By AC

Malibu Media v. Fantalis et al: another update

We continue to cover one of the most important battlegrounds against copyright trolls, Malibu Media, LLCv. Jeff Fantalis et al lawsuit (12-cv-00886). If you don’t know what it is about, please consider reading the previous posts on the topic:

• In a well prepared and mighty counter-attack, “Malibu Media v. Fantalis” case turns into “Fantalis v. Malibu Media.”
• Copyright trolls: “We don’t care if you did it or not, we just want your money!”
• Malibu Media v. Fantalis et al: an update.

Motion denied on technicality, resubmitted

On 11/7 Jeff Fantalis filed a motion for leave to file surreply to Kotzker’s objection to Fantalis’ objection to the entry of Default Judgment against Bruce Dunn (whew… the back and forth is really getting extreme). The motion was denied on a technicality:

Defendant Fantalis’ Motion for Leave to File Surreply [filed November 5, 2012; docket #107] is denied without prejudice for failure to comply with D.C. Colo. LCivR 7.1A, which states,

• The court will not consider any motion, other than a motion under Fed. R. Civ. P. 12 or 56, unless counsel for the moving party or a pro se party, before filing the motion, has conferred or made reasonable, good-faith efforts to confer with opposing counsel or a pro se party to resolve the disputed matter. The moving party shall state in the motion, or in a certificate attached to the motion, the specific efforts to comply with this rule.

It looks like Fantalis has all but given up on trying to confer with Kotzker before filing. So Fantalis went and conferred with Kotzker, and needless to say Kotzker objected. So, Fantalis refiled the motion having fulfilled the technicality:

Calling out fallacy

This motion is a real beauty. Fantalis is basically arguing 3 points:

1. Kotzker cannot argue that defendants are jointly and severally liable (JSL) in the complaint to minimize filing costs, and then later turn around and argue the defendants are independent from one another to maximize damages.
2. Plaintiff is dropping charges and changing theories midstream to prejudice discovery proceedings.
3. Plaintiff cannot collect twice on recovery.

So I know we all love to argue that swarm theory of joinder is bogus, and I still agree with this because in many cases it kills the troll business model before it begins: suing individuals one by one is not a profitable business model.

However, many districts like the theory, and many subpoenas are being granted under it. So it seems counterintuitive that in fact, the swarm theory of joinder has some benefits if a case has proceeds past the initial ex parte discovery phase that Fantalis is now trying to take advantage of, and some downsides Kotzker is trying to avoid. Also see Rob Cashman’s post, which explores this line of argument more fully.

Fantalis claims that Kotzker cannot argue that defendants are JSL in the complaint, and then turn around and argue they are not at the current stage. Plaintiff benefited in those early stages because it allowed them to file a single complaint against 30 Does, and get all their information with one subpoena. Now, they want to argue the opposite, because if they are JSL, then Malibu Media can only collect $150,000 among the 30 Does, instead of $150,000 from each.

In reliance on these sworn statements [on JSL], the Court permitted Plaintiff to proceed with filing a single case against 30 anonymous defendants and granted Plaintiff’s request for expedited discovery to uncover their personal identifying information […]

However, Plaintiff’s interests have now changed. Plaintiff has achieved its goal: it obtained their personal identifying information of the Does and has obtained settlements from many of them. It got a settlement from Deus and a default against Dunn. Now Plaintiff simply seeks to maximize the amount it can collect from this lawsuit with as little public exposure as possible. Therefore, it is dropping any claims that would require it to reveal its own financial interests — hence, dropping its claim for actual damages — and is dropping the claim for contributory infringement because in that way, it can attempt to collect maximum statutory damages separately from each individual infringer.

Fantalis argues that plaintiff is estopped (a tool courts invoke to prevent the “improper use of judicial machinery”) from abandoning its previous allegations, on the grounds that it cannot hold two opposing points of view especially when the previous point of view was accepted by the court (they granted ex parte discovery based on swarm theory of joinder), and would prejudice the other party.

So as many of us suspected, Kotzker is now shifting tactics to avoid discovery and collect maximum damages for the Malibu Media. The charge dropped was contributory infringement, and Kotzker is now electing to take only statutory damages. This is important because

[B]y dropping the claim of contributory liability and demand for actual damages, Plaintiff has avoided providing discovery in response to any questions that might conceivably touch on anything but direct infringement and statutory damages until a decision is made on Plaintiff’s motion to dismiss. Moreover, Plaintiff seeks to gain an unfair advantage by avoiding this claim of contributory liability: namely, it seeks to avoid having to engage in a hearing on the issues of damages.

This is very important, because as we learned from Troll Nicoletti, and as we expected all along, Malibu Media is just a shell corporation whose sole existence is to contract works from Brigham Field and then sue individuals who download them. Ultimately, Brigham Field and other stakeholders in Malibu Media do not want to be exposed to liability through these lawsuits. Thus, they hope to limit and confound discovery of the financial workings of Malibu Media.

Finally, Fantalis argues that Malibu Media is not allowed to collect twice for the same infringement. The default on Bruce Dunn was ordered at $2,500 in statutory damages + $739.26 in attorney’s fees, for a total of $3,239.26 (which is funny on 2 counts. 1) it’s significantly less than the $30,000 they were requesting and 2) it’s less than the typical $3400 Prenda asks for settlement. I believe Malibu Media settles for between $7000 and $10000 for these multiple infringement suits. In this case, not even answering the summons is more economical than settling).

Fantalis also counts Dues in this action, and 8 other Does who settled in the previous action. Thus Malibu Media has recovered at least nine separate settlements for the same alleged act of infringement. Again they argued originally that the defendants were JSL. Accordingly:

Copyright infringement is in the nature of a tort, for which all who participate in the infringement are jointly and severally liable… under elementary principles of tort law a plaintiff is entitled to only one recovery for a wrong. Payments made in partial satisfaction of a claim are credited against the remaining liability.

Thus Malibu Media can only recover a total of $150,000 for the infringement from all Does combined if they are JSL. Now Kotzker is trying to pivot and say “No wait… these were separate acts, and we want $150,000 from each individual.” This position also prevents Kotzker from having to divulge settlement info related to the infringement to the court.

Further, it seems to me that if they want to argue that all members of the swarm for all time are JSL (as they argue in their complaints), settlements from any suit across the country for the infringement of a given film in the same swarm should be credited toward the same $150,000 total, not just the current action. After all, if defendants in the swarm in the same district spanning months of time are JSL, then any member in the swarm in any district at any time is JSL. But that is my own conjecture.

Finally, I leave you with this passage from the motion, which sums the whole piece up nicely (emphasis added):

As noted above, the allegations of Plaintiff’s Complaints against defendant… were very clear: these defendants are jointly and severally liable; they participated together in one massive, collective activity; and they could not possibly have acted alone because this was such a huge undertaking — in fact, the very nature of the technology requires concerted action. Thus, for Plaintiff now to say that each act of infringement was discrete and unique is not only disingenuous, it gives the lie to the entire foundation of Plaintiff’s cases across the nation. Either the defendants worked together or they didn’t. Either they participated in the BitTorrent or they didn’t. This is a question of fact without which Plaintiff cannot succeed in its case: if Plaintiff wants to concede this issue, it should be required to dismiss its entire case against Defendant. The fact that Dues settled and Dunn defaulted does not change Plaintiff’s burden on this score.

So what’s it going to be Kotzker? Joinder or no Joinder? Can’t have both.