Microsoft Corp. et al v. John Does 1-39

Filing 38

MEMORANDUM AND ORDER dated 11/8/12 that the Court finds that Defendants 1-21, 25-35, and 37-39 have failed to plead or otherwise defend the action and hereby directs the Clerk of the Court to enter a notation of default against them. ( Ordered by Judge Sterling Johnson, Jr on 11/8/2012 ) (Guzzi, Roseann)

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IN CLERK:',
U.S O!STRIC ;'r

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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MICROSOFT CORP. et al,

Plaintiffs,
MEMORANDUM
AND ORDER
12-CV- 1335 (SJ)(RLM)

-against-

JOHN DOES 1-21.25-35, and 37-39,

Defendants.

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APPEARANCES
ORRICK, HERRINGTON & SUTCLIFFE LLP
1000 Marsh Road
Menlo Park, CA 94025
By:
Gabriel M. Ramsey

Jacob M. Heath
Jeffrey L. Cox
Richard A. Jacobsen

JOHNSON, Senior District Judge:

Plaintiffs Microsoft Corp., FS-ISAC, Inc., and the National Automated
Clearing House Association (collectively, "Plaintiffs") have moved for an entry of
default against John Doe Defendants 1-21,25-35, and 37-39 (collectively,

"Defendants") pursuant to Fed. R. Civ. P. 55(a) and Local Civil Rule 55.1 (at D.I. 32).

For the reasons set forth below, Plaintiffs' motion is GRANTED.

I. Background Information
Plaintiffs commenced this action on March 19, 2012, alleging that Defendants
have caused them injury in violation of the following statutes: the Computer Fraud and
Abuse Act, 18 U.S.C. §1030; the CAN-SPAM Act, 15 U.S.c. § 7704; the Electronic

Communications Privacy Act, 18 U.S.C. § 2701; trademark infringement under the
Lanham Act (15 U.S.C. § 1114) (including false designation of origin under the
Lanham Act, 15 U.S.C. § 1125(a) and trademark dilution under the Lanham Act, 15
U.S.C. § 1125(c)); and the Racketeer Influence and Corrupt Organizations Act, 18

U.S.C. §1962(c). Plaintiffs also allege unjust enrichment; trespass to chattels; and

common law conversion. Plaintiffs seek injunctive and other equitable relief and
damages against Defendants for their creation, control, maintenance, and ongoing use
of the "Zeus Botnets" mal ware, which Plaintiffs allege have caused and continue
injure Plaintiffs, Plaintiffs' customers and members, and the general public.
Plaintiffs served Defendants via email and internet publication. Certain
defendants responded to Plaintiffs' service without revealing their true identities. As
of September 13, 2012, Plaintiffs had dismissed this action with respect to two

identified defendants, and another defendant has been identified by the name

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"Jabberzeus Crew". Notably, the other Defendants remain unidentifiable, and
Plaintiffs now seek entries of default as to them.

II. Discussion
A. A Court May Enter Default Judgment Against Properly-Served Defendants
Who Have Failed to Defend Actions Commenced Against Them
A district court may make an entry of default against defendants who fail to
plead or otherwise defend actions commenced against them by plaintiffs, if they
determine that defendants have been properly served by plaintiffs. See Fed. R. Civ. P.

55(0).
In order make an entry of default against Defendants, the Court must be
satisfied that proper service of process was effectuated. Plaintiffs may serve foreign
defendants in accordance with "any internationally agreed means of service that is
reasonably calculated to give notice, such as those authorized by the Hague
Convention on the Service Abroad of Judicial and Extrajudicial Documents [the
"Hague Convention"]''' Fed. R. Civ. P. 4(f)(1). In the case at bar, the Defendants have
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operated surreptitiously, making the standard means of serving defendants difficult or
impossible to accomplish. Additionally, as defendants are operating from foreign
jurisdictions, the Court must also determine whether the Hague Convention is the
applicable law to use in determining the adequacy of Plaintiff' s service of Defendants.

B. The Hague Convention Does Not Apply When the Addresses of Foreign
Defendants are Unknown
The remaining Defendants are alleged cybercriminals whose personal
identities and physical locations are unknown. Through months of investigation,
Plaintiffs have only been able to ascertain that Defendants most likely reside in the
Russian Federation, Ukraine andlor Romania. As other courts in this Circuit have
already recognized, Article 1 of the Hague Convention specifies that the Convention
does not apply when the addresses of foreign defendants are unknown. See SEC v.
Lines, 2009 U.S. Dist. LEXIS 91811, *9 (S.D.N.Y Oct. 2, 2009) (Cote, J.) ("[The
Hague Convention) 'shall not apply where the address of the person to be served with
the document is not known. "') (citations omitted)). Defendants operate via the
Internet, using usernames, and understandably, do not wish to be identified or located.
They have used sophisticated means to conceal their identities and locations. Despite
the most diligent efforts on the part of Plaintiffs, Defendants cannot be located.
Accordingly the Hague Convention is not applicable to them.
C. The District Courts Have Discretion to Authorize Service by E-mail or Any
Other Means of Service Comporting with the Principles of Due Process
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The Federal Rules set forth that the purpose of serving process upon a
defendant is to provide the defendant with notice of the action against him or her. The
purpose of providing a defendant with notice of an action against him or her is to
allow the defendant to defend him or herself against that action, in comportment with
the principles of Due Process. Accordingly, a plaintiff may serve notice upon a foreign
defendant in any way:
(1) by any internationally agreed means of service that is reasonably
calculated to give notice, such as those authorized by the Hague
Convention on the Service Abroad of Judicial and Extrajudicial
Documents;

(2) jf there is no internationally agreed means, or if an international
agreement allows but does not specify other means, by a method
that is reasonably calculated to give notice ...
(3) by other means not prohibited by international agreement, as the
court orders
Fed R. Civ. P. 4(1)(1 )-(3).

While case law on this issue is somewhat scarce, other circuit courts have held
that it is not an abuse of discretion for a district court to authorize a plaintiff to serve a
foreign Internet business bye-mail. Since the defendant in that case did not list a
physical address and chose to operate via email, the Ninth Circuit found that notice by
email provided reasonable notice and an opportunity to be heard. That Court "le[ft] it
to the discretion of the district court to balance the limitations of email service against
its benefits in any particular case." Rio Props .. Inc. v. Rio Int'l Interlink, 284 F.3d
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1007,1018 (9th Cir. 2002). The Court acknowledged that email "communication has
been zealously embraced by the business community" and recalled that the
Constitution never required any particular means of service, so long as the means
comported with Constitutional due process requirements. Id. at 1017 (citing Mullane
v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314).
Similarly, the Southern District of New York found as follows:

Federal Rule of Civil Procedure 4(0 requires a plaintiff to serve foreign
defendants in accordance with "any internationally agreed means
reasonably calculated to give notice," such as the Hague Service
Convention. Fed. R. Civ. P. 4(£)(1), Notwithstanding this provision,
district courts have discretionary authority to direct service "by other
means not prohibited by international agreements." Arista Records
LLC v. Media Servs. LLC, 2008 U.S. Dist. LEXIS 16485, '4-5
(S.D.N.Y. Feb. 25, 2008) (internal citations omitted) (Buchwald, J.).
In fact, the validity of electronic service of process upon foreign defendants
has been recognized since as long ago as 1980. In New Eng. Merchs. Nat'l Bank v.
Iran Power Generation & Transmission Co., 495 F. Supp. 73, 80 (S.D.N.Y. 1980)
(Duffy, J.), the Court allowed service by telex of defendants in Iran. Said the Court:
I am very cognizant of the fact that the procedure which I have ordered
in these cases has little or no precedent in our jurisprudence. Courts,
however, cannot be blind to changes and advances in technology. No
longer do we live in a world where communications are conducted
solely by mail carried by fast sailing clipper or steam ships, Electronic
communication via satellite can and does provide instantaneous
transmission of notice and information. No longer must process be
mailed to a defendant's door when he can receive complete notice at an
electronic terminal inside his very office, even when the door is steel
and bolted shut. Id. at 81.

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Thus, the District Court clearly has discretion to order service of process upon
a foreign defendant by alternate means of service so long as the defendant is afforded
proper notice, and an opportunity to defend the action. See Arista, 2008 U.S. Dist.
LEXIS 16485 at n.3 ("Of course, any alternate method of service 'must ... comport
with constitutional notions of due process,' which require 'notice reasonably
calculated, under all the circumstances, to apprise interested parties of the pendency of
the action and afford them an opportunity to present their objections''') (internal
citations omitted). In the instant matter, certain Defendants have responded to
Plaintiffs' service of process-thereby proving the sufficiency of Plaintiffs' service
and demonstrating that they have been provided adequate notice of the action against
them, and effectively estopping them from claiming otherwise.

III. Conclusion
Plaintiffs' email and internet-based service of process upon Defendants was
designed to provide Defendants with notice of the action existing against them,
Defendants' anonymity and unknown whereabouts notwithstanding. Accordingly, in
keeping with the Court's discretion pursuant to Rules 4(1)(3) and 55(a), the Court
finds that Defendants 1-21,25-35, aod 37-39 have failed to plead or otherwise defend
the action and hereby directs the Clerk of the Court to enter a notation of default
against them.
SO ORDERED.
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/s/(SJ)

Dated: Brooklyn, New York
November l , 2012

Sterling-:ru;;;;son, Jr., v.SlD.J.

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