Fabric Selection, Inc. v. Manjeet International, Inc. et al

Filing 23

ORDER DENYING MOTION FOR DEFAULT JUDGMENT 17 by Judge Otis D. Wright, II: The Court DENIES Plaintiffs motion for default judgment without prejudice. Plaintiff may refile its motion at the conclusion of the proceedings against Union. (lc)

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O 1 2 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 Case № 2:17-cv-02353-ODW (KS) FABRIC SELECTIONS, INC., Plaintiff, 12 v. 13 ORDER DENYING MOTION FOR 14 MANJEET INTERNATIONAL, INC.; 15 UNION APPAREL GROUP, LTD.; and 16 DOES 1 through 10, inclusive, 17 Defendants. DEFAULT JUDGMENT [17] 18 19 I. INTRODUCTION 20 This is a fabric copyright case. Before the Court is Plaintiff Fabric Selection, 21 Inc.’s motion for default judgment against Defendant Manjeet International, Inc. 22 (ECF No. 17.) For the following reasons, the Court DENIES the motion.1 23 II. FACTUAL BACKGROUND 24 Plaintiff is a Los Angeles-based fabric designer. (Compl. ¶ 1, ECF No. 1.) 25 Defendant Manjeet International, Inc. (“Manjeet”) is an “importer and/or wholesaler 26 of apparel in the business of selling garments and apparel to retailers/distributors.” 27 1 28 After considering the moving papers, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78(b); C.D. Cal. L.R. 7-15. 1 (Id. ¶ 2.) Defendant Union Apparel Inc. (“Union”) is in essentially the same business 2 as Manjeet. (Id. ¶ 3.) 3 Plaintiff designed the relevant SE41092 fabric pattern and subsequently 4 registered the pattern with the United States Copyright Office. (Id. ¶¶ 9, 10.) At some 5 point, Plaintiff discovered that Union and Manjeet (collectively “Defendants”) were 6 distributing goods featuring the pattern without authorization. (Id. ¶ 15.) Plaintiff 7 sent cease and desist letters to Defendants on September 20, 2016, demanding that 8 they discontinue their unauthorized manufacture, sale, and distribution of goods 9 featuring the infringing pattern. (Id.) Defendants did not cease their activities. (Id. 10 ¶¶ 18, 27.) 11 Plaintiff filed this lawsuit against Defendants on March 27, 2017, alleging (1) 12 copyright infringement and (2) contributory copyright infringement. (Id. ¶¶ 11–30.) 13 On May 1, 2017, the Clerk of Court entered default against Manjeet at Plaintiff’s 14 request. (ECF No. 15.) On May 8, 2017, Plaintiff filed the pending motion for 15 default judgment with the Court. (ECF No. 17.) 16 Attached to Plaintiff’s motion for default judgment is a declaration from 17 Plaintiff’s attorney Stacy Knox attempting to clarify the roles that Union and Manjeet 18 played in the infringing activity. (See Knox Decl., ECF No. 17.) According to the 19 declaration, Knox spoke to Edison Wong, a Union representative, who indicated that 20 Union had “received additional, unauthorized units . . . of garments bearing the 21 Subject Design from Manjeet.” (Id. ¶ 3.) Knox then spoke with Sudeep Kaur, a 22 Manjeet representative, who confirmed that Manjeet manufactured the goods in 23 question. (Id. ¶ 4.) Kaur stated that Manjeet manufactured the goods at Union’s 24 request, believing that Union “owned” the pattern. (Id.) 25 III. LEGAL STANDARD 26 Federal Rule of Civil Procedure 55(b) authorizes a district court to enter a 27 default judgment following an entry of default by the clerk against a defendant that 28 fails to respond to a complaint. A district court has discretion as to whether to enter a 2 1 default judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Upon 2 default, the defendant’s liability generally is conclusively established, and well- 3 pleaded factual allegations in the complaint are accepted as true. TeleVideo Sys., Inc. 4 v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987) (per curiam) (citing Geddes v. 5 United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977)). 6 In exercising its discretion, a court must consider several factors, including (1) 7 the possibility of prejudice to plaintiff; (2) the merits of plaintiff’s substantive claim; 8 (3) the sufficiency of the complaint; (4) the sum of money at stake; (5) the possibility 9 of a dispute concerning material facts; (6) whether the defendant’s default was due to 10 excusable neglect; and (7) the strong policy favoring decisions on the merits. Eitel v. 11 McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). 12 IV. DISCUSSION 13 Since the Supreme Court’s decision in Frow v. De La Vega, 82 U.S. 552 (1872) 14 more than one hundred years ago, courts have consistently held that where “a 15 complaint alleges [that the] defendants are jointly liable and one of them defaults, 16 judgment should not be entered against the defaulting defendant until the matter has 17 been adjudicated with regard to all defendants.” Nielson v. Chang, 253 F.3d 520, 532 18 (9th Cir. 2001); Societe d’Equipments Internationaux Nigeria, Ltd v. Dolarian 19 Capital, Inc., No. 115CV01553DADSKO, 2016 WL 6868023, at *2 (E.D. Cal. Nov. 20 21, 2016) (cumulating cases to show that Frow remains good law in the Ninth 21 Circuit). This is because it would be “absurd” for a court to enter inconsistent 22 judgments against two defendants that essentially engaged in the same course of 23 conduct. 24 CV1205453DMGJEMX, 2012 WL 12893781, at *2 (C.D. Cal. Nov. 29, 2012) 25 (“[C]ourts find that it would be ‘incongruous and unfair’ to allow a plaintiff to prevail 26 against defaulting defendants on a legal theory later rejected with respect to an 27 answering defendant ‘in the same action.’” (quoting Garamendi v. Henin, 683 F.3d 28 1069, 1082–83 (9th Cir. 2012))). See Frow, 82 U.S. at 554; Vaughn v. Wells Fargo Bank, N.A., No. 3 1 While this common law rule was originally limited to jointly-liable co- 2 defendants, in recent years, the Ninth Circuit has extended the rule to encompass 3 “similarly situated” parties. Garamendi, 683 F.3d at 1082–83. A defaulting party is 4 similarly situated to an answering party when the case against both parties rests on the 5 “same legal theory.” Id.; see also Vaughn, 2012 WL 12893781, at *2 (finding parties 6 to be similarly situated where causes of action were common to defaulting and 7 answering defendants and all defendants were liable for the full amount of damages); 8 Mason v. City of Lake Forest Park, No. C13-0676-JCC, 2014 WL 4093933, at *4 9 (W.D. Wash. Aug. 18, 2014) (denying motion for default judgment where “three of 10 the four” claims were alleged against “all defendants,” some of whom answered and 11 some of whom did not); Societe d’Equipments, 2016 WL 6868023, at *3 (finding that 12 parties were “similarly situated” where “the claims, facts, and legal issues asserted in 13 the complaint relative to each of the two defendants” were similar). 14 This case has the potential to implicate the common law rule annunciated in 15 Frow because one of the defendants has answered the complaint (Union) and the other 16 has not (Manjeet). See Nielson, 253 F.3d at 532. As such, the Court considers 17 whether Defendants are jointly liable or similarly situated and whether there is a risk 18 of inconsistent judgments. 19 A. Whether Defendants are Jointly Liable or Similarly Situated 20 To begin, Union and Manjeet are likely to be held jointly liable for any 21 infringement because it appears they were part of a distribution chain that produced 22 infringing goods. (See Knox Decl. ¶¶ 3–4); see also Adobe Sys. Inc. v. Blue Source 23 Grp., Inc., 125 F. Supp. 3d 945, 973 (N.D. Cal. 2015) (cumulating cases for the 24 proposition that members of a distribution chain involving infringing goods may be 25 held jointly liable for infringement). 26 Further, Defendants are similarly situated. Defendants are subject to the same 27 two causes of action and are liable for the full range and amount of damages. See 28 Vaughn, 2012 WL 12893781, at *2. Indeed, the complaint itself makes no distinction 4 1 between the actions of Union and Manjeet. (See e.g., Compl. ¶¶ 12–13, 16.) Adding 2 in the facts from the Knox declaration does little to change this—Defendants were 3 allegedly on opposite ends of the same transaction involving infringing goods. (Knox 4 Decl. ¶¶ 3–4.) 5 B. Whether There is a Risk of Inconsistent Judgments 6 As discussed above, in reviewing a motion for default judgment, the Court must 7 take the allegations in the complaint as true. TeleVideo Sys., 826 F.2d at 917–18. As 8 such, the Court must take the allegation in the complaint that Manjeet engaged in 9 various forms of infringing conduct as true. (See Compl. ¶¶ 12–13.) 10 Union, on the other hand, has answered the complaint and denied that any 11 infringing conduct occurred. (Answer ¶¶ 11–30.) Union has also asserted a number 12 of affirmative defenses, including that Plaintiff cannot establish authorship or the 13 requisite level of originality for the work in question. (Id. ¶¶ 32–33, 38.) Union 14 further asserts the affirmative defenses of fraud on the copyright office and unclean 15 hands. (Id. ¶¶ 32, 41.) 16 These affirmative defenses would apply equally to Union and Manjeet. For 17 instance, if Union proved that there was a lack of originality and by extension that 18 Plaintiff’s copyright had been improperly granted by the copyright office, then there 19 would be no basis for liability against either defendant. N. Coast Indus. v. Jason 20 Maxwell, Inc., 972 F.2d 1031, 1033 (9th Cir. 1992) (“Originality is the indispensable 21 prerequisite for copyrightability.”). If such a scenario came to pass, it would not be 22 equitable to allow a default judgment to stand against Manjeet. See Vaughn, 2012 WL 23 12893781, at *2 (“[C]ourts find that it would be ‘incongruous and unfair’ to allow a 24 plaintiff to prevail against defaulting defendants on a legal theory later rejected with 25 respect to an answering defendant ‘in the same action.’” (quoting Garamendi, 683 26 F.3d at 1082–83)). While it is unclear whether Union will ultimately prevail on any of 27 its affirmative defenses, the Court finds that the best course of action is to deny the 28 pending motion for default judgment at this time. Plaintiff may refile this motion at 5 1 the conclusion of the proceedings against Union. See Garamendi, 683 F.3d at 1083 2 (noting that district courts should adjudicate defaults after adjudicating the case of 3 answering defendants); see also Guotai USA, Co., Ltd. v. J&Company, LLC, No. 4 216CV06948ODWPLA, 2017 WL 1740014, at *5 (C.D. Cal. May 3, 2017). 5 V. CONCLUSION 6 For the foregoing reasons, the Court DENIES Plaintiff’s motion for default 7 judgment without prejudice. (ECF No. 17.) Plaintiff may refile its motion at the 8 conclusion of the proceedings against Union. 9 10 IT IS SO ORDERED. 11 May 24, 2017 12 13 14 15 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28 6

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