Opinion
99 Civ. 10785 (WK)
December 13, 2001
For Plaintiffs: (pro se), Stephen Peyser, Diana Moss, One By Diana, 65 West 95th St., New York, N Y 10025.
For Defendants: John W. Dunne, Robert P. Lynn, Jr., LLC, 330 Old Country Road, Suite 103, Mineola, N Y 11501.
MEMORANDUM ORDER
On August 2, 2000, we granted summary judgment in favor of Defendants Searle Blatt Co., Ltd., Searle Blatt, and Alice Blatt (collectively referred to as "the Searle Defendants"). The Searle Defendants now seek the attorneys fees and costs they incurred in defending against the actions instituted by Plaintiffs Steven Peyser d/b/a One By Diana and Diane Moss (collectively referred to as "Plaintiffs").
Although Plaintiffs were originally represented by counsel when they filed their Complaint and opposed the Searle Defendants' motion for summary judgment, motion to vacate judgment, and motion for attorneys' fees, we have since allowed their most recent counsel to withdraw and Plaintiffs are currently proceeding pro se.
BACKGROUND
On October 25, 1999, Plaintiffs filed a Complaint asserting causes of actions against Defendants Carol Horn ("Horn"), Roni Rabl, Inc. ("Rabl"), Neiman-Marcus Group, Inc. ("Neiman-Marcus"), E.N.K. Productions, Ltd. ("E.N.K.") (collectively referred to as "Defendants"), and the Searle Defendants. In their Complaint, Plaintiffs alleged violations of the Copyright Act of 1976, 17 U.S.C. § 101 et seq. ("the Copyright Act"), and the Trademark Act of 1946, 15 U.S.C. § 1125(a) (commonly referred to as "the Lanham Act"), as well as various state law claims.On August 2, 2000, we denied summary judgment with respect to Horn, Rabl, Neiman-Marcus, and E.N.K. However, we granted summary judgment in favor of the Searle Defendants on the grounds of laches because the Searle Defendants had demonstrated both (1) an unreasonable lack of diligence by Plaintiffs and (2) a resulting prejudice to themselves. See Peyser v. Searle Blatt Co., Ltd. (S.D.N.Y. August 2, 2000) 2000 WL 1071804 ("Peyser I"). Plaintiffs subsequently moved, pursuant to Federal Rule of Civil Procedure 60(b)(2), to vacate our previous decision. We denied Plaintiffs' motion. See Peyser v. Searle Blatt Co., Ltd. (S.D.N.Y. December 22, 2000) 2000 WL 1876917 ("Peyser II"). As we assume familiarity with the facts in both these memoranda and orders, we do not elaborate on the facts and procedural history set forth therein.
Having prevailed on their motion for summary judgment, the Searle Defendants now move for attorneys' fees and costs. The Searle Defendants assert that they are entitled to fees and costs under both the Copyright Act, 17 U.S.C. § 505, and the Lanham Act, 15 U.S.C. § 1117(a).
DISCUSSION
I. Plaintiffs' Renewed Attempt To Obtain Relief From Summary Judgment
Prior to oral arguments on the Searle Defendants' motion for attorneys fees, Plaintiffs, now proceeding pro se, requested permission to move a second time for relief from our order granting summary judgment. On July 27, 2001, we denied Plaintiffs' request. Despite our denial of that request, pro se Plaintiffs spent nearly an hour at oral arguments on the Searle Defendants' motion for attorneys' fees attempting to persuade us to vacate the order granting summary judgment. In essence, pro se Plaintiffs believe that their former counsel omitted important information in their motion for relief from judgment and from their opposition papers to the attorneys' fee motion and assert that they have obtained new evidence which would militate against the entry of summary judgment in favor of the Searle Defendants.
We reiterate the conclusions we reached in our July 27, 2001 order. Plaintiffs "voluntarily chose their attorneys as [their] representatives in this action, and [they] cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent. . . ." Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. Partnership (1993), 507 U.S. 396, [ 507 U.S. 380] citing Link v. Wabash R. Co. (1962) 370 U.S. 626, 633-634. See also S.E.C. v. McNulty (2d Cir. 1998) 137 F.3d 732, 739, cert. denied sub nom., Shanklin v. S.E.C. (1998) 525 U.S. 931.
Moreover, we have already rejected Plaintiffs' prior request for relief from judgment for reasons that have not changed, including our assessment that newly-discovered evidence, even if we permitted its introduction at this very late stage, would not produce a different outcome. See Peyser II, 2000 WL 1876917. We therefore again deny Plaintiffs' request for relief from our order granting summary judgment.
II. Attorneys Fees Under The Lanham Act
In their Complaint, Plaintiffs alleged that the Searle Defendants engaged in a number of violations of the Lanham Act. Having prevailed in securing summary judgment with respect to these claims, the Searle Defendants assert that they are entitled to fees pursuant to the Lanham Act, 15 U.S.C. § 1117(a).
Although the Lanham Act allows a prevailing party to recover for reasonable attorneys' fees, such fees may only be awarded in "exceptional cases." See 15 U.S.C. § 1117(a). "`A case does not qualify as `exceptional' under the Lanham Act without a finding of fraud or bad faith.'" Morris v. Business Concepts, Inc. (S.D.N.Y. Oct. 31, 2001) 2001 WL 1338907, *3. "An action is brought in bad faith when the claims are `entirely without color and made for reasons of harassment or delay or for other improper purposes.'" Gamla Enterprises North America, Inc. v. Lunor-Brillen Design U. Vertirebs GMBH (S.D.N.Y. Feb. 17, 2000) 2000 WL 193120, *4.
Here, the Searle Defendants argue that Plaintiffs acted in bad faith by unreasonably sleeping on their rights before initiating their lawsuit against them. However, initiating an action after sleeping on one's rights does not in an of itself serve as a basis for recovery of attorneys fees under the Lanham Act where the plaintiff has offered evidence to explain the delay, even if such evidence was ultimately insufficient to avoid the laches defense. See Hermes International v. Lederer de Paris Fifth Avenue, Inc. (S.D.N.Y. 1999) 50 F. Supp.2d 212, 226, rev'd in part on other grounds (2d Cir. 2000) 219 F.3d 104 (declining to award attorneys' fees under 15 U.S.C. § 1117(a) merely because the plaintiff's claims had been dismissed on the basis of laches as plaintiff had presented arguments against the application of the laches defense); Conopco, Inc. v. Campbell Soup Co. (S.D.N.Y. July 6, 1995) 1995 WL 404847, *1-*3, aff'd (2d Cir.) 95 F.3d 187, 194-195 (refusing to award attorneys fees under the Lanham Act after dismissing claims on the grounds that the plaintiff had slept on its rights for five years before filing suit where evidence had been presented by the plaintiff which, if resolved in its favor, would have avoided the laches defense). In opposing the Searle Defendants' motion for summary judgment, Plaintiffs presented evidence in support of a number of explanations for why they slept on their rights prior to initiating this lawsuit. These explanations, although ultimately insufficient to avoid a dismissal on the grounds of laches, militate against a finding of bad faith.
The Searle Defendants also claim that Plaintiffs could not have filed their actions against them in good faith as Plaintiffs had discarded their evidentiary support prior to filing their lawsuit. Specifically, the Searle Defendants argue that since Plaintiffs returned the exemplar they had of the Searle Defendants' allegedly infringing conduct, they could not have complied with Federal Rule of Civil Procedure 11(b)(3)'s provisions regarding evidentiary support. The Searle Defendants assert that Plaintiffs' decision to file their actions against them without such support demonstrates Plaintiffs' bad faith.
Federal Rule of Civil Procedure 11(b)(3) provides, in relevant part, that [b]y presenting to the court (whether by signing, filing, submitting, or later advocating) a pleading, written motion or other paper, an attorney or other represented party is certifying that to the best of the person's knowledge, information, and belief, formed afer an inquiry reasonable under the circumstances . . . the allegations and other factual contentions have evidentiary support, or . . . are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.
FED. R. CIV. P. 11(b)(3) (emphasis added).
While we found it remarkable that Plaintiff Diana Moss returned her exemplar in order to secure a refund, see Peyser I, 2000 WL 1071804 at *2, she had personally seen the allegedly infringing sweater, see id., and could reasonably have expected to obtain such an exemplar from the Searle Defendants after a reasonable opportunity for discovery. Since Plaintiffs could reasonably have believed that they would obtain evidentiary support for their allegations after a reasonable opportunity for discovery, Plaintiffs did not violate any obligations under Rule 11(b)(3) in filing their actions. Although Plaintiffs ultimately learned that the Searle Defendants no longer possessed any relevant exemplars after they commenced their actions against them, their eventual failure to obtain the exemplar does not indicate that they filed their actions against the Searle Defendants in bad faith.
Finally, the Searle Defendants assert that Plaintiffs have failed to oppose their motion for attorneys fees on the merits and instead raised new allegations of infringing conduct. The Searle Defendants claim that such actions further evidence Plaintiffs' bad faith. However, contrary to the Searle Defendants' assertions, Plaintiffs, through their former counsel, did oppose the motion for attorneys fees on its merits. Moreover, to the extent that Plaintiffs asserted various allegations regarding new evidence of the Searle Defendants' allegedly infringing conduct, we have already denied Plaintiffs' motion to vacate judgment on the basis of new evidence and such subsequent allegations, raised long after Plaintiffs filed their Complaint, do not demonstrate that Plaintiffs originally brought their action two years prior to such allegations in bad faith.
The Searle Defendants also assert that Plaintiffs could not have proven consumer confusion and causation under the Lanham Act, an argument which they also raised in their motion for summary judgment. They claim that since Plaintiffs could not have proven such causation, they initiated their actions in bad faith. We need not address this contention. We granted summary judgment solely on the basis of laches and must therefore limit our determination regarding attorneys fees to whether or not Plaintiffs acted in bad faith by filing their actions against the Searle Defendants after unreasonably sleeping on their rights.
Since the Searle Defendants have not demonstrated that Plaintiffs filed their Complaint in bad faith by sleeping on their rights, they have failed to show that this is an "exceptional case" warranting a fee award under the Lanham Act.
III. Attorneys Fees Under The Copyright Act
The Searle Defendants also seek to recover fees under the Copyright Act, 15 U.S.C. § 505. Section 505 of the Copyright Act allows courts to award the prevailing party its attorneys fees and costs. See Morris, 2001 WL 1338907 at *1, citing 17 U.S.C. § 505. The Supreme Court has held that attorneys fees should be equally available to prevailing plaintiffs and prevailing defendants. See Fogerty v. Fantasy, Inc. (1994) 510 U.S. 517, 533.
While attorneys fees are equally available to prevailing defendants, such fees "should be awarded to the prevailing party, `not as a matter of course,' but `only as a matter of the court's discretion.'" Earth Flag Ltd. v. Alamo Flag Co. (S.D.N.Y. 2001) 154 F. Supp.2d 663, 665. In Fogerty, the Supreme Court highlighted a list of non-exclusive factors to guide the district court's exercise of discretion in awarding fees, including "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Fogerty, 510 U.S. at 534 n. 19.
The Second Circuit has since held that, of the factors enumerated by the Supreme Court, "objective unreasonableness" should be accorded "substantial weight." See Matthew Bender Co., Inc. v. West Publ'g Co. (2d Cir. 2001) 201 F.3d 116, 120-121. The Searle Defendants argue that Plaintiffs' copyright claims were objectively unreasonable because (a) the three year statute of limitations on Plaintiffs' claims allegedly ran in 1997; (b) Plaintiffs could not produce an exemplar of the garment at issue in this case at the time we were considering the motion for summary judgment; and (c) Plaintiffs discarded the garment. The Searle Defendants also claim that Plaintiffs' position with respect to their defense of laches was objectively unreasonable. Since we granted summary judgment in favor of the Searle Defendants solely on the grounds of laches, we will only consider whether Plaintiffs' position with respect to the Searle Defendants' defense of laches was objectively unreasonable.
"[T]he mere fact that a defendant obtains summary judgment does not necessarily mean that the plaintiff's position was frivolous or objectively unreasonable." Earth Flag Ltd., 154 F. Supp.2d at 666. "To hold otherwise would establish a per se entitlement to attorney's fees whenever those issues are resolved against a copyright plaintiff." CK Co. v Burger King Corp. (S.D.N Y Jan. 26, 1995) 1995 WL 24988, *1.
While the Searle Defendants are not entitled to fees merely because we granted summary judgment in their favor, we agree with them that Plaintiffs' decision to initiate their copyright actions against them under these circumstances was objectively unreasonable. Plaintiffs slept on their rights for approximately five years before initiating their lawsuit. See Peyser I, 2000 WL 1071804 at *2. The Searle Defendants suffered appreciable prejudice as a result of this delay. Id. at *8. See also Peyser II, 2000 WL 1876917 at *3. The Second Circuit has specifically recognized that a plaintiff's copyright claims would be barred by laches where his five year delay had prejudiced the defendant. See Conopco, Inc. v. Campbell Soup Co. (2d Cir. 1996) 95 F.3d 187, 192-193. As such, Plaintiffs' decision to commence this action after unreasonably sleeping on their rights for five years was objectively unreasonable and weighs in favor of a fee award under the Copyright Act.
The unreasonableness of Plaintiffs' decision to commence this lawsuit despite their five year delay is underscored by the nature of their excuses for that delay. With respect to their delay between July 1994 and March 1997, Plaintiffs did not even attempt to give a reasonable explanation for why they waited two and a half years to notify the Searle Defendants of their allegedly infringing conduct. See Peyser I, 2000 WL 1071804 at *7. With respect to their further two and a half year delay between March 1997 and October 1999 in filing their actions against the Searle Defendants, Plaintiffs offered two excuses. First, Plaintiffs asserted that they had engaged in a period of sincere and productive negotiations which should not count for the purposes of laches. Id. at *6. Second, they alleged that they lacked the financial ability to pay a retainer fee in order to secure a lawyer to file their lawsuit. Id. Although we gave some weight to Plaintiffs' financial distress, we also explained that the "inability to pay a retainer fee, `without more,' almost never constitutes an adequate excuse for delay in filing suit.'" Id. As such, Plaintiffs' defense against dismissal on the grounds of laches rested almost entirely on their discussions with the Searle Defendants. Although we recognized that "[p]eriods of sincere and productive negotiations do not count for laches purposes," we ultimately found that Plaintiffs' one week period of negotiations with the Searle Defendants was insufficient to meet this standard. Id. Indeed, even had we found that this one week period constituted a sincere and productive period of negotiations and did not count that one week for laches purposes, Plaintiffs would still have delayed nearly five years in filing their actions. Given that this lengthy delay, as measured even without the one week period, appreciably prejudiced the Searle Defendants, we would still have been required to grant summary judgment on the grounds of laches. See Conopco, Inc., 95 F.3d at 192-193. In essence, these excuses did not create a fair grounds for litigating whether laches applied under the circumstances, and Plaintiffs' decision to commence their action after sleeping on their rights without any reasonable excuses for why laches would not bar their actions further demonstrates that their position was objectively unreasonable.
We also find that the Searle Defendants should be awarded fees in order to advance the considerations of compensation and deterrence. See Fogerty, 510 U.S. at 534 n. 19 (recognizing that a court may award attorneys fees under the Copyright Act for the need in particular circumstances to advance considerations of compensation and deterrence"). Failing to award attorneys' fees to defendants where the plaintiffs have unreasonably slept on their rights for five years prior to commencing their actions against the defendants, thereby prejudicing them appreciably, would invite others to bring similarly unreasonable actions without fear of any consequences.
Plaintiffs seek to avoid the imposition of attorneys fees under the Copyright Act by asserting that they brought only a single claim for contributory copyright infringement against the Searle Defendants and that they withdrew this claim in the course of opposing the Searle Defendants' motion for summary judgment. The Searle Defendants argue that Plaintiffs' complaint is replete with specific allegations of copyright infringement against them and that the Complaint's ad damnum clause specifically seeks damages arising from their alleged copyright infringement.
Having exhaustively reviewed the Complaint, we find that Plaintiffs only alleged a contributory copyright claim against the Searle Defendants. The allegations in the Complaint show that Plaintiffs apparently recognized the difference between copyright infringement and contributory copyright infringement. The Complaint specifically asserts a copyright infringement cause of action against Horn, Rabl, and Neiman-Marcus. See Complaint ¶¶ 57-60. In sharp contrast, Plaintiffs only asserted a contributory copyright infringement claim against the Searle Defendants. See Complaint ¶¶ 88-92. As part of that cause of action, they clearly allege that the Searle Defendants are "contributorily liable for Carol Horn's copyright infringement . . . and for Carol Horn's trade dress infringement." Complaint ¶ 91.
While Plaintiffs' copyright infringement claim contains allegations which generally refer to "defendants'" copyright infringement without ever defining who such defendants are, see Complaint ¶¶ 57-60, we do not believe that the use of the general term "defendants'" alone amounts to a cause of action for copyright infringement against the Searle Defendants where that action was specifically asserted only against Horn, Rabl, and Neiman-Marcus. Moreover, while the ad damnum clause to the Complaint does generally seek damages from "defendants" for copyright infringement without specifically defining which Defendants allegedly owe certain damages for certain claims, see Ad Damnum Clause to Complaint, ¶¶ 4, 5, 7, we will not infer a copyright claim merely from such general allegations in the ad damnum clause where the specific allegations in the Complaint indicate that Plaintiffs only asserted a contributory infringement claim against the Searle Defendants.
However, Plaintiffs cannot avoid the imposition of attorneys fees under the Copyright Act merely by asserting that they only sought to recover against the Searle Defendants on the basis of contributory copyright infringement and withdrew that claim in the process of opposing the motion for summary judgment. Plaintiffs' decision to commence such an action against the Searle Defendants after sleeping on their rights was objectively unreasonable, and the Searle Defendants are entitled to recover under the Copyright Act for the attorneys fees and costs they incurred defending against that copyright claim.
At oral arguments, Plaintiffs indicated that they intend to file an amended Complaint in early 2002 and that this amended Complaint will include various claims against the Searle Defendants. Since Plaintiffs are proceeding pro se, we note for their benefit that, at this late date, they must first request leave from us, on noticed motion, to file such an amended complaint, and that the various defendants, including the Searle Defendants, will be allowed the opportunity to oppose such amendments. See FED.R.CIV.P. 15(a). We caution Plaintiffs that, to the extent they intend to amend their Complaint to assert claims against the Searle Defendants which are barred either on the grounds of laches or the relevant statute of limitations, the Searle Defendants may potentially recover against Plaintiffs for the attorneys fees and costs they incur if they prevail in opposing such a motion for leave to file an amended complaint.
We therefore grant the Searle Defendants' motion for attorneys fees pursuant to 17 U.S.C. § 505. However, since fee awards should be related to the costs or expenses incurred as a direct result of the conduct by Plaintiffs which justify such an award, see Matthew Bender Co., Inc., 240 F.3d at 126, the Searle Defendants may only recover under the Copyright Act for those fees they incurred in defending against Plaintiffs' contributory infringement claim. Moreover, as Plaintiffs withdrew their contributory infringement claim against the Searle Defendants in the course of litigating the motion for summary judgment, the Searle Defendants may only recover for the fees they incurred in defending against that claim until the date on which Plaintiffs withdrew that claim. Finally, the Searle Defendants may not recover a sum which is excessive in light of Plaintiffs' resources. As courts have emphasized, the aims of the Copyright Act "are compensation and deterrence where appropriate, but not ruination." Lieb v. Topstone Industries, Inc. (3d Cir. 1986) 788 F.2d 151, 156.
CONCLUSION
For the foregoing reasons, we deny the Searle Defendants motion for attorneys fees pursuant to the Lanham Act, 15 U.S.C. § 1117(a), but grant their motion for attorneys fees and costs pursuant to the Copyright Act, 17 U.S.C. § 505. Within 30 days from the date of this Order, the Searle Defendants shall submit to Magistrate Judge Dolinger a detailed breakdown of the relevant attorneys' fees and costs they incurred in defending against Plaintiffs' contributory infringement claim, along with all relevant evidentiary support. A separate order will refer this matter to Magistrate Judge Dolinger.