Righthaven LLC v. Newman

Filing 33

REPLY to Response to 25 MOTION to Dismiss for Lack of Jurisdiction Subject Matter and Personal First Amended Complaint ; filed by Defendant Garry Newman. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D)(DiRaimondo, Anthony)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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THE HONORABLE JAMES C. MAHAN, JUDGE PRESIDING

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RIGHTHAVEN, LLC,

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Plaintiff,

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vs.

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PAHRUMP LIFE, et al.,

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NO. 2:10-CV-1575-JCM-PAL

Defendants.

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MOTION HEARING
/

REPORTER'S TRANSCRIPT OF PROCEEDINGS
WEDNESDAY, JULY 27, 2011

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10:00 A.M.

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APPEARANCES:
For the Plaintiff:

SHAWN MANGANO, ESQ.
DALE CENDALI, ESQ.

For the Defendants:

LAURENCE F. PULGRAM, ESQ.
CLYDE DeWITT, ESQ.
J. MALCOLM DeVOY, ESQ.

Amicus Curiae:

PROFESSOR JASON SCHULTZ

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Reported by:

Joy Garner, CCR 275
Official Federal Court Reporter

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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LAS VEGAS, NEVADA, WEDNESDAY, JULY 27, 2011

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10:00 A.M.

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P R O C E E D I N G S

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THE CLERK:

This is the time set for

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the show cause hearing and plaintiff's motion to

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amend or correct complaint, Civil Case Number

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2:10-CV-1575-JCM-PAL; Righthaven, LLC versus

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Pahrump Life, and all others.
Counsel, please note your
appearance for the record.

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THE COURT:

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MR. MANGANO:

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Good morning, your Honor,

Shawn Mangano on behalf of Righthaven.

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THE COURT:

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MR. MANGANO:

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Mr. Mangano.

Thank you.
With me is Dale Cendali

who has been admitted pro hac vice.

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MS. CENDALI:

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THE COURT:

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MS. CENDALI:

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THE COURT:

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MR. PULGRAM:

Thank you, your Honor.
Cendali, is that right?
That's right, your Honor.
Thank you.

All right.

Good morning, your Honor,

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for Amicus Democratic Underground, Laurence

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Pulgram of the law firm of Fenwick and West.

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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With me is Curt Apsal (phonetic) of the

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Electronic Frontier Foundation.

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THE COURT:

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MR. SCHULTZ:

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Jason Schultz.

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Yes, sir.
Good morning, your Honor,

I'm one of the amici as well.

MR. DeWITT:

Good morning, your Honor,

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Clyde DeWitt for Citizens Against Litigation

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Abuse, Amicus Curiae.

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based on your order of June 29th.

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MR. DEVOY:

We were allowed to appear

Good morning, your Honor,

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J. Malcolm DeVoy of Randazza Legal Group here on

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behalf of Amicus Media Bloggers Association

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pursuant to this Court's order.

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THE COURT:

Yes, sir.

Thank you.
And those of you

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who have appeared in front of me before know that

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I welcome the amicus people.

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other voices I guess and not to say, well, let's

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not have a hearing, we'll just decide it on the

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papers, or whatever.

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everybody a chance to be heard.

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say something, but if you want to say something

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first, go ahead.

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MR. MANGANO:

And I want to hear

I always like to give

No.

I was going to

Go ahead, your

Honor.
THE COURT:

I've reviewed this with my

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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brain trust.

Let me tell you what I'm inclined

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to do and I'll give everybody a chance to argue.

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Righthaven has been involved in

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litigation with, you know, in this building, you

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know, where other judges have decided cases, you

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know, which are interesting but not necessarily

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controlling on my thinking.

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this, though, to cut right to the heart of the

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matter, and it's kind of a procedural thing, but

So as I look at

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I don't think Righthaven has standing based on

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Lujan versus Defenders of Wildlife, 504 U.S. 555

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at 571.

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federal jurisdiction ordinarily depends on the

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facts as they exist when the complaint is filed.

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In footnote 4 it says, the existence of

And then there is a follow-up

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case, which I have somewhere here in my

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paperwork, Newman-Green versus Alfonzo-Larrain,

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490 U.S. 826, 109 S.Ct. 2218.

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federal jurisdiction ordinarily -- this is Roman

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numeral number II in the opinion -- let's see,

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it's page 2222 of the Supreme Court Reporter and

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488 of -- no, I'm sorry, it's at page 2222 of the

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Supreme Court Reporter.

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The existence of

The existence of federal
jurisdiction ordinarily depends on the facts as

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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they exist when the complaint is filed.

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it notes there are two exceptions, the defective

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under Title 28 USC, Section 1653, defective

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allegations of jurisdiction may be amended upon

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terms in the trial of appellate court, and that

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is to say it again, defective allegations of

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jurisdiction which suggests that it addresses

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only incorrect statements about jurisdiction that

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actually exist and not the affects of the

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And then

jurisdictional facts themselves.

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And then the second exception is

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Rule 21 which has since been amended, but anyway

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this case where it has been interpreted by the

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Second Circuit in Herrick, H-E-R-R-I-C-K,

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Company, Inc. versus SCS Communications, Inc.,

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251 F.3d, 315 at 329, Second Circuit, a 2001

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case.

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facts necessary to the establishment of diversity

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jurisdiction are subsequently determined to have

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obtained all along, a federal court may simply

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allow a complaint to be amended to assert those

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necessary facts.

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need to be corrected, then we can correct the

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allegations, and then treat diversity

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jurisdictions having existed from the beginning,

And it says, quote, as a result where the

And again the allegations that

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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but no such amendment is possible when the

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underlying facts (and not merely the pleadings)

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are inadequate to support federal jurisdiction.

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For curing jurisdiction in such a circumstance

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requires more than just changing the pleadings.

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And the facts here are that, and

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now I'm going to rely on other decisions as well,

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but as other courts have found, you know, there

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was no federal jurisdiction under the agreement

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with Stephens Media.

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is to dismiss the case based on lack of

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jurisdiction.

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people have to say.

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So what I'm inclined to do

Now I'll be glad to hear whatever

MS. CENDALI:

Your Honor, may I take

the podium?

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THE COURT:

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MS. CENDALI:

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Yes, ma'am, sure.
Thank you.

First off, thank you, your

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Honor, for granting my pro hac petition and for

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letting me be here today.

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THE COURT:

Ms. Cendali, put your right

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hand on the slant and find the button on the

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slant.

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that's your tax dollars at work.

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button again and it will go down.

That's how you adjust the microphone.
So hit the

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

So

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MS. CENDALI:

Does that seem the best

angle there?

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THE COURT:

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MS. CENDALI:

I think so.
All right, thank you very

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much.

I had a similar problem once at the United

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States Supreme Court, and Judge Scalia suggested

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I lower the podium to the maximum extent possible

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so I think I'll do the same here today.

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THE COURT:

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MS. CENDALI:

Oh, all right, that's fine.
In any case, your Honor,

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Righthaven does have standing today with regard

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to the restated and amended Strategic Alliance

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Agreement.

No court has construed that

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agreement.

That agreement is on all fours with

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the Silvers case in the Ninth Circuit.

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a bare right to sue but fully grants the right to

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Righthaven in all rights to the copyrights at

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issue in this case including the right to sue.

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THE COURT:

It is not

You speaking now of the

amendment, is that right?

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MS. CENDALI:

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THE COURT:

That's right.
Okay, but we go by the

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facts as they existed at the time the lawsuit was

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filed.

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MS. CENDALI:

So let's focus on that.

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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Your point is that in the Lujan case you need to

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look at the facts as they existed at the time the

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complaint was filed.

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which our opponents have not tried to distinguish

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such as --

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THE COURT:

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Well, we have cited cases

Oh, just wait, just wait.

MS. CENDALI:

Well, such as Valmont,

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Travelers, Gallans, Novende (all phonetic), all

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of which accepted post filing facts as giving

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rise to standing.

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the Northstar decision in the Northern District

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of California, a 2011 decision, is particularly

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helpful and say that --

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And those courts, and I think

THE COURT:

So you're saying I should

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follow the Northern District of California rather

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than the Supreme Court?

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MS. CENDALI:

No.

The difference is

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you have to read the rule that, of course, we're

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not arguing that standing is not to be considered

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at the time the complaint is filed, but almost

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all of those cases, and as far as I know all of

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the cases that have discussed this, have not also

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dealt with the issue of a motion for leave to

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amend to supplement the pleadings to plead the

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new jurisdictional facts.

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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In fact, the Haddad (phonetic)

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case in the Second Circuit specifically noted

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that while a lot of cases cite the old saw that

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you need to look at the facts at the time the

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complaint was filed, they don't deal with the

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more sophisticated issue of when you have a

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motion for leave to amend in light of subsequent

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events.

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THE COURT:

But I mean the facts have

changed?

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MS. CENDALI:

Yes, the facts have

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changed, fundamentally have changed.

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business agreement that was originally entered

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into is no longer the same business agreement

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that it is today and what the Northstar case in

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the -- in the --

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THE COURT:

The

But I mean what Supreme

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Court cases say is that allegations, you can

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change allegations, but you can't -- you can

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amend, well, where you want additional

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allegations, but not where you want to change the

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facts.

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MS. CENDALI:

But the issue is how you

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reconcile that with the issue of a motion for

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leave to amend which we've liberally granted.

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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Again in the Northstar case, it discusses the

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fact that there the argument, similar to what's

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being made here by the amici, is that, well, it's

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too late because we looked at what happened on

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the day of the original filing, that's all you

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looked at.

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And the court said that this

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argument elevates form over substance and goes on

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to say that although there's no published Ninth

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Circuit authority on this point, courts in other

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circuits have found that parties may cure

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standing deficiencies through supplemental

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pleadings.

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was a subsequent assignment that cured in that

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case the admitted lack of existing standing

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originally, because there was that subsequent

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assignment, the court said, I'm going to deny the

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motion for -- the motion to dismiss and permit

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the supplemental pleading.

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And thus, because in that case there

And the court did this for a

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very practical reason because the alternative, as

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we know, standing is a jurisdictional issue with

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dismissal without prejudice.

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be re-filed tomorrow based on the new restated

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and amended Strategic Alliance Agreement which

The complaint can

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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has never been viewed by any court, and we would

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end up delayed but in the same position we are in

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now, and the courts recognize why go through that

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as a matter of judicial economy.

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practical under Rule 15 to permit an amendment?

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There's relation back under Rule 15, let it amend

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back, relate back, to the original filing and

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let's get on with it.

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Isn't it

There's already been an answer

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filed.

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much like to get to the merits, your Honor.

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our point is that there is a line of cases.

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Northstar I thought was helpful because it's

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2011, and it summarized a lot of the law.

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There's a line of cases that say, yes, absolutely

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you need to look at standing at the time of

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filing, but you also need to read that in

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conjunction with subsequent facts and a motion

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for supplemental pleading.

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Let's get to the merits and we'd very
So

And in light of those cases and

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in light of the practicality, it makes more sense

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we respectfully submit to accept the

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supplemental -- or grant our motion for leave to

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amend and let the case proceed to the merits

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phase because alternatively your Honor will

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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dismiss without prejudice which is the rule and

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we'll be re-filing, and it will just take that

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much longer to get to the actual merits of the

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copyright infringement here.

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Thank you.

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THE COURT:

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MR. PULGRAM:

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THE COURT:

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MR. PULGRAM:

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THE COURT:

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MR. PULGRAM:

All right.

Opposition?

Thank you, your Honor.
Yes, sir.

Mr. Pulgram?

Yes, sir.
Yes.
Thank you for allowing

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the amici to appear because this is an important

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issue and the particular issue that you have is a

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slightly progressed version of what has come

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before the other courts here.

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exactly correct that the case should be dismissed

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for lack of standing under the Lujan line of

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cases and five cases in this jurisdiction have so

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held.

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precedent, but we do believe and we'll talk about

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in a moment about whether they are collateral

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estoppel.

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Your Honor is

Those aren't binding on your Honor as

Second, all of those cases have

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held, as your Honor is stating, that when they

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not manufacture facts to create jurisdiction,

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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that was the language used by Judge Dawson in the

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Mostofi case, which is a final judgment in which

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he said, plaintiffs and Stephens Media attempt to

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impermissibly amend the facts to manufacture

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standing.

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federal practice.

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made here is twofold on the part of plaintiffs.

That just doesn't work as a matter of
And I think the argument being

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First, we would like to amend

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even though we can't, and if you don't let us,

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we'll have to sue again.

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Honor, is that this is not after a finding that

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there was no standing because there was no

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ownership of the copyright.

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be a dismissal without prejudice and, in fact,

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those cases that have already dismissed on the

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basis of lack of ownership of Righthaven, all of

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which are the five cases before yours, all of

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those cases also have preclusive effect here, and

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let me explain if I may.

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And our position, your

That is not going to

In the typical situation of a

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copyright case there are two elements that need

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to be shown, ownership of a copyright and a

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copyright.

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element of the claim.

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element of ownership is an element of standing.

The element of ownership is an
Now, in addition, the

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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And so when Judge Hunt, Judge Dawson, Judge Pro

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concluded there was no ownership under the SAA in

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Righthaven, they concluded that an element of the

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claim of copyright is missing.

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THE COURT:

And just for the record,

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SAA is the Strategic Alliance Agreement for the

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record, but go ahead.

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MR. PULGRAM:

I'm sorry to use the

jargon but exactly right, and that was the

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agreement that existed at the beginning of this

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case and, Judge, in the Hoehn case Judge Pro even

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went on to say that the clarification so-called

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did not create an ownership interest.

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has, therefore, been settled that under the SAA

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there is no ownership interest in Righthaven and

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that isn't --

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THE COURT:

Now it

But they respond what about

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this second -- I'm going to use the wrong

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terminology -- but the second amendment, if you

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will, to the Strategic Alliance Agreement?

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MR. PULGRAM:

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THE COURT:

So we have -And understand what I'm

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saying, I'm saying, okay, I understand these

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other judges ruled against Righthaven, but now

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with the second amendment to the Strategic

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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Alliance Agreement, that cures all of that.
MR. PULGRAM:

And the answer to that

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is, it does not because it has already been

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concluded that under the Strategic Alliance

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Agreement whether you amend it later or not,

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under the Strategic Alliance Agreement there is

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no ownership.

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court, of which there have been four saying that

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this is no ownership, come back, change the facts

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You cannot after a judgment of a

and avoid preclusive effect.

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And I think there are two cases

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that I would like to provide to your Honor and

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your brain trust on this point because we

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received yesterday a brief at 6:58 in the morning

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that for the first time addressed this question

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of collateral estoppel.

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our June 27th brief.

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this yesterday and, if I may, I'll hand you

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copies of the cases.

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THE COURT:

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We briefed the issue in

We got their first brief on

Sure, yes, sir.

Have you

provided -MS. CENDALI:

They provided it moments

ago, your Honor.
THE COURT:

Well, this case I think we

originally set for hearing back in May I think,

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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and somebody wants to file something and, like I

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say, it's my preference is I want to hear more

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rather than less so --

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MR. PULGRAM:

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copies of two cases.

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THE COURT:

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MR. PULGRAM:

These are two multiple

Okay.
And I did provide them as

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soon we got copies from Kinko's this morning

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before the hearing, but the first case is a case

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out of the Northern District of Illinois, Judge

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Shadur, and it was affirmed in the Seventh

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Circuit.

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page which is his first decision.

And the place to start is the very last

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And the last paragraph says

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because Hyperquest is not an exclusive licensee

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of any of the rights that it now claims, it is

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without standing to bring the current action.

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Accordingly both the complaint and this action

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are dismissed for lack of subject matter

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jurisdiction.

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your Honor can find no ownership, no exclusive

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rights, no standing, to dismiss this, and he

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calls it lack of subject matter jurisdiction.

So just like all the courts and

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If you turn to the second page

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of this, he explains because one of the parties

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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said, Judge, that was a dismissal without

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prejudice, that was just subject matter

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jurisdiction.

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corner, he explains, no, that was with prejudice,

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and I'll read that paragraph.

And in the bottom right-hand

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THE COURT:

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MR. PULGRAM:

Yes, sir.
By sharp contrast, what

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was at issue in this case was not subject matter

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jurisdiction in the real sense, but rather the

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standing, or more accurately the lack of

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standing, of Hyperquest to file suit in a case in

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which, one, a copyright indisputably existed and;

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two, this court had ample power to decide all

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issues of that copyright's validity and its

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claimed infringement.

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order, this court rejected HQ's litigative effort

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definitively and with prejudice because of its

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lack of standing, not because of the absence of

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power of subject matter jurisdiction.

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And then he says, in the

And so what Judge Shadur said

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and what the Seventh Circuit said is, I dismissed

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it because there was no ownership of an exclusive

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right.

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it's the part of jurisdiction standing that is

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about justiciability not about power and,

I called it lack of jurisdiction, but

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

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therefore, it's a dismissal with prejudice.

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that's why, your Honor, those decisions by the

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other courts have collateral estoppel effect

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here, and it's why your Honor when you dismiss

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because the SAA has no -- has no ownership

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interest in Righthaven, it should be a dismissal

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with prejudice.

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9

And

Now, the plaintiffs argue we
just want to re-file with this new restated

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agreement and that's where the second case that I

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handed you, the Penonia (phonetic) case, comes

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in.

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cited a lot of cases that say a dismissal for

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lack of jurisdiction, a dismissal just for lack

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of jurisdiction, is not collateral estoppel.

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all that Judge Hunt and Judge Mahan decided was

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there was no jurisdiction because we didn't own

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the copyright, that's not collateral estoppel.

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They cited a lot of cases for

The plaintiffs have in their brief yesterday

So

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that proposition, none of which dealt with

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ownerships of copyrights, not any, and none of

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which dealt with this case, the situation where

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the merits are intertwined with standing,

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intertwined with jurisdiction, and what the

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Penonia Farms case shows is that where a court

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

19

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has dismissed a claim based on lack of ownership,

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that is collateral estoppel, and I would direct

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the point to the -- the court to the third of the

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pages of this decision, the paragraph ending

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two-thirds down on the right-hand side.

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THE COURT:
notes.

I was looking at the head

I'm sorry, the first page?

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MR. PULGRAM:

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THE COURT:

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sorry, let me catch up to you.

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right-hand side, yes, sir.

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MR. PULGRAM:

On the third page.
On the third page, I'm

Right.

Oh, on the

At the bottom of

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that paragraph there is a sentence that begins

14

about seven lines up, the bottom of the last full

15

paragraph.

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District of New York Federal Court thoroughly

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investigated the effect of the 1990 settlement

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agreement in Penonia Farm's ownership interest in

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Penonia One, reconsidered the issue in Penonia

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Two.

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jurisdiction did actually and necessarily

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determine the standing issue, thus satisfying the

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second prong of the Yamaha test, and the Yamaha

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test is the test for issue preclusion.

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we have is a decision because it decided

This court finds that the Southern

Therefore, a court of competent

So what

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

20

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ownership that is preclusive.

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THE COURT:

But their response is,

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well, we've amended the Strategic Alliance

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Agreement, now we do have ownership.

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MR. PULGRAM:

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THE COURT:

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8

That's right.
And no court has addressed

that.
MR. PULGRAM:

That's exactly what they

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say, your Honor, and they say pay no attention to

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the fact that the agreement that was litigated on

11

which we sued has been conclusively determined to

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not grant standing.

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tunc what happened in the last year-and-a-half,

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and I know Judge Hunt said, I know Judge Hunt

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ruled, and I know the DiBiasi decision entered

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judgment that, quote, the plain language of the

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SAA conveys the intent to deprive Righthaven of

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any right save for the right to sue alleged

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infringers and profits from such lawsuits.

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We are changing nunc pro

I know that's what has been

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decided to be what happened in this case, but

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we're changing all of that now.

23

after a judgment was entered, after preclusive

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effect has been obtained, and we're now creating

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a new set of facts.

We're coming in

And we want to sue on it,

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

21

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and we want to sue on the same SAA, the exact

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same contract.

3

we get, when we don't like the decision that has

4

come down in a prior case, to paper over it by

5

changing the language of the contract.

6
7

We're just restating it because

THE COURT:

But I mean parties can

amend their agreements any time they want to.

8

MR. PULGRAM:

9

THE COURT:

They sure can.
And so here we've got

10

this -- if I can call it the Strategic Alliance

11

Agreement One, Strategic Alliance Agreement Two,

12

and by my count, and you bicker with me and say,

13

no, it's three, or two, or whatever, but now it

14

looks like the third incarnation of the Strategic

15

Alliance Agreement.

16

MR. PULGRAM:

17

THE COURT:

That's right.
No judge has determined

18

this Strategic Alliance Agreement doesn't confer

19

ownership, or I mean there's just no judge has

20

addressed that, no court has addressed that.

21

MR. PULGRAM:

No court has determined

22

whether or not if this had been the original

23

Strategic Alliance Agreement, it could have

24

created ownership, but the courts are not time

25

travelers, and I would respectfully suggest that

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

22

1

my esteemed New York counsel isn't either such

2

that they can go back to the time that the SAA

3

was entered and decide I know there's been a

4

final adjudication, but the intent was to give

5

Righthaven nothing.

6

We're changing that after the

7

fact.

We are undoing -- we're undoing the rule

8

on what the SAA meet and we're -- because we can

9

because we want to nunc pro tunc say the

10

opposite.

11

number three, version number three says, recites,

12

that it is the intention of the parties -- that

13

it was the intention of the parties that

14

Righthaven receive all rights of an ownership and

15

the copyright.

16

opposite that that's not what the SAA did.

17

The Strategic Alliance Agreement issue

It's been decided exactly the

And so if you come in after the

18

fact and you try to rewrite an agreement to

19

create a claim that has already been denied,

20

that's undoing the courts' decisions.

21

think it goes back to the question of what is

22

collateral estoppel issue preclusion about?

23

the Supreme Court has made that pretty clear in

24

explaining that the doctrine is invoked by the

25

courts to promote conclusive resolution of

And I

And

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

23

1

disputes.

2

I'm quoting here from Montana

3

versus United States, 440 U.S. 147 at 153.

The

4

doctrine is invoked by the courts to promote

5

conclusive resolution of the disputes thereby

6

protecting parties from the expense of multiple

7

lawsuits, conserving judicial resources, and

8

increasing the reliability and consistency of

9

judicial decisions.

That's exactly why we should

10

only have one adjudication about the SAA in this

11

case and that's exactly why the plaintiffs can't

12

come in after that.

13

We cited the FM Industries case

14

for the proposition that a party cannot simply

15

amend its agreement to get around a judgment.

16

It's not been responded to by the plaintiffs, and

17

that court specifically was a copyright case

18

where the parties came in after the judgment and

19

they asked for relief.

20

59 or 60, and the court said, no, I'm not going

21

to allow you to change my judgment by rewriting

22

the agreement.

23

I think it was under Rule

And that's what's happening here.
Now, that's why the procedure

24

says this case is over.

There are other reasons

25

why the substance of the restated agreement

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

24

1

couldn't amount to a claim anyway, and I believe

2

that is sufficiently before the Court.

3

procedural position is that your Honor shouldn't

4

allow them in because Lujan prohibits it and

5

because all of these other cases were decisions

6

on the merits.

7

Our

If you get past that issue, then

8

we're talking about whether or not this restated

9

agreement is real and whether it's something that

10

could be amended, and our position is that it is

11

not.

12

further propagating or perpetuating the fraud on

13

the court that Judge Hunt explained in his

14

sanctions order.

15

chance to read it, but it was two weeks ago and

16

he ordered it delivered to every other court in

17

this jurisdiction and in Colorado that had these

18

issues.

And our position is that, in fact, this is

19

I don't know if you've had a

The new agreement contradicts in

20

its recitation of intent the express findings

21

that Judge Hunt has made.

22

prior agreements.

23

after Righthaven was to be given so-called

24

exclusive rights, it was going to license back

25

all-exclusive rights.

It contradicts the

The prior agreements said that

That was the SAA.

The

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

25

1

first amendment, the so-called clarification

2

said, when we said that the license back to

3

Stephens Media was exclusive, we didn't really

4

mean that.

5

and they inserted the word "non" and then they

6

said, but Stephens Media has a right to veto any

7

further license or use by Righthaven.

We meant that it was nonexclusive,

8
9

And once Judge Pro rejected that
in the Hoehn case, they said, oh, third

10

clarification, now the nonexclusive license back

11

to Stephens Media doesn't have Stephens Media

12

with the right to veto anymore.

13

that each of these agreements are just

14

contradictory.

15

intent.

16

or were doing.

17

to create some status, some possible patina for a

18

claim, and that's not a basis upon which a new

19

claim can be made here.

20

So the point is

They are not statements of true

They are not what the parties agreed to
They are efforts above all else

I would just add that the

21

restated amendment also contradicts history.

22

the last eighteen months, Righthaven has acted

23

exclusively as an agent to sue people.

24

restated agreement purports on its face to say

25

For

during those eighteen months, that was not its

The

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

26

1

status, it was an actual licensee with a right to

2

license people.

3

your Court, your Honor, a copy of the LLC

4

Operating Agreement for Righthaven, and even that

5

says that its job is to sue people, and at the

6

end of those lawsuits the copyrights will, must,

7

be given back to the party who gave them.

And, in fact, we have before

8

The restated agreement would

9

just perpetuate the very fraud for which they

10

were sanctioned, and for that reason even if you

11

assume that there was any basis under Lujan and

12

under collateral estoppel rules that it could be

13

added, even if you assume that, it's not a basis

14

upon which a claim could be made now in this case

15

or in the future.

16

You know, it was interesting to

17

me to read the brief that we received yesterday

18

morning which said that the defendants in this

19

case or my law firm is interested in creating a

20

copyright free zone on the Internet.

21

THE COURT:

22

MR. PULGRAM:

A copyright free zone?
A copyright free zone was

23

the rhetoric, and what's also interesting is that

24

every case that is brought by Righthaven that has

25

gotten to the question of infringement has been

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

27

1

lost by Righthaven.

2

there's been a determination of whether there's

3

infringement or not, at least three have come out

4

at summary judgment to the contrary.

5

Every single case in which

What we are defending, your

6

Honor, what the amici are here about is to

7

establish a shakedown free zone where real

8

lawsuits are filed by real parties who have real

9

grievances and real ownership interest and not by

10

people who can easily file hundreds of actions

11

against the unrepresented, against people who

12

have to go out to get pro bono counsel all over

13

the country in an effort to shakedown nuisance

14

settlements.

15

That's why we're here and we

16

think that your Honor has before you all the

17

facts to do exactly what you started with today

18

to dismiss this case, to dismiss it with

19

prejudice, and to end this lawsuit by this party

20

under this agreement, the SAA restated or not,

21

against this defendant.

22
23
24
25

THE COURT:

All right.

Thank you, Mr.

Pulgram.
MS. CENDALI:

Your Honor, may I respond

to this, please?

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

28

1

THE COURT:

No, you'll get a chance to

2

respond at the end.

I've got another hearing

3

that started twelve minutes ago.

4

MR. PULGRAM:

5

THE COURT:

I apologize, your Honor.
No, no, I mean it just so

6

happens this got continued so often that I wanted

7

to get it on calendar as quickly as possible.

8
9
10

Professor, good to see you
again.
PROFESSOR SCHULTZ:

Good to see you,

11

thank you, your Honor.

12

brief as well.

13

trying to focus a little bit more on copyright

14

policy and the Copyright Act and the Silvers

15

decision because I think from the sort of big

16

picture point of view, I want to make sure that

17

what happens here is consistent for all the

18

cases, not just Righthaven cases, but all

19

copyright cases.

20

I'll try and keep this

I want to just add two points in

So I want to start with one

21

solid reason why it might make sense to dismiss

22

this case and not allow amendment, and that is

23

that one important policy that's in the Copyright

24

Act is that when you have a prevailing party,

25

attorney's fees are available and costs.

And

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

29

1

that's something that is used quite often on both

2

sides, both the copyright plaintiffs to get fees

3

when they win and defendants when they win.

4

And, in fact, you know it's

5

certainly one of the things that is at issue here

6

in a lot of these cases, and so one of the things

7

that I think I saw going on with these amendments

8

was that there's sort of this language about

9

restatement clarification, but I think I agree

10

with you, your Honor, that in some ways it's not

11

a do-over.

12

the same thing over and over, but yet a series

13

like, you know, you make a movie, and then a

14

sequel, and then a third one, and you're sort of

15

trying to get it, you know, kind of down the

16

road.

17

It's not like they are trying to do

And it actually makes a

18

substantive difference, all right, because if you

19

don't have a valid copyright claim when you file

20

your complaint, then you are subject to fees and

21

costs if you lose and the defendant wins.

22

I think in Section 505 of the Copyright Act,

23

which clearly states that a prevailing party is

24

eligible for fees and costs, that's an important

25

policy that actually would back up a reason for

And so

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

30

1

dismissing the case is not just allowing

2

perpetual amendments.

3

The second point that I would

4

like to make is to actually take a look at the

5

Silvers case a little closer as to a few

6

different places where the Ninth Circuit talked

7

about why the rule they instituted was important

8

and actually talked about why Congress passed

9

Section 501(b) specifically in the statute

10

because I think it's easy on some level to say

11

that maybe this new agreement, if you read

12

specific words in it, meets the single line

13

holding in Silvers.

14

But I actually don't think

15

that's true when you look at what the agreement

16

is really trying to do and also what Silvers is

17

trying to do, what the Ninth Circuit en banc

18

decision was trying to do because actually what

19

was interesting to me is how little discussion of

20

Silvers there was in detail in the plaintiff's

21

briefing, and I just wanted to highlight a couple

22

of things that I find there.

23

First is that there's an

24

explicit statement that the Copyright Act does

25

not permit copyright parties to choose third

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

31

1

parties to sue on their behalf, and in that

2

specific instance it was that there was an

3

assignment of the bare right to sue.

4

screen writer in Silvers who, you know, the

5

writer had claimed that the movie was copied from

6

her writings.

7

the court said, no, that you don't have standing,

8

but the reason was for this fundamental principle

9

that you can't outsource your enforcement, and

So the

She got a bare right to sue, and

10

that the court talks about the kind of history of

11

who could sue.

12

And I don't want to go into a

13

lecture, but let me just focus on one area which

14

is that originally actually under the 1909

15

Copyright Act, not only did the copyright owner

16

have to be the one who sued, but you couldn't

17

even split up a copyright.

18

different parts of a copyright you can have

19

exclusive rights to reproduce, to distribute, to

20

perform publically a song, or a movie, or

21

something like those little pieces of it, a

22

bundle of sticks as they say in law school,

23

right?

24
25

There are lots of

And in the 1976 Act, Congress
amended it to say actually, okay, we're going to

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

32

1

allow you to split that up, but the reason they

2

did it, and Silvers says this explicitly, was

3

because Congress is aware of constraints on

4

commercial dealings, that there were certain

5

kinds of exploitations of the copyright.

6

wrote a book and someone wanted to make a movie

7

of it, and you wanted to license or give them the

8

rights to do that exclusively over here, but then

9

someone wants to do an audio book over here, and

Say you

10

you want to do it a different thing, you are able

11

to split it up in order to kind of exploit the

12

copyright to make more works available, to make

13

money off of it, and that the enforcement that's

14

written into Section 501(b) is to back that up,

15

right, it's to allow people who go out and do

16

business to back it up.

17

So I just wanted to kind of

18

highlight that because when I look at the

19

amendments here, again this is -- I don't mean to

20

sort of, you know, harp on the same point, but it

21

even though in theory they say that Righthaven

22

has this right to exploit the copyright, there's

23

no indication that they're doing anything of that

24

sort that this is really about litigation, and so

25

I wanted to just sort of focus on the Silvers

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

33

1

case in those two respects because I think if the

2

Court were -- I agree actually that there might

3

be a number of procedural issues in Lujan and all

4

these other cases.

5

But if the Court even does get

6

to this new agreement, I think the Silvers case

7

actually talks more broadly about why this right

8

to sue needs to be really held by the same people

9

exploiting the copyright and not allowed to

10

wander and the copyright to become fragmented.

11

And that's really what Congress's purpose was, so

12

that aligned with the attorney's fees provision,

13

I think are two additional reasons why I agree

14

with your Honor, and I think the decision can

15

focus in the instructions.

16
17

THE COURT:

So thank you.

All right, thank you.

Mr. DeWitt?

18

MR. DeWITT:

19

THE COURT:

20

MR. DeWITT:

Good morning, your Honor.
Good morning.
As I said, I represent an

21

organization called Citizens Against Lawsuit

22

Abuse, and at their request the single issue I

23

have written on is that Righthaven is a law firm

24

engaged in the unauthorized practice of law.

25

There's only two points I want to make because my

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

34

1

other counsel here are much more esteemed than I

2

am.

3

One is I think just for the

4

public, you need to write an opinion in this case

5

and publish it, and I think it's very, very

6

important to the Scaccias and the other ones of

7

the world against whom Righthaven is engineering

8

stickup after stickup after stickup.

9

second point is it's very important this case be

And the

10

dismissed with prejudice both for the claim

11

preclusion, issue preclusion, reasons that my

12

co-counsel has addressed so well, and because if

13

you dismiss it without prejudice, the defendants

14

don't have the resources to appeal.

15

They don't know how to do this

16

and they don't even have a lawyer.

17

going to happen if assuming the Ninth Circuit as

18

I'm confident it would upholds your ruling, then

19

it will just be another stickup.

20

important to get to the prejudice issue because

21

just a matter of public policy and a matter of

22

fairness to the defendants in this case and,

23

goodness knows, how many other defendants.

24
25

And so what's

And it is so

I'm not going to go into what I
put in my brief about why it's a law firm engaged

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

35

1

in the unauthorized practice of law, but I can

2

only make -- there's two points that are

3

important.

4

attorneys represent Righthaven.

5

represents Stephens Media.

6

goes to Righthaven and talks to them about the

7

cases.

8

Righthaven isn't a lawyer, it doesn't claim to be

9

even though it's a law firm in fact.

One thing that is in my brief, the
Righthaven

Okay, Stephens Media

It's not a privileged communication.

10

And as to all these Strategic

11

Alliance Agreements, the Court needs to look at

12

substance over form.

13

chicken suit, it's still a duck.

14

can write clever language in a Strategic Alliance

15

Agreement, which I'm sure they'll have ten more

16

amendments to in response to the Court's response

17

to what they're doing, but it's not what the

18

agreement says, it's what's really going on.

19

If you put a duck in a
And I mean they

And what's really going on is

20

Righthaven is a law firm.

It's engaged in the

21

unauthorized practice of law, and it's very

22

important that the Court find that and give the

23

Ninth Circuit a chance to agree with you, which

24

I'm confident that it will for the reasons that

25

are in my brief.

Every state that's addressed

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

36

1

this has come to that conclusion, and the cases

2

are all in there.

3

colleagues are doing better than I am, so I'll

4

let them talk.

5
6

Otherwise, my esteemed

THE COURT:

All right.

Thank you, sir.

Mr. Devoy?

7

MR. DEVOY:

Thank you, your Honor.

8

THE COURT:

Yes, sir.

9

MR. DEVOY:

I will be brief.

Recapping

10

what my colleagues have said, I'm specifically

11

addressing the Court's need to not allow

12

Righthaven to have leave to amend its brief.

13

Specifically doing so would be futile.

14

all, it is moot because Righthaven does not have

15

standing and there is no way that amending its

16

complaint will simply cure that.

17

back in time and change this with another

18

amendment to an agreement that has already been

19

found to not confer its standing from a

20

standpoint of justiciability.

21

First of

It cannot go

What Righthaven has done the

22

first time is to put -- to have in its agreement,

23

and now by restating it again, it's put a beard

24

on it as Mr. DeWitt pointed out, and as

25

Righthaven somewhat hypocritically points out by

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

37

1

arguing about form over substance, Righthaven's

2

relationship with Stephens Media and its lack of

3

ownership of these copyrights is not going to

4

change until its conduct changes, and its conduct

5

is not going to change.

6

in this case and has been doing in other cases is

7

attempting to create an army of zombie lawsuits,

8

things that have been settled, things that have

9

been set aside, in an effort to undermine this

What Righthaven is doing

10

Court's principles of finality and of preclusive

11

effects, and of prejudice in order to keep these

12

lawsuits alive for whatever purpose it's

13

accomplished.

14

These don't deserve to be alive.

15

They shouldn't be.

They should have all have

16

been dismissed, and in many cases they have been

17

resolved for a point of judgment, yet they are

18

being re-filed under the pretense, the mistaken

19

pretense, that changing an agreement after the

20

fact and after the rights have transferred

21

somehow changes the facts many years in the past.

22

The other problem is that even if Righthaven got

23

everything that it wanted, it wouldn't change the

24

fact that these lawsuits ignore important First

25

Amendment principles.

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

38

1

Most importantly, every single

2

case where a motion for summary judgment has been

3

brought by counsel, I understand that in this

4

case it hasn't happened because the defendants

5

have been pro per, but when evidence is put on

6

the record, Righthaven has not won a single

7

dispute on fair use because it is not in the same

8

market as content producers, it is in the market

9

of lawsuits.

It is a separate market and unless

10

somebody else is claiming ownership of a

11

copyright and suing on it, it is not competing

12

with Righthaven.

13

Allowing Righthaven to re-file

14

this lawsuit ignores that, and it also allows

15

them to continue on with this enterprise that

16

harms the First Amendment.

17

their basement where they're afraid to talk,

18

they're afraid to entrap one another, and they're

19

afraid to come out and to produce content because

20

it might infringe upon what somebody else has

21

done.

22

the Media Bloggers Association's counsel, we also

23

have to uphold the provisions of copyright

24

owners.

25

It puts people into

Moreover, and as we represent bloggers as

Allowing Righthaven to continue

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

39

1

on with this lawsuit and to further amend its

2

complaint harms the interest of legitimate

3

producers of content who own their own content

4

and sue on their own content by retaining

5

attorneys rather than a complex transfer of

6

rights that doesn't transfer anything at all.

7

And Righthaven has done more damage to the

8

interests of intellectual property holders than

9

Perfect Ten, Incorporated, which has filed

10

numerous lawsuits and strengthened the provisions

11

of fair use and given more protections to website

12

operators and Internet hosts.

13

It is important to understand

14

the relationship within the copyright between

15

content producers and content consumers, however,

16

the way that this is being done ignores important

17

First Amendment principles, punishes the most

18

protected kind of speech that we have in public

19

forums, such as the Internet, about public

20

matters of policy, politics, and other issues of

21

debate and tries to commoditize (phonetic) them

22

in what Mr. Schultz characterized as a secondary

23

market for lawsuits.

24
25

The U.S. Government, it is to
nobody's surprise, heavily regulates these

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

40

1

secondary markets, and if it intended to create

2

one for copyrights, it would be reflected in the

3

Copyright Act.

4

for this lawsuit to persist and this model to

5

proliferate undermines these goals, harms the

6

court, harms producers, and it harms people who

7

are trying to exercise their free speech rights

8

guaranteed by the First Amendment.

To allow amendment of this and

9
10

Thank you.
THE COURT:

11
12
13

Thank you.

Ms. Cendali, now you can get a
chance to reply.
MS. CENDALI:

14

Thank you.

I will attempt to respond

15

briefly to the gist of the comments.

16

there is a dismissal, we still believe that the

17

Court should grant our motion for leave to amend.

18

It clearly should be without prejudice.

19

other dismissals in the other district courts in

20

this -- have ruled on this and have done it

21

without prejudice because that is what the law is

22

when it's simply an issue of standing and

23

jurisdiction that doesn't reach the merits.

24
25

First, if

All the

Second, there's no preclusive
effect here.

It's clearly the overriding

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

41

1

takeaway that I get from especially Mr. Pulgram's

2

argument is that the amici want to prevent this

3

court or any court from ruling on the third

4

version, the restated amendment, and that's

5

because conspicuously absent from their brief is

6

really any challenge to the third amendment of

7

the restated agreement as to why it doesn't

8

comply with Silvers.

9

No court has ruled on the

10

restated amendment.

11

Because of that to deny us, Righthaven, the right

12

to file a new lawsuit based on a new agreement is

13

violation of due process and it fails the issue

14

preclusion requirement that there has to be an

15

identity of issues.

16

issues between the restated amendment and the

17

original SSA (sic).

18

That's the bottom line.

There's no identity of

Moreover, the case that Mr.

19

Pulgram mentioned that he copied from Kinko's,

20

presumably heard about before and he sent it to

21

Kinko's for copying, was a summary judgment

22

decision where the court specifically said even

23

in the language read that there was a full

24

opportunity for the court to hear and understand

25

the issues before ruling.

This is a motion to

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

42

1

dismiss.

2

motion to dismiss fundamental property rights.

3

That's antithetical to both the law and to the

4

constitution.

5

They want to summarily adjudicate on a

That's a violation of due

6

process and is not supported by any authority

7

that I am aware of.

8

absent from their discussion of other cases is

9

Judge Navarro's decision in Virginia Citizens,

Moreover, conspicuously

10

and in that case Judge Navarro denied a motion to

11

dismiss and that was not either with regard to

12

the current restated amendment saying that they

13

pled that they had ownership rights and we'll

14

test it out in discovery and see.

15

I suggest that Judge Navarro's

16

approach is also a very practical approach that

17

this Court should take.

18

opinion.

19

with a copy of it if your Honor doesn't have it.

20

It said that, look, if there is an issue on this,

21

let's decide it, you know, after a full

22

development of the record.

23

She wrote a very recent

We'd be happy to provide your Honor

Finally, on the issue of the

24

amendment, counsel completely ignores a comment

25

that your Honor made which is that parties always

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

43

1

have the right to amend and enter into new

2

agreements, and this is something that the United

3

States Supreme Court in Sprint Communications, a

4

case cited in our recent brief, specifically said

5

there, too -- it wasn't a copyright case, but it

6

was a case similarly where somebody was -- there

7

were aggregators who were suing on various

8

collection cases.

9

And the Supreme Court said if

10

there was some issue with the assignment, the

11

parties could readily fix it by entering into a

12

new agreement.

13

believes in the freedom of contract and agrees

14

that you are not forever bound to whatever

15

agreement you may have entered into two years ago

16

and have no ability to change that agreement

17

based on guidance from the various courts.

18

So the Supreme Court certainly

The other thing is that we've

19

heard from our opponents is a lot of talk about,

20

well, you know, you're bad, Righthaven, because

21

you want to file lawsuits and that's a bad thing.

22

And I think that counsel, with respect, totally

23

misconstrues the Silvers case and what it holds

24

because Silvers simply says if all you have is

25

the right to sue, you don't have the right to

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

44

1

sue.

2

What Silvers says is that as

3

long as you have any one of the exclusive rights

4

under the copyright law, you have the right to

5

sue that goes with that.

6

its head and trying to say, well, you can't, your

7

purpose can't ever be as the copyright order to

8

file lawsuits, but Silvers said, look to patent

9

law.

They're turning it on

Silvers in the key area of the case says

10

because patent law and copyright law are similar,

11

especially for issues of assignment, it's

12

instructive to look to patent law.

13

And when you look to patent law,

14

you look to what -- the case I believe is highly

15

on point here, which is the SGS Thomson case

16

versus International Rectifier cited in our

17

omnibus brief that we submitted in the course of

18

this briefing, and there Judge Michel, Chief

19

Judge Michel, writing for the federal circuit

20

rejected a very similar argument that you're

21

hearing the professor and others making here with

22

the idea that there's somehow something wrong

23

with exercising as part of your ownership rights

24

the right to bring a suit.

25

The federal circuit found that

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

45

1

the district court erred in granting summary

2

judgment on the grounds that the patent

3

assignment in issue was a sham because the sole

4

purpose was to facilitate litigation -- sole

5

purpose to facilitate litigation.

6

circuit held in so ruling the trial court ignored

7

the express language of the assignment and in

8

effect created a new requirement not found in any

9

case law that a patent assignment must have an

10

The federal

independent business purpose.

11

The motive or purpose of a

12

patent assignment is irrelevant to the assignee's

13

standing to enforce the assigned patent.

14

the key language.

15

expressly to facilitate litigation is of no

16

concern to the defendant and does not bear on the

17

effectiveness of the assignment citing the United

18

States Supreme Court language in discovery

19

records case.

20

wrong with choosing as part of your ownership

21

rights to file lawsuits is fundamentally flawed.

22

And equally fundamentally flawed is the idea that

23

there's something noble about copying other

24

people's intellectual property on the Internet.

25

This is

Even a motive solely or

So the idea that there's something

These cases will ultimately I

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

46

1

hope be decided on the merits where the court can

2

look at the facts and properly view under the

3

First Amendment analysis under the fair use test

4

and see whether, in fact, there's an

5

infringement.

6

somebody else's property wholesale, copying it in

7

toto, and using it for your own self and selling

8

ads to make money as a result of it, that's theft

9

and there's a right to bring that claim.

10

I was taught if you're taking

THE COURT:

11

be permitted to amend?

12

MS. CENDALI:

13

THE COURT:

How many times should you

Well -I mean because, you know,

14

you want to amend your complaint, but we're on

15

the third amendment, frankly, aren't we?

16

MS. CENDALI:

17

THE COURT:

We are, your Honor.
I mean you understand what

18

I'm saying, you didn't amend the complaint, but

19

basically you did because you've amended the

20

agreement.

21

agreement.

22
23
24
25

This is a third incarnation of the

MS. CENDALI:

I don't see any reason to

have to amend after this point.
THE COURT:

I understand, but should it

be with prejudice or without prejudice because

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

47

1

you've had one bite at the apple, two bites at

2

the apple, and now you want a third bite of the

3

apple.

4

MS. CENDALI:

But there's been no --

5

there's been no judicial -- it would be -- it

6

would be --

7

THE COURT:

8

amendment, isn't it?

9

amended the complaint three times, but you've

10

It would be, it's the third
I mean I know you haven't

amended the contract three times -- two times.

11

MS. CENDALI:

But there's been no --

12

but there's been no judicial ruling as to whether

13

the amended contract provides standing.

14

can't have it two ways.

15

THE COURT:

16

MS. CENDALI:

17

THE COURT:

They

Look at it this way --

No, but answer my question.
Okay.
Right?

This is the

18

third -- I mean you had one amendment, now you've

19

amended it again.

20

the complaint.

21

I want to amend my complaint.

22

give you a chance to amend your complaint.

23

now they come back.

24

give me another chance.

25

chance.

I mean this is like amending

I mean somebody comes in and says
All right, I'll

It's still no good.

Okay,
Well,

Okay, here's another

And that's where we are, is it not?

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

48

1

MS. CENDALI:

There's only been a

2

single motion to amend before you, your Honor,

3

and --

4

THE COURT:

5

MS. CENDALI:

6

I know that.
But the point is they

can't have --

7

THE COURT:

But the point is -- the

8

point is you've amended the complaint, you've

9

amended the underlying contract, the Strategic

10

Alliance Agreement.

11
12

MS. CENDALI:

And we have the right to

do that under the Supreme Court's ruling.

13

THE COURT:

That's correct, but you've

14

amended that which in effect amends the complaint

15

because it changes the basis upon which the case

16

is brought.

17
18

MS. CENDALI:

Right, and if that's the

case --

19

THE COURT:

So there's one amendment,

20

two amendments, how many times do you get to

21

amend?

22

MS. CENDALI:

Your Honor, if we -- if

23

you -- they have just argued to you that you

24

should not consider the restated and amended

25

agreement because it wasn't in existence at the

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

49

1

time of the original --

2

THE COURT:

Well, I can't care what

3

they say.

4

you've amended this case --

5
6

MS. CENDALI:

So if the restated if you

want to deem --

7
8

I mean, right, you've amended it,

THE COURT:

You've amended this case

twice now.

9

MS. CENDALI:

And if you want to deem

10

the restated and amendment before the court, then

11

we should have a discussion right now as to

12

whether the restated and amended agreement is

13

valid under the Silvers test or not.

14

that it is valid.

15
16

THE COURT:

We believe

Well, we're here because

they're saying you still don't have standing.

17

MS. CENDALI:

Right, and what they have

18

not articulated any reason why version three does

19

not convey standing.

20

tentative was --

21

THE COURT:

Your point in your

Well, except they have.

22

What you're trying to do is reverse court

23

decisions.

24

don't have any standing, and you say, well, okay,

25

let me work on this agreement.

Other courts have said, well, you

Well, you still

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

50

1

don't have any standing.

Okay, well, let me work

2

on it some more.

3

jurisdiction and you want to amend to keep

4

creating jurisdiction.

5

MS. CENDALI:

So you're just trying to create

Your Honor, all we're

6

saying is that there has been no decision on

7

version three of the agreement.

8

that, to prohibit us from ever re-filing this

9

case --

10

THE COURT:

As a result of

Well, you've got other

11

cases you've filed.

There are other cases,

12

aren't there?

13

more Righthaven cases after this?

14

MS. CENDALI:

Is that the end then, are there no

Well, your Honor, you

15

would have to decide that the restated version

16

three which wasn't in existence as of the time

17

the case was --

18
19

THE COURT:

And, in fact, contradicts

the terms of the original agreement.

20

MS. CENDALI:

21

terms of the original agreement.

22

THE COURT:

It doesn't contradict the

Well, sure it does because

23

it says we intend to assign all the rights.

24

That's not what -- that wasn't in the first

25

agreement.

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

51

1
2

MS. CENDALI:

But that's consistent,

there's no contradiction.

3

THE COURT:

Well, sure, so then I don't

4

need -- then we don't need to have the amendment

5

because if there's no contradiction, then that's

6

the same agreement.

7

in front of me I had before then.

8

MS. CENDALI:

9
10

I've got the same agreement

Your Honor, there has --

on jurisdiction and standing there is no basis
for a decision --

11

THE COURT:

Well, no, no, you said

12

there's no contradiction.

13

contradiction.

14

MS. CENDALI:

15

contradiction.

16

There is a

There's not a

always to --

17

The intent of the parties was

THE COURT:

But the intent of the

18

parties is what they express.

19

what did you intend?

20

create a brand new hamburger to sell to

21

McDonald's.

22

says.

23

intent of the parties is what they express.

Well, I intended really to

Well, that's not what your agreement

Well, that's what I intended.

24
25

We don't say, now

And so the

They can't say, well, no, I know
what we said.

I know we said that we were going

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

52

1

to create a car, build a car, but I meant to --

2

what we intended was I was going to create a

3

hamburger.

4

intent is, does it square with what the terms of

5

the agreement are?

Well, I don't care what you say your

6

MS. CENDALI:

7

THE COURT:

And it does, your Honor.
And it doesn't because you

8

didn't have the right to sue -- I'm sorry --

9

that's all you had was the right to sue.

10

didn't have the underlying copyright.

11
12

You

MS. CENDALI:

That's apparently your

view with regard to the original --

13

THE COURT:

Well, let's see, let me

14

call Judge Hunt and see if he agrees, and Judge

15

Dawson and see if he agrees, and Judge Whoever

16

and see if they agree.

17

MS. CENDALI:

18

about the version three.

19
20

But now we're talking

THE COURT:

No, now we're talking about

how that contradicts the first two.

21

MS. CENDALI:

22

it amends it.

23

It doesn't contradict it,

facts.

24
25

It changes it, it's a new set of

THE COURT:

It contradicts it.

It

doesn't contradict it so that you always have the

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

53

1

right -- that you had all of the rights under the

2

copyright law, right, and you always had that.

3

Why did you amend it then?

4

once?

5

had those rights?

6

is there?

7

Why did you amend it

Why did you amend it twice if you already
There's no need to amend it,

MS. CENDALI:

We amended it because

8

other courts have found that there was a problem

9

with standing under the original and under the

10

second version and in order to moot any issue --

11
12

THE COURT:

They found based on the language of the contract.

13
14

Well, what did they find?

MS. CENDALI:

Under the first and the

second but not the third.

15

THE COURT:

Exactly, contradicted.

16

This contradicts the terms of the first and the

17

second.

18

MS. CENDALI:

But no court found

19

anything with regard to the third, your Honor,

20

and that's the key point.

21
22
23
24
25

THE COURT:

But this contradicts the

terms of the first and the second, does it not?
MS. CENDALI:

No, it doesn't, it

changes it.
THE COURT:

Well, sure it does.

It

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

54

1

does because you didn't have these rights,

2

otherwise, why would you amend it if it didn't

3

contradict them?

4

to give us jurisdiction.

5

you're amending it.

6

let's amend it again.

7

course, it does because under the first agreement

8

you didn't have any right to -- you didn't have

9

all the copyright rights that you are supposed to

10

have.

11

it.

12

doesn't it?

So let's amend it again,

MS. CENDALI:

MS. CENDALI:

THE COURT:

MS. CENDALI:

It changes the terms of

It absolutely contradicts

It's absolutely different

from the change of the first.
THE COURT:

23

MS. CENDALI:

25

Yes, it does, it does.

it.

22

24

It changes the change of

the first absolutely.

18

21

So you changed

the first.

16

20

Of

Yes, it does, yes, it does.

THE COURT:

19

Does it contradict?

That contradicts the terms of the first,

15

17

That's the only reason

So then we'll change it.

13
14

You're contradicting it to try

Well, thank you, finally.
So it totally changes the

terms of the first agreement.
THE COURT:

And the second.

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

55

1

MS. CENDALI:

2

THE COURT:

3

MS. CENDALI:

And the second.
That's right.
Absolutely, and so the

4

point is that third agreement has not been ruled

5

on.

6

THE COURT:

The point is you've already

7

amended it twice.

You're saying let me amend it

8

again, let me amend it again.

9

formation of Righthaven where counsel tells me

What about the

10

that in the formation documents they agree that

11

at the end of the litigation the copyright gets

12

returned to Stephens Media.

13

terms of the third agreement.

That contradicts the

14

MS. CENDALI:

15

the terms of the third agreement.

16

only party with standing to sue is Righthaven

17

because Stephens Media only has a nonexclusive

18

license to use the copyright.

19

decide that Righthaven had no ability even under

20

a new agreement that was not originally before --

21

THE COURT:

No, it doesn't contradict
Right now the

So if you were to

But answer my question.

22

can tell you're a lawyer.

You know, yeah, the

23

parameters of the paradigm are such that the

24

confluence of factors bearing on the -- what?

25

What in the world are you saying?

Answer my

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

I

56

1

question.

2
3
4

MS. CENDALI:

What's you question, your

Honor?
THE COURT:

Should I have the court

5

reporter read it back?

6

weren't listening I guess.

7
8
9
10
11
12
13

I mean obviously you

MS. CENDALI:

Forgive me, I don't

understand it.
THE COURT:

What about the formation

documents of Righthaven?
MS. CENDALI:

Right.

The formation

documents of Righthaven -THE COURT:

They say that at the end of

14

litigation then the copyright reverts back to

15

Stephens Media.

16

MS. CENDALI:

Right, and that is not

17

antithetical with the -- in the SGS case, the

18

federal circuit case that I was discussing

19

earlier, the federal circuit said the fact that

20

an assignment provides for a right of reversion

21

does not mean that it's not a bona fide

22

assignment that gives the right to sue.

23

have cited no case law that that provision in the

24

operating agreement means that Righthaven --

25

THE COURT:

They

But I mean what we've got

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

57

1

here are a series of amendments just trying to

2

give us jurisdiction.

3

me.

4

amendments other than to try to create

5

jurisdiction.

That's the way it seems to

I mean there's no other reason for these

6

MS. CENDALI:

But the fundamental

7

business deal has changed, it used to -- that the

8

original agreement Righthaven got much narrower

9

rights.

Now, under the new agreement it has all

10

right, title, and interest.

Stephens Media only

11

has a nonexclusive right to use, which doesn't

12

even give it standing to sue.

13

is clear that there's no standing to sue under

14

those circumstances.

The copyright law

15

Stephens Media has no ability to

16

make decisions on who can file a lawsuit or when.

17

It has no ability to get the copyrights back

18

whenever it wants it.

19

the Silvers case and the Nafal case and the cases

20

that find it, under all the decisions in that

21

case under the third agreement, there's clearly a

22

grant of copyright to Stephens -- to Righthaven

23

and with it the right to sue.

24
25

THE COURT:

All the -- if you look at

All right, I'm going to

grant the motion to dismiss, but it's always my

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

58

1

preference to do it without prejudice.

2

giving you -- but I'm telling you I'm running out

3

of patience with all of these amendments.

4

understand and don't be technical and say, oh, we

5

haven't amended the complaint before.

6

you have by amending the Strategic Alliance

7

Agreement, the agreement on which the lawsuit is

8

based.

9

without prejudice.

So there we are.

So I'm

Now,

In effect

So I'll dismiss it

10

MS. CENDALI:

Thank you, your Honor.

11

MR. PULGRAM:

Could I have twenty-two

12

seconds, your Honor?

13

THE COURT:

Twenty-two, you got it.

14

And understand it's just -- I want people to have

15

their day in court.

16
17
18

MR. PULGRAM:

And we appreciate that,

your Honor, you've been very generous.
THE COURT:

And understand, too, none

19

of us has focused on this third incarnation, and

20

it may be Casper, the friendly ghost, or I don't

21

know what it is, but, you know, I'm just

22

reluctant to say, no, you are out of time, you're

23

out of luck.

24
25

MR. PULGRAM:

Then I'll take one minute

and twenty-two seconds.

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

59

1

THE COURT:

2

MR. PULGRAM:

Okay.
All right, first with

3

respect to the third amendment, there are two

4

ways and two reasons why it doesn't matter.

5

first is that there's already a judgment that the

6

SAA did not create standing.

7

estoppel.

8

this, counsel stated that the dismissals by the

9

other courts on the standing issue were -- was,

10

The

That is collateral

Now, the point I stood up to make is

quote, without prejudice and with leave to amend.

11

I suggest that those decisions

12

be reviewed because they do not say that the

13

dismissal was without prejudice.

They do not say

14

that it was with leave to amend.

They say I

15

dismissed because there was no standing because

16

there was no ownership and as we looked at the

17

case earlier, that is a dismissal with prejudice

18

on the merits.

19

don't get to the third agreement at all.

20

over.

21

reason --

22
23

And so that's reason one why you

It's been decided.

THE COURT:

This is

And the second

Wait, wait, let me stop you

right there.

24

MR. PULGRAM:

25

THE COURT:

Yes, yes.
One thing you don't want to

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

60

1

do is mislead a judge.

2

MR. PULGRAM:

3

THE COURT:

Absolutely.
You told me these were

4

without prejudice these other dismissals.

5

I've got this other case and these people have

6

been waiting patiently to --

7

MS. CENDALI:

I mean

Your Honor, if this is

8

helpful, under Federal Rule of Civil Procedure

9

41, in voluntary dismissals for lack of

10

jurisdiction is deemed a dismissal without

11

prejudice unless the court expressly states

12

otherwise.

13

Procedure 41 says.

14

know in any of these opinions that says, that

15

states, that it's with prejudice.

16
17

That's what Federal Rule of Civil
There's nothing as far as I

THE COURT:
before, did you?

18

MS. CENDALI:

19

THE COURT:

20

Well, you didn't say that

So that's -You didn't say that before,

did you?

21

MS. CENDALI:

22

THE COURT:

I did -You did not say that

23

before, did you?

Rule 41 says that, you didn't

24

tell me that before.

25

is that what you're telling me now?

You're relying on Rule 41,

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

61

1

MS. CENDALI:

Yes, it's none of them

2

say they're with prejudice, that means they are

3

without prejudice.

4

THE COURT:

You didn't say that before.

5

You said these are dismissals without prejudice.

6

So I'm looking here to see were they without

7

prejudice or with prejudice and you're saying,

8

well, no, I'm relying on Rule 41.

9

tell me that before?

10

MR. PULGRAM:

Why didn't you

All right, go ahead.
So Rule 41 is not the

11

rule that applies when you have a determination

12

of standing and ownership which is a

13

determination on the merits.

14

THE COURT:

15

MR. PULGRAM:

I understand.
Second, regardless of the

16

fact that these agreements are completely -- that

17

these amendments are foreclosed by the prior

18

decisions, we've gone through the reasons why all

19

of those contradictions mean they can't state a

20

claim.

21

prejudice so we don't have to come in here and do

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this again.

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And, therefore, it should be with

Thank you, your Honor.

THE COURT:

I appreciate it.

And again

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my preference is just I want to be sure that

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everybody gets their day in court and that we

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

62

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have and full and fair hearing.

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really focused -- and by that I mean the parties

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either.

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of the courts have, but it's just I want

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everybody to have a fair shake at it.

I mean you've discussed it more than any

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None of us has

So I'm going to order this
dismissal without prejudice, all right?

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MS. CENDALI:

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THE COURT:

Thank you, your Honor.
Thank you.

We'll in be

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this recess.

Oh, Mr. Pulgram, now let me put the

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burden on you to prepare an appropriate order if

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you would, please.

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MR. PULGRAM:

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THE COURT:

We will, your Honor.
And I realize it's not

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your -- your preference was with prejudice, but

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prepare an appropriate order and submit that, if

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you would, please.

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MR. MANGANO:

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THE COURT:

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MR. MANGANO:

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Could I review that?

before it's submitted?

Pardon me?
Could I review that

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THE COURT:

Yeah, but understand they

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win, they prevailed.

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say, oh -- I mean I won't let them misstate

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anything, but I'm not inclined to give you a lot

So I mean I'm not going to

JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C

63

1

of leeway.

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MR. MANGANO:

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THE COURT:

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No, I understand.
But, yeah, run it by Mr.

Mangano, please.

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(Whereupon, the proceedings concluded.)

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I hereby certify that pursuant
to Section 753, Title 28, United States Code, the
foregoing is a true and correct transcript of the
stenographically reported proceedings held in the
above-entitled matter.
Date:

August 29, 2011

/s/ Joy Garner
JOY GARNER, CCR 275
U.S. Court Reporter

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JOY GARNER, CCR 275
LAS VEGAS, NEVADA [phone]
Exhibit C