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SHADY RECORDS, INC. v. SOURCE ENTERPRISES

June 7, 2004.

SHADY RECORDS, INC., Plaintiff, -v- SOURCE ENTERPRISES, INC., DAVID MAYS, RAYMOND SCOTT p/k/a RAY BENZINO, and BLACK ENTERPRISE/GREENWICH STREET CORPORATE GROWTH MANAGEMENT LLC, Defendants


The opinion of the court was delivered by: GERARD E. LYNCH, District Judge

OPINION AND ORDER

In this action for copyright infringement, plaintiff Shady Records, Inc. ("Shady") argues that defendants, various corporations and individuals associated with the magazine The Source ("Source"), infringed its copyright in certain songs allegedly created by the performer Eminem by posting recordings of those songs and printed versions of their lyrics on the magazine's website.*fn1 On December 15, 2003, this Court entered a temporary restraining order prohibiting Source from "[r]eproducing, distributing or publicly performing or in any way making available any hard copy or electronic copy" of the songs.*fn2 Shady now moves for an order holding defendants in contempt of that order.*fn3 The Court held an evidentiary hearing on that motion on April 5, 2004, after which the parties submitted written arguments. Having considered the evidence presented at the hearing and the arguments of the parties, the Court will grant the motion.

  LEGAL STANDARDS

  "It is well settled in this circuit that a party may be held in civil contempt for failure to comply with an order of the court if the order being enforced is clear and unambiguous, the proof of noncompliance is clear and convincing, and the defendants have not been reasonably diligent and energetic in attempting to accomplish what was ordered. It is not necessary to show that defendants disobeyed the district court's orders willfully." EEOC v. Local 638, Local 28 of Sheet Metal Workers' Int'l Ass'n, 753 F.2d 1172, 1178 (2d Cir. 1985), aff'd, 478 U.S. 421 (1986) (citations and internal quotation marks omitted). Shady moves for an order of civil contempt. Civil contempt is intended either to "coerce the contemnor into future compliance with the court's order or to compensate the complainant for losses resulting from the contemnor's past noncompliance." New York State Nat'l Ore, for Women v. Terry, 886 F.2d 1339, 1352 (2d Cir. 1989): see also Hess v. New Jersey Transit Rail Operations, Inc., 846 F.2d 114, 115 (2d Cir. 1988) ("If the sentence of contempt is imposed for the coercive or remedial purpose of compelling obedience to a court order and providing compensation or relief to the complaining party, the contempt is civil in nature."). Profits derived by the contemnor from violating the order may be "an equivalent or a substitute for legal damages, when damages have not been shown, and are recoverable not by way of punishment but to insure full compensation to the party injured." Manhattan Industries, Inc. v. Sweater Bee by Banff, Ltd., 885 F.2d 1, 6 (2d Cir. 1989), citing Leman v. Krentler-Arnold Hinge Last Co., 284 U.S. 448, 455-56 (1932) (internal quotation marks omitted).

  In this case, there is no need for a coercive order, as the parties agree that Source is now in compliance with the Court's order and has been since January 6, 2004, shortly after Shady complained to it of the matters that are the subject of this motion, before the motion itself was even filed. Nor does Shady claim that it suffered damages from the exploitation of its intellectual property, or that Source derived any profits from the alleged violation.

  Shady does claim that it should be compensated for its legal fees incurred in preparing and prosecuting this motion. Our Court of Appeals has stated that in order to award attorneys' fees, a district court must find that a contempt was willful. King v. Allied Vision, Ltd., 65 F.3d 1051, 1063 (2d Cir. 1995). But the statement in King is dictum, as the Court did not ultimately rule on the propriety of the attorneys' fees award in that case. See id. Moreover, the authority relied upon for the statement in King did not themselves squarely hold that such an award would necessarily be inappropriate in the absence of a finding of willfulness, nor did the Court cite any cases where such an award had been reversed. See Sweater Bee, 885 F.2d at 8 (declining to award fees in the absence of a finding of wilfulness on grounds that "courts in this Circuit generally award [fees] only where violation of a court order is found to have been willful"); Vuitton et Fils S.A. v. Carousel Handbags, 592 F.2d 126, 130-31 (2d Cir. 1979) ("Since the plaintiff should be made whole for the harm he has suffered, it is appropriate for the court also to award the reasonable costs of prosecuting the contempt, including attorney's fees, if the violation of the decree is found to have been willful"). Subsequently, and again in dictum, the Court has suggested that "willfulness may not necessarily be a prerequisite to an award of fees and costs," though a finding of willfulness "strongly supports granting them." Weitzman v. Stein, 98 F.3d 717, 719 (2d Cir. 1996). The Court has twice since noted the contrasting dicta in King and Stein, and stated that whether willful contempt is a prerequisite for an attorneys' fee award remains an open question in this Circuit. North American Oil Co. v. Star Brite Distributing, Inc., No. 00-9526, 2001 WL 792643, at *2 (2d Cir. Jul. 9, 2001); Jaeger v. Massis, No. 00-7390, 2000 WL 1678778, at *3 (2d Cir. Nov. 3, 2000).*fn4

  As the Eleventh Circuit has noted, permitting an award of attorneys' fees serves a significant purpose where a contempt has been found by providing parties with "an added incentive to monitor and enforce an opponent's compliance with a court order by allowing them to recover their expenses in exposing noncompliance." Sizzler Family Steak Houses v. Western Sizzlin Steak House, Inc., 793 F.2d 1529, 1535 (11th Cir. 1986). In a case of this sort, where the allegedly contumacious conduct was quickly detected and ended, failure to compensate the expenses of enforcing the order, where the defendants' behavior was genuinely, if not willfully, worthy of a contempt sanction would not only permit the offender to violate the court's order with impunity, but would leave the party that obtained the order worse off for its efforts to secure compliance with its rights and the court's command. Accordingly, the Court concludes that an award of attorneys' fees would be an appropriate sanction if Source is held in contempt, whether or not the contempt was willful.

  FACTUAL FINDINGS

  Shady argues that the appearance of the lyrics of the contested songs on Source's website on or about January 6, 2004, constitutes a contempt of this Court's orders of December 15 and 23, 2003.*fn5 Shady has established, and indeed Source has conceded, that the lyrics were available for public download on January 6, 2004. Source does not dispute that the Court's order unambiguously prohibited defendants from "making available any . . . electronic copy" of the songs, or that the availability of the full text of the lyrics on the website on January 6, 2004, was a clear violation of the Court's orders. It does argue, however, that defendants were "reasonably diligent and energetic in attempting to accomplish what was ordered," Powell v. Ward, 643 F.2d 924, 931 (2d Cir. 1981), and that at a minimum, any failure to comply was not willful.

  Before addressing this contention, it will be useful to outline the evidence regarding the violation of the order. Brian Bloom, an associate at Shady's law firm, testified that upon returning to work after a short vacation on the morning of January 6, 2004, he visited Source's website, as he had regularly done in the past, to check for compliance with the Court's order. He discovered that the website contained a banner headline that included an instruction to "Click Here for Lyrics" that led the viewer to a page that displayed and permitted the downloading of the lyrics of the disputed songs. (PX 6, Bloom Aff. ¶¶ 9-10 & Ex. G, H.)*fn6 On further exploration, Bloom discovered other links on the site to the same material. (Id. ¶¶ 11-12 & Ex. I, J.) He reported the matter to Kenneth Schwarz, a partner at the firm, who testified that he also examined the site, and confirmed the presence of the links and lyrics. (PX 5, Schwarz Aff. ¶¶ 2-4 & Ex. A.) Schwarz immediately took steps to notify Source's lawyers of the claimed breach. (Id. ¶ 4.)

  While defendants initially argued that these observations did not reflect the true content of the website as of January 6, but rather were the result of the witnesses' connecting to prior versions of the website that were "cached" in their computers (D. Br. 4), this contention has now been abandoned. David Mays, Source's CEO, acknowledged that he himself visited the website on January 6, after being advised of Shady's complaint, and saw that Shady's contentions "were accurate" and that the lyrics were "still on the website." (Tr. 52.) Counsel for Source explicitly conceded that the lyrics "were there," obviating the need for Shady to offer proffered expert testimony on the plausibility of the Source's earlier "caching" argument. (Tr. 135.)*fn7 Mays's testimony and counsel's concession conclusively resolve any possible dispute about whether the lyrics were on the website on January 6 or not. They were.

  Shady argues that the appearance of the links and lyrics on January 6 was willful. The argument rests principally on inferences from four sorts of evidence. First, Shady claims that the links in effect had been removed after December 23, and re-appeared on or about January 6. It accordingly infers that the lyrics must have been returned to the website by conscious agency. Second, Shady contends that Source initially took no steps to comply with the Court's December 15 order, but deferred its compliance until after the entry of the modified order on December 23. It argues that an adverse inference about Source's intent can be drawn from this "arrogan[t]" prior similar act. (P. Summ. Br. 10.) Third, Shady argues that the method of compliance Source now claims to have adopted was intrinsically inefficient and inadequate, and amounts at a minimum to reckless disregard of the likelihood that it would fail to achieve full compliance. And fourth, Shady cites the shifting and contradictory positions espoused by Source in its legal submissions and in testimony from various witnesses as evidence that its protestations of good faith should be discredited. Source, in contrast, argues that it acted with reasonable diligence and energy to comply with the Court's order, relying primarily on the testimony of Mays, corroborated by Source's former head of technology, Harold Aris, that in response to the Court's order he instructed Aris on December 16, 2003, to "take all that material down immediately." (Tr. 48-49.)

  Based on the record evidence, the Court has no hesitation in finding that Source was not "reasonably diligent and energetic in attempting to accomplish what was ordered." Despite Mays's testimony that he instructed all of the contested material to be removed on December 16, Bloom testified credibly, corroborated by contemporaneous correspondence between counsel, that links remained or reappeared on the webpage on that date. (PX 6, Bloom Aff. ¶¶ 5-7 & Ex. C, D, E.) Moreover, Source's initial memorandum in opposition to the contempt motion asserted that the Source defendants had deliberately "continued to make certain portions of the recordings and lyrics available on [Source's] website" after the Court's initial order, "pursuant to their fair use rights."*fn8 (D. Br. 3.) Source also submitted an affidavit by Cyejuan Washington, identified as a technology analyst for Source, who stated that Mays ordered his technology department to remove the disputed material from the website "[c]onsistent with the December 23, 2003 modified TRO." (Washington Decl. ¶ 3.) Source's effort to disavow these admissions as "mistake[s]" (Tr. 62, 63), which resulted from the haste of counsel and errors by an undisclosed witness (identified only as being neither Aris nor Mays) (Tr. 120), are unavailing. Taken in the light most favorable to Source, it appears at a minimum that a Source witness (perhaps Washington), who was sufficiently familiar with the events of December 16 to have been relied upon by counsel in making an authoritative submission of Source's position in a Court filing, was under the impression that the decision to remove the material was not taken immediately — and indeed, the links were not immediately removed on December 16.

  Moreover, Source's effort to comply was decidedly haphazard. Aris's testimony is confused and confusing, though the Court does not believe that Aris intended to mislead.*fn9 Shady contends that the easiest and simplest way of removing the songs from the website would be to take down the "content," that is, to remove the lyrics and recordings themselves from the server. Aris, however, undertook instead to leave the material itself available on the server, but to make it inaccessible to the public by removing the "links" to that content on the website. (Aris Tr. 39.) Shady contends that Aris initially testified, under questioning by Shady's lawyer, that Mays had instructed him to proceed in that manner, and then, after coaching by Source's attorney (who represented Aris for purposes of the deposition), disavowed that testimony. (P. Summ. Br. 8, 15-16.) The Court does not read the testimony as falling into such a clear pattern. Aris repeatedly testified that he removed ...


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