CASE NAME: Capitol Records, LLC, et al. v. Sirius XM Radio, Inc. CASE NO.: BC520981 HEARING DATE: 12/5/14 CALENDAR NO.: 11 SUBJECT: Motion for Reconsideration or, in the Alternative, for an Order Identifying a Controlling Issue of Law MOVING PARTY: Defendant Sirius XM Radio, Inc. RESP. PARTY: Plaintiffs Capitol Records, LLC, Sony Music Entertainment, UMG Recordings, Inc., Warmer Music Group Corp., and ABKCO Music & Records, Inc. COURT'S RULING The court reconsiders its ruling granting Capitol Records’ motion for a jury instruction. The discussion below supplements the reasoning set forth in the court's October 14, 2014 ruling without changing the decision - Plaintiff's motion for a jury instruction is granted. Motion for certification of a controlling question of law pursuant to CCP § 166.1 GRANTED. The Court identifies the following issue for interlocutory appellate review: Does California Civ. Code Section 980(a)(2) grant exclusive public performance rights to the owner of a sound recording created before February 15, 1972? ANALYSIS Defendant's Request for Judicial Notice Exhibit A- GRANTED. The Court may take judicial notice of a federal district court order.Plaintiffs’ Request for Judicial Notice Exhibits 1-2 - GRANTED. The Court may take judicial notice of federal district court orders. Motion for Reconsideration Pursuant to CCP §1008(a), “When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order, The party making the application shall state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” Motions for reconsideration are restricted to circumstances where a party offers the Court some fact or circumstance not previously considered, and some valid reason for not offering it earlier. (Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1500.) There is a strict requirement of diligence - ie., the moving party must present a satisfactory explanation for failing to provide the evidence or different facts earlier. (Garcia v. Hejmadi (1997) 58 Cal. App.4th 674, 690.) Defendant seeks reconsideration of this Court's October 14, 2014 Order approving a jury instruction stating that California Civil Code Section 980(a)(2) grants an exclusive public performance right to the owner of a sound recording created before February 15, 1972. The Court's August 27 tentative ruling concluded that such a right did not exist under California law. In its final order, the Court reversed its tentative ruling based in part on reasoning contained in the intervening federal district court decision in Flo & Eddie Inc. v. Sirius XM Radio, Inc., which was issued while the Plaintiffs’ motion was under submission. Defendant did not oppose Plaintiffs’ request for judicial notice of the Flo & Eddie order or request additional briefing in the more than three weeks between issuance of the Flo & Eddie order and the Court's October 14 order. Nevertheless, because the Court relied on the Flo & Eddie order without briefing from Defendant, there is a basis to grant reconsideration. (See Gravillis v. Coldwell Banker Residential Brokerage Co. (2008) 143 Cal App.4th 761, 772- 773.) Further, regardless of whether the provisions of CCP Section 1008, the court has discretion to reconsider its own interlocutory orders. The court exercises that discretion here.In addition to the discussion of the Flo & Eddie order, Defendant also cites case authorities, previously uncited, which Defendant contends address “the limited common law protection for sound recordings’ in California, With respect to the Commerce Clause, Defendant also states that the “the parties did not address the threshold issue of whether Section 301(c) of the Copyright Act constitutes an authorization to the states to regulate sounds recordings, or merely a ‘savings clause’." (Mot. 1-2.) Defendant has not explained in a declaration why it was unable to discuss these authorities or arguments in the original briefing. Nevertheless, because the Court has determined to reconsider the order, it will address these additional authorities as well Public Performance Right Pursuant to Section 980(a)(2} In its final decision, the Court indicated that the parties had not presented any case which specifically limited ownership rights in pre-1972 recordings. Defendant argues that RCA Mfg. Co. v. Whiteman (2™ Cir. 1940) 114 F.2d 86, and Supreme Records v. Decca Records (S.D. Cal. 1950) 90 F.Supp. 904 stand for the proposition that the common law did not recognize public performance rights in sound recordings. The Whiteman Opinion Defendant contends that RCA Mfg. Co. v. Whiteman (2™ Cir. 1940) 114 F.2d 86, established a common law rule that no performance right exists in sound recordings. In Whiteman, a record company and orchestra leader brought common law copyright and unfair competition claims against a radio network for nationally broadcasting records that had been sold to the public. The recordings at issue were sold with a restrictive legend on the packaging that stated “[nJot Licensed For Radio Broadcast." As summarized by Judge Learned Hand in the opinion, “the questions raised [in the trial court] were whether Whiteman and/or RCA Manufacturing Company, Inc., had any musical property at common-law in the records which radio broadcasting invaded ... and whether, if either Whiteman or RCA Manufacturing Company, Inc., had any such common-law property, the legends and notice enabled them, or either of them, to limit the uses which the buyer might make of the records.” (Id. at 87.) Whiteman concluded that “the ‘common-law property’ in these performances ended with the sale of the records and that the restriction did not save it; and that if it did, the records themselves could not be clogged with a servitude.” (Id. at 88.) The Whiteman decision does not provide a basis to change the Court's October 14 ruling. Whiteman is not relevant to a primary basis for the Court's order: that the text and structure of Section 980(a)(2) support the conclusion that the Legislature did not intend to exclude a performance right from the exclusive ownership rights in Pre-72 Recordings.Significantly, Whiteman was limited to New York common law. Thus, to the extent this decision recognized a common law rule against performance rights in sound recordings, its relevance to the interpretation and legislative history of Section 980(a)(2) appears tenuous. Indeed, Whiteman noted that its decision was contrary to the holding of the Pennsylvania Supreme Court. (Id. at 89.) Finally, Whiteman was expressly disapproved in Capitol Records v. Mercury Records Corp. (2" Cir. 1958) 221 F.2d 657. In Capitol Records, the court interpreted Whiteman as holding that “the common law property in the performances of musical artists which had been recorded ended with the sale of the records and that thereafter anyone might copy them and use them as he pleased.” According to the Capito! Records court, this conclusion “is not the law of the State of New York.” (Id. at 663.) Although Defendant argues in a footnote that Capito! Records limited its criticism to the issue of “copying,” the criticized language from Whiteman also included the phrase “use it as he pleases.” (Mot. 4, fn. 1.) Thus, the essential reasoning of Whiteman on the issue of public performance rights has been questioned. ‘The Supreme Records Decision Defendant contends that California has followed Whiteman, and that the state's common law did not recognize a public performance right. Initially, this argument is unpersuasive both because of the criticisms of Whiteman, discussed above, and because Defendant cites no California authorities expressly denying a public performance right. Defendant refers to Supreme Records v. Decca Records (S.0. Cal. 1950) 90 F.Supp. 904 as the "seminal decision” on public performance rights in California. In Supreme Records, both Supreme and Decca, with permission from the copyright holder, recorded the same song and sold phonograph records containing the sound recording. Supreme sued Decca, claiming that Decca had infringed its rights in recording the song. Before reaching the issue of misappropriation, the Court considered whether Supreme had a “property interest which it is the duty of a court of equity to protect?” (Id. at 906.) The Court concluded that “a mere recording of an arrangement of a musical composition by one who is not the author of the composition” is not “a property right which should be given recognition in equity." (Id. at 908.) Contrary to Defendant's suggestion, Supreme Records did not cite Whiteman for the proposition that there is no performance right in sound recordings. (See Id. at 908.) Moreover, as Defendant concedes, this case “was not about a public performance right.” (Mot. 6.) The cases Defendant claims “followed” Supreme Records also did not address the issue of public performance rights in sound recordings; rather, these cases involved the imitation of particular arrangements of a song. (Mot. 6.) Supreme Records is notstrong authority, in either direction, on the issue of whether the common law recognized public performance rights. It would be speculative to find that Supreme Records had any bearing on the enactment of Section 980(a)(2). The Flo & Eddie Order Following Flo & Eddie, the Court concluded in its October 14 order that “the exclusive ownership right in pre-1972 recordings includes a public performance right" because it was “not specifically excluded” as it was under federal law Defendant contends that there was no reason for the California Legislature to add a public performance exception where Supreme Records and Whiteman had already established that the common law did not recognize a public performance right for sound recordings. For the reasons stated above, this argument stretches Supreme Records and Whiteman beyond their holdings and also ignores subsequent criticism of Whiteman. Defendant still cites no California authorities expressly denying @ public performance right in sound recordings. Defendant contends that if Flo & Eddie’s reading of the law were correct— that ownership of a sound recording includes a common law right to control its performance—the exception that permits making a “cover” would be ineffective because Section 980(a)(2) would prohibit playing a cover record on the radio. The cover exception provides for the "making" of a cover song, but says nothing about the performance of a cover song. Defendant contends that “this would create competing ownership claims between the owner of the original sound recording and the person” who made the cover song. However, the cover exception is just that — an exception to the “exclusive ownership” provision of Section 980(a)(2). The cover exception might be reasonably interpreted to extend the performance rights of “ownership” to the maker of the cover song — but that is not an issue before the court. Defendant's argument does not bear on the basis for the court's conclusion that in carving out one exception to exclusive ownership rights, the legislature did not intend other exceptions to apply, Commerce Clause Defendant contends that the Court previously did not consider the argument that Section 301(c) of the Copyright Act operates only as a “savings clause” to protect statutes from federal preemption. Defendant contends that a savings clause does not authorize a state to “burden interstate commerce.” (Mot. 10.) The savings clause at issue in the case cited by Defendant provided that the federal regulation “shall not ... deprive a State or State commission of its lawful authority now exercised over the exportation of hydroelectric energy which is transmitted across a State line.” (New England Power Co. v. New Hampshire(1982) 455 U.S. 331, 341 [emphasis added].) Section 301(c) provides that “With respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067.” [emphasis added], The Flo & Eddie order issued by the California district court dismissed the Commerce Clause challenge, in a footnote, on the basis that “Congress specifically authorized protection of pre-1972 sound recording rights by the states in 17 U.S.C. § 301(c).” The parties have requested judicial notice of a decision in the New York Flo & Eddie case which found that Section 301(c) does not “unambiguously” or “unmistakenly ... permit state interference with interstate commerce,” as required by Supreme Court jurisprudence. (Defendant's RIN Exh. A at 36-37.) Defendant has not cited any authorities that would convince the court to change its ruling with respect to the Commerce Clause analysis. The savings clause in the New England Power Co. was expressly limited to “lawful authority now exercised,” which “did no more than leave standing whatever valid state laws then existed relating to the exportation of hydroelectric energy.” (See New England Power Co., supra at 341.) Section 301(c) does not include such a limitation, and specifically provides that the federal legislation does not limit rights and remedies under state statutory or common law. This provision is most reasonably interpreted to apply to both existing and prospective common law and legislation. The court is also not persuaded that its ruling would violate the dormant commerce clause despite the legislature's recognition that the copyright act did not limit states' right to regulate pre-1972 recordings. Certification of Controlling Question of Law “Upon the written request of any party or his or her counsel, or at the judge's discretion, a judge may indicate in any interlocutory order a belief that there is a controlling question of law as to which there are substantial grounds for difference of opinion, appellate resolution of which may materially advance the conclusion of the litigation. Neither the denial of a request for, nor the objection of another party or counsel to, such a commentary in the interlocutory order, may be grounds for a writ or appeal.” (CCP § 166.1.) The issue of whether Section 980(a)(2) provides for exclusive public performance rights in pre-1972 sound recordings is a controlling question of law. Even if appellate resolution of this issue would not affect Defendant’s common law liability and liability for unauthorized reproductions, it would address the central question for which the jury instruction was requested — whether Plaintiffs have exclusive public performance rights in the pre-1972 sound recordings.There are also substantial grounds for difference of opinion on this issue The issue of whether a public performance right exists under Section 980(a)(2) could affect a large number of sound recording owners in California and various participants in the broadcasting industry. Apparently, this is a legal issue of first impression in California. The judicial silence on this issue and the broadcasting industry's practice of not paying royalties for public performance of sound recordings creates a scenario ripe for difference of opinion. In changing its tentative ruling, this Court has also recognized reasonable arguments on both sides. The court also finds that appellate resolution of this legal question would materially advance the conclusion of the litigation. interlocutory appellate review could provide needed guidance on an important issue of law, could promote settlement, and could avoid future litigation. Accordingly, this element is satisfied. The motion for certification of a controlling question of law pursuant to CCP § 166.1 is GRANTED.