Chara Curtis v. Illumination Arts, Inc.

FILED
NOT FOR PUBLICATION
MAR 16 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHARA CURTIS; CYNTHIA ALDRICH; No. 14-35686
ALFRED CURRIER,
D.C. No. 2:12-cv-00991-JLR
Plaintiffs-Appellees,
v. MEMORANDUM*
ILLUMINATION ARTS, INC.;
ILLUMINATION ARTS PUBLISHING,
L.L.C.; JOHN M. THOMPSON; KIMMIE
LYNN THOMPSON,
Defendants-Appellants.
Appeal from the United States District Court
for the Western District of Washington
James L. Robart, District Judge, Presiding
Submitted March 8, 2017**
Seattle, Washington
Before: GRABER, IKUTA, and HURWITZ, Circuit Judges.
Plaintiffs Chara Curtis, Cynthia Aldrich, and Alfred Currier are the author
and illustrators of three children’s books. They sued Defendants—two publishing
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes that this case is suitable for decision
without oral argument. Fed. R. App. P. 34(a)(2).
entities and two individuals involved with those entities—for copyright
infringement and breach of contract after Defendants allegedly stopped paying
royalties but continued to sell Plaintiffs’ books without permission. Defendants
appeal from the final judgment against them, and we affirm.
1. The district court did not abuse its discretion by entering a default
judgment against Defendants. DirecTV, Inc. v. Hoa Huynh, 503 F.3d 847, 852
(9th Cir. 2007). The court appropriately applied the factors identified in Eitel v.
McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). The court documented
Defendants’ numerous discovery violations and delays that took place over many
months. The court issued several warnings and lesser sanctions that were
ineffective in causing Defendants to comply with deadlines and court orders.
Finally, the court held an evidentiary hearing before entering a default judgment.
2. The district court did not err in failing to construe Defendant John
Thompson’s pro se declarations as requests to withdraw Defendants’ admission as
to Request for Admission #41, pursuant to Federal Rule of Civil Procedure 36(b),
and in failing to order that the admission be withdrawn. The pro se filings at issue
are not reasonably interpreted to ask for withdrawal of any admissions. No party
cited Rule 36 in the district court. Moreover, even if we construed the filings as
Rule 36(b) motions, withdrawal of an admission is permissive, not mandatory, and
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we review the denial of such a motion only for abuse of discretion. Conlon v.
United States, 474 F.3d 616, 621 (9th Cir. 2007). And finally, because all
infringement-related facts were deemed admitted because of the default, Derek
Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696, 702 (9th Cir. 2008); TeleVideo
Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987) (per curiam),
withdrawal of the admissions would not make any difference to the outcome.
3. Because Plaintiffs’ allegations of willful infringement are deemed true on
account of the default, the district court properly found that the infringement was
willful. We find no abuse of discretion in the court’s award of statutory damages.
See BMG Music v. Perez, 952 F.2d 318, 320 (9th Cir. 1991) (describing "‘wide
discretion’ in setting the amount of damages within the statutory range," reviewed
for an abuse of discretion (quoting Harris v. Emus Records Corp., 734 F.2d 1329,
1335 (9th Cir. 1984)); Harris, 734 F.2d at 1335 ("The award will be overturned
only for abuse of discretion."). The court awarded only one-third of the allowable
maximum, and an award of statutory damages is meant to serve both compensatory
and punitive purposes. L.A. News Serv. v. Reuters Television Int’l, Ltd., 149 F.3d
987, 996 (9th Cir. 1998).
4. The district court did not err in finding Defendant Kimmie Thompson
individually liable for copyright infringement. As noted, upon entry of default, the
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allegations of the complaint were deemed true. And the complaint accused all
Defendants of directly continuing to publish, sell, and distribute the books even
after Plaintiffs terminated the publishing agreement. Those facts make her liable
for damages under the Copyright Act, 17 U.S.C. § 501(a).
5. The district court did not clearly err in applying the alter ego doctrine to
hold Defendant John Thompson individually liable to Plaintiffs on their breach of
contract claim. See Towe Antique Ford Found. v. IRS, 999 F.2d 1387, 1391 (9th
Cir. 1993) (holding that we review application of the alter ego doctrine for clear
error). Under Washington law, "[f]irst, the corporate form must be intentionally
used to violate or evade a duty; second, disregard must be necessary and required
to prevent unjustified loss to the injured party." Meisel v. M & N Modern
Hydraulic Press Co., 645 P.2d 689, 692 (Wash. 1982) (internal quotation marks
omitted). "Intentional misconduct must be the cause of the harm that is avoided by
disregard." Id. at 693. First, the court cited undisputed facts demonstrating that
John Thompson used corporate assets to pay for obviously personal expenses, such
as grocery bills, salon services, pet services, and dental work, and that he freely
transferred money between personal and company accounts. Second, the court did
not clearly err in concluding that this behavior dissipated corporate assets available
to pay Plaintiffs’ royalties. Although the district court did not explicitly hold that
disregard of the corporate form was necessary to prevent unjustified losses to
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Plaintiffs, this oversight was harmless. The record shows that the corporate entities
were nearly insolvent, and therefore any dissipation resulting from John
Thompson’s use of corporate assets to pay personal expenses would directly and
unjustifiably harm Plaintiffs.
AFFIRMED.
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