In re Albarran
| Decision Date | 24 July 2006 |
| Docket Number | BAP No. SC-05-1398-MaSPa.,Bankruptcy No. 04-04938.,Adversary No. 04-90395. |
| Citation | 347 B.R. 369 |
| Parties | In re Lucia ALRARRAN and Antonio Barboza, Debtors. Lucia Albarran; Antonio Barboza, Appellants, v. New Form, Inc., Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Colin W. Wied, C. W. Professional Corporation, San Diego, CA, for debtors.
Gerald H. Davis, Palm Springs, CA, for trustee.
Before: MARLAR, SMITH, and PAPPAS, Bankruptcy Judges.
The debtors, who reproduce and distribute motion picture titles in the home video market, filed a voluntary chapter 71 petition after a district court judgment for willful copyright infringement was entered against them for statutory damages plus interest, attorney's fees and costs in the sum of $893,077.11. The judgment creditor then obtained a judgment, in bankruptcy court, that the debt was a nondischargeable "willful and malicious injury" pursuant to & sect; 523(a)(6).
Debtors maintain that an award of statutory damages, without proof of any actual damages, was not an "injury," and that mere duplication of the films, without proof of sale, did not establish the subjective intent requirement for "willfulness."
We conclude that an award for statutory damages for willful copyright infringement is a debt for a categorically harmful activity, which is a nondischargeable "injury" under & sect; 523(a)(6) if the bankruptcy court determines that the infringer had the requisite subjective intent to injure another's property interest. Here, the debtors' actual knowledge of the creditor's copyright interest at the time of infringement was proof of their "substantial certainty" of resultant harm. Therefore, we AFFIRM.
Lucia Munguia Albarran ("Albarran") and her husband, Antonio Barboza ("Barboza"), ("Debtors"), operated a business for the duplication, distribution and sale of Spanish language films. This appeal concerns ten films known as the India Maria Pictures.2
On May 15, 1999, appellee New Form, Inc. ("New Form") acquired the exclusive rights to manufacture, sell and distribute the India Maria Pictures.
Before New Form acquired its exclusive rights, Debtors had purchased a large amount of inventory of India Maria Pictures from Million Dollar Video Corp. ("Million Dollar Video"). Debtors also utilized the services of Reel Picture Productions, LLC ("Reel Picture") for reproduction of the India Maria Pictures. A copy of each India Maria Picture ordered was made and packaged into a finished VHS tape product. Debtors sold the India Maria Pictures, but they kept no inventory or sale records.
In late summer, 1999, New Form learned that Debtors were selling the India Maria Pictures. It sent Debtors a letter, dated September 3, 1999, advising them of New Form's "exclusive right to duplicate and sell" the India Maria Pictures.
Following their receipt of this letter, Debtors ordered 500 VHS tape finished product copies of the India Maria Pictures from Reel Picture on or about September 9, 1999.
Albarran responded to New Form by letter, on September 17, 1999, stating that they: (1) did not know about New Form's exclusive rights prior to receiving the September 3rd letter; (2) were selling inventory of India Maria Pictures legally purchased from Million Dollar Video;3 and (3) were "open to a purchase proposal or to another reasonable agreement" with New Form.
New Form sent a final warning letter on December 9, 1999. Debtors continued to sell the India Maria Pictures until March 20, 2002, when New Form filed a lawsuit against them for willful copyright infringement in the District Court for the Central District of California (the "District Court Action"). The complaint alleged that Debtors had willfully infringed New Form's copyright in the India Maria Pictures beginning on or after May 15, 1999 and ending in 2002.
New Form moved for partial summary judgment in the District Court Action, arguing that Debtors had willfully infringed its copyright by (1) duplication of the India Maria Pictures, and (2) sale and distribution of the India Maria Pictures. Following a hearing, the district court granted summary judgment on only one issue & — New Form's ownership of a valid copyright interest in the India Maria Pictures effective May 15, 1999 and continuing to May 15, 2004.
A jury trial was held in April, 2004, on the infringement by duplication issue.4 To establish statutory copyright infringement based on duplication under the Copyright Act, 17 U.S.C. & sect;§ 101-1332 (2004 & Supp.2006), a plaintiff must prove: "(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original." Feist Publ'ns, Inc. v. Rural Tel. Sera Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991).
The jury instructions on infringement of copyright stated:
If you find by a preponderance of the evidence that [Albarran] reproduced and/or in any manner duplicated each or all of the ten (10) India Maria Pictures at any time between May 15, 1999, and the present, you are instructed to find that Defendant infringed Plaintiff's copyright interests for each India Maria Picture reproduced.
The jury was also instructed on "willful" infringement:
To prove willful infringement, the Plaintiff must prove by a preponderance of the evidence that the Defendants knew that they were infringing the Plaintiffs copyrights or that they acted with reckless disregard as to whether they were doing so. If you conclude that the Defendants reasonably and in good faith believed that they were not infringing the Plaintiffs copyrights, then you may not find that they willfully infringed those copyrights.
The jury returned special verdicts finding that Albarran and Barboza had willfully infringed New Form's copyright in each of the India Maria Pictures, and awarded statutory damages. Judgment was entered on May 10, 2004, for $750,000 ($75,-000 for each of the ten films), plus costs and attorney's fees; the final judgment amount was fixed at $893,077.11.
Debtors filed a bankruptcy petition on May 28, 2004. New Form timely filed a complaint seeking to have the entire judgment debt declared nondischargeable as a "willful and malicious" injury under § 523(a)(6). It promptly moved for summary judgment, and requested that the bankruptcy court take judicial notice of the record and judgment in the District Court Action.
Debtors filed an opposition and a counter-motion for summary judgment. Albarran filed her declaration in which she denied any intent to injure New Form, and argued that the district court verdict and judgment were based on mere "reckless" conduct.
In resolving the motion, the court applied collateral estoppel, or issue preclusion, to the district court's finding that Debtors had infringed New Form's copyright. Specifically, it held that Albarran was "bound by the fact that she ordered" the duplication of the India Maria Pictures. Tr. of Proceedings (March 28, 2005), pp. 18-19.5
Since the jury instruction had defined "willful" infringement as either "knowing" or "reckless" conduct, the bankruptcy court reserved for trial the issue of whether Debtors had the "subjective intent to injure [New Form] or its property, or subjective knowledge that injury [was] substantially certain to result." Order on Summary Judgment (June 7, 2005), p. 2.
New Form then moved for partial summary judgment on the issue of subjective intent. It argued that the undisputed evidence showed that there was no tribal issue as to Debtors' knowledge that an injury to New Form's copyright was substantially certain to occur from their duplication of the India Maria Pictures. Furthermore, it argued that the undisputed evidence was that Debtors had sold the unlawfully duplicated India Maria Pictures.
New Form presented the declarations of Manual Hinostroza ("Hinostroza"), president of New Form, and Michael Ishayik ("Ishayik"), president of Reel Picture. Hinostroza averred that New Form discovered that Debtors were duplicating and selling the India Maria Pictures in late summer, 1999. He introduced the series of letters between New Form and Albarran which gave notice to Debtors of New Form's copyright on and after September 3, 1999.
Ishayik averred that, on and after May 14, 1999, Debtors had ordered overflow services from Reel Picture which included duplication and preparation of finished product of the India Maria Pictures. He stated that the orders were picked up by either Barboza or Albarran's son, Gustavo Munguia ("Gustavo"). The relevant exhibits, i.e., those dated after the September 3, 1999, notice to Debtors of New Form's copyright, were as follows:
1. A "Packing Slip," dated September 9, 1999, listing quantities and titles of India Maria Films, and signed by Gustavo.
2. A "Packing Slip," dated September 14, 1999, listing the quantities and titles of India Maria Films "shipped," totaling 2,091 reproductions. Under a column marked "Carrier," were written the words, "will call." At the bottom, after "Received By" was printed the name "Antonio Barboza C."
New Form's "Statement of Uncontroverted Facts" cited the same exhibits for the following allegations:
16. Subsequent to receiving actual written notice of Plaintiff's exclusive ownership rights to the India Maria Pictures, Defendants ordered and received 500 VHS Tape Finished Product copies of the India Maria Pictures from Reel Picture on September 9, 1999.
17. Subsequent to receiving actual written notice of Plaintiff's exclusive ownership rights to the India Maria Pictures, Antonio Barboza picked up and received on behalf of Defendants, 2,091 VHS Tape Finished Product copies of the India Maria Pictures from Reel Picture on September 14, 1999.
Debtors filed an opposition...
To continue reading
Request your trial
-
In re Wright
...criteria for a "willful and malicious injury," constitutes a nondischargeable debt under § 523(a)(6). Albarran v. New Form, Inc. (In re Albarran), 347 B.R. 369, 383 (9th Cir.BAP2006); Star's Edge, Inc. v. Braun (In re Braun), 327 B.R. 447, 452 (Bankr.N.D.Cal.2005). Before the trial court re......
-
In re Brendon Keith RETZ
...1105, 1107, 166 L.Ed.2d 956 (2007). The “fresh start” is explained by the Ninth Circuit Bankruptcy Appellate Panel in In re Albarran, 347 B.R. 369, 379 (9th Cir. BAP 2006): The general policy of bankruptcy law favors allowing an honest debtor to discharge debts and to make a fresh start fre......
-
In re Long., Case No. 07-60011-7 (Bankr.Mont. 6/17/2008)
...L.Ed.2d 956 (2007). The "fresh start" is explained by the Ninth Circuit Bankruptcy Appellate Panel in Albarran v. New Forms, Inc. (In re Albarran), 347 B.R. 369, 379 (9th Cir. BAP 2006): The general policy of bankruptcy law favors allowing an honest debtor to discharge debts and to make a f......
-
In re Merena
...L.Ed.2d 755 (1991). The "fresh start" is explained by the Ninth Circuit Bankruptcy Appellate Panel in Albarran v. New Form, Inc. (In re Albarran), 347 B.R. 369, 379 (9th Cir. BAP 2006): The general policy of bankruptcy law favors allowing an honest debtor to discharge debts and to make a fr......