AF Holdings LLC v. Doe [1]

On April 24, 2012, AF Holdings LLC filed a complaint [2] against a John Doe defendant as well as individual defendant Josh Hatfield in the U.S. District Court for the Northern District of California, arising out of the alleged distribution via BitTorrent swarm of a video. The plaintiff, which asserted that it held the copyright [3] in the video by assignment [4], claimed that the Doe defendant violated its copyright by reproducing and distributing the video via BitTorrent, and contributed to infringement by all other members of the BitTorrent swarm.

The plaintiff claimed that defendant Hatfield was liable on a state law theory of negligence for failing to secure his wifi Internet connection against public use (including the alleged use by defendant Doe) for infringing purposes. The plaintiff also noted that it did not know whether Hatfield himself was the Doe responsible for the uploading of the video via BitTorrent.

Hatfield filed a motion [5] to dismiss the complaint against him, or, in the alternative, for a more definite statement as to whether plaintiff was pursuing a contributory copyright infringement against Hatfield as well as a negligence claim. This first motion was withdrawn [6] when the plaintiff filed an amended complaint [7], which added further allegations regarding the negligence claim against Hatfield (including allegations in support of the claim that Hatfield should have known about infringing activity occurring via his Internet connection).

On June 30, 2012, Hatfield filed another motion to dismiss [8] (or for a more definite statement with respect to contributory infringement), this time with respect to the allegations of the amended complaint. The motion argued that the negligence claim against Hatfield failed for three reasons: (1) the claim as stated on the face of the complaint was within the subject matter of copyright, and preempted by federal copyright law either expressly or on theories of conflict or field preemption; (2) the claim was barred by Section 230 of the Communications Decency Act because it treated Hatfield as the "speaker or publisher" of material provided by a third party; and (3) the plaintiff failed to plead a special relationship giving rise to a duty on Hatfield's part to secure his wifi Internet connection. Hatfield further argued that the complaint was ambiguous as to whether he was being sued only for negligence or also for contributory copyright infringement, and sought clarification as to the basis for the claims against him in order to allow him to respond properly.

On July 3, 2012, the Electronic Frontier Foundation moved for leave to file an amicus curiae brief [9] in support of Hatfield's motion to dismiss. The proposed brief argued that finding negligence liability for failure to secure a wifi connection would interfere with federal, state, private, and community efforts to promote open access to public wifi, and would exacerbate problems with allegedly coercive settlement practices in mass file-sharing litigation. The court denied [10] leave to file the brief.

In its opposition [11] to Hatfield's motion to dismiss, the plaintiff argued that express preemption by federal law did not apply to the negligence claim; rather than asserting infringement of copyright, the plaintiff said, the claim asserted negligent operation of a residential network, which is not an exclusive right under the Copyright Act. The plaintiff further argued that Hatfield failed to establish either conflict preemption (because he identified no conflicting state or federal statutes relating specifically to operation of home Internet connections) or field preemption (because he did not cite to cases indicating that a federal regulatory scheme had occupied the relevant field). With respect to Hatfield's Section 230 defense, the plaintiff argued that Section 230 was inapplicable because the claim related to negligence leading to copyright infringement by a third party, rather than a failure to edit, withhold, or restrict access to a third party's offensive speech. Finally, the plaintiff argued that Hatfield had engaged in negligent affirmative acts rather than a negligent failure to act, giving rise to a general responsibility to the public that did not require proof of a specific duty owed by Hatfield.

With respect to Hatfield's motion for a more definite statement, the plaintiff argued that the issue of the definiteness of the negligence claim would not be ripe until after the motion to dismiss was resolved. In another part of the plaintiff's opposition, however, the plaintiff explicitly disclaimed that it was asserting that Hatfield "knowingly facilitated and actively participated in another's alleged infringement."

Hatfield responded further to these arguments in a reply brief [12] on July 23, 2012, arguing, among other things: (1) with respect to preemption, that the plaintiff improperly focused on Hatfield's conduct as opposed to the rights plaintiff sought to protect; (2) that Section 230 protection was not limited to cases involving "offensive speech;" and (3) that plaintiff's argument that Hatfield engaged in active misfeasance as opposed to a negligent failure to act conflicts with the plaintiff's own complaint, which alleged a failure to secure an Internet connection.

On September 4, 2012, the district court granted Hatfield's motion to dismiss [10] the claims against him. The court ruled that the claim against Hatfield (1) was expressly preempted by the Copyright Act; and (2) alleged a failure to act that was deficient as a negligence claim because the plaintiff had not established any special relationship between it and Hatfield giving rise to a duty to act. The court further noted that Hatfield appeared to meet the qualifications for protection under Section 230, but found that it was not necessary to rule on that issue given the other deficiencies in the plaintiff's claim.

The court further noted that there was no evidence that the plaintiff had served the Doe defendant, and gave the plaintiff until October 5, 2012, to do so or face the dismissal of the remainder of the complaint without prejudice.

On September 28, 2012, the plaintiff moved for leave [13] to file a second amended complaint [14] expressly identifying Hatfield as the Doe defendant, claiming that further investigation following the filing of the first amended complaint had given rise to a reasonable basis to name and serve Hatfield as a direct and contributory infringer of the plaintiff's copyright. The motion for leave stated that the additional information discovered by the plaintiff related to Hatfield's "interactions on the computer and living situation (among other things)."

Hatfield filed an opposition [15] to the motion to file a seconded amended complaint on October 12, 2012. The plaintiff moved to strike [16] Hatfield's opposition, on the basis that Hatfield was not a party in the time period between the dismissal of the claim against Hatfield in the first amended complaint and the allowance of the proposed second amended complaint. Therefore, plaintiff argued, Hatfield had no standing to respond to the plaintiff's attempt to add new claims against him. The court rejected [17] this argument.

In the opposition, Hatfield argued that the plaintiff had failed to prosecute its claims against the Doe defendant in a timely manner and as required by the court's October 5th order, and as such the court should dismiss the remainder of the first amended complaint. Hatfield further argued that leave to amend the complaint a second time should be denied, because: (1) the plaintiff's motion was made in bad faith and futile, because the plaintiff conceded in its response to the earlier motion to dismiss that Hatfield was ignorant of the alleged infringement; and (2) there was no excuse for the plaintiff's delay in proceeding against Hatfield, the plaintiff having neither identified the new information at issue or why it could not have learned that information earlier.  Hatfield also noted that the identification of his IP address as the source of the torrent at issue (which plaintiff knew about at the beginning of the case) had not been sufficient to name him as an infringer at the outset.

The plaintiff replied to the opposition [18], arguing that the identification of Hatfield's IP address would have been sufficient to name Hatfield at the outset, but that it had wanted to be "confident that it ha[d] an objectively reasonable basis to name" him as the infringer. Thus, the plaintiff claimed, its delay in naming Hatfield as the Doe defendant was the result of careful diligence rather than inaction or bad faith. With respect to the issue of whether it could have discovered the new information earlier with reasonable diligence, the plaintiff argued that its investigation was "heavily reliant on insights, the timing of which are out of Plaintiff’s control; after enough 'digging', Plaintiff will sometimes have the good fortune to find information sufficient to name a direct and contributory infringer." The plaintiff also argued that it had no obligation to disclose that information in support of its motion to amend. Finally, the plaintiff argued that an amendment cannot be considered futile merely because it contradicts a position previously taken by a plaintiff and considered by a court, because an "amended complaint inherently changes the position taken by the amending party."

At a hearing on November 7, 2012 [17], the district court rejected the suggestion that the current amended complaint should be dismissed pursuant to the October 5th order, and (as mentioned above) denied the motion to strike Hatfield's opposition to the motion for leave to amend. The court further directed the plaintiff to submit for the court's consideration a revised proposed second amended complaint specifically identifying the new facts learned about Hatfield; pending that submission, the court deferred on ruling on the motion to amend.

On November 14, 2012, plaintiff submitted its second proposed second amended complaint [19] for consideration as directed by the court. The new allegations presented in support of the identification of Hatfield as the infringer include:

• "that Defendant had a large Internet presence, and that presence demonstrated Defendant's knowledge of computers and the Internet."
• "According to a Facebook page purportedly attributed to a Josh Hatfield living in the Bay Area ... Defendant ‘likes' movies, ‘pretty much any movie,' among other things."
• "According to a MySpace page purportedly attributed to a Josh Hatfield living in the Bay Area ... he goes by the moniker ‘Mistah HAT' and has pictures of his various activities including, but not limited to, playing video games."
• "Defendant lived in a small apartment building in Oakland, California ... . Plaintiff discovered a recent listing by a real estate agent for one of the units located on the property. According to that listing, the building has eight units with at least on two-bedroom unit."
• "There was no information available about Defendant's neighbors or whether he in fact Defendant [sic] had any nearby neighbors."
• "Research on the building's other potential residents indicated that, while a residential building, it had a few tenants who were running their businesses out of their units."
• "Through [a] skip trace, it was revealed that Defendant was thirty-three-years old and in fact currently residing at [ADDRESS]. Further it revealed that he lived at that location with thirty-year old female with a different last name. There was no indication that the two were married."
• "Defendant had a criminal record. The offenses allegedly occurred in Oregon on June 25, 2001 and January 10, 1999, and both were labeled as ‘Court Offense: VIOL OF BASIC RULE.' The actual violation charged was unclear, but each passed through the criminal courts in Oregon."
• "Plaintiff found no evidence that Defendant had a wireless Internet network. Further, Plaintiff found no evidence that, if such wireless Internet connection existed, that such network was unsecured (i.e. without password protection)."
• "Most importantly, Plaintiff searched the Court's docket in this case and never found any declaration under oath from Defendant stating clearly that he had not infringed on Plaintiff's work. In fact, Plaintiff had never encountered such a document off the record as well."

On January 7, 2013, the court denied [20] the plaintiff's motion to file the second amended complaint and its motion to strike the defendant's opposition to the motion. The court indicated uncertainty as to whether Hatfield would be substantially prejudiced by the amendment given his lack of knowledge, based on the plaintiff's prior conduct and statements, that he was considered a target for a direct copyright infringement claim. However, the court did find that "AF Holdings delayed unduly in seeking leave to amend, and that its conduct is at least suggestive of bad faith." The court further found that

the new allegations in the revised proposed [Second Amended Complaint] are vague and speculative, and do not demonstrate diligence or add any substance to the claims. ... In short, the revised proposed SAC alleges no facts showing that Hatfield infringed AF Holdings' copyrighted material, apart from the facts that were previously alleged and that have been known to AF Holdings for more than a year[.]

Having denied the plaintiff's motion to amend, the court also denied Hatfield's motion that the case be dismissed for lack of prosecution as per its comments at the hearing on November 7, 2012.