Curet–velÁzquez v. Acemla De P.R. Inc.

• Decision Date: 29 August 2011
• Docket Number: No. 10–1587.,10–1587.
• Parties: Hilda CURET–VELÁZQUEZ, Eduardo Curet–Velázquez, Hilda Velázquez–Coto, Plaintiffs, Appellees,v.ACEMLA DE PUERTO RICO, INC.; Latin American Music Co., Inc., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

656 F.3d 47
2011 Copr.L.Dec. P 30,129
100 U.S.P.Q.2d 1042

Hilda CURET–VELÁZQUEZ, Eduardo Curet–Velázquez, Hilda Velázquez–Coto, Plaintiffs, Appellees,
v.
ACEMLA DE PUERTO RICO, INC.; Latin American Music Co., Inc., Defendants, Appellants.

No. 10–1587.

United States Court of Appeals, First Circuit.

Heard March 7, 2011.Decided Aug. 29, 2011.

[656 F.3d 49]

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.Before LYNCH, Chief Judge, TORRUELLA and LIPEZ, Circuit Judges.TORRUELLA, Circuit Judge.

This appeal concerns a copyright infringement claim involving four songs that Puerto Rican composer Catalino “Tite” Curet–Alonso (“Tite Curet”) authored.

[656 F.3d 50]

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 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 “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

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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 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.

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

[656 F.3d 52]

Félix Norman Román–Negrón (“Román”), the Curet Heirs' expert witness, regarding the royalty reports and his 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, 113 S.Ct. 2786, 125 L.Ed.2d 469 (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 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.

II. Discussion A. Copyright Act Preemption and...