Cass County Music Co. v. C.H.L.R., Inc., 95-2304

• Decision Date: 08 July 1996
• Docket Number: No. 95-2304,95-2304
• Citation: 88 F.3d 635
• Parties: , 1996 Copr.L.Dec. P 27,543, 39 U.S.P.Q.2d 1429 CASS COUNTY MUSIC COMPANY; Red Cloud Music Company, Appellees, v. C.H.L.R., INC.; Jeffrey C. Jones; Stanford P. Glazer; John L. Marks, originally sued as John L. Marx, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 635

88 F.3d 635

65 USLW 2032, 1996 Copr.L.Dec. P 27,543,

39 U.S.P.Q.2d 1429

CASS COUNTY MUSIC COMPANY; Red Cloud Music Company, Appellees, v. C.H.L.R., INC.; Jeffrey C. Jones; Stanford P. Glazer; John

L. Marks, originally sued as John L. Marx, Appellants.

No. 95-2304.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 10, 1996.

Decided July 8, 1996.

Pamela A. Moseley, argued, North Little Rock, Arkansas, for appellants.

Nancy Bellhouse May, argued, Little Rock, Arkansas (Patricia S. Lewallen, Richard H. Reimer and Andrew Jonas Sanders, on the brief), for appellees.

Before RICHARD S. ARNOLD, Chief Judge, JONES, ^* District Judge, and BOWMAN, Circuit Judge.

BOWMAN, Circuit Judge.

C.H.L.R., Inc., Jeffrey C. Jones, John L. Marks, and Stanford P. Glazer (collectively, C.H.L.R.) appeal from decisions of the District Court granting summary judgment to Cass County Music Company and Red Cloud Music Company on the music companies' copyright infringement claim and denying C.H.L.R. a jury trial. We affirm in part and reverse and remand in part.

I.

C.H.L.R. is a corporation that operates Stanford's Comedy House in Little Rock, Arkansas, among other enterprises. Jones, Marks, and Glazer are officers, directors, and shareholders of C.H.L.R., and Jones was day-to-day manager of the Comedy House in Little Rock. Cass County Music Company and Red Cloud Music Company own the copyrights to the four songs at issue in this dispute, and are members of the American Society of Composers, Authors and Publishers (ASCAP). ASCAP is a performing rights society, a nonexclusive licensee of the nondramatic public performance rights of its members. ¹ Broadcast Music, Inc. v. Columbia Broadcasting Sys., Inc., 441 U.S. 1, 5, 99 S.Ct. 1551, 1554, 60 L.Ed.2d 1 (1979).

The Comedy House in Little Rock opened in September 1993. Before and after its comedy shows, for perhaps thirty to forty-five minutes, the Comedy House played recorded and radio music over a stereo system. Soon after the Comedy House opened, ASCAP contacted Jones to advise him of the need for an ASCAP license if ASCAP sound recordings were to be played at the club. Negotiations on an appropriate fee for the license ensued, and subsequently broke down.

C.H.L.R. then instituted a "no-ASCAP" music policy at the Comedy House. That is, a list of ASCAP music was obtained, music tapes were made that included no ASCAP recordings, and the staff was instructed to play only the recorded non-ASCAP tapes when the club was open for business. Notwithstanding these precautions, ASCAP advised C.H.L.R. more than once that the Comedy House, when open to the public, persisted in playing music copyrighted by ASCAP members. ASCAP continued to recommend licensing to avoid legal action on a copyright infringement claim. On May 6, 1994, an ASCAP investigator visited the Comedy House and documented the public performance over the stereo system before the comedy show of four songs owned by ASCAP members, the music companies that are appellees here. C.H.L.R. contends that any copyright infringements were the result of its employees' inadvertence and were unknown to management, but acknowledges that it cannot refute the allegation that the violations did occur.

In August 1994, the music companies filed suit alleging copyright infringement based on the May 6, 1994, investigator's report, seeking an injunction, statutory damages, and costs and attorney fees. C.H.L.R. demanded a jury trial, which the District Court denied. In March 1995, the court granted summary judgment to the music companies, permanently enjoining C.H.L.R. from engaging in infringing activities, awarding $1000 in statutory damages for each of the four infringements, and awarding $1119 in costs and $5469 in attorney fees.

For its appeal, C.H.L.R. does not challenge the injunction (it has since obtained a license issued by Broadcast Music, Inc., another performing rights society) or "the District Court's conclusion that as a matter of law an infringement occurred for which the defendants are jointly and severally liable." Brief for Appellants at 2 n. 1. The five issues C.H.L.R. does raise can be summarized as follows: The District Court erred in determining the infringements were "knowing," the court erred in rejecting C.H.L.R.'s jury demand, and the award of costs and attorney fees was error.

II.

C.H.L.R. claims that a grant of summary judgment was precluded because there was a genuine issue of material fact on the question whether the infringements were "knowing." C.H.L.R. correctly acknowledges that the state of mind of the copyright infringer is of no consequence to liability, so whether or not there is a genuine issue on the question is equally inconsequential to liability. "Once a plaintiff has proven that he or she owns the copyright on a particular work, and that the defendant has infringed upon those 'exclusive rights' "--that is, he has proven the two key elements of copyright infringement, which are not at issue here--"the defendant is liable for the infringement and this liability is absolute." Pinkham v. Sara Lee Corp., 983 F.2d 824, 829 (8th Cir.1992). The state of mind of the infringer is relevant, if at all, only to the award of damages. Although it is not entirely clear from the way the argument is structured in C.H.L.R.'s brief, we will assume that the contention is that there is a genuine issue of material fact (or that C.H.L.R. was not on notice that it should offer evidence to show one) on the question whether the infringements were unknowing, that is, "innocent," rather than knowing or "willful." "Innocent" and "willful" are terms of art in copyright law. If proved, innocence or willfulness may have a bearing on the amount of statutory damages awarded but cannot affect liability.

If "the copyright owner sustains the burden of proving, and 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 $100,000." 17 U.S.C. § 504(c)(2) (1994). Although C.H.L.R. claims that "[t]he ASCAP members contended that the infringement was knowing and willful," Brief of Appellants at 16, their prayer for damages in the complaint was for an amount between $500 and $20,000 per infringement, the statutory damages range when neither willful infringement nor innocent infringement is proved, and the District Court awarded only $1000 per infringement. Thus to the extent C.H.L.R. equates "knowing" with "willful," its argument is a nonstarter, since no willful violation was alleged by the music companies or found by the District Court.

On the other hand, copyright law also provides that the court in "its discretion may reduce the award of statutory damages to a sum of not less than $200" when the "infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright." 17 U.S.C. § 504(c)(2). If C.H.L.R., with its argument that there is a genuine issue of fact on whether its behavior was "knowing," is trying to fit its actions into the requirements for this statutory mitigation of damages for innocent infringement, we must conclude that there is no genuine issue of material fact for trial.

Before May 6, 1994, there were extensive conversations and written correspondence between ASCAP and C.H.L.R. regarding the purchase of an ASCAP license. It is clear from the record that ASCAP advised C.H.L.R.--and that C.H.L.R. understood--that the Comedy House's unlicensed public performance of music in which ASCAP members owned performance rights would be a violation of law and could precipitate a lawsuit. C.H.L.R. opted not to purchase an ASCAP license (or any other license at that time), and instead decided to institute a policy, of questionable efficacy from the very beginning, that no ASCAP music was to be played at the Comedy House. That policy failed, as ASCAP advised C.H.L.R. on several occasions after the implementation of the "no-ASCAP" policy and before the filing of this lawsuit. The fact that there was such a policy and that it evidently was violated by employees of the club without management's notice is not relevant. C.H.L.R. and the individual defendants are liable for the copyright infringements, notwithstanding that the infringements were perpetrated by their employees and without their knowledge, because C.H.L.R. had the right and ability to supervise those employees, and because C.H.L.R. had a financial interest in the use of the copyrighted songs. See Pinkham, 983 F.2d at 834 (setting out the test for vicarious liability in copyright infringement actions). As a matter of law, based on the undisputed facts in this record, C.H.L.R.'s copyright infringements were not innocent. In fact, with the repeated notices of ongoing infringement that ASCAP gave C.H.L.R., the apparent deliberate ignorance by management of the fact that violations continued even with the "no-ASCAP" policy in place, and the somewhat acrimonious "course of dealing between the parties," the music companies may have given C.H.L.R. a break by not seeking enhanced damages for willful infringement. Chi-Boy Music v. Charlie Club, Inc., 930 F.2d 1224, 1227-28 (7th Cir.1991) (discussing notice, deliberate ignorance, and past dealings between the parties as relevant to finding of willful infringement).

As we intimated above, C.H.L.R. argues that it had inadequate opportunity to develop the record on this issue, because it was unaware that the issue would be decided on summary judgment. We find this argument specious. The music companies' motion for summary judgment specifically asked the court to find "defendants liable for copyright infringement" and to award "plaintiffs statutory damages of $5,000 per infringement." Plaintiffs' Motion for Summary Judgment and Permanent Injunction at 2. C.H.L.R. knew it had been denied a jury trial, so if C.H.L.R. could demonstrate no genuine question of fact on the question...