Capitol Records, LLC v. Redigi Inc.

Filing 146

TRANSCRIPT of Proceedings re: CONFERENCE held on 12/2/2013 before Judge Richard J. Sullivan. Court Reporter/Transcriber: Steven Griffing, [phone]. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 1/16/2014. Redacted Transcript Deadline set for 1/27/2014. Release of Transcript Restriction set for 3/27/2014.(Rodriguez, Somari)

1
DC2MCAPC1
1
2

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------x

3

CAPITOL RECORDS, LLC,

4

Plaintiff,

5
6
7

v.

12 Civ. 95 (RJS)

REDIGI, INC.; JOHN
OSSENMACHER; and LARRY
RUDOLPH, also known as
Lawrence S. Rogel,

8
Defendants.
9
------------------------------x
10

New York, N.Y.
December 2, 2013
6:10 p.m.

11
12
13

Before:
HON. RICHARD J. SULLIVAN,

14
15
16
17

District Judge
APPEARANCES
COWAN LIEBOWITZ & LATMAN
Attorneys for Plaintiff
BY: RICHARD S. MANDEL
JONATHAN Z. KING

18
19
20
21
22

ADELMAN MATZ
Attorneys for Defendant Redigi, Inc.
BY: GARY P. ADELMAN
SARAH M. MATZ
HAUSFELD, LLP
Attorneys for Defendants John Ossenmacher
and Larry Rudolph
BY: JAMES J. PIZZIRUSSO

23
24
25
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

2
DC2MCAPC1
1

(Case called)

2

MR. MANDEL:

3

MR. KING:

4

Jonathan King, also from Cowan Liebowitz &

Latman.

5
6

Richard Mandel, Cowan Liebowitz & Latman.

THE COURT:

Mr. King good afternoon to you.

defendants.

7

MS. MATZ:

8

MR. ADELMAN:

9

MR. PIZZIRUSSO:

10

For the

Sarah Matz for Redigi.
Gary Adelman also for Redigi.
Your Honor, James Pizzirusso for the

individual defendants, John Ossenmacher and Larry Rudolph.

11

THE COURT:

12

were waiting on someone else.

13
14

MR. PIZZIRUSSO:
other courtroom.

15
16

You are for both of them.

Just me, your Honor.

I thought we

I was in your

This is my first time I've been here.

THE COURT:

You were in 318 where I had the trial.

That's because the marshals told you to go there.

17

MR. PIZZIRUSSO:

They did.

18

THE COURT:

19

Thank you all for your patience.

20

As Mr. Pizzirusso knows, I've got a criminal trial

Sorry for all that.

21

going.

It's an insider trading case.

It's interesting, but

22

it's been time consuming.

23

seem to have half a dozen things we need to talk about, which

24

is what happened today.

25

your patience.

So whenever I let the jury go we

My apologies to you.

Thank you for

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

3
DC2MCAPC1
1

I asked you to come in because there is sort of a

2

barrage of letters going back and forth on a variety of issues,

3

including discovery issues.

4

about where we have been and where we are now.

5

obviously, that has a fair amount of history.

6

situation where several months ago plaintiffs asked to amend

7

and that would have been up to me as to whether I would allow

8

an amendment and it is up to me.

9

But it seems to me we should talk
This is a case,
We also have a

I allowed it.

But in part I allowed it because of the

10

representations made by Mr. Adelman.

11

making false statements, but they turn out not to be accurate

12

statements, not to have been accurate statements.

13

I'm not suggesting he was

So my principal question was whether amending was

14

going to require additional discovery and a lot of additional

15

time and effort on a case where I had already ruled on a motion

16

for summary judgment on what are important issues and legal

17

issues that were well briefed and well argued.

18

And when I asked that question Mr. Adelman certainly

19

didn't think there was going to be any need for additional

20

discovery.

21

representations I allowed the amendment.

Mr. Mandel agreed.

And so on the basis of those

22

We have the amendment and it turns out that Mr.

23

Adelman and Ms. Matz are not representing the individual

24

defendants, so they have new counsel.

25

defendants are pursuing some of the same defenses and some new

And the individual

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

4
DC2MCAPC1
1

defenses and also are seeking discovery that is above and

2

beyond what was the subject up until the first summary judgment

3

motion.

4

The plaintiffs have wanted to amend had they known we were

5

going to go down this road.

So that sort of prompts me to say, is this worth it.

6

Mr. Mandel.

7

MR. MANDEL:

Yes.

We do want to amend and we think we

8

have valid claims against the individuals.

9

what we think has happened is, new counsel has come into the

10

case and is using it as an opportunity to try and just invent

11

anything under the sun that they can unearth defenses out of,

12

many of which I think have already been ruled upon.

13
14

THE COURT:

Some of which have been ruled upon.

Fair

use is one I ruled upon.

15

MR. MANDEL:

16

THE COURT:

17

But unfortunately

The first sale doctrine.
First sale doctrine.

Those are the two

principal ones, right?

18

MR. MANDEL:

19

THE COURT:

Correct.
There are some additional defenses that

20

plaintiffs argue Redigi could have raised earlier and did not

21

and that the individual defendants should be foreclosed from

22

bringing those.

23

elsewhere, principally the Second Circuit, In Re Teltronics and

24

Kreager.

25

And you cite cases from the Second Circuit and

I think the posture in those cases was a little
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

5
DC2MCAPC1
1

different in that there was already was a judgment in those

2

cases as opposed to here where we don't have a final judgment.

3

We are doing discovery now on damages.

4

could do that pretty quickly and then tee this whole thing up

5

for the circuit sooner rather than later.

6

And the thought was we

I think those cases are different.

I think that the

7

reasoning might apply, but those are cases which involve

8

collateral estoppel where there has been a judgment.

9

my reason for suggesting that probably had I started from

10

scratch and known this is where we are going, I would have

11

denied the motion to amend.

12

the individual defendants, and we would have then gone forward

13

on two tracks.

14

almost done by now as opposed to us being kind of mired in

15

discovery disputes and motions practice.

16

So that's

You could have then filed against

But I think the track against Redigi would be

MR. MANDEL:

No.

I understand.

But I do think, your

17

Honor, that there is law that has applied collateral estoppel

18

to partial summary judgments.

19

beyond, even if you assume that these defenses are eligible to

20

be asserted, on the factual record that exists already, it

21

seems very plain that there is actually no possible basis for

22

any of them in terms of just what's already been found.

23

And I believe even if you look

In terms of the DMCA defense, I think there is a

24

reason Redigi asserted that in the answer.

We moved in our

25

partial summary judgment motion, actually addressed it in our
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

6
DC2MCAPC1
1

moving papers.

2

response.

3

They didn't even see fit to address it in

That's how little they thought of that defense.

THE COURT:

The fact that one defendant thinks little

4

of a defense and another thinks better of it is not

5

dispositive.

6

there are repercussions that flow from that.

7

am not sure I'm prepared to say that.

8
9

I think if it's a frivolous motion, then I guess
At this point I

And there is a motion to dismiss now that's pending.
And I am not supposed to be delving into the record with

10

respect to the motions to dismiss.

11

record with respect to Redigi which has already passed stage 1

12

of motions for summary motion.

13

additional summary judgment on the remaining issues, including

14

damages.

15

this point.

16

You are talking about a

There is a contemplation of

But we are kind of moving on a different tract at

MR. MANDEL:

I guess so.

I guess what confusing me is

17

the factual record really is the same.

These individuals, the

18

only question that's really left in terms of their individual

19

liability is whether they participated in this conduct that's

20

been found to be infringing.

21

THE COURT:

That's what I thought the use was going to

22

be for purposes of the amended complaint against the

23

individuals and that's certainly what was represented to me.

24

And I can quote from the transcript if necessary.

25

The only defense that could potentially be available
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

7
DC2MCAPC1
1

is somehow they didn't have enough personal involvement to be

2

individually liable.

3

basically agreed with that, that that would be the issue.

4

so that certainly I think would be relevant when we get to

5

summary judgment.

6

We are at a motion to dismiss for the individual defendants.

7

They are seeking discovery with respect to other issues that

8

were not contested by Redigi, but I don't know, are they

9

estopped?

That's Mr. Mandel.

I think Mr. Adelman
And

Right now we are not at summary judgment.

I think part of it is a factual issue as to how much

10

of the individual defendants were involved in running the

11

Redigi litigation, right?

12
13

MR. MANDEL:

I don't think there is much of a dispute

about that.

14

THE COURT:

15

MR. MANDEL:

I don't know.
They are the only witnesses who were

16

identified in initial disclosures.

17

showed up at the preliminary injunction hearing, at every

18

deposition, at every mediation.

19

other shareholders, they objected and said it was irrelevant.

20

If there is anybody else who controlled this litigation, I

21

don't know who they are or where they were.

22

They are the people who

When we asked to even identify

We certainly haven't heard anything but these two

23

people who founded this business.

This was their brainchild.

24

They thought it was legal.

25

case and submitted declarations explaining why a preliminary

They came in from the outset of the

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

8
DC2MCAPC1
1

injunction shouldn't be issued.

2

on the basis of their testimony and only their testimony.

3

The company was found liable

This, to me, is really a classic case of people who

4

participated actively.

5

participated on behalf of Redigi with the defense.

6

literally no other person I can think of who had any

7

involvement whatsoever.

8
9

THE COURT:
to that.

They are the only people who

That may be true.

There is

I don't know the answer

But I'm talking about the specific issue under

10

Teltronics as to whether or not the individual defendants

11

should be estopped.

12

30(b)(6) witness can then be added in a case and they are

13

estopped from asserting any defenses because having been

14

designated as a 30(b)(6) witness they are involved in the

15

litigation.

16

MR. MANDEL:

You wouldn't take the position that a

Not entirely.

I think if you look at the

17

couple of cases we cited, in both of them the courts talked

18

about the fact that they were the principal witness, that they

19

were there at the trial, that they had submitted declarations.

20

These are the kind of facts that the Court looked at in those

21

cases.

22

only two individuals who have been there from the outset.

23

If you look at our situation, these really were the

THE COURT:

It's not clear to me how the courts in the

24

cases you've cited were in the position to make those

25

pronouncements about the state of the record because the
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

9
DC2MCAPC1
1

posture of the case wasn't such that I think it was in the

2

record.

3

at what some of the district court submissions and filings

4

were, but I don't know that that's dispositive on the issues.

5

They kind of cherrypicked the circuit data and looked

MR. MANDEL:

I think in this case I would like to hear

6

if there is somebody else who effectively controlled or

7

participated.

8
9
10

They have never been identified.

THE COURT:

I've got a lawyer for the individuals and

I've got a lawyer for the corporate defendant here, somebody
else who is running this company.

11

Who retained you, Mr. Adelman?

12

MR. ADELMAN:

13

THE COURT:

John Ossenmacher.

And who gives you direction now as to how

14

the corporate defendant should be pursuing this case?

15

tell me the substance of communications, but the individual

16

who --

17
18

MR. ADELMAN:

Don't

Primarily, we talked to John Ossenmacher

and Larry Rudolph.

19

THE COURT:

Mr. Pizzirusso, what is the defense here

20

with respect to those individuals not joined at the hip with

21

the corporate defendant?

22

MR. PIZZIRUSSO:

Certainly, your Honor.

I understand

23

there is a history here and I have not been involved in that

24

history.

25

Capital decided on the eve of trial that they wanted to name my

I'm coming in as an outsider at the end of case when

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

10
DC2MCAPC1
1

clients.

2

THE COURT:

I don't know if it was the eve of trial.

3

MR. PIZZIRUSSO:

It was near the end of discovery and

4

the case was pretty much -- partial summary judgment obviously

5

had been granted.

6

Redigi had enough money, so they wanted to name the individual

7

defendants, too.

8

paragraph 37 in the amended complaint, that says:

9

Ossenmacher and Larry Rudolph controlled the company and,

And then they decided that they didn't think

And they dropped in one conclusory paragraph,

10

therefore, they are liable, too.

11

And John

defendant and changed it to defendants.

12

And then this did a find all

And so then they said, well, this was the complaint

13

against your clients.

14

order.

15

hold my clients responsible based on one conclusory paragraph

16

because they say there is this entire record where they

17

submitted declarations and did all these other things, but I

18

have to go by the complaint that's in front of me.

19

go by what's been pled against my clients.

20

filed a motion to dismiss because we think it is wholly

21

conclusory under Twombly and under Iqbal and don't really

22

understand the allegations made against my client.

23

them don't make any sense.

24
25

We have these partial summary judgment

Your clients are also liable.

They basically tried to

I have to

And that's why we

A lot of

When they say defendants, defendants users did this
and this and this.

Obviously, my clients don't have users.

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

11
DC2MCAPC1
1

Redigi does, but the individuals don't.

2

that you could merely name individuals in a copyright case,

3

every copyright case the executives of the company would be

4

liable, but that's not the law.

5

So we are kind of floundering.

6

conclusory complaint that pleads very little against our

7

clients and have to assert at the same time discovery defenses

8

and potential summary judgment motions that we want to file.

9

But we still aren't even sure what they are alleging against

10

If it were the case

That's not what the law says.
We are left with this very

our client.

11

What's the direct financial interest that my clients

12

have?

What are the acts that each one of them individually did

13

that contributed or that caused the copyright infringement of

14

this case?

15

company and that's it.

16

have said we might have defenses.

17

have not seen a real complaint.

18

alleges information against our client.

19

of alert, what are all of the possible defenses that we could

20

have based on what we think the allegations are probably trying

21

to say against us?

They can't just say, well, you're in charge of the

22

THE COURT:

23

That's not what the law says.

So we

We don't know yet because we

We don't think that adequately
So we have had to sort

the songs at issue?

24
25

Including whether there is copyright in

MR. PIZZIRUSSO:

Yes.

Because, your Honor,

interestingly enough, we went through every single copyright
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

12
DC2MCAPC1
1

registration they produced, and we made a chart and we said,

2

which songs have they asserted copyright claims against and

3

which songs have they provided actual copyright registrations.

4

And it was probably less than 20 percent that they actually

5

provided registrations for.

6

judgment issue.

7

We said, well, that's a summary

They have not proved their case.

So even though Mr. Mandel asserts discovery is over,

8

in the last week we have received over 3,000 pages of

9

additional discovery, approximately 3,000 pages of additional

10

discovery from his client after we said we are going to file

11

summary judgment on this and after he has said, no more

12

discovery.

13

So we have got thousands of pages of additional

14

documents that were just sprung on us over the Thanksgiving

15

holiday that we have not even had a chance to review yet while

16

he is asserting that we don't get any discovery against his

17

client.

18

them for what they are.

19

But here are the documents, you just have to accept

THE COURT:

Here is the question I have in connection

20

with the motion to amend.

If amending to add them, your

21

clients, is not going to require any additional discovery, then

22

I think I will probably allow it.

23

additional discovery then I am not so sure.

24

Mr. Mandel, he didn't think there would be any additional

25

discovery, and Mr. Adelman agreed.

But if it's going to require
I asked

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

13
DC2MCAPC1
1

So why would your clients not be bound by that?

2

MR. PIZZIRUSSO:

Mr. Adelman didn't represent my

3

clients at the time.

4

litigation.

5

they have brought in new counsel, may have new ideas or may

6

want to do things differently, I don't know why Redigi did the

7

things that they did.

8
9

They weren't named as defendants in the

Now that the Court has allowed an amendment and

I don't know their strategy.

But my clients are now being asked to be joint and
severally liable for potentially millions of dollars.

And they

10

have a due process right to take discovery, to find out what

11

the claims are being asserted against them and don't think that

12

they are bound by representations on behalf of people who did

13

not represent them personally, that no discovery is needed

14

here.

15

THE COURT:

There is case law, slightly different

16

procedural context, though, that basically bars the principals

17

of a corporate defendant from asserting claims and making

18

arguments that were or could have been made by the corporate

19

defendant.

20

them, right?

21

You're familiar with those cases.

MR. PIZZIRUSSO:

You've seen

I have seen the cases that Mr. Mandel

22

cited, and I agreed with your Honor's initial assessment that

23

they took place in generally different contexts than what we

24

have here.

25

THE COURT:

They are different contexts, but it's not

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

14
DC2MCAPC1
1

clear to me why the rationale would be any different at this

2

stage of this proceeding.

3

You are not asserting that somebody else is who ran

4

the litigation and somebody else is who is responsible for the

5

corporate defendant defending himself, right?

6

somebody else?

7

MR. PIZZIRUSSO:

Is there

There are other shareholders of the

8

company, your Honor.

There is inside counsel.

9

just these two individuals.

There aren't

If Mr. Mandel wants to have some

10

additional discovery after he is saying that no additional

11

discovery is needed, we can go into that.

12

to take the complaint that we have against us and respond to

13

that.

14

has that talk about how my clients have run the show from day

15

one and are really responsible here, and he has got this great

16

discovery record.

17

complaint.

18

unquote, eve of trial, the 11th hour, the close of discovery

19

and he is saying, you don't get any more discovery, you're

20

essentially liable.

21

think the complaint should be dismissed with prejudice, but, at

22

the very least, if not, he should have to replead and allow us

23

to answer.

24
25

I think we have got

He hasn't asserted any of these facts that he claims he

I think it should have been in the

It wasn't.

So now here we are on the, quote

And we think that's prejudicial and we

But I do agree that the cases should be severed.

We

could proceed right now against Redigi and go to trial and let
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

15
DC2MCAPC1
1

him proceed separately against my clients so they can assert

2

what they believe are their rights to take discovery on issues

3

that were never raised.

4

about, your Honor, are not issues that were asserted by Redigi.

5

THE COURT:

Most of the issues that we are talking

That's the whole point, though.

I guess

6

the initial issue then is whether your client should be barred

7

from asserting defenses and arguments that could have been

8

asserted previously by the corporate defendant.

9

MR. PIZZIRUSSO:

10

applicable to them, like laches.

11

here at the end of the case.

12

Redigi.

13

They have defenses that are solely
Like them only being named

That clearly wouldn't apply to

That's a different as to Redigi.
Your Honor, in your opinion itself, said that fair use

14

is really a case-by-case equitable doctrine.

15

look at the specific instances of the case at hand and there

16

may be, again, particular fair use issues as to the individual

17

defendants that weren't applicable to Redigi.

18

THE COURT:

19

MR. PIZZIRUSSO:

20
21

You've got to

Like what?
I have not seen a complaint that I

could fairly respond to yet, so I don't know, but there may be.
THE COURT:

I am not sure why that the answer to that

22

question turns on the complaint.

23

a defense.

24

cross motions, I guess, by Redigi and by the plaintiffs.

25

I mean, fair use is obviously

I addressed it in the summary judgment motion,

And so in what way would your fair use and first sale
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

16
DC2MCAPC1
1

defense be different from what was asserted previously by the

2

corporate defendant?

3

MR. PIZZIRUSSO:

The first sale defense, your Honor, I

4

think your Honor pretty clearly covered.

5

would disagree, respectfully, with the opinion.

6

Obviously, my clients

But with regard to fair use, to the extent that they

7

are being deemed individually liable, I think the equities

8

might weigh more in their favor on a fair use defense just

9

because these are individuals who had meetings with Capital,

10

who encouraged their use of this technology, who, you know, we

11

think, gave implied consent to it.

12

supportive of them.

13

the fair use defense, it may weigh more in their favor because

14

of the individual liability trying to be imposed on them by

15

Capital.

16
17
18

THE COURT:
that proposition.

There were people who were

So we think when you weigh the equities of

I would love to see some authority for

It doesn't sound right to me.

(Continued on next page)

19
20
21
22
23
24
25
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

17
DC27CAP2
1
2

THE COURT:

complaint or sever the defendants.

3

MR. MANDEL:

4

THE COURT:

5
6

So, you're not looking then to dismiss the

I'm sorry?
You're not looking to sever the defendants

or dismiss the amended complaint and go forward on the old one.
MR. MANDEL:

No.

And I don't think we should have to.

7

I really believe, with all due respect, that this is a bit of a

8

smoke screen.

9

founded this company came in arguing vociferously that what

10

they were doing was legal, don't know what they are charged

11

with, it's ridiculous.

12

founded a company, they founded a business model, they

13

developed the technology, they did all of the acts that were

14

found to be infringing.

15

They did it.

16

people who put it into motion, who completed the business

17

modeled and who did all of the acts at issue.

18

I mean the idea that these two individuals who

I mean of course they know.

They

It's not like somebody else did it.

This was their brainchild, and they are the

Now, the idea that they would somehow have a different

19

fair use defense makes no sense under the four factors we are

20

looking at.

21

looking at the exact same analysis.

22

defense is no different.

23

We are looking at the same exact things.

We are

Of course their fair use

There is also just no factual basis for any of these

24

defenses.

They are so far afield from anything that I honestly

25

don't think they could be asserted consistent with Rule 11.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

18
DC27CAP2
1

For example, unclean hands, they are asking questions about the

2

mechanical royalties that Capitol pays to its artists with whom

3

it has contracts, and their theory is that maybe Capitol has

4

somehow underpaid these artists, then that would create an

5

unclean hands defense for them.

6

these artists.

7

are not in a position to assert anything.

8

turn it into a trial about whether we paid the right royalties,

9

what audits have been done, whether these audits have been

They have nothing to do with

They have no contractual relationship.

They

And they want to

10

properly paid?

11

nothing to do with this.

12

And our business relationship with our artists has nothing to

13

do with this case.

14

unclean hands defense.

15

They are just outside infringers who have
This has nothing to do with them.

It can't possibly set the grounds for an

They also talk about latches.

Mr. Ossenmacher's own

16

deposition testimony -- and I would ask Mr. Pizzirusso to read

17

it at pages 104 to 110 in his deposition -- he basically says

18

that he couldn't get a meeting with Capitol; capitol wouldn't

19

meet with him.

20

other record labels, they refused to hear what I had to say.

21

They were too busy to meet with me, and then after the RA sent

22

a claim letter I got to meet with every other label but Capitol

23

refused."

24

going to give rise to laches, where you have to have reasonable

25

prejudicial reliance on what the plaintiff did?

"They took an uneducated view.

Unlike the

How is that possibly under any factual scenario

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

19
DC27CAP2
1

The plaintiff made clear, they sued Redigi within

2

three months of its launch, and they want to say that they

3

somehow reasonably relied that it was OK for them to go forward

4

in the face of Capitol having filed a suit against their

5

company for infringement, that somehow they thought they had

6

assurances that what they were doing was legal or Capitol

7

approved of it?

8

these things.

9
10

There is no possible basis to assert any of

THE COURT:
there yet.

11

That's a Rule 11 point, and we're not

Right?

MR. MANDEL:

I guess the question is in terms of

12

discovery, it's not true -- we're willing to be reasonable

13

about discovery.

14

thought that no real discovery was necessary, was because all

15

of the issues relate to the defendant's own conduct.

16

solely within their knowledge.

17

discovery they could really want from Capitol on whether they

18

personally participated, what they did.

19

clear what they did, and they know what they did.

20

The reason we thought, both Mr. Adelman and I

THE COURT:

It was

And we didn't understand what

I think that it's

So, you are not seeking additional

21

discovery to establish the point whether they controlled the

22

company.

23

MR. MANDEL:

No.

We think the record is clear, as it

24

is now, as to their participation in the acts.

Whether they

25

are collaterally estopped, or whether you want to relook at it,
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

20
DC27CAP2
1

the record is such that we have no doubt that we can establish

2

as a matter of law that they are personally liable.

3

Now, it's true if they want to take discovery into

4

ownership -- because that was something that Mr. Adelman didn't

5

want to pursue; we talked about it during the second discovery

6

period after the summary judgment opinion -- look, that's fair

7

game.

8

something they want to pursue, you know, we just identified the

9

universe of songs at the end of discovery.

I think that's a legitimate point, and if that's

It was somewhat

10

complicated because they had to run a program to figure out

11

which ones had been uploaded through Redigi 1.0.

12

THE COURT:

13

You're talking about ownership of --

MR. MANDEL:

-- our copyrights in the universe of

14

recordings that we were able to finally figure out through the

15

discovery process and isolate those recordings at the end of

16

discovery.

17

before your Honor, that we had fully through getting the charts

18

that Redigi compiled, through the program that Mr. Rudolph ran,

19

where we were able to say these are the recordings that went up

20

through Redigi 1.0.

21

changed the universe.

22

recordings, and so obviously if you want to start digging into

23

the record of contracts on every one of those, that's fine.

24

mean we're not saying that they shouldn't be allowed to do

25

that.

So, it wasn't really until August, when we came

And we eliminated some recordings, and we
You know, there are 500 some odd

Mr. Adelman wasn't interested in doing that, but we
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

I

21
DC27CAP2
1

understand that they are entitled to take discovery on that.

2

So, we are now producing that voluminous record because they

3

asked for it, and we're putting it together.

4

Frankly, there probably are a couple of recordings

5

that we would even drop, and we might even need to add some

6

subsidiaries, because as we are going through the chain of

7

title, if you really are going to dig into it and take that

8

discovery, some of these copyrights are owned by wholly owned

9

subsidiaries of Capitol.

10

of the analysis.

It doesn't change anything in terms

It would be the same witness --

11

THE COURT:

12

MR. MANDEL:

Would it require an amended pleading?
It might, actually.

But we had always

13

said from the outset of the case management schedule that the

14

universe of recordings was dynamic, and it was going to take a

15

little bit of work to figure that out, and to hone in on what

16

they are, to isolate them, and also because of a lot of change

17

that is going on at our client with changes in corporations

18

because they have now been merged together with the Universal

19

Music Group, there are company names that are changing, there

20

are things that have changed even since July, you know, I think

21

it's a technical point.

22

Christian Music Group that owns the copyright, that's a wholly

23

owned subsidiary of Capitol Records, we would like to clear

24

that up.

25

If it turns out that it's now Capitol

We would certainly be willing to work with defendants
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

22
DC27CAP2
1

to make sure they get anything they need if they really do want

2

to mount a challenge to whether we own each of those

3

recordings.

4
5

THE COURT:

That's with respect to the individual

defendants only, in your opinion.

6

MR. MANDEL:

Or Redigi.

If Redigi is now interested

7

in doing that, I think that's sort of related to damages, and

8

they are all jointly and severally liable.

9

on trying to say that that's not fair game in terms of

I am not standing

10

determining the full scope of recordings that we can collect a

11

damage award for.

12

The problem that Capitol has is to be hit with massive

13

discovery requests, that ask about things that are completely

14

tangential to any issue in the case, that have nothing to do

15

with the underlying causes of action, that are being offered in

16

front of defenses that even counsel didn't think enough to

17

assert because there wasn't a basis for them, there really

18

wasn't.

19
20

THE COURT:

I think he's complimenting you, Mr.

Adelman.

21

MR. ADELMAN:

22

THE COURT:

23

MR. ADELMAN:

24
25

Excuse me?

I think he's complimenting you.
I think he is, but I still would like to

address it.
THE COURT:

I will give you a chance.

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

23
DC27CAP2
1

MR. ADELMAN:

2

MR. MANDEL:

Thank you, your Honor.
So, that's really where we are.

The

3

problem is that if it's going to be turned into an accounting

4

about how we pay royalties to our artists on every one of these

5

500 recordings, how we digitally exploit them all, every piece

6

of correspondence we have had with anybody, I mean that is not

7

reasonably related to any issue that remains in the case at

8

this point, in our view.

9

THE COURT:

And the discovery with respect to damages,

10

what we launched on before the amended complaint, or I guess

11

contemporaneous with the contemplation of the amended

12

complaint, where are you with that?

13

MR. MANDEL:

Well, from our perspective we are done

14

with discovery.

15

If the individuals defendant and/or Redigi wants to take a

16

deposition of our 30(b)(6) witness and go through the chain of

17

title and talk about ownership, we don't have a problem with

18

that; we are prepared to produce somebody.

19

the documents.

20

they say they want that, that's fine.

21

I mean Capitol doesn't need anymore discovery.

We are producing

We have been producing the documents.

Since

Beyond that, I mean if they want us to answer some

22

interrogatories that explain to them why they are individually

23

liable, I mean we think it's pretty obvious from the opinion

24

and from their deposition testimony, but obviously we can

25

answer that.

The real problem is if they want to turn it into
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

24
DC27CAP2
1

a fishing expedition, to look for defenses that the record

2

absolutely clearly establishes have no possible basis -- I mean

3

in terms of the DMCA defense, they are not even registered as

4

an agent as required by the statute.

5

could not assert a DMCA defense, you know, separate and apart

6

from anything else.

As a matter of law they

7

And the court's opinion found that they had a

8

financial interest, that Redigi had a financial interest, that

9

the elements of control and financial benefit were both

10
11

satisfied, so that would also defeat the defense under 512.
So, a lot of these defenses, honestly, you know, it's

12

going to end up being very expensive, wasting a lot of time and

13

effort, and, you know, if we have to pursue this, we are going

14

to hear about it at the end of the day when there is an

15

attorney fee motion, because there is no way these defenses can

16

stand, and they really shouldn't be asserted.

17

THE COURT:

All right.

But, so what you are seeking

18

then is this:

19

discovery until I rule on that, and then allow for I guess what

20

would be styled as a motion for summary judgment with respect

21

to the Teltronics issue?

22

Rule on the motion to dismiss, basically stay

MR. MANDEL:

Is that right?

Well, I think what I would propose is not

23

staying discovery, because regardless of what the issue is on

24

the motion to dismiss -- I mean obviously if your Honor grants

25

the motion to dismiss and that's the end of it, then of course
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

25
DC27CAP2
1

that's one thing.

2

something that's going to happen.

3

But we're pretty confident that that's not

We think that if they want to pursue discovery, we

4

certainly think ownership discovery we should go forward with;

5

we should do everything that needs to be done.

6

probably ask permission to maybe amend at the end of that so

7

that we all are operating on a clear understandings of what the

8

recordings are, who the plaintiffs are, so there can be no

9

dispute about that.

10

We would

But I think that this other discovery, in terms of the

11

issues that we complained about in our letter, we would be

12

fighting about that, and I don't even know how we could comply

13

with that.

14

know, every accounting and every deal that we've done for every

15

one of these recording artists, it's going to be a massive

16

undertaking and I think toward no end.

17

If we are going to have to start producing, you

THE COURT:

I understand that, but certain defenses

18

would be off the table, depending on how I resolve the issue of

19

what we will call the Teltronics issue, right?

20
21
22

MR. MANDEL:

So, your Honor is proposing having a

separate briefing on the Teltronics issue.
THE COURT:

Well, I think that depending on how that

23

gets resolved, then the defendants basically are stripped down

24

to the same defenses that are asserted by the corporate

25

defendant.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

26
DC27CAP2
1

MR. MANDEL:

I suppose we could do that.

I mean I

2

guess the issue I have is I'm still assuming that if the motion

3

to dismiss is denied, and they have to come in with an answer,

4

they have an extensive factual record, they have deposition

5

testimony that I have just cited them to, I assume they will

6

look at that before they sign a pleading that asserts some of

7

these defenses separate and apart from Teltronics.

8

THE COURT:

Right.

Well, that's the reason for my

9

suggestion, that I rule on the motion to dismiss first, and

10

then they have to answer, and depending on what they answer,

11

then there are certain defenses that would require additional

12

discovery and others that wouldn't.

13

MR. MANDEL:

Right.

And that's fine.

I think the

14

point I was making is regardless of what happens, I think the

15

one thing is if they are intent on pursuing chain of title and

16

delving into ownership, then that's going to have to take

17

place, and there is no reason to hold off on that; we are

18

prepared to allow that and to cooperate with that.

19

THE COURT:

Well, I don't know if it prevents

20

additional discovery, but I may otherwise not require the

21

parties to produce discovery where there is a dispute as to

22

whether such discovery should be had at all.

23

what you are really arguing, right?

24
25

MR. MANDEL:

Yes, I think so.

That seems to be

If we stayed discovery

on the issues that we are fighting about, went forward on the
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

27
DC27CAP2
1

ownership interests, that would be fine.

2
3

THE COURT:

Mr. Adelman, you have been waiting

patiently.

4

MR. ADELMAN:

Thank you, your Honor.

5

And notwithstanding Mr. Mr. Mandel's compliment to me,

6

there is one thing I take issue with, and that is that we were

7

not interested in the ownership issue.

8

not interested.

9

2012 we asked all contracts, agreements, assignments, any

10

In fact, in our initial demands in March of

documents evidencing or concerning --

11
12

It's not that we were

THE COURT:

OK.

But then we went to summary judgment

without that being disputed, right?

13

MR. ADELMAN:

14

THE COURT:

No, for the purposes of that motion.

Well, I mean, wait a minute.

The purpose

15

of that motion was that you folks were teeing it up for me, but

16

it wasn't like if you lose you get to make repeated additional

17

motions, right?

18
19

MR. ADELMAN:

prove in damages that ownership of copyright.

20
21
22

No, but they certainly still have to

THE COURT:

We are in damages discovery now; I get

that.
MR. ADELMAN:

That's all I'm talking about.

But this

23

is a continuing demand, which means they have to provide the

24

ownership materials continuing.

25

discovery ended August 8, and they've had the lists.

And, as far as I'm concerned,

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

The last

28
DC27CAP2
1

list was generated in early June of 2013.

2

generated in June of 2012.

3

THE COURT:

4

granted it.

5

The first list was

I ruled on the summary judgment.

I

discovery.

6

Then we said we are going to have damages

MR. ADELMAN:

That's what I am talking about, your

7

Honor.

8

8, yet what we maintained in our letter is that they have not

9

proved ownership in many of their copyrights, and all of a

10

sudden in the last four or five days we get 3,000 pages of

11

ownership.

12

Damages discovery for Redigi corporate closed on August

We maintain that they're precluded, and that certainly

13

goes to the issue of damages, because any copyright that they

14

cannot prove reduces any potential damage to us.

15

take issue that we don't care about it.

16

any ownership documents that were not produced by the end of

17

disclosure for Redigi corporate are precluded at this point.

18
19
20

THE COURT:

All right.

So, I would

Our position is that

So you want to take back all

the nice things you said about him?
MR. MANDEL:

No.

I mean I think his choice of what

21

defenses to assert was proper and reasonable, and is what I

22

would have done, so I stand by that.

23

THE COURT:

No, the issue is he is saying that you're

24

out of time on discovery.

He asked for these things before he

25

decided to concede them for purposes of a summary judgment
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

29
DC27CAP2
1
2

motion.
MR. MANDEL:

No, but here is the thing.

We all

3

understood on summary judgment that the actual universe of what

4

recordings were going to end up being claimed on was something

5

that we were going to have to figure out.

6

We didn't have that.

Now, what happened is Redigi on summary judgment did

7

not challenge ownership.

When we talked about what discovery

8

they wanted during Redigi post-summary judgment discovery,

9

Mr. Adelman didn't want to take a deposition, didn't seem to be

10

pursuing wanting to challenge ownership, which he hadn't

11

challenged on summary judgment.

12

they recognized that it wasn't going to be a very fruitful area

13

to see that Capitol didn't own the recordings it says it owns.

14

And that was my assumption.

15

discovery was really focused on figuring out which of the

16

recordings that actually --

17

THE COURT:

18

MR. ADELMAN:

So, my assumption was that

Most of the effort during that

Look -Your Honor, one thing.

Remember they

19

amended the complaint and added copyrights.

That was not part

20

of the complaint during the summary judgment motion.

21

were only about 111 tracks at issue during the summary judgment

22

motion, and all of those were purchased by the investigator.

23

So, there is an amended complaint, we have actually answered,

24

and we have affirmative defenses as far as ownership is

25

concerned.

There

I don't think we ever conceded ownership as to the
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

30
DC27CAP2
1

tracks that they are alleging in the complaint.

2

we are arguing was whether there was an infringement or not.

3

And for the basis of the summary judgment motion, they

4

certainly owned at least one of the tracks, and I think that we

5

have stated that; but, nevertheless, my position on discovery

6

is solely as to the copyright issue.

7

THE COURT:

I think what

But you are suggesting that Mr. Mandel

8

basically did and should have understood that you wanted all of

9

this discovery with respect to ownership.

And the date of that

10

is when in relation to my summary judgment ruling, in relation

11

to the conference we had on the motion to amend?

12

date of your demand?

13

MR. ADELMAN:

14

THE COURT:

15

MR. ADELMAN:

16

THE COURT:

17

MR. ADELMAN:

What's the

The date of the demand is March.

March of 2013.
2012.

2012, OK.

So, I ruled.

So, the question you asked me at the

18

conference is as it related to the individuals, who as

19

Mr. Pizzirusso suggested -- I did not represent at the time --

20

but you asked me what I thought was an off-the-cuff request,

21

and at the time off the top of my head, as far as the

22

individuals are concerned, no, I could not think of any

23

discovery.

24

after we had that conference.

25

discovery.

But going forward discovery had already closed
August 8 was the close of

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

31
DC27CAP2
1
2

THE COURT:

Damages discovery.

We all contemplated

that.

3

MR. ADELMAN:

No, not before that conference, your

4

Honor.

5

We had that conference after the close of damages discovery.

6

Damages discovery was closed prior to that conference.

MR. MANDEL:

Your Honor, if I could.

What happened is

7

it wasn't really until the end of that damage discovery

8

period -- we were racing to figure out which were the

9

recordings that actually had been uploaded through Redigi 1.0.

10

We then did a quick search of our computer systems to identify

11

which recordings we could claim on, and we came up with an

12

amended complaint.

13

It would not have been possible in that couple of

14

weeks between the time, less than two weeks really between when

15

we finalized the information to know what the recordings were,

16

to have produced contracts covering all 500 of those

17

recordings.

18

was contesting that.

19

And it wasn't my understanding that Mr. Adelman

THE COURT:

But, you know, obviously -Look, I have to say, to the extent that

20

Mr. Mandel was wrong in what he assumed, I assumed the same

21

thing.

22

a year before my summary judgment ruling was still alive and

23

that you were going to say they haven't produced.

24
25

So, I did not anticipate that the document request made

MR. ADELMAN:

Well, your Honor, the fact is that

damages discovery had closed before that conference.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

32
DC27CAP2
1

THE COURT:

Before the conference on the motion to

2

amend, you mean, in August?

3

MR. ADELMAN:

4

MR. MANDEL:

5

MR. ADELMAN:

Yes.
But it's not -So, my assumption was that discovery was

6

closed and Mr. Mandel had provided me with all the discovery

7

that he wished to.

8
9

And to the extent that Mr. Mandel knows that it's his
burden of ownership in a copyright case on damages, he should

10

have provided all the documentation.

11

to provide more documentation after that, the close of damages,

12

at the conference, he should have brought up the fact that

13

damages discovery needs to continue because we haven't provided

14

all the ownership documents, which is our burden to prove at

15

trial.

16

THE COURT:

17

MR. MANDEL:

To the extent he wanted

All right.
Well, your Honor, we did produce all the

18

registrations during the discovery period, which satisfies as

19

our burden of prima facie proof.

20

I didn't understand that Mr. Adelman -- because he had

21

didn't served new requests.

And we asked are you going to want

22

a deposition of our witness, and the answer was, no, I don't

23

want to take another deposition.

24

questions about ownership at the first deposition.

25

produced some ownership documents relating to the original

And he asked barely any

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

And we had

33
DC27CAP2
1

universe of recordings.

2

So, it was not my understanding that this was a topic

3

that they were actually pursuing.

4

registrations were going to provide sufficient proof.

5

If they want to pursue it, if the individual

6

defendants want to pursue it, that's fine, we don't object to

7

that.

That I think is fair game, although --

8
9

And I thought the

THE COURT:

Well, he's saying it's too late for that.

So, the fact that you are not objecting, of course you are not

10

objecting.

He's not asking for it now; he says you are

11

precluded from producing any.

12

MR. MANDEL:

That I guess I have a problem with under

13

the circumstances of how this developed.

14

defendants asked for it.

15

And the individual

We made very clear from the outset -- even though we

16

were objecting to a lot of the discovery that the individual

17

defendants were serving -- that we were absolutely going to

18

produce.

19

would produce that, and we would certainly produce a witness to

20

testify to that.

That's never been something that we have

21

sought to block.

The whole reason we got derailed with

22

discovery disputes with the individual defendants is because of

23

all these other issues that they were seeking.

24
25

If they wanted the chain of title documentation, we

MR. ADELMAN:

Your Honor, notwithstanding that, in

order to proceed with this case, he has to have ownership
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

34
DC27CAP2
1

documents.

2

that they own the copyright.

3

the individual tracks.

4

He has to prove the copyright.

He has to prove

We have never conceded that as to

And during discovery there was also conversations

5

between Ms. Matz and Mr. King, which I'd like her to express,

6

if you would, your Honor.

7

THE COURT:

Look, I don't know that I'm going to need

8

to sort of peel this onion, because I don't think there is a

9

satisfactory way to do it.

10

So, what I'm prepared to do is stay all discovery now,

11

rule on the motion to dismiss -- which I will do very

12

shortly -- and then once I have done that, then we will have an

13

answer, we will have defenses that are asserted, and then you

14

can make your motion for summary judgment against the

15

individual defendants, arguing at least in part that they are

16

precluded from certain defenses, and we can I guess coordinate

17

whatever additional discovery is necessary to wrap this up.

18

And then I guess we would have additional summary judgment

19

motions on damages.

20

That's what you are contemplating, right, Mr. Mandel?

21

MR. MANDEL:

22

judgment motion on the individual defendants' liability.

23

THE COURT:

24

MR. MANDEL:

25

We are only contemplating summary

So, damages would be at trial?
Well, we are going to move for summary

judgment on the innocent infringement defense that would open
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

35
DC27CAP2
1
2
3
4

up a lower category of damages.
THE COURT:

So, anyway, I think all of that happens

after I rule on the motion to dismiss.
So, to the extent you want to do informal discovery

5

between now and then, you can.

6

that discover is closed, and he is not so accepting or asking

7

for anything more, then he can take that position.

8

very likely to reopen discovery for a limited time for the

9

purpose of wrapping this up, so we can get to the finish line.

10

If Mr. Adelman is of the view

But I am

So, I think to the extent there has been confusion and

11

that there has been misunderstandings -- I'm not accusing

12

anybody of anything -- I'm just saying that certainly at the

13

time we had our conference in August, I anticipated a very

14

different way this would unfold.

15

So, I think it's not fair to Mr. Pizzirusso to be

16

asserting defenses until he knows what he's shooting at, so I

17

think I have to rule on that motion.

18

to hold off.

19
20
21

But discovery I'm going

You see the way this wind is blowing, right, Mr.
Pizzirusso?

You're a smart guy.

MR. PIZZIRUSSO:

I do.

That was going to be my next

22

question, which was:

I hear the court is inclined perhaps

23

probably to deny the motion to seek an answer.

24

going to happen, we might be more inclined, my clients, to go

25

ahead with some informal discovery if that appears to be the

And if that's

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

36
DC27CAP2
1
2

way the wind is blowing.
THE COURT:

Nobody is precluded from informal

3

discovery, but I'm certainly stopping the requirement of

4

reciprocal discovery at this point.

5

Discovery is stopped unless you folks can agree.

But

6

once I rule, and assuming this thing is back on a litigation

7

track, then I will almost certainly reopen discovery for a

8

limited range of issues.

9

yet, and I think that will turn on what the pleadings, what the

10
11

What those are exactly, I'm not sure

answer says.
So, I'm not sure that's satisfactory to everybody, but

12

I think it's the best we can do at this hour.

13

I have overlooked, or anything else you think I should at least

14

keep in my brain?

15
16
17

MR. ADELMAN:

So,anything else

Only that we also have a letter for

summary judgment as well.
THE COURT:

Right.

Well, there certainly was talk

18

about summary judgment, and I think we should hold off on

19

summary judgment until we have concluded all discovery.

20

MR. ADELMAN:

21

THE COURT:

22
23
24
25

I agree.

So, no prejudice to your motion, but I

think we should -MR. ADELMAN:
in the mix.

No.

I was just making sure that it was

But I think your plan is a good one.

THE COURT:

And you don't always think that.

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

37
DC27CAP2
1

MR. ADELMAN:

No, you're right.

And you know I'm very

2

vocal as far as whether I agree or disagree.

3

a rational one, because I think there has been some confusion

4

as to where everyone is going, and I am going to say on the

5

record that I am open to discussing it with Mr. Mandel.

6

THE COURT:

Good.

But I think it's

Look, that's the goal, of course.

7

You obviously have very different positions on the law,

8

interesting case, clients who feel the importance of this.

9

It's not lost on me, but there is no reason why the lawyers

10

have to be acrimonious with each other.

11

suggesting they are necessarily.

12

you can reach agreement, but right now the ball is in my court

13

to resolve a couple of things and get you on track.

14
15

MR. ADELMAN:

And I am not

So, do sit down and see where

We're actually quite unacrimonious.

all get along, so it's been helpful.

We

Even Mr. Pizzirusso.

16

But I appreciate your help on this one, your Honor.

17

THE COURT:

18
19

I'm not sure how much I've helped, but

anyway.
So, let's adjourn.

Let me thank the court reporter

20

for his time and his predecessor's time.

21

copy of the transcript, you can take that up with the court

22

reporter, but I will be in touch with you very shortly.

23

Mr. Pizzirusso, thanks for coming up.

24

If anybody needs a

- - -

25
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

OK?