Dallas Buyers Club, LLC v. DOE-72.197.35.160

Filing 32

ORDER granting Defendant Michael Ahmari's 29 Motion to Set Aside Default. Defendant is ordered to file an Answer by 6/17/2016. Signed by Judge Cynthia Bashant on 6/9/2016. (jah)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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DALLAS BUYERS CLUB, LLC,

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Case No. 15-cv-1614-BAS-BGS

Plaintiff,

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ORDER GRANTING MOTION
TO SET ASIDE DEFAULT

v.

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MICHAEL AHMARI,

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Defendant.

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On May 6, 2016, the Clerk of the Court entered default against Michael

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Ahmari (“Ahmari”). (ECF No. 25.) On the same day, Ahmari filed a notice of

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objection to the default (ECF No. 26) to which Plaintiff replied. (ECF No. 28.) On

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May 16, 2016, Ahmari moved to set aside the entry of default. (ECF No 29.) Plaintiff

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opposes. (ECF No. 30.)

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The Court finds this motion suitable for determination on the papers submitted

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and without oral argument. See Civ L.R. 7.1(d)(1). For the following reasons, the

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Court GRANTS Ahmari’s Motion to set aside the default.

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I.

BACKGROUND

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On July 21, 2015, Plaintiff commenced this action, alleging a single cause of

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action for direct copyright infringement of the motion picture Dallas Buyers Club,
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against John Doe. (ECF No. 1.) The Court granted Plaintiff’s motion to expedite

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discovery to ascertain the identity of the Defendant in the complaint. (ECF No. 6.)

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Plaintiff obtained the name and address of Michael Ahmari as the subscriber

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associated with the IP address alleged to have committed the infringing conduct.

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However, Plaintiff informed the Court that Ahmari may not be the actual infringer as

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he shared a student apartment with other individuals. (ECF No. 12.) Therefore,

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Plaintiff requested permission to subpoena Ahmari’s father for deposition and to

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subpoena records from Ahmari’s former apartment complex in an attempt to learn

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the identity of the other individuals who resided with Ahmari at the time of the

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infringing activity. (Id.) The Court granted the latter but denied the former as “unduly

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burdensome.” (ECF No. 14.)

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Despite uncertainty as to the actual infringer, Plaintiff requested the Court’s

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permission to name Ahmari in the Complaint with leave to amend after depositions

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if those depositions showed that Ahmari was not the infringer and if the identity of

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the infringing party could be determined. (ECF No. 15.) In the alternative, Plaintiff

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asked for leave to issue an FRCP 45 third party subpoena for the deposition of

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Ahmari. (Id.) The Court denied both requests. (ECF No. 16.)

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Plaintiff then requested leave to take the deposition of Ahmari by written
depositions. (ECF No. 17.) The Court denied this request as well. (ECF No. 18.)

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Thereafter, on March 5, 2016, despite admissions that Plaintiff was not sure

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whether Ahmari had committed the infringing conduct or not, Plaintiff filed a First

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Amended Complaint (“FAC”) naming Ahmari as the defendant. (ECF No. 20.) On

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April 6, 2016, Ahmari was served with the FAC. (ECF No. 23.)

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After service, a flurry of communications ensued between Plaintiff’s and

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Ahmari’s counsel, in which Ahmari adamantly denied being the infringer, Plaintiff

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offered to dismiss if Ahmari would take a polygraph and identify who might be the

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infringer, Plaintiff insisted that Ahmari’s counsel file an answer, and Ahmari’s

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counsel insisted that he did not want to incur the legal fees of answering if the case
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was going to be dismissed. (ECF No. 30, Exs. 1-5.) Plaintiff clearly informed

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Ahmari’s counsel that if Ahmari did not file an answer by the end of the day on May

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6, 2016, Plaintiff would move for default. (Id.) Ahmari’s counsel responded by

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saying he would not file an answer when Plaintiff had promised to dismiss. (Id.)

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Thus, on May 6, 2016, Plaintiff filed a Request for Entry of Clerk Default, which was

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granted. (ECF No. 24, 25.) Ahmari immediately filed on objection (ECF No. 26),

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and on May 16, 2016, filed this Motion to set aside the entry of default. (ECF No.

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29.)

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II.

LEGAL STANDARD

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If a complaint is properly served, failure to make a timely answer or otherwise

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defend will justify entry of default. Fed. R. Civ. P. 55(a). Under Rule 55(c) of the

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Federal Rules of Civil Procedure, the court “may set aside an entry of default for

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good cause.” Fed. R. Civ. P. 55(c). The court’s good cause analysis considers the

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following three so-called “Falk factors”: “(1) whether the plaintiff will be prejudiced,

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(2) whether the defendant has [no] meritorious defense, and (3) whether culpable

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conduct of the defendant led to the default.” Brandt v. Am. Bankers Ins. Co. of Fla.,

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653 F.3d 1108, 1111 (9th Cir. 2011) (quoting Falk v. Allen, 739 F.2d 461, 463 (9th

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Cir. 1984)). These factors are disjunctive and a district court may deny a motion to

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set aside default if any of the three factors is true. Franchise Holding II, LLC v.

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Huntington Rests. Grp., Inc., 375 F.3d 922, 926 (9th Cir. 2004). Nonetheless, a

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district court is not, as a matter of law, required to deny a motion to set aside entry of

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default upon a finding of any of the factors. See Brandt, 653 F.3d at 1111. The

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defendant moving to set aside default bears the burden of showing that any of these

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factors favor setting aside default. Id.

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Notably, “[j]udgment by default is a drastic step appropriate only in extreme

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circumstances; a case should, whenever possible, be decided on the merits.” Falk,

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739 F.2d at 463. Thus, “[w]here timely relief is sought from a default … and the

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movant has a meritorious defense, doubt, if any should be resolved in favor of the
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motion to set aside the [default] so that cases may be decided on their merits.”

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Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 945-46 (9th Cir. 1986) (quoting

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Schwab v. Bullock’s Inc., 508 F.2d 353, 355 (9th Cir. 1974)). The court has broad

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discretion in setting aside entry of default. Id. at 945.

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III.

ANALYSIS—FALK FACTORS

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A. Culpability

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Plaintiff argues that the Motion to set aside the default should be denied

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because Ahmari’s counsel knew that an answer was due and still failed to file an

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answer, thus showing culpable conduct under the “Falk factors.” A defendant’s

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conduct is culpable if he “received actual or constructive notice of the filing of the

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action and intentionally failed to answer.” TCI Grp. Life Ins. Plan v. Knoebber, 244

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F.3d 691, 696 (9th Cir. 2001) (emphasis in original) (citation omitted), overruled in

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part on other grounds by Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001).

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The term “intentionally” does not mean a court can treat a defendant as culpable

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“simply for having made a conscious choice not to answer; rather, to treat a failure

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to answer as culpable, the movant must have acted with bad faith, such as an intention

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to take advantage of the opposing party, interfere with judicial decision-making, or

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otherwise manipulate the legal process.” United States v. Signed Pers.Check No. 730

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of Yubran S. Mesle, 615 F.3d 1085, 1092 (9th Cir. 2010) (internal quotations

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omitted). “Neglectful failure to answer as to which the defendant offers a credible,

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good faith explanation negating any intention to take advantage of the opposing

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party, interfere with judicial decision-making, or otherwise manipulate the legal

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process is not ‘intentional.’” TCI Grp., 244 F.3d at 697. Such conduct is not

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necessarily culpable or inexcusable, although it may be “once the equitable factors

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are considered.” Id. at 698.

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In this case, Ahmari’s counsel has offered a credible, good faith explanation

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for his failure to file an answer, namely he believed that a dismissal of his client was

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soon to be obtained and he did not want to saddle his client (or the opposing side)
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with the costs of filing an answer. Considering the additional factors, as discussed

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below, the Court finds it was not defendant’s culpable conduct that led to the default.

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B. Meritorious Defense

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The underlying concern of this factor “is to determine whether there is some

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possibility that the outcome of the suit after a full trial will be contrary to the result

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achieved by the default.” Hawaii Carpenters’ Trust Funds v. Stone, 794 F.2d 508,

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513 (9th Cir. 1986). The party in default is therefore required to make “some

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showing of a meritorious defense.” Id. Notably, “the standards for setting aside entry

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of default under Rule 55(c) are less rigorous than those for setting aside a default

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[judgment].” Id.

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In this case, the Court finds it particularly significant that Plaintiff has

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repeatedly expressed concern to the Court that Ahmari may not be the infringing

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party.

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identification of who this infringing party may be, but asked the Court several times

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for additional discovery to attempt to ascertain who the infringing party actually was.

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The Court denied these requests, and nonetheless Plaintiff filed a FAC against

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Ahmari.

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uncertainty in this regard, it appears Ahmari may have a meritorious defense.

Plaintiff expressed frustration that Ahmari was not cooperating with

Ahmari has denied being the infringing party, and given Plaintiff’s

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C. Prejudice

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Prejudice is determined by whether Plaintiff’s ability to pursue its claim will

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be hindered. See TCI Grp., 244 F.3d at 701 (citing Falk, 739 F.2d at 463). “To be

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prejudicial, the setting aside of a judgment must result in greater harm than simply

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delaying resolution of the case.” Id. Rather, “the delay must result in tangible harm

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such as loss of evidence, increased difficulties of discovery, or greater opportunity

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for fraud or collusion.” Id. (quoting Thompson v. Am. Home Assurance Co., 95 F.3d

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429, 433-34 (6th Cir. 1996)). Being forced to litigate on the merits cannot be

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considered prejudicial for purposes of reversing an entry of default. Id. Vacating the

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entry of default “merely restores the parties to an even footing in the litigation.” Id.
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Plaintiff cites no evidence that ability to pursue its claims will be hindered by

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setting aside the default. In fact, Plaintiff must have anticipated that Ahmari would

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immediately file a motion to set aside the default as he did.

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IV.

CONCLUSION

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All three Falk-factors support vacating the entry default. Therefore, the Court

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GRANTS Ahmari’s Motion to set aside the entry of default. (ECF No. 29.) Ahmari

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is ordered to file an Answer no later than June 17, 2016.

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IT IS SO ORDERED.

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DATED: June 9, 2016

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