Baronius Press Ltd. v. Faithlife Corp.

• Decision Date: 06 February 2023
• Docket Number: 2:22-cv-01635-TL
• Parties: BARONIUS PRESS LTD, Plaintiffs, v. FAITHLIFE CORPORATION, Defendants.
• Court: U.S. District Court — Western District of Washington

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BARONIUS PRESS LTD, Plaintiffs, v. FAITHLIFE CORPORATION, Defendants.

No. 2:22-cv-01635-TL

United States District Court, W.D. Washington, Seattle

February 6, 2023

ORDER GRANTING DEFENDANT'S MOTION TO SET ASIDE DEFAULT

TANA LIN, UNITED STATES DISTRICT JUDGE

Plaintiff Baronius Press LTD brings federal copyright infringement claims, as well as various state law tort and consumer protection claims, against Defendant Faithlife Corporation (“Faithlife”). Dkt. No. 13. Faithlife failed to file a responsive pleading or appear in this case by the response deadline, so default was entered by the Clerk. See Dkt. No. 22. This matter in now before the Court on Defendant's motion to set aside the entry of default^[1] (Dkt. No. 24) Plaintiff's Motion for Default Judgment (Dkt. No. 35) and Defendant's motion in response seeking to stay proceedings related to the motion for default judgment (Dkt No. 37). Having reviewed the Parties' briefing, the relevant record, and governing law, the Court GRANTS Defendant's motion to set aside the default (Dkt, No. 24) and VACATES the entry of default against Defendant (Dkt. No 22). The Court STRIKES the remaining motions as therefore moot.

I. Background

Plaintiff initially filed its Complaint against Defendant on November 15, 2022 (Dkt. No. 1), and then filed its First Amended Complaint (“FAC”) as a matter of course on November 21, 2022 (Dkt. No. 13). Service of process was perfected on November 23, 2022. See Dkt. No. 16. Defendant's deadline to respond to the FAC was December 14, 2022. See Fed. R. Civ. P. 12(a)(1)(A); see also Fed. R. Civ. P. 15(a)(1)(3). Defendant never filed a response to the FAC. On December 15, 2022, Plaintiff applied for entry of default. Dkt. No. 17. The Clerk of the Court then entered default against Defendant on December 21, 2022, per Rule 55(a). Dkt. No. 22. That same day, Defendant filed the present motion to set aside the entry of default. Dkt. No. 24. Defendant also requests 60 days to respond to the FAC if the motion is granted. Id. at 7.

II. Legal Standard

“As a general rule, default judgments are disfavored.” Westchester Fire Ins. Co. v. Mendez, 585 F.3d 1183, 1189 (9th Cir. 2009). Except in “extreme circumstances,” a case should be decided on the merits rather than by default. United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010) (citing Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). “The Court's discretion is especially broad where it is entry of default rather than default judgment that is being set aside.” Bergman v. Moto, No. C22-0161, 2022 WL 16574322, at *1 (W.D. Wash. Oct. 28, 2022) (citing Mendoza v. Wright Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir. 1986)). See also O'Connor v. State of Nev., 27 F.3d 357, 364 (9th Cir. 1994) (same).

While a Court “may set aside an entry of default for good cause” (Fed. R. Civ. P. 55(c)), the defendant bears the burden of showing that relief from default is warranted. See Franchise Holding II, LLC. v. Huntington Restaurants Grp., Inc., 375 F.3d 922 at 926 (9th Cir. 2004).

III. Discussion

To grant Defendant's requested relief, the Court must determine that “good cause” exists by considering three factors: (1) the defendant's level of culpability in causing the default, (2) the existence of a meritorious defense, and (3) the prejudice to plaintiff. E.g., Mesle, 615 F.3d at 1091. While these factors are disjunctive, the Court may deny the motion if “any one of these factors is true.” Id. The Parties contest each factor, so the Court will review each one in turn.^[2]

A. Culpable Conduct

The Ninth Circuit has articulated the culpability standard in two ways. The first way states that “a defendant's conduct is culpable if he has received actual or constructive notice of the filing of the action and intentionally failed to answer.” TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001) (emphasis in original) (quoting Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988)), overruled on other grounds by Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001). In the second way, the Ninth Circuit does not use the word intentionally, but the intention of the defendant still appears to be relevant. See Meadows v. Dominican Republic, 817 F.2d 517, 521 (9th Cir. 1987) (defendant found culpable for intentionally declining service). Overall, the Ninth Circuit has typically held that for the purposes of the good cause factors, a defendant's conduct was culpable “where there is no explanation of a default inconsistent with devious, deliberate, willful, or bad faith failure to respond.” Mesle, 615 F.3d at 1092.

Defendant asserts that its conduct was not culpable as it did not receive actual or constructive notice of the filing of the action and intentionally fail to answer. Dkt. No. 24 at 4. For support, Defendant provides a declaration from Vikram Rajagopal, Faithlife's current Chief Executive Officer. Dkt. No. 25 ¶ 1. Mr. Rajagopal declares that upon investigation he determined Faithlife's “registered corporate agent for service,” National Registered Agents, received “the Summons and Amended Complaint” on November 23, 2022, but he “was not aware of the Complaint Documents, and the deadline to respond, until December 15, 2022.” Dkt. No. 25 ¶¶ 2-3. This is sufficient to establish that Defendant had actual notice of the action. See Fed. R. Civ. P. 4(h) (allowing for a corporation to be personally served via an “agent authorized . . . to receive service of process”); see also In re Grand Jury Investigation, 966 F.3d 991, 1000 (9th Cir. 2020) (quoting Henderson v. United States, 517 U.S. 654, 672 (1996) for the proposition that “the core function of service is to supply notice of the pendency of a legal action”). Thus, this factor turns on the intentionality of Defendant's failure to respond.

Despite admitting that Faithlife's registered agent received notice on November 23, Defendant argues that Mr. Rajagopal's failure to act until December 15 was not sufficiently willful, deliberate, or done in bad faith. Dkt. No. 24 at 4-5. The relevant facts show that National Registered Agents sent the Complaint Documents to Faithlife's headquarters in Bellingham, WA, addressed to former CEO Robert D. Pritchett (who no longer works at the Bellingham office), where they were received on November 28, 2022. Dkt. No. 25 ¶ 4(a)-(c); Dkt. No. 32 ¶ 2. Defendant claims that the documents remained in the mail room until approximately December 13, 2022, when Mr. Rajagopal's assistant retrieved them; however, Mr. Rajagopal apparently did not review the documents until December 15, 2022. Id. ¶¶ 3, 5. In his supplemental declaration, Mr. Rajagopal admits that on November 23, 2022, National Registered Agents also sent an email to the address they had on file for Mr. Pritchett, which carried the subject line: “ATTENTION: CCEmail of SOP Process received in WASHINGTON (OurTransmittal #542737471)” and included the “Service of Process Summary Transmittal Form.” Dkt. No. 32 ¶ 4. But the Complaint Documents were not attached to the email. Id. ¶¶ 5-6. Mr. Rajagopal further admits that Mr. Pritchett relayed the email to him on November 23, 2022. Id. ¶ 4. But Mr. Rajagopal states that he was unaware of the filing deadline until he saw the physical copy of the FAC on December 15, 2022, because the email contained no attachment and did not have information under the “Appearance/Answer Date” line of the provided transmittal form. Id. ¶ 7-9. See also Dkt. No. 32-1. However weak Mr. Rajagopal's reasons for the delay in responding, nothing in the conduct of Defendant demands a finding of willfulness or bad faith. C.f. Bateman v. United States Postal Serv., 231 F.3d 1220, 1223 (9th Cir. 2000) (applying the “good faith” standard to set aside a final judgment under Rule 60(b)(1), yet finding no bad faith conduct even though the judgment-party's counsel knew of the summary judgment motion deadline and left the country without responding or obtaining an extension); see also TCI Grp., 244 F.3d at 696 (explaining that the same factors apply under both Rule 60(b) and Rule 55(c)).

Also relevant to this Court's determination of culpability is Defendant's diligence upon realizing its mistake. Within one week of Mr. Rajagopal reviewing the Complaint Documents, Defendant engaged legal counsel to begin communicating with Plaintiff's counsel (Dkt. No. 26 ¶¶ 2-6), began preparing a response to Plaintiff's motion for entry of default (id. ¶ 7), noted appearance of counsel (Dkt. No. 21), and filed this motion. In fact, this motion to set aside entry of default was filed on the same day that default was actually entered by the Clerk (see Dkt. No. 22).

Thus, it is hard for the Court to see how Defendant could have possibly gained any advantage during this relatively slight delay. See Mesle, 615 F.3d at 1092 (quoting TCI Grp., 244 F.3d at 697).

Considering all the facts presented, Defendant's conduct cannot be said to be devious, deliberate, willful, or in bad faith. Thus, no culpable conduct is found.^[3]

B. Meritorious Defenses

“All that is necessary to satisfy the ‘meritorious defense' requirement is to allege sufficient facts that, if true, would constitute a defense.” Mesle, 615 F.3d at 1094. Defendant's burden on this factor is “not extraordinarily heavy.” Id. (quoting TCI Grp., 244 F.3d at 700).

Defendant raises potential defenses to each claim in its motion. Dkt. 24 at 6. Defendant also alleges facts that if proved would constitute a defense to Plaintiff's claims. Id. Defendant therefore meets its minimal burden on this factor.

C. Prejudice

To be prejudicial, the harm of setting aside default must be more than simply delaying resolution of the case. TCI Grp., 244 F.3d at 701. To...