Elohim EPF USA, Inc. v. 162 D & Y Corp.

Background

Elohim EPF USA, Inc. alleged that defendants—karaoke bars and individuals who own, manage, or work at those establishments—used or displayed Korean musical compositions without licensing agreements. Elohim alleged direct, contributory, vicarious, and inducement copyright infringement. The Clerk issued certificates of default against Sing Sing Bell, Inc., doing business as Christmas Karaoke; Jin E. An; M & S Music Studio, Inc., doing business as Gagopa Karaoke; Hye Kyung Han; Bizmax NY, Inc., doing business as Wow Karaoke; and Li Beom Kim. These defendants were referred to collectively as the “Defaulted Defendants.”

The Defaulted Defendants moved under Federal Rule of Civil Procedure 55(c) to set aside the entries of default. A court may set aside an entry of default for “good cause.” The court evaluated three factors: whether the default was willful, whether the defendants had potentially meritorious defenses, and whether setting aside the default would prejudice Elohim.

The Court’s Analysis

On prejudice, the court held that Elohim showed only delay. Elohim argued that vacating the defaults could prolong the alleged unauthorized use of its musical compositions and delay relief. The court concluded that delay alone was insufficient, particularly because courts generally prefer deciding disputes on their merits.

On willfulness, the Defaulted Defendants said that a misunderstanding between corporate counsel and a referral law firm caused them to believe that an attorney had entered an appearance for them. They also cited delays connected to the COVID-19 pandemic, the death of counsel’s mentor, language barriers, time-zone issues, and logistical problems. The court found that the defendants’ conduct was at least negligent and that the seven-month delay in seeking relief was unwarranted. But, resolving doubts in their favor, the court concluded that the conduct was not willful.

On defenses, the Defaulted Defendants argued that the karaoke bars’ private viewing rooms could affect whether their performances were public performances or displays under copyright law. The court found that defense potentially meritorious because the issue depended on facts about how the karaoke performances occurred. The court did not decide the defense, stating that discovery and later proceedings would be needed to resolve it.

Disposition

Judge Alison J. Nathan concluded that all three factors favored setting aside the defaults. The court granted the Defaulted Defendants’ motion, vacated the certificates of default identified in the order, and ordered the Defaulted Defendants to respond to Elohim’s Second Amended Complaint within 14 days. The order resolved Docket No. 133.