C/A No.: 0:17-2081-DCC-SVH
REPORT AND RECOMMENDATION
This matter comes before the court on Plaintiffs' motion for default judgment as to defendants Vitamin Boat Corp., d/b/a ManRelated.com, ("Vitamin Boat") and Paul Buchanan ("Buchanan") (collectively "Defendants"). [ECF No. 15]. The motion was referred to the undersigned by order of the Honorable Donald C. Coggins, United States District Judge, dated May 4, 2018. [ECF No. 19]. I. Factual and Procedural Background
Plaintiffs allege claims against Defendants for false advertising and unfair competition in violation of the Lanham Act, 15 U.S.C. § 1051, et seq., the South Carolina Unfair Trade Practices Act ("SCUTPA"), S.C. Code Ann. § 39-5-10, et seq., and South Carolina common law. [ECF No. 1]. Plaintiffs allege Defendants market, distribute, and sell joint health supplements online through various websites, including but not limited to, www.movexa.com and www.manrelated.com (the "ManRelated.com website"). Id. at ¶ 24. Defendants' ManRelated.com website markets itself as "the authority on men's health products" and contains reviews for various products sold on the website, including Nutramax's COSAMIN®DS (Double Strength) product ("the Review"). Id. at ¶ 24. Plaintiffs allege that the Review contains false, misleading, and disparaging statements regarding COSAMIN®DS and deceptively depicts the performance, efficacy, and material attributes of Nutramax's COSAMIN®DS product. Id. at ¶¶ 28-35. Defendants also sponsor an advertisement on Google.com entitled "Cosamin DS Exposed." Id. at ¶¶ 52-55. Plaintiffs allege that by running this Google advertisement, Defendants are intentionally promoting the false and misleading content contained in the Review. Id.
Plaintiffs filed proof of service on September 1, 2017. [ECF Nos. 8, 9]. Plaintiffs requested an entry of default against Defendants on September 12, 2017, asserting that Defendants were served with copies of the summons and complaint on August 14 and 17, 2017, and had failed to answer or otherwise plead. [ECF No. 10]. The clerk entered default against Defendants on September 12, 2017. [ECF Nos. 12, 14]. On October 24, 2017, Plaintiffs filed a motion for default judgment against Defendants. [ECF No. 15].
Upon the motion for default judgment being referred, the undersigned issued an order on May 7, 2018, directing Plaintiffs to supplement the motion, explaining the type and amount of damages sought. [ECF No. 20]. On June 6, 2018, Plaintiffs were granted an extension until August 3, 2018, to supplement their motion for default judgment. [ECF No. 24]. In their supplement, Plaintiffs withdraw their request for full damages, but request injunctive relief and attorneys' fees. [ECF No. 25]. II. Discussion
A. Standard on Motion for Default Judgment
Default having been entered against Defendants, they are deemed to have admitted the factual allegations of the complaint against them. "In determining whether to enter a default judgment, the court must determine whether the well-pleaded allegations in a plaintiff's complaint entitle the plaintiff to the relief sought." Minnewawa, Inc. v. Stansell, No. 6:16-cv-02712-MGL, 2017 WL 588501, at *1 (D.S.C. Feb. 14, 2017) (citing Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001)); see also DIRECTV, Inc. v. Pernites, 200 Fed. App'x 257, 258 (4th Cir. 2006) ("In the context of a default judgment, the defendant, by his default, admits the plaintiff's well-pleaded allegations of fact[.]") (quoting Ryan, 253 F.3d at 780) (internal quotation marks and bracket omitted).
1. Actual Damages
Nutramax's complaint includes claims for violations of the Lanham Act, 15 U.S.C. § 1125(a), and violation of SCUTPA. The Lanham Act, 15 U.S.C. § 1117(a), provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." In addition, SCUTPA provides that:
(a) Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful by Section 39-5-20 may bring an action individually, but not in a representative capacity, to recover actual damages. . . . Upon the finding by the court of a violation of this article, the court shall award to the person bringing such action under this section reasonable attorney's fees and costs.
S.C. Code Ann. § 35-5-140. Here, Defendants have violated both the Lanham Act 15 U.S.C. § 1125(a)) and S.C. Code Ann. § 39-5-20 insofar as they have admitted the truth of all allegations in the complaint through their default.
SCUPTA requires an ascertainable loss of money before an award of attorney's fees. Actual damages under the SCUTPA include special or consequential damages that are a natural and proximate result of deceptive conduct. Taylor v. Medenica, 324 S.C. 200, 479 S.E.2d 35 (1996). Here, although Plaintiffs were unable to discover an exact amount of their lost profits related to Defendants' actions or Defendants' resulting profits, the undersigned finds that the allegations in the complaint that are deemed admitted support a minimal finding of one dollar in actual damages to Plaintiffs. Accordingly, reasonable attorneys' fees shall be awarded.
2. Attorneys' Fees Calculation
In determining what constitutes a reasonable number of hours and the appropriate hourly rates (i.e., in calculating the lodestar fee), the court considers the following factors: (1) the time and labor expended; (2) the novelty and difficulty of the questions raised; (3) the skill required to properly perform the legal services rendered; (4) the attorney's opportunity costs in pressing the instant litigation; (5) the customary fee for like work; (6) the attorney's expectations at the outset of the litigation; (7) the time limitations imposed by the client or circumstances; (8) the amount in controversy and the results obtained; (9) the experience, reputation and ability of the attorney; (10) the undesirability of the case within the legal community in which the suit arose; (11) the nature and length of the professional relationship between attorney and client; and (12) attorneys' fees awards in similar cases. Barber v. Kimbrell's, Inc., 577 F.2d 216, 226 (4th Cir. 1978); Jackson v. Estelle's Place, LLC, 391 Fed. App'x 239, 243-44 (4th Cir. 2010). Although the court must consider all twelve of the factors, it need not rigidly apply these factors, as not all may affect the fee in a given case. "[T]hese factors should be considered in determining the reasonable rate and the reasonable hours, which are then multiplied to determine the lodestar figure which will normally reflect a reasonable fee." E.E.O.C. v. Serv. News Co., 898 F.2d 958, 965 (4th Cir. 1990). In determining whether a rate is reasonable, the court is to consider "prevailing market rates in the relevant community." Rum Creek Coal Sales, Inc. v. Caperton, 31 F.3d 169, 175 (4th Cir.1994) (quoting Blum v. Stenson, 465 U.S. 886, 895 (1984)).
Given Plaintiffs' reluctance to accrue additional attorneys' fees in this action, they cite to the reasoning of a prior order in this district, finding reasonable the hourly rates of the highest-paid attorneys assigned to this case in another case brought on behalf of Plaintiffs. See ECF No. 25 at 6 (citing Nutramax Laboratories, Inc. et al. v. Manna Pro Products, LLC, et al., No. 0:16-cv-1255-JMC, 2017 WL 6523616 (D.S.C. Dec. 21, 2017). Under the unique circumstances of this case and in an effort to avoid Plaintiffs' accrual of additional attorneys' fees, the undersigned recommends the district judge adopt the reasoning in C/A No. 0:16-cv-1255-JMC in evaluating the reasonableness of the fees in this case. The undersigned further notes that the hours expended appear reasonable and recommends Plaintiffs be granted $1 in actual fees, $12,807.78 in attorneys' fees, and $852.65 in costs for a total judgment in the amount of $13,661.43.
3. Injunctive Relief
A plaintiff must satisfy the traditional permanent-injunction analysis to receive such relief. See eBay, Inc. v. MercExchange, LLC, 547 U.S. 388, 391-94 (2006). As explained by the Court, a plaintiff must show:
(1) that it has suffered an irreparable injury;
(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
(3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
(4) that the public interest would not be disserved by a permanent injunction.
Id. at 391; see also PMB Prods, LLC v. Mead Johnson & Co., 639 F.3d 111, 126-27 (4th Cir. 2011) (finding eBay factors should be considered in request for a permanent injunction pursuant to the Lanham Act).
The complaint sets forth facts demonstrating irreparable harm. Because claims under the Lanham Act involve injury to reputation and goodwill, the Fourth Circuit recognizes that it is almost impossible to prove the extent of harm. See PBM Prod, LLC, 639 F.3d at 126 ("It is virtually impossible to prove that so much of one's sales will be lost or that one's goodwill will be damaged as a direct result of a competitor's advertisement."). (citation omitted). For this reason, the Fourth Circuit has made clear that the irreparable harm element is satisfied and injunctive relief is proper when a plaintiff "suffers from irreparable harm based primarily on the fact that [defendant's] advertising misled customers." Id. at 126; see also Black & Decker (U.S.) Inc, v. Pro-Tech Power, Inc., 26 F. Supp. 2d 834, 861 (E.D. Va. 1998) ("[T]he irreparable harm prong can be satisfied upon a demonstration that the competitor's advertising tends to mislead consumers.").
Additionally, a purely legal remedy is inadequate because Defendants have not appeared or participated in discovery, making it impossible for Plaintiffs to ascertain the full value of their actual damages. Further, even if actual damages for prior actions could be established and awarded, those damages would not prevent potential future damage to good will and corporate reputation and would require speculation and guesswork. See Christopher Phelps & Associates, LLC v. Galloway, 492 F.3d 532, 544 (4th Cir. 2007) (noting even if future damages could be determined, they would require "a substantial amount of speculation and guesswork.")
Plaintiffs have also satisfied the third and fourth eBay factors. The balance of hardships tips in Plaintiffs' favor. Plaintiffs have invested millions of dollars and significant time and effort in advertising, promoting and developing their brand within the joint supplement market, including and especially in regards to their COSAMIN® brand. See Compl. at ¶¶ 18-19. There has been no hardship identified for Defendants to comply with a permanent injunction. Finally, the public's interest in ensuring manufacturers accurately represent their products and do not misrepresent the products of competitors weighs in favor of an injunction. Scotts Co. v. United Indus. Corp., 315 F.3d 264 (4th Cir. 2002) ("[T]here is a strong public interest in the prevention of misleading advertisements.") (citations omitted); see also Choice Hotels Int'l, Inc. v. Zeal, LLC, No. 4:13-1961-BHH, 2015 WL 5781507, *13 (D.S.C. Sept. 29, 2015) ("It is well established that the public interest is served by preventing consumer confusion in the marketplace.").
Based on the recommended findings that Plaintiffs have satisfied the four eBay factors, the undersigned recommends the court grant a permanent injunction: (1) restraining and enjoining Defendants and their agents, divisions, subsidiaries, officers, employees, attorneys, and all those persons in active concert or participation with them from making false and misleading statements of fact (a) in regard to COSAMIN®DS and (b) in the advertising of Movexa products and any other products marketed distributed or sold by Defendants; and (2) ordering removal of all of Defendants' false advertisements and statements from ManRelated.com, Google.com, and any other website on which they remain. III. Conclusion and Recommendation
For the foregoing reasons, the undersigned recommends the district judge grant Plaintiff's motion for default judgment, enter a permanent injunction, and award Plaintiffs' judgment in the amount of $13,661.43.
IT IS SO RECOMMENDED. August 9, 2018
Columbia, South Carolina
Shiva V. Hodges
United States Magistrate Judge
The parties are directed to note the important information in the attached
"Notice of Right to File Objections to Report and Recommendation."
Notice of Right to File Objections to Report and Recommendation
The parties are advised that they may file specific written objections to this Report and Recommendation with the District Judge. Objections must specifically identify the portions of the Report and Recommendation to which objections are made and the basis for such objections. "[I]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must 'only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.'" Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310 (4th Cir. 2005) (quoting Fed. R. Civ. P. 72 advisory committee's note).
Specific written objections must be filed within fourteen (14) days of the date of service of this Report and Recommendation. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b); see Fed. R. Civ. P. 6(a), (d). Filing by mail pursuant to Federal Rule of Civil Procedure 5 may be accomplished by mailing objections to:
Robin L. Blume, Clerk
United States District Court
901 Richland Street
Columbia, South Carolina 29201
Failure to timely file specific written objections to this Report and Recommendation will result in waiver of the right to appeal from a judgment of the District Court based upon such Recommendation. 28 U.S.C. § 636(b)(1); Thomas v. Arn, 474 U.S. 140 (1985); Wright v. Collins, 766 F.2d 841 (4th Cir. 1985); United States v. Schronce, 727 F.2d 91 (4th Cir. 1984).