Out-Grow, LLC v. Miami Mushroom

OUT-GROW, LLC, Plaintiff, v. MIAMI MUSHROOM, et al, Defendants.

No. 21-60742-CIV-ALTMAN

United States District Court, S.D. Florida

July 6, 2021

ORDER ON FINAL DEFAULT

ROY K ALTMAN, UNITED STATES DISTRICT JUDGE

The Plaintiff has filed a Motion for Final Default Judgment (the “Motion†) [ECF No. 18]. The Clerk entered a Default [ECF No 15] against the Defendants because—despite having been served [ECF Nos. 7, 8]—the Defendants have failed to appear, answer or otherwise respond to the Complaint. The Court has carefully considered the Motion, the record, and the applicable law. For the reasons set out below, the Motion is GRANTED in part and DENIED in part.

The Facts

This case falls at the intersection of mushrooms and intellectual property. The Plaintiff, OutGrow, LLC, sells supplies for growing and cultivating mushrooms. See Complaint [ECF No. 1] ¶ 8. Out-Grow has been in business since 2010. Id. ¶ 9. Out-Grow sells its products on its own websites, as well as on Amazon, Etsy, and eBay. Id. ¶ 10. The Defendants are Miami Mushroom, a competing business run as a sole proprietorship, and Ryan McCully, that business's sole owner. Id. ¶¶ 3-4. Miami Mushroom also sells supplies for mushroom cultivation and sells across its website, Amazon, Etsy, and eBay. Id. ¶¶ 12-13. Miami Mushroom sprouted into existence in 2020. Id. ¶ 11.

Out-Grow owns a trademark registration for the OUT-GROW mark. Id. ¶ 14. Out-Grow began using that trademark as early as 2011 and has continuously used the mark since that time. Id. ¶¶ 15, 17. Out-Grow registered its OUT-GROW mark with the U.S. Patent and Trademark Office in

December 2018. Id. ¶ 15. The trademark covers an array of goods and services related to mushrooms, including “dried edible mushrooms, †“[f]resh mushrooms, †and “[r]etail online ordering services featuring mushroom products.†See Trademark Registration No. 5, 636, 623 [ECF No. 1-5].

In September 2020, Miami Mushroom, through McCully (its owner), wrote a letter to OutGrow. Id. ¶ 20. The letter was addressed to “Out Grow™, ” indicating that McCully was fully aware of Out-Grow's trademark rights. Id. ¶ 21; see also Letter [ECF No. 1-6]. Seeking to cultivate a relationship, McCully said that he was “interested in doing business with your company” and asked if Out-Grow was “hiring or offering franchising opportunities.” Id. He also “request[ed] permission for rights to use your brand for [his] products on Amazon.” Id. Out-Grow was not hiring, was not offering franchising opportunities, and never authorized Miami Mushroom or McCully to use the Out-Grow brand in any way. See Complaint ¶¶ 23-24.

Nonetheless, Miami Mushroom-in selling its own mushroom products-copied Out-Grow's (1) trademark, (2) product images, and (3) product descriptions. Id. ¶¶ 25-28. Examples of each are pictured below. First, Miami Mushroom posted the following product on Amazon under the OUT-GROW mark:

(Image Omitted)

See Compl. Ex. E [ECF No. 1-8].

Second, Miami Mushroom copied Out-Grow's product images. Here, for example, are Out-Grow's photographs of its products pictured alongside Miami Mushroom's copies of those images:

(Image Omitted)

See Compl. Ex. D [ECF No. 1-7].

Third, Miami Mushroom copied some of Out-Grow's product descriptions. For example:

(Image Omitted)

See id.

After discovering Miami Mushroom's infringing use of Out-Grow's brand name, product images, and product descriptions, Out-Grow sent Miami Mushroom a cease-and-desist letter. Compl. ¶ 29. In response to that letter, McCully confirmed that he would “comply with refraining from use” and that he had “removed the images/text.” Id. ¶ 30. It turned out that this was false. Despite McCully's representations, Out-Grow learned that Miami Mushroom and McCully were continuing to use Out-Grow's trademark, product images, and product descriptions. Id. ¶ 31. As a result, Out-Grow sent them a second cease-and-desist letter. Id. ¶ 32. But Miami Mushroom and McCully continue to use Out-Grow's IP to sell mushroom products. Id. ¶ 34. This is true even though Out-Grow has reported Miami Mushroom to Amazon at least a dozen times. Id. ¶ 33.

Out-Grow filed this lawsuit on April 5, 2021, and timely served the Defendants through drop service. See Returns of Service [ECF Nos. 7, 8]. As set out in the Returns of Service, McCully (unsuccessfully) attempted to evade service: When the process server approached him, McCully “advised [that] if [the process server] did not leave he was going to call the police.” Id. McCully then “ran back inside and closed the door on the [process server].” Id. The process server successfully served the Defendants by dropping the documents through McCully's front door. Id.^[1] But, like some underground Mycelium, the Defendants have disappeared. See generally Docket. On May 4, 2021, the Clerk entered defaults against both Defendants. See Clerk's Entry of Default [ECF No. 15]. Out-Grow has now filed its Motion, seeking an entry of final default judgment. See Motion at 1.

The Law

Rule 55(b)(2) of the Federal Rules of Civil Procedure authorizes courts to enter final default judgments against any party who has failed to respond to a complaint. Still, “[a] defendant's default does not in itself warrant the court entering a default judgment.” DirecTV, Inc. v. Huynh, 318 F.Supp.2d 1122, 1127 (M.D. Ala. 2004) (cleaned up) (quoting Nishimatsu Constr. Co., Ltd. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). Rather, the trial court must first determine whether there is a sufficient factual basis in the complaint to sustain the judgment. See id.; see also Annon Consulting, Inc. v. BioNitrogen Holdings Corp., 650 Fed.Appx. 729, 733 (11th Cir. 2016) (“Because the allegations in [the] complaint-admitted as true-establish Defendants' liability . . ., default judgment was appropriate.”). “Conceptually, then, a motion for default judgment is like a reverse motion to dismiss for failure to state a claim.” Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1245 (11th Cir. 2015).

Rule 55(b)(2) also provides that a court may conduct hearings or make referrals “when, to enter or effectuate judgment, it needs to . . . determine the amount of damages.” Despite the Rule's permissive language, a “judgment of default awarding cash damages [can]not properly be entered ‘without a hearing unless the amount claimed is a liquidated sum or one capable of mathematical calculation.'” Adolph Coors Co. v. Movement Against Racism and the Klan, 777 F.2d 1538, 1543 (11th Cir. 1985) (quoting United Artists Corp. v. Freeman, 605 F.2d 854, 857 (5th Cir. 1979)). Damages may be awarded “only if the record adequately reflects the basis for award via a hearing or a demonstration by detailed affidavits establishing the necessary facts.” Id. at 1544 (internal quotation marks omitted).

Analysis

I. Default Judgment

Out-Grow, our plaintiff, asserts two claims: one for unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a); and a second for unfair competition in violation of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), Fla. Stat. § 501.201, et seq. As redress, OutGrow seeks both damages and injunctive relief.

A. Lanham Act

Out-Grow has plausibly alleged that Miami Mushroom and McCully violated the Lanham Act-both by infringing on its trademark and by copying its product images and descriptions. We address each in turn.

First, Out-Grow has stated a claim for trademark infringement under § 1125(a).^[2] To prevail on a claim for trademark infringement, “a claimant must show (1) that it had prior rights to the mark at issue and (2) that the defendant had adopted a mark or name that was the same, or confusingly similar to its mark, such that consumers were likely to confuse the two.” Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1193 (11th Cir. 2001). Out-Grow has plausibly alleged both elements. As to the first element, Out-Grow's prior rights in its OUT-GROW mark are supported by three considerations. One, “[a] trademark registered on the principal register is presumptively valid.” Sream, Inc. v. Cancer Smoke Shop, LLC, 2017 WL 7798663, at *2 (S.D. Fla. Jan. 25, 2017). Here, OutGrow has alleged that it registered its trademark on the principal register, affording it that presumption of validity. See Compl. ¶ 14. Two, that presumption of validity is supported by the distinctiveness of Out-Grow's mark. “To be valid, a trademark must be ‘distinctive'-that is, it must ‘serve the purpose of identifying the source of . . . goods or services,' not just the goods and services themselves.” Engineered Tax Servs., Inc. v. Scarpello Consulting, Inc., 958 F.3d 1323, 1327 (11th Cir. 2020). Out-Grow's mark is distinctive because it identifies the source of the goods (the Out-Grow company)-and not just the goods themselves (mushroom products).^[3] Three, further bolstering our Plaintiff's rights over the OUT-GROW mark is the principle that “[t]he party who first uses a mark in commerce is said to have priority over other users.” Hana Fin., Inc. v. Hana Bank, 574 U.S. 418, 419 (2015). Out-Grow has used its mark since 2011 (and registered its mark in 2018)-all before Miami Mushroom first used it in 2020. See Compl. ¶¶ 11, 15-17. Out-Grow thus has valid, prior rights in its mark.

As to the second element, Out-Grow has plausibly alleged that Miami Mushroom and McCully's use of the Out-Grow mark is likely to cause confusion among consumers. See Id. ¶¶ 42, 44, 50 (alleging that the Defendants' use of the mark is “likely to cause confusion”). In assessing the likelihood of confusion, courts consider seven factors:

(1) the strength of the allegedly infringed mark; (2) the similarity of the infringed and infringing marks; (3) the similarity of the goods and

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