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

• Decision Date: 02 May 2018
• Docket Number: CIVIL ACTION NO. H-14-1903
• Parties: ENERGY INTELLIGENCE GROUP, INC. and ENERGY INTELLIGENCE GROUP (UK) LIMITED, Plaintiffs, v. KAYNE ANDERSON CAPITAL ADVISORS, LP and KA 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, LPand KA FUND ADVISORS, LLC, Defendants.

CIVIL ACTION NO. H-14-1903

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

May 2, 2018

MEMORANDUM OPINION AND ORDER

Energy Intelligence Group, Inc. and Energy Intelligence Group (UK) Limited (together, "Plaintiffs" or "EIG") sued Kayne Anderson Capital Advisors, LP and KA Fund Advisors, LLC (together, "Defendants" or "Kayne") for violations of the Copyright Act, 17 U.S.C. § 106, and the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. §§ 1202-03. Pending before the court are Defendants' Motion for Attorney's Fees and Costs ("Kayne's Motion for Fees and Costs") (Docket Entry No. 287), Plaintiffs' Motion for Post-Judgment Relief (Docket Entry No. 289), and Plaintiffs' Application for Attorney's Fees ("EIG's Fee Application") (Docket Entry No. 290). For the reasons stated below, Plaintiffs' Motion for Post-Judgment Relief will be denied; EIG's Fee Application will be granted in part and denied in part; and Kayne's Motion for Fees and Costs will be denied.

I. Background

A detailed history of the parties' business relationship as related to the present litigation is provided in a prior opinion.¹ In short, EIG alleged that Kayne copied and distributed Oil Daily, a subscription newsletter published by EIG, in violation of EIG's subscription agreements.² From at least 2004 to 2013 Kayne purchased a single annual subscription to Oil Daily for a Kayne employee, Jim Baker. That subscription was routinely forwarded to Kayne employees and others who were not subscribers. In 2013 Kayne entered into a multi-user license agreement with EIG, paying for five Kayne employees to receive Oil Daily. But EIG alleged that Kayne continued to distribute unauthorized copies of Oil Daily until at least May 21, 2014. EIG filed this action against Kayne for copyright infringement and for DMCA violations on July 8, 2014.

This case was the subject of a four-day jury trial held from December 4-7, 2017.³ The jury found that Kayne infringed 1,646 individual Oil Daily works between December 29, 2004, and July 8, 2014, and awarded $15,000 in statutory damages for each work infringed.⁴ The jury found that EIG knew or should have known onor before July 8, 2011, that Kayne was infringing its copyrights of Oil Daily;⁵ that Kayne fraudulently concealed its copying of Oil Daily and that EIG failed to discover the copying despite exercising due diligence;⁶ but that EIG failed to mitigate their damages⁷ and could have avoided 1,607 acts of infringement had EIG used reasonable diligence to mitigate damages.⁸ With respect to EIG's DMCA claims, the jury found that Kayne intentionally removed or altered copyright management information for Oil Daily a total of 425 times having reasonable grounds to know that it would induce, enable, facilitate, or conceal copyright infringement.⁹ The jury did not find that Kayne distributed Oil Daily knowing that the copyright management information had been removed or altered without EIG's permission,¹⁰ or that EIG knew or should have known on or before July 8, 2011, that Kayne was intentionally removing or altering copyright management information for Oil Daily or distributing Oil Daily knowing that the copyright management information had been removed or altered without EIG's permission.¹¹ The jury awarded $2,500 in statutory damages for each of Kayne's425 violations of the DMCA.¹² The jury also found that EIG failed to mitigate their DMCA damages,¹³ and that EIG could have avoided all 425 DMCA violations had reasonable diligence been used to mitigate damages.¹⁴

II. EIG's Rule 59 Motion for Post-Judgment Relief

EIG moves the court to alter or amend judgment pursuant to Federal Rule of Civil Procedure 59(e) by (1) striking the jury verdict and questions relating to the affirmative defense that EIG failed to mitigate its damages, and (2) entering judgment against defendants, jointly and severally, for statutory damages under 17 U.S.C. § 504(c)(2) in the sum of $24,690,000 ($15,000 x 1,646 infringements), plus statutory damages under 17 U.S.C. § 1203(c)(3)(B) in the sum of $1,062,500 ($2,500 x 425 DMCA violations).¹⁵ Alternatively, EIG asks the court to enter a judgment of $15,000 for each of the 670 works infringed and $2,500 for each of the 49 DMCA violations that occurred during the three years immediately preceding the filing of this suit.¹⁶ As other alternatives EIG moves the court to grant a new trial pursuant toFederal Rule of Civil Procedure 59(a) because of improper jury instructions and verdict questions, or to grant a new trial on the issue of failure to mitigate damages for Kayne's DMCA violations.¹⁷

Kayne opposes EIG's requests for post-judgment relief arguing that the jury correctly found that EIG failed to mitigate their damages,¹⁸ EIG's other challenges to the jury charge are baseless and were waived,¹⁹ and judgment should not be rendered as EIG requests because EIG's DMCA claims failed as a matter of law, the jury's verdict leads to a fair and reasonable outcome -- an award of damages in EIG's favor of $585,000.00, and EIG's requests for judgment would be unconstitutionally excessive.²⁰

A. EIG Is Not Entitled to Rule 59(e) Relief

1. Applicable Law

"'Under Rule 59(e), amending a judgment is appropriate (1) where there has been an intervening change in the controlling law; (2) where the movant presents newly discovered evidence that was previously unavailable; or (3) to correct a manifest error of law or fact.'" Alexander v. Wells Fargo Bank, N.A., 867 F.3d 593, 597 (5th Cir. 2017). EIG has not cited an intervening change in controlling law and has not presented newly discovered evidence.Instead, EIG argues that the instruction that EIG could not recover statutory damages for any copyright infringement or DMCA violation that EIG could have avoided was a manifest error of law.²¹ A "'[m]anifest error [of law]' is one that is 'plain and indisputable, and that amounts to a complete disregard of the controlling law.'" Guy v. Crown Equipment Corp., 394 F.3d 320, 325 (5th Cir. 2004). "The district court has considerable discretion in deciding whether to reopen a case under Rule 59(e)." Edward H. Bohlin Co., Inc. v. Banning Co., Inc., 6 F.3d 350, 355 (5th Cir. 1993). Nevertheless, "[t]he court must strike the proper balance between two competing imperatives: (1) finality, and (2) the need to render just decisions on the basis of all the facts." Id.

2. Application of the Law to the Facts

(a) EIG Fails to Show Manifest Error of Law

EIG argues that the portions of the jury instructions and verdict form questions stating that EIG "'may not recover for any item of damage that could have [been] avoided through reasonable efforts' constituted legal error,"²² and that Kayne's mitigation defense was improperly accounted for more than once.²³ Kayne responds that the mitigation defense applies to copyright claims,the jury was correctly instructed on mitigation, and the jury correctly found that EIG failed to mitigate their damages.²⁴

(1) EIG Has Not Shown that Mitigation Instructions or Questions Were a Manifest Error of Law

EIG argues that the jury charge improperly instructed that

Plaintiffs may not recover for any item of damage that they could have avoided through reasonable effort. If you find Defendants have proved by a preponderance of the evidence that Plaintiffs unreasonably failed to take advantage of an opportunity to lessen their damages, you should deny them recovery for those damages that they would have avoided had they taken advantage of the opportunity.²⁵

Asserting that Kayne's mitigation defense relied on arguments that EIG could have stopped the infringement in January of 2007 by notifying Kayne that its actions constituted infringement and that infringement can cause legal and financial consequences, EIG argues that this instruction and related verdict questions constitute manifest error because Kayne's mitigation defense conflicts with the Copyright Act's specific notice requirements, which allow reduced statutory damages, and conflicts with the DMCA, which has no notice requirements.²⁶ Asserting that statutory damages are not meant solely to compensate copyright owners for their injuries butalso to deter future infringement, EIG also argues that this instruction and related verdict questions constitute manifest error because statutory damages are available for infringement and violation of the DMCA regardless of whether actual damages are suffered or could have been mitigated.²⁷

Kayne responds that "there is nothing in the Copyright Act that addresses, much less eliminates, the general requirement that an injured plaintiff has a duty to mitigate damages,"²⁸ and that EIG cites no authorities that have adopted its overly-expansive interpretation of the Copyright Act's notice provision as an "exclusive 'duty to warn' in copyright cases."²⁹ Acknowledging that the DMCA has no formal notice requirement, Kayne argues that EIG offers "no authority for their huge leap in logic seeking to turn statutory silence on notice requirements into an affirmative provision preempting generally-applicable defenses such as mitigation,"³⁰ and that "[c]ontrary to [EIG]'s argument, several courts have recognized the failure to mitigate defense when a plaintiff does not send notice requesting the infringer to stop its conduct."³¹ Kayne argues that its

mitigation defense was not just a "failure to warn" defense, the defense was based on [EIG]'s taking no action over the course of many years to protect its own interest and products. It is true that [EIG] did not warn Kayne Anderson after learning of the infringement in 2007, which is significant because Kayne Anderson stopped its infringement immediately after receiving [EIG]'s cease and desist letter in May 2014. See Tr. Vol. 4 at 49-52. It is also clear that [EIG] never took action to

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