Capitol Records, LLC v. Redigi Inc.
Filing
169
MEMORANDUM OF LAW Regarding the Application of Res Judicata, Collateral Estoppel, and Law of the Case. Document filed by John Ossenmacher, Larry Rudolph. (Attachments: # 1 Affidavit Declaration of James J. Pizzirusso, # 2 Exhibit 1-5, # 3 Exhibit 6-10, # 4 Exhibit 11-15, # 5 Certificate of Service)(Giddings, Nathaniel)
IN THE UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
CAPITOL RECORDS, LLC, CAPITOL
CHRISTIAN MUSIC GROUP, INC., and
VIRGIN RECORDS IR HOLDINGS, INC.,
12-CV-00095 (RJS)
Plaintiffs,
v.
REDIGI INC., JOHN OSSENMACHER, and
LARRY RUDOLPH a/k/a LAWRENCE S.
ROGEL,
Defendants.
INDIVIDUAL DEFENDANTS’ MEMORANDUM OF LAW
REGARDING THE APPLICATION OF
RES JUDICATA, COLLATERAL ESTOPPEL, AND LAW OF THE CASE
TABLE OF CONTENTS
I.
PROCEDURAL HISTORY ................................................................................................. 1
A.
THE INITIAL COMPLAINT AND ANSWER. .............................................................................. 1
B.
THE MOTION FOR PRELIMINARY INJUNCTION. ..................................................................... 2
C.
INDIVIDUAL DEFENDANT DEPOSITIONS ............................................................................... 2
D.
THE CROSS-MOTIONS FOR SUMMARY JUDGMENT ............................................................... 3
E.
THE FILING OF THE FIRST AMENDED COMPLAINT................................................................ 3
F.
THE FILING OF THE SECOND AMENDED COMPLAINT ........................................................... 5
II. THE DISCOVERY DISPUTE ............................................................................................. 7
A.
PRE-MOTION TO DISMISS RESOLUTION ............................................................................... 7
B.
POST-MOTION TO DISMISS RESOLUTION ........................................................................... 10
III. ARGUMENT ....................................................................................................................... 11
A.
RES JUDICATA DOES NOT APPLY....................................................................................... 12
B.
COLLATERAL ESTOPPEL DOES NOT APPLY........................................................................ 14
C.
LAW OF THE CASE DOES NOT APPLY. ................................................................................ 18
D. DENYING INDIVIDUAL DEFENDANTS DISCOVERY AND TO DISPUTE THEIR LIABILITY
WOULD VIOLATE THEIR DUE PROCESS RIGHTS......................................................................... 19
E.
THE DISCOVERY REQUESTS AT ISSUE ARE APPROPRIATE. ................................................ 22
1.
Requests for Production Numbers 10, 17, & 18 ........................................................... 22
2.
Interrogatory Number 19. ............................................................................................. 23
IV. CONCLUSION ................................................................................................................... 24
ii
TABLE OF AUTHORITIES
Page(s)
CASES
Am. Stock Exch., LLC v. Mopex, Inc.,
215 F.R.D. 87 (S.D.N.Y. 2002) ...............................................................................................18
Arista Records LLC v. Lime Grp. LLC,
No. 06 CV 5936, 2010 WL 4720338 (S.D.N.Y. Nov. 19, 2010) ............................................23
Arizona v. California,
460 U.S. 605 (1983) ...........................................................................................................11, 19
Avondale Shipyards, Inc. v. Insured Lloyd’s,
786 F.2d 1265 (5th Cir. 1986) .................................................................................................16
Ball v. A.O. Smith Corp.,
451 F.3d 66 (2d Cir. 2006).......................................................................................................15
Benavidez v. Piramides Mayas Inc.,
No. 09 Civ. 5076, 2013 WL 2357527 (S.D.N.Y. May 24, 2013) ............................................22
Cargill, Inc. v. Sears Petroleum & Transp. Corp.,
334 F. Supp. 2d 197 (N.D.N.Y. 2004) .....................................................................................19
Cartier, Inc. v. Four Star Jewelry Creations, Inc.,
No. 01 Civ. 11295, 2004 WL 169746 (S.D.N.Y. Jan. 28, 2004) .............................................19
CBS Inc. v. Creed Taylor et al.,
No. 17421/83, slip op. (N.Y. Sup. Ct. Oct. 15, 1984)..............................................................17
Creed Taylor, Inc. v. CBS, Inc.,
718 F. Supp. 1171 (S.D.N.Y. 1989)...................................................................................16, 17
Davis v. Lenox Hill Hosp.,
No. 03 Civ. 3746, 2004 WL 1926086 (S.D.N.Y. Aug. 31, 2004) .............................................6
Eugene v. 3Don & Partner Estate Grp., LLC,
No. 07-80439-CIV, 2009 WL 1810735 (S.D. Fla. June 24, 2009)..........................................21
Flynn v. Best Buy Auto Sales,
218 F.R.D. 94 (E.D. Pa. 2003) .................................................................................................21
H.R. Bushman & Son, Corp. v. Spud Packers, Inc.,
No. 4:06CV1638, 2008 WL 625023 (E.D. Mo. Mar. 4, 2008)................................................21
iii
Harris Trust & Sav. Bank v. John Hancock Mut. Life Ins. Co.,
722 F. Supp. 998 (S.D.N.Y. 1989) aff’d in part, rev’d in part sub nom. Harris Trust
& Sav. Bank v. John Hancock Mut. Life Ins. Co., 970 F.2d 1138 (2d Cir. 1992) aff’d
sub nom. John Hancock Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86
(1993) .......................................................................................................................................17
Holzsager v. Valley Hosp.,
482 F. Supp. 629 (S.D.N.Y. 1979) ..........................................................................................14
Hudson v. Universal Studios Inc.,
235 F. App’x 788 (2d Cir. 2007) .............................................................................................12
In re Hyman,
335 B.R. 32 (S.D.N.Y. 2005) aff’d on other grounds, 502 F.3d 61 (2d Cir. 2007).................13
In re re Teltronics Servs., Inc.,
762 F.2d 185 (2d Cir. 1985).....................................................................................................13
Kay-R Elec. Corp. v. Stone & Webster Constr. Co.,
23 F.3d 55 (2d Cir. 1994).........................................................................................................16
Kreager v. General Electric Co.,
497 F.2d 468, 470 (2d Cir. 1974).............................................................................................13
L M Ericsson Telecomms., Inc. v. Teltronics Servs., Inc.
18 B.R. 705 (E.D.N.Y.1982) ...................................................................................................13
Liberty Mut. Ins. Co. v. Wetzel,
424 U.S. 737 (1976) .................................................................................................................16
Lummus Co. v. Commonwealth Oil Ref. Co.,
297 F.2d 80 (2d Cir.1961)........................................................................................................16
Marvel Characters, Inc. v. Simon,
310 F.3d 280 (2d Cir. 2002).....................................................................................................11
McCarthy v. Dun & Bradstreet Corp.,
482 F.3d 184 (2d Cir. 2007).....................................................................................................19
McNabb v. Riley,
29 F.3d 1303 (8th Cir. 1994) ...................................................................................................19
Mei v. City of N.Y.,
No. 06 Civ. 00296, 2006 WL 2997111 (S.D.N.Y. Oct. 5, 2006) ..............................................1
Metromedia Co. v. Fugazy,
983 F.2d 350 (2d Cir. 1992).....................................................................................................16
iv
Moezinia v. Damaghi,
544 N.Y.S.2d 8 (1st Dep’t 1989) .............................................................................................13
Monahan v. New York City Dep’t of Corr.,
214 F.3d 275 (2d Cir. 2000)...............................................................................................12, 14
Moran v. City of New Rochelle,
346 F. Supp. 2d 507 (S.D.N.Y. 2004)......................................................................................15
Nelson v. Adams USA, Inc.,
529 U.S. 460 (2000) ...........................................................................................................20, 21
Netherby Ltd. v. Jones Apparel Grp., Inc.,
No. 04 Civ. 7028, 2005 WL 1214345 (S.D.N.Y. May 18, 2005) ............................................12
Novick v. AXA Network, LLC,
642 F.3d 304 (2d Cir. 2011).....................................................................................................16
Oppenheimer Fund, Inc. v. Sanders,
437 U.S. 340 (1978) .................................................................................................................22
PenneCom B.V. v. Merrill Lynch & Co.,
372 F.3d 488 (2d Cir. 2004).....................................................................................................17
Perez v. Nationwide Mut. Fire Ins. Co.,
No. 01 Civ. 2135, 2001 WL 716924 (S.D.N.Y. June 25, 2001) ..............................................17
Pescatore v. Pan Am. World Airways, Inc.,
97 F.3d 1 (2d Cir. 1996)...........................................................................................................19
Pike v. Freeman,
266 F.3d 78 (2d Cir. 2001).......................................................................................................11
Quatraro v. Vill. of Kenmore Zoning Bd. of Appeals,
716 N.Y.S.2d 508 (4th Dep’t 2000) .........................................................................................11
Quern v. Jordan,
440 U.S. 332 (1979) .................................................................................................................18
Rezzonico v. H & R Block, Inc.,
182 F.3d 144 (2d Cir. 1999).........................................................................................12, 13, 18
Semple v. Eyeblaster, Inc.,
No. 08 Civ. 9004, 2009 WL 1748062 (S.D.N.Y. June 19, 2009) ............................................18
Smith v. Cafe Asia,
256 F.R.D. 247 (D.D.C. 2009).................................................................................................24
v
Stichting Ter Behartiging Van de Belangen Van Oudaandeelhouders In Het Kapitaal Van
Saybolt Int’l B.V. v. Schreiber,
407 F.3d 34 (2d Cir. 2005).......................................................................................................19
Teltronics Servs., Inc. v. L M Ericsson Tel. Co.,
No. 79 Civ. 1233, slip op. (S.D.N.Y. May 9, 1979) ................................................................13
Teltronics Servs., Inc. v. L M Ericsson Telecomms., Inc.,
486 F. Supp. 836 (S.D.N.Y. 1980), on reargument, 491 F. Supp. 538 (S.D.N.Y.1980),
aff’d, 642 F.2d 31 (2d Cir. 1981), cert. denied, 452 U.S. 960 (1981) .....................................13
U.S. Dep’t of Justice v. Hudson,
No. 1:06-CV-763, 2007 WL 2461783 (N.D.N.Y. Aug. 24, 2007) opinion vacated in
part on reh’g sub nom. U.S. Dep’t of Justice, Tax Div. v. Hudson, No. 1:06-CV-763
FJS, 2009 WL 7172812 (N.D.N.Y. July 8, 2009) ...................................................................17
United States v. Alfano,
34 F. Supp. 2d 827 (E.D.N.Y. 1999) .........................................................................................1
Vardon Golf Co. v. Karsten Mfg. Corp.,
294 F.3d 1330 (Fed. Cir. 2002)................................................................................................16
Warner Bros. Inc. v. Dae Rim Trading, Inc.,
877 F.2d 1120 (2d Cir. 1989)...................................................................................................23
Werking v. Andrews,
526 F. App’x 94 (2d Cir. 2013) ...............................................................................................19
Yoon v. Fordham Univ. Faculty & Admin. Ret. Plan,
263 F.3d 196 (2d Cir. 2001).....................................................................................................14
Zomba Recording Corp. v. MP3.Com, Inc.,
No. 00 Civ. 6831, 2001 WL 770926 (S.D.N.Y. July 10, 2001) ................................................6
STATUTES
Fed. R. Civ. P. 26 ...........................................................................................................................22
vi
Pursuant to this Court’s instruction at the November 6, 2014 hearing and the November
12, 2014 minute entry, Mr. John Ossenmacher and Prof. Larry Rudolph (the “Individual
Defendants”) file this memorandum of law on the application of res judicata, collateral estoppel,
and law of the case doctrine to the Individual Defendants. For the reasons outlined herein, none
of these doctrines apply, and the Individual Defendants are permitted to assert, seek discovery
on, and litigate defenses that this Court did not actually decide in the earlier phases of the
litigation between just Capitol Records, LLC (“Capitol”) and ReDigi, Inc. (“ReDigi”). 1
I.
PROCEDURAL HISTORY
Although the Court is well aware of the history of this action, Individual Defendants
repeat some of it herein for its relevance to this current dispute.
A.
The Initial Complaint and Answer.
Capitol filed its initial complaint on January 6, 2012. Compl., ECF No. 1. This first
complaint only named ReDigi as a defendant and alleged claims for (1) copyright infringement
under 17 U.S.C. § 106; (2) inducement of copyright infringement under 17 U.S.C. §§ 106 and
501; (3) contributory copyright infringement under 17 U.S.C. §§ 106 and 501; (4) vicarious
copyright infringement under 17 U.S.C. §§ 106 and 501; and (5) common law copyright
infringement. Id.
ReDigi filed an answer to this complaint on January 19, 2012. Ans., ECF No. 6. This
answer asserted fourteen affirmative defenses, including (1) the applicability of the safe harbor
1
The Court need not reach the privity issue because Individual Defendants are only
seeking to assert, obtain discovery, and litigate defenses not already decided by the Court. Privity
would only be relevant, if at all, if the Individual Defendants were seeking to relitigate the issues
already decided in the partial summary judgment order. See Part III, infra. In any event, Capitol
has not produced any evidence that Individual Defendants controlled the prior litigation, which is
its burden to carry as the party asserting these doctrines. See, e.g., Mei v. City of N.Y., No. 06
Civ. 00296, 2006 WL 2997111, at *7 (S.D.N.Y. Oct. 5, 2006); United States v. Alfano, 34 F.
Supp. 2d 827, 833 (E.D.N.Y. 1999).
1
defense of the Digital Millennium Copyright Act (“DMCA”) (17 U.S.C. § 512), Ans. ¶¶ 62-63;
(2) the fair use doctrine, Ans. ¶¶ 64, 68; (3) the essential step doctrine, Ans. ¶¶ 65, 69; (4) the
exhaustion doctrine, Ans. ¶¶ 66, 70; (5) the first sale doctrine, Ans. ¶ 67; and (6) that Capitol’s
distribution rights were not implicated by the ReDigi system, Ans. ¶ 71.
B.
The Motion for Preliminary Injunction.
On January 26, 2012, Capitol filed a motion for a preliminary injunction. Mot. for Prelim.
Inj., Order to Show Cause, ECF No. 8. In responding to the injunction, ReDigi argued that the
ReDigi system did not infringe on Capitol’s copyrights under the fair use and essential step
doctrines, that there was no infringement of Capitol’s distribution rights, and that Capitol failed
to comply with the notice requirements of DMCA. Defs. Mem. of Law in Opp. to Pl.’s Mot. for a
Prelim. Inj., ECF No. 14 (filed Jan. 27, 2012). Capitol’s reply brief argued that these defenses
were inapplicable. Reply Mem. in Further Supp. of Pl.’s Mot. for Prelim. Inju., ECF No. 21
(filed Feb. 1, 2012).
On February 6, 2012, the Court denied the motion for a preliminary injunction “[f]or the
reasons stated on the record at [that day’s] conference.” Order, ECF No. 25. In particular, this
Court stated that “the lack of irreparable harm is one that really is the issue that cause[d] [it] to
deny the motion.” Transcript 60:20-21, ECF No. 26 (field Feb. 9, 2014). The Court did not
discuss any of the defenses asserted by ReDigi in the briefing.
C.
Individual Defendant Depositions
As part of fact discovery, Capitol deposed each of the Individual Defendants twice. Mr.
Rudolph was first deposed pursuant to Federal Rule of Civil Procedure 30(b)(6) on June 18,
2012 and again on July 12, 2013. The combined transcripts of Mr. Rudolph’s depositions run
more than 400 pages. Mr. Ossenmacher was first deposed pursuant to Federal Rule of Civil
Procedure 30(b)(6) on June 19, 2012 and again on July 11, 2013. The combined transcripts of
2
Mr. Ossenmacher’s depositions run just under 400 pages. Because the Individual Defendants
were not parties to the action, ReDigi’s counsel defended each of these depositions. The roughly
800 pages of deposition transcripts is devoid of a single question regarding the control (or lack
thereof) the Individual Defendants were exercising over the ReDigi-Capitol litigation or of their
supposed personal interest in the allegedly infringing conduct.
D.
The Cross-Motions for Summary Judgment
In the amended scheduling order, the Court ordered Capitol and ReDigi to file motions
for summary judgment by July 20, 2012. Am. Case Management Plan and Scheduling Order,
ECF No. 37. Consistent with the Court’s scheduling order, on July 20, 2012, Capitol and ReDigi
cross-moved this Court for partial summary judgment. See Notice of Mot. ECF No. 48 (filed July
20, 2012); Notice of Mot. for Sum. J. ECF No. 54 (filed July 20, 2012).
The Court granted Capitol’s motion for summary judgment against ReDigi on March 30,
2013. Mem. and Order, ECF No. 109. The Court’s order began by stating that the issues
presented by the cross-motions were “narrow, technical, and purely legal,” id. at 1, before noting
that “ReDigi’s arguments in this round of briefing differ markedly from those it asserted in
opposition to Capitol’s motion for preliminary injunction.” Id. at 3, n.4. The Court remarked that
ReDigi did not assert the essential step defense, that “copying” to ReDigi’s cloud locker fell
under the fair use defense, or that DMCA applied. Id. Instead, the Court reviewed the affirmative
defenses asserted by ReDigi in its motion for partial summary judgment - fair use and first sale –
and conclude that on the record before it, that neither applied to shield ReDigi from copyright
infringement liability. Id. at 9-13.
E.
The Filing of the First Amended Complaint
After entering the partial summary judgment order, the Court entered a Joint Amended
Case Management Plan and Scheduling Order, ECF No. 111 (filed May 6, 2013. This order
3
provided that (1) “[a]ll remaining discovery shall be completed by August 2, 2013,” (2) that
“[n]o additional parties may be joined or amended pleadings served except with the opposing
party’s written consent or leave of the Court . . .”, (3) that “the list of plaintiff’s sound recordings
allegedly infringed will have to be supplemented prior to final adjudication in the case based on
information obtained through discovery,” and (4) that the Court would “conduct a post-discovery
conference on August 9, 2013 . . . .”
On August 2, 2013, the day all discovery was to be completed, Capitol’s counsel
submitted a letter requesting leave to amend its complaint. Declaration of James J. Pizzirusso,
Ex. 1 (hereinafter “Pizzirusso Declaration”). In relevant part, Capitol sought, for the first time to
“join the principals of defendant ReDigi, Inc. . . . as additional defendants.” In support of this
request, Capitol asserted adding the Individual Defendants to the action would “require no
further discovery, and will not delay the case schedule” and that this amendment was proper
because “[d]iscovery has confirmed that both are personally liable as a legal matter and . . .
ReDigi itself has insufficient funds to satisfy even a modest damage award in this case.”
Because Individual Defendants had not yet retained counsel (there had been no need prior
to August 2, 2013), on August 7, 2013 ReDigi’s counsel responded on ReDigi’s behalf opposing
Capitol’s request to add the Individual Defendants to the action; ReDigi’s counsel did not and
could not respond on the Individual Defendant’s behalf as such counsel did not represent those
individuals for such purposes. 2 Pizzirusso Decl., Ex. 1. ReDigi’s counsel responded by arguing
that the cases cited by Capitol regarding the Individual Defendants’ alleged liability were
inapposite and that the request “seems motivated by an intention to harass and exert pressure and
stress on ReDigi’s officers.”
2
The ABA Model Rules of Professional Conduct and New York Rules of Professional
Conduct both provide that an attorney retained by a corporation represents the entity and not the
individuals connected with the entity. See ABA Model Rule 1.13(a); New York Rule 1.13(a).
4
On August 9, 2013, the Court held the contemplated post-discovery conference and
discussed Capitol’s letter seeking to add the Individual Defendants to the action. In relevant part,
the Court stated: “[I]f amending to add [the Individual Defendants] is not going to require any
additional discovery, then I think I probably will allow it. But if it’s going to require additional
discovery, then I’m not so sure.” Pizzirusso Decl., Ex. 2 at 3:15-18. ReDigi’s counsel, which
again did not represent the Individual Defendant’s or their interests, when asked whether he
thought that the Individual Defendants would require additional discovery, responded, “No, I do
not.” Id. at 4:1-3. Thus, this Court permitted Capitol to add the Individual Defendants to this
action, id. at 4:4-6, and Capitol filed its Amended Complaint on August 30, 2013. First Am
Compl., ECF No. 118.
On September 16, 2013, after Individual Defendants were added to this action and
retained their own separate counsel, counsel for all of the parties submitted a joint letter to the
Court. Pizzirusso Decl., Ex. 3. In relevant part, this letter notified the Court of the Individual
Defendants’ intention to move to dismiss the Amended Complaint and of their need to receive
additional discovery should they remain in the case. Id. Capitol opposed this request, arguing
that no additional discovery was needed. Id.
On September 19, 2013, the Court entered an order permitting the Individual Defendants
to file a motion to dismiss and ordered the parties to submit a revised case management plan
“that amend[ed] the existing discovery deadlines to allow for the completion of all discovery by
November 8, 2013.” Order, ECF No. 124. Consistent with this order, the Second Amended Joint
Case Management Plan and Scheduling Order, which extended the deadline for completion of all
discovery to November 8, 2013 was entered on September 25, 2013. ECF No. 129.
F.
The Filing of the Second Amended Complaint
On October 21, 2014, Capitol submitted a letter requesting leave to file a second
5
amended complaint adding Capitol Christian Music Group, Inc. and Virgin Records IR
Holdings, Inc., allegedly companies affiliated with Capitol, as plaintiffs to this action because
they “are the owners of certain of the sound recordings infringed by Defendants.” Pizzirusso
Decl., Ex. 4. ReDigi, together with Individual Defendants, filed a letter responding to the request
on October 24, 2014. Letter, ECF No. 157 (attached hereto as Pizzirusso Decl., Ex. 4), arguing
that the proposed amendment should not be permitted because of Capitol’s undue delay in
seeking the amendment and the prejudice it would cause to ReDigi and the Individual
Defendants. Following communications between the Court and Capitol, Capitol emailed a
redline of the proposed second amended complaint to the Court on October 28, 2014. Pizzirusso
Decl., Ex. 5.
The Court entered an order permitting Capitol to file its second amended complaint on
October 29, 2014. Order, ECF No. 158. In relevant part, without briefing, the Court found that
the second amended complaint “involves mostly technical changes that are not the result of
undue delay or bad faith and would not require additional discovery.” Capitol filed the second
amended complaint on October 30, 2014, Second Am. Compl., ECF No. 161, and Individual
Defendants filed their answer on November 11, 2014. Answer to Second Am. Compl., ECF No.
162.
Notably, Individual Defendants dispute the Court’s assertion that the addition of the new
Plaintiffs does “not require additional discovery.” While the discovery dispute at issue in this
brief is between Capitol and the Individual Defendants, the Individual Defendants are also
clearly entitled to factual discovery of the two, newly added Plaintiffs. 3 See Davis v. Lenox Hill
3
Individual Defendants may also be entitled to reimbursement from Plaintiffs “for the
reasonable costs (including attorneys’ fees) of preparing for and taking all such additional
30(b)(6) depositions” of the newly added Plaintiffs. Zomba Recording Corp. v. MP3.Com, Inc.,
No. 00 Civ. 6831, 2001 WL 770926, at *1 (S.D.N.Y. July 10, 2001).
6
Hosp., No. 03 Civ. 3746, 2004 WL 1926086, at *4 (S.D.N.Y. Aug. 31, 2004) (denying leave to
amend to add new plaintiffs to an action because, in part, the request was made after the close of
discovery and the defendants had not had an opportunity to take discovery of the new named
plaintiffs). At the very least, such discovery will likely include requiring the newly named
Plaintiffs to answer interrogatories, to produce documents related to ownership (among other
things), and to sit for depositions.
II.
THE DISCOVERY DISPUTE
On October 9, 2013, without the benefit of Capitol’s prior document production 4 and
after investing substantial time and resources into briefing their motion to dismiss 5 and
familiarizing themselves with the pertinent facts and procedural history, Individual Defendants
served their (a) initial disclosures, (b) first set of interrogatories, and (c) first set of requests for
production of documents and things. 6 Pizzirusso Decl., Ex. 6. These are the same requests,
though significantly narrowed, see infra, that are still at issue.
A.
Pre-Motion to Dismiss Resolution
On October 14, 2013, Capitol sent a letter opposing these discovery requests. Pizzirusso
4
Individual Defendants did not receive this prior production until October 24, 2013, or
15 days before the November 8, 2013 discovery deadline. Pizzirusso Decl., Ex. 13.
5
See ECF Nos. 126 (filed Sept. 20, 2013), 127 (filed Sept. 20, 2013). By the time the
motion to dismiss briefing was completed, Individual Defendants only had 31 days (18 of which
were week days) to plan, serve, and complete all of their anticipated discovery. Id.
6
Thereafter, on October 22, 2013, Individual Defendants served a 30(b)(6) deposition
notice on Capitol; on October 25, 2013, Individual Defendants attempted to serve deposition
notices on one current and three former Capitol employees; and on October 29, 2013, Individual
Defendants served a subpoena to testify at a deposition and produce documents on the Recording
Industry Association of America (“RIAA”). Pizzirusso Decl., Ex. 14. These proposed
depositions are not principally before the Court in the ongoing discovery dispute, but the Court’s
ruling on the issue presented by this memorandum – the scope of discovery Individual
Defendants will be permitted to engage – will have obvious implications on whether Individual
Defendants will be permitted to pursue these noticed depositions.
7
Decl., Ex. 7. In relevant part, Capitol insisted that the discovery requests were untimely 7 and that
because “ReDigi ha[d] already been found to be an infringer and its affirmative defenses rejected
as a matter of law, the only remaining subjects for adjudication [were] whether the individual
defendants participated in the infringing acts and the amount of statutory damages . . . .” Capitol
did not articulate the legal basis for the latter claim made in this letter.
After the disagreements could not be resolved through several meet and confers, the
parties submitted a joint letter to the Court on October 25, 2013. Pizzirusso Decl., Ex. 8. In this
letter, Capitol opposed these requests on the same grounds it articulated in its October 14 letter,
and finally articulated the legal basis for its position that Individual Defendants were barred from
litigating their liability: “Because they are in privity with ReDigi, IDs are barred by collateral
estoppel and the law of the case doctrine from relitigating issues already determined” in the
Court’s prior partial summary judgment order. Capitol did not assert that res judicata applied in
this letter. 8 Individual Defendants responded that the requests were timely and that collateral
estoppel did not apply to bar any defenses because the doctrine only applies in subsequent
actions, and even if it did apply, that it would only bar those defenses actually decided by the
Court (and many for which Individual Defendants were seeking discovery were not so decided).
Following a series of pre-summary judgment motion letters mandated to be filed by the
case management order, most of which raised the same issues regarding the application of legal
doctrines that Capitol contends bar Individual Defendants from engaging in discovery into their
liability, Pizzirusso Decl., Ex. 9, the Court scheduled a status conference for December 2, 2013
to discuss whether the Individual Defendants “should be permitted to seek discovery for legal
defenses that could have been raised, but were not, by Defendant ReDigi.” Order, ECF No. 143
7
Capitol no longer appears to be asserting these initial requests were untimely.
8
Capitol did not make their res judicata assertion until their November 6, 2013 letter.
8
(filed Nov. 21, 2013). 9
At the December 2 hearing, the Court discussed the parties’ dispute:
There are some additional defenses that plaintiffs argue ReDigi
could have raised earlier and did not and that the individual
defendants should be foreclosed from brining those. And you
[Capitol] cite cases from the Second Circuit and elsewhere,
principally the Second Circuit, In re Teltronics and Kreager. I
think the posture of those cases was a little different in that there
was already was a judgment in those cases as opposed to here
where we don’t have a final judgment. . . . I think those cases are
different. I think that the reasoning might apply, but those are cases
which involve collateral estoppel where there has been a judgment.
So that’s my reason for suggesting that probably had I started from
scratch and known this is where we are going, I would have denied
the motion to amend. You could have then filed against the
individual defendants, and we would have then gone forward on
two tracks. But I think the track against Redigi would be almost
done by now as opposed to us being kind of mired in discovery
disputes and motions practice. . . . The fact that one defendant
thinks little of a defense and another thinks better of it is not
dispositive. I think if it’s a frivolous motion, then I guess there are
repercussions that flow from that. At this point I am not sure I’m
prepared to say that.
Pizzirusso Decl., Ex. 10 at 4:19-5:15; 6:3-7. 10 At the end of the hearing, the Court
decided to hold off on deciding the discovery dispute until it resolved the pending motion
to dismiss. Id. at 34:10-19. The Court also stayed discovery until it decided the pending
motion to dismiss unless the parties voluntarily agreed to exchange information. Id. at
9
This order appears to be focused on the res judicata argument raised for the first time in
Capitol’s November 6, 2013 letter, which argued that “because the IDs are in privity with
ReDigi, they are barred under principals of res judicata from now asserting such defenses” that
ReDigi could have asserted but chose not to omit. Put differently, res judicata is the only
doctrine that would apply to bar the assertion of defenses not actually litigated by Capitol and
ReDigi in the prior partial summary judgment order. At the November 7, 2014 conference, the
Court was also focused on whether res judicata applied.
10
As discussed herein, In re Teltronics and Kreager are actually res judicata cases, not
collateral estoppel cases as Capitol has repeatedly claimed. Individual Defendants have
continually pointed out that Capitol is mis-citing the holdings of these cases, but Capitol
continues to press forward with its misleading argument. That difference is pertinent as discussed
herein.
9
36:2-10.
B.
Post-Motion to Dismiss Resolution
The Court eventually decided the Individual Defendants’ motion to dismiss on September
2, 2014. Opinion and Order, ECF No. 148. In its Order, the Court required the parties to submit a
joint letter by “September 19, 2014 advising the Court of the need for additional discovery and
whether the parties contemplate post-discovery motions for summary judgment as to the
Individual Defendants.” Id. The parties then submitted a joint letter on September 19, 2014
stating that the parties would “make a good faith effort to resolve as many of [the discovery]
issues by agreement and then report back to the Court by October 22, 2014, regarding any
disputes that remain. . . .”
After further discussing the discovery requests in good-faith, Individual Defendants
substantially narrowed their requests, 11 and Capitol responded to the first set of discovery
requests on October 15, 2014. Pizzirusso Decl., Ex. 11. Of the remaining discovery requests,
Capitol agreed to respond to 9 of the 12 remaining requests for production and 18 of the 20
remaining interrogatories. 12 Put differently, there are only 3 requests for production and 2
interrogatories that are still in dispute: Requests for Production Nos. 10, 17, & 18 and
Interrogatory Nos. 4 & 19. 13 Individual Defendants now withdraw Interrogatory No. 4. 14
11
Individual Defendants agreed to withdraw Requests for Production Nos. 7, 8, 11, 12,
13, 14, 15, 16 & 20 and Interrogatory Nos. 21 and 22.
12
Capitol has agreed to respond (or has stated that it has already responded) to Requests
for Production Nos. 1-5, 9, 16, & 19 and Interrogatory Nos. 1-3, 5-18, & 20. The parties disagree
on Requests for Production Nos. 6, 10, 17, & 18 and Interrogatory Nos. 4 & 19. Individual
Defendants reserve their right to challenge the adequacy of Capitol’s responses.
13
Individual Defendants have explicitly reserved their right to seek additional factual
discovery and to challenge the adequacy of Capitol’s responses. Pizzirusso Decl., Ex. 15.
14
As explained herein, the discovery requests in dispute encompass a small universe of
legal issues but raise the dispute really at issue in this memorandum: whether Individual
Defendants are entitled to seek discovery and dispute liability as to defenses that ReDigi raised
10
On October 22, 2014, the parties submitted a joint letter outlining the discovery requests
still in dispute and requesting a conference to discuss these disputes. Pizzirusso Decl., Ex. 12.
While the letter delved into the propriety of the specific document requests, the significant issue
underlying the entire letter was whether Individual Defendants were barred by res judicata,
collateral estoppel or law of the case from asserting any defenses. The Court held a hearing on
these discovery issues on November 7, 2014 and ordered the parties to submit briefing on this
issue. Individual Defendants submit this brief in compliance with this order.
III.
ARGUMENT
Capitol contends that the doctrines of res judicata (claim preclusion), collateral estoppel
(issue preclusion), and law of the case each apply to bar the Individual Defendants from
litigating – and seeking discovery on – defenses that ReDigi could have raised prior to Capitol
adding the Individual Defendants to the action. 15 Pizzirusso Decl., Ex. 12. As explained below,
“the principles of res judicata, as well as the doctrine[] of collateral estoppel . . . are not
applicable” where “the original determination and the determination upon a rehearing [arose]
from the same proceeding.” Quatraro v. Vill. of Kenmore Zoning Bd. of Appeals, 716 N.Y.S.2d
508, 509 (4th Dep’t 2000) (applying New York law) (citations omitted); 16 see c.f., Arizona v.
California, 460 U.S. 605, 619 (1983) (observing that the law “is clear that res judicata and
collateral estoppel do not apply if a party moves the rendering court in the same proceeding to
or could have raised in the partial summary judgment motion papers.
15
The Court has not decided at least 20 defenses raised by the Individual Defendants,
including DMCA, the essential step defense, unclean hands, waiver, innocent intent, and laches.
This Court explicitly stated that it was not considering the essential step and DMCA defenses in
its partial summary judgment order. See Mem. and Order, ECF No. 109 at n.4.
16
“[T]here is no discernible difference between federal and New York law concerning
res judicata and collateral estoppel.” Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286 (2d
Cir. 2002); see also Pike v. Freeman, 266 F.3d 78, 91 n.14 (2d Cir. 2001) (“[T]here appears to be
no significant difference between New York preclusion law and federal preclusion law. . . .”).
11
correct or modify its judgment”). And as to law of the case, this doctrine only applies to issues
actually decided by the Court in the partial summary judgment order: fair use on the download
incident to sale and the first sale doctrine. Moreover, Capitol’s argument, if accepted, raises
serious due process concerns, ensuring that the Individual Defendants would have no ability to
defend themselves from the accusations in the complaint. See Part III-D, infra.
Capitol’s position should therefore be rejected, and Individual Defendants should be
permitted to assert, seek discovery, and litigate, all defenses for which they have a good faith
basis to pursue that this Court has not already decided.
A.
Res Judicata Does Not Apply.
Putting aside the fact that “the discovery process is an inappropriate place to assess
[Capitol’s] substantive arguments that some of [Individual Defendants’] [defenses] are barred by
res judicata,” Netherby Ltd. v. Jones Apparel Grp., Inc., No. 04 Civ. 7028, 2005 WL 1214345, at
*1 (S.D.N.Y. May 18, 2005), the doctrine is clearly inapplicable here. As the Second Circuit has
explained, “[t]he doctrine of res judicata, or claim preclusion, holds that ‘a final judgment on the
merits of an action precludes the parties or their privies from relitigating issues that were or
could have been raised in [a prior] action.”‘ Monahan v. New York City Dep’t of Corr., 214 F.3d
275, 284-85 (2d Cir. 2000) (quoting Allen v. McCurry, 449 U.S. 90, 94, 101 (1980); Burgos v.
Hopkins, 14 F.3d 787, 789 (2d Cir. 1994)). “Res judicata applies when: (1) the previous action
involved an adjudication on the merits; (2) the previous action involved the same parties or those
in privity with them; and (3) the claims asserted in the subsequent action were, or could have
been, raised in the prior action.” Hudson v. Universal Studios Inc., 235 F. App’x 788, 790 (2d
Cir. 2007) (citing Monahan, 214 F.3d at 285).
As the above makes clear, “[r]es judicata does not speak to direct attacks in the same
case, but rather has application in subsequent actions.” Rezzonico v. H & R Block, Inc., 182 F.3d
12
144, 148 (2d Cir. 1999). 17 For instance, In re Teltronics Servs., Inc., a case repeatedly cited by
Capitol (albeit incorrectly for collateral estoppel), begins by noting that “[t]he facts underlying
these consolidated appeals are set forth in the numerous prior determinations in this matter,” and
citing to no fewer than three district court decisions, a district court decision on rehearing, a
Second Circuit opinion affirming the district court, and a denial of certiorari by the Supreme
Court. 762 F.2d 185, 187 (2d Cir. 1985). 18 The Teltronics court then went on to quote the
Supreme Court for the fundamental precept that ‘“[t]he general rule of res judicata applies to
repetitious suits involving the same cause of action.”‘ Id. at 190 (quoting Commissioner v.
Sunnen, 333 U.S. 591, 597 (1948)). Similarly, Kreager v. General Electric Co., another case
repeated relied upon by Capitol (again incorrectly for collateral estoppel), begins by noting that
the appeal involved the dismissal of one action and the filing, on the same day as the dismissal of
the prior action, of “a second action [that] asserted essentially the identical claims as those in the
action dismissed earlier that day.” 497 F.2d 468, 470 (2d Cir. 1974). The court, relying on a
Second Circuit decision from 1964, stated that one of the requirements of res judicata was that
“identical issues sought to be raised in the second action must have been decided in the prior
action. . . .” Id. at 472 (citing Zdanok v. Glidden Co., Durkee Famous Foods Div., 327 F.2d 944,
955 (2d Cir. 1964), cert. denied, 377 U.S. 934 (1964)). Because res judicata, by binding Second
17
In re Hyman, 335 B.R. 32, 37 (S.D.N.Y. 2005) aff’d on other grounds, 502 F.3d 61 (2d
Cir. 2007) (“The case law Debtor cites fails to establish the applicability of res judicata to claims
adjudicated in the same action, as opposed to those adjudicated in previous actions.”); Moezinia
v. Damaghi, 544 N.Y.S.2d 8, 11 (1st Dep’t 1989) (applying New York law and stating that
“principles of res judicata are inapplicable when . . . the two determinations arise in the same
action.”).
18
Teltronics cites to the following prior adjudications: L M Ericsson Telecomms., Inc. v.
Teltronics Servs., Inc. (In re Teltronics Servs., Inc.), 18 B.R. 705 (E.D.N.Y.1982); Teltronics
Servs., Inc. v. L M Ericsson Telecomms., Inc., 486 F. Supp. 836 (S.D.N.Y. 1980), on reargument,
491 F. Supp. 538 (S.D.N.Y.1980), aff’d, 642 F.2d 31 (2d Cir. 1981), cert. denied, 452 U.S. 960
(1981); and Teltronics Servs., Inc. v. L M Ericsson Tel. Co., No. 79 Civ. 1233, slip op. (S.D.N.Y.
May 9, 1979).
13
Circuit precedent, only applies in later suits and this is the same suit, res judicata does not apply
to bar the Individual Defendants from asserting any of their anticipated defenses. 19
Under binding Second Circuit precedent, because res judicata does not apply in the same
action (as is the case here), Individual Defendants are not barred by this doctrine from asserting,
obtaining discovery on, and litigating any of the defenses ReDigi could have raised in the partial
summary judgment briefing.
B.
Collateral Estoppel Does Not Apply
For the same reason, collateral estoppel does not bar the Individual Defendants from
asserting any defense ReDigi could have asserted at the partial summary judgment stage of this
litigation. As the Second Circuit explained in Monahan, “collateral estoppel, or issue preclusion,
. . . ‘bars a party from relitigating in a second proceeding an issue of fact or law that was
litigated and actually decided in a prior proceeding if that party had a full and fair opportunity to
litigate the issue in the prior proceeding . . . .”‘ 214 F.3d at 284 n.5 (quoting Metromedia Co. v.
Fugazy, 983 F.2d 350, 365 (2d Cir. 1992), cert. denied, 508 U.S. 952 (1993)) (emphasis
added). 20 That is, just as is the case with res judicata, collateral estoppel has no application in the
same action. See Holzsager v. Valley Hosp., 482 F. Supp. 629, 633 (S.D.N.Y. 1979) (“But this is
not a subsequent action; it is the same action, and neither res judicata nor collateral estoppel has
any application here.”).
As the Second Circuit made clear, a party must meet four requirements for a court to
invoke collateral estoppel: “(1) the identical issue was raised in a previous proceeding; (2) the
19
It is not clear what might have happened had Capitol decided to file a separate action
against Individual Defendants, but that is of no moment − Capitol chose not to do so for strategic
reasons that have not been revealed. Capitol has to live with the consequences of its legal
strategy.
20
See also Yoon v. Fordham Univ. Faculty & Admin. Ret. Plan, 263 F.3d 196, 202 n.7
(2d Cir. 2001) (applying New York law for the same).
14
issue was ‘actually litigated and decided’ in the previous proceeding; (3) the party had a ‘full and
fair opportunity’ to litigate the issue; and (4) the resolution of the issue was ‘necessary to support
a valid and final judgment on the merits.’” Moran v. City of New Rochelle, 346 F. Supp. 2d 507,
514 (S.D.N.Y. 2004) (quoting Cent. Hudson Gas & Elec. v. Empresa Naviera Santa S.A., 56
F.3d 359, 368 (2d Cir. 1995)). 21 This doctrine is inapplicable for failure to satisfy two
requirements: the lack of a prior proceeding and the lack of the issues actually being litigated and
decided.
The lack of a prior proceeding is self-evident. And Moran – the only collateral estoppel
case on which Capitol relies in its letters – does not alter the “prior-proceeding requirement” or
somehow make collateral estoppel applicable here. There, the court explicitly discussed the prior
proceeding: a New York state court that proceeded to a judgment as to some of the same issues
sought to be litigated in federal court. 346 F. Supp. 2d at 514. The court determined that the
parties were barred from re-litigating the issues actually determined by the state court but could
litigate those issues which the state court did not reach. Id. at 515. Here, there is no subsequent
proceeding, and as such, collateral estoppel does not apply.
The law is equally clear that partial summary judgment orders in and of themselves are
not final judgments for collateral estoppel purposes. Rather, there must be a “prior adjudication
of an issue in another action that is determined to be sufficiently firm to be accorded conclusive
effect.” Restatement (Second) of Judgments § 13 (1982) (emphasis added). Whether a prior
judgment is “sufficiently final” depends on “such factors as the nature of the decision (i.e. that it
was not avowedly tentative), the adequacy of the hearing, and the opportunity for review.”
21
See also Ball v. A.O. Smith Corp., 451 F.3d 66, 69 (2d Cir. 2006) (quoting Purdy v.
Zeldes, 337 F.3d 253, 258 n.5 (2d Cir. 2003)).
15
Lummus Co. v. Commonwealth Oil Ref. Co., 297 F.2d 80, 89 (2d Cir.1961). 22 The opportunity
for review is paramount, as it ensures ‘“the quality of decisions offered as a basis for
preclusion.”‘ Kay-R Elec. Corp. v. Stone & Webster Constr. Co., 23 F.3d 55, 59 (2d Cir. 1994)
(quoting 8 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice &
Procedure § 4432 at 299 (1981)). Thus, partial summary judgment orders that are not rendered
in a prior action and do not become final – that is, appealable – generally do not have preclusive
effect. See Vardon Golf Co. v. Karsten Mfg. Corp., 294 F.3d 1330, 1333-34 (Fed. Cir. 2002)
(applying Seventh Circuit case law and vacating the dismissal of patent infringement claims
based on the collateral estoppel affect of a partial summary judgment order in a prior suit
because, in part, the partial summary judgment order was interlocutory and never certified under
Rule 54(b); Avondale Shipyards, Inc. v. Insured Lloyd’s, 786 F.2d 1265, 1270 (5th Cir. 1986)
(“We have likewise throughout the years on several occasions recognized that such partial
summary judgment orders lack the finality necessary for preclusion.”) (citing cases). 23
Consequently, the Court’s prior partial summary judgment order has no preclusive effect as to
the Individual Defendants.
Indeed, Capitol has yet to provide this Court with a case in which collateral estoppel
effect was given to a partial summary judgment order (let alone any order) rendered in the same
action. Each case Capitol has cited in its letter to the Court affirms Individual Defendants’
position. For instance, in Creed Taylor, Inc. v. CBS, Inc., the court gave preclusive effect to a
partial summary judgment entered in a prior state court action involving the same parties. 718 F.
22
See also Metromedia Co. v. Fugazy, 983 F.2d 350, 366 (2d Cir. 1992) (listing the
same).
23
See c.f., Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 737, 744 (1976) (concluding that a
partial summary judgment order that determined a party’s liability but reserved damages issues
was not “final” under 28 U.S.C. § 1291 and not certifiable under Rule 54(b)); Novick v. AXA
Network, LLC, 642 F.3d 304, 314 (2d Cir. 2011) (holding that a partial summary judgment order
is an interlocutory decision).
16
Supp. 1171, 1176-78 (S.D.N.Y. 1989) (discussing the collateral estoppel effect to be given to the
partial summary judgment order rendered in CBS Inc. v. Creed Taylor et al., No. 17421/83, slip
op. at 8 (N.Y. Sup. Ct. Oct. 15, 1984)). 24
In any event, even if collateral estoppel were to apply, it would only bar those issues
actually decided by the Court in the partial summary judgment order: fair use and first sale. Put
differently, Individual Defendants are permitted to assert and obtain discovery on their other
defenses, including DMCA and essential step. See PenneCom B.V. v. Merrill Lynch & Co., 372
F.3d 488, 493 (2d Cir. 2004) (reversing district court order barring a party from obtaining
discovery under collateral estoppel, finding that the party “must be allowed discovery to collect
evidence which might support a finding” that collateral estoppel should not have been invoked);
Perez v. Nationwide Mut. Fire Ins. Co., No. 01 Civ. 2135, 2001 WL 716924 (S.D.N.Y. June 25,
2001) (rejecting the plaintiff’s collateral estoppel argument that the defendant was barred from
making certain arguments as to “issues not actually litigated,” and holding that the defendant was
“necessarily entitled to discovery on [these] issues” reasoning that “[b]ecause [the defendant] has
raised . . . defenses that have not been litigated previously, and because this Court has not yet
ruled on any waiver argument that may preclude certain defenses, [the defendant] must be
24
See also U.S. Dep’t of Justice v. Hudson, No. 1:06-CV-763, 2007 WL 2461783, at *1
(N.D.N.Y. Aug. 24, 2007) opinion vacated in part on reh’g sub nom. U.S. Dep’t of Justice, Tax
Div. v. Hudson, No. 1:06-CV-763 FJS, 2009 WL 7172812 (N.D.N.Y. July 8, 2009) (deciding the
preclusive effect to be given to a partial summary judgment order in Hudson v. IRS, 1:03-CV172 (N.D.N.Y. Mar. 25, 2004); Harris Trust & Sav. Bank v. John Hancock Mut. Life Ins. Co.,
722 F. Supp. 998, 1006 (S.D.N.Y. 1989) (considering the collateral estoppel effect to be given to
the “a decision rendered in Jacobson v. John Hancock Mut Life Ins. Co., Civ. No. N-84-663
(PCD): Ruling on Motion for Summary Judgment, 655 F. Supp. 1290 (D. Conn.), judgment
withdrawn and vacated pursuant to settlement, 662 F. Supp. 1103, 1112-13 (1987)”) aff’d in
part, rev’d in part sub nom. Harris Trust & Sav. Bank v. John Hancock Mut. Life Ins. Co., 970
F.2d 1138 (2d Cir. 1992) aff’d sub nom. John Hancock Mut. Life Ins. Co. v. Harris Trust & Sav.
Bank, 510 U.S. 86 (1993).
17
allowed to take discovery” on these defenses). 25
In short, collateral estoppel does not operate to bar Individual Defendants from asserting
and seeking discovery at all, but particularly as to defenses which the Court has not actually
decided.
C.
Law of the Case Does Not Apply.
“Under the law-of-the-case doctrine, once a court has ruled on an issue, that decision
generally should be adhered to in subsequent stages of the same action, unless cogent or
compelling reasons militate otherwise.” Semple v. Eyeblaster, Inc., No. 08 Civ. 9004, 2009 WL
1748062, at *2 (S.D.N.Y. June 19, 2009) (citing United States v. Crowley, 318 F.3d 401, 420 (2d
Cir. 2003). Even though this is the only doctrine that would arguably apply in the same action,
Capitol has repeatedly failed to point this Court to a single law of the case decision, let alone one
that supports its position. See Rezzonico v. H & R Block, Inc., 182 F.3d 144, 148 (2d Cir. 1999)
(“The doctrine of law of the case is similar to the issue preclusion prong of res judicata in that it
limits relitigation of an issue once it has been decided. However, law of the case is concerned
with the extent to which law applied in a decision at one stage of litigation becomes the
governing principle in later stages of the same litigation. Res judicata does not speak to direct
attacks in the same case, but rather has application in subsequent actions.”).
Indeed, the law of the case doctrine, like collateral estoppel, only serves to bar relitigation of issues actually decided by the Court. See Quern v. Jordan, 440 U.S. 332, 348 n.18
(1979) (“The doctrine of law of the case comes into play only with respect to issues previously
25
See, c.f., Am. Stock Exch., LLC v. Mopex, Inc., 215 F.R.D. 87, 95 (S.D.N.Y. 2002)
(“Clearly, a party has a right to conduct discovery on the claims brought against it, even if it
already has some information on such claims”) (citing Devlin v. Scardelletti, 536 U.S. 1 (2002)).
18
determined.”) (citing In re Sanford Fork & Tool Co., 160 U.S. 247 (1895)). 26 For instance, in a
recent Second Circuit decision, the court concluded that the law of the case doctrine did not
apply to an issue that was not “squarely presented” to the court. See Stichting Ter Behartiging
Van de Belangen Van Oudaandeelhouders In Het Kapitaal Van Saybolt Int’l B.V. v. Schreiber,
407 F.3d 34, 44 (2d Cir. 2005). Similarly, the doctrine does not apply to issues explicitly left
open by the court, such as was the case here. See McNabb v. Riley, 29 F.3d 1303, 1305 (8th Cir.
1994) (finding that an issue explicitly left open was “not part of the law of the case . . . .”).
Because Individual Defendants are seeking only to assert, obtain discovery on, and
litigate defenses not actually decided by the Court, the law of the case doctrine also does not
apply. 27
D.
Denying Individual Defendants Discovery and to Dispute their Liability
Would Violate Their Due Process Rights.
While the Individual Defendants should have never been added to this action in the first
instance, 28 if this Court accepts Capitol’s position and denies Individual Defendants’ the ability
26
See also Arizona, 460 U.S. at 618; Pescatore v. Pan Am. World Airways, Inc., 97 F.3d
1, 7-8 (2d Cir. 1996).
27
In any event, this doctrine is discretionary, and courts have refused to invoke it where
new discovery has been sought or obtained such that the “interests of justice militated against
[blind] application of the law of the case doctrine.” Cargill, Inc. v. Sears Petroleum & Transp.
Corp., 334 F. Supp. 2d 197, 243 (N.D.N.Y. 2004). Such interests are present here inasmuch as
Individual Defendants’ due process rights would be violated if Capitol’s argument were
accepted. See Part III-D, infra.
28
See generally Werking v. Andrews, 526 F. App’x 94, 96 (2d Cir. 2013) (“We are
particularly likely to find prejudice where the parties have already completed discovery and the
defendant has moved for summary judgment.”) (citing cases); McCarthy v. Dun & Bradstreet
Corp., 482 F.3d 184, 202 (2d Cir. 2007) (finding that the district court did not abuse its
discretion in denying a motion to amend when “discovery had closed, defendants had filed for
summary judgment, and nearly two years had passed since the filing of the original complaint”);
Cartier, Inc. v. Four Star Jewelry Creations, Inc., No. 01 Civ. 11295, 2004 WL 169746, at *2-3
(S.D.N.Y. Jan. 28, 2004) (denying the plaintiffs an opportunity to replead their complaint to add
individual corporate defendants because of concern of the corporate defendant’s ability to pay
any judgment against it as unduly prejudicial, reasoning that “[t]he factual possibility that a
corporate defendant will not be able to satisfy a money judgment attends every litigation” and
19
to also contest their liability through meaningful discovery, the Court will have both violated
Federal Rule of Civil Procedure 15 and the Individual Defendants’ due process rights. See
Nelson v. Adams USA, Inc., 529 U.S. 460 (2000).
In Nelson, the plaintiff-corporation sued the defendant-corporation for patent
infringement. Id. at 462. The district court dismissed the case and ordered the plaintiff to pay the
defendant’s costs and attorney fees. Id. Fearing that the plaintiff “might be unable to pay the fee
award,” the defendant “sought a means to recover from . . . [the] president and sole shareholder
of [the plaintiff], in his individual capacity” by moving to amend the pleading to add the
president to the action under Federal Rule of Civil Procedure 15. Id at 462-63. In support of this
motion, the defendant argued that the president “was the flesh-and-blood party behind [the
plaintiff], the person whose conduct . . . precipitated the fee award, and a person with funds
sufficient to satisfy that award.” Id. at 463.
The district court granted this motion and also simultaneously amended the judgment to
subject the president “to liability as soon as he was made a party . . .”Id at 464. The Federal
Circuit affirmed, reasoning that although adding a party after entry of a judgment was
“uncommon,” that the president “had not been prejudiced by the postjudgment joinder” because
he had failed to show that ‘“anything different or additional would have been done’ to stave off
the judgment had [the president] been a party, in his individual capacity, from the outset of the
litigation.” Id. (quoting Ohio Cellular Prods. Corp. v. Adams USA, Inc., 175 F.3d 1343, 1351
(1999)).
The Supreme Court reversed, finding that the district court had violated the president’s
due process rights (as well as Rules 15 and 12) by adding him to the action and denying him the
“the theory for relief against the proposed defendants that plaintiffs advocate for was known to
them at the time they filed their initial and first amended complaints.”).
20
“opportunity to respond and contest his personal liability for the award after he was made a party
and before the entry of judgment against him.” Id. at 463. The Supreme Court explained that
“[t]he Federal Rules of Civil Procedure are designed to further the due process of law that the
Constitution guarantees,” id. at 465, and that “[t]he propriety of allowing a pleading alteration
depends not only on the state of affairs prior to amendment but also on what happens
afterwards.” Id at 461. (emphasis added). Because the president had been denied an opportunity
to respond and be heard regarding his liability, his due process rights had been violated. Id. 29
Capitol’s argument, if accepted by this Court, would have the same effect on the
Individual Defendants as the district court’s actions in Nelson had on the corporation’s president:
Individual Defendants would be barred from developing defenses and litigating their liability.
And because the Individual Defendants are only liable, if at all, by virtue of ReDigi’s liability,
Individual Defendants have the right to raise, obtain discovery, and litigate at least those
defenses pertaining to ReDigi’s liability that the Court has not actually decided (i.e., the DMCA
defense). Due process requires that new defendants to an action – even those allegedly in privity
with prior defendants – be given the opportunity to respond and contest their personal liability
and because Capitol’s argument seeks to deprive the Individual Defendants of that opportunity, if
29
See also Flynn v. Best Buy Auto Sales, 218 F.R.D. 94, 97 (E.D. Pa. 2003) (denying
leave to amend individual defendants to an action after a default judgment had been entered
because “the addition of these parties would be constitutionally suspect in relation to the due
process rights of these individuals”); Eugene v. 3Don & Partner Estate Grp., LLC, No. 0780439-CIV, 2009 WL 1810735, at *4 (S.D. Fla. June 24, 2009) (“Plaintiff does not merely seek
to amend the complaint by adding a new party and proceed with the litigation. Rather, Plaintiff
seeks to amend the complaint to add a new defendant, simultaneously expose him to a money
judgment months after the judgment has been entered, and enjoin him from transferring real
property without allowing the newly added defendant any chance to contest liability or any other
issue. . . . Granting Plaintiff’s motion under the present circumstances would not only violate
Rule 15, but would also violate the basic requirements of due process.”) (citations omitted); H.R.
Bushman & Son, Corp. v. Spud Packers, Inc., No. 4:06CV1638, 2008 WL 625023, at *2 (E.D.
Mo. Mar. 4, 2008) (“If the amendment were allowed at this point due process would require that
the trial be postponed, that the new parties be properly served under Rule 4, and that they be
given an opportunity for discovery.”).
21
the Court were to accept Capitol’s argument, the Individual Defendants’ due process rights
would be violated. 30 Thus, the Court should permit the Individual Defendants’ the right to assert
and ability to obtain discovery as to any defense on which they have a good-faith basis to
assert. 31
E.
The Discovery Requests At Issue Are Appropriate.
Because res judicata, collateral estoppel, and law of the case do not bar Individual
Defendants from seeking discovery on defenses not actually decided by the Court, Individual
Defendants are permitted to seek discovery “regarding any nonprivileged matter that is relevant
to any party’s claim or defense. . . . Relevant information need not be admissible at the trial if the
discovery appears reasonably calculated to lead to the discovery of admissible evidence.” Fed. R.
Civ. P. 26(b)(1). The scope of permissible discovery under Rule 26 is broad. See Oppenheimer
Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) (holding that “relevant” for the purposes of Rule
26(b) means “any matter that bears on, or that reasonably could lead to other matter that could
bear on, any issue that is or may be in the case”). As demonstrated below, the requests in issue
more than meet this standard, and therefore, the Court should compel Capitol to respond.
1.
Requests for Production Numbers 10, 17, & 18
Requests for Production 10, 17, and 18 seek information related to Capitol’s plans to
30
See c.f., Benavidez v. Piramides Mayas Inc., No. 09 Civ. 5076, 2013 WL 2357527, at
*4 (S.D.N.Y. May 24, 2013) (denying a motion for reconsideration of an order vacating a partial
summary judgment order in conjunction with the filing of an amended complaint because not
vacating the partial summary judgment order would have resulted in manifest injustice on the
defendant inasmuch as the defendant “would be prejudiced if the partial summary judgment
order, imposing liability on him based on the prior complaints, remained in effect, while at the
same time, the amended complaints, which he would be entitled to answer, were permitted to go
forward.”).
31
Even if the Court is disinclined to believe that the Individual Defendants’ due process
rights would be violated if they are denied the right to pursue their asserted defenses, their
requested discovery is nonetheless appropriate because neither res judicata, collateral estoppel,
nor law of the case preclude them from asserting, seeking discovery, and litigating defenses not
actually decided by the Court in the partial summary judgment order. See supra.
22
develop its own ReDigi-like service for the resale of digital music. 32 Capitol objected to these
requests “on the grounds that [they] [are] vague and ambiguous, overbroad and unduly
burdensome and seek[] documents which are irrelevant and not reasonably calculated to lead to
the discovery of admissible evidence.”
These requests are relevant, in part, as to the amount of actual damages suffered by
Capitol inasmuch as Capitol’s own projections on the amount of money they stood to make (or
lose) through the development and/or use of a ReDigi-esque system bears on the amount of
damages that ReDigi supposedly inflicted on Capitol (as well as other labels). While it is true
that Capitol has purported to elect a statutory damages award in this case, “it is well-settled that
the amount of actual damages is one factor that courts take into account when setting statutory
damages.” Arista Records LLC v. Lime Grp. LLC, No. 06 CV 5936, 2010 WL 4720338, at *4
(S.D.N.Y. Nov. 19, 2010) (citing authorities). 33
2.
Interrogatory Number 19.
Interrogatory number 19 seeks information related to the amount of money that Capitol
contends the Individual Defendants have made through ReDigi. 34 Capitol objected to this
32
Request for Production No. 10 seeks “YOUR POLICY or POLICIES, including drafts
thereof, that refer or relate to the use of the PRE-1972 SONGS or the ALLEGEDLY
COPYRIGHTED SONGS for DIGITAL EXPLOITATION.”
Request for Production No. 17 seeks “All DOCUMENTS relating to YOUR plans or
intentions to develop SOFTWARE ARCHITECTURE for reselling of songs originally
purchased from DIGITAL CONTENT PROVIDERS.”
Request for Production No. 18 seeks “All DOCUMENTS relating to RECORD
LABELS’ plans or intentions to develop SOFTWARE ARCHITECTURE for reselling of songs
originally purchased from DIGITAL CONTENT PROVIDERS.”
33
See also Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1126 (2d Cir.
1989) (“In making a statutory award, the court may consider the likelihood of profits and losses
and may take into account the attitude and conduct of the parties.”).
34
Interrogatory No. 19 asks Capitol to “[s]tate all facts that YOU contend demonstrate
that the INDIVIDUAL DEFENDANTS have made money from REDIGI’s resale of the
ALLEGEDLY COPYRIGHTED SONGS and PRE-1972 SONGS, and IDENTIFY the total
23
interrogatory “on the grounds that it is vague and ambiguous, and seeks information which is
irrelevant and not reasonably calculated to lead to the discovery of admissible evidence.” 35
Capitol’s objection lacks merit.
Among other defenses, this interrogatory goes directly to whether Capitol can prove a
requisite element – substantial benefit - of its contributory infringement claim against the
Individual Defendants. This interrogatory therefore seeks extremely relevant information from
Capitol, and the Court should compel Capitol’s response. See Smith v. Cafe Asia, 256 F.R.D.
247, 251 (D.D.C. 2009) (“Relevance is determined by looking at the elements of plaintiff’s
claims to see if the information would tend to support or detract from any of those elements.”).
IV.
CONCLUSION
For the foregoing reasons, the Individual Defendants respectfully request (1) that the
Court permit them to raise, seek discovery, and litigate defenses not already decided by the Court
in the partial summary judgment order, and (2) compel Capitol to provide responses to Requests
for Production Nos. 10, 17, & 18 and Interrogatory No. 19. Alternatively, the Court should
dismiss the Individual Defendants from this action, with prejudice, so as to permit this action to
proceed in a timely manner against ReDigi alone.
///
///
///
///
///
amount of money YOU contend the INDIVIDUAL DEFENDANTS have made from REDIGI’s
resale of the ALLEGEDLY COPYRIGHTED SONGS and PRE-1972 SONGS, including
through any COMPENSATION that YOU contend the INDIVIDUAL DEFENDANTS have
received from REDIGI.
35
Capitol continued: “Capitol further objects to this interrogatory on the grounds that it
seeks information which is exclusively within the possession, custody or control of ReDigi,
Ossenmacher and/or Rudolph. Moreover, as majority owners of ReDigi, Ossenmacher and
Rudolph were in a position to benefit from the commissions earned from resale of Capitol’s
recordings.”
24
Dated: December 5, 2014
/s/ James J. Pizzirusso
James J. Pizzirusso (pro hac vice)
Seth R. Gassman (SG-8116)
Nathaniel C. Giddings (pro hac vice)
HAUSFELD LLP
1700 K Street, N.W., Suite 650
Washington, D.C. 20006
jpizzirusso@hausfeldllp.com
sgassman@hausfeldllp.com
ngiddings@hausfeldllp.com
Counsel for John Ossenmacher & Larry Rudolph
25
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?