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Arista Records, Inc. v. Flea World

January 27, 2005

ARISTA RECORDS, INC., ATLANTIC RECORDING CORPORATION, BMG MUSIC, CAPITOL RECORDS, INC., ELEKTRA ENTERTAINMENT GROUP, INC., FONVISA, INC., INTERSCOPE RECORDS, MOTOWN RECORD COMPANY, L.P., PRIORITY RECORDS LLC, SONY MUSIC ENTERTAINMENT, INC., UMG RECORDINGS, INC., VIRGIN RECORDS OF AMERICA, INC., WARNER BROS. RECORDS INC. AND ZOMBA RECORDING CORPORATION, PLAINTIFFS,
v.
FLEA WORLD, INC., A PENNSYLVANIA CORPORATION, D/B/A COLUMBUS FARMERS MARKET; FLEA WORLD LLC, A NEW JERSEY CORPORATION, D/B/A COLUMBUS FARMERS MARKET; COLUMBUS FARMERS MARKET LLC, A NEW JERSEY CORPORATION, D/B/A COLUMBUS FARMERS MARKET; JOHN ACKERMAN, AN INDIVIDUAL; CHARLES PRATT, AN INDIVIDUAL; AND DOES 1 THROUGH 20, DEFENDANTS.



The opinion of the court was delivered by: Simandle, District Judge.

OPINION

This matter comes before the Court upon Defendants Flea World, Inc., Flea World LLC, Columbus Farmers Market LLC, John Ackerman and Charles Pratt's (referred to collectively hereinafter as "Columbus Farmer's Market") motion for reconsideration of this Court's July 12, 2004 Opinion and Order pursuant to L. Civ. R. 7.1(g). Also before the Court are Defendants' joint motion for leave to file its Second Amended Answers and Plaintiffs' motion to dismiss Defendants' Second Amended counterclaims and to strike certain defenses.

For the reasons discussed herein, this Court denies Defendants' motion for reconsideration. As to Defendants' motion for leave to file Second Amended Answers, that motion is granted in part and denied in part, consistent with the directions of this Opinion. Finally, the Court grants Plaintiffs' motion to dismiss Defendants' Second Amended Counterclaims and to strike the thirteenth, twentieth, and twenty-eighth separate defenses, and denies same with respect to the nineteenth separate defense.

I. BACKGROUND

Plaintiffs are fourteen member companies of the Recording Industry Association of America ("RIAA"). The RIAA is a not-for-profit trade association whose member *415 companies create, manufacture and/or distribute approximately 90 per cent of all legitimate sound recordings sold in the United States. The Defendants are Flea World, Inc., Flea World LLC, Columbus Farmers Market LLC, John Ackerman and Charles Pratt.

Plaintiffs filed their Complaint on June 3, 2003, alleging that Defendants ignored repeated demands from the RIAA to curtail the sale of pirated and counterfeit compact discs ("CDs") and cassette tapes ("cassettes") at the Farmers Market. Plaintiffs asserted claims for contributory and vicarious copyright infringement. On October 1, 2003, Plaintiffs filed an Amended Complaint identifying over 7,500 pirated recordings that had been sold at the Market.

Defendants filed their Answer, Separate Defenses and Counterclaim on October 29, 2003, admitting that they provided space and facilities to vendors who have sold and continue to sell pirated and counterfeit CDs and cassettes. Plaintiffs filed a motion to dismiss the Counterclaim and to strike eighteen of the asserted defenses. After the motion was fully brief and submitted to this court, Defendants filed their Amended Answer and Counterclaim. The Answer itself was not amended, but Defendants asserted nine new defenses and amended their Counterclaim to plead in three separate counts that Plaintiffs are liable under claims of false light, defamation and tortious interference. Plaintiffs moved to dismiss the Amended Counterclaim and to strike twenty-three defenses.

This Court's July 12, 2004 Order dismissed Defendants' amended counterclaims without prejudice and granted Plaintiffs' motion to strike Columbus Farmers Market's first, fourth, ninth, tenth, sixteenth, eighteenth, nineteenth, twentieth, twenty-first, twenty-fifth and twenty-sixth affirmative defenses. Columbus Farmers Market now seeks reconsideration of this Court's Order to the extent that it granted Plaintiff's motion to strike Columbus Farmers Market's ninth, sixteenth, eighteenth, nineteenth, twentieth, and twenty-fifth affirmative defenses.

On the heels of its substitution of counsel, Defendants also seek leave to file their Second Amended Answers. Plaintiffs have moved to dismiss Defendants' Second Amended Counterclaims and to strike certain defenses.

II. DISCUSSION

A. Defendants' Motion for Reconsideration

1. Standard of Review

Local Civil Rule 7.1(g) of the United States District Court, District of New Jersey, governs the instant motion for reconsideration. The rule requires that the moving party set forth the factual matters or controlling legal authority that it believes this Court overlooked when rendering its initial decision. L. Civ. R. 7.1(g). Whether to grant reconsideration is a matter within the district court's discretion, but it should only be granted where such facts or legal authority were indeed presented but overlooked. DeLong Corp. v. Raymond Int'l, Inc., 622 F.2d 1135, 1140 (3d Cir.1980), overruled on other grounds by Croker v. Boeing Co., 662 F.2d 975 (3d Cir.1981); Williams v. Sullivan, 818 F.Supp. 92, 93 (D.N.J.1993). The purpose of a motion for reconsideration "is to correct manifest errors of law or to present newly discovered evidence." Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir.1985), cert. denied, 476 U.S. 1171, 106 S.Ct. 2895, 90 L.Ed.2d 982 (1986). A motion for reconsideration is improper when it is used solely to ask the court to rethink what it has already thought through--rightly or wrongly. Oritani Savings & Loan Assoc. v. Fidelity & Deposit *416 Co., 744 F.Supp. 1311, 1314 (D.N.J.1990)(citing Above the Belt v. Mel Bohannan Roofing, Inc., 99 F.R.D. 99, 101 (E.D.Va.1983)), rev'd on other grounds, 989 F.2d 635 (3d Cir.1993). Nor is reconsideration warranted when the moving party simply recapitulates the cases and arguments considered by the court prior to rendering its initial decision. Carteret Sav. Bank v. Shushan, 721 F.Supp. 705, 706-07 (D.N.J.1989). Here, Defendants Columbus Farmers Market seek reconsideration of this Court's prior determination that its ninth, sixteenth, eighteenth, nineteenth, twentieth, and twenty-fifth affirmative defenses should be struck. The motion consists largely of arguments that the Court heard, considered and adjudicated, thereby rendering the instant motion an improper one under the standard articulated above. Nevertheless, those arguments are now briefly addressed again.

2. Ninth Affirmative Defense: Damages Caused by Third Parties

Columbus Farmers Market's ninth affirmative defense states, "[t]he incident(s) and alleged damages mentioned in the Complaint were due to the negligence or other wrongdoing of a third person or persons over whom these parties exercised no control and for whose acts these parties are not responsible." (Amended Answer at 14-15.) In originally striking this defense, this Court stated:

This defense, however, is made without regard to the established law of contributory and vicarious copyright infringement. The negligence of third parties is no defenses to these claims. In fact, courts have held that copyright infringing defendants can not assert contribution in claims against third parties who allegedly contribute to infringement; neither the Copyright act nor federal common law recognize a copyright infringer's right to contribution. See e.g., Lehman Brothers, Inc. v. Wu, 294 F.Supp.2d 504 (S.D.N.Y.2003).

(July 12, 2004 Opinion at 18-19.) Columbus Farmers Market argues that this defense was improperly struck, because it seeks not to establish the "negligence of third parties" nor a claim for contribution, but rather to establish that any damage to Plaintiffs was the result of the actions of third parties, all of whom Columbus Farmers Market has no knowledge of, authority or control over.

This argument essentially repeats that which Defendants made in briefing the initial motion (again, without any citation to law) and which this Court rejected.

Third party direct liability is one of the elements of an allegation of secondary liability. A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 n. 2 (9th Cir.2001); Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F.Supp.2d 1029, 1034 (C.D.Cal.2003). Thus, every case of contributory or vicarious liability necessarily involves the defendant being held to answer for the direct conduct of another. Moreover, Plaintiffs allege that Defendants are legally responsible for the infringement of these third parties (i.e. the vendors) because they had knowledge of and materially contributed to the third party's infringing activity (contributory infringement), or had the ability to supervise and control it and financially benefited from it (vicarious liability). Plaintiffs need not sue the numerous third party direct infringers in order to bring this cause of action against Defendants. In re Aimster Copyright Litigation, 334 F.3d 643, 646 (7th Cir.2003). In addition, Defendants may not seek contribution from those third party direct infringers. Lehman Brothers, Inc. v. Wu, 294 F.Supp.2d 504, 505 (S.D.N.Y.2003).

Defendants cite to the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. *417 s 512, and assert that they are "similar to being in the position of an internet service provider (ISP) for which the Copyright Act specifically carved out safe-harbor provisions from liability." (Defs.' Brief at 10.) While Defendants are admittedly not ISPs, nor does this case in any way deal with internet services, they argue that they perform a function very similar to an ISP and thus, their liability should be judged with a similar yardstick. This Court finds this argument unpersuasive; Defendants have cited to, and this Court has found, no case suggesting that such an analogy is appropriate. The public policy creating a safe harbor for ISPs is informed by considerations of lack of ISP control and knowledge of the millions of items of data flowing daily through the providers' facilities; these considerations are absent in this matter's lessor/lessee relationships arising from the rental of real market space to vendors on Defendants' premises. For these reasons, Defendants' ninth affirmative defense will remain stricken.

3. Sixteenth Affirmative Defense: Corporate Immunity

Columbus Farmers Market's sixteenth affirmative defense states "[t]he claim served against Charles Pratt and John Ackerman, individually, is improper as both are protected by the Doctrine of Corporate/Company Immunity." (Amended Answer at 15.) Defendants argument for reconsideration on this point is merely a recapitulation of that which was previously argued and rejected by this Court. The defense of corporate immunity comes into play when a plaintiff sues corporate officers or directors for the acts or failures to act of the corporation. Here, however, Plaintiffs appear to be suing Defendants Ackerman and Pratt for their individual acts or omissions, and not derivatively based on their employment by or relationship to any corporation. Plaintiffs' allege that Ackerman and Pratt personally had actual or constructive knowledge of--and materially contributed to--infringement, that they personally had the ability to supervise or control that infringement, and that their failure to do so resulted in personal financial benefit. See Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749 F.2d 154, 160 (3d Cir.1984)("An officer or director of a corporation who knowingly participates in the infringement can be held personally liable, jointly and severally, with the corporate defendant.") Based on this, Defendants' sixteenth affirmative defense was properly struck.

4. Eighteenth, Nineteenth, and Twentieth Affirmative Defenses: No Legal Duty to Provide Police Investigations

As Defendants describe them, the eighteenth, nineteenth, and twentieth affirmative defenses "seek to limit both the expansion of the duty on businesses in policing others' copyrights, and to defeat the strict liability standard demanded by the Plaintiffs." (Defs.' Brief at 14.) Though Defendants raise arguments now that were not made earlier, and thus need not be considered on a motion for reconsideration, this Court will nevertheless discuss each below, for the sake of hastening the ultimate resolution of these issues.

First, Defendants argue that Plaintiffs have an affirmative duty to police infringing activity on their own and are obligated not to sleep on their rights. This argument relates only to the defense of laches, which Plaintiffs did not move to strike. Even the case cited by Defendants on this point, Kepner-Tregoe, Inc. v. Executive Dev., Inc., 79 F.Supp.2d 474 ...


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