PrimoHoagies Franchising, Inc. v. J.G. Primo, LLC

PrimoHoagies Franchising, Inc., Plaintiff, v. J.G. Primo, LLC, Greg Sutor, and Jesse Nutter Defendants.

Civil No. 19-21854 (RBK-JS)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN VICINAGE

June 29, 2020

Opinion

KUGLER, United States District Court Judge

BEFORE THE COURT IS THE MOTION ["the Motion"] (ECF Doc. 15) of plaintiff PrimoHoagies Franchising, LLC ["Primo" or "plaintiff'} for default judgment against defendant Greg Sutor ["Sutor" or "defendant"] pursuant to Fed. R. Civ. P. ["or Rule"] 55(b)(2). The complaint (ECF Doc. 1) pleads three counts: breach of a franchise agreement ["the Agreement"], breach of the non-compete clause in the Agreement; and trademark infringement and unfair competition for defendant's continued use of plaintiff's registered mark(s) after termination of the Agreement.

Consequently, in the Motion, plaintiff seeks: preliminary and permanent injunction against the use of plaintiff's trademarks; an accounting of and judgment for the profits to which plaintiff is entitled; treble damages under the Lanham Act, 15 U.S.C. §1117, and attorneys' fees and costs in pursuing the Motion.

Defendant has filed neither an answer nor an opposition to the Motion.

THE COURT GRANTS the Motion for default judgment against Sutor, and ORDERS a hearing at which the parties will present an accounting of remedies and damages to be awarded.

An appropriate Order of this date accompanies this Opinion.

1.0 Facts and Procedural History

According to plaintiff's complaint (ECF Doc. 1), on Aug 2018, plaintiff as franchisor and franchisee J.G Primo LLC ["JG"] (owned by Jesse Nutter and Greg Sutor) executed a franchise agreement ["the Agreement"] whereby JG undertook to operate a PrimoHoagies^® franchise at 1313 West Boynton Beach Boulevard, Boynton Beach, Florida 33426, for a term of five years. Nutter and Sutor each agreed to be individual guarantors for the JG franchisee and to pay any amounts due under the Agreement owed by JG.

The Agreement 7.15 required JG operate the franchised business in strict conformity with methods, standards, and specifications detailed in the PrimoHoagies^® Operation Manual ["the Manual"], which required, among other things, maintenance of certain health standards, the use of certain, approved products and the sale of certain menu items. At §3.4, the Agreement permitted the franchisor to conduct periodic inspections of the franchised business either with or without notice. The Agreement also included JG's right to use the franchisor-registered marks for Primo Hoagies, which license would cease immediately upon termination or expiration of the Agreement. The Agreement at §17.3 also contained a non-compete clause that prohibited JG from owning, operating, maintaining, being employed by, or helping any competing deli or sandwich shop for two years after the termination of the Agreement.

Further, if the Agreement were terminated prior to expiration, then according to §16.7, JG and Sutor and Nutter as JG Guarantors agreed to pay plaintiff a monthly fee for the lesser of 3 years or the number of months remaining in the term of the Agreement. The amount of the monthly fee would be the average of the combined royalty and advertising fee paid by JG for the twelve months preceding early termination.

On 20 Dec 2019, the franchisor caused an inspection of the JG premises by its inspection agent who found multiple instances of non-compliance with the methods, standards, and specifications set forth in the Manual. Before the inspection was completed, JG asked the agent to vacate the JG premises, which the Agreement state at §7.7 is a material breach. Accordingly, on that day, plaintiff notified JG, Sutor, and Nutter in writing that the Agreement was terminated without an opportunity to cure. Plaintiffs reports that as of 23 Dec 2019, JG continued to operate the business as if it were a PrimoHoagies^® deli-sandwich franchise.

On 23 Dec 2019, plaintiff filed this action. pleading breach of the Agreement and breach of the Agreement's non-compete clause inasmuch as Sutor continues to operate the deli-sandwich business within two years of the termination of the Agreement. Plaintiff also pleads trademark infringement because the JG business continues to use plaintiff's registered marks in the store front signage and other signs and items of the deli-sandwich business.

On 10 Jan 2020, Sutor was served in person a copy of the summons and complaint according to the process server's return of service document (ECF Doc. No. 4). As for service on defendants JG and Jesse Nutter, the process server made at least four attempts to serve them in person. According to the affidavit of plaintiff's attorney (ECF Doc. 5) the process server resorted to mailing the summons and complaint to Nutter's last known address pursuant to Rule 4.

None of the defendants filed an answer pursuant to Rule 12(a)(i). On 10 Feb 2020, plaintiff requested the Clerk of the Court to order a default as to JG, Greg Sutor, and Jesse Nutter (ECF Doc. 6). On 14 Feb 2020, the Clerk issued a default as to Sutor. On 19 Feb 20, Nutter's attorney made an appearance in this matter (ECF Doc. 8), and in ECF Doc. 9, Magistrate Judge Schneider ordered Nutter to answer the complaint by 23 Mar 20, which he did in ECF Doc. 13. On 23 Mar 20, plaintiff filed this motion, seeking a default judgment against Sutor as well as the following remedies and damages:

Permanent injunctive relief to enjoin further use of plaintiff's trademarks;

An accounting of and judgment for the profits to which plaintiff is entitled;

Sutor's disgorgement of profits and treble damages resulting from the trademark infringement; and

Attorney's fees and costs in pursuing this action.

2.0 Legal Standard of Review

Fed. R. Civ. Proc. 55(b)(2) authorizes federal courts, upon plaintiff's motion, to enter a default judgment against a properly served defendant who fails to plead or otherwise timely defend against a claim for affirmative relief. If a defendant is in default of prosecuting the case, the Court accepts as true all of plaintiff's well-pleaded factual allegations in the complaint. Comdyne I, Inc. v Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990). The Court, however, does not accept plaintiff's legal conclusions as it's the Court that determines whether the pleaded facts set forth an actionable claim (Doe v. Simone, No. 12-5825, 2013 WL 3772532, at *2 (D.N.J. 17 July 2013)). Nor does the Court accept plaintiff's allegations concerning damages. Id. [citing 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, FEDERAL PRACTICE & PROCEDURE §2688, at 58-59 (3d ed. 1998 and Supp. 2013).

The "decision to enter default judgment rests within the sound 'discretion of the district court' (Chanel, Inc. v. Matos, 133 F.Supp.3d 678, 683 (D.N.J. 2015) [citing Hritz v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984). The Third Circuit's repeatedly stated preference is that "cases be disposed of on the merits whenever practicable". Hritz, 732 F.2d at 1181.

3.0 Default Judgment Discussion

3.1 Jurisdiction

As this action pleads trademark infringement and unfair competition under the Lanham Act, 15 USC §1051 et seq., the Court has subject matter jurisdiction under 15 U.S.C. §1121 and 28 U.S.C. §§1331 and 1338 (b). The Court also has pendent jurisdiction over the state law claims for breach of the Agreement and of the non-compete clause because both state and federal claims "derive from a common nucleus of operative fact" and "are such that plaintiff would ordinarily be expected to try them all in one judicial proceeding." United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). See also Lentino v. Fringe Emp. Plans, Inc., 611 F.2d 474, 484 (3d Cir. 1979) stating "[c]onstitutional power to adjudicate a pendent claim [in a default context] is ordinarily to be determined by reference to the pleadings, not on the facts as they may eventually be established [citations omitted]."

The Court has jurisdiction over Greg Sutor because, in the Agreement at §26.5, Sutor irrevocably consented to personal jurisdiction in the state and federal courts of New Jersey.¹

3.2 Entry of Default

The Court must ensure the entry of default was appropriate. Rule 55(a) directs the Clerk of the Court to enter a party's default when that party "against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise." Here, the Clerk appropriately issued entry of default under Rule 55(a) on 14 February 2020 for Sutor's failure to answer within the time limit of Rule 12(a)(i).

3.3 Fitness of Defendants to be Subject to Default Judgment

The Court must also confirm that the defaulting parties are not infants, incompetent persons, or persons in military service exempted from default judgment. Fed. R. Civ. Proc. 55(b)(2). In its request for default (ECF Doc. 6: ¶¶4-5), plaintiff attested that Sutor was neither an infant nor incompetent to comprehend the Franchise Agreement nor in the military servicewhen the Agreement was executed and allegedly breached on 20 Dec 2019 (ECF Doc. 1: ¶¶24-28). The Court finds that Sutor is subject to default judgment under Rule 55(b)(2).

3.4 Properly Pleaded Causes of Action Against Defendants

To award a default judgment, the Court must determine whether the complaint states proper causes of action against defendants. In doing so, the Court accepts as true plaintiff's well-pleaded fact allegations and disregards its pleaded legal conclusions. Directv, Inc. v. Asher, No. 03-1969, 2006 WL 680533, at *1 (D.N.J. 14 March 2006) [citing 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, FEDERAL PRACTICE AND PROCEDURE § 2688, at 58-59 (3ed. 1998)].

3.4.1 Federal Trademark Infringement

Federal trademark infringement and unfair competition are measured by the same standard, that is: a mark used in commerce is likely to cause confusion because of its similarity to a mark already registered...