Sailor Music v. Walker (In re Walker)

540 B.R. 413

In re: Doug Walker, and Carmen Walker, Debtors.Sailor Music, et. al., Plaintiffs,

v.Doug Walker, Defendant.

Case No. 11–52059–659

Adversary No. 12–4013–659

United States Bankruptcy Court, E.D. Missouri, Eastern Division.

Signed April 18, 2014

Spencer P. Desai, Saint Louis, MO, for Debtor

FINDINGS OF FACT AND CONCLUSIONS OF LAW

KATHY A. SURRATT–STATES, Chief United States Bankruptcy Judge

The matter before the Court is the Complaint to Determine Dischargeability of Debt and Answer of Defendant Doug Walker to Complaint to Determine Dischargeability of Debt. A trial was held on August 27, 2013, at which Plaintiffs appeared by counsel, Debtor Doug Walker appeared by counsel and in person and the parties presented testimony and argument. The matter was then taken under submission. Upon consideration of the record as a whole, the Court enters the following FINDINGS OF FACTS:

Plaintiffs Sailor Music, Controversy Music, Innocent Bystander, Write Treatage Music, Universal-Polygram International Publishing, Inc. and Hideout Records and Distributors, Inc. (Gear Publishing Division) (hereinafter “Plaintiffs”) are members of the American Society of Composers, Authors and Publishers (hereinafter “ASCAP”). ASCAP is a performing rights licensing organization that issues licenses to perform songs in the ASCAP repertoire on behalf of its members. As such, ASCAP is a professional membership organization of song writers, composers and music publishers. ASCAP's mission is to license and promote the music of its members and foreign affiliates, obtain fair compensation for the public performance of their works and to distribute the royalties that ASCAP collects based upon those performances. Plaintiffs granted ASCAP a nonexclusive right to license public performance rights of Plaintiffs' compositions.

Debtor Doug Walker a/k/a Douglas Walker (hereinafter “Debtor”) is currently a high school physical education, art and literacy teacher and is also a football and track and field coach. Prior to employment as a teacher, Debtor was self-employed, prior to which he was the Executive Director of Head First Foundation which educates children on how to prevent head injuries.

Debtor was the managing member of Twister's Iron Horse Saloon, L.C. located at 1045 Main Street, Imperial, MO (hereinafter “Twister's”). Twister's is a restaurant-bar that operates as a place of public entertainment, amusement and refreshments. Twister's is open to the public, Monday through Saturday from 11 a.m. to 1:30 a.m., and 11 a.m. to 12:00 a.m. on Sundays. Debtor testified that he was in charge of day-to-day operations of Twister's in that he arrived every week day morning at approximately 7 a.m. and typically worked until 3:00 p.m. as well as working the occasional weekend. In this capacity, Debtor got the cash registers prepared for the day, made bank deposits and made sure Twister's was adequately stocked with both food and beverages.

Debtor also permitted music that is included in the ASCAP repertoire to be publicly performed at Twister's without a license from ASCAP as required by federal copyright law. From May 2006 through at least September 2009, Debtor was offered public performance licenses by ASCAP representatives in person,¹by mail²and repeated attempts were made by ASCAP to contact Debtor by telephone for the same purpose.³The uncontroverted evidence demonstrates that at least 14 letters were sent to Debtor's attention at Twister's and at least 28 attempts were made by ASCAP to contact Debtor telephonically from June 16, 2006 through January 30, 2008. These telephone calls were made on different days of the week at varied times of day, as early as 9:49 a.m. and as late as 10:14 p.m. This public performance license would have permitted the authorized public performance of ASCAP members' copyrighted material at Twister's.

Russell R. McGuire (hereinafter “Mr. McGuire”), Director of Licensing at ASCAP, testified to the following. ASCAP has a returned mail process whereby all returned mail would be sent to the main office of ASCAP⁴and none of the mail correspondence sent to Debtor at Twister's was returned.⁵ASCAP obtained the address for Twister's from two publicly available sources: the Missouri Secretary of State database and the Alcohol Beverage Licensing, both of which listed 1045 Main Street, Imperial, MO as the address for Twister's. No other address was listed. The address where all mail correspondence was sent by ASCAP to Debtor is also the address where ASCAP representative Mary Johnes visited in person.

Debtor testified that he only received mail for Twister's at a P.O. Box and he does not recall ever receiving any mail from ASCAP at the P.O. Box, nor does he recall receiving mail from ASCAP at Twister's. Debtor testified that in addition to Twister's, he had other businesses and used the same P.O. Box as a mail collection box for all of his businesses. Debtor admits that he has received mail that was addressed to Debtor at 1045 Main Street, Imperial MO, the Twister's address, but delivered to the P.O. Box.

Debtor further testified that he does not recall ever speaking with any ASCAP representative over the telephone or speaking with his staff about telephone messages from representatives of ASCAP. Debtor stated that it was not unusual for his staff to fail to deliver telephone messages and in fact, at times, even customers would answer the phone at Twister's. For this reason, Debtor testified that he has never answered the phone and denied his identity to the caller, in part, because he wanted to teach his staff proper telephone etiquette.

On July 15, 2009, ASCAP sent a third-party investigator to Twister's. The investigator arrived at 7:17 p.m. at which time 25 patrons were present, and left at 11:17 p.m. at which time 118 patrons were present.⁶Twister's has a total capacity of 140 patrons.

That evening, patrons were entertained by a disk jockey, the jukebox and karaoke. The investigator took notes of all songs that were performed during the time the investigator was in Twister's. At least four (4) unauthorized performances of Plaintiffs' copyrighted material took place in Twister's in the investigator's presence. There was also an unlicensed jukebox in Twister's which is not directly the subject of any dispute before the Court.⁷Debtor testified that a vendor supplied the jukebox and other games in Twister's for which all proceeds derived therefrom were split 30% to Twister's and 70% to the vendor for the jukebox and split 50% to Twister's and 50% to the vendor for the games. Debtor testified that it was his understanding that the jukebox proceeds were not split 50% to Twister's and 50% to the vendor and rather were split 30% to Twister's and 70% to the vendor because the vendor was required to pay royalties. Debtor testified that he understood the term “royalties” to mean that something was being paid to either someone who wrote a song or performed a song.

In a letter dated September 17, 2009, the Manager of Litigation Services for ASCAP sent Debtor a settlement offer after informing Debtor of the findings of ASCAP's third-party investigator.⁸The letter was sent to Debtor at the Twister's address by United States Postal Service – certified mail, return receipt requested.⁹The return receipt states that the date of delivery is September 23, 2009 and is signed by Debtor.¹⁰Debtor admits that the return receipt bears his signature.

Debtor did not accept ASCAP's settlement offer.

On June 21, 2010, Plaintiffs brought an action for copyright infringement against Debtor and Twister's in the United States District Court for the Eastern District of Missouri (hereinafter “District Court” or “District Court Case”). After several unseized opportunities to comply with discovery obligations, on May 31, 2011, the District Court entered a Default Judgement as to liability as a sanction for Debtor's willful failure to comply with discovery. On August 3, 2011, a Memorandum and Order was entered by the District Court on Plaintiffs' Motion for Default Judgment and for Final Judgement against Debtor and Twister's, jointly and severally, in the total amount of $41,231.90 (hereinafter “Judgment”) for Debtor's violation of federal copyright law, specifically Sections 504 and 505 of Title 17.¹¹

On November 16, 2011, Debtor filed a Voluntary Petition under Chapter 7 of the Bankruptcy Code. Debtor claims at least a 50% ownership interest in Twister's on Debtor's Schedule B. Debtor seeks to discharge his debt to Plaintiffs.

Plaintiffs seek a determination that the Judgment should be excepted from discharge under Section 523(a)(6) because Debtor's actions were willful and malicious within the meaning of Section 523(a)(6). Debtor denies that his conduct was willful and malicious in that Debtor testified that he does not recall receipt of any correspondence from Plaintiffs nor did Debtor intend to harm Plaintiffs and therefore his actions cannot be willful or malicious. Alternatively, Debtor argues that even if he received the letter dated September 17, 2009, receipt of this letter would serve as Debtor's first notice—albeit constructive notice because Debtor testified that he does not recall ever receiving or reading this letter—of Debtor and Twister's copyright infringement and therefore any act to perform copyrighted material after this date would be willful and malicious. As such, because the investigator's July 15, 2009 visit preceded this September 17, 2009 letter, Debtor argues that Plaintiffs' allegations are insufficient for Plaintiffs to meet their heightened burden under Section 523(a)(6).

JURISDICTION

This Court has jurisdiction over the parties and subject matter of this proceeding under 28 U.S.C. §§ 151, 157, and 1334 (2012)and Local Rule 81–9.01(B) of the United States District Court for the Eastern District of Missouri. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) (2012). Venue is proper in this District under 28 U.S.C. § 1409(a) (2012).

CONCLUSIONS...