Curet-Velazquez v. Acemla De Puerto Rico, Inc.

United States Court of Appeals
For the First Circuit
No. 10-1587
HILDA CURET-VELÁZQUEZ, EDUARDO CURET-VELÁZQUEZ,
HILDA VELÁZQUEZ-COTO,
Plaintiffs, Appellees,
v.
ACEMLA DE PUERTO RICO, INC.;
LATIN AMERICAN MUSIC CO., INC.,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Aida M. Delgado-Colón, U.S. District Judge]
Before
Lynch, Chief Judge,
Torruella and Lipez, Circuit Judges.
Mauricio Hernández-Arroyo, with whom José Luis Torres and Law
Offices of Mauricio Hernández-Arroyo, were on brief for appellants.
Samuel F. Pamias-Portalatín, with whom Aileen E. Vázquez-
Jiménez and Hoglund & Pamias, P.S.C., were on brief for appellees.
August 29, 2011
TORRUELLA, Circuit Judge. This appeal concerns a
copyright infringement claim involving four songs that Puerto Rican
composer Catalino "Tite" Curet-Alonso ("Tite Curet") authored.
Appellees Hilda Curet-Velázquez, Eduardo Curet-Velázquez and Hilda
Velázquez-Coto (collectively, the "Curet Heirs") filed a complaint
against the appellants, ACEMLA de Puerto Rico, Inc. ("ACEMLA") and
Latin American Music Co., Inc. ("LAMCO"), alleging copyright
infringement under the Copyright Act of 1976, as amended, 17 U.S.C.
§ 101, et seq. The complaint also included Puerto Rico law claims
for, inter alia, breach of contract, nullity of contract, and
rescission of contract. The district court adopted the magistrate
judge's report and recommendation granting in part the Curet Heirs'
motions for summary judgment and finding that the appellants had
infringed on the Curet Heirs' valid copyrights on four of Tite
Curet's songs. After a bench trial to determine damages and to
address the Curet Heirs' contractual claims, the court also imposed
the maximum statutory damages for the copyright infringements
pursuant to 17 U.S.C. § 504(c)(1).
Appellants now ask us to find that the district court
erred in, among other things, (a) extending the deadline for
discovery; (b) not finding that the Curet Heirs' claims were barred
by the Civil Code's statute of limitations for rescission claims,
P.R. Laws Ann. tit. 31, § 3500; (c) allowing the Curet Heirs'
expert witness to testify regarding matters outside his expert
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report, not excluding his testimony as a sanction; and (d) imposing
the maximum statutory damages pursuant to 17 U.S.C. § 504(c)(1).
For the reasons explained hereafter, we affirm the judgment of the
district court.
I. Background
A. Facts1
Tite Curet was a prolific Puerto Rican composer who
passed away on August 5, 2003, leaving three heirs. LAMCO is a
publisher that owns music through contracts with composers and
ACEMLA is a performance rights society. Tite Curet's musical
catalog with ACEMLA and LAMCO includes approximately 1100 to 1200
compositions.
At issue in this case are four of Tite Curet's songs,
Pueblo Latino, Distinto y Diferente, Periódico de Ayer, and Planté
Bandera. On August 4, 1995, Tite Curet signed contracts with LAMCO
and ACEMLA assigning and conveying the licensing rights to certain
songs, including the four songs at issue here. According to these
contracts, LAMCO and ACEMLA were obligated to provide Tite Curet
with bi-annual royalty reports on February 15th and August 15th of
each year. Tite Curet also signed the June 9, 1998 Rider (the
1
For additional details, refer to the magistrate judge's report
and recommendation, Curet-Velázquez v. ACEMLA de P.R., Inc., No.
06-1014 (ADC), 2008 WL 4006701, at *4-6 (D.P.R. Aug. 26, 2008), and
the district court's post-trial opinion and order, Curet-Velázquez
v. ACEMLA de P.R., No. 06-1014 (ADC), slip op. (D.P.R. Mar. 31,
2010).
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"1998 Rider"), which extended the previously mentioned contracts
indefinitely in exchange for $6000. However, as the Curet Heirs'
expert testified, ACEMLA and LAMCO never paid Tite Curet the $6000.
ACEMLA and LAMCO failed to comply with the requirement to
provide bi-annual royalty reports. They failed to issue separate
royalty reports between 1995 and 2001 but instead compiled the
royalties data for those years in the 2002 and 2003 royalty
reports. Further, although ACEMLA and LAMCO are separate entities
and should have provided separate reports, they submitted combined
data in the 2002 and 2003 royalty reports. They failed to provide
any royalty reports for 2005 and did not provide the 2006 and 2007
royalty reports until January 15, 2009. To make matters worse, the
district court found that the reports contained inconsistencies and
accounting discrepancies. See Curet-Velázquez v. ACEMLA de P.R.,
No. 06-1014 (ADC), slip op. at 10, 14-17 (D.P.R. Mar. 31, 2010).
ACEMLA and LAMCO also issued several checks to Tite Curet as
royalty reimbursements or as performance-based bonuses, but
accounted for them as royalty advances. ACEMLA and LAMCO also
failed to report royalties and to issue payments with respect to
the same. See id. at 10-12.
B. Procedural History
The Curet Heirs filed a complaint against ACEMLA and
LAMCO in the United States District Court for the District of
Puerto Rico seeking injunctive and monetary relief pursuant to the
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Copyright Act of 1976, as amended, 17 U.S.C. § 101, et seq. The
district court had jurisdiction over this claim pursuant to 28
U.S.C. §§ 1331 and 1338. The complaint also included Puerto Rico
law claims for breach of contract, nullity of contract, rescission
of contract, unfair competition, tort, unjust enrichment and moral
rights. The district court had jurisdiction over these claims
pursuant to 28 U.S.C. §§ 1338 and 1367.
On April 11, 2006, the Curet Heirs filed a motion for
summary judgment and a statement of facts in support thereof. This
initial motion for summary judgment stated that no genuine issue of
material fact existed with respect to ACEMLA's and LAMCO's
infringement of the Pueblo Latino copyright. The district court
set September 15, 2006 as the deadline for ACEMLA's and LAMCO's
response to the Curet Heirs' motion for summary judgment. ACEMLA
and LAMCO filed their opposition to the motion for summary judgment
on the deadline date, and the Curet Heirs filed a sur-reply on
October 27, 2006.
On February 22, 2007, the Curet Heirs filed a second
motion for summary judgment and a second statement of material
facts alleging that no genuine issue of material fact existed with
respect to ACEMLA's and LAMCO's infringement of Pueblo Latino,
Distinto y Diferente, Periódico de Ayer, and Planté Bandera.
ACEMLA and LAMCO filed their opposition to the second motion for
summary judgment on April 13, 2007.
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On June 19, 2007, the district court issued an order
referring the motions for summary judgment to a magistrate judge
for a report and recommendation pursuant to 28 U.S.C. § 636(b)(1).
On November 21, 2007, the magistrate judge issued a report and
recommendation granting in part and denying in part the motions for
summary judgment. Curet-Velázquez v. ACEMLA de Puerto Rico, Inc.,
No. 06-1014 (ADC), 2008 WL 4006701, at *4 (D.P.R. Aug. 26, 2008).
The magistrate judge recommended granting summary judgment
regarding 1) the copyright infringement claim regarding the
licensing of the performance of Pueblo Latino at a concert at
Hostos Community College and 2) the copyright infringement claims
regarding the licenses issued as to Planté Bandera and Periódico de
Ayer.2 Id. at *14. On January 2, 2008, ACEMLA and LAMCO filed
their objections to the report and recommendation, but despite the
objections, the district court adopted the report and
recommendation in full in an order issued on August 26, 2008. Id.
at *1.
The district court then held a bench trial to address two
issues: 1) the amount of damages and 2) the Curet Heirs' claims of
breach of contract and rescission. During the trial, the court
heard testimony from Félix Norman Román-Negrón ("Román"), the Curet
Heirs' expert witness, regarding the royalty reports and his
2
The Curet Heirs were unable to produce admissible evidence to
establish that ACEMLA and LAMCO committed infringements of Distinto
y Diferente. Curet-Velázquez, 2008 WL 4006701, at *11-12.
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calculation of the damages to the plaintiffs. His valuation of the
Curet Heirs' damages was based on two value theories: 1) the
Opportunity Cost Theory and 2) the Conclusion of Value Theory
("CVT"). ACEMLA and LAMCO moved to strike Román's testimony,
arguing that he was not qualified as an expert in copyright
infringement and challenging the value theories he used to assess
the Curet Heirs' damages. On March 31, 2010, the court issued its
opinion and order, and entered judgment. Curet-Velázquez, No. 06-
1014 (ADC), slip op. at 17-18.
The district court concluded that Román was qualified as
an expert witness, but rejected the use of the Opportunity Cost
Theory, concluding that the theory did not pass muster under
Federal Rule of Evidence 702 and Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579 (1993). Curet-Velázquez, No.
06-1014 (ADC), slip op. at 4-5.
With respect to the copyright infringement claim, the
court concluded that ACEMLA's and LAMCO's copyright infringements
were not "willful" under the Copyright Act because at the time of
the infringements ACEMLA and LAMCO were appealing the district
court's ruling regarding the ownership of Pueblo Latino. Id. at
21. The court then proceeded to impose the maximum statutory
damages allowed under 17 U.S.C. § 504(c), which was $30,000 for
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each of the four infringements,3 for a total of $120,000 in
statutory damages. Id. at 21-23. The court reasoned that it was
impossible for it to determine the amount of damages due to
ACEMLA's and LAMCO's incomplete records. Id. at 22.
The court also concluded that the statute of limitations
for actions arising under the Commonwealth's Commerce Code or under
Article 940 of the Commerce Code, P.R. Laws Ann. tit. 10, § 1902,
did not bar the Curet Heirs' claims. Id. at 17-18. The court
noted that even if this statute of limitations were to apply, it
would not bar the Curet Heirs' claims because of the on-going
nature of ACEMLA's and LAMCO's actions. Id. at 18. Further, the
court determined that the applicable statute of limitations was the
fifteen year statute of limitations for breach of contract pursuant
to Article 1864 of the Puerto Rico Civil Code, P.R. Laws Ann. tit.
31, § 5294, and that the claims fell within the required
limitation. Id. at 18-19.
ACEMLA and LAMCO filed a notice of appeal on April 15,
2010. This court has jurisdiction over the appeal pursuant to 28
U.S.C. § 1291.
3
The district court determined that ACEMLA and LAMCO committed
two infringements of the Pueblo Latino copyright and one
infringement each of the Periódico de Ayer and Planté Bandera
copyrights. Curet-Velázquez, No. 06-1014 (ADC), slip op. at 20.
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II. Discussion
A. Copyright Act Preemption and Statute of
Limitations
Appellants contend that the Copyright Act of 1976
preempts the Curet Heirs' cause of action under Puerto Rico law for
rescission of contract, P.R. Laws Ann. tit. 31, § 3491, and that
the statute of limitations for actions of rescission, id. § 3500,
bars the Curet Heirs' action seeking such rescission. Appellants
failed to properly raise these arguments at the district court
level and, absent compelling circumstances, these arguments are
waived.
We do not find any evidence in the record below that
ACEMLA and LAMCO argued that the Copyright Act preempts the cause
of action for rescission of contract under Puerto Rico law. "It is
hornbook law that theories not raised squarely in the district
court cannot be surfaced for the first time on appeal." McCoy v.
Mass. Inst. of Tech., 950 F.2d 13, 22 (1st Cir. 1991), cited with
approval in Horne v. Flores, 129 S. Ct. 2579, 2617 (2009); see,
e.g., Boston Celtics Ltd. P'ship v. Shaw, 908 F.2d 1041, 1045 (1st
Cir. 1990); Clauson v. Smith, 823 F.2d 660, 666 (1st Cir. 1987).
There is nothing sufficiently compelling about this case to warrant
relaxation of such a fundamental rule. See Teamsters, Chauffeurs,
Warehousemen & Helpers Union, Local No. 59 v. Superline Transp.
Co., 953 F.2d 17, 21 (1st Cir. 1992).
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With respect to the statute of limitations argument,
ACEMLA and LAMCO argue that they specifically raised the argument
in their answer to the Curet Heirs' complaint where they stated,
"Claimant's allegations are time barred by the statute of
limitation," without specifying which statute of limitations was
applicable. During the closing arguments at the bench trial,
appellants argued that the applicable statute of limitations was
Article 948 of the Puerto Rico Commerce Code, P.R. Laws Ann. tit.
10, § 1910, et seq. See Curet-Velázquez, No. 06-1014 (ADC), slip
op. at 17-18. As the district court noted, both during trial and
in their post-trial brief, ACEMLA and LAMCO cited to a provision of
the Commerce Code that applies to actions that prescribe in one
year, none of which apply to the claims at issue in this case.4
Id. at 18. The appellants' post-trial brief failed to provide
4
The statute reads, in pertinent part,
The following shall prescribe after one year:
(1) Actions arising from services, works, provisions, and
furnishing of goods or money for the construction,
repair, equipment, or provisioning of vessels, or to
support the crew, . . . .
(2) Actions relating to the delivery of the cargo in
maritime or land transportation or to indemnity for
delays and damages suffered by the goods
transported, . . . .
(3) Actions to recover for the expenses of the judicial
sale of vessels, cargoes, or goods, transported by sea or
by land, . . . .
P.R. Laws Ann. tit. 10, § 1910.
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adequate legal argumentation explaining why the Commerce Code
should apply. See id. On appeal, appellants now seek to buttress
their statute of limitations argument by citing to a different
statute of limitations, P.R. Laws Ann. tit. 31, § 3500. Yet, they
fail to explain why they cited to a different statute in the
district court.
We cannot say that this argument was clearly raised
before the district court, and "[o]verburdened trial judges cannot
be expected to be mind readers." McCoy, 950 F.2d at 22. We
conclude that appellants have failed to make "some effort at
developed argumentation . . . . It is not enough merely to mention
a possible argument in the most skeletal way, leaving the court to
do counsel's work, create the ossature for the argument, and put
flesh on its bones." Harriman v. Hancock Cnty., 627 F.3d 22, 28
(1st Cir. 2010) (quoting United States v. Zannino, 895 F.2d 1, 17
(1st Cir. 1990)) (internal quotation marks omitted).
B. Various Objections to the Magistrate Judge's
Report and Recommendation
ACEMLA and LAMCO contend that the magistrate judge's
report and recommendation with respect to the Curet Heirs' motion
for summary judgment was based on erroneous findings of fact and
law. Specifically, they argue that the magistrate judge committed
errors of fact and law regarding the validity of the assignment
establishing ownership, and the finding that the Harry Fox Agency
authorization of licenses constituted infringements. We have
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examined ACEMLA's and LAMCO's objections to the magistrate judge's
report and recommendation and we conclude that they failed to
object to the magistrate judge's manner of addressing these issues
in the report and recommendation. Therefore, we conclude that
these arguments are waived. See Borden v. Sec'y of Health & Human
Servs., 836 F.2d 4, 6 (1st Cir. 1987) (agreeing with the district
court that the appellant had waived an issue by failing to raise it
before the magistrate judge). "[I]t is a virtually ironclad rule
that a party may not advance for the first time on appeal . . . a
new argument . . . ." Cochran v. Quest Software, Inc., 328 F.3d 1,
11 (1st Cir. 2003).
C. Implied License Defense
ACEMLA and LAMCO also argue that the district court erred
in deeming their implied license defense waived. See Curet-
Velázquez, 2008 WL 4006701, at *3. They argue that "[e]ven if the
arguments were more developed in the objections, the factual bases
are contained in the record, the complaint, and exhibits to the
motions . . . and were undoubtedly raised and argued by
defendants."
We review for abuse of discretion a district court's
conclusion that a party has waived an issue by failing to
adequately assert it before the magistrate judge. See
Guillemard-Ginorio v. Contreras-Gómez, 490 F.3d 31, 36 (1st Cir.
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2007). Arguments alluded to but not properly developed before a
magistrate judge are deemed waived. See id. at 37.
We conclude that the district court did not abuse its
discretion in not addressing an argument not explicitly raised
before the magistrate judge. The appellants had "their chance to
exhaust their nonexclusive implied license argument in front of the
[magistrate judge], but made the affirmative decision not to do
[so]." Curet-Velázquez, 2008 WL 4006701, at *3. Their contention
that the factual basis for the implied license argument was in the
record before the magistrate judge is unavailing. A passing
mention that fails to present analysis or any legal theory of
support is insufficient to constitute an argument. McCoy, 950 F.2d
at 22. A party has a duty "to spell out its arguments squarely and
distinctly . . . . [rather than being] allowed to defeat the system
by seeding the record with mysterious references . . . hoping to
set the stage for an ambush should the ensuing ruling fail to
suit." Id. (alterations in original) (internal quotation marks
omitted) (quoting Paterson-Leitch Co. v. Mass. Mun. Wholesale Elec.
Co., 840 F.2d 985, 990 (1st Cir. 1988)). "If claims are merely
insinuated rather than actually articulated in the trial court, we
will ordinarily refuse to deem them preserved for appellate
review." Id. Here, the appellants mentioned in passing facts that
might have been used to support the argument they now seek to
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develop on appeal. The magistrate judge should not have been
expected to make the argument for them. The argument is waived.
D. Discovery and Expert Testimony
ACEMLA and LAMCO contend that the district court abused
its discretion when it reopened discovery and ordered simultaneous
disclosure of expert reports and that those actions prejudiced
them. They further assert that the district court abused its
discretion because it permitted the Curet Heirs' expert to testify
to matters beyond his report without requiring him to amend his
report. We conclude that the district court did not abuse its
discretion when it decided to reopen discovery and to allow the
expert witness to testify to matters beyond his report.
1. Reopening Discovery
District courts have broad discretion in pretrial
management matters. Wells Real Estate Inv. Trust II, Inc. v.
Chardón/Hato Rey P'ship, S.E., 615 F.3d 45, 58 (1st Cir. 2010). We
review discovery orders for abuse of discretion. Remexcel
Managerial Consultants, Inc. v. Arlequín, 583 F.3d 45, 51 (1st Cir.
2009). "[W]e may reverse a district court only upon a clear
showing of manifest injustice, that is, where the lower court's
discovery order was plainly wrong and resulted in substantial
prejudice to the aggrieved party." Id. (alteration in original)
(internal quotation marks omitted) (quoting In re Subpoena to
Witzel, 531 F.3d 113, 117 (1st Cir. 2008)).
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At a settlement conference held on October 8, 2008, the
court set new deadlines for, among other things, discovery,
designation of experts, expert reports, and the deposition of
experts. ACEMLA and LAMCO argue that the court's decision to
reopen discovery prejudiced them, in part because the court
required that the parties submit their expert reports
simultaneously. Specifically, ACEMLA and LAMCO argue that the
court should have set the deadline for the submission of their
expert report for sixty days after the deadline for the Curet Heirs
to submit their expert report. They assert that the court's
failure to do so prejudiced them because they did not know whether
the Curet Heirs would use an expert or what the expert's testimony
would cover.
The record reveals that the appellants paint a picture
that is convenient for them, but unsupported in fact. Because the
parties explicitly agreed to designate experts and exchange reports
by a certain date, the appellants cannot claim that they were
unprepared for the possibility that the Curet Heirs would use an
expert. The district court's October 29, 2008 Settlement
Conference Report and Order, which was entered with respect to the
October 8, 2008 settlement conference, states that "October 28th
was agreed upon to exchange the designation of experts;
November 28, 2008 expert reports are due . . . ." (emphasis added).
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It appears that what appellants are really complaining
about is the court's refusal to grant the requested extensions and
not the court's decision to extend discovery. In fact, they
themselves requested that the court extend the time further.
Although the appellants were aware of the deadline to produce their
expert report, they failed to file it on time and, on December 3,
2008, after the November 28, 2008 deadline, they filed a motion
titled "Omnibus Motion Regarding Expert Report, Nunc Pro Tunc,"
requesting an extension until December 11, 2008 to produce the
expert report. On December 12, 2008, they filed a motion titled
"Motion Requesting Enlargement of Time Opposition to Preclude
Expert Witness Nunc Pro Tunc," in which they requested an extension
until December 18, 2008 to produce their expert report. On
January 13, 2009, ACEMLA and LAMCO filed a motion seeking to extend
the time to conclude discovery until February 14, 2009. On
January 15, 2009, the court denied all motions requesting an
extension of time. Given the appellants' requests, we find it
difficult to understand exactly how the appellants were prejudiced
by the court's decision to reopen discovery. The district court
did not abuse its discretion in reopening discovery.
2. Expert Witness
ACEMLA and LAMCO also claim that the district court
abused its discretion by allowing the Curet Heirs' expert witness
to testify to matters that were not covered in his expert report,
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in particular, documents that he received on the day of his
deposition and a week before trial. They also objected to Román's
qualifications and methodology. The appellants filed a motion to
limit the Curet Heirs' expert's testimony to the content of his
filed report. The district court nevertheless allowed Román to
testify, including about the newly received evidence. The
appellants now object to the district court's failure to exclude
Román's testimony as a sanction for failing to amend his expert
report to reflect new evidence, as Federal Rule of Civil Procedure
26(e)(2) requires. They also appeal the district court's
conclusion that Román was a qualified expert witness.
a. Expert Report Discussion
We review a district court's decision to admit or exclude
expert testimony due to a violation of Federal Rule of Civil
Procedure 26(e) for abuse of discretion. Boston Gas Co., d/b/a
KeySpan Energy Delivery v. Century Indem. Co., 529 F.3d 8, 17 (1st
Cir. 2008) (reviewing the district court's decision to preclude an
expert witness from supplementing his expert report for abuse of
discretion). Further, the court's abuse of discretion must have
"resulted in prejudice to the complaining party." Licciardi v. TIG
Ins. Grp., 140 F.3d 357, 362-63 (1st Cir. 1998).
Federal Rule of Civil Procedure 26(e)(2) requires a party
to supplement information included in the expert report and
information given during the expert's deposition. One of the
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purposes of this rule is "to avoid trial by ambush." Macaulay v.
Anas, 321 F.3d 45, 50 (1st Cir. 2003). We have "looked to a
variety of factors in assessing a claim of error under Rule 26."
Licciardi, 140 F.3d at 363. These include "the conduct of the
trial, the importance of the evidence to its proponent, and the
ability of the [opposing party] to formulate a response." Id.(alteration in original) (quoting Johnson v. H.K. Webster, Inc.,
775 F.2d 1, 8 (1st Cir. 1985)) (internal quotation marks omitted).
"Surprise and prejudice are important integers" in determining
whether the district court abused its discretion. Macaulay, 321
F.3d at 51.
Here, appellants complain that Román testified to things
he did after his report was rendered without amending his expert
report. We have examined the record and note that during the voir
dire, plaintiffs' counsel did ask questions about documents that
were not included in the report. However, the documents at issue
are documents that ACEMLA and LAMCO produced on the day of Román's
deposition and about a week before trial. The court noted that
Román did not prepare an amended report, but verified that he did
not reach any new conclusions or change his opinion based on the
new information. Román testified that the new documentation did
not change the conclusion in his original report and in fact
corroborated the inconsistencies and lack of proper record keeping
that he originally identified.
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In these circumstances, we conclude that the district
court did not abuse its discretion in concluding that no amendment
to the expert report was required and allowing the testimony.
Here, there was no prejudice to the appellants because Román's
testimony briefly referenced new documents that the appellants
themselves drafted and had delayed in disclosing. In this case,
the expert's testimony did not evidence a different conclusion or
opinion from that expressed in his report. Cf. Macaulay, 321 F.3d
at 51-52 (affirming the district court's decision to preclude
appellant's expert witness where her expert witness attempted to
opine on a new theory of liability and the court concluded that
this change would cause unfair surprise); Licciardi, 140 F.3d at
359-60, 367 (vacating and remanding for a new trial where the trial
testimony of appellee's expert directly contradicted and went
beyond his expert report regarding a material issue in the case).
Further, appellants cannot claim that the reference to these new
documents was an unfair surprise because they themselves prepared
and disclosed the documents. See Brennan's Inc. v. Dickie Brennan
& Co., 376 F.3d 356, 375 (5th Cir. 2004) (affirming district
court's denial of a motion to exclude plaintiff's expert's
supplemental report where the district court reasonably believed
that the defense expert had access to the supporting work papers
and calculations and where the defense expert was already familiar
with the underlying data).
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b. Expert's Qualifications
Appellants also object to the district court's failure to
strike Román's testimony because his qualifications and methodology
were unreliable. We review a district court's Federal Rule of
Evidence 7025 rulings for abuse of discretion. Milward v. Acuity
Specialty Prods. Grp., Inc., 639 F.3d 11, 13 (1st Cir. 2011).
Appellants specifically objected to the reliability of
Román's Opportunity Cost Theory. Although the district court
allowed Román to present the theory and did not strike it from the
record, it rejected the Opportunity Cost Theory in its opinion and
order. Curet-Velázquez, No. 06-1014 (ADC), slip op. at 5.
Therefore, there was no prejudice to ACEMLA and LAMCO due to the
testimony regarding the Opportunity Cost Theory. We can easily
dismiss appellants' argument because the district court ultimately
rejected and disregarded the portion of Román's testimony based on
his Opportunity Cost Theory, a method that he created and that had
5
Federal Rule of Evidence 702 provides as follows:
If scientific, technical, or other specialized knowledge
will assist the trier of fact to understand the evidence
or to determine a fact in issue, a witness qualified as
an expert by knowledge, skill, experience, training, or
education, may testify thereto in the form of an opinion
or otherwise, if (1) the testimony is based upon
sufficient facts or data, (2) the testimony is the
product of reliable principles and methods, and (3) the
witness has applied the principles and methods reliably
to the facts of the case.
Fed. R. Evid. 702.
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not gained acceptance in the music industry. Id. After reviewing
the record we find no abuse of discretion in the district court's
determination that Román was a qualified expert. We therefore
affirm the district court's decision to qualify Román as an expert
and to allow his testimony regarding appellants' accounting,
royalty reports and statements.
E. Statutory Damages
Appellants ACEMLA and LAMCO argue that the district court
erred in awarding, pursuant to 17 U.S.C. § 504(c)(1), maximum
statutory damages for each of the four infringements that ACEMLA
and LAMCO were found to have committed. Specifically, ACEMLA and
LAMCO argue that the Curet Heirs did not properly exercise the
option to receive statutory damages because their complaint elected
to receive an award of either actual damages or statutory damages.
They also aver that the district court's imposition of the
statutory maximum for each infringement was grossly excessive and
was an abuse of discretion because the damages were not proven and
the court improperly relied on Román's determination of damages.
We reject the appellants' claims and affirm the district court's
imposition of the maximum damages allowed under 17 U.S.C.
§ 504(c)(1).
First, we reject the contention that the Curet Heirs
failed to properly exercise their option to receive statutory
damages. In these circumstances, where the Curet Heirs requested
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either actual damages or statutory damages, appellants cannot
complain that they had no notice that the court might grant
statutory damages. In fact, Federal Rule of Civil Procedure 8
explicitly allows a plaintiff to demand relief in the alternative.
Fed. R. Civ. P. 8(a)(3) ("[A] demand for the relief sought[] . . .
may include relief in the alternative or different types of
relief."); see also 6 William F. Patry, Patry on Copyright § 22:171
(2011) (noting that a plaintiff may submit both actual damages and
statutory damages to the trier of fact as alternatives and wait
until the verdict is rendered to select which one it prefers).
Further, the statute clearly states that "the copyright owner may
elect, at any time before final judgment is rendered, to
recover[] . . . an award of statutory damages for all infringements
involved in the action . . . ." 17 U.S.C. § 504(c)(1). In any
event, the Curet Heirs clearly elected statutory damages before
judgment was entered in their proposed findings of fact and
conclusions of law. We therefore dismiss appellants' contention
that the Curet Heirs failed to properly elect statutory damages.
We now turn to our review of the district court's
imposition of the maximum statutory damages under 17 U.S.C.
§ 504(c). Our review of a trier of fact's decision as to the
amount of a statutory damages award is "extremely narrow." Morley
Music Co. v. Dick Stacey's Plaza Motel, Inc., 725 F.2d 1, 3 (1st
Cir. 1983). "The employment of the statutory yardstick, within set
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limits, is committed solely to the court which hears the case, and
this fact takes the matter out of the ordinary rule with respect to
abuse of discretion." Id. (quoting Douglas v. Cunningham, 294 U.S.
207, 210 (1935)) (internal quotation marks omitted); see also
Markham v. A.E. Borden Co., 221 F.2d 586, 587 (1st Cir. 1955) ("The
Supreme Court has held that within the minimum and maximum limits
set by Congress '* * * the court's discretion and sense of justice
are controlling * * *' in its award of statutory damages."
(citations omitted)). Other circuit courts agree that an appellate
court's review of a district court's award of statutory damages is
extremely limited. See, e.g., Yurman Design, Inc. v. PAJ, Inc.,
262 F.3d 101, 113 (2d Cir. 2001) (noting that a deferential
standard of review is applied to a fact finder's calculations of
statutory damages); Superior Form Builders, Inc. v. Dan Chase
Taxidermy Supply Co., 74 F.3d 488, 496 (4th Cir. 1996) (noting that
the appellate court reviews the award of statutory damages for a
willful infringement under a standard more deferential than abuse
of discretion); Dream Games of Ariz., Inc. v. PC Onsite, 561 F.3d
983, 992 (9th Cir. 2009) (noting that a jury has "wide discretion
in determining the amount of statutory damages to be awarded,
constrained only by the specified maxima and minima" (quoting Peer
Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 (9th Cir.
1990)) (internal quotation mark omitted)).
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Although the court's discretion in awarding statutory
damages is broad, it is not unlimited. There must be some basis,
such as a hearing or sufficient affidavits, for the court's
judgment. See Morley Music Co., 725 F.2d at 3. ACEMLA and LAMCO
complain that the district court based its award of the maximum
statutory damages on the opinion of the Curet Heirs' expert.
However, a review of the district court's reasoning suggests
otherwise. See Curet-Velázquez, No. 06-1014 (ADC), slip op. at 19-
23. The district court acknowledged that, in determining what
amount of statutory damages to impose, it may consider factors such
as "the expenses saved and profits reaped by the defendants in
connection with the infringements, the revenues lost by the
plaintiffs as a result of the defendant's conduct," and the state
of mind of the infringers.6 Id. at 20 (quoting N.A.S. Import,
Corp. v. Chenson Enters., Inc., 968 F.2d 250, 252 (2d Cir. 1992)).
However, the district court could not take the above
referenced factors into consideration because ACEMLA and LAMCO did
not cooperate. They did not provide comprehensive and accurate
reports to the district court. Id. at 22. The district court
properly took this fact into account, stating,
[I]t is impossible for the court to determine
the expenses saved or the profits reaped by
6
The court also noted that it may consider whether the defendants
had cooperated in providing the court with records from which to
assess the damages to the copyright owner. See Curet-Velázquez,
No. 06-1014 (ADC), slip op. at 20.
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the defendants, nor can it be established with
certainty the amount of revenues lost as a
result of the defendants' conduct. However,
what the court can assess is [appellants']
inability to provide clear records for each
company, its intermingling of the reports, and
its failure to fulfill its contractual
obligations of rendering royalty reports to
plaintiffs. This is exacerbated by the fact
that the underlying data that supports the
reports furnished to the plaintiffs does not
coincide and is unreliable, making it
impossible to re-create or track the
information, data and revenues supplied in the
defendants' reports.
Id. Given our limited review of the amount of a district court's
statutory damages award and the validity of the reason given by the
district court in support of its award, we affirm the district
court's imposition of the maximum statutory damages pursuant to 17
U.S.C. § 504(c).
III. Conclusion
For the reasons stated above, we affirm the district
court's orders.
Affirmed.
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