## Facts

- Music publishers affiliated with ASCAP owned copyrights in six musical compositions.
- Vasfi Muedini owned and operated Port Town Family Restaurant in Racine, Wisconsin.
- The restaurant played an FM radio station through a “radio-over-speaker” system providing continuous background music in the dining area.
- ASCAP investigators visited the restaurant and heard the copyrighted songs played through the restaurant’s system from the FM broadcast.
- The radio station’s ASCAP license prohibited retransmission and did not authorize receivers of the broadcast to publicly perform the compositions.
- The publishers sued, alleging Muedini publicly performed the songs without authorization, infringing their copyrights.
- Muedini did not answer; the district court entered default judgment as to liability.
- After receiving damages submissions, the district court reconsidered liability on its own initiative, applied the 17 U.S.C. § 110(5) “home-style” exemption, and entered summary judgment for Muedini, dismissing the case.

## Issues

1. After entry of default on liability, may a district court sua sponte grant summary judgment for the defaulting defendant by rejecting liability on a legal theory that depends on facts not established by the pleadings?
2. Did the complaint’s allegations of ownership and unauthorized public performance state a legally sufficient claim for copyright infringement notwithstanding the potential applicability of the § 110(5) “home-style” exemption?

## Decision

- The Seventh Circuit reversed and remanded.
- The district court erred by granting summary judgment for the defaulting defendant after liability had been established by default.
- The complaint adequately stated a claim for copyright infringement based on ownership and unauthorized public performance.
- The § 110(5) exemption could not be applied on an undeveloped record to negate liability in favor of a defaulting defendant.

## Legal Principles

- Upon default, well-pleaded factual allegations relating to liability are taken as true; a court may not resolve factual disputes or supply favorable facts for the defaulting party to defeat liability.
- A default does not entitle a plaintiff to relief if the complaint fails to state a claim as a matter of law, but that inquiry must be confined to the pleaded facts.
- To plead copyright infringement, a plaintiff must allege ownership of valid copyrights and unauthorized copying or public performance.
- The 17 U.S.C. § 110(5) “home-style” exemption functions as a defense requiring factual development (e.g., nature of equipment, size and setting, and whether the broadcast was further transmitted), and it cannot be presumed to apply to defeat admitted allegations.

## Conclusion

The Seventh Circuit held that the publishers’ complaint stated a valid infringement claim and that, after default on liability, the district court could not rescue the defaulting restaurant owner through sua sponte summary judgment based on a fact-dependent § 110(5) exemption; the case was remanded for further proceedings.


Cass Cnty. Music Co. v. Muedini, 55 F.3d 263 (7th Cir. 1995)