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In re Digital Music Antitrust Litigation

February 27, 2007

IN RE DIGITAL MUSIC ANTITRUST LITIGATION


The opinion of the court was delivered by: Loretta A. Preska, U.S.D.J.

THIS DOCUMENT RELATES TO: ALL ACTIONS

OPINION AND ORDER

This multidistrict litigation involves allegations that Sony BMG Music Entertainment, Sony Corporation of America, Bertelsmann Music Group, Inc., Bertelsmann, Inc., Universal Music Group, Inc., Time Warner Inc., Warner Music Group Corp., and EMI Music North America (collectively, the "Defendants") conspired artificially to fix or maintain the prices of digital music recordings offered for sale on the internet in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, various states' antitrust and consumer protection statutes, and/or state common law, such as unjust enrichment.*fn1 Over 30 actions (the "Digital Music actions") have now been transferred and consolidated before the Court for pre-trial proceedings (collectively, the "Consolidated Action"). Proposed Interim Co-Lead Counsel, on behalf of all Plaintiffs and the proposed Class(es) in the Consolidated Action, now move for recusal under 28 U.S.C. § 455(a) and (b)(4). For the reasons set forth below, the motion is denied.

BACKGROUND

1. Recusal Issue Raised

In The Seley, Devine, Corkery, And Zedek Actions The Court was involved in this multidistrict litigation from the outset. On March 9, 2006, the first Digital Music action filed in this District was assigned to this Court. See Seley v. Universal Music Group, Inc., No. 06 Civ. 1887 (LAP) (S.D.N.Y.) ("Seley"). Counsel in Seley was Christopher Lovell, Esq., of Lovell Stewart Halebian LLP ("Lovell Stewart").

On June 6, 2006, Mr. Lovell, on behalf of named plaintiff Mark Devine, filed Devine v. Universal Music Group, Inc., No. 06 Civ. 4211 (LAP) (S.D.N.Y.) ("Devine").*fn2 Shortly thereafter, on June 12, 2006, the Court issued the following Memorandum (the "Memorandum") in Devine:

The parties are informed that the law firm in which my husband is a partner, Cahill Gordon & Reindel LLP, from time to time represents Sony BMG Music Entertainment and Warner Music Group Corp., and he has worked on those matters. The firm has also represented Universal Music Group, and he has worked on those matters. (Dkt. No. 2).*fn3

On July 3, 2006, Mr. Lovell wrote the Court to raise the recusal issue. (See Consolidated Action, Dkt. No. 40, Ex. 1 at 1 ("I respectfully draw Your Honor's attention to the following matters that Your Honor may consider relevant under 28 U.S.C. § 455(a).") (the "July 3, 2006 Letter")). Mr. Lovell asserted that there is a relationship between the alleged digital music conspiracy in the Devine action and the alleged compact disc music conspiracy in In re Compact Disc Minimum Advertised Price Antitrust Litigation, MDL No. 1361 (D. Me.) ("Maine CD MDL"). (Id. at 1-2). Mr. Lovell asserted further that Defendants in both actions overlapped and that my husband, Thomas J. Kavaler, Esq., represented several Defendants in the Maine CD MDL. (Id. at 2). Finally, Mr. Lovell stated that "[P]laintiffs [in the Devine action] will be taking positions contrary to the positions taken by the [D]efendants in [the Maine CD MDL] with respect to an entire gamut of legal, procedural, factual, and antitrust conspiracy issues" and that "[t]he evidence from the [Maine CD MDL] in which [my husband] represented the [D]efendants may be melded with or added to the great bulk of the evidence which will concern the time period and on-line context at issue in this case." (Id.).

On July 24, 2006, the Court issued an Order (the "July 24, 2006 Order") in the Seley, Devine, Corkery, and Zedek actions informing the parties that it was in receipt of Mr. Lovell's July 3, 2006 Letter. (See, e.g., Seley, Dkt. No. 10). The Order recited the following information: (i) Cahill Gordon & Reindel LLP ("Cahill Gordon") had not been retained in those Digital Music actions; (ii) a conference would be held by the Court on July 26, 2006 "relating to possible overlap between [the Seley, Devine, Corkery, and Zedek] actions and [the Maine CD MDL];" and (iii) "any party wishing to be heard on that issue [may] appear." (Id.).*fn4

On July 26, 2006, the Court held the aforementioned conference. At that conference, Defendants provided details of Cahill Gordon's and my husband's representation of Defendants, including their roles in the representation of Sony Music Entertainment in In re Compact Disc Litigation, MDL No. 1216 (C.D. Cal.) ("California CD MDL"), Ottinger v. EMI Music Distributors, No. 24865-II (Tenn. Cir. Ct., Cocke Cty.) ("Ottinger"), and the Maine CD MDL. Based on these disclosures, the fact that neither my husband nor Cahill Gordon was representing any Defendant in the Seley, Devine, Corkery, and Zedek actions pending before me, and on the fact that, following my inquiry at the conference, no Plaintiff in those Digital Music actions sought recusal, I concluded at the conference that no further action on this issue was warranted. (See Seley, Dkt. No. 12 ("At the conference held on July 26, attended by counsel for [P]laintiffs and counsel for several [D]efendants, the parties informed the court that no party sought recusal. Accordingly, no further action will be taken with respect to Mr. Lovell's July 3 letter.")).

2. Recusal Issue Not Raised Before The JPML

On or about March 30, 2006, Plaintiffs in the Seley action and Defendants separately moved the Judicial Panel on Multidistrict Litigation ("JPML") for an order centralizing all the then-pending Digital Music actions in the Southern District of New York. In re Digital Music Antitrust Litig., 444 F. Supp. 2d 1351, 1352 (J.P.M.L. 2006). "No party oppose[d] centralization." Id. However, "Plaintiffs in various [Digital Music] actions support[ed] transfer to the Northern District of California." Id.*fn5 The JPML heard oral argument on the motions to transfer on July 27, 2006.

It does not appear that the recusal issue was raised with, or considered by, the JPML, and no party has suggested otherwise. Id. ("We are persuaded that the Southern District of New York is an appropriate transferee forum for this litigation. Most defendants are headquartered in the Southern District of New York, and some relevant witnesses and documents may be located there. Moreover, this district enjoys the support of the [D]efendants as well as some [P]laintiffs in this litigation."). On August 16, 2006, the JPML transferred the then-pending Digital Music actions to this Court in the Southern District of New York for coordinated or consolidated pre-trial proceedings pursuant to 28 U.S.C. § 1407. Id.

3. Recusal Issue Not Raised At The Initial Pre-Trial Conference In The Consolidated Action

On November 17, 2006, the Court held an initial pre-trial conference in the Consolidated Action. In advance of that conference, the Court ordered the parties to meet and confer on a proposed agenda. (Dkt. No. 8 ("Counsel shall appear for the initial pretrial conference . . . . Counsel shall confer among themselves and inform the Court by letter . . . how they propose to proceed.")). The parties did so. (Dkt. No. 56 at 1, n.1 (Letter from Kenneth R. Logan, Esq., with the consent of Plaintiffs and Defendants, to the Court, dated November 10, 2006: stating that "[c]counsel for Plaintiffs in various actions transferred to this Court participated in the [meet and confer] conference" and that "the parties agree that this list [of issues discussed] presents an appropriate agenda for discussion at the Initial Pretrial Conference")). The issue of recusal was not included. (Id. passim).

At the conference, Mr. Lovell appeared among other attorneys for Plaintiffs, including Bonny E. Sweeny, Esq., and Christopher M. Burke, Esq., of Lerach Coughlin Stoia Geller Rudman & Robbins LLP ("Lerach Coughlin"), and spoke on behalf of all Plaintiffs with respect to some of the items on the agenda. One item was the proposed organization of Plaintiffs' counsel. (Id. at 1). Another item was the filing of the initial Consolidated Class Action Complaint. (Id. at 2). Before filing this pleading, Plaintiffs sought discovery of information already provided by Defendants to law enforcement agencies in connection with those agencies' investigations relating to the distribution of digital music. (Id. at 3). The Court denied that request without prejudice to Plaintiffs' seeking such discovery after filing their Consolidated Class Action Complaint and before their time to file an Amended Consolidated Class Action Complaint. (Dkt. No. 28 at 2 ("Defendants have no present obligation to produce documents in this litigation.")).

4. Recusal Issue Raised For The First Time In The Consolidated Action One Month After The Initial Pre-Trial Conference

On November 17, 2006, after the initial pre-trial conference, the Memorandum was placed on the docket in the Consolidated Action. (Dkt. No. 18). On December 4, 2006, the parties submitted a proposed Order which set forth, inter alia, the following deadlines: (i) Plaintiffs' time to file their motion for appointment of Lead Counsel or Co-Lead Counsel; (ii) Plaintiffs' time to file the Consolidated Class Action Complaint; (iii) Defendants' time to respond to the Consolidated Class Action Complaint; (iv) Plaintiffs' time to file an Amended Consolidated Class Action Complaint; and (v) the time for the parties to meet and confer regarding discovery. The Court entered that Order on December 5, 2006. (Dkt. No. 28).

That same day, Lerach Coughlin attorneys (including John J. Stoia, Jr., Esq., Ms. Sweeney, and Mr. Burke) and Lovell Stewart attorneys (including Mr. Lovell) filed Plaintiffs' Motion for Appointment of Interim Co-Lead Counsel, Steering Committee and Plaintiffs' Foreign Liaison Counsel, their Memorandum of Law in support thereof, and their proposed Appointment Order (collectively, the "Class Counsel Motion"). (Dkt. Nos. 24-25). The Motion seeks, inter alia, to have the Lerach Coughlin and Lovell Stewart law firms appointed as Interim Co-Lead Counsel in the Consolidated Action. (See Memorandum of Law in Support of Motion for Appointment of Interim Co-Lead Counsel, Steering Committee and Plaintiffs' Foreign Liaison Counsel ("Class Counsel Mem."), filed on December 5, 2006, at 8-14).

More than one month after the initial pre-trial conference, on December 20, 2006, Messrs. Stoia and Lovell, in their capacity as proposed Interim Co-Lead Counsel on behalf of all Plaintiffs and the proposed Class(es), requested a pre-motion conference. (Dkt. No. 39 (the "December 20, 2006 Letter")). Messrs. Stoia and Lovell stated that "the parties and the Court need additional information concerning the scope and substance of Mr. Kavaler's and Cahill Gordon's former ...


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