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, (212) 805-0300. 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)

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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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 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. (212) 805-0300 OK?

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