UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
May 24, 2011
J & J SPORTS PRODUCTIONS, INC.,
FORTINO ORTIZ TAPIA, ET AL.,
The opinion of the court was delivered by: Lucy H. Koh United States District Judge
ORDER GRANTING MOTION TO SET ASIDE DEFAULT, DENYING MOTION FOR DEFAULT JUDGMENT AS MOOT
On November 12, 2010, J & J Sports Productions, Incorporated (Plaintiff) filed a complaint alleging illegal interception and display of a fight program by Fortino Ortiz Tapia (Defendant).
Plaintiff served Defendant with a copy of the complaint on December 9, 2010. Defendant did not 20 file an answer to the complaint, and Plaintiff requested entry of default on January 10, 2011. The Clerk's office entered default against Defendant on January 12, 2011. Plaintiff filed a Motion for Default Judgment (Default Motion) on January 25, 2011. On March 28, 2011, Defendant filed a Motion to Set Aside Default (Set Aside Motion). The Court set these motions for hearing on May 26, 2011. The Court has determined that these matters are suitable for decision without oral 25 argument, pursuant to Civil Local Rule 7-1(b). Accordingly, the hearing on these motions is 26 hereby VACATED. For the reasons set forth below, the Court GRANTS Defendant's Set Aside
Motion and DENIES Plaintiff's Default Motion as moot. 28
Plaintiff claims to possess the exclusive nationwide commercial distribution rights to the November 14, 2009 telecast of "Firepower": Manny Pacquiao v. Miguel Cotto WBO Welterweight 4 Championship Fight Program (the "Program"). Dkt. No. 1 ("Compl."). These distribution rights 5 included additional, preliminary ("under-card") bouts and fight commentary. Id. ¶ 9. Plaintiff 6 alleges that Defendant illegally intercepted and displayed the Program at his business, El Nayariga 7 Motion, Plaintiff submitted the declaration of Nathan Tate. See Dkt. No. 13, Ex. 3 (Tate Decl.)
Restaurant (a.k.a. "Mariscos Nayariga 1") (hereinafter "Restaurant"). In support of its Default 8 Tate declares that he visited the Restaurant on November 14, 2009 at 8:01 p.m. He paid no cover 10 charge to enter. He observed one "medium-size" television displaying one of the under-card bouts from the Program. See Dkt. No. 13, Ex. 4 (Gagliardi Decl.) at ¶ 7. He also observed "8 x 11" signs on the Restaurant walls that "said 'Saturday 14 Fight Pacquiao v. Cotto.'" Tate Decl. Tate 13 states that the Restaurant's capacity was 80 people, and that he counted 75 people in the restaurant 14 between 8:01 p.m. and 8:05 p.m. Id. 15
Default Motion, Plaintiff moved for default judgment against Defendant on the following claims in 17 the complaint: (1) Violation of 47 U.S.C. § 605, et seq. and (3) Conversion. Plaintiff's complaint 18 seeks $100,000 in "statutory damages for each willful violation" and a recovery of "full costs, 19 including reasonable attorneys' fees." Compl. at ¶ 17. In the Default Motion, however, Plaintiff 20 seeks $110,000 for the violation of 47 U.S.C. § 605 et seq: $10,000 in statutory damages (the 21 maximum allowable for statutory damages), plus $100,000 enhanced damages for willfulness.
Decl.) at ¶¶ 3-4. Defendant's son states that Defendant is primarily Spanish-speaking and reads no English, and that Defendant mistakenly believed that he had no obligation to respond to the 26 complaint because he was in Mexico when it was served. Id. at ¶¶ 5-6. After the Clerk's office 27 entered default against Defendant, and Plaintiff filed its Default Motion on January 25, 2011,
Based on the allegations in its complaint and the declarations submitted in support of its
Defendant's attorney has submitted a declaration from his son stating that Defendant was in Mexico when a copy of the complaint was served at the Restaurant. See Dkt. No. 16, Ex. 1 (Tapia 24
Defendant's son contacted Defendant's current counsel. Defendant's counsel in turn contacted counsel for Plaintiff on January 28, 2011. See Dkt. No. 16, Ex. 2 (Harris Decl.) at ¶ 1. Thereafter, 2 the parties (through counsel) attempted to settle the case via telephone conversations and written 3 correspondence. Harris Decl. at ¶ 5. Defendant's counsel states that it "became clear that the 4 parties could not reach a settlement" on or about March 18, 2011, and that Defendant's counsel 5
Defendant has not yet filed an answer to the complaint. Defendant submitted an untimely 7 opposition to the Default Motion on May 12, 2011. Plaintiff moved for leave to file a reply brief in 8 response. 9
A. Motion to Set Aside Default
This "court may set aside an entry of default for good cause." Fed. R. Civ. P. 55(c). "To determine 'good cause', a court must 'consider three factors: (1) whether the party seeking to set 13 aside the default engaged in culpable conduct that led to the default; (2) whether it had no 14 meritorious defense; or (3) whether reopening the default judgment would prejudice' the other 15 party." United States v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 16 922, 925-26 (9th Cir. 2004)) (alterations omitted). "This standard, which is the same as is used to 18 determine whether a default judgment should be set aside under Rule 60(b), is disjunctive, such 19 that a finding that any one of these factors is true is sufficient reason for the district court to refuse 20 to set aside the default." Id. (citation omitted). "'[W]hile the same test applies for motions seeking 21 relief from default judgment under both Rule 55(c) and Rule 60(b), the test is more liberally 22 applied in the Rule 55(c) context' . . . ." Id. at 1091 n.1 (quoting Cracco v. Vitran Exp., Inc., 559 23 F.3d 625, 631 (7th Cir. 2009)) (alterations omitted). "This is because in the Rule 55 context there 24 is no interest in the finality of the judgment with which to contend." Id. (citing Hawaii 25 Carpenters' Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986)). "Judgment by default is a 26 drastic step appropriate only in extreme circumstances; a case should, whenever possible, be 27 decided on the merits." See Mesle, 615 F.3d at 1091 (9th Cir. 2010) (quoting Falk v. Allen, 739 28
"began to prepare" the Set Aside Motion at that time. Id. at ¶ 6. 6
1091 (9th Cir. 2010) (quoting Franchise Holding II v. Huntington Rests. Group, Inc., 375 F.3d 17 F.2d 461, 463 (9th Cir. 1984)).
1. Culpable Conduct
"[A] defendant's conduct is culpable if he has received actual or constructive notice of the 3 filing of the action and intentionally failed to answer." TCI Group Life Ins. Plan v. Knoebber, 244 4 F.3d 691, 697 (9th Cir. 2001) (quotation and quotation marks omitted). Here, "the term 5 'intentionally' means that a movant cannot be treated as culpable simply for having made a 6 conscious choice not to answer." Mesle, 615 F.3d at 1092. Instead, the term means something like 7 "willful, deliberate, or evidence of bad faith." TCI Group, 244 F.3d at 697 (quotation and 8 quotation marks omitted). "Neglectful failure to answer as to which the defendant offers a 9 credible, good faith explanation negating any intention to take advantage of the opposing party, 10 interfere with judicial decisionmaking, or otherwise manipulate the legal process is not 11 'intentional' under our default cases . . . ." Id.
For the Northern District of California
"[S]imple carelessness is not sufficient to treat a
12 negligent failure to reply as inexcusable, at least without a demonstration that other equitable 13 factors, such as prejudice, weigh heavily in favor of denial of the motion to set aside a default."
Mesle, 615 F.3d at 1092.
The Court finds that Defendant's conduct is not intentional. Through his son, he has 16 offered a credible explanation as to why he failed to timely answer the complaint. Defendant 17 mistakenly believed that he could not be properly served while he was out of the United States.
Within two weeks after the Clerk's office entered default, Defendant sought an attorney and, 19 through his attorney, contacted Plaintiff to discuss settling the Plaintiff's claims.
Because it appears that Defendant did not intend to "take advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal process," he did not 22 intentionally fail to answer. Therefore, this factor does not prohibit the Court from setting aside the 23 Clerk's entry of default against Defendant.
2. Meritorious Defense
"A defendant seeking to vacate a default judgment must present specific facts that would constitute a defense. But the burden on a party seeking to vacate a default judgment is not 27 extraordinarily heavy." Mesle, 615 F.3d at 1094 (citing TCI Group, 244 F.3d at 700) (quotation 28 marks omitted). "All that is necessary to satisfy the 'meritorious defense' requirement is to allege sufficient facts that, if true, would constitute a defense: 'the question whether the factual allegation 2 is true' is not to be determined by the court when it decides the motion to set aside the default." Id. 3 (quotation and alterations omitted). "Rather, that question 'would be the subject of the later 4 litigation.'" Id. (quotation omitted). 5
6 facts that could bear on the Court's determination of willfulness. Defendant's son represents that 7
As evidence that he has a meritorious defense, Defendant (through his son) asserts various Defendant was not in the Restaurant when the Program was shown. Tapia Decl. at ¶ 11. He 8 further alleges that the first time Defendant learned that the Program was shown at the Restaurant 9 was when "he received a demand letter from Plaintiff." Id. at ¶12. In addition, he refutes the 10 version of the facts set forth in the Tate Declaration, stating that the Restaurant did not advertise the Program, and that its capacity is only 44 (not 80). Id. at ¶¶ 14, 15 and 18. Taking these allegations as true, as the Court must at this stage, these facts could affect the Court's 13 determination of Defendant's willfulness. As the cases cited in Plaintiff's Default Motion 14 demonstrate, Courts often consider the number of patrons present or the economic advantage 15 realized by the defendant when determining the appropriate measure of enhanced damages for 16 willfulness in similar signal piracy cases. See, e.g., Kingvision Pay-Per-View, Ltd. v. Dosani, No. 17
Defendant does not appear to refute that the Program was actually shown at the Restaurant 19 on November 14, 2009. However, the complaint limits the request for damages to damages 20 relating to "each willful violation" of 47 U.S.C. § 605(e), and is silent regarding damages for non-21 willful violations of this statute. Accordingly, as currently pled, it appears that Plaintiff's recovery 22 for the alleged § 605(e) violation depends entirely on the Court's determination of willfulness. 23
Even if Plaintiff had sought non-willful statutory damages in the complaint, the fact that over 90% 24 of the damages Plaintiff seeks in the Default Motion depend on a determination of willfulness 25 counsels against deciding the willfulness issue without an opportunity for Defendant to be heard. 26
Since the determination of all or most of Plaintiff's claimed damages necessarily turns on a 27 determination of willfulness, the Court finds that Defendant has adequately presented facts 28 indicating a meritorious defense. This does not mean that the Court will ultimately accept 2
Defendant's argument, but it is sufficient to support setting aside the entry of default.
prejudiced, and that Plaintiff has failed to carry this burden. Plaintiff cites no authority for the 6 proposition that the Defendant must affirmatively disprove that the Plaintiff will be prejudiced by 7 setting a default aside. In any case, Plaintiff's attempt to demonstrate that it will be prejudiced 8 persuades the Court of the opposite. Plaintiff argues that it will be prejudiced because the case has 9 been pending since December 9, 2010. However, "[t]o be prejudicial, the setting aside of a 10 judgment must result in greater harm than simply delaying resolution of the case." Mesle, 615 F.3d greater possibility for fraud and collusion." While the Court does not find this relevant to the 14 analysis of prejudice, it does concern the Court that the Defendant has failed to personally submit a 15 declaration in support of the Set Aside Motion. In addition, it would have been much preferable 16 for the Defendant to submit an answer to the complaint and the Set Aside Motion promptly upon 17 retaining counsel, rather than waiting for settlement discussions to break down before doing so. 18
III. Conclusion 20
21 established good cause for setting aside the default entered against him. Therefore, the Court 22
Judgment as moot. Accordingly, Plaintiff's request to file a reply in support of the Motion for 24
Default Judgment is moot as well. The Clerk shall set aside default as to Defendant, individually 25 and dba El Nayariga Restaurant. 26
27 this Order. An Initial Case Management Conference shall be held on June 17, 2011 at 1:30 p.m. 28
3. Prejudice to Plaintiff
Plaintiff argues that it is the Defendant's burden to prove that the Plaintiff will not be
at 1095 (quoting TCI Group, 244 F.3d at 701).
Plaintiff also argues that Defendant's reliance on his son's declaration "gives rise to a The Court will not accommodate further delay on Defendant's part. 19
Because all three factors weigh in favor of Defendant, the Court finds that Defendant has GRANTS Defendant's Motion to Set Aside Default and DENIES Plaintiff's Motion for Default
Defendant shall file and serve an answer to the complaint within 14 days of the date of
IT IS SO ORDERED.
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