Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-00795/USCOURTS-cand-3_04-cv-00795-1/pdf.json

Parties Involved:
Evenflow Plumbing Company, Inc.
Counter-defendant
Pacific Bell Directory
Counter-claimant

Document Text:

United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

EVENFLOW PLUMBING COMPANY, INC.,

Plaintiff,

 v.

PACIFIC BELL DIRECTORY,

Defendant. /

No. C-3:04-cv-00795 EDL

FINDINGS OF FACT AND

CONCLUSIONS OF LAW FOLLOWING

COURT TRIAL

 Plaintiff Evenflow Plumbing Company filed this copyright infringement action against

Defendant Pacific Bell Directory. Pacific Bell Directory counterclaimed against Evenflow for

breach of contract, account stated and quantum meruit. Both parties consented to court trial by a

magistrate judge pursuant to 28 U.S.C. § 636(c). 

On February 15, 2005, the Court issued its order on the parties’ motions for summary

judgment, holding that Pacific Bell Directory infringed on Evenflow’s copyrighted photographic

image of a backhoe in a vertical Yellow Pages advertisement for All-American Plumbing and that

Pacific Bell Directory is entitled to recover on its breach of contract claims arising out of some of

the advertising contracts between the parties. At that time, only the amount of damages recoverable

by either party on their respective claims and the enforceability of the late fees and collection

activity fees contained in the advertising contracts claimed by Pacific Bell Directory remained for

trial. 

The case was tried by the Court on April 18, 2005. At the beginning of the trial, Pacific Bell

Directory waived its right to collect the late fees and collection activity fees, so the only issues

remaining were the amount of damages for copyright infringement and the amount of damages for

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the breach of contract claims. Bruce McIntosh represented Evenflow. Fenn Horton represented

Pacific Bell Directory. 

On April 26, 2005, the Court granted Pacific Bell Directory’s oral motion to strike the trial

testimony of Evenflow’s witness, Shawny Hoops, regarding the actual damages Evenflow sustained

as a result of Pacific Bell Directory’s copyright infringement. The Court also granted Pacific Bell

Directory’s motion to exclude exhibits five and six, on which Ms. Hoops relied for that testimony. 

On May 24, 2005, the Court held a hearing on the parties’ Proposed Findings of Fact and

Conclusions of Law and gave the parties leave to file additional briefing on the applicability of the

statute of limitations defense to Pacific Bell Directory’s counterclaims. On May 27, 2005, Pacific

Bell Directory timely filed its brief and on June 1, 2005, Evenflow timely responded. 

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Copyright damages

As noted above, the Court granted Evenflow’s motion for summary judgment in favor of its

copyright infringement claim and held that Pacific Bell Directory infringed Evenflow’s copyrighted

image of a backhoe tractor by copying that image in the vertical Yellow Pages advertisement for

All-American Plumbing. Upon a finding of copyright infringement, a copyright holder is entitled to

recovery of actual damages, the infringer’s wrongful profits or statutory damages. See 17 U.S.C. §

504(b), (c). 

Throughout this case, Evenflow has focused on recovering its actual damages in the form of

profits lost because one of its customers, Sousa & Viviani, was diverted to a competitor by Pacific

Bell Directory’s misappropriation of Evenflow’s copyrighted image from Evenflow’s own

advertisements for use in its competitor’s advertisement instead. The Court rule in limine that this

type of actual damages is allowable, rejecting Pacific Bell Directory’s argument that recovery of

actual damages is limited to amounts attributable to the loss of market value or the value of the use

of the work to the infringer. See, e.g., Polar Bear Prods. V. Timex Corp., 384 F.3d 700, 708 (9th

Cir. 2004) (“Actual damages are usually determined by the loss in the fair market value of the

copyright, measured by the profits lost due to the infringement or by the value of the use of the

copyrighted work to the infringer.”) (emphasis added); see also 4 Melville Nimmer, et al., Nimmer

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on Copyright, § 14.02[A][1] at 14-14 (noting that in determining actual damages when it is difficult

to do so under a loss of market value theory, “the plaintiff’s [actual] damages may be said to equal

the profits that the plaintiff might have accrued but for the defendant’s infringement.”). Of course,

the copyright holder bears the burden of showing that the infringement was the cause of the loss of

profits. See, e.g., Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 567 (1985). 

Therefore, Evenflow’s lost profits are recoverable if proven and if causation is established. 

To establish causation, Evenflow presented testimony from John Monacelli, a principal with

Sousa & Viviani, a general plumbing contractor located in San Leandro, California. Mr. Monacelli

testified that his brother recommended that Mr. Monacelli call Gary Dimodana’s company when Mr.

Monacelli needed to subcontract sewer work and that the company could be located by looking for

the advertisement with a backhoe tractor. Mr. Monacelli wanted to use a subcontractor that owned

its backhoe tractor. Mr. Monacelli intended to hire Mr. Dimodana’s company for the sewer work, so

he and his brother looked in the Pacific Bell Directory for an advertisement containing a backhoe

tractor. Upon seeing such an advertisement, Mr. Monacelli called the company from that ad, AllAmerican Plumbing. During that telephone call or any subsequent calls, Mr. Monacelli neither

asked to speak with Mr. Dimodana nor inquired as to whether All-American was Mr. Dimodana’s

company. Mr. Dimodana, in fact, had no involvement with All-American. Mr. Monacelli did

business with All-American for two to three years until All-American changed its name to Bay City

Plumbing and the quality of the work declined. Unable to contact All-American and believing that

plumbing contractors are notorious for going out of business and reemerging under a different name,

Mr. Monacelli looked in the Pacific Bell Directory again to find the advertisement with the backhoe

tractor. This time he found Mr. Dimodana’s company, Evenflow. Thinking that Evenflow was the

reincarnation of All-American, Mr. Monacelli called Evenflow to complain about the quality of the

work. Shortly thereafter, Mr. Monacelli realized that All-American was not Mr. Dimodana’s

company, even though he thought he was dealing with Mr. Dimodana’s company for many years. 

Mr. Monacelli’s testimony is sufficient to show that Pacific Bell Directory’s infringement caused

actual damage to Evenflow in the form of lost profits. 

As the Court explained to Evenflow before trial, Evenflow’s lost profits do not equal the

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gross amount of the Sousa & Viviani contracts with All-American because those contracts only

reflect All-American’s price for the work, not the profits that Evenflow would have made if it had

been awarded those contracts. 

To prove its net lost profits at trial, Evenflow offered Shawny Hoops, an Evenflow

employee. As described in the Court’s Order Granting Defendant’s Motion to Strike Trial

Testimony dated April 26, 2005, Ms. Hoops was unable to testify about lost profit from her

independent personal knowledge, but instead referred to a compilation of calculations she assembled

about one month before trial, but gave to Pacific Bell Directory for the first time only on the eve of

trial. Because Evenflow did not timely disclose that information to Pacific Bell Directory and the

failure was not harmless, the Court excluded Ms. Hoops’ testimony about lost profit and excluded

exhibits five and six showing her calculation. See Fed. R. Civ. Proc. 37(c)(1); April 26, 2005 Order

at 2:26-28. Evenflow presented no other evidence of damages from which the Court could make its

own calculations of the profit Evenflow would have received but for the infringement. 

In its post-trial Proposed Findings of Fact and Conclusions of Law, Evenflow argues for the

first time that it is entitled to statutory damages. See 17 U.S.C. § 504 (permitting a court to award

statutory damages for copyright infringement of not less than $750 nor more than $30,000, or, for

willful infringement, not more than $150,000); see also Russell v. Price, 612 F.2d 1123, 1129 (9th

Cir. 1980) (“It is true that when injury is proven but neither the infringer’s profits nor the copyright

holder’s actual damages can be proved, statutory damages are mandatory.”). Russell is inapposite;

the rule mandating “in lieu” statutory damages applies where damages are unascertainable, not

where, as here, a copyright holder fails to adequately prove its damages that are otherwise

ascertainable. More importantly, Evenflow is not entitled to statutory damages because even though

it began using the photograph containing the backhoe in its advertisements in 1998, it did not

register its copyright in the photograph until February 15, 2002, and Pacific Bell Directory’s

infringement began at the latest in August 2001. See 17 U.S.C. § 412 (providing that statutory

damages are unavailable if “(1) any infringement of copyright in an unpublished work commenced

before the effective date of its registration; or (2) any infringement of copyright commenced after

first publication of the work and before the effective date of its registration, unless such registration

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is made within three months after the first publication of the work.”). Evenflow has presented no

authority, and the Court can find none, that the “in lieu” statutory damages rule from Russell trumps

section 412. Russell did not address the applicability of section 412 because the work at issue there

was copyrighted well in advance of the infringement. 

Further, Evenflow has not established that Pacific Bell Directory enjoyed any profits from its

infringement that Evenflow could recover as damages under section 504. Accordingly, because

Evenflow has failed to meet its burden of proving any damages under section 504, Evenflow shall

take nothing on its claim for copyright infringement. 

Breach of contract

Evenflow entered into various advertising agreements with Pacific Bell Directory from 1997

through 2003 on accounts numbered 279949, 279950 and 770469 under which Evenflow’s

advertisements were to be inserted into several of Pacific Bell Directory’s Yellow Pages

publications. The Court previously granted Pacific Bell Directory’s motion for summary judgment

on its breach of contract counterclaims, holding that Pacific Bell Directory’s breach of contract

claims for advertising contracts prior to July 18, 1998 were time-barred, but that Pacific Bell

Directory was entitled to principal and interest on advertising agreements that were not time-barred. 

Pacific Bell Directory’s witness, Gina Bello, testified at trial that it was Pacific Bell

Directory’s custom and practice to apply a form of FIFO (”first in, first out”) to its accounts

receivables. Under a FIFO system, Pacific Bell Directory credited Evenflow’s payments as they

were received to pay off installments that had first become due and were unpaid when the payments

were received. Ms. Bello also testified that, based on her experience working for other companies in

this field, the standard practice within the industry was consistent with Pacific Bell Directory’s

system. Evenflow presented no evidence to the contrary. Evenflow did not, for example, present

any evidence that it had requested that specific payments that it made be credited to more recent

amounts due, and that Pacific Bell Directory had agreed to do so. Furthermore, Pacific Bell

Directory points out correctly that crediting payments to the most overdue account receivable

protects customers from higher interest payments for late payments. 

The Court previously ruled that Pacific Bell Directory’s “breach of contract claims for

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unpaid installments prior to July 18, 1998, four years before the state suit was filed, are timebarred.” See Feb. 15, 2005 Order at 11:27-28. The evidence presented at trial, however, revealed

that there were no unpaid installments existing prior to July 18, 1998. The financial transaction

statements show that the unpaid balance that existed on account number 279949 as of June 24, 1998

was paid off no later than March 1999, prior to the filing of Pacific Bell Directory’s lawsuit. See

Def.’s Exh. A. The unpaid balance on account number 279950 as of June 24, 1998 was paid off no

later than January 2000, which is also prior to the filing of Pacific Bell Directory’s lawsuit. See

Def.’s Exh. C. Account number 770469 was opened in March 2002, so no part of it is time-barred. 

See Def.’s Exh. B. Again, Evenflow did not produce any evidence to the contrary. Evenflow did

not meet its burden of establishing that the statute of limitations defense barred any amounts sought

by Pacific Bell Directory. 

Ms. Bello testified that the total amount due, less non-adjusted late payment charges for

advertising, on account number 279949 is $226,950.44. See Def.’s Exh. Y at 3. She also testified

that the total amount due, less non-adjusted late payment charges for advertising, on account number

279950 is $77,370.85 . See Def.’s Exh. Y at 4. The total amount due, less non-adjusted late

payment charges for advertising, on account number 770469 is $76,540.36. See Def.’s Exh. Y at 5. 

Therefore, the final amount due on all accounts is $380,861.65. Evenflow presented no persuasive

evidence to contradict Ms. Bello’s calculations. While it argued for a lower amount, the Court

credits Ms. Bello’s calculations. 

Pacific Bell Directory has proven its damages for breach of contract in the amount of

$380,861.65. Pre-judgment interest in the amount of ten percent is mandatory under California Civil

Code section 3287(a) and 3289(b). Pacific Bell Directory conceded that because interest in this case

is recoverable as damages rather than based on the contracts, Civil Code section 3290 applies to

waive interest from the time the accounts had zero balance. See Cal. Civ. Code § 3290 ( “Accepting

payment of the whole principal, as such, waives all claim to interest.”); Kawasho Int’l, U.S.A., Inc.

v. Lakewood Pipe Serv., Inc., 152 Cal.App.3d 785, 794-95 (1983) (“Section 3290 applies only to

situations where interest is claimed as damages for nonpayment or default in payment of a debt. 

Section 3290 does not apply to situations where the interest claimed is a part of the debt, that is,

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where the claim for interest is based upon a contract, express or implied, to pay interest.”) (emphasis

in original). Account number 279950 had a zero balance as of May 26, 2000, so no pre-judgment

interest is recoverable on that account prior to that date. See Def.’s Exh. C. Similarly, account

number 770469 had a zero balance as of June 8, 2002, so no pre-judgment interest is recoverable on

that account prior to that date. See Def.’s Exh. B. The trial exhibits showing interest on the three

accounts also included late payment charges, which Pacific Bell Directory waived at the beginning

of trial. See Def.’s Exh. U, V, W. In its post-trial submission, Pacific Bell Directory submitted

updated pre-judgment interest calculations showing pre-judgment interest due on account number

279949 in the amount of $19,463.40 on the balance due as of July 18, 1998, on account number

279950 in the amount of $2,197.62 on the balance due as of May 26, 2000 and on account number

770469 in the amount of $1,614.68 on the balance due as of June 8, 2002. See Def.’s Proposed

Findings of Fact and Conclusions of Law at 8:1-9. Accordingly, Pacific Bell Directory is entitled to

prejudgment interest in the amount of $23,275.70.

CONCLUSION

Evenflow is not entitled to damages for its copyright infringement claim. Pacific Bell

Directory is entitled to damages in the amount of $404,137.35 on its breach of contract

counterclaim. 

IT IS SO ORDERED.

Dated: June 7, 2005 

ELIZABETH D. LAPORTE

United States Magistrate Judge

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