Thursday, July 26, 2007

Pre-Trial Forfeiture in Copyright cases

Federal Rule of Civil Procedure 64 provides that at the commencement of and during the course of a civil action, all remedies providing for the seizure of property in order to secure satisfaction of a judgment ultimately entered are available according to the law of the state in which the federal district court sits, subject to (among other things) "any existing statute of the United States govern[ing] the .. extent to which it is applicable." My view, which is admittedly ignorant, is that this provision is not applicable because the Copyright Act itself spells out what pre-trial remedies are available and because any such state remedy would be preempted by Section 301.

A recent case in Puerto Rico rejected an outrageous Rule 64 request, although not on this ground. Here's the opinion in full:

--- F.Supp.2d ----, 2007 WL 2118854 (D.Puerto Rico)
United States District Court, D. Puerto Rico.

ESTATE OF Roberto HEVIA, Plaintiffv.PORTRIO CORPORATION, et al., Defendants.
Civil No. 07-1363 (JP).

July 23, 2007.

OPINION AND ORDERJAIME PIERAS JR., U.S. Senior District Judge.*1 The Court has before it the plaintiff's motion for a hearing and for provisional remedies. The plaintiff claims it owns the copyrights to architectural plans created by Roberto Raúl Hevia-Acosta, and alleges the defendants infringed those copyrights by using them to develop a residential complex in Río Grande, Puerto Rico. In its Second Amended Complaint, the plaintiff claims damages in the amount of $1,365,750.03 in profits it would have realized if the defendants had lawfully used the plans for the residential complex, and $31,500,000 in profits it alleges the defendants gained from the sale of units in the residential complex. The plaintiff moves the Court to exercise its authority under Rule 64 of the Federal Rules of Civil Procedure (1) to garnish any and all of the defendants' property in the possession of third parties up to the amount of $1,365,750.03 plus interest, and (2) to attach a certain property in Río Grande, presumably the entire residential complex that is the subject of this action. The plaintiff also moves the Court to hold a hearing on its motion for these provisional remedies. The plaintiff's motion (No. 12) is DENIED.A federal district court has the authority to issue orders “providing for seizure ... of property for the purpose of securing satisfaction of the judgment ultimately to be entered in the action.” Fed.R.Civ.P. Rule 64. Rule 64 provides that, subject to exceptions not relevant here, such provisional remedies are available under the circumstances and in the manner provided by the law of the state in which the district court sits. See id. Rule 56 of the Puerto Rico Rules of Civil Procedure provides that upon a motion by the claimant a court “may issue any provisional order it may deem necessary to secure satisfaction of the judgment.” P.R. LAWS ANN. tit. 32, App. III R. 56.1 (1979). The Supreme Court of Puerto Rico has construed Rule 56 expansively, “Rule 56 of the Rules of Civil Procedure confers on the court sufficient flexibility to issue the measures which it deems necessary or convenient, according to the circumstances of the case, to secure the effectiveness of judgments.” HMG Prop. Investors, Inc. v. Parque Indus. Río Cañas, Inc., 847 F.2d, 908, 913-914 (quoting F.D. Rich Co. v.Super. Ct., P.R.R. 155, 173 (1970)). An attachment order may not be entered without notice to the adverse party and a pre-attachment hearing, unless the claimant demonstrates (1) a previous proprietary interest in the object to be attached, (2) the existence of extraordinary circumstances, or (3) the probability of prevailing on the merits through the use of authentic documentary evidence which shows there is a debt liquid, due, and payable. See P.R. LAWS ANN. tit. 32, App. III R. 56.2 (1979); see Rivera-Rodríguez v. Stowell, 133 D.P.R. 881, 896 (1993).Here the plaintiff's motion for pre-judgment attachment and for a hearing is denied, because there is insufficient information in the motion to indicate that the requested pre-judgment attachment might be necessary to secure satisfaction of an anticipated judgment, or even that the Court should hold a hearing to decide the issue. The plaintiff's motion is only eight pages long, and the section titled “Arguments in Support of Provisional Remedy” is less than two pages long. The plaintiff merely argues that pre-judgment attachment would be necessary to secure a judgment as follows,*2 In the past, some of the co-defendants in this case have left other corporations they have created to develop the projects, as in this case, without any monies to satisfy the judgment. Thus, it is imperative that an attachment be granted to satisfy the future judgment that will be entered in this case.No. 12 at 6. These arguments, without more, are insufficient to indicate that the sweeping remedies the plaintiff requests, one of which would apply against all defendants, are necessary to secure a judgment in the plaintiff's favor.The plaintiff's motion must also be denied, because it does not indicate that the plaintiff could or is willing to file a bond sufficient to secure the defendants' damages in the event the plaintiff does not prevail on its claims. The validity of an attachment under Rule 56 depends on the validity of the plaintiff's claim against the defendant-attachee. García- Guzmán v. Villoldo, 273 F.3d 1, 6 (1st Cir.2001). If the plaintiff does not prevail on its claims against the defendant-attachee, that defendant-attachee has a claim under Article 1802 of the Puerto Rico Civil Code, P.R. LAWS ANN. tit. 31, § 5141 (1979), for the damages arising from the attachment. Id. at 6. In the usual case, Rule 56 requires a plaintiff seeking to attach a defendant's property to file a bond “sufficient to secure all the damages arising from” the attachment. P.R. LAWS ANN. tit. 32, App. III R. 56.3 (1979). On the issue of a bond, the plaintiff's motion merely states “[t]he appearing party is required an [sic] willing to post a bond, in an amount to be determined [at a hearing on the plaintiff's motion].” Given the value of the property the plaintiff wishes to attach, damages resulting from wrongful attachment would be substantial, and the Court would require the plaintiff to post a bond sufficient to satisfy such damages. The plaintiff's motion does not indicate its ability or willingness to post a bond of sufficient size.


I would be very interested if others have had experience with this issue.


Anonymous said...

A few comments:

(1) From my reading of the opinion, the case involved nothing more than a garden-variety attempt to obtain pre-judgment attachment and/or garnishment of property. Requests for such relief are not that unusual (heck, you can theoretically get them in any case where you're seeking monetary damages), but always are a very tough remedy to get a court to grant. (Given the extraordinary nature of the relief, the high burden on the party seeking it is probably not a bad thing.)

I don't know Puerto Rician law, but if it's anything like laws of most states on the point, I think the Court nailed it. Pre-judgment attachment / sequestration / garnishment / asset freezes / etc. are going to require a showing of exceptional circumstances and need, and those just don't appear to have been presented on this record. (I'm not saying that such relief could not / should not be granted in that case, just that it doesn't appear that the plaintiff made anywhere near the evidentiary showing required to get it.)

(2) Having said that, this sort of prejudgment relief *has* been granted in AWCPA (architectural copyright) cases. In one of my cases (Patrick Berrios Designs v. Arthur Monroe Construction et al., No. 05-cv-03633 (S.D.Tx.)), the defendants sold the house at issue during the lawsuit under very unusual and suspicious circumstances. The Court granted my emergency motion for a preliminary injunction freezing the proceeds of the sale and requiring the defendant to immediately account for them. (See docket #27 on the PACER records of this case.)

Ultimately, after the defendants failed to comply with numerous other pretrial orders, they were ordered (8/29/06 minute entry) to pay almost $200,000 of sale proceeds into the registry of the Court on pain of contempt (quite literally, a very frustrated judge told them that if the money wasn't in the registry by the end of the week, folks were going to jail).

(Coda: virtually all of the seized funds were ultimately released to my client pursuant to a settlement agreement.)

Again, however, this was a very extreme case. To understand how unusual it was, check out this recent press story on what happened to the house a few weeks after the copyright case was settled, as well as the fate of many of the people involved:

Not your average copyright infringers, thank goodness.

(3) My experience is that getting this sort of relief in a copyright case is no different than in any other civil case: you'd better have *very* compelling evidence of why it is necessary, and be prepared to post a substantial bond. (In a non-copyright cases I've handled, the bond for prejudgment asset seizures / freezes have been as much as $1 million.)

LKB in Houston

William Patry said...

Thanks for you very comprehensice comment LKB. I thought the case would be of interest to you given the architectural works angle.

LBF said...

After a Motion for Reconsideration was filed, which demonstrated exigent circumstances warranting the relief sought the court granted the pre-judgment attachment although for a lesser quantity.