G & G Closed Circuit Events LLC v. Arvizu

          ORDER

          Honorable John J. Tuchi United States District Judge

         At issue is Plaintiff's Application for Default Judgment by the Court (Doc. 17, Mot.), to which Defendant filed a Response (Doc. 19, Resp.) and Plaintiff filed a Reply (Doc. 20, Reply).

         I. FACTUAL BACKGROUND

         Plaintiff G&G Closed Circuit Events, LLC was granted exclusive contractual rights to the nationwide distribution of a boxing match which aired on May 6, 2017 (“the Program”). (Doc. 1, Compl. ¶ 16.) Defendant Francisca Gonzalez Arvizu owns Taco Mich, a restaurant and bar in Phoenix. (Compl. ¶ 12.) In its Complaint, Plaintiff alleges that Defendant unlawfully intercepted and broadcast the Program at Taco Mich, and that the broadcast “resulted in increased profits for Taco Mich.” (Compl. ¶¶ 11, 13.) Plaintiff seeks damages under Title 47 U.S.C. §§ 605(e) and 553. (Compl. ¶¶ 15-29.)

         Plaintiff filed its Complaint on March 1, 2018 and executed service on Defendants Gonzalez Arvizu and Taco Mich. on April 27, 2018. (Compl, Doc. 13.) Defendants failed to answer or otherwise appear in their defense. On May 14, 2018, Plaintiff filed an Application for Entry of Default (Doc. 14). The Clerk of Court entered default against Defendants on May 15, 2018 (Doc. 15). Plaintiff timely filed a Motion for Default Judgment as to both Defendants on July 12, 2018 (Mot.). On July 30, Defendants filed a Response (Resp.) Plaintiff then filed a Reply, arguing that because default has already been entered, Defendants are barred from appearing or presenting evidence. (Reply at 2.)

         In their Response, Defendants allege that Plaintiff cannot prove its damages because it lacks supporting evidence. (Resp. at 2-4.) Defendants assert that Plaintiff's investigator, Amanda Hidalgo (“Hidalgo”) misrepresented the events of May 6, 2017 in her affidavit in support of Plaintiff's allegation. (Resp. at 2.) Defendants argue that Hidalgo could not possibly have been at Taco Mich. between 9:11 and 9:17 p.m. when she claims she saw the Program being unlawfully broadcast but then arrive at a different establishment seven miles away at 9:15. (Resp. at 2.) Defendant also argues that Plaintiff's contract with the third party (“Promoter”) who conveyed to Plaintiff rights to nationally broadcast the Program, did not provide Plaintiff any rights to broadcasts of the Program in languages other than English. (Resp. at 3). Defendant alleges that, if the Program was broadcast at Taco Mich, it was in Spanish, and therefore Plaintiff would not have any rights to that broadcast. (Resp. at 3.)

         In its Reply, Plaintiff responds to Defendants' two points, but argues in the alternative that “Defendant's Opposition should be disregarded in its entirety” because once in default, Defendants had no right to participate in the litigation. (Reply at 2.) Plaintiff seeks entry of default judgment in a total amount of $60, 000 for violations of 47 U.S.C. §§ 605(e)(3)(C)(i)(II) and (ii). (Mot. at 3.)

         II. LEGAL STANDARD

         When a party against whom relief is sought fails to defend against the claim, the court may enter default against that party. Fed.R.Civ.P. 55(a). After entry of default, the other party may move for entry of default judgment, which will stand as a final judgment in the case. Fed.R.Civ.P. 55(b). But at either stage-entry of default or entry of default judgment-the party against whom default was entered has an avenue for relief. “The court may set aside an entry of default for good cause, and may set aside a final default judgment under Rule 60(b).” Fed.R.Civ.P. 55(c). Rule 60(b) lays out specific grounds for relief, but “[t]he different treatment of default entry . . . by Rule 55(c) frees a court considering a motion to set aside a default entry from the restraint of Rule 60(b) and entrusts determination to the discretion of the court.” Haw. Carpenters' Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986). Thus, while courts have held that the possible reasons for relief under Rule 55 and Rule 60 are roughly equivalent, “the standards for setting aside entry of default under Rule 55(c) are less rigorous than those for setting aside a default [judgment].” Id. And in any case, reaching entry of default judgment is “appropriate only in extreme circumstances [because] a case should, whenever possible, be decided on the merits.” Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984).

         The party seeking to set aside entry of default under Rule 55(c) must show that any one of three factors favors their motion. Franchise Holding II, LLC v. Huntington Rest. Grp., Inc., 375 F.3d 922, 925-26 (9th Cir. 2004). The three factors are: (1) whether the party against whom default was entered “engaged in culpable conduct that led to the default;” (2) “whether [that party] had a meritorious defense; or (3) whether reopening the default judgment would prejudice” the party in whose favor default was entered. Id. at 926. “As these factors are disjunctive, the district court [is] free to deny the motion ‘if any of the three factors [is] true.'” Id. (quoting Amer. Ass'n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000)).

         In order to justify vacating default on the grounds that it had a meritorious defense, the party so moving must “present the district court with specific facts that would constitute a defense.” Id. (citing Madsen v. Bumb, 419 F.2d 4, 6 (9th Cir. 1969)).

         III. ANALYSIS

         Plaintiff is not misguided in its argument that Defendant's Response constitutes an argument on the merits that it is not normally permitted after default has been entered. (Reply at 2.) But Defendants are within their rights to seek relief under Rule 55(c), which governs when default has been entered but there is not yet a final default judgment. In substance, Defendant's Response comports with Rule 55(c) and addresses the appropriate factors that the Court considers when ruling on a Motion to Set Aside Default. Thus, the Court will treat Defendant's Response as a Motion to Set Aside a Default under Rule 55(c) and will treat Plaintiff's Reply as a Response to that Motion.

         Defendants need only show that one of the three factors outlined above justifies vacating default. Defendants seem to have only addressed the existence of a meritorious defense. Thus, the Court will not determine whether Defendants “engaged in culpable conduct that led to the default”^[1] or “whether ...