Truth or Troll Redux: The Curious Case of Malibu Media v. Pelizzo

Stephen Carlisle April 9, 2015

We are all familiar with the way any fact can be “spun” in the media. In a recent case involving yet another courtroom tilt over BitTorrent file sharing, you could write as a headline:

COURT IMPOSES SANCTIONS ON COPYRIGHT TROLL MALIBU MEDIA!

Or you could write

MALIBU MEDIA DEFEATS APPEAL BY BITTORRENT DEFENDANT!

And both would be correct.

On March 26, 2015, the Eleventh Circuit Court of Appeals issued what looked to be an important ruling on the endless stream of litigation over BitTorrent file sharing. However, on closer examination, there are problems with the ruling that make its further application unclear.

The case, Malibu Media v. Pelizzo, ¹ involved an appeal by a successful defendant in a BitTorrent lawsuit. He challenged the District Court Judge’s determination that despite being the prevailing party, he was not entitled to have Malibu Media pay the attorneys’ fees and costs he incurred in his successful defense.

The plaintiff, Malibu Media, should be familiar to faithful readers of this blog. ² Malibu Media, an adult film company operating under the brand name “X-Art,” files more copyright infringement lawsuits than any other person or corporation in the United States. ³

As usual, Malibu Media used “geo-locater” technology to determine the location of an IP address that was using BitTorrent to download a “genuinely phenomenal number of films.” ⁴ In response to a subpoena from Malibu Media, Pelizzo’s internet service provider (ISP) identified Pelizzo as the person to whom that IP address was assigned. This was a unit owned by Pelizzo in a 700 unit condominium. ⁵

Pelizzo denied the allegations, stating that while he owned the unit, he did not live there, ⁶ and further alleged that he was out of the country when the infringements occurred, offering copies of his passport and visas as proof. ⁷ Based upon this evidence, Malibu Media took the deposition of a representative of Hotwire, Pelizzo’s ISP. It was at this deposition that it became apparent that the ISP had probably fingered the wrong person. ⁸ Malibu Media offered to dismiss the case. Pelizzo’s attorney in turn demanded that Malibu Media pay $17,500 in accrued attorneys’ fees to not oppose the motion for dismissal. ⁹

From there, the case descended into what attorneys call a “pissing contest.” This is when the egos of the legal counsel involved cause them to take hyper-aggressive or immovable positions, rather than move to a sensible resolution of the case. For Malibu Media’s part, it was sending out volumes of discovery requests for a case that obviously needed to be dismissed. ¹⁰ For Pelizzo’s part, it was refusing Malibu’s offer to dismiss the case and pay $13,000 in attorneys’ fees, instead demanding $24,000 in fees. ¹¹

Malibu Media moved for a voluntary dismissal, which was granted with the Court retaining jurisdiction to consider the ward of attorneys’ fees. ¹² Pelizzo filed a motion “seeking an award of fees against [Malibu Media] pursuant to the Copyright Act and/or an award of fees as a sanction against Plaintiff’s counsel pursuant to 28 U.S.C. § 1927.” ¹³

Unlike many parts of the world, where in civil litigation the loser is expected to pay the winner’s attorneys’ fees (the so-called “English rule”), ¹⁴ in America, each side is expected to pay their own attorneys’ fees regardless of who wins. ¹⁵ The only exception to this is if there is “loser pays” language in a contract between the parties or there is language in a statute to that effect.

The Copyright Act is one of those laws. Section 505 of the Copyright Act reads as follows:

“In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.”

Note that the statute says “may,” not “shall.” This makes the award of attorneys’ fees discretionary, not mandatory. In his Motion for Fees, Pelizzo advanced these theories:

• “[Malibu Media] is motivated by the desire to extort settlements out of and funds from innocent internet users who, in order to avoid the embarrassment associated with being accused of infringing adult video content, are willing to pay [Malibu Media] to go away without regard to the merits of its case.” ¹⁶
• The investigative techniques used by Malibu Media to identify infringers are inherently unreliable and the therefore the suit is frivolous. ¹⁷
• “[Once Malibu Media] was provided with passport and visa documentation demonstrating that Mr. Pelizzo had not been in the United States for a range of dates including February 6, 2012, [their] claims became frivolous.” ¹⁸

In other words, Malibu Media is an evil “copyright troll” and deserves to be punished. Neither the Magistrate, nor the District Court Judge was buying any of it.

• “[Pelizzo] has not directed the Court to any evidence that would support even an inference that [Malibu Media] filed this suit to shame [Pelizzo] into a pre-suit settlement. [Pelizzo] has not provided a single communication from [Malibu Media] wherein it sought to settle this matter in exchange for thousands of dollars either before or after filing suit.” ¹⁹
• “[It] remains unrefuted that someone using the IP address named in the pleadings infringed 14 movies a total of 337 times prior to the commencement of this suit and 25 movies a total of 549 times by the time the infringement ceased. (citation omitted) [Pelizzo] makes a half-hearted attempt to undermine the detection methods employed by IPP Limited, but those methods have been relied upon in hundreds of lawsuits across the country and by law enforcement to locate criminals.” ²⁰ To that, the District Court Order added: “This conclusion is based upon the affidavit of a twenty-two year veteran of the Palm Beach County Sheriffs’ Department. Eleven of Officer, and later Detective Paige’s years with the Sheriffs’ Department were spent in the computer crimes unit.” ²¹
• “Expecting [Malibu Media] to immediately dismiss the lawsuit upon receipt of [Pelizzo’s] affidavit explaining he was out of the country during the time of infringement is unrealistic. At a minimum, [Malibu Media] would have been well within its rights to test the veracity of [Pelizzo’s] assertions through discovery. [Pelizzo] cites no authority for the proposition that the pursuit of this lawsuit became objectively unreasonable the moment [Pelizzo] came forward with potential exculpatory evidence. Further, the Court finds [Pelizzo’s] assertion that [Malibu Media] should have dismissed this action immediately following Murphy’s deposition on March 13, 2013, confounding since the record reflects that is exactly what [Malibu Media] attempted to do. It was only because of [Pelizzo’s] demand for all of its costs and attorney’s fees ($17,500) that the matter was not dismissed at that time.” ²²

The magistrate recommended that no “prevailing party” attorneys’ fees be awarded to Pelizzo. ²³

However, Malibu Media did not get away scot-free. The magistrate found that Malibu Media had acted in a manner constituting “bad faith and a willful abuse of the judicial process” ²⁴ by “threatening protracted, future litigation” ²⁵ at a time when it was clear the matter should have been dismissed along with asking Pelizzo’s attorney “to inform his client that he would be penniless at the conclusion of this case while also owing [Malibu Media] hundreds of thousands of dollars.” ²⁶

While Pelizzo might have been thrilled about the stinging rebuke of Malibu Media’s attorney, he was doubtlessly less thrilled with the amount awarded as a sanction, only $6,815.50, ²⁷ or about half of what he had been offered previously by Malibu Media to settle the matter. He filed objections to the Report and Recommendation of the magistrate. The District Court Judge denied all of his objections and adopted the findings of the magistrate. He appealed to the Eleventh Circuit Court of Appeals hoping for a better result. It was not forthcoming.

In a terse and rather curious opinion, the Eleventh Circuit held the following:

• “We find no abuse of discretion in the district court’s conclusion under Section 505 and Fogerty that Malibu’s subjective motivation for filing suit was not improper or that the suit was not frivolous, the first two Fogerty factors. To whomever the subject IP address was subscribed, it is undisputed that a genuinely phenomenal number of films was being downloaded using it.” ²⁸
• “We also find no abuse of discretion in the district court’s conclusion that Malibu, up to a point, acted in an objectively reasonable manner and in a manner that served the purposes of the Copyright Act: compensation and deterrence. (footnote omitted) Contrary to Pelizzo’s assertion, Malibu could not have been expected simply to take his word for the fact that he had not infringed Malibu’s copyrights, given the substantial evidence implicating Pelizzo.” ²⁹
• “If Malibu’s claims were properly brought and properly maintained, then they properly served the purposes of the Copyright Act.” ³⁰

This decision is curious for a number of reasons.

First, the Court seems to be pulling its punches. Saying that the District Court did not “abuse its discretion” is not the same thing as holding that the District Court ruling was completely correct. This only means that the District Court did not make “a clear error in judgment.” ³¹

Second, the opinion of the Eleventh Circuit is marked “do not publish.” ³² This is important as the decision is now not considered binding precedent that must be followed by District Courts within the Eleventh Circuit. ³³ Here is the text of the Eleventh Circuit rule:

“11th Cir. R. 36-2 Unpublished Opinions. An opinion shall be unpublished unless a majority of the panel decides to publish it. Unpublished opinions are not considered binding precedent, but they may be cited as persuasive authority.” ³⁴

This is significant. One of the main defense strategies in BitTorrent litigation is to attack how the Defendant is located and identified. “An IP address is not a person,” is their mantra. Of course, this is correct, but the Plaintiff’s response points out it can lead you to the correct person, and at least one Judge has observed that the films did not download themselves. Somebody had to be at the computer to make this happen. The District Court in Pelizzo found that the methodology was reliable and let the case go forward.

As noted in my previous blog post, Judge Ursula Ungaro, a judge in the same District as the Pelizzo case was tried, takes the exact opposite position, namely “There is nothing that links the IP address location to the identity of the person actually downloading and viewing Plaintiff’s videos and establishing whether that person lives in this District.” ³⁵ This decision has been cited by many BitTorrent defendants in an effort to get their case dismissed at the outset.

If the Pelizzo decision was published, it seems it would have the effect of over-ruling Judge Ungaro’s position. Since it is unpublished, it can only be cited as persuasive precedent that her position is incorrect.

So now the precedential value of the Eleventh Circuit decision has been reduced by quite a bit. If you are potentially a Plaintiff in a BitTorrent lawsuit, and you are going to file your case in the Southern District of Florida, whether your case will go forward or not depends entirely on which Judge that it lands in front of.

A curious result indeed.