Facebook v Martin Grunin Doc51 Reply to Opposition Response

1 DEFENDANTS REPLY TO PLAINTIFFS OPPOSITION TO

DEFENDANTS MOTION TO SET ASIDE DEFAULT

(Case No. 14-cv-02323)

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Andrew B. Gordon, IL Bar No. 6309109 GORDON LAW GROUP, LTD. 1 1st Bank Plz, Suite 302 Lake Zurich, IL 60047 [email protected] Seth Weinstein, CA Bar No. 279625) LAW OFFICES OF SETH WEINSTEIN 15260 Ventura Blvd. Suite 1200 Sherman Oaks, CA 91403 Telephone: (310) 707-7131 Facsimile: (818) 475-1945 [email protected] Attorneys for Defendant Martin Grunin

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

FACEBOOK, INC., | Case No. 3:14-cv-02323-WHA | Plaintiff, | DEFENDANT MARTIN GRUNINS | REPLY TO PLAINTIFFS | OPPOSITION TO DEFENDANTS | MOTION TO SET ASIDE v. | ENTRY OF DEFAULT | MARTIN GRUNIN, | | [Fed. R. Civ. P. 55(c)] Defendant. | | Date: | Time: | Judge: Hon. William H. Alsup | Location: Courtroom 8 19th Floor ______________________________ |

Case3:14-cv-02323-WHA Document51 Filed09/09/14 Page1 of 15

I DEFENDANTS REPLY TO PLAINTIFFS OPPOSITION TO


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TABLE OF CONTENTS

Page

I. INTRODUCTION.............................................................................................................................2

II. STATEMENT OF FACTS AND PROCEDURAL HISTORY........................................................2

III. ARGUMENT....................................................................................................................................3

A. Grunin Has Demonstrated His Delay in Responding to the Lawsuit was Not Culpable............4

B. Grunin Has Submitted a Meritorious Legal Defense to the Court..............................................9

C. Plaintiff Will Not Suffer Prejudice if Entry of Default is Set Aside..........................................11

IV. CONCLUSION................................................................................................................................12


DEFENDANTS REPLY TO II PLAINTIFFS OPPOSITION TO


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TABLE OF AUTHORITIES

Page

CASES

Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388 (9th Cir. 1988)...........................................................................................................5, 7 Audio Toys, Inc. v Smart AV Pty Ltd., 2007 U.S. Dist. LEXIS 44078 (N.D. Cal. June 6, 2007).................................................................9,11 Bateman v. United States Postal Service, 231 F.3d 1220 (9th Cir. 2000)............................................................................................................ 11 Benny v. Pipes, 799 F.2d 489 (9th Cir. 1986).............................................................................................................5,8 Bonita Packing Co. v. OSullivan, 165 F.R.D. 610 (C.D. Cal. 1995)........................................................................................................4 Continental Leasing Corp. V. Zimmerman, 485 F. Supp. 495 (N.D. Cal. 1980)................................................................................................9,11 Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685 (9th Cir. 1988)...........................................................................................................5,7 Falk v. Allen, 739 F.2d 461 (9th Cir. 1984)...........................................................................................................4, 7 Franchise Holding II, LLC v. Huntington Rest. Group, Inc., 375 F.3d 922 (9th Cir. 2004)...............................................................................................................3 Hawaii Carpenters Trust Funds v. Stone, 794 F.2d 508 (9th Cir. 1986)..............................................................................................................9 Meadows v. Dominican Republic, 817 F.2d 517 (9th Cir. 1987)........................................................................................................4,5.6 Meehan v. Snow, 652 F. 2d 274 (2d Cir. 1981)............................................................................................................6 Mendoza v. Wright Vineyard Mgmt., 783 F.2d 941 (9th Cir. 1986)...........................................................................................................4,5,8 Pena v. Seguros La Comercial,S.A. 770 F.2d 811 (9th Cir. 1985)............................................................................................................5.8 Schwab v. Bullocks Inc., 508 F.2d. 353 (9th Cir. 1974)..............................................................................................................4


DEFENDANTS REPLY TO III PLAINTIFFS OPPOSITION TO


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Page

TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691 (9th Cir. 2001)......................................................................................................4,5,7,11 Tri-Continental Leasing Corp. v. Zimmerman, 485 F. Supp. 495 (N.D. Cal. 1980)......................................................................................................9 United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085 (9th Cir. 2010)..........................................................................................................4,6 United States v. Scharringhausen, 224 F. Appx 611 (9th Cir. 2007).....................................................................................................11 RULES Fed. R. Civ. P. 55(c)................................................................................................................................3,4,6 Fed. R. Civ. P. 60(b)..................................................................................................................................3,4




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MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION

Plaintiff Facebook (Facebook) is seeking a quick and easy resolution to this matter. To this end, the Plaintiff spends the majority of their Opposition to Motion to

Set aside Default (Docket 47, hereinafter referred to as Opposition) doing two

things: submitting irrelevant propaganda regarding Defendant Martin Grunins

Instagram account as exhibits to the Court and exploring Grunins (Grunin)

actions while he was being advised by Brian Robert Costello (Costello). Pictures

Grunin allegedly posted in the past are completely irrelevant to the three factor test of

whether there is cause to set aside entry of default in this lawsuit. The fact of the

matter is that Grunin acted in good faith by retaining Costello to defend him. Grunin

believed Costello could and would adequately represent his interests in this matter and

accordingly followed Costellos advice when filing documents with the Court. The

fact that Grunin failed to file an answer or otherwise plead in this matter is due to

excusable neglect on his part. In addition, despite Facebooks contention, Grunin has

set forth a meritorious legal defense in his Motion to Set Aside Entry of Default

(Docket 44, hereinafter referred to as Motion). Finally, Facebook failed to

successfully demonstrate that it would be in any way prejudiced if the Default is set

aside.

II. STATEMENT OF FACTS AND PROCEDURAL HISTORY Plaintiff Facebook filed a lawsuit against Grunin on May 20, 2014 (Dkt. 1). On May 27, 2014 Grunin retained the services of Brian Robert Costello. At the time of

retention, Grunin was under the belief that Costello had the requisite authority to

represent his interests before this Court. On May 29, 2014 Costello filed a NOTICE

RE Special Limited Power of Attorney (Dkt. 8, Stricken) with what appeared to

Grunin to contain legal allegations and defenses to Facebooks lawsuit. Grunin is




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currently 22 years old with no legal education or training; he mistakenly concluded

that Mr. Costello had both filed an Appearance on his behalf and had timely responded

to the requirements of filing answering or pleading to the Complaint. Declaration of

Martin Grunin in Support of Motion to Set Aside Default Entered on June 23, 2014

(Grunin Decl.) 5. Throughout the entirety of the litigation process, Grunin believed

he was adequately represented by counsel. Having no legal background, Grunin did

not understand the notion of a default entry on June 23, 2014 (Dkt. 22). As such,

Grunin continued to believe that Costello was his legal representative. It was not until

Grunin received the Order Granting Plaintiff Facebooks Motion for an Order

Prohibiting Brian Robert Costello From Appearing on Behalf of Defendant and to

Strike Dockets 8,10 and 17 (Dkt. 33) that he realized he was not adequately

represented. Grunin Decl. 6. At that time, Grunin immediately started his search to

find new representation. Grunin Decl. 7. Grunin retained Andrew Gordon on August

4, 2014, less than two weeks after he learned he needed new counsel. Id. Mr. Gordon

then engaged the services of California attorney Seth Weinstein so that Mr. Gordon

could secure pro hac vice admission.

III. ARGUMENT Federal Rule of Civil Procedure 55(c) provides that entry of default may be set

aside upon a showing of good cause. Fed R. Civ. P. 55(c). The Ninth Circuits good

cause standard for setting aside entry of default is the same as that for setting aside

default judgment under Federal Rule of Civil Procedure 60(b), but the test for setting

aside entry of default is less rigid and is more generous to the party in default.

Franchise Holding II, LLC v. Huntington Rest. Group, Inc., 375 F.3d 922, 925 (9th Cir.

2004).

The Court considers three factors when deciding whether to set aside default: (1)

whether the defendants culpable conduct led to the default; (2) whether the defendant




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has a meritorious defense; and (3) whether setting aside default would prejudice the

plaintiff. Id. At 925-26. In addition, [t]he law does not favor defaults, and

therefore, any doubts as to whether a party is in default should be decided in favor of

the defaulting party. Bonita Packing Co. v. OSullivan, 165 F.R.D. 610, 614 (C.D.

Cal. 1995).

The Ninth Circuit has also stated, The court may set aside an entry of default

for good cause. Rule (55(c). Our court of appeals has held that a district courts

discretion is especially broad where a party is asking that mere entry of default,

rather than a default judgment, be set aside. Mendoza v. Wright Vineyard Mgmgt.,

783 F.2d 941, 945-46 (9th Cir. 1986) (stating that [w]here timely relief is sought from

a default ... and the movant has a meritorious defense, doubt, if any, should be resolved

in favor of the motion to set aside the [default] so that cases may be decided on their

merits. Schwab v. Bullock's Inc., 508 F.2d 353, 355 (9th Cir.1974) (quoting 7 J.

Moore, Moore's Federal Practice 60.19, at 23233). Our rules for determining

when a default should be set aside are solicitous towards movants, especially those

whose actions leading to the default were taken without the benefit of legal

representation. United States v. Signed Pers. Check No. 730 of Yubran S. Mesle,

615 F.3d 1085, 1089 (9th Cir. 2010); see Falk v. Allen, 739 F.2d 461, 463 (9th

Cir.1984); TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 69598 (9th

Cir.2001). In this matter, the mere entry of default is all Grunin is attempting to have

set aside so he may adjudicate his dispute on the merits.

A. Grunin Has Demonstrated His Delay in Responding to the Lawsuit was Not Culpable In the Ninth Circuit, analysis of culpability for the purposes of demonstrating good cause under Rule 55(c) overlaps with the standard for excusable neglect

under Rule 60(b)(1). TCI Group Life ins. Plan v. Knoebber, 244F.3d 691, 696 (9th Cir.




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2001)(questioned on other grounds); also see Meadows v. Dominican Republic, 817

F.2d 517, 522 (9th Cir. 1987) (finding that the conduct of defendants in district court

was culpable because defendants were aware of federal law, and their intentional

failure to respond to the action was not excusable neglect). The Ninth Circuit finds a

negligent failure to respond excusable if the defaulting party offers a credible, good-

faith explanation for the delay that negates any intention to take advantage of the

opposing party, interfere with the judicial decision-making, or otherwise manipulate

the legal process. Knoebber, 244 F.3d at 697-98. Further, in analyzing culpability,

the Court may consider a defendants exigent personal matters, his mental state, and

his lack of familiarity with legal matters. See Id at 699 (finding defendants delay in

response not culpable because she was grieving the death of her husband and was not

familiar with the legal system).

In its Opposition, Facebook cites to several cases in a disingenuous attempt to

compare Grunins conducts to other defaulting defendants. These cases which

include, Meadows, Direct Mail Specialists, Inc. v. Eclat Computerized Techs, Inc., 840

F.2d 685 (9th Cir. 1988), Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388 (9th Cir.

1988), Benny v. Piper, 799 F.2d 489 (9th Cr. 1986), and Pena v. Seguros La Comercial,

S.A. 770 F.2d 811 (9th Cir. 1985), can be distinguished in fact, but most importantly in

legal standard, from the present matter. As mentioned above, the Mendoza Court

states that the standard for a district court to have a mere default set aside is much

more broad then overturning a default judgment. Mendoza at 945-946. In each of the

cases relied upon by Facebook, the Court is evaluating a default judgment rather than a

default. As such, each case, although factually distinguishable in its own right, should

be given less weight, as each employed a more exigent standard for determining

whether to relieve the affected parties of default. The appellate courts in those cases

were analyzing whether or not district court judges used abuse of power in not setting




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aside default judgments as opposed to analyzing district court decisions for abuse of

power analyzed under the broader, more lenient scope of not setting aside mere

defaults. See Meehan v. Snow, 652 F.2d 274, 277 (2d Cir. 1981) (noting that [t]he

lenient standard of Rule 55(c) for determining whether to relieve a party of a

default was simply not applied in this case (emphasis added)).

As mentioned in both Grunins Motion to Set Aside and Facebooks Opposition,

the Meadows Court found the defendants to be culpable of failing to appear. The case

is easily distinguishable from the present matter. In addition to attempting to

overcome the heightened legal standard of setting aside a default judgment as opposed

to a default, when the Meadows defendants claimed they were relying on advice of

counsel, the defendants counsel denied responsibility for the failure to respond.

Meadows at 522. In addition, the Meadows Court found that the defendants expansive

dealings in other United States Courts showed that they were sufficiently

sophisticated and experienced in the requirements of American law to protect its

interest. Id.

While Grunin did not file a response with the Court in time, Grunins conduct

was excusable because he believed that he engaged a licensed representative before

this Court and followed requisite legal procedure. Grunin Decl. 5. In fact, Costello

has never denied that he advised Grunin with respect to this lawsuit while he was

representing him, and ensured Grunin that he would handle all legal matters arising out

of the proceeding. Also unlike the Meadows defendants, Grunin himself does not have

working knowledge of the Federal legal system. Grunin Decl. 3. Additionally,

particular emphasis should be placed upon Costellos incompetent and fraudulent

representation of Grunin, as such behavior had the practical effect of leaving

Grunin without counsel, during the period in which the circumstances for default

arose. United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d




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1085, 1089 (9th Cir. 2010) (stating that [o]ur rules for determining when a default

should be set aside are solicitous towards movants, especially those whose actions

leading to the default were taken without the benefit of legal representation

(emphasis added) (see Falk v. Allen, 739 F.2d 461, 463 (9th Cir.1984); TCI Group

Life Ins. Plan v. Knoebber, 244 F.3d 691, 69598 (9th Cir.2001). Taken

cumulatively, Grunins reliance on Costello for legal representation, Costellos

ignorance of the law, Costellos fraudulent misrepresentation to and of Grunin, and the

lessened legal standard, are sufficient to distinguish the present matter from Meadows.

The Court in Direct Mail Specialist also found the defendant culpable and thus

refused to overturn a default judgment. Direct Mail Specialist at 690. In addition to

attempting to overcome the heightened legal standard of setting aside a default

judgment as opposed to a default, the defendant in this case was a corporation who had

an attorney as its president. Id. The Court stated Mr. Bujkovsky, as a lawyer,

presumably was well aware of the dangers of ignoring service of process. Id. Again,

this fact pattern does not coincide with the present matter. Grunin is an individual and

not a corporation. Costello - contrary to his representations to Grunin has no legal

training, is not licensed to practice law, and is wholly unaware of the dangers of

ignoring service of process. Grunin Decl. 3.

In Alan Neuman Productions, the Court found the defendant culpable of failing

to timely respond to a lawsuit and upheld the district courts finding for a default

judgment. Alan Neuman Productions at 1392. Again, this case turns on whether or

not the defendant intentionally failed to answer. Id. However, once again the facts

show that the defendants interest was represented by an attorney. Id. In the present

matter, Grunin believed he was being represented by someone who would in fact

represent his interests. Grunin Decl. 5. Because he is not an attorney, and because he




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has no legal training, Grunin was unaware of precisely how unorthodox Costellos

methods were.

In Benny v. Pipes, the Court was again reviewing whether it was proper to

overturn a default judgment based on the lower courts abuse of discretion. Benny v.

Pipes at 494. Here, the defendants filed motions to extend their time to answer the

complaint. Id. The district court entered default judgments against the defendants

when no answer was filed. Id. at 491. Here again, the present case differs in that only

a default has been entered against Grunin, which demands a more lenient standard of

review than that of a default of judgment. Mendoza at 945-946; see Meehan v. Snow,

652 F.2d 274, 277 (2d Cir. 1981). Grunin has not filed any motions for time to

extend, or acknowledging the need for an answer at all. In the larger sense, until

Grunin was represented by present counsel, Grunin was not actually aware of the

requirements of being the defendant in a lawsuit.

Finally, the turning point in the analysis of culpability in Pena v. Seguros La

Comercial centers on whether or not the defendant had received actual or constructive

notice of the filing of the lawsuit when seeking to have its default judgment

overturned. See Pena v. Seguros La Commercial at 815. The Pena Court found that

because the defendant was deemed to have both actual and constructive notice of the

suit that the defendant was culpable for failing to respond. See Id. In the present

matter, Grunin does not challenge that he was served a copy of the Facebook

complaint. As such, the Pena decision should not influence this Court in its analysis of

culpability versus excusable neglect.

Facebooks Opposition dives into great depth about its belief that Grunin had

intent to delay proceedings and interfere with the judicial system. Opposition at 7-10.

Grunin in fact had no intent to gain an advantage over the opposing party or to delay

legal proceedings. Grunin Decl. 10. As stated in his Motion, when Grunin learned




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of the Court order striking the appearance of Costello, he immediately began the

search and retained new counsel less than two weeks later. Grunin Decl. 7. Grunin

is a young man with no legal training; he does not know what differentiates legal

tactics from practice prohibited by the Court. Costello fraudulently misrepresented

himself as a capable legal advocate and promised Grunin that he would oversee the

paperwork for the current proceedings. While ascertaining a persons state of mind is

never an easy task, the fact that Grunin was fraudulently duped by Costello must be

given particular emphasis, as it supports the notion that Grunins conduct was not

culpable, but due to excusable neglect.

B. Grunin Has Submitted a Meritorious Legal Defense to the Court A defense is considered meritorious if there is some possibility that the

outcome of the suit after a full trial will be contrary to the result achieved by the

default. Hawaii Carpenters Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986).

All that is required is an assertion of a factual or legal basis that is sufficient to raise a

particular defense; the question of whether a particular factual allegation is true is

resolved at a later stage. Audio Toys, Inc. v. Smart AV Pty Ltd., 2007 U.S. Dist.

LEXIS 44078, *8 (N.D. Cal. June 6, 2007)

In its Opposition, Facebook takes issue with the fact that Grunins declaration

only states that he has both factual and legal defenses to the lawsuit. Opposition at 13.

While Grunin believes he has factual defenses to this lawsuit that will be explored

more prior to an answer or discovery, Grunin did in fact state a legal defense.

Facebooks cites Tri-Continental Leasing Corp. V. Zimmerman to stand for the

proposition that conclusory allegations are insufficient to set aside default. Tri-

Continental Leasing Corp. V. Zimmerman, 485 F. Supp. 495 (N.D. Cal. 1980).

However, Facebook mistakenly takes from Continental Leasing Corp. that the Court

required that a party provide both an adequate factual and legal bases for defense in its




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Motion to Set Aside a Default. See Id at 497. Rather, that party only carries the

burden of producing competent evidence that establishes a factual or legal basis for the tendered defense. Id (emphasis added). Defendant believes this language to state that

establishing a factual or legal defense is sufficient to have a default set aside.

In his Motion, Grunin raised a meritorious legal defense to this lawsuit. Motion

at 6 25. To reiterate the claims asserted, Facebook has alleged a Breach of Contract

claim, along with three claims of Fraud against Grunin. (Dkt. 1 at 10(3), 10(19),

11(14), 12(6)). Essential to each individual cause of action raised in its Complaint,

Facebook must demonstrate that it was in fact Grunin who committed the acts alleged

in the Complaint. In the Complaint Facebook relies on the proposition that 1) Grunin

actually controlled the original Martin Grunin Facebook account and therefore

consented to its terms of service. (Dkt. 1 at 12 and 19) and 2) that Grunin himself

impersonated various individuals in order to gain access to Facebook advertising space

(Dkt. 1 at 31- 48).

What Facebook does not allege, however, is that it ever tried to verify Martin

Grunins identity. Facebook never once alleges that anyone from its company ever

met Grunin face to face. Facebook never even alleges that anyone ever spoke with an

individual representing himself as Grunin over the phone. All of Facebooks claims

rely on the notion that Grunin, the individual they have sued, has wronged them in

some way; however Facebook has failed to prove, or even allege, that Grunin is in fact

the Martin Grunin with a Facebook account they seek.

Given the exclusively online nature of Facebooks claims, linking Grunins

identify with the alleged unauthorized access is an evidentiary task requiring complex

internet sourcing methods. Absent such evidence, Facebooks claims make an

unfounded logical leap and arbitrarily impute liability without proof of proximate

causation. Therefore, Grunins defense as to Facebooks failure to verify his identify




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and associate him with each of the alleged instances of unauthorized access thus

presents a sufficient factual and legal basis to set aside default and try this case on its

merits. See Continental Leasing Corp. at 497.

Grunin has set forth a meritorious legal defense and satisfies the second good

cause factor.

C. Plaintiff Will Not Suffer Prejudice if Entry of Default Is Set Aside. Prejudice is determined by whether a party will be hindered in pursuing its claim. See Knoebber, 244 F.3d at 701. The fact that a party may be denied a quick

victory is not sufficient to deny relief from default judgment. Bateman v. United

States Postal Service, 231 F.3d 1220, 1225 (9th Cir. 2000). The delay must result in

tangible harm such as loss of evidence, increased difficulties of discovery, or greater

opportunity for fraud or collusion. Audio Toys, 2007 U.S. Dist. LEXIS at *9.

Facebook alleges that it will be prejudiced in this matter because In the absence

of a swift judgment and entry of a permanent injunction, Facebook is without recourse

for Grunins bad acts. Opposition at 13. Grunin proffers that had Facebook really

believed this to be true, there were other swift actions Facebook could have taken.

When the lawsuit was initiated back in May 2014, Facebook could have asked for a

temporary restraining order and a preliminary injunction in this matter. Facebook

chose not to take this action. Further, Grunin has been in default in this matter since

June 23, 2014. Facebook had ample time to prove up its case and request a default

judgment; this never occurred.

Facebook offers United States v. Scharringhausen to stand for the notion that if

a defendant might be concealing assets and could prejudice the plaintiff, the default

should not be overturned. United States v. Scharringhausen 224 F. Appx 611(9th Cir.

2007). In truth, the Court in Scharringhausen had already determined that because the

defendant had waited over a year to respond to the default that he was culpable. See




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Id. at 611. In addition, the Court stated he had not provided a meritorious defense. Id.

The Court certainly did not turn its decision on whether or not reopening the default

judgment would prejudice the plaintiff. In fact, the sentence Facebook includes in its

Opposition is the only sentence the Court spends on the topic in its opinion. Id. at 613.

As it stands, Facebook is not prejudiced from setting aside the default because

they have yet to prove up any damages owed from Grunin to them. Facebooks

overreaching concern about not being able to locate assets of Grunins is entirely

premature.

IV. Conclusion Grunin is ready and willing to litigate this lawsuit. Grunins delay in responding

was not culpable, Grunin has meritorious defenses, and Facebook will not suffer any

prejudice in pursuing its claims if default is set aside. Therefore, Grunin has met the

good cause standard of Rule 55(c) and this Court should set aside the entry of default

against him. Based on the above reasons, this Court should grant Grunins Motion to

Set Aside Default.

DATED: September 9, 2014 ANDREW GORDON

Appearance pro hac vice

By: /s/ Andrew Gordon Andrew Gordon, Bar No. 6309109

[email protected] Seth Weinstein, Bar No. 279625 [email protected] Attorneys for Defendant Martin Grunin


Facebook v Martin Grunin Doc51 Reply to Opposition Response

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