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Energy Intelligence Group, Inc. v. Kayne Anderson Capital Advisors, LP

United States District Court, S.D. Texas, Houston Division

July 26, 2017

ENERGY INTELLIGENCE GROUP, INC. and ENERGY INTELLIGENCE GROUP UK LIMITED, Plaintiffs,
v.
KAYNE ANDERSON CAPITAL ADVISORS, LP and KA FUND ADVISORS, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          SIM LAKE, UNITED STATES DISTRICT JUDGE

         Energy Intelligence Group, Inc. and Energy Intelligence Group (UK) Limited (together, "Plaintiffs" or "EIG") have sued Kayne Anderson Capital Advisors, LP and KA Fund Advisors, LLC (together, "Defendants" or "Kayne") for copyright infringement. Pending before the court are Defendants' Motion for Referral to the Register of Copyrights Pursuant to 17 U.S.C. § 411(b) and a Concurrent Stay ("Motion for Referral") (Docket Entry No. 2 04) and Plaintiffs' Motion to Strike the Expert Declaration of Ralph Oman ("Motion to Strike") (Docket Entry No. 236) . For the reasons stated below, Kayne's Motion for Referral will be denied and EIG's Motion to Strike will be granted.

         I. Background

         A detailed history of the parties' business relationship as it relates to the present litigation is provided in a prior opinion.[1]In short, EIG alleges that Kayne copied and distributed Oil Daily, a subscription newsletter published by EIG, in violation of EIG's subscription agreements.[2] From at least 2004 to 2013 Kayne purchased a single annual subscription to Oil Daily for a Kayne employee, Jim Baker. That subscription was routinely forwarded to Kayne employees and others who were not subscribers. In 2013 Kayne entered into a multi-user license agreement with EIG, paying for five Kayne employees to receive Oil Daily. But EIG alleges that Kayne continued to distribute unauthorized copies of Oil Daily until at least May 21, 2014. EIG filed this action against Kayne for copyright infringement on July 8, 2014.

         Docket call was held on April 14, 2017, and a trial date was then set. On May 3, 2017, with trial set to begin the following month, Kayne challenged the validity of EIG's copyright registrations for the first time and moved for referral to the Register of Copyrights and for a stay of proceedings. Despite Kayne's tardiness, the court postponed trial in order to consider the motion and ordered EIG to respond. In Defendants' Reply in Support of Their Motion for Referral to the Register of Copyrights Pursuant to 17 U.S.C. § 411(b) and a Concurrent Stay ("Reply") (Docket Entry No. 232), Kayne introduced a declaration from a previously undisclosed expert in support of its Motion for Referral. EIG moves to strike Kayne's expert's declaration as untimely.

         II. EIG's Motion to Strike

         Because Kayne's Reply incorporates the Declaration of Ralph Oman ("Oman Declaration") (Docket Entry No. 232-1), the court will address the admissibility of the Declaration before turning to the merits of Kayne's arguments in favor of its Motion for Referral. EIG moves to strike the Declaration as an untimely expert report. EIG bases its arguments primarily on Federal Rule of Civil Procedure 26(a)(2) regarding the mandatory disclosure of expert witnesses a party "may use at trial." Kayne argues that Oman is not subject to Rule 26 because his Declaration is only for the benefit of the court, and his testimony will not be used at trial. Kayne also argues that Oman's expert opinion is necessary to rebut arguments made in Plaintiffs' Opposition to Defendants' Motion for Referral to the Register of Copyrights Pursuant to 17 U.S.C. § 411(b) and a Concurrent Stay ("Opposition") (Docket Entry No. 229). Kayne's arguments are unavailing, and Kayne's untimely designation of an expert in its Reply to a late motion will not be permitted.

         The court has broad discretion in scheduling and managing its docket. McClain v. Lufkin Industries, Inc., 519 F.3d 264, 282 (5th Cir. 2008). "A schedule may be modified only for good cause and with the judge's consent." Fed.R.Civ.P. 16(b)(4). The most recent scheduling order regarding experts in this case called for identification of the parties' experts and production of their reports by August 5, 2016, and identification of the parties' rebuttal experts and production of their reports by September 9, 2016.[3] Kayne's designation of an expert for the first time in a reply filed on June 9, 2017, is untimely.

         Kayne has known about the issues raised in its Motion for Referral for years.[4] Kayne subscribed to Oil Daily for over a decade, and EIG attached its registration certificates to its original complaint in 2014. Kayne had everything it needed to investigate and identify any defects in EIG's registrations from the inception of this action. But Kayne only now challenges the validity of EIG's copyright registrations. In doing so, Kayne has delayed an already overdue trial. The court initially agreed to consider the Motion for Referral out of an abundance of caution. But Kayne now asks the court to rely on the legal analysis of an expert first identified in its Reply.

         Kayne's explanation for the delayed disclosure of its expert is that Oman's testimony only became necessary as a result of EIG's "unsupported arguments" in its Opposition. Kayne argues that Oman's testimony is needed to rebut EIG's arguments concerning the materiality of any registration inaccuracies and the purpose and implementation of group copyright registrations. Kayne's argument is not persuasive.[5] EIG did not rely on expert testimony in its Opposition; but if Oman's Declaration is admitted, EIG will be entitled to a rebuttal expert, which will further delay the resolution of this matter at additional expense to the parties.

         Kayne argues that its delay is harmless because the focus of the Rule 26 prejudice inquiry is on whether failure to timely disclose its expert prejudiced EIG's ability to prepare for trial, not on whether EIG will be prejudiced by use of the evidence at trial. See Savant v. APM Terminals, Civil Action No. 4:11-1980, 2013 WL 12099874, at *7 (S.D. Tex. Aug. 27, 2013). But admitting Oman's testimony will prejudice EIG's ability to prepare for trial. On the eve of trial Kayne has already diverted EIG's attention and resources by raising new issues and would further do so by designating a new expert. EIG would be prejudiced whether or not it were given the opportunity to rebut Oman's testimony.

         Neither Kayne's explanation for its delay nor its argument that Oman's testimony is necessary is persuasive. The court further concludes that admitting the Oman Declaration would prejudice EIG by interfering with its trial preparation, adding to its expenses, and delaying its day in court.[6] These effects could not be cured by a continuance. The court will therefore conduct its analysis without the benefit of Oman's testimony. The Declaration and any reference to it in Kayne's Reply will be disregarded.

         Ill. Kayne's Motion for Referral

         Kayne alleges that EIG knowingly included inaccurate information in all of its registration applications for the works at issue in this case. Kayne's arguments can be summarized as follows: (1) Oil Daily was not eligible for group registration using Form G/DN because EIG did not either author or possess exclusive rights to all of the content contained in the registered issues; or (2) if Oil Daily did qualify for group registration, EIG provided inaccurate information by failing to identify the Oil Daily issues as "compilations."

         A. Standard of Review

         Section 411(b)(1) states:

A certificate of registration satisfies the requirements of this section and section 412, regardless of whether the certificate contains ...

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