Capitol Records, LLC v. Redigi Inc.

Filing 166

TRANSCRIPT of Proceedings re: conference held on 11/7/2014 before Judge Richard J. Sullivan. Court Reporter/Transcriber: Patricia Kaneshiro-Miller, (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 12/26/2014. Redacted Transcript Deadline set for 1/5/2015. Release of Transcript Restriction set for 3/5/2015.(McGuirk, Kelly)

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1 Eb74capc 1 2 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------x 3 CAPITOL RECORDS, LLC, et al., 4 Plaintiffs, 5 v. 12 CV 95 (RJS) 6 REDIGI, INC., et al., 7 Defendants. 8 ------------------------------x New York, N.Y. November 7, 2014 4:50 p.m. 9 10 Before: 11 HON. RICHARD J. SULLIVAN, 12 District Judge 13 14 15 16 APPEARANCES COWAN, LIEBOWITZ & LATMAN, P.C. Attorneys for Plaintiffs BY: RICHARD S. MANDEL JONATHAN Z. KING 17 18 HAUSFELD LLP Attorneys for Defendant Ossenmacher BY: NATHANIEL C. GIDDINGS 19 20 21 ADELMAN MATZ P.C. Attorneys for Defendant Redigi Inc. BY: GARY P. ADELMAN SARAH M. MATZ 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 2 Eb74capc 1 (Case called) 2 THE COURT: With respect to this case, I guess we have 3 a dispute that stems back to what we talked about some time 4 ago, which is whether or not the individual defendants are sort 5 of locked into the positions taken by the corporate defendants 6 up through the time of the summary judgment ruling. 7 So far so good? 8 I think that is the basic issue. 9 So there is a legal dispute clearly as to whether or not the Second Circuit's 10 decision in Teltronics, which is factually a little different 11 because that's a case where there was a case, a ruling, and 12 then a subsequent case involving the individual principals and 13 shareholders of the corporate defendant that was found liable 14 in the first case, but I think the principle would apply 15 equally to both. 16 Teltronics is relevant to this situation. 17 there is a factual dispute as to whether or not the individual 18 defendants, in fact, controlled the corporate defendant and 19 directed the litigation up through the time of the summary 20 judgment ruling. 21 22 There is a legal dispute as to whether or not I'm not sure if Maybe we should start there. Is there a dispute about whether or not -- not you, Mr. Mandel. 23 MR. MANDEL: I didn't think so. 24 THE COURT: 25 MR. GIDDINGS: Is there a dispute about that? Yes, your Honor. SOUTHERN DISTRICT REPORTERS, P.C. It is something that (212) 805-0300 3 Eb74capc 1 we would like discovery on. 2 THE COURT: What sort of discovery do you need to 3 determine whether or not your clients were running the 4 litigation? 5 MR. GIDDINGS: Let me rephrase, your Honor. 6 It is something that we think can be developed further 7 and potentially challenged in this litigation. 8 would like to develop an argument based on facts -- 9 THE COURT: If Capitol Basically, the easiest way to do this is I 10 throw your clients on the stand and we ask them questions about 11 what involvement they had with respect to the litigation when 12 it was just the corporate defendant and who else is involved in 13 running the corporate defendant and running the litigation. 14 don't want privileged information, but I think that would be 15 relevant to determine whether or not these are people who are 16 responsible for the corporate defendant's litigation strategies 17 and, therefore, arguably liable to stick with those decisions, 18 those prior decisions. 19 Is there really a dispute about this? 20 MR. GIDDINGS: I Your Honor, it is something that we 21 didn't focus on in the letters before you. 22 would like to explore further, and we would be happy to brief 23 it to your Honor. 24 25 It is something we What we think the issue really is today before the Court, as you correctly identified, was whether res judicata SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 4 Eb74capc 1 and collateral estoppel applies here, and we think we can reach 2 that issue without ever having to get to the privity issue. 3 THE COURT: That may be. If I rule on the legal issue 4 in your favor, then I guess you're right. I think I'm likely 5 to rule the other way on this. 6 from the parties somewhat cursorily lay out the positions. 7 not criticizing. 8 basically, your argument is that the Teltronics case and other 9 cases that have been discussed in this context were sort of in The letters that I received You had a limited amount of space. I'm I think, 10 a procedurally different posture and, therefore, are wholly 11 inapplicable. 12 Mr. Mandel has any choice but to concede that there is a 13 procedural difference between where those cases were and where 14 this case is. 15 agree -- that's a distinction that doesn't make any difference 16 for purposes of the legal analysis. 17 agree with that. 18 more fully, I guess I would give you a chance to do that. I think I would concede, I don't think But his point is -- and I think I'm inclined to I think I'm likely to If you want to have a chance to develop this 19 MR. GIDDINGS: 20 THE COURT: Absolutely, your Honor. I wouldn't bet the house on changing my 21 view on that, just because I think there is not a ton of case 22 law, and I think there is only so many ways to slice this. 23 MR. GIDDINGS: Absolutely, your Honor. Just to 24 clarify, Teltronics was a res judicata case, not a collateral 25 estoppel case. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 5 Eb74capc 1 2 Are you inclined to say that res judicata would apply here? 3 4 THE COURT: I'm inclined to say that the principles articulated in Teltronics would apply here, as well -- 5 MR. GIDDINGS: 6 THE COURT: Okay. -- if, in fact, it is true and undisputed 7 that the individual defendants were running this defense for 8 the corporate client, the corporate defendant, and knew full 9 well what they were doing when they decided to not challenge 10 certain things, stipulate to certain things, not assert certain 11 defenses. 12 is equally applicable here. 13 wouldn't be applied here. It would seem to me that the rationale in Teltronics I can't think of a reason that it 14 MR. GIDDINGS: 15 four-part test for res judicata. 16 that was: 17 that judgment must be by a court of competent jurisdiction; 18 third, the same party for privity; and fourth, the same cause 19 of action. 20 Your Honor, Teltronics laid out a It laid out four factors, and First, the final judgment on the merits; second, Now, I think we can let two and three go for right 21 now. 22 not there has been a final judgment in the merits. 23 is pretty well accepted that res judicata, that means it has to 24 be in a prior proceeding, a prior action, right? 25 Really, what the question is, your Honor, is whether or I think it What we have here is the same action, so that SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 6 Eb74capc 1 res judicata would not apply. 2 Bank, the Court said, quote, defenses that could have been 3 raised by a corporation in a prior action were barred by 4 res judicata. 5 THE COURT: For instance, in Marine Midland That's what it said. It didn't say in a 6 situation like this one that the individual defendants could 7 then raise everything anew, right? 8 9 I see the language you're seizing upon, but I don't think that was the holding of the case; right? 10 MR. GIDDINGS: 11 that. 12 detail, your Honor. 13 THE COURT: I would have to go back and look at It is something we would be happy to brief in greater I will give you a chance to brief it. I 14 think, clearly, the language of Teltronics, at pages 190 and 15 191, principally those pages, would seem to have equal force 16 here as to what went on. 17 whether or not the individual defendants really were running 18 the litigation, well, then I guess we would have to nail that 19 down. 20 MR. GIDDINGS: 21 THE COURT: If there is a factual dispute as to Right. I think that would be easily done by 22 putting them on the stand in front of me and then I could 23 assess and make a finding. 24 25 MR. GIDDINGS: Your Honor, Teltronics also said, quote, res judicata applies to repetitious suits involving the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 7 Eb74capc 1 same cause of action. 2 suits here. 3 THE COURT: Right? Again, we don't have repetitious So your view is that had the suit that I 4 granted summary judgment on, if that went to final judgment and 5 then they filed a separate action against your clients, then of 6 course they would be stuck with what they did here; but because 7 it was an amended complaint with the same docket number, that 8 makes all the difference in the world? 9 10 MR. GIDDINGS: THE COURT: Correct, your Honor. Okay. I think that is the kind of 11 formalism that I don't find persuasive. 12 you a chance to brief it, certainly, but it doesn't strike me 13 as that persuasive. 14 partial summary judgments are entitled to conclusive effect. 15 I think I will give Certainly, there are cases in which MR. GIDDINGS: Your Honor, to be clear about the 16 partial summary judgment point, the cases that Capitol cites, 17 those are all partial summary judgment orders from a prior 18 proceeding, a different action, right. 19 order from a district court judge in another district. 20 THE COURT: Hudson involved an I get all that, but your view is that the 21 entire issue turns on whether or not there was an amended 22 complaint or whether there was a new complaint with a different 23 docket number. 24 25 MR. GIDDINGS: Correct. That's what the cases say, your Honor. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 8 Eb74capc 1 THE COURT: But they don't say that. They don't 2 address this issue squarely and say that you have to bring a 3 new case; that in a situation in which there's an amended 4 complaint, bringing the same cause of action against two new 5 defendants, that the result is totally different. 6 found a case that says that. 7 MR. GIDDINGS: I haven't Are you aware of one? I am not, but I'm not aware of a case 8 where res judicata and collateral estoppel have been applied in 9 the same proceeding, to preclude that defendant from raising 10 those defenses. Right? 11 letter, either. Again, maybe something better suited for 12 further briefing and further explanation, but Capitol has not 13 pointed to a single case in which this has been done before. 14 THE COURT: Capitol hasn't pointed to one in their This is the language from Teltronics: "In 15 light of the individual defendant's continuous and active 16 non-party participation and his apparent day-to-day leadership 17 role in the prior litigation, we hold that he was in privity 18 with Teltronics and is bound by the result in Teltronics' 19 litigation arising from this cause of action." 20 21 22 So you're hanging your hat on the fact that prior litigation was at issue in that case. MR. GIDDINGS: Correct, your Honor. Actually, 23 Teltronics, my reading of the case, is there are three or four 24 different subsequent actions prior to the Second Circuit 25 decision. It depends on how you count them. SOUTHERN DISTRICT REPORTERS, P.C. Three or four is (212) 805-0300 9 Eb74capc 1 a fair assessment at the very beginning of the opinion. 2 THE COURT: The other quote at page 191: "If a 3 stockholder, officer, or director of a corporation controls an 4 action brought on its behalf in furtherance of his own 5 interests, he is bound by the result of that action." 6 I think the issues are pretty clear. 7 additional authority, I would love to see it. 8 any. 9 I haven't found How long do you think you need to brief it? 10 MR. GIDDINGS: 11 THE COURT: 12 If there is To submit a brief on it? A fuller brief than what you have given me. 13 MR. GIDDINGS: From our perspective, we probably need 14 until the first or second week in December, your Honor. 15 Thanksgiving is coming up, and I am going to be out of the 16 country for a different matter for eight days, six to eight 17 days. 18 THE COURT: 19 scheduling and anything else. 20 guess, in response, right? 21 22 23 24 25 MR. MANDEL: Let me hear what Mr. Mandel has to say on You want to submit a brief, I I suppose so, if your Honor wants briefing. THE COURT: I'm going to give them an opportunity to brief it more fully than a three-page letter. MR. MANDEL: That's fine. SOUTHERN DISTRICT REPORTERS, P.C. Obviously, we would like (212) 805-0300 10 Eb74capc 1 the opportunity to respond if they're going to submit a brief. 2 THE COURT: 3 MR. GIDDINGS: 4 Mr. Giddings, by December 5th. Thank you. 5 THE COURT: 6 MR. MANDEL: 7 THE COURT: 8 So December 19th. 9 10 I think that is fair, your Honor. How long do you need, Mr. Mandel? Two weeks. Two weeks. That is what I was thinking. All right. MR. GIDDINGS: Your Honor, to be clear, are we going to be permitted a reply? 11 THE COURT: I'm not sure that I need a reply, 12 candidly. We have sort of teed this up twice already now in 13 letters and with oral argument back in December, so I would 14 love to get it wrapped up. 15 can make a reply by the 23rd. 16 MR. GIDDINGS: 17 If you want to make a reply, you Okay. necessary, your Honor. 18 THE COURT: I don't know if one is going to be I assume it will be short. I assume 19 you're not going to find anything in their opposition that you 20 haven't already seen. 21 do it. 22 23 So the 23rd, it gives you five days to Is that okay? MR. GIDDINGS: That sounds great, your Honor. Thank you. 24 THE COURT: All right. Let's do that. 25 In the meantime, what else can we or should we be SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 11 Eb74capc 1 2 doing? Damages discovery is something I certainly 3 contemplated. 4 the motions to dismiss and motions for reconsideration of the 5 order denying the motions to dismiss. 6 We could put that on hold pending resolution of So, Mr. Mandel, from your perspective, what do we need 7 to do with respect to damages? 8 MR. MANDEL: I think we've talked to Mr. Giddings. 9 don't need any more discovery from Capitol's perspective. 10 Mr. Giddings had talked about, perhaps, until the end of 11 February, for them to complete the discovery that they feel 12 We they need. 13 14 15 THE COURT: The discovery they feel they need meaning requests of you? MR. MANDEL: Yes. Discovery that the individual 16 defendants are seeking of Capitol to defend the case. 17 agreeable to that. 18 We're The one thing I would point out, we think these 19 defendants are barred by res judicata and collateral estoppel, 20 but even apart from that, I think just in the context of the 21 discovery disputes that we briefed in the letters, even if you 22 assume that somehow these defenses could stand, I think the 23 discovery requests are still way out of bounds and not 24 connected to anything that's really reasonable. 25 defenses, to be frank, they're very slim. SOUTHERN DISTRICT REPORTERS, P.C. I think these They could (212) 805-0300 12 Eb74capc 1 2 probably -THE COURT: You're alleging that they infringed on 3 your copyrights, what you own? 4 MR. MANDEL: 5 THE COURT: 6 MR. MANDEL: 8 THE COURT: 10 11 You've attached to your complaint a couple of lists of copyrighted material. 7 9 Correct. Correct. If we were starting from scratch and they said, I don't think you really own those copyrights -MR. MANDEL: I'm not contesting their entitlement to discovery on ownership. 12 THE COURT: 13 MR. MANDEL: What are you talking about? I'm talking about the few issues that we 14 briefed in the letters, which are really primarily geared to 15 their so-called defenses, and they relate to things that are 16 very far afield. 17 THE COURT: 18 MR. MANDEL: What are you talking about? Every copyright case that Capitol has 19 brought for any of these recordings, we have to tell them what 20 they are; what the result was; if there was a settlement, how 21 much it was for. 22 issue that is left to be decided. 23 our digital exploitation for all of these recordings, so 24 basically all of our contracts. 25 It's crazy. I mean, it has no bearing on any They're asking for all of At this point in the case, where we are, I don't know SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 13 Eb74capc 1 what that has to do with any issue that's left. We produced in 2 discovery and they have our contract with Apple, which is 3 really the primary relationship that is significant; but at 4 this point, for us to start producing all our licenses, all of 5 our contracts for digital exploitation, everything relating to 6 our policies of digital exploitation, it is a complete fishing 7 expedition. 8 questions about it and get us to prove that we own it, fine, I 9 understand that. If they want to challenge ownership and ask But these other topics are so far afield, and 10 they try to justify them without even explaining they're 11 supposedly related to their unclean hands defense, which they 12 have never articulated what unclean hands defense could 13 possible exist here, or copyright misuse. 14 those defenses are. 15 them as a matter of res judicata or collateral estoppel, but 16 even if they could, they're totally without any factual or 17 legal foundation at this point. 18 THE COURT: I don't know what I don't think they're entitled to assert I'm inclined to agree. I guess I would be 19 curious to know what they are, but it may be that the legal 20 ruling dispenses the need even to do that. 21 Mr. Giddings, do you want to say something? 22 MR. GIDDINGS: 23 Regarding Mr. Mandel's comment about the end of Yes, your Honor. 24 February, I think your ruling, depending on what it does at the 25 briefing, has an impact on that. That will obviously push the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 14 Eb74capc 1 discovery or have a very real impact on what discovery the 2 individual defendants are able to seek in this action. 3 think it may be premature. 4 THE COURT: Maybe. So I Why do you think you need to know 5 about all the infringement cases they have settled with other 6 people? 7 MR. GIDDINGS: Your Honor, my point was that if we are 8 precluded, in your view, by res judicata or collateral estoppel 9 from asserting any defense as to our liability or certain 10 defenses as to the individual defendant's liability, then I 11 believe the discovery period that we could negotiate with 12 Capitol Records would be much shorter. 13 THE COURT: I agree with that. I guess I'm asking, 14 even if I said you can assert defenses that the corporate 15 defendant waived or didn't make, what would be the rationale 16 for getting discovering on every infringement action they've 17 had with third parties? 18 19 MR. GIDDINGS: Your Honor, our client believes that it is pertinent to the way in which -- 20 THE COURT: 21 of no moment to me. 22 If your client believes it is pertinent is relevance? What is the articulable basis for its 23 MR. GIDDINGS: 24 THE COURT: 25 MR. GIDDINGS: About prior actions, your Honor? Yes. It goes as to how Capitol has enforced SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 15 Eb74capc 1 its copyrights as to other start-ups, as to other users, which 2 goes, we think, into the damage calculation or the damage -- 3 "computation" is not the correct word -- but the equation, if 4 you will. 5 THE COURT: I guess I would want to see some authority 6 for the proposition that you're entitled to know the settlement 7 terms of every infringement case they have ever settled to 8 assess the damages. 9 MR. GIDDINGS: To be clear, your Honor, we weren't 10 asking for settlement terms. 11 list of all their prior enforcement actions or their copyright 12 actions as to these asserted claims. 13 THE COURT: I believe the request asks for a What would that be relevant to in this 14 case? 15 brought to protect their copyrights? 16 17 A list of other enforcement actions that they have MR. GIDDINGS: It does also ask for the outcome of the claim. 18 THE COURT: Look, I think I'm not likely to allow 19 that. I think the legal question may resolve it without me 20 having to do this piecemeal, but I do think at some point we 21 may get to the merits of these, and whether this is just 22 designed to inflict pain on the other side or whether it is 23 just a fishing expedition or a desire to delay further the 24 litigation, so I guess I'm not going to resolve that now, but 25 I'm skeptical. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 16 Eb74capc 1 MR. GIDDINGS: 2 THE COURT: 3 Thank you, your Honor. Mr. Adelman, this is the quietest I have ever seen you. 4 MR. ADELMAN: 5 THE COURT: 6 Anything else you want us to cover? 7 MR. ADELMAN: 8 9 10 I appreciate that. I said it with a smile. I have lots to say, but not in this case. THE COURT: You have nothing to say today? MR. ADELMAN: No, I don't think we have anything to 11 say other than we are going to participate, obviously, in the 12 discovery process to the extent it goes on, because I think we 13 feel, to the extent that -- may I stand? 14 THE COURT: Sure. 15 MR. ADELMAN: While we continue to object to their 16 providing certain documents after the close of damages 17 discovery in the corporate case proffer, they did disclose 18 almost 4,000 pages, and we would like the opportunity to depose 19 someone from the plaintiffs -- 20 THE COURT: 21 MR. ADELMAN: 22 THE COURT: 23 MR. MANDEL: 24 25 With respect to damages? Yes, with respect to damages. Mr. Mandel, you're not objecting to that? No. I think if, by damages, they mean ownership -MR. ADELMAN: Yeah, I mean in the damages, as part of SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 17 Eb74capc 1 the damages phase, yes, as to ownership -- 2 MR. MANDEL: 3 MR. ADELMAN: 4 5 We don't have any problem with that. I just wanted to make sure that was part of whatever you decide here today vis-a-vis discovery. THE COURT: I think we will resolve the legal issue as 6 to what the defendants are going to be able to assert. Once I 7 have done that, then we will decide what discovery remains and 8 what it is going to look like. 9 terribly long because I think it is going to be fairly I don't anticipate it lasting 10 discrete. 11 to damages was done. 12 all along was to have some damages discovery, and then we kind 13 of got waylaid by the individual defendants submitting 14 complaints and the motions to dismiss and reconsider. I'm not 15 faulting anybody, but I think that's what has gone on. So my 16 contemplation was always and remains -- and I think I have the 17 discretion to make this happen -- that we're going to have some 18 damages discovery, but let's first resolve this last legal 19 issue relating to Teltronics and what it means for this case. 20 I didn't understand that fact discovery with respect I mean, my understanding and my intention I will issue a scheduling order for that briefing, and 21 then I think I will likely resolve it very quickly, with or 22 without an opinion. 23 we can get this back on track. 24 25 The opinion may follow later, just so that Okay. It is an interesting case. It has attracted a lot of attention, with good reason, but I want to get it moving. SOUTHERN DISTRICT REPORTERS, P.C. So (212) 805-0300 18 Eb74capc 1 it may be that the Teltronics issue is one where I will rule 2 and then explain later. Okay? All right. 3 Anything else we should cover today? 4 MR. MANDEL: 5 THE COURT: 6 MR. ADELMAN: 7 MR. GIDDINGS: 8 THE COURT: 9 I will issue that short order. 10 11 12 13 14 Not from plaintiffs, your Honor. All right. No, your Honor. Not from our perspective, your Honor. Thanks very much. I thank the court reporter, as always, for her talent and time. If anybody needs a copy of the transcript, you can take that up with her now. (Adjourned) 15 16 17 18 19 20 21 22 23 24 25 SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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