MARK W. BENNETT, District Judge.
TABLE OF CONTENTS
I. INTRODUCTION AND BACKGROUND .................................... 949
A. Procedural Background ....................................... 949
B. Factual Background .......................................... 950
II. LEGAL ANALYSIS ................................................. 950
A. Entry Of Default And Default Judgment ....................... 950
B. Motion To Set Aside Default .................................. 952
1. Applicable rules for service ............................. 952
2. Sufficiency of service on Youngtek ....................... 953
a. The Hague Convention .................................. 953
b. Service on Youngtek ................................... 954
3. Setting aside default for good cause ..................... 955
a. Legal Standards ....................................... 955
b. Analysis .............................................. 955
i. Blameworthiness or culpability .................... 955
ii. Youngtek's possible defneses ...................... 957
iii. Whether Fraserside would be prejudiced ............ 958
iv. Summary ........................................... 958
C. Motion For Default Judgement ................................ 958
III. CONCLUSION ..................................................... 958
In this lawsuit, the plaintiff asserts a variety of copyright and trademark infringement claims against defendants concerning adult motion pictures on their internet websites. The Clerk of Court has entered a default against defendant Youngtek Solutions Limited ("Youngtek"). Youngtek, a foreign corporation, has moved to set aside that default on the grounds that it is void for insufficient service of process and, alternatively, that it should be set aside for good cause. The plaintiff has resisted Youngtek's motion on all grounds, asserting that the default should be allowed to stand, and filed its own motion for default judgment in which it requests that default judgment be entered in its favor.
On February 17, 2011, plaintiff Fraserside IP L.L.C. ("Fraserside") filed a complaint against Youngtek, John Does, and John Doe Companies, alleging the following causes of action: copyright infringement, in violation of 17 U.S.C. §§ 106 and 501 et seq.; contributory copyright infringement, in violation of 17 U.S.C. §§ 106 and 501 et seq.; vicarious copyright infringement, in violation of 17 U.S.C. §§ 106 and 501 et seq.; inducing copyright infringement, in violation of 17 U.S.C. §§ 106 and 501 et seq.; trademark infringement, in violation of 15 U.S.C. § 1114; contributory trademark infringement, in violation of 15 U.S.C. § 1114;
On June 1, 2011, Fraserside filed a Motion for Clerks Entry of Default (docket no. 11). On June 2, 2011, the Clerk of Court entered Youngtek's default (docket no. 13). On June 16, 2011, Fraserside filed a Motion For Entry Of Default Judgment (docket no. 14). On June 17, 2011, Youngtek filed a Motion To Set Aside Default (docket no. 15). In its motion, Youngtek moves to set aside the default arguing it has not been properly served. Youngtek argues, alternatively, that the default should be set aside for good cause. On June 23, 2011, Fraserside filed a timely resistance to Youngtek's motion. Fraserside argues Youngtek's motion is premature because default judgment has not yet been entered against it. Fraserside, alternatively, argues Youngtek has not demonstrated excusable neglect to set aside the default.
On April 13, 2011, the summons and complaint, with no Greek translation, were served on Youngtek's agent for process in Cyprus. Although Youngtek does have an office in Cyprus for service of process, none of its management is located there. Youngtek's agent did not understand the importance of the summons and complaint because of the lack of a Greek translation. Youngtek's Cyprus office mailed hard copies of the summons and complaint to Youngtek's management. Youngtek maintains that this mailing process took "a couple weeks." Wijnveen Aff. at ¶ 12 (docket no. 15-4). When Youngtek's management received the documents, it consulted with its European counsel and was advised that the documents had not been properly served. On April 29, 2011, Youngtek's European counsel sent a letter to Keys Systems GmbH, the registrar for the domain names TnaFlix.com and EmpFlix.com, which referenced this lawsuit. Because Youngtek assumed that proper service of process might be made it contacted attorney Valentin Gurvitis to retain him to represent it in this matter. After he was formally retained, Gurvitis spent two weeks locating qualified local counsel in Iowa. Gurvitis Aff. at ¶ 6 (docket no. 15-7). On June 17, 2011, Gurvitis retained local counsel in Iowa. Gurvitis Aff. at ¶ 6. On this same date, Youngtek filed its Motion To Set Aside Default.
Rule 55 of the Federal Rules of Civil Procedure provides, in pertinent part, as follows:
FED.R.CIV.P. 55.
In Hayek v. Big Brothers/Big Sisters of America, 198 F.R.D. 518 (N.D.Iowa 2001), I summarized the mechanics under Rule 55 of obtaining the entry of default and default judgment, as well as the method for setting aside a default or default judgment, as follows:
Hayek, 198 F.R.D. at 520.
The Clerk of Court has entered the default of Youngtek pursuant to Rule 55(a), completing the first step in the two-step process toward default judgment. See id. Thus, the questions presented by the pending motions are whether I should now take the second step, and enter default judgment pursuant to Rule 55(b)(2), or whether I should, instead, set aside the
It is uncontested that Youngtek is not located within a judicial district of the United States, but has a business address in Cyprus. See Complaint at ¶¶ 2, 18; Youngtek Mot. To Set Aside Default at 2. The service of an individual or corporation, partnership, or association located at a place not within any judicial district of the United States is governed by Federal Rules of Civil Procedure 4(f) and 4(h)(2). Rule 4(f) provides:
FED.R.CIV.P. 4(f). In turn, Rule 4(h)(2) provides:
FED.R.CIV.P. 4(h)(2).
Thus, Rule 4 provides both that an individual "may be served at a place not within any judicial district of the United States by any internationally agreed means of service that is reasonably calculated to give notice, such as those authorized by the Hague Convention....," FED. R. CIV. P. 4(f)(1), and that a corporation "at a place not within any judicial district of the United States" may be served "in any manner prescribed by Rule 4(f) for serving an individual." Id. at 4(h)(2). Neither party disputes that both the United States
"The Hague Convention is a multinational treaty, formed in 1965 for the purpose of creating an `appropriate means to ensure that judicial and extrajudicial documents to be served abroad shall be brought to the notice of the addressee in sufficient time.'" Bankston v. Toyota Motor Corp., 889 F.2d 172, 173 (8th Cir. 1989) (quoting Hague Convention preamble, T.I.A.S. No. 6638, 20 U.S.T. 361, 1969 WL 97765). The Hague Convention was created "to provide a simpler way to serve process abroad, to assure that defendants sued in foreign jurisdictions would receive actual and timely notice of suit, and to facilitate proof of service abroad." Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 698, 108 S.Ct. 2104, 100 L.Ed.2d 722 (1988). The Eighth Circuit Court of Appeals has explained:
Bankston, 889 F.2d at 173. Thus, the Hague Convention requires each member country to establish a central authority that receives requests for service of documents from other countries. Upon receiving a request for service, a central authority must serve the documents by a method prescribed by that country's internal law or by a method designated by the requester and compatible with that law. See Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 698-99, 108 S.Ct. 2104, 100 L.Ed.2d 722 (1988) (citing Hague Service Convention arts. 2, 5, 6). So, to serve defendants, Fraserside must adhere to procedures set out in the Hague Convention.
To serve Youngtek, Fraserside hired a process server located in Cyprus who delivered a summons and complaint to Youngtek. See Proof of Service/Affidavit, April 13, 2011 (docket no. 8). Article 10 of the Hague Convention states that, "[p]rovided the State of destination does not object, the present Convention shall not interfere with ... the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination." Hague Convention art. 10(c), T.I.A.S. No. 6638, 20 U.S.T. 361, 1969 WL 97765; FED.R.CIV.P. 4 app. (A copy of the Hague Convention is attached to Rule 4 as an appendix).
The burden of proving that process or service of process was insufficient lies with Youngtek as the party challenging the sufficiency of the service. See S.E.C. v. Internet Solutions for Business Inc., 509 F.3d 1161, 1163 (9th Cir.2007); Burda Media, Inc. v. Viertel, 417 F.3d 292, 299 (2d Cir.2005); Bally Exp. Corp. v. Balicar, Ltd., 804 F.2d 398, 404 (7th Cir.1986). In support of its position, Youngtek points to a copy of an email from Maria Pilikou, an associate in a Cypriot law firm, to Youngtek's counsel in which Pilikou reports "that according to Cyprus Civil Procedure Rules, a private process server must be authorized by the Supreme Court of Cyprus to serve process." See Pilikou e-mail at 1 (docket no. 15-8). Pilikou, however, does not state any basis for her legal conclusion and cites no Cypriot law mandating or requiring that process servers be approved by the Cyprus Supreme Court. Youngtek has not supplemented Pilikou's e-mail with a citation to or a copy of any Cypriot law. Absent any supporting legal authority, Youngtek has not established that private process servers are required under Cypriot law to be authorized by the Cyprus Supreme Court. See FROF, Inc. v. Harris, 695 F.Supp. 827, 829 (E.D.Pa. 1988) ("a bare allegation by a defendant that he was improperly served cannot be allowed to bely the private process server's return"). Thus, I will not set aside Youngtek's default on this basis.
Pilikou e-mail at 1. Youngtek, however, has not provided an affidavit from Pilikou setting out her background and qualifications, detailing her search, or identifying the "Court's officials" who aided in her search. Youngtek also has not provided any official Cypriot documentation which would support its assertion. Youngtek has not established that Kontos was unauthorized to serve process on it and I will not set aside Youngtek's default on this basis.
Youngtek argues, in the alternative, that the default should be set aside for good cause. Youngtek contends its delay in responding to the summons and complaint results, in part, from confusion caused by the service of those documents without an accompanying Greek translation, coupled with the difficulties it experienced in locating and securing local Iowa counsel to represent it. Fraserside responds that Youngtek's conduct does not constitute excusable neglect warranting setting aside the default.
Rule 55(c) expressly provides that "[t]he court may set aside an entry of default for good cause...." FED. R. CIV. P. 55(c) (emphasis added); see Stephenson v. El-Batrawi, 524 F.3d 907, 912 (8th Cir. 2008) (quoting FED.R.CIV.P. 55(c)). "When examining whether good cause exists, the district court should weigh `whether the conduct of the defaulting party was blameworthy or culpable, whether the defaulting party has a meritorious defense, and whether the other party would be prejudiced if the default were excused.'" Id. (quoting Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781, 784 (8th Cir.1998)). I examine each of these factors, in turn. In doing so, I am mindful that "default judgment is not favored by the law," United States v. Harre, 983 F.2d 128, 130 (8th Cir. 1993), and "should be a `rare judicial act.'" Comiskey v. JFTJ Corp., 989 F.2d 1007, 1009 (8th Cir.1993) (quoting Edgar v. Slaughter, 548 F.2d 770, 773 (8th Cir.1977)).
First, I examine Youngtek's culpability or blameworthiness in failing to file a timely response to the complaint. I must "focus heavily on the blameworthiness of the defaulting party." Johnson, 140 F.3d at 784. I must also distinguish conduct that is "contumacious" or demonstrates an "intentional delay or disregard for deadlines and procedural rules," from conduct that involves only a "marginal failure to meet pleading or other deadlines." Id. (quotation marks omitted). The Eighth Circuit Court of Appeals has "rarely, if ever, excused the former." Id.
Youngtek's reason for its failure to file a timely response to the complaint is two fold. First, Youngtek suggests that its response to the complaint was delayed because Fraserside did not provide it with a Greek translation of the summons and complaint at the time they were served. This resulted in the importance of the summons and complaint not being immediately apparent to Youngtek's agent in Cyprus. Under Article 5, paragraph 3 of the
Second, Youngtek points to the difficulties it had in securing local counsel. Youngtek initially consulted its European counsel and then contacted attorney Valentin Gurvitis to retain him to represent it in this matter. Gurvitis's law firm is located in Newton, Massachusetts. After he was formally retained, Gurvitis spent two weeks locating qualified local counsel in Iowa. Gurvitis Aff. at ¶ 6 (docket no. 15-7). On June 17, 2011, Gurvitis retained local counsel in Iowa. Gurvitis Aff. at ¶ 6. On this same date, Youngtek filed its Motion To Set Aside Default.
Although Youngtek's conduct regarding its response to the summons and complaint was negligent, it was not contumacious and does not demonstrate an intentional disregard for the court's deadlines. This conduct does not weigh heavily in favor of a finding of blame or culpability. See id. (stating that a failure to timely respond to a complaint is made in good faith when there is a "relatively brief default in the filing of an initial pleading, caused by poor communication" between defendant and another). I conclude Youngtek's failure to timely respond to the summons and complaint was due to negligence—not an intentional disregard for the court or its deadlines. Thus, I find Youngtek's negligence weighs only slightly against setting aside the default.
The second factor I must examine is whether Youngtek has a meritorious defense to Fraserside's claims. "Whether a meritorious defense exists is determined by examining `whether the proffered evidence would permit a finding for the defaulting party.'" Stephenson, 524 F.3d at 914 (quoting Johnson, 140 F.3d at 785). "`The underlying concern is [...] whether there is some possibility that the outcome [...] after a full trial will be contrary to the result achieved by the default.'" Id. at 914 (quoting Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp., 843 F.2d 808, 812 (4th Cir.1988)); see also Jones v. Phipps, 39 F.3d 158, 165 (7th Cir.1994) ("A meritorious defense is not necessarily one which must, beyond a doubt, succeed in defeating a default judgment, but rather one which at least raises a serious question regarding the propriety of a default judgment and which is supported by a developed legal and factual basis."). Any further mention of a "meritorious defense" is shorthand for a defense which raises a serious question about the propriety of the default. As the Eighth Circuit Court of Appeals explained in Johnson, the issue is whether the asserted defense "`would permit a finding for the defaulting party,' not whether it is undisputed." Johnson, 140 F.3d at 785 (quoting Augusta Fiberglass Coatings, Inc., 843 F.2d at 812). A party should provide "a sufficient elaboration of facts or evidence to permit the district court to determine whether, if believed, the defenses [are] meritorious." Stephenson, 524 F.3d at 914
Youngtek asserts it has several defenses to Fraserside's lawsuit. First, Youngtek contends it is not subject to personal jurisdiction in Iowa. It points out Fraserside has not alleged any facts which would permit a court to find sufficient minimum contacts exist between Youngtek and Iowa such that Youngtek should reasonably anticipate being haled into court here. Youngtek asserts that it has no offices in Iowa, no employees in Iowa, and no agent of process in Iowa. Wijnveen Aff. at ¶¶ 3-4. Youngtek further contends it does not advertise in Iowa, and no Youngtek officer or director has ever visited Iowa. Wijnveen Aff. at ¶ 5.
To establish jurisdiction, a defendant must have sufficient contacts with the United States as a whole to satisfy the due process requirements of the Fifth Amendment. This test is used to ensure that the exercise of jurisdiction comports with "traditional notions of fair play and substantial justice." International Shoe v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed.2d 95 (1945). This determination includes: the burden on the defendant to litigate in the forum, the state's interest in settling the dispute, the plaintiff's interest in obtaining convenient and effective relief, the plaintiff's burden to litigate elsewhere, and the interstate judicial system's interest in efficient resolution of disputes. Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 105, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987). Although Fraserside hotly disputes the merit of Youngtek's proffered defense, if one believes Youngtek's assertions, it has a potentially valid defense to Fraserside's lawsuit, which would be contrary to the result achieved by the default entry.
Youngtek further argues it has a meritorious affirmative defense under the Digital Millennium Copyright Act's ("DMCA") "safe harbor" provision found in 17 U.S.C. § 512(c). Youngtek maintains it has maintained a DMCA agent for service of takedown notices and has responded expeditiously to all properly submitted takedown notices. Youngtek contends Fraserside's complaint fails to assert that it ever issued a takedown notice to Youngtek. Youngtek argues that absent those allegations, Fraserside's
Section 512(c) precludes imposing monetary liability on a "service provider ... for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider." 17 U.S.C. § 512(c)(1). This protection is available only if the service provider satisfies a number of statutory requirements. For example, the service provider must not have actual knowledge that the material or an activity using the material on the relevant system is infringing, must not receive a direct financial benefit from infringing activity, and must expeditiously remove or disable access to material if it is notified that the material is infringing or is the subject of infringing activity. 17 U.S.C. § 512(c)(1)(A)-(C). However, the limitations on liability established in § 512(c) "apply to a service provider only if the service provider has designated an agent to receive notifications of claimed infringement...." 17 U.S.C. § 512(c)(2); see In re Aimster Copyright Litig., 252 F.Supp.2d 634, 661 n. 22 (N.D.Ill.2002). While Fraserside again contests the merit of Youngtek's proffered defense, if one believes Youngtek's assertions, then it has, again, asserted another potentially valid defense to Fraserside's lawsuit. Thus, I conclude Youngtek has meritorious defenses to Fraserside's claims. Accordingly, this factor weighs heavily in favor of setting aside the default entry.
Finally, I must consider whether Fraserside would be prejudiced by setting aside the default entry. "[D]elay alone, or the fact the defaulting party would be permitted to defend on the merits, are insufficient grounds to establish the requisite prejudice to the plaintiff." Stephenson, 524 F.3d at 915 (citing Johnson, 140 F.3d at 785). "Setting aside a default must prejudice [the] plaintiff in a more concrete way, such as loss of evidence, increased difficulties in discovery, or greater opportunities for fraud and collusion." Id. (citation and quotation marks omitted). Fraserside does not argue that it would be prejudiced in any concrete way by setting aside the default entry. Thus, I conclude that Fraserside would not be prejudiced by my setting aside the default entry.
After considering the relevant factors, I conclude good cause exists to set aside the default entry. Youngtek was negligent in its handling of the complaint; however, its failure to timely respond to the complaint was not intentional or contumacious. Additionally, Youngtek has various potential meritorious defenses to Fraserside's claims and Fraserside has not pointed out that it would be prejudiced in any concrete way by setting aside the default entry. Thus, I grant Youngtek's Motion to Set Aside Default.
Because I find good cause exists to grant Youngtek's Motion to Set Aside Default, I need not address Fraserside's Motion for Default Judgment. See Johnson, 140 F.3d at 783 ("[E]ntry of default must precede grant of a default judgment under Rule 55(b)[.]"). Therefore, I deny Fraserside's Motion for Default Judgment.
For the reasons discussed above, Youngtek's Motion To Set Aside Default (docket no. 15) is
FED.R.CIV.P. 4 advisory committee's note.
