expert-retention-letter-lakeshore.docx

1035-00003 · Flor de Luna Publishing, LLC · Correspondence

expert-retention-letter-lakeshore.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP 777 South Figueroa Street, 34th Floor Los Angeles, California 90017 Telephone: (213) 555-9400 Facsimile: (213) 555-9401 www.calderwoodharkness.com

June 8, 2023

VIA EMAIL (e.marchetti@lakeshoreforensic.com)

Dr. Ellen Marchetti, CPA, CFF Engagement Lead Lakeshore Forensic Accounting Group, LLC 200 South Wacker Drive, Suite 3100 Chicago, IL 60606

Re: Retention as Forensic Accounting Expert — Fonseca et al. v. Crescendo Digital Media, Inc., Case No. 2:23-cv-02841-RGK-PLA (C.D. Cal.)

Our Matter No.: 1035-00003

Dear Dr. Marchetti:

This letter confirms the retention of Lakeshore Forensic Accounting Group, LLC ("Lakeshore") as a forensic accounting and royalty audit expert in the above-referenced matter. Lakeshore is retained on behalf of our clients Marguerite D. Fonseca, Flor de Luna Publishing, LLC, and Mariposa Sound Recordings, LLC (collectively, "Plaintiffs") in the copyright infringement action captioned Fonseca et al. v. Crescendo Digital Media, Inc., Case No. 2:23-cv-02841-RGK-PLA, currently pending in the United States District Court for the Central District of California. The Complaint in this action was filed on April 3, 2023. The defendant in this matter is Crescendo Digital Media, Inc. ("Crescendo"), a Delaware corporation headquartered in Austin, Texas, which operates the "Crescendo Stream" digital streaming and content aggregation platform. This letter sets forth the scope of Lakeshore's engagement, the fee arrangement, applicable privilege and confidentiality terms, and related logistical matters. We ask that you review this letter carefully, and if the terms are acceptable, sign and return the enclosed copy as indicated below.

1. Scope of Engagement

(a) Royalty Audit and Damages Quantification

Lakeshore's primary task will be to review and analyze streaming data, sublicense agreements, and revenue records produced by Crescendo in discovery, and to calculate the total back-royalties and other damages owed to Plaintiffs arising from Crescendo's unauthorized exploitation of Plaintiffs' copyrighted works. The period of analysis for purposes of this engagement covers January 1, 2019 through December 31, 2022, a span of approximately forty-eight (48) months corresponding to the infringement period alleged in the Complaint (the "Infringement Period").

The copyrighted works at issue comprise forty-seven (47) registered musical compositions bearing U.S. Copyright Office Registration Nos. PA 1-742-891 through PA 2-318-406 and thirty-two (32) registered sound recordings bearing Registration Nos. SR 0-891-220 through SR 1-104-773. The publishing rights in the compositions are owned by Flor de Luna Publishing, LLC, a California single-member limited liability company (EIN 82-4193507). The master recording rights in the sound recordings are owned by Mariposa Sound Recordings, LLC, a California single-member limited liability company (EIN 84-2671058). Both entities are wholly owned by Ms. Fonseca.

Based on Plaintiffs' preliminary review of the available data, Crescendo's platform logged approximately 18,426,331 streams of Plaintiffs' works during the Infringement Period. In addition, Crescendo sublicensed curated playlists containing Plaintiffs' works to fourteen (14) commercial clients, including fitness chains, hospitality brands, and retail environments. The sublicense revenue attributable to Plaintiffs' catalog is estimated to be approximately $2,740,000 over the four-year Infringement Period. We expect that these figures will be refined and, where necessary, corrected as Lakeshore conducts its independent analysis of Crescendo's production.

The damages categories to be quantified by Lakeshore include, but are not necessarily limited to, the following:

(i) Unpaid mechanical royalties (compositions) — to be calculated based on the applicable statutory mechanical rate per stream (as set forth in 37 C.F.R. Part 385) plus any sublicense mechanical royalties attributable to Crescendo's commercial sublicensing arrangements;

(ii) Unpaid master use royalties (sound recordings) — to be calculated based on comparable master license rates per stream as established through analysis of industry benchmarks, third-party licensing agreements, and other relevant market data;

(iii) Unpaid performance royalties — to be estimated based on the unremitted share of performance royalties attributable to Crescendo's exploitation of Plaintiffs' works, including any amounts that should have been reported to and paid through the applicable performing rights organization(s); and

(iv) Any additional damages categories identified by Lakeshore through the course of its analysis, including but not limited to unjust enrichment, disgorgement of profits, and other theories of recovery that may be supported by the financial evidence.

For purposes of contextualizing market rate analyses, we note that Crescendo reported total revenue of approximately $189 million for fiscal year 2022 and maintains a subscriber base of approximately 2.3 million users. Lakeshore should consider these figures, along with other relevant platform and industry metrics, in establishing the appropriate frameworks for royalty rate comparisons and damages modeling.

(b) Expert Report

Lakeshore shall prepare a written expert report suitable for submission under Federal Rule of Civil Procedure 26(a)(2)(B). The report shall set forth Dr. Marchetti's opinions, the bases and reasons therefor, and all supporting calculations and analyses. In accordance with Rule 26(a)(2)(B), the expert report must include:

(i) A complete statement of all opinions Dr. Marchetti will express and the basis and reasons for each opinion;

(ii) The facts or data considered by Dr. Marchetti in forming those opinions;

(iii) Any exhibits that will be used to summarize or support Dr. Marchetti's opinions;

(iv) Dr. Marchetti's qualifications, including a list of all publications authored by Dr. Marchetti within the preceding ten (10) years;

(v) A list of all other cases in which Dr. Marchetti has testified as an expert at trial or by deposition within the preceding four (4) years; and

(vi) A statement of the compensation to be paid for Dr. Marchetti's study and testimony in this matter.

We will coordinate with you regarding the format and organization of the report to ensure that it meets all applicable requirements under the Federal Rules of Civil Procedure and the Local Rules of the Central District of California.

(c) Testimony. If required, Lakeshore shall provide deposition and/or trial testimony in support of Dr. Marchetti's opinions. This matter is assigned to the Honorable R. Gary Klausner, District Judge, and the Honorable Patricia L. Alvarez, Magistrate Judge, in the Central District of California. We will provide reasonable advance notice of any scheduled deposition or trial dates and will work with you to accommodate Dr. Marchetti's schedule to the extent practicable.

2. Materials to Be Provided

Calderwood & Harkness LLP will provide to Lakeshore the following materials for review and analysis in connection with this engagement, among others:

(i) Crescendo's discovery production (Bates Nos. CDM-000001 through CDM-004218), consisting of:

• Streaming logs, including platform usage data for Plaintiffs' works reflecting stream counts, timestamps, geographic data, and subscriber tier information;

• Content management system ("CMS") records, including records reflecting the "cleared — blanket license" tagging of Plaintiffs' works within Crescendo's internal content management infrastructure;

• Sublicense agreements between Crescendo and its fourteen (14) commercial clients, including all amendments, schedules, and rate cards;

• Revenue reports, including both streaming revenue and sublicensing revenue, broken down by reporting period and, to the extent available, by individual work or playlist;

(ii) Historical royalty statements from Thornfield Music Administration, Inc. ("Thornfield"), which serves as Plaintiffs' catalog administrator. Thornfield administers the catalog on a non-exclusive basis under the direction of Raymond O. Sato, President, with offices at 6363 Wilshire Boulevard, Suite 410, Los Angeles, California 90048. These statements will provide a historical baseline for royalty income attributable to the works at issue;

(iii) The expired blanket license agreement between Plaintiffs and Peregrine Music Group, LLC ("Peregrine"). This agreement was effective January 1, 2016 and expired by its own terms on December 31, 2018. Peregrine ceased operations in November 2018. The license was expressly non-transferable and non-assignable, and contained no automatic renewal provision. This document is central to the dispute, as Crescendo has asserted reliance on this expired license as a defense;

(iv) U.S. Copyright Office registration certificates for all forty-seven (47) compositions and thirty-two (32) sound recordings at issue. We note that all registrations were timely filed within three (3) months of first publication or prior to the commencement of the infringement, thereby qualifying Plaintiffs for statutory damages and an award of attorney's fees under 17 U.S.C. §§ 504(c) and 505;

(v) Any additional materials produced during the course of discovery, including any supplemental productions by Crescendo, third-party discovery materials, or other documents that may be relevant to Lakeshore's analysis; and

(vi) Ms. Fonseca's historical royalty income data for use as a comparable benchmark. For reference, Ms. Fonseca's average annual royalty income from her catalog was approximately $1,820,000 over the five-year period from 2018 through 2022. This data will assist Lakeshore in contextualizing the damages attributable to the infringement.

Please note that all materials provided in connection with this engagement are confidential and are subject to the Protective Order entered in this action. Lakeshore must handle, store, and dispose of all such materials in accordance with the terms of that Protective Order, a copy of which we will provide separately.

3. Background on the Dispute

For Dr. Marchetti's orientation, we provide the following brief factual summary of the dispute:

Ms. Fonseca is a Grammy-nominated singer-songwriter and recording artist based in Los Angeles, California, with a distinguished twenty-eight-year career spanning Latin pop, jazz, and contemporary R&B. She has released nine studio albums, received three Grammy Award nominations, and won two Latin Grammy Awards. Her full catalog comprises 214 registered compositions and 188 registered master recordings. She is widely recognized as one of the leading artists in her genre and her works have been commercially exploited through a wide range of distribution channels, including physical media, digital downloads, streaming platforms, synchronization licenses, and live performance.

Crescendo Digital Media, Inc. is a business-to-business ("B2B") and business-to-consumer ("B2C") digital streaming and content aggregation company. Crescendo was founded in 2016 by its Chief Executive Officer, Nikolai R. Sorensen. In 2021, Crescendo raised $75 million in a Series C financing round led by Ridgeline Ventures Partners, LP, whose General Partner is Warren Hu. Crescendo operates the "Crescendo Stream" platform, which provides streaming services directly to individual consumers and also aggregates and curates playlists for commercial sublicensing to business clients.

Crescendo previously held a valid blanket license to exploit Plaintiffs' works through Peregrine Music Group, LLC. That license was effective from January 1, 2016 through December 31, 2018. Peregrine ceased operations in November 2018, and the license expired by its own terms on December 31, 2018, with no provision for automatic renewal and no right of transfer or assignment. Despite the expiration of this license, Crescendo's content management system incorrectly continued to tag Plaintiffs' works as "cleared — blanket license," and Crescendo continued to exploit those works without authorization from January 1, 2019 through at least December 31, 2022 — the entirety of the Infringement Period.

On March 6, 2023, Calderwood & Harkness LLP, on behalf of Plaintiffs, sent a pre-litigation cease-and-desist letter to Crescendo's General Counsel, Priya Chandrasekaran, demanding that Crescendo immediately cease all unauthorized exploitation of Plaintiffs' works and provide a full accounting of all revenues generated therefrom. On March 17, 2023, Crescendo's outside counsel, Hargrove, Pennington & Cao LLP, by lead attorney Denise K. Whitford, responded on behalf of Crescendo, disputing that any infringement had occurred and asserting that Crescendo had relied in good faith on the expired blanket license.

The Complaint was filed on April 3, 2023. Crescendo filed its Answer on April 28, 2023, asserting affirmative defenses including, among others, good faith and innocent infringement under 17 U.S.C. § 504(c)(2). An Early Neutral Evaluation session was held on May 15, 2023 before Magistrate Judge Alvarez, but the parties were unable to reach a resolution.

4. Fee Arrangement

Lakeshore's fees for this engagement will be billed at Dr. Marchetti's standard expert engagement rate of $625.00 per hour. Supporting staff assigned to the engagement by Lakeshore will be billed at a rate of $350.00 per hour. Lakeshore shall submit monthly invoices to Calderwood & Harkness LLP at the address set forth above, with sufficient detail to permit review and approval by the firm and, as appropriate, by the client.

Based on our preliminary assessment of the scope of this engagement, we estimate total fees in the range of $45,000 to $65,000, depending on the ultimate scope of discovery and whether deposition and/or trial testimony is required. This estimate is provided for budgeting purposes only and is not a cap on fees. We will work collaboratively with Lakeshore to manage costs and ensure that the engagement proceeds efficiently.

Costs and expenses incurred by Lakeshore in connection with this engagement, including but not limited to travel, lodging, document reproduction, and other out-of-pocket expenses, will be billed at cost without markup. Lakeshore shall obtain prior approval from Calderwood & Harkness LLP before incurring any single expense item in excess of $500.00.

Please note that under our engagement agreement with Ms. Fonseca, Calderwood & Harkness LLP is required to seek client approval before incurring any single expert expense in excess of $5,000.00. Accordingly, Lakeshore should coordinate with Calderwood & Harkness LLP to ensure that any anticipated billings or expense items that would cause cumulative charges to exceed this threshold in a single billing period are identified and communicated in advance.

5. Privilege and Confidentiality

This engagement is at the direction of counsel in connection with pending litigation, and all aspects of Lakeshore's retention and work are to be treated as privileged and confidential. Specifically:

(a) All communications between Lakeshore and Calderwood & Harkness LLP, and all draft reports, working papers, notes, memoranda, and other work product generated by Lakeshore in connection with this engagement, are protected by the attorney-client privilege and/or the work product doctrine. Lakeshore must take all reasonable steps to preserve the privileged and confidential nature of these materials.

(b) Dr. Marchetti shall not communicate regarding this engagement, its subject matter, or any aspect of the underlying litigation with any party other than Calderwood & Harkness LLP without the prior written consent of this firm. This restriction extends to communications with Plaintiffs, Crescendo, Crescendo's counsel, third parties, and any other persons or entities.

(c) The final expert report, once served upon opposing counsel pursuant to Federal Rule of Civil Procedure 26(a)(2), will not be privileged and will become part of the record in this case.

(d) Draft reports and communications between Lakeshore and counsel will remain privileged and protected from discovery under Federal Rule of Civil Procedure 26(b)(4)(B) (protecting draft expert reports) and Rule 26(b)(4)(C) (protecting communications between counsel and retained experts, subject to limited exceptions).

6. Conflicts of Interest

We request that Lakeshore confirm, in writing, that it has conducted an appropriate conflicts check and that it has no conflicts of interest with respect to any party, entity, or individual involved in this action. Specifically, please confirm that Lakeshore has no current or prior engagement or relationship that would create a conflict with respect to any of the following:

• Marguerite D. Fonseca

• Flor de Luna Publishing, LLC

• Mariposa Sound Recordings, LLC

• Crescendo Digital Media, Inc.

• Nikolai R. Sorensen

• Priya Chandrasekaran

• Hargrove, Pennington & Cao LLP

• Thornfield Music Administration, Inc.

• Ridgeline Ventures Partners, LP

• Peregrine Music Group, LLC

If any potential conflict exists, please identify it immediately so that we may evaluate whether it can be addressed through appropriate measures.

7. Engagement Team at Calderwood & Harkness LLP

The Calderwood & Harkness LLP engagement team for this matter is as follows:

Day-to-Day Contact: Christy Bauer, Lead Associate

Email: c.bauer@calderwoodharkness.com

Supervising Partner: Alan Ngo, Responsible Partner, intellectual Property

Email: a.ngo@calderwoodharkness.com

Additional Support: Peter Vassiliev, Associate

Email: p.vassiliev@calderwoodharkness.com

Ms. Bauer will serve as the primary point of contact for all day-to-day matters relating to this engagement, including the transmission of materials, scheduling, and substantive discussions regarding the scope and progress of Lakeshore's analysis. Mr. Vassiliev will assist with data compilation and discovery coordination. All questions regarding the strategic direction of the engagement or the scope of Dr. Marchetti's opinions should be directed to Ms. Bauer or Mr. Ngo.

8. Timeline and Deliverables

We anticipate the following timeline for Lakeshore's work on this engagement:

(a) Initial Review and Preliminary Damages Estimate. Lakeshore should target completion of an initial review of the discovery materials and preparation of a preliminary damages estimate within four (4) weeks of receipt of the materials described in Section 2 above. We expect to transmit these materials to Lakeshore within the next five (5) business days.

(b) Draft Expert Report. The draft expert report shall be provided to Calderwood & Harkness LLP for review sufficiently in advance of any Rule 26(a)(2) disclosure deadline to be set by the Court. The Court has not yet set expert disclosure deadlines, but we anticipate that the scheduling order will be entered within the next thirty (30) days. We will communicate the applicable deadlines to Lakeshore promptly upon their issuance.

(c) Coordination with Thornfield Music Administration, Inc. To the extent that Lakeshore requires historical royalty data or other information from Thornfield Music Administration, Inc. in connection with this engagement, all such requests should be channeled through Calderwood & Harkness LLP. Lakeshore should not contact Thornfield directly without prior approval from this firm.

We believe this engagement will greatly benefit Plaintiffs' case, and we look forward to working with you and your team at Lakeshore. If the foregoing terms are acceptable, please sign and return the enclosed copy of this letter to confirm your acceptance of the engagement. Please do not hesitate to contact me or Mr. Ngo if you have any questions or wish to discuss any aspect of this letter prior to signing.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Christy Bauer, Associate Calderwood & Harkness LLP 777 South Figueroa Street, 34th Floor Los Angeles, California 90017

ACCEPTED AND AGREED

________________________________________

Dr. Ellen Marchetti, CPA, CFF Engagement Lead Lakeshore Forensic Accounting Group, LLC

Date: June 10, 2023

cc: Alan Ngo, Partner, Calderwood & Harkness LLP (via email: a.ngo@calderwoodharkness.com)

cc: Peter Vassiliev, Associate, Calderwood & Harkness LLP (via email: p.vassiliev@calderwoodharkness.com)

CALDERWOOD & HARKNESS LLP 777 South Figueroa Street, 34th Floor Los Angeles, California 90017 Telephone: (213) 555-9400 Facsimile: (213) 555-9401 www.calderwoodharkness.com
June 8, 2023
VIA EMAIL (e.marchetti@lakeshoreforensic.com)
Dr. Ellen Marchetti, CPA, CFF Engagement Lead Lakeshore Forensic Accounting Group, LLC 200 South Wacker Drive, Suite 3100 Chicago, IL 60606
Re: Retention as Forensic Accounting Expert — Fonseca et al. v. Crescendo Digital Media, Inc., Case No. 2:23-cv-02841-RGK-PLA (C.D. Cal.)
Our Matter No.: 1035-00003
Dear Dr. Marchetti:
This letter confirms the retention of Lakeshore Forensic Accounting Group, LLC ("Lakeshore") as a forensic accounting and royalty audit expert in the above-referenced matter. Lakeshore is retained on behalf of our clients Marguerite D. Fonseca, Flor de Luna Publishing, LLC, and Mariposa Sound Recordings, LLC (collectively, "Plaintiffs") in the copyright infringement action captioned Fonseca et al. v. Crescendo Digital Media, Inc., Case No. 2:23-cv-02841-RGK-PLA, currently pending in the United States District Court for the Central District of California. The Complaint in this action was filed on April 3, 2023. The defendant in this matter is Crescendo Digital Media, Inc. ("Crescendo"), a Delaware corporation headquartered in Austin, Texas, which operates the "Crescendo Stream" digital streaming and content aggregation platform. This letter sets forth the scope of Lakeshore's engagement, the fee arrangement, applicable privilege and confidentiality terms, and related logistical matters. We ask that you review this letter carefully, and if the terms are acceptable, sign and return the enclosed copy as indicated below.
1. Scope of Engagement
(a) Royalty Audit and Damages Quantification
Lakeshore's primary task will be to review and analyze streaming data, sublicense agreements, and revenue records produced by Crescendo in discovery, and to calculate the total back-royalties and other damages owed to Plaintiffs arising from Crescendo's unauthorized exploitation of Plaintiffs' copyrighted works. The period of analysis for purposes of this engagement covers January 1, 2019 through December 31, 2022, a span of approximately forty-eight (48) months corresponding to the infringement period alleged in the Complaint (the "Infringement Period").
The copyrighted works at issue comprise forty-seven (47) registered musical compositions bearing U.S. Copyright Office Registration Nos. PA 1-742-891 through PA 2-318-406 and thirty-two (32) registered sound recordings bearing Registration Nos. SR 0-891-220 through SR 1-104-773. The publishing rights in the compositions are owned by Flor de Luna Publishing, LLC, a California single-member limited liability company (EIN 82-4193507). The master recording rights in the sound recordings are owned by Mariposa Sound Recordings, LLC, a California single-member limited liability company (EIN 84-2671058). Both entities are wholly owned by Ms. Fonseca.
Based on Plaintiffs' preliminary review of the available data, Crescendo's platform logged approximately 18,426,331 streams of Plaintiffs' works during the Infringement Period. In addition, Crescendo sublicensed curated playlists containing Plaintiffs' works to fourteen (14) commercial clients, including fitness chains, hospitality brands, and retail environments. The sublicense revenue attributable to Plaintiffs' catalog is estimated to be approximately $2,740,000 over the four-year Infringement Period. We expect that these figures will be refined and, where necessary, corrected as Lakeshore conducts its independent analysis of Crescendo's production.
The damages categories to be quantified by Lakeshore include, but are not necessarily limited to, the following:
(i) Unpaid mechanical royalties (compositions) — to be calculated based on the applicable statutory mechanical rate per stream (as set forth in 37 C.F.R. Part 385) plus any sublicense mechanical royalties attributable to Crescendo's commercial sublicensing arrangements;
(ii) Unpaid master use royalties (sound recordings) — to be calculated based on comparable master license rates per stream as established through analysis of industry benchmarks, third-party licensing agreements, and other relevant market data;
(iii) Unpaid performance royalties — to be estimated based on the unremitted share of performance royalties attributable to Crescendo's exploitation of Plaintiffs' works, including any amounts that should have been reported to and paid through the applicable performing rights organization(s); and
(iv) Any additional damages categories identified by Lakeshore through the course of its analysis, including but not limited to unjust enrichment, disgorgement of profits, and other theories of recovery that may be supported by the financial evidence.
For purposes of contextualizing market rate analyses, we note that Crescendo reported total revenue of approximately $189 million for fiscal year 2022 and maintains a subscriber base of approximately 2.3 million users. Lakeshore should consider these figures, along with other relevant platform and industry metrics, in establishing the appropriate frameworks for royalty rate comparisons and damages modeling.
(b) Expert Report
Lakeshore shall prepare a written expert report suitable for submission under Federal Rule of Civil Procedure 26(a)(2)(B). The report shall set forth Dr. Marchetti's opinions, the bases and reasons therefor, and all supporting calculations and analyses. In accordance with Rule 26(a)(2)(B), the expert report must include:
(i) A complete statement of all opinions Dr. Marchetti will express and the basis and reasons for each opinion;
(ii) The facts or data considered by Dr. Marchetti in forming those opinions;
(iii) Any exhibits that will be used to summarize or support Dr. Marchetti's opinions;
(iv) Dr. Marchetti's qualifications, including a list of all publications authored by Dr. Marchetti within the preceding ten (10) years;
(v) A list of all other cases in which Dr. Marchetti has testified as an expert at trial or by deposition within the preceding four (4) years; and
(vi) A statement of the compensation to be paid for Dr. Marchetti's study and testimony in this matter.
We will coordinate with you regarding the format and organization of the report to ensure that it meets all applicable requirements under the Federal Rules of Civil Procedure and the Local Rules of the Central District of California.
(c) Testimony.  If required, Lakeshore shall provide deposition and/or trial testimony in support of Dr. Marchetti's opinions. This matter is assigned to the Honorable R. Gary Klausner, District Judge, and the Honorable Patricia L. Alvarez, Magistrate Judge, in the Central District of California. We will provide reasonable advance notice of any scheduled deposition or trial dates and will work with you to accommodate Dr. Marchetti's schedule to the extent practicable.
2. Materials to Be Provided
Calderwood & Harkness LLP will provide to Lakeshore the following materials for review and analysis in connection with this engagement, among others:
(i) Crescendo's discovery production (Bates Nos. CDM-000001 through CDM-004218), consisting of:
•  Streaming logs, including platform usage data for Plaintiffs' works reflecting stream counts, timestamps, geographic data, and subscriber tier information;
•  Content management system ("CMS") records, including records reflecting the "cleared — blanket license" tagging of Plaintiffs' works within Crescendo's internal content management infrastructure;
•  Sublicense agreements between Crescendo and its fourteen (14) commercial clients, including all amendments, schedules, and rate cards;
•  Revenue reports, including both streaming revenue and sublicensing revenue, broken down by reporting period and, to the extent available, by individual work or playlist;
(ii) Historical royalty statements from Thornfield Music Administration, Inc. ("Thornfield"), which serves as Plaintiffs' catalog administrator. Thornfield administers the catalog on a non-exclusive basis under the direction of Raymond O. Sato, President, with offices at 6363 Wilshire Boulevard, Suite 410, Los Angeles, California 90048. These statements will provide a historical baseline for royalty income attributable to the works at issue;
(iii) The expired blanket license agreement between Plaintiffs and Peregrine Music Group, LLC ("Peregrine"). This agreement was effective January 1, 2016 and expired by its own terms on December 31, 2018. Peregrine ceased operations in November 2018. The license was expressly non-transferable and non-assignable, and contained no automatic renewal provision. This document is central to the dispute, as Crescendo has asserted reliance on this expired license as a defense;
(iv) U.S. Copyright Office registration certificates for all forty-seven (47) compositions and thirty-two (32) sound recordings at issue. We note that all registrations were timely filed within three (3) months of first publication or prior to the commencement of the infringement, thereby qualifying Plaintiffs for statutory damages and an award of attorney's fees under 17 U.S.C. §§ 504(c) and 505;
(v) Any additional materials produced during the course of discovery, including any supplemental productions by Crescendo, third-party discovery materials, or other documents that may be relevant to Lakeshore's analysis; and
(vi) Ms. Fonseca's historical royalty income data for use as a comparable benchmark. For reference, Ms. Fonseca's average annual royalty income from her catalog was approximately $1,820,000 over the five-year period from 2018 through 2022. This data will assist Lakeshore in contextualizing the damages attributable to the infringement.
Please note that all materials provided in connection with this engagement are confidential and are subject to the Protective Order entered in this action. Lakeshore must handle, store, and dispose of all such materials in accordance with the terms of that Protective Order, a copy of which we will provide separately.
3. Background on the Dispute
For Dr. Marchetti's orientation, we provide the following brief factual summary of the dispute:
Ms. Fonseca is a Grammy-nominated singer-songwriter and recording artist based in Los Angeles, California, with a distinguished twenty-eight-year career spanning Latin pop, jazz, and contemporary R&B. She has released nine studio albums, received three Grammy Award nominations, and won two Latin Grammy Awards. Her full catalog comprises 214 registered compositions and 188 registered master recordings. She is widely recognized as one of the leading artists in her genre and her works have been commercially exploited through a wide range of distribution channels, including physical media, digital downloads, streaming platforms, synchronization licenses, and live performance.
Crescendo Digital Media, Inc. is a business-to-business ("B2B") and business-to-consumer ("B2C") digital streaming and content aggregation company. Crescendo was founded in 2016 by its Chief Executive Officer, Nikolai R. Sorensen. In 2021, Crescendo raised $75 million in a Series C financing round led by Ridgeline Ventures Partners, LP, whose General Partner is Warren Hu. Crescendo operates the "Crescendo Stream" platform, which provides streaming services directly to individual consumers and also aggregates and curates playlists for commercial sublicensing to business clients.
Crescendo previously held a valid blanket license to exploit Plaintiffs' works through Peregrine Music Group, LLC. That license was effective from January 1, 2016 through December 31, 2018. Peregrine ceased operations in November 2018, and the license expired by its own terms on December 31, 2018, with no provision for automatic renewal and no right of transfer or assignment. Despite the expiration of this license, Crescendo's content management system incorrectly continued to tag Plaintiffs' works as "cleared — blanket license," and Crescendo continued to exploit those works without authorization from January 1, 2019 through at least December 31, 2022 — the entirety of the Infringement Period.
On March 6, 2023, Calderwood & Harkness LLP, on behalf of Plaintiffs, sent a pre-litigation cease-and-desist letter to Crescendo's General Counsel, Priya Chandrasekaran, demanding that Crescendo immediately cease all unauthorized exploitation of Plaintiffs' works and provide a full accounting of all revenues generated therefrom. On March 17, 2023, Crescendo's outside counsel, Hargrove, Pennington & Cao LLP, by lead attorney Denise K. Whitford, responded on behalf of Crescendo, disputing that any infringement had occurred and asserting that Crescendo had relied in good faith on the expired blanket license.
The Complaint was filed on April 3, 2023. Crescendo filed its Answer on April 28, 2023, asserting affirmative defenses including, among others, good faith and innocent infringement under 17 U.S.C. § 504(c)(2). An Early Neutral Evaluation session was held on May 15, 2023 before Magistrate Judge Alvarez, but the parties were unable to reach a resolution.
4. Fee Arrangement
Lakeshore's fees for this engagement will be billed at Dr. Marchetti's standard expert engagement rate of $625.00 per hour. Supporting staff assigned to the engagement by Lakeshore will be billed at a rate of $350.00 per hour. Lakeshore shall submit monthly invoices to Calderwood & Harkness LLP at the address set forth above, with sufficient detail to permit review and approval by the firm and, as appropriate, by the client.
Based on our preliminary assessment of the scope of this engagement, we estimate total fees in the range of $45,000 to $65,000, depending on the ultimate scope of discovery and whether deposition and/or trial testimony is required. This estimate is provided for budgeting purposes only and is not a cap on fees. We will work collaboratively with Lakeshore to manage costs and ensure that the engagement proceeds efficiently.
Costs and expenses incurred by Lakeshore in connection with this engagement, including but not limited to travel, lodging, document reproduction, and other out-of-pocket expenses, will be billed at cost without markup. Lakeshore shall obtain prior approval from Calderwood & Harkness LLP before incurring any single expense item in excess of $500.00.
Please note that under our engagement agreement with Ms. Fonseca, Calderwood & Harkness LLP is required to seek client approval before incurring any single expert expense in excess of $5,000.00. Accordingly, Lakeshore should coordinate with Calderwood & Harkness LLP to ensure that any anticipated billings or expense items that would cause cumulative charges to exceed this threshold in a single billing period are identified and communicated in advance.
5. Privilege and Confidentiality
This engagement is at the direction of counsel in connection with pending litigation, and all aspects of Lakeshore's retention and work are to be treated as privileged and confidential. Specifically:
(a) All communications between Lakeshore and Calderwood & Harkness LLP, and all draft reports, working papers, notes, memoranda, and other work product generated by Lakeshore in connection with this engagement, are protected by the attorney-client privilege and/or the work product doctrine. Lakeshore must take all reasonable steps to preserve the privileged and confidential nature of these materials.
(b) Dr. Marchetti shall not communicate regarding this engagement, its subject matter, or any aspect of the underlying litigation with any party other than Calderwood & Harkness LLP without the prior written consent of this firm. This restriction extends to communications with Plaintiffs, Crescendo, Crescendo's counsel, third parties, and any other persons or entities.
(c) The final expert report, once served upon opposing counsel pursuant to Federal Rule of Civil Procedure 26(a)(2), will not be privileged and will become part of the record in this case.
(d) Draft reports and communications between Lakeshore and counsel will remain privileged and protected from discovery under Federal Rule of Civil Procedure 26(b)(4)(B) (protecting draft expert reports) and Rule 26(b)(4)(C) (protecting communications between counsel and retained experts, subject to limited exceptions).
6. Conflicts of Interest
We request that Lakeshore confirm, in writing, that it has conducted an appropriate conflicts check and that it has no conflicts of interest with respect to any party, entity, or individual involved in this action. Specifically, please confirm that Lakeshore has no current or prior engagement or relationship that would create a conflict with respect to any of the following:
•  Marguerite D. Fonseca
•  Flor de Luna Publishing, LLC
•  Mariposa Sound Recordings, LLC
•  Crescendo Digital Media, Inc.
•  Nikolai R. Sorensen
•  Priya Chandrasekaran
•  Hargrove, Pennington & Cao LLP
•  Thornfield Music Administration, Inc.
•  Ridgeline Ventures Partners, LP
•  Peregrine Music Group, LLC
If any potential conflict exists, please identify it immediately so that we may evaluate whether it can be addressed through appropriate measures.
7. Engagement Team at Calderwood & Harkness LLP
The Calderwood & Harkness LLP engagement team for this matter is as follows:
Day-to-Day Contact: Christy Bauer, Lead Associate
Email: c.bauer@calderwoodharkness.com
Supervising Partner: Alan Ngo, Responsible Partner, intellectual Property
Email: a.ngo@calderwoodharkness.com
Additional Support: Peter Vassiliev, Associate
Email: p.vassiliev@calderwoodharkness.com
Ms. Bauer will serve as the primary point of contact for all day-to-day matters relating to this engagement, including the transmission of materials, scheduling, and substantive discussions regarding the scope and progress of Lakeshore's analysis. Mr. Vassiliev will assist with data compilation and discovery coordination. All questions regarding the strategic direction of the engagement or the scope of Dr. Marchetti's opinions should be directed to Ms. Bauer or Mr. Ngo.
8. Timeline and Deliverables
We anticipate the following timeline for Lakeshore's work on this engagement:
(a) Initial Review and Preliminary Damages Estimate. Lakeshore should target completion of an initial review of the discovery materials and preparation of a preliminary damages estimate within four (4) weeks of receipt of the materials described in Section 2 above. We expect to transmit these materials to Lakeshore within the next five (5) business days.
(b) Draft Expert Report. The draft expert report shall be provided to Calderwood & Harkness LLP for review sufficiently in advance of any Rule 26(a)(2) disclosure deadline to be set by the Court. The Court has not yet set expert disclosure deadlines, but we anticipate that the scheduling order will be entered within the next thirty (30) days. We will communicate the applicable deadlines to Lakeshore promptly upon their issuance.
(c) Coordination with Thornfield Music Administration, Inc. To the extent that Lakeshore requires historical royalty data or other information from Thornfield Music Administration, Inc. in connection with this engagement, all such requests should be channeled through Calderwood & Harkness LLP. Lakeshore should not contact Thornfield directly without prior approval from this firm.
We believe this engagement will greatly benefit Plaintiffs' case, and we look forward to working with you and your team at Lakeshore. If the foregoing terms are acceptable, please sign and return the enclosed copy of this letter to confirm your acceptance of the engagement. Please do not hesitate to contact me or Mr. Ngo if you have any questions or wish to discuss any aspect of this letter prior to signing.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Christy Bauer, Associate Calderwood & Harkness LLP 777 South Figueroa Street, 34th Floor Los Angeles, California 90017
ACCEPTED AND AGREED
________________________________________
Dr. Ellen Marchetti, CPA, CFF Engagement Lead Lakeshore Forensic Accounting Group, LLC
Date: June 10, 2023
cc: Alan Ngo, Partner, Calderwood & Harkness LLP (via email: a.ngo@calderwoodharkness.com)
cc: Peter Vassiliev, Associate, Calderwood & Harkness LLP (via email: p.vassiliev@calderwoodharkness.com)

CALDERWOOD & HARKNESS LLP

ACCEPTED AND AGREED

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