September 29, 2014

Federal district judge in New York reduces $7.5M punitive damages award in record industry lawsuit against founder of MP3 service

Today, Judge William H. Pauley III of the Southern District of New York issued a decision reducing a punitive damages award from $7.5 million to $750,000 in a lawsuit brought by numerous record companies against a guy who operated an MP3 downloading service.

Yes, people are still litigating over free MP3 downloads. This case has been dragging on for seven years, generating over 628 docket entries and some apparent frustration on the part of Judge Pauley, judging by the tone of his opinion.

The record industry plaintiffs obtained a jury verdict awarding over $48 million in damages, including $7.5 million in punitive damages.  In his order, Judge Pauley notes that the plaintiffs introduced no evidence of actual harm, and obtained nominal damages of only $40.  (The other damages were all civil statutory penalties.)  For this and other reasons, Judge Pauley concluded that the $7.5 million in punitive damages awarded by the jury was grossly excessive, and that the defendant is entitled to a new trial unless the plaintiffs agree to a remittitur of the damages to $750,000.  That still seems awfully high given the complete lack of evidence of any actual harm.  But it pales in comparison to the huge statutory penalties in the case, which will probably be the focus of any appeal by the defendant.

Although media reports and commentaries about punitive damages often speak as if punitive damages are only awarded against big corporations in favor of individual consumers, this case is an illustration that many actual punitive damages cases don't fit that mold.  Sometimes, as here, they involve big corporations suing an individual. 

Hat tip: Ray Beckerman