Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_00-md-01369/USCOURTS-cand-3_00-md-01369-20/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 28:1338 Copyright Infringement

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UNITED 

STATES 

DISTRICT 

COURT

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

IN RE NAPSTER, INC. COPYRIGHT 

LITIGATION

 

This Document Relates To:

 

UMG RECORDINGS, INC. et al., 

Plaintiffs,

v.

HUMMER WINBLAD VENTURE PARTNERS et al.,

Defendants. 

UMG RECORDINGS, INC. et al., 

Plaintiffs, 

v.

BERTELSMANN AG et. al.,

Defendants. 

JERRY LEIBER et al.,

Plaintiffs,

v.

BERTELSMANN AG et al., 

Defendants. 

No. C MDL-00-1369 MHP

No. C 04-1166 MHP

No. C 04-1351 MHP

No. C 04-1671 MHP

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For the Northern District of California

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CAPITOL RECORDS, INC. et al.,

Plaintiffs,

v.

BERTELSMANN AG et. al.,

Defendants. /

No. C 04-2121 MHP

MEMORANDUM & ORDER

Re: Motions to Stay and for

Reconsideration

On April 21, 2006 this court granted three motions to compel production of documents

previously withheld as privileged, based on the crime-fraud exception to the attorney-client

privilege. The court ordered plaintiff UMG Recordings, Inc. (“UMG”), plaintiff Capitol Records,

Inc. (“EMI”), and defendant Bertelsmann AG (“Bertelsmann”) to produce the withheld documents

within 30 days of the court’s order.1

On May 1, 2006 UMG and EMI requested leave to seek reconsideration of the court’s order.

Simultaneously, UMG and EMI sought a stay of the court’s order pending reconsideration. 

Bertelsmann did not seek reconsideration, but also sought a stay pending appeal to the Ninth Circuit,

which Bertelsmann noticed on May 2, 2006. UMG and EMI also filed a notices of appeal on May 9,

2006.

The notices of appeal divest this court of jurisdiction to entertain UMG and EMI’s requests

for reconsideration. “The filing of a notice of appeal generally divests the district court of

jurisdiction over the matters appealed.” McClatchy Newspapers v. Central Valley Typographical

Union No. 46, 686 F.2d 731, 734 (9th Cir. 1982). Here, the parties are appealing this court’s orders

to compel production, and as a result this court cannot now reconsider the merits of those orders.

Even if this court retained jurisdiction, or in the event that the Ninth Circuit might wish to

remand to this court in order to permit adjudication of the motions for reconsideration, the court

would not be inclined to reconsider its rulings. “Reconsideration is appropriate if the district court

(1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was

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For the Northern District of California

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manifestly unjust, or (3) if there is an intervening change in controlling law.” School Dist. No. 1J,

Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). Both EMI and UMG

present voluminous new evidence in support of their requests for reconsideration, but with the

exceptions discussed below, none of the evidence is “newly discovered” as it was in the parties

possession prior to the briefing and argument for the motions to compel. See id. (“The

overwhelming weight of authority is that the failure to file documents in an original motion or

opposition does not turn the late filed documents into ‘newly discovered evidence.’”). The court

considers the arguments offered by EMI and UMG in turn.

Only three of the pieces of evidence submitted by EMI in support of reconsideration were

even arguably before the court at the time of its decision. First, EMI claims that the appendix to the

EMI White Paper—a document comprising roughly 800 pages of dense legal language—was

“referred to at oral argument” and “shown to the Court at that hearing.” EMI Motion at 5 n.1. Even

if showing a document to the court were the same as “fil[ing]” for purposes of reconsideration, cf.

Multnomah County, 5 F.3d at 1263, the arguments EMI advances based on specific citations to

portions of the appendix were not before the court, and could not reasonably have served as the basis

for denying Hummer’s motion to compel. EMI’s argument that the court committed “clear error” by

failing to appreciate the significance of the appendix is absurd.

Second, EMI points out that Exhibit 64 to the Anderson Declaration was before the DOJ, and

in fact was discussed in the EMI White Paper. The court notes, however, that Hummer also

submitted Exhibit 62, which contains more specific language as to the similarity of terms offered to

the record label parents: MusicNet offered to give EMI a deal that “treats everyone the same.” This

additional document, in combination with the vague language in the White Paper, provides further

prima facie evidence of fraud. The order relied on Exhibit 64 as only one factor among several

establishing Hummer’s prima facie case.

Third, EMI cites two portions of the MusicNet White Paper in support of its argument that

the DOJ would have realized that EMI was not a “Distribution Stockholder” and therefore would

have been permitted to receive a copy of MusicNet’s license to Napster. The MusicNet White Paper

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For the Northern District of California

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states broadly that “the Distribution Agreements themselves and Section 5.4(c) of the Amended and

Restated Stockholders Agreement [with the parent record labels] prohibit disclosure of the terms of

the Distribution Agreements.” Anderson Dec., Exh. 7 at 22. EMI now argues that footnote 35,

which is cited in support of the broad statement, puts the DOJ on notice that only “Distribution

Stockholders” were prohibited from seeing the terms of distribution agreements. The footnote

states, in relevant part, that “the terms and conditions of the Distribution Agreements . . . [are] not

divulged to any other Distribution Stockholder . . . or any other third parties.” Id. at 22 n.35

(emphasis added). Far from supporting EMI’s position, the language in the footnote reinforces the

White Paper’s assertion that terms of distribution agreements were to be kept strictly confidential. 

EMI’s citation to another passage limiting the ability of Distribution Stockholders to “participate in

negotiations relating to distribution agreements” is also not relevant to prove that the DOJ knew the

EMI was entitled to receive the entire Napster distribution agreement.

Finally, EMI offers the newly-produced deposition testimony of Paul Vidich, a former

Warner Music executive and former member of the MusicNet board of directors. Mr. Vidich stated

the opinion that “EMI was entitled to [see MusicNet’s distribution agreements with entities such as

Napster.]” Simmons Dec. Exh. 3, at 288:22–290:13. Mr. Vidich’s opinion is based on his

interpretation of the Stockholders Agreement, which was attached as an exhibit to the MusicNet

White Paper. Whatever limited probative value Mr. Vidich’s opinion may have as to the meaning of

the Stockholders Agreement, the court fails to see how it bears on the DOJ’s reasonable

interpretation of the broad, clear statements of independence in the White Paper itself.

In sum, to the extent EMI’s arguments for reconsideration are based on appropriate evidence,

they are unavailing.

UMG’s principal argument in support of reconsideration is that the court mischaracterized

UMG’s positions with respect to the prevalence and effect of Most-Favored Nation clauses in

UMG’s content licenses. The court’s order does make broad statements about UMG’s concessions: 

“UMG does not disagree with Hummer’s characterization of the effect of MFN clauses, or dispute

that each of the agreements cited in the White Paper contains an MFN clause” (Order at 6), and

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“[UMG does not deny] the consistent practice of including MFNs in all license agreements” (Order

at 7). Even if the court’s order overstates UMG’s concessions, the court is not inclined to revisit its

ruling because the evidentiary record submitted by Hummer as to the prevalence and similarity of

MFNs—the numerous agreements listed in Hummer’s papers and relied upon at oral argument—is

more than adequate to make out a prima facie case of a consistent practice which was deliberately

hidden from the DOJ.

UMG’s other arguments are similarly without merit. First, UMG argues, as it did in

opposing Hummer’s motion, that the presence of MFNs in the labels’ agreements with third parties

is not relevant to prove that the labels exchanged information through the joint ventures—the

purported antitrust violation. The court found MFNs to be relevant under a different theory: they

undermine the evidentiary value of the supposedly disparate licensing terms. The “disparate

licensing” argument was the centerpiece of the pressplay White Paper and provided the primary

stated rationale for the DOJ’s decision to cease pursuing its antitrust case. The MFNs need not

directly prove the sharing of information to be relevant to the DOJ’s decision to drop its

investigation.

Second, UMG argues that the pressplay Guidelines make broad representations about

pressplay’s independence from its parents. Although the court does not accept UMG’s

characterization of the quote it selectively offers from the Guidelines, UMG’s argument does not

appear to help its case. To the extent that the Guidelines make broad representations of

independence, they are belied by the documents offered by Hummer in support of its motion.

The remainder of UMG’s arguments are based entirely on newly offered documents which

were in UMG’s possession prior to briefing and argument for the motion to compel, or are new

arguments not raised in the parties’ papers or at oral argument. The court may not rely on them in

deciding whether to reconsider its order.

The remaining issue is whether the court should stay its discovery orders pending appeal. 

Ninth Circuit law is not settled as to whether an order vitiating privilege under the crime-fraud

exception is appealable at all: “Our circuit has not resolved the general question of ‘whether a

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For the Northern District of California

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discovery order disposing of an asserted claim of privilege could be independently appealed under

the collateral order doctrine of Cohen[ v. Beneficial Indus. Loan Corp., 337 U.S. 541 (1949)]’” 

Agster v. Maricopa County, 422 F.3d 836, 838 (9th Cir. 2005) (citing United States v. Fernandez,

231 F.3d 1240, 1245 n. 4 (9th Cir.2000)); but see Bittaker v. Woodford, 331 F.3d 715 717–18 (9th

Cir. 2003) (en banc) (exercising jurisdiction over appeal of grant of protective order); United States

v. Griffin, 440 F.3d 1138, 1142 (9th Cir. 2006) (exercising jurisdiction over appeal of order denying

application of marital privilege).

Even if the parties succeed in obtaining appellate review of the orders, the court has serious

doubts about their likelihood of success on the merits. A stay is therefore not appropriate at this

time.

UMG also objects to the scope of the order, which requires production of all communications

related to the antitrust investigation. Since the court’s injunction order is on appeal, thus depriving

this court of jurisdiction, even opining on what the court would do if the matter were remanded

before the Circuit rules on the appeal is not warranted or appropriate. 

CONCLUSION

For the foregoing reasons, the court hereby DENIES UMG’s, EMI’s and Bertelsmann’s

motions to stay and DENIES UMG’s and EMI’s motions for leave to seek reconsideration.

IT IS SO ORDERED.

Dated: May 17, 2006 

MARILYN HALL PATEL

District Judge

United States District Court

Northern District of California

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1. The court will not restate the facts underlying the motions to compel, which are set forth in the

court’s previous orders.

ENDNOTES

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