United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
THOMAS M. DURKIN, District Judge.
Plaintiff Window World, Inc. ("Window World") brought this action June 4, 2012 against David Hampton and Window World of Chicagoland, LLC, ("Defendants") alleging claims of trademark infringement and unfair competition under multiple sections of the Lanham Act, 15 U.S.C. § 1114(1) & § 1125(a), breach of contract, and indemnification. R. 1. Default judgment against the Defendants was entered by Judge George Lindberg on December 4, 2012. Presently before this Court is Defendants' amended motion to set aside that default judgment. R. 25. For the reasons explained below, the motion is granted.
Window World entered into multiple license agreements with David Hampton from 2005 through 2009, allowing the Defendants to sell windows and related products under the "Window World" name. On October 28, 2011, Window World advised the Defendants that their relationship with Window World was in fact a franchise, and that their license agreements violated franchise registration and disclosure laws. Window World gave the Defendants written notice to either agree to become a Window World franchisee in 35 days, or rescind the license agreements and cease operating under the Window World name. Window World's letter noted that if the Defendants decided to convert from a licensee to a franchisee, the Defendants would continue to operate under their current licensing agreement until its expiration, and would then be asked to sign a franchise agreement. See Case No. 12 C 579, R. 1-3 Ex. C at 1-2. The Defendants elected to enter into a franchise agreement with Window World. Window World alleges that on April 4, 2012, before any franchise agreements were executed, the Defendants abandoned their Window World business and were in default on the November 21 and December 11, 2008 license agreements that they had earlier entered into with Window World.
On January 26, 2012, the Defendants filed a complaint against Window World and multiple co-defendants claiming fraud, breach of contract, and violation of the Illinois Franchise Disclosure Act ("IFDA") (the "Hampton I" complaint). See Case No. 12 C 579, R. 1. In that case, which was also pending before Judge Lindberg, the Defendants were represented by attorney Alice Kelly. Several amended complaints were filed. See Case No. 12 C 579 R. 6, 10 & 48. On April 9, 2012, Window World and its co-defendants filed a motion to dismiss the second amended Hampton I Complaint. Id. at R. 30.
On May 23, 2012, Judge Lindberg granted in part and denied in part the motion to dismiss the second amended Hampton I complaint. Id. at R. 46. Specifically, Judge Lindberg declined to dismiss the claims under the IFDA (Counts I-III) and the breach of contract claim (Count IV). Id. On May 29, 2012, the Defendants filed a third amended complaint. Id. at R. 48.
On June 4, 2012, Window World filed a complaint against the Defendants and additional defendants. See Case No. 12 C 4329, R. 1 (the "Window World" complaint). That case was initially assigned to Judge John F. Grady. On June 13, 2012, in the Hampton I case, Window World filed an unopposed motion to reassign to Judge Lindberg and consolidate its newly filed Window World complaint with the Hampton I complaint, pursuant to Federal Rule of Civil Procedure 42 and Local Rule 40.4. See Case No. 12 C 579, R. 49.
Although Kelly never entered an appearance for the Defendants in the Window World case, she accepted waiver of service forms from Window World counsel Scott Walton, who was also counsel for Window World during the Hampton I case, as he represented to the Court on August 14, 2013. Kelly provided the waiver form to Hampton, who signed it on June 11, 2012. R. 31 at 3; R. 25-1 Ex. A at 2; R. 30-1 at 3-4.
On June 14, 2012, the Window World case was reassigned to Judge Lindberg as it related to the Hampton I case. R. 5. The docket sheet of Hampton I reflects a June 13, 2012 minute order entry that the Window World case was reassigned to Judge Lindberg and "consolidated" with Hampton I. See Case No. 12 C 579, R. 51. However, the cases apparently remained separated for purposes of notices sent out electronically by the clerk's office.
On June 25, 2012, the Defendants filed a notice of voluntary dismissal of the Hampton I complaint, which Judge Lindberg granted on July 5, 2012, construing it as a motion to dismiss. Id. at R. 53, 55. That same day, on June 25, 2012, Kelly sent a letter to counsel for Window World notifying them that she did not represent the Defendants in the Window World case. R. 30-2 Ex. A at 4.
On August 8, 2012, Window World made an oral motion for entry of default in the Window World case before Judge Lindberg, which he granted that day. See Case No. 12 C 579, R. 9. On September 26, 2012, Window World appeared before the Court with a witness to prove its damages and to testify in support of the requested injunctive relief. Id. at R. 10. On October 3, 2012, Window World filed a written motion for default judgment, pursuant to Federal Rule of Civil Procedure 55(b). R. 12. Kelly received no notice about any of the default proceedings related to the motion for default judgment, R. 30 Ex. 2 at 1, and Hampton never received a copy of Window World's October 3, 2012 motion for default judgment, nor was he made of the August 8, 2012 status hearing or Window World's request for a default judgment therein. R. 25-1 Ex. A ¶¶ 19-22. On October 10, 2012, Judge Lindberg held a hearing on Window World's motion for default judgment which, as counsel for Window World represented to the Court on August 14, 2013, only counsel for Window World attended. R. 13. On December 4, 2012, Judge Lindberg entered a final judgment order in favor of Window World against the Defendants on all counts, ordering the Defendants to pay damages in the amount of $49, 763.35 and costs and expenses in the amount of $58, 196.50. R. 19. Hampton never received a copy of the final judgment order. R. 25-1 Ex. A ¶ 23. This Court was assigned the Window World case on August 7, 2013, when Judge Lindberg retired. R. 24.
On June 24, 2013, the Defendants, along with additional plaintiffs, filed a second complaint against Window World and additional defendants, again asserting claims under the IFDA and breach of contract, among others. See Case No. 12 C 4624 (the "Hampton II" case), R.1. That case was initially assigned to the Honorable Amy St. Eve. Ms. Kelly entered an appearance as local counsel, and Jonathan Fortman, Defendants' current counsel, entered an appearance as well. Id. at R. 2-3.
On July 17, 2013, Hampton became aware of the default judgment in this case while reviewing the 2013 Window World Franchise Disclosure Document in which the default judgment was disclosed, and contacted his attorney who advised him that a default judgment had been entered. R. 25-1 Ex. A ¶ 25.
Twelve days later-on July 29, 2013-and nearly eight months after Judge Lindberg entered the default judgment order in this case, attorney Jonathan Fortman entered an appearance for Defendants in this case. R. 21. The same day, Defendants filed a motion to set aside the default judgment. R. 22. Before that point, the Defendants' last activity in this case was their execution of waiver of service on June 18, 2012. R. 7. On August 9, 2013, ...