Real Estate Webmasters, Inc. v. Great Colorado Homes, Inc. et al

Filing 44

ORDER Granting 38 Plaintiff's Motion to Dismiss Under Fed. R. Civ. P. 41(a)(2). Denying as moot 29 Defendants' Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6). Entered by Judge William J. Martinez on 7/16/2021.(afran)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 20-cv-2595-WJM-KMT
REAL ESTATE WEBMASTERS, INC.,
Plaintiff,
v.
GREAT COLORADO HOMES, INC., and
ANDREW FORTUNE,
Defendants.

ORDER GRANTING PLAINTIFF’S MOTION TO DISMISS
UNDER FED. R. CIV. P. 41(a)(2)

This matter is before the Court on Plaintiff Real Estate Webmasters, Inc.’s Motion
to Dismiss Under Fed. R. Civ. P. 41(a)(2) (“Motion”). (ECF No. 38.) For the following
reasons, the Motion is granted.
I. BACKGROUND
Plaintiff is a Canadian technology provider of custom website designs tailored
specifically for real estate professionals. (ECF No. 27 ¶ 1.) In 2014, Defendant Andrew
Fortune, a real estate agent from Colorado Springs, Colorado, purchased a license to
use Plaintiff’s custom website design and agreed to be bound by Plaintiff’s licensed
solution agreement (“LSA”), which provided that Plaintiff maintained exclusive
ownership and control to all rights, title, interest, and benefit over its products, including
customizations, enhancements, and associated intellectual property. (Id. ¶¶ 2–3.) In
March 2020, Fortune terminated the LSA and thereafter began using a new website for

his company, Defendant Great Colorado Homes, Inc. (Id. ¶¶ 4–5.) Plaintiff alleges that
Fortune’s website is nearly identical to Plaintiff’s website and uses Plaintiff’s intellectual
property, though Fortune claims he created his website and spent over two years
developing it with multiple developers. (Id. ¶ 5.)
On August 26, 2020, Plaintiff filed its initial Complaint against Defendants Great
Colorado Homes, Inc. and Andrew Fortune (jointly, “Defendants”), alleging copyright
infringement under the Canadian Copyright Act, R.S.C., ch. C-42 § 13(3) (1985), breach
of contract, unjust enrichment, and misappropriation of trade secrets under 18 U.S.C. §
1836. (ECF No. 1.) On October 14, 2020, Defendants filed a motion to dismiss. (ECF
No. 14.) The Court struck that motion for failure to confer under WJM Revised Practice
Standard III.D.1. (ECF No. 20.)
Following conferral, Plaintiff filed an Amended Complaint, in which it withdrew its
claims for breach of contract and misappropriation of trade secrets, but added a claim
for civil theft. (ECF No. 27.) Plaintiff withdrew the breach of contract claim because
Defendants stated their intention to enforce an exclusive jurisdiction clause within the
applicable contract that required all proceedings asserted thereunder to be brought
before the courts of British Columbia, Canada. (ECF No. 38 at 3 (citing ECF No. 29-1
at 2).) Plaintiff has filed an action for breach of contract against Defendants in the
Supreme Court of British Columbia. (Id.)
Defendants filed a Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6). (ECF
No. 29.) Plaintiff filed a response on December 9, 2020 (ECF No. 34), and Defendants
replied on December 23, 2020 (ECF No. 35). While that Motion to Dismiss was
pending, the parties engaged in discovery.
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On March 30, 2021, counsel for Plaintiff conferred by phone and e-mail with
counsel for Defendants regarding a proposed dismissal of this action. (ECF No. 38 at
1.) Nearly a month later, having not received a response, Plaintiff’s counsel again
sought to confer with Defendants’ counsel. (Id.) During that conferral, the parties
discussed dismissal of Plaintiff’s copyright infringement and civil theft claims with
prejudice, and its unjust enrichment claim without prejudice; Plaintiff seeks to dismiss
the unjust enrichment claim without prejudice because that matter is being litigated in
Canada and dismissal with prejudice might have a preclusive effect on the same claim
brought in the Canadian case. (Id. at 1–2.)
Plaintiff states that Defendants agreed to stipulate to the dismissal of the
copyright infringement and civil theft claims with prejudice, but Defendants insisted that
the unjust enrichment claim also be dismissed with prejudice. (Id. at 2.) Plaintiff further
states that counsel for Defendants stated: “I guess if it will have re [sic] judicata effects
in the BC case, then we can stipulate to it being dismissed without prejudice.” (Id.)
Plaintiff prepared a dismissal on those terms, but when Defendants received it, they
refused to sign, claiming that Plaintiff’s proposal “completely and intentionally
mischaracterizes the reasons behind the dismissal and therefore is not acceptable.”
(Id.)
On May 3, 2021, Plaintiff filed the Motion, seeking to dismiss its copyright
infringement and civil theft claims with prejudice, and its unjust enrichment claim without
prejudice. (ECF No. 38.) Plaintiff explains that following briefing on the Motion to
Dismiss, it “did its own extensive analysis of its damages and determined that
proceeding in two forums is not worth the expense of litigation.” (Id. at 7.) Defendants
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oppose the Motion, arguing that while the case should be over, Plaintiff should be
required to pay Defendants’ attorneys’ fees under Federal Rule of Civil Procedure
41(a)(2), the fee-shifting provision of the Copyright Act, 17 U.S.C. § 505, or Colorado
Revised Statutes § 13-17-201. (ECF No. 39.) Thus, at bottom, the issue for the Court
now is whether to award Defendants some amount of attorneys’ fees.
II. LEGAL STANDARDS
A.

Rule 41(a)(2)
Rule 41(a)(2) “permits a district court to dismiss an action . . . upon such terms

and conditions as the court deems proper.” Frank v. Crawley Petroleum Corp., 992
F.3d 987, 998 (10th Cir. 2021) (quoting Am. Nat. Bank & Tr. Co. of Sapulpa v. Bic
Corp., 931 F.2d 1411, 1412 (10th Cir. 1991) (internal quotation marks omitted)). “The
rule is designed primarily to prevent voluntary dismissals which unfairly affect the other
side, and to permit the imposition of curative conditions.” Id. (quoting Brown v. Baeke,
413 F.3d 1121, 1123 (10th Cir. 2005) (internal quotation marks omitted)). “Conditions
are designed to alleviate any prejudice a defendant might otherwise suffer upon refiling
of an action.” Id. (quoting Am. Nat. Bank, 931 F.2d at 1412).
“[P]rejudice is a function of . . . practical factors including: the opposing party’s
effort and expense in preparing for trial; excessive delay and lack of diligence on the
part of the movant; insufficient explanation of the need for a dismissal; and the present
stage of litigation.” Brown, 413 F.3d at 1124 (internal quotation marks omitted). “These
factors are neither exhaustive nor conclusive; the court should be sensitive to other
considerations unique to the circumstances of each case.” Id. “[I]n reaching its
conclusion, the district court should endeavor to insure substantial justice is accorded to
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both parties, and therefore the court must consider the equities not only facing the
defendant, but also those facing the plaintiff.” Id. “The district court, however, should
impose only those conditions which actually will alleviate harm to the defendant.” Am.
Nat. Bank, 931 F.2d at 1412.
“These rules apply to dismissals with prejudice as well as dismissals without.”
Frank, 992 F.3d at 998 (citing Cnty. of Santa Fe v. Pub. Serv. Co. of N.M., 311 F.3d
1031, 1049 (10th Cir. 2002) (the “normal” legal-prejudice analysis that governs
dismissals without prejudice also governs dismissals with prejudice, although the
presence of prejudice will be “rare”)). “[A] defendant may not recover attorney’s fees
when a plaintiff dismisses an action with prejudice absent exceptional circumstances.”
AeroTech, Inc. v. Estes, 110 F.3d 1523, 1528 (10th Cir. 1997); accord Vanguard Envtl.,
Inc. v. Kerin, 528 F.3d 756, 760 (10th Cir. 2008); Steinert v. Winn Grp., Inc., 440 F.3d
1214, 1222 (10th Cir. 2006).
B.

Copyright Act
The Copyright Act, 17 U.S.C. § 101 et seq., provides that “In any civil action

under this title, the court in its discretion may allow the recovery of full costs by or
against any party other than the United States or an officer thereof. Except as
otherwise provided by this title, the court may also award a reasonable attorney’s fee to
the prevailing party as part of the costs.” 17 U.S.C. § 505 (emphasis added).
The Supreme Court has established several principles and criteria to guide a
court in deciding whether to award attorneys’ fees under § 505. Kirtsaeng v. John Wiley
& Sons, Inc., 136 S. Ct. 1979, 1985 (2016). The statute clearly connotes discretion and
eschews any precise rule or formula for awarding fees. Id. However, in Fogerty v.
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Fantasy, Inc., 510 U.S. 517 (1994), the Supreme Court established two restrictions: (1)
a district court may not award attorneys’ fees as a matter of course; and (2) the
Supreme Court noted with approval “several nonexclusive factors” to inform a court’s
fee-shifting decisions, including “frivolousness, motivation, objective
unreasonableness[,] and the need in particular circumstances to advance
considerations of compensation and deterrence.” Id.
III. ANALYSIS
A.

Rule 41(a)(2)
Defendants argue that exceptional circumstances exist in this case such that the

Court should award them their attorneys’ fees. (ECF No. 39.) For the following
reasons, the Court disagrees.
First, Defendants argue that they have expended considerable effort and
expense in preparing for trial. (Id. at 5.) They cite their two rounds of motions to
dismiss and Plaintiff’s “sweeping discovery requests,” which they describe as a “fishing
expedition.” (Id. at 6 (emphasis in original).) Defendants state that they “meaningfully
engaged in the discovery process and served [their] responses to Plaintiff’s requests.”
(Id.) Fortune states in an affidavit that “Prior to Plaintiff moving to voluntarily dismiss its
claims against me, I incurred over $20,000 in legal fees defending myself and my
business in this action.” (ECF No. 39-5.)
While the Court understands that Defendants have participated in the discovery
process and have engaged in some motion practice, this case is not yet a year old.
Moreover, the case is in the early stages of litigation, discovery only ended in June
2021, no depositions were taken, no expert reports were exchanged, and no trial date
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has been set. (See ECF No. 38 at 5.) Plaintiff states that from January 5, 2021 through
March 30, 2021, Defendants made no efforts to seek discovery from Plaintiff. (ECF No.
41 at 4.) In addition, Plaintiff points out that although Defendants were served with a
round of written discovery requests, they “declined to answer the majority of the
requests, and produced a mere 162 images.” (Id.) Given the foregoing, the Court
cannot find that Defendants have expended considerable effort and expense in
preparing for trial. See Frank, 992 F.3d at 991, 1002 (finding that because Crawley has
not identified any legal prejudice it would suffer from the dismissal, the imposition of
conditions was an abuse of discretion, where Crawley stated it had spent $1 million
defending the suit).
Next, Defendants argue that Plaintiff’s lack of diligence has forced them to
unreasonably incur substantial fees. (ECF No. 39 at 7.) Specifically, Defendants argue
that Plaintiff’s Motion “results from its own failure to conduct a reasonable inquiry prior
to bringing its claims, an affront to its obligations under Rule 11.” (Id.) Defendants also
state that Plaintiff did not try to confer before adding the civil theft claim to the Amended
Complaint. (Id.) Defendants also argue that Plaintiff waited until “nearly the close of
discovery” before volunteering to dismiss its claims, which also forced Defendants to
incur substantial fees. (Id. at 9.)
Although the Court agrees that it would have been advisable for Plaintiff to more
thoroughly investigate the merits of its claims and the potential damages available
before filing its claims, the Court does not find that Plaintiff’s exhibited a “lack of
diligence.” In addition, the Court does not find that Plaintiff waited an inordinately long
amount of time to file its Motion. Plaintiff requested conferral on the Motion in March
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2021, more than two months before the June 2021 discovery deadline. Moreover,
Plaintiff was forced to wait for Defendants to respond for at least a month, unnecessarily
lengthening the timeline. Such actions do not demonstrate a lack of diligence by
Plaintiff such that they transform this matter into an “exceptional” case.
Next, Defendants contend that Plaintiff’s explanation for the need for dismissal is
insufficient. (ECF No. 39 at 8.) In the Motion, Plaintiff explains that it wishes to dismiss
this case because it has grown frustrated with Defendants’ gamesmanship and
conflicting positions taken in this case and in the case in Canada. (ECF No. 38 at 4.)
Further, due to the COVID-19 pandemic, Plaintiff’s resources have been constrained in
a manner that was not foreseeable before commencing both this case and the case in
Canada. (Id.) Plaintiff also admits that after it analyzed its possible damages, it
determined that proceeding in two forums is not worth the expense of litigation. (Id. at
7.) Upon due consideration, the Court finds Plaintiff’s explanations for dismissal
sufficient.
The Court also notes Defendants’ argument that if the Court does not impose
curative conditions, Defendants will suffer a legal detriment. (ECF No. 39 at 10.)
Specifically, Defendants argue that this is an exceptional case; they are entitled to fees
under § 505; if the Court had ruled on their Motion to Dismiss and dismissed Plaintiff’s
claims, they would be entitled to a mandatory award of fees and costs under Colorado
Revised Statutes § 13-17-201; and at a minimum, the Court should condition dismissal
on an award of attorneys’ fees against Plaintiff for the fees Defendants might have to
incur if Plaintiff files another lawsuit against them for unjust enrichment. (Id. at 10–12.)
The Court finds Defendants’ arguments unavailing. For the reasons explained
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above, this is not an exceptional case. As the Court explains below, Defendants are not
entitled to attorneys’ fees under § 505, see infra Part III.B. The Court never ruled on the
Motion to Dismiss, and therefore any claim of entitlement to attorneys’ fees under
Colorado Revised Statutes § 13-17-201 is similarly unsuccessful.
Finally, the Court acknowledges that Plaintiff seeks to dismiss the unjust
enrichment claim without prejudice. In the Tenth Circuit, “[w]hen a plaintiff dismisses an
action without prejudice, a district court may seek to reimburse the defendant for his
attorneys’ fees because he faces a risk that the plaintiff will refile the suit and impose
duplicative expenses upon him.” AeroTech, 110 F.3d at 1528. In this case, however,
the Court construes the Tenth Circuit’s language—specifically, “may seek to
reimburse”—as discretionary and declines to award Defendants attorneys’ fees on the
unjust enrichment claim, despite the fact that it will be dismissed without prejudice.
Therefore, the Court finds that “exceptional circumstances” do not exist in this case
such that Defendants may recover attorneys’ fees under Rule 41(a)(2).
B.

Copyright Act
Defendants argue that because the copyright infringement claim will be

dismissed with prejudice, they are a prevailing party under the Copyright Act, and thus,
the Court should award them attorneys’ fees under § 505. (ECF No. 39 at 12.) Further,
Defendants argue that Plaintiff’s “vexatious conduct and bad faith in bringing suit”
militate in favor of awarding attorneys’ fees. (Id. at 13.)
While Defendants do not appear to acknowledge it, Court is mindful that § 505
dictates that the Court “may also award a reasonable attorney’s fee to the prevailing
party.” Thus, the Court’s power is discretionary, not mandatory. The Court has
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considered the “several nonexclusive factors” that the Supreme Court counsels should
inform a court’s fee-shifting decisions under § 505, including frivolousness, motivation,
objective unreasonableness, and the need in particular circumstances to advance
considerations of compensation and deterrence. The Court will not explicitly analyze
these factors, as the analysis above, see supra Part III.A, is sufficiently applicable, and
the outcome would be no different. The Court disagrees with Defendants’
characterization of this litigation, particularly that Plaintiff brought this suit in bad faith or
prosecuted it in a vexatious or oppressive manner. (See ECF No. 39 at 13.) As a
result, in its discretion, the Court declines to award attorneys’ fees to Defendants under
§ 505.
IV. CONCLUSION
For the foregoing reasons, the Court ORDERS:
1.

Plaintiff Real Estate Webmasters, Inc.’s Motion to Dismiss Under Fed. R. Civ. P.

41(a)(2) (ECF No. 38) is GRANTED;
2.

Plaintiff’s copyright infringement and civil theft claims are DISMISSED WITH

PREJUDICE, and Plaintiff’s unjust enrichment claim is DISMISSED WITHOUT
PREJUDICE;
3.

Defendants’ Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (ECF No. 29)

is DENIED AS MOOT;
4.

The Clerk shall enter judgment and terminate this action; and

5.

Each party shall bear his or her own attorney’s fees and costs.

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Dated this 16th day of July, 2021.
BY THE COURT:

______________________
William J. Martinez
United States District Judge

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