1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Ralph T Reilly, No. CV-18-03775-PHX-MTL
10 Plaintiff, ORDER
11 v. NOT FOR PUBLICATION
12 Steve Wozniak, et al.,
13 Defendants. 14 15 This matter is set for trial on Plaintiff’s remaining claims of copyright infringement 16 and declaratory relief.1 Defendants have filed two Motions in Limine. The first Motion, 17 concerning Plaintiff’s copyright damages (Doc. 156), is denied without prejudice. The 18 second, concerning contributory and vicarious copyright infringement (Doc. 157), is 19 granted. 20 I. 21 A. 22 Defendants move, under Rule 37(c)(1), Fed. R. Civ. P., to preclude Plaintiff “from 23 introducing or referring to any evidence, including argument, documents or testimony, 24 related to any alleged damage calculation pertaining to Plaintiff’s claim for copyright 25 infringement.” (Doc. 156 at 5.) Defendants contend that Plaintiff failed to provide a 26 computation of his damages as required under Rule 26(a)(1)(A)(iii), Fed. R. Civ. P. 27 1 Although Plaintiff’s Complaint included declaratory relief as a separate claim, the Court 28 has previously indicated that it construes the request for declaratory relief as a requested remedy, rather than as a separate cause of action. (Doc. 145 at 15–16.) 1 (requiring that a party, in its initial disclosure statement, provide “a computation of each 2 category of damages claimed by the disclosing party.”). The Rule obligates a party to 3 supplement this disclosure throughout the case. 4 Defendants further contend that Plaintiff has failed to satisfy his disclosure 5 obligations under subsection (B)(5) of this Court’s General Order 17-08, the Mandatory 6 Initial Discovery Pilot (“MIDP”), requiring that a party “[p]rovide a computation of each 7 category of damages claimed by you, and a description of the documents or other 8 evidentiary material on which it is based, including materials bearing on the nature and 9 extent of the injuries suffered.” Finally, Defendants argue that Plaintiff failed to respond 10 adequately to damages-related discovery requests. 11 Supporting their position, Defendants provide the following damages disclosures. 12 In his complaint, Plaintiff requests “(A) damages to be proven at trial but no less than 13 $1,000,000” and “(B) Defendants’ and each of their profits from the use, exploitation and 14 turning to account of [Plaintiff’s] Work.” (Doc. 156 at 2; Doc. 1 ¶ 36.) In his MIDP initial 15 disclosure, Plaintiff states that his 16 best computation of damages is as follows: . . . A. For actual, 17 general, compensatory and consequential damages in an amount to be proven at trial, but no less than $1,000,000. B. 18 For the reasonable and fair value of Reilly’s Work in an 19 amount to be proven at trial but no less than $1,000,000. C. For disgorgement of Defendant’s and each of their profits from the 20 use, exploitation and turning to account of [Plaintiff’s] 21 Copyrighted Works. 22 (Doc. 156 at 2.) 23 In response to a request for production seeking “copies of all Documents evidencing 24 the not less than $1,000,000 in damages the Plaintiff is seeking to recover . . . ,” Plaintiff 25 responded that he “has not commenced discovery of the gross receipts realized by 26 Defendants and each of them from use, application and exploitation of [Plaintiff’s] Work 27 and [Plaintiff’s] Copyright Work as defined in the Complaint ¶¶ 1A, 9.” (Id. at 2–3.) 28 Plaintiff opposes the Motion on the basis that the MIDP disclosure obligation 1 applies only to “documents then in possession of the responding party . . . . [and] [t]he 2 evidence of Defendants’ profits is and was at all time in the exclusive possession of 3 Defendants.” (Doc. 160 at 3.) Plaintiff also argues that he disclosed his 4 specific damage calculation to Defendants in his settlement 5 conference memorandum. . . . That calculation was based on documents produced by Defendants which show: (a) the 6 advance paid by other Defendant to Defendant Wozniak and 7 (b) Defendants’ own valuation of their business based on infringement of Plaintiff’s work as shown in the “put price.” 8 (Id. at 4.) 9 B. 10 Under the Copyright Act, 17 U.S.C. § 504(b), “[a] copyright owner is entitled to 11 recover the actual damages suffered by him or her as a result of the infringement, and any 12 profits of the infringer that are attributable to the infringement and are not taken into 13 account in computing the actual damages.” The Act further provides, “[i]n establishing the 14 infringer’s profits, the copyright owner is required to present proof only of the infringer’s 15 gross revenue, and the infringer is required to prove his or her deductible expenses and the 16 elements of profit attributable to factors other than the copyrighted work.” 17 U.S.C. 17 § 504(b). In Polar Bear Productions, Inc. v. Timex Corp., 384 F.3d 700 (9th Cir. 2004), 18 the Ninth Circuit held that “a causal link between the infringement and the monetary 19 remedy sought is a predicate to recovery of both actual damages and profits.” Id. at 708. 20 In this case, Plaintiff did not provide an “ideal” computation of his actual damages 21 or any gross profits attributable to the alleged infringement. He simply stated, without any 22 differentiation or explanation, that he intended to prove damages of “not less than 23 $1,000,000” and that certain unidentified documents supporting disgorgement were 24 produced by Defendants. Compare AFL Telecommunications LLC v. SurplusEQ.com Inc., 25 946 F. Supp. 2d 928 (D. Ariz. 2013) (discussed in 8A Charles Alan Wright & Arthur R. 26 Miller, Federal Practice and Procedure § 2053 n.59 (3d ed. 2013) (“A distributor of fusion 27 splicers adequately disclosed its computation of damages and underlying documents on 28 1 which the computation was based. It disclosed . . . a separate calculation for a copyright 2 claim, as well as a detailed calculation showing a competitor’s profits and plaintiff’s lost 3 profits.”)). 4 Nor does it appear that Plaintiff has disclosed a theory or evidence supporting 5 causation between the alleged infringing conduct and his claimed damages. The only real 6 damages disclosure is found in Plaintiff’s settlement conference memorandum of May 21, 7 2020.2 Plaintiff calls this a disclosure because he provided a copy to the Defendants’ 8 attorney as a means of facilitating the settlement conference. In the memorandum, Plaintiff 9 reasons that, in his opinion, he is entitled to (A) 50% of the cash compensation paid by 10 Defendant Woz U Education Holdings, LLC to Defendant Wozniak and (B) 50% of the 11 receipts for the combined membership interests in Woz U. These demands are further 12 supported with rudimentary calculations in an attached demand letter. 13 The Court will recognize Plaintiff’s settlement memorandum as a damages 14 calculation disclosure. While Plaintiff appears to have mailed-in his required damages 15 computation, a broad sanction under Rule 37(c)(1) prohibiting Plaintiff from making any 16 damages argument or introducing any evidence of damages is overbroad and unwarranted. 17 This is particularly so because Defendants could have, but did not, sought an order during 18 discovery compelling Plaintiff to make a more fulsome disclosure. Additionally, the 19 availability of trial objections for previously undisclosed testimony and other evidentiary 20 material remains an adequate remedy. The Motion (Doc.
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Ralph T Reilly, No. CV-18-03775-PHX-MTL
10 Plaintiff, ORDER
11 v. NOT FOR PUBLICATION
12 Steve Wozniak, et al.,
13 Defendants. 14 15 This matter is set for trial on Plaintiff’s remaining claims of copyright infringement 16 and declaratory relief.1 Defendants have filed two Motions in Limine. The first Motion, 17 concerning Plaintiff’s copyright damages (Doc. 156), is denied without prejudice. The 18 second, concerning contributory and vicarious copyright infringement (Doc. 157), is 19 granted. 20 I. 21 A. 22 Defendants move, under Rule 37(c)(1), Fed. R. Civ. P., to preclude Plaintiff “from 23 introducing or referring to any evidence, including argument, documents or testimony, 24 related to any alleged damage calculation pertaining to Plaintiff’s claim for copyright 25 infringement.” (Doc. 156 at 5.) Defendants contend that Plaintiff failed to provide a 26 computation of his damages as required under Rule 26(a)(1)(A)(iii), Fed. R. Civ. P. 27 1 Although Plaintiff’s Complaint included declaratory relief as a separate claim, the Court 28 has previously indicated that it construes the request for declaratory relief as a requested remedy, rather than as a separate cause of action. (Doc. 145 at 15–16.) 1 (requiring that a party, in its initial disclosure statement, provide “a computation of each 2 category of damages claimed by the disclosing party.”). The Rule obligates a party to 3 supplement this disclosure throughout the case. 4 Defendants further contend that Plaintiff has failed to satisfy his disclosure 5 obligations under subsection (B)(5) of this Court’s General Order 17-08, the Mandatory 6 Initial Discovery Pilot (“MIDP”), requiring that a party “[p]rovide a computation of each 7 category of damages claimed by you, and a description of the documents or other 8 evidentiary material on which it is based, including materials bearing on the nature and 9 extent of the injuries suffered.” Finally, Defendants argue that Plaintiff failed to respond 10 adequately to damages-related discovery requests. 11 Supporting their position, Defendants provide the following damages disclosures. 12 In his complaint, Plaintiff requests “(A) damages to be proven at trial but no less than 13 $1,000,000” and “(B) Defendants’ and each of their profits from the use, exploitation and 14 turning to account of [Plaintiff’s] Work.” (Doc. 156 at 2; Doc. 1 ¶ 36.) In his MIDP initial 15 disclosure, Plaintiff states that his 16 best computation of damages is as follows: . . . A. For actual, 17 general, compensatory and consequential damages in an amount to be proven at trial, but no less than $1,000,000. B. 18 For the reasonable and fair value of Reilly’s Work in an 19 amount to be proven at trial but no less than $1,000,000. C. For disgorgement of Defendant’s and each of their profits from the 20 use, exploitation and turning to account of [Plaintiff’s] 21 Copyrighted Works. 22 (Doc. 156 at 2.) 23 In response to a request for production seeking “copies of all Documents evidencing 24 the not less than $1,000,000 in damages the Plaintiff is seeking to recover . . . ,” Plaintiff 25 responded that he “has not commenced discovery of the gross receipts realized by 26 Defendants and each of them from use, application and exploitation of [Plaintiff’s] Work 27 and [Plaintiff’s] Copyright Work as defined in the Complaint ¶¶ 1A, 9.” (Id. at 2–3.) 28 Plaintiff opposes the Motion on the basis that the MIDP disclosure obligation 1 applies only to “documents then in possession of the responding party . . . . [and] [t]he 2 evidence of Defendants’ profits is and was at all time in the exclusive possession of 3 Defendants.” (Doc. 160 at 3.) Plaintiff also argues that he disclosed his 4 specific damage calculation to Defendants in his settlement 5 conference memorandum. . . . That calculation was based on documents produced by Defendants which show: (a) the 6 advance paid by other Defendant to Defendant Wozniak and 7 (b) Defendants’ own valuation of their business based on infringement of Plaintiff’s work as shown in the “put price.” 8 (Id. at 4.) 9 B. 10 Under the Copyright Act, 17 U.S.C. § 504(b), “[a] copyright owner is entitled to 11 recover the actual damages suffered by him or her as a result of the infringement, and any 12 profits of the infringer that are attributable to the infringement and are not taken into 13 account in computing the actual damages.” The Act further provides, “[i]n establishing the 14 infringer’s profits, the copyright owner is required to present proof only of the infringer’s 15 gross revenue, and the infringer is required to prove his or her deductible expenses and the 16 elements of profit attributable to factors other than the copyrighted work.” 17 U.S.C. 17 § 504(b). In Polar Bear Productions, Inc. v. Timex Corp., 384 F.3d 700 (9th Cir. 2004), 18 the Ninth Circuit held that “a causal link between the infringement and the monetary 19 remedy sought is a predicate to recovery of both actual damages and profits.” Id. at 708. 20 In this case, Plaintiff did not provide an “ideal” computation of his actual damages 21 or any gross profits attributable to the alleged infringement. He simply stated, without any 22 differentiation or explanation, that he intended to prove damages of “not less than 23 $1,000,000” and that certain unidentified documents supporting disgorgement were 24 produced by Defendants. Compare AFL Telecommunications LLC v. SurplusEQ.com Inc., 25 946 F. Supp. 2d 928 (D. Ariz. 2013) (discussed in 8A Charles Alan Wright & Arthur R. 26 Miller, Federal Practice and Procedure § 2053 n.59 (3d ed. 2013) (“A distributor of fusion 27 splicers adequately disclosed its computation of damages and underlying documents on 28 1 which the computation was based. It disclosed . . . a separate calculation for a copyright 2 claim, as well as a detailed calculation showing a competitor’s profits and plaintiff’s lost 3 profits.”)). 4 Nor does it appear that Plaintiff has disclosed a theory or evidence supporting 5 causation between the alleged infringing conduct and his claimed damages. The only real 6 damages disclosure is found in Plaintiff’s settlement conference memorandum of May 21, 7 2020.2 Plaintiff calls this a disclosure because he provided a copy to the Defendants’ 8 attorney as a means of facilitating the settlement conference. In the memorandum, Plaintiff 9 reasons that, in his opinion, he is entitled to (A) 50% of the cash compensation paid by 10 Defendant Woz U Education Holdings, LLC to Defendant Wozniak and (B) 50% of the 11 receipts for the combined membership interests in Woz U. These demands are further 12 supported with rudimentary calculations in an attached demand letter. 13 The Court will recognize Plaintiff’s settlement memorandum as a damages 14 calculation disclosure. While Plaintiff appears to have mailed-in his required damages 15 computation, a broad sanction under Rule 37(c)(1) prohibiting Plaintiff from making any 16 damages argument or introducing any evidence of damages is overbroad and unwarranted. 17 This is particularly so because Defendants could have, but did not, sought an order during 18 discovery compelling Plaintiff to make a more fulsome disclosure. Additionally, the 19 availability of trial objections for previously undisclosed testimony and other evidentiary 20 material remains an adequate remedy. The Motion (Doc. 156) will, therefore, be denied 21 without prejudice. Defendants may make an appropriate objection at trial if any previously 22 undisclosed documents, damages theories, or damages computations are presented at trial. 23 II. 24 Defendants move for an order precluding Plaintiff “from introducing or referring to 25 any evidence, including argument, documents or testimony, related to any alleged 26 contributory or vicarious copyright infringement by Defendants as Plaintiff has disclosed 27 no such legal theory or brought any such claims in this action.” (Doc. 157 at 1.) Defendants
28 2 Plaintiff attached a redacted portion of the settlement memorandum to his response. (Doc. 160-2 at 4–6.) The full settlement memorandum was provided for in camera review. 1 argue that the Complaint states that “Defendants and each of them infringed” on Plaintiff’s 2 copyrighted works, but that Plaintiff’s counsel has now indicated he “may bring claim 3 against the Defendants for contributory copyright infringement.” (Id. at 3.) Defendants 4 assert that Plaintiff never disclosed any legal theory regarding contributory or vicarious 5 copyright infringement. 6 Plaintiff responds that Defendants intend to use a motion in limine as an 7 “unauthorized motion to dismiss certain Defendants for alleged failure to plead a ‘legal 8 theory’ in the Complaint and failure to disclose that ‘legal theory’ in Plaintiff’s initial 9 disclosures in alleged violation of General Order 17-08.” (Doc. 161 at 2–3.) Plaintiff also 10 argues that the Complaint’s allegation that each Defendant “infringed Reilly’s Copyrighted 11 Work in the marketing and publicity of Woz U” was a “sufficient allegation of both direct, 12 contributory and/or vicarious liability.” (Id. at 3; Doc. 1 ¶ 13.) 13 Contributory and vicarious copyright infringement are distinct claims with unique 14 standards of proof that must be alleged separately from direct copyright infringement. “A 15 party engages in contributory copyright infringement when it (1) has knowledge of 16 another’s infringement and (2) either (a) materially contributes to or (b) induces that 17 infringement.” Erickson Prods., Inc. v. Kast, 921 F.3d 822, 831 (9th Cir. 2019). “To prevail 18 on a vicarious liability claim, [plaintiff] must prove [defendant] has (1) the right and ability 19 to supervise the infringing conduct and (2) a direct financial interest in the infringing 20 activity.” Id. at 829 (quoting VHT, Inc. v. Zillow Group, Inc., 918 F.3d 723, 745 (9th Cir. 21 2019)). 22 The Court agrees with Defendants that Plaintiff should be precluded from presenting 23 argument and evidence on contributory and vicarious infringement theories. Plaintiff did 24 not assert these claims in his complaint, nor did he seek to amend his complaint to include 25 them. Only now, at the eve of trial, has Plaintiff indicated that these claims will go forward. 26 Allowing Plaintiff to present these theories at trial, however, “would prejudice the 27 defendant who faces different burdens and defenses under this [previously undisclosed] 28 theory of liability.” Coleman v. Quaker Oats Co., 232 F.3d 1271, 1292 (9th Cir. 2000). || This late disclosure also violates this District’s MIDP Order. See IceMOS Tech. Corp. v. 2|| Omron Corp., No. 17-CV-02575, 2020 WL 2527018, at *3 (D. Ariz. May 18, 2020) || (“General Order No. 17-08 requires parties to ‘fairly expose the facts and issues to be 4|| litigated’ within their initial discovery response and provide ‘adequate notice of what 5 || arguments will be made.’”). The Motion (Doc. 157) will be granted. 6 III. 7 Accordingly, IT IS ORDERED: 8 1. Defendants’ Motion in Limine No. | RE: Plaintiff's Damages (Doc. 156) is 9|| denied without prejudice. Defendants may raise appropriate objections at trial regarding Plaintiffs failure to timely disclose any particular document, evidentiary material, or 11 || damages computation. 12 2. Defendants’ Motion in Limine No. 2 RE: Contributory and Vicarious 13} Copyright Infringement (Doc. 157) is granted. Plaintiff is precluded from introducing or referring to any evidence, including argument, documents, or testimony at trial, regarding 15 || any contributory or vicarious copyright infringement on the part of Defendants. 16 Dated this 26th day of May, 2021. 17 WMichadl T. dibunde Michael T. Liburdi 20 United States District Judge 21 22 23 24 25 26 27 28
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