Capitol Records, LLC v. Redigi Inc.
Filing
272
DECLARATION of RICHARD S. MANDEL in Support re: 270 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)
EXHIBIT B
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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CAPITOL RECORDS, LLC, et al.,
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Plaintiffs,
12 CV 95 (RJS)
v.
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Defendants.
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New York, N.Y.
November 7, 2014
4:50 p.m.
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Before:
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HON. RICHARD J. SULLIVAN,
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District Judge
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APPEARANCES
COWAN, LIEBOWITZ & LATMAN, P.C.
Attorneys for Plaintiffs
BY: RICHARD S. MANDEL
JONATHAN Z. KING
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HAUSFELD LLP
Attorneys for Defendant Ossenmacher
BY: NATHANIEL C. GIDDINGS
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ADELMAN MATZ P.C.
Attorneys for Defendant Redigi Inc.
BY: GARY P. ADELMAN
SARAH M. MATZ
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SOUTHERN DISTRICT REPORTERS, P.C.
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(Case called)
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THE COURT:
With respect to this case, I guess we have
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a dispute that sterns back to what we talked about some time
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ago, which is whether or not the individual defendants are sort
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of locked into the positions taken by the corporate defendants
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up through the time of the summary judgment ruling.
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So far so good?
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I think that is the basic issue.
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So there is a legal
dispute clearly as to whether or not the Second Circuit's
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decision in Teltronics, which is factually a little different
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because that's a case where there was a case, a ruling, and
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then a subsequent case involving the individual principals and
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shareholders of the corporate defendant that was found liable
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in the first case, but I think the principle would apply
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equally to both.
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Teltronics is relevant to this situation.
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there is a factual dispute as to whether or not the individual
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defendants, in fact, controlled the corporate defendant and
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directed the litigation up through the time of the summary
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judgment ruling.
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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.
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MR. MANDEL:
I didn't think so.
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THE COURT:
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MR. GIDDINGS:
Is there a dispute about that?
Yes, your Honor.
SOUTHERN DISTRICT REPORTERS, P.C.
It is something that
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we would like discovery on.
THE COURT:
What sort of discovery do you need to
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determine whether or not your clients were running the
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litigation?
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MR. GIDDINGS:
Let me rephrase, your Honor.
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It is something that we think can be developed further
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and potentially challenged in this litigation.
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would like to develop an argument based on facts --
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THE COURT:
If Capitol
Basically, the easiest way to do this is I
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throw your clients on the stand and we ask them questions about
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what involvement they had with respect to the litigation when
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it was just the corporate defendant and who else is involved in
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running the corporate defendant and running the litigation.
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don't want privileged information, but I think that would be
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relevant to determine whether or not these are people who are
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responsible for the corporate defendant's litigation strategies
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and, therefore, arguably liable to stick with those decisions,
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those prior decisions.
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Is there really a dispute about this?
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MR. GIDDINGS:
I
Your Honor, it is something that we
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didn't focus on in the letters before you.
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would like to explore further, and we would be happy to brief
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it to your Honor.
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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.
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and collateral estoppel applies here, and we think we can reach
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that issue without ever having to get to the privity issue.
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THE COURT:
That may be.
If I rule on the legal issue
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in your favor, then I guess you're right.
I think I'm likely
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to rule the other way on this.
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from the parties somewhat cursorily lay out the positions.
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not criticizing.
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basically, your argument is that the Teltronics case and other
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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,
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a procedurally different posture and, therefore, are wholly
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inapplicable.
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Mr. Mandel has any choice but to concede that there is a
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procedural difference between where those cases were and where
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this case is.
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agree -- that's a distinction that doesn't make any difference
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for purposes of the legal analysis.
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agree with that.
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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
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MR. GIDDINGS:
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THE COURT:
Absolutely, your Honor.
I wouldn't bet the house on changing my
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view on that, just because I think there is not a ton of case
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law, and I think there is only so many ways to slice this.
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MR. GIDDINGS:
Absolutely, your Honor.
Just to
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clarify, Teltronics was a res judicata case, not a collateral
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estoppel case.
SOUTHERN DISTRICT REPORTERS, P.C.
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Are you inclined to say that res judicata would apply
here?
THE COURT:
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I'm inclined to say that the principles
articulated in Teltronics would apply here, as well --
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MR. GIDDINGS:
Okay.
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THE COURT:
if, in fact, it is true and undisputed
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that the individual defendants were running this defense for
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the corporate client, the corporate defendant, and knew full
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well what they were doing when they decided to not challenge
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certain things, stipulate to certain things, not assert certain
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defenses.
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is equally applicable here.
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wouldn't be applied here.
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It would seem to me that the rationale in Teltronics
MR. GIDDINGS:
I can't think of a reason that it
Your Honor, Teltronics laid out a
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four-part test for res judicata.
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that was:
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that judgment must be by a court of competent jurisdiction;
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third, the same party for privity; and fourth, the same cause
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of action.
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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
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now.
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not there has been a final judgment in the merits.
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is pretty well accepted that res judicata, that means it has to
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be in a prior proceeding, a prior action, right?
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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.
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res judicata would not apply.
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Bank, the Court said, quote, defenses that could have been
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raised by a corporation in a prior action were barred by
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res judicata.
THE COURT:
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For instance, in Marine Midland
That's what it said.
It didn't say in a
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situation like this one that the individual defendants could
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then raise everything anew, right?
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I see the language you're seizing upon, but I don't
think that was the holding of the case; right?
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MR. GIDDINGS:
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that.
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detail, your Honor.
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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
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think, clearly, the language of Teltronics, at pages 190 and
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191, principally those pages, would seem to have equal force
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here as to what went on.
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whether or not the individual defendants really were running
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the litigation, well, then I guess we would have to nail that
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down.
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MR. GIDDINGS:
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THE COURT:
If there is a factual dispute as to
Right.
I think that would be easily done by
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putting them on the stand in front of me and then I could
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assess and make a finding.
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MR. GIDDINGS:
Your Honor, Teltronics also said,
quote, res judicata applies to repetitious suits involving the
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same cause of action.
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suits here.
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THE COURT:
Right?
Again, we don't have repetitious
So your view is that had the suit that I
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granted summary judgment on, if that went to final judgment and
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then they filed a separate action against your clients, then of
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course they would be stuck with what they did here; but because
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it was an amended complaint with the same docket number, that
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makes all the difference in the world?
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MR. GIDDINGS:
THE COURT:
Correct, your Honor.
Okay.
I think that is the kind of
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formalism that I don't find persuasive.
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you a chance to brief it, certainly, but it doesn't strike me
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as that persuasive.
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partial summary judgments are entitled to conclusive effect.
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I think I will give
Certainly, there are cases in which
MR. GIDDINGS:
Your Honor, to be clear about the
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partial summary judgment point, the cases that Capitol cites,
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those are all partial summary judgment orders from a prior
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proceeding, a different action, right.
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order from a district court judge in another district.
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THE COURT:
Hudson involved an
I get all that, but your view is that the
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entire issue turns on whether or not there was an amended
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complaint or whether there was a new complaint with a different
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docket number.
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MR. GIDDINGS:
Correct.
That's what the cases say,
your Honor.
SOUTHERN DISTRICT REPORTERS, P.C.
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THE COURT:
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But they don't say that.
They don't
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address this issue squarely and say that you have to bring a
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new case; that in a situation in which there's an amended
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complaint, bringing the same cause of action against two new
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defendants, that the result is totally different.
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found a case that says that.
MR. GIDDINGS:
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I haven't
Are you aware of one?
I am not, but I'm not aware of a case
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where res judicata and collateral estoppel have been applied in
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the same proceeding, to preclude that defendant from raising
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those defenses.
Right?
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letter, either.
Again, maybe something better suited for
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further briefing and further explanation, but Capitol has not
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pointed to a single case in which this has been done before.
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THE COURT:
Capitol hasn't pointed to one in their
This is the language from Teltronics:
"In
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light of the individual defendant's continuous and active
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non-party participation and his apparent day-to-day leadership
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role in the prior litigation, we hold that he was in privity
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with Teltronics .and is bound by the result in Teltronics'
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litigation arising from this cause of action."
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So you 1 re hanging your hat on the fact that prior
litigation was at issue in that case.
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MR. GIDDINGS:
Correct, your Honor.
Actually,
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Teltronics, my reading of the case, is there are three or four
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different subsequent actions prior to the Second Circuit
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decision.
It depends on how you count them.
SOUTHERN DISTRICT REPORTERS, P.C.
Three or four is
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a fair assessment at the very beginning of the opinion.
THE COURT:
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The other quote at page 191:
"If a
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stockholder, officer, or director of a corporation controls an
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action brought on its behalf in furtherance of his own
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interests, he is bound by the result of that action."
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I think the issues are pretty clear.
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additional authority, I would love to see it ..
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any.
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I haven't found
How long do you think you need to brief it?
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MR. GIDDINGS:
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THE COURT:
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If there is
To submit a brief on it?
A fuller brief than what you have given
me.
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MR. GIDDINGS:
From our perspective, we probably need
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until the first or second week in December, your Honor.
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Thanksgiving is coming up, and I am going to be out of the
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country for a different matter for eight days, six to eight
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days.
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THE COURT:
Let me hear what Mr. Mandel has to say on
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scheduling and anything else.
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guess, in response, right?
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MR. MANDEL:
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
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the opportunity to respond if they're going to submit a brief.
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THE COURT:
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MR. GIDDINGS:
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Mr. Giddings, by December 5th.
Thank you.
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THE COURT:
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MR. MANDEL:
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THE COURT:
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So December 19th.
How long do you need, Mr. Mandel?
Two weeks.
Two weeks.
That is what I was thinking.
All right.
MR. GIDDINGS:
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I think that is fair, your Honor.
Your Honor, to be clear, are we going
to be permitted a reply?
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THE COURT:
I'm not sure that I need a reply,
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candidly.
We have sort of teed this up twice already now in
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letters and with oral argument back in December, so I would
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love to get it wrapped up.
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can make a reply by the 23rd.
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MR. GIDDINGS:
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If you want to make a reply, you
Okay.
necessary, your Honor.
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THE COURT:
I don't know if one is going to be
I assume it will be short.
I assume
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you're not going to find anything in their opposition that you
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haven't already seen.
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do it.
Is that okay?
MR. GIDDINGS:
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So the 23rd, it gives you five days to
That sounds great, your Honor.
Thank
you. ·
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THE COURT:
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In the meantime, what else can we or should we be
All right.
Let's do that.
SOUTHERN DISTRICT REPORTERS, P.C.
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doing?
Damages discovery is something I certainly
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contemplated.
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the motions to dismiss and motions for reconsideration of the
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order denying the motions to dismiss.
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We could put that on hold pending resolution of
So, Mr. Mandel, from your perspective, what do we need
to do with respect to damages?
MR. MANDEL:
I think we've talked to Mr. Giddings.
We
don't need any more discovery from Capitol's perspective.
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Mr. Giddings had talked about, perhaps, until the end of
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February, for them to complete the discovery that they feel
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they need.
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THE COURT:
The discovery they feel they need meaning
requests of you?
MR. MANDEL:
Yes.
Discovery that the individual
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defendants are seeking of Capitol to defend the case.
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agreeable to that.
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We're
The one thing I would point out, we think these
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defendants are barred by res judicata and collateral estoppel,
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but even apart from that, I think just in the context of the
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discovery disputes that we briefed in the letters, even if you
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assume that somehow these defenses could stand, I think the
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discovery requests are still way out of bounds and not
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connected to anything that's really reasonable.
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defenses, to be frank, they're very slim.
SOUTHERN DISTRICT REPORTERS, P.C.
I think these
They could
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probably
THE COURT:
your copyrights, what you own?
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MR. MANDEL:
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THE COURT:
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MR. MANDEL:
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THE COURT:
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Correct.
You've attached to your complaint a couple
of lists of copyrighted material.
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You're alleging that they infringed on
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.
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THE COURT:
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MR. MANDEL:
What are you talking about?
I'm talking about the few issues that we
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briefed in the letters, which are really primarily geared to
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their so-called defenses, and they relate to things that are
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very far afield.
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THE COURT:
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MR. MANDEL:
What are you talking about?
Every copyright case that Capitol has
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brought for any of these recordings, we have to tell them what
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they are; what the result was; if there was a settlement, how
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much it was for.
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issue that is left to be decided.
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our digital exploitation for all of these recordings, so
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basically all of our contracts.
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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.
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what that has to do with any issue that's left.
We produced in
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discovery and they have our contract with Apple, which is
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really the primary relationship that is significant; but at
4
~his
5
our contracts for digital exploitation, everything relating to
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our policies of digital e;xploitation, it is -a complete fishing
7
expedition.
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questions about it and get us to prove that we own it, fine, I
9
understand that.
point, for us to start producing all our licenses, all of
If they want to challenge ownership and ask
But these other topics are so far afield, and
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they try to justify them without even explaining they're
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supposedly related to their unclean hands defense, which they
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have never articulated what unclean hands defense could
13
possible exist here, or copyright misuse.
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those defenses are.
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them as a matter of res judicata or collateral estoppel, but
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even if they could, they're totally without any factual or
17
legal foundation at this point.
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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.
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Mr. Giddings, do you want to say something?
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MR. GIDDINGS:
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Regarding Mr. Mandel's comment about the end of
Yes, your Honor.
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February, I think your ruling, depending on what it does at the
25
briefing, has an impact on that.
SOUTHERN DISTRICT REPORTERS, P.C.
That will obviously push the
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discovery or have a·very real impact on what discovery the
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individual defendants are able to seek in this action.
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think it may be premature.
THE COURT:
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Maybe.
So I
Why do you think you need to know
5
about all the infringement cases they have settled with other
6
people?
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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
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believe the discovery period that we could negotiate with
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Capitol Records would be much shorter.
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THE COURT:
I agree with that.
I guess I'm asking,
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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?
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MR. GIDDINGS:
Your Honor, our client believes that it
is pertinent to the way in which --
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THE COURT:
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of no moment to me.
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If your client believes it is pertinent is
relevance?
What is the articulable basis for its
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MR. GIDDINGS:
24
THE COURT:
25
MR. GIDDINGS:
About prior actions, your Honor?
Yes.
It goes as to how Capitol has enforced
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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.
THE COURT:
5
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.
MR. GIDDINGS:
9
To be clear, your Honor, we weren't
10
asking for settlement terms.
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list of all their prior enforcement actions or their copyright
12
actions as to these asserted claims.
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THE COURT:
I believe the request asks for a
What would that be relevant to in this
14
case?
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brought to protect their copyrights?
MR. GIDDINGS:
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17
A list of other enforcement actions that they have
It does also ask for the outcome of the
claim.
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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.
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MR. GIDDINGS:
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THE COURT:
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Thank you, your Honor.
Mr. Adelman, this is the quietest I have
ever seen you.
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MR. ADELMAN:
5
THE COURT:
6
Anything else you want us to cover?
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MR. ADELMAN:
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I appreciate that.
I said it with a smile.
I have lots to say, but not in this
case.
THE COURT:
MR. ADELMAN:
You have nothing to say today?
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
14
THE COURT:
15
MR. ADELMAN:
may I stand?
Sure.
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 --
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THE COURT:
21
MR. ADELMAN:
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THE COURT:
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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.
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the damages phase, yes, as to ownership
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MR. MANDEL:
3
MR. ADELMAN:
4
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
5
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.
15
faulting anybody, but I think that's what has gone on.
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'm not
So my
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
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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
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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)
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22
23
24
25
SOUTHERN DISTRICT REPORTERS, P.C.
( 212.) 8 0 5 - 0 3 0 0
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