ALLSTAR MARKETING GROUP, LLC v. AFACAI

Background

Allstar moved for default judgments against 76 defendants on trademark-infringement and related claims involving its “Socket Shelf” product. Allstar requested statutory damages, permanent injunctions, destruction of infringing products, post-judgment restraints on assets, and an order transferring frozen assets to satisfy any damages award. Allstar later voluntarily dismissed 35 defendants, leaving 41 defaulting defendants in the action. No defendants appeared at the March 9, 2021 show-cause hearing.

The court separately entered a Final Default Judgment and Permanent Injunction Order. That separate order granted default judgments and damages awards against the 41 remaining defendants and issued substantial permanent injunctive relief. This opinion explains why the court did not include all of Allstar’s proposed relief.

Permanent Injunction

The court held that Allstar had shown the requirements for a permanent injunction under the Lanham Act. Allstar faced threatened loss of goodwill and control over its trademark, monetary damages were difficult to calculate because the defendants had not appeared, the defendants’ past conduct suggested a risk of continued infringement, and the public had an interest in avoiding confusion about the origin and quality of goods.

The court nevertheless required the injunction to be narrowly tailored to the specific legal violations. It removed references to the defendants’ “successors and assigns” because Federal Rule of Civil Procedure 65 permits an injunction to bind the parties, specified related persons, and others acting in active concert or participation with them—not unrelated successors or assigns. The court added the word “active” to track the rule.

The court denied Allstar’s request to permanently prohibit third-party service providers from providing services to the defaulting defendants. The requested provision would have effectively shut down the defendants’ commercial activity on online platforms, including sales of products unrelated to the “Socket Shelf.” The court found no evidence that the defendants had violated federal law or Allstar’s trademark rights through other products. The proposed order also sought to bind unidentified service providers, even though only one such provider, ContextLogic doing business as Wish, had been identified. The court found that relief excessive and inconsistent with the requirement that injunctions be narrowly tailored.

The court also removed language concerning any false designation, false description, or conduct likely to cause confusion about any product sold by the defendants. The court stated that this language appeared to cover products other than the “Socket Shelf,” lacked supporting evidence, and was unnecessary because other provisions already prohibited infringement involving the “Socket Shelf.”

Post-Judgment Asset Restraint and Transfer

The court rejected Allstar’s argument that Federal Rules of Civil Procedure 64 or 65, or the Lanham Act’s injunction provision, supplied authority for the requested post-judgment asset freeze and transfer. Rule 64 concerns provisional remedies, while Rule 69 governs execution of a judgment. Rule 65 also could not be used to bypass Rule 69’s more specific requirements, and Allstar had not shown that the financial institutions holding the assets were acting in active concert with the defaulting defendants.

Under Rule 69, New York law governed the procedure for enforcing the judgment. New York law requires notice to people or entities holding a judgment debtor’s property and an opportunity for affected third parties to challenge a requested transfer. It also requires findings about specific property, the judgment debtor’s interest in that property, the judgment creditor’s right to possess it or superior claim to it, and the court’s personal jurisdiction over the third party holding it.

The court found that Allstar’s proposed order did not provide those procedures. It sought to transfer generally described frozen assets without identifying specific property, without providing third parties an opportunity to object, and without establishing personal jurisdiction over the financial institutions. It also would have allowed Allstar to garnish assets held by institutions not yet identified. The court therefore declined to grant the requested post-judgment asset restraint and transfer provisions. The court stated that its order did not prevent Allstar from pursuing remedies available under New York law.

The court also rejected Allstar’s alternative argument that an asset freeze was needed to preserve an equitable accounting. Allstar had elected statutory damages instead of actual damages and profits, and the court explained that a plaintiff who elects statutory damages cannot rely on an accounting remedy to justify a post-judgment asset freeze on this record.

Enforcement of the Judgment

The court dissolved the automatic 30-day stay that ordinarily applies to execution and enforcement of a judgment under Rule 62. It authorized immediate enforcement of the judgment, while leaving Allstar free to use the enforcement procedures available under Rule 69 and the New York Civil Practice Law and Rules.

Disposition

The court separately entered default judgments, damages awards, and permanent injunctive relief as to the 41 remaining defaulting defendants. It denied or removed the additional overbroad injunction provisions and declined to enter Allstar’s proposed post-judgment asset-restraint and asset-transfer provisions. It dissolved the automatic 30-day enforcement stay to permit immediate enforcement.