Court Opinion

ID: 2980473
Source: CourtListenerOpinion
Date Created: 2015-09-22 19:10:56.909842+00
Date Added: 2024-06-11T08:52:38.848576
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                                 File Name: 11a0309p.06

              UNITED STATES COURT OF APPEALS
                             FOR THE SIXTH CIRCUIT
                               _________________

                                                X
                                                 -
 DASSAULT SYSTEMES, SA,
                                                 -
                             Plaintiff-Appellee,
                                                 -
                                                 -
                                                     No. 10-1987
           v.
                                                 ,
                                                  >
                                                 -
                                                 -
 KEITH CHILDRESS, dba Practical Catia

                        Defendant-Appellant. -
 Training,
                                                 -
                                                N
                  Appeal from the United States District Court
                 for the Eastern District of Michigan at Detroit.
              No. 09-10534—Lawrence P. Zatkoff, District Judge.
                      Decided and Filed: December 13, 2011
              Before: MARTIN, MOORE, and COOK, Circuit Judges.

                                 _________________

                                     COUNSEL
ON BRIEF: Douglas P. LaLone, RADER, FISHMAN & GRAUER PLLC, Bloomfield
Hills, Michigan, for Appellee. Keith Childress, Algonac, Michigan, pro se.

                                 _________________

                                      OPINION
                                 _________________

       KAREN NELSON MOORE, Circuit Judge.                  Plaintiff-Appellee Dassault
Systemes, SA (“Dassault”) filed suit against Defendant-Appellant Keith Childress, d.b.a.
Practical Catia Training (“Childress”), seeking damages for copyright and trademark
infringement, unfair competition, and Michigan Consumer Protection Act violations
arising from Childress’s allegedly unauthorized use of Dassault’s name and software
licenses to operate a for-profit training course. Upon final judgment for Dassault,
Childress filed a notice of appeal challenging a number of the district court orders,

                                           1
No. 10-1987        Childress v. Dassault Systemes, SA                             Page 2

including the denial of Childress’s motion to set aside entry of default judgment, the
grant of Dassault’s motion for leave to subpoena the FBI, the denial of Childress’s
motion to strike certain paragraphs from Dassault’s complaint, and the judgment entry
and order for a permanent injunction. For the reasons set out below, we REVERSE the
district court’s order denying Childress’s motion to set aside entry of default judgment,
VACATE the award of damages in Dassault’s favor and the order for a permanent
injunction, and REMAND for further proceedings. Because we generally agree with the
district court’s assessment of both the Federal Rule of Criminal Procedure 6(e)
nondisclosure requirements and Childress’s motion to strike, we AFFIRM the district
court’s judgment on those issues.

                       I. BACKGROUND & PROCEDURE

A. Factual Background

       For about fifteen years, Childress has owned and operated Practical CATIA, a
small business that trained individuals to use the computer-aided design program
CATIA, which was developed by the French company Dassault. Dassault owns the
copyrights for its CATIA software products, including the CATIA V5 software at issue
in this case. Dassault has also registered the CATIA trademark with the United States
Patent and Trademark Office (“USPTO”). Citing the potential for confusion and the
similarity of the marks and underlying services, the USPTO denied Childress’s request
for a trademark on the name “Practical Catia Training” in August 2003.

       In 2001, Childress obtained the initial license for Dassault’s CATIA V5 software
through IBM, which was a business partner of Dassault and was involved in licensing
CATIA software. The license was issued to the name “G. Bailey and Associates,” which
Childress asserts was the original name of his business and was located at Childress’s
address. The license agreement provided for one annual nodelock license that permits
the CATIA software to be used on a single computer based on a unique Target ID.
Childress paid the approximately $2,380 yearly fee for that license from 2002 until 2010.
No. 10-1987        Childress v. Dassault Systemes, SA                              Page 3

       The parties do not dispute that Childress operated CATIA software on multiple
computers during the course of his training classes. Childress claims that IBM and
MSC, which is a business partner of IBM and an authorized CATIA reseller, began
providing additional licenses in 2001 in exchange for Childress’s willingness to provide
sales leads and to place MSC advertising on his website. According to Childress, an
agreement with MSC provided that IBM would supply Practical CATIA with fully
functional licenses for use in the training courses, as well as temporary licenses for
students’ personal use. Although Childress admitted to copying his single nodelock
license to multiple computers, Childress maintains that he was merely implementing a
“workaround” provided by MSC that avoided certain problems with the license server
used to access the software on the training computers. R. 55 (Childress Aff. ¶¶ 59–61).

       Dassault counters that Childress had no such licenses, and that Childress instead
conducted his training courses using bootlegged copies of the CATIA software created
from his single legitimate license. Dassault maintains that Childress illegally cloned the
Target IDs and software to permit him to upload the software onto multiple additional
machines. According to Dassault, any software issues requiring a “workaround” were
the result of Childress’s attempts to operate unlicensed and illegitimate copies of the
CATIA software. R. 54-3 (Clarkson Aff. ¶ 15).

B. Procedural History

       On October 30, 2006, the FBI executed a search warrant for Practical CATIA’s
office and training site, during which time it confiscated twenty computers alleged to
contain “bootlegged” copies of the CATIA software in violation of federal copyright
law. R. 55 (Childress Aff. ¶ 74). The search warrant authorized the agents to seize
records, documents, correspondence, and other materials pertaining to alleged violations
U.S. copyright law. Grand jury subpoenas issued to Childress, G. Bailey and Associates,
and Practical Catia on the same date broadly sought access to any records or materials
associated with Childress’s training business, and therefore encompassed the materials
seized in the FBI raid. The FBI ultimately declined to prosecute the case.
No. 10-1987         Childress v. Dassault Systemes, SA                                Page 4

        Dassault filed its civil complaint on February 12, 2009. In his initial response
to Dassault’s complaint, Childress sought an extension, which the district court granted.
The district court ordered Childress to file an answer by March 27, 2009. Childress
proceeded to file a number of other motions that purported to respond to the complaint,
but he never filed an answer. On April 1, 2009, for example, Childress filed a Federal
Rule of Civil Procedure 12(e) motion for a more definite statement, which the district
court denied; the district court then ordered Childress to file his answer within thirty
days of the court’s May 22 order. Childress’s response to that order was a Rule 12(f)
motion to strike information from the complaint, which he filed on June 25, 2009. Along
with the motion to strike, Childress also filed a letter explaining why he filed the Rule
12(f) motion in lieu of the answer that the district court had demanded.

        Because Childress had yet to file a responsive pleading, Dassault filed a motion
for default judgment on July 6, 2009. On October 27, 2009, the district court entered an
order directing Childress to show cause why default judgment should not be entered.
Childress responded by explaining that he believed in good faith that his actions were
permitted under the Federal Rules of Civil Procedure. Childress indicated that he had
filed the initial motion for a more definite statement to avoid disclosing confidential
information related to the grand jury investigation. After entering the grand jury
subpoenas and search warrants into the record, Childress filed a motion to strike, instead
of an answer, based on his belief that the filing was his only recourse to Dassault’s
inclusion of allegedly secret grand jury information in its complaint.

        Childress subsequently filed a handful of additional motions, seeking, among
other things, reconsideration of earlier court orders and a stay against the district court’s
order permitting Dassault to issue a subpoena to the FBI. Finally, on December 7, 2009,
after determining Childress’s show-cause response to be insufficient to justify his failure
to file a responsive pleading, the district court granted Dassault’s motion for default
judgment. Childress then filed a motion on January 27, 2010, requesting that the district
court set aside the entry of default judgment. On July 20, 2010, the district court denied
Childress’s motion and, after considering the parties’ motions addressing the appropriate
No. 10-1987        Childress v. Dassault Systemes, SA                               Page 5

measure of damages, entered both a permanent injunction against Childress’s further use
of the CATIA software and a judgment in Dassault’s favor in the amount of $964,465
plus attorney fees and costs. Childress filed this timely appeal.

                                     II. ANALYSIS

A. The District Court’s Entry of Default

       Childress first contends that the district court abused its discretion by failing to
set aside the entry of default after he demonstrated good cause in accordance with Rule
55(c) of the Federal Rules of Civil Procedure. To evaluate fully the merits of that
argument, we must, as a preliminary matter, address an issue that appears to have created
some inconsistencies within our precedents: the application of Rule 55(c), which
permits a court to set aside a default or default judgment for good cause, versus the
application of Rule 60(b), which grants relief from final judgments.

       Under either rule, our review invokes the well-established factors set forth in
United Coin Meter Co. v. Seaboard Coastline Railroad, which assess “whether (1) the
default was willful, (2) a set-aside would prejudice plaintiff, and (3) the alleged defense
was meritorious.” 705 F.2d 839, 844 (6th Cir. 1983). Although the elements are the
same, the standard for applying them to a motion to set aside a final default judgment
under Rule 60(b) is more demanding than their application in the context of a motion to
set aside an entry of default under Rule 55(c). O.J. Distrib., Inc. v. Hornell Brewing Co.,
340 F.3d 345, 352 (6th Cir. 2003).

       The ambiguity in this case stems from the following course of events. Dassault
framed its initial motion as a request for default judgment, and the district court granted
the motion in those terms. The final entry of default judgment, however, did not occur
until July 20, 2010, after the district court fully considered the damages question and
determined the amount that Childress owed. Prior to the judgment entry, Childress filed
a “motion to set aside order granting plaintiff’s motion for entry of default judgment or
to set aside entry of default judgment.” R. 49. The district court denied Childress’s
“motion to set aside default” in a July 20, 2010 order. Dassault Systemes, SA v.
No. 10-1987        Childress v. Dassault Systemes, SA                                  Page 6

Childress, No. 09-10534, 2010 WL 2854339 (E.D. Mich. July 20, 2010). In doing so,
the district court did not identify which standard applied, but “out of caution” analyzed
Childress’s request to set aside the entry of default under the Rule 55(c) analysis. Id. at
*4.   The district court ultimately concluded that Childress could not meet the
requirements to set aside default under either Rule 55(c) or Rule 60(b). Id. at *7.

       Because of the initial grant of default judgment and the timing of Childress’s
motion to set aside entry of default judgment, it is not immediately clear which rule
should have been applied. At first blush, the district court’s grant of Dassault’s motion
for default judgment suggests that Rule 60(b) should apply. But, because final judgment
was not entered until after Childress filed his motion to set aside entry of default
judgment, applying the Rule 60(b) standard to a motion challenging a not-yet-final
default judgment seems premature.

       We have previously differentiated between the Rule 55(c) “good cause” standard
and the Rule 60(b) standard for setting aside a default judgment as follows:

       Once a defendant fails to file a responsive answer, he is in default, and
       an entry of default may be made by either the clerk or the judge. A
       default judgment can be entered by the clerk only if a claim is liquidated
       or, if a claim is unliquidated, by the judge after a hearing on damages.
       A default can be set aside under rule 55(c) for “good cause shown,” but
       a default that has become final as a judgment can be set aside only under
       the stricter rule 60(b) standards for setting aside final, appealable orders.

Shepard Claims Serv., Inc. v. William Darrah & Assocs., 796 F.2d 190, 194 (6th Cir.
1986) (internal quotation marks omitted). Subsequent cases have clarified that the
stricter Rule 60(b) standard for setting aside a default judgment applies “once [the
default] has ripened into a judgment,” meaning “once the court has determined damages
and a judgment has been entered.” O.J. Distrib., Inc., 340 F.3d at 353 (emphasis added)
(internal quotation marks omitted); Waifersong, Ltd. v. Classic Music Vending, 976 F.2d
290, 292 (6th Cir. 1992) (“[O]nce the court has determined damages and a judgment has
No. 10-1987             Childress v. Dassault Systemes, SA                                           Page 7

been entered, the district court’s discretion to vacate the judgment is circumscribed by
public policy favoring finality of judgments and termination of litigation.”).1

         These rulings are also consistent with the well-established rule that Rule 60(b)
applies only to final, appealable judgments. See 12 James Wm. Moore et al., Moore’s
Federal Practice §§ 60.22(3)(b), 60.23 (3d ed. 2000); cf. Berthelsen v. Kane, 907 F.2d
617, 620 (6th Cir. 1990) (noting that “a default judgment may be vacated only by
satisfying the stricter standards applied to final, appealable orders under Fed. R. Civ.
P. 60(b)”). An order granting default judgment without any judgment entry on the issue
of damages is no more than an interlocutory order to which Rule 60(b) does not yet
apply. See Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1364 n.27 (11th Cir.
1997) (“When the amount of damages is in dispute . . . only the court may enter
judgment, and then only after determining the amount of damages. There can be no
‘judgment’ without a determination of relief. Thus, the document entitled ‘default
judgment’ in this case is more properly termed simply a ‘default.’” (citation omitted));
Dow Chem. Pac. Ltd. v. Rascator Mar. S.A., 782 F.2d 329, 335–36 (2d Cir. 1986)
(stating that absent a determination on damages, the court’s entry of default judgment
“was in fact no more than another interlocutory entry of default,” and determining that
the defendant would have been entitled to move to set aside the default under Rule

         1
           We acknowledge that our prior precedent, INVST Financial Group, Inc. v. Chem-Nuclear
Systems, Inc., 815 F.2d 391 (6th Cir.), cert. denied, 484 U.S. 927 (1987), is somewhat inconsistent with
these rulings. In fact, the procedural posture of that case was quite similar to the one at hand: the district
court’s grant of the plaintiff’s motion for default judgment was followed by the defendant’s motion
opposing the entry of default judgment well before the district court conducted any hearing on damages.
Id. at 396–97. INVST Financial Group, Inc., however, was preceded by Shepard Claims and United Coin
Meter, which both indicate that as a matter of procedure, a judge does not enter a default judgment until
after the damages have been ascertained. Shepard Claims, 796 F.2d at 194 (stating that “a default
judgment can be entered . . . by the judge after a hearing on damages” (second emphasis added)); United
Coin Meter, 705 F.2d at 844 (discussing the procedural steps to default judgment and indicating that after
entry of default, the defendant can seek to have the default set aside under Rule 55(c); if the defendant’s
“motion is not made or is unsuccessful, and if no hearing is needed to ascertain damages, judgment by
default may be entered by the court” (emphasis added) (internal quotation marks omitted)).
          Although it cited the correct standards, the INVST court assumed without analysis that the order
granting default judgment actually qualified as “an order that has become final as a judgment” and that the
Rule 60(b) standard therefore applied. INVST Fin. Group, 815 F.2d at 398. Had it properly applied
Shepard Claims and United Coin Meter, however, the INVST court could not have concluded that an order
granting a motion for default judgment issued prior to any hearing on the issue of damages qualified as a
final judgment for purposes of applying the Rule 60(b) standard. Insofar as INVST conflicts with our
earlier published decisions differentiating between the applicable standards for entry of default and default
judgment, we are bound by those earlier decisions. United States v. Caruthers, 458 F.3d 459, 472 n.6 (6th
Cir. 2006).
No. 10-1987         Childress v. Dassault Systemes, SA                                Page 8

55(c)). Thus, absent entry of a final default judgment, the more lenient Rule 55(c)
standard governs a motion to set aside a default or default judgment. FDIC v. Francisco
Inv. Corp., 873 F.2d 474, 478 (1st Cir. 1989).

        In granting Dassault’s motion for default judgment, the district court indicated
that “[j]udgment [would] enter after the issue of damages is resolved.” R. 40 (Dec. 7,
2009 Op. & Order at 6) (emphasis added). The final default-judgment entry on the
docket was filed on July 20, 2010. Because Childress filed his motion to set aside entry
of default judgment on January 27, 2010, well before the district court entered a final
judgment, we conclude that the Rule 55(c) “good cause” standard should be applied.

        We review for abuse of discretion the district court’s denial of Childress’s motion
to set aside entry of default judgment under Federal Rule of Civil Procedure 55(c). O.J.
Distrib., Inc., 340 F.3d at 352. Because of our general preference for judgments on the
merits, however, “a ‘glaring abuse’ of discretion is not required for reversal of a court’s
refusal to relieve a party of the harsh sanction of default.” United Coin Meter, 705 F.2d
at 846. Our review is therefore a “forgiving” one, United States v. $22,050.00 U.S.
Currency, 595 F.3d 318, 322 (6th Cir. 2010), and applies a “less deferential species of
abuse of discretion rather than the normal abuse of discretion review,” id. at 324. In
conducting this review, we “construe[ ] all ambiguous or disputed facts in the light most
favorable to the defendant[ ],” resolving any doubts in his favor. INVST Fin. Group,
Inc., 815 F.2d at 398 (alterations in original).

        Childress’s argument rests on the assertion that the district court’s analysis of the
three relevant factors presented an unfair evaluation of the facts. In particular, Childress
argues that the district court (1) failed to take into account his “meritorious defenses”;
(2) improperly determined that Dassault would be prejudiced; and (3) too hastily
dismissed his “credible explanation” for failing to comply with the court order requiring
him to file an answer to Dassault’s complaint. See Appellant Br. at 25–30, 31–38,
38–45. We agree as explained below.
No. 10-1987         Childress v. Dassault Systemes, SA                                Page 9

        1. Childress’s Culpability

        The district court’s decision to deny Childress’s motion to set aside entry of
default judgment was based in large part on its perception that Childress had engaged
in deliberately dilatory motions practice—including ignoring two court orders that he
file an answer—rather than answering Dassault’s complaint. Dassault, 2010 WL
2854339, at *4–5. “To be treated as culpable, the conduct of a defendant must display
either an intent to thwart judicial proceedings or a reckless disregard for the effect of its
conduct on those proceedings.” Shepard Claims Serv., 796 F.2d at 194.

        Although we sympathize with the district court’s exasperation at Childress’s
numerous lengthy filings, we do not agree that the facts support the conclusion that
Childress was engaged in an egregious motions practice that embodied a “calculated
strategy to delay these proceedings and avoid discovery.”             Appellee Br. at 37.
Concededly, it is possible that Childress was intentionally undermining Dassault’s
discovery efforts. More likely, however, is that Childress, as a pro se litigant, was
merely attempting to navigate the none-too-intuitive labyrinth of procedural rules.
Indeed, his show-cause response, the letter accompanying his Rule 12(f) motion, and a
sworn affidavit of his cousin, Lisa Oliver, a legal secretary, which documents his
confusion and his attempts to reach out to her for assistance in interpreting the Federal
Rules of Civil Procedure, all support this view. Furthermore, Childress filed his motion
to set aside entry of default judgment within a reasonable time after the district court
entered the order. This also weighs against the district court’s finding that Childress was
intentionally disrespectful of the court proceedings. Shepard Claims Serv., 796 F.2d at
194. Taking these facts in the light most favorable to Childress as our precedent
requires, we do not believe that the culpability factor weighs as heavily in the equation
as the district court concluded. See Krowtoh II LLC v. Excelsius Int’l Ltd., 330 F. App’x
530, 537 (6th Cir. 2009) (assessing a foreign defendant’s culpability for failing to
respond to court orders and concluding that “[w]hile the facts suggest that [defendant]
made a conscious—although misguided—decision to ignore the district court
No. 10-1987         Childress v. Dassault Systemes, SA                              Page 10

proceedings, his explanation demonstrates that he did not intend to disrespect the court
proceedings”).

        2. Prejudice

        Dassault maintains that it has experienced prejudice due to (1) Childress’s
attempts to thwart discovery, which Dassault for the first time asserts could result in its
inability to retrieve data from the computers because of the potential that the machines
“freez[e] up due to inaction[,] which means the data on these [hard] drives may be
spoiled,” Appellee Br. at 31; (2) Childress’s continued operation of his training facilities
in violation of Dassault’s copyrights, causing avoidance of royalty payments, frustration
of competition, and diminished copyright value; and (3) increased legal fees due to
discovery issues and the need to defend against “baseless motion[s],” id. at 32.

        “[D]elay alone is not a sufficient basis for establishing prejudice.” INVST Fin.
Group, 815 F.2d at 398 (internal quotation marks omitted). Nor does increased litigation
cost generally support entry of default. $22,050, 595 F.3d at 325. Instead, “it must be
shown that delay will result in the loss of evidence, create increased difficulties of
discovery, or provide greater opportunity for fraud and collusion.” INVST Fin. Group,
815 F.2d at 398 (internal quotation marks omitted). Additionally, the relevant inquiry
concerns the future prejudice that will result from reopening the judgment, not prejudice
that has already resulted from the defendant’s conduct. Berthelsen, 907 F.2d at 620–21.

        Taking each of Dassault’s arguments in turn, we conclude that the district court
also gave undue weight to the prejudice element of the United Coin Meter analysis.
Initially, we observe that Dassault’s newly presented assertion that the hard drives of the
computers in the FBI’s possession could freeze up and destroy the evidence is
completely unsupported, and appears to be a questionable attempt to reframe its
argument into one that demonstrates a potential loss of evidence. Dassault’s concern
about legal fees is similarly unpersuasive.         It goes without saying that further
proceedings would have such an impact. See $22,050, 595 F.3d at 325 (“[I]t does not
make intuitive sense that simply claiming an increase in litigation cost should be
sufficient to establish prejudice. Setting aside default will always increase litigation cost
No. 10-1987        Childress v. Dassault Systemes, SA                             Page 11

to the plaintiff because the plaintiff will actually have to litigate the case.”). But see
United States v. Goist, 378 F. App’x 517, 519 (6th Cir. 2010) (concluding that the need
to defend against “additional frivolous filings” can constitute prejudice under the United
Coin Meter analysis). Thus, this argument also does not strongly militate in Dassault’s
favor on the issue of prejudice. Finally, Dassault’s argument that it is prejudiced by its
inability to enforce its intellectual property rights largely boils down to prejudice that
resulted from past conduct, which is irrelevant to the question whether to set aside the
entry of default. To the extent that Dassault’s argument could be construed as
addressing prejudice that could result upon reopening the case, it amounts to little more
than an assertion of prejudice by delay. Although a trial would likely prolong the time
during which Dassault remains uncompensated for alleged violations of its intellectual-
property rights, the ultimate purpose of that trial would be to determine whether Dassault
is entitled to compensation. To that end, if Childress were found liable, the licensing
fees and royalties owed would be assessed as damages and Dassault would presumably
be made whole upon successfully demonstrating Childress’s alleged infringement. The
prejudice element therefore is significantly less compelling than the district court
concluded, and it does not weigh heavily in favor of denying Childress’s motion.

       3. The Existence of a Meritorious Defense

       Childress finally raises a number of defenses, which he claims have the potential
to absolve him of liability for copyright and trademark infringement. These include
express and implicit license, fair use, copyright and trademark estoppel, statute of
limitations, and trademark laches. Because it determined the first two elements
(culpability and prejudice) to weigh heavily against Childress, the district court
erroneously skipped any analysis of Childress’s purported meritorious defenses. Despite
the district court’s failure to consider them, we may nonetheless evaluate those defenses
on appeal. See Amernational Indus., Inc. v. Action–Tungsram, Inc., 925 F.2d 970, 977
(6th Cir.), cert. denied, 501 U.S. 1233 (1991).

       A defense is “meritorious” if it is “good at law.” $22,050, 595 F.3d at 326
(quoting Williams v. Meyer, 346 F.3d 607, 614 (6th Cir. 2003)). Attempting to
No. 10-1987         Childress v. Dassault Systemes, SA                             Page 12

demonstrate that Childress does not meet this prerequisite, Dassault engages in a lengthy
evaluation of the merits of each of Childress’s defenses. But the test is not whether a
defense is likely to succeed on the merits; rather, the criterion is merely whether “there
is some possibility that the outcome of the suit after a full trial will be contrary to the
result achieved by the default.” Id. (quoting Burrell v. Henderson, 434 F.3d 826, 834
(6th Cir. 2006)). Thus, even conclusory assertions may be sufficient to establish the
“hint of a suggestion” needed to present a meritorious defense. Id. (internal quotation
marks omitted).

        Childress correctly points out that he is not obligated at this stage to provide
detailed factual allegations. See id. (noting the absence of any factual allegations and
the conclusory nature of the defenses, but nonetheless concluding that the asserted
defenses were meritorious as the term is defined in the context of setting aside default).
Even so, Childress presented the district court with factual allegations and legal
arguments to support each of his asserted defenses. Although he may not succeed on the
merits of those defenses, that does not foreclose a determination that at least one of his
asserted defenses may meet the relatively lenient “good at law” standard.

        The statute-of-limitations defense satisfies the hint-of-a-suggestion requirement,
particularly in light of Dassault’s inconsistent statements concerning when the company
actually learned of the alleged infringement. Indeed, although Dassault’s later motions
and its appellate brief adamantly maintain that it learned of the possible copyright
infringement as a result of the FBI investigation, Dassault initially stated that it had
informed the FBI of Childress’s alleged infringement. Compare R. 53 (Pl.’s Br. in Opp.
to Mot. to Set Aside Order at 17) (“The FBI conducted its raid in October of 2006,
giving rise to Dassault’s knowledge of the infringement and starting the clock for accrual
of an infringement claim. Once Dassault learned that the FBI would take no action to
protect its valid copyrights, Dassault filed suit in February of 2009; well within the three
year period.”), with R. 12 (Pl.’s Mot. for Entry of a Protective and Privacy Act Order at
1) (“Dassault informed the FBI about Childress’ illegal activity. The FBI ultimately
conducted a raid on Childress’ business and seized his computers.”). This discrepancy
No. 10-1987            Childress v. Dassault Systemes, SA                                        Page 13

raises the possibility that Dassault’s infringement claims were barred by the statute of
limitations. See 17 U.S.C. § 507(b) (prohibiting copyright-infringement claims that are
filed more than three years after they accrued). Childress has thus raised at least one
defense that presents “some possibility” of a different outcome. “All that matters is
whether a well-stated defense, if sustained, would change the outcome.” $22,050, 595
F.3d at 326. Childress meets this burden.

         4. Rebalancing the United Coin Meter Factors

         After reweighing the United Coin Meter factors based on the above analysis, we
conclude that the balance does not tip in Dassault’s favor. Childress has met his burden
of demonstrating a possibly meritorious defense, and the prejudice element also does not
tilt strongly toward Dassault. Furthermore, even if there were some culpability on
Childress’s part, there is not evidence to support an “intent to thwart judicial proceedings
or a reckless disregard for the effect of its conduct on those proceedings,” particularly
given his status as a pro se defendant. Shepard Claims Serv., 796 F.2d at 194. The
balance of those factors is thus insufficient to support the district court’s refusal to set
aside the entry of default. Cf. Waifersong, Ltd., 976 F.2d at 293 (stating that where
“defendants came perilously close to articulating the existence of a meritorious defense
. . . and demonstrating the absence of substantial prejudice to plaintiffs, . . . it would
require particularly culpable conduct by the defendants to outweigh those two factors
and tip the balance toward denial of relief”). Our conclusion is particularly appropriate
in light of the precedential directive that “[a]ny doubt should be resolved in favor of the
petition to set aside the judgment so that cases may be decided on their merits.” United
Coin Meter, 705 F.3d at 846 (internal quotation marks omitted). We therefore reverse
the district court’s order denying Childress’s motion to set aside entry of default
judgment, its order granting Dassault’s motion for default judgment, and its July 20,
2010 default-judgment entry, and remand for proceedings consistent with this opinion.2

         2
          We note also that given the above analysis on the three United Coin Meter elements, we would
have reached the same result even under the stricter Rule 60(b) standard. Though perhaps misguided,
Childress’s responses did not demonstrate the level of culpability required to preclude a determination of
excusable neglect under Federal Rule of Civil Procedure 60(b)(1). Coupled with a possibly meritorious
defense and a lack of significant prejudice to Dassault, relief even from final default judgment would have
No. 10-1987            Childress v. Dassault Systemes, SA                                         Page 14

B. The FBI Subpoena

         Childress next asserts that the district court erred when it granted Dassault’s
motion to subpoena the FBI for access to the documents and computers that were seized
during the FBI’s execution of the search warrant in 2006. According to Childress,
access to that information would violate the presumption of nondisclosure afforded by
Rule 6(e) of the Federal Rules of Criminal Procedure because the FBI seizures were
made pursuant to a grand jury investigation.3

         We review the district court’s decision to permit disclosure of grand jury
materials for abuse of discretion. United States v. Alpha Med. Mgmt., Inc., No. 96-5825,
1997 WL 359065, at *5 (6th Cir. June 26, 1997) (unpublished opinion) (citing Douglas
Oil Co. v. Petrol Stops Nw., 441 U.S. 211, 223 (1979)). Federal Rule of Criminal
Procedure 6(e) creates an obligation of secrecy that prevents certain persons from
disclosing “a matter occurring before the grand jury.” FED. R. CRIM. P. 6(e)(2)(B).
“[C]onfidential documentary information not otherwise public obtained by the grand
jury by coercive means is presumed to be ‘matters occurring before the grand jury.’” In
re Grand Jury Proceedings, 851 F.2d at 866. Thus, even documents that were originally
prepared in the ordinary course of business are presumptively “matters occurring before
the grand jury” when they have been requested pursuant to a grand jury investigation.
FDIC v. Ernst & Whinney, 921 F.2d 83, 87 (6th Cir. 1990).

         “Mere contact with a grand jury, however, does not change every document into
a matter ‘occurring before a grand jury’ within the meaning of Rule 6.” United States
v. Rutherford, 509 F.3d 791, 795 (6th Cir. 2007). Rather, a party can rebut the

been warranted. See Waifersong, 976 F.2d at 292 (stating that when a defendant falls within one of the
Rule 60(b)(1) categories, relief should be granted if he can also show a meritorious defense and an absence
of substantial prejudice).
         3
           After the district court granted leave to do so, Dassault issued a subpoena to the FBI requesting
“[a]ll computers, materials and documents that were seized at Keith Childress’ business, Practical Catia,
at the address of . . . .” R. 38 (Emergency Mot. for Stay Ex. C). Because the subpoena did not contain a
particularized description of the information sought and its relevance to Dassault’s case, the FBI has not
agreed to turn over the requested information. R. 17 (Ex. 6) (citing 28 C.F.R. §§ 16.21–16.29, which
governs the disclosure of information pertaining to Department of Justice business by current or former
Department of Justice employees, as justification for the FBI’s refusal).
No. 10-1987             Childress v. Dassault Systemes, SA                                          Page 15

presumption that the sought-after materials should be so classified by demonstrating that
“the information is ‘public or was not obtained through coercive means or that disclosure
would be otherwise available by civil discovery and would not reveal the nature, scope,
or direction of the grand jury inquiry.’” Id. (quoting In re Grand Jury Proceedings, 851
F.2d at 866–67).

         Because the search warrants and grand jury subpoenas were issued on the same
date and to the same FBI special agent, the district court correctly erred on the side of
determining that the investigations were linked and that computers and records were
obtained via the grand jury’s coercive process. As a result, the district court assumed
that the presumption against nondisclosure applied.4 The question then becomes
whether Dassault can overcome the presumption by demonstrating that the materials did
not in fact constitute “matters occurring before the grand jury.” Childress does not
dispute the district court’s determination that both the computers and the business
records would be discoverable as relevant evidence. Thus, our analysis begins with the
question whether those materials would “reveal the nature, scope, or direction of the
grand jury inquiry.”

         We evaluated a similar question in United States v. Alpha Medical Management,
Inc., No. 96-5825, 1997 WL 359065, at *5 (6th Cir. June 26, 1997). There, we
determined that the business records at issue would not reveal information concerning
the grand jury inquiry, stating:

         4
           It is an open question in this circuit whether materials sought pursuant to a search warrant issued
at about the same time as a grand jury subpoena fall within the scope of “matters occurring before the
grand jury.” The Fourth Circuit, in an opinion addressing a similar issue held that, as long as the search
warrant is not a de facto grand jury process, the materials obtained pursuant to that warrant generally will
not be subject to Rule 6(e) disclosure restrictions, even if a parallel grand jury investigation is occurring
simultaneously. See In re Grand Jury Subpoena, 920 F.2d 235, 243 (4th Cir. 1990); see also In re Grand
Jury Matter, 682 F.2d 61, 64 (3d Cir. 1982) (“The disclosure of information obtained from a source
independent of the grand jury proceeding, such as a prior government investigation, does not violate Rule
6(e).” (internal quotation marks omitted)). The Fourth Circuit’s decision, however, was based on a close
evaluation of the facts, which made clear that the “IRS investigation and the grand jury investigation were
not indiscriminately merged [and] that the initial IRS investigation was conceived and initiated without
any connection to a grand jury proceeding.” In re Grand Jury Subpoena, 920 F.2d at 243. In this case,
the district court merely assumed that the investigations were related and, perhaps because the parties
presented no facts addressing the relatedness of the FBI and grand jury investigations, did not conduct a
specific factual inquiry. We need not resolve that issue on appeal.
No. 10-1987        Childress v. Dassault Systemes, SA                             Page 16

       Although the grand jury’s subpoena of these records reveals that the
       investigation must in some way be correlated to the business affairs of
       Alpha, the fact that the grand jury subpoenaed all of Alpha’s records for
       a certain time period makes any link between these records and the
       determination of the nature or direction of the investigation tenuous.
       Furthermore, because these records were prepared in the ordinary course
       of business, this information would not tend to reveal the substance of
       the grand jury inquiry, as might be the case with records prepared by
       prosecutors or transcripts of witness testimony.

Id. A similar line of reasoning can be applied in this case. Dassault asserts that “100%
of the requested materials in [its] subpoena existed in the ordinary course of Childress’
business,” and that its subpoena deliberately “did not seek any of the substance of grand
jury testimony, the identity of any grand jury witness(es), FBI investigative notes, or the
like.” Appellee Br. at 42–43 (emphasis omitted). Although the search warrants that
defined the records to be seized by the FBI sought materials specifically related to
violations of U.S. copyright law, the grand jury subpoenas sought a broad swath of
materials, including records pertaining to Childress’s software and hardware licenses and
expenses, client lists, design work, student enrollment, income, as well as any other
records related to Childress or his business. Given the scope of the grand jury’s potential
investigation, it is unlikely that Dassault’s attempt to obtain only the computers and
business records that the FBI seized will shed light on the scope or substance of the
grand jury investigation. That the information Dassault seeks is limited to preexisting
computers and business records makes it further unlikely that the disclosure would
somehow reveal the scope or nature of the grand jury inquiry. The district court
therefore did not abuse its discretion in determining that Dassault had rebutted any
presumption that the materials sought in its subpoena were matters occurring before the
grand jury.

C. Motion to Strike

       Childress next argues that the district court erred by denying his motion to strike
certain paragraphs from Dassault’s complaint, which Childress maintains revealed
“secret” information concerning the grand jury investigation that was protected under
Federal Rule of Criminal Procedure 6(e). Federal Rule of Civil Procedure 12(f) permits
No. 10-1987            Childress v. Dassault Systemes, SA                                        Page 17

a court to “strike from a pleading an insufficient defense or any redundant, immaterial,
impertinent, or scandalous matter.” “We review the decision to grant or deny a motion
to strike for an abuse of discretion, and decisions that are reasonable, that is, not
arbitrary, will not be overturned.” Seay v. Tenn. Valley Auth., 339 F.3d 454, 480 (6th
Cir. 2003) (internal quotation marks omitted).

         Federal Rule of Criminal Procedure 6(e)(2) applies only to grand jurors;
interpreters; court reporters; operators of recording devices; persons transcribing
recorded testimony; attorneys for the government; and persons to whom disclosure is
made under Rule 6(e)(3)(A)(ii) or (iii), which encompasses government personnel
assisting in the enforcement of federal law. The rule imposes no obligation of secrecy
on persons or entities that are not included on that list. United States v. Jeter, 775 F.2d
670, 675 (6th Cir. 1985); see also 1 Charles Alan Wright & Andrew D. Leipold, Federal
Practice and Procedure § 106 (4th ed. 2008). Thus, the district court correctly
determined that Dassault “is a private corporation not implicated by the restrictions of
Rule 6(e)(2).” Dassault Systemes, SA v. Childress, No. 09-10534, 2009 WL 3602084,
at *5 (E.D. Mich. Oct. 27, 2009). Indeed, even if the FBI did improperly disclose
information, Dassault, as a non-covered entity, is not sanctionable under Rule 6(e)(2) for
that disclosure.5 Accordingly, Dassault’s allegations were neither immaterial nor
scandalous, and the district court did not abuse its discretion in refusing to strike them.

D. Right to a Jury Trial

         Childress’s final argument centers on his right to a jury trial. Specifically,
Childress argues that the district court violated his Seventh Amendment rights when it
entered damages against him without affording him the trial he requested in his
opposition motion to Dassault’s statement of damages and proposed injunctive relief.
Because we are reversing and remanding due to the district court’s erroneous refusal to
set aside the entry of default judgment, we need not address whether the district court

         5
          Although Childress is correct in his observation that the limited scope of Federal Rule of
Criminal Procedure 6(e) does not prevent a court’s imposition of other statutory penalties arising from the
disclosure of protected grand jury information, see Jeter, 775 F.2d at 675, Childress offers no basis for
imposing such penalties here.
No. 10-1987        Childress v. Dassault Systemes, SA                            Page 18

erred in denying Childress’s request for a jury trial, and instead we vacate the district
court’s damages award in favor of Dassault and its order granting Dassault’s request for
a permanent injunction.

                                 III. CONCLUSION

       For the foregoing reasons, we AFFIRM the district court’s judgment in part and
REVERSE in part. We REVERSE the district court’s orders granting Dassault’s
motion for default judgment and denying Childress’s motion to set aside entry of default
judgment, VACATE the permanent injunction against Childress and the default-
judgment entry awarding damages to Dassault, and REMAND for proceedings
consistent with this opinion. Because we agree with the district court’s conclusion that
the materials Dassault seeks from the FBI are not comprised of protected grand jury
information, we AFFIRM the district court’s judgment that Dassault’s subpoena does
not violate Federal Rule of Criminal Procedure 6(e). For the reasons stated above, we
also AFFIRM the district court’s denial of Childress’s motion to strike.