Facebook V Grunin Doc47 - Page1 of 17

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OPPOSITION TO MOTION
TO SET ASIDE DEFAULT
Case No. 14-cv-02323-CRB
LEGAL123279658.5
Judith B. Jennison, Bar No. 165929
JJennison@perkinscoie.com
PERKINS COIE LLP
1201 Third Avenue, Suite 4900
Seattle, WA 98101-3099
Telephone: 206.359.8000
Facsimile: 206.359.9000
Attorneys for Plaintiff
Facebook, Inc.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
FACEBOOK, INC.,
Plaintiff,
v.
MARTIN GRUNIN,
Defendant.
Case No. 3:14-cv-02323-CRB
OPPOSITION TO MOTION TO SET
ASIDE DEFAULT
[Fed. R. Civ. P. 55(c)]
Date: October 10, 2014
Time: 10:00 a.m.
Judge: Hon. Charles R. Breyer
Location: Courtroom 6, 17th Floor
Case3:14-cv-02323-CRB Document47 Filed09/02/14 Page1 of 17
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TABLE OF CONTENTS
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I. INTRODUCTION .............................................................................................................. 1
II. FACTS ................................................................................................................................ 2
A. Facebook Background............................................................................................. 2
B. Summary of Grunins Illegal Activities.................................................................. 2
C. Harm to Facebook................................................................................................... 5
D. Grunin Has Failed to Answer or Appear in This Action and Has Abused
the Judicial Process by Filing Threatening and Nonsensical Documents
with This Court ....................................................................................................... 5
III. LEGAL STANDARD......................................................................................................... 6
IV. ARGUMENT...................................................................................................................... 7
A. Grunin Fails to Rebut Any of the Three Factors that Support Maintaining
Entry of Default....................................................................................................... 7
1. Grunins Culpable Conduct Led to Default ................................................ 7
2. Grunin Has Failed to Present a Meritorious Defense................................ 12
3. Facebook Will Be Prejudiced if Default Is Set Aside............................... 13
V. CONCLUSION................................................................................................................. 14
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TABLE OF AUTHORITIES
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CASES
Alan Neuman Prods., Inc. v. Albright,
862 F.2d 1388 (9th Cir. 1988)................................................................................................. 12
Benny v. Pipes,
799 F.2d 489 (9th Cir. 1986)................................................................................................... 12
Cohen v. Murphey,
222 F.R.D. 416 (N.D. Cal. 2004) ............................................................................................ 13
Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc.,
840 F.2d 685 (9th Cir. 1988)............................................................................................. 11, 12
Franchise Holding II, LLC v. Huntington Rests. Grp., Inc.,
375 F.3d 922 (9th Cir. 2004)............................................................................................... 6, 12
Madsen v. Bumb,
419 F.2d 4 (9th Cir. 1969)....................................................................................................... 12
Meadows v. Dominican Republic,
817 F.2d 517 (9th Cir. 1987)............................................................................................... 6, 12
Pena v. Seguros La Comercial, S.A.,
770 F.2d 811 (9th Cir. 1985)............................................................................................... 6, 12
Sovereign Capital Resources, LLC v. Armstrong Square Limited Partnership,
58 F. Appx 335 (9th Cir. 2003) ............................................................................................. 13
TCI Grp. Life Ins. Plan v. Knoebber,
244 F.3d 691 (9th Cir. 2001)........................................................................................... 6, 7, 12
TriContinental Leasing Corp. v. Zimmerman,
485 F. Supp. 495 (N.D. Cal. 1980) ......................................................................................... 13
United States v. Scharringhausen,
224 F. Appx 611 (9th Cir. 2007) ........................................................................................... 14
RULES
Fed. R. Civ. P. 4(e)(2)(A) ............................................................................................................... 5
Fed. R. Civ. P. 12(a)(1) ................................................................................................................... 5
Fed. R. Civ. P. 55(c)........................................................................................................................ 6
Fed. R. Civ. P. 60(b) ....................................................................................................................... 6
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I. INTRODUCTION
Defendant Martin Grunin is a serial offender who has repeatedly and willfully violated
Facebooks terms of service, defrauded Facebook, and abused its usersall for his own
handsome profit. Grunin accessed Facebook without authorization, sold access to Facebook
advertising accounts without authorization, impersonated other Facebook users to gain control of
their advertising accounts, doctored up bank records to make his fraudulent misrepresentations
believable, and then used hijacked Facebook advertising accounts to run $340,000 worth of
deceptive advertisements (for which he never paid) that tricked Facebook users into visiting
commercial websites that lined Grunins pockets with referral commissions.
Facebook personally served Grunin with the Complaint and Summons on May 22, 2014.
Grunin was given ample time to respond to the Complaint, to hire counsel licensed to practice
before this Court, and to defend himself. Instead, since the inception of this lawsuit, Grunin has
thumbed his nose at Facebook, its counsel, the Court, and, indeed, the entire legal system by
littering the docket with documents filled with extortionist demands of the Court, Facebook, and
the undersigned counselignoring (and even denying the existence of) the Courts rules and
procedures.
Grunin has failed to show good cause to set aside the default. First, Grunin acted culpably
in this matter because he willfully failed to file an answer to the Complaint. Second, Grunin has
not articulated a single fact to support a meritorious defense to Facebooks claims. Third,
Facebook will be prejudiced if default is set aside; Grunins sworn statements flatly rejecting the
U.S. banking system, U.S. currency, the U.S. legal system, and these proceedings suggest he may
hide his assets or deny their existence, robbing Facebook of its opportunity to recover damages.
Because Grunin cannot show good cause, his motion should be denied.
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II. FACTS
A. Facebook Background
Facebook offers an online service that enables people to connect and share information.
Compl. 11. More than one billion people use Facebook each month. Compl. 11. Facebook
generates revenue by selling ads that it displays to users when they use Facebooks websites or
mobile applications. Compl. 13. Advertisers typically purchase ads directly through
Facebooks online tool, and they may also interact with Facebook sales representatives for
assistance with their accounts. Compl. 14. All Facebook advertisers must create a Facebook
account, agree to Facebooks terms, including Facebooks Statement of Rights and
Responsibilities, available at https://www.facebook.com/legal/terms, and Advertising Guidelines,
available at https://www.facebook.com/ad_guidelines.php (Terms), and open an advertising
account. Facebook typically imposes spending limits on advertising accounts to ensure that
advertisers do not run up more advertising costs than they are able to pay. Facebook bills some
advertisers once per day, while settling other accounts by invoicing the advertisers on a monthly
or periodic basis, where the advertisers have a proven track record of reliability. Compl. 18.
Facebooks Terms prohibit (1) false, misleading, fraudulent, or deceptive claims or content, and
(2) ads that contain adult content or activities that are overly suggestive or sexually provocative.
See Facebooks Statement of Rights and Responsibility 4; Facebooks Advertising Guidelines
III, IV, V.
B. Summary of Grunins Illegal Activities
Grunin repeatedly disregarded Facebooks Terms, committed fraud against Facebook, and
took advantage of Facebook and its users for his own profit. Beginning in early 2011, Grunin
placed ads on Facebook that contained sexually provocative content. Compl. 21. When users
clicked on the ads, they were redirected to third-party websites that paid Grunin for the referral
traffic. Compl. 22. Both the sexually explicit nature of Grunins advertising and the deceptive
methods he used to bait users into clicking on his ads violate Facebooks Terms. When Facebook
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discovered this activity, it took measures to block Grunins access to Facebook by, among other
things, disabling Grunins personal account and advertising accounts. Compl. 23.
Undeterred, Grunin created new user accounts under fictitious names in violation of
numerous provisions of Facebooks Terms. Compl. 24. Grunin also sold unauthorized access
to Facebook advertising accounts to individuals who could not otherwise obtain them because
they had been previously banned by Facebook, did not have adequate credit, or they wanted to
run Facebook ads without paying for them. Compl. 28. This conduct, too, violates Facebooks
Terms.
In 2012, Grunin took his illegal activity on Facebook to the next level. Facebooks
security staff determined that Grunin was connected to fake Facebook accounts and aliases that
he used to defraud Facebook into creating new lines of advertising credit for several of
Facebooks legitimate advertising customers. He used these accounts and aliases to fraudulently
pose as legitimate Facebook advertising customers so that he could run his own advertisements
on their accounts. For example, in November 2012, Grunin used the alias Kayla Stewart to
pose as an employee of Marketing Drive, one of Facebooks legitimate advertising customers, to
defraud Facebook into creating new advertising accounts with high spending limits for a
Marketing Drive subsidiary called Thinkmodo. Compl. 31. Because Marketing Drive was on a
monthly billing cycle, Grunin was able to run approximately $40,000 worth of deceptive ads
without paying for them before Facebook and Marketing Drive discovered the fraud. Compl.
33. These included misleading ads that appeared to be endorsed by celebrities Jennifer Lopez and
Dr. Oz. Compl. 37.
Grunins fraud continued in February 2013, when he used the alias Colan Neilson to
contact a Facebook sales representative by email, claiming that Neilsons employer, Imprezzio
Marketing, was expanding into the Canadian market and needed ten new advertising accounts and
a line of credit. Compl. 39. Grunin then posed as the purported President of Imprezzio
Marketing, Felix Ward, to support Neilsons request for additional advertising accounts.
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Facebooks sales representative requested that Ward have one of his U.S. colleagues contact
Facebook. Compl. 41. Soon thereafter, the same Facebook representative received an email
purportedly from Joy Hawkins, the Search Engine Optimization Director of Imprezzio
Marketing, using the email joy@imprezziomarketing.com. The email stated: Felix requested
that I send this email to you. He will contact you in the next 15 minutes. Compl. 43. But the
real Joy Hawkins did not send this email to Facebook. Instead, Grunin either hijacked Hawkinss
email account to send the email or spoofed the from line of his email to make it appear that it
came from Hawkins. Compl. 44. When Facebook requested supporting documentation to
establish the credit, Grunin sent falsified bank statements that purported to show Imprezzio
Marketings finances. Compl. 45.
Relying on Wards and Neilsons representations, the email from Joy Hawkins, and
the falsified bank statements, Facebook provided advertising accounts and a credit line billed to
Imprezzio Marketing. Grunin then used the account to run at least $300,000 worth of deceptive
ads that violated Facebooks Terms. Compl. 46. To date, Facebook has not been paid for the
ads it served for the unauthorized Imprezzio Marketing accounts, and Grunin likely earned
significant sums of money in commission payments from his unauthorized campaigns.
Grunins violations of Facebooks Terms and fraud against Facebook were calculated and
willful. Each time Facebook implemented technical measures to disable one of Grunins user
accounts (all but the first of which were created in violation of Facebooks Terms), Grunin, to
avoid detection and circumvent Facebooks technical measures, adjusted his behavior before
creating, obtaining, or using new accounts to resume his placement of noncompliant Facebook
ads. Since 2011, Facebook has disabled at least 70 accounts linked to Grunin for violations of
Facebooks Terms. Compl. 56.
Grunin is not shy about what motivates him: Money drives me completely . . . . Ive
gotten so used [to] just being able to go anywhere without looking at any price tags. Declaration
of Judith B. Jennison in Support of Opposition (Jennison Decl.) 2; id. Ex. A. Grunin litters
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the Internet with photos and comments designed to flaunt the fortune that he has amassed. See,
e.g., Jennison Decl. Exs. BG. For example, in March of this year, Grunin boasted on a web
forum about his recent automobile purchase: an Audi R8 for which he paid roughly $100,000 in
cash. Jennison Decl. Ex. B. In the same post, Grunin remarked that he could have purchased a
$400,000 Lamborghini Aventador and made the $8,300-a-month payment, but that he chose not
to because the ride quality under 35 mph of the V12 Lambo that he had previously rented was
horrible. Id. Grunin assured readers that, to be practical, he had kept his 2011 BMW 535i
luxury sedan as his everyday car. Id. Grunins Instagram account, which was disabled after
this lawsuit was filed, also displayed photos of Grunins lavish lifestyle, including pictures of
Grunins Rolex watch, Audi R8, BMW, boat, and photos from high-end vacations. Jennison
Decl. Exs. CG. All of this suggests that Grunin is more sophisticated than he claims, and has
profited handsomely from his schemes against Facebook.
C. Harm to Facebook
Facebook has not been paid for approximately $340,000 worth of ads Grunin purchased
with unlawfully created or fraudulently acquired accounts. Compl. 53. Furthermore, Grunins
unlawful marketing activities have tainted the Facebook experience for Facebook users and
especially for the advertisers whose accounts he hijacked. Compl. 54. As a direct and
proximate cause of Grunins deceptive advertising and fraudulent advertising accounts, Facebook
has suffered and continues to suffer harm to its reputation and goodwill. Compl. 55. Facebook
has incurred additional damages attributable to the effort and resources used to identify,
investigate, and remove Grunins accounts and deceptive ads, and to stop Grunins injurious
activities.
D. Grunin Has Failed to Answer or Appear in This Action and Has Abused the Judicial
Process by Filing Threatening and Nonsensical Documents with This Court
Facebook personally served Grunin with the Complaint and Summons on May 22, 2014,
in accordance with Fed. R. Civ. P. 4(e)(2)(A). (Dkt. 13.) Grunins responsive pleading was due
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on June 12, 2014. Fed. R. Civ. P. 12(a)(1). Grunin did not file a responsive pleading by June 12,
2014, or anytime thereafter.
Instead, Grunin filed numerous documents that ignore the Courts rules and procedures
and make patently ridiculous demands of Facebook, its counsel, and the Court. For example,
Grunin demanded in public filings that Facebook pay him $1 million for the unauthorized use
of his name in pleadings (Dkt. 8) and that this Court be fined $500,000 for issuing rulings adverse
to Grunin or otherwise intervening in this case (Dkt. 27). In total, Grunin has filed fourteen
documents with this Court, each of which is a violation of the Courts rules and ignores the
legitimacy and seriousness of this lawsuit. See Dkts. 8, 10, 17, 23, 26, 27, 30, 31, 32, 35, 36, 37,
38, 39.
III. LEGAL STANDARD
Federal Rule of Civil Procedure 55(c) provides that a court may set aside an entry of
default for good cause. Fed. R. Civ. P. 55(c). The good cause standard that governs vacating
an entry of default under Rule 55(c) is the same standard that governs vacating a default judgment
under Rule 60(b). See, e.g., TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir.
2001). The good cause analysis requires the Court to consider whether the defendant has
successfully rebutted the following three factors: (1) that the defendants culpable conduct led to
the default; (2) that the defendant has no meritorious defense; and (3) that the default would
prejudice the plaintiff. See id. The defendant bears the burden of demonstrating that all three
factors favor reopening the default, and the Court may deny the motion if the defendant fails to
bear its burden on even one factor. See, e.g., Franchise Holding II, LLC v. Huntington Rests.
Grp., Inc., 375 F.3d 922, 926 (9th Cir. 2004); see also Meadows v. Dominican Republic, 817 F.2d
517, 521 (9th Cir. 1987) (If a default judgment is entered as the result of a defendants culpable
conduct, however, we need not consider whether a meritorious defense was shown, or whether
the plaintiff would suffer prejudice if the judgment were set aside.); Pena v. Seguros La
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Comercial, S.A., 770 F.2d 811, 815 (9th Cir. 1985) (holding that the defendants culpability, by
itself, is sufficient grounds to uphold denial of request to set aside default).
IV. ARGUMENT
A. Grunin Fails to Rebut Any of the Three Factors that Support Maintaining Entry of
Default
1. Grunins Culpable Conduct Led to Default
Grunins failure to respond to the Complaint in this case was without question the result of
his own culpable conduct. [A] defendants conduct is culpable if he has received actual or
constructive notice of the filing of the action and intentionally failed to answer. TCI, 244 F.3d at
697 (emphasis, internal quotation marks, and citation omitted). A failure to answer is intentional
if done willfully, deliberately, or in bad faith. Id. Bad faith includes any intention to take
advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate
the legal process. Id.
Grunin had actual notice of the lawsuit. Indeed, the docket is filled with documents
signed by Grunin himselfthat demonstrate his knowledge of the lawsuit and intent to interfere
with the Courts decision-making and to manipulate the legal process. In total, Grunin has filed
fourteen documents, none of which conform to the Courts rules, and almost all of which contain
coercive language, baseless threats, and, in many instances, a flat-out rejection of the U.S. legal
system. Highlights include:
Dkt. 8: Grunins signature on a document appended to a copy of the
Complaint containing a handwritten note stating: I do not accept this offer to
contract and I do not consent to these proceedings.
Dkts. 10, 17: Grunins name on a document ordering Facebook to tender
$100,000 and demanding a penalty of $1 million should Facebook continue its
lawsuit.
Dkts. 23, 27: Grunins signature on a document entitled Notice of Offer to
Settle, demanding $500,000 from Facebook for failure to accept and
demanding a penalty of $500,000 against the Court for issuing any orders or
judgments, or otherwise interfering with the dispute.
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Dkt. 26: Grunins signature on a document demanding Facebooks payment of
$100,000.
Dkt. 30: Grunins signature on a document demanding Facebooks payment of
$300,000 and containing a handwritten copy of a Formal Public Minister
Oath.
Dkt. 31: Grunins signature on a document stating that Facebook defaulted on
Grunins settlement offer.
Dkt. 35: Grunins signature on his own sworn affidavit stating, among other
things, that:
o the U.S. District Court is not a district court for the United States, 1;
o he believes no district courts for the United States exist, 2;
o the U.S. District Court has no injunctive power, 7;
o the U.S. District Court has no capacity for substantive due process,
910;
o Martin Grunin is [not] a citizen [or resident] of the UNITED
STATES, or the UNITED STATES OF AMERICA, or the USA, or
any Federal Government entity, 1720;
o Martin Grunin is not liable to or for any of the Federal Government
statutes or codes, such as the UNITED STATES CODE, or the CODE
OF FEDERAL REGULATIONS, 2728;
o Martin Grunin or any of his concerns of property are [not] the subject
of jurisdiction of any Federal, State, or municipal officers, 2930;
o the UNITED STATES DISTRICT COURT, NORTHERN
DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION, a
fictional corporate entity for profit and gain [does not] exist[], 45
46;
o Martin Grunin does not exist, 4748;
o the laws cited in Facebooks Complaint do not exist, 4950;
o this case does not exist, 5152; and
o Facebook does not exist, 53.
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Dkt. 36: Grunins signature on a document purporting to be administrative
judgments against Mark Zuckerberg, Facebooks chief executive officer, and
the undersigned counsel.
Dkt. 39: Grunins signature on a document denying the right of lawyers to
practice law, stating, among other things, that the state bar is unconstitutional,
and case law is unconstitutional, and denying the power of courts in this
country.
Grunin was aware of, consented to, and condoned the statements in these documentsfrom his
initial refusal to consent to these proceedings (Dkt. 8) to his disavowal of the courts power
over him (Dkt. 35).
Grunin claims that he is a 22 year old with no legal education or training who
mistakenly concluded that Mr. Costello was adequately representing his interests. Mot. to Set
Aside Def. at 3. But Grunins suggestion that Costello somehow took advantage of him simply is
not credible. Costello does not hide the fact that he is not an attorney or licensed to practice law.
A simple Google search of Costellos name produces ample evidence that Costello is not licensed
to practice law and represents clients by rejecting the existence of the authorities (such as
courts) that seek to impose power over them. Grunin makes his living on the Internet, and must
have been aware of this evidence; he claims in his affidavit that [b]ased upon recommendations
and reviews, I believed that Mr. Costello could represent my interests before the court. Grunin
Aff. 6. What Grunin really means is that he believed Costello had found a way to outsmart
Facebook and evade the Courts authority.
Costellos website and YouTube videos make clear that his services are targeted at
thwarting the legal system so that his clients can avoid liability. For example, one of Costellos
YouTube videos instructs viewers on how to get out of speeding tickets by denying the authority
of the police and the applicability and existence of the law. Jennison Decl. 9; Ex. H. Another
of Costellos YouTube videos, entitled Ask a Lawyer How to Crush every Bureaucratic Cash-
Confiscation/Court Case/Acct, informs viewers that attorneys are a fraud. Jennison Decl. 10;
Ex. I. One of Costellos comments to this video instructs readers not to hire a bull shit lawyer:
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Jennison Decl. Ex. I. In short, Grunin did not hire Costello to participate in the case in
good faith. Grunin hired Costello to outsmart Facebook and thwart the Courts authority.
Finally, Grunins claim that he immediately retained a licensed attorney when he learned
that Costello was not adequately representing him is plainly contradicted by the docket itself.
First, each and every docket entry was sent to Grunin's home address, and not to Costello, by
either the undersigned counsel or the Court. Second, Grunin was alerted at numerous points in
this lawsuit that the documents he was filing were inappropriate and contrary to his own
interests. Grunin ignored these alerts. A simple timeline of this case demonstrates this clearly:
On May 20, 2014, Facebook filed its Complaint. (Dkt. 1.)
Between June 6 and 10, Grunin filed numerous documents with the Court,
none of which constituted a responsive pleading. (Dkts. 8, 10, 17.)
On June 19, Facebook filed its Motion for an Order Prohibiting Brian Robert
Costello from Appearing on Behalf of Defendant and to Strike Grunins
filings to date (Motion to Strike). (Dkt. 18.) Facebooks Motion to Strike
explicitly put Grunin on notice that Costellos behavior was not only
inappropriate, but in violation of the law.
That same day, Facebook applied for default. (Dkt. 19.)
On June 23, the Clerk entered default. (Dkt. 22.) While Grunin claims he did
not know the consequences of entry of default, a simple Google search would
have provided him all the education he would need to understand the gravity
of the situation. Grunin clearly understands how to access and use the
Internet.
On June 25, Grunin filed another document. (Dkt. 23.)
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On July 9, the Court issued an Order to Show Cause why Facebooks Motion
to Strike should not be entered. (Dkt. 24.).
Between July 10 and 16, Grunin continued to file documents with this Court.
(Dkts. 26, 27, 30, 31.)
On July 21, the Court entered an Order (July 21 Order) prohibiting Costello
from appearing in this case and striking Grunins initial filings. (Dkt. 33.)
After entry of this Order, there could be no question regarding Costellos
inability to adequately represent Grunin.
After entry of the Courts July 21 Order, Grunin filed five more documents
with the Court. Grunins Affidavit denying the existence or the power of
this Court, the existence or the power of laws, and the existence of both
himself and Facebook, is signed July 22one day after the entry of the
Courts July 21 Order prohibiting Costello from appearing. (Dkt. 35.)
Grunins Notice of Default is signed July 24. (Dkt. 36.) Grunins signed
affidavit denying the right of lawyers to practice law, stating, among other
things, that the state bar is unconstitutional, case law is unconstitutional, and
denying the power of courts in this country, is undated, but was filed on
August 7nearly three weeks after entry of the July 21 Order prohibiting
Costello from appearing.
These filings seriously undermine Grunins claim that he immediately started his search
to find new representation after this Courts entry of its July 21 Order. And even if that claim
were true, it does not excuse Grunins signature on at least two documents post-dating the entry
of the Courts July 21 Order.
Grunin has not cited a single case on similar facts that supports his argument. Indeed, the
weight of authority is against him. Here, Grunin purposefully thumbed his nose at the Court, at
Facebook, and at Facebooks counsel. Grunin actively supported and participated in Costellos
willful attempts to thwart these judicial proceedings by signing his name to documents that deny
the legitimacy of the Court and the U.S. legal system. Grunins actions were willful and not the
result of negligence and carelessness. The Ninth Circuit has declined to set aside default in
cases involving conduct far less egregious than Grunins. See, e.g., Direct Mail Specialists, Inc.
v. Eclat Computerized Techs., Inc., 840 F.2d 685, 690 (9th Cir. 1988) (defendant had actual
notice of the summons and complaint and its presidenta lawyerwas presumably . . . well
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aware of the dangers of ignoring service of process); Franchise Holding II, LLC, 375 F.3d at 926
(If a defendant has received actual or constructive notice of the filing of the action and failed to
answer, its conduct is culpable.) (quoting Direct Mail Specialists, Inc., 840 F.2d at 690); Alan
Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988) (holding that defendants
conduct was culpable where defendant had actual notice of the complaint and presented evidence
that his attorneys monitored the docket); Meadows, 817 F.2d at 522 (rejecting defendants
argument that they were not culpable because they were advised by counsel not to respond to the
complaint, and holding that defendants conduct was culpable because they were aware of
relevant federal law[,] . . . fully informed of the legal consequences of failing to respond, . . .
[and] sufficiently sophisticated and experienced in the requirements of American law to protect
[their] interests); Benny v. Pipes, 799 F.2d 489, 494 (9th Cir. 1986) (holding that defendants
failure to answer the complaint was culpable when defendants had actual notice of the complaint
and had filed motions to extend their time to answer); Pena, 770 F.2d at 815 (holding that
defendants conduct was culpable where defendant had provided its customers and state insurance
regulators with an incorrect address, thereby precluding service of process on the company).
2. Grunin Has Failed to Present a Meritorious Defense
To satisfy the second prong of the good faith test, a defendant must present specific facts
that would constitute a defense. See Madsen v. Bumb, 419 F.2d 4, 6 (9th Cir. 1969). While this
burden is not extraordinarily heavy, TCI, 244 F.3d at 700, Grunin fails to meet it. Indeed,
Grunin fails to provide any facts constituting a defense. In his motion, Grunin merely says that a
meritorious factual defense to this lawsuit will be asserted at the time of discovery or trial.
Mot. to Set Aside Default at 7. Similarly, Grunins affidavit proclaims only that he has
meritorious legal . . . [and] factual defenses to this lawsuit. Grunin Aff. 89. Grunin does
not even go so far as to deny the facts Facebook has asserted against him (though even that would
be insufficient), see Franchise Holding II, LLC, 375 F.3d at 926. Mot. to Set Aside Default at 6
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7 (arguing that Facebook has failed to meet its factual burden without actually denying that
Grunin engaged in the acts set forth in the Complaint).
Courts regularly decline to set aside defaults when presented with unsupported denials. In
Sovereign Capital Resources, LLC v. Armstrong Square Limited Partnership, 58 F. Appx 335,
336 (9th Cir. 2003), the Ninth Circuit held that the trial court did not abuse its discretion in ruling
that the defendants had failed to establish a meritorious defense where one defendants
declaration proclaimed, summarily, I believe I have a meritorious defense to this lawsuit, and
where the defendants failed to provide factual support for their defenses in any of their other
filings or pleadings. See also Cohen v. Murphey, 222 F.R.D. 416, 418 (N.D. Cal. 2004) (refusing
to set aside default where defendants failed to provide any facts supporting their denials); Tri
Continental Leasing Corp. v. Zimmerman, 485 F. Supp. 495, 49799 (N.D. Cal. 1980) (holding
that conclusory allegations were insufficient to set aside default, and parties must provide
adequate factual and legal bases for defenses). Grunins statement that he has meritorious
legal . . . [and] factual defenses to this lawsuit is just the kind of bald assertion that courts have
found to fall far short of even this low bar, and should therefore be rejected.
3. Facebook Will Be Prejudiced if Default is Set Aside
A prejudicial delay is one that results in tangible harm such as loss of evidence,
increased difficulties of discovery, or greater opportunity for fraud or collusion. Id. (quoting
Thompson v. Am. Home Assurance Co., 95 F.3d 429, 43334 (6th Cir. 1996)). Facebook will be
prejudiced if Grunin is allowed to proceed with this lawsuit. Grunin has repeatedly and brazenly
violated Facebooks Terms for his own profit, and, since 2011, Facebook has disabled at least 70
accounts linked to Grunin for violations of Facebooks Terms. In the absence of a swift judgment
and entry of a permanent injunction, Facebook is without recourse for Grunins bad acts.
Moreover, Grunins affidavit swearing that he does not participate in U.S. currency or the U.S.
banking system, and he does not recognize the legitimacy or enforceability of the Courts orders
or authority suggest that he may attempt to hide or deny the existence of his assets in order to
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avoid liability. (Dkt. 35, 3536.) This risk is augmented each day that this litigation is
extended. See, e.g., United States v. Scharringhausen, 224 F. Appx 611, 613 (9th Cir. 2007) (In
light of information that Scharringhausen might be concealing assets, the district court concluded
that reopening the case would cause further delay and could prejudice the United States in
collecting taxes from him.).
V. CONCLUSION
A request to set aside default should be denied if the applicant fails to establish any one of
the good cause factors. Grunin fails to establish all three. Accordingly, Facebook respectfully
requests that this Court deny Grunins Motion to Set Aside Default.
DATED: September 2, 2014 PERKINS COIELLP
By: /s/ Judith B. Jennison
Judith B. Jennison, Bar No. 165929
JJennison@perkinscoie.com
Attorneys for Plaintiff
Facebook, Inc.

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