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Castro & Co., LLC v. Polymath Inc.

United States District Court, N.D. Texas, Dallas Division

September 6, 2019

POLYMATH INC., Defendant.


          Sam A. Lindsay United States District Judge

         Before the court is Defendant/Counter-Plaintiff Polymath Inc.'s (“Defendant” or “Polymath”) Motion for Default Judgment (Doc. 21), filed February 19, 2019. After careful consideration of the motion, record, and applicable law, the court dismisses with prejudice all claims asserted by Plaintiffs/Counter-Defendants Castro & Co., LLC. (“Castro”) and Texas Cryptomarks, LLC.'s (“Texas Cryptomarks”) (collectively, “Plaintiffs”) in their First Amended Complaint (Doc. 10) for failure to comply with a court order pursuant to Rule 41(b) of the Federal Rules of Civil Procedure. Further, the court grants in part and denies in part Defendant's Motion for Default Judgment (Doc. 21).

         I. Procedural and Factual Background

         On March 21, 2018, Plaintiffs filed this action asserting claims for trademark infringement and unfair competition under the Lanham Act and state law. Plaintiffs also asserted a claim for injury to business reputation or trade name under Section 16.29 of the Texas Business and Commerce Code. Plaintiffs alleged they possess a trademark for the word marks “Securities Token” and “Polymath Securities Token” for use in connection with its products and services “currently being developed” for their online cryptocurrency exchange platform. Pls.' Original Compl. ¶ 8. In their Original Complaint (“Complaint”), Plaintiffs alleged that Defendant is infringing on their trademarks by using similar marks on its website. Id. ¶ 10.

         On April 11, 2018, Defendant filed a motion to dismiss (Doc. 6), arguing that Plaintiffs have no federal registrations in the asserted word marks and the Complaint failed to establish that, in the absence of federal registrations, Plaintiffs have superior common law rights in the mark. Plaintiffs subsequently amended their complaint (“Amended Complaint”) (Doc. 10) and, in their response to Defendant's motion to dismiss (Doc. 11), noted that the Amended Complaint “dropped their claim for infringement of a federally registered trademark . . . and asserted new claims of federal false advertising, Texas common law unfair competition and unjust enrichment as to each unregistered mark.” Pls.' Resp. ¶ 1.

         On May 15, 2018, Defendant filed its Answer, Affirmative Defenses, and Counterclaims to the Amended Complaint (“Answer”) (Doc. 12) and asserted several counterclaims, which include the following:

1. Declaratory judgment that Defendant has established priority rights in the mark “Polymath” and the slogan “The Securities Token Platform” in connection with financial services throughout the United States;
2. Declaratory judgment that Defendant did not infringe upon any trademark rights that Plaintiff claims to own;
3. Fraud claim based on the allegation that Plaintiffs filed a frivolous lawsuit;
4. Trademark infringement claim pursuant to 15 U.S.C. § 1125(a); and 5. Unfair competition claim under Texas law.

         Def.'s Ans. ¶¶ 45-73. Plaintiffs did not answer or otherwise respond to Defendant's Answer and counterclaims contained therein and have not otherwise appeared in this action since filing the Amended Complaint. On February 7, 2019, Defendant made a request for the clerk to issue an entry of default, and the clerk entered default on the same day, which was sent to Plaintiffs' counsel of record. Docs. 19-20. On February 19, 2019, Defendant filed its Motion for Default Judgment on its counterclaims pursuant to Federal Rule of Civil Procedure 55(b)(2), seeking statutory and additional damages and a permanent injunction.

         On March 21, 2019, the counsel of record for Plaintiffs, Joshua S. Milam, filed a motion to withdraw as counsel without substitution. Doc. 23. Mr. Milam advised the court that he “ceased to be litigation counsel for Plaintiffs in or around December 2018 . . . [and] was under the impression that Plaintiffs had substituted new counsel for this matter after being relieved of his duties.” Doc. 23 at 1. Mr. Milam further stated that “Plaintiffs have been advised that they should retain substitute counsel . . . [and] are advised of the current status of the case and are aware that failure to hire substitute counsel could result in a default judgment granted by the court.” Doc. 23 at 1.

         On March 22, 2019, the court granted Mr. Milam's motion to withdraw as counsel and directed Plaintiffs to obtain counsel by April 22, 2019. Doc. 24. In its order, the court warned Plaintiffs that their failure to comply would result in dismissal of the action for failure to comply with a court order or to prosecute pursuant to Federal Rule of Civil Procedure 41(b). Plaintiffs received notice of this order via mail at 13155 Noel Road, Suite 900, Dallas, Texas 75240, but did not comply with the court's order. On August 9, 2019, the court entered another order directing Plaintiffs to obtain counsel and instructing them that the court would dismiss their claims pursuant to Rule 41(b) if Plaintiffs failed to comply by August 23, 2019. The court further instructed Plaintiffs that it would enter a default judgment against them if they did not obtain counsel by the August 23rd deadline. Once again, Plaintiffs have not complied with the court's order.

         Rule 41(b) of the Federal Rules of Civil Procedure allows a court to dismiss an action sua sponte for a party's failure to prosecute or comply with a court order. Larson v. Scott, 157 F.3d 1030, 1031 (5th Cir. 1998) (citation omitted); Long v. Simmons, 77 F.3d 878, 879 (5th Cir. 1996) (footnote and citation omitted). “This authority flows from the court's inherent power to control its docket and prevent undue delays in the disposition of pending cases.” Boudwin v. Graystone Ins. Co., 756 F.2d 399, 401 (5th Cir. 1985) (citing Link v. Wabash R.R. Co., 370 U.S. 626 (1962)). The court's decision to dismiss an action, however, is materially affected by whether the dismissal is to be with or without prejudice. “A dismissal with prejudice is appropriate only if the failure to comply with the court order was the result of purposeful delay or contumaciousness and the record reflects that the district court employed lesser sanctions before dismissing the action.” Long v. Simmons, 77 F.3d at 880 (footnote and citation omitted). ÔÇťAssessments of fines, costs, or damages against the plaintiff or his counsel, attorney disciplinary ...

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