Stairway to Retrial: 9th Circuit Court of Appeals Cites Error in Led Zeppelin Infringement Ruling

Vintage Radio Microphone with Vinyl Records

In 2016, a California jury decided that Led Zeppelin’s “Stairway to Heaven” did not infringe on Randy Wolfe’s “Taurus”.  However, the 9th Circuit Court of Appeals reviewed that decision and has now called for a do-over, citing reversible error in evidentiary rulings by the trial judge.  In particular, the Court of Appeals stated that the trial judge erred by failing to advise the jury that, while specific elements of a song are not protected, a combination of those elements could be protected, as well as prohibiting Wolfe’s camp from playing the actual recordings.

It has long been accepted that individual notes, chords, scales, rhythms and harmonies, as well as content in the public domain, are not protectable elements of a song.  However, the trial judge, U.S. District Judge R. Gary Klausner, failed to instruct the jury that, while these elements may not individually or separately constitute copyrightable material, a combination of these elements could well be original enough to make out a case for a protectable copyright.  Ninth Circuit Judge Richard Paez stated, in pertinent part:

Nowhere did the jury instructions include any statements clarifying that the selection and arrangement of public domain elements could be considered original. Jury Instruction No. 20 compounded the errors of that omission by furthering an impression that public domain elements are not protected by copyright in any circumstances. This is in tension with the principle that an original element of a work need not be new; rather, it need only be created independently and arranged in a creative way. See Feist Publ’ns, 499 U.S. at 345, 349; see also Swirsky, 376 F.3d at 849. Jury Instruction Nos. 16 and 20 in combination likely led the jury to believe that public domain elements—such as a chromatic scale or a series of three notes—were not protectable, even where there was a modification or selection and arrangement that may have rendered them original.

This error was compounded by the trial court, according to the Ninth Circuit, when it also barred the jury from hearing the actual songs during the trial.

The district court excluded the sound recordings under Federal Rule of Evidence 403, finding that “its probative value is substantially outweighed by danger of . . . unfair prejudice, confusing the issues, [or] misleading the jury . . . .” Fed. R. Evid. 403. Here, the district court abused its discretion in finding that it would be unduly prejudicial for the jury to listen to the sound recordings in order to assess Page’s access to “Taurus.” The district court acknowledged that the recordings were relevant to whether Page had access to “Taurus,” as Page would have heard and allegedly copied a recording of “Taurus.” The district court was concerned, however, that allowing the jury to hear the recordings would confuse them.

While it is understandable for the trial judge to be concerned that listening to both songs in their entirety, when many of the individual elements are not protectable, could confuse the jury, the Ninth Circuit did not feel that this potential prejudicial effect outweighed its probative value.  While not explicitly stated, the Ninth Circuit may well have been suggesting that there would be no prejudice if the parties and their experts do their job in properly explaining the permissible and non-permissible elements.

However, the Ninth Circuit also suggested another reason that the songs should be played to the jury; specifically, that there could be probative value in the jury merely observing the reactions of the parties while the songs are being played.

Although the jury could still draw conclusions and inferences from Page’s demeanor during his testimony, allowing the jury to observe Page listening to the recordings would have enabled them to evaluate his demeanor while listening to the recordings, as well as when answering questions. Limiting the probative value of observation was not proper here, as the risk of unfair prejudice or jury confusion was relatively small and could have been reduced further with a proper admonition. For example, the district court could have instructed the jury that the recordings were limited to the issue of access and that they were not to be used to judge substantial similarity.

It seems inconceivable that Jimmy Page, Robert Plant and/or John Paul Jones are going to have any reaction while listening to the recordings, let alone any reaction that should lead a juror to draw any conclusion.  All of the parties have heard both versions numerous times prior to trial and, thus, there will certainly be no surprise.  The parties will also be even better prepared for testimony during the new trial.  They will be cognizant that any reaction could impact the outcome, as the court has signaled that any reaction is now something to look out for.

As the song goes, “There’s a feeling I get, when I look to the west.”  In this case, that feeling is that playing both songs in this California Federal Courthouse may confuse the jury and lead to a different result.

Questions? Let Jeff know.

Jeff Cohen is a member of Flaster Greenberg’s Litigation, Intellectual Property, Corporate and Real Estate Practice Groups. He has been a trial attorney for more than 23 years, counseling and representing a diverse range of clients in matters related to commercial contracts, shareholder and partnership agreements, trademarks, copyrights, patents, including Hatch-Waxman, insurance coverage, franchise disputes and commercial construction.

Gifts and Medicaid: Gifting to Children and Grandchildren

Clients often ask me, can they make gifts to their children and grandchildren without a problem concerning Medicaid?  Often, what they have in mind is the $15,000 annual exclusion, which is a federal provision, not a Medicaid regulation. The $15,000 annual exclusion permits a taxpayer to give up to $15,000 away per year without being required to file a gift tax return. Married couples may split gifts and currently give up to $30,000 per person per year if they both agree.

But the federal tax rules and the Medicaid rules are “apples and oranges” in this case. Different rules apply here for Medicaid than for tax purposes. While a gift of less than $15,000 would not require a federal gift tax return, even small gifts, payments of medical and educational expenses of others, and gifts to children and grandchildren and others, of any amount, can jeopardize Medicaid coverage for long-term care for New Jersey residents.  This is because of the rules which apply during the five year Medicaid look back period. If there are any gifts made by the Medicaid applicant within the five years immediately preceding the filing of the applicant’s first Medicaid application, all of the gifts made during that five year period will be totaled and a Medicaid penalty period corresponding to the value of the total gifts will be imposed. Due to the Medicaid penalty period, Medicaid will generally deny coverage for long-term care, for a period of time corresponding to the total amount of all of the gifts made during the five years immediately prior to the filing of the Medicaid application.  Under the current New Jersey policy, even if some of the gifts are returned, the total amount of all of the gifts made during the lookback period can be subject to a Medicaid penalty period. This can have disastrous results on a Medicaid application.

For example, assume that Billy and Sue are husband and wife and they together make $92,000 in gifts to their children between February 1, 2012 and January 31, 2017. If a Medicaid application was filed for Billy in the month of February, 2017, even if $90,000 of the gifts are returned by the children back to Billy and Sue, a Medicaid penalty in the sum of $92,000 can be imposed on Billy and Sue because that was the amount of the total gifts made during the five year Medicaid look back period for Billy.

Fortunately, there are sometimes strategies available to push back against this very harsh result.  When filing any Medicaid application in New Jersey, consulting with an experienced elder law attorney is advised.

Questions? Let Jane know.

 

Jane Fearn-Zimmer is a shareholder in the Elder and Disability Law, Taxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

 

 

Medicaid and Gifts

Medicaid will not pay for long term or home and community based care during a Medicaid penalty period. A penalty period will generally be imposed where uncompensated gifts have been made during the five years immediately preceding the filing of the Medicaid application. This period is known as the Medicaid lookback.  The length of the penalty period is computed based on the total amount of gifts during the look back period. Under the current Medicaid divisor, approximately one month of ineligibility is imposed for every $10,000 given away during the lookback period.

Many applicants are unaware that there is a rule, which applies to Medicaid applications filed in New Jersey after May 26, 2010, as well as to Medicaid applications filed in other states, including Ohio, preventing recalculation of the penalty period where some, but not all of the gifts made during the lookback period, were returned. The rule, as stated in New Jersey, is found in Medicaid Communication 10-06 and requires that the penalty period cannot be decreased for the returned gifts unless all of the assets given away have been returned.  This rule can have very harsh consequences, which are illustrated in a recent case from Ohio.

In Paczko v. Ohio Dept. of Job & Family Servs., (2017 OH 9024 (Oh. Ct. App., 8th Dist., Cuyahoga County, No. 105783, Dec. 14, 2017), an elderly woman transferred the sum of $146,122 to a trust, which would benefit her children. She later applied for Medicaid during the five year lookback period. The sum of $89,227.38 was returned from the trust to the elderly woman to pay for her care. She sought to reduce the original Medicaid penalty period computed on the total transfers during the preceding five years, by the sum of the returned gifts.  At the Board level, the Ohio Medicaid agency gave her limited for her returns, and denied her request for additional credit for all of the gifts returned. Her appeal was denied at both the Staff Hearing Officer and Court of Common Pleas levels.

While the Paczko case is not binding on the New Jersey courts, the case is a good illustration of what can happen when there is a partial return of gifts without further planning and a Medicaid application is filed within the five year lookback period. The take away from Paczko is that, in New Jersey, as in Ohio, applicants for Medicaid re well-advised to be mindful of the “no credit for partial returns” rule and to consult an attorney before filing any Medicaid application, or proceeding to a Medicaid Fair Hearing, to determine what solutions may be available.

Questions? Let Jane know.

 

Jane Fearn-Zimmer is a shareholder in the Elder and Disability Law, Taxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

 

Involuntary Commitment Proceedings –Who Pays for That?

An involuntary commitment, or civil commitment, proceeding, is a summary legal action filed in order to obtain a court order to require a mentally ill individual to receive necessary psychiatric treatment against his or her wishes, pursuant to N.J. Rule of Court §4:74-7 and N.J.S.A. §30:4-27.2.  Typically, the involuntary commitment process is initiated through a mental health screening, but the process can also be filed by a prosecutor or the Attorney General. Only individuals who are shown by clear and convincing evidence to present a danger to themselves may be involuntarily committed.

An order for involuntary commitment must be issued within 72 hours, and the hearing itself must be held in no more than 20 days.  The individual who is the subject of an involuntary commitment hearing has the right to an attorney to represent her in the commitment proceedings. The existence of involuntary commitment proceedings does not mean that an individual has been adjudicated incapacitated, nor does it mean that her rights, such as the right to bear arms, the right to drive, the right to have visitors, to receive medical treatment, and to fresh air and exercise, are removed or restricted.  The only mechanism to restrict these rights is to obtain a guardianship order from the Superior Court, which is an entirely different proceeding governed by different rules.

By law, the State of New Jersey is required to bear ninety percent of the cost of an involuntary commitment, leaving the remaining ten percent to be borne by the involuntarily committed individual. The financial evaluation process is undertaken by the county adjuster’s office. If it is determined that the individual can afford to pay for the cost of their psychiatric care, the county adjuster seeks a court order requiring the individual to pay for the cost of psychiatric care, which can impose a heavy financial burden on the former patient.

It is important to know that hospitals and the county adjuster’s office are required to follow strict regulations in collection matters arising from emergency hospital admissions and psychiatric emergency screening services.  Charity care regulations apply where a financially eligible patient becomes involuntarily committed as the result of a hospital emergency room admission. Newton Medical Center v. D.B., No. A-5101-15T4 (N.J. Super. App.Div., January 17, 2018.  The case involved an uninsured patient who was admitted to a hospital emergency room during a psychotic episode, and was involuntarily committed. After the patient’s release, the medical center billed the patient the sum of $65,000 bill for the eleven days of care, reduced the bill due to the patient’s lack of insurance, and attempted to collect on the reduced bill. At the trial level, the Court entered summary judgment in favor of the hospital.  The Appellate Division reversed the trial judge’s decision, ruling that the hospital could not recover from the former patient, because it did not contact the patient as required by the charity care regulations.

Questions? Let Jane know.

 

Jane Fearn-Zimmer is a shareholder in the Elder and Disability Law, Taxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Selling the Home Through Guardianship

What happens when residential real property must be sold, but the owner of the property can no longer make their own decisions? If there is no one authorized to sell the property under an existing power of attorney, the real property can be sold by a guardian. Selling real property through a guardianship requires two real estate appraisals and court approval. The touchstone is whether the proposed sale will be in the best interests of the incapacitated person. Factors for consideration include whether the incapacitated person can return to live in the home, the fair market and tax assessed values of the property, the marketability of the property, the outcome of any prior attempts to sell the property, the expenses of continued ownership, and whether a sale or liquidation agreement must be entered into as a condition of Medicaid eligibility. In limited cases where the safety of the alleged incapacitated person is endangered, the guardianship process can be expedited in New Jersey (and other states) through a temporary emergency guardianship order.

Questions? Let Jane know.

 

Jane Fearn-Zimmer is a shareholder in the Elder and Disability Law, Taxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

 

Estate Planning Check Up and the New Tax Laws

The Tax Cuts and Jobs Act of 2017 enacted the most sweeping changes to the federal tax code since 1986. Many people assume that due to the increase in the basic exclusion amount (BEA) to $11,180,000 per individual, only the wealthiest need now estate planning. That is just not true!

Certainly, many fewer federal estate tax returns will be required to be filed. However, it is still important to periodically review your documents and your estate plan.  Most clients should review their existing wills and trusts. Particularly where a formula bequest was incorporated, the estate plan must be reviewed to ensure consistency with the client’s legacy goals.  This is due to the increase of the BEA.  The BEA functions like a sponge to limit or prevent a decedent from any federal estate tax liability at death. The BEA soaks up the decedent’s aggregated lifetime gifts and the assets remaining in the decedent’s estate at the moment of death, allowing the donor’s wealth up to the BEA limit to be transferred free of federal estate and gift taxes. Beyond the BEA, the estate will incur federal estate transfer tax liability. When the BEA was significantly lower, it was very common for estate planners to draft formula bequests, which allocated all of the decedent’s assets up to the decedent’s basic exclusion amount, to a “credit shelter trust” for the benefit of the surviving spouse and/or the descendants of the decedent. The remaining assets would pass outright to or in trust for the surviving spouse. With the doubling of the BEA and with credit shelter trusts which do not name the surviving spouse as a trust beneficiary, those estate plans will now disinherit the surviving spouse, and the surviving spouse will then be entitled to a one-third elective share of the decedent’s augmented estate in New Jersey.  The solution is to update the estate planning now, possibly with a disclaimer formula.  The new law sunsets on December 31, 2025.

At least until the new law sunsets, under the current regime, family limited partnerships remain a viable planning strategy, with the possibility of discounts for lack of marketability and lack of control. Trusts will continue to be useful for non-tax reasons, including privacy by avoiding the probate process, creditor protection, curbing spendthrift children, centralizing asset management, fostering family harmony through controlled asset disposition, and preserving a fund for a special needs beneficiary while protecting the beneficiary’s Medicaid and SSI eligibility.

Questions? Let Jane know.

 

Jane Fearn-Zimmer is a shareholder in the Elder and Disability Law, Taxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

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