Free Motion for Miscellaneous Relief - District Court of Arizona - Arizona

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FENNEMORE CRAIG, P.C. Jordan Green (No. 001860) Lawrence Palles (No. 020263) 3003 North Central Avenue Suite 2600 Phoenix, Arizona 85012-2913 Telephone: (602) 916-5000 Email: [email protected] Attorneys for Defendant Avnet, Inc.

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA DAN COOGAN,

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No. CV2004-0621 PHX SRB Plaintiff, v. DEFENDANT AVNET, INC.' S MOTION FOR AMENDMENT OF JUDGMENT OR NEW TRIAL

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AVNET, INC., et al.,
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Defendants.
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F ENNEMORE C RAIG
PROFESSIONAL CORPORATION P HOENIX

One issue leads Avnet to file this Motion: Allen Maag' ("Maag") knowledge of, s or participation in, the distribution of annual reports pendente lite. The issue was not the subject of a stipulated or contested fact in the Joint Pretrial Order. No evidence was presented at trial on this issue. The issue was not subject to the adversarial process. The Court awarded Plaintiff $100,000 in statutory damages, based on findings that Maag intentionally chose to continue distributing print copies of the 2002 and 2003 Annual Reports to save time and money, the infringement occurred over a four year period, and Avnet was less than forthcoming during discovery. Avnet is embarrassed and apologizes to the Court and Plaintiff for the duration of the infringement and its failures during discovery. It is only with regard to the conclusion that Maag, and therefore Avnet,
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intentionally continued the infringement by distributing Annual Reports to save time and money that Avnet asks the Court to amend its Findings of Fact and Conclusions of Law or grant a new trial. Relief is appropriate because: 1. The issue whether Maag knew about, condoned, or ordered the continued distribution of the printed Annual Reports pendente lite was not an issue in the case. Plaintiff did not contend, in the Proposed Pretrial Order, and did not offer any evidence regarding Maag' knowledge of, or involvement s with, the distribution of the printed Annual Reports; The evidence in the record and the Court's other findings of fact and conclusions of law suggest a finding that the distribution of printed Annual Reports after February 2004 was accidental; and The deposition testimony of Whitney Crutchley, 1 Avnet' Manager of s Investor Relations, and the Affidavit of Allen Maag , demonstrate that the continued distribution of printed Annual Reports was without financial benefit and accidental.

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3.

Pursuant to Fed. R. Civ. P. 52(b) and 59(a),2 the Court should amend Findings of Fact ¶¶ 29, 30, 32, 33, and 34, Conclusions of Law ¶¶ 45, 49, and 56, and reduce the damage award to $45,000, an amount commensurate with the amended findings and conclusions. In the alternative, pursuant to Fed. R. Civ. P. 59(a), the Court should grant a new trial to allow introduction of evidence regarding Maag' knowledge of, or s participation in, the distribution of the printed reports after February 2004. I. BACKGROUND In February 2004, Allen Maag, Avnet' Chief Communications Officer and head of s the Public Relations Department, received a letter from Plaintiff' counsel informing him s that Avnet was infringing Plaintiff' copyright. See FOF ¶¶ 6, 24. Upon receiving the s letter, Maag instructed his staff to immediately remove all of the infringing pictures. See
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F ENNEMORE C RAIG
P ROFESSIONAL CORPORATION P HOENIX

The deposition testimony establishing the details regarding the distribution of the printed Annual Reports was developed during Mr. Meschkow' cross-examination of Ms. Crutchley on December 7, 2005. Maag s was not asked questions on the issue in his deposition so his Affidavit is attached.
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Rule 52(b) and Rule 59 motions often are filed simultaneously. Diebitz v. Arreola, 834, F. Supp. 298, 302 (E.D. Wis. 1993).
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FOF ¶ 25; Exhibit 64 (February 25, 2004 e-mail discussing efforts to remove infringing pictures); Exhibit 69 (May 14, 2004 e-mail stating, "I want to thank you all for your cooperation when I asked each of you months ago when challenged by Dan Coogan' s lawyer to stop showing anywhere online or in print Roy' photos. Please continue to s monitor that situation so no photos are exposed again.") (emphasis added). Despite Maag' instructions and the staff' efforts, three infringing uses continued. See FOF s s ¶¶ 26, 27. Until October 2005, Plaintiff' photos were posted on the GCIT website and s distributed in printed copies of Avnet' 2002 and 2003 Annual Reports. Id. s With respect to the GCIT website, the Court concluded that Avnet' failure to s retrieve the photograph was accidental. See FOF ¶ 28, COL ¶ 44. Since Avnet had made such extensive use of the photos, including distributing them to multiple third parties, when Maag ordered his staff to remove the photographs, there was no recollection that one of the photographs had been sent to GCIT. See FOF ¶ 28. Despite Avnet' good s faith effort to retrieve all of the photos, it was impossible to recover every one that had been given to a third party over the years. See COL ¶ 44. However, the Court concluded that Avnet intentionally continued the infringing distribution of the printed Annual Reports to save time and money. See FOF ¶ 29; COL ¶¶ 45, 49. The Court found that Avnet' removal of the infringing photographs from the s electronic versions of its Annual Reports supported the conclusion that the continued distribution of the printed reports was intentional.3 See COL ¶ 45. Maag' knowledge of, or involvement in, the continued distribution of the printed s Annual Reports was not an issue which defense counsel understood was to be tried. Plaintiff' 163 contentions of disputed fact (with numerous subparagraphs) in the Joint s Proposed Pre-Trial Order ("JPPTO") did not allege that Maag knew about, condoned, or
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F ENNEMORE C RAIG
P ROFESSIONAL CORPORATION P HOENIX

Based in some part on this conclusion, the Court awarded Plaintiff $100,000 in statutory damages, more than six times the amount of Plaintiff' maximum actual damages. s
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ordered the continued distribution of the printed Annual Reports. See JPPTO, Plaintiff's Contentions of Disputed Fact, ¶¶ 22-28, 30-34, 62, 129, 133. The parties stipulated that "[p]rint versions of the 2003 Annual Report were available for distribution in approximately October 2003. Distribution of the printed version of the Annual report containing Plaintiff' photograph continued until October 2005." See JPPTO, Stipulations s and Undisputed Facts, ¶¶ 25, 27 (2002 Annual Report). Similarly, Plaintiff did not introduce any evidence at trial that Maag knew about or authorized the distribution of the printed versions of the 2002 and 2003 Annual Reports after February 2004. See FOF ¶ 29, n. 5 ("Curiously, Plaintiffs counsel did not explore this issue during trial. He did not ask Maag whether he approved of the decision to permit distribution of the 2002 and 2003 Annual Reports even after the February 2004 letter. Plaintiffs counsel did not ask any questions concerning whether Avnet chose to permit distribution of those annual reports as a cost saving measure."); FOF ¶ 27 (no evidence regarding how many annual reports were distributed following Avnet's receipt of the February 2004 letter); COL ¶ 20 (no evidence that Avnet saved additional money by choosing not to reprint the 2002 and 2003 Annual Reports). Maag participates in the design and production of Avnet' Annual Reports. See s Affidavit of Allen Maag, attached as Exhibit A, at ¶ 2. Printed copies of the Annual Report are mailed directly from the Printer to investors and every Avnet office (for distribution to all employees). Id. at ¶ 3. Once the Annual Report is finalized, Maag' s direct personal involvement with the printed Annual Reports is complete. Id. at ¶ 4. Maag has only limited involvement with the distribution of the electronic version of the Annual Reports because the Public Relations Department is responsible for the content of Avnet' website. Id. at ¶ 5. Neither Maag, nor his staff, have any involvement in the s distribution of printed Annual Reports to investors or the public. Id. at ¶ 7. Their sole involvement with the distribution of any printed reports is to notify Avnet employees that
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P ROFESSIONAL CORPORATION P HOENIX

they can request copies of the printed Annual Report from the Warehouse Superintendent. Id. at ¶ 7. These requests are rare and occur only within 30 days of the release of the new Annual Report. Id. There was no benefit in time or cost savings to Avnet from the continued distribution of the printed 2002 and 2003 Annual Reports. See Maag Affidavit at ¶¶ 1518. Plaintiff' photographs had been immediately removed from the electronic versions s of the Annual Reports. Id. at ¶ 16. Any request for a printed Annual Report, without the infringing photos, could be fulfilled, at little or no cost, by simply printing a copy of the s abridged electronic version. Id. at ¶ 17. In the alternative, Plaintiff' picture could have been redacted, at little no cost, from the printed reports with a black marker. Id. at ¶ 18. Last, the request could be satisfied by sending a copy of the form 10-K, which never contained Plaintiff' photograph. s See Deposition of Whitney Crutchley ("Crutchley

Depo."), attached as Exhibit B, at p. 76:13-16. Whitney Crutchley, Avnet' Manager of Investor Relations, is responsible for s responding to requests for Avnet financial materials, including Annual Reports. See Crutchley Depo. at pp. 8:5-6, 8:24-9:1, 10:9-19. She was hired on May 17, 2004. Id. Ms. Crutchley reports to Vince Keenan, the Vice President and Director of Investor Relations, in the Finance Department. See Crutchley Depo. at pp. 12:7-21, 15:23-16:2, 18:9-13. Her predecessor, Marti Benfield, left Avnet in September of 2003. See

Crutchley Depo. at pp. 31:8-32:4. There was no Manager of Investor Relations between September 2003 and May 2004. Id. Thus the position was unfilled at the time that Plaintiff filed suit. See Complaint, filed March 29, 2004. The printed 2002 and 2003 Annual Reports were distributed by a third-party vendor, not Avnet. See Crutchley Depo. at pp. 28:19-22, 60:22-61:1, 89:6-13, 100:23101:7, 108:23-109:4. Requests for printed Annual Reports are rare because the reports are available for printing on the website. See Crutchley Depo. at pp. 10:14-11:1.
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F ENNEMORE C RAIG
P ROFESSIONAL CORPORATION P HOENIX

Ms. Crutchley first learned about the infringement and this lawsuit after speaking with Plaintiff on the phone in October 2005. See Crutchley Depo. at pp. 27:6-8, 37:1-11, 62:17-19, 72:5-13, 80:24-81:2, 116:12-119:24. Mr. Coogan had recently purchased Avnet stock and requested permission to attend the shareholder meeting, despite the fact that he had not been a shareholder of record prior to the cutoff date. Id. During a conversation with one of Avnet' in-house lawyers regarding Plaintiff' request, she learned for the first s s time about the infringement and that Plaintiff' photographs were in the 2002 and 2003 s Annual Reports. Id. In response, Ms. Crutchley informed her supervisor, Mr. Keenan, and others in her department that printed copies of the 2002 and 2003 Annual Reports containing Mr. Coogan' photographs could no longer be distributed. See Crutchley Depo. at pp. 106:7s 19, 103:7- 12. She also immediately instructed the third-party vendor to cease distribution of the printed Annual Reports containing Mr. Coogan' photos. See Crutchley Depo. at s pp. 72:5-13, 87:3-9. Thereafter, any investor requesting a printed 2002 or 2003 Annual Report was sent a copy of the printed 10-K statement, which did not contain any of Plaintiff' photographs. See Crutchley Depo. at pp. 76:13-16, 84:14-85:9. s II. ANALYSIS A. Legal Standards.

Fed. R. Civ. P. 52(b) and 59(a), permit a court to amend a judgment to "correct a clear error of law or prevent manifest injustice." Equal Employment Opportunity

Comm'n v. Lockheed Martin Corp., 116 F.3d 110, 112 (4th Cir. 1997).4 Amendment is
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Fed. R. Civ. P. 52(b) provides: On a party' motion filed no later than 10 days after entry of judgment, s the court may amend its findings ­ or make additional findings ­ and may amend the judgment accordingly. The motion may accompany a motion for new trial under Rule 59. When findings of fact are made in actions tried without a jury, the sufficiency of the evidence supporting the findings may be later questioned whether or not in the district court the party raising the question objected to the findings, moved to amend them,

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appropriate when: 1. The court "has made a decision outside the adversarial issues presented, [or]

has made a mistake not of reasoning but of apprehension...". Gregg v. American Quasar Petroleum Co., 840 F. Supp. 1394, 1401 (D. Colo. 1991). 2. There is no evidence in the record to support the court' findings of fact or s

judgment. Sequa Corp. v. GBJ Corp., 156 F.3d 136, 144 (2nd Cir. 1998). 3. A court' judgment is based on a misunderstanding of fact or law. See s

Equal Employment Opportunity Comm'n v. Lockheed Martin Corp., 116 F.3d 110, 112 (4th Cir. 1997) (district court misunderstood the relevance of subpoenaed information and declined to enforce the subpoena); Norman v. Arkansas Dept. of Educ., 79 F.3d 748, 750 (8th Cir. 1996) (holding trial court should have set aside dismissal based on erroneous belief that plaintiff failed to timely respond to court' inquiry); Mobil Oil Corp. v. Amoco s Chem. Corp., 915 F. Supp. 1333, 1377 (D. Del. 1995) (court miscalculated damages); Atlantic States Legal Found., Inc. v. Karg Bros., Inc., 841 F. Supp. 51, 53 (N.D.N.Y. 1993) (court based its ruling on a misunderstanding of the relevant regulatory scheme); Halper v. Browning, King & Co., 325 F.2d 644, 645 (D.C. Cir. 1963) (parties tried the case in reliance on the court' mistaken belief that the defendant bore the burden of s proof). ...
or moved for partial findings. Fed. R. Civ. P. 59(a), provides, in pertinent part: A new trial may be granted to all or any of the parties and on all or part of the issues... (2) in an action tried without a jury, for any of the reasons for which rehearings have heretofore been granted in suits in equity in the trial courts of the United States. On a motion for a new trial in an action tried without a jury, the court may open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions of law or make new findings and conclusions, and direct the entry of a new judgment.
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B.
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Avnet' Continued Distribution Of The Printed Annual Reports Was s Accidental.

The Court found it "inconceivable" that Avnet remembered to remove the infringing photos from the electronic versions of the Annual Reports, but forgot to remove them from the printed reports. See FOF ¶ 29. Thus, the Court concluded that the

continued distribution of the printed reports was intentional, and done for the purpose of saving time and money. See FOF ¶ 29 ("Maag must have either explicitly or tacitly approved of" the continued distribution), COL ¶¶ 45, 49. The Court' conclusion is a s decision made outside the adversarial issues presented, and is inconsistent with the evidence and the Court' other findings and conclusions. s 1. Mr. Maag' knowledge of, or participation in, the distribution of s the printed Annual Reports was not an issue in the case.

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F ENNEMORE C RAIG
P ROFESSIONAL CORPORATION P HOENIX

One purpose of a pre-trial conference and a pre-trial order is to identify and simplify the issues for trial. See Fed. R. Civ. P. 16(a), (c)(1); FDIC v. Glickman, 450 F.2d 416, 419 (9th Cir. 1971). The pre-trial order "shall control the subsequent course of the action unless modified by a subsequent order." Fed. R. Civ. P. 16(e); see also U.S. v. Hayes, 369 F.2d 671, 677 (9th Cir. 1966) (essential to the orderly disposition of litigation that the parties be able to rely on course clearly defined in pre-trial proceedings); Trujillo v. Uniroyal Corp., 608 F.2d 815, 817 (10th Cir. 1979) ("A definitive pre-trial order reflecting the agreement of the parties, having been entered into after full discovery, must, of course, control the subsequent course of the action."). The pre-trial order "represents a complete statement of all the contentions of the parties." Trujillo, 608 F.2d at 817. Maag' knowledge of, or involvement in, the continued distribution of the printed s Annual Reports was not an issue in the pre-trial order. Plaintiff' 163 contentions of s disputed fact in the Joint Proposed Pre-Trial Order did not allege that Maag knew about, condoned, or ordered the continued distribution of the printed Annual Reports. The
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parties stipulated only that print versions of the 2003 Annual Report were "available" for distribution in October 2003 and that distribution of the printed reports continued until October 2005. As a result, Avnet and its counsel never anticipated the issue, or its significance, and did not offer evidence regarding the details of the distribution. 5 Amendment is appropriate in this case because the court' "decision [was] outside the s adversarial issues presented." Gregg, 840 F. Supp. at 1401. There is no evidence, and Plaintiff never alleged, that Maag had any knowledge of or connection with the distribution of the printed reports. evidence is to the contrary. 2. There is no evidence that Avnet intentionally continued to distribute the printed Annual Reports. As explained below, the

Avnet and Maag had no reason to discontinue all of the other infringing uses but intentionally continue to use the printed reports. Plaintiff argued, but failed to present any evidence, that Avnet saved money by not reprinting the 2002 and 2003 Annual Reports. See COL ¶ 20. Avnet removed the infringing photos from the electronic versions of the Annual Reports. See COL ¶ 45. There was no reason for Avnet to reprint the reports and no savings due to their continued distribution.6
Maag apologized for Avnet' infringement of Plaintiff' photos. See FOF ¶ 34, COL ¶ 56. However, the s s Court was critical of Mr. Maag for making only a partial apology. See FOF ¶ 34, COL ¶ 56 (Mr. Maag "did not own up to the more serious matter of intentionally violating Plaintiffs copyright"). As explained below, Avnet and Maag deny that the continued distribution of the printed reports was intentional. Avnet requests that the Court consider the fact that Mr. Maag had never been accused of intentionally choosing to continue distributing the Annual Reports prior to testifying. Avnet should not be penalized because Mr. Maag failed to apologize for acts that he was never accused of, or that the evidence showed he had no involvement in. The Court should also consider the Affidavit of Allen Maag in connection with Avnet' request for Rule s 59(a) relief, which provides affirmative evidence that: (1) Maag did not know about the continued distribution of the printed Annual Reports, and (2) the lack of any financial benefit from their distribution. Consideration of additional evidence and amendment of findings is appropriate when a court' decision s was based on an issue neither party anticipated or advocated at trial. See Sequa, 156 F.3d at 144 ("Where the district court adopted, after trial, a contractual interpretation advocated and anticipated by neither party that, in turn, directed the calculation of actual damages incorporate a financial element as to which no evidence has been introduced at trial ­ the introduction of limited additional evidence was warranted.").
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F ENNEMORE C RAIG
P ROFESSIONAL CORPORATION P HOENIX

Avnet could fulfill a request for a printed Annual Report, without the infringing photos, by printing a copy of the abridged electronic version. In the alternative, Avnet could redact the picture from the printed reports with a black marker or send a copy of form 10-K. There was no need to incur substantial costs to reprint Annual Reports that were rarely requested and could be printed or redacted as needed, at little or no cost. The uncontroverted evidence demonstrates that Maag instructed his staff to immediately halt the infringement, in both print and electronic formats. See Exhibit 69 ("I want to thank you all for your cooperation when I asked each of you months ago when challenged by Dan Coogan' lawyer to stop showing anywhere online or in print Roy' s s photos. Please continue to monitor that situation so no photos are exposed again.") (emphasis added). The Court found that Avnet' staff acted in good faith. Avnet had no s motive to treat the printed reports differently than any other use. Therefore, there was no basis to conclude that Avnet acted intentionally in distributing the printed reports after February 2004. 3. Distribution of the printed Annual Reports is performed by a separate Avnet department through a third-party vendor.

Responses to requests for Avnet' financial materials, including Annual Reports, s are handled by Ms. Crutchley, in Avnet' Finance Department. 7 Ms. Crutchley does not s report to Maag, who heads Avnet' Public Relations Department. Actual distribution of s printed Annual Reports is performed by a third-party vendor, not Avnet. 8 These requests are rare because the reports are available for printing on the website. Ms. Crutchley' s

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The Court should amend the Judgment based on the evidence presented in Ms. Crutchley' deposition s and Mr. Maag' Affidavit, or grant a new trial for the purpose of receiving this evidence. See Sequa, 156 s F.3d at 144.
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Distribution of the printed reports by a third-party vendor is not an excuse for the infringement. This evidence is offered solely to demonstrate that the distribution of the printed reports after February 2004 occurred outside of Maag' view and knowledge, and was accidental. s
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position was vacant at the time that Mr. Maag received notice of the infringement from Plaintiff' counsel in February 2004. Ms. Crutchley terminated the distribution of the s printed reports immediately upon learning about the infringement for the first time in October 2005. Thereafter, any investor requesting a printed 2002 or 2003 Annual Report was sent a copy of the printed 10-K statement, which did not contain any of Plaintiff' s photographs. The Court concluded that Avnet' failure to remove the photo from the GCIT s website in February 2004 was accidental. See FOF ¶ 28, COL ¶ 44. In reaching this conclusion, the Court noted that since Avnet had made such extensive use of the photos, including distributing them to multiple third parties, when Maag ordered his staff to remove the photographs, there was no recollection that one of the photographs had been sent to GCIT and despite their good faith effort to retrieve all of the photos, it was impossible to recover every one that had been given to a third party over the years. See FOF ¶ 28, COL ¶ 44. The same factors demonstrate that the continued distribution of the printed reports was accidental. Responses to requests for Avnet financial materials are handled by a separate Avnet department and the actual distribution of the printed Annual Reports is performed by a third-party vendor, not Avnet. In February 2004, when Mr. Maag

received notice of the infringement, he ordered the halt of the use of the infringing photos. At the time, there was no Manager of Investor Relations. Ms. Crutchley first found out about the lawsuit and continuing infringement in October 2005 and immediately halted the distribution of the infringing printed reports. Therefore, the Court should amend its Findings of Fact, Conclusions of Law and reduce the Judgment. C. The Judgment Should Be Reduced To $45,000.

The Court awarded Plaintiff $100,000 in statutory damages, more than six times the amount of Plaintiff' maximum actual damages. See COL ¶ 14. A $45,000 award is s
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appropriate on the facts of this case. See Peer Int' Corp. v. Pausa Records, Inc., 909 F.2d l 1332, 1336 (9th Cir. 1990). An award of three times Plaintiff' maximum actual damages s would more accurately reflect the conduct of the parties, while discouraging future infringement. Id. at 1337. III. CONCLUSION Avnet was surprised by the Court' findings because the issue whether Maag knew s about, condoned, or ordered the continued distribution of the printed Annual Reports was never an issue in the case. The conclusion that Avnet intentionally continued to distribute printed Annual Reports to save money is unsupported by any evidence. The evidence adduced at trial, Ms. Crutchley' and Mr. Maag' testimony, and the Court' other s s s Findings of Fact and Conclusions of law suggest a finding that the distribution of printed Annual Reports after February 2004 was accidental. The Court should amend its Findings of Fact, Conclusions of law and reduce the amount of the Judgment to $45,000. In the alternative, the Court should grant a new trial to allow introduction of evidence regarding the distribution of the printed reports after February 2004. Respectfully submitted this 6th day of September, 2006. FENNEMORE CRAIG, P.C.

By s/Jordan Green Jordan Green Lawrence Palles Attorneys for Defendant Avnet, Inc.

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CERTIFICATE OF SERVICE I hereby certify that on September 6, 2006, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for filing and s transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Jordan Meschkow, Esq. Meschkow & Gresham, P.L.C. 5727 North Seventh Street Suite 409 Phoenix, Arizona 85014-5818 Nancy Giles, Esq. Giles Legal PLC 733 W. Willetta Street Phoenix, Arizona 85007

s/Jordan Green
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