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Surf's Up LLC v. Rahim

United States District Court, D. South Carolina, Florence Division

November 14, 2017

Surf's Up, LLC, Plaintiff,
Rick Rahim; Myrtle Laser Tag, LLC; and, LLC, Defendants.


          Kaymani D. West, United States Magistrate Judge

         This trademark-infringement matter is before the court on Plaintiff's Motion for Entry of Default Judgment. ECF No. 87. In its Complaint Surf's Up, LLC (“Surf's Up” or “Plaintiff”) brings claims pursuant to the Lanham Act, 15 USC §§ 1051, et seq. and common law claims for “trademark infringement, deceptive trade practices.” Compl. ¶ 1, ECF No. 1. Plaintiff seeks injunctive and monetary relief, as well as attorneys' fees and costs. This matter was referred to the undersigned pursuant to 28 U.S.C. § 636(b)(1)(B). Because this motion is dispositive, the undersigned submits this Report and Recommendation (“Report”) for the court's consideration.

         I. Background

         A. Initial entry of default

         Plaintiff served Defendant Myrtle Laser Tag, LLC (“Myrtle Laser Tag”) with a Summons and Complaint by certified mail on January 27, 2015. ECF No. 6. Myrtle Laser Tag did not timely answer or otherwise respond to the Complaint, and Plaintiff requested that the Clerk of Court enter default. ECF No. 10. The Clerk entered default as to Myrtle Laser Tag on February 27, 2015. See ECF No. 12. On March 12, 2015, attorney Benjamin Parker appeared and filed a Motion to Dismiss on behalf of Defendants Myrtle Laser Tag, LLC (“”), and Rick Rahim (“Rahim”). ECF No. 13. On March 26, 2015, Counsel Parker filed a Motion to Set Aside Default as to Myrtle Laser Tag. ECF No. 16. Plaintiff's counsel responded to the pending Motions and filed a Motion for Preliminary Injunction on behalf of Surf's Up, ECF No. 21, to which Defendants responded on May 18, 2015, ECF No. 22, and Plaintiff replied on May 29, 2015, ECF No. 23.

         B. Relief from initial default and relief of counsel

         On February 18, 2016, Counsel Parker filed a motion to withdraw as counsel for all Defendants. ECF No. 24. On March 21, 2016, United States District Judge Bruce H. Hendricks granted the motion of Surf's Up to be relieved from default and granted Parker's Motion to be Relieved as Counsel. ECF No. 25. The court stayed the matter for 45 days to “allow the corporate defendants [Myrtle Laser Tag and] o obtain substitute counsel.” Id. at 2. In that same order, the court denied the motion to dismiss and the motion for a preliminary injunction, finding it was unable to determine issues raised in those motions on the record then before it. Id. at 3-4.

         C. Entry of default as to all Defendants

         As the matter then included pro se litigants, the matter was referred to the undersigned for pretrial handling. On March 24, 2016, the undersigned issued an Order, stating, inter alia, that the pro se corporate Defendants [Myrtle Laser Tag and] were required to have retained counsel licensed to practice in this District and that counsel was to have filed a formal appearance in this case on or before May 5, 2016 as District Judge Hendricks had directed. ECF No. 32. Myrtle Laser Tag and were advised that corporations were not permitted to represent themselves and that failure to obtain counsel “could have serious consequences, including, but not limited to, striking a defense, striking a pleading, and/or holding the party in default.” Id. at 1-2. Defendant Rahim was advised that individual defendants such as himself were permitted to proceed pro se but were required to follow the court's rules and orders. Id. at 2-3.

         Counsel did not appear on behalf of Myrtle Laser Tag and, nor did Defendant Rahim submit additional pleadings in this matter. On June 21, 2016, Judge West issued a Report and Recommendation recommending that default be entered against Defendants Myrtle Laser Tag and for failure to appear through counsel by the required deadline and failure to otherwise communicate with the court. ECF No. 43. On November 7, 2016, Judge Hendricks issued an Order adopting the undersigned's Report, and ordering the Clerk of Court to enter default against Defendants Myrtle Laser Tag and ECF No. 61. The Clerk entered default as to those Defendants that same day. ECF No. 62. As Defendant Rahim did not respond to the court's orders or otherwise respond to the Complaint, on February 21, 2017, the undersigned recommended that the Clerk of Court be instructed to enter default as to Rahim. ECF No. 74. On March 22, 2017, Judge Hendricks issued an Order adopting the undersigned's Report and ordering the Clerk of Court to enter default against Defendant Rahim. ECF No. 80. The Clerk entered default against Defendant Rahim on March 22, 2017. ECF No. 81.

         D. Motion for Entry of Default Judgment

         On April 10, 2017, Plaintiff filed the Motion for Entry of Default Judgment now under consideration. ECF No. 87. Defendants were served with the Motion on April 26, 2017 and affidavits of service for each Defendant were filed on May 2, 2017. ECF Nos. 89, 90. No Defendant has filed any response to Plaintiff's Motion. On August 8, 2017, the undersigned issued an order setting a hearing on the Motion for Default Judgment for October 18, 2017, instructing Plaintiff to file a supplemental memorandum outlining its establishment of the elements of its claims and the relief it seeks, and advising pro se Defendant Rahim it could file a response by October 2, 2017 if he so chose, and that Defendants Myrtle Laser Tag and could file a response through counsel. ECF No. 93. The Order was sent to all Defendants at their last known addresses by both regular and certified mail. Although the copies the court sent to Myrtle Laser Tag were returned as undeliverable, the certified-mail copies of the Order were signed for by Rahim and by an individual on behalf of ECF Nos. 101, 102. Plaintiff submitted the requested briefing, ECF No. 99, but no Defendant filed any response, nor has any Defendant otherwise submitted any filing to the court since the filing of the Motion for Default Judgment.

         The undersigned conducted a hearing on the Motion for Default Judgment on October 18, 2017, at which time counsel for Plaintiff appeared and offered argument on behalf of Plaintiff. No one appeared on behalf of any Defendant. At the court's request, Plaintiff has now provided an affidavit with details of specific damages sought as well as supplemental briefing as to attorneys' fees and costs sought. ECF No. 107. Having considered all pleadings, briefing, and arguments of Plaintiff's counsel, the undersigned issues the following proposed findings and conclusions recommending default judgment.

         II. Recommended findings and conclusions

         Having reviewed Plaintiff's Complaint, Answers to Local Rule 26.01 Interrogatories, Requests for Entry of Default, Motion for Default Judgment, as well as all supporting and supplemental information provided, the court accepts Plaintiff's well-pleaded factual allegations as true and makes the following factual findings. See DIRECTV, Inc. v. Rawlins, 523 F.3d 318, 322 n.2 (4th Cir. 2008) (accepting plaintiff's allegations against defaulting defendant as true, noting a defaulting defendant “‘admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established.'”) (quoting Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001)).

         Plaintiff, a South Carolina limited liability company, owns the federal trademark Registration No. 3496814-which is the trademark for “Surf's Up Family Fun Center.” Compl. ¶¶ 2, 8; U.S. Patent and Trademark Office Notice of Acceptance of Statement of Use of “Surf's Up Family Fun Center” Mark, ECF No. 1-1. Plaintiff is owned in equal parts by Patrick E. Fire and Teresa M. Walden. Compl. ¶ 9; Affidavit of Patrick E. Fire (“Fire Aff.”) ¶¶ 1-3, ECF No. 107-1. Plaintiff formerly owned and operated an amusement facility and business located at 4112 Carolina Commercial Drive in Myrtle Beach, South Carolina called Surf's Up Family Fun Center, which opened in April 2008. Compl. ¶ 13. In September 2010 Plaintiff closed the business. Subsequently, Defendants purchased the property on which and the building in which the business was formerly operated. Id. ¶ 20. Defendants began operating the amusement business in early 2012. Plaintiff, through Fire, “learned Defendants were unlawfully and improperly using, utilizing and misappropriating” Plaintiff's intellectual property, which Defendants did not own. Id. ¶ 21. Plaintiff learned Defendants were using a website and copyrighted logo belonging to Fire, as well as Plaintiff's registered Trademark. Id. ¶ 21. Plaintiff and Fire asserted their rights in that intellectual property and, in the spring of 2012, Fire-on behalf of himself and Plaintiff-and Defendants reached an agreement in which Defendants agreed to purchase the rights to the website and the copyrighted logo from Fire and the registered and protected Trademark from Plaintiff. Id. ¶ 22. When Defendants reneged on that agreement, Fire personally sued Defendants in Horry County Magistrate's Court. The suit in that court was brought by Fire himself and concerned only the website and copyright violations. That litigation did not relate to the trademark infringement suffered by Plaintiff. Id. ¶ 22. In March 2015, the Horry County Magistrate's Court issued a judgment in favor of Patrick Fire and against Defendants in the sum $7, 333.33 on each of the two claims, for a total of $14, 666.66. Amended Judgment, ECF No. 19-1.

         In early May of 2012, Dennis M. Moskal, counsel for Plaintiff, sent a demand letter to Defendants, requesting that they “immediately cease and desist from any further commercial use of the Trademark in connection with advertising, promotion, offer or sale of any goods or services.” Letter, ECF No. 99-1[1]; see Compl. ¶ 26. Defendants did not comply with Plaintiff's demand letter. Rather, Defendants continue to use the Trademark. Compl. ¶¶ 27-28.

         Defendants' website-both at the former address, and at the current address, Plaintiff's registered trademark, “Surf's Up Family Fun Center.” Compl. ¶ 24; see also ECF No. 99-2 (printed copy of homepage provided by Plaintiff with Aug. 27, 2017 filing). This remains true as of the writing of this Report. (last visited Nov. 14, 2017).

         If one goes to the website, and clicks on the icon “Locations” a viewer will see the listing for “Surf's Up Family Fun Center” and can connect directly to its website. (last visited Nov. 14, 2017), see ECF No. 99-3. If one clicks on the “On TV” icon, the viewer can actually watch the television commercial for the “Surf's Up Family Fun Center” wherein the protected Trademark is displayed prominently throughout. (last visited Nov. 6, 2017); see ECF No. 99-4. At the bottom of the “” home page is a banner indicating the “[s]ite design and content [is] by Rick Rahim.” (last visited Nov. 14, 2017). The website information continues: “Copyright Myrtle Laser Tag, LLC I Managed by II A store.” Id.; see also ECF No. 99-3 (copy of LaserTagGroup.Com homepage showing locations, including Surf's Up Family Fun Center as “Myrtle Beach (#1)”). This remains true as of the writing of this Report.

         As alleged by Plaintiff, Defendants' continued use of the Trademark has created confusion as to the business and source, affiliation, approval and/or sponsorship of the materials, advertisements, and services bearing the Trademark. Plaintiff further alleges consumers are likely to incorrectly believe that Defendants' website and its website, as well as its business venture and products, are associated with Plaintiff. Plaintiff submits such confusion has damaged its ability to interact with potential patrons and gain revenue through the sale of merchandise bearing the Trademark and, consequently, has prevented or reduced its ability to perform any business functions. Compl. ¶ 25.

         III. Analysis of Lanham Act claim

         A. Liability

         Accepting these facts as true, the court now reviews the Complaint to ensure it sets forth claims as to which relief can be granted pursuant to the standard of Rule 12(b)(6) of the Federal Rules of Civil Procedure. See Joe Hand Promotions, Inc. v. Scott's End Zone, Inc., 759 F.Supp.2d 742, 747 (D.S.C. 2010); GlobalSantaFe Corp. v., 250 F.Supp.2d 610, 612 n.3 (E.D. Va. 2003). If Plaintiff's claims pass Rule 12(b)(6) muster, the undersigned must also consider the appropriate damages to be awarded Plaintiff.

         Although Plaintiff's Complaint includes a cause of action for common law trademark infringement as well as trademark infringement in violation of the Lanham Act, Plaintiff's counsel advised at the hearing that Plaintiff elects to proceed on its Lanham Act claim.

The Lanham Act provides, in pertinent part:
(1) Any person who shall, without the consent of the registrant -
(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, or
(b) reproduce, counterfeit, copy or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrapper, receptacles or advertisements intended to be used in commerce or upon or in connection with the sale, offering for sale, distribution, or advertising of any goods or services in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action by the registrant for the remedies hereinafter provided.

15 U.S.C. §1114(1)(a) and (b). Further, the Lanham Act prohibits the “false or misleading description of fact, or false or misleading representation of fact, which . . . in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities.” 15 U.S.C. § 1125(a)(1)(B).

         To prevail, Plaintiff must demonstrate that it has a “‘valid, protectable trademark and that the defendant's use of [the mark or] a colorable imitation of the trademark is likely to cause confusion among consumers.'” Synergistic Intern., LLC v. Korman, 470 F.3d 162, 170 (4th Cir. 2006) (quoting Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc., 43 F.3d 922, 930 (4th Cir. 1995)). “[A]n unauthorized use of a trademark infringes the trademark holder's rights if it is likely to confuse an ‘ordinary consumer' as to the source or sponsorship of the goods.” Anheuser-Busch, Inc. v. L & L Wings, Inc., 962 F.2d 316, 318 (4th Cir. 1992).

         Plaintiff has presented uncontested evidence that it owns a valid, protectable trademark for “Surf's Up Family Fun Center.” Attached to the Complaint is a copy of Trademark Registration Number 3496814, which was issued to Surf's Up LLC. The United States Patent and Trademark Office issued the trade mark for “Surf's Up Family Fun Center” on September 2, 2008. ECF No. 1-1. Plaintiff has provided ample evidence of a potential for confusion or deceit among consumers. Defendants continue to use the registered mark in operating the same sort of business and services-laser tag-at the same location where Plaintiff had run a laser-tag business. See, e.g., ECF Nos. 99-2, 99-3, 99-4. Defendants continue to use the Surf's Up Family Fun Center name in manners certain to confuse the consuming public as to the source of the service. Accordingly, the undersigned recommends a finding that Plaintiff has established the elements of a Lanham Act trademark infringement claim.

         B. Damages

         The court now considers Plaintiff's request for monetary damages and other relief. The Lanham Act provides that a successful litigant “shall be entitled, [] subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.” 15 U.S.C. § 1117(a). Under certain circumstances, the court may award up to three times the amount of actual damages. Further, the court “in exceptional cases may award reasonable attorney fees to the prevailing party.” Id. Here, Plaintiff seeks monetary damages, attorneys' fees, and injunctive relief. Plaintiff does not request that the court treble or otherwise multiply any monetary damages award.

         Recognizing the Lanham Act “gives little guidance on the equitable principles to be applied by a court in making an award of damages, ” the Fourth Circuit has set out the following six nonexclusive factors for courts ...

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