The opinion of the court was delivered by: Gary L. Sharpe U.S. District Judge
This suit arises out of the alleged infringement of plaintiffs' copyrights through the defendants' public performance of plaintiffs' musical works without having paid required licensing fees. Currently pending are plaintiffs' motions seeking severance of defendant Northern Lights, Inc. from the action and entry of a default judgment against defendant Kip Finck. For the reasons that follow the motions are granted.
Plaintiff Broadcast Music, Inc. ("BMI") is a corporation which has been granted the right to license the public performance rights in the musical works alleged to have been infringed by the defendants herein. (See Dkt. No. 1.) The remaining plaintiffs are the owners of copyrights in such musical works. Id. Defendant Northern Lights, Inc. is a corporation which runs a night club in Clifton Park, New York called Northern Lights (the "establishment"). Id. The establishment is overseen by defendant Kip Finck ("Finck"), who is an officer of Northern Lights, Inc.. Id.
From June of 2004 to June of 2006, BMI sent multiple letters to Finck notifying the defendants that their license to publicly perform plaintiffs' works had expired, and that they needed to renew the license or cease their infringing performance of such works. (See Dkt. Nos. 12:2-12:3.) BMI personnel also called the establishment frequently during this period regarding the expired license and spoke to Finck. Id. Despite these notifications, defendants failed to renew their license. Id. As such, BMI employees were dispatched to monitor the establishment on November 16 and 17, 2004 and August 4, 2006. Id. On these occasions BMI's employees documented the ten public performances of plaintiffs' works which give rise to this action. Id.
Subsequently, on May 3, 2007, plaintiffs commenced this action under the United States Copyright Act of 1976, 17 U.S.C. § 101 et seq., seeking damages and equitable relief against Finck and Northern Lights, Inc. (See Dkt. No. 1.) Defendants were served with process on May 14, 2007. (See Dkt. Nos. 6, 7.) To date neither defendant has appeared in this action, and their time to do so has expired. See FED. R. CIV. P. 12(a). On August 20th, plaintiffs filed a Request for Entry of Default pursuant to Federal Rule of Civil Procedure 55 and Local Rule 55.1. (See Dkt. No. 8.) The Clerk of the Court entered such default on August 22nd. (See Dkt. No. 11.) Apparently, Northern Lights, Inc. has since filed for bankruptcy. As such, plaintiffs now seek to sever their claims against Northern Lights, Inc. pursuant to FED. R. CIV. P. 21. (See Dkt. No. 16) Plaintiffs further move for a default judgment against Finck, awarding them: 1) a permanent injunction prohibiting Finck from infringing plaintiffs' musical works, 2) $40,000 in statutory damages for the infringement, 3) attorneys' fees in the amount of $1,625 and 4) prejudgment interest at the rate set by 28 U.S.C. § 1961. (See Dkt. No. 12)
Under FED. R. CIV. P. 21 "the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party."*fn1
Whether to sever claims is a decision within the discretion of the trial court. However, the following factors provide some guidance " (1) whether the claims [against the parties] arise out of the same transaction or occurrence, (2) whether the claims present common questions of fact or law, (3) whether severance would serve judicial economy, (4) prejudice to the parties caused by severance, and (5) whether the claims involve different witnesses and evidence." Boston Post Road Medical Imaging, P.C. v. Allstate Ins. Co., No. 03 Civ. 3923, 2004 WL 1586429, at *1 (S.D.N.Y. July 15, 2004) (citation omitted).
In the current instance, the claims against both defendants arise out of the same infringement, present common question of fact and law, and necessarily involve the same witnesses and evidence. Additionally, the interests of judicial economy are not heavily implicated here regardless of whether severance is granted, as both defendants have defaulted. However, the prejudice to the plaintiffs if the claims against Northern Lights, Inc. are not severed, combined with the relatively small prejudice to Finck if they are, compels the court to grant the motion.
Due to Northern Lights, Inc.'s petition in bankruptcy, all judicial proceedings against it have been stayed pursuant to 11 U.S.C. § 362(a). As such, failing to sever the claims against Northern Lights, Inc. would result in plaintiffs' inability to recover from either defendant and a statistical closure of the entire case. Finck, however, is not entitled to the automatic stay, and it is manifestly unjust to allow him to shield himself behind the protection afforded Northern Lights, Inc. as a defendant in bankruptcy. In similar circumstances numerous courts have come to the same conclusion, granting motions to sever claims against bankrupt co-defendants as long as they were not indispensable parties. See, e.g., Teachers Ins. & Annuity Assoc. of America v. Butler, 803 F.2d 61, 65 (2d Cir. 1986); Cashman v. Montefiore Medical Center, 191 B.R. 558, 561 (S.D.N.Y. 1996). Here Northern Lights, Inc. is not an indispensable party, despite the fact that it may be jointly and severally liable for the default judgment plaintiffs seek. See Samaha v. Presbyterian Hosp. in the City of New York, 757 F.2d 529, 531 (2d Cir. 1985). Additionally, Finck will suffer no real prejudice by the ...