GS Holistic, LLC v. Cigarette Outlet Smoke Shop — Court Grants Leave to File Third Amended Complaint in Trademark Counterfeiting Case Despite Repeated Pleading Deficiencies

Background

GS Holistic, LLC initiated this trademark action on February 25, 2023, against Cigarette Outlet Smoke Shop and Maher Nagi, asserting claims for Federal Trademark Counterfeiting and Infringement under 15 U.S.C. § 1114 and Federal False Designation of Origin and Unfair Competition under 15 U.S.C. § 1125(a). The defendant has never appeared in the action. The court previously granted leave to file a First Amended Complaint in June 2023, but denied the plaintiff's December 2023 motion for default judgment without prejudice because the complaint failed to satisfy the second and third Eitel factors regarding the merits of the substantive claim and sufficiency of the pleading.

After the plaintiff filed a Second Amended Complaint in May 2024 and a second motion for default judgment in January 2025, the court again denied default judgment in June 2025 on the same grounds. Following six months of inactivity, the court ordered the plaintiff to advise on case posture in December 2025. In its status report, the plaintiff represented that it would file a Third Amended Complaint to streamline the defendant designation to avoid duplicative naming, add specific factual allegations regarding counterfeit identification and likelihood of confusion, and file supporting investigator declarations. The court ordered the plaintiff to file any motion for leave to amend within thirty days.

The Court’s Holding

The court granted the motion to amend, finding that the Rule 15 standard was "only just met." While acknowledging that the complaint was filed over three years ago and that the number of amendments and potential futility gave the court pause, the court found no evidence of bad faith and no undue prejudice to the defendant, who had not opposed the motion. The court emphasized that Rule 15's policy favoring amendment should be applied with liberality.

However, the court found that the plaintiff failed to follow through on its status report representations. The proposed TAC did not streamline the defendant designation, instead using the exact same language—"MAHER NAGI, individually and d/b/a CIGARETTE OUTLET SMOKE SHOP"—that the court had previously identified as duplicative. The plaintiff also failed to file any supporting declarations from an investigator, and the exhibits attached to the proposed TAC were identical to those attached to the SAC.

Despite these deficiencies, the court concluded that the proposed TAC contained some additional factual allegations regarding the basis for counterfeit identification and timing and manner of use, such that amendment was not futile. The court granted leave to amend and ordered the plaintiff to file the third amended complaint within seven days.

Key Takeaways

• Rule 15's liberal amendment policy can permit a third amended complaint even where the plaintiff has repeatedly failed to cure previously identified pleading deficiencies, provided there is no bad faith or undue prejudice.
• A plaintiff's failure to follow through on specific representations made in a status report regarding planned amendments does not automatically render a proposed amendment futile if some additional factual allegations are included.
• In trademark counterfeiting cases, courts may require specific factual allegations regarding the basis for counterfeit identification, timing and manner of use, and likelihood of confusion, including investigator methodology and marketplace context.
• Naming a defendant both individually and doing business as a trade name may be deemed duplicative, requiring streamlining in amended pleadings.
• A defendant's failure to appear or oppose a motion to amend weighs against a finding of undue prejudice under the Foman factors.

Why It Matters

This order demonstrates the tension between Rule 15's liberal amendment policy and the practical limits of judicial patience in trademark cases where plaintiffs repeatedly fail to state sufficient claims for default judgment. The court's willingness to grant a third amendment despite noting that the standard was "only just met" underscores the strong presumption in favor of amendment in the Ninth Circuit, while also serving as a warning that future amendments may face stricter scrutiny.

For trademark practitioners, the decision highlights the importance of curing specific pleading defects identified by courts in prior orders, particularly regarding duplicative defendant designations and the need for detailed factual allegations supporting counterfeit identification and likelihood of confusion. The court's insistence on investigator declarations and specific factual allegations regarding marketplace context provides a roadmap for pleading trademark counterfeiting claims sufficient to support default judgment.