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Six Years Later, Capitol Records Is Still Chasing Big Copyright Ruling

Capitol claims the owner of a music-sharing site fraudulently hid millions owed to the label from a copyright case about MP3s.

Six years after Capitol Records won a $3.5 million judgment against a music-sharing site called ReDigi, attorneys for the label are still trying to collect it.

In a new lawsuit filed earlier this month in Florida federal court, Capitol accused ReDigi founder John M. Ossenmacher of concocting a “fraudulent scheme” to hide millions that he owes the label from the 2016 judgment, in which a New York federal judge ruled ReDigi had infringed the label’s copyrights.

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At the center of Capitol’s allegations is a complex property deal in 2016 involving a parcel of land in Palm Beach County called “Hogarcito,” which the label described to a judge as “a Mediterranean-style house built in 1921 by cereal heiress Marjorie Merriweather Post.” Post later went on to build Mar-a-Lago, the nearby mansion now owned by former Pres. Donald Trump.

Capitol says the Hogarcito deal saw Ossenmacher rake in a profit of $3.47 million – just weeks after a federal judge ordered him to pay $3.5 million in damages. But the label claims that he effectively hid those proceeds “with the specific intent to hinder, delay and defraud his creditors” and avoid paying up.

Filed more than a decade after Capitol first sued the website over unauthorized MP3s, the new lawsuit is the latest in years of legal wrangling – spanning state and federal courts and multiple bankruptcy proceedings – to collect the money owed by ReDigi.

CAPITOL OFFENSES

Launched in 2011, the site billed itself as a digital version of a used record store. Employing special technology that purportedly only allowed a single copy of a song to exist at once, ReDigi said it could enable users to legally swap their old MP3s without violating copyright law.

Capitol Records disagreed. The label sued in 2012, calling ReDigi a “clearinghouse for copyright infringement.” The next year, a federal judge sided with Capitol and ruled that ReDigi was technically creating illegal copies of each song, not re-selling the same one. The decision was finalized in 2016, along with a $3.5 million judgment for which the company and Ossenmacher were jointly liable.

As of 2022, Capitol says that judgment remains “almost entirely unsatisfied.” But it’s not for a lack of effort.

Court records show that ReDigi and Ossenmacher both filed for bankruptcy in the wake of the 2016 judgment; each listed almost no assets and more than $6 million in debts. The label participated in both bankruptcies, but each case was eventually dismissed on the grounds that neither ReDigi nor Ossenmacher had sufficient assets to pay almost anything to their creditors.

After a federal appeals court upheld the $3.5 million copyright ruling in late 2018, Capitol began filing new cases seeking to collect the money. Such “foreign judgment” actions are commonly used by successful litigants to enforce an unpaid court ruling in a different federal jurisdiction. The cases were filed in California and Florida, where Ossenmacher allegedly lived.

FLIPPED HOUSE RAISES FLAGS

In the midst of one of those cases, Capitol says it discovered the Hogarcito deals. The 2016 property sale was reported at the time by the local Palm Beach Daily News, which told readers that the “landmarked house” was “sold twice in one week” in a deal linked to a “John Ossenmacher, who founded ReDigi.” But Capitol says it only found out in 2020, when it subpoenaed documents from his former attorney who worked on the property sale.

The label quickly filed lawsuits in California and Florida state courts, alleging that the Hogarcito deals amounted to a fraudulent transfer of assets and demanding that the profits be turned over to satisfy the judgment; it also filed similar claims in a federal lawsuit in California. For procedural reasons, those previous cases appear to have been supplanted in favor of the new Florida case, which was filed March 11.

According to Capitol’s attorneys, Ossenmacher orchestrated a plan to buy the Palm Beach property in June 2016 and then resell it the very next day to waiting buyers – a flip that earned him $3.47 million in profit. The deals closed just three weeks after he was ordered to pay the $3.5 million to Capitol, but the label says he used complex legal mechanisms to “conceal” his profits and avoid handing them over.

Instead, most of the money from the Florida land deal ultimately ended up with either an LLC controlled by Ossenmacher himself or with Julia Mellerski, his “long-time cohabitating girlfriend.” The lawsuit named Mellerski as a defendant and repeatedly argued they were a “single economic unit.”: An attorney representing her and Ossenmacher did not return repeated requests for comment.

LAYERS OF ‘FRAUD’

At the center of the alleged scheme was a “land trust” – a Florida legal entity that Capitol says allowed Ossenmacher to obscure who was actually receiving the proceeds from the transactions. The label claims he used such a corporate structure to purchase the property, and then used the same entity to re-sell it.

“These measures were intended to, and had the effect of, hindering, delaying and defrauding plaintiffs,” wrote Capitol’s attorneys, who hail from the law firms Fox Rothschild LLP and Katten Muchin Rosenman LLP. “This was because, among other reasons, public records do not reveal what natural person has the economic or beneficial interest in a land trust, so a search of Florida land conveyance records would not have revealed that Ossenmacher … had an interest.”

As added layers of deception, Capitol says the only beneficiary of the land trust was a “sham” shell company, and that Ossenmacher used his son as the “front man” for the ultimate transaction.

“In this way, Ossenmacher … created multiple layers of entities to distance himself personally from his interest in the [Hogarcito] property, and enabled himself and his insiders to receive the proceeds from its sale while his creditors (principally plaintiffs) were none the wiser,” the lawsuit said.

The lawsuit even included a detailed chart of the alleged fraud, with bubbles and arrows describing the way the money allegedly changed hands, under the title: “John Mark Ossenmacher’s Fraudulent Scheme to Conceal Assets from Plaintiffs and Transfer Them to His Insiders.”

Ossenmacher did not return a request for comment on the dispute. Reps for Capitol Records, a unit of Universal Music Group, declined to comment.