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Judge Gross Grants in Part a Motion for Reconsideration and Sanctions Filed in an Adversary Proceeding and Fashions a Remedy to Apply During the Damages Phase of the Trial

By Scott D. Cousins

On September 3, 2015, Judge Kevin Gross of the United States Bankruptcy Court for the District of Delaware granted in part a motion for reconsideration and sanctions filed by SuperMedia LLC (the “Debtor”) in an adversary proceeding it commenced against Yellow Pages Photos, Inc. (“YPPI”).  Following a trial on liability, on December 29, 2014, Judge Gross adjudged the Debtor liable for infringement of certain images of YPPI that the Debtor transferred to bieMedia, LLC and ASEC, as well as others.  At the time of the Court’s decision on the motion for reconsideration, the damages portion of the trial had not occurred.

In considering the Debtor’s motion for reconsideration of the adjudication, the Court noted that during the liability phase, YPPI had failed to produce a settlement agreement, whereby YPPI granted licenses to bieMedia and ASEC, in response to the Debtor’s discovery requests.  Additionally, the Court determined that during the liability phase of the trial, YPPI’s president testified “falsely under oath” that the Debtor unlawfully transferred the images to ASEC.  As a result, on reconsideration, Judge Gross concluded that at the time of the December 29 decision, the Court was not aware that bieMedia had a license for the same images that the Debtor transferred to it and that ASEC could have obtained the images as a result of its license with YPPI, in a manner “other than through an unlawful transfer” by the Debtor.

In response to the Debtor’s request for relief under Federal Rule of Civil Procedure 60(b)(2) (relief granted as a result of “newly discovered evidence”) and Federal Rule of Civil Procedure 60(b)(3) (relief granted as a result of “fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party),” the Court concluded that neither rule applied because the evidence showed that the Debtor also engaged in copyright infringement by distributing the images to entities other than bieMedia and ASEC.  Nevertheless because the Court concluded that YPPI “made misrepresentations and non-disclosures which require some relief,” it applied Federal Rule of Civil Procedure 60(b)(6) to the Debtor’s motion for reconsideration and fashioned a remedy to apply during the damages phase of the proceeding.  The remedy precludes YPPI from presenting and the Court from considering evidence of damages (whether economic or statutory) related to the Debtor’s transfer of YPPI’s images to bieMedia and ASEC.  In addition, Judge Gross requested that the Debtor present its claim for fees and expenses in prosecuting its motion.

A copy of the Court’s opinion is available here.

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