Shirokov v. Dunlap, Grubb & Weaver PLLC et al

Filing 84

OBJECTION to 79 Report and Recommendations ON DEFENDANTS MOTIONS TO DISMISS THE SECOND AMENDED COMPLAINT PURSUANT TO FED. R. CIV. P. 72 filed by Thomas Dunlap, Dunlap, Grubb & Weaver PLLC, Nicholas Kurtz, US Copyright Group. (Thorvaldsen, Kara)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
__________________________________________
)
DMITRIY SHIROKOV, on behalf of himself
)
and all others similarly situated
)
)
Plaintiff,
)
v.
) Case:1:10-cv-12043-GAO/JCB
)
DUNLAP, GRUBB & WEAVER, PLLC; US
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COPYRIGHT GROUP; THOMAS DUNLAP;
)
NICHOLAS KURTZ; GUARDALEY, LIMITED; )
and ACHTE/NEUNTE Boll Kino
)
Beteiligungs Gmbh & Co KG,
)
)
Defendants.
)
__________________________________________)
OBJECTIONS OF DEFENDANTS DUNLAP, GRUBB & WEAVER, PLLC, US
COPYRIGHT GROUP, THOMAS DUNLAP, AND NICHOLAS KURTZ TO REPORT
AND RECOMMENDATION ON DEFENDANTS’ MOTIONS TO DISMISS THE
SECOND AMENDED COMPLAINT PURSUANT TO FED. R. CIV. P. 72
Defendants Dunlap, Grubb & Weaver, PLLC, US Copyright Group, Thomas Dunlap, and
Nicholas Kurtz (“the defendants”) respectfully submit the following objections to the Report and
Recommendation on the defendants’ Motions to Dismiss the Second Amended Complaint
Pursuant to Fed. R. Civ. P. 72 (“Report”).
I. INTRODUCTION
The plaintiff is Dmitriy Shirokov (“Shirokov”), and he is believed to have infringed the
intellectual property rights of co-defendant Achte/Neunte Boll Kino Beteiligungs Gmbh & Co
KG (“Achte”) by illegally downloading and file sharing a copy of Achte’s film “Far Cry.” To
address widespread illegal downloading of Far Cry, Achte retained defendant law firm Dunlap,
Grubb & Weaver, PLLC (“DGW”), to protect Achte’s intellectual property rights in Far Cry.
Defendants Thomas Dunlap (“Dunlap”) and Nicholas Kurtz (“Kurtz”) are attorneys associated
with DGW.
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With the aim of protecting Achte’s intellectual property rights, defendants DGW, Dunlap
and Kurtz, instituted a lawsuit in the U.S. District Court for the District of Columbia captioned
Achte/Neunte Boll Kino Beteligungs & Co., KG v. Does 1 -4,577, Civil Action No. 10-453 (the
“Far Cry Lawsuit”). Within the context of the Far Cry Lawsuit, Shirokov was identified by his
internet service provider (“ISP”), as a suspected infringer of the movie. Upon obtaining this
information, DGW, on behalf of Achte, served a settlement offer letter upon Shirokov indicating
that: (a) Shirokov had been identified as a suspected infringer, (b) Achte had brought the Far Cry
Lawsuit to seek redress against suspected infringers such as he; and, (c) as such, he could be
named as a defendant in the lawsuit. The letter also included: a settlement offer and information
regarding the basis for Achte’s claims; where additional information, including a copy of the
complaint could be found; and a caveat that DGW’s attorneys did not represent Shirokov, and
that he should consider “consult[ing] with an attorney to review your rights and risk exposure in
connection with this matter.” There is no false statement or misrepresentation in the demand
letter – only statements as to the legal positions taken by Achte, qualified statements as to what
remedies “might be available,” and projections as to what relief Achte “might seek.”
At no time has Shirokov claimed that he did not illegally share a copy of the film Far
Cry. Likewise, although he disputes the remedies that might be available to Achte against him
for his alleged infringement, he concedes that Achte has enforceable rights in the copyright of
Far Cry.

1

The Magistrate Judge has recommended that all but the following counts against the
defendants be dismissed:

1

Although the publication of the United States version of the DVD is arguably a derivative work, which would
permit a separate copyright registration than an earlier version, regardless of whether the Far Cry copyright
registration is valid, plaintiff concedes that Achte was entitled to bring suit against suspected infringers in the United
States at least for actual damages “even absent a registration.” See Second Amended Complaint, Doc. No. 26
(“SAC”) ¶ 107.

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•
•
•
•
•
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Count 1: Fraudulent Misrepresentation
Count 2: Fraudulent Omission/Nondisclosure
Count 3: Conspiracy to Commit Fraud
Count 5: Aiding and Abetting Fraud
Count 8: Negligent Misrepresentations and Omissions
Count 11: Fraud on the Copyright Office (for declaratory relief only)
Count 13: Civil Conspiracy
Count 18: Violation of the Massachusetts Consumer Protection Act
II. ARGUMENT

A.

Standard of Review of Report and Recommendation Pursuant to Fed. R.Civ. P.
72(b).
Pursuant to Fed. R. Civ. P. 72(b), where a party timely objects to a Magistrate Judge’s

recommendation regarding a dispositive motion, “[t]he district judge must determine de novo
any part of the magistrate judge’s disposition that has been properly objected to,” and “may
accept, reject or modify the recommended disposition; receive further evidence; or return the
matter to the magistrate judge with instructions.”
B.

Conclusions of Law Couched as Factual Allegations Need Not Be Accepted as True
in Reviewing a Motion to Dismiss for Failure to State a Claim.
A plaintiff must set forth the grounds for his entitlement to relief with “more than labels

and conclusions, and a formulaic recitation of the elements.” Bell Atl. Corp. v. Twombly, 550
U.S. 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). In reviewing the
sufficiency of a complaint, courts should not accept legal conclusions couched as factual
allegations as true. Id.; see also Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1216 (1st Cir.
1996) (“a court must take all well-pleaded facts as true, but it need not credit a complaint’s ‘bald
assertions’ or legal conclusionsLikewise, “[c]onclusions that are not supported by the facts that
are alleged in the complaint ‘deserve no deference.’” Mass. Laborers’ Health & Welfare Fund,
by and Through its Trustees v. Philip Morris, Inc., 62 F. Supp. 2d 236, 240-241 (D.Mass. 1999)
(citations omitted).
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Shirokov’s claim that the settlement demand letter contained materially false or
inaccurate statements is centered on his contention that Achte’s copyright registration is invalid
and that Achte was therefore never entitled to seek statutory damages or attorney’s fees in the
Far Cry Lawsuit. Shirokov further alleges that Achte sells the Far Cry DVD for $26.99 or less
and thus Shirokov could only have been liable to Achte for a fraction of that amount. These
allegations, while couched as facts, are actually legal conclusions relating to the merits of, and
potential damages available in, the Far Cry Lawsuit. As such, they are not binding upon this
Honorable Court in determining the sufficiency of the SAC under Federal Rule 12(b)(6).2
Likewise, although Shirokov alleges that the challenged settlement demand letter
contains false statements of fact that are actionable under theories of fraudulent or negligent
misrepresentation or omission, this Court is not bound to accept his characterization of those
statements as “factual statements,” when on their face, they are legal opinions or positions
asserted on behalf of Achte. “It is ... well settled, as a general rule, that fraud cannot be
predicated upon misrepresentations of law or misrepresentations as to matters of law.” Miller v.
Yokohama Tire Corp., 358 F.3d 616, 621 (9th Cir. 2004) (citing Am.Jur.2d of Fraud and Deceit
§ 97 (2001)). As a general rule, “false statements of opinion, of conditions to exist in the future,
or of matters promissory in nature are not actionable.” Pepsi–Cola Metro. Bottling Co. v.
Pleasure Island, Inc., 345 F.2d 617, 622 (1st Cir. 1965) (citation omitted); see also Hogan v.
Eastern Enterprises/Boston Gas, 165 F.Supp.2d 55, 64 (D. Mass. 2001) (holding that plaintiff
was not justified in relying upon statements about future actions of company). Here, the alleged

2

The Report and Recommendation states that the “Dunlap Defendants did not move to dismiss the fraud and
fraudulent omissions/nondisclosure claims (Counts 1 and 2) on the basis that they fail to state a claim.” See Report
at 44-45 n. 14. However, the defendants’ motion to dismiss did assert that “each of the plaintiff’s nineteen counts
fails to state a claim on which relief can be granted,” and defendants’ motion in support thereof stated that “even
taking the plaintiff’s allegations as true for purposes of this motion to dismiss, each of the nineteen counts of the
Second Amended Complaint fails to state a claim upon which relief can be granted and must be dismissed against
the defendant attorneys.” See Doc. No. 28 at 1; Doc. No. 29 at 9.

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false statements about the damages recoverable under the Copyright Act and that defendants
might pursue individuals in litigation after sending out the settlement letters cannot form the
basis of a fraud or negligence claim against defendants. That Shirokov characterizes these as
actionable statements of fact does not make it so.
When the actual language of the letter sent to plaintiff, as opposed to plaintiff’s
characterization of the letter, is examined, it becomes clear that there are no statements of fact
justifying any claim for misrepresentation, whether fraudulent or negligent. The alleged
objectable statements include:
-

The law provides protection for copyright owners through the Federal copyright statute
found at 17 U.S.C. §§ 501-506, which allows the copyright owner to impound your
material, recover their attorneys’ fees, and seek damages of $750 - $150,000 per work,
depending on the circumstances surrounding the infringement.

-

If forced to do so, our client will be seeking to recover the maximum amount of damages
provided under the Copyright Act for copyright infringement, which is up to $30,000 per
illegally downloaded film, plus attorneys’ fees and costs of litigation. Because torrent
file-sharing requires deliberate action by the uploader or downloader of a movie, we may
be able to prove that your actions were intentional, rather than just negligent. In the event
we are able to prove that the infringement was intentional, our client will be seeking the
maximum statutory damages allowed by the Copyright Act in the amount of $150,000
per infringement, attorneys’ fees and costs.

See Doc. No. 1-15.
The first statement is purely a recital of the Copyright Act. The second statement puts
forth Achte’s legal position and statement as to future legal filings. Such a statement likewise
cannot be a representation of present fact, regardless of how Shirokov couches his allegations.
Further, Shirokov’s conclusory allegation that the defendants had superior knowledge to
plaintiff, giving rise to a duty of disclosure is directly contradicted by the specific factual
allegations contained in the SAC. As Shirokov’s own pleadings show, information regarding Far
Cry, its registered copyright, and its theatrical and DVD releases were all public information at
the time defendants sent the settlement letter to plaintiff.
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The conclusory allegations reciting the elements of Shirokov’s fraud and negligence
claims are refuted by other, more specific allegations in his own pleadings. For example, some
of the primary bases for plaintiff’s fraudulent and negligent misrepresentation claims are that
defendants never intended to name individuals to infringement lawsuits. However, plaintiff
concedes that Achte named an individual in the underlying Achte case in D.C. and has brought
additional suits against individual infringers. Doc. No. 26 at 51, ¶¶ 209, 214. Therefore,
plaintiff’s own allegations refute his fraud and negligence claims. To the extent that conclusory
allegations are contradicted by specific factual averments and exhibits attached to the SAC, they
should not be presumed true, and are entitled to no deference under the Rule 12(b)(6) standard.
Similarly, Shirokov’s legal conclusions, couched as factual allegations, are entitled to no
deference. Shirokov alleges, as if it were a fact, that Achte’s damages against him in the Far Cry
Lawsuit would be limited to some portion of the sale price of Far Cry, i.e. profits, for each
infringement. See SAC ¶ 220.
However, even assuming Achte’s registration were invalid, the Copyright Act does not
have such a limitation on actual damages. “The copyright owner is entitled to recover the actual
damages suffered by him or her as a result of the infringement, and any profits of the infringer
that are attributable to the infringement and are not taken into account in computing the actual
damages.” 17 U.S.C. § 504(b).
File sharing in the manner alleged requires that the infringer make his copy available to
other users of the network, meaning that one user’s participation could lead to numerous
instances of infringement. As the United States District Court for the First Circuit has noted,
peer-to-peer file sharing has led to rampant copyright infringement and significant diminished
revenues for copyright owners:
Peer-to-peer networks enable individuals both to make digital files stored on their own
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computers available to other network users and to download such files from the
computers of others. Files shared between users of these networks do not pass through a
central computer, but are instead exchanged directly from one user's computer to another.
Through the use of these peer-to-peer networks, the unauthorized and illegal
downloading and distribution of copyrighted materials--especially music recordings-became commonplace. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545
U.S. 913, 919-20, 923, 125 S. Ct. 2764, 162 L. Ed. 2d 781 (2005) (describing operation
of peer-to-peer networks and noting that their advent has likely resulted in copyright
infringement on a "staggering" scale). Because music recordings are loaded onto peer-topeer networks in digital form, recordings downloaded from peer-to-peer networks are
virtually indistinguishable from recordings purchased through lawful means, making
enforcement difficult.
The proliferation of these networks from 1999 onward and the piracy they enable has had
a significant negative impact on the recording industry. Between 1999 and 2008, the
recording industry as a whole suffered a fifty percent drop in both sales and revenues, a
figure plaintiffs attribute to the rise of illegal downloading. This reduction in revenues
has, in turn, diminished recording companies' capacities to pursue, develop and market
new recording artists. It also affected the companies' employees. The loss in revenues has
resulted in a significant loss of industry jobs. Sony BMG Music Entertainment and
Warner Music Group, for example, each have suffered a fifty percent reduction in
workforce since 2000.

Sony BMG Music Entm't v. Tenenbaum, 660 F.3d 487, 491-492 (1st Cir. 2011).
By illegally file sharing the film Far Cry (an act he does not deny), Shirokov may have
been responsible for multiple other users illegally downloading the film. Thus, actual damages
are not necessarily limited to the profit that Achte might have derived from the sale of one DVD
to Shirovko.

3

Overall, how damages—even actual damages—should be measured against an individual
defendant in the Far Cry Lawsuit is a question of law for the court hearing that case to decide.
Although a jury might ultimately make findings as to the amount of actual damages, they would
be constrained by the court’s instructions on the law as to how the damages could be calculated.
Accordingly, to the extent that the plaintiff’s claims are premised on his contention that the

3

Applying the plaintiff’s theories of recovery here, because the defendants disagree with Shirokov’s opinion as to
what damages might be available, the defendants would be entitled to seek damages—in the form of attorneys’ fees
incurred in retaining counsel to investigate the merits of these statements.

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$1,500 demand was false or misleading because it bore no relation to the amount of damages that
Achte could legitimately claim, this allegation is not entitled to any presumption of truth.
Contrary to the premise expressed in the Report and Recommendation, this Honorable Court is
not bound to accept these allegations as true in ruling upon the legal sufficiency of the plaintiff’s
SAC. Therefore, the Court should also dismiss claims 1, 2, 3, 5, 8, and 13.4
C.

The Magistrate Judge Erred in Recommending that Attorneys’ Fees Constitute an
Injury Sufficient to Convey Standing.
As the Report and Recommendation noted, “‘[s]ince [the elements of standing] are not

mere pleading requirements, but rather an indispensable part of the plaintiffs’ case, each element
must be supported in the same way as any other matter on which the plaintiff bears the burden of
proof, i.e., with the manner and degree of evidence required at the successive stages of the
litigation.’” Report at 28. Moreover, per the First Circuit, “where standing is at issue, heightened
specificity is obligatory at the pleading stage.” Id. (quoting United States v. AVX Corp., 962 F.2d
108, 113-114 (1st Cir. 1992)). Despite the plaintiff’s vague and conclusory allegations as to the
injury he claims to have incurred as a result of the challenged conduct, the Magistrate Judge
determined that Shirokov had met this burden by alleging that he had incurred the cost of counsel
after his receipt of the demand letter so as to advise him regarding the merits of Achte’s
copyright claims.
The defendants object to this conclusion on three grounds: first, because of Shirokov’s
vague allegation that he consulted with an attorney—particularly in light of the highly detailed
pleadings that he has filed—does not meet the “heightened specificity” contemplated by the First
Circuit; second, because such a conclusion is contrary to the “American Rule,” whereby each
party is responsible for his own attorneys’ fees, even pre-litigation fees, win or lose; and third,

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because the Magistrate Judge appeared to conclude that the cost of consulting with an attorney,
alleged by Shirokov, could constitute an injury in fact for purposes of standing as, according to
the Judge Boal those fees could be an element of damages in an abuse of process claim; even
though Judge Boal’s Report subsequently recommended dismissing that very claim from this
action.
It is well settled that parties are responsible for their own attorneys’ fees. Alyeska
Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240 (1975). The Magistrate Judge reasoned that
“[t]he natural and probable consequences of the defendants’ alleged actions include the costs
incurred in defending the copyright claims,” and that as such, “fees incurred in connection with
the Letter would be considered compensatory damages, not attorneys’ fees.”5 Report at 31 (citing
Millenium Equity Holdings, LLC v. Mahlowitz, 456 Mass. 627, 645 (2010)). The defendants
respectfully object.
The Millenium case cited in the Report presents a wholly different scenario from this
case. There, an attorney for the wife in a divorce suit was sued by the husband on several
theories relating to the filing of an attachment on the husband’s property. The attorney was
ultimately successful in defending the lawsuit, with the court holding that his conduct in the
litigation had been privileged, and he was successful on his abuse of process counterclaim. The
case was litigated over several years and was ultimately decided in the SJC. Notably, the court
did not award the attorney the fees he incurred in prosecuting his abuse of process and other
counterclaims. Id. at 646.
In contrast, here, Shirokov did not defend or respond to the copyright claim and thus did
not incur costs “in defending the copyright claims” as stated in the Report. See Report at 30. The

5

The settlement letter indicated that the recipient should consider consulting with counsel. However, had it not
included such a caveat, the defendants would have been excoriated for not recommending that the recipient seek an
independent opinion.

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Millenium case states: “[t]he ‘natural and probable’ consequences of an abuse of process lawsuit
include the costs incurred in successfully defending the charge. As such, fees incurred for
defending such a lawsuit are considered compensatory damages, not attorney’s fees.’” Report at
31 (quoting Millenium, 456 Mass. at 645). This principle is simply inapplicable here, where, as
the Report acknowledges, Shirokov never defended the copyright claims. Report at 58-59.
At most, it can be inferred that Shirokov was advised that the infringement claim did not
pose a risk of large exposure to him, and that no defense was therefore warranted. It is equally
fair to infer that Shirokov received advice related to the commencement of the instant lawsuit.

6

To hold that these consultations are sufficient to convey standing on a party would give
rise to an ability to “purchase” standing to sue in an opponent and his attorney in federal court
for the price of an initial consultation with an attorney anytime that opponent and his attorney
asserts a legal position with which it does not agree or which ultimately is not successful. Cf.
Report at 30 (quoting Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 107 (1998) (“[A]
plaintiff cannot achieve standing to litigate a substantive issue by bringing suit for the cost of
bringing suit.”)). Moreover, the Magistrate Judge’s reliance on a case holding that attorney’s fees
can constitute compensatory damages in an abuse of process claim, to show that the incursion of
fees can constitute an “injury,” while holding that Shirokov did not state a claim for abuse of
process, cannot be reconciled. See Report at 57-59.
D.

Noerr-Pennington Immunity Is Appropriately Applied to Settlement Demand
Letters Relating to Intellectual Property Disputes.
The defendants object to the Report regarding the application of the Noerr-Pennington

doctrine to Shirokov’s claims for two reasons: (1) the Report improperly limited the Noerr6

Presumably Shirokov’s counsel is representing him on a contingent fee basis or are being paid by interested third
parties. Indeed, the ultimate goal for plaintiff and/or his counsel seems to be class certification, as within hours of
issuance of the Report, Shirokov’s counsel had posted notice on their website declaring: “Short version: class action
survives.” This representation is interesting in as much as a class has yet to be certified, this Court has not made a
final ruling on the motions to dismiss, and the Report recommends dismissing a majority of plaintiff’s claims.

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Pennington doctrine; and (2) the Report improperly found that Achte’s claims of copyright
infringement constituted sham litigation.
First, the Report and Recommendation improperly limited the Noerr-Pennington
doctrine. Noerr-Pennington immunity has been held to bar claims outside of the anti-trust
context. In a case similar to the one at bar, Atlantic Recording Corp. v. Raleigh, 2008 U.S. Dist.
LEXIS 62977 (E.D. Mo. Aug. 18, 2008), a defendant in a copyright infringement suit brought
counterclaims for racketeering and conspiracy pursuant to RICO, along with fraudulent
misrepresentation, prima facie tort, and conspiracy. The District Court for the Eastern District of
Missouri dismissed the counterclaims pursuant to the Noerr-Pennington doctrine. The Report
and Recommendation completely failed to address this decision, which is directly analogous.
The Federal Circuit has also recognized the doctrine’s applicability to settlement
communications, citing the policy of encouraging settlement and noting that “the same First
Amendment policy reasons that justify the extension of Noerr immunity to pre-litigation conduct
in the context of federal antitrust law apply equally in the context of state-law tort claims.”
Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367 (Fed. Cir. 2004);
accord Ocean Spray Cranberries, Inc. v. Decas Cranberry Prods., NO. 08-11738-RWZ, 2011
U.S. Dist. LEXIS 38399 (D. Mass. Apr. 8, 2011); see also Storage Tech. Corp. v. Custom
Hardware Eng'g & Consulting, Ltd., 2006 U.S. Dist. LEXIS 43690 (D. Mass. June 28, 2006)
(holding that Noerr-Pennington doctrine applied to settlement communications warning of
imminent litigation).
The dissenting opinion in the Tenth Circuit’s decision in the Cardtoons case cited by the
Magistrate Judge is also persuasive on this point. The dissenting justices noted that the “there can
be little doubt that Noerr-Pennington immunity, as amplified by California Motor Transport, is
mandated by the First Amendment’s right to petition, irrespective of any independent statutory
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basis it might also have, and ‘Noerr-Pennington immunity’ has evolved into an umbrella term for
First Amendment petitioning immunity.” Cardtoons, L.C. v. Major League Baseball Players
Ass'n, 208 F.3d 885, 895 (10th Cir. 2000) (Lucero, C.J., dissenting). Moreover, with respect to
statements made in a letter threatening litigation, the dissent reasoned:
I cannot agree with the majority's proposition that the First Amendment protects
an owner of intellectual property rights who blindsides an adversary with a
lawsuit claiming infringement of those rights, but fails to shield that same owner
when a more civilized notice and demand letter is sent in advance. Put another
way, there is no sound basis for the conclusion that a complaint will be afforded
immunity while a “cease-and-desist” letter will not, when both documents contain
identical allegations. The majority's ruling encourages, nay demands, more
litigation; it requires intellectual property owners to bypass the post office on the
way to the court house and avoid the letter carrier in a rush to get to the process
server.
Today’s decision ignores the reality of intellectual property law, in which the
enforcement of legal rights, and thus the invocation of the litigation process, is
customarily commenced by a cease-and-desist letter. Consequently, the practical
result of the majority's holding will be to force parties seeking to prevent the
wrongful infringement of their intellectual property rights to ambush infringers
with lawsuits or risk having to defend against retaliatory tort claims. NoerrPennington, as that body of jurisprudence has come to be known, has been
applied to immunize from state tort claims objectively reasonable petitioning
activity invoking the courts. In furtherance of the First Amendment interest in the
vindication of legal rights and the constitutional requirement that the right to
petition be given the breathing space necessary to survive, the same immunity
should be afforded to objectively reasonable allegations of infringement and
threats of litigation contained in cease-and-desist letters.
Id. at 893-894; see also DirecTV, Inc. v. Lewis, 2005 U.S. Dist. LEXIS 8187 (W.D.N.Y. Apr. 29,
2005).
Here, the “scheme” alleged by Plaintiff is that defendants utilized settlement offer letters
instead of running to the courthouse and filing litigation against the infringers. Apparently
plaintiff is suggesting defendants should have engaged in the very conduct warned of by the
dissent in Cardtoons - ambushing infringers with lawsuits rather than attempting out of court
settlements. Such a position distorts the reasoning behind the Noerr-Pennington doctrine and
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ignores the practical realities of intellectual property litigation.
The defendants further object to the Report insofar as it suggests that Shirokov
adequately pled the “sham litigation” exception to the Noerr-Pennington doctrine. See Report at
35-36 (“Shirokov has alleged sufficient facts that, if proven, would establish that the Achte
Lawsuit was a sham.”) However, this conclusion is based on an incorrect premise that Achte
would only have the right to bring an infringement lawsuit if its copyright registration were
valid. See Report at 35. The Report does not distinguish between the underlying copyright and
the copyright registration. As the Report correctly notes, “Achte is the holder of copyright of
‘Far Cry,’ a fact that Shirokov does not dispute.” Id. The validity of Achte’s copyright in “Far
Cry” has never been in dispute, only the copyright registration.
The Report failed to acknowledge that, as pled by plaintiff, Achte was entitled to bring
suit against suspected infringers in the United States at least for actual damages “even absent a
registration.” SAC ¶ 107. Therefore, because the Magistrate Judge’s premise for finding that
Shirokov adequately pled the sham litigation exception is flawed, it should not be adopted.
Further, the Report did not state how the Far Cry Lawsuit could be ultimately found to
have been a “sham.” According to the Report, “the ‘sham exception’ may apply in three
circumstances: (1) where the lawsuit is objectively baseless and the defendant’s motive in
bringing it was unlawful; (2) where the conduct involves a series of lawsuits brought pursuant to
a policy of starting legal proceedings without regard to the merits and for an unlawful purpose;
and (3) if the allegedly unlawful conduct consists of making intentional misrepresentations to the
court, litigation can be deemed a sham if a party’s knowing fraud upon, or its intentional
misrepresentations to, the court deprive the litigation of its legitimacy.” Report at 35 (citing
Sosa v. DirecTV, 437 F.3d 923, 939 (9th Cir. 2006).
Based on the analysis in the Report, it appears the Magistrate Judge concluded that
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Shirokov had properly pled the sham litigation exception because he alleged that the Far Cry
copyright registration was invalid, and that therefore, the Far Cry Lawsuit was objectively
baseless. However, the underlying lawsuit cannot be said to be objectively baseless. In the Far
Cry Lawsuit, the U.S. District Court for the District of Columbia determined that the defendant
attorneys had demonstrated probable cause to believe that the John Doe defendants had infringed
their client’s copyright and permitted it to go forward with discovery against the John Doe
defendants, including the plaintiff. Achte/Neunte Boll Kino Beteiligungs GmbH & Co. KG, v.
Does 1 -4,577, 736 F. Supp.2d 212, 216, n.2 (D.D.C. 2010) (“Plaintiff has made a prima facie
case of copyright infringement in this case, and Plaintiff's need for disclosure outweighs the First
Amendment privacy interests here”). Thus, the underlying litigation has an objectively
reasonable basis was. In order properly plead the sham litigation exception, “the lawsuit must be
objectively baseless in the sense that no reasonable litigant could realistically expect success on
the merits.” Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60
(1993). Again, based upon his own allegations, Shirokov could have been found liable to Achte
in the Far Cry Lawsuit, even if a recovery were limited to damages.
“The existence of probable cause to institute legal proceedings precludes a finding that an
antitrust defendant has engaged in sham litigation.” See Professional Real Estate Investors, Inc.,
508 U.S. at 62. Because probable case existed here, there is no basis for applying the sham
litigation exception here, on the facts as pled by Shirokov.
E.

The Massachusetts Litigation Privilege Immunizes the Defendants’ Conduct and
Statements.
These Defendants object to the Report and Recommendation insofar as it concludes that

the Massachusetts litigation privilege should not bar, at this time, any of Shirokov’s claims. As
the Report acknowledges, “an attorney’s statements are absolutely privileged whether in the
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institution or conduct of litigation or in conferences and other communications preliminary to
litigation.” Report at 36 (quoting Blanchette v. Cataldo, 734 F.2d 869, 877 (1st Cir. 1984). As
the Report further acknowledges, where litigation is already underway, as was the case with
regard to the Far Cry Lawsuit, “the privilege applies if the statements are ‘pertinent’ to the
litigation.” Id. (citing Meltzer v. Grant, 193 F.Supp. 2d 373, 377 (D. Mass. 2002). A settlement
offer letter, indicating that a lawsuit has been filed and that the recipient of the letter may be
named as a defendant and served with process is indisputably “pertinent” to the litigation.
The litigation at issue was not only contemplated at the time that the settlement letter was
sent to Shirokov, it was underway.7 Further, Shirokov’s allegation that the litigation was brought
for the purpose of obtaining settlements from suspected infringers is irrelevant, as this is the
purpose of most litigation given that a scant fraction of lawsuits are ever prosecuted through trial.
The case is thus distinguishable from Int'l Floor Crafts, Inc. v. Adams, 477 F. Supp. 2d 336 (D.
Mass. 2007), in which it was claimed that the challenged litigation was brought for the purpose
of interfering with a business relationship. Bringing a lawsuit for an ulterior purpose, unrelated to
the claims made in the lawsuit itself, is distinguishable from bringing a lawsuit for the purpose of
advocating for a client’s legal rights with a goal of settling it.
“A pre-suit demand letter. . . cannot form the basis of a claim, since it is absolutely
privileged under the common law.” Rubin v. Murray, 25 Mass. L. Rep. 429 (Mass. Super. Ct.
2008) (citing Giuffrida v. High Country Investor, Inc., 73 Mass. App. Ct. 225, 2008 WL
4951595 at *11 (2008); Sriberg v. Raymond, 370 Mass. 105, 109 (1976) (where communication
to prospective defendant relates to proceeding contemplated in good faith, privilege should
7

The Report only analyzes the “good faith” and “serious consideration” elements related to the litigation privilege
when applied to communications made preliminary to proposed judicial proceedings. The Report never analyzed
whether the communications were “pertinent” to the litigation when judicial proceedings are already underway. As
shown herein, this is plain error, as judicial proceedings were already underway when the letter was sent to plaintiff;
therefore, the Court only has to determine that the letter was pertinent to the judicial proceedings to determine if the
claims are barred by the litigation privilege.

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attach); Sullivan v. Birmingham, 11 Mass.App.Ct. 359, 361-62 (1981); Fisher, 69 Mass.App.Ct
at 369-70; Blanchette v. Cataldo, 734 F.2d 869, 877 (1st Cir. 1984)).
F.

The Claims for Conspiracy and Aiding and Abetting are Insufficient.
The Report and Recommendation correctly found that no allegations existed against

Guardaley to support a claim for conspiracy or aiding and abetting, leaving just Achte and its
attorneys for these claims. However, the allegations are insufficient to support such claims
between a client and its attorneys.
“Conspiracy requires proof that the attorney’s participation involved more than legal
representation.” Gael-Greco Ltd. Partnership v. Bagshaw Mills Condominium Trust, 60
Mass.App.Ct. 1109, 800 N.E.2d 727, 2003 WL 23018208, *2 (Mass.App.Ct. 2003)
(unpublished). Here, there are no allegations that the Dunlap defendants’ work was more than in
a legal capacity.8 Therefore, the Court should dismiss the conspiracy and aiding and abetting
claims.
G.

The Report and Recommendation Improperly Transformed Plaintiff’s Claim for
Fraud on the Copyright Office into one for Declaratory Judgment.
The Report correctly noted that, ordinarily, fraud on the Copyright Office is an

affirmative defense to copyright infringement, not a cause of action. However, the Report
transformed Shirokov’s claim for fraud on the Copyright Office into one for declaratory
judgment. The Court should not follow suit.
According to Shirokov’s allegations, the defendants have no intent to pursue him for
copyright infringement.9 The Report states that “any potential threat of litigation against

8

Plaintiff generally alleges that the Dunlap defendants participated in the “scheme” with Achte by receiving a
portion of the settlements. However, such a relationship does not take the Dunlap defendants out of their legal
representation of Achte. Otherwise, any attorney who worked on a contingency basis would potentially be liable for
civil conspiracy with the client.
9
Achte’s present intent regarding naming Shirokov as a defendant in the Far Cry Lawsuit is obviously a separate
issue from its intent at the time that the suit was filed and the settlement letter transmitted to Shirokov.

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Shirokov is speculative and too remote to support a finding of standing,” Noting that Shirokov
has not been named as a defendant in the Far Cry Lawsuit, which was filed approximately two
years ago. Report at 29. Therefore, based on the facts alleged by Shirokov, there is no present,
actual controversy whereby the validity of Achte’s copyright registration is at issue. As such, the
plaintiff lacks standing to seek declaratory relief, even had the remedy been properly invoked in
the pleadings. Moreover, insofar as this Court does not dismiss the count to the extent it seeks
declaratory relief as to Achte, it should dismiss the count as to the defendant attorneys, as any
declaration as to the validity of the copyright would affect the rights only of the copyright holder,
not its attorneys.
H.

The Plaintiff has not Alleged that he was Engaged in Trade or Commerce with the
Defendants and has not Alleged the Elements of Causation and Injury Necessary to
State a Claim Under the Massachusetts Consumer Protection Statute.
The defendants object to the Magistrate Judge’s conclusion that Shirokov has properly

alleged facts showing that he is a “consumer” for purposes of the Massachusetts Consumer
Protection Statute, and that the defendants were engaged in “trade or commerce” with him. On
the facts pled by Shirokov, he is not a “consumer,” as he was not engaged in any commercial
transaction with these Defendants. Indeed, Shirokov is not even a “consumer” with respect to the
Defendants’ client—he is alleged, in effect, to have stolen from Achte, by infringing its
copyright. “Although whether a particular set of acts, in their factual setting, is unfair or
deceptive is a question of fact, the boundaries of what may qualify for consideration as a c. 93A
violation is a question of law.” Chervin v. Travelers Ins. Co., 448 Mass. 95, 112 (2006) (holding
that insurance company filing subrogation claim against doctor did not constitute “business
transaction” which could serve as a predicate for liability under chapter 93A).
Far from the parties being involved in a commercial transaction with one another, it is
clear on the face of the pleadings that Shirokov was adverse to Achte, and vice versa – indeed,
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that is the nature of a civil lawsuit.10 Within that civil action – the Far Cry Lawsuit – these
defendants represented Achte and acted on its behalf. It is well established that chapter 93A “has
never been read to broadly as to establish an independent remedy for unfair or deceptive dealing
in the context of litigation.” Morrison v. Toys “R” Us, Inc., 441 Mass. 451, 457 (2004) (citing
Framingham Auto Sales, Inc. v. Workers’ Credit Union, 41 Mass. App. Ct. 416, 418 (1996);
Gath v. M/A-Com, Inc., 440 Mass. 482, 497-98 (2003); Cady v. Marcella, 49 Mass. App. Ct.
334, 343 (2000); Arthur D. Little, Inc. v. East Cambridge Sav. Bank, 35 Mass. App. Ct. 734, 743
(1994)). The Magistrate Judge’s recommendation cannot be reconciled with this clear line of
authority.
The case of St. Paul Fire & Marine Ins. Co. v. Ellis & Ellis, 262 F.3d 53, 56 (1st Cir.
Mass. 2001) is distinguishable. In Ellis, a worker’s compensation insurer sued an attorney and
law firm for common law fraud and violations of chapter 93A. The attorney had represented one
individual who had two identities, two employers, two injuries, and two workers’ compensation
claims on both of those workers compensation claims. After a trial, the district court judge
entered judgment as a matter of law for the defendant attorney on the chapter 93A claim, on the
grounds that the attorney was not engaging in a business transaction with respect to his
representation in the workers compensation matters, but rather was litigating the workers
compensation claims.
The First Circuit vacated the judgment and remanded the claim, holding that a jury could
find that the attorney was engaged in a business transaction with the insurer. The relationship
alleged between Shirokov and the defendants here is qualitatively different. Whereas in Ellis,
there was a commercial relationship between the plaintiff insurer and the attorney’s client—a
10

In reality, Achte does trade or commerce as a creator and distributor of motion pictures, and the Dunlap
defendants do trade or commerce in legal services. Rather than acknowledge either of these trades or commerce, the
Report and Recommendation seemingly adopted plaintiff’s theory that the copyright “scheme” was its own trade or
commerce. However, there is no legal or factual basis for doing so.

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contractually based workers’ compensation insurance arrangement—there was no commercial
relationship between Shirokov and Achte. Thus, the interactions between Shirokov and the
defendants, and their client Achte, were outside of the context of “trade or commerce” as
contemplated by the Consumer Protection Statute.
The cases cited in the Ellis decision are similarly distinguishable. See id. (citing Coggins
v. Mooney, 1998 Mass. Super. LEXIS 320, *13, 1998 WL 156998 at *5 (Mass. Super. Ct. April
3, 1998), aff’d sub non Miller v. Mooney, 431 Mass. 57 (Mass. 2000) (holding that lawyer can be
liable under ch. 93A “to a nonclient or to an adversary of its client, if it joins its client in
marketplace communications to the adversary rather than merely relays its client's positions; and
if those marketplace communications knowingly or carelessly turn out to be false, misleading,
and harmful”); JRJ Constr. Co. v. R.W. Granger & Sons, Inc., 1999 Mass. Super. LEXIS 322,
*36, 1999 WL 706717 at *14 (Mass. Super. Ct. July 29, 1999) (finding that architect had
engaged in trade or commerce when it allegedly made bad faith decision when resolving disputes
over the scope of a subcontractor's obligations under building contract). In each of those cases,
there was an existing commercial relationship between the plaintiff and the defendant’s client
such that when the defendant became involved in the conduct, it affected the commercial
relationship between them. Again, here, the only relationship between Shirokov and Achte is that
Shirokov is alleged to have illegally shared a copy of Achte’s film, Far Cry.
Even were the parties engaged in trade or commerce vis a vis one another, Shirokov has
failed to allege facts supporting the essential elements of causation and injury. See Hershenow v.
Enter. Rent-A-Car Co. of Boston, 445 Mass. 790, 797 (2006). In cases involving an alleged
deception, “the plaintiff must prove reliance as ‘an essential link in the proof of causation.’”
Mass. Laborers’ Health & Welfare Fund, 62 F. Supp. 2d at 242 (O’Toole, J.) (citing Trifiro v.
New York Life Ins. Co., 845 F.2d 30, n.1 (1st Cir. 1988)). Here, the plaintiff has not claimed, and
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cannot prove, that his receipt of and/or reliance on any statements by the defendant attorneys
caused him any legally cognizable injury because he admittedly did not settle the Far Cry
Lawsuit; indeed, he did and still has done nothing to refute the legitimacy of that civil action.
SAC ¶ 232 (“Plaintiff has not paid to settle the claims.”) Shirokov claims that by making
allegedly false or misleading representations, the defendant attorneys caused him a per se injury.
Allowing such a claim to go forward would permit “a purely vicarious suit by self-appointed
attorneys general, which [chapter 93A] does not allow.” Fine v. Sovereign Bank, 2010 U.S. Dist.
LEXIS 76449 (D. Mass. July 28, 2010) (citing Leardi v. Brown, 394 Mass. 151 (1985)).
The Magistrate Judge reasoned that Shirokov did suffer an injury that was “casually
related” to the alleged deceptive statements in the demand letter, in the form of legal fees
incurred in having an attorney review the letter. However, as several courts interpreting chapter
93A have held that in order to state a claim for violation of chapter 93A, where liability is
premised on an allegedly false or deceptive statement, evidence of reasonable reliance is required
in order to establish a “causal connection” and thus, liability. See, e.g., Rodi v. Southern New
Eng. Sch. of Law, 532 F.3d 11 (1st Cir. 2008) (applying Massachusetts law); Rodi v. Southern
New Eng. Sch. of Law, 532 F.3d 11 (1st Cir. 2008); (Ruggers, Inc. v. United States Rugby
Football Union, Ltd., 2012 U.S. Dist. LEXIS 10587 (D. Mass. Jan. 30, 2012) (“Because, as
discussed above, plaintiff cannot demonstrate reasonable reliance, its Chapter 93A claim fails as
a matter of law”); Mass. Laborers’ Health & Welfare Fund, 62 F. Supp. 2d at 242.
The SJC, in the Iannacchino case cited by the Magistrate Judge, has hypothesized11 that
a deceptive statement could cause a loss absent a showing that the consumer relied on it.
However, this reasoning was discussed (and not applied) in connection with a particular set of

11

The discussion is dicta, as the court concluded that the plaintiffs had not adequately alleged that the vehicles at
issue were non-compliant with safety regulations, and dismissed the chapter 93A claim on that ground.
Iannacchino, 451 Mass. at 631.

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allegations: that a vehicle manufacturer falsely certified to regulators that a particular model
complied with relevant safety standards. The court reasoned that the fact that the consumers may
never have been aware of the misrepresentation did not preclude them from showing that their
injury (not receiving what they believed they were paying for, to wit, a compliant vehicle) was
causally related to the unfair act or practice that was alleged. Iannacchino v. Ford Motor Co.,
451 Mass. 623, 631 (2008).
Here, the allegedly deceptive statement or statements consisted of legal positions asserted
by these defendants on behalf of their client, Achte. It is manifest that Shirokov did receive them
and was not “misled” or “deceived” by the statements, because, according to him, he allegedly
obtained an independent opinion as to their legal correctness, or lack thereof. Obtaining the
opinion of legal counsel is not an injury “caused by” the statements in the settlement letter. If
attorneys’ fees incurred in the course of obtaining an opinion as to whether an act or practice is
unfair or deceptive constitutes “actual injury” for chapter 93A purposes, this would render the
fee award provision meaningless—attorneys’ fees incurred would simply be another element of
damages. Moreover, the question of whether an actual injury is a required element of a chapter
93A claim (as opposed to merely the invasion of a legally protected right) would be essentially
mooted, as any person who believed that they had been the subject of an unfair or deceptive act,
but who was not harmed by it, could satisfy the injury element simply by consulting with an
attorney.
III.

CONCLUSION

Wherefore, the defendants respectfully request that the Court reject or modify the
portions of the Report and Recommendation on Defendants’ Motions to Dismiss the Second
Amended Complaint Pursuant to Fed. R. Civ. P. 72 to which they respectfully object, and enter
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an order dismissing the plaintiff’s claims in their entirety against defendants Dunlap Grubb &
Weaver, PLLC, US Copyright Group, Thomas Dunlap and Nicholas Kurtz, along with the
putative class claims, with prejudice, and award attorneys’ fees and expenses and such other
further relief that the Court deems just and proper.

The Defendants,
Dunlap, Grubb & Weaver, PLLC,
US Copyright Group,
Thomas Dunlap, and Nicholas Kurtz
By their counsel,
/s/ Kara Thorvaldsen
George C. Rockas BBO# 544009
Kara Thorvaldsen BBO# 660723
WILSON ELSER MOSKOWITZ
EDELMAN & DICKER LLP
260 Franklin Street
Boston, MA 02110
[phone]

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Certificate Of Service
I, Kara Thorvaldsen, hereby certify that this document filed through the ECF system will
be sent electronically to the registered participants as identified on the Notice of Electronic Filing
(NEF). I am not aware of any party who is a not a registered participant, and therefore electronic
filing is the sole means of service of this document.

/s/ Kara Thorvaldsen

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