Opinion
CV-22-01837-PHX-JZB
02-20-2024
G&G Closed Circuit Events LLC Plaintiff, v. Jose O Diaz, et al., Defendants.
TO THE HONORABLE STEPHEN M. MCNAMEE, SENIOR UNITED STATES DISTRICT JUDGE:
REPORT AND RECOMMENDATION
Honorable John Z. Boyle United States Magistrate Judge
Pending before the Court is Defendant Jose O. Diaz's “Motion [to] Dismiss for Jose Diaz Personally” (“Motion to Dismiss”) (doc. 31), and “Plaintiff's Application for Default Judgment by the Court” against Defendant Mariscos El Tiburon (the “Motion for Default Judgment”) (doc. 40). This Report and Recommendation is filed pursuant to General Order 21-25.The Court recommends that Defendant Diaz's Motion to Dismiss be denied and Plaintiff's Motion for Default Judgment be granted for the reasons set forth below.
General Order 21-25 states in relevant part: “When a United States Magistrate Judge to whom a civil action has been assigned pursuant to Local Rule 3.7(a)(1) considers dismissal to be appropriate but lacks the jurisdiction to do so under 28 U.S.C. § 636(c)(1) due to incomplete status of election by the parties to consent or not consent to the full authority of the Magistrate Judge, IT IS ORDERED that the Magistrate Judge will prepare a Report and Recommendation for the Chief United States District Judge or designee. IT IS FURTHER ORDERED designating the following District Court Judges to review and, if deemed suitable, to sign the order of dismissal on my behalf: Phoenix/Prescott: Senior United States District Judge Stephen M. McNamee....”
Considering that Defendant Diaz is self-represented, the Court notes its recommendation to deny Defendant Diaz's Motion to Dismiss, if affirmed by the District Court Judge, would not decide the ultimate facts of Diaz's individual liability. “The purpose of a motion to dismiss under rule 12(b)(6) is to test the legal sufficiency of the complaint.” N. Star Int'l v. Ariz. Corp. Common, 720 F.2d 578, 581 (9th Cir. 1983) (citations omitted). It is not to determine the substantive merits of a claim. In re Cornerstone Propane Partners, L.P. Sec. Litig., 416 F.Supp.2d 779, 783 (N.D. Cal. 2005) (citations omitted). “[F]actual challenges to a plaintiff's complaint have no bearing on the legal sufficiency of the allegations under Rule 12(b)(6). Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001).
I. Background.
On October 26, 2022, Plaintiff G&G Closed Circuit Events, LLC (“Plaintiff” or “G&G”) filed the Complaint initiating this civil action against Defendants Jose O. Diaz (“Diaz”) and “Mariscos El Tiburon LLC” alleging violations of 47 U.S.C. §§ 553, 605 for the willful and unlawful interception and publication of the Saul Alverez v. Caleb Plant boxing event taking place on November 6, 2021 (“the Program”). (Doc. 1.) Plaintiff alleges it held “exclusive nationwide commercial distribution (closed-circuit) rights to the [the Program]” including “all under-card bouts and commentary,” and that it entered “subsequent sublicensing agreements with various commercial entities throughout North America, including entities within the State of Arizona, by which it granted these entities limited sublicensing rights, specifically the rights to publicly exhibit the Program within their respective commercial establishments[,]” and that the commercial fee for these rights was $1,250 for establishments with the capacity of Mariscos El Tiburon. (Id. ¶¶ 18, 22-23, italics omitted.) Plaintiff alleges Mariscos El Tiburon unlawfully “intercepted, received and published the Program” to show to its patrons, that it advertised beforehand via Facebook its intent to show the program, and that it charged its patrons $10 per person for admission. (Id. at ¶¶ 19-20, 27, italics omitted.) Plaintiff alleges Defendant Diaz is the sole licensee of Mariscos El Tiburon according to Arizona Department of Liquor Licenses and Control records, that he is identified in Arizona Corporation Commission records as member and manager of Mariscos El Tiburon, LLC, which owns and operates Mariscos El Tiburon, and that Defendant Diaz had the responsibility to supervise activities there. (Doc. 1, ¶¶ 7-9.) In the Complaint, Plaintiff seeks up to $10,000 in statutory damages for violations of 47 U.S.C. § 605(e)(3)(C)(i)(II), up to $100,000 in enhanced statutory damages for violations of 47 U.S.C. § 605(e)(3)(C)(ii), costs, and attorney fees. (Doc. 1, ¶¶ 33(a)-(c).) Plaintiff also alleges violations of 47 U.S.C. § 553 for the “interception or receipt of communications offered over a cable system absent specific authorization.” (Id. at ¶ 35.) In the Complaint, Plaintiff seeks up to $10,000 in statutory damages under Title 47 U.S.C. § 553(c)(3)(A)(ii), and up to $50,000 in statutory damages under Title 47 U.S.C. § 553(c)(3)(B), costs, and attorney fees. (Id. at ¶¶ 39(a)-(d).)
As discussed in Section IV(B)(3) infra, Plaintiff concedes it may not concurrently recover under both statutes and elects to pursue recovery under Section 605. (Doc. 40-1 at 5 n. 2.)
II. Procedural History.
Plaintiff served Defendant Mariscos El Tiburon, LLC on November 9, 2022, by leaving a copy of the legal process with an individual “apparently in control of the business” at the business location. (Doc. 6.) Plaintiff also served process by certified mail. (Id.) Defendant Jose O. Diaz was personally served on November 17, 2022. (Doc. 9.)
Neither Defendant having answered the Complaint, Plaintiff applied for entry of default against both Defendants on December 6, 2022. (Doc. 10.) The Clerk of Court entered default on December 12, 2022. (Doc. 11.) The same day, Defendant Diaz filed a motion construed as a motion to set aside default and for an extension of time to answer the Complaint (“Motion to Vacate Default”). (Doc. 12.) The Court granted the motion on January 24, 2023, giving Diaz until February 14, 2023, to answer the Complaint. (Doc. 17.) Diaz answered on February 9, 2023 (doc. 18), and the Court scheduled a Case Management Conference for March 23, 2023 (doc. 19).
On March 29, 2023, Defendant Diaz filed a “Motion Not to Default Judgment” wherein he stated as follows:
Defendant respectfully ask the court not to do a default judgment for Mariscos el Tiburon LLC because the defendant is the only member of Mariscos el Tiburon LLC and even is an LLC is considered a sole member LLC and ruling a default
judgement on Mariscos el Tiburon LLC will affect the defendant personally, also defendant have file in time for this lawsuit and doing a default judgment on the entity Mariscos el Tiburan LLC will irreparable harm the defendant.(Doc. 25.)
The Court held a March 23, 2023, scheduling conference and issued a scheduling order on March 31, 2023. (Doc. 26.) The Court ordered the parties to meet and confer regarding case management and Mariscos El Tiburon LLC's status as a Defendant. (Doc. 26 at 2.) The Court directed Plaintiff to respond to Defendant Diaz's “Motion Not to Default Judgment” on or before May 19, 2023. (Id.) The Court set appropriate scheduling deadlines. (Id.) Plaintiff's counsel filed Notice of the Meet and Confer on May 19, 2023, stating that the parties had discussed settlement but not reached one, and that Defendant Diaz had been advised that Defendant Mariscos El Tiburon would need to retain counsel for representation. (Doc. 27 at 2.)
Plaintiff's counsel responded to Defendant Diaz's “Motion Not to Default Judgment” on May 19, 2023. (Doc. 28.) Plaintiff sought a Court order directing Defendant Mariscos El Tiburon to retain counsel within 30 days, and granting an additional 30 days to file an Application for Default Judgment against that Defendant if it failed to retain counsel. (Doc. 28.) On June 9, 2023, Defendant Diaz filed a “motion to sett[l]e the case and respond not to order attorney for mariscos el tiburon llc.” (Doc. 29.) In that motion, Defendant Diaz stated as follows:
Defendant respectfully ask the court not to order an attorney legal representation for Mariscos el Tiburon LLC because the defendant is the only member of Mariscos el Tiburon LLC and even is an LLC is considered a sole member LLC on legal representation on Mariscos el Tiburon LLC will affect the defendant economically Defendant and Mariscos el Tiburan LLC are a same entity and or person ruling for legal representation from the defendant will irreparable ham the defendant economically. Defendant is willing to sett[l]e the case and pay the cost of the fight which was $2300.00. Defendant is acting in good faith and want to resolve this matter. Defendant never tried to hurt plaintiff and never play the alleged fight, personally.(Doc. 29.)
On August 1, 2023, the Court denied both motions, noting that (1) default is not to be avoided merely because it would adversely impact a defendant, and (2) that a corporation may only appear in federal court through licensed counsel. (Doc. 30 at 3.) The Court instructed Defendant Diaz to retain counsel to represent Defendant Mariscos El Tiburon in the action. (Doc. 30 at 3-4.)The Court cautioned that, if Defendant Diaz failed to retain counsel for Mariscos El Tiburon, Plaintiff may file his application for default against that Defendant. (Id.)
The Court ordered, “On or before September 1, 2023, Defendant Diaz shall obtain counsel to represent Defendant Mariscos El Tiburon LLC in this action. If Defendant fails to obtain counsel to represent Mariscos El Tiburon LLC by the deadline, Plaintiff may file an application for default judgment against that corporate defendant.” (Id.)
On August 7, 2023, Defendant Diaz filed the Motion to Dismiss that is currently before this Court. (Doc. 31.) Defendant Diaz asserted he was not present at Mariscos El Tiburon or “in charge of the management of Mariscos el Tiburon” when the Program was allegedly shown there. (Id. at 1.) Defendant Diaz attached two notarized statements: one from three witnesses purporting to state that Defendant Diaz was somewhere else on the night of November 6, 2021; and another by Defendant Diaz and a witness stating Defendant Diaz had “not been in the management of Mariscos el Tiburon . . . since December[] 2019[,]” that “[h]e quit coming to Mariscos el Tiburon in December 2019 and ha[d] not come since then[,]” and that “[h]e is not active in the management of Mariscos el Tiburon since 2019[.]” (Id. at 2-3.)
On September 22, 2023, the Court ordered Plaintiff to file notice of status within 14 days, noting Plaintiff had not filed an application for default or responded to Defendant Diaz's Motion to Dismiss. (Doc. 32.) Plaintiff filed notice on October 3, 2023, requesting until October 17, 2023, to respond to Defendant Diaz's Motion to Dismiss and to file an application for default as to Defendant Mariscos El Tiburon. (Doc. 33.) The Court granted Plaintiff until October 10, 2023, to respond to the Motion to Dismiss, and until October 17, 2023, to file an application for default judgment as to Defendant Mariscos El Tiburon. (Doc. 35.)
On October 10, 2023, Plaintiff responded to the Motion to Dismiss. (Doc. 36.) On October 17, 2023, Plaintiff applied for entry of default against Defendant Mariscos El Tiburon. (Doc. 37.) On October 18, 2023, the Clerk of Court entered default against that Defendant. (Doc. 38.) On October 20, 2023, the Court referred the parties for a telephonic settlement conference. (Doc. 39.) The conference was later vacated as futile. (Doc. 39, 41.) Plaintiff filed a Motion for Default Judgment against Defendant Mariscos El Tiburon on November 1, 2023. (Doc. 40.) The Court set a hearing on these motions for December 4, 2023. Defendant Diaz and Plaintiff's counsel attended. (Doc. 43.) Defendant's Motion to Dismiss and Plaintiff's Motion for Default are fully briefed and before the Court.
III. Defendant Diaz's Motion to Dismiss.
A. The Parties' Arguments.
Defendant Diaz argues he has not been “in charge of the management of Mariscos el Tiburon and that he was not in the place when [the Program]” was aired. (Doc. 31.) He attaches two notarized statements indicating he was not physically present at Mariscos El Tiburon on the night of the Program, and that he has not actively managed that establishment since 2019. (Id. at 2-3.)
Plaintiff argues Defendant Diaz's Motion does not address the sufficiency of the claim, that Diaz's denials are irrelevant since the allegations in the complaint are accepted as true, and that the Court should not consider Diaz's extrinsic evidence, because only the sufficiency of the complaint is at issue in a 12(b)(6) motion. (Doc. 36 at 4.) Plaintiff argues that, even assuming the truth of Diaz's statements, they do not go to the dispositive issues, i.e., that Diaz had the right and the ability to supervise the unlawful conduct, and that he had an obvious, direct financial interest in it. (Id. at 6.) Plaintiff notes that Diaz has twice admitted being the sole member of the LLC and does not disclaim the accuracy of state government records reflecting such. (Id. citing doc. 25, 29.) Plaintiff argues the Complaint states sufficient allegations under a theory of vicarious liability for Diaz, and that courts have upheld similar allegations as sufficient in other cases. (Id.) Lastly, Plaintiff argues that, should the Court elect to convert the Motion to Dismiss to a Motion for Summary Judgment under Federal Rule of Civil Procedure 12(d) because Defendant Diaz submitted extrinsic evidence, that Plaintiff be given an opportunity to respond. (Id. at 8-9.)
B. Legal Standard.
A successful motion to dismiss under Rule 12(b)(6) must show either that the complaint lacks a cognizable legal theory or fails to allege facts sufficient to support its theory. Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013) (citing Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008)). A complaint that sets forth a cognizable legal theory will survive a motion to dismiss if it contains “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility when “the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556). On a 12(b)(6) motion, the Court takes the plaintiff's well-pleaded factual allegations as true and construes them in the light most favorable to the plaintiff. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Legal conclusions couched as factual allegations are not entitled to a presumption of truth and are not sufficient to defeat a 12(b)(6) motion. Iqbal, 556 U.S. at 678. A complaint does not need to have detailed factual allegations, but it must have more than a “the-defendant-unlawfully-harmed-me accusation.” Id.
Finally, under Federal Rule of Civil Procedure 12(d), “[i]f, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56[ and a]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.” A party's submission of extrinsic evidence with a 12(b)(6) motion to dismiss does not automatically convert the motion to a motion for summary judgment. N. Star Int'l v. Arizona Corp. Comm'n, 720 F.2d 578, 582 (9th Cir. 1983). Conversion occurs when “the district court acts to convert the motion by indicating, preferably by an explicit ruling, that it will not exclude those materials from its consideration.” Swedberg v. Marotzke, 339 F.3d 1139, 1146 (9th Cir. 2003). “Whether to conve[r]t a Rule 12(b)(6) motion into one for summary judgment pursuant to Rule 12(d) is at the discretion of the district court.” Adobe Sys. Inc. v. Blue Source Grp., Inc., 125 F.Supp.3d 945, 968 (N.D. Cal. 2015) (citations omitted); Young v. City of Visalia, 687 F.Supp.2d 1141, 1150 (E.D. Cal. 2009).
C. Analysis.
The Court recommends declining to convert Defendant's Motion to Dismiss into a Motion for Summary Judgment. The Court has not considered Defendant Diaz's extrinsic evidence in its recommendation on the Motion to Dismiss. Plaintiff argues, persuasively, that Diaz's physical presence at Mariscos El Tiburon on the night of the alleged offense, and the extent of his participation in management, do not address the core elements of vicarious liability under Sections 553 or 605, i.e., whether Diaz had the right and ability to supervise the unlawful activity, and whether he had an obvious, direct financial interest in it. E.g., G & G Closed Cir. Events, LLC v. Miranda, No. 2:13-CV-2436-HRH, 2014 WL 956235, at *4 (D. Ariz. Mar. 12, 2014) (“[T]o establish vicarious liability of an individual shareholder [or officer] for a violation of § 553 or § 605, [a p]laintiff must show that: (1) the individual had a right and ability to supervise the infringing activities and (2) had an obvious and direct financial interest in those activities.”) (citations omitted, modifications in original). As such, the Court recommends excluding from consideration Diaz's extrinsic evidence (doc. 31 at 2-3) and declining to convert the motion. See Barnes v. Sea Hawai'i Rafting, LLC, 493 F.Supp.3d 972, 976 (D. Haw. 2020) (declining to convert a motion to dismiss to a motion to summary judgment when the evidence at issue is “minimal, incomplete, and unnecessary[]”), affd sub nom. Barnes v. Kris Henry, Inc., No. 20-17141, 2022 WL 501582 (9th Cir. Feb. 18, 2022).
Turning now to the substance of the motion, the Court finds the allegations in Plaintiff's Complaint are sufficient to establish Diaz's liability, assuming their truth. Plaintiff alleges that (1) on the date of the alleged infraction, Arizona Corporation Commission and Department of Liquor Licenses and Control records identify Diaz as sole licensee and member and manager of Mariscos El Tiburon, LLC, which owns and operates Mariscos El Tiburon (doc. 1, ¶ 8); (2) upon information and belief, Defendant Diaz had the right, ability, and obligation to supervise activities there, including the alleged pirating of the Program, and that he directed or permitted his employees to do so (id., ¶¶ 9-11); (3) given his position, Diaz had an obvious, direct financial interest in the activities there and the infringing conduct increased profits (id., ¶¶ 12-14); (4) Mariscos El Tiburon published on Facebook that it would be showing the program and charged $10 per person for admittance to the establishment for the purposes of watching it (id., ¶¶ 1920); and (5) that it unlawfully broadcast the Program on four televisions in the establishment without paying the fee (id., ¶¶ 17-18). These facts are similar to those of several cases in this district and others where the Court held the allegations supporting vicarious liability under Section 605 were sufficient to defeat a motion to dismiss, or sufficient to grant a motion for default judgment or a motion for summary judgment. The Court finds Plaintiff has stated a claim for vicarious liability under Section 553 and 605 upon which relief may be granted and will recommend Diaz's Motion to Dismiss (doc. 31) be denied. See G&G Closed Cir. Events LLC v. Alexander, No. CV-18-02886-PHX-MTL, 2020 WL 1904628, at *3 (D. Ariz. Apr. 17, 2020).
See, e.g., G & G Closed Cir. Events, LLC v. Ayala, No. CV-22-01803-PHX-DJH, 2023 WL 4269637, at *5 (D. Ariz. June 29, 2023) (on a motion for default judgment, finding the allegations in the complaint sufficient to state a claim for vicarious liability where it was alleged the individual defendants were named on the Arizona Corporation Commission records; that defendants had the “right and ability” to supervise activities; that defendants had an “obvious and direct financial interest”; that defendants received increased profits; and that the event was advertised on the establishment's Facebook and Instagram pages); G & G Closed Cir. Events, LLC v. Pacheco, No. 3:19-CV-1761-CAB-LL, 2020 WL 13469799, at *2 (S.D. Cal. Jan. 7, 2020) (on a motion for default judgment, finding the allegations in the complaint sufficient to state a claim for vicarious liability where it was alleged the individual “specifically directed or permitted” employees to unlawfully broadcast the program; employees' actions were “directly imputable” to the defendant based on “his acknowledged responsibility for the operation of the establishment”; and the defendant was specifically identified as the owner of the business in city records); G&G Closed Cir. Events LLC v. Espinoza, No. CV-18-08216-PCT-JAT, 2019 WL 2173675, at *2 (D. Ariz. May 20, 2019) (denying an individual defendant's motion to dismiss where plaintiff alleged defendant was the managing member of the LLC which owned the establishment; defendant had the right, ability, and obligation to supervise the program; defendant “had an obvious and direct financial interest in the activities” as the licensee of the liquor license; defendant admitted he is the owner/operator of the establishment; and defendant was listed as statutory agent in Arizona Corporation Commission records); J & J Sports Prods. Inc. v. Rubio, No. CV-16-01111-PHX-JJT, 2016 WL 4074114, at *3 (D. Ariz. Aug. 1, 2016) (denying a motion to dismiss where plaintiff alleged individual defendant was a managing member of the LLC; defendant was identified on the business license; defendant specifically directed employees to unlawfully intercept and broadcast the program; defendant supervised and/or authorized the broadcast; and defendant had an obvious and direct financial interest as the managing member and as the member listed on the business license); G & G Closed Cir. Events, LLC v. Miranda, No. 2:13-CV-2436-HRH, 2014 WL 956235, at *4-5 (D. Ariz. Mar. 12, 2014) (denying motion to dismiss where plaintiff alleged the individual defendant was the licensee of the liquor license on state records; defendant had the right and ability to supervise activities in the establishment; defendant had the obligation to supervise those activities and ensure the liquor license was not used in violation of the law; defendant specifically directed the violation or, alternatively, the employees' actions could be imputed to defendant “by virtue of [his] acknowledged responsibility” for the establishment; that defendant, as the holder of the liquor license, had an obvious, direct financial interest; and that, upon information and belief, the broadcast increased the establishment's profits).
In Alexander, the Court found an LLC owner vicariously liable under Section 605, reasoning, “there is evidence in the record that Mr. Alexander had the right and ability to supervise the infringing activities. He made weekly visits to the family-owned establishment and was one of only two members of Let it Roll Bowl. It is not necessary that Mr. Alexander violated the law himself or that he was present for the violation. Mr. Alexander was part-owner of the business, which in this context is sufficient. The Court finds that Mr. Alexander had the right and the ability to supervise the infringing activities. That he did not do so in this case is irrelevant. Second, Mr. Alexander is a member of Let It Roll, LLC, giving, him an obvious and direct financial interest in the business. Therefore, Mr. Alexander is liable for the violation.” Id. (emphasis added).
IV. Plaintiff's Motion for Default Judgment.
On November 1, 2023, Plaintiff filed a Motion for Default Judgment against Defendant Mariscos El Tiburon, arguing that while Defendant Diaz had, on a few occasions during this litigation, attempted to argue on behalf of that Defendant, his efforts to do so “had no legal efficacy[]” because a corporate defendant cannot appear in federal court without licensed counsel. (Doc. 40-1 at 2.) Plaintiff notes this Court's August 1, 2023, Order to that effect directing Diaz to find counsel for Mariscos El Tiburon within 30 days, and ordering, “If Defendant fails to obtain counsel to represent Mariscos El Tiburon LLC by the deadline, Plaintiff may file an application for default judgment against that corporate defendant.” (Doc. 30 at 3-4.) Plaintiff notes Mariscos El Tiburon still has not appeared with counsel, that the deadline is long expired, and that the Clerk of Court has entered default against that Defendant pursuant to Plaintiff's application. (Doc. 40-1 at 2.) Plaintiff argues the “Eitel factors” militate in favor of default judgment. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Plaintiff “requests $10,000 in statutory damages and $25,000 in enhanced statutory damages [under 47 U.S.C. § 605(e)(3)(C)], for a total statutory damages award of $35,000.” (Doc. 40-1 at 8.)Plaintiff requests 14 days from the entry of default judgment to submit a motion for attorneys' fees. (Id. at 14.)
Plaintiff correctly notes it may not simultaneously recover under 47 U.S.C. § 605(e)(3)(C) and 47 U.S.C. § 553 and elects to recover under Section 605. (Id. at 5 n. 2.)
A. Legal Standard.
Under Rule 55(a) of the Federal Rules of Civil Procedure, “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). Once a party's default has been entered, the court has discretion to grant default judgment against that party. See Fed.R.Civ.P. 55(b)(2); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).
In assessing a motion for default judgment, the court first “has an affirmative duty to look into its jurisdiction over both the subject matter and the parties.” Tuli v. Republic of Iraq, 172 F.3d 707, 712 (9th Cir. 1999) (“To avoid entering a default judgment that can later be successfully attacked as void, a court should determine whether it has the power, i.e., the jurisdiction, to enter the judgment in the first place.”). Once jurisdiction is satisfied, the court must determine whether default judgment is proper under the Eitel factors. See Eitel, 782 F.2d at 1471-72. A court should consider:
(1) the possibility of prejudice to the plaintiff[;]
(2) the merits of plaintiff's substantive claim[;]
(3) the sufficiency of the complaint[;]
(4) the sum of money at stake in the action[;]
(5) the possibility of a dispute concerning material facts[;]
(6) whether the default was due to excusable neglect[;] and
(7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Id., at 1471-72. In applying the Eitel factors, “the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.” Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977).
B. Discussion.
1. Jurisdiction.
“When entry of judgment is sought against a party who has failed to plead or otherwise defend, a district court has an affirmative duty to look into its jurisdiction over both the subject matter and the parties.” Tuli, 172 F.3d at 712. Plaintiff brings only federal claims pursuant to 47 U.S.C. §§ 553, 605. (Doc. 1, ¶¶ 21-39.)As such, this Court has subject matter jurisdiction. See 28 U.S.C. § 1331. The Court finds it may exercise personal jurisdiction over the parties, as Plaintiff has alleged Mariscos El Tiburon is an Arizona LLC and that “all Defendants reside within the State of Arizona[.]” (Doc 1., ¶ 4, 7-8.)
In the Complaint, Plaintiff alleges “[t]his Court has subject matter jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367[,]” (doc. 1, ¶ 2), but Plaintiff brings no state law claims (see doc. 1, ¶¶ 21-39).
The Court also finds service has been effective here. See Crowley v. Bannister, 734 F.3d 967, 974-75 (9th Cir. 2013) (“A federal court is without personal jurisdiction over a defendant unless the defendant has been served in accordance with Fed.R.Civ.P. 4.”) (quotations and citations omitted). Plaintiff personally served Defendant Diaz on November 14, 2022. (Doc. 9.) Plaintiff argues it served Defendant Mariscos El Tiburon on November 7, 2022, pursuant to Federal Rule of Civil Procedure 4(e)(1) and A.R.S. § 29-3119, but “wish[es] to alert the court to potential issues with service.” (Doc. 40-1 at 6.) Plaintiff notes process was served upon an individual at Mariscos El Tiburon, “whom the process server identified as apparently in control of the business.” (Id.) Plaintiff states the process server was informed that “Defendant Diaz, who is the statutory agent for the LLC, . . . does not come to the business[,]” and “[t]he documents were thereafter sent via certified mail to Defendant.” (Id.) Plaintiff argues that, while service upon an individual apparently in control of the business is proper under A.R.S. § 29-3119(C), that Defendant should have been served via certified mail under A.R.S. § 29-3119(B) before service upon the apparent business manager (idf in other words, that the two methods of service should have happened in reverse order. Still, Plaintiff argues “the fact of actual notice would ultimately serve to cure any potential defects[.]” (Id.)
The Court agrees. Federal Rule of Civil Procedure 4(h)(1)(A) states that service upon a corporation, partnership or unincorporated association can be effectuated “in the manner prescribed by Rule 4(e)(1) for serving an individual[.]” Rule 4(e)(1) states that “[u]nless federal law provides otherwise, an individual . . . may be served in a judicial district of the United States by: (1) following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made . . . .” Under Arizona law, service upon an LLC is effectuated by serving the statutory agent. A.R.S. § 29-3119(A). If the company does not have a statutory agent, or that agent cannot be served with reasonable diligence, service can be effected by registered or certified mail, or by a similar commercial delivery service, to the company's principal address. Id. § 29-3119(B). If process cannot be served pursuant to subsections (A) or (B), then “service may be made by handing a copy to the individual in charge of any regular place of business or activity of the company or foreign company if the individual served is not a plaintiff in the action.” Id. § 29-3119(C).
Notably, Rule 4 does not require strict compliance:
Rule 4 is a flexible rule that should be liberally construed so long as a party receives sufficient notice of the complaint. . . . However, neither actual notice, nor simply naming the person in the caption of the complaint, will subject defendants to personal jurisdiction if service was not made in substantial compliance with Rule 4.Crowley, 734 F.3d at 975 (cleaned up); Jes Solar Co. Ltd. v. Tong Soo Chung, 725 Fed.Appx. 467, 470 (9th Cir. 2018) (unpublished), amended on denial of reh'g, 716 F. App'x 635 (9th Cir. 2018).
The Court finds Plaintiff substantially complied with A.R.S. § 29-3119, and thus, Federal Rule of Civil Procedure 4(e)(1). Assuming service upon a person in charge of Mariscos El Tiburon was improper (see doc. 6), the Court finds alternative service by certified mail upon Defendant Mariscos El Tiburon was sufficient, and that service became effective at that time. See A.R.S. § 29-3119(B). It is noteworthy that Diaz, Mariscos El Tiburon's statutory agent, has participated in these proceedings and has been served in his personal capacity. See id. § 29-3119(A) (“A limited liability company or registered foreign limited liability company may be served with any process, notice or demand required or permitted by law by serving its statutory agent.”). Plaintiff would normally be permitted to serve the LLC by certified mail only if its statutory agent, i.e., Diaz, could not “with reasonable diligence” be served. See id. § 29-3119(B). But the Court notes Defendant Diaz was personally served, albeit in his personal capacity. (Doc. 9.) Although he may not advocate on behalf of Mariscos El Tiburon, his knowledge of this civil action is certainly imputable to Mariscos El Tiburon. See A.R.S. § 29-3119(A) (an LLC may be served by statutory agent); see Crowley, 734 F.3d at 975 (“Rule 4 is a flexible rule that should be liberally construed so long as a party receives sufficient notice of the complaint . . . .”). The Court finds that between service of Diaz in his personal capacity, service upon Mariscos El Tiburon via certified mail, and service of an individual, on the premises, who was apparently in control of the business, Plaintiff has substantially complied with A.R.S. § 29-3119, and thus, Federal Rule of Civil Procedure 4(e). Crowley, 734 F.3d at 975.
2. Eitel Factors.
Having determined that this Court has both subject matter and personal jurisdiction in this action, the Court will examine whether entry of default judgment is proper under the Eitel factors.
a. The First, Fifth, Sixth, and Seventh Eitel Factors.
When a defendant has not responded or participated in any litigation, the “first, fifth, sixth, and seventh [Eitel] factors are easily addressed.” Zekelman Industries Inc. v. Marker, No. CV-19-02109-PHX-DWL, 2020 WL 1495210, at *3 (D. Ariz. March 27, 2020). The first factor weighs in favor of default judgment because denying Plaintiff's Motion will leave it “without other recourse for recovery,” PepsiCo, Inc. v. California Security Cans., 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002), and prejudice would exist if Plaintiff's Motion was denied because it would lose the right to a “judicial resolution” of its claims. Elektra Entertainment Group, Inc. v. Crawford, 226 F.R.D. 388, 392 (C.D. Cal. 2005). The fifth factor weighs in favor of default judgment because the well-pleaded factual allegations in the Complaint are taken as true, and there is no “genuine dispute of material facts” that would preclude granting the Motion. PepsiCo, 238 F.Supp.2d at 1177.
The sixth factor considers whether the default was due to excusable neglect. Here, Defendant Mariscos El Tiburon's failure to participate after being served does not indicate that default was due to excusable neglect. See Twentieth Century Fox Film Corp. v. Streeter, 438 F.Supp.2d 1065, 1071-1072 (D. Ariz. 2006). In its August 1, 2023, Order, the Court ordered Defendant Diaz, as statutory agent for Mariscos El Tiburon, to retain counsel for Mariscos El Tiburon, and explained that Plaintiff could file a motion for default if Diaz did not retain counsel. (Doc. 30.) Still, Diaz did not retain counsel or seek any extension to comply. These facts do not support a claim of excusable neglect.
The seventh factor favoring decisions on the merits generally weighs against default judgment; however, “the mere existence of [Rule 55(b)] indicates that ‘this preference, standing alone, is not dispositive,'” PepsiCo, 238 F.Supp.2d at 1177, and is insufficient to preclude the entry of default judgment in this case. Warner Bros. Entertainment Inc. v. Caridi, 346 F.Supp.2d 1068, 1073 (C.D. Cal. 2004) (explaining that the seventh Eitel factor “standing alone, cannot suffice to prevent entry of default judgment for otherwise default judgment could never be entered” and courts have concluded that “this factor does not weigh very heavily”). Here, a decision on the merits is impossible, given that Mariscos El Tiburon failed to retain counsel and participate in this case. The first, fifth, sixth, and seventh factors therefore weigh in favor of default judgment.
b. The Second and Third Eitel Factors.
The second and third Eitel factors the merits of the claim and the sufficiency of the complaint are “often analyzed together and require courts to consider whether a plaintiff has state[d] a claim on which [he] may recover.” Vietnam Reform Party v. Viet Tan-Vietnam Reform Party, 416 F.Supp.3d 948, 962 (N.D. Cal. 2019) (quotations omitted).
Plaintiff alleges Mariscos El Tiburon, LLC, “is an owner, and/or operator, and/or licensee, and/or permittee, and/or person in charge, and/or an entity with dominion, control, oversight and management of the commercial establishment doing business as Mariscos El Tiburon” (doc. 1, ¶ 15); that it advertised on Facebook it would be broadcasting the Program (Id. at ¶ 19); that it broadcast the program on November 6, 2021, on four different TVs without paying the commercial fee (Id. at ¶¶ 17-18), that it charged patrons $10 for entry that evening (Id. at ¶ 20); that it sold food and alcoholic beverages to patrons (Id. at ¶ 16); and that it earned increased profits from these activities (Id. at ¶ 14). See J & J Sports Prods., Inc. v. Kooner, No. 1:12-CV-01842-AWI-JL, 2013 WL 6070407, at *3 (E.D. Cal. Nov. 18, 2013) (“The common elements of [Sections 605 and 553] require: 1) The plaintiff must show that the defendants intercepted a broadcast, 2) The plaintiff must show defendants were not authorized to intercept the broadcast, and 3) Defendants showed this broadcast to others.”) (citations omitted). The Court finds Plaintiff adequately pled allegations for a Section 605 claim against Mariscos El Tiburon.
c. The Fourth Eitel Factor.
The fourth Eitel factor considers “the amount of money at stake in relation to the seriousness of Defendant's conduct.” PepsiCo, Inc., 238 F.Supp.2d at 1176. “If the sum of money at stake is completely disproportionate or inappropriate, default judgment is disfavored.” Twentieth Century Fox Film Corp., 438 F.Supp.2d at 1071. Plaintiff seeks $10,000 in statutory damages for violations of 47 U.S.C. § 605(e)(3)(C)(i)(II), and $25,000 in enhanced statutory damages under Section 605(e)(3)(C)(ii) for each “willful violation” for the purposes of commercial advantage or financial gain, and reasonable attorneys' fees and costs pursuant to Section 605(e)(3)(B)(iii). (Doc. 1, ¶ 33.)
Damages under Section 605 are within the discretion of the Court, subject to the parameters established in 47 U.S.C. §§ 605(e)(3)(C)(i)(II), (e)(3)(C)(ii). Zuffa LLC v. Long, No. CV-19-04917-PHX-DJH, 2020 WL 9813948, at *4 (D. Ariz. Nov. 23, 2020) Although the Court finds a $25,000 enhanced statutory penalty for the violation in question is disproportionate to the offense, the Court can mitigate this by reducing damages appropriately. Otherwise, the statutory damages Plaintiffs seek are within statutory limits and are not inherently unreasonable. See Joe Hand Promotions Inc. v. Alhamedany, No. CV-19-0376-PHX-DMF, 2019 WL 4394885, at *4 (D. Ariz. Aug. 23, 2019) (listing cases with similar damage awards), report and recommendation adopted, No. CV-19-00376-PHX-DMF, 2019 WL 4394533 (D. Ariz. Sept. 13, 2019). The Court finds that the amount requested is reasonable and not disproportionate or inappropriate, and that the fourth Eitel factor weighs in favor of default judgment. Overall, the Eitel factors weigh in favor of entering default judgment against Mariscos El Tiburon.
3. Damages.
Having found that entry of default judgment is proper under the Eitel factors, the Court will turn to damages. Unlike the allegations in the Complaint, the Court does not take allegations relating to damages as true. Geddes, 559 F.2d at 560; see also TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). Plaintiffs have the burden of “proving up” damages, and “if the facts necessary to determine damages are not contained in the complaint, or are legally insufficient, they will not be established by default.” Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003). Courts may rely on declarations submitted by the plaintiff in determining appropriate damages. Tolano v. El Rio Bakery, No. CV-18-00125-TUC-RM, 2019 WL 6464748, at *6 (D. Ariz. Dec. 2, 2019) (citing Philip Morris USA, Inc., 219 F.R.D. At 498).
Plaintiff correctly notes it may not recover under both Sections 553 and 605 and elects to pursue statutory penalties under Section 605. Kingvision Pay-Per-View, Ltd. v. Gutierrez, 544 F.Supp.2d 1179, 1184 (D. Colo. 2008) (“While Plaintiff has set forth the elements of liability for both statutes, recovery under both section 553 and section 605 is improper.”) (citations omitted), report and recommendation adopted as modified sub nom. Kingvision Pay-Per-View, Ltd. v. Valles-Salcedo, No. CIVA07CV00979RPMMEH, 2008 WL 583817 (D. Colo. Feb. 28, 2008). In determining appropriate damages under Section 605, “courts should attempt to impose ‘a sanction that deters but does not destroy.'” G & G Closed Cir. Events LLC v. Halstead, No. CV-20-02105-PHX-ESW, 2022 WL 2274546, at *3 (D. Ariz. Mar. 4, 2022) (citing Kingvision Pay-Per-View Ltd. v. Lake Alice Bar, 168 F.3d 347, 350 (9th Cir. 1999) report and recommendation adopted, No. CV-20-02105-PHX-ESW (D. Ariz. Sept. 13, 2019); Joe Hand Promotions Inc. v. Hernandez, No. CV-21-00966-PHX-DJH, 2022 WL 4017406, at *3 (D. Ariz. Sept. 2, 2022) (“This statutory range of awards aims to create an award that would deter further unauthorized use of television programs, but it is not intended to destroy small businesses.”); see also J & J Sports Prods., Inc. v. Meza Jimenez, No. CV-17-1320-PHX-DGC, 2018 WL 317288, at *3 (D. Ariz. Jan. 8, 2018). “Courts consider several factors when awarding statutory damages, including the maximum capacity of the commercial establishment, the number of patrons present at the time of the violation, and the commercial licensing fee that the defendant would have paid.” J & J Sports Prods., Inc. v. Rubio, No. CV-17-1026-PHX-DGC, 2019 WL 160649, at *4 (D. Ariz. Jan. 10, 2019) (citations omitted); see also Hernandez, 2022 WL 4017406, at *3 (“[C]ourts in this Circuit have considered several factors, including: (1) the size of the establishment, (2) the number and size of screens displaying the broadcast, (3) advertising to attract customers, (4) cover charges, (5) premium prices for food and drink, (6) the need to deter future violations, (7) the difficulty in detecting piracy, and (8) the widespread loss that occurs through piracy.”) (quotations and citations omitted). Plaintiff seeks $10,000 in statutory damages for violations of 47 U.S.C. § 605(e)(3)(C)(i)(II), and $25,000 in enhanced statutory damages for the “willful violation” made for the purposes of commercial advantage or financial gain in violation of Section 605(e)(3)(C)(ii).
In support, Plaintiff submitted the affidavits of two investigators, both present at Mariscos El Tiburon on the evening of November 6, 2021, between 6:25 and 7:07 pm. (Doc. 40-2 at 2-8.) The Court notes there are conflicts between these accounts, including the correct name of the establishment, the estimated capacity of the establishment, the number of patrons present, and the part of the program being broadcast when each investigator arrived.
The Court acknowledges that discrepancies in the number of patrons present and the part of the program being broadcast could be attributable to the varying timeframes the investigators were present. The Court also acknowledges that when counting the number of patrons present, it is possible the investigators were counting each other since each was present at Mariscos El Tiburon from 6:35 to 7:00 pm. (Doc. 40-2 at 2, 7-8.)
Investigator Christina Donaldson was present from 6:35 pm to 7:07 pm. (Doc. 402 at 2.) She testified that she paid a $10 cover charge to enter, and that she observed five other patrons in the establishment. (Id.) She testified that five televisions were showing the introduction of a boxing match between Ray Vargas and Leonardo Baez. (Id.) She testified that when she left, ten more people had entered the establishment. (Id.) She stated that the capacity of the establishment was approximately 75 people. (Id.)
Investigator Sarah Jennings testified she was at “El Tiburon Tacos y Mariscos,” at the same address, from 6:25 pm to 7:00 pm. (Id. at 7-8.) She testified there were “several TVs inside this establishment[,]” including three smaller televisions and one larger one showing a boxing match between Elvis Rodriguez and Juan Pablo Romero. (Id. at 7.) She testified she watched the last two rounds of this event, which ended in the fifth round. (Id.) She estimated the capacity of the establishment was approximately 40 persons, and that there were eight people present: four waitresses and four customers. (Id.)
The evidence supports there were between 4 and 15 customers present between 6:25 and 7:07 pm, that the patrons were charged $10 for entry, that the program was being broadcast on four-to-five televisions, and that the commercial licensing fee was $1,200. The Court recommends statutory damages in the amount of $2,500 with an enhancement penalty of $2,500. Rubio, 2019 WL 160649, at *4-5 (awarding $2,500 in statutory damages and $500 in enhanced damages for a violation where the establishment's maximum capacity was 50, there were 10 patrons present, and the commercial licensing fee was $2,200, but the defendant did not advertise or charge a cover). The Court notes there are aggravating factors, such as Defendant's advertisement of the event on Facebook, and the $10 cover charge. Investigator Jennings also noted “some of the tables had ‘Reserved' signs on them.” (Doc. 40-2 at 7.) On the other hand, there is no evidence Mariscos El Tiburon is a repeat violator, and there were only a few people present, including restaurant staff. The Court's recommended statutory and enhanced damages awards balance the goal of deterring future infractions while also not bankrupting a small business.
V. Conclusion and Recommendation.
Having reviewed Plaintiff's Motion and the underlying documents in the record, the Court finds that the Eitel factors weigh in favor of granting default judgment in favor of Plaintiff for $5,000 against Defendant Mariscos El Tiburon.
Accordingly, IT IS RECOMMENDED that Defendant Diaz's Motion to Dismiss (doc. 31) be DENIED;
IT IS FURTHER RECOMMENDED that Plaintiff's Motion for Entry of Default Judgment (doc. 40) be GRANTED against Defendant Mariscos El Tiburon;
IT IS FURTHER RECOMMENDED that Plaintiff be awarded $5,000 in total statutory fees, $2,500 pursuant to 47 U.S.C. § 605(e)(3)(C)(i)(II), and $2,500 in enhanced damages pursuant to 47 U.S.C. § 605(e)(3)(C)(ii).
IT IS FURTHER RECOMMENDED that Plaintiff have no later than 14 days after entry of Judgment to file an application for attorneys' fees and costs.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment. The parties shall have 14 days from the date of service of a copy of this Report and Recommendation within which to file specific written objections with the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(b) and 72. Thereafter, the parties have 14 days within which to file a response to the objections. Failure to timely file objections to the Magistrate Judge's Report and Recommendation may result in the acceptance of the Report and Recommendation by the district court without further review. See United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003). Failure to timely file objections to any factual determinations of the Magistrate Judge will be considered a waiver of a party's right to appellate review of the findings of fact in an order of judgment entered pursuant to the Magistrate Judge's Report and Recommendation. See Fed. R. Civ. P. 72.