Free Response to Motion - District Court of Arizona - Arizona

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FENNEMORE CRAIG Jordan Green (No. 001860) Charles Houston (No. 020844) 3003 North Central Avenue Suite 2600 Phoenix, Arizona 85012-2913 Telephone: (602) 916-5000 Email: [email protected] Email: [email protected] Attorneys for Defendants Avnet, Inc., Roy Vallee, and Allen Maag UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA DAN COOGAN, doing business as Coogan Photographic, Plaintiff, No. CV2004-0621 PHX SRB

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AVNET, INC., a foreign corporation, Roy Vallee and Jane Doe Vallee, husband and wife; and ALLEN MAAG and JANE DOE MAAG, husband and wife, Defendants.

DEFENDANTS'RESPONSE TO PLAINTIFF' MOTION FOR HOLDING S ALLEN MAAG JOINTLY AND SEVERALLY LIABLE AS TO ANY DAMAGES

(Assigned to The Hon. Susan R. Bolton)

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F ENNEMORE C RAIG
PROFESSIONAL CORPORATION P HOENIX

The Court should deny Plaintiff' Motion because Defendant Allen Maag does not s have a direct financial interest in the copyright infringement at issue in this lawsuit. Mr. Maag' infinitesimally small percentage of Avnet, Inc.' ("Avnet") stock is insufficient to s s create a direct financial interest. Avnet is not an undercapitalized ` shell' or ` dummy' corporation behind which Mr. Maag is hiding his assets. Any damages suffered by Plaintiff are only fairly attributed to Avnet. Factual Background Allen Maag is Avnet' Chief Communications Officer. Mr. Maag owns 2,200 s shares of Avnet stock and stock options that, if exercised, would result in ownership of an
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additional 80,000 shares of Avnet stock. (Affidavit of Allen Maag, attached as Exhibit 1). Avnet currently has 145,916,000 shares of stock outstanding. (New York Stock Exchange website print-out, attached as Exhibit 2). Allen Maag therefore owns approximately .00150% of Avnet' stock.1 s Legal Argument Virtually every circuit, including the Ninth Circuit, has adopted the same twoprong test to determine whether a corporate officer is jointly and severally liable with the corporation for copyright infringement. Jobete Music Co., Inc. v. Johnson

Communications, Inc., 285 F. Supp. 2d 1077, 1083 (S.D. Ohio 2003). The prerequisites for vicarious liability are: (1) the right and ability to supervise the infringing activity and (2) a direct financial interest in the infringing activity. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1022 (9th Cir. 2001). Direct financial benefit is an essential element of a claim for vicarious liability. F.E.L. Publications, LTD v. National Conference of Catholic Bishops, 466 F. Supp. 1034, 1042 (N.D. Ill. 1978) (finding a lack of direct financial interest where defendant did not receive commission from infringing party). Courts refuse to find vicarious liability where plaintiffs fail to show that the defendant had a direct financial interest. The Roy Export Company Establishment v. Trustees of Columbia University, 344 F. Supp. 1350, 1353 (S.D.N.Y. 1972). The purpose of the doctrine of vicarious liability in copyright infringement is to "prevent an entity that profits from infringement from hiding behind undercapitalized ` dummy' operations when the copyright owner eventually sues." Nelson-Salabes, Inc. v. Morningside Development, LLC, 284 F.3d 505, 513 (4th Cir. 2002) (quoting Hard Rock Café Licensing Corp. v. Concession Service, Inc., 955 F.2d 1143, 1150 (7th Cir. 1992)). This purpose can be seen in the body of vicarious infringement case law, the vast majority
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Even if Mr. Maag exercised his stock options, he would own only .05633% of Avnet' stock. s

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of which deals with corporate officer defendants who own most if not all of the infringing corporation' stock.2 s Allen Maag cannot be vicariously liable for Avnet' copyright infringement s because he lacks a direct financial interest in the infringing activities. Mr. Maag did not receive any income arising directly out of the use of Plaintiff' photographs. Furthermore, s even assuming Avnet profited through its use of Plaintiff' photographs (a contention s Avnet disputes), Mr. Maag did not share in those profits. Mr. Maag' .00150% stock s ownership is insufficient to create a direct financial interest in the infringing activities because the infinitesimally small amount of money relating to the use of Plaintiff' s photographs that Mr. Maag may have received through his stock ownership could not possibly have caused or motivated Mr. Maag to infringe Plaintiff' copyright. On these s facts, if Mr. Maag is vicariously liable so is every Avnet employee involved in the use of Plaintiff' photographs who happens to own even one share of Avnet stock. s The rationale behind vicarious liability for corporate officer defendants does not apply to Allen Maag. Mr. Maag is not the sole or majority shareholder in Avnet. Mr.

See e.g., Broadcast Music, Inc. v. Blueberry Hill Family Restaurants, Inc., 899 F. Supp. 474 (D. Nev. 1995) (sole shareholder); Silor Music v. IML Corp., 867 F. Supp. 565 (E.D. Mich. 1994) (sole shareholder); Superhype Publishing, Inc. v. Vasiliou, 838 F. Supp. 1220 (S.D. Ohio 1993) (sole shareholder); Realsongs v. Gulf Broadcasting Corp., 824 F. Supp. 89 (M.D. Louisiana 1993) (50% shareholder); Pinkham v. Sara Lee Corp., 83 F.2d 824 (8th Cir. 1992) (sole shareholder); Meadowgreen Music Co. v. Voice in the Wilderness Broadcasting, Inc., 789 F. Supp. 823 (E.D. Texas 1992) (sole shareholder); Luft v. Crown Publishers, Inc., 772 F. Supp. 1378 (S.D.N.Y. 1991) (65% shareholder); Chi-Boy Music v. Towne Tavern, Inc., 779 F. Supp. 527 (N.D. Alabama 1991) (sole shareholder); Crabshaw Music v. K-Bob' Of El Paso, Inc., 744 F. Supp. 763 (W.D. Texas 1990) (50% shareholder); Major s League Baseball Promotion Corp. v. Colour-Tex, Inc., 729 F. Supp. 1035 (D.N.J. 1990) (90% shareholder); Fermata International Melodies, Inc. v. Champions Golf Club, Inc., 712 F. Supp. 1237 (S.D. Texas 1989) ("majority" shareholder); Merrill v. Bill Miller' Bar-B-Q Enterprises, Inc., 688 F. Supp. 1172 (W.D. Texas 1988) (25% s shareholder); RCA/Ariola International, Inc. v. Thomas & Grayston Co., 845 F.2d 773 (8th Cir. 1988) (50% shareholder); Shumann v. Albuquerque Corp., 664 F. Supp. 473 (D.N.M. 1987) ("controlling" shareholder); Broadcast Music, Inc. v. Behulak, 651 F. Supp. 57 (M.D. Florida 1986) (50% shareholder); van Halen Music v. Palmer, 626 F. Supp. 1163 (W.D. Arkansas 1986) (50% shareholder); Sygma Photo News, Inc. v. High Society Magazine, Inc., 778 F.2d 89 (2nd Cir. 1985) (sole shareholder); Blendingwell Music, Inc. v. Moor-Law, Inc., 612 F. Supp. 474 (D. Del. 1985) (sole shareholder); Warner Bros., Inc. v. Lobster Pot, Inc., 582 F. Supp. 478 (N.D. Ohio 1984) ("principal" shareholder); Milene Music, Inc. v. Gotauco, 551 F. Supp. 1288 (D.R.I. 1982) (sole shareholder); Donsco, Inc. v. Casper Corp., 587 F.2d 602 (3rd Cir. 1978) (sole shareholder); Lottie Joplin Thomas Trust v. Crown Publishers, Inc., 456 F. Supp. 531 (S.D.N.Y. 1977) (sole shareholder).
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Maag owns an insignificant percentage of Avnet' stock. Avnet is not an undercapitalized s ` shell' or ` dummy' corporation behind which Mr. Maag is hiding his assets. Avnet is capable of paying the damages, if any, proven by Plaintiff.3 Allen Maag' circumstances are similar to those of the employee defendant in s Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 886 F.2d 1545 (9th Cir. 1989). In Frank Music, an MGM employee staged, produced, and directed a theatrical production that included the plaintiff' copyrighted material. The plaintiff sought to hold the MGM s employee jointly and severally liable for MGM' profits. The court refused, finding that s the employee was paid via salary and did not receive royalties or other meaningful compensation based on the copyright infringement. The plaintiff then sought to receive statutory damages against the employee defendant. The court refused this request as well, holding that the plaintiff would be amply compensated by the MGM corporate defendants. Conclusion The Court should deny Plaintiff' Motion. Allen Maag did not have a direct s financial interest in the copyright infringement. Mr. Maag' stock ownership is too small s to create a direct financial interest, even assuming Avnet had profited from its use of Plaintiff' photographs. Avnet is a large, well-capitalized company that is more than s capable of paying any judgment that may arise out of the current lawsuit. Dated this 22nd day of December, 2005. FENNEMORE CRAIG, P.C.

By s/Jordan Green Jordan Green Charles Houston Attorneys for Defendants Avnet, Inc., Roy Vallee, and Allen Maag
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Even if the Court grants Plaintiff' Motion, Allen Maag would be liable only for the profit he personally received. s See, Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 519 (9th Cir. 1985) ("When a copyright is infringed, all infringers are jointly and severally liable for plaintiff' actual damages, but each defendant is severally s liable for his or its own illegal profit; one defendant is not liable for the profit made by another.")
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CERTIFICATE OF SERVICE I hereby certify that on December 22, 2005, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for s filing and 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

s/Jordan Green
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F ENNEMORE C RAIG
P R O F E S S I O N A L C O R P O R A T ION P HOENIX

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