Arista Records LLC et al v. Lime Wire LLC et al

Filing 243

MEMORANDUM OF LAW in Support re: 242 MOTION for Preliminary Injunction Freezing Defendants' Assets.. Document filed by Capitol Records, Inc., Elektra Entertainment Group, Inc., Interscope Records, Laface Records LLC, Motown Record Company, L.P., Arista Records LLC, Priority Records LLC, Sony BMG Music Entertainment, UMG Recordings, Inc., Virgin Records America, Inc., Warner Bros. Records Inc., Atlantic Recording Corporation, BMG Music. (Attachments: # 1 Exhibit A)(Klaus, Kelly)

EXHIBIT A

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ARISTA RECORDS LLC; ATLANTIC RECORDING CORPORATION; BMG MUSIC; CAPITOL RECORDS, INC.; ELEKTRA ENTERTAINMENT GROUP INC.; INTERSCOPE RECORDS; LAFACE RECORDS LLC; MOTOWN RECORD COMPANY, L.P.; PRIORITY RECORDS LLC; SONY BMG MUSIC ENTERTAINMENT; UMG RECORDINGS, INC.; VIRGIN RECORDS AMERICA, INC.; and WARNER BROS. RECORDS INC., Plaintiffs, v. LIME WIRE LLC; LIME GROUP LLC; MARK GORTON; GREG BILDSON; and M.J.G. LIME WIRE FAMILY LIMITED PARTNERSHIP, Defendants. Upon consideration of Plaintiffs' Motion for Preliminary Injunction Freezing Defendants' Assets and all papers and arguments of counsel in connection with the same, the Court rules as follows: IT IS HEREBY ORDERED THAT: I. ASSET FREEZE Defendants Lime Wire LLC, Mark Gorton, Lime Group LLC, and the M.J.G. Lime Wire Family Limited Partnership (collectively, "Defendants"), and their officers, agents, directors, servants, employees, salespersons, independent contractors, attorneys, distributors, corporations, parents, subsidiaries, affiliates, successors, assigns, and those persons or entities in active concert or participation with them are hereby restrained and enjoined from directly or indirectly:

06 Civ. 05936 (KMW) ECF CASE [PROPOSED] PRELIMINARY INJUNCTION FREEZING DEFENDANTS' ASSETS

A.

Selling, liquidating, assigning, transferring, converting, loaning, encumbering, pledging, concealing, dissipating, spending, withdrawing, or otherwise disposing of any funds, real or personal property, or other assets or any interest therein, wherever located, including any assets outside the territorial United States, which are: 1. 2. in the actual or constructive possession of Defendants; owned or controlled by, or held, in whole or in part, for the benefit of, or subject to access by, or belonging to, Defendants; or 3. in the actual or constructive possession of, or owned or controlled by, or subject to access by, or belonging to, any corporation, partnership, trust or any other entity directly or indirectly owned, managed, or controlled by, or under common control with, Defendants (collectively, "Defendant Affiliates"), including, but not limited to, any assets held by or for Defendants at any bank or savings and loan institution, or with any brokerdealer, escrow agent, title company, commodity trading company, precious metal dealer, payment service provider, or other financial institution or depository of any kind including, but not limited to, assets at the following institutions and entities: a. b. c. d. e. f. g. h. i. 377 Tower Realty, LLC A&M Roadhouse Lime Brokerage Holdings, LLC Lime Brokerage, LLC Lime Capital Management Administrators, LLC Lime Capital Management, LLC Lime Fund LLC Lime Labs LLC Lime Labs Technology India Holdings A LLC -1-

j. k. l. m. n. o. p. q. r. s. t. u. v. w. x.

Lime Labs Technology India Holdings B LLC Lime Overseas Fund, Ltd. LimeLock LLC Limestone Trading, LLC M.J.G. Lime Spot Family Limited Partnership M.J.G. Tower Research Family Limited Partnership. MJ Gorton Family Limited Partnership MJG 377 Tower Realty Family Limited Partnership Sharp Rock Trading, Ltd. Spire Master Fund, Ltd. Split Level LLC Tower Research Capital, LLC Tower Research Capital Europe LLC Tower Research Capital Holdings, Inc. Tower Research Capital Investments LLC (together with Lime Brokerage Holdings, LLC, Lime Brokerage, LLC, Lime Fund LLC, Sharp Rock Trading, Ltd., Spire Master Fund, Ltd., Split Level LLC, Tower Research Capital, LLC, Tower Research Capital Europe LLC, Tower Research Capital Holdings, Inc. the "Investment Affiliates").

B.

Opening or causing to be opened any safe deposit boxes titled in the names of Defendants, or subject to access by Defendants;

C.

Incurring charges on any credit card issued in the name, singly or jointly, of Defendants;

D.

The funds, property and assets affected by this Section shall include both existing assets and assets acquired after the effective date of this Order, including without

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limitation, those acquired by loan or gift. Defendants shall hold all assets, including without limitation, payments, loans, and gifts, received after service of this Order; and E. Notwithstanding the asset freeze provisions of Sections A-D above, Defendants may pay reasonable, usual, ordinary, and necessary living and business expenses, and reasonable attorney's fees, as authorized by a fiscal agent designated by the Court. F. Moreover, notwithstanding the asset freeze provisions of Sections A-D above, this Order shall not restrict (i) the return of assets of third parties (other than Defendants or Defendant Affiliates) owned, controlled or possessed by any Investment Affiliates (ii) any transfer of assets owned, controlled or possessed by any Investment Affiliate as may be required by statute or regulation, provided, that Defendants shall provide a fiscal agent designated by the Court and Plaintiffs with prompt written notice of any such transfers, or (iii) purchases, sales or other investments of assets of third parties, or of assets of Defendants or Defendant Affiliates commingled with assets of third parties, by any Investment Affiliate pursuant to normal trading activities, provided that in the case of commingled assets, all such purchases, sales or other investments will be made with parties other than Defendants or Defendant Affiliates, and will be in exchange for assets of reasonably equivalent value.

II.

DUTIES OF ASSET HOLDERS Defendants are required to serve this Order on any financial institution, or any person or other entity that has possession, custody, or control of any account, asset, or document held on behalf of, or relating or belonging to Defendants. Any financial institution, or any person or other entity served with a copy of this Order, or who otherwise has actual

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knowledge of this Order, that has possession, custody, or control of any account, asset, or document held on behalf of, or relating or belonging to Defendants, shall: A. Hold and retain within such entity's or person's control, and prohibit the withdrawal, removal, assignment, transfer, pledge, hypothecation, encumbrance, disbursement, dissipation, conversion, sale, liquidation, or other disposal of any funds, documents, property, or other assets held by or under such entity's or person's control: 1. on behalf of, or for the benefit of Defendants or other parties subject to Section I above; 2. in any account maintained in the name of, or subject to withdrawal by Defendants or other parties subject to Section I above; 3. that are subject to access or use by, or under the signatory power of Defendants or other parties subject to Section I above; B. Deny access to any safe deposit boxes that are either: 1. titled in the name, individually or jointly, of Defendants or other parties subject to Section I above; or 2. C. subject to access by Defendants or other parties subject to Section I above;

Provide to counsel for Plaintiffs, within three (3) business days, a statement setting forth: 1. the identification of each account or asset titled in the name, individually or jointly, or held on behalf of, or for the benefit of Defendants or other parties subject to Section I above, whether in whole or in part; 2. the balance of each such account, or a description of the nature and value of such asset; 3. the identification of any safe deposit box that is either titled in the name of, individually or jointly, or is otherwise subject to access or control by

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Defendants or other parties subject to Section I above, whether in whole or in part; and 4. if the account, safe deposit box, or other asset has been closed or removed, the date closed or removed and the balance on said date; D. The accounts subject to this provision include existing assets and assets deposited after the effective date of this Order. This Section shall not prohibit transfers in accordance with any provision of this Order, or any further order of the Court; and E. Plaintiffs are granted leave, pursuant to Fed. R. Civ. P. 45, to subpoena documents immediately from any such financial institution, account custodian, or other entity concerning the nature, location, status, and extent of Defendants' assets, as well as compliance with this Order, and such financial institution, account custodian or other entity shall respond to such subpoena within five (5) business days after service. F. Notwithstanding the duties of asset holders provisions of Sections A-D above, any financial institutions, persons or other entities subject to these provisions may permit withdrawals or transfers of assets which are necessary for Defendants to pay reasonable, usual, ordinary, and necessary living and business expenses, and reasonable attorney's fees, as authorized by a fiscal agent designated by the Court. Defendants are required to serve on any financial institutions, persons or other entities subject to these provisions those withdraws and transfers that have been expressly authorized by the Court's designated fiscal agent.

III.

REPATRIATION OF FOREIGN ASSETS AND DOCUMENTS Defendants shall: A. Within three (3) business days following service of this Order, take such steps as are necessary to repatriate to the United States all documents and assets that are -5-

located outside of such territory and are held by or for Defendants or are under Defendants' direct or indirect control, jointly, severally, or individually; B. Within three (3) business days following service of this Order, provide Plaintiff with a full accounting of all documents and assets that are located outside of the territory of the United States or that have been transferred to the territory of the United States pursuant to Subsection A above and are held by or for Defendants or are under Defendants' direct or indirect control, jointly, severally, or individually, including the names and addresses of any foreign or domestic financial institution or other entity holding the assets, along with the account numbers and balances; C. Hold and retain all repatriated documents and assets and prevent any transfer, disposition, or dissipation whatsoever of any such documents or assets; and D. Within three (3) business days following service of this Order, provide Plaintiffs access to Defendants' records and documents held by financial institutions or other entities outside the territorial United States, by signing and delivering to Plaintiffs' counsel the Consent to Release of Financial Records attached to this Order as Attachment A. IV. FINANCIAL REPORTS AND ACCOUNTING No later than ten (10) calendar days after entry of this Order, Defendants shall provide to counsel for Plaintiffs: A. A completed financial statement accurate as of the date of service of this Order upon Defendants. B. A completed statement, verified under oath, of all payments, transfers, or assignments of funds, assets, or property worth $5,000 or more since January 1, 2006. Such statement shall include: (a) the amount transferred or assigned; (b) the name of each transferee or assignee; (c) the date of the assignment or transfer;

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and (d) the type and amount of consideration paid by or to the Defendants. Each statement shall specify the name and address of each financial institution and brokerage firm at which Defendants have accounts or safe deposit boxes. Said statements shall include assets held in foreign as well as domestic accounts. C. Plaintiffs shall have the right to take reasonable discovery to ensure the accuracy of the information provided in Defendants' completed financial statement.

Dated: Submitted by: /s/ Kelly M. Klaus Kelly M. Klaus (pro hac vice)

_____________________________ KIMBA M. WOOD United States District Judge

Attorney for Plaintiffs and Counterclaim Defendants Munger, Tolles & Olson LLP 355 South Grand Avenue, 35th Floor Los Angeles, CA 90071-1560 [phone] [phone] (Fax)

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Exhibit A CONSENT TO RELEASE OF FINANCIAL RECORDS AND DOCUMENTS I, ___________________________________, do hereby direct any bank, savings and loan association, credit union, depository institution, finance company, commercial lending company, credit card processor, credit card processing entity, brokerage house, escrow agent, money market or mutual fund, title company, commodity trading company, trustee, or person that holds, controls or maintains custody of assets, wherever located that are owned or controlled by I or at which I have an account of any kind, or at which a corporation or other entity has a bank account of any kind upon which I am authorized to draw, and its officers, employees and agents, to disclose all information and deliver copies of all documents of every nature in your possession or control which relate to the said accounts to any attorney of Munger, Tolles & Olson, LLP, and to give evidence relevant thereto, in the matter of Arista Records LLC et al. v. Lime Group LLC et al., No. 06 CV 5936, now pending in the United States District Court for the Southern District of New York, and this shall be irrevocable authority for so doing. This direction is intended to apply to the laws of countries other than the United States of America which restrict or prohibit the disclosure of bank or other financial information without the consent of the holder of the account, and shall be construed as consent with respect thereto, and the same shall apply to any of the accounts for which I may be a relevant principal, Dated: __________________________________

Signature:

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Printed full name:

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