Opinion
1:20-cv-00769 (JGK) (SDA)
11-21-2022
Cengage Learning, Inc., et al., Plaintiffs, v. Trung Kien Nguyen, et al., Defendants.
HONORABLE JOHN G. KOELTL, UNITED STATES DISTRICT JUDGE:
REPORT AND RECOMMENDATION
STEWART D. AARON, UNITED STATES MAGISTRATE JUDGE.
Plaintiffs Cengage Learning, Inc. (“Cengage”); Bedford, Freeman & Worth Publishing Group, LLC d/b/a Macmillan Learning (“Macmillan”); Elsevier Inc. (“Elsevier”); McGraw Hill LLC (“McGraw Hill”); and Pearson Education, Inc. (“Pearson”) (collectively, “Plaintiffs”) brought this action against multiple defendants alleging federal copyright infringement. (See Compl., ECF No. 1.) Certain defendants defaulted and a default judgment was entered against them following an inquest. See Cengage Learning, Inc. v. Nguyen, No. 20-CV-00769 (JGK) (SDA) 2021 U.S. Dist. LEXIS 104758, *1 (S.D.N.Y. Jun. 1, 2021), report and recommendation adopted, 2021 U.S. Dist. LEXIS 115213 (S.D.N.Y., Jun. 21, 2021). Defendant Michael McEvilley (“Defendant” or “McEvilley”) also later defaulted and Plaintiffs now seek a judgment for damages, as well as injunctive and additional post-judgment relief, against McEvilley.
See Plaintiffs' Proposed Findings of Fact and Conclusions of Law (“PFF”), ECF No. 169; Pls.' Mem., ECF No. 170; Tinelli Decl., ECF No. 171.
For the following reasons, I respectfully recommend that Plaintiffs be awarded a judgment in the amount of $1,500,000, along with injunctive and additional post-judgment relief.
As set forth below, in light of the default, the Court accepts as true the properly pleaded allegations in the Amended Complain, except those related to damages.
Plaintiffs are five of the leading educational publishers in the United States. (Am. Compl., ECF No. 36, ¶ 67.) Plaintiffs' publications include physical textbooks, as well as digital and online textbooks (e.g., eBooks).(See id.) These textbooks are widely available in the United States marketplace to consumers for a fee. (Id.) They are sold through direct sales channels and via legitimate distributors and stores, including through online sales. (Id.)
EBooks are “digital book[s] that you can read on a computer screen or an electronic device.” Random House, Inc. v. Rosetta Books LLC, 150 F.Supp.2d 613, 614-15 (S.D.N.Y. 2001), aff'd, 283 F.3d 490 (2d Cir. 2002).
Plaintiffs publish their textbooks under many imprints, or brands, that are well known and highly respected. (Am. Compl. ¶ 68.) Plaintiffs are the owners of various copyrights issued by the United States Copyright Office, which cover many of Plaintiffs' textbooks. (Id. ¶ 71; see also Ex. C to Am. Compl. (list of Plaintiffs' authentic works (the “Authentic Works”).) Plaintiffs invest significant time and money into publishing their textbooks. (Am. Compl. ¶ 69.)
McEvilley is a California resident who has owned/operated at least the following eleven websites through which he has engaged in extensive copyright infringement: ebookspot.shop, fridaycollection.myshopify.com, payversitystore.myshopify.com, ka-shopp.myshopify.com, kiwibookclub.myshopify.com, smart-edu-store.myshopify.com, studentnclass.myshopify.com, bestbookz.myshopify.com, books4days.myshopify.com, ebookspot.myshopify.com and pdfxpress.com (“Infringing Sites”). (See Am. Compl. ¶ 52 & Ex. A (ECF No. 36-1) at PDF pp. 22-23.) McEvilley has reproduced, distributed and sold an indeterminable amount of digital, pirated copies of Plaintiffs' copyrighted textbooks (“Infringing eBooks”) through his Infringing Sites. (See Am. Compl. ¶ 134; Tinelli Decl. ¶¶ 14-15.)
PROCEDURAL HISTORY
On January 29, 2020, Plaintiffs initiated this action against then-unknown defendants, alleging copyright infringement based on the defendants' online sales of pirated copies of Plaintiffs' copyrighted textbooks to consumers in the United States. (See Compl. ¶ 2.) On February 18, 2020, they obtained an ex parte temporary restraining order (“TRO”), an expedited discovery order and an order to show cause regarding a preliminary injunction. (2/18/20 OTSC, ECF No. 11.) Pursuant to the Court's ex parte order, Plaintiffs served their Complaint and ex parte application on the defendants through the email addresses associated with the defendants' online storefronts. (See 2/20/20 Aff. of Service, ECF No. 9.) The Court thereafter issued a preliminary injunction in favor of Plaintiffs. (Prelim. Inj., ECF No. 14.) On Plaintiffs' motion, on March 19, 2020, the Court entered an Amended Preliminary Injunction, which extended the injunctive relief to an expanded list of the defendants' names, aliases, email addresses and infringing sites. (Am. Prelim. Inj., ECF No. 25.)
Plaintiffs pursued expedited discovery from third parties on whose services McEvilley relied to operate his Infringing Sites, such as web hosts, domain registrars and payment processors. (Fleischman 8/31/21 Decl., ECF No. 150, ¶ 10.) Through this process, Plaintiffs were able to identify McEvilley, his known Infringing Sites, his aliases and his email addresses. (Id.) In addition, Plaintiffs identified McEvilley's accounts at financial institutions where he kept his illicitly obtained proceeds. (Id.) After Plaintiffs froze certain accounts associated with McEvilley's illegal sales, McEvilley hired California-based counsel, Ricardo Chavez, who contacted Plaintiffs in late March 2020. (Id.)
On July 1, 2020, Plaintiffs filed an Amended Complaint. (Am. Compl., ECF No. 36.) Plaintiffs served the Amended Complaint and Summons on McEvilley on August 31, 2020 by agreed service to his counsel. (Fleischman 8/31/21 Decl. ¶ 11.) McEvilley's counsel never entered an appearance in this case, and McEvilley never filed an Answer or otherwise responded to the Amended Complaint. (Id.) Plaintiffs also served McEvilley with Requests for Production of Documents pursuant to Federal Rule of Civil Procedure 34 on November 19, 2020, to which McEvilley never responded. (Id.) On August 20, 2021, and upon Plaintiffs' request, the Clerk issued a Certificate of Default as to McEvilley. (8/20/21 Cert. of Default, ECF No. 146.)
On October 10, 2022, Judge Koeltl entered an Order providing that Plaintiffs were entitled to a default judgment against McEvilley. (10/10/22 Order, ECF No. 165.) Judge Koeltl also referred this case to me for an inquest on damages and a recommendation of an appropriate judgment. (Id.)
On October 12, 2022, I ordered that Plaintiffs file Proposed Findings of Fact and Conclusions of Law concerning all damages and any other monetary relief permitted under the entry of default. (See 10/12/22 Order, ECF No. 167.) Plaintiffs timely filed their proposed findings and conclusions, along with other accompanying submissions. McEvilley had until November 16, 2022 to file any response to Plaintiffs' submissions. As of the date of this Report and Recommendation, McEvilley has not responded or appeared to defend in this action.
LEGAL STANDARDS
Where default has been entered against a defendant, courts are to accept as true all of the well-pleaded facts alleged in the complaint, except those concerning the amount of damages. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997) (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)); see also City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) (“It is an ‘ancient common law axiom' that a defendant who defaults thereby admits all ‘well-pleaded' factual allegations contained in the complaint.”) (quoting Vt. Teddy Bear Co., Inc. v. 1800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)); Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (“In light of [defendant's] default, a court is required to accept all . . . factual allegations as true and draw all reasonable inferences in [plaintiff's] favor.”) (citation omitted).
“While a party's default is deemed to constitute a concession of all well-pleaded allegations of liability, it is not considered an admission of damages.” Gogo Apparel, Inc. v. Daruk Imports, Inc., No. 19-CV-05701 (LGS) (SDA), 2020 WL 4274793, at *6 (S.D.N.Y. June 11, 2020), report and recommendation adopted, No. 19-CV-05701 (LGS), 2020 WL 4271694 (S.D.N.Y. July 23, 2020) (quoting Greyhound Exhibitgroup, Inc, 973 F.2d at 158); accord Trs. of Local 813 Ins. Tr. Fund v. Rogan Bros. Sanitation Inc., 12-CV-06249 (ALC) (HBP), 2018 WL 1587058, at *5 (S.D.N.Y. Mar. 28, 2018). “A plaintiff bears the burden of establishing its entitlement to recovery and thus must substantiate its claim with evidence to prove the extent of its damages.” Best Brands Consumer Prod., Inc. v. Versace 19.69 Abbigliamento Sportivo S.R.L., No. 17-CV-04593 (VSB) (SDA), 2020 WL 8678085, at *4 (S.D.N.Y. Oct. 1, 2020) (citation omitted).
The Second Circuit has held that a damages inquest may be held on the basis of documentary evidence alone “as long as [the court has] ensured that there was a basis for the damages specified in [the] default judgment.” Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989); accord Action S.A. v. Marc Rich & Co., Inc., 951 F.2d 504, 508 (2d Cir. 1991). In the case of a default where the defendant has never appeared, “a court may base its determination of damages solely on the plaintiff's submissions.” Trs. Of Local 813 Ins. Tr. Fund, 2018 WL 1587058, at *5 (citing Fustok, 873 F.2d at 40).
DISCUSSION
Plaintiffs seek a default judgment for statutory damages for Defendant's copyright infringement, as well as injunctive and additional post-judgment relief. (See Pls.' Mem. at 6-20; PFF ¶ 42.) Because the default order entered in this case establishes Defendant's liability, the only remaining issue is whether Plaintiffs have supplied adequate support for the damages they seek. See Kuruwa v. Meyers, 823 F.Supp.2d 253, 256 (S.D.N.Y. 2011), aff'd, 512 Fed.Appx. 45 (2d Cir. 2013); see also Cengage Learning, Inc. v. Yousuf, No. 14-CV-03174 (DAB) (SDA), 2018 WL 6990757, at *3 (S.D.N.Y. Dec. 20, 2018), report and recommendation adopted, No. 14-CV-03174 (DAB), 2019 WL 162661 (S.D.N.Y. Jan. 10, 2019) (“Where, as in this case, a plaintiff's well-pleaded facts are sufficient to state a claim on which relief can be granted, the only remaining issue in an inquest is whether plaintiff has provided adequate support for its requested relief.”) (citations omitted).
I. Findings Of Fact Relating To Quantum Of Damages Sought
The October 12, 2022 Order notified the parties that the Court would conduct the inquest into damages based upon the written submissions of the parties unless a party sought an evidentiary hearing. (See 10/12/22 Order ¶ 5.) No party has requested an evidentiary hearing. Moreover, because Plaintiffs' submissions provide a basis for an award of damages, no hearing is required.
Plaintiffs seek damages in this case based on the ten textbook titles that Plaintiffs actually purchased from the Defendant's Infringing Sites. (See PFF ¶ 42.) Plaintiffs made purchases of Infringing eBooks directly from Defendant's Infringing Sites, representing ten Authentic Works. (See Am. Compl. ¶ 71; see also Am. Compl. Ex. C, rows 2, 9, 10, 13, 24, 39, 43, 47, 53 & 60.)
Under the Copyright Act, an infringer of a copyright is liable for either (a) the copyright owner's actual damages and any additional profits of the infringer, or (b) statutory damages. 17 U.S.C. § 504(a); Brown v. Party Poopers, Inc., No. 00-CV-04799 (JSM) (DFE), 2001 WL 1380536, at *4 (S.D.N.Y. July 9, 2001). Section 504(c) of the Copyright Act permits a court to award statutory damages “with respect to any one work . . . in a sum of not less than $750 or more than $30,000 as the court considers just.” 17 U.S.C. § 504(c)(1). If the court finds willful infringement, “the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.” Id. § 504(c)(2). Within these statutory limits, the court has broad discretion in determining the appropriate statutory damages award. See Fitzgerald Publ'g Co., Inc. v. Baylor Publ'g Co., Inc., 807 F.2d 1110, 1116 (2d Cir. 1986); accord Noble v. Crazetees.com, No. 13-CV-05086 (PAE) (HBP), 2015 WL 5697780, at *6 (S.D.N.Y. Sept. 28, 2015) (citations omitted).
No proof of actual damages or, in fact, any damages, is necessary for the award of statutory damages. See All-Star Mktg. Grp., LLC v. Media Brands Co., 775 F.Supp.2d 613, 626 (S.D.N.Y. 2011) (quoting Nat'l Football League v. PrimeTime 24 Joint Venture, 131 F.Supp.2d 458, 472 (S.D.N.Y. 2001)). Where a defendant has defaulted, a complaint's allegations of willfulness may be taken as true. See Rovio Ent., Ltd. v. Allstar Vending, Inc., 97 F.Supp.3d 536, 546 (S.D.N.Y. 2015) (citing All-Star Mktg., 775 F.Supp.2d at 621-22).
In calculating the appropriate statutory damages award, the Second Circuit has held that a court should consider the following factors:
(1) the infringer's state of mind; (2) the expenses saved, and profits earned, by the infringer; (3) the revenue lost by the copyright holder; (4) the deterrent effect on the infringer and third parties; (5) the infringer's cooperation in providing evidence concerning the value of the infringing material; and (6) the conduct and attitude of the parties.Bryant v. Media Right Prods., Inc., 603 F.3d 135, 143-44 (2d Cir. 2010) (citation omitted); accord Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120, 127 (2d Cir. 2014); Hollander Glass Tex., Inc. v. Rosen-Paramount Glass Co., 291 F.Supp.3d 554, 559 (S.D.N.Y. 2018). “[W]illfulness in the context of statutory damages for copyright infringement means that the infringer either had actual knowledge that it was infringing the plaintiffs' copyrights or else acted in reckless disregard of the high probability that it was infringing plaintiffs' copyrights.” Nat'l Football League, 131 F.Supp.2d at 475 (internal quotation marks and citation omitted; alteration in original) (citing cases).
II. Analysis Of Factors Regarding Statutory Damages Awards
With respect to the first factor, by virtue of his default, Defendant is deemed to be a willful infringer. See Rovio Entm't, 97 F.Supp.3d at 546. Moreover, on the record before the Court, there is no question that Defendant's conduct was willful. Defendant is a recidivist infringer. (Tinelli Decl. ¶ 10.) Defendant operated additional infringing websites that are the subject of another copyright action Plaintiffs brought in this District prior to this case. (Id.) Defendant intentionally built a business devoted to selling pirated copies of Plaintiffs' copyrighted works, which he knowingly obtained with no license or other form of permission to copy or distribute. (See id. ¶ 11.)
In addressing factors two and three, the Court cannot determine from the record the full extent of the expenses saved or the profits earned by Defendant, nor the revenue lost by the Plaintiffs, since Defendant did not respond to discovery requests. Nevertheless, “it is clear that the Defendant[] profited substantially from their infringing conduct, while the Plaintiffs suffered losses” in part “because [the Defendant] bore none of the costs of creating any of the copyrighted works, yet profited from their unauthorized sale.” Cengage Learning v. Shi, No. 13-CV-07772 (VSB) (FM), 2015 WL 5167775, at *5 (S.D.N.Y. Sept. 3, 2015); see also id. (“despite investing heavily in the creation of the copyrighted works, the Plaintiffs have seen no profits from the Defendants' sales”).
The fourth factor regarding the deterrent effect on the infringer and third parties also weighs in Plaintiffs' favor. “[C]ourts have repeatedly emphasized that defendants must not be able to sneer in the face of copyright owners and copyright laws.” Tu v. TAD Sys. Tech. Inc., No. 08-CV-03822 (SLT) (RM), 2009 WL 2905780, at *6 (E.D.N.Y. Sept. 10, 2009) (quoting N.Y. Chinese TV Programs, Inc. v. U.E. Enterprises, Inc., No. 89-CV-06082 (KAR), 1991 WL 113283, at *4 (S.D.N.Y. Jun. 14, 1991) (internal quotation marks omitted)). In the case of “coordinated . . . and extensive copyright infringement,” a substantial statutory damage award can “act as a specific deterrent to the [defendant] and a general deterrent to other like-minded infringers.” Cengage Learning v. Bhargava, No. 14-CV-03174 (DAB) (RLE), 2017 WL 9802833, at *5 (S.D.N.Y. Aug. 22, 2017), report and recommendation adopted, 2018 WL 1989574 (S.D.N.Y. Apr. 25, 2018).
The last two factors weigh in Plaintiffs' favor as well, given that Defendant's “default and subsequent[t] silence shows a lack of cooperation in determining damages.” Hollander Glass, 291 F.Supp.3d at 559. In addition to making any damages calculation more difficult, Defendant's lack of cooperation in this action has ensured that the full scale of his infringement and the resulting damage to Plaintiffs will remain unknown.
Another factor often considered by courts is the value of the copyrights. See Fitzgerald Pub. Co. v. Baylor Pub. Co., 807 F.2d 1110 (2d Cir. 1986). That factor also weighs in Plaintiffs' favor. Plaintiffs are among the leading higher education publishers in the world and have invested decades of effort in building a reputation of quality in the publishing industry, which consumers associate with Plaintiffs and their textbooks. (See Tinelli Decl. ¶ 21.)
III. Application Of Factors Regarding Statutory Damages Awards
In light of Defendant's infringements on Plaintiffs' legitimate copyrights, Plaintiffs seek statutory damages for copyright infringement under the Copyright Act, 17 U.S.C. § 504. (See Pls.' Mem. at 6-15.) Plaintiffs seek maximum statutory damages for willful infringement-i.e., $150,000 per copyright infringed. (See id.)
“In cases where the plaintiffs seek the maximum damages, awarded damages span a large range, from $10,000 to $150,000 per infringement.” Cengage Learning, Inc., 2017 WL 9802833, at *5 (citing cases). A damages award of $150,000 per infringement “is simply a possibility, not an assurance.” Id. “A court will find an award of the maximum statutory damages reasonable under the Copyright Act when there is a clear relationship to the profit or in the most egregious of circumstances.” Id. (citations omitted). Based upon the Court's review of the record and relevant case law, and the Court's view regarding the need for deterrence and the other Bryant factors, the Court finds that the maximum statutory award of $150,000 per infringement is appropriate in this case, given the egregious circumstances that exist. There is evidence of flagrant and extensive copyright infringement, together with disregard of prior court orders in this action and substantial revenues earned from their unlawful activities.(See PFF ¶¶ 21-38.) Accordingly, I recommend that Plaintiffs be awarded statutory damages of $150,000 for each of the ten copyrights infringed, for a total of $1,500,000.
Plaintiffs have submitted evidence that, in addition to the 10 titles of Authentic Works for which Plaintiffs are seeking damages in this case, Defendant sold a substantial number of Plaintiffs' other titles. (See Fleischman 8/31/21 Decl. ¶ 16.)
Defendant has shown his willingness to disregard injunctions before, as he also operated additional infringing websites that are the subject of another copyright action Plaintiffs brought in this District prior to this action. (See Fleischman 8/31/21 Decl. ¶ 13.)
From the records that Plaintiffs were able to amass without the benefit of discovery from Defendant, Plaintiffs have shown sales in excess of $500,000 by Defendant of Infringing eBooks. (See Fleischman 8/31/21 Decl. ¶ 18.)
IV. Injunctive Relief
Plaintiffs also “request that the Court permanently enjoin Defendant, pursuant to Federal Rule of Civil Procedure 65(d), from directly or indirectly infringing Plaintiffs' copyrights, in the same manner that the Court has already enjoined such infringement in issuing the TRO and preliminary injunctions against Defendant, and also permanently enjoined the other defendants in this case.” (Pls.' Mem. at 15.) “[A] court may issue an injunction when the moving party establishes that there is a statutory basis for relief and that it meets the prerequisites for the issuance of an injunction.” TigerCandy Arts, Inc. v. Blairson Corp., No. 09-CV-06215 (GBD) (FM), 2012 WL 760168, at *7 (S.D.N.Y. Feb. 23, 2012), report and recommendation adopted, 2012 WL 1948816 (S.D.N.Y. May 30, 2012) (internal quotation marks and citations omitted).
To obtain a permanent injunction, a plaintiff must show:
(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a
remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (citations omitted); accord Salinger v. Colting, 607 F.3d 68, 77-78 (2d Cir. 2010). The Copyright Act authorizes a court to “grant . . . final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.” 17 U.S.C. § 502(a).
In the present case, the eBay factors weigh in favor of granting an injunction to Plaintiffs. “First, courts routinely find the harm suffered by plaintiffs in copyright cases to be ‘irreparable' on the theory that lost sales or diminished reputation can be difficult if not impossible to measure.” Broad. Music, Inc. v. Prana Hosp., Inc., 158 F.Supp.3d 184, 195 (S.D.N.Y. 2016) (citations omitted). Second, the record establishes that there is a significant threat of future infringement. “Courts in this Circuit have consistently found monetary damages inadequate where the defendant poses a significant threat of future infringement.” Id. at 195 (citations omitted). Third, as to the balance of hardships, “[i]t is axiomatic that an infringer . . . cannot complain about the loss of ability to offer its infringing product.” WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 287 (2d Cir. 2012) (alteration in original) (quoting WPIX, Inc. v. ivi, Inc., 765 F.Supp.2d 594, 621 (S.D.N.Y. 2011)). Fourth, “the public has an interest in not being deceived-in being assured that the mark it associates with a product is not attached to goods of unknown origin and quality.” N.Y.C. Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F.Supp.2d 305, 344 (S.D.N.Y. 2010).
Thus, I recommend that a permanent injunction be issued in Plaintiffs' favor.
V. Post-Judgment Relief
Plaintiffs also request that the judgment to be entered by the Court contain (1) a postjudgment asset restraint, (2) a provision dissolving the automatic stay and (3) a provision requiring the transfer of Defendant's frozen assets to satisfy the judgment. (Pls.' Mem. at 18.) Each of these requests is considered below.
A. Post- Judgment Asset Restraint
Federal Rule of Civil Procedure 69(a)(1) provides that “[t]he procedure on execution-and in proceedings supplementary to and in aid of judgment or execution-must accord with the procedure of the state where the court is located ....” Fed.R.Civ.P. 69(a)(1). In New York, where this Court is located, Section 5222 of the New York Civil Practice Law and Rules (“CPLR”) permits a judgment creditor to serve a restraining notice on a judgement debtor, which prohibits the judgment debtor from “mak[ing] or suffer[ing] any sale, assignment, transfer or interference with any property in which [it] has an interest,” except in limited circumstances. N.Y. C.P.L.R. § 5222(b). Thus, once a defendant is found liable and a money judgment is rendered against a defendant, a district court sitting in New York has the power to restrain a defendant's assets, and I recommend that Defendant's assets be restrained. See Off-White LLC v.AAWarm HouseAAStore, No. 17-CV-08872 (GBD) (GWG), 2019 WL 418501, at *7 (S.D.N.Y. Jan. 17, 2019) (granting motion for post-judgment asset restraint); WowWee Grp. Ltd. v. Haoqin, No. 17-CV-09893, 2019 WL 1316106, at *6 (S.D.N.Y. Mar. 22, 2019) (same).
The asset restraint also could be based upon Rules 64 and/or 65 of the Federal Rules of Civil Procedure. Some courts in the Second Circuit “have used both Rule 64 of the Federal Rules of Civil Procedure . . . and Rule 65 to issue post-judgment injunctions to secure assets.” Shamrock Power Sales, LLC v. Scherer, No. 12-CV-08959 (KMK) (JCM), 2016 WL 11484445, at *4 (S.D.N.Y. June 15, 2016), report and recommendation adopted as modified, 2016 WL 6102370 (S.D.N.Y. Oct. 18, 2016).
B. Automatic Stay
Rule 62(a) of the Federal Rules of Civil Procedure stays the execution of and proceedings enforcing judgments for 30 days. See Fed.R.Civ.P. 62(a). However, Rule 62 expressly recognizes the Court's authority to dissolve the automatic stay. See Fed.R.Civ.P. 62 (providing for stay “unless the court orders otherwise”); see also Advisory Committee's Notes (2018) (“Amended Rule 62(a) expressly recognizes the court's authority to dissolve the automatic stay..... One reason for dissolving the automatic stay may be a risk that the judgment debtor's assets will be dissipated.”). Here, there is a risk of dissipation of assets, such that dissolving of the automatic stay is appropriate. Thus, I recommend that the Court “dissolve[] the automatic stay imposed by Rule 62 and allow[] for immediate enforcement of the judgment.” See Allstar Mktg. Grp., LLC v. 123 Beads Store, No. 19-CV-03184 (AJN), 2020 WL 5836423, at *7 (S.D.N.Y. Sept. 30, 2020).
In the alternative, as requested by Plaintiffs (see Pls.' Mem. at 19 n.8), I recommend that the Court temporarily continue the asset freeze in the Amended Preliminary Injunction (Am Prelim. Inj. at 5-6) for 30 days so that the pre-judgment restraint does not expire until the post-judgment restraint becomes enforceable.
C. Transfer Of Frozen Assets
Rule 64 of the Federal Rules of Civil Procedure provides that “[a]t the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgment.” Fed.R.Civ.P. 64. In New York, Section 5225 of the CPLR authorizes this Court to compel a nonparty to surrender a judgment debtor's property. N.Y. C.P.L.R. § 5225.
The Court has authority to order a transfer of an infringing defendant's frozen assets to plaintiffs pursuant to Rule 64, as well as “this Court's inherent equitable power to issue remedies ancillary to its authority to provide final relief.” Gucci Am., Inc. v. Curveal Fashion, No. 09-CV-08458 (RJS), 2010 WL 308303, at *5-6 (S.D.N.Y. Jan. 20, 2010); see also Spin Master Ltd. v. Alan Yuan's Store, 325 F.Supp.3d 413, 428 (S.D.N.Y. 2018) (ordering transfer of infringing defendants' frozen assets to plaintiff). Such an order is appropriate in this case so that the assets can be applied towards satisfaction of the judgment to be entered.
This authority stems from the All Writs Act. See 28 U.S.C. § 1651(a) (“The Supreme Court and all courts established by Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.”).
CONCLUSION
For the foregoing reasons, I respectfully recommend that Plaintiffs be awarded damages against Defendant McEvilley in the amount of $1,500,000. I also recommend that a permanent injunction be entered in Plaintiff's favor; that a post-judgment asset restraint be entered in Plaintiffs' favor; that the automatic stay imposed by Rule 62 be dissolved to allow for immediate enforcement of the judgment; and that the judgment provide for the transfer of Defendant McEvilley's frozen assets to Plaintiffs.
No later than November 23, 2022, Plaintiffs shall serve this Report and Recommendation upon Defendant McEvilley in the same manner previously used (see, e.g., ECF No. 173) and shall file proof of service thereof.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Koeltl.
THE FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).