Heidi & Hans-Jürgen Koch GbR v. Blue Label Solutions LLC

Background

Heidi & Hans-Jurgen Koch GbR brought a copyright-infringement action under 17 U.S.C. § 101 and following sections. The complaint alleged that Blue Label Solutions LLC used a copyrighted photograph of a baboon on a computer without first obtaining a license and removed the photograph’s attribution to the plaintiff.

The plaintiff served Blue Label through the New York Secretary of State’s office on June 4, 2021. After Blue Label did not respond to the complaint, the clerk entered a certificate of default on July 21, 2021. The plaintiff then sought a default judgment and an inquest hearing was scheduled. Blue Label’s counsel appeared shortly before the hearing, and Blue Label moved to vacate the certificate of default. The plaintiff stated that it did not oppose the motion.

Legal standard

Because the clerk had entered a certificate of default but no default judgment had been entered, the court applied Federal Rule of Civil Procedure 55(c), which allows an entry of default to be set aside for “good cause.” Courts consider three factors: whether the default was willful, whether the defendant has a potentially valid defense, and whether setting aside the default would prejudice the plaintiff. The court also noted the general preference for deciding cases on their merits rather than by default.

Analysis

The court determined that Blue Label’s default was not willful. Blue Label apparently had failed to update the New York Secretary of State with its new address after relocating its New York office during the COVID-19 pandemic. Although service was proper under New York law, Blue Label represented that it had not received the documents filed in the case, and the record did not suggest that it had tried to evade service.

Blue Label had not yet shown that it had a meritorious defense because it had only recently begun reviewing the plaintiff’s allegations. The court nevertheless found that this factor did not prevent vacatur. The plaintiff would not be prejudiced because the delay was slight, and delay alone was insufficient to establish prejudice. The plaintiff’s lack of opposition and the preference for decisions on the merits also supported finding good cause.

Disposition

Judge Katharine H. Parker granted Blue Label’s motion to vacate the clerk’s certificate of default. The plaintiff’s motion for default judgment, listed at ECF No. 24, was terminated as moot. Blue Label was ordered to file a responsive pleading by December 22, 2021. The order did not decide the underlying copyright-infringement allegations.