Sirius XM Radio Inc. v. Aura Multimedia Corporation

Background

Sirius XM Radio Inc. brought claims under the Lanham Act and New York law against Aura Multimedia Corporation, Aura Multimedia Technologies Company LLC, and Clayton B. Burton, Jr. Sirius alleged that, after distribution agreements between Sirius and Aura Multimedia Corporation were terminated, Aura continued to represent on its website that it was affiliated with Sirius and continued using Sirius’s trademarks. The complaint alleged that Burton was the registered agent and president of Aura Multimedia Corporation and the registered agent and manager of Aura Multimedia Technologies Company LLC.

Aura Multimedia Corporation and Aura Multimedia Technologies Company LLC did not timely appear, and the Clerk entered defaults against them. After unsuccessful attempts to serve Burton, the court authorized alternative service by email and through Attorney Marcus A. Castillo. Burton was served on December 6, 2021, but did not timely respond. He later appeared, moved to dismiss the complaint under Rules 12(b)(1), (2), (3), (4), (5), and (6), and moved under Rule 55(c) to set aside the default entered against him.

Motion to Set Aside Default

The court granted Burton’s motion to set aside his default and directed the Clerk to vacate the Certificate of Default. Under Rule 55(c), the court considered whether the default was willful, whether Burton had a potentially meritorious defense, and whether Sirius would suffer prejudice if the default were vacated.

The court did not decide whether Burton’s default was willful. It found that Burton had presented a plausible defense to individual liability: he asserted that he was unaware of Sirius’s concerns until the lawsuit and that he promptly communicated those concerns to the person responsible for the website, who corrected them. The court also found that Sirius had not shown legally cognizable prejudice. The costs of service, seeking a default judgment, and opposing the motion did not establish prejudice, and Sirius had not shown that the 42-day delay caused loss of evidence, greater discovery difficulties, fraud, collusion, or a reduced ability to collect a potential judgment.

Process and Service of Process

The court recommended denying Burton’s motion to dismiss under Rule 12(b)(4) for insufficient process and Rule 12(b)(5) for insufficient service of process. Burton did not identify a defect in the summons, and the court found none. The court also relied on its earlier order authorizing service by email and through Attorney Castillo, concluding that this method was authorized under New York Civil Practice Law and Rules § 308(5) and complied with due process.

This part of the ruling was a recommendation rather than a final ruling by the district judge. The notice stated that the parties had 14 days after service to file objections, and that failing to object would waive objections and prevent appellate review.

Jurisdictional Discovery and Deferred Issues

The court did not make a recommendation on Burton’s Rule 12(b)(2) motion challenging personal jurisdiction. Sirius relied on New York’s long-arm statute and alleged that Burton, while serving as an officer or manager of the corporate defendants, executed the distribution agreements and was a primary actor concerning the agreements and the alleged trademark infringement. Burton stated that he had not personally transacted business in New York but acknowledged managing the corporate defendants’ day-to-day operations.

Because the record did not contain enough information to evaluate Burton’s contacts with New York, the court granted Sirius leave to take limited jurisdictional discovery. The discovery was limited to up to 20 document requests and a remote deposition lasting no more than five hours. The court set deadlines for completing discovery and filing supplemental briefing. It deferred recommendations on improper venue and failure to state a claim, stating that it would address those issues if it found that personal jurisdiction existed.

Disposition

The court granted Burton’s motion to set aside his default. It recommended denying his motion to dismiss for insufficient process and insufficient service of process. It deferred a recommendation on personal jurisdiction pending jurisdictional discovery and supplemental briefing, and likewise deferred venue and failure-to-state-a-claim issues. Sirius’s motion for default judgment against Burton was moot because Burton’s default was vacated; the motion for default judgment against the two corporate defendants remained pending.