Curtis et al v. Illumination Arts, Inc. et al

Filing 43

ORDER by Judge James L. Robart. The court GRANTS in part and DENIES in part Plaintiffs' second motion for partial summary judgment (Dkt. # 32 ) and GRANTS in part and DENIES in part Plaintiffs' second motion for sanctions (Dkt. # 30 ). The court strikes the trial date, but will reschedule it, if necessary. (CL)

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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 CHARA CURTIS, et al., Plaintiffs, 11 v. 12 13 ILLUMINATION ARTS, INC., et al., ORDER ON PLAINTIFFS’ SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT AND SECOND MOTION FOR SANCTIONS Defendants. 14 15 16 CASE NO. C12-0991JLR I. INTRODUCTION Before the court are two motions: (1) Plaintiffs Chara Curtis, Cynthia Aldrich, 17 and Alfred Currier’s second motion for partial summary judgment (2d SJ Mot. (Dkt. # 18 32)); and (2) Plaintiffs’ second motion for sanctions (2d Sanc. Mot. (Dkt. # 30)). The 19 court has considered both motions, all submissions filed in support of and opposition to 20 21 22 ORDER- 1 1 the motions, the balance of record, and the applicable law. Being fully advised, 1 the 2 court GRANTS in part and DENIES in part Plaintiffs’ second motion for partial 3 summary judgment and GRANTS in part and DENIES in part Plaintiffs’ second motion 4 for sanctions. 5 II. BACKGROUND 6 A. Plaintiffs’ Second Motion for Partial Summary Judgment 7 This case involves claims for breach of contract and copyright infringement. (See 8 generally Compl. (Dkt. # 1).) On May 29, 2013, the court granted in part and denied in 9 part Plaintiffs’ first motion for partial summary judgment. (See 5/29/13 Order (Dkt. 10 # 29).) The court ruled that Defendants Illumination Arts, Inc. (“IAI”) and Illumination 11 Arts Publishing, LLC (“IAP”) are liable to Plaintiffs for breach of contract. (Id. at 10, 12 13.) The court ruled that IAP is liable for IAI’s breach of contract because it is a mere 13 continuation of IAI and that both entities will be subject to the same liability with respect 14 to Plaintiff’s claims because the corporate veil between IAI and IAP has been pierced. 15 (Id. at 13, 18.) The court declined to pierce the corporate veil with respect to Defendants 16 John Thompson’s and Kimmie Lynn Thompson’s personal liability because there was no 17 evidence before the court that either of the Thompsons personally dissipated any of IAI’s 18 or IAP’s assets or that their activities actually harmed Plaintiffs. (Id. at 18-19.) Finally, 19 the court ruled that all Defendants were liable for copyright infringement and that the 20 21 22 1 No party has requested oral argument with respect to either motion. The court deems both motions to be appropriate for disposition without oral argument. ORDER- 2 1 infringement was willful. (Id. at 19-23.) Based on the foregoing, the court also granted 2 Plaintiffs a permanent injunction and ordered Defendants to return to Plaintiffs all 3 infringing copies of Plaintiffs’ books. (Id. at 23-24.) Plaintiffs now seek an additional 4 order on summary judgment with respect to damages for breach of contract and statutory 5 damages for willful copyright infringement. (See generally 2d SJ Mot.) 6 With respect to breach of contract damages, Plaintiffs assert that between 1998 7 and 2011, Defendants sold 77,869 copies of the books at issue: (1) 4,786 copies of How 8 Far to Heaven?, (2) 19,328 copies of Fun Is a Feeling, and (3) 53,755 copies of All I See 9 Is a Part of Me. (See 6/5/13 Kruckeberg Decl. re: SJ (Dkt. # 34) Exs. A-C.) The retail or 10 list price for each book is $15.95. (See id.; 3/28/13 Kruckeberg Decl. (Dkt. # 24) Ex. J.) 11 The publishing agreements for Fun Is a Feeling provide that each author is to receive a 12 royalty of 5% for the first 10,000 copies sold and 6.25% for the next 20,000 copies sold. 13 (Id. Exs. F at 3, G at 4.) Similarly, the publishing agreements for How Far to Heaven? 14 provide for each author to receive a royalty of 5% for the first 10,000 copies sold and 15 6.25% for the next 20,000 copies sold. (Id. Exs. D at 3-4, E at 4.) Accordingly, Plaintiffs 16 calculate their royalty rate for all sales of all books as follows: $53,526.61 for Mr. Curtis, 17 $49,709.77 for Ms. Aldrich, and $3,816.84 for Mr. Currier. (See 2d Sanc. Mot. at 9-10.) 18 Comparing these figures to available tax records, Plaintiffs also calculate that Mr. Curtis 19 was underpaid $5,790.84 or roughly 10.82%. (See 6/5/13 Curtis Decl. (Dkt. # 33) ¶ 3, 20 Ex. A.) 21 Plaintiffs do not, however, provide direct evidence of the amount of royalty 22 underpayments with respect to Ms. Aldrich and Mr. Currier. Rather, Plaintiffs infer that, ORDER- 3 1 if Defendants had permitted an audit as required by the publishing contracts between 2 Plaintiffs and IAI, Ms. Aldrich and Mr. Currier could have expected to find and recoup 3 similar underpayments in the amounts of $5,377.91 and $412.93, respectively. (See Mot. 4 at 10.) 5 Plaintiffs note that because the court denied their motion to pierce the corporate 6 veil between the corporate entities, IAI and IAP, on the one hand, and the Thompsons, on 7 the other hand, their claim for contract damages is limited to IAI and IAP. (See Mot. at 8, 8 n.1.) However, if the court were to grant their pending motion for sanctions, then 9 Plaintiffs would ask the court to find Mr. Thompson and Ms. Thompson jointly and 10 severally liable with IAI and IAP. (See id.) 11 In addition to damages for their breach of contract claim, Plaintiffs seek $150,000 12 each as maximum statutory damages under 17 U.S.C. § 504(c)(1)-(2) for willful 13 copyright infringement. (2d SJ Mot. at 4-5.) Defendants provided no argument or 14 evidence in contradiction to Plaintiffs’ evidence with respect to Plaintiffs’ claimed 15 contract and willful copyright infringement damages. 16 B. Plaintiffs’ Second Motion for Sanctions 17 Plaintiffs have also moved separately for additional sanctions against Defendants. 18 (See generally 2d Sanc. Mot.) On November 29, 2012, Plaintiffs served Defendants with 19 a set of discovery requests that included interrogatories, requests for the production of 20 documents, and requests for admission. (1/21/13 Kruckeberg Decl. (Dkt. # 17) ¶ 2, 21 Ex. A.) By January 31, 2013, Plaintiffs had received no responses or objections to any of 22 the discovery requests (id. ¶ 12), and they moved to compel responses and for sanctions ORDER- 4 1 (see generally Mot. to Compel (Dkt. # 16)). Defendants filed no response to Plaintiffs’ 2 motion to compel. (See 2/20/13 Order (Dkt. # 19) at 3.) On February 20, 2013, the court 3 granted Plaintiffs’ motion to compel, found that Defendants had waived any objections to 4 Plaintiffs’ discovery requests, and ordered Defendants to “provide complete responses . . 5 . no later than March 1, 2013.” (Id. at 6, 8.) In addition, the court ordered Defendants to 6 pay sanctions to Plaintiffs in the form of Plaintiffs’ reasonable expenses and attorneys’ 7 fees incurred in bringing the . . . [discovery] motion.” (Id. at 8.) 8 On February 20, 2013, the same day as the court’s ruling on discovery and 9 sanctions above, Defendants served their initial answers to Plaintiffs’ discovery requests. 10 (See 6/5/13 Kruckeberg Decl. re Sanc. (Dkt. # 31) Ex. A.) Despite the court’s order 11 stating that Defendants had waived any objections to Plaintiffs’ discovery requests, 12 Defendants objected to requests for production and interrogatories related to Ms. 13 Thompson’s financial records. (See id.) Between February 27 and February 29, 2013, 14 Defendants began producing financial records relating to Mr. Thompson, IAI, and IAP, 15 but they produced no information regarding Ms. Thompson’s financial records. (Id. ¶ 6.) 16 To date, Defendants have produced no documents or information related to Plaintiffs’ 17 discovery requests concerning Ms. Thompson. Plaintiffs assert that they have been 18 prejudiced by Defendants’ failure to produce any of the requested financial information 19 concerning Ms. Thompson because Plaintiffs have been unable to establish their claim 20 that the corporate veil should be pierced with respect to Ms. Thompson. (See 2d Sanc. 21 Mot. at 4-5.) Indeed, the court previously declined to pierce the corporate veil with 22 ORDER- 5 1 respect to Ms. Thompson because “there [wa]s no evidence . . . that either of the 2 Thompsons personally dissipated any of IAI’s or IAP’s assets.” (5/29/13 Order at 18.) 3 On June 20, 2013, after Plaintiffs had filed their present motion for sanctions, and 4 after the discovery and dispositive motions cutoff, 2 Defendants finally produced copies of 5 bank statements for IAP’s Chase checking and savings accounts (6/28/13 Kruckeberg 6 Decl. (Dkt. # 41) ¶ 2, Ex. A), copies of bank statements for Mr. Thompson’s and 7 Arrieana Thompson’s 3 Bank of America checking and savings accounts (id. ¶ 3, Ex. B), 8 and copies of bank statements for IAI’s Bank of America checking and savings accounts 9 (id. ¶ 4, Ex. C). Defendants, however, produced no records related to Ms. Thompson’s 10 bank accounts. 11 Plaintiffs assert that this new evidence, produced after the dispositive motions 12 deadline, contradicts or is in conflict with Mr. Thompson’s testimony in response to 13 Plaintiffs’ initial motion for summary judgment that his bank accounts were never 14 comingled with IAI or IAP bank accounts and that Defendants’ corporate forms were 15 never abused or used for an improper purpose. (See 2d Sanc. Reply (Dkt. # 40) at 4 16 (citing Thompson Decl. (Dkt. # 26) ¶¶ 10, 16-17; 6/28/13 Kruckeberg Decl. Ex. A).) 17 Plaintiffs assert that the new evidence demonstrates that Mr. Thompson freely transferred 18 funds between his personal account and IAI’s bank account in the months before he 19 20 21 22 2 The discovery cutoff was May 6, 2013. (See Sched. Ord. (Dkt. # 15) at 1.) The dispositive motions deadline was June 5, 2013. (Id.) 3 Arrieana Thompson is Mr. Thompson’s former wife (see King Decl. (Dkt. # 38) Ex. 3 at 36) and is not a party to this action. ORDER- 6 1 closed IAI’s Bank of America account. (Id. (citing 6/26/13 Kruckeberg Decl. Exs. B-C).) 2 Plaintiffs assert they have been prejudiced by Defendants’ failure to comply with the 3 court’s prior discovery order because, had this information been available sooner (i.e., 4 before the dispositive motions deadline), Plaintiffs could have used it to support their 5 motion for summary judgment with respect to piercing the corporate veil and establishing 6 Mr. Thompson’s personally liability. (Id. at 4, n.1.) 7 Defendants assert that they should not be sanctioned because they “have provided 8 at least 60 reports on the royalties due for the work and financial records, including tax 9 returns for the Defendants,” and that “[a]dditional documents were similarly emailed to 10 Plaintiffs’ counsel.” (Resp. to Sanc. Mot. (Dkt. # 37) at 2 (citing King Decl. (Dkt. # 38) 11 Exs. 3, 5).) They do not deny, however, that the bank records cited above were provided 12 only after the discovery cutoff and dispositive motions deadline had expired. Defendants 13 also do not deny that they have not produced requested financial information related to 14 Ms. Thompson. 15 Defendants also assert that they offered an opportunity to Plaintiffs to review 16 additional records at Defendants’ offices (which is also the Thompsons’ home), but 17 Plaintiffs failed to avail themselves of this opportunity. (Id. at 2 (citing King Decl. Ex. 18 2).) Plaintiffs respond that, despite repeated inquiries, Defendants’ counsel never 19 clarified how documents produced at their home were to be duplicated. (Reply to Sanc. 20 Mot. (Dkt. # 40) at 5.) 21 // 22 // ORDER- 7 1 III. ANALYSIS 2 A. Summary Judgment Motion 3 Summary judgment is appropriate if the evidence, when viewed in the light most 4 favorable to the non-moving party, demonstrates “that there is no genuine dispute as to 5 any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. 6 P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Galen v. Cnty. of L.A., 7 477 F.3d 652, 658 (9th Cir. 2007). The moving party bears the initial burden of showing 8 there is no genuine issue of material fact and that he or she is entitled to prevail as a 9 matter of law. Celotex, 477 U.S. at 323. If the moving party meets his or her burden, 10 then the non-moving party “must make a showing sufficient to establish a genuine 11 dispute of material fact regarding the existence of the essential elements of his case that 12 he must prove at trial” in order to withstand summary judgment. Galen, 477 F.3d at 658. 13 The court is “required to view the facts and draw reasonable inferences in the light most 14 favorable to the [non-moving] party.” Scott v. Harris, 550 U.S. 372, 378 (2007). 15 Defendants filed a consolidated response to Plaintiffs’ motions for summary 16 judgment and for sanctions. (See Consol. Resp. (Dkt. # 37).) Nowhere in the responsive 17 memorandum or in counsel’s declaration (see King Decl. (Dkt. # 38)), however, do 18 Defendants provide any evidence or argument in opposition to Plaintiffs’ motion for 19 summary judgment. Instead, the substance of Defendants’ response is directed virtually 20 entirely towards Plaintiffs’ concurrently-filed motion for sanctions and discovery-related 21 issues. (See generally Consol. Resp; King Decl.) Nevertheless, the court must still 22 assess the substance of Plaintiffs’ second motion for partial summary judgment and the ORDER- 8 1 evidence they have submitted in support thereof to determine if they have met their initial 2 burden of demonstrating the lack of a genuine dispute of material fact for trial. See 3 Martinez v. Stanford, 323 F.3d 1178, 1182 (9th Cir. 2003) (holding that nonmoving 4 party’s failure to oppose summary judgment “does not excuse the moving party's 5 affirmative duty under Rule 56 to demonstrate its entitlement to judgment as a matter of 6 law”). 7 1. Contract Damages 8 The court finds that Plaintiffs have submitted unopposed evidence in support of 9 their motion for summary judgment and met their initial burden of demonstrating their 10 entitlement to judgment as a matter of law with respect to Mr. Curtis’s claim that he was 11 underpaid $5,790.84 with respect to royalty payments he was entitled to receive from IAI 12 or IAP under his publishing contract. (See 6/5/13 Curtis Decl. (Dkt. # 33) ¶ 3, Ex. A.) 13 Accordingly, the court will grant Mr. Curtis’s motion for summary judgment with respect 14 to his claimed contract damages in this amount. 15 However, the court also finds that Plaintiffs have failed to meet their initial burden 16 on summary judgment with respect to contract damages for either Ms. Aldrich or Mr. 17 Currier. Here, Plaintiffs do not provide direct evidence of Ms. Aldrich’s or Mr. Currier’s 18 contract damages but merely extrapolate based on the contract damages they found with 19 respect to Mr. Curtis. (See 2d SJ Mot. at 10.) Further, Plaintiffs do not explain or 20 provide evidence to support their assertion that “[i]f [] [D]efendants had allowed an audit, 21 Ms. Aldrich and Mr. Currier could have expected to find and recoup similar 22 underpayments [to those experienced by Mr. Curtis] in the amounts of $5,377.91 and ORDER- 9 1 $412.93, respectively.” (Id.) Accordingly, the court denies Plaintiffs’ motion for 2 summary judgment with respect to contract damages for Ms. Aldrich and Mr. Currier. 3 The court’s ruling in this respect, however, is without prejudice to Plaintiffs re-filing a 4 motion for partial summary judgment with respect to Ms. Aldrich’s and Mr. Currier’s 5 contract damages as described below. 6 2. Maximum Statutory Damages for Willful Copyright Violations 7 A copyright owner may elect to recover statutory damages, rather than actual 8 damages and additional profits of the infringer, “in a sum of not less than $750 or more 9 than $30,000” for each copyright infringed. See 17 U.S.C. § 504(c)(1). If the copyright 10 owner proves that the infringement was willful, the Copyright Act authorizes enhanced 11 statutory damages of up to $150,000.00 per infringed work. See id. § 504(c)(2). Here, 12 the court has already determined on summary judgment that Defendants’ infringement of 13 Plaintiffs’ copyrights was willful. (See 5/29/13 Order at 19-23.) Accordingly, Plaintiffs 14 now seek a judgment of $150,000.00 for each of their three copyright claims, totaling 15 $450,000.00 against all Defendants jointly and severally. 4 (See 2d SJ Mot. at 4-8; see 16 also Prop. SJ Ord. (Dkt. # 32-1) at 2.) 17 A plaintiff may elect statutory damages regardless of the adequacy of the evidence 18 offered as to his or her actual damages and the amount of the defendant’s profits. 19 20 4 Plaintiffs seek a joint and several judgment against Defendants in favor of Mr. Curtis and Ms. Aldrich in the amount of $300,000.00 for willful copyright infringement, and a joint and 21 several judgment against Defendants in favor of Mr. Curtis and Mr. Currier in an amount of $150,000.00. (See Prop. SJ Ord. (Dkt. # 32-1) at 2.) 22 ORDER- 10 1 Columbia Pictures Television, Inc. v. Krypton Broadcasting of Birmingham, Inc., 259 2 F.3d 1186, 1194 (9th Cir. 2001). “If statutory damages are elected, ‘[t]he court has wide 3 discretion in determining the amount of statutory damages to be awarded, constrained 4 only by the specified maxima and minima.’” Peer Int’l Corp. v. Pausa Records, Inc., 5 909 F.2d 1332, 1336 (9th Cir. 1990) (quoting Harris v. Emus Records Corp., 734 F.2d 6 1329, 1335 (9th Cir. 1984)). Nevertheless, the court is guided by “what is just in the 7 particular case, considering the nature of the copyright, the circumstances of the 8 infringement and the like.” Peer Int’l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 9 (9th Cir. 1990) (quoting F.W. Woolworth Co. v. Contemporary Arts, Inc., 314 U.S. 228, 10 232 (1952)). Because awards of statutory damages serve both compensatory and punitive 11 purposes, a plaintiff may recover statutory damages “whether or not there is adequate 12 evidence of the actual damages suffered by plaintiff or of the profits reaped by 13 defendant.” Harris, 734 F.2d at 1335. Such an approach serves “‘to sanction and 14 vindicate the statutory policy’ of discouraging infringement.” Peer Int’l Corp., 909 F.2d 15 at 1337 (quoting Woolworth Co., 344 U.S. at 233). 16 Plaintiffs assert that an award of the statutory maximum is appropriate here 17 because Defendants’ willful infringement was particularly egregious. (See 2d SJ Mot. at 18 5-6.) Plaintiffs sent Defendants demand letters after having terminated their licensing 19 agreement with respect to the books at issue. (See 5/29/13 Order at 6-7.) In one demand 20 letter, Mr. Curtis even set out Section 502 of the Copyright Act in full, stating: “If you’re 21 not familiar with copyright infringement penalties, you need to take a look. I’ve printed 22 the basics below.” (Curtis Decl. (Dkt. # 23) Ex. J.) In any event, Defendants are in the ORDER- 11 1 business of selling copyrighted books and so should be familiar with copyright 2 requirements. See Peer Int’l Corp., 909 F.2d at 1337 (affirming district court’s 3 imposition of maximum statutory damages for willful infringement in part due to the 4 number of willful infringements by defendant and the fact defendant was “engaged in the 5 business of selling copyrighted works”). 6 Plaintiffs also assert that an award of the statutory maximum is warranted due to 7 Defendants’ failure to participate in discovery and obstruction of the discovery process. 8 (2d SJ Mot. at 6-7.) Plaintiffs assert that Defendants’ obstructionist behavior has made it 9 difficult, if not impossible, to ascertain the actual amount of Plaintiffs’ damages for 10 infringement. (Id. at 7.) Finally, Plaintiffs also assert that Defendants’ wide, open-access 11 distribution of their works on the Internet (see 5/29/13 Order at 7) favors imposition of 12 maximum statutory damages. (Id. at 7-8.) Defendants offer no evidence or argument to 13 contravene Plaintiffs’ position on statutory damages. 14 Despite the fact that Defendants have offered virtually no response to Plaintiffs’ 15 motion for summary judgment, the determination of whether Plaintiffs are entitled to an 16 award of maximum statutory damages for willful copyright infringement is inherently 17 discretionary, and therefore the court cannot enter summary judgment on this issue. The 18 court’s conclusion in this regard arises out of the logical extension of a 1998 Supreme 19 Court decision. In Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 355 20 (1998), the Supreme Court held that a claim for statutory damages under § 504(c) of the 21 Copyright Act, 17 U.S.C. § 504(c), is a suit at law to which the Seventh Amendment 22 applies. See also GoPets Ltd. v. Hise, 657 F.3d 1024, 1034 (9th Cir. 2011) (“[T]he ORDER- 12 1 Seventh Amendment provides a right to a jury trial both as to liability and as to the 2 amount of actual copyright damages, even though the copyright statute does not so 3 provide.”). This does not mean, however, that a jury must resolve every issue in a 4 copyright dispute, as Defendants similarly argued in response to Plaintiffs’ first motion 5 for summary judgment (see Resp. to 1st SJ Mot. (Dkt. # 25) at 6-7). BMG Music v. 6 Gonzalez, 430 F.3d 888, 892 (7th Cir. 2005). “When there are no disputes of material 7 fact [with respect to an issue in a copyright action], the court may enter summary 8 judgment without transgressing the Constitution.” Id. (citing Fidelity & Deposit Co. v. 9 United States, 187 U.S. 315 (1902); Galloway v. United States, 319 U.S. 372 (1943); 10 Gasoline Products Co. v. Champlin Refining Co., 283 U.S. 494 (1931)). As the Seventh 11 Circuit explained in BMG Music: 12 13 14 15 We read Feltner as establishing no more (and no less) than that cases under § 504(c) are normal civil actions subject to the normal allocation of functions between judge and jury. When there is a material dispute of fact to be resolved or discretion to be exercised in selecting a financial award, then either side is entitled to a jury; if there is no material dispute and a rule of law eliminates discretion in selecting the remedy, then summary judgment is permissible. 16 430 F.3d at 892-93 (citing Segrets, Inc. v. Gillman Knitwear Co., 207 F.3d 56, 65 n.7 (1st 17 Cir. 2000)). Thus, this court could and did enter summary judgment with respect to the 18 issues of copyright infringement and willfulness because there were no disputes of 19 material fact with respect to those issues. (See 5/29/13 Order at 19-23 & n.8.) 20 The issue of imposing maximum statutory damages, however, is different in that it 21 inherently involves an exercise of discretion by the fact finder. In BMG Music, because 22 Plaintiffs had requested only the minimum statutory damages, the Seventh Circuit ORDER- 13 1 concluded that the issue of damages could be properly decided on summary judgment. 2 See BMG Music, 430 F.3d at 892-93; see also GoPets, 657 F.3d at 1034 (discussing 3 Feltner, the Ninth Circuit held “that there is no right to a jury trial when a judge awards 4 the minimum statutory damages” and cited BMG Music with approval). Here, however, 5 Plaintiffs have not sought minimum statutory damages, but rather of $150,000.00 per 6 work, which is the statutory maximum for a willful copyright violation. (See 2d SJ Mot. 7 at 8 (“Given the nature of the defendants’ infringement, the statutory maximum is a just 8 award and the plaintiffs should be awarded $150,000 for each of their three copyright 9 claims.”).) Even considering Plaintiffs’ undisputed evidence in favor of an award of the 10 statutory maximum, the selection of such an award requires the exercise of discretion by 11 the fact finder. In BMG Music, the Seventh Circuit stated that if the plaintiff “had 12 requested more than [the statutory minimum in damages] per work, then [the defendant] 13 would have been entitled to a trial.” 430 F.3d at 892. This is because “[w]hen there 14 is . . . discretion to be exercised in selecting a financial award, then either side is entitled 15 to a jury.” Id. This court agrees with the Seventh Circuit’s analysis in BMG Music, and 16 accordingly must deny Plaintiffs’ motion for summary judgment with respect to an award 17 of maximum statutory damages for Defendants’ willful copyright violations. This is an 18 issue that the court must reserve for the jury. See also Matlow v. Solomon, No. 04-610919 HO, 2005 WL 309976, at *2 (Feb. 7, 2005) (concluding that the Supreme Court’s holding 20 in Feltner “preclude[s] the court from determining statutory damages on summary 21 judgment”); Ultra-Images, LLC v. Franclemont, No. 05-60538-CIV, 2007 WL 4557148, 22 at *5 (S.D. Fla. Dec. 20, 2007) (“[I]f infringement is found to be willful, a fact finder ORDER- 14 1 must determine if enhanced statutory damages should be imposed. . . . Thus, the Court 2 cannot make any determination regarding statutory damages at the summary judgment 3 stage.”) 5 4 B. Sanctions Motion 5 Due to Defendants’ failure to fully abide by the court’s prior order on discovery, 6 Plaintiffs seek sanctions including either the entry of factual findings that “the 7 Thompsons and their corporate entities are alter-egos and that Mr. and Mrs. Thompson 8 dissipated corporate assets for personal expenses” or default judgment on all of Plaintiffs’ 9 claims. (2d Sanc. Mot. at 7.) Under Federal Rule of Civil Procedure 37(b)(2)(A), the 10 11 12 13 14 15 16 17 18 19 20 21 22 5 In Microsoft Corp. v. Image & Bus. Solutions, Inc., No. CV 05-6807, 2007 WL 2874430, at *7-8 (C.D. Cal. May 4, 2007), the federal district court rejected defendants’ argument that the court could award only the statutory minimum damages for non-willful infringement on summary judgment. The plaintiff had requested the statutory maximum in damages. Id. at *7. The Microsoft court evaluated the plaintiff’s “undisputed” evidence of the defendants’ “egregious pattern of unlawful conduct and suspect business practices,” see id., and concluded that “[w]hile . . . this conduct warrants a damages award toward the higher end of the statutory damages for non-willful infringement,” it did not justify an award of the statutory maximum. Id. Indeed, the court cut plaintiff’s request for damages in half. Id. at *8. The Microsoft court’s resolution of the statutory damages issue underscores the discretionary nature of the issue and its consequent inappropriateness for resolution on summary judgment. This court also notes that in rejecting the Seventh Circuit’s decision in BMG Music, the Microsoft court stated that BMG Music was not binding authority and was contradicted by Ninth Circuit authority. The Microsoft court, however, relied upon Ninth Circuit authority that predated the Supreme Court’s decision in Feltner. See Microsoft, 2007 WL 2874430, at *7 (citing Peer Int’l, 909 F.2d at 1335; Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir. 1984)). The only other decision cited by the Microsoft court in rejecting BMG Music simply affirmed the district court’s denial of defendant’s motion in limine to preclude a jury trial on statutory damages following remand by the Supreme Court in Feltner and is not in conflict with BMG Music. See Microsoft, 2007 WL 2874430, at *7 (citing Columbia Pictures Television, Inc. v. Krypton Broadcasting of Birmingham, Inc., 259 F.3d 1186, 1192-93 (9th Cir. 2001)). Particularly in light of the Ninth Circuit’s recent reliance upon BMG Music while analyzing Feltner, see GoPets, 657 F.3d at 1034, this court cannot conclude that the rationale of the Microsoft court to decide a claim under the Copyright Act for maximum statutory damages on summary judgment remains viable. ORDER- 15 1 court has discretion to impose “just” sanctions against a party for failure to obey an order 2 to permit or provide discovery. Fed. R. Civ. P. 37(b)(2)(A). Specifically, Rule 3 37(b)(2)(A) provides that “[i]f a party or a party’s officer, director, or managing 4 agent . . . fails to obey an order to provide or permit discovery . . . the court . . . may issue 5 further just orders.” Fed. R.Civ. P. 37(b)(2)(A). “These may include . . . (ii) prohibiting 6 the disobedient party from supporting or opposing designated claims or defenses, or from 7 introducing designated matters in evidence; [and] . . . (vi) rendering a default against the 8 disobedient party.” Id. These sanctions are not available unless a court’s discovery order 9 has not been obeyed. Id. “Also, “[i]nstead of or in addition to the orders above, the court 10 must order the disobedient party, the attorney advising that party, or both to pay the 11 reasonable expenses, including attorney's fees, caused by the failure, unless the failure 12 was substantially justified or other circumstances make an award of expenses unjust.” 13 Fed. R. Civ. P. 37(b)(2)(C). 14 Under Rule 37(b)(2), sanctions such as default judgment or orders taking the 15 plaintiff’s allegations as established are “appropriate only in ‘extreme circumstances’ and 16 where the violation is ‘due to willfulness, bad faith, or fault of the party.’” Fair Housing 17 of Marin v. Combs, 285 F.3d 899, 905 (9th Cir. 2000) (citations omitted); Computer Task 18 Group, Inc. v. Brotby, 364 F.3d 1112, 1115 (9th Cir. 2004) (per curiam). Further, in 19 deciding whether to grant such a motion for sanctions under subsections (A) through (C) 20 of Rule 37(b)(2) for noncompliance with a discovery order, the court should consider five 21 factors: “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s 22 need to manage its docket; (3) the risk of prejudice to [the party seeking sanctions]; (4) ORDER- 16 1 the public policy favoring disposition of cases on their merits; and (5) the availability of 2 less drastic sanctions.” Rio Props., Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1022 (9th 3 Cir. 2002); Computer Task Group, Inc., 364 F.3d at 1115. 4 Based on the factual record recited above, the court has little difficulty in 5 concluding that Defendants’ failure to fully comply with the court’s prior discovery order 6 was willful. Nevertheless, Defendants assert that they should not be sanctioned because 7 “Plaintiffs have had ample opportunity to go on-site and review all of Defendants’ 8 records,” but they failed to do so. (See Resp. at 5.) Defendants’ documents, however, 9 even if offered for review, were late in their production to Plaintiffs. The court ordered 10 Defendants “to provide complete responses to Plaintiffs’ discovery requests . . . no later 11 than March 1, 2013.” (2/20/13 Order at 8.) Defendants acknowledge that they did not 12 offer them for production until the week of March 18, 2013. More importantly, as 13 Plaintiffs note, Defendants present counsel’s March 1, 2013, email offering Defendants’ 14 documents for production out of context. (See Sanc. Reply at 5.) Counsel for both 15 Plaintiffs and Defendants conferred just hours after Defendants’ counsel sent his March 16 1, 2013 email. (6/5/13 Kruckeberg Decl. re Sanc. ¶ 9.) Plaintiffs’ counsel asked about 17 the availability of duplication services and proposed sending the documents off-site for 18 duplication. (Id.) Plaintiffs’ counsel responded that he would inquire with his clients. 19 (Id.) Despite numerous follow-up inquiries from Plaintiffs’ counsel, Defendants never 20 provided any clarification concerning duplication services and continued to put off 21 arrangements for inspection and copying of their records. (Id. ¶¶ 10-20, Exs. G-N.) 22 ORDER- 17 1 In any event, there is no indication in the record before this court that Defendants’ 2 offer to provide documents for inspection on-site included any of the financial 3 information concerning Ms. Thompson that was requested by Plaintiffs. To the contrary, 4 the evidence before the court is that Ms. Thompson still has not provided any answers to 5 discovery regarding her finances. (6/5/13 Kruckeberg Decl. re Sanc. ¶ 20.) 6 Further, the court has no difficulty in concluding based on the foregoing factual 7 record that Plaintiffs have been prejudiced by Defendants’ conduct. Defendants’ 8 complete failure to provide any discovery regarding Ms. Thompson’s financial 9 information prevented Plaintiffs from establishing on summary judgment that the 10 corporate veil between her and IAI and IAP should be pierced. (See 2d Sanc. Mot. at 411 5.) In addition, Plaintiffs assert that the evidence that Defendants produced after the 12 dispositive motions deadline contradicts Mr. Thompson’s statements in his prior 13 declaration that the assets in his bank accounts were never commingled with the assets in 14 IAI’s or IAP’s bank accounts (see Sanc. Reply (Dkt. # 40) at 4 (citing Thompson Decl. 15 (Dkt. # 26) ¶ 16)) and that IAI and IAP had never been used for an improper purpose or 16 their corporate forms abused (id. (citing Thompson Decl. ¶¶ 10, 17)). 17 Based on the foregoing, the court concludes that further sanctions are warranted. 18 In its prior discovery order, the court warned Defendants that “[s]hould Defendants fail to 19 produce the ordered discovery . . . within the timeframe stated . . . , the court w[ould] 20 consider the imposition of additional sanctions.” (2/20/13 Order at 7.) Plaintiffs ask the 21 court to impose sanctions including either an entry of default judgment on all claims or 22 the entering of factual findings that “the Thompsons and their corporate entities are alterORDER- 18 1 egos and that Mr. and Mrs. Thompson dissipated corporate assets for personal expenses.” 2 (2d Sanc. Mot. at 7.) In considering the factors outlined by the Ninth Circuit prior to the 3 imposition of such sanctions, however, the court concludes that something less than these 4 extraordinary sanctions are warranted. There is no question that the public’s interest in 5 expeditious resolution of litigation and the court’s need to manage its docket weigh in 6 favor of additional sanctions. As described above, there is also no question that Plaintiffs 7 have established that they have been prejudiced during the course of this litigation as a 8 result of Defendants’ obstreperous behavior in discovery. However, the public policy 9 favoring disposition of cases on the merits still favors the imposition of less drastic 10 sanctions, and despite Defendants’ continuing failure to pay monetary sanctions 11 previously ordered by the court (see 6/5/13 Kruckeberg Decl. re Sanc. ¶ 21), the court 12 believes that it can fashion a lesser sanction that will not only punish Defendants for their 13 conduct but also alleviate the prejudice Plaintiffs have experienced to date. In 14 determining that lesser sanctions than those sought by Plaintiffs are warranted at this 15 point, the court is mindful that Defendants produced at least a portion of the ordered 16 discovery. 17 Accordingly, the court orders Defendants to produce, without objection, all of the 18 financial records pertaining to Ms. Thompson that have been requested by Plaintiffs 19 within fourteen days of the date of this order and file a certification with the court that 20 they have done so. The certification should be signed not only by counsel for 21 Defendants, but also by Mr. Thompson and Ms. Thompson, in both their personal and 22 representative capacities for IAI and IAP. If Defendants fail to produce this discovery, ORDER- 19 1 having now been ordered to do so twice, the court will consider entering a factual finding 2 piercing the corporate veil between Ms. Thompson and the other Defendants. In 3 addition, within the same timeframe, Defendants must produce any remaining 4 outstanding discovery covered by the court’s prior order (see 2/20/13 Order) and file a 5 similar certification with the court that they have done so. If Defendants fail to file the 6 foregoing certifications or fail to produce the ordered discovery within the timeframe 7 described above, the court will consider imposing additional adverse evidentiary findings 8 or the entry of default judgment against Defendants. 9 Following receipt of the foregoing discovery, the court further authorizes Plaintiffs 10 to bring a third motion for partial summary judgment regarding the issue of piercing the 11 corporate veil with respect to Mr. Thompson and/or Ms. Thompson, and with regard to 12 contract damages for Ms. Aldrich and Mr. Currier—if the discovery produced by 13 Defendants so warrants. If Defendants fail to timely comply with this order, the court 14 authorizes Plaintiffs to bring a third motion for sanctions in which the court will consider 15 the imposition of adverse evidentiary findings or the entry of default judgment against 16 Defendants. Plaintiffs’ third motion for partial summary judgment or for further 17 sanctions, if any, shall be filed no later than 45 days following the date of this order. 18 Finally, Plaintiffs have requested the imposition of additional monetary sanctions. 19 Under Federal Rule of Civil Procedure 37(b)(2)(C) the court “must order the disobedient 20 party, the attorney advising that party, or both to pay the reasonable expenses, including 21 attorney’s fees, caused by the failure, unless the failure was substantially justified or 22 other circumstances make an award of expenses unjust.” Fed. R. Civ. P. 37(b)(2)(C). ORDER- 20 1 Defendants have failed to demonstrate that their failure to comply with the court’s prior 2 discovery order was substantially justified or that other circumstances make such an 3 award unjust. The court can discern no just reason to deny Plaintiffs’ request for 4 additional monetary sanctions, and Defendants have offered none. Accordingly, the court 5 grants Plaintiffs’ request for additional monetary sanctions. The court orders both 6 Defendants and their counsel to pay Plaintiffs’ reasonable expenses, including attorney’s 7 fees, caused by Defendants’ failure to comply with the court’s prior discovery order. See 8 Fed. R. Civ. P. 37(b)(2)(C). Within seven days of the date of this order, Plaintiffs shall 9 submit a statement, along with appropriate documentation, concerning such reasonable 10 expenses and attorney’s fees. Defendants will have an additional seven days following 11 Plaintiffs’ submission to respond concerning the reasonableness of Plaintiffs’ expenses 12 and fees. After considering these additional submissions, the court will issue a further 13 order regarding the specific amount of sanctions awarded to Plaintiffs. 14 The timeline that the court has outlined above with respect to possible additional 15 motions for partial summary judgment renders obsolete the present trial date of 16 September 3, 2013. It would only compound any prejudice to Plaintiffs to force them to 17 go to trial on September 3, 2013 on an incomplete factual record caused by Defendants’ 18 obstreperous behavior in the discovery process. Accordingly, the court strikes the trial 19 date. The court, however, recognizes that this detrimental effect on its calendar and trial 20 schedule is caused by Defendants’ conduct. The court places Defendants on notice that it 21 will consider additional sanctions if there is any further delay in timely compliance with 22 this court’s orders. The court will reschedule the trial date, if necessary, following ORDER- 21 1 consideration of Plaintiffs’ third motion on partial summary judgment or for sanctions, if 2 any. 3 4 IV. CONCLUSION Based on the foregoing, the court GRANTS in part and DENIES in part Plaintiffs’ 5 second motion for partial summary judgment (Dkt. # 32) and GRANTS in part and 6 DENIES in part Plaintiffs’ second motion for sanctions (Dkt. # 30). Further, the court 7 strikes the trial date, but will reschedule it, if necessary, as described above. 8 Dated this 18th day of July, 2013. 9 11 A 12 JAMES L. ROBART United States District Judge 10 13 14 15 16 17 18 19 20 21 22 ORDER- 22

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