December 5, 2008

Arista v - Chock full of Fed R Civ P

United States District Court (SDNY) Judge Baer's recent decision in Arista Records LLC v. Usenet.Com Inc., No. 07 Civ. 8822, 12/05/08 NYLJ "Decision of Interest" (S.D.N.Y. Nov. 24, 2008) is chock full of federal civil procedure issues. The decision, which granted plaintiff's motion to dismiss or strike Usenet's counterclaims for declaratory judgment, addressed the following issues:

Rule 12(f) - striking redundant pleadings
Rule 8(c)(2) - mistakenly labeling a defense a counterclaim
Rule 12(b)(6) - failure to state a claim
Rule 12(b)(1) - jurisdiction
Rule 41(a) - once answer filed, court has discretion to determine the proper terms of dismissal and whether it is with prejudice (concerning defendant's fear that if plaintiffs were to voluntarily dismiss their complaint, Usenet would be threatened with future litigation by plaintiffs)

The crux of the decision concerns counterclaims. The Court held that counterclaims are viable only when they present an independent case or controversy; counterclaims will be dismissed if they are merely a "mirror image" of the complaint. Therefore, because Usenet's DMCA safe-harbor counterclaims could not stand on their own without the complaint (i.e., the DMCA does not create an affirmative cause of action, but rather a defense), then they were dismissed. Moreover, the court noted, the counterclaims were not factually distinguishable because Usenet had not made any independent factual allegations. (The Court similarly dismissed Usenet's counterclaim seeking a declaratory judgment that its activities do not constitute inducement of copyright infringement, contributory infringement, or vicarious copyright infringement: this counterclaim, too, was a mirror image of plaintiff's copyright infringement claim.)

Lastly, the Court found that Usenet's argument that it would be precluded from recovering costs and attorneys' fees if its counterclaims are were dismissed was without merit. Pursuant to Section 505 of the Copyright Act, the Court would have discretion to award costs and attorneys' fees, irrespective of any counterclaims, if Plaintiff's claims were ultimately to fail.