Agora Financial Llc. v. Samler

725 F.Supp.2d 491

AGORA FINANCIAL, LLC, et al., Plaintiffs,

v.Martin SAMLER, Defendant.

Civil No. WDQ-09-1200.

United States District Court, D. Maryland,Northern Division.

June 17, 2010.

Michael E. Geltner, Geltner and Associates PC, Falls Church, VA, Matthew J. Turner, Agora Management LLC, Baltimore, MD, for Plaintiff.

ORDER

WILLIAM D. QUARLES, JR., District Judge.

Upon review of Magistrate Judge Beth P. Gesner's June 17, 2010 Report and Recommendation, to which no objections have been filed, it is, this 15th day of July 2010, ORDERED that:

1. Judge Gesner's Report and Recommendation (Paper No. 23) BE, and HEREBY IS, ADOPTED AS AN ORDER OF THE COURT;

2. Agora Financial's motion for default judgment (Paper No. 10) BE, and HEREBY IS, DENIED;

3. This case BE, and HEREBY IS, CLOSED; and

4. The Clerk of the Court shall send copies of this Order to the parties.

REPORT AND RECOMMENDATION

BETH P. GESNER, United States Magistrate Judge.

This case has been referred to the undersigned pursuant to 28 U.S.C. § 636 and Local Rules 301 and 302 to conduct proceedings and submit a report and recommendation regarding the entry of default judgment and the appropriate amount of damages to be awarded to plaintiffs. (Paper No. 13.) For the reasons discussed herein, I respectfully recommend that plaintiffs' Motion for a Default Judgment (Paper No. 10) be DENIED and no damages be awarded.

I. BACKGROUND

Plaintiffs Agora Financial, LLC, Oxford Club, LLC, Taipan Publishing Group, LLC, Stansberry and Associates Investment Research, LLC, and Sovereign Offshore, LLC publish financial investment newsletters featuring articles written by respected financial analysts employed by plaintiffs. (Compl. ¶ 4, Paper No. 1 at 2; Mem. Supp. Pls.' Mot. Def. J., Paper No. 10-2 at 3.) In these articles, plaintiffs' financial analysts recommend broad investment strategies as well as specific investments to plaintiffs' readers. ( Id.; The Oxford Club Communiqué, Apr. 1, 2010, Paper No. 16 at 13-25.) Plaintiffs' publications also contain “portfolios,” or lists summarizing plaintiffs' analysts' recommended investments. (The Oxford Investment Portfolio, Paper No. 16 at 26-27.) These publications are sent to plaintiffs' paid subscribers and are a vital component of plaintiffs' business. (Decl. of Julia Cooke Guth, Executive Director, The Oxford Club, LLC, Nov. 17, 2009, Paper No. 10 Attach. 8 at 1-2.)

According to plaintiffs, defendant Martin Samler operates the website Tipstraders.com. (Compl. ¶ 5.) Without plaintiffs' authorization, defendant posts on his website the investment recommendations contained in plaintiffs' publications and profits from these postings by charging individuals access to his website. ( Id.) Specifically, one page of defendant's website lists hundreds of financial analysts, including plaintiffs' financial analysts, next to their affiliated financial entities, including plaintiffs. (Tipstraders.com, List of Tipsters, Paper No. 10 Attach. 3 at 1-5; Guth Decl., Paper No. 10 Attach. 8 at 2.) By clicking on an analysts' name, the user is directed to a page with a list purporting to represent that analysts' recommended investments. (Paper No. 10 Attach. 3 at 11-18; Guth Decl., Paper No. 10 Attach. 8 at 2-3.) The page also provides statistical information summarizing the performance of those recommended stocks. (Paper No. 10 Attach. 3 at 11-18.) For example, after clicking on plaintiff Oxford Club analyst Alexander Green's name, users are directed to a page listing Mr. Green's name at the top of the page, and identifying Oxford Club as his affiliate publisher. (Paper No. 10 Attach. 3 at 16.) Under this identifying information, Tipstraders.com lists Mr. Green's stock recommendations, statistical information regarding the performance of each stock, and statistical information regarding the overall performance of Mr. Green's recommended stocks. ( Id.) ¹

Defendant's site expressly disclaims any affiliation, endorsement, or sponsorship by or with those analysts whose recommendations it reproduces or those analysts' affiliated financial entities. ( Id. at 11-18.) For example, Tipstraders.com provides the following disclaimer at the bottom of the page listing Mr. Green's purported recommendations:

Tipstrader.com is in no way affiliated with or endorsed or sponsored by Alexander Green or The Oxford Club, nor do we claim to represent the performance of their publication. The picks above are, unless otherwise stated, entered by registered members of TipsTraders.com in accordance with our general methodology and respecting any proprietary rights. Analysts are likely to have recommended trades not listed here, and at different times of entry. Analysts are also likely to offer an exit strategy very different from ours.

( Id. at 16.) ²

Plaintiffs filed a Complaint in this court on May 8, 2009 asserting two causes of action. (Paper No. 1.) First, plaintiffs claim that defendant's conduct constitutes a “hot news” misappropriation of their writers' investment recommendations under the doctrine set forth in International News Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918). ( Id. ¶¶ 6-9.) Second, plaintiffs assert that defendant's conduct violates Section 43(a) of the Lanham Act. ( Id. ¶¶ 10-12.)

After defendant failed to file an answer or otherwise defend against plaintiffs' Complaint, plaintiffs filed a Motion for a Default Judgment (Paper No. 10) on November 23, 2009. On January 5, 2010, the Clerk of this Court entered an Order of Default against defendant Martin Samler for want of answer or other defense. (Paper No. 12.) On January 22, 2010, Judge Quarles referred this case to the undersigned to review plaintiffs' Motion for a Default Judgment and to make recommendations regarding the entry of default judgment. (Paper No. 13.) In accordance with Federal Rule of Civil Procedure 55(b)(2), the undersigned held a hearing on May 4, 2010 in open court. Plaintiffs' counsel, Michael Geltner, Esquire, attended on behalf of plaintiffs. Defendant was served with notice of the hearing (Paper No. 18), but did not attend. In addition, prior to and following the May 4th hearing, plaintiffs submitted supplemental briefing in accordance with the undersigned's direction. (Paper Nos. 15, 16, 20 & 21.)

II. STANDARD FOR ENTRY OF DEFAULT JUDGMENT

In reviewing plaintiffs' Motion for a Default Judgment (Paper No. 10), the court accepts as true the well-pleaded factual allegations in the complaint as to liability. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780-81 (4th Cir.2001). It, however, remains for the court to determine whether these unchallenged factual allegations constitute a legitimate cause of action. Id.; see also 10A Wright, Miller & Kane, Federal Practice and Procedure § 2688 (3d ed. Supp.2010) (“[L]iability is not deemed established simply because of the default ... and the court, in its discretion, may require some proof of the facts that must be established in order to determine liability.”).

If the court determines that liability is established, the court must then determine the appropriate amount of damages. Ryan, 253 F.3d at 780-81. The court does not accept factual allegations regarding damages as true, but rather must make an independent determination regarding such allegations. E.g., Credit Lyonnais Secs. (USA), Inc. v. Alcantara, 183 F.3d 151, 154 (2d Cir.1999). In so doing, the court may conduct an evidentiary hearing. Fed.R.Civ.P. 55(b)(2). In addition, with respect to the character of the amount and judgment, Fed.R.Civ.P. 54(c) provides that “[a] default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.”

In sum, the court must (1) determine whether the unchallenged facts in plaintiffs' complaint constitute a legitimate cause of action, and, if they do, (2) make an independent determination regarding the appropriate amount of damages.

III. DEFENDANT'S LIABILITY

As noted above, plaintiffs' Complaint sets forth two causes of action: (1) a “hot news” misappropriation claim; and (2) a claim under Section 43(a) of the Lanham Act. A discussion of each cause of action follows.

A. Plaintiffs' “Hot News” Misappropriation Claim

The central issue with respect to plaintiffs' “hot news” misappropriation claim is whether this claim is preempted by federal copyright law. The “hot news” misappropriation cause of action was first recognized in International News Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918) (“ INS”). INS involved two competitor news wire services, the Associated Press (“AP”) and International News Service (“INS”). 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918). AP “gather[ed] in all parts of the world, by means of various instrumentalities of its own, by exchange with its member[ ] [newspapers], news and intelligence of current and recent events of interest to newspaper readers and distribute[d] it daily to its members for publication in their newspapers.” Id. at 229, 39 S.Ct. 68. INS pirated AP's “news” by, among other means, taking it from bulletins or early editions of AP's publications and selling this news, either wholesale or after rewriting it, to its customers.

Id. at 231-32, 39 S.Ct. 68. AP filed suit against INS alleging that its conduct constituted unfair competition in business. Id. at 232, 39 S.Ct. 68.

Before analyzing AP's unfair competition claim, the Supreme Court discussed the relationship between AP's claim and copyright law. Id. at 234, 39 S.Ct. 68. While acknowledging that a newspaper “article, as a literary production, is the subject of copyright,” the Court rejected the notion that the copyright in an article extended to the factual information contained therein because “the news element-the information respecting current events contained in the literary production-is not the creation of the writer, but is a report of matters that are ordinarily publici juris; it is the history of the...