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Moffat v. Academy of Geriatric Physical Therapy

United States District Court, W.D. Wisconsin

September 20, 2017


          OPINION & ORDER


         Plaintiffs Marilyn Moffat, Karen Kemmis, Danielle Parker, and Mark Richards claimed ownership of copyright in course materials used by defendant Academy of Geriatric Physical Therapy. Plaintiffs asserted copyright infringement claims, and the Academy asserted counterclaims for breaches of contract and fiduciary duty. The court granted summary judgment in favor of the Academy and dismissed the copyright infringement claims, Dkt. 61, and the parties stipulated to dismiss the counterclaims, Dkt. 88.

         The Academy has filed a motion for attorney fees and a bill of costs. Dkt. 92 and Dkt. 93. The court will order costs in the amount requested by the Academy. The court will grant the Academy's motion for attorney fees, but it will not award the full amount requested. The court finds both the hourly rates and the amount of time spent by counsel to be reasonable. But the court will reduce the fee award slightly to reflect that counsel's work on the Academy's counterclaims does not perfectly mirror the work required to defend plaintiffs' copyright claims. More significantly, the court will also reduce the fee award by one-third, to reflect the Academy's contribution to the poor contracting that led to this dispute in the first place. The Academy is awarded attorney fees in the amount of $177, 203.95 and costs in the amount of $8, 497.01.

         The court will deny Academy's motion under 28 U.S.C. § 1927 for sanctions against plaintiffs' former counsel. It will grant plaintiffs' motion to file a sur-reply. Dkt. 115.


         A. Attorney fees

         1. Grounds for attorney fees

         Under the Copyright Act, a district court “may . . . award a reasonable attorney's fee to the prevailing party.” 17 U.S.C. § 505. The Act's language “clearly connotes discretion, and eschews any ‘precise rule or formula' for awarding fees.” Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979, 1985 (2016) (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 533, 534 (1994)). But a district court's discretion is cabined by two principles. First, the court cannot grant “attorney fees as a matter of course.” Id. (quoting Fogerty, 510 U.S. at 533). Instead, the “court must make a more particularized, case-by-case assessment.” Id. Second, the court “may not treat prevailing plaintiffs and prevailing defendants any differently.” Id. Defendants should be “encouraged to litigate [meritorious defenses] to the same extent that plaintiffs are encouraged to litigate meritorious claims of infringement.” Id. (quoting Fogerty, 510 U.S. at 527). In essence, “[u]nlike many fee-shifting statutes, which entitle prevailing plaintiffs to recover fees as a matter of course but allow prevailing defendants to recover fees only if the suit was frivolous, [the Copyright Act] treats both sides equally and allows an award in either direction.” Riviera Distribs, Inc. v. Jones, 517 F.3d 926, 928 (7th Cir. 2008).

         Within these two limiting principles, a district court may consider several discretionary factors: (1) frivolousness of claims or defenses; (2) motivation of the parties; (3) objective unreasonableness; and (4) “the need in particular circumstances to advance considerations of compensation and deterrence.” Kirtsaeng, 136 S.Ct. at 1985 (quoting Fogerty, 510 U.S. at 534, n.19). This is not an exclusive list of factors, and a district court has wide discretion to consider “the totality of circumstances.” Id.

         In the Seventh Circuit, “the two most important considerations . . . ‘are the strength of the prevailing party's case and the amount of damages or other relief the party obtained.'” Klinger v. Conan Doyle Estate, Ltd., 761 F.3d 789, 791 (7th Cir. 2014) (quoting Assessment Techs. of Wis., LLC v. WIREdata, Inc., 361 F.3d 434, 436 (7th Cir. 2004)). This means that “[i]f the case was a toss-up and the prevailing party obtained generous damages, or injunctive relief of substantial monetary value, there is no urgent need to add an award of attorneys' fees.” Id. (quoting Assessment Techs., 361 F.3d at 436). On the other hand, if “the claim or defense was frivolous and the prevailing party obtained no relief at all, the case for awarding attorneys' fees is compelling.” Id. The Seventh Circuit has held that a prevailing defendant, who by definition does not obtain monetary relief, is “entitled to a ‘very strong' presumption in favor of receiving attorney fees.” Id. (quoting Assessment Techs., 361 F.3d at 437). This rule avoids forcing a defendant to enter into “a nuisance settlement” and abandon meritorious defenses. Id. (quoting Assessment Techs., 361 F.3d at 437).

         With this analytical framework in mind, the court turns to the factors that are salient in this case.

         a. The Academy prevailed, but as the defendant makes no recovery

         The Academy is plainly the prevailing party here because the copyright claims at the heart of this case were decided in its favor. The Academy's counterclaims largely, though not entirely, mirrored plaintiffs' claims. Thus, the dismissal of the relatively minor counterclaims does not diminish the Academy's status as the prevailing party. But the Academy makes no affirmative recovery here, so under the Seventh Circuit's guidance, the Academy is entitled to a presumption that it should recover its fees.

         Plaintiffs contend that the Seventh Circuit's view is contrary to Kirtsaeng, where the Supreme Court explained that a district court “may not treat prevailing plaintiffs and prevailing defendants any differently.” Kirtsaeng, 136 S.Ct. at 1985. In Kirtsaeng, one of the issues was whether a district court should give “substantial weight” to the reasonableness of the losing party's position. Id. at 1988-89. Although the Supreme Court concluded that a district court could give such substantial weight, the Court nonetheless remanded the case because the Second Circuit had “a presumption against granting fees” when the losing party's position was reasonable. Id. Such a presumption, the Court explained, went “too far in cabining how a district court must structure its analysis and what it may conclude from its review of relevant factors, ” and the district courts in the Second Circuit had turned “substantial weight” to “nearly dispositive weight” when evaluating fee petitions. Id.

         Kirtsaeng makes it clear that a neither side is entitled to a dispositive presumption on the fee question. But Kirtsaeng does not contradict the Seventh Circuit's guidance that a prevailing defendant who takes nothing should generally be entitled to fees. This notion is really just the converse of the idea that a prevailing plaintiff who makes a recovery that is far less than the expense of the litigation should also generally be entitled to fees. So both plaintiffs and defendants are treated equally in this regard. It's also worth pointing out that the Seventh Circuit reaffirmed the presumption rule in Klinger, 761 F.3d at 791, after the Supreme Court had held that “[p]revailing plaintiffs and prevailing defendants are to be treated alike, ” in Fogerty, 510 U.S. at 534. So the Seventh Circuit recognized the obligation to treat both sides alike when it reaffirmed the presumption rule.

         The court concludes that as a prevailing defendant who recovered nothing, the Academy is presumptively entitled to an award of attorney fees. But that presumption is not dispositive, and we are far from the end of the analysis.

         b. Strength of plaintiffs' case

         The strength of plaintiffs' case is a factor that weighs in favor of awarding fees to the Academy. Plaintiffs' claims were facially plausible because the consideration of copyright ownership begins with the individual human creator who did the actual work. See Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 737 (1989). Here, plaintiffs were among the human creators of the works at issue. And, as the court noted in the summary judgment opinion, the parties could have avoided this dispute by contacts that clearly specified ownership. Dkt. 61, at 1. But despite this facial plausibility, plaintiffs' case was substantively weak.

         Plaintiffs asserted copyright in eight works. But plaintiffs conceded at summary judgment that two of the eight copyrighted works, the Pre-course Materials, were the initial versions of the course materials and that they belonged to the Academy. The remaining six works, the 2013 Materials, were derivative works based on the Pre-course Materials. So plaintiffs could claim ownership, at most, in those aspects of the 2013 Materials that were original to them. And even then, plaintiffs' rights to create derivative works based on the Pre-course Materials were subject to the approval ...

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