Uh-Oh: ReDigi Might Be Running Out of Cash

Should music fans have the right to re-sell used MP3s?

That’s exactly what Cambridge, MA-based ReDigi is fighting for in court, with EMI Music suing to protected its right of sale.  So grab some popcorn: presiding District Court judge Richard Sullivan has called this a ‘fascinating issue‘ in need of clarification, and even Google has poked its beak into this fight.

There’s only one problem: ReDigi might be running out of cash. Which is exactly the strategy EMI Music had in mind, and another sad commentary on the American legal system.

The warning signs started appearing this week.  That’s when current ReDigi attorney Ray Beckerman filed a motion to exit the case, and hand things over to another firm.  That’s an abrupt-and-messy move, and it could mean a lot of things.  Except that sources smartly pointed to the existence of a ‘retaining lien‘ by Beckerman in court documents. “My firm does have, and is exercising, a retaining lien,” Beckerman wrote the court, meaning that debts remain unpaid.

Which means that some sort of collateral or valuable property (in some cases, even important files) are being withheld pending payment.  All of which basically means that Beckerman isn’t getting paid for whatever reason.

There’s disagreement in the legal community over whether retaining liens should be permitted.  In some cases, a client is just a deadbeat and not paying, but in others, there’s a valid dispute that doesn’t justify keeping paperwork hostage.  Or, the client is merely trying in good faith to finalize debts.  “The essence of the retaining lien is that a lawyer claiming to be entitled to a fee may impound a client’s papers, money, or other property that are in the lawyer’s possession until the fee has been paid,” John Leubsdorf explained in the Fordham Law Review.  “Even as a method  of collecting fees, the  lien is far too coercive and destructive…”

Let’s see how this shakes out: Beckerman declined any comment to Digital Music News, and ReDigi was similarly silent.  But one music industry attorney told Digital Music News that ‘money is likely an issue here,’ while noting that major labels frequently drain their opponents prior to any resolution on the merits.  Another source independently raised similar concerns.

Sadly, this is oftentimes the result in a major label lawsuit – for money-strapped startups and file-swappers alike, all of whom get bankrupted by expensive and drawn-out legal processes.  An old-and-dirty label trick for sure, but one that usually works.

More ahead.

3 Responses

  1. dangude

    This legal question will not go away and it is unfortunate that it will not be answered or even commented on by the court this time. A decision one way or the other would help define what digital copies are.

  2. Maxwellian

    You will see Google step into this. I think they have more money than EMI.

  3. mdti

    retention of customers’ document is shoking for european lawyers. Here (in FR at least) the rule is that you cannot hold the customers’ documents. You have to hand them over at first demand. For payment, it is the other lawyers who cannot start pleading or submitting observation in courts as long as the deseized lawyer is not paid the most part of his fees.