were represented by counsel and were fully aware of the potential consequences of their testimony. Thus, it was unreasonable for plaintiffs to maintain what had become a purely semantic distinction between their asking for money and their invoking the legal process to obtain it.
Therefore, we hold, alternatively, that the jury's finding that plaintiffs' reasonable fear lasted until December 1984 is against the overwhelming weight of the evidence. As a result, the answers to Special Verdict Questions 16, 19 are set aside and plaintiffs may only pursue those damages which accrued within three years of this lawsuit.
Equitable Doctrines of Repose: Laches and Equitable Estoppel Laches
In order to prevail on a laches defense, the Levy defendants must demonstrate that plaintiffs, in asserting their rights, were guilty of unreasonable delay and that the delay prejudiced the defendants.
See Stone v. Williams, 873 F.2d 620, 623 (2d Cir. 1989) ("Stone I") (citing Gardner v. Panama Railroad Co., 342 U.S. 29, 31, 96 L. Ed. 31, 72 S. Ct. 12 (1951)). While statutes of limitations and laches promote similar values of repose, the latter's dual inquiry involves a balancing of the equitable circumstances of each case rather than the former's more mechanical application of a time bar within which suit must be instituted. 873 F.2d at 623-625. Consistent with this balancing, defendants must have suffered some amount of prejudice to successfully invoke laches, even if plaintiffs have a weak or no excuse for their delay. Id. at 625. Relevant factors in assessing prejudice include the decreased ability of the defendants to vindicate themselves, on account of the death of witnesses or fading memories and stale evidence, as well as the prejudice that may result from a change in the defendant's position. Id. Counterbalancing these factors is the defendant's culpability in creating the circumstances causing the prejudice. Stone v. Williams, 891 F.2d 401, 405 (2d Cir. 1989) ("Stone II").
In Stone II, the Second Circuit reconsidered its affirmance of a grant of summary judgment on the grounds of laches and held that the defendant's egregious conduct, undiscovered at the time of the first ruling, tipped the balance of equities in the plaintiff's favor. Id. at 404-405. The plaintiff, a nonmarital child of the late country western singer Hank Williams, brought a lawsuit asserting a claim for a share of her father's copyrights almost twelve years after reaching the age of majority. Id. at 404. Without reexamining the trial court's finding of inexcusable delay, the court held that the defendants' knowing participation in a conspiracy to defraud the plaintiff of her copyright interest precluded the defendant's assertion of prejudice. Id. at 405.
Relying on traditional equitable principles, id. at 404 ("one who seeks Equity's assistance must stand before the court with clean hands") (citation omitted), and on the principle that the defendant's could not fairly rely on a delay caused in part by their own actions, the court held that allowing laches to apply when defendants had acted in such an "unworthy manner" would grant them a windfall. Id. at 405. In addition, the court noted that the defendants could have avoided any prejudice by seeking a court declaration of their rights vis-a-vis the plaintiff. Id.
Similarly, the Levy defendants cannot fairly plead prejudice from the passage of time and the death and disappearance of key witnesses in light of their conduct toward plaintiffs. Focusing first on the years from 1961-1969, beginning with plaintiffs' reaching majority and ending with Levy's threat to Santiago,
the Levy defendants argue that plaintiffs' rights were cut off during this period because plaintiffs' delay pursuing their rights was inexcusable and the prejudice to the defendants was manifest. However, the jury's finding that Goldner and Levy had fraudulently concealed from plaintiffs the accrual of royalties from Fools for a period of approximately six years undermines the defendants' claim of prejudice. Considering also the jury's finding that plaintiffs' co-wrote Fools and the testimony that Santiago signed a songwriter's contract, a ruling barring plaintiffs' claims would allow the Levy defendants to profit from their untoward actions. Under the rationale of Stone II, a court sitting in equity should not countenance such a result.
Turning to the period of time between 1969 and 1984, we find that the equitable principles discussed above apply with equal force. As noted earlier, the jury found that Levy threatened plaintiffs on two occasions, in 1969 and again in 1977, and that plaintiffs, due to their reasonable fear that these threats would be carried out, delayed until 1987 the filing of their suit. By virtue of the jury's finding of Levy's egregious conduct, the Levy defendants cannot now complain of the prejudice they would suffer due to their efforts to exploit Fools and to the loss of witnesses and business records.
In sum, the Levy defendants knew from the late 1950's the circumstances under which the Fools copyright was obtained and attempted until Levy's death either to conceal these facts, see Deposition of Morris Levy p. 82 (stating that Levy was a co-author of Fools), or to coerce plaintiffs into abandoning their rights. These actions tip the balance of equities in plaintiffs' favor and relieve plaintiffs from the defense of laches.
The issue of equitable estoppel was withheld from the jury because the Levy defendants did not offer sufficient evidence to meet the elements of the defense. In order to prevail on the defense of equitable estoppel the defendant must have been misled into reasonably and justifiably believing that the plaintiff would not pursue his claims against the defendant. Glus v. Brooklyn Eastern Dist. Terminal, 359 U.S. 231, 234, 3 L. Ed. 2d 770, 79 S. Ct. 760 (1959); Mikinberg v. Baltic S.S. Co., 988 F.2d 327, , 1993 U.S. App. LEXIS 4404, *9-10 (2d Cir. 1993); Travellers Int'l AG v. Trans World Airlines, Inc., 722 F. Supp. 1087, 1098 (S.D.N.Y. 1989). In the context of a copyright action the plaintiff-copyright holder's rights may be destroyed if the defendant shows that: a) the plaintiff knew of the defendant's wrongful conduct; b) the plaintiff intended that his conduct be acted upon or acted in a way that the defendant had a right to believe it was so intended; c) the defendant was ignorant of the true facts; and d) the defendant relied on plaintiff's conduct to his detriment. Basic Books, Inc. v. Kinko's Graphics Corp., 758 F. Supp. 1522, 1539-1540 (S.D.N.Y. 1991). See Lottie Joplin Thomas Trust v. Crown Publishers Inc., 456 F. Supp. 531 (S.D.N.Y. 1977), aff'd, 592 F.2d 651 (2d Cir. 1978); Hampton v. Paramount Pictures Corp., 279 F.2d 100, 104 (9th Cir.), cert. denied, 364 U.S. 882, 81 S. Ct. 170, 5 L. Ed. 2d 103 (1960). See also 3 Nimmer, § 13.07 at 13-133 n.2 (noting that the defense of estoppel may sometimes be asserted in a contract action for royalties.)
At trial, the Levy defendants offered no evidence that the plaintiffs acted in a manner which justified a belief on the part of defendants that their copyright was free from challenge. Although in some instances, silence and inaction may induce justifiable reliance on the part of the defendant, those circumstances are not present when the defendant is in a position to ascertain the extent of the competing claim. Hampton, 279 F.2d at 105. See also 3 Nimmer, § 13.07 (acknowledging that such acts of omission rarely satisfy elements of estoppel.) In the instant case, not only did Goldner and Levy know of the plaintiffs' claim to ownership of the Fools copyright and attempt to conceal the accrual of royalties from them, but Levy also, in part, caused the plaintiffs' silence and inaction. Cf. Stone II, 891 F.2d 401, 404, ("one who seeks Equity's assistance must stand before the court with clean hands") (citation omitted). Applying the jury's findings to the estoppel claim it is clear that whatever change in position undertaken by Levy in reliance on the plaintiffs' inaction was unwarranted. Therefore, the Levy defendants' motion for judgment on the grounds of equitable estoppel is denied.
The Evidentiary Issues
In support of their motion for a new trial, the Levy defendants renew their objections to the admission of two categories of evidence that reached the jury: 1) the so-called "raft of 'Mafia' evidence", and 2) the testimony of Herbert Cox stating that Goldner had put his name on the copyrights of songs written by Cox's group, The Cleftones, that Goldner had not authored.
With respect to the "raft of Mafia" evidence, the Levy defendants point in particular to plaintiff Merchant's testimony concerning a 1981 Village Voice article which included references to Levy's reputed "Mafia" connections. Defendants advance two arguments as to why this evidence was inadmissible. First, defendants assert that the evidence was hearsay and not within a recognized exception. Second, defendants rely on their offer to stipulate that any actual reliance on Levy's threats would be deemed objectively reasonable rendered this evidence irrelevant under Fed. R. Evid. 401. Addressing each point in turn and without adopting the defendants' characterization of this evidence, we find that neither argument has merit nor, if error, would warrant a new trial.
In the first instance, Merchant testified that he had read the article at the time it was published and that it confirmed for him Levy's reputation as a "gangster". This evidence was introduced to explain Merchant's fear of filing a lawsuit against Levy. See, e.g., United States v. Delia, 944 F.2d 1010 (2d Cir. 1991) (witness's belief that defendant had ties to organized crime was basis of inference that she acted in accordance with that fear). Upon defendants' counsel's request, on two occasions the Court gave a limiting instruction explaining to the jury that this type of evidence was only admissible to explore the plaintiff's state of mind and could not be considered for its truth. Tr. 218, 221. Furthermore, the Court excluded evidence of Levy's criminal activities that were unknown to plaintiffs during the period which the duress was operative. Therefore, admitted on this basis and with contemporaneous limiting instructions, the evidence of Levy's ties to organized crime does not constitute hearsay under Fed. R. Evid. 801, and was not erroneously admitted.
Second, while we disagree with defendants' assertion that the challenged evidence was prejudicial, see United States v. Gilliam, 994 F.2d 97, 1993 U.S. App. LEXIS 13073, *8 (2d Cir. June 2, 1993) ("evidence is prejudicial only when it tends to have some adverse effect upon a defendant beyond tending to prove the fact or issue that justified its admission into evidence") (citation omitted), because a stipulation may not provide a jury with a basis for evaluating probative force, the admission of potentially prejudicial evidence with probative value may be proper even though the party against whom it is offered is willing to stipulate to the proposition for which the evidence was offered. United States v. Valentine, 644 F. Supp. 818, 822-23 (S.D.N.Y. 1986); 1 Jack B. Weinstein & Margaret A. Berger, Weinstein's Evidence P 403 (1992 & Supp. 1993) (hereinafter "Weinstein"); cf. Gilliam, 1993 U.S. App. 13073, *14 (where potentially prejudicial evidence directly establishes an element in the case, defendant may not stipulate to that element in order to bar that evidence). Indeed, as a general rule, a party is not required to accept a judicial admission of his adversary but may insist on proving the fact in order to present to the jury a picture of the events relied upon. To substitute for such a picture a naked admission might have the effect of eliminating from the evidence much of its fair and legitimate weight. Weinstein P 403; Parr v. United States, 255 F.2d 86 (5th Cir.), cert. denied, 358 U.S. 824, 3 L. Ed. 2d 64, 79 S. Ct. 40 (1958). In the current case, plaintiffs' state of mind was relevant and probative to the issue, under the duress toll and under the doctrines of laches and equitable estoppel, of whether their fear was reasonable. Without evidence of the Levy's reputation as it was known to plaintiffs, Merchant and Santiago would have been severely hampered in attempting to explain their motivation for avoiding a legal confrontation with Levy until 1987.
Addressing Herbert Cox's testimony that Goldner's or one of his employee's names appeared on copyrights for songs written solely by Cox's group, The Cleftones, the Levy defendants argue that Fed. R. Evid. 404 precludes this evidence from reaching the jury. The Levy defendants maintain that this evidence "painted defendants as music industry thieves" for the sole purpose of showing that defendants acted in conformity with such a characterization when dealing with plaintiffs. Defendants' Mem. at 27. However, defendant's reliance on Rule 404(b) is misplaced. Evidence that aids the trier of fact in determining the probative value of other relevant evidence is itself relevant even if the proffered evidence itself does not relate to a consequential fact. See Weinstein P 401.
Cox testified to eight or nine instances of either Goldner or Henry Glover, an employee of Gee, listing their names on a copyright of a song for which they had no authorship role. Without commenting on whether this activity constituted theft or any other "bad act" as encompassed by Fed. R. Evid. 404(b), we note that this testimony directly refutes the Levy defendants' position that Goldner's listing as an author on the Fools copyright entitles him to a presumption of authorship. Even upon reflection, we adhere to our original conclusion that Cox's testimony was relevant, highly probative and not introduced as evidence of Goldner's character. Therefore, this evidence was properly put before the jury.
In conclusion, considering the ample evidence adduced at trial concerning the authorship of Fools, and my review of the evidentiary rulings discussed above, I deny the Levy defendants' motion for a new trial. However, in light of the total absence of evidence indicating that the Levy defendants acquired the Fools copyright by duress, I find that the duress later exercised by Levy on plaintiffs was not integrally related to plaintiffs' cause of action. Therefore, I grant the defendants' motion for judgment as a matter of law on the issue of the duress toll to the statute of limitations thus limiting recovery to damages that accrued within three years of the filing of the lawsuit. Furthermore, I grant judgment in favor of the Levy defendants for copyright infringement and unfair competition claims arising under both the Lanham Act and common law. In addition, I deny the Levy defendants' motions for judgment based on the equitable doctrines of laches and estoppel. Finally, plaintiffs' cross motions for a judgment as a matter of law on the issue of fraudulent concealment and for judgment that each plaintiff be granted a one-third share of the Fools copyright are denied in their entirety.
IT IS SO ORDERED.
DATED: New York, New York
July 22, 1993
NAOMI REICE BUCHWALD
UNITED STATES MAGISTRATE JUDGE