Copyright: “Innocent” LLC Owner Still Liable for Willful Infringement

Joe Hand Promotions, Inc. v. Alburl (N.D. Ala. Feb. 20, 2020) [JoeHand v Barraza]

This short copyright decision has some interesting holdings regarding copyright infringement and LLCs.

The basics are that Sidelines Pub & Grub exhibited a PPV fight (2017 Mayweather vs. McGregor) without paying the license fee to the US promoter Joe Hand.

One of the defendants is Angie Barraza. Barraza was minority owner in the business (10%); was a daytime manager of the bar; but apparently had no knowledge of the alleged unlawful activity.

Barraza claims that all of the unlawful activity alleged in the complaint fell under the purview of Scott Alburl [Barraza’s husband at the time] and was orchestrated and carried out by him without her knowledge or assent. Barraza also stated that, even if she had known about her former husband’s activities with regard to the Program, she would not have been able to stop him because, she says, Alburl was abusive and deceitful towards her in their marriage.

The problem is that the ex-husband is in default.  Prior to the infringement another co-owner “sold” his rights to the business back to Alburl for “the amount of $0.00.”  The bar was never profitable and is now closed.  So . . . Barraza is the only one with money to pay.

Liability for Owner: Assuming that Barraza’s allegations are true, the Court must determine whether, despite her alleged limited ownership and control of Sidelines33, LLC, she can still be held vicariously liable for the infringing conduct of Alburl and Sidelines33, LLC.

  • The question: Is Barraza personally liable for the (willful) copyright infringement?
  • Answer: Yes, she is vicariously liable — even for the willful infringement.

In its opinion, the court appeared to have no concern regarding the role of “limited liability” or limits on officer liability. The court explains:

All business owners share in both the gains and losses of their businesses. Had the business been profitable, Barraza would have been entitled to a share of those returns. However, she can not now disclaim her interest in the business to avoid its liabilities.

The court went-on to explain that Barraza’s “level of influence” over the company activities is immaterial and irrelevant “for the purpose of determining whether she is jointly liable for the business’s copyright infringement.”

= = =

The statutory damage regime offers an award of $750 – $30,000 for each copyrighted work infringed.  That award can be increased to $150,000 for willful infringement, and lowered to $200 for innocent infringement.

(c) Statutory Damages.–

(1) … the copyright owner may elect … an award of statutory damages … for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just.

(2) In a case where … the court finds, that infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000. In a case where … such infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages to a sum of not less than $200.

17 U.S.C. 504.

Joe Hand asked for $24,000 in statutory-damages — treble $8,000 standard license for this size of bar showing the fight.   Barraza asked that the court lower the damages to the $200 minimum for innocent infringement.

In its decision, the court found that willfulness damages would be appropriate even though Barraza may have acted be innocent herself.

The infringement at issue in this case was willful. . . .  Barraza appears to misunderstand the concept of vicarious joint and several liability. As noted above, the Plaintiff is not required to even prove that she had knowledge of or participated in the infringement. Rather, as an owner, the infringing actions of Sidelines are imputed to her.

Since the underlying infringement was willful — that willfulness can be imputed onto Barraza as the business owner. Accordingly, the amount of statutory damages is between $750 and $150,000.”

The statutory damages provision is written to suggest that the court (i.e., the judge) would set the amount of statutory damages “as the court considers just.”  However, the Supreme Court held in Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998) that statutory copyright damages serve as substitute for regular damages in a way that preserves the Constitutional right to a Jury Trial. “[I]f a party so demands, a jury must determine the actual amount of statutory damages under § 504(c) in order to preserve the substance of the common-law right of trial by jury.” Id. (internal citations omitted).

Bottom line here – the jury gets to pick a number between $750 and $150,000.

 

12 thoughts on “Copyright: “Innocent” LLC Owner Still Liable for Willful Infringement

  1. 3

    Dennis, Why doesn’t the LLC provide any protection to her personally? What liability is limited?

    1. 3.1

      I was wondering the same thing. There is nothing in the opinion about having to pierce the corporate veil to get at the assets of the shareholders. I’m guessing that either the LLC tag was used and it really wasn’t one or that they owners filed a piece of paper to set up the LLC and never followed through with the rest of the corporate structure in order for it to be effective. Either way, it suggests that they didn’t have any kind of intelligent legal counsel in setting up the business.

  2. 2

    Give me a @#$%^& break. He’s the jerk and SHE has to pay?

    If the company infringed, then the company should pay, and she the individual is off the hook. Conversely, if the individual infringed, then it was her now-ex, not her, who infringed, and she owes nothing. The fact that the infringer is broke is tough for the plaintiff.

    I hope the jury sees through this baloney. I know any five-year-old would.

    1. 2.1

      The judge really blew the vicarious liability bit, and completely ignored the fact that this D had no legal or practical ability to control or prevent the infringement. If appealed, this judgment will be overturned.

      1. 2.1.1

        Correct. The judge gets off on a tangent of whether you need knowledge of the infringement (you don’t) and whether the person was actually involved in the infringement (not necessary).

        But the 11th Circuit law he cites clearly states you need BOTH the “ability to supervise infringing activity” and “a financial interest in that activity,” both of which are longstanding requirements for vicarious liability.

        Ability is the key — could she have told the owner, stop playing the infringing program at the bar? If she could she is liable — even if she did not know what was happening, and even if she had no actual involvement in the decision to play the program. OTOH, it is certainly possible that as a minor owner, the majority owner could have said, butt out, it is my decision.

        Suppose I own one share of Google. I have a financial interest in what it does, but I have no authority to tell it what to do, including any authority to tell it not to infringe someone’s copyright.

        The other problem I see is that the company’s willfulness is imputed to her. I don’t think that is right — one can be vicariously liable without being willful.

        1. 2.1.1.1

          BL,

          I am not sure that you can use the analogy of your 1% to a principal (albeit minor) owner.

          That’s a little “Fox New’sie” to me…

          1. 2.1.1.1.1

            A shareholder is a minor owner. They are the same thing.

            The point is, you have to show “ability to supervise infringing activity.” The fact that someone has an ownership interest in a company (corporation or LLC) does not mean they have any supervisory authority. There are plenty of companies, large and small, who have passive shareholders or part-owners that have no authority at all, they are just passive investors. It is not a matter of how much you own, but what authority you have.

            1. 2.1.1.1.1.1

              Being of signatory authority (i.e., an officer) and a shareholder are most definitely NOT the same thing.

              So while we may be getting to the same place (I don’t think that we are really disagreeing), we get there a bit differently, and your original post requires caveats (as my rejoinder suggests) in order to hold.

              You are welcome.

              1. 2.1.1.1.1.1.1

                Did she have signature authority on behalf of the company? If not or you don’t know, your caveats are non sequitors.

                1. The caveats are NOT non sequitors (maybe you meant a different word).

                  The caveats may move the needle differently based on the answers to the actual factual situation — but they very much remain pertinent.

    2. 2.2

      Another possibility…does a divorce clear liability for per-divorse torts?

      That is, if her husband (at the time, now former) was personally liable for something he did while married, can someone sue the ‘marital assets’ for recovery of *his* tort (just like they could have if the couple was still together)?

  3. 1

    Were criminal penalties not a part of this case….?

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