United States v. Gallant

570 F. Supp. 303, 220 U.S.P.Q. (BNA) 27, 1983 U.S. Dist. LEXIS 14822
CourtDistrict Court, S.D. New York
DecidedAugust 8, 1983
Docket83 Cr. 053 (DNE)
StatusPublished
Cited by17 cases

This text of 570 F. Supp. 303 (United States v. Gallant) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Gallant, 570 F. Supp. 303, 220 U.S.P.Q. (BNA) 27, 1983 U.S. Dist. LEXIS 14822 (S.D.N.Y. 1983).

Opinion

MEMORANDUM OPINION AND ORDER

EDELSTEIN, District Judge:

FACTUAL BACKGROUND

The defendant, John Gallant (“Gallant”) is charged in a forty-nine count indictment with fourteen counts of mail fraud, 18 U.S.C. § 1341 (Counts 1 through 14); four counts of wire fraud, 18 U.S.C. § 1343 (Counts 15 through 18); nine counts of interstate transportation of stolen property, 18 U.S.C. § 2314 (Counts 19 through 27); and, twenty-two counts of copyright infringement, 17 U.S.C. § 506(a) (Counts 28 through 49). There is no dispute as to the facts giving rise to the indictment.

From October 1, 1979 to May, 1981 Gallant worked as a salesman at Gallant International, his father’s apparel business. In May, 1981, agents of the Federal Bureau of Investigation searched Gallant International 1 and discovered that, in addition to selling women’s clothing, Gallant was selling “bootleg” record albums from his father’s warehouse. A bootleg album is an unauthorized recording of a live performance that is recorded either at the performance or from a radio or television broadcast of the performance and is not available for purchase as an authorized recording. Bootleg albums usually carry blank labels that make no suggestion that the album is authorized by the performer or the performer’s record company, and the sound quality is generally inferior to that of studio recordings. 2

*306 The search uncovered thousands of bootleg albums of popular contemporary recording artists performing copyrighted musical compositions. 3 The search also uncovered business records, such as invoices, journals and United Parcel Service receipts, reflecting shipments of bootleg albums to record distributors and retailers throughout the United States. Gallant sold these bootleg albums primarily as a wholesaler.

Gallant has moved pursuant to Fed.R. Crim.P. 12(b)(2) to dismiss counts 1 through 27 of the indictment on the ground that the indictment fails to establish a cognizable scheme to defraud or to transport stolen property interstate. He does not dispute the sufficiency of the allegations of counts 28 through 49, the copyright infringement counts. 17 U.S.C. § 506(a).

DISCUSSION

A. Gallant’s Challenge to the Mail and Wire Fraud Counts.

Gallant has moved to dismiss counts 1 through 14 and 15 through 18 of the indictment charging him with mail fraud, 18 U.S.C. § 1341 and wire fraud, 18 U.S.C. § 1343, respectively. Counts 1 through 18 charge Gallant with unlawfully, wilfully and knowingly

defrauding] recording artists, musical composers, music publishing companies, and recording companies, thereby depriving them of their rightful royalties, payments and income, and infringing on their lawful property and contractual rights, by distributing, selling and offering for sale phonograph records containing performances of musical compositions which were reproduced illegally and without authorization of their copyright proprietors.

Indictment ¶2. The indictment further alleges that Gallant engaged in a scheme and artifice, involving the use of the mails and wires, to sell hundreds of thousands of dollars of unauthorized phonorecords containing illegally reproduced copyrighted compositions. Id. ¶3. The government contends that by virtue of this scheme Gallant obtained money and property by means of fraud. Specifically, the government contends that Gallant defrauded the copyright holders who possess the exclusive rights to distribute and reproduce recordings containing their copyrighted works.

Gallant contends the indictment fails to state a cognizable scheme to defraud because he made no false statements, misrepresentations or promises to the copyright holders. Simply stated, Gallant’s position is that while he may have infringed the copyright holders’ copyrights, he defrauded no one. Affidavit of Steven Kimelman, sworn to March 23, 1983 ¶ 9.

18 U.S.C. §§ 1341 and 1343 prohibits the use of the mails or of wire, radio or television communication for “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises .... ” The two elements of the offense are: (1) use of the mails or wires; (2) to further a scheme to defraud. Gallant has not denied that he used the wires and mails in connection with his distribution of the bootleg records. The issue raised by the defendant’s motion therefore is whether the distribution and sale of bootleg records is a scheme to defraud.

*307 The elements of fraud are well established: (1) the defendant must have made an affirmative misrepresentation or nondisclosure; (2) that deception must be material; and (3) it must be done in contemplation of harm to the defrauded party or gain to the defendant. United States v. Bronston, 658 F.2d 920, 927 (2d Cir.1981), cert. denied, 456 U.S. 915, 102 S.Ct. 1769, 72 L.Ed.2d 174 (1982). 4 The government does not contend that Gallant made any affirmative misrepresentation in furtherance of the alleged scheme to defraud. Instead, the government, asserts that, under the copyright law, one who intends to distribute recordings of copyrighted musical compositions is under a duty to disclose his plans to the copyright owner. Because Gallant failed in this duty, the government argues, he committed a fraud.

The government initially asserted that the compulsory license provision, 17 U.S.C. § 115 (which allows a party seeking to make and distribute a copyrighted work to do so by serving a notice on, and paying a royalty to, the copyright holder) imposes upon record bootleggers a “duty” to disclose their activities to the copyright holder. The government further argued that a bootlegger’s failure to comply with the notice provision constitutes a breach of a duty to disclose and that this is a “scheme to defraud” under a mail and wire fraud prosecution.

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Bluebook (online)
570 F. Supp. 303, 220 U.S.P.Q. (BNA) 27, 1983 U.S. Dist. LEXIS 14822, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-gallant-nysd-1983.