Divorce Rates and COVID-19

With divorce rates spiking, some couples want to know their options for separating in 2020.

All relationships involve a degree of conflict—and it’s normal to argue more during stressful times. From worrying about your health and the health of your loved ones to facing increased financial uncertainty, all of the classic marital stressors have been amplified by the events of 2020.

For some couples, pandemic friction has involved a few more fights about the laundry or the savings account. For others, lockdown has exposed issues that run deeper and offered ample time for reflection, leaving them to wonder about their options for pursuing separation during the pandemic.

Covid’s Impact on Relationships

Relationship counselors consistently rank financial stress, boredom, disagreements about parenting, and arguing about household chores as the most common sources of relationship trouble.

With many couples stuck in the house, homeschooling children, and facing added financial uncertainty, it should come as no surprise that the coronavirus pandemic is placing additional strain on relationships that were already struggling.

Additionally, support systems have become more difficult to access. Venting to friends over coffee or spending a night out on the town just isn’t an option right now. If you’ve been using these outlets to manage stress—or, perhaps, to avoid dealing with deeper problems—-you may find yourself suddenly in the position of having to confront your difference head on.

It’s no surprise that given this, many marriages have reached their breaking point.

Although the recognition of real, substantive problems in a marriage can be a sobering moment, it is also a necessary and hopeful turning point on the road to a healthy future. One of the pandemic’s brighter spots may be that it may prompt a refocusing on values and on what really matters, clarifying when the healthiest and wisest path forward for two people involves separation.

The Pandemic and Divorce Rates

The evidence that the pandemic might lead to an uptick in divorce rates came early this year.

By April, the interest in divorce had already increased by 34% in the US, with newer couples being the most likely to file for divorce. In fact, a full 20% of couples who had been married for five months or less sought divorce during this time period, compared with only 11% in 2019.

Some predict a continuation of this trend, anticipating that divorce rates will increase between 10% and 25% in the second half of the year.

One way of understanding this timeline is through the collective disaster response curve, a model charting the phases through which a community moves in the wake of trauma. The curve shows increased energy and a sense of community cohesion in the period of time immediately following a disaster —it’s the “We’ll get through this together!” phase of disaster response. After a few weeks, the energy wears off, and disillusionment and depression can set in. During this period, couples may begin to struggle.

Experts also observe that when people are experiencing greater stress from sources external to a relationship, they struggle more to problem-solve within their relationships, and may inadvertently take out this stress on each other.

In the most serious cases, tensions can lead to violence, and 2020 saw a 9% increase in outreach to the National Domestic Violence Hotline compared to the same period last year. If you are experiencing domestic violence, there’s help just a phone call away with the National Domestic Violence Hotline here.

Can I still get divorced during the pandemic?

If you’re wondering whether or not you can still get divorced with everything going on, the answer is yes. Deciding to end a marriage is never easy, and with the pandemic altering the rhythms of life, it may feel particularly daunting. But there are many options to start the divorce process in 2020, and finding which path is best for you and your family is essential.

New Jersey courts are fully operational and handling most things virtually. Additionally, there are other options outside of the courts, including mediation, arbitration, and collaborative divorce.

If you are considering divorce and unsure how to proceed, contact Stark & Stark to learn more about your options.

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New Case Inadvertently Serves as a Tip for Couples with Young Children Divorcing/Setting Child Support

The newly unreported (does not set precedent) decision of Covone v. Curreri makes two bold moves: (1) asserting that the passage of time is not a change in circumstance warranting a modification to child support and (2) confirming that the trial court has authority to allocate expenses between parents even without proof of their financial circumstances.  When rendering this decision, affirmed by the Appellate Court, it seems that the trial court inadvertently gave some tips for couples with young children who are divorcing/setting child support.

In this matter, the parties had a child in 2002 and then divorced in 2003.  In their divorce agreement, the parties set the former husband’s child support obligation and agreed to review it in April 2005.  The parties then entered into a Consent Order with an updated child support amount in 2005, and included cost of living adjustments (COLA) to increase child support in the years that followed, which they did.

In 2010, the parties agreed to retain a Parent Coordinator (“PC”), which is a professional (usually a family law attorney) who helps resolve custody/parenting time related disputes between parties, with the goal of reducing litigation.  Unless otherwise authorized by agreement of the parties, a PC’s recommendations are not binding.  Thus, if one party does not agree to the recommendation, it does not take effect.  The other party can file an application with the Court seeking to incorporate the recommendations into a Court Order, which is what happened here when the former husband refused to sign a Consent Order that the PC drafted with respect to parenting time and child support.

As should be expected, after the former husband refused to sign the Consent Order, the former wife filed a motion with the Court seeking:

•  Adopting the PC’s recommendations;
• Compelling the former husband to attend therapy with their daughter;
• Compelling the former husband to file an updated Case Information Statement (setting forth income, budget, assets and liabilities) in order to recalculate child support, arguing that the passage of time (13 years) is a change in circumstance warranting such recalculation; and,
• Compelling  the former husband to contribute to educational and extraordinary expenses on behalf of their daughter, such as SAT costs, driving lessons, college visits, prom costs and senior class trip. Practice tip: the sharing of these expenses are often outlined in the divorce agreement even when a child is so young that the actual allocation cannot be defined.  The agreement can simply list that extraordinary expenses will be shared at the relevant time based upon the parties’ financial circumstances, which would have required the financial circumstance/Case Information Statement exchange that the former wife sought.

After a hearing and updated briefs from each party, the Court denied the former wife’s request for the former husband to file an updated Case Information Statement and for the recalculation of child support simply because 13 years had passed since the present obligation was set.  The Court did not seem to care that the former husband was driving a Maserati and had other luxury assets.

Citing to Martin v. Martin, the Court reiterated that the passage of time is not a change in circumstance warranting a child support modification and, in fact, that is why we have COLAs.  Here, the parties had implemented COLAs since the last time child support was determined, resulting in an increase of over $2,000 over those 13 years.

On the other hand, the Court did find that the child’s status as a high school senior did result in the parents having to incur additional expenses that are not covered by child support, thereby ordering that the parties equally share the expenses requested by the former wife and for the parties to confer before incurring any such expense above $500.

In a somewhat surprising fashion, the Appellate Division affirmed the decision.  While the child support order seems on point because there was no evidence of a change in circumstance  with respect to child support that would open up discovery of the party’s financial circumstances (required for post-divorce financial issues), it is questionable as to how the trial court could have determined that the extraordinary expenses should be equally shared without proof of financial circumstances.  Even the Child Support Guidelines state that extraordinary expenses are to be shared pro rata, i.e.: in proportion to income.  If using the Guidelines to calculate child support, which the parties did here, there is even a specific line in the Guidelines that demonstrates each party’s percentage share of income.  Moreover, generally in order to have a court compel the sharing of expenses, the cost (or estimated) cost must be provided.  In fact, the Case Information Statement, addressed above, asks for an attachment when seeking contribution toward college expenses.

The Appellate Division, in affirming the decision with respect to equal allocation for the child’s expenses, said that the Court exercised its discretion in the absence of accurate financial circumstances of either party.  This ignores that the former wife asked for the former husband to be required to produce such proofs (and presumably she would have had to also), and rewards the former husband for refusing to do so.  If his obligation would have otherwise been more than 50% upon such discovery exchange, the former wife is the one making up the difference out of pocket.

Thus, even if the law is correct to deny a discovery exchange with respect to base child support, it should have required financial circumstance proofs before allocating child-related expenses – understanding that it could have opened the door to a child support recalculation. Even if it did, child support is for the child – not a reward or punishment for the parents – so if ultimately a recalculation resulted, where is the harm?

Beyond the takeaway of never being so sure what the court or Appellate Division will decide, a good tip is for couples divorcing with young child.  In many of those circumstances (unless one part is significantly more wealthy than the other), you may want to build in reviews over time with required disclosures, and confirm an agreement to share extraordinary expenses at the relevant time based on financial circumstances at the time.  Both of those agreements will likely require a financial disclosure and you will not be left without modifying child support while your former spouse is driving a Maserati and equally paying for expenses when your share perhaps should have been less.

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Lindsay A. Heller is a partner in the firm’s Family Law practice, based in its Morristown, NJ office. You can reach Lindsay at 973.548.3318 or lheller@foxrothschild.com.

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Permissive Infringement: Use of Trademarks in Creative Works Offers First Amendment Protection from Lanham Act Liability

After the debut of hit show Empire, record label Empire Distribution asserted trademark infringement counterclaims against Twentieth Century Fox Television, who sought a declaratory judgment that its television show and associated music releases did not violate Empire Distribution’s trademark rights. In Twentieth Century Fox TV v. Empire Distribution, Inc., 875 F.3d 1192 (9th Cir. 2017), the Ninth Circuit affirmed the district court’s finding that the First Amendment protected Fox’s use of the name “Empire” for an expressive, creative work and ancillary works. In doing so, the appellate panel reaffirmed First Amendment protection for use of marks in creative works where the use of the mark bears some artistic relevance to the underlying work and does not explicitly mislead consumers.

Founded in 2010, Empire Distribution is a record label that records and releases albums in the urban music genre, which includes hip hop, rap, and R&B. In 2015, Fox premiered Empire, a dramatic television series about a fictional New York based hip-hop record label, and the storylines that revolve around its inception, founding members, executives, and artists. The show features songs in every episode, some of which are original, and Fox contracted with Columbia Records to distribute the music in the show under the Empire brand. After receiving several threatening letters from Empire Distribution about Fox’s use of the “Empire” name, Fox filed a declaratory judgment action seeking a determination that its Empire show, its associated music releases, and affiliate merchandise did not violate Empire Distribution’s trademark rights. Empire Distribution counterclaim for trademark infringement, unfair competition, and false advertising. The fight centered on whether Fox’s creative work, which utilized the protected name and trademark of Empire Distribution, was exempt from the Lanham Act as a First Amendment expression.

When it comes to First Amendment protections for trademark use, the discussion must start with the test expounded by the Second Circuit in Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989). Courts generally apply the Rogers test in determining whether an expressive work runs afoul of the Lanham Act where “the public interest in avoiding consumer confusion outweighs the public interest in free expression.” Pursuant to Rogers, use of another’s trademark or protected identifying material in an expressive work does not violate the Lanham Act unless the use “has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless it explicitly misleads consumers as to the source or content of the work.”

Analyzing the first prong, the Ninth Circuit found Fox used the word “Empire” for artistically relevant reasons because the show was set in New York, the Empire State, and its subject matter is a music and entertainment conglomerate. The court rejected Empire Distribution’s contention that for a use to have an artistic relevance it must refer to the owner’s mark, in this case Empire Distribution, holding that supporting the themes and geographic setting of the work was sufficient to satisfy the first prong of the Rogers test, which simply requires minimal relevance.

Turning to the second prong, the Ninth Circuit found Fox’s use of the title Empire did not explicitly mislead consumers. Absent an “explicit indication,” “overt claim,” or “explicit misstatement” that causes such consumer confusion, the second prong of the Rogers test will be satisfied. Since Empire did not mislead consumers into believing it was produced or created by Empire Distribution, the Court affirmed the lower court’s grant of summary judgment in favor of Fox.

Tucked away in the Ninth Circuit’s decision is the acknowledgment that not only is an expressive work protected from trademark infringement liability if it passes the Rogers test, but also are similarly branded ancillary promotional activities and commercial products based on the expressive work. So as long as the attendant commercial use is auxiliary to the expressive work and not explicitly misleading, it falls within the protective umbrella. Thus, Fox can sell Empire branded CDs, t-shirts, and music, as well as put on and promote Empire concerts without infringing on Empire Distribution’s “exclusive” rights to use the Empire name in conjunction with those goods and services. Although the Ninth Circuit’s decision may be a significant victory for Fox and other creators of expressive works, brand owners will likely see this decision as a setback to trademark enforcement and an expansion of the Rogers test. With bated breath, we anticipate how other courts apply and expound on Rogers in light of the Ninth Circuit’s decision, and whether the Supreme Court will weigh in on the topic.

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Strike 3 Saga: Turning BitTorrent Downloads Into A Copyright Infringement Settlement Machine Part 3

Balancing Individual John Doe Defendants’ Privacy Rights With Strike 3’s Right to Pursue Its Copyright Infringement Claims

Digital piracy on peer-to-peer networks can have severe financial consequences for copyright holders. As one member of Congress put it:

Under U.S. law, stealing intellectual property is just that—stealing. It hurts artists, the music industry, the movie industry, and others involved in creative work. And it is unfortunate that the software being used—called “file sharing,” as if it were simply enabling friends to share recipes, is helping create a generation of Americans who don’t see the harm. [1]

As digital pirates increasingly use BitTorrent and other peer-to-peer networks to share media, copyright holders have pressed the courts for recourse.  To combat losses from peer-to-peer file sharing, copyright holders have filed a spate of lawsuits against infringers in federal courts across the country. See, e.g., BMG Rights Mgmt. (US) LLC v. Cox Commc’ns, Inc., 881 F.3d 293, 298-99 (4th Cir. 2018); Killer Joe Nevada, LLC v. Does 1-20, 807 F.3d 908, 910 (8th Cir. 2015); Dallas Buyers Club, LLC v. Madsen, 2015 U.S. Dist. LEXIS 148445 at *1 (W.D. Wash. Nov. 2, 2015) (noting that the action is “one of 13 practically identical cases filed” alleging BitTorrent users’ infringement of the movie Dallas Buyers Club).

These suits are not without controversy: many involve “copyright trolls” who buy up copyrights to adult films and then sue masses of unknown BitTorrent users for illegally downloading pornography. [2]

Peer-to-peer networking involves a “decentralized infrastructure whereby each participant in the network . . . acts as both a supplier and consumer of information resources.” [3] In other words, “peers” download content from fellow peers, while leaving their own folders of digital content available for others to download. One type of peer-to-peer networking involves the BitTorrent protocol, in which a file is broken up into smaller pieces from various peers and then reassembled upon completion of a download. With BitTorrent, “each user is both downloading and uploading several different pieces of a file from and to multiple other users.” [4] Peer-to-peer networks like BitTorrent are “ideally suited for sharing large files, a feature that has led to their adoption by, among others, those wanting access to pirated media, including music, movies, and television shows.” [5]

BitTorrent is a system designed to quickly distribute large files over the Internet. Instead of downloading a file, such as a movie, from a single source, BitTorrent users are able to connect to the computers of other BitTorrent users in order to simultaneously download and upload pieces of the file from and to other users. To use BitTorrent to download a movie, the user has to obtain a “torrent” file for that movie, from a torrent website. The torrent file contains instructions for identifying the Internet addresses of other BitTorrent users who have the movie, and for downloading the movie from those users. Once a user downloads all the pieces of that movie from the other BitTorrent users, the movie is automatically reassembled into its original form, ready for playing on the recipient’s device.

Strike 3 hires forensic investigators to tap into BitTorrent and track the uploading and downloading of the hash files that comprise its copyrighted adult film works.  Using specially designed software and tools, the investigators can ascertain when an IP address is used to download all of the hash files for a complete movie.  The investigators then continue to monitor that IP address for months or years until the number of tracked downloads triggers Strike 3 to take legal action (usually more than 20).

When John Doe’s IP address is named in a complaint, John Doe is none the wiser until he/she receives a letter from his/her Internet Service Provider (“ISP”) (such as Comcast, Verizon, AT&T, Time Warner, etc.) informing John Doe of a subpoena the ISP received directing it to reveal John Doe’s name and address to Strike 3.  Thus, John Doe is forced to deal with a lawsuit alleging illegal downloading of pornographic materials even though Strike 3 does not yet have any actual proof that John Doe – as opposed to some other individual with access to John Doe’s Wi-Fi – was the internet user who actually downloaded Strike 3’s films.

This of course implicates privacy concerns and the potential for reputational harm of an innocent John Doe being named in or associated with a salacious lawsuit.  That is why courts insist on anonymity and protective orders to protect a John Doe’s privacy while still allowing Strike 3 to obtain the information it needs to prosecute its case.

In balancing John Doe Defendants’ privacy interests with Plaintiff’s right to pursue those who anonymously violate its intellectual property rights, many courts find that entry of a limited protective order strikes the right balance between Strike 3’s interests and individual defendants’ misidentification and invasion of privacy concerns.  See, e.g., Manny Film LLC v. Doe Subscriber Assigned IP Address 50.166.88.98, 98 F. Supp.3d 693, 696 (D.N.J. 2015) (granting expedited discovery but directing the internet service provider to provide the internet subscriber with a copy of the order and a copy of the subpoena received from the plaintiff and upon receipt of the order and the subpoena, granting the internet subscriber twenty-one (21) days to quash the subpoena or move in the alternative for a protective order. Further, the court ordered that the ISP shall not provide any responsive information to the plaintiff until the latter of the expiration of twenty-one (21) days or resolution of any motion to quash or for a protective order); Strike 3 Holdings, LLC v. Doe, 2019 U.S. Dist. LEXIS 168379, at *7 (D.N.J. Sept. 30, 2019) (declining to issue a protective order but permitting the plaintiff to proceed anonymously); Strike 3 Holdings, LLC v. Doe, 330 F.R.D. 552, 556-57 (D. Minn. 2019) (entering a comprehensive, multifaceted protective order to aid in protecting privacy interests and limit risks of embarrassment and misidentification); Malibu Media, LLC v. Doe, 2013 U.S. Dist. LEXIS 189452 at *2 (D.N.J. Aug. 19, 2013) (limiting the scope of a pre-Rule 26(f) conference subpoena to a subscriber’s name and address); Voltage Pictures v. Doe, 2013 U.S. Dist. LEXIS 155356, at *9-10 (D.N.J. May 31, 2013) (granting leave to serve subpoena requesting only the name, address, and media access control address associated with a particular IP address).

[1] Privacy and Piracy: the Paradox of Illegal File Sharing on Peer-To-Peer Networks and the Impact of Technology on the Entertainment Industry: Hearing Before the S. Comm. on Governmental Affairs, 108th Cong. 10-14 (2003) (statement of Sen. Levin); see also id. at 1-2 (statement of Sen. Boxer) (asserting that “downloading copyrighted works is theft” and “is a real problem”).

[2] Glacier Films (USA), Inc. v. Turchin, 896 F.3d 1033, 1035 (9th Cir. 2018).

[3] Columbia Pictures Indus., Inc. v. Fung, 710 F.3d 1020, 1024 (9th Cir. 2013).

[4] Fung, 710 F.3d at 1027.

[5] Id. at 1025; see also Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 919-20 (2005).

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N.J. Prompt Pay Act and Piercing the Corporate Veil

In a recent appellate decision, the court discussed the N.J. Prompt Pay Act, a fraudulent inducement claim and piercing the corporate veil with regard to a subcontractor’s claims against a general contractor. In finding in favor of the sub-contractor, the court applied the N.J. Prompt Pay Act and a fraudulent inducement claim in order to pierce the corporate veil of the contractor who had declared bankruptcy.

In this matter, the subcontractor had properly completed its work and said work had been approved by the contractor, thereby triggering the N.J. Prompt Pay Act. Thereafter, the contractor certified to the general manager that it paid the subcontractor for the concrete work, even though it had not paid the subcontractor. Shortly thereafter, the contractor filed for bankruptcy and it sought the protection of the bankruptcy court against any claims brought by the subcontractor.

During the course of the bankruptcy proceedings, the bankruptcy court pierced the corporate veil of the contractor and allowed the subcontractor to seek reimbursement directly from the principals of the corporation. The court explained that the principals of the contractor had fraudulently induced the subcontractor to enter into the agreement, and moreover, that said funds were due to the subcontractor pursuant to the terms of the N.J. Prompt Pay Act. As a result of this decision, principals of the general contractor became personally liable for the payment of the judgment, and moreover, the award of counsel fees and costs that were granted to the subcontractor. This decision clearly highlights how strong the New Jersey Prompt Pay Act is and how it can be utilized for a subcontractor to obtain the relief it seeks.

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Strike 3 Saga: Turning BitTorrent Downloads Into A Copyright Infringement Settlement Machine Part 2

Appellate Courts Recognize Strike 3’s Ability to Meet Standard for Early Discovery to Obtain John Doe Defendant’s Name and Address

While some bullheaded District Court judges have stopped Strike 3 in its tracks by denying its request for early discovery, most appellate courts to have considered the issue find that Strike 3’s allegations of copyright ownership and illegal downloading of their works by an identifiable IP address are enough to permit Strike 3 to discover the IP address owner’s name and address.

Federal Rule 26(d)(1) generally prohibits parties from seeking discovery “from any source before the parties have conferred as required by Rule 26(f).”  Further, Rule 26(d) does not set a standard for determining when expedited discovery should be permitted.  District courts possess broad discretion in managing the discovery process and may expedite or otherwise alter its timing or sequence. In re Fine Paper Antitrust Litig., 685 F.2d 810, 817 (3d Cir. 1982) (“matters of docket control and conduct of discovery are committed to the sound discretion of the district court”). Absent guidance from the rule itself, courts faced with motions for leave to serve expedited discovery requests to ascertain the identity of John Doe defendants in internet copyright infringement cases often apply the “good cause” test.

Good cause exists where the “need for expedited discovery, in consideration of the administration of justice, outweighs the prejudice to the responding party.”  Malibu Media, LLC v. John Doe, 2016 U.S. Dist. LEXIS 32445 *1 (D.N.J. Mar. 14, 2016). Under the good cause test, whether to permit expedited discovery is decided by considering the totality of the circumstances and the balancing of the interests of the plaintiff and defendant.

A non-exclusive list of factors courts typically examine in conducting the good cause analysis include:

(1) the timing of the request in light of the formal start to discovery;

(2) whether the request is narrowly tailored;

(3) the purpose of the requested discovery;

(4) whether the discovery burdens the defendant; and

(5) whether the defendant can respond to the request in an expedited manner.

Other courts have offered related but different factors for consideration, including:

(1) the plaintiff’s ability to make out a prima facie showing of infringement,

(2) the specificity of the discovery request,

(3) the absence of alternative means for obtaining the information sought in the subpoena,

(4) the need for the information sought in order to advance the claim, and

(5) the defendant’s expectation of privacy.

[See Strike 3 Holdings, LLC v. Doe, 329 F.R.D. 518, 521 (S.D.N.Y. 2019) (citing Arista Records, LLC v. Doe 3, 604 F.3d 110, 119 (2d Cir. 2010).]

It is a first principle of federal civil procedure that litigants are entitled to discovery before being put to their proof.

In conducting any discovery inquiry, the Third Circuit has suggested that district courts risk reversal if their rulings will make it impossible for any party to “obtain crucial evidence[.]”  See In re Fine Paper Antitrust Litig., 685 F.2d at 818 (quoting Eli Lilly & Co. v. Generix Drug Sales, Inc., 460 F.2d 1096, 1105 (5th Cir. 1972)) (“[the Third Circuit] will not upset a district court’s conduct of discovery procedures absent ‘a demonstration that the court’s action made it impossible to obtain crucial evidence'”).  After all, it is a first principle of federal civil procedure that litigants “are entitled to discovery before being put to their proof.” Bennett v. Schmidt, 153 F.3d 516, 519 (7th Cir. 1998).

The legal standard requires, however, that where well-pled factual allegations exist, courts should “assume their veracity” at the pleading stage.  Alston v. Parker, 363 F.3d 229, 233 n.6 (3d Cir. 2004) (cautioning that courts should permit “discovery before testing a complaint for factual [as opposed to legal] sufficiency”).  It is well settled that a pleading is sufficient if it contains “a short and plain statement of the claim showing that the pleader is entitled to relief.”  Fed. R. Civ. P. 8(a)(2).  The focus, therefore, is not on whether the plaintiff will ultimately be able to prove each of the alleged facts in the complaint, but simply whether, if such facts are later proven to be true, the plaintiff has stated a legally actionable claim.

In a Strike 3 Holdings case brought in the District of New Jersey, the District Court reversed the Magistrate Judge’s denial for early discovery (Strike 3 requested permission to serve a subpoena on an ISP to obtain the name of the owner of the IP addressed alleged to have been used to download Strike 3’s videos) holding that Strike 3’s allegations that it owned the rights to films that the named John Doe Defendants pirated on particular dates and times using an identifiable IP address were sufficient to allow for early discovery.  See Strike 3 Holdings, LLC v. Doe, 2020 U.S. Dist. LEXIS 114598, at *11-14 (D.N.J. June 30, 2020).  The Magistrate Judge had based its decision on seven considerations:

1. Strike 3 bases its complaints on unequivocal affirmative representations of alleged facts that it does not know to be true;
2. Strike 3’s subpoenas are misleading and create too great of an opportunity for misidentification;
3. the linchpin of Strike 3’s good cause argument, that expedited discovery is the only way to stop infringement of its works, is wrong;
4. Strike 3 has other available means to stop infringement besides suing individual subscribers in thousands of John Doe complaints;
5. the deterrent effect of Strike 3’s lawsuits is questionable;
6. substantial prejudice may inure to subscribers who are misidentified; and
7. Strike 3 underestimates the substantial interest subscribers have in the constitutionally protected privacy of their subscription information.

But, the Magistrate Judge erred in not accepting Strike 3 allegations as true and presuming that just because Strike 3 had not yet obtained evidence to link the IP address owner to the alleged infringement it could not do so in the future after obtaining relevant discovery.  Plaintiff is not required to sufficiently establish the John Doe Defendant did the infringing at the pleading stage, rather Plaintiff must only allege facts that allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.  See Blakeslee v. Clinton Cty., 336 F. App’x 248, 250 (3d Cir. 2009) (“Use of John Doe defendants is permissible in certain situations until reasonable discovery permits the true defendants to be identified”).  Relying on Third Circuit precedent, the District Court re-affirmed that meritorious claims must be permitted to proceed even if a plaintiff cannot adduce all the necessary facts at the outset, including the identity of the Defendant.

Because Strike 3 sufficiently stated a viable claim of copyright infringement against the identified IP addresses and its placeholder-defendant subscribers, Strike 3 is entitled to discovery to further assist it in identifying the underlying wrongdoer.  Any consideration of the merits of Strike 3’s claims before permitting discovery to identify the placeholder-defendants, including whether Plaintiff has sued the correct Defendants, would be inappropriate at the pleading stage.

Finally, because the requested early discovery (name and address of IP subscriber) was narrowly tailored (requesting no more than would be required to identify the relevant individual) and there did not exist an alternative means for legally obtaining this crucial information, the District Court joined a growing number of other courts in finding good cause existed for Strike 3’s request to serve a subpoena to obtain the name and address of the John Doe owner of the IP address.

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Supplemental Guidance Regarding the Proxy Voting Responsibilities of Investment Advisers

The Securities and Exchange Commission’s (“SEC”) Supplement to Commission Guidance regarding Proxy Voting Responsibilities of Investment Advisers (“Guidance”) became effective on September 3, 2020. Additionally, the SEC final rules governing Proxy Advisors (“Amendments”), intended to improve the accuracy and transparency of information provided by proxy advisory firms, will go into effect on November 2, 2020 with a required compliance date of December 1, 2021, for certain provisions and full compliance by the 2022 proxy season. The Guidance and the Amendments are part of the SEC’s continued efforts to promote transparency, accountability and disclosure to investors during the proxy voting process.

In previous guidance, the SEC discussed how an investment adviser’s (“adviser”) fiduciary duty and Rule 206(4)-6 under the Advisers Act are related to an adviser’s exercise of its voting authority on behalf of its clients and provided examples to help the adviser comply with its obligations related to proxy voting. The previous guidance is now supplemented based upon the SEC’s ongoing review of the proxy voting process and the Amendments. The SEC expects that the Amendments will provide issuers, among other things, with access to the proxy advisory firms’ recommendations in a timely manner and will allow issuers to share any additional information with shareholders that may be material to their voting decisions. Proxy advisory firms, as a condition of their reliance on Rules 240 14a-2(b)(1) and (b)(3), must also develop policies and procedures that are reasonably designed to provide advisers and other clients with a mechanism by which they can be reasonably learn of the additional information before making proxy voting decisions.

The Guidance is intended to:

1. Assist advisers in determining how to consider any additional information that will become more readily available as a result of the Amendments; and
2. Address the disclosure obligations and considerations that may arise when advisers use proxy advisory firms, electronic vote management systems or other voting execution services for voting proxies.

Pre-Population of Voting Proxies

Since pre-population and automated voting occur before the submission deadline for proxies to be voted at a shareholder meeting, advisers that pre-populate clients’ votes now have an obligation to determine whether an issuer plans to file or has already filed additional soliciting materials reflecting its views regarding the voting recommendations. This should be done as part of an adviser’s reasonable due diligence into matters on which it votes. Some steps that an adviser could take to demonstrate that it is making voting determinations in a client’s best interest include, but is not limited to:

• Review the policies and procedures to determine whether they are reasonably designed to address circumstances where the adviser becomes aware that an issuer intends to file or has filling additional soliciting materials with the SEC after the adviser has received the proxy advisory firm’s voting recommendations but before the submission deadline;
• Determine whether the proxy advisory firm may obtain non-public information about how an adviser will vote clients’ proxies and then review all agreements with the proxy advisory firm to determine whether the agreements will permit the proxy advisory firm to use that non-public information in a manner that would not be in the best interest of the adviser’s clients; and
• Determine whether policies and procedures are reasonably designed to address the adviser’s disclosure obligations.

Disclosure Obligations

Advisers are required, as part of its duty of loyalty to clients, to make full and fair disclosure of all material facts relating to the advisory relationship including, material facts related to the exercise of its proxy voting authority. Advisers that use automated voting should disclose:

• The extent of the adviser’s use of automated voting and under what circumstances it will use automated voting;
• How the adviser’s policies and procedures address the use of automated voting when the adviser becomes aware that an issuer intends to file or already filed additional soliciting materials with the SEC regarding a matter to be voted on prior to the submission deadline for proxies to be voted at the shareholder meeting; and
• Sufficient and specific information which will provide a client with enough information to understand the role of the automated voting in the adviser’s exercise of its voting authority and to provide informed consent to the use and scope of automated voting.

The Amendments and the Guidance, in part, are focused on ensuring advisers act “in a manner consistent with their fiduciary obligations” and that they provide investors with enough information to make informed decisions when voting proxies. The new requirements could impact an adviser’s continued use of electronic proxy voting and the use of proxy advisor voting firms due to the Amendments and the corresponding anticipated increased cost of compliance. If your firm is engaged in voting proxies on behalf of your clients (either directly or via the use of a proxy voting vendor), then Stark and Stark is available to help you evaluate your proxy voting process and assist you with meeting your obligations under the Guidance.

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