Petition for Writ of Certiorari — Home Boy 2000 v. Gucci America, Inc.

’ Cetreme Court, U.S.

BB 828 nov 81998

No.

In The OFFICE CF Ti CLERK

Supreme Court of the United States

<>

October Term, 1998

HOME BOY 2000, Petitioner,

-against-

GUESS?, INC.,

GUCCI AMERICA, INCORPORATED,

AND BIG TIME JEWELRY,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE SECOND CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

HAROLD N. LEDERMAN

Counsel of Record

BRUCE H. LEDERMAN

On the Brief

Lederman Abrahams

Lederman & Zarett, LLP

Attorneys for Petitioner

567 Broadway

Massapequa, NY 11758

(516) 541-8900

bi |

QUESTIONS PRESENTED

Does a District Court Judge have any discretion, in the

interests of justice, to modify the amount of damages awarded

on a default judgment even though the Judge found that the

default was negligent, or even deliberate, or is there a “hard and

fast” or “bright-line” rule making it reversible error for the

District Court judge to reduce the amount of a default judgment

in the interest of justice after the defendant failed to respond toa

motion for entry of default judgment?

Does the discretion of a District Court Judge to grant

relief from a judgment under Fed. R. Civ. Pro. 60 allow him or

her to give any consideration to the inequity posed by a default

judgment, the amount of which is substantially higher than

would have been awarded on the merits, if the District Court

judge determines that the defendant “made a conscious decision

to pay not attention [to the motion to enter default judgment] and

not to seek legal advice, [but] the Court [was] satisfied that this

was more a product of stupidity than of malice?”

PARTIES

The Court of Appeals decision for which review is

sought consolidated appeals in two separate District Court

actions, both of which were assigned to Hon. Lewis A. Kaplan,

and dealt with as related cases even though no formal order of

consolidation was entered at the District Court Level.

-ii-

The parties in the case Gucci America, Inc. v. Gold

Center Jewelry, Southern District Case Number 97-CV-1354, er

al., are as follows:

Plaintiff: Gucci America, Inc.,

Counsel: Kalow Springut and Bressler

488 Madison Avenue

New York, NY 10022

(212) 813-1600

Defendants

Who Were

Parties to the

Second Circuit

Appeal

Home Boy 2000

Counsel: Lederman Abrahams Lederman &

Zarett, LLP

567 Broadway

Massapequa, NY 11758

(516) 541-8900

Big Time Jewelry

Counsel: Noel W. Hauser and Associates

415 Madison Avenue

New York, NY 10017

(212) 688-6400

Defendants

Not Parties to

Second Circuit

Appeal:

Gold Center Jewelry

Gold Fortune Jewelry

Empire Jewelry

-ili-

Gold “N” Ice

Gold Spot Jewelry

Golden Touch Bronx Corp.

Manny’s Joyeria Jewelry

Oro-Uno Jewelry, Inc.

Senobar Jewelry

John Does 1-8

-]V-

io Nine STN Chants eed bse te bind dain

The parties in the case Guess?, Inc, v. Gold Center

Jewelry, et a],, Southern District Case Number 97-CV-1374, are

as follows:

Plaintiff: Guess?, Inc.,

Counsel: Kalow Springut and Bressler

488 Madison Avenue

New York, NY 10022

(212) 813-1600

Defendants )

Who Were :

Parties to the

Second Circuit

Appeal

Home Boy 2000

Counsel: Lederman Abrahams Lederman &

Zarett, LLP

567 Broadway

Massapequa, NY 11758

(516) 541-8900

Big Time Jewelry

Counsel: Noel W. Hauser and Associates

415 Madison Avenue

New York, NY 10017

(212) 688-6400

Defendants

Not Parties to

Second Circuit

Appeal:

Gold Center Jewelry

Gold Fortune Jewelry

Empire Jewelry

Gold “N” Ice

Gold Spot Jewelry

Golden Touch Bronx Corp.

Manny’s Joyeria Jewelry

Oro-Uno Jewelry, Inc.

Senobar Jewelry

John Does 1-8

-Vi-

——

Table of Content

Page

Question Presented for Review ..............0eeeeeeeees i

List of Parties to the Proceedings in the Court Below ......... ii

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SUMGMOGRT OT FUTIENOTIGE 6 oc coc ccscccssescsccessnecvese l

Constitution and Statutory Provisions ................005: l

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A. Opinion of the United Stated Court of Appeals

for the Second Circuit,

Entered October 1, 1998 ................ 14

B. Opinion of the United States District Court for

the Southern District of New York, of March

13, 1998, published at 997 F. Supp. 409 .... 24

-Vii-

C. Opinion of the United States District Court for

the Southern District of New York, of January

29, 1998, published at 997 F. Supp. 399 .... 30

Table of Authorities

Cases:

Pioneer Inc. Services v. Brunswick, 507 U.S. 380,

Se ee WO OED 6 hi Sida ces asveiebeseess ck 8,9, 10

Robb v. Norfolk & Western Railway Co., 122 F.3d 354, 359 (7"

Ce BOS eda eK sc uiet ss cd eo bioks ened lcs keeseub eee cies 8

Thompson v. Kerr-McGee Refining Corp., 660 F.2d 1380 (10"

Ef EE CR SE Sy iy a rae PEM ay ee 12

Rogers v. ITT Hartford, 178 F.R.D. 476, 483 (S.D. Miss see

baned Nhe CES ae OER ESSA he KERKS Chk O de eRCAEE ad ee 11

Statutes and Rules:

Pc Be Ns FO OE a's 6 ccc ase ncaa ob easy new an en 7-13

ES hee BE a ik o's noone VOR ced Ee 12

Treatises

Wright, Miller & Kane, Federal Practice and Procedure, Civil,

VOR SAS Sere LAO wikw o kn bceeworisiareeier Gis 12

Moore’s Federal Practice 3“, § 60.41[1][c][i] (1998) ....... 10

-Viii-

Petitioner respectfully prays that a writ of certiorari

issue to review the judgment and opinion of the United States

Court of Appeals for the Second Circuit entered in this matter on

October 1, 1998.

OPINIONS BELOW

The October 1, 1998 opinion of the Court of Appeals

whose judgment is sought to be reviewed is reported at __

F.3rd__ and is reprinted in the Appendix to this Petition at pp.

14. The prior opinions of the United States District Court for

the Southern District of New York, dated January 29, 1998, and

March 13, 1998, are published at 997 F. Supp. 399, and 997 F.

Supp. 409, respectively, and are also reprinted in the Appendix

at pp. 24 and 30.

JURISDICTION

The decision of Court of Appeals was entered on

October 1, 1998. The jurisdiction of the Supreme Court is

invoked pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY PROVISION

F.R.C.P. 60 (b) provides: “On motion and upon such

terms as are just, the court may relieve a party or a party’s legal

representatives from a final judgment ... for any of the following

reasons: (1) mistake, inadvertence, surprise, or excusable

neglect, ... (6) any other reason justifying relief from the

operation of the judgment”

STATEMENT OF THE CASE

ine fundamental question on this appeal is the extent, if

any, of a District Court Judge’s discretion to do justice ina

particular situation where the District Court Judge found that a

se

defendant deliberately made a decision not to respond to a

motion for entry of a default statutory damage judgment, but that

this decision was the product of “stupidity rather than malice.”

The Second Circuit’s decision holds that the District Court

abused its discretion by granting equitable relief in the form of

reducing the amount of the statutory damage judgment (without

vacating the default itself) based upon the equitable

consideration that the amount of the judgment was

disproportionately high to the offense. As explained in the

reasons for granting the writ, by stripping the District Court of

any discretion whatsoever to consider the equities of the case,

the Second Circuit created a split with authority in the Seventh

Circuit, and also ignored important prior rulings by this Court as

to the ability of trial judge to consider the equities in exercising

discretion under Fed R. Civ. Pro. 60(b).

This appeal involves two separate, but substantively

identical, trademark infringement actions commenced by Gucci

America, Inc. and Guess?, Inc., against 11 unrelated small retail

stores in Bronx County, New York, and eight (8) “John Does.”

Both cases were assigned to Hon. Lewis A. Kaplan. This

petition for certiorari is filed solely on behalf of defendant Home

Boy 2000, against which a judgment was entered in the Guess,

Inc. action.

Defendant Home Boy 2000 is a small retail jewelry store

located in the Bronx County, in the City of New York. The

evidence in the record for the Guess case as against defendant

Home Boy 2000 was that it sold < small number of 10 Karat

gold charms, for $9.99, which bore counterfeit copies of Guess’

registered trademark.

The summons and complaint was filed on February 26,

1997, and served on or about March 7, 1997.

A default was entered against Home Boy 2000 on May

7, 1997.

An omnibus motion (with in excess of 200 pages of

supporting documentation) to set an amount of statutory

damages at $25,000.00 against all of the eleven (11) defendants

in this case, pursuant to the default, was served and filed on or

about September 17, 1997. The cover page of plaintiff's 200

page motion was captioned “Gucci America, Inc. v. Gold Center

Jewelry, et al.; Guess?, Inc, v. Gold Center Jewelry, et al.”, and

did not clearly indicate that relief was being sought against

Home Boy 2000. In support of their claim for a $25,000.00

award, plaintiff suggested that each of the eleven (11)

defendants earned a profit of at least $26,000.00 per six month

period from the sale of infringing Guess merchandise.

Home Boy 2000 failed to respond to the omnibus

motion and a default judgments of $25,000.00 were entered

against it in the Gucci and Guess cases! on Oct. 21, 1998.

1

Subsequently, plaintiff rzalized that it never intended to

seek a statutory damage award against Home Boy 2000 in the

Gucci case, because there was no evidence that Home Boy 2000

had sold any Gucci merchandise after the effective date of the

Statutory Damage Provisions of the Lanham Act. Counsel for

Gucci stipulated to the vacatur of the Gucci judgment, although

they vigorously pursued the Guess judgment. It was urged in the

Second Circuit, and is urged once again, that the procedural

confusion which resulted in an unrequested judgment being

entered in the Gucci case was sufficient ground, standing alone,

for the discretionary decision by Judge Kaplan to modify the

Guess decision. :

x

On December 23, 1997, plaintiff's counsel assisted by

the United States Marshall appears at Home Boy 2000's store

and executed upon the default judgment.

On December 31, 1997, defendant Home Boy 2000 filed

an order to show cause with the District Court to vacate the

default judgment. At the January 8, 1998 return date of the

order to show cause, Hon. Lewis A. Kaplan heard oral argument

of counsel and scheduled a hearing for January 16, 1998 with

respect to the application to vacate the default, so that the

testimony of the defendant’s principal could be heard.

On January 16, 1998, Home Boy 2000's principal, Kevin

Amirianfar, was questioned at length both by his own counsel

and by Judge Kaplan. Additionally, plaintiff's counsel cross-

examined Mr. Amirianfar at length.

THE RULINGS BELOW

The District Court ruled that although Home Boy 2000

physically received both the summons and complaint, and the

motion to enter a $25,000.00 default judgment, the failure to

respond was the product of “stupidity than of malice” on the part

of Mr. Amirianfar. 997 F. Supp at 409. Judge Kaplan

contrasted “stupidity” with “malice” to explain his factual

determination that Mr. Amirianfar’s failure to respond to the

motion was not a deliberate tactical effort to frustrate the legal

system, and was instead negligence born out of his lack of

understanding of the legal system. In support of his findings,

Judge Kaplan carefully reviewed the testimony of Mr.

Amirianfar, an unsophisticated, immigrant shopkeeper, in a

socio-economically depressed area of New York. The District

Court found that while it would not vacate the default itself’,

based upon the equities of the case, it was appropriate to

reconsider the amount of the default judgment. Jd,

Judge Kaplan found, after the hearing, that the “sales of

counterfeit goods [by Home Boy] were not enormous because

the business is a modest one’.” 997 F. Supp. 411. Based upon

the testimony of Mr. Amirianfar, and post hearing submissions,

the District Court issued an order resettling the amount of

statutory damages at $4,500, which the Court determined to be

ten (10%) of the Home Boys 2000's gross annual income, plus

an additional $3,500 for attorney’s fees. The amount of the

default judgment represented over half the defendant’s annual

gross income.

Judge Kaplan’s decision also expressly recites that the

reduced judgment was intended to be severe and reflect the

“need for deterring even small retail operations conducted by

persons who are neither wealthy nor sophisticated.” 997 F.

Supp. at 411-412. The modified judgment was clearly intended

to be a severe penalty since the amount of merchandise

infringing merchandise actually sold was small, but at the same

time not a crippling penalty of over half of the defendant’s

2

At the return date of the order to show cause to vacate the

default, counsel for Home Boy 2000 stipulated that it was only

seeking to vacate the amount of the judgment and not the

underlying default on liability.

3

The only actual evidence in the record of the sale of counterfeit

Guess merchandise was of the sale of a few 10 Karat charms for

$9.99 each.

annual gross income. The modified judgment was likely a

substantially greater judgment than would have been entered had

Home Boy 2000 originally appeared rather than default, so that

the policy of discouraging defaults, but preventing injustices,

was fairly balanced.

The Court of Appeals reversed and directed

reinstatement of the original $25,000.00 default judgment

simply because the defendant admitted he had received the

summons and complaint, and notice of motion for entry of

default judgment. The Court of appeals found that since the

“district court specifically found that Amirianfar and Zarrin

made deliberate decisions not to respond to plaintiffs’ damage _

application” the District Court erred as a matter of law in further

considering whether the delioerate decision was made in bad

faith and whether or not there was still some equitable basis for

modifying the amount of the default judgment. Effectively, the

Second Circuit’s decision establishes a “hard and fast” or

“bright-line” rule that if a default is deliberate, the District Court

may not consider good faith or equitable factors and the

judgment must stand, no matter how harsh or draconian.

REASONS FOR GRANTING THE WRIT

The Supreme Court has never issued a definitive

decision determining whether a District Court judge has any

discretion, and the extent of that discretion, under FRCP 60(b) to

modify the amount of a default judgment if a defendant

negligently, or even deliberately, failed to respond to a motion

for a default judgment, but equitable factors nonetheless exist

which warrant relief.

This case cries out for review by the Supreme Court

under Supreme Court Rule 10 because (a) a split exists between

the Second and Seventh Circuits, (b) the elimination of any

discretion on the part of District Court constitutes a departure

from the accepted and usual course of judicial proceedings, and

(c) the Second Circuit’s decision conflicts with important

precedent from this Court as to the discretionary nature of the

decision to vacate a default such that it is important for this

Court to call for the exercise of this Court’s supervisory powers.

The Second Circuit’s decision effectively states that no

matter how draconian and unfair a default judgment may be on

the individual facts of a case, District Court judges cannot

modify default judgments in the interests of justice if they find

physical receipt of a summons and complaint and motion for

entry of default, and a deliberate, but not bad faith, decision to

default. While defaults should certainly not be encouraged,

fundamental principles of fairness dictate that the accepted and

usual course of judicial proceedings be that District Court judges

deal with default judgments as discretionary matters. This case

illustrates exactly how unsophisticated immigrants may not

properly respond to complex legal papers for a variety of

reasons, which can only be properly evaluated by a trial judge

who listens to extremely fact specific testimony. Indeed, this

case illustrates how behavior which may seem absolutely

unforgivable on a cold printed record, may nonetheless be

ts

forgivable when a District Court Judge actually hears and

evaluates live testimony and cross-examination of someone

steeped in a different culture. The important question which this

Court should accept the case to address is that decisions, such as

the one made by Judge Kaplan, are particularly discretionary

matters which should not be subjected to reversal as a matter of

law.

Se eee

The Seventh Circuit, in Robb v. Norfolk & Western

Railway Co,, 122 F.3d 354, 359 (7 Cir. 1997), interpreted this

Court’s decision in Pioneer Inc. Services v. Brunswick, 507 U.S.

380, 113 S.Ct. 1489 (1993), as granting District Court judges

“discretion to consider the equities and determine whether . . .*

negligence is (or is not) excusable neglect.” [Emphasis in

original.] This Court’s decision in the Pioneer case strongly

indicates that the decision to vacate a default under Fed. R. Civ.

Pro. 60 is particularly discretionary and that such discretion

includes consideration of any inequity created by the default and

resulting judgment, even if “a party may choose to miss a

deadline.” 507 U.S. at 388, 113 S. Ct. at 1394. In the case at

bar, the Second Circuit took the exact opposite approach,

holding that a determination that a deliberate decision to default

precluded any consideration whatsoever of the good or bad faith

underlying the decision to default or the overall equities

attendant to the case.

4

Robb involved a claim of attorney negligence. Since this

Court has clearly stated that clients are held accountable for the

acts or omissions of their attorneys, Pioneer, 507 U.S at 396, 113

S.Ct at 1499. the neg!'zer-e of 4 pro se litigant should be judged

by the same standard. Certainly, this Court should not want to

create a standard under which District Court judges have

discretion to excuse negligence by counsel but no discretion to

grant the same relief to pro se litigants.

-8-

The Court of Appeals for the Second Circuit should not

have imposed rigid requirements that prevent justice from being

done in particular cases.

Fed. R. Civ. Pro. 60(b) grants a District Court wide

discretion to relieve party from a final judgment “upon such

terms as are just” for a variety of reasons, including “(1)

mistake, inadvertence, surprise, or excusable neglect, ... (6) any

other reason justifying relief from the operation of the

judgment.” This Court’s decision in Pioneer, which was

decided under Bankruptcy Rule 9006(b), holds that FRCP

60(b)(1) should be interpreted flexibly. The majority opinion in

Pioneer explicitly rejects the dissent’s call for a “‘bright-line’

rule of the sorts embraced by some Courts of Appeals, erecting a

rigid barrier against late filings attributable in any degree to the

movant’s negligence.” 507 U.S. at 396, 113 S.Ct. at 1498, n. 14.

The Seventh Circuit’s Robb decision accords broad discretion to

the District Court, and expressly rejects any “hard and fast”

rules eliminating discretion. The Second Circuit’s decision

effectively does the opposite by adopting a “hard and fast” and

“bright-line” rule.

The lengthy and thoughtful decisions of District Court

Judge Lewis A. Kaplan demonstrates a proper invocation of his

discretion under Rule 60(b). Judge Kaplan’s finding that the

decision to default, was “more the product of stupidity than of

malice” falls within the “range of possible explanations for a

parties failure to comply with court-ordered deadlines” which

this Court recognized in Pioneer.’ Judge Kaplan’s decision was

$

In Pioneer the majority recognized that there is a

spectrum of reasons a party may default, with acts of God at one

end, and flouting a deadline at the other end. The Court stated

that “in between lie cases where a party may choose to miss a

deadline ... through inadvertence, miscalculation or negligence.”

-9-

the result of listening to live testimony, and evaluating disputed

issues of intent and credibility, which should not be second

guessed at the appellate level. Indeed, it is submitted that Judge

Kaplan’s decisions demonstrate the type of careful evaluation of

credibility, balancing of competing interests and fashioning of a

remedy which will discourage future defaults, yet at the same

time prevent injustice, which should be praised by this Court

rather than reversed.

Research has not revealed a single case in which a

District Court made a discretionary decision to reopen a case in

the interest of justice, and was later reversed by a Court of

Appeals for the simple reason that the defendant had physically

received the summons and complaint and motion for entry of

default judgment. Indeed, most cases decided at the Court of

Appeals level involving default judgments generally involve

affirmances by the Court of a refusal to vacate a default because

it was intentional. The fact that a District Court judge will be

affirmed on a discretionary decision not to vacate an intentional

default does not mean that a District Court judge should be

reversed in the rare instance where discretion is exercised to

vacate an arguably intentional, or grossly negligent, default.

Notably, Moore’s Federal Practice 3", § 60.41[1]{c][i] at 60-89,

states that willful or deliberate conduct “mitigates against relief”

but the treatise in no way indicates that such deliberate conduct

absolutely precludes relief irrespective of any equitable

507 U.S. at 387-88, 113, S.Ct. at 1494. It is submitted that

Judge Kaplan’s finding of “stupidity” rather than “malice” was

intended to illustrate that even though the default was deliberate,

it still was not at the extreme end of the spectrum of defaults, so

that the Judge felt justified in exercising discretion. In any

event, even if the default was at the extreme end of the spectrum

identified by this Court, the decision of whether to vacate the

default still should be left to the discretion of the trial judge, and

not be absolutely precluded as a matter of law.

-10-

considerations. The Seventh Circuit’s decision in the Robb case

ends with a clear instruction to District Court judges to exercise

discretion sparingly in the case of defaults, but an

acknowledgment that the language of Fed. R. Civ. Pro. 60, as

interpreted by this Court in the Pioneer case, requires that the

ultimate decision as to whether to vacate default be left to the

discretion of the trial judge.

This case is important to the fair and efficient

functioning of the Federal Court system, because it presents a

clear case of a District Court judges recognizing that justice

requires modification of a default judgment, only to be reversed

by a Court of Appeals. Unless reversed, this case will become

dangerous precedent unequivocally slamming the doors of

justice in the face of potential litigants who may have an

explanation warranting some equitable mercy from an unduly

punitive default judgment (particularly in the context of a

statutory damage award which by definition is discretionary).

Research indicates that no cases in this procedural

posture have reached the Court of Appeals level, but it is

submitted that such situations do present themselves at the

District Court level, e.g. Rogers v. ITT Hartford, 178 F.R.D.

476, 483 (S.D. Miss (1997)(denying motion to vacate default

judgment, but modifying amount of award). It is important that

District Court judges understand that they have the discretion to

do justice, even if they are instructed to exercise such discretion

sparingly. The Second Circuit should not have stripped the

District Court of such discretion completely. Any desire which

the Second Circuit may have to clear calendars by rigidly

enforcing standards for vacating default judgments is not an

excuse for depriving a District Court judge of discretion which

clearly exists under Rule 60(b), and which is the accepted and

usual course of judicial proceedings. It is submitted that unless

this Court exercises its supervisory powers to review this case,

the Second Circuit’s decision will become precedent preventing

at $..

District Court judges from properly exercising discretion to do

justice.

Moreover, the Second Circuit’s opinion conflicts in a

general way with the well established law in every other Circuit

which holding that a District Court, pursuant to Rule 60 has “a

grand reservoir of equitable power to do justice in a particular

case,” as well as the hornbook principle that default judgments

are disfavored. See Thompson v. Kerr-McGee Refining Corp.,

660 F.2d 1380 (10" Cir. 1981) see generally Wright, Miller &

Kane, Federal Practice and Procedure, Civil, Vol. 10A, § 2693

(1998)(Judicial Discretion in Setting Aside a Default).

Since Fed. R. Civ. Pro. 60(b) is at its heart designed to

allow the District Court to fulfill the aims of justice, the decision

of the Second Circuit, which eliminates the discretion of District

Court judges, and conflicts with the discretion granted District

Court judges in other Districts, should be reviewed and

reversed’.

6

Review by this Court is particularly appropriate because

the recently enacted statutory damage provisions of the Lanham

Act, 15 U.S.C. § 1117(c), empower the District Court to enter

statutory damage awards for intentional trademark counterfeiting

of between $500.00 and $1,000,000.00. This case illustrates how

large, multi-national corporations, with substantial trademark

enforcement judgments often commence federal actions against

small immigrant retailers, who may not have the understanding or

sophistication to properly respond to legal papers (particularly

when the papers are several hundred pages thick), with the result

that default judgments are often entered. While petitioner in no

way intents to argue that intentional defaults should be

encouraged, the issue to be reviewed is whether District Court

Judges should be allowed discretion to consider reasonable

penalties for arguably intentional, or grossly negligent, defaults

«12.

fe eee CO PE EE ee TE

CONCLUSION

WHEREFORE, petitioner respectfully prays that a writ

of certiorari be granted.

Dated: November 11, 1998

LEDERMAN ABRAHAMS

LEDERMAN &

567 Broadway

Massapequa, NY 11758-5079

Tele: (516) 541-8900

Fax: (516) 541-9232

penalties for arguably intentional, or grossly negligent, defaults

where a foolish failure to respond to complex legal papers results

in a draconian penalty against an unsophisticated immigrant

shopkeeper.

-13-

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term, 1997

(Argued: July 15, 1998* Decided: September 30, 1998)

Docket Nos. 98-7642, 98-7644, 98-7726. 98-7728

GUCCI AMERICA, INCORPORATED, GUESS?, INC.,

Plaintiffs-Appellants-Cross-Appellees,

—Y,

GOLD CENTER JEWELRY, GOLD FORTUNE JEWELRY, EMPIRE

JEWELRY, GOLD ae. Se “GOLD SPOT JEWELRY,

GOLDEN TOUCH BRONX CORP., MANNY’S JOYERIA JEw-

ELRY, ORO-UNO JEWELRY, INC., SENOBAR JEWELRY,

JOHN DOES 1-8,

Defendants,

HOME Boy 2000,

Defendant-Appellee,

BIG TIME JEWELRY,

Defendant-Appellee-Cross-Appellani.

This case was heard Pursuant to an order of the Chief Judge of the United

Siates Court of Appeals for the Second Circuit under 28 U.S.C. § 46(b), cer-

tifying a judicial emergency.

6871 Apeend ‘X A 14

Before:

CABRANES and REAVLEY,* Circuit Judges,

and COVELLO,** District Judge.

Plaintiffs-appellants-cross-appellees Gucci America, Inc.

and Guess?, Inc. appeal from judgments of the United States

District Court for the Southern District of New York (Lewis

A. Kaplan, Judge) vacating and reducing the monetary por-

tion of default judgments previously entered in favor of

defendant-appellee Home Boy 2000 and defendant-appellee-

cross-appellant Big Time Jewelry. Appellants argue that the

district court erred by construing Federal Rule of Civil

Procedure 60(b)(1) to require a finding of bad faith as a pred-°

icate to a conclusion that a defendant defaulted “willfully.”

Vacated and remanded.

MILTON SPRINGUT, Springut & Bressler, New

York, NY (Robert Tilewick, on the brief), for

Appellants.

BRUCE H. LENDERMAN, Lenderman Abrahams

Lenderman and Zarett, LLP, Massapequa,

NY, for Appellee Home Boy 2000.

NOEL W. HAUSER, Noel Hauser and Associates,

New York, NY, for Appellee Big Time Jewelry.

* The Honorable Thomas M. Reavley of the United States Court of Appeals

for the Fifth Circuit, sitting by designation.

** The Honorable Alfred V. Covello, Chief Judge of the United States District

Court for the District of Connecticut, sitting by designation.

6872 1S

ee he Sabet Re at

ALFRED V. COVELLO, District Judge*

This is an appeal from a decision of the United States Dis-

trict Court for the Southern District of New York, (Lewis A.

Kaplan, Judge), vacating and reducing the monetary portions

of default judgments previously entered in favor of the appel-

lants, Gucci America, Inc. (“Gucci”) and Guess?, Inc.

(“Guess”). The appellants filed this appeal, arguing that the

district court erred in reducing the amount of the original

default judgments. The issue to be determined is whether the

district court erred in setting aside default judgments based

upon the notion that to have defaulted “willfully” for the pur-

poses of our cases interpreting Federal Rule of Civil Proce-

dure 60(b)(1), a defendant must have acted in bad faith. We

reverse the decision of the district court and reinstate the

Original monetary award.

BACKGROUND

On February 26 and 27, 1997, Gucci and Guess sued the

appellees, Home Boy 2000 (“Home Boy”) and Big Time Jew-

elry (“Big Time”), for, inter alia, trademark infringement in

violation of the Trademark Act of 1946, 15 U.S.C. § 1051, et

seq., as amended by the Anticounterfeiting Protection Act of

1996, Pub. L. No. 104-153. The compla.nts, which sought

both damages and injunctive relief, alleged that Home Boy

and Big Time were selling counterfeits of Gucci and Guess

name brand products. Home Boy and Big Time failed to

answer il: coniplaints aud, on May 6, 1997, the disti..i court

entered default judgments against them. In those default

judgments, the district court granted the injunctive relief

sought in the appellants’ complaints and retained jurisdiction

over the cases for the purpose of calculating damages.

as The Honorable Alfred V. Covello, Chief Judge of the United States District

Court for the District of Connecticut, sitting by designation.

6873 / 6

On September 17, 1997, Gucci and Guess filed their joint

memorandum in support of an award of damages against the

defaulting defendants. The memorandum indicated that

Guess sought $25,000 in statutory damages from Home Boy

and that each of the appellants sought $25,000 in statutory

damages from Big Time.! Home Boy and Big Time received

copies of the plaintiffs’ memorandum, but failed to file a

response. :

On October 20, 1997, the court amended the default judg-

ments, ordering Home Boy and Big Time individually to pay

$25,000 in statutory damages to each of the appellants.? On

December 30, 1997 and January 9, 1998, after Gucci and

Guess had executed on the judgments, Home Boy and Big

Time moved to vacate the default judgments against them

pursuant to Federal Rule of Civil Procedure 60(b).3

On January 16, 1998, the district court held a hearing on

Home Boy’s application to vacate the monetary portion of the

judgment against it. At the hearing, Keyvan Amirianfar

(“Amirianfar”), the owner of Home Boy, testified that he had,

in fact, received a copy of the complaint and the plaintiffs’

application for damages and was aware that a lawsuit was

pending against his company. Gucci America, Inc. v. Gold

Center Jewelry, 997 F. Supp. 399, 408 (S.D.N.Y. 1998).

Based on Amirianfar’s testimony, the district court concluded

that Amirianfar had “deliberately and wilfully defaulted in

Gucci did not seek statutory damages from Home Boy because the latter had

not sold counterfeit Gucci goods after the effective date of the Anticounter-

feiting Consumer Protection Act of 1996, which amended the Trademark Act

of 1946 by authorizing the award of statutory damages.

Ww

To the extent that it ordered Home Boy to pay $25,000 to Gucci, the

amended default judgment was in error. Pursuant to a stipulation of the parties,

the district court subsequently corrected its mistake.

Although the district court originally denied these motions, it subsequently

decided to reconsider the issue.

6874 17

this action. . . . Although Amirianfar has not sought to

reopen the default as to liability and injunctive relief, this

finding would have led the Court to deny any such applica-

tion.” Jd. However, the district court then went on to consider

separately Amirianfar’s failure to respond to the appellants’

application for the award of statutory damages against Home

Boy. On that issue, the district court concluded that

Amirianfar was concededly served with the application

for the entry of $25,000 judgments against Home Boy

and ignored it. As a legal matter, he was on notice of the

relief sought against him. Having considered [Amirian-

far’s] demeanor and all of the evidence in the case, how-

ever, the Court is not persuaded that his failure to

respond to that application was the product of bad faith.

And while it was deliberate in the sense that Amirianjar

made a conscious decision to pay no attention to it and

not to seek legal advice, the Court is satisfied that this

was more a product of stupidity than of malice.

Id. at 109 (emphasis added). The district court thereafter

vacated the monetary portion of the judgment against Home

Boy and permitted it to file a memorandum on the issue of

the amount of damages to be awarded.

In an opinion dated March 13, 1998, the district court con-

cluded, after consideration of Home Boy’s opposition, that

the amount of damages to be awarded against Home Boy

should be ten percent of its yearly profits. The court found

Home Bc~’’s vearly rrofits to be approximately $45,000 and,

therefore, awarded damages against that defendant in the

amount of $4,500. In addition, the court awarded attorney's

fees in the amount of $3,500, for a total amended damages

award against Home Boy of $8,000. See Gucci America, Inc.

v. Guess, Inc., 997 F. Supp. 409, 412 (S.D.N.Y. 1998).

6875 f .

With respect to Big Time, the court noted, in its January

29, 1998 opinion, that Big Time “acknowledge[d] that its

default with respect to the complaint was knowing and delib-

erate.” Gucci America, Inc., 997 F. Supp. at 405. The district

court also indicated that Big Time “[did] not deny having

been served with plaintiffs’ joint application for the impo-

sition of statutory damages of $25,000 per trademark.” Jd.

Nonetheless, the district court decided to grant Big Time a

hearing on the issue of whether its failure to respond to the

application for statutory damages was excusable.

On March 23, 1998, the district court held a hearing on Big

Time’s application to vacate the monetary portion of the judg-

ments against it. At the hearing, Behzad Zarrin (“Zarrin”), the

owner of Big Time, testified that he had received a copy of the

complaint and that he had contacted an attorney shortly there-

after. He further testified that he was aware that his company

was being sued, that he received the plaintiffs’ brief on dam-

ages and that he was aware that the plaintiffs sought an award

of damages. The court concluded that

the question of whether the default with respect to mon-

etary relief here was willful is a very ciose one, certainly

in the sense that Mr. Zarrin knew that relief was being

sought against him of a monetary nature and deliberately

decided not to contest it. It was willful in that sense.

On the other hand, I am not entirely persuaded that he

acted in bad faith at that point. . . . [T]he notion that

(Zarrin} advances—neamely, that there was not really

going to be a problem here as long as he was not selling

counterfeit goods and that he stopped [selling them]—is

not manifestly unreasonable on its face. So I think, as I

Say, it is a very close call.

The court vacated the monetary portion of the judgments

against Big Time and set a briefing schedule with respect to

6876 14

:

%

3

:

2

!

the issue of the amount of damages to be awarded. On April

10, 1998, after consideration of the parties briefs, the district

court entered an order amending the amended judgments with

respect to Big Time, to provide that each of the plaintiffs

would recover monetary damages from Big Time in the

amount of $7,500, which included $1,250 in attorneys’ fees.

On May 6, 1998, Gucci and Guess filed this appeal, argu-

ing that the district court erred in amending the monetary

portions of the judgments. Big Time filed a cross appeal,

arguing that the district court should have vacated the default

judgments entered against Big Time in their entirety.

We reverse the order amending the amount of the judg-

ments and remand to the district court for reinstatement of

the original monetary awards against Home Boy and Big

Time. The cross-appeal is dismissed.

DISCUSSION

“A “district court’s grant or denial of relief under Rule

60(b), unless rooted in an error or law, may be reversed only

for abuse of discretion.’ ” DeWeerth v. Baldinger, 38 F.3d

1266, i272 (2d Cir. 1994) (quoting Twelve John Does v. Dis-

trict if Columbia, 841 F.2d 1133, 1138 (D.C. Cir. 1988)). We

conclude that the decision here involved an error of law.

Federal Rule of Civil Procedure 60(b)(1) provides, in rel-

evant part, as follows:

(b) ‘Mistakes; Inadvertence; Excusable Neglect;.. .

On motion and upon such terms as are just, the court

may relieve a party or a party’s legal representative from

a final judgment, order, or proceeding for the following

reasons: (1) mistake, inadvertence, surprise, or excusable

neglect;. . .

6877 10

Fed. R. Civ. P. 60(b)(1). In considering a motion to vacate

pursuant to rule 60(b)(1), in the default judgment context,

“courts have gone beyond the bare wording of the rule and

established certain criteria which should be considered im

deciding whether the designated standards have been satis-

fied.” Brien v. Kullman Industries, Inc., 71 F.3d 1073, 1077

(2d Cir. 1995). In this circuit, it is well settled that those cri-

teria are as follows: ‘“ ‘(1) whether the default was willful;

(2) whether defendant has a meritorious defense; and (3) the

level of prejudice that may occur to the nondefaulting party

if relief is granted.’ American Alliance Ins. Co., Ltd. v.

Eagle Ins. Co., 92 F.3d 57, 59 (2d Cir. 1996) (quoting Davis

v. Musler, 713 F.2d 907, 915 (2d Cir. 1983)).

On this appeal, we conclude that the district court was in

error with respect to its assessment of the first element, that

is, its conclusion that the defendants actions were not willful

because they were not in bad faith.

In construing Rule 60(b)(1) as it did, the district court

appears to have misinterpreted our decision in American

Alliance. In that case, we held that a default caused by a fil-

ing mistake on the part of the defendant's in-house counsel

was not “willful” for the purposes of our cases interpreting

Rule 60(b)(1). See id. at 61. The rationale for our holding

was that we “s[aw] no reason to expand this Court’s will-

fulness standard to include careless or negligent errors in the

efault judgment context.” Jd.

In the course of our analysis in American Alliance, we

observed that this Court “will look for bad faith, or at least

something more than mere negligence, before rejecting a

claim of excusable neglect based on an attorney's or a liti-

gant’s error.” Jd. at 60. We illustrated our point by contrast-

ing two cases, one involving a negligent filing error (where

we found excusable neglect) and the other involving a delib-

i

6878 2

erate decision to default (where we found that the default was

not excusable). See id. Later in the Opinion, we further

observed that the public interest in deterring abuses of pro-

cess would be Sufficiently served “by enforcing those

Cefaults that arise from egregious or deliberate conduct.” Jd.

at 61.

It seems to us clear that the analysis in American Alliance

did not intend to Suggest that a finding of bad faith is a nec-

essary predicate to concluding that a defendant acted “will-

fully” for the Purposes of Rule 60(b)(1). Instead, we merely

Sought to contrast defaults caused by negligence, which may

in some cases be excusable, with defaults resulting from

deliberate conduct, Which are not excusable. Cf. Securities

and Exchange Commission vy. McNulty, 137 F.3d 732, 738 (2d

Cir. 1998) (citing American Alliance for the Proposition that,

in the context of a default, “willfulness” refers to “conduct

that is more than merely negligent or Careless”). Thus, while

@ Cetermination that the defendant acted in bad faith would

Certainly support a finding of “willfulness,” it is Sufficient

that the defendant defaulted deliberately.

The evidence here demonstrates that Home Boy and Big

Time, through their Principals, Amirianfar and Zarrin, were

served with the complaints and, subsequently, with the plain-

tiffs’ joint application for damages. Amirianfar and Zarrin

“ere Doth aware that a lawsuit was pending against them and,

pecifically, that Gueci and Guess sought damages of

$25,000, per trademark violation, against their respective

ompanies. Most Significantly, the district court specifically

nat Amirianfar and Zarrin made deliberate decisions

c

found t

not tO respond to the plaintiffs’ damages application.

ce the trial court here incorrectly required bad faith as

Precicate to a determination of Willfulness and since the

cord reflects that Home Boy and Big Time deliberately and

ie

6879

intentionally allowed default judgments to enter against

them, we reverse and order reinstatement of the original -

monetary judgments. See American Alliance Ins. Co., Ltd. v.

Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996).

We have examined the remaining arguments of both Home

Boy and Big Time, including Big Time’s arguments on cross-

appeal, and find them to be without merit.

CONCLUSION

For the foregoing reasons, we conclude that the district

court erred in granting the motion to vacate the damages por-

tion of the judgments and, with respect to that issue, the deci-

sion of the district court is hereby reversed. The case is

remanded for the entry of the original monetary judgments

against Home Boy and Big Time in the amounts of $25,000

and $50,000, respectively.

In all other respects, the decision of the district court is

hereby affirmed.

6880

997 F.Supp. 409, Guess?, Inc. v. Gold Center Jewelry, (S.D.N.Y. 1998)

*409 997 F.Supp. 409

GUESS?, INC., Plaintiff,

v. >

GOLD CENTER JEWELRY, et al., Defendants.

No. 97 Civ. 1374(LAK).

United States District Court,

S.D. New York.

March 13, 1998.

Upon entry of default judgment in favor of trademark owner in action

against jewelry store arising from sale of counterfeit goods, trademark

owner moved to fix amount of statutory damages. The District Court,

Kaplan, J., held that: (1) trademark owner was entitled to statutory

damages in amount of $4,500, and (2) owner was entitled to attorney

fees in amount of $3,500.

So ordered.

MEMORANDUM OPINION

KAPLAN, District Judge.

The history of this action is fully set forth in Gucci America, Inc. v.

Gold Center Jewelry, (FN1) familiarity with which is assumed. The

matter now is before the Court on the plaintiff's motion to fix the amount

of statutor: 4omages 2gainst defendant Home Boy 2000. against which

the Court has entered a default judgment as to liability for wilful

trademark infringement and counterfeiting.

Facts

Home Boy 2000 is a small retail jewelry store operated by JAF, Inc.

24 Apeer dix

and its principal, Kevin Amirianfar. It is located in the

Bronx.

On February 26, 1996, an investigator acting on behalf of plaintiff

visited Home Boy and observed various medallions, earrings and

bracelets bearing the "Guess?" trademark. On the following day,

plaintiff's counsel sent a cease and desist letter to Home Boy. An

investigator therefore returned to the store on June 6, 1996 and

purchased two additional "Guess?" trademarked items. A third visit was

made on January 28, 1997, at which time the defendant still was selling

"Guess?" items, one of which was purchased by the investigator.

This action was commenced on or about February 27, 1997. The

complaint alleges that this defendant wilfully sold counterfeit

"Guess?" items and continued to do so after receiving plaintiff's demand

that it cease and desist. (FN2) Defendant's default

admitted these well pleaded factual allegations.

Mr. Amirianfar's conduct with respect to the litigation itself already

has been described in the Gucci opinion. Suffice it to

say here that Mr. Amirianfar's behavior was irresponsible and, to some

degree, deliberately obstructive. (FN3) Moreover, the

affidavit he submitted in support of the motion to vacate the monetary

award previously entered against him was inaccurate

in important respects.

At the hearing held on the motion to vacate and in a subsequent

declaration, Mr. Amirianfar testified in substance that his dealings in

counterfeit Guess? merchandise were de minimis. He contends also that

he is a person of limited means and that any award should be no more

than $3,500.

Discussion

Congress passed The Anticounterfeiting Consumer Protection Act of

1996 in an effort to counter the unprecedented escalation in

trademark counterfeiting activities in this country. (FN4) Section 7 of

the Act, (FNS) provides that:

-

23

"In a case involving the use of a counterfeit mark ... in connection with

the sale, offering for sale, or distribution of goods

and services, the plaintiff may elect, at any time before final judgment

is rendered by the trial court, to recover, instead of

actual damages and profits under subsection (a) of this section, an

award of statutory damages for any such use in connection

with the sale, offering for sale, or distribution of goods or services in

the amount of--

"(1) not less than $500 or more than $100,000 per counterfeit mark

per type of goods or services sold, offered for sale, or

distributed, as the court considers just; or

"(2) if the court finds that the use of the counterfeit mark was willful,

nor more than $1,000,000 per counterfeit mark per

type of goods or services sold, offered for sale, or distributed, as the

court considers just."

The creation of this alternative to the more traditional damage

remedies of recovery of the plaintiff's damages or the defendant's profits

reflected a harsh reality--counterfeiters often do not keep or secrete

records of their unlawful activities, thus making proof of the extent of

the plaintiffs injury or the counterfeiters’ profits impossible as a practical

matter. (FN6)

The statute itself does not afford much guidance as to how the courts

are to fix appropriate amounts in statutory damage cases. But there is an

analogy--Section 504(c) of the Copyright Act (FN7) and its predecessor

under the 1909 Act, both of which provide for awards of statutory

damages for willful copyright infringement. Hence, cases decided under

the Copyright Act, which

deals w.* = :'milar problem and a similar legislative grant of discretion,

afford guidance here. (FN8) And while there is no

precise formula, even under the Copyright Act, for the determination of

exactly what damages are just in a given case, the

defendant's intent and the need to deter future violations are appropriate

considerations along with the economic benefits and

detriments to the plaintiff and defendant. (FN9)

In this case, defendant wilfully infringed the plaintiff's mark by selling

counterfeit goods even after being warned not to do so. Indeed, he does

not contend otherwise. While the Court accepts that his sales of

counterfeit goods were not enormous because the business is a modest

one, the Court has no confidence at all that they were as small as Mr.

Amirianfar, whose credibility is subject to serious question in a number

of respects, claimed. There is no way to determine the damage to

plaintiff or the benefit to defe.idant, given the available credible

evidence. Further, Mr. Amirianfar’s conduct during the course of the

litigation was entirely inappropriate. And there obviously is a need for

deterring even small retail operations *412. conducted by persons who

are neither wealthy nor sophisticated from dealing in counterfeit goods.

Mr. Amirianfar contends that his annual take home from the business

is about $35,000. The Court infers that the figure is net

of taxes, so that the annual profitability of the business, assuming

arguendo the accuracy of Mr. Amirianfar's figure, probably is in the

realm of $45,000. The Court finds that statutory damages of ten percent

of that amount are appropriate here, taking into account the inability to

determine the extent to which the defendant profited from its unlawful

activities, the willfulness ofits conduct, and the need to deter others

from engaging in similar activities.

Accordingly, the Court fixes the statutory damages at

$4,500.

Section 35(a) of the Trademark Act, as amended, (FN10) permits the

court to award attorney's fees in "exceptional cases." "Usually, the type

of conduct that has sufficed to make out an ‘exceptional case’ is

intentional, deliberate or willful infringement." (FN11) Here, the

willfulness of the infringement is established. Moreover, defendant's

conduct with respect to the litigation has caused needless expense for the

plaintiff and unnecessarily consumed a great deal of the Court's time. In

consequence, an award of attorney's fees is appropriate. Taking into

account the effort that plaintiff's counsel have devoted to the case, the

value of such services in this market, the fact that judgment was obtained

by default, plaintiff's means, and the award of statutory damages, the

Court finds that a reasonable attorney's fee with respect to this defendant

nm

ie |

is $3,500.

Conclusion

The Clerk shall amend the amended judgment in favor of plaintiff and

against defendant Home Boy 2000 as follows:

1. The name of the defendant shall be changed from Home Boy 2000

to "JAF, Inc., d/b/a Home Boy 2000."

2. Plaintiff shall recover monetary damages and attorney's fees against

the defendant in the total amount of $8,000.

SO ORDERED.

FN1. 997 F.Supp. 399 (S.D.N.Y.1998).

FN2. Cpt. pp 15-16, 21-22, 27.

FN3. 997 F.Supp. at 406-408.

FN4. See generally H.R.REP. NO. 556, 104th Cong., 2d Sess. (1996),

reprinted in 1996 U.S.C.C.A.N. 1074 (1996); S.REP. NO. 177,

104th Cong., 2d Sess. (1995),1995 WL 709282 (1995).

FNS. 15 U.S.C. s 1117(c).

FN6. S.REP. NO. 177, 104th Cong., 2d Sess. (1995), 1995 WL 709282,

at *11 (1995).

FN7. 17 U.S.C. s 504(c).

FN8. 4 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS

AND UNFAIR COMPETITION s 30:95, at 30-158 (4th ed.1997)

(hereinafter MCCARTHY).

FNQY. E.g., F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S.

228, 233, 73 S.Ct. 222, 97 L.Ed. 276 (1952); N.A.S. Import °

“)

-

Corp. v. Chenson Enter., Inc., 968 F.2d 250, 252-53 (2d Cir.1992);

Fitzgerald Pub. Co. v. Baylor Pub. Co., 807 F.2d 1110, 1117 (2d

Cir.1986).

FN10. 15 U.S.C. s 1117(a).

FN11.4 MCCARTHY s 30:100, at 30-167 (collecting cases).

14

997 F.Supp. 399, Gucci America, Inc. v. Gold Center Jewelry, (S.D.N.Y.

1998)

*399 997 F.Supp. 399

GUCCI AMERICA, INC., Plaintiff,

v.

GOLD CENTER JEWELRY, et al., Defendants.

GUESS?, INC., Plaintiff,

v.

GOLD CENTER JEWELRY, et al., Defendants.

Nos. 97 Civ. 1354(LAK), 97 Civ. 1374(LAK).

United States District Court,

S.D. New York.

Jan. 29, 1998.

Manufacturers of trademarked-goods sued jewelry stores for selling

counterfeit merchandise after receiving cease and desist letters. On

defendants’ motions to vacate default judgments, the District Court,

Kaplan, J., held that: (1) defaulting parties received adequate notice in

plaintiffs’ joint memorandum in support of entry of judgment for

damages of trademark owners’ intention to seek statutory damages for

sale of counterfeited merchandise, even though complaint itself did not

mention statutory damages; and (2) even though jewelry store owner

deliberately and wilfully defaulted and deliberately obstructed progress

of litigation by his actions at deposition ordered by court for calculation

of damages, issue of amount of statutory damages, but not basic question

of liability, had to be reopened.

Motions granted in part and denivu in part.

MEMORANDUM OPINION

KAPLAN, District Judge. [4 pprnd el eee

These matters are before the Court on motions to vacate default

judgments entered against many of the defendants on claims of violation

of the Trademark Act of 1946 as amended by the Anticounterfeiting

Consumer Protection Act of 1996 (the "1996 Act"). Briefly stated, the

plaintiffs are manufacturers of trademarked goods marketed under the

Gucci and Guess? brands. The defendants all appear to be retail jewelry

stores doing business in the Bronx. Each i is alleged to have sold

counterfeit Gucci and Guess? merchandise even after agreeing to cease

and desist from doing so. In view of the plethora of post-judgment

applications, some of them repetitive, and two notices of appeal filed by

counsel for a number of the defendants, it is essential to begin with a

detailed summary of the course of proceedings in these cases.

I

Both actions were commenced in late February 1997. The complaints

make similar allegations of trademark infringement and counterfeiting.

Both sought damages and injunctive relief. The Gucci complaint named

as defendants Gold Center Jewelry ("Gold Center"), Home Boy 2000

("Home Boy"), Big Time Jewelry ("Big Time"), Gold Fortune Jewelry

("Gold Fortune") and John Does 1-8. The Guess complaint also named

Gold Center, Home Boy, Big Time and twenty John Doe defendants. In

addition, it named Empire Jewelry ("Empire"), Gold "N" Ice ("Gold"),

Gold Spot Jewelry ("Gold Spot"), Golden Touch Bronx Corp. ("Golden

Touch"), Manny's Joyeria Jewelry ("Manny's"), Oro-Uno Jewelry, Inc.

("Oro-Uno") and Senobar Jewelry ("Senobar"). Affidavits purportedly

reflecting service on each of the defendants except Gold Fortune and the

Does were filed in April 1997. (FN1)

The Default Judgments

With the exception of Gold Spot, which moved unsuccessfully to

dismiss the Guess complaint pursuant to Rules 12(b)(4) and (5), none of

the defendants appeared in either action. (FN2) In consequence, on May

6, 1997, the Court granted plaintiffs' applications for default judgments

in both cases as to each of the defaulting defendants--Gold Center, Home

Boy and Big Time in both cases and Empire, Gold, Golden Touch,

Manny's, Oro-Uno and Senobar in the Guess case. The judgments

oO!

granted principally injunctive relief and retained jurisdiction to award

damages, including statutory damages, as well as attorneys’ fees and

costs. In June 1997, the Court granted plaintiffs’ applications for leave

to conduct discovery against the defaulting defendants in order to enable

plaintiffs to present their damages cases, and several of the defaulting

defendants were deposed.

The Damage Awards

On September 17, 1997, the plaintiffs filed papers in support of

applications for the entry of judgments for damages pursuant to Rule

55(b)(2). The-applications specifically sought awards of statutory

damages pursuant to the 1996 Act in the amount of $25,000 against each

defaulting defendant in each case. Although the applications were

served on each defaulting defendant, none appeared or filed any papers

in response. By orders entered October 16, 1997, the Court granted the

applications and directed the Clerk to modify the judgments previously

entered to award $25,000 plus costs and attorneys' fees against each

defaulting defendant in each case. The Court found that the defendants

had engaged in deliberate and wilful counterfeiting, even after receiving

cease and desist letters. The amount of damages, the Court concluded,

Was necessary to deter defendants from future infringing activities.

Amended judgments were filed on October 20, 1997.

The Applications to Vacate the Judgments

The first of the applications to vacate the default judgments was filed

in the Guess case on behalf of Empire by the law firm of Tratner &

Molloy on October 31, 1997. It argued that its default was excusable

because it was the product of its principal's limited abilities in the

English language. The cvurt, however, denied the motion becaus< the

record showed that Empire had retained Tratner & Molloy in June 1997,

the firm represented it at a deposition conducted on June 30, and Empire

offered no excuse for the lengthy delay in seeking relief from the

judgment. (FN3)

Gold Center, Golden Touch, and Oro-Uno 32

The issuance of writs of execution prompted additional applications.

On December 3, 1997, Gold Center, Golden Touch and Oro-Uno--all

represented by Mr. Hauser--moved by orders to show cause to set aside

the judgments against them, Gold Center in both cases and Golden

Touch and Oro-Uno in the Guess case.

Gold Center argued in substance that it had assumed that plaintiffs

would seek no relief against it by virtue of the Court's comment at a

pretrial conference, attended by Gold Center's principal (in June 1997),

that the matter probably would resolve itself if he cooperated with

plaintiffs. He nonetheless admitted service of process, did not contest

receipt after the conference of the application to award damages against

him, and offered no other excuse for its default. The Court denied Gold

Center's motion for failure to establish excusable neglect. (FN4)

Golden Touch denied having been served while Oro-Uno contended

that it had been misled by plaintiffs’ counsel. Following an evidentiary

hearing on these two motions, the Court found that Golden Touch had

not been served and that Oro-Uno had not been misled by plaintiffs’

counsel. It vacated the judgment against Golden Touch and denied

Oro-Uno's motion. (FNS)

Home Boy

On December 30, 1997, Home Boy, represented by the Lederman firm,

moved in both cases by order to show cause to vacate the judgments

against it. During argument on January 16, 1998, counsel for Home Boy

indicated that it seeks to vacate only the award of money damages and

an opportunity to litigate the amount that should be awarded. (FN6)

Gold and Senobar

On December 31, 1997, Mr. Hauser presented another order to show

cause in the Guess case, this one seeking a temporary restraining order

and vacatur of the judgments against Gold and Senobar. While the

Court declined to issue the restraining order, (FN7) it made the motion

to vacate returnable on January 9, 1998. 33

Big Time and Manny's

On January 9, 1998, Mr. Hauser appeared with still another order to

show cause, this one captioned in both cases. The order itself sought a

stay of all enforcement efforts and to bring on a motion to vacate the

defaults as to Big Time (both cases) and Manny's (Guess case). The

moving affidavit, however, sought to vacate the judgments against not

only Big Time and Manny's, but also against Gold Center, Gold, Golden

Touch, Oro-Uno (a/k/a A & D) and Senobar although the judgment

against Golden Touch already had been vacated. (FN8) It argued, for the

first time, that the monetary relief granted against the defendants

exceeded in kind and amount that prayed in the complaint and therefore

was impermissible under Rule 54(c). While the Court declined to issue

the requested stay, it made the motion returnable on January 15, 1998.

The Appeals and Other Proceedings

Confusing matters still further, Mr. Hauser filed notices of appeal on

January 9, 1998 in both cases. Each purports to appeal on behalf of

"defendants"--although Mr. Hauser does not represent all of the

defendants--from the judgments against the defendants and the orders

refusing to vacate the default judgments. The appeals in the Gucci case,

however, were dismissed on January 22, 1998 and the mandate filed in

this Court on the following day.

On January 15, 1998, Guess?, Inc. stipulated with Gold, Manny's and

Senobar to vacate the monetary provisions entered against them in the

Guess case. Similarly, Gucci America, Inc. agreed to vacate the

monetary provisions of the judgments entered against Home Boy in the

Gucci case.

Finaity, wie Cour held an evidentiary hearing on January 16, 1998

with respect to the Home Boy motions in both cases.

In summary then, the matters stand as follows:

1. The pending motions are as follows: (a) by Home Boy in the Guess

case to vacate the damage award against it, (b) by Gold, Manny's and

34

Senobar to vacate the remaining nonmonetary portions of the judgments

against them in the Guess case, and (c) if the Court regards the

applications as properly before it, by Big Time, Gold Center and

Oro-Uno to vacate the judgments against them, Big Time and Gold

Center in both cases and Oro-Uno in Guess.

2. Absent relief from one or more of the default judgments, the Gucci

case has been resolved as to all defendants.

3. The Guess case remains pending as to Golden Touch irrespective of

the outcome of these motions, as the default judgment against it was

vacated.

4. A notice of appeal of uncertain effect remains pending in the Guess

case on behalf of unspecified defendants.

II

The starting point is to determine the effect of the pending notice of

appeal on this Court's jurisdiction to decide the matters now before it in

the Guess case.

In general, "the filing of a notice of appeal is an event of jurisdictional

significance--it confers jurisdiction on the court of appeals and divests

the district court of its control over those aspects of the case involved in

the appeal." (FN9) Rigid enforcement of such a mechanical rule,

however, would ill serve the rule's objective of promoting efficiency by

preventing two courts from addressing the same matter at the same time.

(FN10) Moreover, it would deliver into the hands of each litigant the

ability to freeze matters in the district court simply by filing a notice of

appeal, no matter how frivolous. (FN11) In consequence, district courts

are not deprived of jurisdiction by the filing of untimely or manifestly

defective appeals and appeals from non-appealable orders. (FN12)

The notice of appeal did not transfer jurisdiction over the amended

default judgment in the Guess case to the Court of Appeals. The

amended default judgment was entered on October 20, 1997. The notice

of appeal was not filed until January 9, 1998, considerably more than

3

i i i a a

thirty days thereafter. In consequence, insofar as the notice of appeal

seeks review of the amended default judgment, it is untimely.

The notice seeks review also of unspecified subsequent orders

declining to vacate the default judgments. But there are two additional

problems.

First, the only defendants as to which the Court had denied motions to

vacate on or before the date of the notice of appeal were Empire, Gold

Center and Oro-Uno (a/k/a A & D Jewelry). The order denying the

motion to vacate made on behalf of Empire was entered on November

17, 1997. The January 9, 1998 notice of appeal, even assuming that Mr.

Hauser was authorized and intended to file it on Empire's behalf, was

untimely insofar as Empire is concerned.

Second, Mr. Hauser does not represent Empire and lacked authority to

file the notice on its behalf, assuming arguendo that it was his intention

to do so.

Accordingly, the only orders denying motions to vacate that are the

subjects of a timely, authorized and pending notice of appeal are the

December 17 and December 29 orders denying the motions of Gold

Center and Oro-Uno in the Guess case. (FN13) In consequence, the sole

effect of the notices of appeal filed on January 9, 1998 is to preclude this

Court from entertaining--insofar as it relates to Gold Center and

Oro-Uno--Mr. Hauser's request, contained in the affidavit in support of

his January 9, 1998 motion, that the default judgment in the Guess case

be vacated on the ground that the relief granted exceeds that sought in

the complaint and therefore ran afoul of Rule 54(c). (FN14)

Il

Having thus cleared the underbrush, the Court turns first to that aspect

of Mr. Hauser's January 9, 1998 application which seeks to vacate the

judgments against Big Time in both cases and against Gold Center in the

Gucci case on the ground that the relief granted exceeds that demanded

in the complaint and therefore violates Rule 54(c). (FN15)

3b

The complaints in these cases each alleged that the plaintiff had no

adequate remedy at law and had been damaged in an undetermined

amount believed to be in excess of $25.000. The prayers for relief

sought, among other things, injunctive relief and "[t]hat defendants be

required to account to *404 plaintiff Guess for all profits and damages

resulting from defendants’ respective infringing activities and that the

award to plaintiff ... be increased as provided for under 15 U.S.C. 1117."

The moving defendants argue that the complaints thus did not seek

statutory damages and, in any case, that the awards of $25,000 in

Statutory damages against each defendant exceeded the amount prayed

for in the demand for judgment. In consequence, they contend,

the judgments violated Rule 54(c) and must be set aside.

Rule 54(c) of the Federal Rules of Civil Procedure states:

“A judgment by default shall not be different in kind from or exceed in

amount that preyed for in the demand for ipdeoert

Except as to a party against whom a judgment is entered by default,

every final judgment shall grant the relief to which the party in whose

favor it is rendered is entitled, even if the party has not demanded such

relief in the party's pleadings."

The rationale for the rule, insofar as it applies to default judgments, "is

that default is tantamount to consent to the entry of judgment, but this

consent is effective only to the extent that it was duly informed." (FN16)

In these cases, the only monetary relief sought in the complaints, even

read generously in favor of the plaintiffs, was an accounting for

defendants’ profits and damages sustained by plaintiffs, "increased as

provided for under 15 U.S.C.s 1117." The latter phrase obviously

refers to Sections 1117(a) and (b), which permit courts to increase

monetary awards to as much as treble the amount of plaintiff's actual

damages or defendant's actual profits as established by the plaintiff.

Nevertheless, the plaintiffs here elected, following the entry of default

judgments as to liability and injunctive relief, to seek awards of statutory

damages pursuant to Section 1117(c), which permits a prevailing

plaintiff so electing to recover up to $1 million for willful use of each

counterfeit mark per type of goods or services sold as an alternative to

37

actual damages or an accounting of the defendant's profits.

Statutory damages under Section 1117(c) are different in kind from

actual damages or an accounting of the defendant's profits, most

fundamentally because there is no necessary mathematical relationship

between the size of such an award and the extent or profitability of the

defendant's wrongful activities. Surely it cannot be said that even a

defendant who deliberately elects to default in a suit seeking only actual

damages or an accounting of profits, secure in the knowledge that no

substantial award can be entered because the defendant's infringing sales

were minimal, knowingly consents to the entry of an award of up to $1

million. In consequence, if these defendants simply had been served

with the summonses and complaints and with nothing further prior to the

award of statutory damages against them, the statutory damages awards

could not stand in light of Rule 54(c). (FN17) These defendants,

however, were not thus surprised. Each admittedly was served with

plaintiffs’ joint memorandum in support of entry of judgments for

damages, which clearly elected to pursue statutory damages, rather than

actual damages or an accounting of profits by the defaulting defendants.

Indeed, page | of plaintiffs’ memorandum explained that Section 7 of the

1996 Act (FN18) permitted imposition of damages of up to $1 million

and "request[ed] that a judgment be entered against each of the

defaulting defendants of $25,000 per infringing mark." Thus, anyone

who gave a cursory reading even to the first page had to have known that

judgments of $25,000 were sought by each plaintiff against each

defaulting defendant. Yet none of the defaulting defendants responded

to that application.

While Rule 54(c) must be enforced strictly in order to prevent the

consent to the entry of judgment that is implicit in a default from being

expanded beyond the defaulting party's intentions, there is no reason to

permit it to be used as a shield when a defaulting party has full

knowledge of the relief sought against it but nevertheless ignores the

proceedings. As long as the defaulting party receives adequate notice of

the relief sought and is afforded a meaningful opportunity to oppose it,

the purpose of Rule 54(c) is served and any variance between the relief

granted and that contained in the prayer for relief in the complaint is

immaterial. (FN19) In Trans World Airlines, Inc. v. Hughes, (FN20) the

3

notorious case in which a $145 million default judgment was awarded

against TWA based on the failure of Howard Hughes to appear for a

deposition, for example, the Second Circuit affirmed against Rule 54(c)

attack the district court's decision to permit amendment of the prayer for

relief to increase the damages sought after the default occurred. (FN21)

Although it did not discuss the point in detail, the decision clearly rested

on the fact that TWA had a full opportunity to contest the amount of the

damages following the amendment. Similarly, in Appleton Electric Co.

v. Graves Truck Line, Inc., (FN22) the Seventh Circuit upheld default

judgments that awarded relief that was not spelled out with precision in

the complaints because the defendant had been served with a proposed

default order which contained a formula that permitted the defendant to

determine the amount of the judgments that would be entered against it.

(FN23)

Big Time here admits that it was served with the summons and

complaint and “with papers which I am now informed constituted the

application of the plaintiffs for a default judgment.” (FN24) It claims to

have defaulted “upon the understanding that the plaintiffs were seeking

an Injunction against our sale of merchandise which were counterfeit or

spurious,” (FN25) relief to which it did not object. Thus, it

acknowledges that its default with respect to the complaint was knowing

and deliberate. (FN26) Nor does it not deny having been served with

plaintiffs’ joint application for the imposition of statutory damages of

$25,000 per trademark. But it contends that it never understood that the

plaintiffs were seeking monetary damages. (FN27)

The situation of Gold Center is similar. Its principal admitted receipt

of process and with “being familiar with the claims asserted.” (FN28)

Although the complaints clearly sought damages, albeit not statutory

damages, he contended that, during the period from the commencement

of the action through the June 1997 depositions conducted by plaintiffs,

he "was under the impression that the plaintiffs were not seeking

monetary relief." (FN29) He admitted also that he was served "with a

voluminous set of legal documents" in September or October--the only

documents meeting that description in the relevant time period being

plaintiffs’ joint application for awards of statutory damages--but claimed

that he did not understand them. (FN30) Although he was sufficiently

22

oI

curious to telephone plaintiffs’ counsel, he did not reach them and, as far

as the record discloses, never sought legal advice of his own. (FN31)

*406 In these circumstances, the Court holds tha? the monetary relief

granted by the amended judgments is valid notwithstanding that it differs

in kind from that referred to in the prayers for judgment in the

complaints. The plaintiffs served each of the defaulting defendants with

papers which very clearly explained that they were seeking statutory

damages in the amount of $25,000 per trademark from each defendant.

The defaulting defendants therefore were afforded notice and an

Opportunity to be heard with respect to the relief to be granted against

them. In view of Trans World Airlines and Appleton, there is no Rule

54(c) infirmity in the judgments.

That is not the end of the matter, however. Although the issue has not

been raised by counsel, the defaulting defendants’ contentions that they

did not understand the application for statutory damages that was served

upon them raises the question whether relief should be granted from the

monetary awards on the ground that their failure to respond was the

product of mistake, inadvertence or excusable neglect. (FN32) This

requires consideration of "(1) whether the default was willful; (2)

whether defendant has a meritorious defense; and (3) the level of

prejudice that may occur to the non-defaulting party if relief is granted."

(FN33) Relevant too is the length of any delay between the default and

the application for relief and the reasons for it. (FN34)

The Court assumes arguendo that each of these defendants has a

meritorious defense with respect to the amount of statutory damages as

that phrase has been defined by the Second Circuit. Each has made

assertions in its affidavit that would "give the fact finder some

determination to make." (FN35) While the plaintiffs would suffer some

prejudice if *h= amount of statutory damages were reopened, the extent

of that prejudice would be limited--and certainly far more limited than if

the issue of liability were reopened. In consequence, the Court's

judgment as to whether to vacate the monetary awards will depend

significantly on its assessment of the credibility of the principals of Big

Time and Gold Center. Accordingly, the Court will conduct an

evidentiary hearing limited to the issue whether these defendants’ failure

U0

to respond to the joint application for the imposition of statutory

damages was wilful. (FN36)

IV

Home Boy seeks only to vacate the awards of monetary relief. (FN37)

In view of the stipulation by Gucci America to vacate the monetary relief

procured on its behalf, the motion remains viable only to the extent it

relates to the monetary award in favor of Guess?, Inc.

As indicated above, the factors relevant to the question whether to

vacate the monetary pertion of the default judgment against Home Boy:

"(1) whether the default was willful; (2) whether defendant has a

meritorious defense; and (3) the level of prejudice that may occur to the

non-defaulting party if relief is granted.” (FN38) In this case, Home Boy

has a meritorious defense in the requisite sense--it is in a position to

advance facts that were not previously before the Court that could be

material to the determination of the appropriate amount of statutory

damages. (FN39) *407 (FN39) Plaintiff is situated no differently with

respect to prejudice were the amount of statutory damages against this

defendant reopened than in the case of the defendants discussed

above--there would be some prejudice, but not so much to preclude

reopening in an otherwise appropriate case. Wilfulness, however, is a

harder issue.

Home Boy actually is a name under which JAF, Inc.--a corporation

wholly owned by Keyvan Amirianfar, who emigrated from Iran some

years ago--conducts a small retail jewelry business at the corner of

Fordham Road and Webster Avenue in the Bronx. (FN40) In order to

place the motion to vacate in proper context, it is necessary to

recapitulate the history of the lawsuit to the extent it relates to this

defendant.

Home Boy was served with the summons and complaint, which were

left in its store in Amirianfar’s presence, on March 7, 1997. (FN41) The

default judgment was entered on May 6, 1997. Home Boy was served

with a notice of deposition, which was served pursuant to a court order

the object of which was to afford plaintiff discovery on the issues of

Yl

damages in preparation for the inquest, in June 1997. (FN42) On June

25, 1998, Amirianfar appeared pursuant to the notice at the offices of

plaintiff's counsel--thus demonstrating that he read the notice of

deposition--but refused either to identify himself or be sworn. (FN43)

When Amirianfar sought to turn the tables and question plaintiff's

counsel, the following colloquy occurred:

"Q [Mr. O'Neill] I am asking the questions.

"A [Mr. Amirianfar] Don't push me. I am not going to lose, you are

going to lose. I am not going to lose a penny.

"Q Similarly, if 1 don't understand your answers or your answers are

incomplete I will ask you to explain them. The deposition

of defendant Home Boy 2000 is being taken in Gucci Inc. versus Gold

Center, et al., Civil Action 97 Civ. 1354.

"A David, I am leaving, I don't make a deal with you. Let the marshal

come to my store.

"Q Let the record reflect that the deponent is refusing to testify in the

category specified in the orders issued in Guess?,

Inc. versus Gold Center Jewelry, 97 Civ. 1374 19. Date order for

discovery dated June 9, 1997, signed by Louis [sic ] A. Kaplan.

And let the record also reflect that the deponent is refusing to testify in

Gucci Inc. versus Gold Center Jewelry, 97 Civ. 1354

order for discovery signed by Louis [sic ] A. Kaplan." (FN44)

The discussion continued in a similar vein for a few minutes,

whereupon Amirianfar announced that he was "not going to pay a penny

to the attorney" and, after being told that "there is an order entered in the

case and [that] you are refusing to testify," told plaintiff's counsel to

"shut up” and "[hJave a nice day" and left. (FN45)

Amirianfar concededly was served in September 1997 with plaintiffs’

application for the entry of $25,000 damage awards in favor of each of

the plaintiffs against Home Boy. Nevertheless, he neither appeared nor

answered in response to the motions. In the declaration submitted in

ud

support of the motion to vacate the judgments, Amirianfar asserted that

he never dealt in Guess or Gucci trademarked goods except in a few

instances in which he had taken such merchandise in trade. He argued

that the default had been excusable because he had assumed that the case

was against only companies that were dealing in Gucci and Guess

merchandise and that it did not pertain to *408 him. (FN46) To

buttress this contention, he swore that he "never before had any

experience with the legal system, and never been in any sort of trouble."

(FN47) Indeed, in reference to the remarkable behavior relating to the

deposition, he “absolutely den[ied] ever having gone to plaintiffs office

and spoken with them about this case." (FN48)

At the evidentiary hearing on January 16, 1998, a somewhat different

story emerged. Amirianfar first contended that legal papers had been

delivered to him in his store, but that he saw the name "Gold Center" on

them and put them aside without reading them because he "thought

maybe it is nothing." (FN49) He acknowledged that he had received the

notice of deposition and admitted that it had been he who had appeared

at the offices of plaintiffs counsel on the occasion referred to above, an

event he claimed to have forgotten at the time his declaration had been

prepared. When he then was pressed about whether he had read the

summons and complaint, he admitted that he had read enough to know

that the document had come from the United States District Court, but

claimed that he nevertheless decided not to read the balance. (FN50)

Moreover, he subsequently acknowledged that he had learned from other

local jewelry store owners even before he had gone to counsel's office in

June 1997 that there were lawsuits about claims that the stores were

selling counterfeit goods, although he claimed that one of the other store

owners told him that "it's nothing." (FN51) Although he admitted

receiving the plaintiffs' application to fix the monetary award against

Home Boy, Amirianfar claimed that he did not understand that it sought

money from him. (FN52)

The hearing established also that Amirianfar was not as naive as his

declaration claimed. He admitted that he had been arrested in 1994 for

selling stolen merchandise and that he had retained a lawyer on that

occasion. (FN53) He had retained counsel also for the purpose of

forming JAF, Inc., (FN54) and uses an accountant to prepare tax returns.

45

(FN55) It now is clear in this circuit that wilfulness for purposes of

determining whether to vacate a default judgment refers to "deliberate

default or bad faith on the part of the defaulting party." (FN56) The

question whether Amirianfar’s actions were wilful in this sense basically

requires a judgment involving the Court's assessment of his credibility

and the logic of the situation in which he found himself.

Amirianfar received the summons and complaint. He read the

summons. Even if he did not read the complaint, he knew from the

summons and his conversations with other store owners that Home Boy

had been sued. He knew from his previous experience that he needed a

lawyer, a fact confirmed by his protestation at the June 1997 deposition

that he "was not going to pay a penny to the attorney." He knew, in

short, that he was in peril of a default judgment if Home Boy did not

take timely and appropriate action but nevertheless failed to act. Once

the default judgment was entered, he appeared for the noticed

deposition, thus demonstrating that his claims that he never read the

legal papers are untrue at least in part. If his behavior on that occasion

cannot be described as wilful and in bad faith, those terms have no

meaning. Thus, the Court finds that Amirianfar deliberately and wilfully

defaulted in this action and, moreover, deliberately obstructed its

progress by his actions at the deposition. Although he has not sought to

reopen the default as to liability and injunctive relief, this finding would

have led the Court to deny any such application. But it is important to

focus on the fact that he seeks only to open the question of the amount of

statutory damages.

Amirianfar concededly was served with the application for the entry

of $25,000 judgments against Home Boy and ignored it. As a legal

matter, he was on notice of the relief sought against him. Having

considered his demeanor and all of the evidence in the case, however,

the Court is not persuaded that his failure to respond to that application

was the product of bad faith. And while it was deliberate in the sense

that Amirianfar made a conscious decision to pay no attention to it and

not to seek legal advice, the Court is satisfied that this was more a

product of stupidity than of malice. Accordingly, the monetary relief

awarded against Home Boy in the Guess case is vacated and the issue of

the amount of statutory damages to be awarded against Home Boy is

vu

an 3

reopened.

V

Finally, the Court turns to consideration of the stipulations. As noted

above, Gold, Manny's and Senobar each stipulated with Guess to vacate

the monetary portion of the judgments against them. Still pending

before this Court then is the motion of these defendants to vacate the

non-monetary portion of the judgments against them in the Guess case.

The only ground raised in support of the motion to vacate the defaults as

to Gold, Manny's and Senobar is that the relief granted exceeds that

demanded in the complaint and therefore violates Rule 54(c). This

argument, however, goes only to the monetary portion of the judgments

and therefore was mooted by the stipulation entered into between Guess

and Gold, Manny's and Senobar. As there were no grounds articulated

in the motion for vacating the non-monetary portions of the judgments

against these defendants, any relief from the non-monetary portion of the

judgments would be inappropriate.

Conclusion

For the foregoing reasons,

1. The Court will hold an evidentiary hearing on February 13, 1998 at

9:30 a.m. on the motions of (1) Big Time Jewelry to vacate so much of

the amended judgments in both of these cases as awarded statutory

damages against it, and (2) Gold Center Jewelry to vacate so much of the

amended judgment in No. 97 Civ. 1354 as awarded statutory damages

against it. In the event that the Court of Appeals remands No. 97 Civ.

1374 to this Court prior to that date, the hearing will also cover the

motions of Gold Center Jewelry and Oro-Uno Jewelry to vacate so much

of the amended judgment in that case as awarded statutory damages

against them.

2. All further proceedings to enforce the monetary provisions of the

judgments against Big Time Jewelry in both of these cases and against

Gold Center Jewelry in No. 97 Civ. 1354 are stayed pending further

order of the Court. ys

WATT OTE LE

3. The motion of defendant Home Boy 2000 to vacate so much of the

amended judgment in No. 97 Civ. 1374 as awarded statutory damages

against it is granted. Said defendant shall file any papers in opposition

to the plaintiff's motion for the imposition of damages in that case no

later than February 13, 1998.

4. The motions of defendants Gold "N" Ice, Senobar Jewelry and

Manny's Joyeria Jewelry, to the extent not resolved by the stipulation

dated January 15, 1998, are denied.

SO ORDERED.

FN1. The actions were dismissed as to the Doe defendants and Gold

Fortune for failure to make timely service by orders dated

October 9, 1997.

FN2. The action against Gold Spot was resolved by the entry of a

consent judgment dated January 15, 1998.

FN3. Order, Nov. 17, 1997 (Guess case).

FN4. Order, Dec. 17, 1997. It should be noted also that Gold Center's

motion made no showing that it had a meritorious defense.

The Court denied Gold Center's motion for reconsideration by order

dated December 23, 1997.

FNS. Order, Dec. 29, 1997, Guess case; Tr., Dec. 29, 1997, Guess case,

at 79-80 (Golden Touch), 83-88 (Oro-Uno [A & D Jewelry)).

46

FN6. Tr., Jan. 16, 1998, at 5.

FN7. Tr., Dec. 31, 1997, Guess case, at 2-4.

FN8. The judgment against Golden Touch was vacated on December 29,

1997.

FN9. Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58, 103

S.Ct. 400, 74 L.Ed.2d 225 (1982); United States v. Rodgers,

101 F.3d 247, 251 (2d Cir.1996).

FN10. See, e.g., Rodgers, 101 F.3d at 251.

FN11. See Leonhard v. United States, 633 F.2d 599, 609-11 (2d

Cir.1980), cert. denied, 451 U.S. 908, 101 S.Ct. 1975, 68 L.Ed.2d 295

(1981).

*409_ FN12. E.g., Griggs, 459 U.S. at 58 (non-appealable order); SEC

v. American Bd. of Trade, 829 F.2d 341, 344 (2d Cir.1987),

cert. denied sub nom. Economou v. SEC, 486 U.S. 1034, 108 S.Ct.

2018, 100 L.Ed.2d 605 (1988)(same); Leonhard, 633 F.2d at 610

(same); In re Grand Jury Proceedings, 795 F.2d 226, 231 (1st Cir.1986)

(defective or untimely notice of appeal); United States v.

Hitchmon, 587 F.2d 1357, 1360 (Sth Cir.1979) (same); 20 JAMES WM.

MOORE, MOORE'S FEDERAL PRACTICE s 303.32[2][b]fiv] (3d

ed.1997)

(hereinafter Moore's Federal Practice).

FN13. As a general matter, an order denying a motion to vacate a default

judgment is final and therefore appealable. E.g., Welden

v. Grace Line, Inc., 404 F.2d 76, 77 (2d Cir.1968); Weilbacher v. J.H.

Winchester, 197 F.2d 303, 305 (2d Cir.1952).

FN14. E.g., New York v. NRC, 550 F.2d 745, 758-59 (2d Cir.1977)

(district court may not reexamine or supplement the order or U7

judgment from which an appeal is pending).

FN15. The motion is made on behalf of Big Time (both cases), Gold

Center (both cases), Gold (Guess case), Golden Touch (Guess

case), Oro-Uno (Guess case), Manny's (Guess case) and Senobar (Guess

case). As indicated above, insofar as the motion is made on

behalf of Gold Center and Oro-Uno with respect to the Guess case, this

Court is deprived of jurisdiction by the pendency of the

appeal from the December 17 and 29 orders denying their motions to

vacate. The entire judgment against Golden Touch was vacated

prior to the filing of this motion. The monetary portions of the judgment

in the Guess case against Gold. Manny's and Senobar

were vacated by stipulation dated January 15, 1998. In consequence, the

argument made in this aspect of the motion applies only to

the judgments against Big Time and Gold Center (in both cases) and

Oro-Uno (in Guess ). As the Court lacks jurisdiction over the

attacks on the judgments against Gold Center and Oro-Uno ill the Guess

case by virtue of the pendency of their appeal, the only

matters open for consideration here are the judgments against Big Time

in both cases and the judgment against Gold Center in Gucci.

eS

FN16. 10 MOORE'S FEDERAL PRACTICE s 54.71, at 54-127.

FN17. See, e.g., Compton v. Alton S.S. Co., 608 F.2d 96, 105-06 (4th

Cir.1979) (no statutory penalty available on default where

pl-adings did not request such relief). Marina B. Creation S.A. v. de

Maurier, 685 F.Supp. 910, 912-13 (S.D.N.Y.1988) (no trebling

of patent damages on default where neither pleadings nor motion for

default judgment mentioned such relief).

FN18. 15 U.S.C. s 1117(c).

FN19. 10 MOORE'S FEDERAL PRACTICE s 54.71[1], at 54-127-28.

FN20. 449 F.2d 51 (2d Cir.1971). yy

FN21. Id. at 56-57.

FN22. 635 F.2d 603 (7th Cir.1980).

FN23. Id. at 610-11. See also In re Dierschke, 975 F.2d 181, 185 (Sth

Cir.1992) (failure of complaint to request relief granted

on default immaterial where defendant contested amount of award at

inquest).

FN24. Zarrin Aff. pp 3, 5.

FN2S. Id. p 7.

FN26. This admission, coupled with (a) the eight month delay between

the entry of the default judgments as to liability and

injunctive relief and the application to vacate the judgments and (b) the

unfairness and needless expense that would be imposed on

the plaintiffs at this late date if the issue of liability were reopened, is

more than sufficient basis for declining to vacate

those aspects of the default judgments regardless of whether this

defendant has demonstrated the existence of a meritorious defense.

*409_FN27. Zarrin Aff. pp 7-8.

49

Rn DR OT ee Oe eT

VB Bi ob ata eG a Nh RIL Belle EB 89 bt el Bee A

NOS 2 ee ee ee ee ee

FN28. Shvut Aff., Nov. 19, 1997, p 4.

FN29. Id. p 12.

FN30. Id. p 13.

FN31. Id.

FN32. FED.R.CIV.P. 60(b)(1).

FN33. American Alliance Ins. Co. v. Eagle Ins. Co., 92 F.3d 57, 59 (2d

Cir.1996) (quoting Davis v. Musler, 713 F.2d 907, 915 (2d

Cir.1983)) (internal quotation marks omitted).

FN34. Beller & Keller v. Tyler, 120 F.3d 21, 23 (2d Cir.1997); Kotlicky

v. United States Fidelity & Guar. Co., 817 F.2d 6, 9 (2d

Cir.1987).

FN35. American Alliance Ins. Co., 92 F.3d at 61.

FN36. Precisely the same analysis would warrant further consideration

of the question whether to vacate the monetary awards against

Gold Center and Oro-Uno hi the Guess case had the pending appeal not

ousted this Court of jurisdiction. These defendants may wish

to move the Court of Appeals to remand to this Court to permit it to do

so. See Winter v. Cerro Gordo Co. Conservation Board, 925

F.2d 1069, 1073 (8th Cir.1991); Commonwealth of Puerto Rico v. S.S.

Zoe Colocotroni, 601 1.20 39 (1st Cir.1979).

FN37. Tr., Jan. 16, 1998, at 5.

FN38. American Alliance Ins. Co., 92 F.3d at 59 (quoting Davis v.

Musler, 713 F.2d 907, 915 (2nd Cir.1983)) (internal quotation

marks omitted). SO

FN39. Id. at 61.

FN40. Amirianfar Decl. p 1.

FN41. This is undisputed. Tr., Jan. 16, 1998, at 32.

FN42. Amirianfar produced the notice of deposition at the hearing. DX

D; Tr., Jan. 16, 1998, at 21-22.

FN43. PX 7, at 3.

FN44. PX 7, at 3-4.

FN4S. Id. at 7.

FN46. Amirianfar Decl. pp 4-5.

FN47. Id. p 8.

FN48. Id. 9.

FN49. Tr., Jan. 16, 1998, at 18.

FNSO. Id. at 24-25.

FNS1. Id. at 31-33, 57.

FNS2. Id. at 34-36.

FNS3. Id. at 36-37, 53.

FNS4. Id. at 53.

FNSS. Id. at 53-54.

FN56. American Alliance Ins. Co., 92 F.3d at 59.

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