1st Circuit Reinstates $675,000 File-Sharing Award Against Tenenbaum — Sony BMG v. Tenenbaum

[Post by Venkat Balasubramani]

Sony BMG Music Entertainment v. Tenenbaum, 2011 WL 4133920 (1st Cir. Sept. 16, 2011) [pdf]

Sony’s lawsuit against Joel Tenenbaum was one of two file-sharing lawsuits brought by record labels against end users that proceeded to trial. (The RIAA’s lawsuit against Jammie Thomas resulted in three trials, a $1.5mm verdict which was reduced to $54,000 and is currently on appeal.)

In a nutshell, in this case, the jury returned a verdict of $675,000. The trial judge found the award excessive under Due Process standards and reduced it to $67,500. The First Circuit finds that the trial judge erred in not reducing the award based on common law remittitur and giving Sony the choice between accepting the reduced verdict or opting for a new trial. The original verdict is reinstated and the case is sent back to Judge Gertner to rule on plaintiff’s motion for remittitur.

The court’s opinion summarizes the facts viewed in the light most favorable to the jury’s finding, and contains plenty of facts that cast Tenenbaum in a not-so-favorable light. According to the court, he had plenty of notice of facts that precluded any sort of argument that he was innocent as to the consequences of his actions:

He used Napster . . . [After Napster was shut down,] he instead began using other peer-to-peer networks for the same illegal purposes. . . . Tenenbaum shifted to these other networks after Napster’s termination despite his knowledge that Napster was forced to close on account of a lawsuit brought against it for copyright infringement. . . . . Tenenbaum knew that his conduct, both his downloading and distribution, was illegal and received warnings the industry had started legal proceedings against individuals. He received several warnings regarding the potential liability his actions carried with them.

He received warnings from Goucher College, which he attended, from his internet service provider, from his parents, and from the record companies themselves. It looks like he pretty much ignored these warnings. He was far from a model defendant, and the court’s recitation of the facts makes it seem like he was an odd choice to push legal arguments that had yet to gain mainstream acceptance. (Tenenbaum was represented by a law professor who engaged in some questionable tactics, to say the least.)

Tenenbaum raised a variety of pre-trial issues, including some that veered into tax-protestor territory. He claims, for example, that Congress did not intend for the Copyright Act to impose liability against “consumer copiers,” or intend that the Copyright Act be used for infringement suits of this nature. That’s right up there with arguing that the IRS is should be abolished and is not properly empowered to levy taxes. The trial court rejects these arguments, and they fare no better with the First Circuit:

We reject Tenenbaum’s invitation to usurp Congress’s legislative authority and to disregard binding Supreme Court precedent.

The case went to trial, and the jury returned a verdict of $625,000 ($22,500 per infringement x 30 works). The Copyright Act provides for statutory damages to be determined by the court (rather than the jury), but the Supreme Court held in Feltner v. Columbia Pictures Television Inc. that the Seventh Amendment’s right to a jury trial entitles a copyright defendant to have the amount of statutory damages determined by a jury and not a judge. Following Feltner, courts leave the damages determination entirely to the jury. After trial, Tenenbaum filed a motion for a new trial or for a reduction of the award based on the fact that it was excessive and “shocking to the conscience.” He filed a separate motion arguing that the award violated Due Process standards. Sony opposed Tenenbaum’s motions, and the United States also intervened, since Tenenbaum challenged the statutory damages award as being overly excessive. Judge Gertner tackled the Due Process question and held that an award of $625,000 violates Due Process.

The First Circuit says that the trial court should have avoided the constitutional issue and should have ruled first on the motion for remittitur. As the First Circuit points out, the constitutional issues are “difficult.” Supreme Court precedent holds that states have wide latitude to impose statutory damages for violations of state statutes. On the other hand, under more recent case law, where a jury awards punitive damages, the jury award must comport with Due Process standards. It’s not entirely clear where statutory damages fit in–are they punitive in nature? There’s also the issue that Copyright Act damages are set by Congress, rather than awarded pursuant to state law, and a court’s scrutiny of a statutory damages range set by Congress raises separation of powers issues.

At the end of the day, the First Circuit says that Judge Gertner should have avoided these thorny issues and should have instead considered the remittitur motion. There’s a final question as to whether the trial court should give Sony the choice between accepting the award or a new trial or whether it may merely adjust the award. The court says that the usual rule is that the court may not reduce the jury’s award without giving the plaintiff a choice, but there is case law from intermediate appeals courts which suggests that the court may reduce an award which is “punitive” in nature without giving the plaintiff a choice for a new trial. The court cites to Feltner and says that regardless of the precise nature of statutory damages under the Copyright Act, since the Supreme Court held in Feltner that the issue of statutory damages must be tried to a jury, the court may not reduce the award without also giving the plaintiff the option of a new trial.

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I’m not sure exactly where this leaves us. The $625,000 award in favor of Sony is reinstated. Judge Gertner’s analysis of the Due Process limits on statutory damages and the feelings of Congress about peer-to-peer file sharing, while interesting, is swept aside (for now). The million dollar question, and one I wish the court had answered, is whether Sony can immediately appeal the choice to accept a reduced award or whether it has to proceed with the new trial. Will Sony be trapped in an “endless loop” of going through trials resulting in a damage awards that the court reduces on the basis that the awards are “excessive”? (See Ben Sheffner’s post about the Thomas-Rasset case: “Labels reject remittitur, opt for third trial on damages in Jammie Thomas-Rasset case.”) The other question that the First Circuit’s opinion raised but didn’t address is: if statutory damages are to be determined by the jury, why does the trial court get to take this decision away from the jury and reduced it via a remittitur? What is the effect of Feltner on the common law practice of reducing damage awards? Where an award is within the statutory range, it seems odd for the court to have authority to reduce it via a remittitur–isn’t this the point of Feltner?.

My instinct is that the labels will end up winning this particular battle over damages, although I don’t know the various details of how statutory damages, Due Process, and remittitur fit together. Most notably, Tenenbaum does not look like anything close to a model defendant. While the economic arguments around what relationship the damage award bears to the actual harm suffered by the labels may be debatable, and the current scheme for awarding statutory damages may not be ideal, it will be tough for any court to ignore Tenenbaum’s own culpability. And it looks from the First Circuit’s opinion, there is a lot of it.

Added: Judge Gertner who heard the case has since retired from the bench and is now teaching at Harvard Law (alongside Charlie Nesson, whom she threatened with sanctions in this case, which should make for some lively faculty meetings). It looks like it will be up to Judge Gertner’s replacement to determine whether the award should be reduced.

Other coverage:

Techdirt: “Appeals Court Reinstates $675,000 Jury Award Against Joel Tenenbaum On Procedural Grounds”

EFF: “Appellate Court Sends Tenenbaum Case Back For Another Round”

Previous posts:

Copyright Statutory Damages Award Violates Constitutional Due Process–Sony v. Tenenbaum