Stampin' Up!, Inc. v. Hurst

STAMPIN' UP!, Inc., Plaintiff, v. ELIZABETH HURST aka ELIZABETH TERRELL,an individual, and DAVE GUY, an individual,d/b/a DIES BY DAVE, Defendants.

Case No. 2:16-cv-00886

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, CENTRAL DIVISION

May 1, 2018

MEMORANDUM DECISION AND ORDER

Judge Clark Waddoups

Before the court is Plaintiff's Motion for Default Judgment and Permanent Injunction. (ECF No. 44.) Plaintiff "moves the Court for default judgment against defendant Elizabeth Hurst . . . d/b/a Dies by Dave ('Hurst') on its claims for breach of contract and copyright infringement." (ECF No. 44 at 1.) Plaintiff also argues that "injunctive relief is justified" "to deter [Hurst] from future [copyright infringement] violations." (ECF No. 44 at 7.) As explained below, the court grants Plaintiff's motion for permanent injunctive relief and directs Plaintiff to submit a proposed order. The court also finds that Hurst is liable and default judgment should be entered against her, but will not determine the amount of statutory damages or attorney fees until Plaintiff advises how it wishes to proceed.

I. Background

On March 3, 2017, Plaintiff filed its Second Amended Complaint against Hurst and Dave Guy, both doing business as "Dies by Dave." (ECF No. 15.) On June 14, 2017, out-of-state counsel "for and in behalf of Hurst—but not Dave Guy—"accept[ed] service" of the Second Amended Complaint and Summons on "behalf of Dies by Dave." (ECF No. 18 at 1.) On July 5, 2017, Plaintiff filed a Motion to Extend Time to Answer the Second Amended Complaint. (ECF No. 19.) In this Motion, Plaintiff provided that it had "served Defendants Elizabeth Hurst and Dies by Daves." (ECF No. 19 at 1.) But it did not mention Dave Guy. The court has not received any proof that Dave Guy was ever served with the Second Amended Complaint.

In the Motion to Extend time to Answer the Second Amended Complaint, Plaintiff explained that "[o]ut-of-state counsel for Defendants has represented that they are in the process of engaging an attorney licensed before this Court so they may appear pro hac vice, and there have been unforeseen delays in that process." (ECF No. 19 at 1.) Because of this delay, Plaintiff "agreed to extend the time for Defendants to Answer the Second Amended Complaint . . . ." (ECF No. 19 at 1-2.) On July 6, 2017, Magistrate Judge Furse (Judge Furse) entered an order granting the motion to extend time to answer complaint. (ECF No. 20.) On July 14, 2017, an attorney from a local firm entered a Notice of Appearance of Counsel for Hurst. (ECF No. 21 at 1.) On that same day, that local attorney moved for the out-of-state attorney's admission pro hac vice for Hurst. (ECF No. 22 at 1.)

On July 19, 2017, Hurst, through counsel, filed a Motion to Dismiss for Lack of Personal Jurisdiction. (ECF No. 25) And she filed an Answer. (ECF No. 26.) On August 16, 2017, Hurst, through counsel, filed a Notice of Withdrawal of Motion to Dismiss. (ECF No. 30.)

On December 12, 2017, out-of-state counsel for Hurst filed an Unopposed Motion to Withdraw as Counsel. (ECF No. 33.) On December 13, 2017, Judge Furse granted the Motion to Withdraw as Counsel. (ECF No. 34.) On December 18, 2017, Judge Furse entered an Order (ECF No. 38) granting in-state counsel's Amended Motion to Withdraw, (ECF No. 37). Judge Furse's Order provided that "[c]lient or new counsel for [c]lient must file a Notice of Appearance within twenty-one (21) days after the entry of this order . . . ." (ECF No. 38 at 1.) OnJanuary 9, 2018, Hurst filed a Motion for Extension of Time to Retain New Counsel, in which she requested a sixty day extension. (ECF No. 39.) On January 18, 2018, Judge Furse entered an Order granting the motion, but ordered "that Defendants Elizabeth Hurst and Dave Guy have thirty (30) days to retain counsel." (ECF No. 41.) The Order also provided that "[a] party who fails to file a . . . Notice of Appearance may be subject to sanction pursuant to Federal Rules of Civil Procedure 16(f)(1), including but not limited to entry of default." (ECF No. 41.)

More than thirty days passed, and Defendants did not file a Notice of Appearance. On February 21, 2018, Plaintiff filed a Motion for Entry of Default wherein it "move[d] for entry of default against Defendants . . . ." (ECF No. 42.) On February 23, 2018, the court issued an order granting Plaintiff's Motion for Entry of Default. (ECF No. 43.) The court also directed the Clerk of Court to "enter certificates of default against Defendants." (ECF No. 43.) On March 14, 2018, Plaintiff submitted a Motion for Default Judgment and Permanent Injunction, "mov[ing] the [c]ourt for default judgment against . . . Hurst . . . d/b/a Dies by Dave . . . on [Plaintiff's] claims for breach of contract and copyright infringement." (ECF No. 44 at 1.) On March 29, 2018, the Clerk of Court entered the Default Certificate as to both Hurst and Dave Guy. (ECF No. 47.)¹

II. Default Judgment

A. Default Judgment as a Sanction Under Rule 16 and Rule 37

Rule 16 of the Federal Rules of Civil procedure provides that a court "may issue any just orders, including those authorized by Rule 37(b)(2)(A)(ii)-(vii), if a party . . . fails to obey a scheduling or other pretrial order." Fed.R.Civ.P. 16(f)(1)(c). Rule 37 provides for certainsanctions when a party does not obey a discovery order, including "rendering a default judgment against the disobedient party." Fed. R. Civ. P. 37(b)(2)(A)(vi).

"Default judgment" is a "harsh sanction that should be used only when a party's noncompliance is due to 'willfulness, bad faith, or any fault of the disobedient party and not when a party is unable to comply with a [pretrial] order." See Klein-Becker USA, LLC v. Englert, 711 F.3d 1153, 1159 (10th Cir. 2013) (alteration in original) (citation omitted). Courts should consider whether a sanction less than default judgment may be appropriate—"[p]articularly in cases in which a party appears pro se . . . ." See Ehrenhaus v. Reynolds, 965 F.2d 916, 920 n.3 (10th Cir. 1992). But courts should also be mindful that "a workable system of justice requires that litigants not be free to appear at their pleasure." Cessna Fin. Corp. v. Bielenberg Masonry Contracting, Inc., 715 F.2d 1442, 1444 (10th Cir. 1983). Courts "therefore must hold parties . . . to a reasonably high standard of diligence in observing the courts' rules of procedure." Id.

Before entering default judgment, a court should consider factors set forth in Ehrenhaus. Klein-Becker 711 F.3d at 1159 ("To determine if a sanction such as . . . default judgment is appropriate, courts should consider [the Ehrenhaus factors.]"). The factors are:

(1) the degree of actual prejudice to the [opposing party]; (2) the amount of interference with the judicial process; (3) the culpability of the litigant, (4) whether the court warned the party in advance that dismissal of the action would be a likely sanction for noncompliance; and (5) the efficacy of lesser sanctions.

Ehrenhaus, 965 at 921. (citations omitted) (internal quotation marks omitted). The court is mindful that "[i]n Ehrenhaus, [the Tenth Circuit] expressly stated the factors 'do not represent a rigid test'. . . ." Lee v. Max Int'l, LLC, 638 F.3d 1318, 1323 (10th Cir. 2011) (citation omitted). Instead, the factors "are simply a non-exclusive list of sometimes-helpful 'criteria' or guide posts the district court may wish to 'consider' in the exercise of what must always remain a discretionary function." Id. In the next paragraph, the court considers the Ehrenhaus factors.

The court finds that the majority of the Ehrenhaus factors weigh in favor of entry of default judgment against Hurst. First, the court notes that Plaintiff, as "the diligent party," "must be protected lest [it] be faced with interminable delay and continued uncertainty as to [its] rights." Cessna, 715 F.2d at 1444 (citation omitted) (internal quotation marks omitted). The court finds that Plaintiff is prejudiced by Hurst's delays. Next, the court finds that Hurst is culpable. Hurst filed a Motion for Extension of Time to retain new counsel. (ECF No. 39.) Judge Furse granted this Motion. (ECF No. 41.) Hurst was aware she had 30 days to retain counsel, but she did not do so. She is culpable. The next factor, "whether the court warned [Hurst] in advance that [entry of default judgment] would be a likely sanction for noncompliance," Ehrenhaus, 956 at 921, weighs heavily against Hurst. Judge Furse's Order provided that "[a] party who fails to file a Notice of Substitution of Counsel or Notice of Appearance may be subject to sanction pursuant to Federal Rules of Civil Procedure 16(f)(1), including . . . entry of default." (ECF No. 41 at 1.) The court finds that Hurst was properly warned that entry of default judgment would be a likely sanction for noncompliance. Finally, the court finds that other sanctions would not be effective in this case. The court, with the threat of default, ordered Hurst to retain counsel, but she did not do so. The court doubts that lesser sanctions would be effective in spurring her to action. The court finds that the majority of the Ehrenhaus factors weigh in favor of entry of default judgment against Hurst.

B. Rule 55

The court, "having determined that [Hurst's] noncompliance warrants an entry of default judgment pursuant to Rule 37," follows "the procedure for entry of a default judgment as set forth in Rule 55." See Coach, Inc. v. O'Brien, 2012 WL 1255276, at *10 (S.D.N.Y. Apr. 13, 2012) (alteration removed). "Decisions to enter judgment by default are committed to the districtcourt's sound discretion . . . ." Olcott v. Delaware Flood Co., 327 F.3d 1115, 1124 (10th Cir. 2003). "A defendant who fails to . . . defend an action is deemed to have admitted the well-pleaded factual allegations of the complaint as true." Lopez v. Highmark Constr., LLP, No. 17-CV-01068-CMA-MLC, 2018 WL 1535506, at *2 (D. Colo. Mar. 29, 2018) (citations omitted); see also Eagle Hosp. Physicians, LLC v. SRG Consulting, ...