J & J Sports Productions, Inc. v. Micherie, LLC

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

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J & J SPORTS PRODUCTIONS, INC., )

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Plaintiff, )

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v. ) No. 17-cv-1150 (KBJ)

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MICHERIE, LLC, d/b/a Cheerz Sports ) Grill, et al., )

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Defendants. )

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MEMORANDUM OPINION ADOPTING REPORT & RECOMMENDATION OF THE MAGISTRATE JUDGE

A professional boxing match took place between Floyd Mayweather and Manny Pacquiao on May 2, 2015, and plaintiff J & J Sports Productions, Inc. (“J & J” or “Plaintiff”) was granted the exclusive right to distribute the match via closed circuit television and encrypted satellite signal. (See Compl., ECF No. 1, ¶ 9.) According to the complaint that was filed in this matter, defendants Micherie, LLC (“Micherie”), Roxanne Dover, and Deanna Watson (collectively, “Defendants”) operate a restaurant known as Cheerz Sports Grill (see id. ¶ 7), and J & J alleges that they “unlawfully intercepted, received, and/or de-scrambled” the signal for the Mayweather/Pacquiao fight in order to broadcast the match to patrons at Cheerz without paying Plaintiff the requisite fees (id. ¶ 12). J & J has brought a two-count complaint alleging that Defendants’ conduct violates the Communications Act of 1934, Pub. L. No. 73-416 § 605, 48 Stat. 1064, 1103–04 (1934), codified at 47 U.S.C. § 605, and the Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385

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§ 21, 106 Stat. 1460, 1498 (1992), codified at 47 U.S.C. § 553 (together, the “FCA”) (see id. ¶¶ 15–25), and seeking statutory damages of up to $110,000 on Count One and statutory damages of up to $60,000 on Count Two, as well as injunctive relief and attorneys’ fees (see id. ¶ 30).

J & J served defendant Watson with the complaint on September 4, 2017, (see Proof of Service, ECF No. 4), but nothing on the docket reflects that J & J has ever effected service on the other two named defendants. On September 29, 2017, after Watson failed to respond to the complaint, the Clerk of the Court entered a default against her (see Clerk’s Entry of Default, ECF No. 7), and J & J subsequently filed a motion for default judgment pursuant to Federal Rule of Civil Procedure 55(b), in which it requested that this Court enter judgment in its favor and against Watson in the amount of $38,372.50 for statutory damages and attorneys’ fees (see Pl.’s Mot. for Entry of Default J., ECF No. 8, at 1, 4). 1 On October 19, 2017, this Court referred this matter to a Magistrate Judge for full case management, and the matter was randomly assigned to Magistrate Judge Michael Harvey. (See Minute Order of Oct. 19, 2017; Minute Entry of Oct. 19, 2017.)

On May 14, 2018, Magistrate Judge Harvey ordered J & J to show cause why its motion for a default judgment should not be denied in light of the absence of any facts in the complaint establishing Watson’s personal liability for the conduct alleged. (See Order to Show Cause, ECF No. 10, at 3 (noting that the complaint did not plead facts sufficient to state a claim against Watson because it “neither pierces the corporate veil nor shows that Defendant Watson had control over the violations and derived financial

1 Page numbers herein refer to those that the Court’s electronic case filing system automatically assigns.

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benefit from them[,]” such that she could be held personally liable).) Moreover, to the extent that J & J alleged new facts in any response to the Order to Show Cause, Magistrate Judge Harvey instructed J & J to “aver under oath the basis for its knowledge of or belief in those facts[.]” (Id. at 6.) In addition, the Order required J & J to explain why the other two defendants—Micherie and Dover—should not be dismissed from this matter under Federal Rule of Civil Procedure 4(m) for lack of service. (See id.) J & J did not respond to this order.

Before this Court at present is the comprehensive Report and Recommendation that Magistrate Judge Harvey filed on June 4, 2018, in regard to J & J’s motion for default judgment. (See R. & R., ECF No. 11.) 2 The Report and Recommendation reflects Magistrate Judge Harvey’s opinion that J & J’s motion for default judgment should be denied, and that J & J’s complaint against Watson should be dismissed without prejudice for failure to plead sufficient facts establishing that Watson is individually liable for the pirated broadcast. (See id. at 3–5, 7.) Specifically, Magistrate Judge Harvey finds that the complaint contains insufficient facts to hold Watson liable either due to piercing the corporate veil or based on application of the “benefit and control” test—i.e., the two means by which courts have imposed liability on an individual for the misconduct of a business in the FCA context. (See id. at 3–4.) With respect to the “benefit and control” test in particular, Magistrate Judge Harvey notes that J & J’s complaint does not allege that Watson “had an obvious and direct financial interest in the infringement” (id. at 5 (internal quotation marks and citation omitted)), nor does it “make a plausible claim that Defendant Watson directly pirated

2 The Report and Recommendation is attached hereto as Appendix A.

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the Broadcast” (id.), which would be necessary to hold Watson individually liable for any FCA violations Cheerz has committed. Magistrate Judge Harvey further recommends that the complaint be dismissed without prejudice as to Micherie and Dover based on Plaintiff’s failure to establish good cause for not serving them in a timely manner. (See id. at 8.)

On June 14, 2018, J & J filed a document entitled “Plaintiff’s Reply to Court’s Report and Recommendation of 06/04/2018.” (See Pl.’s Reply to Court’s R. & R. of 06/04/2018 (“Pl.’s Reply”), ECF No. 12.) In that document, J & J argues that Watson can be held individually liable for the unlawful broadcast of the Mayweather/Pacquiao fight at Cheerz. (See id. at 3.) As support, J & J attaches to its Reply a Washington Post article that describes Watson as a “co-owner” of Cheerz, and says that, as such, Watson was advocating for an expansion of business in Washington, D.C. neighborhoods. (See Ex. 1 to Pl.’s Reply, ECF No. 12-1, at 2–5.) J & J argues that this article shows that Watson is “part owner of the business” and “has a strong financial interest in the activities of the business.” (Pl.’s Reply at 3.) J & J has also submitted a settlement agreement that Watson signed as a co-owner of Cheerz (see Ex. 2 to Pl.’s Reply, ECF No. 12-2, at 8–12), which allegedly “clearly shows that she has a ‘strong interest’ in the establishment” (Pl.’s Reply at 3), and copies of certain social media postings (see Ex. 3 to Pl.’s Reply, ECF No. 12-3, at 2–8), which allegedly demonstrate that Watson was “very active in promotion of her establishment and advertising the Mayweather/Pacquiao Championship Fight Event” (Pl.’s Reply at 3). 3 J & J’s filing

3 Notably, J & J’s Reply addresses Watson alone; it does not dispute that the other two defendants have not been served and that Plaintiff’s claims against them are therefore subject to dismissal under Federal Rule of Civil Procedure 4(m).

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also “apologizes” for “failing to respond to the deadline” for the submission of evidence that Magistrate Judge Harvey had imposed in his Order to Show Cause of May 14, 2018. (Id. at 2.)

On June 21, 2018, while the initial Report & Recommendation and J & J’s Reply were pending before this Court, Magistrate Judge Harvey issued a Supplemental Report and Recommendation in which he asserts that this Court should deem J & J’s filing “an untimely response to the Order to Show Cause[,]” and should decline to consider it, in an exercise of discretion. (Suppl. R. & R., ECF No. 13, at 4.) Magistrate Judge Harvey notes that J & J’s Reply “has all the trappings of a response to the Order to Show Cause” (id.) and expresses concern that considering this submission “would allow Plaintiff to avoid the strictures of Rule 6(b)(1)” (id. at 5), which requires a litigant who misses a deadline to file a motion to establish excusable neglect in order to file material out of time (see id. at 5–7). The Supplemental Report and Recommendation further stresses the detrimental impact that J & J’s delayed filing has had on these proceedings. (See id. 7–8; see also id. at 4 (noting that “[t]he clear (and explicit) impetus [of the Order to Show Cause] was to avoid the situation now presented: issuance of a Report and Recommendation based on an incomplete record and the presentation of additional evidence . . . in connection with objections that might undermine the efficacy of the Report and Recommendation”).)

This Court has reviewed Magistrate Judge Harvey’s Report and Recommendation and Supplemental Report and Recommendation and largely agrees with their substantive analysis and conclusions. The Court has decided to decline Magistrate Judge Harvey’s recommendation to strike J & J’s Reply as untimely, because J & J has

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styled its submission as a response to the June 4th Report and Recommendation and has submitted it within the timeframe allotted for such a response, and also because the Court agrees with Magistrate Judge Harvey that there is insufficient evidence to impose individual liability on Watson nevertheless. (See id. at 8 n.3 (finding that he “would not change the ultimate recommendation” contained in the initial Report and Recommendation even after “consider[ing] the evidence and argument in the June 14 Submission”).) In particular, this Court finds that, even when all of the allegations in J & J’s complaint are taken as true, the complaint contains insufficient facts to establish that Watson is personally liable for any FCA violations arising from the broadcast of the Mayweather/Pacquiao Fight at Cheerz. (See R. & R. at 3–5.) And the unsworn materials that Plaintiff submitted with its objection do not provide any additional basis for rejecting Magistrate Judge Harvey’s considered opinion, as none of these materials cure the defects that Magistrate Judge Harvey identified.

First, Plaintiff’s additional materials do not speak to whether these is any basis for piercing the corporate veil between Cheerz and Watson, as would be necessary for her to be held liable for the broadcast that took place at Cheerz. See Lopes v. JetsetDC, LLC, 994 F. Supp. 2d 135, 147 (D.D.C. 2014) (noting that “[u]nder the District’s veil- piercing test, courts generally inquire as to whether corporate formalities have been observed; whether there has been commingling of corporate and shareholder funds, staff and property; whether a single shareholder dominates the corporation; whether the corporation is adequately capitalized; and, especially, whether the corporate form has been used to effectuate a fraud” (internal quotation marks and citation omitted)). Nor do the additional materials support an allegation of liability under the alternative

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“benefit and control” test for individual FCA liability, because they do not indicate that Watson directed the piracy or received a direct financial benefit from it. See Joe Hand Promotions, Inc. v. Wright, 963 F. Supp. 2d 26, 28 (D.D.C. 2013); see also J & J Sports Prods., Inc. v. Taqueria Juarez Rest., Inc., No 17 CV 4158, 2018 WL 2056181, at *4 (E.D.N.Y. Mar. 16, 2018), report and recommendation adopted, 2018 WL 2048370 (E.D.N.Y. May 2, 2018). At most, these materials tend to show that Watson is a co- owner of Cheerz, and that fact, standing alone, is insufficient to impose individual FCA liability on Watson. See, e.g., J & J Sports Prods., Inc. v. MayrealII, LLC, 849 F. Supp. 2d 586, 590–91 (D. Md. 2012); Circuito Cerrado, Inc. v. Pizzeria y Pupuseria Santa Rosita, Inc., 804 F. Supp. 2d 108, 112–13 (E.D.N.Y. 2011).

In sum, after conducting its own review of this matter and considering Plaintiff’s objection and supporting materials, this Court accepts Magistrate Judge Harvey’s analysis and will ADOPT the Report and Recommendation in its entirety. Accordingly, Plaintiff’s Motion for Entry of Default Judgment (ECF No. 8) will be DENIED, and Plaintiff’s complaint will be DISMISSED without prejudice.

A separate Order accompanies this Memorandum Opinion.

DATE: September 27, 2018 Ketanji Brown Jackson KETANJI BROWN JACKSON

United States District Judge

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