Malibu Media, LLC v. Doe

          ORDER SETTING ASIDE DEFAULT

          WILLIAM ALSUP UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         In this copyright infringement action over pornography, the copyright owner failed to timely respond to one accused infringer’s counterclaim for declaratory judgment of non-infringement. The Clerk entered default on the counterclaim. Plaintiff now moves to set aside the default. For the reasons stated below, plaintiff’s motion is Granted.

         STATEMENT

         Plaintiff Malibu Media, LLC, makes pornographic videos which it offers via paid subscription on its website, x-art.com. Within the past year, Malibu Media has commenced 178 copyright infringement actions in this district and thousands more elsewhere. As in each of its numerous actions Malibu Media accused an Internet user of using software called BitTorrent to copy and distribute its copyrighted videos.

         When it commenced this action, Malibu Media could only identify the accused infringer by his IP address, a 32-bit numerical identifier assigned to the Internet connection used by the accused infringer. In order to identify the proper defendant, Malibu Media sought leave to serve a third-party subpoena on Comcast Communications, Inc., the Internet service provider for the connection used by the accused infringer. Malibu Media sought the identity of the subscriber for that Internet service, defendant John Doe Subscriber Assigned IP Address 98.207.153.167 (“Doe ’167”). An order granted Malibu Media’s request for leave to serve a third-party subpoena.

         Once Malibu Media received Doe ’167’s identity, Doe ’167 informed Malibu Media that neither he nor any member of his household had ever used BitTorrent, so Malibu Media conducted a further investigation. Malibu Media determined that John Doe 2, aka MBS, had rented Doe ’167’s guest house and allegedly used Doe ’167’s Internet connection to conduct the accused infringement. Malibu Media amended its complaint and named MBS as a second defendant.

         In February 2016, MBS, who is represented by Attorney J. Curtis Edmondson, answered Malibu Media’s complaint and filed a counterclaim for declaratory judgment of non-infringement (Dkt. No. 32). MBS alleged that he subscribed to x-art.com and that “[i]n exchange for [his] monthly payment, [Malibu Media] granted [him] the right to view and copy the films that are the subject of this lawsuit” (id. at ¶ 44). Malibu Media never answered the counterclaim.

         In May 2016, MBS requested that the Clerk enter default on his counterclaim, inasmuch as Malibu Media had missed the deadline pursuant to Rule 12(a)(1)(C) to respond by more than a month. The Clerk entered default on May 27. Malibu Media moved to set aside the default two weeks later. This order follows full briefing and oral argument.^[1]

         ANALYSIS

         Rule 55(c) provides that “the Court may set aside an entry of default for good cause, ” and the assessment of good cause is subject to a district court’s discretion. Franchise Holding II v. Huntington Rest., 375 F.3d 922, 925 (9th Cir. 2004), cert. denied 544 U.S. 949. Our court of appeals set forth three factors that should be considered in exercising that discretion, “(1) whether the [counterclaimant] will be prejudiced, (2) whether the [counter] defendant has a meritorious defense, and (3) whether culpable conduct of the [counter] defendant led to the default.” Brandt v. Am. Bankers Ins. Co. of Florida, 653 F.3d 1108, 1111 (9th Cir. 2011) (quoting Falk v. Allen, 738 F.2d 461, 463 (9th Cir. 1984). The district court is free to deny relief “if any of the three factors is true.” Ibid. (citations omitted).

         Malibu Media contends that its failure to timely respond is due to a calendaring error, so good cause exists to set aside the default. MBS responds that each of the three Falk factors applies, so the Court should deny relief.

         MBS contends that he will be prejudiced if default is set aside, inasmuch as he has a subscription to view the copyrighted works at issue herein. Similarly, he contends that his subscription constitutes a complete defense to copyright infringement, so Malibu Media’s defense lacks merit. Not so. MBS’s subscription did not grant him free rein to copy or distribute Malibu Media’s videos. Moreover, MBS’s allegation artfully omits the date on which he first subscribed to Malibu Media’s website. MBS also notes that the undersigned recently denied a motion by Malibu Media to dismiss a defendant’s counterclaim for declaratory judgment of non-infringement in a different case, which he contends indicates the lack of merit to Malibu Media’s defense. See Malibu Media v. John Doe, Case No. 15-4441, ECF No. 53 (N.D. Cal. June 20, 2016). Contrary to MBS, that decision did not hold that Malibu Media lacked a meritorious defense but rather held that dismissal of the counterclaim would serve no purpose other than to allow Malibu Media an easier exit from the case should it ultimately prove meritless. MBS’s suggestion that his subscription to x-art.com defeats any meritorious defense to his counterclaim (or that he would be prejudiced by proceeding on the merits) is simply disingenuous.^[2]

         MBS further argues that Malibu Media, which has litigated thousands of similar cases across the country, including nearly two hundred in this district, should have known about this deadline. He contends that counsel’s calendering error was merely “a defect in Malibu Media’s lawsuit manufacturing process” and that it should treat default as its “cost of doing business” (Def’s Opp. at 3). MBS is correct that Malibu Media has regrettably clogged the docket of this district with its prolific litigation. Moreover, Malibu Media’s lack of diligence has been a chronic problem throughout its campaign, and Malibu Media has been required to bear the consequences of its errors frequently. Nevertheless, Malibu Media’s calendaring error, while careless, was not the kind of “culpable ...