GS Holistic, LLC v. Xotic Smokes Inc

Background

GS Holistic alleged that Xotic Smokes Inc. and Murad Alhamdani, Hashem Alhamdani, and Entesar Dargan infringed its trademarks, counterfeited its goods, and used a false designation of origin and unfair competition in violation of the Lanham Act, the federal trademark statute. After the defendants failed to answer or otherwise respond, GS Holistic moved for default judgment. Hashem Alhamdani had appeared once, but did not answer or otherwise respond; the other defendants did not appear or participate.

A magistrate judge recommended entering default judgment against Xotic Smokes, awarding modified statutory damages and costs, and denying injunctive and equitable relief. GS Holistic objected, seeking $150,000 rather than the recommended $5,000 and challenging the recommended treatment of costs and other relief.

Default Judgment Against Xotic Smokes

The court adopted the magistrate judge’s conclusions about subject-matter jurisdiction, personal jurisdiction, and service of process. It also adopted the denial of injunctive and equitable relief.

Applying the seven Eitel factors used for default-judgment motions, the court adopted the conclusion that GS Holistic had shown infringement of one of its three marks by Xotic Smokes. The court approved $5,000 in statutory damages under 15 U.S.C. § 1117(c)(1). It rejected GS Holistic’s request for $150,000 because GS Holistic alleged only one infringing mark, sought more than 250 times the product’s $552.94 sale price, and presented no evidence about the specific nature and circumstances of the infringement.

The court awarded $1,164.40 in costs: the $402 filing fee and $762.40 process-server fee. It did not award the $617.94 in pre-suit investigation fees because GS Holistic provided no authority or argument showing that those expenses qualified as “costs of the action” under 15 U.S.C. § 1117(a).

Claims Against the Individual Defendants

The court denied, without prejudice, GS Holistic’s motion for default judgment against the individual defendants. The court explained that individual liability for a corporation’s infringement generally requires allegations showing that an individual was the guiding force or central figure in the wrongful conduct, or otherwise actively participated in it.

GS Holistic alleged that the individuals authorized, directed, or participated in Xotic Smokes’s sale of counterfeit goods and were a moving or conscious force behind the infringement. The court found those allegations conclusory. GS Holistic did not identify which individual participated personally in the alleged infringement or explain how that person did so. Ownership, an officer position, or management of the company alone was not enough under the court’s analysis.

GS Holistic may renew its motion against the individual defendants within 30 days, but the court stated that a renewed motion must include new, specific factual allegations supporting personal liability.

Disposition

The court adopted the report and recommendation in part. It granted GS Holistic’s motion for default judgment against Xotic Smokes Inc., awarded $5,000 in statutory damages and $1,164.40 in costs, and denied, without prejudice, the motion for default judgment against the individual defendants. The court also adopted the denial of injunctive and equitable relief.