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Capitol Records files new lawsuit against ReDigi founder over unpaid damages

By | Published on Tuesday 29 March 2022


Universal Music’s Capitol Records filed a new lawsuit earlier this month in a bid to secure the damages it was awarded in its long-running legal battle with MP3 resale site ReDigi. Although it initially beat ReDigi in court in 2013 – with the digital company subsequently running out of appeal options in 2019 – the major is still to be paid most of the $3.5 million in damages it is due.

Back when digital music was mainly about downloads, ReDigi operated an MP3 marketplace where people could sell on unwanted second hand digital music files.

The company argued that this was no different to people selling on second hand CDs which copyright law allows, because – although under most copyright systems a record company has control over the first issuing or distribution of a copy of a recording – it has no control over future distribution. In the US this is known as the ‘first sale doctrine’.

However, the record companies were quick to argue, when someone sells on a second-hand CD no additional copying of the recording occurs. However, by definition, when a digital file moves from one computer to another over the internet, that recording is being reproduced.

And that reproduction needs a licence. Without such a licence, ReDigi and its users are liable for copyright infringement. Although the record industry was pretty much in agreement on this point, it was Capital Records – then still an EMI label – that went legal via the New York courts in 2012.

For its part, ReDigi pushed back, in part on the basis that its technology somehow guaranteed that the seller of the MP3 could not retain a copy after a resale had occurred.

But that didn’t really counter the core argument of the labels, that ReDigi was facilitating the copying of recorded music without licence – which is copyright infringement – and the first sale doctrine does not apply to the reproduction of digital files.

The courts initially sided with Capitol – by then part of Universal Music – in 2013 and then again on appeal in 2018, with damages being set in between those two court hearings in 2016. ReDigi tried to take the case to the US Supreme Court in 2019, but the highest court in the land declined to consider the dispute. This meant that the ReDigi company and its founder John Ossenmacher remained liable for the $3.5 million in damages.

However, three years before the Supreme Court declined to hear the case, shortly after the lower court confirmed the damages that were due, both ReDigi and Ossenmacher filed for bankruptcy, claiming to have more or less no assets and more than $6 million in debts. Which kind of suggested Capitol was unlikely to ever get its damages.

However, the major persisted. And, along the way, it seems, discovered that shortly after the damages were set by the court in 2016, Ossenmacher was involved in a property deal that netted him nearly $3.5 million. But this was all allegedly hidden from the courts.

In a new legal filing made earlier this month and published by Billboard yesterday, the label says: “By the time that plaintiffs’ judgment was entered against Ossenmacher on 3 Jun 2016, Ossenmacher had acquired the contractual right to purchase and to sell a … valuable half-acre parcel of real estate in Palm Beach County, Florida, called ‘Hogarcito'”.

“At the end of June 2016 – a mere three weeks after a federal court in New York adjudged him liable to plaintiffs for $3,500,000 – Ossenmacher assigned his contractual rights to buy and sell Hogarcito to a Florida land trust. Ossenmacher created that land trust and made those assignments with the specific intent to hinder, delay and defraud his creditors, including plaintiffs”.

“As a result of his ‘flip’ of the Hogarcito property”, the new lawsuit goes on, “Ossenmacher realised a profit of approximately $3,447,564.13, nearly all of which ended up in his hands, directly or indirectly, or in the hands of his insiders, including his long-time co-habitating girlfriend, Julia Mellerski (alias Julia L Miller, alias JL Miller, alias Julia Ossenmacher)”.

“Ossenmacher, with the assistance of a Florida lawyer, documented the buy-sell transactions to conceal his personal involvement with and interest in the property at issue, primarily by involving a land trust that had a remote, sham entity controlled by Ossenmacher as its sole beneficiary, and by causing his son to be the ‘frontman’ for the ultimate transaction”.

Capitol Records, it seems, became aware of all this in 2020 and, according to Billboard, it began legal proceedings that year in both Florida and California – states where it was thought Ossenmacher resided – the aim being to get court confirmation that the property deal was, in fact, a fraudulent transfer of assets, and that the profits from that deal should be handed over to the label to satisfy the damages claim.

This new lawsuit with the courts in Florida seemingly builds upon and supplants that earlier litigation from 2020. Ossenmacher is yet to respond.