KHN Solutions, LLC. v. Rofeer-US

Background

KHN Solutions LLC brought federal and state false-advertising claims concerning defendants’ breathalyzers. The opinion states that defendants’ products were promoted on Amazon through fake reviews and false quality assurances. The defendants were located in China, and the magistrate judge found that ordinary service was not possible because previously listed addresses were false or defunct. The magistrate judge approved tested email addresses as alternative methods of service. Default was eventually entered against all defendants.

The magistrate judge recommended granting KHN a permanent injunction and damages. Because the parties had not consented to magistrate-judge jurisdiction, Judge William Alsup reviewed the recommendation. He also asked Amazon.com, Inc. to comment because the recommended injunction would burden Amazon. Amazon proposed revisions concerning the products to be stopped and the handling of sales proceeds.

Court’s analysis

For default judgment, the court treated the complaint’s factual allegations as true except allegations concerning damages. The court also accepted the magistrate judge’s other factual and legal findings unless they were challenged or expressly reconsidered.

The court declined to grant the proposed permanent injunction. The complaint did not identify the specific model, product number, or web address of the allegedly falsely advertised product or products. The record supported false-advertising allegations for only one product, identified by Amazon Standard Identification Number B07ZH6PVD4. The proposed injunction, however, covered three products: B07ZH6PVD4, B08CZBL7YS, and B088TQ6RX8. The court also found that the proposed injunction went beyond correcting the alleged false advertising because it would permanently stop defendants from selling the product, require shipping products to KHN, and permanently disable seller accounts.

The court also denied the proposed damages award. It found that the proposed injunction could allow multiple recoveries, including double, triple, or sixteen-fold recovery. It further found that the proposed award improperly sought all sales revenue rather than a legally supported measure of KHN’s actual damages or defendants’ profits. Finally, the record did not adequately establish which products were included in the reported sales figures or otherwise support the proposed amount of $1,823,707.

Interim relief

Although the court did not grant permanent relief, it found interim relief warranted. Until further order, Amazon.com, Inc. was ordered to cease dealing with the defendants and persons or entities known or reasonably believed to be operating for their benefit, including by disabling—but not deleting—specified Amazon Merchant IDs. Amazon was also ordered to impound products in its control identified by the three listed Amazon Standard Identification Numbers and to impound revenues in the relevant Amazon accounts from selling those products.

The order stated that the impounded funds or products might later be released to defendants, KHN, or another recipient, including disappointed purchasers. KHN and Amazon were ordered to serve the order on defendants by October 11, 2024, and defendants were ordered to enter an answer or other appearance by November 15, 2024.

Disposition

Judge William Alsup denied KHN’s motion for default judgment without prejudice. The related hearing was vacated, and the related administrative motion was denied as moot. The court stated that, if defendants failed to appear, it would invite KHN to file a renewed motion for default judgment.