LIVE FACE ON WEB, LLC v. GREEN TECHNOLOGY SERVICES et al

Filing 54

OPINION. Signed by Judge Joseph E. Irenas on 6/20/2014. (dmr)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

LIVE FACE ON WEB, LLC,
HONORABLE JOSEPH E. IRENAS
Plaintiff,
Civil No. 14-00182 (JEI/AMD)
v.

OPINION

EMERSON CLEANERS, INC.,
Defendant.

APPEARANCES:
LAW OFFICE OF JASON RABINOVICH, PLLC
By: Jason L. Rabinovich, Esq.
1700 Market Street
Suite 1005
Philadelphia, PA 19103
Counsel for Plaintiff
BAKOS & KRITZER
By: Noam J. Kritzer, Esq.
147 Columbia Turnpike
Florham Park, NJ 07932
Counsel for Defendant

IRENAS, Senior United States District Judge:
Pending before the Court is Defendant Emerson Cleaners,
Inc.’s (“Emerson”) Motion to Require Plaintiff Live Face on Web,
LLC (“LFOW”) to Post Bond for Costs and Expenses, in the amount
of $50,000.

For the reasons set forth below, the Motion will be

denied without prejudice.

1

I.
Plaintiff LFOW is a Pennsylvania limited liability company
that owns and develops software and video technology, which it
licenses to individuals and businesses for use in online
advertising.

(First Am. Compl. ¶ 11-12)

LFOW’s customers use

the software to customize a “live spokesperson” to direct a
website visitor’s attention to particular products or aspects of
the website.

(First Am. Compl. ¶ 12)

LFOW allegedly is a

“leading developer” of this technology.

(First Am. Compl. ¶ 11)

On January 10, 2014, LFOW filed a Complaint for copyright
infringement pursuant to the U.S. Copyright Act, 15 U.S.C. § 501
et. seq., against four defendants: 1) Emerson Cleaners, Inc.; 2)
Green Technology Services; 3) Innovative Pain Management, LLC;
and 4) Sunrise Go Go Club.

(Dkt. No. 1) 1

LFOW seeks actual

damages and any profits of the defendants’ alleged use of its
software, or to recover statutory damages of $150,000 for each
work infringed.

(First Am. Compl. ¶ 90)

LFOW also seeks

reasonable attorney’s fees and costs, pursuant to 17 U.S.C. §
505. 2

(First Am. Compl. ¶ 91)

1

Magistrate Judge Donio later entered an order severing the
cases against each defendant, leaving LFOW as the only Defendant
in this case.
2

17 U.S.C. § 505 (2012) provides:
In any civil action under this title, the court in its
discretion may allow the recovery of full costs by or
2

The same day, LFOW also initiated a copyright infringement
action in the Middle District of Florida against Tweople, Inc.,
a Florida corporation.

Live Face on Web, LLC v. Tweople, Inc.

No. 14-CV-00044 (M.D. Fl. Jan. 10, 2014).

The Florida complaint

also listed as defendants twenty of Tweople’s allegedly
infringing customers.

Id.

Defendant Emerson filed the current motion requiring
Plaintiff LFOW to post security in the amount of $50,000.

LFOW

timely opposed the motion, and Emerson filed a reply brief.

II.
The Federal Rules of Civil Procedure do not address a
plaintiff’s obligations to post a bond for costs and expenses
before proceeding with an action.
Absent a local rule 3 or statute 4 expressly requiring the
posting of security, “the federal district courts have inherent

against any party other than the United States or an
officer thereof. Except as otherwise provided by this
title,
the
court
may
also
award
a
reasonable
attorney’s fee to the prevailing party as part of the
costs.
3

See, e.g., E.D.N.Y. and S.D.N.Y. Civ. R. 54.2 (“The [c]ourt, on
motion or on its own initiative, may order any party to file an
original bond for costs . . . .”); E.D.Pa. Civ. R. 54.1(a)
(providing that the court may order security for costs for a
non-resident plaintiff); W.D.Pa. L.Civ. R. 67.1(A) (same).
4

See, e.g., N.J.S.A. 14A:3-6.8 (stating that in any derivative
proceeding where the shareholder holds less than 5% of the
3

power to require plaintiffs to post security for costs.”
Simulnet East Assocs. v. Ramada Hotel Operating Co., 37 F.3d
572, 574 (9th Cir. 1994).

See also Hawes v. Club Ecuestre El

Comandante, 535 F.2d 140, 143 (1st Cir. 1976) (stating that it
is within the court’s inherent power to require a plaintiff to
post security “when warranted by the circumstances of the
case”).

A District Court may, in its discretion, require a

plaintiff to post security for costs in “certain exceptional
cases.”

McClure v. Borne Chem. Co., 292 F.2d 824, 835 (3d Cir.

1961).
The District of New Jersey does not have a local rule
governing posting security for costs and expenses, nor does the
statute under which LFOW seeks to recover, 17 U.S.C. § 501 et
seq., expressly require it.

Thus, Emerson’s motion to require

LFOW to post security is a matter for the Court’s discretion.

III.
In exercising their discretion, courts outside of this
district have applied a balancing test to determine whether a
plaintiff should be required to post security.

In a test

outstanding shares, unless the shares exceed $250,000 in market
value, the corporation “shall be entitled at any time before
final judgment to require the plaintiff . . . to give security
for the reasonable expenses, including fees of attorneys, that
may be incurred . . . .”).
4

applied in the Southern District of New York 5 and referenced by
the Second Circuit, 6 the following factors are considered in
evaluating whether a party should be required to post a bond:
(1) the financial condition and ability to pay of the
party who would post the bond; (2) whether that party
is a non-resident or foreign corporation; (3) the
merits of the underlying claims; (4) the extent and
scope of discovery; (5) the legal costs expected to be
incurred; and (6) compliance with past court orders.

RLS Assocs., LLC v. United Bank of Kuwait, PLC, No. 01 Civ. 1290
(CSH), 2005 WL 578917 at *1 (S.D.N.Y. 2005) (citation omitted). 7
The First and Ninth Circuits have also applied a similar
factor test.

See Aggarwal v. Ponce Sch. of Med., 745 F.2d 723,

728 (1st Cir. 1984) (considering the probability of success on
the merits, the background and purpose of the suit, and the
reasonable extent of security to be posted, if any, viewed from
5

While the district has a local rule governing the matter, the
rule merely states that a court “may order” a party to file a
bond. It does not set forth a standard to apply when
determining whether a bond should be required. See S.D.N.Y.
Civ. R. 54.2 (emphasis added).
6

See Selletti v. Carey, 173 F.3d 104, 111 (2d Cir. 1999)
(stating that the district court’s consideration of the
defendant’s doubtful ability to recover costs, the questionable
nature of the merits of the plaintiff’s claims, and the
plaintiff’s prior violations of discovery orders were all
relevant factors in the district court’s decision to order
security to be posted).
7

See also Gary Friedrich Enters., LLC v. Marvel Enters., Inc.,
No. 08 Civ. 01533 (BSJ) (JCF), 2010 WL 3452375 at *2 (S.D.N.Y.
Sept. 1, 2010) (applying the test to determine whether a
plaintiff should be required to file a bond for costs and
attorneys’ fees).
5

both the defendant’s and nondomiciliary plaintiff’s
perspectives); see also Simulnet East Assocs. v. Ramada Hotel
Operating Co., 37 F.3d 573, 576 (9th Cir. 1994) (citing
Aggarwal).
Here, Emerson applies elements of the six-factor test
adopted by the Southern District of New York in RLS Assocs., and
argues that LFOW should be required to post security for costs
and expenses.

Addressing the first prong of the test, Emerson

asserts that the Court should require LFOW to post a bond for
costs and expenses because LFOW’s financial condition renders it
unable to satisfy its obligations against twenty-five
defendants.

However, Emerson fails to set forth any evidence

that LFOW would be unable to satisfy its financial obligations
should Emerson prevail.
In evaluating whether security should be posted, a party’s
financial condition is often the weightiest factor in the
analysis because the bond requirement’s primary purpose is “to
ensure that the prevailing party will be able to collect the
costs and fees owed to it in situations where the other party is
unlikely or unwilling to pay.”

Gary Friedrich Enters., 2010 WL

3452375 at *2-3 (stating that a party’s inability to pay may
sometimes be sufficient in and of itself to warrant posting
security); see also Selletti, 173 F.3d at 112 (stating that the
primary purpose of requiring security is to ensure that the
6

party’s assets will not become “dissipated” or “unreachable” by
the time the costs should be awarded).
Thus, courts have typically required the posting of bond
only when the defendant has made a showing that the plaintiff’s
financial condition is “sufficiently dire” to warrant it.

Gary

Friedrich Enters., 2010 WL 3452375 at *3; see also Beverly Hills
Design Studio Inc. v. Morris, 126 F.R.D. 33, 36 (S.D.N.Y. 1989)
(“Cases requiring a security bond generally involve plaintiffs
with no reachable assets.”)(emphasis added); Atlanta Shipping
Corp. v. Chem. Bank, 818 F.2d 240, 251-52 (2d Cir. 1987)
(affirming the district court’s decision ordering the plaintiff
to post security when the plaintiff was a debtor in a bankruptcy
proceeding and lacked liquid assets).

Indeed, fairness concerns

weigh heavily against ordering a bond in cases that do not
elicit extreme financial circumstances.

As the First Circuit

has said, “toll-booths cannot be placed across the courthouse
doors in a haphazard fashion.”

Aggarwal, 745 F.2d at 728.

Here, Emerson has failed to meet its burden to demonstrate
that LFOW’s financial state is sufficiently dire.

LFOW alleges

that it is a “leading developer” in its industry, with customers
around the world.

(First Am. Compl. ¶ 11)

Unlike the bankrupt

or insolvent plaintiffs in cases in which a bond was required,
LFOW here asserts that it is solvent, and there are no facts
presently before the Court suggesting that LFOW is, or will be,
7

unable to pay judgment costs and expenses.

Indeed, Emerson even

admits that it has “no basis to evaluate Plaintiff’s solvency.”
(Reply Br. 2)
Furthermore, the costs that LFOW will be expected to pay at
the termination of the suit are speculative.

The crux of

Emerson’s argument is that LFOW has instituted a similar action
against a total of twenty-five defendants, and thus is unlikely
to be able to satisfy costs and attorney’s fees under 17 U.S.C.
§ 505 should the defendants prevail.

However, speculation as to

the probability of a lawsuit’s success – and a plaintiff’s
equally speculative resulting financial obligations 8 - is not
sufficient grounds to require posting of a bond at this time. 9
Because Emerson has put forth no evidence regarding LFOW’s
financial condition, and its claims concerning LFOW’s judgment
costs following this suit and the Florida suit are similarly
speculative, Emerson fails to satisfy the first and most weighty
element of the test to determine whether a party should be
ordered to post security.
8

The awarding of both costs and attorney’s fees under 17 U.S.C.
§ 505 are matters for the Court’s discretion, and Emerson is not
automatically entitled to such fees, should it prevail. See 17
U.S.C. § 505 (2012) (“[T]he court in its discretion may allow
recovery of full costs . . . .”)(emphasis added).
9

Even in a case where the defendant had “an understandable
concern” as to the plaintiff’s inability to pay eventual
attorney’s fees and costs when plaintiff admitted it “[did] not
have that kind of money,” the court denied defendant’s motion
for a bond. RLS Assocs., 2005 WL 578917 at *2.
8

In light of this conclusion and the disposition of the
instant motion, the Court need not consider Emerson’s arguments
regarding the merits of the case, the scope of discovery, and
the anticipated costs of defending the action.
not require LFOW to post a bond at this time.

The Court will
However, if

circumstances sufficiently change, Emerson may make another
motion for bond.

IV.
Based on the foregoing, Defendant’s motion for an order
directing Plaintiff to post a bond will be denied without
prejudice.

Date:

An appropriate Order accompanies this Opinion.

June 20, 2014

_s/ Joseph E. Irenas______
JOSEPH E. IRENAS, S.U.S.D.J.

9