Plaintiffs Seek 4th Circuit Rehearing of Damages Award Vacatur vs. Cox

A 4th U.S. Circuit Appeals Court panel improperly vacated a jury’s damages award despite defendant Cox Communications’ uncontested waiver of its challenge to that award, and without explaining why it was excusing that waiver, said more than four dozen record labels and music publishers in a petition Tuesday (docket 21-1168) for rehearing or rehearing en banc.

Cox filed its own petition for rehearing en banc Tuesday, challenging what it called the "most draconian approach in the country" in the manner in which the 4th Circuit treats internet service providers accused of contributory copyright infringement. Rehearing is warranted "to decide whether a secondary infringer can be adjudged willful, exposing it to dramatically enhanced statutory damages, merely because it had knowledge of an internet user’s direct infringement," said the Cox petition. The 4th Circuit temporarily stayed its mandate Wednesday, pending its ruling on the two petitions for rehearing.

The panel’s vacatur of the jury award “ignored binding precedent and created an intra-circuit conflict,” said the labels' and publishers' petition: “These errors warrant panel rehearing or rehearing en banc.” Judges Allison Jones Rushing, Pamela Harris and Henry Floyd comprised the panel.

The judges, in their Feb. 20 ruling, affirmed the jury’s finding of willful contributory copyright infringement against Cox for the piracy actions of some of its 6 million internet customers but reversed the jury’s vicarious liability verdict (see 2402210027). The panel remanded the case to the district court for a new trial on damages, finding that Cox didn’t profit from its subscribers’ acts of infringement, a legal prerequisite for vicarious liability. The jury had found Cox liable for willful contributory and vicarious infringement of 10,017 copyrighted works and awarded the plaintiffs $1 billion in statutory damages.

The panel’s vacatur of the damages award “should be revisited,” either by the panel or by the full 4th Circuit, said the petition. The judges’ decision appears to have “overlooked” Cox’s waiver of its challenge to the award, which is a material factual or legal matter, it said. Had the panel considered Cox’s waiver, “it should have affirmed the award,” said the petition. To the extent the panel sub silentio (under silence) excused Cox’s waiver, that would conflict with 4th Circuit precedents, it said. Cox “made a choice” in the district court, it said. The panel should hold Cox “to the consequences of that choice,” the petition said: “Panel rehearing is warranted.”

Alternatively, the 4th Circuit should grant rehearing en banc for two reasons, said the petition. First, if the panel indeed silently excused Cox’s waiver, that would be a “significant reversal” of the 4th Circuit’s “invited-error doctrine,” it said. As far as plaintiffs’ counsel is aware, the 4th Circuit “has never before excused an invited error,” it said. The 4th Circuit “has never even suggested” that any exception exists to the invited-error doctrine “in circumstances where a sophisticated defendant in a civil case makes a considered strategic choice,” it said.

Second, the judges’ vacatur of the damages award also conflicts with the 4th Circuit’s 2012 decision in Tire Engineering & Distribution v. Shandang Linglong Rubber Co., said the petition. There, the 4th Circuit held that a general damages award predicated on several theories of liability need not be vacated if one of those theories is reversed or dismissed post-verdict where the claims are predicated on the same conduct and the maximum recovery for each claim is the same, it said.

Here, as the panel recognized, the vicarious and contributory infringement claims were predicated on the same conduct and the maximum damages for each are identical, said the petition. “And yet the panel vacated the award,” it said. “This conflict is clear and incontrovertible,” it said. Under Federal Rule of Appellate Procedure 35(b)(1)(A), consideration by the full court is necessary to secure and maintain uniformity of the court’s decisions, it said.