Frost-Tsuji Architects v. Highway Inn, Inc. et al

Filing 451

ORDER ADOPTING IN PART AND REJECTING IN PART THE MAGISTRATE JUDGE'S FINDINGS AND RECOMMENDATION THAT DEFENDANTS' MOTIONS FOR ATTORNEY'S FEES AND COSTS BE DENIED re 437 , 439 , 441 , 443 - Signed by CHIEF JUDGE SUSAN O KI MOLLWAY on 9/23/2015. "Defendants' objections to the Magistrate Judge's Findings and Recommendation to Deny Defendants' Motions for Attorneys' Fees and Costs, Filed July 17, 2015, are sustained in part . This matter is remanded to the Magistrate Judge for a determination of reasonable attorney's fees and costs consistent with this order." (emt, )CERTIFICATE OF SERVICEParticipants registe red to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
FROST-TSUJI ARCHITECTS,

)
)
Plaintiff,
)
)
vs.
)
)
HIGHWAY INN, INC.; HO`OLA
)
MAU, LLC; BRYCE UYEHARA,
)
A.I.A., INCORPORATED; J.
)
KADOWAKI, INC.; FESTIVAL
)
MANAGEMENT CORPORATION; et
)
al.,
)
)
Defendants.
)
_____________________________ )

CIVIL NO. 13-00496 SOM/BMK
ORDER ADOPTING IN PART AND
REJECTING IN PART THE
MAGISTRATE JUDGE’S FINDINGS
AND RECOMMENDATION THAT
DEFENDANTS’ MOTIONS FOR
ATTORNEY’S FEES AND COSTS BE
DENIED

ORDER ADOPTING IN PART AND REJECTING IN PART THE MAGISTRATE
JUDGE’S FINDINGS AND RECOMMENDATION THAT DEFENDANTS’ MOTIONS FOR
ATTORNEY’S FEES AND COSTS BE DENIED
I.

INTRODUCTION.
Defendants object to the Magistrate Judge’s Findings &

Recommendation (“F & R”) that this court deny their respective
motions for attorney’s fees and costs relating to their
successful defense of two copyright claims asserted by Plaintiff
Frost-Tsuji Architects.

This court adopts in part and rejects in

part the F & R and remands Defendants’ respective motions to the
Magistrate Judge for a determination of reasonable fees and costs
in accordance with this order.
Pursuant to Local Rule 7.2(d), the court finds this
matter suitable for disposition without a hearing.
II.

FACTUAL BACKGROUND.
Because the parties and the court are familiar with the

facts and procedural background of this case, this court
addresses only those events relevant to the F & R.
Three separate motions for fees and costs are
considered in the F & R.

One was filed by Defendants Highway

Inn, Inc., and Ho’ola Mau, LLC (collectively, “Highway Inn”).
ECF No. 420.

Another was filed by Defendant Bargreen Ellingson

of Hawaii, Inc.
J. Kadowaki, Inc.

ECF No. 419.

The third was filed by Defendant

ECF No. 421.

In December 2012, Highway Inn hired Frost-Tsuji to
design a restaurant in Honolulu, Hawaii, “for a NOT TO EXCEED SUM
OF $97,500.”

See ECF No. 56-4, PageID #s 472-73.

However, after

cost overruns, Highway Inn terminated the agreement with FrostTsuji and hired a new architect to complete the project.

ECF No.

56-10, PageID # 522.
Frost-Tsuji initiated this action by filing its
original Complaint on September 30, 2013, to recover allegedly
unpaid amounts from Highway Inn.

On February 28, 2014, Frost-

Tsuji filed its Second Amended Complaint, adding Defendants

J.

Kadowaki (the project’s general contractor), Bargreen Ellingson
(the kitchen equipment vendor), Bryce E. Uyehara, A.I.A., Inc.
(the new architect), The Festival Companies (the property
manager), Iwamoto & Associates, LLC (the structural engineer),
and Palekana Permits, LLC (the third-party reviewer of permit
applications for the project).

See ECF No. 53.

2

The Second

Amended Complaint asserted claims for (1) breach of contract
(Count I); (2) quantum meruit (Count II); (3) unjust enrichment
(Count III); (4) copyright violations for the copying of
copyrighted drawings and other documents (“copyright infringement
claim”) (Count IV); (5) copyright violations based on the removal
of Frost-Tsuji’s copyright management information (“CMI claim”)
(Count V); (6) tortious interference with contract (Count VI);
and (7) civil conspiracy (Count VII).

Id., PageID #s 403-08.

The copyright claims in Counts IV and V were asserted against all
Defendants.

Id., PageID #s 408-09.

After extensive discovery, the parties filed various
motions for summary judgment, all of which Defendants prevailed
on.

To begin with, Frost-Tsuji and Defendants filed competing

motions for summary judgment on the copyright infringement claim
asserted in Count IV of the Second Amended Complaint.
Nos. 55, 140, 176.

See ECF

On August 26, 2014, the court issued an order

granting Defendants’ motion for partial summary judgment on the
grounds that Highway Inn had a nonexclusive license to use the
plans created by Frost-Tsuji in the construction and permitting
of the restaurant.

ECF No. 222, PageID # 2862.

Defendants later

filed a motion for partial summary judgment on the CMI claim.
See ECF No. 134, 235, 238, 239.

The court granted summary

judgment in favor of Defendants on this claim as well, holding
that “Frost-Tsuji [made] no effort to raise a genuine issue of

3

fact as to whether Kadowaki removed Frost-Tsuji’s copyright
ECF No. 326, PageID # 5386.1

management information.”

As the case was being fiercely litigated, Frost-Tsuji
directed its lawyers to make numerous complaints to multiple
agencies of the State of Hawaii and the City and County of
Honolulu regarding a number of alleged safety and regulatory
violations by Highway Inn.

The record shows that counsel for

Frost-Tsuji met with representatives from the Hawaii Department
of Health, the Honolulu Fire Department, and the City and County
of Honolulu’s Department of Planning and Permitting (“DPP”),
seeking to stop the restaurant from opening.

See Declaration of

Monica Toguchi, ECF No. 421-9; Declaration of Brad T. Saito, ECF
No. 421-4; ECF Nos. 421-5 to -7.

Frost-Tsuji’s attorneys also

sent multiple letters of complaint to the DPP.

See id.

The city

informed Frost-Tsuji that it found no support for Frost-Tsuji’s
complaints.

See ECF No. 421-8, Page ID # 7266.

Frost-Tsuji’s counsel next opposed Highway Inn’s liquor
license application “in the interest of public safety.”
No. 421-14, PageID # 7365.

See ECF

The Liquor Commission chairman

questioned Frost-Tsuji about the reason for its opposition:
Chairman: I got a fast question for [FrostTsuji’s counsel]. What is your reason and
connection - I mean I don’t understand -

1

Defendants also filed a motion for partial summary
judgment as to Counts VI and VII of the Second Amended Complaint,
ECF No. 237, which the court granted, see ECF No. 327.
4

Counsel: Oh, [Frost-Tsuji] was the former
architect. I’m sorry. [Frost-Tsuji] was the
former architect for Highway Inn. They’re
interested in this construction because we
suspect their plans are still being viewed.
We have an involvement in this project.
Chairman: So, you’re here to protest because
you have another issue against the licensee?
Counsel: Well, we’re here because [we]
noticed certain violations, health safety
violations, or life safety violations with
the restaurant. So, in the interest of
public safety, we want to point that out and
make it sure that the Commission is aware of
these violations before they issue a liquor
license.
Id.
Unsuccessful with these tactics, and having lost on its
motions for summary judgment, Frost-Tsuji decided to file
multiple motions for reconsideration of the court’s orders
regarding the copyright claims and took further discovery on the
copyright claims.

ECF Nos. 232, 354, 391.

The court denied the

first reconsideration motion concerning the copyright
infringement claim, explaining that “[t]he arguments [were]
unsupported by the record and contradict[ed] admissions FrostTsuji previously made.”

ECF No. 320, PageID #s 5333-34.

Frost-Tsuji then took further discovery, sending
Bargreen Ellingson a Fifth Request for Admissions, see ECF No.
308, noticing and taking five more depositions, see ECF Nos. 331,
333-335, 391-4, -7, -8, -9, and -11, and sending a subpoena to a

5

nonparty for various documents and communications.

See ECF No.

372.
Frost-Tsuji filed a second motion for reconsideration
of the same order, ECF No. 391, which was also denied, see ECF
No. 395.

Frost-Tsuji also filed a motion for reconsideration of

the court’s order granting summary judgment on Frost-Tsuji’s CMI
claim.

ECF No. 354.

The court denied that motion because Frost-

Tsuji again failed to submit evidence demonstrating that
Defendants had removed its copyright management information.

See

ECF No. 394, PageID # 6238.
On January 8, 2015, the parties entered into a
settlement agreement regarding Frost-Tsuji’s contract claims
(Counts I, II, and III).

See ECF No. 389.

Even after no claims

remained to be resolved by this court, Frost-Tsuji continued to
pursue discovery from Defendants on the copyright claims.
ECF No. 421-1, PageID # 7235.
2015.

See

Judgment was entered on April 15,

ECF No. 412.
On April 29, 2015, Bargreen Ellingson, Highway Inn, and

J. Kadowaki filed separate motions for attorney’s fees and costs
as to Frost-Tsuji’s copyright claims.

Bargreen Ellingson seeks

$84,744.66 in fees, plus $355.97 in costs, ECF No. 419; Highway
Inn seeks $438,440.03 in fees, plus $9,083.11 in costs, ECF No.
420; and J. Kadowaki seeks $275,356.25 in fees, GET in the amount
of $12,974.79, and $9,809.68 in costs, ECF No. 421.

6

In the F & R, the Magistrate Judge made a finding and
recommendation that Defendants’ motions for attorney’s fees and
costs be denied.

ECF No. 437, PageID # 8410.

The movants

object.
III.

ANALYSIS.
A.

Standard of Review.

Congress has empowered magistrate judges, upon referral
of dispositive pretrial motions by district judges, to conduct
hearings and issue findings and recommendations regarding
dispositive pretrial motions.

See 28 U.S.C. § 636(b)(1)(B); see

also Fed. R. Civ. P. 72(b) (promulgating rule).

The Federal

Rules of Civil Procedure permit a district judge to similarly
refer a post-judgment motion for attorney’s fees “as if it were a
dispositive pretrial matter,” see Fed. R. Civ. P. 54(d)(2)(D),
and such motions are customarily referred to magistrate judges in
this district, see Local Rule 54.3(h).
A district judge reviews a magistrate judge’s findings
and recommendation prior to ruling on the motion, and may accept,
reject, or modify, in whole or in part, the findings and
recommendation made by the magistrate judge.
72(b).

Fed. R. Civ. P.

If a party timely objects to portions of the findings and

recommendation, the district judge reviews those portions of the
findings and recommendation de novo.
Local Rule 74.2.

Fed. R. Civ. P. 72(b)(3);

The district judge may consider the record
7

developed before the magistrate judge.

Local Rule 74.2.

The

district judge also has discretion to receive further evidence.
28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(3); Local Rule 74.2;
see also United States v. Raddatz, 447 U.S. 667, 676 (1980)
(district judge has wide discretion in deciding whether to allow
new evidence).

The de novo standard requires the district court

to consider a matter anew and arrive at its own independent
conclusions, but a de novo hearing is not ordinarily required.
United States v. Remsing, 874 F.2d 614, 617 (9th Cir. 1989);
United States v. Boulware, 350 F.Supp.2d 837, 841 (D. Haw. 2004);
Local Rule 74.2.
The district judge may accept the portions of the
findings and recommendation to which the parties have not
objected as long as it is satisfied that there is no clear error
on the face of the record.

See United States v. Bright, Civ. No.

07–00311 ACK/KSC, 2009 WL 5064355, at *3 (D. Haw. Dec. 23, 2009);
Stow v. Murashige, 288 F.Supp.2d 1122, 1127 (D. Haw. 2003); Fed.
R. Civ. P. 72(b) advisory committee’s note.
The court determines that a hearing on this matter is
neither necessary nor appropriate.
B.

See Local Rule 7.2(d).

Fogerty Factors.

Defendants request attorney’s fees and costs pursuant
to 17 U.S.C. § 505 of the 1976 Copyright Act for work relating to
the copyright infringement claim (Count IV), and 17 U.S.C.

8

§ 1203(b)(5) of the Digital Millennium Copyright Act for the CMI
claim (Count V).

Both Acts permit a court to award full costs

and reasonable attorney’s fees to a prevailing party.

17 U.S.C.

§ 505 (“the court in its discretion may allow the recovery of
full costs by or against any party other than the United States,”
including “a reasonable attorney’s fee to the prevailing party as
part of the costs”); 17 U.S.C. § 1203(b)(5) (the court “in its
discretion may award reasonable attorney’s fees to the prevailing
party”).
Fogerty v. Fantasy, Inc. (“Fogerty I”), 510 U.S. 517,
533 (1994), held that a district court may consider the following
factors in determining whether to award attorney’s fees for
copyright claims: [1] the degree of success obtained; [2]
frivolousness; [3] motivation; [4] objective unreasonableness (as
to both the factual and legal arguments in the case); and [5] the
need in particular circumstances to advance considerations of
compensation and deterrence–-“so long as such factors are
faithful to the purposes of the Copyright Act and are applied to
prevailing plaintiffs and defendants in an evenhanded manner.”
Id. at 534 n.19.

In this regard, the United States Supreme Court

notes:
Because copyright law ultimately serves the
purpose of enriching the general public
through access to creative works, it is
peculiarly important that the boundaries of
copyright law be demarcated as clearly as
possible. To that end, defendants who seek
9

to advance a variety of meritorious copyright
defenses should be encouraged to litigate
them to the same extent that plaintiffs are
encouraged to litigate meritorious claims of
infringement. . . . Thus a successful defense
of a copyright infringement action may
further the policies of the Copyright Act
every bit as much as a successful prosecution
of an infringement claim by the holder of a
copyright.
Fogerty I, 510 U.S. at 527.

Not all factors must be met to

support an award of attorney’s fees.

Fantasy, Inc. v. Fogerty

(“Fogerty II”), 94 F.3d 553, 558 (9th Cir. 1996).

These factors

are merely guideposts for the court in exercising its “equitable
discretion,” and “courts are not limited to considering them.”
Id.
The Magistrate Judge in this case recommended, based on
his analysis of the Fogerty factors, that Defendants’ motions for
attorney’s fees and costs be denied.
8414, 8420.

ECF No. 437, PageID #s

The Magistrate Judge explained that such an award

would not further the purposes of the Copyright Act because
Defendants’ argument that they had a nonexclusive implied license
to use Frost-Tsuji’s copyrighted plans “was not based upon a
legal theory that promotes artistic creativity or preserves
public access to the work,” and an award to Defendants “would
serve to discourage individuals from asserting their ownership in
their copyrights.”

Id., PageID #s 8415, 8420.

Defendants object that they are entitled to attorney’s
fees for their work on both copyright claims.
10

In particular,

Defendants contend that an award of fees and costs furthers the
purposes of the Copyright Act, that under the Fogerty factors,
Frost-Tsuji’s claims and litigation strategy were objectively
unreasonable and improperly motivated, and that there is a
compelling reason to deter conduct like Frost-Tsuji’s and to
compensate Defendants for successfully asserting their copyright
defenses.

ECF No. 441, PageID #s 8473-74; ECF No. 443, PageID #s

8492, 8495-97; ECF No. 440-1, Page ID #s 8468-34.

Defendants

also object that the Magistrate Judge erred in denying costs
without any analysis.

Id.

This court concludes, based on its de novo review of
the matters objected to by Defendants, that they are entitled to
certain of their attorney’s fees and costs with respect to their
defense of the copyright claims, as discussed below.

To the

extent attorney’s fees are not awarded, this court adopts the
Magistrate Judge’s ruling.
1.

Degree of Success.

The first Fogerty factor clearly weighs in favor of
awarding attorney’s fees to Defendants with respect to both
copyright claims.

Defendants prevailed on each motion for

summary judgment and motion for reconsideration.

Furthermore,

Defendants prevailed on the merits, rather than on technical
grounds.

See Fogerty II, 94 F.3d at 556 (affirming district

court’s grant of attorney’s fees based, in part, on reasoning

11

that the “defense was the type of defense that furthers the
purposes underlying the Copyright Act and therefore should be
encouraged through a fee award [because the defendant] prevailed
on the merits rather than on a technical defense, such as the
statute of limitations, laches, or the copyright registration
requirements”).
2.

Frivolousness or Objective Unreasonableness.

A claim is “frivolous” if it “lacks an arguable basis
either in law or in fact.”
325 (1989).

Nietzke v. Williams, 490 U.S. 319,

By contrast, the standard for “objective

unreasonableness” appears to be somewhat lower than the standard
for frivolousness.

See Perfect 10, Inc. v. Giganews, Inc., No.

CV 11-07098-AB SHX, 2015 WL 1746484, at *11 (C.D. Cal. Mar. 24,
2015).

“A claim is objectively unreasonable where the party

advancing it ‘should have known from the outset that its chances
of success in this case were slim to none.’”

Id. (quoting SOFA

Entertainment, Inc. v. Dodger Prods., Inc., 709 F.3d 1273, 1280
(9th Cir. 2013).

Courts assess the objective reasonableness of a

copyright litigant’s claims “both in the factual and in the legal
components of the case.”

Fogerty I, 510 U.S. at 534 n.19

(internal quotes omitted).
A claim that is not “objectively unreasonable” at the
outset can become so if the litigant continues to pursue it when
the litigant knew or should have known that the chance of success

12

was slim to none.

See Allen v. Ghoulish Gallery, No. CIV.

06CV371 NLS, 2008 WL 474394, at *7 (S.D. Cal. Feb. 19, 2008)
(holding claim “objectively unreasonable” when plaintiff
maintained claim without identifying or producing any evidence of
an actual copyright in discovery, and produced only minimal
evidence of it at trial).

It bears emphasis, however, that

“[t]he mere fact that [a party] lost cannot establish his [or
her] objective unreasonability.”

Seltzer v. Green Day, Inc., 725

F.3d 1170, 1181 (9th Cir. 2013).
With regard to the copyright infringement claim (Count
IV), Defendants argue, “If [Frost-Tsuji] had fairly evaluated its
copyright infringement claim, the factual basis for its copyright
infringement claim, and controlling Ninth Circuit precedent,
[Frost-Tsuji] would have known from the outset that its chances
of success on its copyright infringement claim were slim to
none.”

See ECF No. 449, PageID # 8576.

Although Defendants did

prevail on the merits, this court does not find that FrostTsuji’s copyright infringement claim was objectively unreasonable
or frivolous.

It was not obvious at the outset that Defendants

would prevail on this claim.

Only after a careful examination of

the record, in particular the parties’ preliminary and draft
agreements, and careful consideration of the various parties’
arguments and controlling case law, did it become clear to this
court that there was no genuine issue of material fact as to

13

whether Defendants possessed a nonexclusive implied license to
use Frost-Tsuji’s plans for the restaurant project.

ECF No. 222,

PageID # 2868.
However, Frost-Tsuji’s successive motions for
reconsideration on the copyright infringement claim, and the
related discovery Frost-Tsuji conducted after summary judgment
was granted, were objectively unreasonable.

Neither the mere act

of filing a motion for reconsideration nor a party’s loss on a
motion for reconsideration makes an act per se objectively
unreasonable or frivolous.

Rather, this court’s finding of

objective unreasonableness is based on the nature of what FrostTsuji did.

Frost-Tsuji should have known that the particular

motions for reconsideration that it filed with regard to the
copyright infringement claim (and also the CMI claim, as
discussed below) were highly unlikely to succeed.
For example, Frost-Tsuji’s first motion for
reconsideration was denied because the arguments raised in the
motion for reconsideration not only were unsupported by the
record, but also contradicted admissions previously made by
Frost-Tsuji.

ECF No. 320, PageID # 5333.

To make matters worse,

Frost-Tsuji’s motion included arguments that it had clearly
waived in the underlying motion, see id., PageID # 5338, and “new
evidence” that it had in its possession at the time of the
underlying motions.

Frost-Tsuji provided no explanation as to

14

why such evidence was submitted for the first time on
reconsideration.

Id., PageID # 5334, 5342.

The same holds true for Frost-Tsuji’s second motion for
reconsideration, which was based on evidence belatedly sought by
Frost-Tsuji after the first motion for reconsideration was
denied.

In the order denying this motion, the court explained

the fatal flaws in Frost-Tsuji’s approach:
Frost-Tsuji now claims to have discovered new
evidence that raises factual issues that
should have precluded summary judgment with
respect to Count IV. But Frost-Tsuji does
not demonstrate that it acted with reasonable
diligence in obtaining this new evidence. To
the contrary, the record indicates that it
was only after it lost cross-motions for
summary judgment with respect to the
copyright infringement claim asserted in
Count IV that Frost-Tsuji sought the
discovery it says led to the new evidence.
This court expended substantial effort in
drafting its orders of August 26 and October
27, 2014. What Frost-Tsuji would have this
court do is accept that the court wasted its
time relying on the then-existing record,
excuse a party’s belated discovery efforts,
and revisit issues whenever a party feels
ready to supplement the record. The court
denies Frost-Tsuji’s Second Motion for
Reconsideration.
Id., PageID # 6335.

Quite simply, neither of the motions for

reconsideration on the copyright infringement claim was likely to
succeed, and Frost-Tsuji, being represented by sophisticated
counsel, should have known this.
Frost-Tsuji’s CMI claim was, at the very least,
objectively unreasonable.

In Count V of the Second Amended
15

Complaint, Frost-Tsuji asserted that Defendants intentionally
removed Frost–Tsuji’s copyright management information from its
architectural drawings, in violation of 17 U.S.C. § 1202(b)(1).
See ECF No. 53, PageID # 406.

However, “Frost-Tsuji [made] no

effort to raise a genuine issue of fact as to whether Kadowaki
removed Frost-Tsuji’s copyright management information.”
326, PageID # 5386.

ECF No.

Besides lacking evidence supporting its CMI

claim, Frost-Tsuji attempted in its motion for summary judgment
to raise claims under 17 U.S.C. § 1202(b)(2) and -(3) not
mentioned in any complaint.

Those statutory provisions prohibit

the distribution, or importation for distribution, or public
performance of works with knowledge that the copyright management
information has been altered or removed.
# 5128–29.

See ECF No. 303, PageID

This was not only improper, it was also frivolous to

the extent that Frost-Tsuji failed to identify anything in the
record to support its new claims.
Frost-Tsuji then filed a motion for reconsideration on
the CMI claim that was objectively unreasonable for two reasons.
First, the motion for reconsideration was denied because FrostTsuji still had not submitted evidence to establish that
Defendants removed Frost-Tsuji’s copyright management
information.

ECF No. 394, PageID # 6328.

Second, Frost-Tsuji

made no attempt to demonstrate that it could establish the other
elements of its CMI claim.

Id., PageID # 6332 (“even if a

16

copyright management removal claim does not require that
information be removed from an original work, Frost–Tsuji makes
no attempt to demonstrate that it can satisfy the other elements
of such a claim on this motion”).
Whether intentionally or inadvertently, Frost-Tsuji’s
motion failed to take into account the court’s earlier ruling
that Defendants had a nonexclusive implied license to use FrostTsuji’s plans.

In other words, even if one or more Defendants

had removed Frost–Tsuji’s copyright management information, no
Defendant could be said to have removed copyright management
information knowing or having reasonable grounds to know that
that removal would induce, enable, facilitate, or conceal an
infringement of federal copyright laws.

Id.

It was objectively

unreasonable for Frost-Tsuji to attempt to prevail on its motion
for reconsideration by simply disagreeing with or disregarding
this court’s prior rulings on the copyright infringement claim.2
See White v. Sabatino, 424 F.Supp.2d 1271, 1274 (D. Haw. 2006)
(“Mere disagreement with a previous order is an insufficient
basis for reconsideration.”).

2

Indeed, after several instances in which Frost-Tsuji simply
disregarded prior rulings in the case, this court had to remind
Frost-Tsuji that, “[u]nless and until this court actually
reconsiders its previous order granting summary judgment on the
copyright claim, Frost-Tsuji should proceed as if that decision
is the law of the case. In opposing the upcoming dispositive
motions, Frost-Tsuji should refrain from rearguing matters that
are no longer relevant based on the law of the case.” ECF No.
292, PageID # 4567.
17

In sum, this factor weighs in favor of an award of
attorney’s fees for all work Defendants did on the CMI claim.
With respect to the copyright infringement claim, this factor
does not weigh in favor of an award for work on the motion for
summary judgment, but does favor an award for work by Defendants
on that claim after summary judgment was granted on Count IV.
3.

Motivation.

Under this factor, the existence of bad faith or an
improper motive in bringing or pursuing an action weighs in favor
of an award of fees to a prevailing party.
F.3d at 558.

See Fogerty II, 94

A finding of bad faith can be based on actions that

led to the lawsuit, as well as on the conduct of the litigation.
Hall v. Cole, 412 U.S. 1, 15 (1973).
A review of the record reveals several examples of
Frost-Tsuji’s conduct during the litigation that suggest an
improper motive.

As discussed above, Frost-Tsuji directed its

attorneys to make numerous complaints to multiple state and
county agencies about the project.

See Declaration of Monica

Toguchi, ECF No. 421-9; Declaration of Brad T. Saito, ECF No.
421-4; ECF Nos. 421-5 to -7.

Frost-Tsuji attributed its actions

to its concerns with public safety, or with its own liability as
the former architect of record.

Id.

A deputy corporation

counsel informed Frost-Tsuji’s attorney that the Department of
Planning and Permitting “was not able to confirm any of your

18

allegations regarding the Project”; that the DPP had issued
Highway Inn a certificate of occupancy after obtaining approvals
from the Honolulu Fire Department, State of Hawaii Community
Development Association, and DPP Building, Plumbing, and Electric
Code Branches; and that “[t]hese approvals confirmed that the
Project is compliant with relevant codes and requirements.”
No. 421-8, Page ID # 7266.

ECF

Frost-Tsuji nevertheless directed its

attorneys to oppose Highway Inn’s liquor license application.
See ECF No. 421, PageID # 7238.

It strains credulity to believe

that Frost-Tsuji did so out of genuine concern with public safety
or its own liability in the face of a clear communication that
Highway Inn was complying with all applicable health and safety
codes after extensive review by several government agencies.
Nor can the court ignore Frost-Tsuji’s relentless
pursuit of its copyright claims even after the motions for
summary judgment were adjudicated.

Frost-Tsuji took extensive

discovery after the summary judgment motions were adjudicated to
gather further evidence in support of its copyright claims.

See

ECF Nos. 308; 331; 333-335; 372; 391-4, -7, -8, -9, and -11.
Frost-Tsuji offered no legitimate reason for this court to
consider material obtained in that discovery on any of FrostTsuji’s motions for reconsideration.

In fact, even when there

were no claims pending, Frost-Tsuji still continued to pursue
discovery from Defendants.

ECF No. 421-1, PageID # 7235.

19

Such

actions justify an award of attorney’s fees to Defendants for
both copyright claims.
4.

Considerations of Compensation and
Deterrence.

An award of attorney’s fees may advance the purposes of
the Copyright Act if it encourages other parties to defend
themselves when they have valid defenses.

Goldberg v. Cameron,

No. C-05-03534 RMW, 2011 WL 3515899, at *6 (N.D. Cal. Aug. 11,
2011); Omega S.A. v. Costco Wholesale Corp., No. CV 04-05443 TJH
RCX, 2012 WL 3150432, at *1 (C.D. Cal. June 20, 2012) aff’d, 776
F.3d 692 (9th Cir. 2015) (“awarding Costco attorneys’ fees would
encourage future defendants to resist improperly-motivated
infringement actions, and would deter the filing of such
actions”).

This is particularly important “[w]hen the prevailing

party is the defendant, who by definition receives not a small
award but no award . . . .

For without the prospect of such an

award, the party might be forced into a nuisance settlement or
deterred altogether from exercising his rights” under the
Copyright Act.

Assessment Techs. of WI, LLC v. WIREdata, Inc.,

361 F.3d 434, 437 (7th Cir. 2004)(citation omitted)).
Defendants in this case should be compensated for
successfully asserting substantive copyright defenses.
Defendants have expended extensive amounts of time, energy, and
money to defend themselves.

They and others in their position

should not be discouraged from asserting future, meritorious
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copyright defenses because of the heavy financial toll it takes.
In addition, awarding attorney’s fees here may deter
claimants from unreasonably driving up litigation costs.

While a

litigant has every right to select its litigation strategy, there
may be consequences flowing from its choices.
This factor also weighs in favor of awarding fees to
Defendants.
5.

Other Factors.

Although not a Fogerty factor, courts in this circuit
also consider “whether the chilling effect of attorney’s fees may
be too great or impose an inequitable burden on an impecunious
plaintiff.”

Ets-Hokin v. Skyy Spirits, Inc., 323 F.3d 763, 766

(9th Cir. 2003).

Under the circumstances of this case, the court

finds no inequity in awarding Defendants attorney’s fees.

The

record does not indicate that Frost-Tsuji is an impecunious
plaintiff.

According to Frost-Tsuji’s Rule 30(b)(6) witness, for

example, Frost-Tsuji’s partners paid themselves $19,000 per month
each during part of 2013.
15, PageID # 7375.

Ishida Declaration, ¶15, ECF No. 421-

Furthermore, the fee award is driven in large

part by Frost-Tsuji’s own actions.

See Perfect 10, 2015 WL

1746484, at *13.
6.

Balance of Factors in Light of Copyright
Act’s Purposes.

Ultimately, “[f]aithfulness to the purposes of the
Copyright Act is . . . the pivotal criterion” when a court
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considers whether to exercise its discretion in awarding
attorney’s fees relating to copyright claims.
F.3d at 558.

Fogerty II, 94

Both the United States Supreme Court and Ninth

Circuit have made it clear that a court must analyze this
criterion in an even-handed manner.

The Magistrate Judge denied

fees on the ground that Defendants’ success on the merits did not
further the purposes of the Copyright Act because it “was not
based upon a legal theory that promotes artistic creativity or
preserves public access to the work.”
8415, 8420.

This court disagrees.

ECF No. 437, PageID #s

Establishing the existence of

a nonexclusive license actually ensured public access to the
design Highway Inn paid for.

The Magistrate Judge also said that

an award to Defendants “would serve to discourage individuals
from asserting their ownership in their copyrights.”
#s 8415, 8420.

Id., PageID

In reaching this conclusion, the Magistrate Judge

focused on a plaintiff’s claim without giving consideration to
the ways in which a defense furthers the purposes of the
Copyright Act.
Because “copyright law ultimately serves the purpose of
enriching the general public through access to creative works,”
“defendants who seek to advance a variety of meritorious
copyright defenses should be encouraged to litigate them to the
same extent that the plaintiffs are encouraged to litigate
meritorious claims of infringement.”

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Fogerty I, 510 U.S. at 527.

By prevailing on their implied license defense, Defendants can be
said to have enabled the artistic and creative expression of the
restaurant’s architectural designs to be constructed and
displayed for the public.

Had Frost-Tsuji prevailed, Defendants

might have had to start the project from scratch, and Highway Inn
might not have been able to open its restaurant.

As this court

noted, “[t]o deny Highway Inn a license to use and adapt FrostTsuji’s plans would allow Frost-Tsuji to hold the project hostage
until an owner like Highway Inn paid a ‘ransom’ for the continued
use of the plans. . . . [N]ot every owner can start from scratch
after the owner’s contractual agreement with an architect
terminates, especially when government approvals have already
been obtained based on earlier plans.”

ECF No. 222, PageID #

2885 (citing Foad Consulting Group, Inc. v. Azzalino, 270 F.3d
821, 835 (9th Cir. 2001)).
In addition, the prospect of a fee award encourages a
party to protect his or her legitimate rights under copyright
law.

By the same token, the risk of being ordered to pay the

other side’s fees may serve to deter a party from overlitigating
a case, whether to harass the other party, financially ruin it,
or place improper settlement pressure on it.
Although this court is not awarding attorney’s fees for
Defendants’ work on the copyright infringement claim (Count IV)
preceding the order granting summary judgment in favor of

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Defendants, Defendants are awarded fees relating to the
subsequent motions for reconsideration, as well as all fees
relating to Frost-Tsuji’s CMI claim.
C.

Costs.

Defendants also object to the Magistrate Judge’s denial
of costs.

Rule 54(d)(1) of the Federal Rules of Civil Procedure

provides that, “[u]nless a federal statute, these rules, or a
court order provides otherwise, costs–-other than attorney’s
fees–-should be allowed to the prevailing party.”
“In addition to being authorized by statute, a cost
must be both reasonable and necessary to the litigation for a
prevailing party to recover it.”

CrossFit, Inc. v. Jenkins, 69

F. Supp. 3d 1088, 1104 (D. Colo. 2014) (citation omitted).
Pursuant to 17 U.S.C. § 505 and 1203(b)(4), a prevailing party
may recover its costs relating to claims for copyright
infringement and CMI violations.

17 U.S.C. § 505 (“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”);
17 U.S.C. § 1203(b)(4) (“In an action brought under subsection
(a), the court . . . (4) in its discretion may allow the recovery
of costs by or against any party other than the United States or
an officer thereof”).
The court agrees with Defendants that the Magistrate
Judge erred in denying Defendants’ costs without explanation.

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“[A] district court must ‘specify reasons’ for its refusal to tax
costs to the losing party[.]”

Save Our Valley v. Sound Transit,

335 F.3d 932, 945 (9th Cir. 2003) (citing Assoc. of MexicanAmerican Educators v. California, 231 F.3d 572, 591 (9th Cir.
2000); see also Subscription Television, Inc. v. S. California
Theatre Owners Ass’n, 576 F.2d 230, 234 (9th Cir. 1978) (holding
that “the trial court must state reasons for the denial of costs
so that the appellate court will be able to determine whether or
not the trial court abused its discretion”).

For the reasons

discussed above, Defendants are entitled to costs associated with
their defense of the copyright claims.
IV.

CONCLUSION.
Defendants’ objections to the Magistrate Judge’s

Findings and Recommendation to Deny Defendants’ Motions for
Attorneys’ Fees and Costs, Filed July 17, 2015, are sustained in
part.
This matter is remanded to the Magistrate Judge for a
determination of reasonable attorney’s fees and costs consistent
with this order.

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IT IS SO ORDERED.
DATED: Honolulu, Hawaii, September 23, 2015.

/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge

Frost-Tsuji Architects v. Highway Inn, Inc., et al., Civ. No. 13-00496 SOM/BMK; ORDER
ADOPTING IN PART AND REJECTING IN PART THE MAGISTRATE JUDGE’S FINDINGS AND
RECOMMENDATION THAT DEFENDANTS’ MOTIONS FOR ATTORNEY’S FEES AND COSTS BE DENIED

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