Livingston v. Art.com, Inc. et al

Filing 110

ORDER by Judge Charles R. Breyer GRANTING 87 Motion for Default Judgment; DENYING 100 Motion to Set Aside Default; ADOPTING IN PART and MODIFYING IN PART 105 Report and Recommendations. (crblc2, COURT STAFF) (Filed on 7/15/2015)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court
For the Northern District of California

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PETE LIVINGSTON,

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Plaintiff,

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No. 3:13-cv-03748-CRB
ORDER ADOPTING IN PART AND
MODIFYING IN PART REPORT AND
RECOMMENDATION

v.
ART.COM, INC., ET AL.,
Defendants.

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/

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On April 17, 2015, Magistrate Judge Jacqueline Scott Corley entered an Order and

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Report and Recommendation suggesting that this Court deny Defendant Jack Allen’s motion

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to set aside the Clerk’s entry of default judgment and grant Plaintiff Pete Livingston’s motion

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for default judgment. See generally R. & R. (dkt. 105). In the Report, Magistrate Judge

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Corley proposed awarding Livingston actual damages in the amount of $120,000, attorneys’

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fees in the amount of $21,882.25, and $894.10 in costs. Id. Further, Magistrate Judge

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Corley recommended issuing a permanent injunction barring Allen and his company, Dream

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City,1 from engaging in any further infringing conduct related to Plaintiff’s photograph, as

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set forth in the Complaint. Id. For the following reasons, this Court ADOPTS IN PART and

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MODIFIES IN PART Magistrate Judge Corley’s Report and Recommendation.

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In Allen’s Motion to Set Aside Default, he explains that Dream City’s corporate status has
been suspended and the company is now a sole proprietorship. See Mot. (dkt. 100) at 4 n.2. A sole
proprietorship is not legally separate from its owner. See Bd. of Trs. of Laborers Health & Welfare
Trust Fund for No Cal. v. Perez, No. C-10-2002 JSW (JCS), 2011 Wl 6151506, at *4 (N.D. Cal. Nov.
7, 2011). Dream City has not separately moved to set aside default in this case.

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I.

BACKGROUND
In July 2008, Livingston discovered that Art.com was unlawfully selling copies of a

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photograph of Marilyn Monroe, which he had registered with the United States Copyright

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Office on August 3, 2004. Compl. at Ex. A (dkt. 1-1). The photograph in the instant action

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is a black and white photograph of Marilyn Monroe wearing a large hat with a flower (the

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“Photograph.”). Compl. at Ex. B. Livingston contacted Art.com to request that the company

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cease any infringing activity, at which point Art.com explained that its vendor, Classico, had

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permission to sell the photograph based on royalty payments to the purported owner, Jack

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Allen. Compl. ¶ 16. Shortly thereafter, Livingston contacted Allen to demand that he cease

United States District Court
For the Northern District of California

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any infringing activity. Id. ¶ 17. Allen apologized and withdrew the Photograph from

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Classico’s collection. Id. ¶ 18. Nevertheless, in October 2012, Livingston discovered that

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Classico, Art.com, and Culternik continued to infringe upon his copyright. Id. ¶ 19.
On August 13, 2013, Livingston filed a Complaint against Defendants Art.com,

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Culturenik, Classico, Jack Allen, and Allen’s company, Dream City. See generally Compl.

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Allen and Dream City failed to file a responsive pleading or consent to proceed before

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Magistrate Judge Corley. In November 2013, Magistrate Judge Corley severed Livingston’s

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claims against Allen and Dream City. See generally Order (dkt. 35). The Clerk of Court

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entered default judgment against Allen and Dream City on November 14, 2013. See Clerk’s

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Notice (dkt. 20). More than a year later, on January 20, 2015, Allen filed an opposition to

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Livingston’s motion for default judgment, in which he sought to set aside the default. See

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Opp’n (dkt. 95). Magistrate Judge Corley then issued an order in which she recommended

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that this Court deny Allen’s motion to set aside the Clerk’s entry of default judgment and

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grant Livingston’s motion for default judgment. See R. & R. at 28.

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II.

LEGAL STANDARD

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Federal Rule of Civil Procedure 72(b)(3) provides for de novo review of dispositive

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magistrate orders. Upon review of a dispositive magistrate order, “[t]he district judge must

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determine de novo any part of the magistrate judge’s disposition that has been properly

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objected to. The district judge may accept, reject, or modify the recommended
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disposition . . . .” Fed R. Civ. P. 72(b)(3); see also 28 U.S.C. § 636(b)(1)© (“A judge of the

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court shall make a de novo determination of those portions of the [magistrate’s] report or

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specified proposed findings or recommendations to which objection is made.”). The Federal

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Magistrates Act, 28 U.S.C. § 636 et seq., lists eight types of dispositive motions, but does not

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include a Motion for Default Judgment. “[A]ny motion not listed, nor analogous to a motion

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listed in this category, falls within the non-dispositive group . . . .” Maisonville v. F2 Am.,

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Inc., 902 F.2d 746, 748 (9th Cir. 1990). However, because Magistrate Judge Corley’s order

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recommending default judgment disposed of the issues in the case and therefore is analogous

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to a motion for involuntary dismissal, a listed motion, see 28 U.S.C. § 636(b)(1)(A), this

United States District Court
For the Northern District of California

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Court finds that the magistrate order was dispositive. See Ocelot Oil Corp. v. Sparrow

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Indus., 847 F.2d 1458, 1462 (10th Cir. 1988) (“[m]otions not designated on their face as one

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of those [dispositive motions] excepted in [section 636] subsection (A) are nevertheless to be

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treated as such a motion when they have an identical effect”) (citations omitted). Thus, the

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Court considers de novo those portions of Magistrate Judge Corley’s disposition that have

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been properly objected to. See Fed. R. Civ. P. 72(b)(3).

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III.

DISCUSSION

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From what this Court can decipher, Allen, appearing pro se, made the following

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timely objections to Magistrate Judge Corley’s Report: (1) Allen never possessed the alleged

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infringing Photograph, therefore he could not provide the Photograph to Classico, (2)

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Magistrate Judge Corley contradicted herself by calculating actual damages and attorneys’

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fees after denying Livingston’s request for statutory damages, and (3) actual damages were

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beyond the scope of profits Allen received from the Photograph. See generally Obj. re

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R. & R. (dkt. 108). As explained below, the Court rejects Allen’s first two objections in their

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entirety. Regarding Allen’s third objection, this Court modifies Magistrate Judge Corley’s

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recommendation by reducing actual damages.

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A.

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In Allen’s first objection, which he titles “Meritorious Defense,” Allen alleges that the

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Allen’s First Objection

infringing photograph is not part of his photo collection, therefore he is not responsible for
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infringement. See Mot. to Set Aside Entry of Default (dkt. 100) at 2; see also Obj. re R. & R.

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at 2.

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As Magistrate Judge Corley correctly notes in her Report, “Allen’s eleventh-hour
disavowal does not carry much weight.” R. & R. at 10. While Allen contends that he does

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not currently possess the infringing Photograph, previous litigation established that Allen

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entered an agreement in 1996 “whereby Allen purported to grant Classico a license to

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produce and sell certain products using the images contained in a collection of photographs

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of Marilyn Monroe, titled Marilyn by Moonlight, which included the Photograph.”

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Livingston v. Art.com, Inc., No. 3:13-cv-03748-JSC, 2014 WL 3404722, at *1, 3. That

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United States District Court
For the Northern District of California

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Allen began collecting royalties from this agreement indicates, that at a minimum, he led

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Classico to believe that he was the true owner. Id. at *3. Moreover, Allen has offered no

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evidence, beyond his conclusory statements, to counter Livingston’s contention that Allen

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was the critical link in supplying the Photograph to Classico. See R. & R. at 8 (“[T]he

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Complaint alleges a clear relationship between the appearing Defendants and Allen: when

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Plaintiff first discovered infringement . . . Art.com ‘asked [its] vendor[, Classico] to confirm

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they are authorized to sell the Monroe Pictures[, and] Classico [] responded that Jack allen

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owned the image and they pay him a royalty.’”). Allen’s contention that he does not own

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the Photograph and cannot be responsible for the resulting infringement is without merit.

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B.

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Allen’s second objection contends that Magistrate Judge Corley’s Report contradicts

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itself by denying Livingston’s request for statutory damages but then later grants Livingston

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actual damages. See Obj. re R. & R. at 3.

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Allen’s Second Objection

Allen appears to be conflating two different infringement remedies: statutory damages

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and actual damages. Under 17 U.S.C. § 412, statutory damages are only available if

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infringement occurs after the date of copyright registration. With respect to Art.com,

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Culturenik, and Classico, Magistrate Judge Corley correctly concluded that Livingston was

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not entitled to statutory damages because the Defendants’ acts of infringement occurred prior

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to the August 2004 registration of Livingston’s copyright. See R. & R. at 15. Similarly,
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Magistrate Judge Corley reasoned that because Allen’s acts of infringement also began prior

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to the requisite date of copyright registration, Livingston is not entitled to statutory damages

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from Allen or Dream City. Id. at 16. Nevertheless, Magistrate Judge Corley’s denial of

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statutory damages does not preclude an award for actual damages. To the contrary, under 17

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U.S.C § 504(b), Livingston is entitled to recover actual damages and any additional profits

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that Allen realized from his acts of infringement. Furthermore, under 17 U.S.C. § 505, this

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Court may award reasonable attorneys’ fees and costs to the prevailing party. Accordingly,

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this Court rejects Allen’s assertion that Magistrate Judge Corley incorrectly awarded actual

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damages and attorneys’ fees.

United States District Court
For the Northern District of California

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C.

Allen’s Third Objection

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Allen also objects to the amount of actual damages recommended in Magistrate Judge

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Corley’s Report. See Obj. re R. & R. at 3. According to Allen, his profits from the

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Photograph were much lower than those proposed by Livingston. Id. at 4. Rather than the

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$225,940.44 Livingston asserts, Allen alleges he received approximately $731.16 in royalties

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from sales of the Photograph. Id.

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To receive actual damages, Livingston must prove actual damages that resulted from

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infringement, and may also recover any profits Allen received. See 17 U.S.C. § 504(b).

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Magistrate Judge Corley’s recommendation of $120,000 in actual damages was necessarily

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speculative in light of the lack of information provided by the parties. See R. & R. at 17–19.

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Magistrate Judge Corley’s recommendation appears, in part, to be based on misinformation

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provided by Livingston, in which he represents total sales relating to the Photograph as if

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they were royalties paid to Allen from January 1, 2009 to December 31, 2013. See

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Livingston Decl. ¶ 7. While Livingston may have been entitled to the total sales figure from

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the other Defendants in this matter, from Allen, Livingston is only allowed the percentage of

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the total sales that Allen received as a royalty. See R. & R. at 17 (“The Copyright Act

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provides that a copyright owner is entitled to recover his actual damages and any additional

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profits that Allen realized.”); see also Sony Corp. of Am. v. Universal City Studios, Inc., 464

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U.S. 417, 434 (1984). Based on the quarterly earnings statement submitted by Allen, it
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appears as if Allen received 8% of the gross revenue for the Photograph. See Obj. re R. & R.

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at Ex. A.
Assuming Allen began infringing activities on November 18, 1996, the date in which

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the Classico-Allen licensing agreement was executed, and ceased infringement around

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December 31, 2013, Allen is liable for infringement for approximately sixty-eight quarters.2

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See R. & R. at 18. Based on Allen’s exhibit, it appears as if Allen was paid a royalty of 8%

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of the total sales of the Photograph. During the dates for which there is data relating to total

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sales, specifically January 1, 2009 through December 31, 2013, sales averaged $3,322.65 per

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quarter. See Livingston Decl. ¶ 7; see also R. & R. at 18. Applying the mean-sales amount

United States District Court
For the Northern District of California

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to all sixty-eight infringing quarters results in estimated gross revenue of $225,940.20 for

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sales relating to the Photograph. Considering Allen appeared to receive 8% of total sales as a

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royalty, Livingston is entitled to 8% of $225,940.20, or $18,075.22.
Accordingly, this Court reduces the amount suggested by Magistrate Judge Corley and

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awards Livingston actual damages in the amount of $18,075.22.

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IV.

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CONCLUSION
For the foregoing reasons, the Court ADOPTS all of Magistrate Judge Corley’s

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Report and Recommendation save and except for the award of actual damages, which this

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Court modifies to $18,075.22. Livingston is to be awarded attorneys’ fees in the amount of

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$21,882.25 and $894.10 in costs, and is to file by July 24, 2015 a proposed permanent

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injunction barring Allen and Dream City from engaging in any further infringing conduct

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related to the Photograph.

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IT IS SO ORDERED.

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Dated: July 15, 2015
CHARLES R. BREYER
UNITED STATES DISTRICT JUDGE

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This Court has excluded the period of time between November 18, 1996, the date on which the
Allen-Classico licensing agreement was signed, and December 31, 1996, in this calculation. Neither
party has submitted evidence indicating meaningful sales of the Photograph during this brief period.
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