Blagman v. Apple, Inc.Blagman v. Apple, Inc.
MEMORANDUM AND ORDER
Plaintiff Norman Blagman has moved pursuant to Rule 15(a)(2) of the Federal Rules of Civil Procedure for leave to file his third amended complaint. For the following reasons, the motion is granted.
Background
According to the operative complaint in this putative class action, “the digital music business consists of four groups.” (Second Amended Complaint (“2nd Am. Compl.”), ¶ 87). The artists—composers and lyricists—generally own the copyrights in the musical compositions they create; record labels generally own the copyright in the sound recordings of the artists’ compositions; “ag-gregators” acquire digital distribution rights from record labels and upload the digital recordings to online music stores; and digital music retailers sell the recordings online. (2nd Am. Compl., ¶¶ 65, 87). Defendants Apple, Inc., Amazon.com, Inc., Google, Inc., Microsoft Corp., and eMusic.com Inc. (the “Retailer Defendants”) “own and operate the largest digital music retail stores in the world.” (2nd Am. Compl., ¶ 3). Defendants The Orchard Enterprises, Inc., and Orchard Enterprises NY, Inc. (“Orchard”) are aggre-gators who “act as the middlemen between the Retailer Defendants and the record labels.” (2nd Am. Compl., ¶4). Mr. Blagman alleges that the defendants, without acquiring the necessary licenses or permissions, “have all imported, exported, reproduced, distributed, and sold ... digital recordings” of certain compositions (he has identified three) for which he owns the copyright. (2nd Am. Compl., ¶¶ 46-53).
The [defendants’ failure to properly license the music they sell derives from two factors: (a) the Retailer Defendants accept virtually all digital music content from their suppliers without adequately screening the content for unlicensed music or the suppliers for unlawful conduct; and (b) the [defendants take no direct action to obtain or confirm licenses for the music they distribute and sell and instead rely on their suppliers to perform this vital function.
(2nd Am. Compl., ¶ 7). The plaintiff further asserts that the defendants “have [ ] willfully infringed at least thousands of other copyrighted compositions in the same manner.” (2nd Am. Compl., ¶ 57).
The first amended complaint—which was filed in October 2012, three months after the original complaint—identified a “class that includes ‘[a]ll persons or entities who own all or part of one or more registered copyrighted musical compositions that have been reproduced, distributed, or sold by Defendants.’ ” Blagman v. Apple, Inc., No. 12 Civ. 5453,
[t]he legal and/or beneficial owners of all or part of one or more U.S. registered copyrighted musical compositions that have been reproduced, distributed, sold, imported, or exported by the Retailer Defendants and that were supplied to the Retailer Defendants: (a) by Orchard on behalf of the record labels and aggregators listed on the Orchard Label List annexed as Exhibit A; and (b) by the record labels and aggregators listed on the Non-Orchard Label List annexed as Exhibit B.1
(2nd Am. Compl, ¶ 58). I granted the application in May 2014. Blagman II,
As class discovery continued, a disagreement as to the meaning of the class definition emerged. The defendants argued that the putative class consisted of copyright owners whose compositions
have been subjected to two actions. First, they must have been “reproduced, distributed, sold, imported, or exported by the Retailer Defendants.” Second, they must have been either (a) “supplied to the Retailer Defendants ... by [ ] Orchard, on behalf of the record labels and aggregators listed on the Orchard Label List annexed as Exhibit A,” or (b) “supplied to the Retailer Defendants ... by the record labels and aggregators listed on the Non-Orchard Label List annexed as Exhibit B.” Therefore, to be implicated by the class, the content must have been supplied to a Retailer Defendant by Orchard on behalf of one of the entities listed in Exhibit A or by one of the entities on Exhibit B----
(Letter of Gabrielle Levin dated Nov. 14, 2014, at 6 (first and third alterations in original) (citations omitted) (quoting 2nd Am. Compl, ¶ 58)). The plaintiff disagreed, contending that the defendants “read into the class definition the word ‘directly,’ which is plainly not there____Whether the labels listed in the Exhibits to the Second Amended Complaint supplied their tracks directly, or ... through an aggregator[ ] is not relevant to their inclusion in the [cjlass.” (Letter of Oren Giskan dated Nov. 14, 2014, at 2). That is, the plaintiff believed that the putative class included copyright owners whose compositions arrived at the Retailer Defendants from the labels on Exhibit B through an aggregator as an intermediary.
At a conference in December 2014 addressing various discovery disputes (the “December Conference”), I agreed with the defendants’ interpretation, stating:
I read the class definition as the defendants do but I don’t know that that’s the end of the story. I think that that leaves the plaintiff! ] with the option of moving to amend the class definition to perhaps include the words [“jdirectly or indirectly,!”] [and] that’s frankly a motion likely to be granted. At the same time, I would suggest to the plaintiff! ] that you may want to be careful what you wish for because expanding the class definition as you now suggest may lead to issues with respect to ascertainability once we get to the class certification stage. That obviously will be a determination for Judge Carter____ [But] the defendants should be aware that if the plaintiff! ] make[s] that motion, as I say, it’s likely to be granted.
(Transcript dated Dec. 15, 2014 (“Tr.”) at 13). I limited the discovery available to the plaintiff based on this understanding of the operative complaint’s class definition. (Order dated Dec. 15, 2014, at 1).
The plaintiff now moves again to amend his complaint. He describes three “significant” changes, two directed to the class definition and one directed to the damages claimed. (Plaintiffs Memorandum of Law in Support of Motion for Leave to File Third Amended Complaint (“PI. Memo.”) at 1-2).
The Proposed Third Amended Complaint (hereinafter, “Proposed Complaint” or “Proposed 3rd Am. Compl”) purportedly “limits the class by eliminating eleven [] record companies” identified in Exhibits A and B to the Second Amended Complaint and by ex-
the legal and/or beneficial owners of all or part of at least one musical composition registered with the U.S. Copyright Office prior to January 1, 1998[,] and embodied on a phonorecord that was reproduced, distributed, sold, imported, or exported by at least one of the Retailer Defendants during the Class Period and that was supplied to the Retailer Defendant, directly or through one or more intermediaries, by one of the aggregators listed on the Aggre-gator-Label List annexed as Exhibit A on behalf of a corresponding label listed on Exhibit A.
(3rd Am. Compl., attached as Exh. 1 to Declaration of Matthew F. Schwartz dated Feb. 9, 2015, ¶ 160). The Aggregator/Label List pairs 104 record labels—all of which, according to the plaintiff, “were [ ] either listed on Exhibits A and B to the Second Amended Complaint or were label names used by those record companies to market and distribute the music they sell”
The Proposed Complaint also “streamline[s] the damages inquiry by fixing the damages award as the minimum statutory damages of $750 per infringement available under the Copyright Act.” (PL Memo, at 2). Discussion
Rule 15 of the Federal Rules of Civil Procedure provides that courts should “freely give” leave to amend “when justice so requires.” Fed.R.Civ.P. 15(a)(2); see also Foman v. Davis,
The defendants attempt to cover all the bases, arguing that leave to amend should be denied because the plaintiff has acted in bad faith and unduly delayed the amendment; because the amendment would unduly prejudice the defendants; and because amendment would be futile.
A. Bad Faith
The defendants assert that Mr. Blag-man has acted in bad faith by including false allegations, amending for tactical advantage, and proposing self-serving amendments at the expense of the interests of other class members. (Defendants’ Memorandum in Opposition to Plaintiffs Motion for Leave to File Third Amended Complaint (“Def. Memo.”) at 6).
1. Knowingly False Allegations
The defendants claim that evidence they have produced belies the plaintiffs allegation that the identified labels “have all failed to obtain mechanical licenses or any authorization” for the content they supply. (Def. Memo, at 6; Proposed 3rd Am. Compl., ¶ 121). Specifically, they proffer (1) a declaration stating that Google, Inc., has produced spreadsheets that evidence thousands of digital phonorecord delivery licenses that were obtained for record labels included on the Aggregator/Label List; and (2) the declaration of Michael Bennett, who owns several labels on the Aggregator/Label List, which “states that mechanical licenses have been obtained by INgrooves in connection with Bennett tracks that are sold in U.S. online music stores.” (Def. Memo, at 6-7; Declaration of A. John P. Mancini dated March 6, 2015 (“Mancini Decl.”), ¶ 6).
The cases defendants cite establish that courts have denied leave to amend where the plaintiff makes allegations that are contrary to facts of which he has personal knowledge or are verifiably false. See, e.g., Lans v. Digital Equipment Corp.,
Moreover, the “facts” provided by the defendants are largely unsupported. They consist of, first, an assertion by defendants’ counsel that a spreadsheet, not provided to the Court, “evidences” licenses, with no explanation of how the spreadsheet was created, what it was based on, or how it proves the existence of such licenses. (Mancini Decl., If 6). Second, and more disquieting, the defendants contend that Mr. Bennett’s declaration somehow disproves the plaintiffs allegations by establishing that tracks provided to the Retailer Defendants by the Bennett labels through one particular aggregator were licensed. However, Mr. Bennett’s declaration says no such thing:
I personally am not familiar with the specific “mechanical” rights clearance requirements associated with the distribution in the United States of sound recordings and the compositions embodied therein. In connection with any such U.S. distribution, we typically relied on our distributors to obtain whatever mechanical licenses and other authorizations may be necessary to reproduce, distribute and sell these songs*113 in the US. To my knowledge, neither I nor any of the labels described [] took any direct action to obtain mechanical licenses to duplicate or distribute any of the musical compositions embodied in the recordings of these catalogues. I have no personal knowledge of whether Second Wind or Rants obtained the necessary licenses or authorizations. I was advised by a representative of INgrooves that it obtained the mechanical licenses and authorizations required to sell my labels’ tracks in U.S. online music stores, but I have no personal knowledge of this.
(Declaration of Michael Bennett dated Feb. 1, 2015, attached as Exh. D to Maneini Deck, ¶ 8 (emphasis added); Maneini Deck, ¶ 5). This does not come close to showing bad faith.
2. Tactical Advantage
The defendants argue that, by removing certain labels from the Proposed Complaint—particularly Zoom Karaoke—Mr. Blagman “is attempting to gerrymander the boundaries of his class to avoid unfavorable discovery regarding previously-identified labels.” (Def. Memo, at 8). That is, having reproached the plaintiff for including purportedly false allegations in the Proposed Complaint, the defendants now chide him for removing allegations that he learned were faulty through discovery.
As the plaintiff makes clear, he had reason to believe until well after the Second Amended Complaint was filed that Zoom Karaoke provided tracks to the Retailer Defendants without the proper licenses. (2nd Schwartz Deck, ¶¶4-12). For example, although a February 18, 2014 deposition notice served on RightsFlow, a licensing service owned by Google, requested copies of such licenses, none were provided. (2nd Schwartz Deck, ¶ 6). Indeed, it was not until November 7, 2014, when Google provided the plaintiff with the aforementioned spreadsheet “evidencing” licenses that any indication of Zoom Karaoke licenses came to light.
Defendants again cite inapposite cases for support. (Def. Memo, at 8-9). The plaintiff has not added “many new factual allegations, several of which seem to be inconsistent with allegations in the earlier two complaints.” Reisner v. General Motors Corp.,
3. Interests of Other Class Members
Finally, the defendants contend that, by requesting only $750 per infringement in statutory damages, the plaintiff has impaired the interests of potential class members. (Def. Memo, at 9). There appear to be two, perhaps contradictory, branches to this argument. On one hand, the defendants assert that the proposed “self-serving” amendment has “profound” and impliedly pernicious “implications for absent class members” (Def. Memo, at 9) because it would make the class uncertifiable by creating a conflict between Mr. Blagman and the absent class members that renders him an inadequate class representative (Def. Memo, at 23-25). On the other hand, the defendants accuse Mr. Blag-man of proposing the amendment to “avoid[ ] an inevitable denial of class certification.” (Def. Memo, at 9). Neither argument has merit.
As to the first, courts have held that pursuit of statutory damages on behalf of putative class members does not impair those members’ rights. See, e.g., Saucedo v. NW Management and Realty Services, Inc., 290
Nor have the defendants shown that the proposed amendment is merely a strategy to avoid denial of an (as-yet-unfiled) motion for class certification. To be sure, “[a] finding that a party is seeking leave to amend solely to gain a tactical advantage ... supports a finding that such an amendment is made in bad faith.” Franco v. Diaz,
B. Delay
The defendants point out that this application comes “more than two and a half years after the case was filed” and eight months after the Second Amended Complaint was filed. (Def. Memo, at 11). They acknowledge that I invited amendment at the December Conference, but assert that the only amendment anticipated was inclusion of “the words ‘directly or indirectly’ in the class definition,” and not “the vast overhaul of Exhibit A, limitation of absent class members’ remedies, and other changes that [the] [p]laintiff now proposes.” (Def. Memo, at 11).
I will deal with the second point first. Obviously, the substance of the amendment does not affect the length of delay involved, and thus is not a relevant factor at this step of the analysis. Certainly, the unexpectedness of an amendment can be taken into account in determining whether to grant a motion to amend, but that is more logically a concern in the prejudice analysis. In any case, there is no undue surprise here. It has been clear since December 2014 that, if Mr. Blagman sought to amend the class definition, the proposed amendment would somewhat expand the class from the definition in the Second Amended Complaint by including owners of works indirectly supplied to the Retailer Defendants. And, indeed, the modification embodied in the Aggregator/Label List (along with the limitation regarding third party technology providers) appears calculated to address my concerns about potential issues with the ascertainability of a class whose works could have been provided to the Retailer Defendants through any number of aggregators and any number of other intermediaries. (Tr. at 13). This is not, then, an unexpected and wildly different class definition. Moreover, it was proposed fewer than two months after the December conference, with the lag attributable to the plaintiffs attempt to avoid motion practice by conferring with the defendants regarding the proposed amendment. (PI. Memo, at 8). As noted above, discovery is ongoing and the class certification motion is not due until September 2015. Finally, as I recognized in connection with the plaintiffs motion to file the Second Amended Complaint, the length of time at play here—two-and-one-half years after the filing of the original complaint in a complex putative class action—is not com
C. Undue Prejudice
The defendants claim that the amendment will require substantial new discovery in connection with “new” labels included in the Aggregator/Label List and will destroy the value of completed investigation into labels that appeared in the Second Amended Complaint but have been dropped from the Ag-gregator/Label List. (Def. Memo, at 12-13).
The moving party bears the burden “of demonstrating that substantial prejudice would result were the proposed amendment to be granted.” Oneida Indian Nation of New York State v. County of Oneida,
Unlike the Second Amended Complaint, which, I observed, added allegations regarding certain “new methods of infringement,” Blagman II,
The defendants concerns are overblown. The plaintiff asserts that each of the labels on the Aggregator/Label List is an imprint or variation of a label or imprint noted in the Second Amended Complaint. (Reply at 10; Second Schwartz Deck, ¶¶ 17-18 & Exh. 5). To the extent that the defendants contend the inclusion of these imprints constitutes unfair surprise, I find such an argument difficult to credit when the Retailer Defendants have contractual arrangements with the aggregators, such as defendant Orchard, to provide the content at issue to be sold in their online stores. The “essence of the plaintiffs claim” has not changed and the defendants have not identi
D. Futility
Leave to amend may be denied as futile when the proposed pleading would not survive a motion to dismiss. See AEP Energy Services Gas Holding Co. v. Bank of America, N.A.,
1. Failure to Identify Works-Ivr-Suit
The defendants argue that Rule 8 of the Federal Rules of Civil Procedure requires the plaintiff to “identify all works-in-suit, including those compositions owned by absent class members.” (Def. Memo, at 16). Because Mr. Blagman specifically identifies only a few works that he himself owns, the defendants contend that the Proposed Complaint is futile as to the proposed class. (Def. Memo, at 17-18).
When he denied the defendants’ motion to dismiss the plaintiffs first amended complaint, Judge Carter noted that “not being able to specify the original works is to be expected for class allegations.” Blagman I,
I decline to do so. Judge Carter has already addressed this issue and found that the plaintiff was not required to name all the works at issue in this putative class action. Nothing in his opinion indicates that he was relaxing the pleading requirements of Rule 8 based on the procedural posture of the case. Rather, his observation that the plaintiff had not had the opportunity to engage in discovery merely recognized that the expected class certification motion will likely include “ ‘more information than the complaint itself affords.’ ” Blagman I,
The defendants also make an argument tailored specifically to the Proposed Complaint: the class definition, which identifies the relevant works as digital recordings supplied to the Retailer Defendants “directly or through one or more intermediaries, by one of the aggregators listed on ... [the Aggre-gator-Label List] on behalf of a corresponding label” on that list, “is so ambiguous and uncertain as to all but preclude the identification of the works-in-suit.” (Def. Memo, at 18). This is so because, according to the defendants, (1) content providers need not identify all intermediaries in the distribution chain of a digital recording (and may not know that information); (2) content providers need not provide label information, which, in any case is “arbitrary,” “free-form” text, unverified by the Retailer Defendants; and (3) content providers who include label information may not be acting “on behalf of’ that label in providing the recordings to the Retailer Defendants. (Def. Memo, at 19-20).
The defendants argument regarding the first point rests on their understanding that, although a prior version of the Proposed Complaint “explained that the inclusion of ‘intermediaries’ was intended to encompass aggregators that have a direct contractual relationship with a defendant but use third party technology providers to deliver the content,” such “language is no longer included” in the Proposed Complaint, so that the “proposed class definition encompasses content that is provided to [the] [defendants directly or indirectly by anyone on behalf of the aggregator/label combinations” appended to the complaint. (Def. Memo, at 19). The plaintiff points out that the language the defendants refer to is, indeed, included in the Proposed Complaint, as is the limitation to aggregators with a direct contractual relationship with a defendant but who use third party technology providers to deliver the content. (Third Amended Class Action Complaint and Demand for Jury Trial, attached as Exh. B to Mancini Decl., ¶ 60 n. 1; Proposed 3rd Am. Compk, ¶ 111; Reply at 16).
The defendants do not meet their burden to show that them objection regarding label information renders the amendment futile. The plaintiff has presented evidence that such information is available and usable. He has assertedly produced “thousands of pages” showing the relevant labels’ cata-logues in the Retailer Defendants’ online stores. (Second Schwartz Deck, ¶ 18 & Exh. 28). And the defendants have stipulated that they can identify the catalogues of works available in the Retailer Defendants’ online stores either “on a content-provider basis,” which would also “include record label names, to the extent that the content provider included that information,” or on a “label-by-label” basis. (Stipulation dated Oct. 23, 2014, attached as Exh. E to Mancini Deck, ¶ 9; Stipulation dated July 22, 2014, attached as Exh. F to Mancini Deck, ¶ 2; Stipulation dated June 21, 2014, attached as Exh. G to Mancini Deck, ¶3; Stipulation dated June 24, 2014, attached as Exh. H to Mancini Deck, ¶ 3; Stipulation dated June 21, 2014, attached as Exh. I to Mancini Deck, ¶ 3; Stipulation dated June 21, 2014, attached as Exh. J to Mancini Deck, ¶ 3).
Finally, the defendants’ contention that it will be impossible to determine whether a content provider is working “on behalf of’ a label without “conducting discovery into the agreements ... between the content provider and the relevant label” (Def. Memo, at 20), is undeveloped and appears somewhat sophistic. The Proposed Complaint is not concerned with the legal relationship between the aggregators and the labels; the pairings on the Aggregator/Label List are merely the path by which the works were provided to the retailers. The defendants have not shown that identification of these works is “all but preclude[d].” (Def. Memo, at 18).
2. Standing
The defendants argue, for the fourth time, that some members of the proposed class suffered no injury, and therefore lack standing, because licenses were obtained for their works. (Def. Memo, at 21-22; Defendants’ Memorandum of Law in Support of their Motion for Reconsideration of their Motion to Dismiss the Class Claim Based on Lack of Standing at 5-12; Defendants’ Opposition to Plaintiffs Motion for Leave to File Second Amended Complaint at 13-15; Defendants’ Memorandum of Law in Support of their Motion to Dismiss Plaintiffs First Amended Class Action Complaint under Federal Rule of Civil Procedure 12(b)(6) at 17-19). Judge Carter first rejected this argument in May 2013, Blagman I,
3. Class Certification
As noted in Blagman II, inquiry into class action requirements on a motion to amend filed prior to a certification motion “is limited.”
As to ascertainability, the defendants argue that, because identifying the relevant works is impossible, it is also impossible to ascertain the identities of class members. (Def. Memo, at 22). But, as discussed above, the defendants have not shown that identification of the relevant works is “impossible,” so this argument fails.
The defendants also contend that, even if the works-in-suit can be identified, ascertaining members of the proposed class will require “several fact-intensive, individualized inquiries,” including identifying copyright registrations and copyright owners. (Def. Memo, at 22). They made this same argument when they opposed the filing of the Second Amended Complaint. See Blagman II,
Finally, the defendants assert that the class is too dissimilar to meet the commonality and predominance requirements of Rule 23 because the different modes of alleged infringement—failure to license, pirating, unauthorized importation and exportation, and defective compulsory license notices—“will require different factual and legal determinations.” (Def. Memo, at 25). Again, I rejected this same argument in Blagman II, reasoning:
Mr. Blagman’s individual claims are based on the same underlying legal theory as the proposed class and arise from the same course of conduct, which is the alleged*119 systemic failure of the defendants to ensure that the songs sold in their online music stores were appropriately licensed. It is likely that there will be some variation in how and whether infringement occurred, but as long as a sufficient constellation of common issues binds class members together, variations in the sources and application of a defense will not automatically foreclose class certification under Rule 23(b)(3). Mr. Blagman also asserts that there will be common determinations of liability, at least on a label-wide basis. Given the limited inquiry to be undertaken at this stage, and the possibility that theories of liability may be limited at the certification stage to only those capable of classwide proof, there is a reasonable likelihood of certification. Although the defendants have highlighted serious issues that may indeed capsize the plaintiffs class allegations, these arguments are more appropriately weighed in the context of a class certification motion.
Conclusion
For these reasons, the plaintiffs motion for leave to file a third amended complaint (Docket no. 168) is granted.
SO ORDERED.
Notes
. There may be some imprecision in this class definition, as it appears that the relevant exhibits list only record labels and not aggregators.
. A record label may use different names to release certain recordings. These are known as "imprints,” and are described as "what the label chooses to call itself for the purposes of [a particular] recording.” (Deposition of Jason Pascal dated January 10, 2014, attached as Exh. 14 to Declaration of Matthew F. Schwartz dated March 20, 2015 ("2nd Schwartz Decl.”), at 89-90).
. Actually, there are 101 unique label (or imprint) identifiers, as Magnitude Records is listed twice because it is paired with aggregators Rout-enote (misspelled as “Routnote”) and Believe, and AP Music is listed three times because it is paired with aggregators Believe, INgrooves, and Orchard. (Aggregator/Label List). There are nine aggregators included on the Aggregator/La-bel List'—Rants, Routenote (or Routnote), Second Wind, INgrooves, Believe, Adasam, Empire, Orchard (or Orchard (IRIS)), and eOne—although the plaintiff asserts in his papers that there are only eight. (Plaintiff's Reply Memorandum of Law in Support of Motion for Leave to File Third Amended Complaint ("Reply”) at 15). Of these, only Orchard is a named defendant here.
. To be sure, it is curious that Mr. Blagman discounts the spreadsheet as evidence of some licenses but appears to credit it as evidence of Zoom Karaoke licenses. However, perhaps the evidence of Zoom Karaoke licenses is particularly strong. In any case, it is the defendants’ burden to show bad faith, see e.g., Charney,
. The defendants sought leave to file a sur-reply, arguing that the plaintiff, in responding to this assertion, would attempt to re-litigate the question of the Second Amended Complaint’s class definition, which was addressed and decided at the December Conference. (Letter of A. John P. Mancini dated March 17, 2015, at 1). But that ruling is not at issue here and the plaintiff’s arguments do not attempt to undermine it. The relevant question is whether the Proposed Complaint would, if accepted, prejudice the defendants.
. The defendants also argue that Mr. Blagman is an inadequate class representative because he has elected to pursue only statutory damages. I have already addressed (and rejected) this notion above. They also present an underdeveloped argument based on the "typicality” requirement in a three-sentence footnote lifted almost verbatim from their opposition to the plaintiff's motion for leave to file the Second Amended Complaint. (Def. Memo, at 25 n. 20; Defendants’ Opposition to Plaintiff's Motion for Leave to File Second Amended Complaint at 16 n. 12). I deem the argument waived because insufficiently presented. See DeAngels v. Corzine, Nos. 11 Civ. 7866, 12 MD 2338,