Citing “recent evidence” that affiliate program CE Cash continued using the Homegrown Video tour, and that the use “undermines confidence that [CE Cash] completely ceased the alleged infringement,” a federal arbitrator has awarded Homegrown parent New Destiny a preliminary injunction against CE Cash parent Trade News.
Arbitrator Richard Neal noted New Destiny providing evidence of a July 20 Internet search that showed the Homegrown tour was still accessible through links from a Trade News Website – July 20 being the date New Destiny was due to file a reply to Trade News’s assertion that New Destiny, contrary to its prior assertions, dealt with Trade News “for years” prior to charging Voice Media with assigning the tour to Trade News without New Destiny’s consent.
“While acknowledging that final decision must await a full hearing on the merits,” Neal wrote, “serious questions have been raised about liability.”
Ira Rothken, an attorney representing Trade News and Voice Media Inc. in the case, said that at this point it is “premature” to conclude anything about the case, “because there have been no witnesses called to the stand.” He said the injunction ruling was “more done as a compromise, so that the parties can go on and focus on how to resolve the case. Nowhere in the arbitrator’s ruling was there any kind of manifestation that the plaintiff is likely to [succeed].”
Rothken said the ruling was only about the “notion that CE Cash had already terminated [its relationship with] New Destiny, so there wouldn’t be any burden to them to stop doing business with New Destiny.” Rothken also pointed out there would be no decision on the full merits of the case until the evidentiary hearing “some time next year.”
But David Olson, an attorney representing New Destiny/Homegrown, said the Neal rulings represent his side’s first two objectives in the litigation. “One was injunctive relief, the second was to position the case so we could hold [Voice Media chief Ron] Levi personally responsible,” Olson said. “And now we dig into what this case is about: millions and millions the defendants diverted from New Destiny. We’re obviously very pleased with both these rulings. Now we will focus on the task of proving the extent of the damages my clients have sustained.”
Olson said that his side showed Trade News tried to beat an injunction by claiming they stopped all Homegrown tour use and thus the subject was moot. “In other words, we didn’t do anything wrong, but if we did we’ve stopped doing it,” Olson said. “And we showed the [arbitrator] they were in fact still using the copyrighted tour. They had the Homegrown tour with a link to sign for Homegrown membership, but if you clicked they were enrolling users to two of their sites.”
Rothken, however, said he was confident that when “actual hearings with witnesses” occur in court in the case, “[we] will prevail. And, in fact, you don’t need to go much further than the notion that, at all times, any content Homegrown claims they owned was always located at domain names controlled by Homegrown Video. Homegrown’s consent is manifest by continuing to point to that content.”
But Olson said the basis for Neal’s ruling was that no one but Voice Media has the right to use copyrighted material belonging to New Destiny, “because the agreement between New Destiny and Voice Media was assigned without consent. That’s been an argument we’ve been going at in federal court. They’ve tried to come up with theories of consent that were, frankly, not persuasive to [the arbitrator].”
Neal also held that Levi, who New Destiny charges with assigning the Homegrown tour affiliation to Trade News without consent, cannot be held as “two different ‘parties’ in his different capacities [with VMI/Trade News]. Rather, he is a single party with multiple capacities,” thus granting New Destiny’s motion to amend their complaint to add so-called alter ego claims.
“The reasonable and plausible interpretation of the federal court’s ruling striking the motion to add alter ago claims,” Neal wrote, “is that the court intended to defer to the arbitrator to rule on the motion, rather than to reject New Destiny’s right to assert those claims.”
Olson said that proving the alter-ego claim in full court would mean Levi could be held personally responsible for a judgment against Trade News and VMI, if that proved to be the ultimate outcome. “And, it allows us to do discovery on the question,” he said, “so we [can] request all his financial records and we can trace [any] diversion of funds from Voice Media. We feel like what was done to my clients was some very serious wrongdoing.”
Rothken, however, said the only thing that happened regarding the alter ego part of the ruling is “merely allowing them to say the words on paper to make the allegations at arbitration rather than in federal court.”
He said his side’s position remains that Levi does not have to go to arbitration. “And the arbitrator determined, without passing any judgment on the merit of the claims whatsoever, that they’re allowed to get the keys to the arbitration door open to assert such claims. It could be possible that Mr. Levi can say things that would obliterate any claims against him.”
AVNOnline.com was unable to reach Levi for comment before this story was posted.
New Destiny president Farrell Timlake said the arbitrator’s ruling was “very telling. [Voice Media] keep protesting their innocence, and we’ve been nailing them every step of the way. They’ve been stealing more cookies than Keebler has elves.”
