The actions of 28 Chinese entities selling counterfeit goods on the internet did not arise out of the same transaction or occurrence, and they must be severed into individual suits.
The Defendants, 28 unrelated individuals and entities located in the People’s Republic of China, are accused of counterfeiting the Plaintiffs’ registered trademarks and selling these unauthorized products on the internet. The Plaintiffs brought this action under the Lanham Act. All defendants were properly served but failed to file responsive pleadings. The magistrate judge appropriately determined that default judgment should be entered against these defendants.
However, pursuant to this court’s independent obligation to review the magistrate’s report for clear error, one aspect merits closer inspection; namely, whether the 28 defendants are properly joined pursuant to Federal Rule of Civil Procedure 20(a)(2).
In recent years, district courts have split over the parameters of permissive joinder – an issue that often arises in the context of internet commerce cases. Many courts have held that joining multiple defendants – often hundreds or thousands of defendants – in a single action simply because their underlying conduct was similar in nature violates Rule 20’s “transaction or occurrence requirement.” But other courts have held that joinder is appropriate where the defendants’ actions are closely connected in time and space and support or enhance collective illegal activity. Courts focusing on “swarm” joinder also focus heavily on judicial efficiency and the need to effectively manage these internet commerce cases that almost always result in default judgments.
However, courts cannot ignore Rule 20’s plain limitations simply for efficiency’s sake. Here, it is abundantly clear that the defendants’ activities are wholly unrelated to one another and do not arise from the same transaction or occurrence. The defendants in this case are distinct entities independently selling counterfeit goods. The only commonality between them is that they use e-commerce stores to perpetuate their counterfeiting activities. Permitting joinder in this case would deprive the phrase “same transaction or occurrence” of any real meaning. Accordingly, 27 of the 28 defendants must be severed.
This and similar decisions place a hardship on trademark and copyright owners who seek to enforce their interests against the thousands of individuals who violate their trademarks and copyrights on a daily basis. But the result reached here is what the text of Rule 20 requires, and courts cannot elevate policy above the law’s plain meaning. Unless the political branches provide another remedy, plaintiffs will be required to bring individual cases against individual defendants if and when their wrongful actions have no meaningful connection to one another.
Default judgment is granted as to one defendant. The clerk of court shall create new civil cases for each of the remaining 27 defendants.
Volkswagen AG v. Uninc. Ass’ns, Case No. 1:17cv1413, Aug. 30, 2018. EDVA at Alexandria (Ellis). VLW No. 018-3-362, 6 pp.