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Cell Film Holdings LLC v. Acosta

United States District Court, D. Nevada

November 29, 2017

Cell Film Holdings LLC, Plaintiff
v.
Felix Acosta, et al., Defendants

          ORDER GRANTING DEFAULT JUDGMENT AGAINST FELIX ACOSTA; SEVERING AND DISMISSING CLAIMS AGAINST ALL OTHER DEFENDANTS; AND CLOSING CASE [ECF NO. 21]

          Jennifer A. Dorsey, U.S. District Judge

         This is one of three essentially identical cases filed by plaintiff Cell Film Holdings LLC (CFH), in which CFH sues many unidentified Doe defendants-under a single filing fee-for separately infringing its copyright in the film “The Cell” by using BitTorrent software. CFH's practice in these cases is to move for expedited discovery to identify the defendants, and then systematically dismiss the defendants after failing to serve them or settling with them.[1]

         I ordered CFH to show cause why I shouldn't sever all defendants except Felix Acosta, dismiss all claims against the remaining defendants without prejudice, and quash any subpoenas for discovery to the extent that they pertain to anyone other than Mr. Acosta.[2] Despite CFH's response, I find that this “swarm-joinder” practice is not only judicially inefficient, but improper under Federal Rule 20 because the defendants' actions do not arise out of the same transaction or occurrence. So I find that CFH did not show cause, I sever and dismiss all claims against all defendants except for Felix Acosta, and I quash any subpoenas for discovery that do not pertain to Mr. Acosta.[3] I also grant CFH's motion for default judgment against Acosta, deny its request for default judgment against the other defendants, and close this case.

         Discussion

         These copyright-infringement swarm-joinder cases against users of BitTorrent software have significantly increased in popularity nationwide in the past five years with some plaintiffs filing against thousands of defendants in a single action, [4] other plaintiffs filing against defendants in groups of roughly 10-100[5], and at least one plaintiff filing over one thousand cases against individual defendants.[6] The defendants are discovered and targeted by their internet provider (IP) addresses, which register on the BitTorrent tracker when they download the plaintiff's film. Safety Point Products, LLC v. Does describes the BitTorrent protocol well:

BitTorrent is a program that enables users to share files via the internet. Unlike other “peer-to-peer” (P2P) file sharing networks that transfer files between users or between a user and a central computer server, BitTorrent allows for decentralized file sharing between individual users who exchange small segments of a file between one another until the entire file has been downloaded by each user. Each user that either uploads or downloads a file segment is known as a “peer.” Peers that have the entire file are known as “seeds.” Other peers, known as “leeches” can simultaneously download and upload the pieces of the shared file until they have downloaded the entire file to become seeds.
Groups of peers that download and upload the same file during a given period are known as a “swarm, ” with each peer being identified by a unique series of alphanumeric characters known as “hashtag” that is attached to each piece of the file. The swarm's members are relatively anonymous, as each participant is identifiable only by her Internet Provider (IP) address. Overseeing and coordinating the entire process is a computer or server known as a “tracker” that maintains a record of which peers in a swarm have which files at a given time. In order to increase the likelihood of a successful download, any portion of the file downloaded by a peer is available to subsequent peers in the swarm so long as the peer remains online.
But BitTorrent is not one large monolith. BitTorrent is a computer protocol, used by various software programs known as “clients” to engage in electronic file-sharing. Clients are software programs that connect peers to one another and distributes data among the peers. But a peer's involvement in a swarm does not end with a successful download. Instead, the BitTorrent client distributes data until the peer manually disconnects from the swarm. It is only then that a given peer no longer participates in a given BitTorrent swarm.[7]

         CFH brought the instant case against 19 initially unidentified defendants. After learning their identities, CFH amended its complaint against 13 named defendants, [8] and then CFH proceeded to dismiss them from the case.[9] Only five defendants now remain: Felix Acosta, Luis Castaneda, Robrina Howard, Marvin Yap, and Pricz Tattoo (a business).

         Discussion

         A. The swarm-joinder split of authority

         Joining multiple John/Jane Doe participants in a BitTorrent swarm into a single action is commonly referred to as “swarm joinder.”[10] Because the defendants are initially unidentified, the plaintiff files an ex parte motion for expedited discovery to subpoena internet providers (ISPs) for the names and addresses of defendants associated with specified IP addresses. The motion raises two issues: (1) whether the defendants are properly joined; and (2) whether the court should permit the expedited discovery.[11] “Courts have dealt with the issue in several ways: denying the discovery requests, severing all but the first Doe defendants, delaying the severance decision until after the Does have been identified, or approving both joinder and pre-service discovery.”[12]

         The procedural posture of this case tracks the delay-severance-decision option. Magistrate Judge Ferenbach granted CFH's expedited discovery requests, [13] and I then ordered CFH to show cause why the identified defendants shouldn't be severed from the first defendant and dismissed in each of its cases.[14] After considering CFH's argument, I now determine whether the defendants were properly joined and whether severance is appropriate.

         There is a major split of authority on this issue. Only one circuit court-the D.C. Circuit-has ruled on the issue, finding that swarm joinder does not satisfy FRCP 20(a)(2) because the defendants' use of the same BitTorrent protocol to download the same file does not arise out of the same transaction or occurrence.[15] The district courts in every other circuit and even the judges within some districts widely disagree on whether to permit swarm joinder. Some courts hold that swarm joinder is appropriate under FRCP 20(a)(2).[16] Other courts hold as the D.C. Circuit does.[17] And still others exercise their discretion to manage their dockets and sever the defendants even if swarm joinder would technically be permissible under the FRCP because other factors outweigh the benefits conferred by joinder: judicial economy, the high burden on the defendants, the risk of inappropriate settlement leverage, and filing-fee evasion.[18] The Ninth Circuit has not yet decided the issue, so I am not bound by any authority.

         My exhaustive research on the issue uncovered no clear majority rule. The D.C. Circuit is the only circuit court to have addressed the issue (it doesn't allow swarm joinder), [19] 5 districts permit swarm joinder under Rule 20(a)(2), [20] 12 districts do not, [21] 18 districts have judges on both sides of the debate, [22] and the remaining 58 districts have not addressed the issue. Within the Ninth Circuit alone, the District of Arizona, the Central District of California, and the District of Oregon do not allow swarm joinder. The Eastern and Western Districts of Washington both permit swarm joinder under Rule 20. The Eastern, Northern, and Southern Districts of California have judges on both sides of the fence. And the Districts of Alaska, Hawaii, Idaho, Montana, and Nevada have not yet addressed the issue. The only thing that is firmly established about this issue is that there is no uniform protocol.

         B. Rule 20(a)(2) does not permit swarm joinder.

         In similar cases filed by plaintiff's counsel over the film “London Has Fallen, ” I declined to decide whether Rule 20(a)(2) allowed swarm joinder because, even if it were permitted, swarm joinder would not benefit judicial economy.[23] Now, faced with another opportunity to consider the issue, I widen my stance and join those courts that hold that Rule 20 does not permit swarm joinder.

         FRCP 20(a)(2) allows defendants to be joined if: (1) “any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences;” and (2) “any question of law or fact common to all defendants will arise in the action.”[24] And if the plaintiff “has not shown that the defendants satisfy the test for permissive joinder, a court may sever the misjoined parties, so long as no substantial right will be prejudiced by the severance.”[25]

         After identifying the unknown defendants, CFH amended its complaint and attached a summary of the defendants' IP addresses, home addresses, and the dates of their participation in the swarm.[26] CFH alleges that “each of the Defendants was part of a series of transactions over the course of a relatively short period of time, involving the exact same piece of the Plaintiff's copyrighted Work, and was accomplished by the Defendants acting in concert with each other.”[27]But I do not find that downloading the same copyrighted movie with the same BitTorrent program over a “relatively short period of time” indicates that the defendants acted in concert with each other in the same series of transactions or occurrences.

         The D.C. Circuit-the only circuit to have decided the issue-uses a particularly illustrative analogy to support its finding that Rule 20 does not permit swarm joinder:

[T]wo BitTorrent users who download the same file months apart are like two individuals who play at the same blackjack table at different times. They may have won the same amount of money, employed the same strategy, and perhaps even played with the same dealer, but they have still engaged in entirely separate transactions. And simply committing the same type of violation in the same way does not link defendants together for the purposes of joinder.[28]

         CFH's exhibit provides the IP addresses, names, home addresses, and dates and times of participation for 13 individuals.[29] Plotting those home addresses on a map of Las Vegas shows that the defendants lived in all corners of Las Vegas with two of them living in Henderson. Their dates of participation span six days.[30] Three participated on June 10, 2016, four on June 12, another four on the 13th, then one each on the 14th and 15th.[31] And even the participants on June 10th, for example, participated in the swarm at 3:08 p.m., 8:11 p.m., and 9:14 p.m.[32] None of this data suggests to me that these identified defendants acted in concert as part of the same transaction or occurence. I thus hold that Rule 20(a)(2) does not permit swarm joinder, and I sever and dismiss the claims against all defendants other than Felix Acosta.

         C. Motion for default judgment

         CFH also moves for default judgment against defendants Acosta, Castaneda, Howard, Yap, and Pricz Tattoo.[33] Because I sever and dismiss the claims against Castaneda, Howard, Yap, and Pricz Tattoo from this action for improper joinder, the motion is moot against them, and I deny it for that reason. I now address the motion as it pertains to defendant Acosta only.

         1. Background

         After identifying Acosta on August 31, 2016, CFH sent a demand letter informing Acosta of this case and his potential liability.[34] Acosta did not respond, so CFH sent him a second demand letter approximately three weeks later.[35] CFH filed its first-amended complaint in November 2016 and sent Acosta a third demand letter.[36] Despite adequate service of process, Acosta did not respond to the first-amended complaint or demand letter.[37] The Clerk of Court entered default against Acosta on July 19, 2017.[38] CFH now moves for default judgment, requesting $15, 000 in statutory damages, $3, 537.50[39] in attorney's fees and costs, and a permanent injunction to prohibit Acosta from further infringing its copyright directly or indirectly.[40]

         2. Default-judgment standard

         Federal Rule of Civil Procedure 55(b)(2) permits a plaintiff to obtain default judgment if the clerk previously entered default based on a defendant's failure to defend. After entry of default, the complaint's factual allegations are taken as true, except those relating to damages.[41]“[N]ecessary facts not contained in the pleadings, and claims [that] are legally insufficient, are not established by default.”[42] The court has the power to require a plaintiff to provide additional proof of facts or damages in order to ensure that the requested relief is appropriate.[43] Whether to grant a motion for default judgment lies within the court's discretion, [44] which is guided by the seven factors outlined by the Ninth Circuit in Eitel v. McCool:

(1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.[45]

         A default judgment is generally disfavored because “[c]ases should be decided upon their merits whenever reasonably possible.”[46]

         3. Evaluating the Eitel factors

         a. Possibility of prejudice to CFH

         The first Eitel factor weighs in favor of granting default judgment against Acosta. CFH sent Acosta numerous demand letters and a summons along with the first-amended complaint, but Acosta never responded. CFH claims that Acosta infringed its copyright by downloading its film using BitTorrent software. Given the nature of BitTorrent software, Acosta may be exacerbating CFH's injury by continuing to seed the file to the BitTorrent swarm.

         b. Substantive merits and sufficiency of the claims

         The second and third Eitel factors require CFH to demonstrate that it has stated a claim on which it may recover.[47] The first-amended complaint sufficiently pleads CFH's direct-copyright-infringement, contributory-copyright-infringement, and vicarious-liability claims.

         To present a prima facie case of direct infringement, CFH must show that: (1) it owns the allegedly infringed material, and (2) the alleged infringers violate at least one exclusive right granted to copyright holders under 17 U.S.C. § 106.[48] CFH alleges that it is the owner of the copyright registration for the film “The Cell.”[49] CFH also alleges that Acosta willfully violated several exclusive rights granted by 17 U.S.C. § 106, and that those violations caused it to suffer damages.[50]

         The contributory-copyright-infringement claim requires CFH to allege that Acosta “had knowledge of the infringing activity” and “induce[d], cause[d, ] or materially contribute[d] to the infringing conduct of another.”[51] “Put differently, liability exists if the defendant engages in personal conduct that encourages or assists the infringement.”[52] Given the nature of BitTorrent technology, BitTorrent-swarm participants who download files compulsorily upload those same files so that other participants may download them at a faster rate. Accordingly, CFH's allegation that each defendant is a contributory copyright infringer because they participated in a BitTorrent swarm[53] is sufficient to satisfy the induced-caused-or-contributed requirement. CFH satisfies the remaining requirements by alleging that each defendant knew or should have known that other BitTorrent-swarm participants were directly infringing on CFH's copyright by downloading the files that they each uploaded.[54]

         CFH also claims that each defendant, as the account holder for the Internet service, is vicariously liable for any infringing activity conducted by other users on its Internet connection.[55] “Vicarious infringement is a concept related to, but distinct from, contributory infringement.”[56]“To state a claim for vicarious copyright infringement, [CFH] must allege that [Acosta] had (1) the right and ability to supervise the infringing conduct and (2) a direct financial interest in the infringing activity.”[57]

         CFH's allegations satisfy the first prong of the vicarious-infringement test. As the court discussed in Dallas Buyers Club, LLC v. Doughty, “the Internet service account holder, appea[rs] to have had exclusive control over use of the Internet service” and the account holder “could have simply secured access to the Internet by creating a password or by changing an already existing password.”[58] “Thus, . . . [the account holder] had the capacity to terminate use of his Internet service by any infringing third party if he believed it was being used to violate applicable law.”[59]

         CFH also satisfies the direct-financial-interest prong. “The essential aspect of the direct financial benefit inquiry is whether there is a causal relationship between the infringing activity and any financial benefit a defendant reaps, regardless of how substantial the benefit is in proportion to a defendant's overall profits.”[60] “Financial benefit exists where the availability of infringing material acts as a ‘draw' for customers.”[61] “The size of the ‘draw' relative to a defendant's overall business is immaterial. A defendant receives a ‘direct financial benefit' from a third-party infringement so long as the infringement of third parties acts as a ‘draw' for customers ‘regardless of how substantial the benefit is in proportion to a defendant's overall profits.'”[62] CFH alleges that Acosta benefitted from third-party infringement by viewing “The Cell” without paying for it.[63] The law is clear that it doesn't matter how large the financial benefit is: by watching the BitTorrent-downloaded film, Acosta saved the cost of a movie ticket, and that is a direct financial benefit.

         I therefore find that CFH sufficiently pled each of its claims in the first-amended complaint. I also find that CFH's claims have substantive merit, subject to any defenses that Acosta could raise.

         c. Sum of ...


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