whether this constitutes effective 28 3 1 service. 2 Under the Federal Rules of Civil Procedure, a domestic or foreign corporation must be 3 served in a judicial district of the United States, and may be served in the manner prescribed for 4 serving individuals under Rule 4(e)(1). Fed. R. Civ. P. 4(h)(1)(A). A defendant may be served by 5 "following state law for serving a summons in an action brought in courts of general jurisdiction 6 in the state where the district court is located or where service is made." Fed. R. Civ. P. 4(e)(1). 7 In connection with its second revised request for entry of default, Plaintiff asserts that service of 8 the summons and complaint on Defendant complied with California Code of Civil Procedure 9 section 415.20(a), which provides that 10 [i]n lieu of personal delivery of a copy of the summons and complaint to the person to be served as specified in Section 416.10, 11 416.20, 416.30, 416.40, or 416.50,3 a summons may be served by leaving a copy of the summons and complaint during usual office 12 hours in his or her office or, if no physical address is known, at his Northern District of California United States District Court or her usual mailing address, other than a United States Postal 13 Service post office box, with the person who is apparently in charge thereof, and by thereafter mailing a copy of the summons and 14 complaint by first-class mail, postage prepaid to the person to be served at the place where a copy of the summons and complaint 15 were left. When service is effected by leaving a copy of the summons and complaint at a mailing address, it shall be left with a 16 person at least 18 years of age, who shall be informed of the contents thereof. Service of a summons in this manner is deemed 17 complete on the 10th day after the mailing. 18 Cal. Civ. Proc. Code § 415.20(a). 19 There is no indication that Plaintiff served Defendant "during usual office hours in 20 [Defendant's] office." Therefore, Plaintiff appears to contend that the 3053 Fillmore Street 21 address, which is the location of The Postal Chase, is Defendant's "usual mailing address" for 22 purposes of satisfying section 415.20(a). Plaintiff asserts that it obtained this address from 23 Defendant's website. O'Hara Decl., August 25, 2015 ("O'Hara Decl. I"), ¶ 4, Ex. 1. According to 24 Plaintiff's counsel, the street address at issue appears on a page of Defendant's website that states 25 the following: 26 27 3 California Code of Civil Procedure sections 416.10, 416.20, 416.30, 416.40, and 416.50 set forth 28 permissible methods of serving corporations, joint stock companies or associations, unincorporated associations, and public entities. 4 We stand behind our products and the promises we make. If you are 1 not satisfied with your purchase from MaxRelief, you can return it for a full refund. 2 We ask that you send your MaxRelief container to MaxRelief, at: 3 MaxRelief USA, Inc. 4 3053 Fillmore St., Suite 123 5 San Francisco CA 94123 6 See also O'Hara Decl., October 16, 2015 ("O'Hara Decl. II"), ¶ 15, Ex. 2. 7 Plaintiff does not describe any other attempts to locate Defendant's "usual mailing 8 address." Plaintiff's agent left a copy of the summons and complaint with the store manager of 9 The Postal Chase, (identified on the proof of service as "John Doe"), informed him of the 10 contents, and mailed a copy of the documents to the same address. [Docket No. 10.] 11 Plaintiff cites Hearn v. Howard, 177 Cal. App. 4th 1193 (2009), in support of its position 12 Northern District of California that service was properly effectuated. In Hearn, a legal malpractice action, the plaintiffs United States District Court 13 attempted to personally serve one of the individual attorney defendants at an address listed on her 14 business letterhead, which matched the address she reported to the California State Bar. Id. at 15 1198. During the first of three attempts at personal service, the process server discovered that a 16 private post office box rental store was located at the address. On the third attempt, the process 17 server left the summons and complaint with the mail clerk in charge and mailed a copy of the 18 documents to the same address. Id. The court held that the attempts at personal service at the post 19 office box rental store constituted reasonable diligence and that substitute service was valid 20 pursuant to California Code of Civil Procedure section 415.20(b).4 Id. at 1202-03. Plaintiff 21 argues that the facts of this case are analogous to those in Hearn, and cites other similar cases to 22 argue that service was adequately effected here. See also Ellard v. Conway, 94 Cal. App. 4th 540, 23 546-47 (2001) (holding "[t]he plain language of section 415.20, subdivision (b) authorizes 24 25 4 California Code of Civil Procedure section 415.20(b) provides that if personal service cannot be 26 effected with reasonable diligence on an individual, the summons and complaint may be left at the defendant's "dwelling house, usual place of abode, usual place of business, or usual mailing 27 address other than a United States Postal Service post office box, in the presence of a competent member of the household or a person apparently in charge" of the defendant's office, place of 28 business, or usual mailing address who is at least 18 years old and who is informed of the contents thereof. 5 1 substitute service at a defendant's usual mailing address, which includes a private/commercial post 2 office box"; noting that defendants "leased the private/commercial post office box and notified the 3 United States Postal Service it was their forwarding address, making it their 'usual mailing 4 address.'"); Sweeting v. Murat, 221 Cal. App. 4th 507, 513 (2013) (holding that under section 5 415.20, "service at a private or commercial post office box is allowed" (citing Ellard, 94 Cal. App. 6 4th at 545-46)). 7 While Hearn and the other cases cited by Plaintiff stand for the principle that substitute 8 service at a private post office box rental store may constitute sufficient service under section 9 415.20, Plaintiff cites no cases to support its position that the address it used to serve Defendant— 10 an address to which customers may return unsatisfactory MaxRelief products—can reasonably be 11 viewed as Defendant's "usual business address." 5 California's Supreme Court has held that the 12 state's service of process rules should be "liberally construed to effectuate service and uphold the Northern District of California United States District Court 13 jurisdiction of the court if actual notice has been received by the defendant." Pasadena Medi–Ctr. 14 Assocs. v. Superior Court, 9 Cal.3d 773, 778 (1973). However, unlike Hearn, there are no facts 15 that suggest that Defendant has actual knowledge of the lawsuit. The court concludes that a single 16 attempt to serve Defendant at a private post office box address listed on a website for product 17 return does not constitute effective service. Plaintiff's motion for default judgment must be 18 denied on this basis.6 19 5 20 On August 25, 2015, the court received a document titled "Notice of Erroneous Service," purportedly submitted by "The Occupants" of 3053 Fillmore Street, Box 123, San Francisco, CA 21 [Docket No. 16.] The notice states that the documents related to this case were marked return to sender and that the defendants in this action are unknown to "The Occupants." The notice is 22 signed but illegible and contains the Fillmore address. The effect of this notice is unclear to the court and Plaintiff does not address it. 23 6 The court also notes that it is not clear that Plaintiff can establish that Defendant is subject to this 24 court's jurisdiction on this record. Plaintiff contends that this court may exercise specific personal jurisdiction over Defendant. Therefore, Plaintiff must demonstrate that Defendant either 25 "purposefully availed itself of the privilege of conducting activities in California, or purposefully directed its activities toward California," among other factors. Schwarzenegger v. Fred Martin 26 Motor Co., 374 F.3d 797, 801 (9th Cir. 2004). To evaluate purposeful direction, the analytical framework that "is most often used in suits sounding in tort," id. at 802, the Ninth Circuit uses the 27 three-part "Calder-effects" test under which "the defendant allegedly must have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows 28 is likely to be suffered in the forum state." Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th Cir. 2010) (citations omitted). While "maintenance of a passive website 6 IV. CONCLUSION 1 For the foregoing reasons, the court concludes that Plaintiff has failed to establish that 2 service of the summons and complaint on Defendant was properly effected. Accordingly, 3 Plaintiff's motion for default judgment is denied. ISTRIC 4 TES D TC TA O S 5 U ED RT IT IS SO ORDERED. DERED UNIT 6 O OR Dated: January 26, 2016 IT IS S R NIA 7 ______________________________________ 8 DONNA M. RYUonna M. Ry u NO D JudgeMagistrate FO 9 United States Judge RT LI ER H A 10 N C F D IS T IC T O 11 R 12 Northern District of California United States District Court 13 14 15 16 17 18 19 20 21 22 alone cannot satisfy the express aiming prong. . . operating even a passive website in conjunction with 'something more'—conduct directly targeting the forum—is sufficient to confer personal 23 jurisdiction." Id. (citations omitted). Plaintiff argues that Defendant has "maintain[ed] a highly commercial and interactive website" through which California residents may theoretically 24 purchase its products, but does not assert that Defendant has directed advertising specifically to California consumers or that Defendant has made any sales in California. [Docket No. 23 (Suppl. 25 Brief) at 3.] Plaintiff's failure to show that Defendant's online presence was directed towards residents of this state distinguishes this case from those cited by Plaintiff. See Allstar Mktg. Grp., 26 LLC v. Your Store Online, LLC, 666 F. Supp. 2d 1109 (C.D. Cal. 2009); Stomp, Inc. v. NeatO, LLC, 61 F. Supp. 2d 1074, 1077-78 (C.D. Cal. 1999); Washington v., Inc., 27 260 F. Supp. 2d 1048, 1051 (W.D. Wash. 2003); see also Gucci Am., Inc. v. Wang Huoqing, C-09- 05969 CRB, 2011 WL 31191, at *6 (N.D. Cal. Jan. 3, 2011) ("Personal jurisdiction is appropriate 28 where an entity is conducting business over the internet and has offered for sale and sold its products to forum residents."). 7