United States District Court, D. Idaho
MEMORANDUM DECISION AND ORDER (DKT 12)
Lynn Winmill U.S. District Court Judge.
the Court is Defendants' Motion to Aside Default and
Default Judgment. (Dkt. 12.) Default was entered against
Defendants by the Clerk of the Court on April 2, 2019. (Dkt.
8.) A default judgment against Defendants was entered on May
16, 2019. (Dkt. 10.) Defendants argue that the default and
default judgment should be set aside pursuant to Federal Rule
of Civil Procedure 60(b)(4) for lack of service of process
and lack of personal jurisdiction. In the alternative,
Defendants argue that good cause exists to set aside the
default and default judgment pursuant to Rule 55(c) and
60(b)(1). The Court will GRANT Defendants' motion based
on their alternative argument.
court may set aside an entry of default for good
cause....” Fed.R.Civ.P. 55(c). The “good
cause” standard that governs vacating an entry of
default under Rule 55(c) is the same standard that governs
vacating a default judgment under Rule 60(b). See TCI
Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th
Cir. 2001). To determine whether good cause exists, the Court
must analyze three factors:
(1) whether Kellytoy engaged in culpable conduct that led to
(2) whether Kellytoy has a meritorious defense; and
(3) whether Scentsy would be prejudiced if default is set
United States v. Signed Pers. Check No. 730 of Yubran S.
Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) (citing
Franchise Holding II, LLC v. Huntington Rests. Group,
Inc., 375 F.3d 922, 925-26 (9th Cir. 2004)). The factors
are disjunctive, so the Court may deny relief if any of the
three factors are met. Am. Ass'n of
Naturopathic Physicians v. Hayhurst, 227 F.3d 1104,
1108 (9th Cir. 2000). But the Court is not required to grant
relief when one of the three factors is met. Brandt v.
Am. Bankers Ins. Co. of Florida, 653 F.3d 1108, 1112
(9th Cir. 2011). The party seeking to set aside the entry of
default carries the burden of demonstrating that relief is
warranted. See Franchise, 375 F.3d at 926.
“Crucially, ... ‘judgment by default is a drastic
step appropriate only in extreme circumstances; a case
should, whenever possible, be decided on the
merits.'” Mesle, 615 F.3d at 1091 (citing
Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)).
turning to Kellytoy's Rule 55(c) argument, the Court will
briefly address Kellytoy's arguments that default and
default judgment are void because (1) Kellytoy did not
receive service of process and (2) this Court lacks personal
jurisdiction over Kellytoy. With respect to the service of
process argument, the Court is confronted by diametrically
opposed stories: Scentsy's process server, Cruz Gonzalez,
swears that he personally served Kellytoy's registered
agent, Rami Hajeb, with a copy of the complaint and summons
(Dkt. 16-2); Mr. Hajeb denies being served. (Dkt. 13-1.)
Additionally, Mr. Hajeb in his Declaration and Kellytoy in
its motion argue that this Court lacks personal jurisdiction
over Kellytoy because Kellytoy did not sell the allegedly
infringing goods into Idaho. (Dkt. 13 at 6-11.)
the situation before the Court, the Court will order Scentsy
to re-serve Mr. Hajeb with a copy of the complaint and
summons. With respect to Kellytoy's argument that this
Court lacks personal jurisdiction, the Court will allow
Scentsy limited jurisdictional discovery of one (1)
deposition and ten (10) interrogatories (five of which may be
directed at Kellytoy Worldwide, with the other five directed
to Kellytoy USA) for the purpose of gathering sufficient
information so that the Court can, in the context of a Rule
12(b)(1) motion, make a determination regarding personal
jurisdiction over Kellytoy.
to the “good cause” analysis required by Rule
55(c) and Rule 60(b), the Court finds that good cause exists
to vacate the default and default judgment. First, it appears
that Kellytoy may have a meritorious defense based on lack of
personal jurisdiction. If the infringing goods in this case
were not sold into Idaho, then it is potentially
inappropriate for the Court to assert specific personal
jurisdiction over Kellytoy for the sale of those goods.
See J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S.
873, 882 (2011) (“The defendant's transmission of
goods permits the exercise of jurisdiction only where the
defendant can be said to have targeted the forum; as a
general rule, it is not enough that the defendant might have
predicted that its goods will reach the forum State.”).
This is just one of what the Court suspects will be many
defenses that Kellytoy will assert. Accordingly, this factor
weighs in favor of vacating default and the default judgment.
to the prejudice prong, Scentsy vaguely argues that it needs
the default judgment previously granted by this Court in
order to prevent dilution of its brand and infringement of
its intellectual property. (Dkt. 16 at 18-19.) Scentsy's
argument is a red herring; although it is true that Scentsy
may need a judgment to prevent Kellytoy from infringing its
intellectual property, it does not necessarily need, nor is
it automatically entitled to, the default judgment entered by
the Court. If, after a full trial on the merits, Scentsy
proves that it is entitled to a judgment enjoining
Kellytoy's activities, then the Court will issue one. To
the extent Scentsy proves that it suffered monetary harm from
Kellytoy's activities, a damages award would be
sufficient to make Scentsy whole. In short, the ...