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Inc. v. Musclegen Research, Inc.

United States District Court, E.D. Missouri, Southern Division

December 9, 2019

SI03, INC., Plaintiff,
v.
MUSCLEGEN RESEARCH, INC., et al, Defendants.

          MEMORANDUM AND ORDER

          RONNIE L. WHITE, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Defendant Musclegen Research, Inc.'s Motion for Relief. (ECF No. 53) Defendant argues the Court should vacate the Default Judgment and permanent injunction entered December 12, 2017 pursuant to Federal Rule of Civil Procedure 60(b) because it was not properly served before the judgment and injunction were entered and it did not receive notice of the case until October 22, 2018. Plaintiff SIO3, Inc. opposes the motion. After careful consideration, the Court grants the motion and vacates the Default Judgment and permanent injunction (ECF No. 29) previously entered in this case.

         BACKGROUND

         On November 22, 2016, Plaintiff SIO3, Inc. filed suit against Defendant Musclegen[1]Research, Inc., a North Carolina corporation, alleging false advertising under the Lanham Act, 15 U.S.C. § 1125(a) (Count I); unfair competition under Missouri common law (Count II); and unjust enrichment under Missouri common law (Count III). (ECF No. 1) On November 26, 2016, Plaintiffs first attempt to serve Defendant via process server at the address listed on the North Carolina Secretary of State's website was unsuccessful. (ECF No. 5) The address listed on the North Carolina Secretary of State's website, 2044 Muirfield Village Way, Raleigh, NC 27604, was the personal residence of Defendant's registered agent, Dr. Brian Parks.[2] According to Dr. Parks, however, he had paid a service called "MyCorporation" to change the address for Defendant and all of its corporate officers on the North Carolina Secretary of State's website to P.O. Box 607, Willow Springs, NC 27592. (Decl. of Dr. Brian M. Parks ¶ 16, ECF No. 50-1) Evidently, MyCorporation had failed to make Dr. Parks's requested change of address.

         After Plaintiffs first attempt at service failed, it attempted substituted service on Defendant via the North Carolina Department of the Secretary of State, which sent the service documents via certified mail with return receipt requested to 2044 Muirfield Village Way. On December 24, 2016, the service documents were signed for by an individual at the 2044 Muirfield Village Way address. (ECF Nos. 8 & 7) According to Dr. Parks, that individual is the current homeowner of 2044 Muirfield Village Way who has no association with Defendant and did not know Dr. Parks. (Decl. of Dr. Brian M. Parks ¶ 16, ECF No. 50-1) Because the documents had been delivered to the address on record for Defendant and were ostensibly received by a representative of Defendant as evidenced by a signature, the North Carolina Department of the Secretary of State confirmed to Plaintiff on January 4, 2017 that service upon Defendant was successful. (ECF No. 8, at 6)

         On April 18, 2017, Plaintiff filed for the Clerk of Court to enter default pursuant to Federal Rule of Civil Procedure 55(a) (ECF No. 13), which was entered on April 19, 2017 (ECF No. 14). The Clerk of Court noted, "The record reflects service of summons and the complaint upon said Defendant on January 4, 2017, by service upon the North Carolina Secretary of State in accordance with North Carolina law." (Id.)

         On May 18, 2017, Plaintiff filed a Motion for Default Judgment and Entry of Permanent Injunction. (ECF No. 19) Because Defendant had not been notified of the Clerk of Court's entry of default, the Court ordered copies of the Clerk's Entry of Default be mailed through regular mail and certified mail to Defendant via the North Carolina Secretary of State and to Dr. Parks at P.O. Box 607, Willow Springs, NC 27592. (ECF No. 20) The Court notes that it discovered this address, which was the address Dr. Parks says he paid MyCorporation to change on the Secretary of State's website, after conducting its own Internet search. The North Carolina Secretary of State received the copies on May 23, 2017. (ECF No. 22) The copies sent to Dr. Parks, however, were returned as unclaimed on June 15, 2017, and the envelope notes two attempts at delivery were made on May 23 and 29, 2017 before the documents were returned on June 7, 2017. (ECF No. 24)

         On October 6, 2017, Plaintiff filed a Renewed Motion for Default Judgment and Entry of Permanent Injunction. (ECF No. 25) On October 18, 2017, the Court ordered copies of the renewed motion, as well as copies of other filings, to be mailed to Defendant and noted:

While MuscleGen was served through the North Carolina Secretary of State, a recent Internet search by the Court revealed a new mailing address on MuscleGen's website. Out of an abundance of caution, the Court will make one last attempt to notify Defendant MuscleGen of the Complaint and pending motions for default judgment seeking injunctive and monetary relief.

(ECF No. 26) (emphasis added) Accordingly, copies were mailed via regular and certified mail to MuscleGen Research, Inc., 2425 Kildaire Farm Road, Suite 407, Cary, NC 28518. (Id.) On November 8, 2017, the documents were received and signed for by "Sam Steger." (ECF No. 27) According to Dr. Parks, an employee named Samantha Steger worked for Defendant from June 2017 until February 2018, "when she was terminated for cause." (Decl. of Dr. Brian M. Parks ¶ 18, ECF No. 50-1) Dr. Parks further asserts that "[i]f Ms. Steger did sign for those documents, she never passed them along to any other Musclegen employee." (Id.) On December 12, 2017, the Court entered a Default Judgment and permanent injunction in favor of Plaintiff. (ECF Nos. 28 & 29)

         According to Dr. Parks, he first learned of this case once some of Defendant's clients made "passing comments about a lawsuit against Musclegen" after the Court entered its Default Judgment and permanent injunction. (Decl. of Dr. Brian M. Parks ¶ 5, ECF No. 50-1) He then searched online and "learned that this Court had entered an injunction against Musclegen, but had not ordered a fine or made any other demand on Musclegen." (Id.) Dr. Parks states that, after reviewing the language in the Court's Default Judgment and permanent injunction, he "believed that Musclegen was not in violation of it" as Defendant had changed its business practice at issue. (Id.) Conceding his lack of legal knowledge, Dr. Parks avers Defendant did not think they needed to take any action in this matter because they believed they were not in violation of the injunction. (Id.)

         According to Plaintiff, its counsel attempted to contact Defendant on January 11, 2018. (ECF No. 55-2) Once the permanent injunction's deadline passed for Defendant to recall certain products, Plaintiffs counsel sent a letter via email to Defendant at the email address MuscleGen@outlook.com. (ECF Nos. 55-2, -3) That same date, Plaintiffs counsel received a response email from someone named "Gina Travino," who identified herself as "Customer Service Representative" for "Musclegen Research, MedFit RX, Skin Fit and Muscle Mud Coffee." (ECF No. 55-3) "Gina Travino" stated: "Our legal counsel will respond. We have just received noticed [sic] before Christmas as all correspondences were sent to the wrong address. Countersuit to follow." (Id.) According to Dr. Parks, "Gina Travino" is a pseudonym used by a third-party company in India, Habliss, that Defendant hired to handle customer service responses. (Decl. of Dr. Brian M. Parks ¶¶ 20-21, ECF No. 50-1) Dr. Parks further attests that Habliss did not inform Defendant about the communication with Plaintiffs counsel and, after Habliss repeatedly failed to forward certain documents to Defendant's employees, Defendant ceased doing business with it. (Id.)

         Plaintiff filed a Motion for Contempt on April 5, 2018 (ECF No. 35), and Renewed Motion for Contempt on August 13, 2018 (ECF No. 36), claiming Defendant was violating the permanent injunction and moving for sanctions. On September 5, 2018, the Court issued an Order for Defendant to respond to Plaintiffs Motion for Contempt no later than October 3, 2018. (ECF No. 37) The Court ordered the Clerk of Court to serve a copy of the September 5, 2018 Order via regular mail and UPS to MuscleGen Research, Inc., 2425 Kildaire Farm Road, Suite 407, Cary, NC 28518. (Id.) On October 18, 2018, after nothing had been filed to indicate service was successful, the Court issued an Amended Order on October 18, 2018 and ordered Plaintiff to effect service by special process server. (ECF No. 39) Plaintiff submitted an affidavit of service indicating service was successful on October 22, 2018. (ECF No. 40)

         Dr. Parks attests that when Defendant's president was served on October 22, 2018, "that was the first time that Musclegen understood that there might be further action with respect to the injunction." (Decl. of Dr. Brian M. Parks ¶ 24, ECF No. 50-1) The Amended Order of October 18, 2018 ordered Defendant to respond to Plaintiffs Motion for Contempt no later than fourteen days after service was completed. (ECF No. 39) Accordingly, Defendant's response was due no later than November 5, 2018. Defendant's first activity in the case was the entry of appearance of its initial counsel on November 20, 2018. (ECF No. 41) Defendant's initial counsel filed a motion to withdraw as counsel on January 3, 2019 (ECF No. 42) and Defendant's current counsel entered their appearance on February 5, 2019. (ECF Nos. 43 & 44) Defendant's current counsel requested an additional fourteen days to respond to Plaintiffs Motions for Contempt, which the Court granted. (ECF No. 46, 47) Defendant timely filed its Response in Opposition to Plaintiffs Motions for Contempt in which it argues all attempts at service prior to October 22, 2018 were unsuccessful and it only learned of the case on October 22. (ECF No. 50, at 9) Upon consideration of the ...


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