Capitol Records, LLC v. Redigi Inc.

Filing 248

DECLARATION of RICHARD S. MANDEL, ESQ. in Support re: 246 MOTION for Attorney Fees .. Document filed by Capitol Christian Music Group, Inc., Capitol Records, LLC, Virgin Records IR Holdings, Inc.. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Mandel, Richard)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

X

CAPITOL RECORDS, LLC, CAPITOL
CHRISTIAN MUSIC GROUP, INC. and
VIRGIN RECORDS IR HOLDINGS, INC.,

12 Civ. 0095 (RJS)

DECLARATION OF
RICHARD S. MANDEL, ESQ.

Plaintiffs,
-againstREDIGI INC., JOHN OSSENMACHER and
LARRY RUDOLPH a/k/a LAWRENCE S.
ROGEL,
Defendants.

X

RICHARD S. MANDEL, pursuant to 28 U.S.C. § 1746, declares as follows:
1.

I am a shareholder in the firm of Cowan, Liebowitz & Latman, P.C., which

represents Plaintiffs in this action. I submit this declaration in support of Plaintiffs' motion,
pursuant to Fed. R. Civ. P. 54 and 17 U.S.C. § 505, for an award of attorneys' fees in the amount
of $500,000. Ihave personal knowledge of the facts set forth herein.
2.

Plaintiff Capitol Records, LLC ("Capitol") commenced this action on January 6,

2012 against Defendant ReDigi Inc. ("ReDigi"), asserting claims for direct and secondary
copyright infringement. See Docket No. 1. The complaint alleged that the ReDigi service,
which invited users to upload their previously purchased digital music files to ReDigi's remote
server in order to sell such files to other ReDigi users, infringed Capitol's copyright in numerous
sound recordings.
3.

Shortly after filing the complaint, Capitol moved for a preliminary injunction.

ReDigi's opposition to the motion acknowledged that ReDigi made copies of Capitol's sound
recordings, but sought to defend such copying based on various affirmative defenses, such as fair
use and the essential step defense. See Docket No. 14 at 9. After conducting a lengthy oral

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argument on Capitol's preliminary injunction motion on February 6, 2012, the Court found that
Capitol was likely to succeed on the merits of its infringement claims but denied the motion on
the ground that Capitol had not established irreparable harm. See Docket No. 26.
4.

Based on the record developed on the preliminary injunction motion, both sides

believed that resolution of the case would likely turn on legal issues since the underlying facts
concerning the operation of ReDigi's technology were not in dispute. Accordingly, shortly after
the preliminary injunction hearing and ruling, they submitted a joint case management plan
providing for summary judgment motions to be filed following completion of fact discovery,
with any expert disclosures and discovery to be deferred until after resolution of the summary
judgment motion. The Court approved the parties' case management plan on February 15, 2012.
See Docket No. 31.
5.

During depositions conducted at the end of fact discovery, it became apparent

that ReDigi's witnesses were attempting to backpedal from their prior factual admissions of
copying. ReDigi's witnesses sought to disavow or explain away the admission in their
preliminary injunction papers and their own patent that the upload process involved copying of
files, recasting the process as "data migration" in which electronic files are "moved" in "blocks"
from one source to another rather than copied. See Docket No. 52-14 (Rudolph Dep. at 35, 37,
45, 51-54, 56-58, 76-78, 226-227; Ossenmacher Dep. at 45-46, 52).
6.

In July 2012, following the completion of fact discovery, the parties cross-moved

for summary judgment on liability. Although Capitol maintained that ReDigi's revised
description of its technology was legally irrelevant, Capitol also supported its summary judgment
motion by arguing that ReDigi was bound by its prior judicial admissions and opposed ReDigi's
motion by introducing expert testimony from Doug Jacobson to counter ReDigi's "data

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migration" theory. See Docket No. 49 at 7-10; Docket No. 87 at 1-4; Docket No. 75. Capitol's
moving papers also addressed asserted affirmative defenses, such as essential step and DMCA
defenses, which ReDigi only abandoned after Capitol was put to the task of briefing them. See
Docket No. 49 at 18-20, 23.
7.

On March 30, 2013, the Court granted Capitol's motion for partial summary

judgment and denied ReDigi's cross-motion for summary judgment, holding that ReDigi was
liable for direct and secondary copyright infringement and that the affirmative defenses of fair
use and first sale did not shield ReDigi from liability. See Docket No. 109.
8.

After the Court's summary judgment opinion, Capitol sought to amend its

complaint to add ReDigi's two principals and founders, John Ossenmacher and Larry Rudolph
(collectively, the "Individual Defendants") on the ground that they had been personally involved
in the infringing acts and therefore should be held liable. Capitol also sought to expand the
universe of infringed recordings based on discovery identifying the particular Capitol owned
tracks that had been sold or offered for sale on the ReDigi site. ReDigi opposed the amendment,
arguing that the Court's summary judgment ruling did not extend to recordings offered for sale,
but not sold and that the Individual Defendants were not personally liable and should not be
added as parties.
9.

On August 9, 2013, the Court held a conference with respect to Capitol's

proposed amendment. Following an acknowledgement by ReDigi's counsel, Gary Adelman, that
additional discovery would not be required by the amendment, the Court permitted the Individual
Defendants to be named as parties. The Court also agreed with Capitol that recordings that were
reproduced and offered for sale, but not sold, were properly part of the case, explaining that the
"whole opinion" on summary judgment had been about the reproduction right. On August 30,

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2013, Capitol filed its First Amended Complaint adding the Individual Defendants as codefendants and expanding the universe of claimed recordings.
10.

Although it appeared that the only liability issue that remained to be adjudicated

in the case was whether the Individual Defendants personally participated in the activity already
held to be infringing, the Individual Defendants retained separate counsel and embarked on a
course that repeatedly sought to derail and unnecessarily delay the resolution of the case.
I
gnoring the prior acknowledgment of ReDigi's counsel that no further discovery was needed to
adjudicate the Individual Defendants' liability and despite the fact that ReDigi had itself chosen
not to take any damages discovery at all, the Individual Defendants served a blizzard of pointless
discovery requests ranging from audit reports for music publishing royalties to generalized
demands for all of Plaintiffs' digital "policies" and contracts relating thereto. Copies of the
discovery requests and the parties' joint October 25, 2013 letter to the Court addressing their
dispute regarding such requests is attached hereto as Exhibit A.
11.

The Individual Defendants also filed a motion to dismiss, which never

acknowledged the settled standards for their joint and several liability under the Copyright Act
based on their personal participation in the acts at issue. See Docket Nos. 126, 127. When the
motion to dismiss was denied on September 2, 2014 (see Docket No. 148), the Individual
Defendants moved for reconsideration by mischaracterizing both the Court's decision and the
basic elements of copyright liability. See Docket Nos. 149, 150. On October 16, 2014, that
motion was also denied. See Docket No. 155.
12.

Following the denial of the Individual Defendants' pleading motion, they

proceeded to assert some thirty affirmative defenses, the bulk of which had either been waived or
abandoned by ReDigi as groundless or had already been determined against ReDigi on summary

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judgment. See Docket No. 163. The Court held a conference on November 7, 2014 to address
those defenses and the parties' discovery disputes. By that time, the Individual Defendants had
voluntarily agreed to remove some of the most blatantly improper discovery requests which they
had previously sought to justify. However, they were still insisting on extremely broad
discovery, claiming the discovery was related to new affirmative defenses they wished to assert
or to Plaintiffs' damage claim. At the conference, the Court expressed skepticism that the
discovery was proper even if the affirmative defenses could be legally asserted. (A copy of the
transcript from the conference is attached hereto as Exhibit B). Ultimately, the Court ruled on
August 27, 2015 that the Individual Defendants were barred from asserting defenses that ReDigi
had itself waived, and accordingly denied the voluminous discovery sought by the Individual
Defendants with respect to such defenses. See Docket No. 175.
13.

On November 2, 2015, over two years after first being joined in the action, the

I
ndividual Defendants finally agreed to be bound by the Court's summary judgment ruling
(subject to an eventual right of appeal) and stipulated to liability for infringement, thereby
clearing the way for a trial solely on the issue of damages.
14.

However, even as the parties engaged in the process of preparing pre-trial

submissions, Defendants continued to resist the import of the Court's earlier summary judgment
ruling. Despite that ruling and the Court's subsequent approval of Capitol's amendment to
include recordings offered for sale, but not sold, Defendants took the position that such
recordings were outside the scope of the damages trial. The Court rejected Defendants' position
in a February 17, 2016 order. See Docket No. 186. Undeterred by the Court's ruling,
Defendants then asserted that they could maintain defenses such as fair use and implied license
with respect to such recordings at trial. See, e.g., Docket No. 198 at 6-9. As a result, Plaintiffs

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were required to brief these "liability" issues in connection with a trial that had long been
understood to involve only the question of damages, and to address fair use and other unavailable
defenses in connection with Defendants' proposed jury instructions. See Docket Nos. 204 at 2-7,
208 at 4-7, 193, 197.
15.

On April 4, 2016, one week before the damages trial was scheduled to commence,

the parties advised the Court that they had reached a settlement with respect to the remedy
portion of the case. On June 3, 2016, the Court endorsed a Stipulated Final Judgment in this case
(the "Judgment"). See Docket No. 222. The Judgment sets forth the form of injunction to which
the parties agreed, preserves Defendants' right to appeal the Court's prior liability finding on
summary judgment and provides in paragraph 4 for stipulated damages to be awarded against
Defendants jointly and severally in the amount of three million five hundred thousand dollars
($3,5000,000). Paragraph 6 of the Judgment provides that Plaintiffs "shall have the right under
this Judgment to move for an award of attorneys' fees" up to five hundred thousand dollars.
16.

By this motion, Plaintiffs now seek an award of attorneys' fees in the amount of

$500,000, the agreed cap on any fee award under Paragraph 6 of the Judgment. Such amount
constitutes less than half the actual fees expended by Plaintiffs in this case.
IDECLARE UNDER PENALTY OF PERJURY THAT THE FOREGOING IS TRUE
AND CORRECT. EXECUTED ON JULY / t/, 2016 AT NEW YORK, NEW YORK.

RICHARD S. MANDEL

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