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Arista Records LLC; Atlantic Recording Corporation; Arista Music, Fka v. Lime Group LLC; Lime Wire LLC; Mark Gorton; Greg Bildson; and M.J.G.

April 21, 2011

ARISTA RECORDS LLC; ATLANTIC RECORDING CORPORATION; ARISTA MUSIC, FKA BMG MUSIC; CAPITOL RECORDS, INC; ELEKTRA ENTERTAINMENT GROUP INC; INTERSCOPE RECORDS; LAFACE RECORDS LLC; MOTOWN RECORD COMPANY, L.P.; PRIORITY RECORDS LLC; SONY MUSIC ENTERTAINMENT, FKA SONY BMG MUSIC ENTERTAINMENT; UMG RECORDINGS, INC; VIRGIN RECORDS AMERICA, INC.; AND WARNER BROS. RECORDS INC., PLAINTIFFS,
v.
LIME GROUP LLC; LIME WIRE LLC; MARK GORTON; GREG BILDSON; AND M.J.G. LIME WIRE FAMILY LIMITED PARTNERSHIP, DEFENDANTS.



The opinion of the court was delivered by: Kimba M. Wood, U.S.D.J.:

OPINION AND ORDER

I. Introduction

On May 11, 2010, this Court granted summary judgment in favor of Plaintiffs on their claims against Defendants LimeWire LLC ("LW"), Lime Group LLC ("Lime Group"), and Mark Gorton (collectively, "Defendants") for secondary copyright infringement. The Court found that Defendants had induced multiple users of the LimeWire online file-sharing program ("LimeWire") to infringe Plaintiffs' copyrights. In the Court's Opinion and Order (as amended on May 25, 2010), the Court detailed this case's procedural and factual background, familiarity with which is assumed. (See Dkt. Entry No. 223.)

A trial on damages for copyright infringement, and on Plaintiffs' remaining claims, is scheduled for May 3, 2011. Specifically, Plaintiffs will try their claims for (1) vicarious copyright infringement; (2) fraudulent conveyance; and (3) unjust enrichment; as well as for (4) statutory damage awards with respect to post-1972 works; and (5) actual damages, punitive damages, and equitable relief under common law copyright infringement and unfair competition, with respect to pre-1972 works.*fn1 (See Dkt. Entry No. 411-1.)

Defendants have moved in limine to preclude Plaintiffs from offering any argument or evidence at trial regarding Defendant Mark Gorton's net worth, or sources of income and financial condition unrelated to LimeWire, unless and until there has been a determination by the jury that punitive damages are awardable. For the reasons that follow, Defendants' motion is DENIED.

II. Analysis

In their instant motion, Defendants concede that financial information relating to LimeWire may be relevant to the determination of statutory damage awards, with respect to "the expenses saved, and profits earned, by the infringer" factor listed in Bryant v. Media Rights Productions, Inc., 603 F.3d 135 (2d Cir. 2010). Defendants also concede that they are not seeking to preclude evidence concerning the single transfer of assets which is the subject of Plaintiffs' fraudulent conveyance claim. Notwithstanding these two concessions, Defendants contend that all other information pertaining to Gorton's net worth is relevant only to Plaintiffs' common law claim for punitive damages, and that therefore, that evidence should be excluded unless and until the jury determines that punitive damages should be awarded to Plaintiffs for their common law copyright claims. (Def. Mem. at 1.)

A. Evidence of a Defendants' Net Worth Generally

To advance their argument, Defendants cite to several decisions from this Circuit, finding that evidence of a defendant's net worth is highly prejudicial, and relevant only if there has been a finding that punitive damages should be awarded. See e.g., Tyco Int'l Ltd. v. Walsh, No. 02 Civ. 4633, 2010 WL 3000179, at *1 (S.D.N.Y. July 30, 2010) ("A defendant's net worth is only relevant if there is a finding that punitive damages should be awarded."); Reilly v. Natwest Mkts. Grp. Inc., 181 F.3d 253, 266 (2d Cir. 1999) ("Evidence of wealth . . . is generally inadmissible in trials not involving punitive damages." (citation omitted)). As the Second Circuit has noted:

Since it often would be prejudicial to a defendant to attempt to litigate its financial condition during the trial on the issues of liability and compensatory damages, the preferred method of accommodating the various interests is to delay trial as to the amount of an award of punitive damages until the usual issues of liability and compensatory damages have been tried, along with the matter of whether the defendant's conduct warrants any award of punitive damages at all.

Smith v. Lightning Bolt Prods., Inc., 861 F.2d 363, 373-74 (2d Cir.1988).

Defendants are correct that courts have typically found that evidence of a defendant's net worth is too prejudicial to allow for its introduction during the liability phase of a trial, or with respect to the issue of compensatory damages. However, in none of those cases was the defendant's overall financial condition relevant to a liability issue.

Here, however, certain evidence pertaining to Gorton's financial condition is relevant to Plaintiffs' effort to prove, by clear and convincing ...


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