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    Motion in Opposition To Default Judgment

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    YTOLeader
    This document is a reply memorandum submitted by defendants Hannover House, Inc. and its CEO Eric Parkinson in response to an opposition filed by plaintiff John Boal Photography, LLC. The defendants argue that they met the court's deadline of December 15, 2016 to file a responsive pleading by submitting their answer, motion to set aside the entry of default, and motion to dismiss on that date. They also maintain that they have alleged meritorious defenses to the plaintiff's complaint, including that Hannover House has always been incorporated in Wyoming, not Arkansas as the complaint alleges, and that the CEO has no personal liability under corporate law.

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    Motion in Opposition To Default Judgment

    Uploaded by

    YTOLeader
    545 views10 pages
    This document is a reply memorandum submitted by defendants Hannover House, Inc. and its CEO Eric Parkinson in response to an opposition filed by plaintiff John Boal Photography, LLC. The defendants argue that they met the court's deadline of December 15, 2016 to file a responsive pleading by submitting their answer, motion to set aside the entry of default, and motion to dismiss on that date. They also maintain that they have alleged meritorious defenses to the plaintiff's complaint, including that Hannover House has always been incorporated in Wyoming, not Arkansas as the complaint alleges, and that the CEO has no personal liability under corporate law.

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    Motion in Opposition to Default Judgment

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    This document is a reply memorandum submitted by defendants Hannover House, Inc. and its CEO Eric Parkinson in response to an opposition filed by plaintiff John Boal Photography, LLC. The defendants argue that they met the court's deadline of December 15, 2016 to file a responsive pleading by submitting their answer, motion to set aside the entry of default, and motion to dismiss on that date. They also maintain that they have alleged meritorious defenses to the plaintiff's complaint, including that Hannover House has always been incorporated in Wyoming, not Arkansas as the complaint alleges, and that the CEO has no personal liability under corporate law.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    545 views10 pages

    Motion in Opposition To Default Judgment

    Uploaded by

    YTOLeader
    This document is a reply memorandum submitted by defendants Hannover House, Inc. and its CEO Eric Parkinson in response to an opposition filed by plaintiff John Boal Photography, LLC. The defendants argue that they met the court's deadline of December 15, 2016 to file a responsive pleading by submitting their answer, motion to set aside the entry of default, and motion to dismiss on that date. They also maintain that they have alleged meritorious defenses to the plaintiff's complaint, including that Hannover House has always been incorporated in Wyoming, not Arkansas as the complaint alleges, and that the CEO has no personal liability under corporate law.

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    You are on page 1of 10
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    The case discusses setting aside a default entry in a copyright infringement case between a photography company and a publishing company. The publishing company and its CEO argue they responded promptly to the court's deadline and have meritorious defenses.

    The case is about a photography company suing a publishing company and its CEO for copyright infringement over images the photography company took for the publishing company. The publishing company was issued a default entry that it is now trying to set aside.

    The publishing company argues it has defenses that the images are works-for-hire, there was an implied license to use the images, and the complaint fails to establish the photography company owns the copyrights.

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 1 of 10 PageID# 170

    IN THE UNITED STATES DISTRICT COURT


    FOR THE EASTERN DISTRICT OF VIRGINIA
    - Alexandria Division

    JOHN BOAL PHOTOGRAPHY, LLC

    )
    )
    )
    )
    )
    )

    versus
    HANNOVER HOUSE, INC. and
    ERIC PARKINSON

    Case No. 1:16-cv-00654-CMH/TCB

    DEFENDANTS REPLY MEMORANDUM TO OPPOSITION


    TO SET ASIDE ENTRY OF DEFAULT
    Defendants Hannover House, Inc. and its CEO, Eric Parkinson, on December 15, 2016
    filed their Motion to Set Aside the Default on the 2-Count Complaint in this matter (Dkt. ##1726). Now they submit their Reply Memorandum to the Opposition filed by Plaintiff John Boal
    Photography, LLC (Photography LLC) (Dkt. #28).
    On September 29, 2016, the Clerk issued an Entry of Default (Dkt. #11) in this matter.
    After a flurry of filings, this Court, in its November 21, 2016 Order, directed that defendants
    have until December 15, 2016 to file an appropriate responsive pleading (Dkt. #17).
    Defendants Hannover House, Inc. and Eric Parkinson met this deadline when they filed on
    December 15th their Answer, the Motion to Set Aside the Entry of Default, and their Rule
    12(b)(6) Motion to Dismiss.
    Photography LLC has since filed its Opposition Memorandum. This Reply
    Memorandum follows.

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 2 of 10 PageID# 171

    1. Introduction and Summary of Reply Argument.


    Fourth Circuit case law reflects a strong preference that, as a general matter, defaults be
    avoided and that claims and defenses be disposed of on their merits. See, e.g., Tazco, Inc. v.
    Director, Office of Workers Comp. Program, U.S. Dep't of Labor, Consolidated Masonry &
    Fireproofing, 895 F.2d 949, 950 (4th Cir. 1990) ("Generally a default should be set aside where the
    moving party acts with reasonable promptness and alleges a meritorious defense"); Consolidated
    Masonry & Fireproofing, 383 F.2d 249 (4th Cir. 1967) (same); Saurikit, LLC v. cydia.com, No.
    1:11cv0888 JCC/JFA, 2011 WL 5843638 (E.D. Va. Nov. 21, 2011) (Anderson, J.).
    In their earlier Motion and Memorandum, Hannover House/Parkinson addressed the six
    Rule 55(c) factors set forth in in Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198 (4th Cir.
    2006), argued that they had responded to the Courts Order with reasonable promptness, and
    identified meritorious defenses. For the given reasons, the Entry of Default should be set aside.
    In its opposition arguments, Photography LLC (1) contends that there was no reasonable
    promptness, (2) complains that Hannover Houses Wyoming incorporation was somehow a
    dark secret intentionally hidden from the business world, (3) misapplies Arkansas law in its quest
    to impose personal liability on CEO Eric Parkinson, and (4) seeks to debunk Hannover
    House/Parkinsons legal defenses to the Copyright Infringement claim.
    Hannover House/Parkinson reply to these opposition arguments, and in doing so draw
    from their earlier-filed Motion and Supporting Memorandum to Set Aside the Entry of Default
    (Dkt. ## 19-20), and also from their Rule 12(b)(6) Motion to Dismiss and the associated
    Supporting Memorandum (Dkt. ## 24-25).

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 3 of 10 PageID# 172

    2. Reasonable Promptness--Courts December 15, 2016 Deadline Met.


    Defendants complied with the Courts Order and met the given deadline. This should
    qualify as reasonable promptness. This Court, in its November 21, 2016 Order, directed that
    defendants have until December 15, 2016 to file an appropriate responsive pleading.
    Defendants Hannover House, Inc. and Eric Parkinson met this deadline when they filed on
    December 15th their Answer, the Motion to Set Aside the Entry of Default, and their Rule
    12(b)(6) Motion to Dismiss.
    Photography LLC suggests now that a June 2016 Blog entry negates this compliance.
    It does not.
    Sometime in June 2016, Hannover House, Inc. must have learned of the Photography
    LLC lawsuit. This was well before service of process; the Court Docket shows service three
    weeks later on July 19, 2016. Eric Parkinson acknowledges in his Affidavit (Ex. 2 to the
    December 15th Memorandum) that the service papers got to him even though the process was
    flawed in some respects; Hannover House, Inc. and Parkinson make no issue of this. Hannover
    House, Inc. routinely discloses to its investors via its HannoverHouseMovies Blog on an array of
    developments. The June 29, 2016 Blog posting under General Update on HHSE Corporate
    Matters, included as Item 6(c) under Legal Issues a 3-line note identifying a vendor lawsuit.
    In hindsight, Defendants should have been more diligent. They fumbled their early
    responses in this case. But at this point, the critical Order and date are the Courts November
    21st Order and the December 15th deadline. Hannover House, Inc. and Eric Parkinson recovered
    in time to fully comply within the Courts deadline. To now withdraw that safe harbor would be
    to reverse the Courts own November 21st Order and would also be fundamentally unfair.

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 4 of 10 PageID# 173

    3. The Meritorious Defenses to the Complaint.


    While Photography LLC disagrees with the positions taken by Hannover House, Inc. and
    CEO Eric Parkinson in their pleadings and Answer, the primary issue for the Court is whether
    Defendants have alleged a meritorious defense or claim. A meritorious defense requires a
    proffer of evidence which would permit a finding for the defaulting party or which would
    establish a valid counterclaim. The underlying concern is . . . whether there is some possibility
    that the outcome . . . after a full trial will be contrary to the result achieved by the default.
    Saurikit, LLC v. cydia.com, citing Augusta Fiberglass Coatings, Inc. v. Fodor Contracting
    Corp., 843 F.2d 808, 812 (4th Cir. 1988).
    Hannover House, Inc. has acknowledged the $1000 owed for the photography services
    identified in Photography LLCs August 2015 invoice (see FIGURE 1 in the December 15th
    Memorandum and Ex. 1 attached to that Memorandum). On the Count 2 claims where
    Photography LLC alleges that it is due statutory damages of more than $2 million, Hannover
    House aggressively denies the claim and asserts its defenses. CEO Eric Parkinson denies all
    individual liability, and as further protection, adopts Hannover House, Inc.s substantive
    defenses.
    a. Hannover House, Inc.No Secret that it is and has been
    a Wyoming Corporation since 2009.
    The Complaint in this matter identifies the wrong corporate entity. Notwithstanding
    Photography LLCs dark secret protestations, unless and until the Complaint is amended to
    correctly identify Hannover House, Inc., the claims are deficient.
    The Complaint at 5 alleges Upon information and belief, Hannover House, Inc. . . . is
    an Arkansas corporation . . . . Photography LLC was apparently working on bad and
    incomplete information, and it possessed a misguided belief. In fact, Hannover House, Inc. is,
    4

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 5 of 10 PageID# 174

    and has been since 2009, a publicly-traded Wyoming corporation. Confirmation of this
    incorporation was provided in Ex. 4 to the Hannover House/Parkinson original Memorandum.
    After the Hannover House, Inc. truth was brought forward in Defendants December 15th
    Memorandum in Support, Photography LLC shifted to its dark secret argument. This
    argument fares no better. As a straightforward factual point, Hannover House, Inc.s Wyoming
    incorporation is readily accessible publicly available information. As shown in FIGURE 1
    below, the specifics of Hannover House, Inc.s existence, including the state of incorporation, is
    and has been for several years accessible via the Internet.
    FIGURE 1
    SECs EDGAR Database Identifies Hannover House, Inc.
    as a Wyoming Corporation

    The Hannover House, Inc. website (upper left) (www.hannoverhouse.com) in the taskbar
    at the top of the home page lists among the options Investors, a common identifier of a
    publicly-traded company. The #1 storehouse of information on publicly traded companies is the
    5

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 6 of 10 PageID# 175

    EDGAR database of company filings accessed from the U.S. Securities and Exchange
    Commissions website (upper right) (sec.gov/edgar/searchedgar/companysearch.html).
    Page 1 of the first Hannover House, Inc. filing identifies Wyoming as the state of incorporation
    (sec.gov/Archives/edgar/data/106980/000147124215000085/hhse10q09302016.htm). A basic
    3-step search confirms the Wyoming incorporation.
    Photography LLCs arguments of bad faith concealment (Opposition Memo. at 6),
    extraordinary lengths to appear as an Arkansas incorporated entity (Opposition Memo. at 7),
    and that Defendants improperly misrepresent of their claim that Hannover House is not the
    same corporation . . . (Opposition Memo. at 3) have no traction. Before the Court considers any
    legal argument, it should appreciate that the foundational facts recited by Photography LLC are
    just plain wrong.
    Photography LLC has sued the wrong entity and is not excused from having to sue the
    right corporate entity. Hannover House, Inc. has not waived this core requirement, but has
    offered to make this an easier task by accepting through its counsel service of a properly
    amended Complaint.
    b. Misapplied Arkansas Corporate LawNo Individual Liability.
    Eric Parkinson, as Hannover Houses CEO, has no personal liability for the corporations
    acts as alleged in either Count 1 or Count 2 of the Complaint. Photography LLC misapplies
    Arkansas corporate law to construct its argument.
    A basic tenet of corporate law is that the corporate entity shields the officers, directors,
    and shareholders from personal liability. See, e.g., 114 Am. Jur. Proof of Facts 3d 403
    (Originally published in 2010) (. . . a corporation is regarded as a separate legal entity, separate
    and distinct from its stockholders, officers, and directors, with separate and distinct liabilities and

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 7 of 10 PageID# 176

    obligations). Exceptions to this protection, referred to as piercing the corporate veil, are
    typically statutory. For example, Arkansas law holds individuals who masquerade as
    corporations individually liable. Photography LLC cites A.C.A 4-27-204, which provides:
    All persons purporting to act as or on behalf of a corporation, knowing there
    was no incorporation under this chapter, are jointly and severally liable for all
    liabilities created while so acting.
    But Photography LLCs reliance on this statute is misplaced. The section does not
    require that the incorporation be in Arkansas, and hence the section has no application to CEO
    Eric Parkinson because Hannover House, Inc. at all relevant times is and was incorporated.
    Indeed, Arkansas is bound under Article IV, Section 1 of the U.S. Constitution,1 the full faith
    and credit clause, to recognize incorporations under the laws of other states. That the
    incorporation is in Wyoming and not Arkansas does not expose Parkinson to the sanctions of this
    Arkansas Code section.
    Arkansas law does provide that foreign corporations that fail to register with the state are
    subject to various reprimands, including fines. See A.C.A. 4-27-1502. But the reprimands in
    this Code section apply to the corporate entity, and do not reach the corporate officers and
    directors. The statute explicitly provides in subpart (e) [t]he failure of a foreign corporation to
    obtain a certificate of authority does not impair the validity of its corporate acts or prevent it
    from defending any proceeding in this state. Under Arkansas law (and most probably the law
    of every other state) the failure to register does not pierce the corporate veil provided by

    The U.S .Constitution, Article IV, Section 1 reads:


    Full Faith and Credit shall be given in each State to the public Acts, Records, and
    judicial Proceedings of every other State. And the Congress may by general Laws
    prescribe the Manner in which such Acts, Records, and Proceedings shall be
    proved, and the Effect thereof.
    7

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 8 of 10 PageID# 177

    incorporation in another statecertainly the relevant Arkansas statute imposes no such severe
    sanction on Eric Parkinson.
    The 102-year old case identified by Photography LLC, American Hardwood Lumber Co.
    v. T.J. Ellis & Co., 115 Ark. 524 (1914), concerns service of process on a corporate agent as
    adequate service on the corporation. The case has no bearing on individual liability under the
    Arkansas Business Corporation Act of 1987 (which replaced the repealed Wingo Act, the 1965
    Arkansas corporate statute), the statute from which Plaintiff cites.
    c. Defenses to Count 2, the Copyright Infringement Claim.
    Photography LLCs Count 2 alleges violations of the U.S. Copyright Act and seeks
    statutory damages under the Act. As Defendants explained in their Rule 12(b)(6) Supporting
    Memorandum, the Complaint fails to allege a requisite element for a claim of Copyright
    Infringement. See Rule 12(b)(6) Memorandum in Support at 3-4. The Complaint does not
    allege that Photography LLC is the copyright owner. The Opposition Memorandum asserts that
    the copyrights are registered to John Boal, the sole member of Photography LLC. There is no
    allegation in the Complaint of transfer or assignment of the copyright registrations. This failing
    is fatal to the Count 2 claim as now stated.
    Also, the Opposition Memorandum does not rebut the defense that the images at issue are
    works-for-hire under the Copyright Act, which means that Hannover House, Inc., not
    Photography LLC, has the legitimate claim to the copyrights. Defendants Memorandum in
    Support spotlights Photography LLCs invoice that identifies the work assignment, delivery
    instruction and agreed payment, which together support the work-for-hire defense (see FIGURE
    1, Memorandum in Support at 2 and Ex. 1 to the Memorandum.)

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 9 of 10 PageID# 178

    An additional defense not yet pleaded but likely to be soon added as facts emerge is that
    Photography LLC granted Hannover House, Inc. an implied license to post the images at issue.
    If the agreement for the photography services and delivery of the images does not include the
    magic words suggested by Photography LLC, the agreement terms recited in the August 2015
    Invoice minimally support a finding of an implied license for Hannover House, Inc. to use the
    images. This finding would entirely defeat Count 2.
    In sum, Hannover House, Inc. and Eric Parkinson have strong defenses to Photography
    LLCs $2 million claim spun from a $1000 services engagement.
    4. Conclusion
    For the reasons given by Defendants Hannover House, Inc. and Eric Parkinson in their
    December 15th Motion to Set Aside and the Supporting Memorandum, and the reasons argued
    above, the Court should grant Defendants Motion to Set Aside the Entry of Default and deny the
    Motion for Entry of Judgment.
    Respectfully submitted,
    HANNOVER HOUSE, INC.
    ERIC PARKINSON
    By Counsel

    ____/ss/ James S. Kurz_______________


    James S. Kurz (VSB #16610)
    Daniel D. Mauler (VSB #73190)
    REDMON PEYTON & BRASWELL LLP
    510 King Street, Suite 301
    Alexandria, VA 22314
    Ph: (703) 684-2000
    Fax: (703) 684-5109
    JKurz@RPB-law.com
    dmauler@rpb-law.com
    Counsel for Defendants
    9

    Case 1:16-cv-00654-CMH-TCB Document 29 Filed 12/29/16 Page 10 of 10 PageID# 179

    CERTIFICATE OF ELECTRONIC SERVICE


    I hereby certify that on December 29, 2016, I served the foregoing Reply Memorandum
    by ECF (electronic case filing) upon the following counsel of record:
    Christina Sirois (VSB No. 84454)
    Dan Backer (VSB No. 78256)
    DB Capital Strategies, PLLC
    203 South Union Street, Suite 300
    Alexandria, VA 22314T

    ____/ss/ James S. Kurz____________


    James S. Kurz (VSB #16610)
    Daniel D. Mauler (VSB #73190)
    REDMON PEYTON & BRASWELL LLP
    510 King Street, Suite 301
    Alexandria, VA 22314
    Ph: (703) 684-2000
    Fax: (703) 684-5109
    JKurz@RPB-law.com
    dmauler@rpb-law.com
    Counsel for Defendants

    10

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