Restoration Hardware, Inc. v. Lighting Design Wholesalers, Inc.

Background

Restoration Hardware, Inc. and RH US, LLC sued Lighting Design Wholesalers, Inc. (LDWI) and Alan Mizrahi. The claims included direct, contributory, and vicarious copyright infringement; false designation of origin, trademark infringement, and unfair competition under the Lanham Act; and common-law trademark infringement and unfair competition.

The plaintiffs served LDWI through the New York Secretary of State. After unsuccessful attempts to serve Mizrahi at two addresses, the plaintiffs obtained an order allowing service by email and Facebook under Federal Rule of Civil Procedure 4(f)(3). The plaintiffs later served the second amended complaint using those methods. LDWI and Mizrahi did not answer, and the court entered a default judgment imposing $1,300,000 in statutory copyright damages, plus post-judgment interest, and permanently barring further violations of the intellectual property at issue.

LDWI and Mizrahi moved under Rules 55(c) and 60(b)(4) to vacate the default judgment, arguing that service was improper. A magistrate judge recommended denying the motion. The defendants objected to that recommendation.

Rulings on Mizrahi’s objections

The court declined to consider Mizrahi’s new argument that the court lacked personal jurisdiction because that argument had not been presented to the magistrate judge. The court also noted that Mizrahi had agreed during a court conference not to raise a personal-jurisdiction challenge for purposes of the motion to vacate. The court explained that this agreement did not waive his separate argument that service was improper.

The court concluded that the earlier service order covered “all other pleadings,” including the second amended complaint, and authorized electronic service under Rule 4(f)(3). Rule 4(f)(3) permits court-ordered service on a foreign defendant by means not prohibited by an international agreement. The court held that this rule does not require a plaintiff to first try every other available method of international service.

The court found that the plaintiffs had made reasonable unsuccessful attempts to serve Mizrahi before seeking alternative service. It also held that Mizrahi had not identified an international agreement that prohibited the email and Facebook service used in November 2017. Austria was not then a party to the Hague Service Convention, and the court held that service did not have to comply with Austrian law under Rule 4(f)(3). The court therefore found no clear error in the magistrate judge’s conclusion that service was procedurally proper.

Ruling on LDWI

The court adopted the magistrate judge’s finding that LDWI was no longer an active entity. Because the court concluded that LDWI no longer existed and could not seek relief except for purposes of winding up its affairs, it denied LDWI’s motion to vacate the default judgment with prejudice.

Ruling on Mizrahi and disposition

The court emphasized the preference for deciding disputes on their merits and noted that Rule 60(b) provides several grounds for vacating a default judgment. Although Mizrahi’s motion based on a void judgment was unsuccessful, the court denied his motion without prejudice to his filing a new motion based on other Rule 60(b) grounds. The court directed him to file any renewed motion by December 15, 2020.

The objections were overruled, and the magistrate judge’s report was adopted except as otherwise stated. LDWI’s motion to vacate was denied with prejudice. Mizrahi’s motion to vacate was denied without prejudice to seeking relief on other grounds.