File Sharing Damages Award Lowered on Constitutional Grounds

Despite the off-the-wall-defense put forth by Charles Nesson in the Joel Tenenbaum file sharing case, Judge Nancy Gertner reduced the damages in the case from $675,000 to $67,500.  Her reasoning was that the damage award returned by the jury was unconstitutional.  She rejected the option of reducing the damages via remittitur because the plaintiff would have to accept the reduced damages, and if not, would require a new trial.  If that were the circumstance, Judge Gertner said she would still have to face the Constitutional issue the second time around.  The RIAA was not in any mood to back down on the dollar amount in this case.

Tenenbaum was found liable of trading some 30 songs over a peer to peer network.  He admitted to the act on the stand as well as lying about it in his deposition.  The court rejected out of hand the defense of "everybody is doing it so it's just another form of fair use."  But damages have always been troubling in these kinds of cases, with the RIAA attempting to establish the maximum precedent in their favor.  Judge Gertner early on in the case expressed misgivings about the viability of a potentially large damage award that was out of whack with the value of the infringed items.  She waited, however, until the jury assigned a dollar amount before she ruled on the issue.

The various federal courts have ruled in limited circumstances against excessive damages in cases.  The Supreme Court itself ruled in favor of reduction in two cases, also citing Constitutional limits.  The case of BMW of N. Am., Inc. v. Gore, 517 US 559 (1996), found $4,000 in actual damages with punitive damages of $4 million, then reduced to $2 million before the Court even got the  case still was grossly excessive in relation to the State's legitimate interest to punish or defer unlawful conduct.  The case of State Farm Mutual Automobile Insurance v. Campbell, 538 U.S. 408 (2003), found State Farm liable for acting in bad faith on a policy with damages assessed at $1 million with $145 million in punitive damages.  The Court found the amount of the punitive damages violated the Due Process Clause of the 14th Amendment. 

Judge Gertner noted that the Tenenbaum case is different to an extent.  The jury award fell within the damage limit set by Congress.  None of these were calculated as punitive.  Judge Gertner noted that the Constitutional principles still apply, hence her reduction of the dollar amount.  As she says:

Reducing the jury’s $675,000 award, however, also sends another no less important message: The Due Process Clause does not merely protect large corporations, like BMW and State Farm, from grossly excessive punitive awards. It also protects ordinary people like Joel Tenenbaum. 

The Jammie Thomas-Rasset case in Minnesota rages on over the same issue.  The jury in a first trial there found Thomas-Rasset liable for copyright infringement and assessed $222,000 for the trading of 24 songs.  Thomas-Rasset was awarded a retrial with a second award for the whopping total of $1.92 million.  Judge Michael Davis reduced the award to $54,000.  the RIAA offered a settlement of $25,000 which was rejected.  The Court ordered settlement talks, which failed and now a third trial is set for October with the issue limited to damages.  Judge Davis is also troubled by the dollar amount but hasn't gone the Constitutional route just yet. 

The RIAA intends to appeal the Tenenbaum ruling.  If it stands, it could affect the viability of attorney groups taking on mass litigation against alleged infringers, as in it wouldn't be worth the money to pursue claims.  That would be a sad day for the legal profession indeed.  A copy of that opinion is available from the District Court of Massachusetts, here.  [MG]