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

Filing 568

DECLARATION of Rita D. Mitchell in Support re: 505 MOTION for Judgment on the Pleadings (Partial Judgment on the Pleadings).. Document filed by Mark Gorton, Lime Group LLC, Lime Wire LLC, M.J.G. Lime Wire Family Limited Partnership. (Attachments: # 1 Exhibit 1)(Oller, John)

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

Doc. 568 Att. 1

EXHIBIT 1

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

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ARISTA RECORDS LLC, et ai, Plaintiff,

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LIME WIRE LLC, et ai, Defendant.

06 CV 5936 (KMW)

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New York, N.Y. February 18, 2011 12:10 p.m. Before: HON. KIMBA M. WOOD, District Judge APPEARANCES MUNGER TOLLES & OLSON, LLP Attorneys for Plaintiff GLENN POMERANTZ KELLY KLAUS JENNIFER PARISER WILKIE, FARR & GALLAGHER, LLP Attorneys for Defendant JOSEPH T. BAIO TARIQ MUNDIYA MARY EATON ROGER NETZER JOHN OLLER GREG JOSEPH PAMELA JARVIS TODD COCENZA

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(Case called) (In open court) THE DEPUTY CLERK: Arista Records, LLC v. Lime Wire, LLC. Counsel, state your appearances for the record. MR. POMERANTZ: Glen Pomerantz on behalf of the plaintiffs. With me is Kelly Klaus and Jennifer Pariser. THE COURT: Very good. Thank you. MR. BAIO: Your Honor, Joseph Baio on behalf of the defendants. With me are Tarik Mundiya, John Oller, Mary Eaton and for the subsequent argument, counsel will introduce themselves. THE COURT: Very good. Thank you. I've asked Judge Freeman to be with me so that she can give you her decision on outstanding discovery requests. JUDGE FREEMAN: I have, I believe, somebody correct me if I'm wrong, only two outstanding discovery matters. One, whether there should be any 30(b)(6) depositions based on materials I got from defendant's counsel yesterday and two, the application by defendants to enforce compliance of the subpoena on RIA. Is there anything else that anyone is aware of that I'm forgetting about or is that it? Looks like that's it, I'm seeing nodding heads. On the 30(b)(6) depositions, I've looked at the materials that were submitted, I've looked at the speCific questions that were posed to plaintiff representatives where those representatives could not answer the questions and

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said things like "I don't know." Those questions for the most part seem to be things along the lines of are you aware that any studies were done, are you familiar with any reports or documents. They seem to me to be largely covered by document requests and if there were studies done they would have been asked for, they presumably would have been produced and would have been the subject of another motion. I did not see something that looked really very appropriate for deposition testimony in the first place. I was not persuaded that further depositions would be appropriate at this late stage and I'm going to stick with my ruling that there should be no further 30(b)(6) depositions. With respect to the RIA, I'm very concerned about the ultimate timeliness of the application to me, because as I track the history on this, it's my understanding that what happened was that there was a subpoena served on the RIA back in September, that it was brought to my attention and I ruled on in December that I lacked jurisdiction because that was brought in D.C. and should have been enforced in D.C. subject to any transfer here. There was then a period of time when the RIA was communicating with defendants about a second subpoena that was served on the RIA by defendants in New York, but all of that was not brought to my attention until I believe January 24 and I did not see a good reason why that was the case. Even apart

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from the timeliness issue, I've looked at the merits of it all, and some of the applications seemed to be moot, as it seems the RIA has already complied with the subpoenas in part, for example the issue about judgments or settlements, that seems to have been taken care of already. There are other matters I did not find compelling in terms of the documents that are being requested outside what has already been produced by the RIA. gather the RIA has already produced a fair amount of material, and even on the merits I would be inclined to deny this application, and I'm going to do so. I think that covers it for me. THE COURT: Thank you very much. Any questions about the rulings? Okay, good. We'll move, then, to the agenda that I outlined for counsel in our recent conference call. Before I do that, let me ask counsel, is there anything you'd like to raise beforehand? MR. POMERANTZ: Yes, your Honor, if I may. We have had some discussions since the call on Wednesday and I just wanted to fill your Honor in on some of the discussions we've had, because it may expedite things today. First, your Honor had raised further briefing on the issue of the album versus single issue, and asked us to confer on a briefing schedule for additional briefing. We've agreed to the following schedule: We will file a brief next Tuesday.

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They will respond next Thursday. We will reply next Friday. THE COURT: Very good. MR. POMERANTZ: Second, your Honor, your Honor said we would be starting trial May 2nd. I am requesting now that we not have trial on May 23rd, that is the day my son is graduating from college. The defendants said they do not object to that. I just wanted to alert the Court to that conflict. THE COURT: Okay, let me just check when that is. MR. POMERANTZ: It's not quite a bris, but I'm hoping your Honor will indulge. THE COURT: It's a slippery slope when you start with a bris. Let's see. Okay, May 23 is a Monday. We can take that day. MR. POMERANTZ: Thank you, your Honor, appreciate it. THE COURT: Any other conflicts with the May trial? MR. POMERANTZ: Not that I'm aware of from our end. MR. BAIO: None from us. THE COURT: Very good. Thank you. MR. POMERANTZ: Your Honor, at the end of the call on Wednesday, the issue of rebuttal expert reports was raised. I've discussed this with counsel for the defendants. We have agreed we would make the experts available for deposition and I think on that basis they are no longer objecting to the rebuttal reports.

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MR. BAIO: That's correct, your Honor. THE COURT: All right. And when will those depositions take place? MR. POMERANTZ: We haven't discussed that, your Honor, but we would try to make them available as soon as they're available and the defendant's counsel ready to take them. If your Honor wants to set a deadline, that's fine. Otherwise I'll just work it out with them. THE COURT: I would ask you to work it out and have it be as soon as possible and send me a letter letting me know when they're taking place. MR. POMERANTZ: We will do that. Next, Judge Freeman's order of yesterday or the day before, among other things, asked that Mr. Wells be deposed within five days. He is in Hong Kong next week and we have agreed that his deposition will take place sometime the following week, the week of February 28, which is outside the five days, but because of his unavailability, the parties have agreed to move it beyond that, and we just wanted to be sure that was okay. THE COURT: It's fine with me. MR. POMERANTZ: Another aspect of Judge Freeman's order required us to produce certain documents related to the album-single issue, and asked us to do so by February 23. It's clear from some of our clients that that date is not going to

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be attainable. We would like to have an opportunity to discuss this with defendant's counsel. This is one of the issues I have not yet had a chance to discuss, I didn't have all of the information, but we are working on an expedited rolling production. We do not believe we would be able to get it done by February 23. But as soon as we know when we're going to get it done, we will discuss it with defense counsel. If we can reach agreement, we will notify Judge Freeman. If not, we'll call Judge Freeman and explain our situation. THE COURT: All right. I'm moving now to the fact of simultaneous issuance of both single and albums. Are most of the works since the date you gave me on the phone, were they mostly simultaneously issued? MR. POMERANTZ: I'm not sure --I'm sorry, your Honor, I'm not sure I understand the question. THE COURT: Okay. I believe that during the telephone conversation plaintiffs counsel told me that after iTunes became available, there was simultaneous issuance of individual songs and albums. MR. POMERANTZ: In the overwhelming majority of cases, the album and the individual tracks would be released on iTunes on the same day. THE COURT: Now, do you have any agreement among yourselves as to how that should be treated? Song versus album.

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MR. POMERANTZ: Treated for discovery purposes? THE COURT: No, treated for damages. MR. POMERANTZ: No. We do not have an agreement. That's probably one of the issues we will be briefing. THE COURT: If you don't, then I'd like you to brief that. Can you brief that within three business days? MR. POMERANTZ: That's the briefing we discussed at the outset, your Honor, that we will file next Tuesday, they'll file Thursday, we'll file Friday. THE COURT: I understand. If you're going to follow that schedule, that's fine with me. You limited it to album versus single and now I'm asking you to include the simultaneous issue. MR. POMERANTZ: We intend to do that. THE COURT: Is there anything else? MR. POMERANTZ: No. I guess what we should do is get back to Judge Freeman on Monday, if that's all right with Judge Freeman as far as the February 23rd -JUDGE FREEMAN: Court is closed on Monday. MR. POMERANTZ: We'll do it Tuesday. Ultimately we'll have an agreement, but if not we'll request the opportunity to discuss it with your Honor. JUDGE FREEMAN: Just so you know, I'll be in a settlement mediation all morning on Tuesday. I teach as an adjunct usually Monday evenings, but because Monday is a

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holiday I'll be teaching on Tuesday,

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me is either early in the morning, meaning not later than 9:30 or maybe between, maybe up to three in the afternoon, after lunch. MR. POMERANTZ: We'll be in touch with Jamie and find the right time. JUDGE FREEMAN: It may be hard to get me in person if you need me on Tuesday, 9:30 in the morning. MR. POMERANTZ: Thank you. That's all we had, your Honor. THE COURT: I think we've dealt with the Bryant issue.
15 there anything further that anyone wishes to discuss on
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that? Moving, then, to where plaintiffs have already recovered from the direct infringer in another lawsuit, do plaintiffs currently have a view of what the universe of those works is? MR. POMERANTZ: No, your Honor, we don't have that information here. We can get that. THE COURT: How would that be obtainable? MR. POMERANTZ: Your Honor, we believe that they would be reflected in the judgments that have been produced in this case as part of Judge Freeman's orders. We have to go back and double check, but that's our recollection.

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THE COURT: So defendants may have an idea, all right. Mr. Baio, do you have an idea already? MR. BAIO: Yes. It's in the several hundreds. We believe we are continuing to check and compare and it could be more than several hundreds. We think it will be under a thousand. THE COURT: Now, the last day for dispositive motions was December 7. Why are you late in filing this motion? MR. BAIO: Which motion, your Honor? It's not a dispositive motion. It would be either a motion in limine -THE COURT: Well, it would be dispositive of some. MR. BAIO: Yes. THE COURT: Let me make sure that we're -- I'm going to digress here to talk about motions in limine. Different Courts treat different motions as motions in limine. I view them as motions not about the admissibility of something -- I previewed this for you in our phone call -- but rather about Rule 403 considerations, something that may be relevant but as to which its probative value is less than the prejudice it causes. I don't want any substantive motions coming in in limine. So this motion is late and I'm inclined not to allow it at this point. MR. BAIO: Your Honor, may I address that? THE COURT: Yes, you may. MR. BAIO: The judgment documents were only produced

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to us in mid to late January. In January is when we received the documents? THE COURT: When did you ask for them? MR. COCENZA: It was subject to an order issued by Judge Freeman on December 28 and we caucused with the plaintiffs and attempted to get the documents and they were produced to us throughout December and I believe into January. THE COURT: I believe, then, that I should entertain the motion, but on a very quick schedule. How soon could you file? MR. BAIO: Wednesday, your Honor. THE COURT: Okay, with a two-day turn-around. MR. POMERANTZ: Your Honor, because we have agreed to a schedule that has another brief due on Friday, could we have until the following Monday? THE COURT: Yes. And then any reply by Tuesday. MR. BAIO: Yes, your Honor. THE COURT: Moving to the next topic, which is plaintiff's damage theory and whether plaintiffs have been seeking one statutory damage award per work, per infringer, it appears to me that all of plaintiffs references to its seeking damages under that theory are after Munger Tolles appeared in the case. Is that true? MR. KLAUS: Your Honor, Kelly Klaus. I am not, I just don't know whether the Cravath firm made those statements to

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Judge Lynch before the summary judgment motion or not. The ones that I am aware of are since we came involved, but I don't know if it was in issue before the summary judgment proceedings. THE COURT: If you were permitted to seek those damages, how would you prove the number of direct infringers per sound recording?

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MR. KLAUS: Your Honor, we will prove that through the
same proof that we will be offering to show where the damage award should be set within the statutory range by work, and that consists of expert testimony from Dr. Waterman, who, based on the only information that we have available, which is survey work that was done by an organization called NPD between 2004 and 2007, has actual number of downloads by the survey participants using the Lime Wire system, and he also offers an extrapolation based on that survey population of 10,000 or so households to a much broader population to estimate what the total number of infringements were using Lime Wire during an extended period of time. It's also information from our technical expert, Dr. Horowitz, and from the defendants themselves as to the viral nature and the -THE COURT: As to the what?

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MR. KLAUS: Viral nature of the software and the
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it will be from testimony from the defendants themselves as to the way their software worked and was intended to work, and then also, your Honor, there is the matter of missing evidence. There was a, we submit, a conscious decision on the part of the defendants to design their system not to maintain information as to how users were using it, what works they were downloading, how many times they were downloading it, and we think as a matter of the instruction that's something the jury may take into account in terms of the defendant's consciousness and awareness that not keeping this information would leave it subject to some level of uncertainty that we submit they should bear. THE COURT: How do you expect your argument on damages flowing from multiple awards based on multiple infringers to mesh with your seeking a maximum award per work? MR. KLAUS: Because one of the factors that the finder of fact is entitled to take into account under the Bryant standard under long-established law is where is the harm to the copyright owner. It also goes to the issue of expenses saved, profits earned by the party who is responsible for the statutory award, so the magnitude of the harm and the magnitude of the expense saved in having effectively granted themselves a license for unlimited distribution of these works we think will be powerful evidence of where within the statutory range the award here should fall.

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THE COURT: Now, that makes sense. Can I infer from that that you are not seeking particular damages from particular infringers? MR. KLAUS: In this case, your Honor, the only defendants are the secondarily liable Lime Wire defendants. THE COURT: Right. MR. KLAUS: We are not, in this lawsuit, we don't have joined with the defendants each of the other, essentially the very large number of people with whom they are separately jointly and severally liable for all of those awards. I believe the motion that Mr. Baio said he would file next Wednesday, which they said they wanted to file several months ago, is their argument that if there is a particular individual infringer who had settled or had a judgment against it as to a particular work that they infringed on Lime Wire, that that works as an offset to the statutory maximum that would otherwise be available for that infringer's download. THE COURT: Let me check what you have advanced. Mr. Baio, is that your argument? MR. BAIO: It's not that it's an offset, your Honor. It would preclude under the law of damages that they are seeking for that work against us. THE COURT: I thought that was your argument. MR. BAIO: That is our argument. THE COURT: So you need to brief preclusion versus

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offset. MR. BAIO: We shall, your Honor. And as to what Mr. Klaus was saying, we will be putting on expert testimony to challenge the data that they've used, the methodology that was employed and the scope that they are going to be suggesting, and at the same time it seems to me that what Mr. Klaus is saying is they're not seeking trillions of dollars in this case, because they're not counting each infringement towards the statutory maximum. I think what I heard him suggest is that he would like the jury to know that there was lots of activity in deciding how to set the damage, but the damages maxed out per work at $150,000. And I see shaking heads, and if they do think differently, that this really is a case involving, I don't know, $112 trillion I think that's something we should have an understanding about before we launch into the trial. THE COURT: Mr. Klaus? MR. KLAUS: To be very clear, I was disagreeing with what Mr. Baio just said. We think that the way that Section 504(c)(1) is written, the case law under it, in particular the Columbia Pictures Television case, Professor Nimmer's treatise, the legislative history, all say that where you've got one individual or entity that separately is responsible with individual particular users for the infringement of those works, that they are subject to a separate statutory award

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within the range to the maximum for each unit for which that common inducer is separately jointly and severally liable. THE COURT: I would ask that you check the record to see whether that theory was advanced before your law firm came into the case. MR. KLAUS: We will do that, your Honor. THE COURT: Okay. MR. BAIO: Your Honor, a question? THE COURT: Yes. MR. BAIO: On that issue, I'm not sure we have a briefing schedule, and I understand you've asked that the foundational question of whether that had been raised in an earlier period. Certainly if that becomes a live issue, we think that it would benefit the Court and certainly the parties to brief that issue, if they really think -THE COURT: I understand. I take it what you would need to brief is any prejudice to your client. MR. BAIO: Well, it wouldn't only be prejudice, it would be whether under the law -- I mean, that would be one part of it, but under the law whether that theory makes any sense and that the actual minimal damages that they will be seeking are in the $400 million or billion dollars, because that may be what they actually think this trial is about, and that would be useful to have the parameters of that understood by the Court and the parties. So I guess after the response

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that you receive as to whether they can raise the issue in a timely manner, if your Honor will be addressing the question of the quantity of the damages and whether they can get multiple 150,000 max numbers for each work, we would like the opportunity to brief that. THE COURT: All right. Mr. Klaus, by next Tuesday could you have the answer as to whether this theory was a new theory advanced by your clients as of April? MR. KLAUS: Yes. THE COURT: Okay. MR. KLAUS: And would you like to set a briefing schedule on the issue that Mr. Baio raised now? THE COURT: Yes. What would you propose? Do you want to confer with one another? MR. KLAUS: We can confer with the other side. believe the question is whether there is prejudice. MR. BAIO: If we can talk to them about a timing, your Honor, maybe the answer first -THE COURT: Why don't you talk now? MR. BAIO: Should we do it now? THE COURT: Yes. (Pause) MR. BAIO: Your Honor, we have an agreement. You will hear from Mr. Klaus on Tuesday with respect to your inquiry. Simultaneous briefs will be filed on that Friday, and responses

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to the simultaneous filings the following Wednesday. THE COURT: Okay. Thank you. I mentioned in our conference call that I think it's time for everyone to focus on how the trial will take shape. At this point, does plaintiff's counsel know how many witnesses you intend to call on direct, approximately? MR. POMERANTZ: We don't, your Honor. To be fair, our witness list wasn't due for another couple of weeks, but I can give you a sense of the categories of witnesses we are likely to call in our case in chief. THE COURT: All right. MR. POMERANTZ: We think we will call a number of witnesses that will explain the harm caused by Lime Wire. Those witnesses will largely be various employees or former employees of our clients, but there likely will be a few others who are harmed by Lime Wire and related to our clients in some way, such as some creative talent or something of that sort. And that will probably be the largest number of witnesses by sheer number. We also anticipate calling one, more than one, probably a few Lime Wire witnesses in our case, be it -- I'm not sure of the number yet, but I think it will be few in number and then we anticipate that we will be calling our two expert witnesses in our case, the statistician, Dr. Waterman and computer science expert, Dr. Horowitz.

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That is largely by category who we intend to call. I would like to address the issue of 24 hours which maybe is where your Honor is heading with this question. I did have a chance to think about that time limitation and I had a few questions for your Honor and some thoughts. I understand the 24 hours to mean the amount of questioning time that we have and they also have 24 hours, whether it be in our case or in their case, so we're each on our own clock in each keeping to our 24 hours. THE COURT: That's right. I may have a clock too, just in case. MR. POMERANTZ: You can have as long as you want. I'm assuming when we thought about the 24 hours, we excluded proof of ownership and direct infringement, which is in front of your Honor as summary judgment issues. If that proof needs to be offered at trial, we think all bets are off in terms of the amount of time that we would need to rethink that after we see the results of the summary judgment briefing. But putting that to one side, we then thought about how long will it take for us to put in our case and cross-examine theirs. We understand that the whole point of having an hour limitation is to force us to do it efficiently. We understand. We want to do it effiCiently. We think it's better for the jury. THE COURT: It's actually far less intended to police

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what the lawyers are doing and far more intended to make sure that the jury understands the case. MR. POMERANTZ: We-THE COURT: And is willing to pay attention for a long time. MR. POMERANTZ: We think hopefully this case will be more interesting than many, but we understand the concern. As we started penciling out how long we thought it would take to put on our case absent ownership and absent proof of direct infringement, we think we need more than 24 hours. We have to put on the witnesses I mentioned, deal with ten years of history of Lime Wire, we have to deal with the various elements of statutory damages. We have to deal with fraudulent conveyance, a separate claim we have to prove. We have to deal with the fact that we're dealing with a complicated technology that the jury needs to understand. We need to deal with the fact that they've raised a host of arguments primarily through their experts as to why we haven't been harmed. We need to address that in our questioning of witnesses. So as we penciled out what we would need just to put on our case, we thought it was in the range of 35 hours. THE COURT: On direct alone? MR. POMERANTZ: In our case, correct, your Honor. would say direct, but, for example, say if we called Mr. Gordon in our case so in effect crossing him in our case, I'm counting

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those hours as well. THE COURT: Then likely the defense will spend an equal amount of time on cross and you will spend almost an equal amount of time on redirect, they on then recross. MR. POMERANTZ: I'm sorry, I was assuming the 35 hours included all of the questioning we would do in our case in chief. THE COURT: Okay. So that's direct and redirect. MR. POMERANTZ: Correct or cross and recross that we do in our case, correct. THE COURT: Correct. So we're looking at 70 hours for plaintiffs case. MR. POMERANTZ: I have not -- I'm sure they don't yet know precisely the number of witnesses. I'm sure it will depend on who we call in our case as to how long their case is, but my guesstimate is that their case will be somewhat shorter because some of the same witnesses will have already been called in our case. So I was just guessing at 25 hours per side for their case, which would be 60 hours total for each of us, 120 hours divided by 6 is 20 trial days. THE COURT: I see Mr. Baio smiling, but I don't think it's out of happiness. MR. BAIO: I was smiling, your Honor, because I think we just were put at some kind of time disadvantage without having been heard, but the reality is, your Honor, that we want

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to move this case along and we, having thought about it, believed and I don't want this to prejudice us, if it turns out we need more time, but we really were focusing on the 24 hours. We were looking carefully at our designations and the witnesses that we would call live and our experts and what we think needs to be explained to the jury as a technical matter and we were actually focusing within the constraints that you had mentioned and thought that it was wise, and, frankly, I'm going to try to comply with it even if you were to say I have 35 hours. That's a statement against interest, but I think it's in the interests of our client subject to, as the case develops, something else may be required. But we were focusing on what you had said and think we can live with it. THE COURT: Let me mention something that experienced trial lawyers undoubtedly know better than I do. If a plaintiff takes a lot of time to explain the case, that can be advantageous to the plaintiff. In picking the jury, if we tell a jury that it's going to be a three-to-four-week case, you are less likely to have sophisticated jurors and hence less likely to have jurors who will understand plaintiff's theories of the case. And so I assume that plaintiffs want sophisticated jurors and to get those jurors if you have more than a two-week trial you're going to lose them. Maybe you want to go back and think about that. MR. POMERANTZ: Your Honor, I understand that the jury

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mix may differ. We actually think in this case we actually will win with a sophisticated or an unsophisticated jury. Stealing is wrong. It's hard to compete against free. Those are pretty simple concepts for anybody to understand. THE COURT: If it's that simple, it shouldn't take more than 24 hours to explain. I'm sorry - I think it could be-MR. POMERANTZ: Your Honor, the theme is simple, but the harm is not simple to layout. One of the things we have to show is state of mind of the defendants. Another thing we have to show is lost revenue. Another thing is the conduct and attitude of the parties, which Judge Freeman knows all too well. These are things we're entitled to prove here. It takes time for us. We have many aspects of our business that have been destroyed because of Lime Wire. We have to put this on. We've been at this for four years to get to the conclusion. I think if we ask for 20 trial days in a case of this magnitude that seems to be within a to me a reasonable range and I think our numbers if you divide it by six is 20 trial days. Assuming we get six hours a day of trial time, and I don't know the hours your Honor keeps. THE COURT: If we have jurors who have two-hour commutes and that depends on who is selected it's hard to have more than a five-hour trial day.

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MR. POMERANTZ: Your Honor, whether it turns out to be 20 days or 25 days -THE COURT: I'm saying if we start at ten and end at five, we still only get five hours. MR. POMERANTZ: I understand what your Honor is saying. We had a detailed discussion going through various parts of our story and when we added up those hours we came to approximately 35. I can't tell you if it will be shorter or may take a little longer, but that's our best guess at this time and we're hoping to request that you would instead of the 24-hour limit, that you would consider extending that to a 60 hour per side -THE COURT: It would be unreasonable for me to pick a precise number now. I would hope that you could put on a good case in 24 hours. If as you go along it appears that everything that you're eliciting is necessary for your client to elicit and that you have the jurors' attention, I'm certainly likely to permit more time, given everything you've just said. I may from time to time at sidebar mention to you if certain jurors have fallen asleep or are making shopping lists. So the answer is I will consider up to the 35 hours you've requested for direct and redirect. MR. POMERANTZ: Thank you, your Honor. Appreciate

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THE COURT: And I'll be very grateful if defense counsel sticks to 25 or 24. MR. BAIO: We'll strive for that and hopefully accomplish it, your Honor. THE COURT: Okay, thank you. With respect to outstanding claims, what is the status, if any, of the unjust enrichment and vicarious liability claims? MR. POMERANTZ: Your Honor, we do intend to -- I think we sent a letter to your Honor in September setting forth the claims that we intend to try and we still intend to do those. I don't think those claims as we thought about it, including the fraudulent conveyance claim as well, would involve proof, additional proof that we wouldn't put on already for the damage claim on the inducement claim, but we do think that we will be trying certain liability claims as well as the damage claim on the copyright inducement. THE COURT: All right. I'd like to review the schedule. We've typed it up for you so that you don't have to write the days down, the dates down. This is the schedule that I'd like to follow as we move towards trial and for trial. You'll notice that there are times set down for motions in limine. You may know by the dates on this schedule what motions in limine you want to make or you may not know yet. It may depend on how the trial evidence comes in, so I will

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entertain motions in limine whenever they are appropriate. Do counsel have any questions at this point about the schedule? MR. POMERANTZ: Your Honor, with respect to in limine motions, there are certain evidence or argument that we think, for example, would be impermissible for them to raise without first getting a ruling from your Honor. For example, in their opening statements. Typically-THE COURT: Such as? MR. POMERANTZ: I don't have any particular one in mind, your Honor, but I know some of the in limine motions we were thinking about are probably not 403 motions, and so I'm thinking about how to raise the issue, I certainly can raise it with defense counsel, but assuming we disagree, how under your view of in limine motions, how do we raise the issue that we don't think they should be able to cite to certain evidence or make certain arguments in their opening statement, at least absent a ruling from your Honor? THE COURT: Well, could you confer with one another right now and see if you can come up with examples? Then I can help you if I have some examples. (Pause) MR. POMERANTZ: Your Honor, here's an example of one. They, through their expert testimony, they have tried to say that we were not harmed because a Lime Wire user, if they

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didn't go to Lime Wire would go to some other illegal service, and we think that that argument as a matter of law should not be permitted in this case, that if you didn't go to the drug dealer on corner one, you would go to the drug dealer on corner two. We think it's inconsistent with the various elements of Bryant, which among other things looked to deterring this kind of behavior by the defendant and others. And so it's an issue where they have put a lot of prominence on that in their expert reports, and we think it presents a legal question whether your Honor would permit that kind of evidence and argument in this case. THE COURT: That is the kind of argument that should have been raised in motions, not as a motion in limine, but during the motion practice. Now, when is the first time you learned of this? MR. POMERANTZ: I'm not sure how you would raise it, your Honor, it's not a dispositive motion, it's a matter they shouldn't be allowed to argue certain motions or evidence at trial. THE COURT: Motion to exclude reference to X? MR. POMERANTZ: In most courtrooms that would be considered an in limine motion your Honor, I think, that would be my experience. THE COURT: Why don't we just say that we have a different kind of animal here.

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MR. POMERANTZ: Right. THE COURT: It's an animal as to which counsel need to know when we're going to go to trial, the witnesses need to know and it's a case with so many lawyers on each side that new motions, I don't mean this pejoratively, can be thought of every day by creative minds and can be shoehorned in as motions in limine. I would like to have you file by sometime next week any motion as to which you are currently on notice that the other side intends to make an argument and you intend to oppose it as a matter of law. MR. POMERANTZ: And, your Honor, excluded from that, I take it, would be 403 motions? THE COURT: Right. MR. POMERANTZ: And Daubert motions? THE COURT: Daubert should be raised sooner than then, I think. Oh, yes, much sooner. MR. POMERANTZ: Than? THE COURT: Than before trial or in trial. MR. POMERANTZ: No, I was assuming that Daubert would be filed on the same schedule as the in limine schedule. THE COURT: Yes. Let's see. When are your expert depositions? MR. POMERANTZ: I think we're all done with, except for the rebuttal MR. BAIO: We are, your Honor, they're done, but we

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have these two rebuttal -THE COURT: When do they conclude? MR. POMERANTZ: Actually, your Honor, we have one that's going to be scheduled for next Monday. THE COURT: Okay. So any Daubert motions should be filed by Friday of next week. MR. POMERANTZ: Your Honor, we're really batting up a lot into next week. THE COURT: Okay. Let's say, then, I'm afraid these may require a hearing, so we can't let too much time slip. How about Tuesday, March 1. Let's say Wednesday, March 2nd. MR. POMERANTZ: That's fine, your Honor. THE COURT: Gives you a little more time and then for responses, Tuesday, March 8, any reply March 10, and then I will try to have a hearing the following week if we need hearings. MR. POMERANTZ: That's fine, your Honor, thank you. THE COURT: And I'll let you know. As soon as I see the papers, I'll let you know where we stand. All right. MR. POMERANTZ: Your Honor for non-Daubert non-403 motions, if we want to raise any, we ought to do it by the end of next week? THE COURT: What's left? MR. POMERANTZ: For example, the issue I just raised with your Honor. I mean, in a sense you could call it Daubert

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because it is coming in through their experts, but it's probably broader than just that because it would go to argument they may make, maybe testimony they would have a fact witness give. We don't think that's legally relevant or admissible. THE COURT: All right. Now, we have a schedule for that, is that right? MR. POMERANTZ: That's what I was asking, your Honor, whether we do have a schedule. I think your Honor had said next week and you were asking if we could file it by Friday. THE COURT: Yes. Well, I think that's reasonable, so that would be by Friday the 25th, and any response by March 3rd, any reply by March 7. MR. POMERANTZ: Thank you, your Honor. MR. BAIO: And just so I understand your Honor, that motion, those motions are if we believe that there are things that should not be coming up in the opening, and we will identify them for you, that's fine. MR. POMERANTZ: Thank you. THE COURT: Right. And if they are points where you are on notice that the other side intends to present that theory at trial, if you now have notice of that, don't bring it up later in a motion in limine. It should be brought up next Thursday. MR. BAIO: Okay. THE COURT: Okay. And please try to meet to agree as

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to when what has been brought up so that your two judges don't need to wade through the record. I have two items left. The last is the motion to disqualify and we were due to have roughly ten minutes of oral argument per side. This is the point in a case when I should ask are the parties engaged in any settlement discussions and is there anything the Court can do to assist. Let me begin by asking defense counsel, are there any settlement discussions? MR. BAIO: Your Honor, there are not settlement discussions that are going on at this point. Perhaps that's in part because we have been engaged so much in the actual exchange of information and depositions and the like. We always remain amenable to talk about settlement, but right now nothing is happening, in this case. THE COURT: I'm going to throw something out that didn't make sense to me when I was in practice, but apparently works in some cases. Some big firms assign separate people to deal with settlement and those people are not working on the last-minute litigation work. I don't know if you could do that, but I would like to urge anything I can to see if you can settle this rather than spend the probably millions of dollars that are still left to be spent trying the case and then appealing any decision. MR. BAIO: We are prepared to try whatever alternatives your Honor thinks work. I have in fact used that

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technique and it's worked. THE COURT: Okay. Is this a good time for you to talk with one another about how to set up a mechanism for settlement? You could either use the services of the current magistrate judge on the case or another magistrate judge on the case or a mediator that the Court provides or someone of your own choosing or just lawyers face-to-face. Yes? MR. POMERANTZ: Your Honor, I'm trying to answer your question without breaching any confidentiality agreements, but the parties have a mechanism in place. While it is true that what Mr. Baio says, that no discussions are currently underway, clearly the parties have made efforts in the past and have a mechanism in place. THE COURT: Well, do you have a mechanism that is satisfactory to each side and one that can be triggered right away? MR. POMERANTZ: For our side we have a satisfactory mechanism in place. MR. BAIO: Any mechanism that doesn't work is not satisfactory to us, so there are impediments to the mechanism that's been used; location, attention of the mediator, other various matters, your Honor. So it hasn't really stimulated much of anything. Again, I realize we can't force different mechanisms on people, but that mechanism has not worked. MR. POMERANTZ: Your Honor, again, I'm trying not to

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breach agreements. I think what I should do is talk to Mr. Baio off line here. Some of what he just said is news to me, so I think we should probably talk and see where we get. THE COURT: Would it be possible for you to talk to one another here in court and then to have me come back when you're ready to tell me where you stand or do you need a lot of extra time? MR. POMERANTZ: Well, I probably, your Honor, should have consultation not just with Mr. Baio, but with my clients. So in order to have a beneficial discussion with your Honor it probably makes sense to let us have a little time and then if your Honor wants to have another discussion to talk then. THE COURT: Okay. We could have a conference call on, say, is Tuesday too soon? How about, let's see, how about Thursday? MR. POMERANTZ: Thursday of next week? I'm sure that would be fine on our end. THE COURT: Okay. Thursday I have sentencings and conferences that will take my time from, well, until 2:00. So why don't we say 2:30 for a conference call and I'll ask plaintiff's counsel to set that up. And that will be a conference call to my chambers, 805-0258. That's on Thursday, the 3rd of April. I'm sorry, the 3rd of March. MR. POMERANTZ: February 24? THE COURT: I'm sorry. Yes, you're right.

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February 24th. I have different impediments that day. I'd say 2:15 p.m. would work on Thursday, February 24. Would anyone like to raise anything before we have argument on the motion to disqualify? MR. BAIO: Not us, your Honor. MR. POMERANTZ: No, your Honor. THE COURT: Judge Freeman is going to get back to her other work. Please have a seat. Who wishes to argue on behalf of plaintiffs? MR. BAIO: The defense, Mr. Gregg Joseph, will be arguing. THE COURT: And Mr. Klaus? MR. KLAUS: Thank you, your Honor. I know that your Honor had set aside a limit amount of time for argument, so I will be brief but try to cover the main points and if there are questions that your Honor has, please do ask them. Your Honor, we start from the proposition that the defendants have cited no case, not one, and we are not aware of one, in which you have a situation where the same lawyer was involved centrally in the same case on the other side and had a very significant role, and thereafter went to work for another law firm where not only that law firm is on the other side of the case from that lawyer's former client, but that attorney has a close and continuing relationship with the same lawyers who are leading the matter against his former clients. We

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think that what -- there is a lot of back and forth about the Second Circuit's decision in Hempstead Video, and whether a screen may be effective, and it is not the case that we are saying screens are never effective, but Hempstead Video makes clear that a screen can only be effective in an appropriate case and on convincing facts. And we think that the facts here simply don't satisfy their obligation to rebut the presumption of shared confidences between the two -- between the plainly disqualified lawyer and between the firm to whom the conflict is imputed under the otherwise applicable rules. THE COURT: May I interrupt for a moment? I asked in the conference call we had a few days ago whether either party wanted Mr. Korn to be present to testify so that his credibility could be tested, and the answer counsel gave me was no, that both parties accept the truth of what Mr. Korn said in his affidavit. Are you aware of any case in which it was conceded that the same lawyer who worked on the same case previously and who does much of his other work with the same lawyers now working on the case at his new firm says he has heard no confidences and disclosed no confidences? MR. KLAUS: Yes, your Honor. That's in a sense the Chang case from the Second Circuit, which although vacated by the Supreme Court on the question of the immediate appealability of a disqualification order, the underlying

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rationale was not contested, and I believe that in that case, I think what the Second Circuit said was the attorney in question who had been with the plaintiffs law firm had not - and this is significant - had not had as appreciable a role in that plaintiffs case as Mr. Korn had in this case where he was by his own statement the senior associate at the Cravath firm for nearly a year on the case. But in the Chang case the Second Circuit said we don't doubt the good faith, we don't doubt the integrity of the lawyer in saying that he hasn't shared, will not share with the lawyers on the other side, but the Court said we can't accept it, because the risk, your Honor, is not simply that there is an advertent or an intentional disclosure of the confidential information, the risk that the Chang case, the risk that Judge Rakoffs opinion in the -- I believe I may not be pronouncing it correctly -- the Panebianco case, is the risk of even inadvertent disclosure, it's the fact that the lawyer is in the same office with the same people -THE COURT: But we are looking at this at this point, I believe at least two years after Mr. Korn left Cravath. If during those first two years there has been no inadvertent disclosure, which I take it is conceded, how likely is it that from here on out, particularly when this bright light has been shone on Mr. Korn on this issue for Willkie, how likely is it that we have to anticipate that there will be a risk of

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inadvertent disclosure in the future? MR. KLAUS: Your Honor, from the time that he's been gone, Willkie's representation here started this time in approximately June, so it's about the last seven months we're talking about, and to be clear, Mr. Korn does not say, we do not concede, because we simply do not know whether there have been inadvertent disclosures. THE COURT: But you've had the opportunity to depose everyone in question, right? MR. KLAUS: We've had the opportunity to depose Mr. Korn and two of the attorneys from the defendant's counsel who have had in the past and up through the present time a continuing working relationship. We've put the question to Mr. Korn as to did you have or did you communicate anything. What he has said is he doesn't know. He didn't recall doing it. He certainly said in his declaration he thinks he has never shared confidential information, but the problem is given his -- given the extent of his involvement in the case, your Honor, it doesn't take much if one is in one's office and casually talking, as we know has happened that there have been discussions that the lawyers, some of whom are present in the courtroom today, many of whom are among the significant number of lawyers at Wilke Farr who are working on this case have mentioned the case to him. There are individuals who have -- we have seen them in

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the documents that we have submitted -- who were not sent the screening memo that Willkie sent three months after undertaking the representation of Mr. Gordon, that there are individuals who are not copied on those memos, who through no apparent ill will or attempt to gain unfair advantage have sent Mr. Korn things because they were simply not on the distribution list. The Chang case, the Ponebianco case, the numerous other cases that we've cited, your Honor, all recognize is that the realities of a law firm, the realities of litigation and the realities of the way that information travels between people who are in a collegial relationship and who talk, because for better or for worse, your Honor, most of what our lives are consumed with is our work, that that information can go back and forth and that there can be knowing glances, shrugs of the shoulders, a roll of the eyes or a smile or a nod, but even if unintentional may communication information that is confidential information that our clients who employed Mr. Korn have a right to expect not to be shared or who at a minimum had the right to be notified in advance of the potential issues so that the issue could, if there was a disagreement, your Honor, it could have been presented to the Court months and months ago rather than at this juncture. And I will just, I will, unless your Honor has any other questions, I will sum up on the point of the prejudice argument which we anticipated will be made by the defendants,

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which was made and which we think this is a problem and a situation of their own making. Wilke Farr recognized in 2008 when they were first approached about undertaking to represent the defendants in this case, Mr. Korn immediately said you ought to know, I was a senior associate on this case. Immediately when Mr. Mundiya mentioned the fact that he had been contacted by the general counsel at Tower to undertake the representation related to this case, he said that there was an issue. That was the time, not only they were going to try to rely on a screening to put an immediate effective screening in place, but the time to tell the plaintiffs about it. THE COURT: Is there a legal requirement that plaintiffs be told at that point? MR. KLAUS: There is not under New York law, there is not a legal requirement that they be told, but, your Honor, if they have not rebutted the presumption of shared confidences, as we say they cannot in these circumstances, as we say they failed to do, even assuming it would be satisfactory in these circumstances, then the only way that they can undertake the representation is with disclosure and consent. THE COURT: Thank you. MR. KLAUS: Thank you, your Honor. MR. JOSEPH: Good afternoon, your Honor. Gregory Joseph, Gregory P. Joseph law offices. Your Honor, let me begin where your Honor began with

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the concession made on the telephone conference. In paragraph 32 of his declaration, Mr. Korn categorically states he has shared no information. Again, in paragraph 38, he addresses the particular allegation being made here, that maybe he did. He categorically says he did not. The test is trial taint. There is no dispute that he categorically has said nothing, which means the Willkie trial team on Lime Wire is in exactly the same position they would be if he were not out there. THE COURT: May I interrupt? MR. JOSEPH: Please. THE COURT: They, Mr. Klaus, said that all they knew is that he does not recall telling anyone anything important about the case. MR. JOSEPH: He categorically states, and I'll just be clear and obviously we all speak with our memory. Paragraph 32. "I have not shared and will not share with my colleagues at Willkie any confidential information that I learned in connection with my work for plaintiffs while at Cravath." There's another important, very important statements which are uncontested. He says categorically at paragraphs 13 and 28 he doesn't remember any of the speCifics. There's nothing to impute if there's nothing he can communicate, so they have not disputed the fact that there has been no communication. They haven't disputed the fact that he does not remember. Your Honor, that is a concession that the

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presumption of shared confidences has been rebutted. They did take the depositions that Mr. Klaus recited. They were offered anybody they wanted and those are the ones they asked for. So it's not as though anything has been withheld. And let me say that ultimately, the ultimate guardian of a client's confidence is the integrity of the lawyer. Mr. Korn is of unimpeached integrity. So are the members of the Lime Wire team. People have been pristine not to talk about this. He says there have been discussions. The discussions have been at a very high level what they did so they could assess the conflict, how long it had gone on so they
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address the screen and associates saying I could do this, but I've got this two-hour commitment to Lime Wire. Nothing about what's going on. Simply whether they could do it. So the firm has acted scrupulously. Mr. Korn has acted scrupulously. We suggest it would be punitive in this case, since the test is trial taint and there has been no taint for the firm to be disqualified. It would also be obviously onerous for the client and onerous for the Court. There are many other issues they raised in the papers that weren't raised by Mr. Klaus here and I don't want to overstay my welcome. I want to address what your Honor would like to hear but, a concession of the truth of the Korn

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declaration means there is no trial taint. That is the test in Hempstead and that is the governing test.
Thankyou,yourHono~

THE COURT: I have a few questions. MR. JOSEPH: Please. THE COURT: It would appear that Willkie could have done far more with respect to instituting a screen. Can you tell me why more was not done? MR. JOSEPH: Yes, your Honor. Mr. Korn brought no documents with him from Cravath. So the issue of his sharing client confidences had to be a communication from him either orally or in writing. On June 6, which is essentially at the inception of the Tower representation, he's instructed not to do that and he knows that. He volunteers he's not willing to do that on June 6. On the same date, Mr. Mundiya sends an e-mail to Mr. Cocenza, they're the only two people working on the Tower matter, saying Korn is screened off. I would sugge"st to your Honor that that particular -- and that's, we know that nothing is shared, because we know that's Korn's testimony. It's not until July 21, until hard copy and electronic screens go into effect. Mr. Mundiya thought it had happened as of July 1 -THE COURT: A little slower, please. MR. JOSEPH: I'm sorry. On July 21, the hard copy on electronic screens go into effect. It had been Mr. Mundiya's

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understanding that followed his July 1 communication, but that was in error. It actually happened on July 21. We have an electronic audit of more than 2,000 pages that shows that prior to that time and subsequently there was never an attempt by Mr. Korn to get access to any of the data that was subsequently screened. It should have been done earlier. It was not. I would suggest to your Honor that it wasn't essential for the Tower matter. The Tower matter was adverse, but not materially adverse under 110(c). Professor Simon in his treatise, I looked at the 2008-2009 version, talks about materially adverse and what he says is that, for example, it would not be materially adverse if you're in a transaction to be negotiating on the other side from a former client if he's peripherally involved as a guarantor lender, which is very similar to what we had in June. It was an asset freeze where it was immediately agreed that Tower's assets were not going to be frozen so they had to negotiate the terms. It would be much like negotiating the terms of a subpoena with a party who is willing to produce but wants it in writing, and it's adverse but it's not materially adverse and "materially" has to mean something in 110(c). So, your Honor, it could have been done earlier, but by the time we got to the Lime Wire case where it's clearly adverse, everything is already in place. So on September 3, in addition to having all of the electronic and hard copy screens

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in place, a memo goes out to everyone who's billed any time telling them you can't talk to Korn. THE COURT: Why not the whole firm? MR. JOSEPH: Your Honor, there are over 100 screens in place at Willkie, a 622-lawyer firm. If you send out these e-mails to everybody that's uninvolved, you're spamming them. That's Professor Simon's view. That's was what Mr. Minton who was chair of the ethics committee said. We can do that, any firm can do that. But the question is are you materially advancing it or you just making it so that people will stop looking at these because they're getting things that 99 times out a hundred have absolutely no relationship to them. Things are directed, and certainly your Honor mentioned, the antiseptic focus of light. Now these are going out all the time. There's not anybody who's talking about anything but sensitivities and sensibilities are permanently elevated. So everybody is beyond reproach. They have been since the beginning, but now we'll certainly have no possibility of inadvertence. So, your Honor, one could always say it could be more perfect. But I would say, to address one particular point Mr. Klaus made, there is no obligation to quarantine a lawyer off. Rule 111 of the New York State Rules contemplate screens for government lawyers. Nothing in that rule contemplates they have to be screened off and not work with the lawyers. They're

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just screened off from the matter. Now, that's a different screen because it's a government lawyer, but it's exactly the same concept. Since it's conceded that it's now been three years since he left, he testifies without dispute he remembers no specifics and he categorically states he doesn't remember anybody and everybody has stated they didn't talk to him, your Honor, we don't think there would be any benefit that would serve any public interest or private interest that would be served by disqualifying the firm. Thank you. THE COURT: Thank you very much. Mr. Klaus. MR. KLAUS: Very briefly, your Honor. Mr. Joseph said that it is uncontested that Mr. Korn said he does not recall the specifics of what he did. The devil, of course, is in the details about what is specific and what is not specific. Korn also says in the declaration he testified at his deposition that he was asked twice about the nature of the work that he did while he was at Cravath by Mr. Mundiya, who is one of the lead partners representing the defendants in this case, and he told him the particular claims that he had worked on including the fact that Mr. Korn said he had formulated the fraudulent conveyance claim against the family limited partnership, which not only remains a live matter for trial, your Honor, but was the basis for the asset freeze motion that we had filed and that Willkie was coming in to be involved in.

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Takes me to my next point, which is Mr. Joseph said that more was not done early on because the work that Willkie was doing advising Tower was not materially related to the Lime Wire litigation. With all due respect to Mr. Joseph, your Honor, the asset freeze issue was being raised before this Court in this very courtroom in this case. The conflict check that Willkie circulated treated my client, Mr. Korn's former clients, as the adverse parties. Mr. Mundiya said he recognized right away that he had to tell Mr. Cocenza not to talk to Jeff Korn about the case, and Mr. Gordon himself, who at that time was the principal owner either directly or indirectly of the Tower entities who was and who remains the managing member, controlling person in the Tower entities, offered testimony in this court that in opposition to the asset freeze motion that the relief that plaintiffs were seeking would have a damaging effect on these entities. We think they were clearly related and the argument that they were not materially related is being raised now to try to excuse the fact that there was not a comprehensive effective screening that was put in place and that the cases say they're supposed to be put in at the first moment that the firm is aware of the conflict. The cases are very clear on that. If you recognize a conflict, if you're going to rely on the screen, you have to put it in place, you have to put it in

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place immediately. In response to your question, your Honor, about why the memo was not sent to the entire firm, perhaps stated differently not to the entire New York office, the response is, well, that would be treated like spam. I think it would not be if you had an extraordinary situation such as the one you have here. I don't think we've ever heard from the defendants that they've had another comparable case where you've had the same lawyer who is involved in the same case who continues to work with the same people. And we know that even the memo that went out on September 3rd to the limited group didn't reach 22 of the people who have submitted declarations that are attached to Mr. Minton's declaration submitted to your Honor. This is, by any measure, this is a large team. They're a large group of people who have been pulled into this case at Wilke Farr. They're a large group of people who continue to work with Mr. Korn on his other litigation and matters of litigation responsibilities. We submit that the matter and timing of the screen render it ineffective even if one could have an effective screen in a case such as this. THE COURT: I'd like to ask the court reporter if it's possible for you to go back to the first few sentences Mr. Klaus stated in this segment. (Record read) MR. KLAUS: Your Honor, may I correct one thing? Mr.

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Korn did not say he formulated the fraudulent conveyance claim. I believe he said he participated in the formulation of the fraudulent conveyance claim. THE COURT: Thank you very much. Do you wish to say anything in response, Mr. Joseph? MR. JOSEPH: Your Honor, that's always a dangerous question. May I have just a moment or two? THE COURT: Sure. MR. JOSEPH: Thank you. I will be brief. But to be very clear about what Mr. Korn said, he said he remembered no specifics in paragraph 13, but if you get to paragraph 28, he says that he told Mr. Mundiya "I did not recall anything of substance about my work on the case." That's anything of substance. That I would hope is not too detailed, too lost in the details. And just to be clear, I didn't say the Tower matter was not materially related. I said it was not materially adverse. Adverse, yes, but not materially adverse. And the last point I should have made and I neglected to on the screen issue, the one that wasn't put into place until July 21, that only protected the defendant's information. The plaintiff's information was protected as of day one, because Korn was told don't speak to anyone, don't communicate anything and of course the defendant's information was protected on that oral level also and we know that even though

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that screen was not implemented immediately it was honored even before it was implemented, because he never accessed anything. Thank you very much, your Honor. THE COURT: Thank you. Would counsel like to raise anything else? MR. KLAUS: No. MR. BAIO: No, your Honor, thank you. THE COURT: Would counsel please order an expedited copy of the transcript? Thank you very much. (Adjourned)

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