Sony/Atv Music Publ'g LLC v. 1729172 Ontario, Inc.

SONY/ATV MUSIC PUBLISHING LLC, et al. v. 1729172 ONTARIO, INC., et al.

No. 3:14-cv-1929

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF TENNESSEE NASHVILLE, TENNESSEE

August 20, 2018

Judge Trauger

Magistrate Judge Holmes

To: Honorable Aleta A. Trauger, District Judge

REPORT AND RECOMMENDATION

Pursuant to this Court's Order entered March 6, 2017 (Doc. No. 629), this case was referred to the Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1)(B) and (C) for report and recommendation on Plaintiffs' request for sanctions, default damages and a permanent injunction. In their motion (Doc. No. 651), Plaintiffs seek entry of default judgments against 1729172 Ontario, Inc., d/b/a TriceraSoft ("TriceraSoft"), Gai Marcos (together with TriceraSoft, the "TriceraSoft Defendants"), SBI Global Ltd., James Gerald Woodford, Digitop Ltd., Gary Ian Oates, Music Factory Entertainment Group, Peter Parkin, Zoom Entertainments Ltd. and Joe David Blackie (entire group, the "Defaulted Defendants").¹ Plaintiffs request that the Court (1) make permanent the Preliminary Injunction, (2) award Plaintiffs maximum statutory damages and costs, including attorneys' fees pursuant to the Copyright Act and (3) dismiss the TriceraSoft Defendants' two remaining counterclaims.² A hearing was conducted on December 6, 2017. Appearing for thehearing were Paul Harrison Stacy and Timothy Warnock for Plaintiffs. No appearance was made by or on behalf of the Defaulted Defendants. Subsequently, at the direction of the Court (see Order at Doc. No. 656), Plaintiffs submitted proposed findings of fact and conclusions of law (Doc. No. 657 with accompanying exhibits). After review of Plaintiffs' proposed findings and conclusions, and the entire record in this case, and based on the following, the undersigned respectfully recommends that Plaintiff's motion for sanctions against the Defaulted Defendants, default damages and a permanent injunction (Doc. No. 651) be GRANTED.

Also pending is Plaintiffs' Motion for Sanctions (Doc. Nos. 513 through 514-2). Plaintiffs seek sanctions, pursuant to Rule 11 of the Federal Rules of Civil Procedure and 28 U.S.C. § 1927, against the TriceraSoft Defendants and Ramona P. DeSalvo ("DeSalvo"), who was counsel for the TriceraSoft Defendants in this lawsuit until she was granted permission to withdraw on November 16, 2016 (see Doc. No. 551). As relief for the alleged sanctionable conduct, Plaintiffs seek entry of an order: (1) granting their motion; (2) awarding sanctions in favor of the Plaintiffs and against the TriceraSoft Defendants and Ms. DeSalvo, including the striking of all pleadings found to be in violation of Rule 11; (3) granting leave to Plaintiffs to separately file evidence monetizing the damages arising from the sanctionable conduct and, thereafter, an award of all reasonable attorneys' fees and costs incurred by Plaintiffs in adjudication of the sanctionable conduct; and, (4) other and further relief as the Court deems appropriate in the circumstances. Id. at 7. Defendant Gai Marcos filed a pro se response in opposition to the motion (Doc. No. 568)³ and Ms. DeSalvo filed a response in opposition (Doc. No. 579). Also before the Court is Plaintiffs'reply. See Doc. No. 614. By order entered on April 30, 2018, Plaintiffs' motion for sanctions was referred to the undersigned Magistrate Judge for disposition. See Doc. No. 660. As to the TriceraSoft Defendants, the requested relief is already dealt with in the recommended disposition of Plaintiffs' motion for default judgments and other relief. After review of the entire record in this case, and based on the discussion below, the undersigned respectfully recommends that Plaintiff's motion for sanctions against Ramona DeSalvo (Doc. No. 513) be DENIED.

I. Reported and Recommended Findings of Fact

A. Procedural History

1. The original Plaintiffs — two groups of music publishers commonly known as "Sony/ATV" and "EMI" — filed this action on October 1, 2014, alleging copyright infringement. (Doc. No. 1 at 3-4.) The original Defendants were TriceraSoft and the owner of TriceraSoft, Gai Marcos (collectively, the "TriceraSoft Defendants"). (Id. at 4 - 6.)

2. On April 8, 2016, with leave of Court, the Plaintiffs filed the Verified Second Amended Complaint for Injunction and Damages, which added additional Plaintiffs as well as additional Defendants that supplied TriceraSoft with unlicensed recordings. (Doc. Nos. 381 and 382.)

3. The TriceraSoft Defendants filed affirmative defenses and counterclaims. (Doc. Nos. 255 and 390.)

4. On September 25, 2015, the Court entered a Preliminary Injunction against the TriceraSoft Defendants "and all persons in active concert and participation with them." (Doc. No. 254, p. 10.)

5. The TriceraSoft Defendants appealed the grant of the Preliminary Injunction. (Doc. No. 267.) The United States Court of Appeals for the Sixth Circuit affirmed, on every issue, this Court's order granting the Preliminary Injunction. (Doc. Nos. 430 and 433.)

6. On December 9, 2015, Plaintiffs filed a Motion to Show Cause Why Defendants Should Not be Held in Contempt based upon the TriceraSoft Defendants' continued large scale distribution of karaoke recordings of Plaintiffs' copyrighted works. (Doc. Nos. 309 - 314-8.) The Court granted the motion and ordered the TriceraSoft Defendants to show cause. (Doc. 590.) On December 22, 2016, the Court found the TriceraSoft Defendants in contempt, entered a sanction of $250,000.00 against them, and awarded Plaintiffs' counsel attorneys' fees and costs of $173,491.67. (Doc. No. 601, p. 9.)

7. To-date, the TriceraSoft Defendants have not provided any evidence of their compliance with the Court's Order for Contempt and Sanctions. (See Doc. No. 653, ¶ 10.) Nor have the TriceraSoft Defendants paid the $250,000 penalty for contempt or any of Plaintiffs' attorneys' fees and costs. (Id.)

8. While providing some information during the discovery period, the TriceraSoft Defendants failed to supply adequate information for Plaintiffs to fully evaluate the extent and amount of infringement damages. This resulted in multiple motions to compel by Plaintiffs. See e.g. Doc. No. 94 and Doc. No. 183.

9. Ultimately, despite never having received a complete production of documents, Plaintiffs noticed the depositions of the TriceraSoft Defendants for October 26 and 27, 2016. Neither Mr. Marcos nor any other representative of TriceraSoft appeared or produced the documents that Plaintiffs requested, either in the requests for production or in the notices of deposition. Plaintiffs therefore filed yet another Motion to Compel. (Doc. No. 547.)

10. Following a November 22, 2016 in-court status conference, during which Mr. Marcos participated telephonically, depositions were again rescheduled for January 12 and 13, 2017, in Toronto, Canada. (Doc. No. 585.)

11. In the interim between the November 22, 2016 status conference and the depositions scheduled for January 2017, two scheduled hearings occurred—a December 5 hearing on the motion for an order to show cause and the subsequent December 8 show-cause hearing—at which neither Mr. Marcos nor any other representative of TriceraSoft appeared. See Order at Doc. No. 590. Based on the failure of the TriceraSoft Defendants to appear for court hearings as directed, Plaintiffs requested that the Court change the location of the January 12 and 13, 2017, depositions from Toronto, Canada, to Nashville, Tennessee. (Doc. No. 594). After notice to Mr. Marcos and Tricerasoft (Doc. Nos. 596 and 600), the Court conditionally denied the motion (Doc. 603), allowing Mr. Marcos to produce documents by December 30, 2016, and if production occurred by that date, the depositions were to proceed in Toronto.

12. Because, however, production did not occur prior to December 30, 2016, Mr. Marcos was required to appear for the depositions in Nashville in the courtroom in both his individual capacity and as a representative of TriceraSoft. (Doc. Nos. 604 and 605.)

13. The Court repeatedly warned the TriceraSoft Defendants of the potential consequences if Mr. Marcos on his own behalf or as the corporate representative for TriceraSoft failed to comply with the Court's orders, including the possibility of entry of default. (Doc. Nos. 596 and 603.) Yet Defendants Marcos and Tricerasoft again failed to produce the documents and failed to appear for the depositions as ordered. (Doc. No. 639, p. 8.)

14. On February 20, 2017, Plaintiffs filed their Motion for Entry of Default as a Sanction. (Doc. No. 620.) On March 16, 2017, Defendant Marcos filed "Defendants' Response" to Plaintiffs' Motion. (Doc. No. 633.)

15. On July 28, 2017, the undersigned Magistrate Judge issued a Report and Recommendation (Doc. No. 639) that Plaintiffs' Motion for Entry of a Sanction of Default be granted. The TriceraSoft Defendants filed no objection to the Report and Recommendation.

16. By order entered on October 2, 2017 (Doc. No. 644), the Report and Recommendation was adopted, and the Clerk was directed to enter defaults against the TriceraSoft Defendants. The Clerk entered the defaults on October 6, 2017. (Doc. No. 646.)

17. The Court then set a December 6, 2017, hearing regarding damages and any other relief requested and further ordered Plaintiffs to file and serve the Defaulted Defendants with any affidavits, memoranda, or other supporting filings by November 22, 2017. (Doc. No. 648.) Plaintiffs did so on November 22 and requested a permanent injunction, an award of statutory damages, dismissal of all remaining counterclaims, and other relief, including costs and fees. (Doc. Nos. 651 - 655.1.)

18. The Court held a hearing on December 6, 2017, as scheduled. No appearance was made by or on behalf of the Defaulted Defendants.

B. The Defaulted Defendants' Conduct

19. Commencing in 2008, PRS/MCPS, a U.K. licensing society, repeatedly admonished the TriceraSoft Defendants that the PRS/MCPS licenses did not authorize distribution in the United States. The TriceraSoft Defenda...