United States District Court, N.D. California
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 ...