United States District Court, N.D. California
REQUEST FOR REASSIGNMENT AND REPORT AND
RECOMMENDATION TO GRANT PLAINTIFF'S MOTION FOR DEFAULT
JUDGMENT RE: DKT. NO. 59
NATHANAEL M. COUSINS United States Magistrate Judge
Computer Fraud and Abuse Act case, plaintiff Distinct Media
accuses Russian national Lev Shutov of illegally
circumventing website advertisements to siphon proceeds from
click-through advertisements. After ex parte discovery
authorized by this Court, Distinct Media identified Lev
Shutov as the beneficiary of the eBay and Yahoo accounts
holding the rerouted advertising fees. Shutov has not
appeared in this case, but the Court received correspondence
from his lawyer in Russia objecting to this Court's
jurisdiction. Distinct Media now moves for default judgment,
seeking $3, 071, 524.27 in damages.
reviewing the motion, the Court concludes that jurisdiction
over Shutov is proper, and recommends granting the motion for
default judgment. The Court also recommends awarding $180,
524.27 in damages and denying Distinct Media's further
Distinct Media Limited is a private company that operates
approximately eighty websites around the world, including
approximately twenty websites in the United States. Dkt. No.
26 (Second Amended Complaint) at ¶ 1. Defendant Lev
Shutov is a resident of Yoshkar-Ola, Russia. SAC at ¶ 2.
Distinct Media believes other, unidentified defendants are
involved in the alleged fraudulent activity, but has been
unable to identify these individuals. SAC ¶ 3.
Media displays advertisements on its websites and is paid a
small fee each time an internet user clicks on an ad and is
directed to the advertiser's website. SAC ¶ 5. In
2009, Distinct Media entered into a pay-per-click agreement
with Yahoo! for advertising on Distinct Media's website.
SAC ¶ 6. Under this agreement, Distinct Media may not
use any artificial means to generate clicks. SAC ¶ 6.
Media's internal databases, computer, computer programs,
and computer networks are confidential and only authorized
employees are permitted to access the systems. SAC ¶ 8.
Beginning in 2009, Distinct Media contracted with a Russian
company, CPS Labs, to design the Distinct Media systems. SAC
¶ 9. Shutov was one of approximately six engineers
employed by CPS Labs hired for this project. SAC ¶ 9.
Shutov was a lead software developer on the project and
worked on the design of Distinct Media's systems from
2009 until April 2011. SAC ¶¶ 10-11. Shutov's
wife, Irina Shutov, is currently employed at Distinct Media
in Russia. SAC ¶ 12.
2013, defendants caused a jquery.form.js file to be embedded
in the server used by Distinct Media, and in 2014, the file
was transferred to a server Distinct Media leases in the U.S.
SAC ¶ 13. On November 19, 2014, Distinct Media
discovered this file at a meeting with Yahoo. SAC ¶ 14.
According to Yahoo, the Jquery file caused auto-clicking on
the ads, which violates the Yahoo pay-per-click agreement.
SAC ¶ 14.
Media retained Deloitte Consulting to investigate and
continued its own internal investigation. SAC ¶ 15.
Distinct Media discovered the the JQuery file caused an
Amazon or eBay advertisement to be superimposed on top of the
Yahoo ad. SAC ¶ 16. When users clicked on the Amazon or
eBay advertisements, Yahoo paid a pay-per-click fee, the user
was briefly routed to a third party website, and then
transferred to either Amazon or eBay websites. SAC ¶ 16.
Media alleges that Shutov and others were involved in this
re-routing. In addition, Shutov established various Amazon
and eBay accounts to receive payments for the advertisement
clicking. SAC ¶¶ 19-20. Shutov established online
payment accounts through MTACC and eCoin.com. SAC ¶ 20.
According to the MTACC account history, eBay paid Shutov more
than $314, 000 from August 2013 to December 2014. SAC ¶
21. In addition, Amazon paid more than $24, 000 to his MTACC
account. SAC ¶ 23. Shutov's MTACC account was frozen
in December 2015 with a balance of more than $155, 000. SAC
16, 2015, Distinct Media sued Doe Defendants and sought
expedited discovery to identify the defendants by issuing
subpoenas to eBay and Amazon. The Court granted three of
Distinct Media's requests for ex parte discovery. Dkt.
Nos. 14, 17, 41. In the Second Amended Complaint, Distinct
Media identified Shutov as the creator and beneficiary of the
JQuery file and alleges that his conduct violates the
Computer Fraud and Abuse Act 18 U.S.C. § 1030,
California Penal Code § 502, and California Business and
Professions Code § 17200. Dkt. No. 26. Shutov did not
appear in this case. Ruslan Ivanov, Shutov's lawyer,
wrote to the Court and stated an objection to this
Court's exercise of jurisdiction over Shutov. Dkt. Nos.
33, 62. Distinct Media now moves for default judgment against
Media has consented to the jurisdiction of a magistrate
judge. Dkt. No. 7. However, Shutov has not consented to the
jurisdiction of a magistrate judge, so the Court writes this
order as a report and recommendation. 28 U.S.C. § 636.
The clerk will transfer this case to a district judge.
may be entered against a party who fails to plead or
otherwise defend an action and against whom a judgment for
affirmative relief is sought. Fed.R.Civ.P. 55(a). After entry
of default, the Court has discretion to grant default
judgment on the merits of the case. Fed.R.Civ.P. 55(b);
Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir.
1980). In deciding whether to grant default judgment, the
Court considers the following factors: (1) the merits of the
plaintiff's substantive claim; (2) the sufficiency of the
complaint; (3) the sum of money at stake in the action; (4)
the possibility of prejudice to the plaintiff; (5) the
possibility of a dispute concerning material facts; (6)
whether the default was due to excusable neglect; and (7) the
strong policy favoring decisions on the merits. Eitel v.
McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The
factual allegations of the complaint, except those concerning
damages, are deemed admitted by the non-responding parties.
Shanghai Automation Instrument, 194 F.Supp.2d at
995; see also Geddes v. United Fin. Grp., 559 F.2d
557, 560 (9th Cir. 1977) (“[t]he general rule of law is
that upon default the factual allegations of the complaint,
except those relating to the amount of damages, will be taken
Court first considers Shutov's objection to the
jurisdiction of this Court. Then, the Court analyzes the
merits of the complaint, the remaining Eitel
factors, the injunctive relief, and the damages sought.
Jurisdiction and Service of Process
presented with a motion for default judgment, the Court has
“an affirmative duty to look into its jurisdiction over
both the subject matter and the parties.” In re
Tuli, 172 F.3d 707, 712 (9th Cir. 1999). Also, the Court
may only enter default judgment against a minor or
incompetent person if represented by a ...