G & G Closed Circuit Events, LLC v. Looney et al

Filing 37

ORDER by Judge ARMSTRONG adopting Report and Recommendations as to 31 Report and Recommendations.; terminating 19 Motion to Set Aside Default (lrc, COURT STAFF) (Filed on 4/22/2013)

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UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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OAKLAND DIVISION

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G & G CLOSED CIRCUIT EVENTS, LLC,

Case No: C 12-3094 SBA

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Plaintiff,
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vs.
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KENNETH TEDFORD LOONEY,

ORDER OVERRULING
PLAINTIFF’S OBJECTIONS TO
REPORT AND
RECOMMENDATION OF
MAGISTRATE JUDGE

13 individually and d/b/a LOONEY’S

SOUTHERN BBQ; and HTHREEO, LLC, an

Dkt. 19, 31, 32

14 unknown business entity d/b/a LOONEY’S

SOUTHERN BBQ,
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Defendants.
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On January 18, 2013, Magistrate Judge Elizabeth Laporte (“the Magistrate”) issued

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a Report and Recommendation (“R&R”) in which she recommended granting Defendants

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Kenneth Tedford Looney and HTHREEO, LLC’s (collectively “Defendants”) Motion to

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Set Aside Entry of Default. Dkt. 31.

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The parties are presently before the Court on Plaintiff G & G Closed Circuit Events,

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LLC’s Objections to the R&R and related Motion for De Novo Determination Re

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Defendants’ Motion to Set Aside Entry of Default. Dkt. 32. Having read and considered

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the papers submitted, and the file as a whole, the Court GRANTS Plaintiff’s motion for de

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novo review, OVERRULES Plaintiff’s Objections, ADOPTS the R&R, and GRANTS

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Defendants’ Motion to Set Aside Entry of Default. The Court, in its discretion, adjudicates

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the instant matter without oral argument. Fed. R. Civ. P. 78(b); Civ. L.R. 7-1(b).

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I.

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BACKROUND
The facts of this case are set forth in the Magistrate’s R&R, and will not be repeated

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here in detail. Plaintiff was previously granted exclusive nationwide commercial

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distribution rights to “Strikeforce: ‘World Grand Prix’: Alistair Overeem v. Fabricio

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Werdum” (“the Program”), which was telecast nationwide on June 18, 2011. Compl. ¶ 16,

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Dkt. 1. On that date, Defendants allegedly displayed the Program without authorization at

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Looney’s Southern BBQ. However, the Program was displayed at the behest of an

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undercover investigator (hired by Plaintiff’s counsel) posing as a patron. Looney Decl.

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¶¶ 8-9, Dkt. 22. In addition, Defendants made no profit from showing the Program. Id.

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¶ 12.

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On November 20, 2012, the court clerk entered Defendants’ default. Dkt. 17.

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Defendants retained counsel, and on November 29, 2012, filed a Motion to Set Aside

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Default. Dkt. 19. The undersigned referred the motion to the Magistrate for an R&R. Dkt.

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26. On January 18, 2013, the Magistrate issued her R&R which recommended setting aside

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the default. Dkt. 31. Plaintiff has timely objected to the Magistrate’s recommendation and

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filed a motion for de novo review of her R&R. Dkt. 32. The matter is now fully briefed

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and is ripe for adjudication. Dkt. 33, 34, 35.

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II.

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LEGAL STANDARD
A district court judge may refer a matter to a magistrate judge to conduct a hearing,

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including an evidentiary hearing, and to thereafter issue findings of fact and

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recommendations for the disposition of the matter. See 28 U.S.C. § 636(b)(1)(B), (C); Fed.

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R. Civ. P. 72(b)(1); Civ. L.R. 72-3. Within fourteen days of service of the proposed

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findings and recommendations, “any party may serve and file written objections to such

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proposed findings and recommendations as provided by rules of court.” 28 U.S.C.

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§ 636(b)(1); see Fed. R. Civ. P 72(b). The district court must review de novo “those

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portions of the report or specified proposed findings or recommendations to which

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objection is made.” Fed. R. Civ. P 72(b)(1); see Holder v. Holder, 392 F.3d 1009, 1022

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(9th Cir. 2004). Factual findings are reviewed for clear error. Quinn v. Robinson, 783 F.2d
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776, 791 (9th Cir. 1986). The Court may “accept, reject, or modify, in whole or in part, the

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findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1). In

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addition, the Court may consider further evidence or remand the matter to the magistrate

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judge with instructions. Id.

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III.

DISCUSSION

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Under Federal Rule of Civil Procedure 55(c), “[t]he court may set aside an entry of

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default for good cause.” Franchise Holding II, LLC v. Huntington Rests. Group, Inc., 375

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F.3d 922, 925 (9th Cir. 2004). To determine whether a party has shown good cause, the

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court must examine “(1) whether [the party seeking to set aside the default] engaged in

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culpable conduct that led to the default; (2) whether [it] had [no] meritorious defense; [and]

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(3) whether reopening the default judgment would prejudice any other party.” United

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States v. Signed Personal Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th

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Cir. 2010). As these factors are disjunctive, “a finding that any one of these factors is true

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is sufficient reason for the district court to refuse to set aside the default.” Id. The party in

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default bears the burden of showing that the aforementioned factors favor setting aside the

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default. See TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001).

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Any doubt regarding whether to grant relief should be cast “in favor of setting aside the

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entry of default and deciding the case on its merits.” See O’Connor v. Nevada, 27 F.3d

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357, 363 (9th Cir. 1994).

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Plaintiff first contends that the Magistrate applied the wrong legal standard for

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setting aside a default in stating that “a finding that any one of the [Mesle] factors is true is

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sufficient to set aside entry of default . . . .” See R&R at 4:3-4. The statement by the

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Magistrate is not accurate. Mesle states that a finding that any of the three factors is true is

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ground for refusing to set aside the default, not vice versa. 615 F.3d at 1091. Nonetheless,

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the Magistrate’s statement appears to be an inadvertent error. Earlier in the Order in the

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course of setting forth the applicable legal standard, the Magistrate accurately recites the

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Mesle standard—a fact which Plaintiff studiously and inappropriately avoids mentioning in

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its motion. See R&R at 2:2-4. Moreover, the Magistrate correctly analyzed each of the
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three applicable factors and concluded that they militated in favor of Defendants. As such,

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Plaintiff’s suggestion that the Magistrate applied the wrong legal standard is wholly without

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merit.

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Next, Plaintiff vaguely argues that the Magistrate erred in finding that Defendants

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had “a partial meritorious defense as to damages.” See R&R at 4:5. Though not entirely

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clear, Plaintiff appears to argue, without citation to any relevant authority, that Defendants

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must demonstrate that they have a meritorious defense to liability, not merely a meritorious

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defense as to damages. This contention lacks merit. The primary inquiry in evaluating the

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meritorious defense factor involves determining “whether there is some possibility that the

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outcome of the suit after a full trial will be contrary to the result achieved by the default.”

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Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986). Here, the

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Complaint seeks damages in excess of $170,000 plus attorneys’ fees. See Compl. at 10-11.

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However, Defendants have submitted evidence showing that the amount sought by Plaintiff

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is excessive in light of the fact that they made no financial gain from showing the Program.

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Looney Decl. ¶ 12. In addition, Defendants’ evidence shows that Defendants’ employees

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were instructed to avoid displaying the Program, and that the Program was shown only

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because Plaintiff’s undercover investigator had requested that they do so. Id. ¶¶ 8-9.1 This

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evidence is more than sufficient to show that there is some possibility that the outcome of

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the suit after a full trial would be contrary to the result achieved by the default. See Hawaii

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Carpenters’ Trust Funds, 794 F.2d at 513.

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Finally, Plaintiff contends that the Magistrate erred in finding that Defendants’

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conduct was not in bad faith. The failure to answer a complaint is not, standing alone,

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tantamount to bad faith. TCI, 244 F.3d at 697. Rather, there must be evidence of “willful”

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or “deliberate” conduct that evidences an attempt “to take advantage of the opposing party,

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interfere with judicial decisionmaking, or otherwise manipulate the legal process[.]” Id.

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Defendant Looney also points out that he has settled three prior lawsuits with
Plaintiff’s counsel, Thomas Riley, and therefore, he was particularly vigilant about not
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Plaintiff argues that the Magistrate improperly shifted the burden on this issue onto Plaintiff

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as opposed to Defendants. As support, Plaintiff points to the Magistrate’s statement that

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“Plaintiff has not shown that Defendant[s] acted in bad faith.” See Pl.’s Mot. at 6:14-20

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(emphasis added). However, the Magistrate did not, in fact, impermissibly shift the burden

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to Plaintiff. In reaching her conclusion that Defendants did not engage in culpable conduct,

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the Magistrate discussed the evidence submitted by Defendants and concluded that it

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showed that their actions were not in bad faith. The Magistrate’s remark referenced by

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Plaintiff was nothing more than a statement that Plaintiff had presented no evidence to

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rebut Defendants’ evidentiary showing.

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IV.

CONCLUSION
The Court has reviewed de novo the portions of the R&R to which Plaintiff has

objected and concludes that Plaintiff’s objections are without merit. Accordingly,

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IT IS HEREBY ORDERED THAT:

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1.

Plaintiff’s Motion for De Novo Determination Re Defendants’ Motion to Set

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Aside Entry of Default is GRANTED. Upon de novo review, the Court OVERRULES all

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of Plaintiff’s objections to the R&R.

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2.

The Court ADOPTS the Magistrate’s R&R, which shall become the Order of

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the Court. Therefore, Defendants’ Motion to Set Aside Default is GRANTED. Defendants

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shall have fourteen (14) days from the date this Order is filed to respond to the complaint.

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3.

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IT IS SO ORDERED.

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This Order terminates Docket 19, 31 and 32.

Dated: April 19, 2013

_______________________________
SAUNDRA BROWN ARMSTRONG
United States District Judge

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