United States District Court, D. Colorado
BIG O TIRES, LLC, a Nevada limited liability company, Plaintiff,
C&S TIRES, INC., a Nevada corporation, CRAIG A. BRADY, an individual, and SHERI E. BRADY, an individual, Defendants.
RECOMMENDATION OF UNITED STATES MAGISTRATE
Y. WANG, UNITED STATES MAGISTRATE JUDGE
matter comes before the court on Plaintiff Big O Tires,
LLC's Renewed Motion for Default Judgment Against All
Defendants (“the Renewed Motion for Default
Judgment” or “Renewed Motion”) [#39, filed
Feb. 27, 2017],  which was referred to this Magistrate
Judge pursuant to 28 U.S.C. § 636(b)(1); the Order
Referring Case dated April 27, 2016 [#17]; and the Memorandum
dated March 30, 2017 [#41]. Having now reviewed the Renewed
Motion for Default Judgment, the originally filed Motion for
Default Judgment [#24],  the supporting evidence to both
motions including the evidence taken at an August 1, 2016
hearing as to the first Motion for Default Judgment, and the
applicable law, this court respectfully RECOMMENDS that the
Motion for Default Judgment be GRANTED for the following
Big O Tires, LLC (“Plaintiff” or “Big
O”), is a Nevada company that transacts business in
Colorado and has an address at 5025 Florence Street, Unit A,
Denver, Colorado 80238. [#1 at ¶ 1]. Big O offers
franchises of retail tire and automotive stores [id.
at ¶ 8], and initiated this action against Defendants
C&S Tires, Inc. (“C&S”), Craig A. Brady
(“Mr. Brady”), and Sheri E. Brady (“Ms.
Brady”) (collectively, “Defendants”),
former Big O franchisees on March 28, 2016. [#1]. In the
Complaint, Big O asserts four causes of action: (1) trademark
infringement in violation of the Lanham Act, 15 U.S.C. §
1114(1) against all Defendants; (2) unfair competition in
violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)
against all Defendants; (3) breach of contract against
C&S; and (4) breach of the guaranty agreements contained
in Schedule 3 to the Agreement against Mr. Brady and Ms.
Brady. [#1]. In the Complaint, Big O averred that Defendants
owed it $6, 424.20 for product purchases, royalties, and the
national advertising fund. [Id. at ¶ 23].
served the summons and Complaint on Defendants on March 31,
2016, making a responsive pleading due on or before April 21,
2016. [#10, #11, #12]. None of the Defendants answered or
otherwise responded. Big O then moved for the entry of
default on April 25, 2016 [#13], which was denied for being
non-compliant with Rule 55 of the Federal Rules of Civil
Procedure. [#19]. Big O filed a second Motion for Entry of
Default, and the Clerk of the Court entered default against
each of the Defendants on May 5, 2016. [#23]. Big O then
filed its original Motion for Default Judgment on June 28,
2016, seeking $6, 327.60 for product purchases, royalties,
and the national advertising fund [#24 at ¶ 25]; damages
for trademark infringement in the amount of $7, 800.00 in
reasonable royalties for trademark infringement for the
period between March 31, 2015 and May 5, 2015; attorney fees
in the amount of $12, 341.00 and costs of $566.39; and
pre-judgment interest in the amount of $1, 182.65, for a
total of $28, 217.54 as of the filing of the instant Motion;
and certain injunctive relief. [#24]. In support of the Motion for
Default Judgment, Big O submitted a Declaration from its
counsel, Harold R. Bruno, III, that set forth facts regarding
the filing and service of the Complaint; a Declaration from
Rick O'Neil, a Western Division Vice President, who
provided information regarding Big O's Marks and Trade
Dress; the actions of Big O post-termination; and the
calculation of damages sought by Big O. [#24-2]. Mr.
O'Neil's Declaration also attached registration
records from the United States Patent and Trademark Office
[#24-2 at 7-16]; a copy of the Franchise Agreement [#24-2 at
17-75]; a copy of the First Amendment to the Franchise
Agreement [id. at 76-100]; a copy of the Second
Amendment to the Franchise Agreement with Reaffirmation of
Guarantors [id. at 101-209]; a copy of the letter
dated April 15, 2015 sent by Big O to Mr. Brady, reflecting
its belief that C&S continued to use the Marks and Trade
Dress [#24-2 at 110-111]; and a copy of the letter dated May
1, 2015 sent by Big O to Mr. Brady [#24-2 at 114-115].
the original Motion for Default Judgment was referred to the
undersigned Magistrate Judge for Recommendation [#25], this
court set an evidentiary hearing on the Motion for Default
Judgment [#26, #27, #28]. At the hearing, the court admitted
exhibits 4, 5, 6, 7, 8, 9, 10, 11 and 12 of the Amended
Exhibit List [#31-1], and took testimony from James A. Bull,
a Division Vice President of Big O. [#33; #34 at 3:10-12].
After review of the operative pleading and Motion for Default
Judgment, this court respectfully recommended that the
original Motion for Default Judgment be denied without
prejudice on January 17, 2017. [#38]. This court found that
it could not recommend default judgment because evidence
presented as to the calculation of damages provided by Big O
through its Motion for Default Judgment and the testimony at
the hearing was insufficient to establish a precise quantum
of damages. [Id. at 20-21]. This court further
declined to address any liability on the part of Defendants
Craig Brady and Sheri Brady as individual guarantors,
reserving that issue for a renewed motion for default
judgment, if any. [Id. at 24-25].
February 27, 2017, Big O filed this Renewed Motion for
Default Judgment. In reviewing the Renewed Motion for Default
Judgment, this court determined that it was not compliant
with Local Rule 54.3, which requires that a request for an
award of attorney's fees include, for each person for
whom fees are claimed, a summary of relevant qualifications
and experience, and Big O has also not provided any
information as to why the requested billing rates were
reasonable. Rather than simply recommend denial of any
attorney's fees and costs, see Reg'l Dist.
Council v. Mile High Rodbusters, Inc., 82 F.Supp.3d
1235, 1246 (D. Colo. 2015) (declining to entertain requests
for attorneys' fees for two attorneys for whom “a
summary of relevant qualifications and experience” was
not submitted), this court requested that Plaintiff
supplement its Renewed Motion for Default Judgment with the
missing information. [#42]. Big O submitted its Supplement on
May 22, 2017. [#44].
to Rule 55(b) of the Federal Rules of Civil Procedure, a
party may apply to the court for a default judgment after a
party against whom a judgment for affirmative relief is
sought has failed to plead or otherwise defend against the
action. Fed.R.Civ.P. 55(a), (b)(2). A court may conduct
hearings to conduct an accounting; determine the amount of
damages; establish the truth of any allegation by evidence;
or investigate any other matter. Fed.R.Civ.P. 55(b)(2).
is no right to a default judgment, and whether to enter a
default judgment is within the discretion of the court.
Bixler v. Foster, 596 F.3d 751, 762 (10th Cir. 2010)
(citing Nishimatsu Constr. Co. v. Houston Nat'l
Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (“[A]
defendant's default does not in itself warrant the court
in entering a default judgment.”)). In determining
whether a default judgment is warranted, the court must first
consider whether it has jurisdiction over the subject matter
and the defendants. See Williams v. Life Sav.
& Loan, 802 F.2d 1200, 1202-03 (10th Cir. 1986);
CrossFit, Inc. v. Jenkins, 69 F.Supp.3d 1088, 1093
(D. Colo. 2014). It is well established that a judgment is
void if the court that enters it lacks jurisdiction over
either the subject matter of the action or the parties to the
action. United States v. 51 Pieces of Real Prop., 17
F.3d 1306, 1309 (10th Cir. 1994). Plaintiff bears the burden
of establishing jurisdiction.
court then must consider whether the well-pleaded factual
allegations in the complaint support a judgment on the claims
against the defaulting defendants. 10A Charles A. Wright,
Arthur R. Miller & Mary K. Kane, Federal Practice and
Procedure § 2688, at 63 (3d ed. 1998) (“a
party in default does not admit mere conclusions of
law”); see also Nishimatsu Constr.
Co., 515 F.2d at 1206-08 (vacating district court's
entry of default judgment because the pleadings were
insufficient to support the judgment). “There must be a
sufficient basis in the pleadings for the judgment
entered.” Nishimatsu Constr. Co., 515 F.2d at
1206. The well-pleaded facts of a complaint are deemed true,
as are any undisputed facts set forth in affidavits and
exhibits. See Grady v. Swisher, No.
11-cv-02880-WYD-KLM, 2014 WL 3562794, at *12 (D. Colo. July
18, 2014); Samuels v. Feiner Trinh, Int'l, LLC,
No. 10-cv-02574-MEH, 2012 WL 3545275, at *1 (D. Colo. Aug.
15, 2012). The court may also take evidence at a hearing to
establish the truth of any allegation. Fed.R.Civ.P.
55(b)(2)(B). In addition, the entry of default does not
establish the amount of damages that is reasonable. Damages
may be awarded only if the record adequately reflects the
basis for the award as supported by the evidence in the
record. Klapprott v. United States, 335 U.S. 601,
612 (1949); Mathiason v. Aquinas Home Health Care,
Inc., 187 F.Supp.3d 1269 (D. Kan. 2016).
following facts are drawn from the Complaint and Demand for
Injunctive Relief; information and filings on the court's
Electronic Court Filing (“ECF”) docket; and
evidence presented at the August 1 hearing.
(1) Big O is a Nevada company that transacts business in
Colorado and has an address at 5025 Florence Street, Unit A,
Denver, Colorado 80238. [#1 at ¶ 1].
(2) Effective March 31, 2000, C&S entered a franchise
agreement (“Franchise Agreement”) with Big O,
executed by Mr. Brady on behalf of C&S, as President.
[#1-2 at 42].
(3) C&S operated a Big O franchise at 828 South Boulder
Highway, Henderson, Nevada 89015. [#1 at ¶ 17]. That
franchise was known as store 28813. [#34 at 26:13-16].
(4) Mr. Brady and Ms. Brady executed Schedule 2 of the
Franchise Agreement, verifying ownership interest in the
franchisee [#1-2 at 44], and Schedule 3, personally
guaranteeing “each and every covenant, payment,
agreement and undertaking on the part of the Franchisee
contained and set forth in or arising out of such Franchise
Agreement.” [Id. at 45-48].
(5) Big O owns the following trademarks and service marks
(“the Marks”) that are subject to this action:
“BIG-O, ” Registration No. 993, 415, registered
September 24, 1974; “BIG O, ” Registration No.
994, 466, registered October 1, 1974;“BIG O
TIRES” and Design, Registration No. 1, 611, 160,
registered August 28, 1990; “BIG O TIRES, ”
Registration No. 2, 411, 926, registered December 12, 2000;
and “EXTRA CARE” and Design, Registration No. 1,
417, 730, registered November 18, 1986. [#1 at ¶
11]. The Franchise
Agreement, among other things, licensed to C&S the use of
Marks, including “BIG-O”; “BIG O, ”
“BIG O TIRES, ” and “EXTRA CARE”.
[#1-2 at 10; 12 at § 2.01; 18 at ¶ 9; 55-56
(6) Big O uses the Big O Tires and Design, Registration No.
1, 611, 160, BIG O TIRES on its signs, both in the
interior and exterior of its buildings, and in-store signing
and communication pieces. [#34 at 5:4-12].
(7) EXTRA CARE (Registration No. 73589583) is a branding
program used to exemplify that beyond tires, Big O offers
services like brakes, struts, alignments, other repairs.
[Id. at 5:21 -6:4].
(8) The Team You Trust is a market program that Big O has
used for approximately six to seven years in media and
internal branding and external branding to customers.
[Id. at 6:5 -13].
(9) Big O also owns trade dress associated with its
franchised locations, including decorative black and red
stripes, a red and white interior, red and black employee
uniforms, various point of purchase materials and displays
and a distinctive font that is part of the design for
Registration No. 1, 611, 160 (collectively, “Trade
(10) The Franchise Agreement also regulates the use of the
Trade Dress, which is defined as “Any shop or
architectural designs, fixtures, improvements, signs, color
schemes or other elements of the appearance of the Store
which in any manner suggest affiliation of the Store or
Premises with Big O, or the System.” [#1-2 at 12].
(11) The Franchise Agreement states, “Franchisee
understands and agrees that any use of the Licensee Marks
other than as expressly authorized by this Agreement, without
Big O's prior written consent is an infringement of Big
O's rights therein and that the right to use the Licensed
Mark granted herein does not extend beyond the termination or
expiration of this Agreement.” [#1-2 at 11 ¶
(12) The Franchise Agreement further provides “[t]his
Agreement is accepted by Big O in the State of Colorado and
shall be governed by and interpreted in accordance with
Colorado law, which law shall prevail in the event of any
conflict of law. Big O and Franchisee consent to personal and
subject matter jurisdiction and venue in Denver,
Colorado.” [#1 at ¶ 7; #1-2 at 40 § 29.01].
(13) The Franchise Agreement has another provision entitled
“Jurisdiction” that provides, in pertinent part:
“the parties consent to the exclusive jurisdiction of
either the Colorado state courts or the United States Federal
District Court for the District of Colorado for any
litigation relating to this Agreement or the operation of the
Franchise Business thereunder.” [#1-2 at 40 §
(14) The expiration date of the Franchise Agreement was March
31, 2010. [#1-2 at 7].
(15) The Franchise Agreement was renewed by amendments to
provide for an expiration date of March 31, 2015. [#1 at
(16) Big O and C&S entered a First Amendment to the
Franchise Agreement (“First Amendment”) on or
about June 23, 2009. [#1-2 at 69].
(17) A Second Amendment to Franchise Agreement with
Reaffirmation of Guarantors (“Second Amendment”)
was effective February 22, 2010. [#1-2 at 85]. The
termination of the Franchise Agreement identified by the
Second Amendment was March 31, 2012. [Id. at ¶
(18) The Second Amendment provided that each Guarantor
reaffirms, confirms, ratifies, renews, accepts and adopts
that their respective Guaranty shall remain in full force and
effect throughout the term of the Franchise Agreement, as
amended. [Id. at ¶ 2].
(19) The Second Amendment was executed by both Mr. Brady on
behalf of C&S and on behalf of himself, as an individual,
and Ms. Brady. [#1-2 at 86-87].
(20) The Parties entered a Third Amendment to the Franchise
Agreement (“Third Amendment”) that was signed by
Mr. Brady, on behalf of C&S, and Big O. [#37-9 at 1]. The
Third Amendment extended the term of the Franchise Agreement
to March 31, 2015. [Id.; #34 at 11:8-12:6].
(21) Mr. Brady and Ms. Brady reaffirmed their personal
Guaranties as part of the Third Amendment. [#37-9].
(22) The Franchise Agreement between Big O and Defendants
terminated on March 31, 2015. [#1 at ¶ 18].
(23) Defendants did not renew the Franchise Agreement and
continued to use the Marks and the Trade Dress without
permission in Henderson, Nevada. [Id. at ¶ 19].
(24) Defendants' use of the Marks and Trade Dress
continued until May 4, 2015. [#24-2 at ¶ 27].
(25) On April 15, 2015 and May 1, 2015, Big O sent cease and
desist letters to C&S and Mr. Brady, informing them that
the continued use of the Marks amounted to infringement and a
breach of Section 20 of the Franchise Agreement, and
specifically that they had failed to comply with
post-termination duties, such as payment of amounts due and
owing, transferring telephone numbers, and providing customer
lists, to Big O. [#1 at ¶¶ 20-22; #1-3, #1-4].
(26) Despite these letters, Defendants did not cease using
the Marks and Trade Dress until after the March 31, 2015
expiration date, nor did C&S sign over the telephone
numbers or provide the customer lists by the May 4, 2015
deadline. [#1 at ¶ 22; #24-2 at ¶ 23].
(27) C&S had not ceased identifying itself as a Big O
Tire after March 31, 2015, and had not ceased as of on or
about May 4, 2015. [#24-2 at ¶ 23].
(28) When Mr. Bull visited the location in December 2015, the
store had been de-identified and was operating as Henderson
Tire and Auto. [#34 at 23:19-24:1].
(29) Each defendant was served with a copy of the summons and
complaint in this action on March ...