Pearson Education, Inc. et al v. Almgren

Filing 12

ORDER re appeal of orders of the Bankruptcy Court(Written Opinion). Signed by Senior Judge David S. Doty on 7/14/2011. (PJM)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 11-496(DSD/JSM)
Pearson Education, Inc.,
Cengage Learning, Inc., and
The McGraw-Hill Companies, Inc.,
Plaintiff-Appellants,
ORDER

v.
Joel Thomas Almgren,
Defendant-Appellee.

Timothy J. Pramas, Esq. and Manty & Associates, P.A., 510
First Avenue North, Suite 305, Minneapolis, MN 55403,
counsel for plaintiff-appellants.
Scott A. Johnson, Esq., Todd M. Johnson, Esq. and Johnson
Law Group LLP, 10580 Wayzata Boulevard, Suite 250,
Minnetonka, MN 55305, counsel for defendant-appellee.

Appellants Pearson Education, Inc., Cengage Learning, Inc.,
and the McGraw-Hill Companies, Inc. (collectively, Publishers)
appeal the orders of the bankruptcy court1 striking the demand for
a jury trial and denying the motion for attorneys’ fees.

Based on

a review of the file, record and proceedings herein, the court
affirms.

1

The Honorable Nancy C. Dreher, United States Bankruptcy
Judge for the District of Minnesota.

BACKGROUND
The underlying matter came before the bankruptcy court as an
adversary proceeding pursuant to Rules 7052 and 7054 of the Federal
Rules of Bankruptcy Procedure.

In February 2009, the Publishers

discovered that defendant Joel Thomas Almgren was downloading and
selling copyrighted materials.

The Publishers sued Almgren for

copyright infringement in United States District Court for the
Southern District of New York.

On October 19, 2009, Almgren filed

a Chapter 7 bankruptcy petition in the United States Bankruptcy
Court for the District of Minnesota.
ECF No. 4.

See Appellants’ App. A-10,

On December 23, 2009, the Publishers filed an adversary

complaint in bankruptcy court to determine whether their claims
were excepted from discharge pursuant to 11 U.S.C. § 523(a).
at A-53.

Id.

On February 16, 2010, each Publisher filed a proof of

claim in the bankruptcy court.

Id. at A-58.

On June 30, 2010, the

Publishers demanded a jury trial pursuant to Rule 9015 of the
Bankruptcy

Code

and

Rule

Procedure.

38

of

the

Federal

Rules

of

Civil

Id. at A-82.

The bankruptcy court issued an order to show cause why the
Publishers’ demand for a jury trial should not be stricken.

Id. at

A-84. Following the responses of the parties, the bankruptcy court
struck the

demand.

Id.

at

A-86.

On

August 19,

2010,

the

Publishers moved for summary judgment as to liability on the
copyright infringement claims.

The bankruptcy court granted the

2

motion for summary judgment and held that Almgren infringed 19
copyrights belonging to the Publishers by selling unauthorized
copies of copyrighted materials.

Id. at A-89.

On January 26, 2011, following trial, the bankruptcy court
determined that Almgren caused willful and malicious injury to the
Publishers, and, therefore, the debt arising from his conduct was
excepted from discharge pursuant to 11 U.S.C. § 523(a)(6).
A-160, A-163-71.

The bankruptcy court awarded the Publishers

$14,250 in damages and did not award attorneys’ fees.
173.

Id. at

Id. at A-

The Publishers appealed the bankruptcy court’s orders with

respect

to

striking

attorneys’ fees.

the

jury

demand

and

declining

to

award

The court now considers the appeal.

DISCUSSION
When an appellant elects to have the district court hear its
appeal of a final judgment of the bankruptcy court, the district
court “acts as an appellate court and reviews the bankruptcy
court’s legal determinations de novo and findings of fact for clear
error.”
Falcon

Pension Benefit Guar. Co. v. Falcon Prods., Inc. (In re
Prods.,

Inc.),

497

F.3d

838,

840-41

(8th

Cir.

2007)

(citation and internal quotation marks omitted).
I.

Jury Demand
In striking the Publishers’ jury demand, the bankruptcy court

reasoned that dischargeability of debts under 11 U.S.C. § 523 is

3

within its exclusive jurisdiction, and therefore, “the bankruptcy
court may also render a money judgment in an amount certain without
the assistance of a jury” because “it is impossible to separate the
determination of dischargeability function from the function of
fixing the

amount

of

the

nondischargeable

debt.”

Sasson

v.

Sokoloff (In re Sasson), 424 F.3d 864, 869-70 (9th Cir. 2005)
(citation omitted).

The bankruptcy court further determined that,

even if the Publishers had a right to a jury trial, they waived the
right by filing proofs of claim and submitting themselves to the
equitable jurisdiction of the bankruptcy court.
The Eighth Circuit has not addressed whether a party is
entitled to a jury trial on issues of liability and damages once a
bankruptcy court determines an exception to discharge. Opinions of
other Courts of Appeals are in conflict.

Compare In re Merrill,

594 F.2d 1064, 1068 (5th Cir. 1979) (appellant entitled to jury
trial on issues of liability and amount) with In re Sasson, 424
F.3d at 869-70 (no right to a jury on damages) and Porges v.
Gruntal & Co., Inc. (In re Porges), 44 F.3d 159, 164 (2d Cir. 1995)
(bankruptcy court can decide all disputed matters and decree
complete relief).
In the instant action, the court need not determine whether
the Publishers had a right to a jury trial under the Seventh
Amendment because the Publishers waived any such right by filing
proofs

of

claim.

Although

“the

4

right

to

a

jury

trial

is

fundamental [and] courts must indulge every reasonable presumption
against waiver,” the “right to a jury trial in a civil case is not
absolute.”

Ind. Lumbermens Mut. Ins. Co. v. Timberland Pallet &

Lumber Co., Inc., 195 F.3d 368, 374 (8th Cir. 1999) (citation and
internal quotation marks omitted).

“Unlike other constitutional

rights ... an intentional relinquishment of the right [to a jury
trial] is not required for waiver; the right to a jury trial can be
waived by inaction or acquiescence.”

Africa v. City of Phila. (In

re City of Phila. Litig.), 158 F.3d 723, 726 (3d Cir. 1998).

In

the civil context, a party can readily waive its right to a jury
trial through its conduct and without an express intent to do so.
See, e.g., Fed. R. Civ. P. 38(d) (party waives right to jury unless
demand is properly served and filed); Shelton v. Consumer Prods.
Safety Comm’n, 277 F.3d 998, 1011 (8th Cir. 2002) (civil defendant
waived right to jury trial by failing timely to demand jury).
In bankruptcy court proceedings, a plaintiff waives his right
to a jury trial when he files a claim against the bankrupt estate.
In Katchen v. Landy, 382 U.S. 323 (1966), the Supreme Court held
that “although petitioner might be entitled to a jury trial on the
issue of preference if he presented no claim in the bankruptcy
proceeding,” he waived his Seventh Amendment right to a jury trial
by filing a claim against the bankruptcy estate. Katchen, 382 U.S.
at 336.

The Court further reasoned:
[I]n cases of bankruptcy, many incidental
questions arise in the course of administering
5

the bankrupt estate, which would ordinarily be
pure cases at law, and in respect of their
facts triable by jury, but, as belonging to
the bankruptcy proceedings, they become cases
over which the bankruptcy court, which acts as
a court of equity, exercises exclusive
control.
Thus a claim of debt or damages
against the bankrupt is investigated by
chancery methods.
Id. at 337.

Moreover, “a creditor’s right to a jury trial on a

bankruptcy trustee’s preference claim depends upon whether the
creditor has submitted a claim against the estate.”

Langenkamp v.

Culp, 498 U.S. 42, 45 (1990) (citation omitted).
The broad principles of complete relief articulated in Katchen
and Langenkamp apply here.

See, e.g., Katchen, 382 U.S. at 338

(“equity courts have power to decree complete relief and for that
purpose may accord what would otherwise be legal remedies”);
Langenkamp, 498 U.S. at 45 (“By filing a claim against a bankruptcy
estate

the

creditor

disallowance

of

triggers

claims,

the

thereby

process
subjecting

bankruptcy court’s equitable power.”).

of

allowance

himself

to

and
the

Therefore, the bankruptcy

court did not err in finding that the Publishers waived their right
to jury trial.
II.

Attorneys’ Fees
The

award

of

attorneys’

fees

is

reviewed

for

abuse

of

discretion. See Jenkins v. Fitzgerald Marine & Repair, Inc. (In re
Fitzgerald Marine & Repair, Inc.), 619 F.3d 851, 863 (8th Cir.
2010).

Under the American system, a party pays its own fees and

6

may spend whatever it chooses in pursuit of litigation.

When

allowed by statute or contract, a party may seek to shift expenses
to its opponent. In a copyright infringement action, “the court in
its discretion may allow the recovery of full costs by or against
any party other than the United States” including an award of
“reasonable attorney’s fee to the prevailing party.”
§ 505.
district

17 U.S.C.

Awarding attorneys fees under § 505 “is a matter for the
court’s

equitable

discretion

to

be

exercised

in

an

evenhanded manner by considering factors such as whether the
lawsuit

was

frivolous

or

unreasonable,

the

losing

litigant’s

motivations, the need in a particular case to compensate or deter,
and the purposes of the Copyright Act.”

Action Tapes, Inc. v.

Mattson, 462 F.3d 1010, 1014 (8th Cir. 2006) (citation and internal
quotation marks omitted). “There is no precise rule or formula for
making these determinations.”
517, 534, 535 n.19 (1994).

Fogerty v. Fantasy, Inc., 510 U.S.

Instead, the court considers factors

such as “frivolousness, motivation, objective unreasonableness
(both in the factual and in the legal components of the case) and
the need in particular circumstances to advance considerations of
compensation and deterrence.”

Id.

In denying the request for attorneys’ fees, the bankruptcy
court first considered that the Publishers’ motivation in pursuing
the litigation against Almgren was “to make an example of [him].”
The bankruptcy court next considered the particular circumstances

7

of the case, and determined that the dispute could have been
resolved with limited costs and attorneys’ fees if the
Publishers had sent Almgren a cease and desist letter instead of
immediately filing suit, particularly because Almgren immediately
stopped infringing when he received the summons and complaint and
because the Publishers were unable to prove any real damages.

The

bankruptcy court noted that the bankruptcy litigation “could have
and should have ended long ago” but the Publishers instead pursued
litigation
settlement.

and

resisted

the

court’s

efforts

to

facilitate

See Appellants’ App. A-174.

The Publishers argue that the bankruptcy court abused its
discretion by considering that the dispute could have been resolved
more efficiently through other means, such as a cease and desist
letter.

The court disagrees.

The Publishers were entitled to

pursue Almgren to the full extent of the law and, therefore, assume
substantial attorneys’ fees in pursuit of their litigation.
bankruptcy

court

did

not,

however,

abuse

its

discretion

The
by

considering that the Publishers could have achieved the same or
similar result without litigation, as only reasonable attorneys’
fees may be awarded.

This determination falls within the broad

discretion that the bankruptcy court is afforded in determining
attorneys’ fees.
The Publishers also argue that the bankruptcy court abused its
discretion by considering, among other factors, that Almgren “lost

8

everything” in this action, that the case could have been resolved
long ago and that the Publishers refused to settle.
disagrees.

The court

Theses factors go to reasonableness, motivation and

deterrence, all of which are relevant considerations in determining
an award of attorneys’ fees.

See Action Tapes, 462 F.3d at 1014.

Moreover, even if the court disagreed with the bankruptcy court’s
determination, “the stringent abuse-of-discretion review standard
requires that” the court “may not simply substitute [its] judgment
for that of the” bankruptcy court.

Fisher v. Wal-Mart Stores,

Inc., 619 F.3d 811, 819 (8th Cir. 2010).

The bankruptcy court

considered relevant factors in determining that attorneys’ fees
were not warranted. The bankruptcy court, therefore, did not abuse
its discretion in denying attorneys’ fees.

CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.

The order of the bankruptcy court striking the jury

demand is affirmed; and
2.

The order of the bankruptcy court denying attorneys’ fees

is affirmed.
LET JUDGMENT BE ENTERED ACCORDINGLY
Dated:

July 14, 2011
s/David S. Doty
David S. Doty, Judge
United States District Court
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