The opinion of the court was delivered by: Katharine S. Hayden, U.S.D.J.
This matter comes before the Court upon defendants' motion to vacate a default judgment entered against them. Plaintiff opposes the motion, but for the reasons stated below, the Court finds that the present circumstances warrant vacatur. The motion is therefore granted.
The facts of this case are straightforward and essentially undisputed. Plaintiff J&J Sports Productions, Inc. ("J&J") is a California corporation that obtained a license to transmit the May 7, 2007 "De La Hoya/Mayweather Program" (the "Program"), a professional boxing event, via closed circuit television and encrypted satellite signal to various pay-per-view purchasers. Compl. ¶¶ 5, 12. Defendant Krassimer Orachev is a New Jersey citizen and is the president of co-defendant 256 Buffalo Ave, Inc., d/b/a Wild Bull Steakhouse, a/k/a The Wild Bull Steakhouse & Saloon ("Wild Bull"), a New Jersey business entity. Compl. ¶¶ 6-10; Certification of Krassimer Orachev ("Orachev Cert.") ¶ 1. Before the Program aired, the parties entered into sublicense negotiations for the purpose of broadcasting the event at Wild Bull, but ultimately the $2,350.00 that J&J requested was too high a price for Orachev, and no sublicense was granted. Orachev Cert. ¶ 5.
J&J filed a complaint in this Court on March 11, 2008 [D.E. # 1], alleging that despite having not sublicensed the Program to Wild Bull, defendants, using "an illegal cable converter box or device to intercept [J&J's] broadcast," "unlawfully intercepted, received and/or de-scrambled said satellite signal[,] and . . . exhibit[ed] the Program at [Wild Bull] . . . willfully and for purposes of direct or indirect commercial advantage or private financial gain." Compl. ¶¶ 15-16. J&J seeks relief under 47 U.S.C. §§ 553 and 605, which prohibit the unauthorized reception, interception, transmission, publication, and exhibition of communications such as the Program. Compl. ¶¶ 17-28. Jurisdiction and venue are proper. 28 U.S.C. §§ 1331, 1391.
J&J returned the summons served upon defendants as properly executed on March 25, 2008 [D.E. # 4, 5], and when defendants did not respond, J&J requested the entry of default on April 30, 2008 [D.E. # 6]. The Clerk of the Court entered default on May 8, 2008 [D.E. # 7], and J&J thereafter moved for default judgment on June 24, 2006 [D.E. # 9]. On July 31, 2008, the Court granted the motion and entered a default judgment in the amount of $31,246.75 [D.E. # 13]. On April 14, 2009, defendants moved to vacate the default judgment under Rule 60(b) of the Federal Rules of Civil Procedure, and counsel entered an appearance on their behalf the next day [D.E. # 15, 16].
Defendants admit the following: (1) that they did not obtain a sublicense from J&J to broadcast the Program; (2) that despite this, the Program signal was somehow transmitted to Wild Bull; (3) that they broadcast the Program without notifying J&J; and (4) that they are therefore liable to J&J for proper compensation. Defendants assert that they aired the Program "inadvertently (and perhaps foolishly) without seeking consent from or providing compensation to J&J," but deny taking concerted action to intercept plaintiff's signal. Def. Br. at 1. Orachev asserts that he speaks and understands English poorly, which contributed to his dilatory conduct. Orachev Cert. ¶ 3. He contends that the amount of the default judgment entered is grossly unfair and disproportionate to adequate damages. Orachev Cert. ¶¶ 6-8.
Rule 60(b) of the Federal Rules of Civil Procedure provides the mechanism for vacating a previously entered default judgment. It states in pertinent part that "[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; [or] . . . (6) any other reason that justifies relief." Fed. R. Civ. P. 60(b). It is unclear whether defendants move under both subparagraphs (1) and (6), or only under the latter; J&J argues that relief under either is inappropriate. Because Rule 60(b)(6) applies only where the other five subparagraphs do not, see Medunic v. Lederer, 533 F.2d 891, 893 (3d Cir. 1976), the Court addresses both subparagraphs below.
In reviewing a motion to vacate a default judgment under Rule 60(b)(1), the Court applies a balancing test in which it must consider the following three factors: (1) whether the plaintiff will be prejudiced if the default judgment is set aside; (2) whether the defendant has a meritorious defense; and (3) whether the defaulting defendant's conduct is excusable or culpable.
Gold Kist, Inc. v. Laurinburg Oil Co., 756 F.2d 14, 19 (3d Cir. 1985) (collecting cases).*fn1 Of these factors, the existence or absence of a meritorious defense exists is a threshold consideration. Resolution Trust Corp. v. Forest Grove, 33 F.3d 284, 288 (3d Cir. 1994); Harad v. Aetna Cas. & Sur. Co., 839 F.2d 979, 982 (3d Cir. 1988). As plaintiff indicates, defendants do not proffer a viable meritorious defense; in fact, they admit liability. A meritorious defense is acceptable when "allegations of defendant's answer, if established on trial, would constitute a complete defense to the action." Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951). Because defendants have no complete defense to the action here, relief under Rule 60(b)(1) is inappropriate.
Despite its conclusion that Rule 60(b)(1) does not support vacatur of the default judgment, the Court must keep in mind the Third Circuit's "operative premise" that it "does not favor defaults and . . . in a close case doubts should be resolved in favor of setting aside the default and reaching a decision on the merits." United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 197 (3d Cir. 1984) ...