Friday, May 03, 2013

CBC Fails to Obtain Security for Costs Order Midway Through Leuthold’s Appeal

On November 18, 2012 I wrote about the curious case of Ms. Catherine Leuthold, an American gardener and photographer, who believes that she is entitled to about $21.5 million in damages because the CBC inadvertently reused, without adequate clearance, some of her still photos from 9/11. At trial, she was awarded $19,200. However, she is on the hook for an enormous amount of costs because she turned down an offer for a higher amount than the trial Court finally awarded. She is appealing both the trial judgment and the costs ruling. Her theory of damages is apparently predicated upon the proposition that CBC’s transmissions from each of the its 800 or so participating affiliated stations and Broadcasting Distribution Undertakings [BDUs] gave rise to a separate act of infringement.

I also noted that the CBC - which is subsidized by taxpayers to the tune of more than $1.1 billion per year – had not asked the Court for an order for security of costs. Ms. Leuthold is not resident in Canada and such security for costs orders are quite normal in the case of non-residents. A plaintiff can avoid such an order if impecuniosity can be demonstrated and the Court is of the opinion that the case has merit. Without commenting on this particular case, such orders can be very effective at stopping speculative litigation brought by non-residents of Canada. I have not hesitated to use this tool when necessary. And it has worked. 

 So, the CBC eventually got around on December 21, 2012 – well into the appeal process and a month or so after I raised the issue on this blog - to asking for security for costs in the modest amount of $50,000. It did not cross-examine on Ms. Leuthold’s affidavit resisting this motion, which indicated that her average yearly taxable income is less than $15,000.00 US and her assets are of limited value. In the words of Noël, J.A.:

The appellant resides in the United States. She is self-employed as a gardener on a seasonal basis (Affidavit of Catherine Leuthold, Appelant’s Motion Record, p.1, paras. 4 and 5). She also occasionally licenses photographs which she takes (ibidem). Her average yearly taxable income is less than $15,000.00 US and her assets are of limited value (Affidavit of Catherine Leuthold, Appelant’s Motion Record, p.2, paras. 6 and 8; Exhibit CL-1, Appellant’s Motion Record, p.5; Exhibit CL-2, Appellant’s Motion Record, p.60).
 The Federal Court of Appeal has concluded that it is possible she might recover more than the original award of $19,200 and that ordering security for costs would result in discontinuance of her appeal. The Court refused to grant CBC’s motion for security, which is not surprising under all the circumstances and at this late date.  However, why CBC did not seek such an order at the beginning of this proceeding is not apparent. 

Interestingly, the Court makes a very pointed observation:
[7]   Amongst the questions in issue on appeal is whether a communication to the public for purposes of the Copyright Act, R.S.C. 1985, c. C-42 takes place when the photos are transmitted to the broadcasting distribution undertakings or on each occasion when the broadcasting distribution undertakings retransmit the photographs to the public (Amended Notice of Appeal, Appellant’s Motion Record, pp. 85 and 86, paras. II and III). The number of instances when the appellant’s copyright was infringed turns on this question (Motion Record, Reasons, p. 62, para. 105).
 [8]  While I do not believe that the appellant can seriously envisage obtaining an award of the magnitude which she claims, I am unable to conclude that the issue raised on appeal cannot lead to an award that is more favourable to the appellant. To that extent, I am satisfied that the appeal has been shown not to be without merit and I exercise my discretion so as to allow it to proceed.
(Emphasis added)
This is hardly a victory for Ms. Leuthold.  It simply means that she can continue to pursue her quest for a $21.5 million damage award based upon a very novel theory of liability. Clearly, the Federal Court of Appeal has already expressed some explicit skepticism in the above passage on the likelihood of success on this point. Whether the Federal Court of Appeal finds that there is substantively anything more to this case than an ‘honest mistake” and inadvertent failure by a large bureaucracy to pay for a few reuses remains to be seen. The trial Judge apparently did not seem to think so.

So – taxpayers will likely have to absorb all of CBC’s doubtlessly very high costs on this case, which has been going on for years, no matter what the outcome may be. It is difficult to see how the CBC could be able to collect its costs from someone living in the USA on a taxable annual income of less than $15,000. If the CBC had asked for security for costs early on, things might have been very different.

 In case anyone was not already aware, Canadian copyright litigation is not a lottery. One cannot necessarily expect to receive $21.5 million from the proceeds of a lawsuit against a public broadcaster involving a mistaken re-use – or even six such re-uses - of 18 seconds worth of still photographs in a feature length CBC documentary, when the original license was given for $2,500.
If this decision is to indeed have “significant effects in both Canadian copyright and broadcasting law” as her counsel suggests, I suspect that it will be to remind potentially aspiring litigants and their counsel that litigation is in Canada is not like a lottery and Canadian judges do not hand out gigantic jackpots like American juries sometimes do. One can normally expect that Canadian Courts will follow the maxim as stated by Justice Scott of the Federal Court in this case that: 
Fundamentally, the Court‘s discretion is broad but its assessment of damages must be based on common sense.


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