EMI Entertainment World, Inc. v. Karen Records, Inc. et al

Filing 140

MEMORANDUM & ORDER denying 114 Motion for Attorney Fees; denying 114 Motion for Bill of Costs; granting 128 Motion to Set Aside Judgment. For the foregoing reasons, Defendants' motion [dkt. no. 128] is GRANTED, the judgment [dkt. no. 110] is VACATED, and the complaint is DISMISSED. In light of the judgment being vacated, Plaintiff's pending motion for attorney's fees [dkt. no. 114] is denied as moot. (Signed by Judge Loretta A. Preska on 6/10/2013) (lmb)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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EMI ENTERTAINMENT WORLD, INC.,

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Plaintiff,

05 Civ. 390 (LAP)
-againstMEMORANDUM & ORDER
KAREN RECORDS, INC., KAREN
PUBLISHING INC., BIENVENIDO
RODRIGUEZ, ISABEL RODRIGUEZ and
FIDEL HERNANDEZ,
Defendants.

- X
LORETTA A. PRESKA, Chief United States District Judge:
Plaintiff, after being granted partial summary judgment
[dkt. no. 90] in the above-referenced action, was awarded a
$100,000 judgment in its action against Defendants for copyright
infringement.

See Memorandum and Order (Holwell, J.), Aug. 31,

2011 [dkt. no. 110]

("Judgment").)

Defendants move to set aside

the judgment pursuant to Federal Rule of Civil Procedure
60(b) (1),

(3), and (4) on the grounds that

intiff lacked

standing to bring the lawsuit and therefore that this Court
lacked jurisdiction to hear this case.

For the reasons set

forth herein, Defendants' motion [dkt. no. 128] is GRANTED, the
judgment [dkt. no. 110] is VACATED, and the complaint is
DISMISSED.

I.

BACKGROUND

The background of this action has been discussed in two
opinions granting partial summary judgment and damages to
Plaintiff, and familiarity with which is presumed.
Plaintiff EMI Entertainment World Inc. (“EMI” or
“Plaintiff”) is a music publisher that purported to own or
control copyrights to four musical compositions that Defendants
Karen Records, Inc. and Karen Publishing Inc.—owned by
individual Defendants Isabel Rodriguez and husband Bienvenido
Rodriguez—(collectively, “Defendants”) used on records they
released between 1999 and 2001.

(Judgment at 2.)

Beginning in

1998, EMI initiated several legal actions against Defendants for
copyright infringement based on unpaid royalties for numerous
compositions, including the four at issue in this action.
EMI filed this suit in 2005.

(Id.)

Following discovery in 2008,

parties filed cross-motions for summary judgment.

(Id. at 3.)

In March 2009, the Court granted summary judgment to EMI with
respect to certain of its claims, specifically that EMI had
terminated Defendants’ compulsory licenses to certain of the
compositions, and that the Defendants never obtained a license
to the remaining composition.

(Id. at 3.)

In 2011, the Court

found willful copyright infringement, and granted Plaintiffs a
$100,000 judgment.
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Defendants filed this motion to set aside the judgment on
August 15, 2012.

(See Memorandum of Law in Support of

Defendants’ Motion to Set Aside Judgment [dkt. no. 130] (“Def.
Memo”).)

Defendants move to set aside the judgment on the

grounds that newly discovered evidence shows that Plaintiff has
no direct ownership interest in the copyrights over which it has
sued because those rights are owned by subsidiaries of the
Plaintiff who were never joined to the action.
1.)

(Def. Memo at

Thus, Defendants argue, Plaintiffs lacked standing to bring

the action.

(Id.)

Defendants move to vacate the judgment

pursuant to Federal Rule of Civil Procedure 60(b)(1), (3),
and (4).
II.

DISCUSSION
a.

Legal Standard

Under Rule 60(b), a district court may relieve a party from
a final judgment or order for, among others, the following
reasons:

(1) mistake, inadvertence, surprise, or excusable

neglect; (3) fraud (whether intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party; or, (4)
the judgment is void.

“Motions under Rule 60(b) are addressed

to the sound discretion of the district court and are generally
granted only upon a showing of exceptional circumstances.”
Mendell ex rel. Viacom, Inc. v. Gollust, 909 F.2d 724, 731 (2d
3

Cir. 1990) (citing Nemaizer v. Baker, 793 F.2d 58, 61 (2d Cir.
1986)).
Rule 60(b)(1) “permits a district court to grant relief
from a judgment based on ‘mistake, inadvertence, surprise, or
excusable neglect.’”

Johnson v. Univ. of Rochester Med. Ctr.,

642 F.3d 121, 125 (2d Cir. 2011) (quoting Fed. R. Civ. P.
60(b)(1)).

The Court of Appeals has interpreted “mistake” to

include both errors of a party or his representatives, see In re
Emergency Beacon Corp., 666 F.2d 754, 759 (2d Cir. 1981), and
mistakes of law or fact made by the district court, see In re
310 Assocs., 346 F.3d 31, 35 (2d Cir. 2003).
Rule 60(b)(4) provides that the court may vacate a judgment
if “the judgment is void.”

Fed. R. Civ. P. 60(b)(4).

A

judgment is not void within the meaning of Rule 60(b)(4) merely
because it is erroneous.

In re Texlon Corp., 596 F.2d 1092,

1099 (2d Cir. 1979) (citing 11 Wright & Miller, Federal Practice
and Procedures § 2862, at 198 (1973)).

A judgment is void “only

if the court that rendered it lacked jurisdiction of the subject
matter, or of the parties, or if it acted in a manner
inconsistent with due process of law.”

Grace v. Bank Leumi

Trust Co. of N.Y., 443 F.3d 180, 193 (2d Cir. 2006) (quoting
Texlon, 596 F.2d at 1099).

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“Finally, even where a movant can demonstrate that one of
the enumerated grounds in Rule 60(b) applies, in order to
prevail the movant must still demonstrate a strong case that the
movant has a meritorious claim.”

United States v. Billini, No.

99 Cr. 156, 2006 WL 3457834, at *2 (S.D.N.Y. Nov. 22, 2006)
(citing United States v. Cirami, 563 F.2d 26, 35 (2d Cir.
1977)); accord Snyman v. W.A. Baum Co., Inc., 360 F. App’x 251,
254 (2d Cir. 2010) (“[T]he district court may properly consider
the merits of the underlying action in determining whether to
grant a motion pursuant to Rule 60(b).”).
b.

Analysis

A claim that a party lacks standing to bring suit is an
attack on a court’s subject matter jurisdiction over that party.
Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541–42
(1986).

Standing is not subject to waiver, and the court is

obligated to address standing even in the absence of the issue
being raised by the parties themselves.
515 U.S. 737, 742 (1995).

United States v. Hays,

Lack of standing of the party

bringing suit would result in a lack of jurisdiction of the
Court to hear the matter and would require a dismissal of the
action.

See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–

61 (1992); Abortion Rights Mobilization, Inc. v. Baker, 885 F.2d
1020, 1023 (2d Cir. 1989).

Plaintiff’s standing and ownership
5

interests in the copyrights at issue were never challenged or
analyzed by the court.

(Def. Memo at 3.)

Thus, this issue is

ripe for review pursuant to a Rule 60 motion for
reconsideration.

See In re Bulk Oil (USA) Inc., No. 93 Civ.

4492, 4494, 2007 WL 1121739, at *10 (S.D.N.Y. Apr. 11, 2007).
Plaintiff does not dispute that it does not have, and has
never had, direct ownership of any of the copyrights at issue in
this lawsuit but argues that the rights at issue are owned by
“wholly-owned” subsidiaries of Plaintiff or entities on behalf
of which Plaintiff was authorized to act.

(See Letter from Neil

J. Saltzman, Esq., Sept. 7, 2012 [dkt. no. 132] (“Def. Supp.
Memo”), at 1; Plaintiff’s Memorandum in Opposition to
Defendant’s Motion, Sept. 27, 2012 [dkt. no. 133] (“Pl. Opp.”),
at 3.)

Copyright certification notices provided by Plaintiff

demonstrate that Plaintiff is not the named owner of the
copyrights.

(Decl. of Jordan Greenberger in Opposition to

Motion to Set Aside and Stay Enforcement of Judgment, Sept. 27,
2012 [dkt. no. 143], at Ex. 3.)

Plaintiff has also not

attempted to join the subsidiaries that do hold the rights to
the compositions at issue as real parties in interest pursuant
to Fed. R. Civ. P. 17 until this time.

(Def. Supp. Memo at 1.)

There is support from decisions in this circuit for the
holding that a parent company lacks standing to bring claims on
6

behalf of its subsidiary.

See, e.g., Feinberg v. Katz, No. 99

Civ. 45, 2002 WL 1751135, at *6 (S.D.N.Y. July 26, 2002); Diesel
Sys., Ltd. v. Yip Shing Diesel Eng’g Co., Ltd., 861 F. Supp.
179, 181 (E.D.N.Y. 1994); Bross Utils. Serv. Corp. v.
Aboubshait, 618 F. Supp. 1442, 1445 (S.D.N.Y. 1985).

This

conclusion follows from the principle that “a parent corporation
cannot create a subsidiary and then ignore its separate
corporate existence whenever it would be advantageous to the
parent.”

Feinberg, 2002 WL 1751135 at *6 (quoting Pa. Eng’g

Corp. v. Islip Res. Recovery Agency, 710 F. Supp. 456, 465
(E.D.N.Y. 1989)).

Plaintiffs do not provide in their papers a

citation to a case holding otherwise.

Although Plaintiff argues

that it was authorized to act on the copyright claimants’
behalf, (Pl. Opp. at 3), the law requires more than an assurance
of authorization to confer Article III standing upon a party.
In light of the recently unearthed determination that
Plaintiff lacks of standing, Rules 60(b)(1) and 60(b)(4) provide
appropriate bases in this case to vacate the judgment.

The

“mistake” in this case was that all parties and the Court
assumed jurisdiction over Plaintiff based on Plaintiff’s
representations that it was the owner of the copyrights at
issue.

Although Defendant could have raised this issue at an

earlier stage in the proceeding, and even admitted that
7

Plaintiff controlled the copyrights at issue, (Pl. Opp. at 7–9,
12), standing cannot be waived by either party, and the Court
has an obligation to raise the matter sua sponte.

See Mancuso

v. Consol. Edison Co. of N.Y., 130 F. Supp. 2d 584, 588–89
(S.D.N.Y. 2001).

Because of this jurisdictional flaw, the

judgment is void.
Further, although Plaintiff has attempted to provide
ratification by the subsidiary owners of the copyrights, or to
now join those subsidiaries as parties in real interest pursuant
to Fed. R. Civ. P. 17, (Pl. Opp. at 12–13), Rule 17 requires
that joinder to be made within a reasonable time after an
objection is raised, and the party must have a reasonable basis
for naming the wrong party at the outset.

See Advanced

Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 20 (2d
Cir. 1997) (“[T]he district court retains some discretion to
dismiss an action where there was no semblance of any reasonable
basis for the naming of an incorrect party . . . .”).
Defendants state that they alerted Plaintiff to the
jurisdictional defect in April 2012, only to be directed in
circles to the original copyright notices and other sources over
the course of several months.

(See Decl. of Neil J. Saltzman in

Support of Defendants’ Motion to Set Aside Judgment, Aug. 15,
2012, [dkt. no. 129], at Ex. B.)

Plaintiff’s counsel, who has
8

been representing Plaintiff throughout the entire course of this
litigation beginning in 2005, did not seek to remedy the
situation procedurally.

Thus, the reasonable period of time for

joinder of the subsidiaries has passed.

Additionally, Plaintiff

has not identified a reasonable basis for failing to name the
subsidiaries as plaintiffs initially.

The identities of the

real parties in interest have been known to Plaintiff since the
initiation of the lawsuit, as demonstrated in the copyright
papers Plaintiff submitted to the court.

(See Decl. of Christos

P. Badavas, Mar. 14, 2008 [dkt. no. 57], at Exs. G-J.)
Finally, as stated above, Defendant’s argument that
Plaintiff lacks standing is a meritorious defense, and thus
satisfies the requirement of Rule 60(b) that a moving party must
demonstrate a meritorious claim.

Billini, 2006 WL 3457834, at

*2.

9

III. CONCLUSION
For the foregoing reasons, Defendants' motion [dkt. no.
128] is GRANTED, the judgment [dkt. no. 110] is VACATED, and the
complaint is DISMISSED.
vacated,

In light of the judgment being

aintiff's pending motion for attorney's fees

[dkt.

no. 114] is denied as moot.

SO ORDERED.
Dated: New York, New York
June
2013

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UNITED STATES DISTRICT JUDGE

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