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National Restaurant Association Educational Foundation, et al v. Mark Shain

October 3, 2012

NATIONAL RESTAURANT ASSOCIATION EDUCATIONAL FOUNDATION, ET AL., PLAINTIFFS,
v.
MARK SHAIN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

Plaintiffs National Restaurant Association Educational Foundation and National Restaurant Association Solutions, LLC, have sued defendants Mark Shain, the Food Safety Corporation, and Food Safety Administration, alleging trademark infringement. (See Complaint, April 26, 2012 [Dkt. No. 1] ("Compl.").) This is the third action in this Court in which plaintiffs have asserted claims of infringement of their "SERVSAFE" trademarks by defendants Shain and Food Safety Corporation. See National Restaurant Association Educational Foundation v. Food Safety Corporation, et al., No. 10-cv-1140; National Restaurant Association Educational Foundation v. Food Safety Corporation, et al., No. 10-cv-1734.

Before the Court is defendants' Motion to Vacate the Entry of Default (September 10, 2012 [Dkt. No. 16]) and plaintiffs' opposition (September 12, 2012 [Dkt. No. 20]). For the reasons stated, the Court will deny defendants' motion.

BACKGROUND

Plaintiffs' counsel represents that plaintiffs dismissed their first action against defendants, No. 10-cv-1140, "in reliance on a signed, notarized statement from . . . Shain in which he represented that he had stopped using the SERVSAFE Marks and had destroyed all written and electronic materials using them." (Id. at 2.) However, a month after dismissing No. 10-cv-1140, plaintiffs "became aware that . . . Shain and Food Safety Corporation had resumed using the SERVSAFE Marks . . . and that . . . Shain was holding himself out (inaccurately) as an authorized SERVSAFE instructor and proctor." (Id.) Plaintiffs then filed their second action against defendants, No. 10-cv-1734. That action "was resolved by a settlement agreement in which . . . Shain and Food Safety Corporation agreed . . . never to use any trademark owned by [the National Restaurant Association Educational] Foundation, including the SERVSAFE Marks." (Id. at 3.) However, plaintiffs later "received evidence that . . . Shain had, without authorization," used the trademarks. (Id.) On April 26, 2012, plaintiffs had to file yet another action. (See Compl.)

Defendant Shain was served with the complaint, on behalf of himself individually and on behalf of the two corporate defendants, on June 23, 2012. (See Return of Service, July 3, 2012 [Dkt. No. 7]). Defendants' response to the complaint was due July 16, 2012, as the next business day after July 14. See Fed. R. Civ. P. 12(a)(1)(A)(i). When defendants failed to file a response, the Court on July 19 ordered plaintiffs to cause entry of a default or to show cause why a motion for entry of default had not been filed. (Order, July 19, 2012 [Dkt. No. 8] at 1.) Plaintiffs' response to the Court's show-cause order (July 30, 2012 [Dkt. No. 9]) indicated that, on July 11, 2012, plaintiffs' counsel was contacted by Sean Gregor, who has since entered an appearance as counsel for defendants, with a request for an extension of time to respond to plaintiffs' complaint. (Id. at 2.) Plaintiffs consented to a 30-day extension of the deadline, until August 15, 2012. (Id. at 1.) Plaintiffs' counsel represents that he told Gregor "more than once that [p]laintiffs would not agree to any further extension unless defendants sought it by motion (and then only under certain conditions)." (Pl. Opp'n at 4.) Plaintiffs' counsel also represents that, on July 20, he provided a copy of the Court's July 19 show-cause order to Gregor. (Id. at 4 n.1.)

None of the defendants filed any response to the complaint on or before August 15, 2012, nor did they file a motion seeking a further extension of that deadline. Accordingly, on August 27, 2012, the Court ordered plaintiffs to cause default to be entered and apply for entry of judgment thereon by September 11, 2012. (Order, Aug. 27, 2012 [Dkt. No. 10] at 1--2.) Plaintiffs' counsel represents that, on August 29, he provided a copy of the Court's August 27 order to Gregor. (Pl. Opp'n at 4 n.2.)

Plaintiffs sought entry of default as to all defendants on August 30, 2012. (Plaintiffs' Request for Entry of Default, Aug. 30, 2012 [Dkt. No. 11].) On September 4, 2012, the Clerk entered defaults as to the corporate defendants (Clerk's Entry of Default as to Food Safety Administration, Inc., and Food Safety Corporation, Sept. 4, 2012 [Dkt. No. 12]), but as to defendant Shain, a military affidavit was required. In preparing the affidavit, plaintiffs' counsel represents that he emailed Gregor to confirm that Shain was not in the military, but that Gregor never responded. (Pl. Opp'n at 4--5.) On September 6, 2012, plaintiffs' counsel filed a declaration alleging that Shain was not in the military. (Declaration of Steuart H. Thomsen in Support of Plaintiffs' Request for Entry of Default Against Defendant Mark Shain, Sept. 6, 2012 [Dkt. No. 13].)

On September 10, 2012, Gregor filed a notice of appearance as defendants' counsel, a motion to appear pro hac vice, and the motion to vacate the entry of default that is presently before the Court. Attached to the motion was a proposed verified answer. (See Def. Mot., Ex. A.) Defendants' proposed answer states that "[d]efendants deny each and every allegation contained in the [p]laintiff[s'] [c]omplaint," and lists, without explanation, 18 "affirmative defenses," including, inter alia, assumption of risk, "[t]he doctrine of unclean hands," "Accord and Satisfaction," "Waiver," "Estoppel," "Mistake," "Offset," "Legal Justification or Excuse," "Fraud," "Illegality," "Ambiguity," and "Rescission." (Id., Ex. A at 1--2.)

ANALYSIS

Defendants' motion to vacate the defaults entered against the corporate defendants consists of two substantive paragraphs. The first cites the well-established legal principles that "'[d]efault judgments are not favored by modern courts'" in light of "'the strong policies favoring the resolution of genuine disputes on their merits,'" and that "'[a] default can be set aside under rule 55(c) for good cause shown.'" (Def. Mot. at 1 (some internal quotation marks omitted) (quoting Jackson v. Beech, 636 F.2d 831, 835 (D.C. Cir. 1980)). The motion's second paragraph purports to establish "good cause" for vacating the entry of defaults, Fed. R. Civ. P. 55(c), with the following factual explanation:

In the instant matter, the Defendants were representing themselves pro-se for some time in an attempt to come to a reasonable settlement with Plaintiffs.

Having exhausted that option, Defendants retained undersigned counsel to assist them in defending against this matter. Defendants state that the parties agreed to a settlement agreement in December 2010 to dispose of this matter at that time in NATIONAL RESTAURANT ASSOCIATION EDUCATIONAL FOUNDATION v. FOOD SAFETY CORPORATION et al, Civil Action No. 1:10-cv-01734-HHK, docket entry #5. However, Defendants entered into that settlement agreement without the benefit of counsel and felt considerable pressure to resolve the matter because they were representing themselves pro-se, presenting a situation where the parties had clear unequal bargaining power. (Def. Mot. at 2 (footnote omitted).) Defendants' motion concludes: "Thus, Defendant can demonstrate 'good cause' as contemplated by Jackson and Rule 55(c) in order to vacate the default and allow this matter to go forward." (Id.)

The Court disagrees. The Court acknowledges that default judgments are disfavored "because entering and enforcing judgments as a penalty for delays in filing is often contrary to the fair administration of justice." Int'l Painters & Allied Trades Union & Indus. Pension Fund v. H. W. Ellis Painting Co., Inc., 288 F. Supp. 2d 22, 25 (D.D.C. 2003) (citing Jackson, 636 F.2d at 835). Here, however, even when "all doubts are resolved in [defendants'] favor," Jackson, 636 F.2d at 836, defendants have fallen well short of demonstrating the "good cause" necessary to "set aside an entry of default." Fed. R. Civ. P. 55(c).*fn1 Courts consider "three criteria in deciding whether to set aside [a] default: 'whether (1) the default was willful, (2) a set-aside would prejudice plaintiff, and (3) the ...


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