Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

TVT RECORDS & TVT MUSIC, INC. v. ISLAND DEF JAM MUSIC GROUP

April 23, 2003

TVT RECORDS AND TVT MUSIC, INC., PLAINTIFFS, AGAINST THE ISLAND DEF JAM MUSIC GROUP AND LYOR COHEN, DEFENDANTS.


The opinion of the court was delivered by: VICTOR Marrero, United States District Judge

DECISION AND ORDER
In anticipation of the damages phase of the trial of this matter, plaintiffs TVT Records and TVT Music, Inc. (collectively "TVT") have filed a Motion In Limine To Exclude From Evidence Reference To (i) IDJ's And Cohen's Purported Consent To The CMC Album And (ii) Gotti's Purported Delivery of CMC Tracks To TVT, dated April 16, 2003, and a Motion In Limine To Permit TVT To Submit Evidence of Its Legal Expenses To The Jury As Part of Its Punitive Damages Case, dated April 16, 2003. Defendants The Island Def Jam Music Group ("IDJ") and Lyor Cohen ("Cohen") (collectively "Defendants") have filed a Notice of Motion In Limine To Exclude Evidence of Net Worth, dated April 16, 2003 and a Notice of Motion In Limine To Preclude Certain Evidence And/Or Argument Related to Punitive Damages, Consistent With Recent United States Supreme Court Precedent, dated April 16, 2003.*fn1 The Court has reviewed the parties' submissions in support of and in Opposition to these various motions. The following discussion will address the issues raised in turn. For the reasons discussed below, the motions are GRANTED IN PART, DENIED IN PART.

I. DISCUSSION

A. THE MARCH 7, 2003 SIDE LETTER AGREEMENT AND CORRESPONDING IDJ APPROVAL MEMORANDUM
TVT seeks to preclude references to and admission of the version of the Side Letter Agreement signed and delivered to TVT on March 7, 2003. For the reasons articulated on the record on March 10, 2003 and in the Courts Decision and Order dated March 21, 2003 (the "March 21 Decision"),*fn2 the signing and delivery on March 7, 2003 of the Side Letter Aqreement is of dubious legal effect given the history of the parties' dealings up to that point, thus undermininq the probative value and, indeed, the reliability, of the representations expressed. At best, as already stated more fully in the March 21 Decision, that document, when transmitted to TVT on March 7, 2003, represents, perhaps, an offer to consent or a purported grant of consent to the Side Letter Agreement, a contract that IDJ had formally repudiated on August 14, 2002. Nonetheless, as explained, such an offer or putative consent being expressed in the form of a signed (yet legally ineffective) acceptance of the Side Letter Agreement — a matter at the very heart of this litigation — was deemed by the Court to be more prejudicial than probative. The Court concluded, for various expressed reasons, that such a result would obtain insofar as the purported consent likely would have misled the jury into overvaluing IDJ's offer, given its timing and the form in which it was conveyed. The Court was concerned that the jury could improperly be led to believe that TVT had thereby received the benefit of the contract it bargained for and, as a result, could not have been measurably injured. Such evidence was excluded from the liability phase of this trial on this basis.

TVT likewise seeks to exclude that evidence now from the damages phase. The Court finds that the same legal barriers and prejudicial risks previously identified on the record on March 10, 2003 and in the March 21 Decision require the continued exclusion of IDJ's attempted consent to the Side Letter Agreement during the damages phase. Seeing IDJ's purported consent expressed in the form of a signed (yet legally ineffective) acceptance of the Side Letter Agreement is likely to mislead the jury. The jury is no less likely at this stage to overvalue the import of a document that has no legal effect, and to ignore other practical considerations regarding the likelihood of the CMC Album project's completion as well as less tangible cooperation by IDJ necessary to the process of creating and exploiting the CMC Album, and thus to conclude that TVT is as free now to exploit a CMC Album as it would have been in the absence of any of the wrongs the jury already concluded were committed by IDJ and/or Cohen. Such a misapprehension would result in the jury undervaluing the extent of the damages to which, properly valued, TVT may be entitled, whatever that may be. Or, indeed, the jury may conclude, as a consequence of relying on that legally ineffective document, that TVT has not been harmed at all. As before, because it is not likely that a curative instruction could properly account for and explain the significance of such evidence, the prejudice to TVT cannot be overcome absent exclusion of the document and testimony related to it.

On March 8, 2003, a Memorandum dated March 3, 2003 (the "Approval Memo") was delivered to TVT that, on its face, indicated IDJ's internal approvals for IDJ's participation in the CMC Album project via the Side Letter Agreement. Because this five-sentence memorandum (plus attachments) references not only Irv Gotti's ("Gotti") February 26, 2003 delivery to TVT of certain materials for the CMC Album*fn3 but also, more importantly, IDJ's entering into the March 7, 2003 version of the Side Letter Agreement, which is attached and incorporated to the Approval Memo, this material cannot be considered by the jury independently. For, even if the attachments were removed and references to it redacted, the necessary import of an approval memorandum on a given topic, in light of past testimony on the matter, is that the Side Letter Agreement had been or was soon to be signed by IDJ. In this way, the Approval Memo imports the same concerns identified above regarding the March 7, 2003 version of the Side Letter Agreement executed by IDJ. Additionally, the Approval Memo inaccurately characterizes the material delivered to TVT on February 26, 2003 as "master recordings," when, in fact, Gotti himself testified during the liability phase that these materials were so-called "roughs." Introduction of this document would require clarification of this discrepancy, thereby drawing the jury into yet another distracting sidetrack in regards to this evidence. The Approval Memo also characterizes Gotti's intent by referencing and presumably reaffirming contractual obligations to TVT, thus potentially implying to a lay juror that the Heads of Agreement between TVT and Gotti and Ja Rule (the "Artists") had not been breached and that, accordingly, TVT has not been damaged. For these various reasons, the Approval Memo must also be precluded from evidence as more prejudicial than probative.

B. GOTTI'S FEBRUARY 26, 2003 DELIVERY OF CMC "ROUGHS" AND SURROUNDING CORRESPONDENCE
TVT also seeks to preclude as more prejudicial than probative evidence of Gotti's delivery to TVT of so-called "rough" tracks for the CMC Album on February 26, 2003. This request is denied. Gotti's attempted delivery itself would not create a misimpression of a legally binding obligation arising out of the March 7, 2003 version of the Side Letter Agreement and, accordingly, is not so likely to mislead the jury into believing that TVT's position has not been impaired by the Defendants' actions. As the Court noted in the March 21 Decision, it is not inconceivable that, by reason of Gotti's unique relationships with IDJ, and deriving specifically from those ties, Gotti could procure IDJ's consent to the CMC Album flowing directly to Gotti, rather than to TVT, and irrespective of IDJ's consent to the Side Letter Agreement. See TVT Records, 2003 WL 1537569, at *3. Consequently, Gotti's purported delivery may present grounds for IDJ and Cohen to argue that TVT ignored a reasonable opportunity to mitigate potential loss if they can establish by competent evidence that the Artists had a legitimate basis, arising out of their various relationships with IDJ, to perform their obligations to TVT under the Heads of Agreement independent of IDJ's consent. While the Court recognizes TVT's concern that the timing of this delivery on February 26, 2003 — so close to the start of this trial and so late in the parties' dealings on this matter — left TVT with little time to act on this delivery so as to mitigate its losses, this circumstance can easily be presented to the jury for consideration during the damages phase, as can TVT's other stated (and any unstated) reasons for not pursuing this putative opportunity to mitigate, which include jury questions concerning whether in fact a sufficient basis exists, contractual or otherwise, for Gotti to validly perform any obligation to TVT; the credibility and sincerity of Gotti's and IDJ's commitment to see the project through; the feasibility of completion in light of other commitments and capabilities of the relevant parties; the degree of completeness or incompleteness of the tracks delivered in so-called rough form; and the ongoing litigation and related consequences of this trial. The parties' respective arguments on these matters can then be weighed by the jury as it considers the reality or unreality of the alleged mitigation opportunity, and the reasonableness or unreasonableness of TVT's response to it.

TVT argues that quantifying the value of the CMC Album roughs and factoring them as a reduction in TVT's award for failure to mitigate calls for undue speculation. Such quantification, however, is only slightly more abstract than predicting the value of the lost CMC Album itself for damage calculation purposes. Properly structured, the issue should be subject to appropriate analysis and testimony by expert witnesses. Other concerns over potential jury confusion raised in this Court's March 21 Decision, which led the Court to exclude Gotti's delivery of the roughs from the liability phase, have been largely obviated by the bifurcation of the trial into separate liability and damages phases. On balance, having concluded the liability portion of this trial, the Court finds that the purported delivery of the CMC Album roughs is not more prejudicial than probative as it relates to mitigation issues to be tried during the damages phase.

Additionally, while the proximity in time between the delivery of the roughs on February 26 and the commencement of the trial on March 10 may have undermined the preparations and calculations by TVT's experts as of March 10, before the proceedings were bifurcated, TVT by now has had ample time and notice of IDJ's intent to offer such evidence on the issue of mitigation, to assess the legal basis, feasibility and good faith of Gotti's commitment, and to broaden the analysis of its experts to account for such a contingency. Indeed, TVT may still have some time to do so in advance of the damages phase, even if the task is likely to be more burdensome were it to commence at this stage.

Certain correspondence surrounding the attempted delivery of the CMC Album roughs on February 26, 2003, however, reference the satisfaction of alleged legal obligations by Gotti and IDJ and suggest a skirting of legal obligations by TVT. These references render some of these communications more prejudicial than probative for essentially the same reasons as those discussed with respect to IDJ's purported acceptance and delivery of the Side Letter Agreement on March 7, 2003 discussed above. By referencing intricate questions of mixed law and fact regarding legal obligations that may or may not exist or continue to exist and regarding the satisfaction and avoidance of such obligations, some of these documents present a risk of being overemphasized by and confusing to the jury. As before, such overemphasis cannot, in the Court's view, adequately be cured via an instruction by the Court.

The Court notes that it is the fact of delivery of the album roughs itself, which the Court has deemed admissible, that is of probative value for purposes of mitigation, rather than these collateral documents characterizing alleged legal obligations and other matters reflecting ordinary legal posturing. For these reasons, the documents surrounding the February 26 delivery of the CMC Album roughs, to the extent that they reference alleged legal obligations in the manner described above, are more prejudicial than probative and would likely be excluded from the damages phase. However, the letter dated February 26, 2003 from Ron Sweeney to Steve Gottlieb ("Gottlieb") marked previously as part of Plaintiff's Exhibit 216 can be redacted to account for these concerns as follows — first paragraph, line 2, remove: "pursuant to our contractual agreement with you"; third paragraph, line 1, remove: "are delivering the recordings today pursuant to the contractual obligation and we." It is admissible in the redacted form.*fn4

In a similar vein, letters to the Court from the parties, in particular, a letter dated April 17, 2003 from TVT counsel Peter Haviland ("Haviland"), indicate that Gotti has again attempted to deliver additional material for the CMC Album to TVT in recent days. The Court's concerns and conclusions set forth above apply to these late developments, meaning the attempted delivery (and, indeed, any actual delivery) of such materials is admissible though any attendant correspondence referencing the satisfaction or alleged skirting of putative legal obligations that may or may not exist or continue to exist will likely be precluded if redaction is not a feasible option. In this vein, the letter dated April 16, 2003 from IDJ Executive Vice President Jeffrey Kempler to Gottlieb, attached to Haviland's April 17 letter to the Court, can be redacted to address these concerns as follows — first paragraph, line 1, remove: "At the request and instruction of Irv Gotti and Lyor Cohen." With this redaction, the document references Gotti's contractual obligations but not those purportedly on the part of IDJ or Mr. Cohen, nor does it characterize TVT's standing pursuant to any such obligations. Therefore, it is admissible in the redacted form.

C. TVT'S ATTORNEYS' FEES

TVT requests that it be permitted it to introduce evidence of attorneys' fees for the jury's consideration as a component of punitive damages. New York law presents a mixture of authority on this matter, an uncertainty that has been recognized by the State's own courts. See, e.g., Jeffries Avlon, Inc. v. Gallagher, 149 Misc.2d 552, 553 (N.Y. Sup.Ct. N.Y. Cty. 1991) (New York permits "evidence of attorneys' fees to be considered by the fact finder in determining an award of exemplary or punitive damages in cases where malice has been proved. . . . In New York, it has been held that the expenses of litigation, including attorneys' fees, may be considered as an element of punitive damages in a proper case." (citations omitted; internal quotations omitted).); Russian Church of Our Lady of Kazan v. Dunkel, 67 Misc.2d 1032, 1061 (N.Y. Sup.Ct. Nassau Cty. 1971) ("Where the conduct of a party is of such a nature that similar behavior should be discouraged, the court can award punitive or exemplary damages. However, the court or jury must be satisfied that such conduct was wanton, willful or malicious. . . . Research of New York law concerning punitive damages has failed to reveal a clear policy on whether attorneys' fees should be included as an element of punitive damages in all cases. A review of this subject . . . indicates a division of authority.")

This split is reflected in decisions of this District. See, e.g., Doe v. Karadzic, 93 Civ. 0878, 2001 WL 986545, at *4-*5 (S.D.N.Y. August 28, 2001); Softel, Inc. v. Dragon Med. and Scientific Comm., Ltd., 891 F. Supp. 935, 945-46 (S.D.N.Y. 1995) (noting New York court's holding that "it was appropriate for the trier of fact to consider evidence of attorneys' fees in connection with a determination of punitive damages where malice has been proved.")

In this case, the jury's finding of willfulness concerning Defendants' copyright infringement necessarily reflects a rejection of the validity of asserted licenses purportedly granted by TVT for use of its protected materials. This, in turn, indicates a conclusion that the licenses were procured through fraudulent activity by the Defendants. In light of the Court's instructions on willfulness and on copyright licensing, the Court concludes that a sufficient finding of misfeasance approaching "wanton, willful or malicious" conduct has been established with regard to the activities underlying TVT's state law claims so as to permit the introduction of TVT's attorneys' fees for consideration as the jury determines what amount, if any, of punitive damages to impose.*fn5 To the extent that Defendants may desire additional discovery concerning the amount of TVT's attorneys' fees, that request should be directed to Magistrate Judge Freeman in accordance with this Court's prior reference.

D. CONDUCT OF IDJ, MR. COHEN, AND THEIR AFFILIATES

Defendants rely on the Supreme Court's recent decision in State Farm Mutual Automobile Ins. Co. v. Campbell, No. 01-1289, 2003 WL 1791206 (U.S. April 7, 2003), to argue that TVT should be precluded from offering any evidence of allegedly unrelated bad conduct by Defendants or their affiliates. In State Farm, the Supreme Court reversed a jury's punitive damages award of $145 million dollars in a policyholder couple's suit against their insurance company where the verdict for compensatory damages totaled $1 million.

On the issue of collateral conduct, the Supreme Court addressed two key considerations. First, the Court was concerned that laws of one state governing the determination of punitive damages as punishment and directing consideration of activities occurring in other states, implicate principles of interstate sovereignty, comity, and jurisdiction where these activities are not illegal under the laws of those other states. See id., 2003 WL 1791206, at *8-*9. To ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.