Vondran Legal® - BitTorrent Litigation Update: Strike 3 Holdings denied default judgment.  Court cites Cobbler-Nevada case.  If you received a notice from your Internet service provider regarding a deadline to respond, call us at (877) 276-5084.  We have settled MILLIONS of dollars in copyright infringement matters.

Introduction

Recently, prolific copyright infringement filer, Strike Three Holdings, LLC, sought to obtain a default judgment in a federal court case where the defendant failed to answer or respond to the complaint.  Typically, these are routinely granted, but not in this case.  Here was the judge's reasoning for recommending denying their request:

Texas District Court Case

Here is the background on the case:

Plaintiff Strike 3 Holdings, LLC brings this copyright infringement suit against Defendant. Strike 3 “is the owner of award-winning, critically acclaimed adult motion pictures” and alleges Defendant has committed copyright infringement by downloading and/or distributing 32 of Strike 3's movies.

Defendant was served with the summons and First Amended Complaint, but has not filed an answer or otherwise appeared. At Strike 3's request, the Clerk's Office entered default against Defendant. Dkts. 19, 20. Strike 3 now moves for entry of default judgment seeking $24,000 in statutory damages, $564.20 in costs, and injunctive relief. Dkt. 23-6 at 3. Defendant did not respond to the motion.

Attorney Steve® Tip:  Plaintiff is thus seeking $750 per downloaded movie (the minimum amount of statutory damages (see my video below).  Also, when you default, your name becomes public.  Another risk you take when deciding to "WAIT AND SEE WHAT HAPPENS."

Before the court is Plaintiff's Motion for Default judgment Against Defendant. Defendants did not file a response. After reviewing the pleadings, the relevant case law, as well as the entire case file, the undersigned recommends the District Court deny the motion without prejudice to refiling.

The Magistrate sets forth rules on default judgment

Here is the legal analysis:

“Default judgments are a drastic remedy” and thus are “resorted to by courts only in
extreme situations.” Sun Bank of Ocala v. Pelican Homestead & Sav. Ass'n, 874 F.2d 274, 276
(5th Cir. 1989). Accordingly, “[a] party is not entitled to a default judgment as a matter of right,
even where the defendant is technically in default.” Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir.
1996). Rather, “[t]here must be a sufficient basis in the pleadings for the judgment entered.”
Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (default is not
treated as an absolute confession by defendant of liability and of plaintiff's right to recover).

A court must accept pleaded facts as true, but must also determine whether those facts state a claim
upon which relief may be granted. See Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001) (affirming
district court's denial of entry of default judgment because, even if true, plaintiff's allegations
would not support imposing liability against defendants).

Courts use a three-part test to determine when to enter a default judgment. The court first
considers whether the entry of default judgment is procedurally warranted. United States v. Rod
Riordan Inc., No. MO:17-CV-071-DC, 2018 WL 2392559, at *2 (W.D. Tex. May 25, 2018);
Nasufi v. King Cable Inc., No. 3:15-CV-3273-B, 2017 WL 6497762, at *1 (N.D. Tex. Dec. 19,
2017) (citing Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998)).

The Fifth Circuit has set forth six factors for a court to consider in determining whether a default
judgment is procedurally proper:

“(1) whether material issues of fact are at issue;

(2) whether there has been substantial prejudice;

(3) whether grounds for default are clearly established;

(4) whether default was caused by good faith mistake or excusable neglect;

(5) harshness of default judgment;

and

(6) whether the court would feel obligated to set aside a default on the defendant's motion.”

See United States v. Padron, 7:17-CV-00009, 2017 WL 2060308, at *2 (S.D. Tex. May 12, 2017);
see Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998). 

Next, courts assess the substantive merits of the plaintiff's claims and determine whether
there is a sufficient basis in the pleadings for the judgment.
See J & J Sports Prods., Inc. v. MoreliaMexican Rest., Inc., 126 F. Supp. 3d 809, 814 (N.D. Tex. 2015)
(citing Nishimatsu, 515 F.2d at 1206).

In doing so, courts assume that, due to its default, the defendant admits all well-pleaded
facts in the plaintiff's complaint. See Rod Riordan Inc., 2018 WL 2392559, at *3.

Finally, the court determines what form of relief, if any, the plaintiff should receive. 

While damages are normally not to be awarded without a hearing or a demonstration by detailed
affidavits establishing the necessary facts, if the amount of damages can be determined with
mathematical calculation by reference to the pleadings and supporting documents, a hearing is
unnecessary. (citing United Artists Corp. v. Freeman, 605 F.2d 854, 857 (5th Cir. 1979); James
v. Frame, 6 F.3d 307, 310 (5th Cir. 1993)). 

Attorney Steve® Tip:  This is why Strike Three will typically request the lowest amount of statutory damages (which is $750 per infringed title).  By doing this, they avoid an evidentiary "prove up hearing" if the judge decides he or she needs to see the evidence of damages.

The Magistrates Recommendation: Where is the "additional evidence"?

In recommending denial of the motion for default damages, the Magistrate Judge noted:

In reviewing the First Amended Complaint and Strike 3's materials in support of its motion for default, the court finds there is not sufficient basis in the pleadings to support the judgment and the court would be obligated to set aside the default if Defendant requested it.   Accordingly, for the reasons below, the undersigned will recommend Strike 3's motion be denied.

“Once Strike 3 learns the defendant's identity, it cannot rely on a bare allegation that a defendant is the registered subscriber of an IP address associated with infringing activity to state a plausible claim for direct or contributory copyright infringement.” Strike 3 Holdings, LLC v. Andaya, No. 21-CV-00760-VKD, 2021 WL 5123643, at *3 (N.D. Cal. Nov. 4, 2021), report and recommendation adopted, No. 21-CV-00760-LHK, 2021 WL 5908421 (N.D. Cal. Dec. 14, 2021) (citing Cobbler Nevada, LLC v. Gonzales, 901 F.3d 1142, 1144 (9th Cir. 2018)).

“Because multiple devices and individuals may be able to connect via an IP address, simply identifying the IP subscriber solves only part of the puzzle. A plaintiff must allege something more to create a reasonable inference that a subscriber is also an infringer.” 

The decision went on:

Courts have denied motions for default judgment where the plaintiff failed to allege any facts beyond the defendant's status as the subscriber associated with the IP address at issue. Strike 3 asserts its “investigation has determined that Defendant is the person who used this IP address to infringe on its copyrighted works.”

The IP address was assigned to Defendant at his residence during the period of infringement.

Strike 3 alleges “Defendant is interested in inspirational content” and “Defendant is interested in yoga” and contends it logged BitTorrent network activity from Defendant's IP address involving copyrighted works of inspirational quotes and files related to yoga.

Strike 3 also alleges that Defendant works in the computer science industry and it logged BitTorrent network activity from Defendant's IP address involving copyrighted works about computer programming.

But these allegations fall very short of those alleged in Andaya, where default was ultimately granted. See Andaya, 2021 WL 5123643. In Andaya, Strike 3 showed that:

(1) the subscriber and location information Strike 3 received in response to its court-authorized subpoena to the ISP confirmed the information Strike 3 obtained in its geolocation investigation;

(2) during an 18-month period, Strike 3's software determined that a single BitTorrent client (with only one change reflecting updated μTorrent software) was used to download and distribute all works through the IP address in question, suggesting that an individual using one computer downloaded and distributed Strike 3's films using the BitTorrent protocol;

(3) during the same 18-month period, the same IP address was used to download and distribute 1,696 mainstream media, suggesting that the infringer likely is a permanent resident at the identified address;

(4) approximately 15 days after Strike 3 served the court authorized subpoena on the relevant ISP (i.e., after the subscriber would have received notice from the ISP of the infringing activity), the substantial BitTorrent activity associated with the subject IP address came to an abrupt and complete halt;

(5) while Mr. Andaya apparently lives at the residence with his wife and teenage daughter, he is the lone male occupant of the home; and, Strike 3's customer demographics indicate that its films are generally more popular with males than females;

and

(6) after Mr. Andaya was personally served with the complaint and summons, his social media pages were taken down.

_____________________________

Attorney Steve® Sidebar:  These allegations are typical of what you might see as a Defendant in these cases.  To me, the allegations are typically pretty weak, as opposed to convincing evidence of liability.  We are seeing more and more Strike 3 citing these non-specific evidence on infringement as to a particular defendant, and at times, moving forward with their lawsuit even though we may seek to present them with exculpatory evidence.  The idea being, if you don't look at potentially exculpatory evidence (such as proof that the alleged downloader was out of town on alleged download dates, or has no reason to download porn, or that the evidence of what they do for a living is not relevant to guilt and does not matches with other downloads they allege, often very vague things like they downloaded two sci-fi books for example) you can literally force a person into federal court to litigate, which naturally, few people have the money to defend against the well-financed strike three. 

This case is great because it says what I have been telling their IP Copyright attorneys in California, New York, Pennsylvania, New Jersey and other states for many years - "this is all the additional evidence you have?"  Are you willing to show me what these other additional 1,000 downloads are?  No is the standard answer, you will get that in litigation.  Hardly a fair proposition from my vantage point.

______________________________

The Court then threw the fastball up and in:

Here, Strike 3 has provided the court with no information about how many people live in the home, how many men live in the home, the basis for its allegations that Defendant likes inspirational quotes, yoga, and works in computer science, or how many BitTorrent clients are related to the IP address in question.

Other courts in Texas have granted motions to dismiss on facts similar to those pleaded here. Malibu Media LLC v. Duncan, No. 4:19-CV-02314, 2020 WL 567105, at *6 (S.D. Tex. Feb. 4, 2020) 

(“[The Complaint] alleges no personal contact with or investigation of [the defendant]. And so the amended complaint contains no allegations that [the defendant] acknowledged personal involvement in any download or distribution, that he has exclusive access to his IP address, or ‘even circumstances which might increase the likelihood that the subscriber is the infringer (such as defendant's living arrangements or network details).'”).

Accordingly, Strike 3 has not shown it is entitled to default judgment, and the undersigned will recommend its motion be denied without prejudice. Strike 3 may refile its motion with further support that it was in fact Defendant, not another person living at the residence, that violated their copyrights.

Strike 3 could likely make this showing by articulating how many people lived in the home at the relevant time, how many men lived in the home, the basis for its allegations that Defendant likes inspirational quotes, yoga, and works in computer science and therefore all of the BitTorrent activity is attributable to Defendant, or how many BitTorrent clients are related to the IP address in question.

For these reasons, the undersigned RECOMMENDS that Plaintiff's Motion for Default Judgment Against Defendant (Dkt. 23) be DENIED WITHOUT PREJUDICE.

Note:  The status of this recommendation is not clear.  Here is the last post to the docket as of the date this blog was posted. We will let you know if there is any update.

Malibu Media vs. Duncan

The holding in Duncan is worth the read:

"The BitTorrent Adult Film Copyright Infringement Cases frames the best metaphor: "Thus, it is no more likely that the subscriber to an IP address carried out a particular computer function—here the purported illegal downloading of a single pornographic film—than to say an individual who pays the telephone bill made a specific telephone call."

And the decision underlying the Ninth Circuit's opinion best frames the inquiry against the requisite Twombly/Iqbal standard: "While it is possible that the subscriber is also the person who downloaded the movie, it is also possible that a family member, a resident of the household, or an unknown person engaged in the infringing conduct." Cobbler Nevada LLC v Gonzales, 2016 WL 3392368 (D Or) (emphasis in original), affirmed 901 F3d 1142 (9th Cir 2018). 

The Supreme Court has held that the mere possibility that a defendant engaged in prohibited conduct is insufficient to state a claim: "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." Iqbal, 556 US at 678, citing Twombly, 550 US at 556.

Yet Malibu Media in its amended complaint simply converts from pleading that it observed conduct on an IP address to alleging that Duncan himself was the one doing so. Like the Supreme Court in Iqbal, this Court "do[es]  not reject these bald allegations on the ground that they are unrealistic or nonsensical." 556 US at 681. Instead, "[i]t is the conclusory nature of respondent's allegations, rather than their extravagantly fanciful nature, that disentitles them to the presumption of truth." Ibid.

Indeed, in both Iqbal and Twombly, the complaints failed in large measure because an "obvious alternative explanation" existed for the conduct at issue which was not ruled out by conclusory averments. Id at 682, quoting Twombly, 550 US at 567.

Malibu Media has not "nudged" its claims "across the line from conceivable to plausible." Twombly, 550 US at 570. It alleges no personal contact with or investigation of Duncan. And so the amended complaint contains no allegations that Duncan acknowledged personal involvement in any download or distribution, that he has exclusive access to his IP address, or "even circumstances which might increase the likelihood that the subscriber is the infringer (such as defendant's living arrangements or network details)." Elf-Man LLC, 2014 WL 202096 at *2.

It thus remains just as possible that the IP address was used by family members, roommates, guests, friends, and neighbors. See Sag & Haskell, 103 Iowa L Rev at 590. The Court grants Duncan's motion to dismiss on this additional basis.

Attorney Steve® sidebar:  There was also an issue relating to Malibu's geolocation technology which can also be problematic.  I had one case with Strike 3 where their legal counsel came up with two different geolocations.  When we asked "how can this be" their attorney informed us this was all "within the district" and they would be proceeding to court with both sets of infringements, resulting in nearly a double movie count.  The geolocation technology and findings of Strike 3 Holdings should always be closely examined.

The Court in Duncan touched on this topic as well:

The court noted:

"Malibu Media's reliance on "geolocation technology" Malibu Media pleads its use of "geolocation technology" as the exclusive basis upon which it identified not Duncan, but rather, his IP address. Duncan challenges this as inaccurate. Dkt 17 at 2-3.

The Court agrees and finds a speculative gap as to whether Malibu Media has plausibly identified an IP address associated with Duncan's physical address. Recall that Malibu Media does not allege that it actually observed Duncan engaging in infringing acts. It alleges only that its technology identified an IP address "traced to a physical address located within this District." Dkt 11 at ¶ 5.

Yet the amended complaint itself pleads the accuracy limits of this technology, and it inspires no confidence:

"Based upon experience filing over 1,000 cases the geolocation technology used by Plaintiff has proven to be accurate to the District level in over 99% of the cases." Id at ¶ 6 (emphasis added). This Court recently observed that the Southern District of Texas covers approximately one-fifth of the real estate in Texas, totaling more than 44,100 square miles. Total Safety v Knox, 2019 WL 7042114, *2 (SD Tex) (citation omitted). Spanning Houston down to the Rio Grande, this means literally millions of people live within this district.

An allegation that technology accurately observed copyright infringement occurring somewhere amid 44,100 square miles and millions of people is insufficient to plausibly plead infringement by a specific person at a specific address. But based on pleading accuracy to the District level, that is all that Malibu Media has done.

On careful inspection, the amended complaint also contradicts any linkage between the geolocation technology, the allegedly infringing IP address, and Duncan's physical address. The amended complaint states that "Defendant's IP address as set forth on Exhibit A was used to illegally distribute" the allegedly infringed videos. Dkt 11 at ¶ 2. Exhibit A is a report or summary of the geolocation-technology investigation. It lists "IP Address 72.183.55.254" and states "Physical Location: Portland, TX." Dkt 11-1 at 1. But returning to the amended complaint, Malibu Media then pleads that Duncan resides at a street address in Rockport, Texas. Dkt 11 at ¶ 9. The towns of Portland and Rockport are more than twenty miles apart in the Corpus Christi area. Nothing in the amended complaint explains their connection. Perhaps there is one, but that is a matter for potential repleading. Given Malibu Media's current averment that its technology is only accurate to the District level, this unexplained contradiction  leaves it entirely speculative as to whether Malibu Media has pleaded any connection to Duncan—much less a still-insufficient possible one, and far from the requisite plausible one. The Court grants Duncan's motion to dismiss on this basis.

Attorney Steve® Explains Copyright Infringement Damages

Learn More about the significance of the Cobbler-Nevada ruling

Contact a file-sharing defense law firm

Vondran Legal® is a leading handling Strike 3 Holdings defense cases, especially in the State of California.  Being that the lawsuits involve federal copyright infringement (federal law) we are able to assist individuals nationwide including in Ilinois, New York, Texas, Maryland, Pennsylvania, New Jersey and other states. 

In California, we are the clear leader in terms of cases handled and settled.  We have handled hundreds and hundreds of cases up and down the State including federal courts in the Northern District of California (Bay area, San Jose, San Francisco), The Eastern District, (Fresno, Bakersfield) the Southern District (San Diego area), and the Central District (Orange County, Inland Empire, Los Angeles).

 Call us for a free initial consultation at (877) 276-5084 or fill out our contact form on the right side of the page and we will contact you.

Click her to read Steve Vondran sterling client reviews (they do the due diligence for you).