Cavs USA Inc v. Slep-Tone Entertainment Corporation, No. 2:2011cv05574 - Document 86 (C.D. Cal. 2013)
Court Description: ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT 63 , 64 by Judge Dean D. Pregerson . (lc). Modified on 3/21/2013. (lc).
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Cavs USA Inc v. Slep-Tone Entertainment Corporation Doc. 86 1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 CAVS USA, INC., 12 13 14 15 Plaintiff, v. SLEP-TONE ENTERTAINMENT CORPORATION d/b/a SOUND CHOICE, a North Carolina corporation, 16 Defendants. 17 ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 11-05574 DDP (JEMx) ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT [Dkt. Nos. 63 & 64] 18 19 Presently before the court are Plaintiff CAVS USA 20 Inc.(“CAVS”)’s Motion for Partial Summary Judgment and Defendant 21 Slep-Tone Entertainment Corporation d/b/a/ Sound Choice (“Slep- 22 Tone” or “Sound Choice”)’s Motion for Summary Judgment. 23 considered the parties’ submissions and heard oral argument, the 24 court adopts the following order. 25 I. BACKGROUND 26 Having CAVS is a California corporation that designs, manufactures, 27 and distributes hardware for karaoke music, including machines and 28 players that use compression technology known as MP3 + graphics Dockets.Justia.com 1 (“MP3+G”) file compression. 2 a compressed data format that allows thousands of songs to be saved 3 onto a medium. 4 karaoke media format was the compact disc + graphics (“CD+G”) 5 format. 6 onto the JB 99 CAVS karaoke machine (“JB-99"). Defendant Sound 7 Choice sells karaoke content in the form of CD+G discs. (Id.) (Id. ¶ 4.) (Han Decl. ¶ 2.) The MP3+G format is Prior to the MP3+G format, the primary CD+Gs had limited memory but could be uploaded 8 In June 2011, Sound Choice sent an email (the “Email”) to 9 fewer than 1,000 email addresses of people involved in the karaoke 10 11 12 13 industry. (Slep Decl. ¶ 7.) The Email stated: This is an OFFER OF AMNESTY from a lawsuit for the use of Sound Choice Karaoke Music on certain CAVS Machines or preloaded Karaoke hard drives. 14 15 You may be aware that Sound Choice is bringing lawsuits against the users of illegal karaoke CAVs and computer hard drive units (http://thekiaa.org/the-lawsuits.html.) 16 17 18 19 20 Sound Choice is willing to grant you amnesty from a lawsuit for your unauthorized use of Sound Choice content on an illegal karaoke hard drive or CAVS unit in exchange for information concerning your purchase, on the following two conditions: 1. The unit must have been purchased from one of the following websites: 21 [list of seven websites] 22 23 or from someone using one of the following ebay user names 24 [list of three user names] 25 or purchased from the store: 26 Karaoke Kandy Store (aka Lightyear Music) [address] 27 28 2. AND the hard drive or CAVS unit was purchased by you and you did not receive any Sound Choice discs as part of 2 1 2 3 4 your purchase, or the discs you did receive with Sound Choice songs were Super CDGs (possibly DVDs with thousands of songs). If you meet these 2 conditions and will cooperate and provide us the information we need about your hard drive or CAVS purchase this is your chance to be granted amnesty against our lawsuits. 5 [...] 6 7 If you know anyone who meets these conditions, please forward this email to them. [. . .] 8 (Decl. Susan B. Meyer in Support of Plaintiff’s Motion for Partial 9 Summary Judgment, Exh. D.) 10 Plaintiff CAVS filed a First Amended Complaint alleging trade 11 libel and unfair competition. 12 on all issues except for damages, and Sound Choice moves for 13 summary judgment on all claims. 14 II. LEGAL STANDARD 15 CAVS now moves for summary judgment Summary judgment is appropriate where the pleadings, 16 depositions, answers to interrogatories, and admissions on file, 17 together with the affidavits, if any, show “that there is no 18 genuine dispute as to any material fact and the movant is entitled 19 to judgment as a matter of law.” 20 seeking summary judgment bears the initial burden of informing the 21 court of the basis for its motion and of identifying those portions 22 of the pleadings and discovery responses that demonstrate the 23 absence of a genuine dispute of material fact. 24 Catrett, 477 U.S. 317, 323 (1986). 25 the evidence must be drawn in favor of the nonmoving party. 26 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 242 (1986). 27 If the moving party does not bear the burden of proof at trial, it 28 is entitled to summary judgment if it can demonstrate that “there Fed. R. Civ. P. 56(a). 3 A party Celotex Corp. v. All reasonable inferences from See 1 is an absence of evidence to support the nonmoving party’s case.” 2 Celotex, 477 U.S. at 325. 3 Once the moving party meets its burden, the burden shifts to 4 the nonmoving party opposing the motion, who must “set forth 5 specific facts showing that there is a genuine issue for trial.” 6 Anderson, 477 U.S. at 256. 7 party “fails to make a showing sufficient to establish the 8 existence of an element essential to that party’s case, and on 9 which that party will bear the burden of proof at trial.” Summary judgment is warranted if a Celotex, 10 477 U.S. at 322. 11 that a reasonable jury could return a verdict for the nonmoving 12 party,” and material facts are those “that might affect the outcome 13 of the suit under the governing law.” 14 There is no genuine issue of fact “[w]here the record taken as a 15 whole could not lead a rational trier of fact to find for the non- 16 moving party.” 17 Corp., 475 U.S. 574, 587 (1986). 18 A genuine dispute exists if “the evidence is such Anderson, 477 U.S. at 248. Matsushita Electric Indus. Co. v. Zenith Radio It is not the court’s task “to scour the record in search of a Keenan v. Allan, 91 F.3d 1275, 19 genuine issue of triable fact.” 20 1278 (9th Cir. 1996). Counsel has an obligation to lay out their 21 support clearly. 22 F.3d 1026, 1031 (9th Cir. 2001). 23 entire file for evidence establishing a genuine issue of fact, 24 where the evidence is not set forth in the opposing papers with 25 adequate references so that it could conveniently be found." 26 III. DISCUSSION 27 Carmen v. San Francisco Unified Sch. Dist., 237 The court “need not examine the A. Litigation Privilege 28 4 Id. 1 Sound Choice moves for summary judgment, arguing that it 2 enjoys absolute immunity to claims of trade libel and unfair 3 competition based on California’s doctrine of litigation privilege 4 under California Civil Code § 47(b). 5 that the privilege applies to any communication (1) made in 6 judicial or quasi-judicial proceedings; (2) by litigants or other 7 participants authorized by law; (3) to achieve the objects of the 8 litigation; and (4) that have some connection or logical relation 9 to the action.” “The usual formulation is Silberg v. Anderson, 50 Cal. 3d 205, 212 (1990). 10 The doctrine “is not limited to statements made during a trial or 11 other proceedings, but may extend to steps taken prior thereto, or 12 afterwards.” 13 Whether a communication is related to a judicial proceeding is 14 determined by looking to its function in the process, not only its 15 content. 16 court, a letter between counsel or an oral statement-must function 17 as a necessary or useful step in the litigation process and must 18 serve its purposes.” 19 (Ct. App. 1996). 20 Rusheen v. Cohen, 37 Cal. 4th 1048, 1057 (2006). “[T]he communicative act-be it a document filed with the Rothman v. Jackson, 57 Cal. Rptr. 2d 284, 292 Sound Choice argues that the litigation privilege applies to 21 the Email because at the time it was sent, it was engaged in 22 litigation against Charles M. Polidori and his company, Karaoke 23 Kandy Store, Inc., for “selling equipment and media that had been 24 loaded with unauthorized, counterfeit copies of Slep-Tone’s SOUND 25 CHOICE®-branded karaoke accompaniment tracks.” 26 Kurt Slep, President of Slep-Tone, stated: 27 28 (Slep Decl. ¶ 2.) The defendants in that litigation had made sales of equipment under various company names, websites, and eBay 5 1 usernames, though all of their sales emanated from one 2 location. 3 In discovery, the defendants demanded to see evidence we 4 had gathered regarding their activities. 5 been gathered by a private investigator working for an 6 industry group, the Karaoke Industry Alliance of America, not 7 under Slep-Tone’s direct supervision. 8 made their discovery request, we learned that the private 9 investigator’s evidence had been lost or was otherwise 10 The evidence had After the defendants unavailable. 11 (Id. ¶¶ 3-4.) 12 addresses we had compiled as being owned by persons involved in 13 some way with the karaoke industry, including venues that feature 14 karaoke entertainment, karaoke system operators, and others. 15 list had fewer than 1,000 addresses on it.” 16 states that Sound Choice sent the Email to “a list of email (Id. ¶ 6.) That Mr. Slep 17 [t]he email in question was sent in order to attempt 18 to obtain new evidence for use in our case, by requesting 19 that evidence from persons who may have purchased 20 infringing systems from the defendants. 21 were identified in the email using the store name, eBay 22 usernames, and websites known by us to have been used by 23 the defendants. The defendants 24 Because we have filed many lawsuits against users of 25 unauthorized, counterfeit materials, we believed it to be 26 necessary to offer amnesty to induce those persons to 27 come forward. 28 6 ¶¶ 7-8.) Sound Choice argues that because the Email was sent 1 (Id. 2 for the purpose of gathering evidence in the Karaoke Kandy Store 3 litigation, it is covered by the litigation privilege. 4 CAVS argues that the litigation privilege does not apply 5 because (1) the purportedly libelous statements about CAVS products 6 were extraneous and without sufficient connection to the litigation 7 insofar as the Email makes no mention of the particular litigation 8 and the Karaoke Kandy complaint makes no mention of CAVS or its 9 products; (2) the Email was an excessive publication to 1000 or 10 more direct recipients without a proven interest in the litigation; 11 and (3) the Email was published to nonparticipants and is therefore 12 outside of the scope of the privilege. 13 The court finds that there is an issue of material fact as to 14 whether there was a logical relation between the Email and the 15 litigation. 16 CAVS players, nor does the Email mention the case directly. 17 Email was apparently sent to Sound Choice’s full Rolodex, which 18 included “persons involved in some way with the karaoke industry, 19 including venues that feature karaoke entertainment, karaoke system 20 operators, and others.” 21 breadth of this group, combined with the lack of direct reference 22 to the litigation on the face of the Email, attenuates the logical 23 relation of the Email to the litigation and raises a question of 24 fact as to whether it is appropriate to grant Sound Choice the 25 “extraordinary protection” of the litigation privilege. 26 Rothman v. Jackson, 57 Cal. Rptr. 2d. at 292 (The litigation 27 privilege “affords its extraordinary protection to the uninhibited 28 airing, discussion and resolution of disputes in, and only in, The Karaoke Kandy Store complaint does not mention The (Sound Choice Mot., Slep Decl. ¶ 6.) 7 The See 1 judicial or quasi-judicial arenas. Public mudslinging, while a less 2 physically destructive form of self-help than a public brawl, is 3 nevertheless one of the kinds of unregulated and harmful feuding 4 that courts and their processes exist to prevent.”) 5 The court finds that a reasonable finder of fact could 6 determine that the Email is not logically related to the Karaoke 7 Kandy Store litigation and therefore that the statements it 8 contains are not protected by the privilege. 9 10 11 B. Trade Libel Claim 1. Whether Email Is Defamatory CAVS argues that it has established its trade libel claim with 12 uncontested facts. Trade libel is the publication of “an 13 intentional disparagement of the quality of property, which results 14 in pecuniary damage to plaintiff.” 15 215 Cal. Rptr. 416, 419 (Ct. App. 1985). 16 sentences in the Email that use the word “illegal” to establish 17 disparagement: Nichols v. Great Am. Ins. Cos., CAVS points to two 18 (1) “You may be aware that Sound Choice is bringing 19 lawsuits against the users of illegal karaoke CAVs and 20 computer hard drive units . . . .” 21 (2) “Sound Choice is willing to grant you amnesty from a 22 lawsuit for your unauthorized use of Sound Choice content 23 on an illegal karaoke hard drive or CAVS unit in exchange 24 for information concerning your purchase on the following 25 two conditions.” 26 (Decl. Meyer, Exh. D.) CAVS asserts that calling its units 27 “illegal” is disparaging on its face. 28 8 1 According to Sound Choice, the Email does not call the units 2 “illegal.” In sentence (1), it argues, “illegal” modifies 3 “karaoke” and not “CAVS unit,” and the phrasing, if inept, 4 indicates that the content on the machines is illegal, not that the 5 machines themselves are illegal. 6 expressing concern with CAVS units and computer hard drive units 7 loaded with “illegal karaoke” tracks. 8 Choice’s reading, “illegal” is a redundancy, restating the 9 previously mentioned “unauthorized use of Sound Choice content.” In other words, Sound Choice is In sentence (2), on Sound 10 CAVS, in contrast, asserts that in both cases the word “illegal” is 11 an adjective modifying “CAVS unit.” 12 “The question whether challenged statements convey the 13 requisite factual imputation is ordinarily a question of law for 14 the court. However . . . some statements are ambiguous and cannot 15 be characterized as factual or nonfactual as a matter of law. In 16 these circumstances, it is for the jury to determine whether an 17 ordinary reader would have understood the article as a factual 18 assertion.” 19 1991)(internal quotation marks and citations omitted). 20 Kahn v. Bower, 284 Cal. Rptr. 244, 249 (Ct. App. The court agrees that calling a product “illegal” is 21 disparaging on its face but finds that there is an issue of 22 material fact as to whether Sound Choice has done so in the Email. 23 Here, both the defamatory and non-defamatory interpretations may be 24 reasonable, in large part because the two sentences are inartfully 25 composed. 26 “illegal karaoke CAVS unit.” 27 Cavs unit,” taken as expressing a single idea, or modifying only 28 “karaoke.” It is unclear what “illegal” is modifying in the phrase It could be modifying either “karaoke On the former interpretation, the units themselves are 9 1 being referred to as illegal; on the latter, only the content is 2 illegal. 3 only conclusion to be drawn from a grammatical analysis is that 4 their meaning is ambiguous. Additionally, even if the overall 5 impression from the sentences is that the CAVS units are illegal, 6 the Email taken as a whole arguably presents a context in which it 7 becomes more clear that the illegal content of the machines is what 8 is being referenced, not the illegality of the CAVS units and hard 9 drives themselves. 10 Because the sentences are not clearly constructed, the CAVS argues that it has presented evidence that the Email has 11 in fact been interpreted in the defamatory sense. 12 declaration from a karaoke systems manager stating that the Email 13 caused him to believe that CAVS products are illegal.1 14 Decl. ¶ 4.) 15 of the language of the Email and of the sentences taken in context. 16 The court finds that there is an issue of fact as to the defamatory 17 character of the Email and that it is a question that should be 18 submitted to a jury. (Seiflein This declaration alone cannot overcome the ambiguity 2. Damages 19 20 CAVS presents a The court finds that there is also a triable issue of fact as 21 to whether CAVS suffered damages from the Email. CAVS’ expert 22 compared the growth in CAVS sales between 2000 and 2005, subsequent 23 to CAVS’ introduction of new digital technology (the JB-99 24 25 26 27 28 1 As discussed below, the other two declarations are from karaoke machine resellers who report that the Email caused their customers to believe that CAVS machines are illegal. (See Decls. of Kmetova and Morhaim.) Because these declarants do not state that they believed that CAVS machines are illegal, but instead attribute that belief to their customers, these statements are hearsay. CAVS has not provided any exception under which they are admissible. 10 1 machine). She compared that rate of growth to the 2010 to 2015 2 period, subsequent to the introduction of touchscreen and “all-in- 3 one” karaoke systems, and asserts that it is a “reasonable 4 assumption that growth following the introduction of its innovative 5 new products in 2010-2012 would have resulted in growth at least 6 comparable and analogous to that during the prior period of 7 introduction in 2000-2005, namely an annual rate of 16.5%.” (Wilson 8 Report 2.) 9 but for the actions of Sound Choice, CAVS would have maintained or She asserts that “[i]t is a reasonable assumption that, 10 even grown this 30% of the market at the 16.5% rate earlier 11 achieved. 12 would have remained the same, one-fifth or 20% of its customers 13 would be replacing their equipment each year. Therefore, CAVS’ 14 market share in 2011, but for the interference of Sound Choice 15 would have been 3,150 purchasers of karaoke machines.” Even assuming conservatively that CAVS’ market share (Id.) 16 CAVS’ expert provides no basis for the assumption that sales 17 of CAVS’ 2010 model would be similar to that of its 2002 and 2004 18 models. 19 equally attractive or significant, and the context into which such 20 technologies are introduced - here, the world of karaoke - may also 21 be changing. 22 evidence to support her claim that the Email was the “but-for 23 cause” of the decline in sales. 24 evidence that, to the contrary, CAVS’ sales were in decline prior 25 to the Email and that the Email did not reduce the average number 26 of units sold per month in the year that followed. 27 Report 4-8 & Exh. 1.) Technological advancements and modifications are not Additionally, CAVS’ expert has not provided any Sound Choice’s expert presents 28 11 (Crandall 1 CAVS also asserts that the declarations establish that it lost 2 actual sales due to the Email. However, the two statements that 3 would establish that the Email caused customers to not purchase 4 CAVS units appear to be hearsay. 5 wholesaler Leonard Morhaim stated that “some of my customers have 6 opted not to purchase CAVS players based upon their beliefs that 7 CAVS products were illegal.” (Morhaim Decl. ¶¶ 3-4.) 8 Stephan Kmetova, also a karaoke equipment seller, reports that “As 9 a result of the June 2011 Mass Email, my customers, including Karaoke retail store owner and Likewise, 10 businesses known as Chopsticks, Porter House, Pachos, and others 11 who also received the email, have opted not to purchase CAVS 12 players based upon their beliefs that CAVS products were illegal 13 and out of fear of a lawsuit.” (Kmetova Decl. ¶ 4.) 14 the proposition that the Email caused customers to refrain from 15 buying CAVS units, these statements are hearsay. 16 hearsay statement is from Philip Seiflein, a manufacturer of high- 17 end and specialized karaoke systems, who asserts that “[a]s a 18 result of the June 2011 Mass Email, I believe that CAVS products 19 are illegal and I have refrained from purchasing any CAVS 20 products.” 21 Seiflein, a karaoke system manufacturer, would normally purchase 22 CAVS units as part of his professional activities; while he stated 23 that he refrained from purchasing any CAVS units, he did not state 24 that he would otherwise have purchased them. 25 26 (Seiflein Decl. ¶¶ 3-4.) Offered for The only non- It is unclear whether Mr. 3. Conclusion on Trade Libel The court finds that there are material issues of fact as to 27 the defamatory nature of the Email and as to whether CAVS suffered 28 damages caused by the Email. 12 1 C. Unfair Competition Claim 2 Because the court finds that there are issues of fact as to 3 the elements of CAVS’ trade libel claim, it also finds that summary 4 judgment is not appropriate as to its unfair competition claim. 5 IV. CONCLUSION 6 For the reasons stated above, both Motions for Summary 7 Judgment are DENIED. 8 IT IS SO ORDERED. 9 10 11 Dated: March 21, 2013 DEAN D. PREGERSON United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13
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