Energy Intelligence Grp., Inc. v. Kayne Anderson Capital Advisors, LP

• Decision Date: 22 March 2016
• Docket Number: CIVIL ACTION NO. H-14-1903
• Citation: Energy Intelligence Grp., Inc. v. Kayne Anderson Capital Advisors, LP, CIVIL ACTION NO. H-14-1903 (S.D. Tex. Mar 22, 2016)
• Parties: ENERGY INTELLIGENCE GROUP, INC. and ENERGY INTELLIGENCE GROUP (UK) LIMITED, Plaintiffs, v. KAYNE ANDERSON CAPITAL ADVISORS, LP and KAYNE ANDERSON FUND ADVISORS, LLC, Defendants.
• Court: U.S. District Court — Southern District of Texas

ENERGY INTELLIGENCE GROUP,INC. and ENERGY INTELLIGENCE GROUP (UK) LIMITED, Plaintiffs, v. KAYNE ANDERSON CAPITAL ADVISORS,LP and KAYNE ANDERSON FUND ADVISORS, LLC, Defendants.

CIVIL ACTION NO. H-14-1903

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

March 22, 2016

MEMORANDUM OPINION AND ORDER

On July 8, 2014, Energy Intelligence Group, Inc. and Energy Intelligence Group (UK) Limited (together, "Plaintiffs" or "EIG") sued Kayne Anderson Capital Advisors, LP and Kayne Anderson Fund Advisors, LLC (together, "Defendants" or "Kayne") in this court for copyright infringement.¹ Pending before the court is Defendants' Motion for Partial Summary Judgment (the "Motion") (Docket Entry No. 39). For the reasons stated below, the Motion will be denied.

I. Background

EIG publishes "Oil Daily," a daily subscription newsletter.² Oil Daily is provided to subscribers either via email or EIG'swebsite, which provides password-protected access to current and/or archived issues through a subscription or license agreement.³ Non-subscribers/licensees can buy individual articles or issues for a set fee per article or issue per user.⁴ EIG provides copyright notices and warnings on its website, emails, and publications.⁵

Since at least 2004, Kayne has purchased a single annual Oil Daily subscription for employee Jim Baker.⁶ Baker's subscription was routinely forwarded to or shared with other Kayne employees beginning around that time.⁷ In 2007 Kayne switched to receiving Oil Daily solely via email rather than including web-access.⁸ Kayne maintained Baker's subscription until 2013, when it entered a multi-user license agreement with EIG, paying for five Kayne employees to receive the Oil Daily.⁹ EIG alleges that Kayne hasregularly copied and distributed Oil Daily among unauthorized users, including allowing multiple Kayne employees to access the EIG website using Baker's username and password prior to January 3, 2007, which only he was licensed to use.¹⁰

EIG alleges that until at least May 21, 2014, Kayne continued to distribute unauthorized copies of Oil Daily to individuals who were not licensed to use them.¹¹ EIG filed this action against Kayne for copyright infringement on July 8, 2014.¹² Kayne filed the Motion now before the court on November 4, 2015.

II. Standard of Review

Summary judgment is appropriate if the movant establishes that there is no genuine dispute about any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Disputes about material facts are genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2510 (1986). The moving party is entitled to judgment as a matter oflaw if "the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 106 S. Ct. 2548, 2552 (1986).

A party moving for summary judgment "must 'demonstrate the absence of a genuine issue of material fact,' but need not negate the elements of the nonmovant's case." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam) (quoting Celotex, 106 S. Ct. at 2553). "If the moving party fails to meet this initial burden, the motion must be denied, regardless of the nonmovant's response." Id. If, however, the moving party meets this burden, "the nonmovant must go beyond the pleadings" and produce evidence of specific facts demonstrating there is a genuine issue for trial. Id. (citing Celotex, 106 S. Ct. at 2553-54). The nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 106 S. Ct. 1348, 1356 (1986).

"In order to avoid summary judgment, the nonmovant must identify specific facts within the record that demonstrate the existence of a genuine issue of material fact." CO, Inc. v. TXU Min. Co., L.P., 565 F.3d 268, 273 (5th Cir. 2009). "The party must also articulate the precise manner in which the submitted or identified evidence supports his or her claim." Id. (internal quotation marks and citation omitted). "When evidence exists in the summary judgment record but the nonmovant fails even to referto it in the response to the motion for summary judgment, that evidence is not properly before the district court." Id. (same).

In reviewing the evidence "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Prods., Inc., 120 S. Ct. 2097, 2110 (2000). The court resolves factual controversies in favor of the nonmovant, "but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Little, 37 F.3d at 1075.

III. The Statute of Limitations

Kayne seeks partial summary judgment based on the three-year statute of limitations imposed on copyright infringement actions by 17 U.S.C. § 507(b). Kayne argues that no genuine issues of material fact exist to save EIG's infringement claims dating more than three years before EIG served the Complaint on July 8, 2014.¹³ EIG responds that the discovery rule prevented claim accrual, and fraudulent concealment tolled limitations, until February 5, 2014, when a Kayne employee admitted to EIG that Kayne regularly copied and distributed the Oil Daily to unauthorized users.

In responding to EIG's arguments Kayne relies on communications between Kayne employees and EIG employees in January of 2007. On January 3, 2007, Diana Lerma, a Kayne employee,emailed Deborah Brown, an EIG "Account Services Manager," regarding Mr. Baker's subscription to the Oil Daily.

Deborah, Can you advise me on how I go about accessing the account online. I've only been here 2 months; and when I came that was already in place. But now (and maybe it's because the subscription expired); the old link we have does not allow us to access the account.¹⁴

Ms. Lerma forwarded a string of internal Kayne emails along with her email to Ms. Brown. The most recent email in the chain was from Mr. Baker to Ms. Lerma:

I am receiving emails from the Oil Daily. I haven't tried to access our account online. Can you get an update password and login-in from them? Thanks.¹⁵

The second most recent in the forwarded chain was from Ms. Lerma to Mr. Baker:

Jim: Ron told me he was not able to access your oil daily because it expired. Not sure how he was trying to view it; thought he told me from your calendar.¹⁶

That afternoon, EIG employee Peter Buttrick emailed Ms. Brown and copied Mark Hoff, another EIG employee:

I just spoke with Diana Lerma at Kayne. On web access isse [sic] - she will contact you later today with their corporate credit card for the remaining $1,554. On the copyright issue - I discussed the severity of the issue and advised her to schedule a call with her boss, JimBaker (no - not the ex-televangelist) and I as soon as possible to discuss options.

I will keep you updated.¹⁷

Years later, on February 5, 2014, Ana Pope, a Kayne employee, emailed Derrick Dent, an EIG employee, stating:

For some reason we didn't get our oil daily today. Contact is Jim Baker, but would you mind sending it to me? He gets busy during the day.¹⁸

Ms. Pope emailed Mr. Dent later that day stating that "I just saw the Oil Daily in my inbox from Jim—no need to send! Thanks!"¹⁹ At some point, Mr. Dent and Ms. Pope spoke, because Ms. Pope sent Mr. Dent the following email that afternoon:

You asked me to outline to you exactly what we do with the Oil Daily, so here it is: The Oil Daily is sent to one person in the office, Jim Baker. He usually gets it the night before it is published for and forwards it to me that night. When I get into the office that next morning the first thing I do, around 7:40am, is email it out to the 20 or so people in the office who have elected to receive the oil daily every morning. This list includes all of our top execs.²⁰

EIG filed suit in July of 2014.

Kayne argues that the statute of limitations for all infringing acts that occurred more than three years before EIG filed suit has run because EIG knew of Kayne's infringement in January of 2007. EIG argues that there are fact issues as to when the statute began running on those claims pursuant to the discovery rule and the doctrine of fraudulent concealment.

A. The Discovery Rule

A civil action for copyright infringement must be commenced "within three years after the claim accrued." 17 U.S.C. § 507(b). "[E]ach act of infringement gives rise to an independent claim, and the defendant 'is only liable for his acts of infringement committed within three years prior to [p]laintiff's lawsuit.'" Jaso v. The Coca Cola Co., 435 F. App'x 346, 352 (5th Cir. 2011) (quoting Makedwde Publishing Co. v. Johnson, 37 F.3d 180, 182 (5th Cir. 1994));²¹ see also Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1969 (2014) ("[T]he separate-accrual rule attends the copyright statute of limitations. Under that rule, when a defendant commits successive violations, the statute of limitations runs separately from each violation. Each time an infringing workis reproduced or distributed, the infringer commits a new wrong. Each wrong gives rise to a discrete claim that accrue[s] at the time the wrong occurs.") (quotations omitted). Therefore, Kayne argues, each act of sharing the Oil Daily by Kayne that occurred prior to July 8, 2011, is barred by limitations.²²

Ordinarily, a claim accrues "when a plaintiff has a complete and present cause of action. In other words, the limitations period generally begins to run at the point when the plaintiff can file suit and obtain relief." Petrella, 134 S. Ct. at 1969 (citations and quotations omitted). However, the Fifth Circuit (among others)²³ applies the "discovery rule" in copyright infringement actions. See Graper v. Mid-Continent...