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Neumont University, LLC v. Little Bizzy, LLC

United States District Court, D. Nevada

May 20, 2014

Neumont University, LLC, Plaintiff,
v.
Little Bizzy, LLC, et al., Defendants.

ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT, PERMANENT INJUNCTION, AND ATTORNEY'S FEES AND COSTS [DOC. 45]

JENNIFER A. DORSEY, District Judge.

Having secured a clerk's default against the Defendants after they failed to appear at a Court-scheduled settlement conference and violated the Court's order directing Little Bizzy-a fictitious entity-to retain licensed counsel, see Docs. 25, 29, 41, 42, 44, Plaintiff, Neumont University, LLC, seeks a default judgment, permanent injunction, and attorney's fees and costs against these defaulted defendants alleged to have interfered with Neumont's professional reputation and business relationships by posting false and disparaging reviews of Neumont's educational product on the Collegetimes.com website. Doc. 45. On November 4, 2013, the Court heard oral argument, conducted an uncontested evidentiary hearing on the pending motions, and requested supplemental briefing on the propriety of injunctive relief. See Doc. 59. The Court has considered that supplemental brief, the original filings, and the evidence and argument offered at the prove-up hearing, enters a default judgment against Little Bizzy for the tort damages Neumont proved at the evidentiary hearing, but denies the request for attorney's fees and injunctive relief for the reasons below.

Background

Neumont is a private, for-profit limited liability company incorporated in Delaware with its principal place of business in South Jordan, Utah. See Doc. 1 at 2. Defendant Little Bizzy operated Collegetimes.us, a website for "students to comment on their experiences at various colleges and universities around the world." Id. at 4. The Collegetimes website contains a Neumont page allowing postings about the institution. Id. 17 postings appeared on Neumont's Collegetimes page between April 21, 2009, and August 15, 2011. Doc. 1-4 at 2-4. They criticize Neumont's business objectives and the overall quality of its consumer product. For example, content attributable to "Concerned Parent" suggests, "This is a MORMON school or did HITLER come back and move[] to UTAH." Doc. 1-4 at 2. A poster named "Justin" purportedly states, "All I remember learning from Neumont's Computer Science program was learning how to Google. You can learn as much by participating in an open source project for two years without the burden of 100K in student debt." Id. at 3. "No Longer a Fan" posts, "Speaking up for yourself... forget it. The student will end up getting burned somewhere along the way." Id. A posting attributable to "Graduate" provides, "I went to this hell hole of a school. They say they are accredited but they really aren't. I was planning on going for my master's in another field and half way through the program I found out that 80% of other schools in the U.S. won't take their degree.... The administration don't give a shit about any of the student[s] they just want the most money they can get." Id. Poster "HIV Positive" is credited with stating, "This school can be summed up in 3 words PIECE OF SHIT, '" and "Unknown" purportedly states, "Listen to what everyone is saying if you want to go to this school don't! You will be in debt and not able to transfer your credits." Id. at 4.

Responsive comments by other posters suggests the postings had an impact on the marketplace. For example, "Thinking" said, "I have been thinking about going to this school for a long time. I thought it was a good school after reading the website, but now I'm having second thoughts." Id. at 4. Similarly, someone identified as "Eleanor Miller" stated, "My grandson is considering NU. After reading these reviews-it does not sound so good. Especially the part where other schools won't accept the credits earned at NU." Id. Indeed, Neumont's page on Collegetimes is completely devoid of any positive comments about the school.

When Neumont officials attempted to add their own content to the "comments" on Neumont's page, Collegetimes added a banner that stated, "Warning: We recommend that you avoid this college." Doc. 1 at 4. Neumont officials demanded that Collegetimes remove negative postings but the request was refused. Neumont sued Collegetimes's owner, Little Bizzy, LLC, and its principal, Jesse Nickles, asserting claims for (1) business disparagement, (2) intentional interference with contractual relationships, and (3) intentional interference with prospective economic advantage under Nevada state law. See id. at 8-12. Neumont prayed for compensatory and special damages; punitive damages; interest, costs and attorney's fees incurred in prosecuting the action; and a permanent injunction "prohibiting Defendants and their agents, servants, employees, licensees, sponsors, associates, and affiliates, and each of them, from continuing to publish or disseminate false, defamatory and/or derogatory content aimed at harming Neumont and/or its educational services, faculty, administration, students, or staff by way of the Collegetimes website or any other publication." Doc. 1 at 11.[1]

Little Bizzy-acting through its non-lawyer principal, Nickles, moved to dismiss the complaint. Doc. 17. Defendants were advised that Little Bizzy, a fictitious entity, must be represented by counsel, and both Little Bizzy and Nickles were ordered to appear for a settlement conference. They ignored all of these orders; Little Bizzy's motion to dismiss was stricken; and clerk's defaults against them were entered. See Docs. 41, 42, 44. Neumont then moved for a default judgment, permanent injunction, and an award of fees and costs against both Nickles and Little Bizzy. Docs. 45, 58.

On November 4, 2013, the Court conducted an evidentiary hearing on the pending motion. Doc. 59 (minutes). As the Defendants had been defaulted, only Neumont was present at the hearing. Neumont offered the testimony of Stacy C. Hughes, a Neumont administrative official, who testified that other Neumont clients had attempted to post positive comments on the Collegetimes website but those posts had been deleted, and that Neumont administrators were no longer able to access the discussion page to post their own content. Hughes testified that the negative reviews had become one of the regular reasons why students were not enrolling at Neumont; she also offered lost-customer revenue evidence for 2010 through 2014 and detailed Neumont's need to pay outside consultants to manipulate Google search results to "push down" the Collegetimes page.

Hughes also introduced several tweets generated by a "Collegetimes" account from May through October 2013, that were directed towards Neumont. One posting stated, "#Neumont student reveals that administrators host pizza parties' to coax students to leave positive reviews online answers.yahoo.com." Doc. 58-5 at 2. Evidence was also presented that the Collegetimes twitter account posted an article entitled, "Neumont University Slanders Jesse Nickles, Little Bizzy." Doc. 58-4 at 2. Hughes testified that the Twitter postings contributed to several students declining to enroll at Neumont. Neumont calculated $1, 020, 000 in total lost revenue due to Collegetimes' campaign of disparagement. Doc. 58-7 at 2.

Discussion

A. Motion for Default Judgment - Nickles

Neumont has moved for a default judgment against both Little Bizzy and Nickles. Upon further review of the record, however, it does not appear that Nickles was properly served in this case. Therefore, this Court lacks personal jurisdiction over Nickles.

1. The Court lacks jurisdiction over Nickles.

A summons was issued for Nickles on August 7, 2012. Doc. 6. This summons was returned unexecuted on August 28, 2012; the process server stated that he had attempted to serve Nickles by hand-delivery on two separate occasions at his last known address in California, but was told by Nickles's mother and sister that he no longer lived at the address. Doc. 15. Eventually a clerk's default was entered against Nickles on Plaintiff's counsel's representation that Nickles was served via email. See Doc. 43-1 at 3.

"[S]ervice of process is the means by which a court asserts jurisdiction over the person."[2] When personal service is required, failure to perfect it is fatal to a lawsuit.[3] Proper service on an individual within a United States jurisdiction under Fed. R. Civ. Proc. 4(e) is accomplished only by personally serving the individual, leaving a copy of the summons and complaint "at the individual's dwelling or usual place of abode with someone of suitable age and discretion who resides there, " or delivering a copy to an agent authorized to accept service of process.[4] Nickles could also be served either by the methods identified by the law of the state where the district court is located or the state where service is made, which in this case is either Nevada or possibly California. Doc. 1 at 2.[5] Nev. R. Civ. Proc. 4(d)(6) requires personal service on individual defendants in the same manner as the federal rules. Email is not adequate service under the rules.[6] In California, an individual may also be served personally, at a residence, or via authorized agent.[7] California also permits service at an individual's place of business or by mail.[8]

The Court finds no evidence that service on Nickles personally was perfected under federal, Nevada, or California law. The only evidence of a personal service attempt on Nickles reflects that Neumont's "investigator" went to "1874 Shaw Court, Thousand Oaks, CA 91362, " and spoke with Nickles's sister, who told him that Nickles did not live there and that she did not know Nickles's current whereabouts. Doc. 15. The investigator returned to the dwelling two days later and spoke with Nickles's mother, who also stated that Nickles did not live there and that she was unsure of Nickles's current whereabouts. Id.

Nor can it be fairly said that service on Little Bizzy should count as service on Nickles personally. The entity was served through its agent, Mail Link, LLC. See Doc. 14. Although Nickles's preparation and filing of motions to dismiss and to stay discovery on behalf of Little Bizzy certainly demonstrates that Nickles was aware of the lawsuit, see Doc. 27, "actual notice is not an effective substitute for service of process"[9] As personal service was never properly effectuated on Nickles such that exercise of personal jurisdiction over him would be appropriate, the Court lacks personal jurisdiction over him.

2. The default against Nickles is set aside.

Rule 60(a) allows the court to "correct... a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record. The Court may do so on motion or on its own, with or without notice."[10] Upon evaluation of the record, the Court finds that Nickles was never properly served and did not otherwise waive service. As judgment cannot be entered against a party not subject to this Court's personal jurisdiction, the clerk's entry of default must be set aside. Doc. 44. As a result, Neumont is not entitled to a default judgment against Nickles at this time.

3. Extension of time for service on Nickles.

Fed. R. Civ. Proc. 4(m) requires service of the summons and complaint within 120 days. "If a defendant is not served within 120 days after the complaint is filed, the court-on motion or on its own after notice to the plaintiff-must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period."[11] "The plaintiff is responsible for having the summons and complaint served within the time allowed under Rule 4(m)."[12] The Ninth Circuit has interpreted Rule 4(m) to require a two-step process for granting extensions of the service period.[13] If the court finds good cause for the service delay, it must extend the time period. A court ascertains "good cause" on a case-by-case basis, the threshold requirement being excusable neglect.[14]

In this case, the complaint was filed on August 7, 2012, and an unexecuted summons was returned on August 28, 2012. Docs. 1, 15. Well over 120 days have now passed; however, the Court finds that entry of clerk's default plainly gave Neumont good cause for failing to take further action to properly serve Nickles within the time frame mandated by Rule 4(m). Thus, the Court grants Neumont an additional 60 days from the date of this order to either: effect service on Nickles and file proof ...


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