Overseas Direct Import Co., Ltd. v. Family Dollar Stores, Inc. et al
Filing
153
MEMORANDUM OPINION AND ORDER re: 140 MOTION for Attorney Fees and Costs pursuant to Fed.R.Civ.P. 68. filed by Family Dollar Stores, Inc. For the reasons stated above, FDSs motion for attorneys fees is denied. ODIs request for attorneys fees incurred in responding to FDSs motion is also denied. FDS has ten days from the receipt of this decision to file a Bill of Costs with the Clerk pursuant to Local Rule 54.1. The Clerk is directed to close Docket No. 140. (Signed by Judge John G. Koeltl on 11/12/2013) (djc)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
OVERSEAS DIRECT IMPORT CO., LTD.,
Plaintiff,
10 Civ. 4919 (JGK)
- against -
MEMORANDUM OPINION
AND ORDER
FAMILY DOLLAR STORES INC. and
PRESTIGE GLOBAL CO., LTD.,
Defendants.
────────────────────────────────────
JOHN G. KOELTL, District Judge:
Overseas Direct Import Co., Ltd. (“ODI”), a textile design
and sales corporation, sued Family Dollar Stores, Inc. (“FDS”)
and Prestige Global Co., Ltd. (“Prestige”) primarily for
trademark and copyright infringements in packaging for men’s
thermal underwear.
judgment.
Both defendants moved for partial summary
This Court denied the defendants’ motion as to the
plaintiff’s copyright infringement claim.
See Overseas Direct
Import Co. v. Family Dollar Stores Inc., 929 F. Supp. 2d 296
(S.D.N.Y. 2013).1
ODI ultimately settled its claims against Prestige.
FDS
made an offer of judgment pursuant to Rule 68 of the Federal
1
The Court granted the defendants’ motion as to all other
claims except for the claim of unfair competition in violation
of New York law, which was denied as to FDS and granted as to
Prestige. Familiarity with the facts and procedural history of
this case is assumed.
1
Rules of Civil Procedure (“Rule 68”) in the amount of $150,000.
ODI rejected the offer; a jury trial was held in June, 2013, and
the jury returned a verdict in FDS’s favor.
ODI recovered
nothing.
FDS now moves for costs and attorney’s fees pursuant to 17
U.S.C. § 505 and Rule 68.
Not to be outdone, ODI has requested
attorney’s fees incurred in responding to FDS’s motion.
For the
reasons explained below, FDS’s motion and ODI’s request are both
denied.2
I.
A.
Rule 68(d) provides: “If the judgment that the offeree
finally obtains is not more favorable than the unaccepted offer,
the offeree must pay the costs incurred after the offer was
made.”
As used in Rule 68(d), “costs” includes attorney’s fees
where the underlying statute provides for an award of attorney’s
fees as part of costs.
(1985).
See Marek v. Chesny, 473 U.S. 1, 9
The copyright statute does include a provision that
2
ODI has requested leave to file a surreply to FDS’s reply
brief, on the grounds that FDS raised new arguments in its reply
memorandum. This request is denied because the Court’s
disposition of FDS’s motion renders the request moot.
2
allows attorney’s fees to be awarded as part of costs in some
circumstances.
See 17 U.S.C. § 505.
In its papers, FDS initially argued that it was entitled to
recover costs including attorney’s fees under Rule 68 because
the amount ODI recovered (nothing) was not more favorable than
the rejected Rule 68 offer of $150,000.
However, this argument
is squarely foreclosed by the Supreme Court’s holding in Delta
Air Lines, Inc. v. August that the costs provision of Rule 68 is
“simply inapplicable” when the defendant has “obtained the
judgment.”
450 U.S. 346, 352 (1981); see also Jolly v.
Coughlin, No. 92 Civ. 9026, 1999 WL 20895, at *8 (S.D.N.Y. Jan.
19, 1999) (“Rule 68 only applies where a plaintiff prevails and
obtains a judgment in his favor.”).
In its reply papers, FDS
conceded that Delta Air Lines precludes the recovery of
attorney’s fees under Rule 68 in this case.
Mem. at 1.)
(See Def.’s Reply
Accordingly, FDS’s motion for costs and attorney’s
fees under Rule 68 must be denied.
B.
FDS argues that it is entitled to an award of attorney’s
fees under 17 U.S.C. § 505.
That statute provides that, in
addition to costs, “[e]xcept as otherwise provided . . ., the
court may also award a reasonable attorney’s fee to the
3
prevailing party as part of the costs.”
Section 505 is an
independent basis for granting attorney’s fees to a prevailing
defendant in some copyright cases.
See Hudson v. Universal
Studios, Inc., No. 04 Civ. 6997, 2009 WL 536564, at *4 (S.D.N.Y.
Mar. 4, 2009); Screenlife Establishment v. Tower Video, Inc.,
868 F. Supp. 47, 52 (S.D.N.Y. 1994).
However, attorney’s fees
are “not to be awarded automatically to a prevailing party . . .
but ‘only as a matter of the court's discretion.’”
Knitwaves,
Inc. v. Lollytogs Ltd., 71 F.3d 996, 1011 (2d Cir. 1995)
(quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994)).
In making § 505 determinations, courts look to “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.”
Fogerty, 510 U.S. at 534 n.19 (internal citations
and quotation marks omitted).
FDS argues that it is entitled to attorney’s fees under
§ 505 because ODI’s claims were objectively unreasonable.
Objective unreasonableness is given “substantial weight” in
attorney’s fees determinations.
Matthew Bender & Co., Inc. v.
West Publ’g Co., 240 F.3d 116, 122 (2d Cir. 2001).
“[C]laims
that are clearly without merit or otherwise patently devoid of
legal or factual basis ought to be deemed objectively
4
unreasonable.”
Penguin Books U.S.A., Inc. v. New Christian
Church of Full Endeavor, Ltd., No. 96 Civ. 4126, 2004 WL 728878,
at *3 (S.D.N.Y. Apr. 6, 2004).
But lack of success on the
merits, without more, does not establish that the non-prevailing
party’s position was objectively unreasonable.
Int’l Media
Films, Inc. v. Lucas Entm’t, Inc., No. 07 Civ. 1178, 2011 WL
5865739, at *2 (S.D.N.Y. Nov. 22, 2011).
Moreover, claims that
survive summary judgment are unlikely to be objectively
unreasonable.
See Penguin Books, 2004 WL 728878, at *4.
Indeed, FDS cites no precedent for the proposition that a
plaintiff’s claims may be found objectively unreasonable despite
having survived summary judgment.
As the Court’s March 13, 2013 Memorandum Opinion and Order
denying the defendants’ motion for summary judgment on the
copyright claim indicates, the plaintiff’s copyright claim was
not objectively unreasonable.
929 F. Supp. 2d at 308-10.
See Overseas Direct Import Co.,
Nor is this a case in which the
plaintiff “continued to litigate after [the claim] clearly
became” unreasonable.
Bauer v. Yellen, 375 F. App’x 154, 156
(2d Cir. 2010) (summary order); see also Screenlife, 868 F.
Supp. at 53.
FDS argues that ODI’s damages demands and unwillingness to
settle were outrageous to the point of objective
5
unreasonableness.
Derailment of settlement talks and unduly
high damage demands can rise to the level of objective
unreasonableness.
See Baker v. Urban Outfitters, Inc., 431 F.
Supp. 2d 351 (S.D.N.Y. 2006); Screenlife.
But in the rare
circumstances when these actions are found to warrant an award
of attorney’s fees, they are accompanied by aggravating
circumstances, such as indicia of improper motivation.
See
Baker, 431 F. Supp. 2d at 358-59 (knowingly false accusations
and pursuit of unreasonable damages even after explanation of
legal principles); Screenlife, 868 F. Supp. at 52-53 (pursuit of
speculative claims even after court granted injunction and
defendant made concessions).
There are no such indicia here.
FDS does not cite any case finding that the extent of a damage
demand or the plaintiff’s unwillingness to settle, without more,
entitles a defendant to attorney’s fees under § 505.
ODI
plainly thought that its claim was worth more than the offer of
judgment it rejected.
There is no indication that ODI pursued its copyright claim
in bad faith or for any purpose other than to vindicate its
alleged right to its copyrighted work.
A copyright holder
should not be deterred from pursuing a colorable copyright
action for fear that the action may ultimately prove to be
unsuccessful.
Nor should a party’s willingness to go to trial
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be viewed as an indication that the claim is frivolous or made
in bad faith.
ODI was prepared to have its claim adjudicated by
a jury rather than settle for a substantial offer of judgment.
Under all the circumstances, this is not a case where the Court
should exercise its discretion to award attorney’s fees to FDS
under § 505.
For these reasons, FDS’s motion for attorney’s fees under
§ 505 is denied.
C.
FDS has requested an award of substantial court costs,
including transcript costs, and has attached a Bill of Costs to
its papers.
ODI has responded by disputing that the requested
costs are in fact recoverable court costs under Rule 54(d) of
the Federal Rules of Civil Procedure.
Under Rule 54(d), costs
should be allowed to the prevailing party.
The parties ask this
Court to determine the reasonable court costs that can be
assessed.
However, neither party has referred to the proper procedure
in this District for taxing costs.
See Local Rule 54.1 of the
Local Civil Rules for the Southern and Eastern Districts of New
York.
Under that Rule, the Bill of Costs is to be presented to
the Clerk, the opposing party may file objections, and the Clerk
7
will proceed to tax costs.
Thereafter, complaints can be
brought to the District Judge.
However, the initial
determination of costs should be made by the Clerk who regularly
performs that function.
Accordingly, FDS should present its
Bill of Costs to the Clerk within ten (10) days of the receipt
of this Memorandum Opinion and Order.3
II.
ODI has requested that the Court exercise its inherent
power to award it the attorney’s fees incurred in responding to
FDS’s motion for costs and fees.
“In order to impose sanctions
pursuant to its inherent power, a district court must find that:
(1) the challenged claim was without a colorable basis and (2)
the claim was brought in bad faith, i.e., motivated by improper
purposes such as harassment or delay.”
Schlaifer Nance & Co.,
Inc. v. Estate of Andy Warhol, 194 F.3d 323, 336 (2d Cir. 1999).
ODI argues that FDS’s failure to recognize that Delta Air Lines
3
Under Local Rule 54.1(a), the Bill of Costs is to be filed
with the Clerk within thirty days of the entry of judgment,
unless the period is extended by the Court for good cause shown.
In this case, the Bill of Costs is dated within thirty days of
the date of judgment but was filed with the Court rather than
with the Clerk. There is good cause for extending the deadline
so that the Bill of Costs can be filed with the right unit of
the Court.
8
rendered the Rule 68 claim meritless entitles it to attorney’s
fees incurred in responding to FDS’s motion.
The first part of the Schlaifer test asks whether FDS’s
claim was without a colorable basis.
“‘[A] claim is entirely
without color when it lacks any legal or factual basis.’
Conversely, a claim is colorable ‘when it has some legal and
factual support, considered in light of the reasonable beliefs
of the individual making the claim.’”
Schlaifer, 194 F.3d at
337 (alteration in original) (quoting Sierra Club v. U.S. Army
Corps of Eng’rs, 776 F.2d 383, 390 (2d Cir. 1985) and Nemeroff
v. Abelson, 620 F. 2d 339, 348 (2d Cir. 1980)).
In bringing its
motion, FDS relied on a recent decision from this District
awarding attorney’s fees to a defendant pursuant to Rule 68 as
well as § 505, even though the plaintiff recovered nothing.
Baker, 431 F. Supp. 2d at 361-62.
See
In light of this reliance,
FDS’s claim under Rule 68 was not entirely without legal
support.
Moreover, irrespective of the merit of the request for
attorney’s fees under Rule 68, ODI could still have been
required to resist a motion for such fees under § 505.
Furthermore, there is no inference of bad faith on FDS’s
part.
A finding of bad faith requires “clear evidence” gleaned
from “a high degree of specificity” of improper purpose.
Oliveri v. Thompson, 803 F.2d 1265, 1272 (2d Cir. 1986).
9
ODI’s
conclusory allegation that FDS sought to exhaust ODI’s limited
resources is entirely unsupported and fails to meet this
exacting standard.
At most, FDS’s error in relying on Rule 68
was a good faith error of law.
Accordingly, ODI’s request is
denied.
CONCLUSION
For the reasons stated above, FDS’s motion for attorney’s
fees is denied.
ODI’s request for attorney’s fees incurred in
responding to FDS’s motion is also denied.
FDS has ten days
from the receipt of this decision to file a Bill of Costs with
the Clerk pursuant to Local Rule 54.1.
The Clerk is directed to
close Docket No. 140.
SO ORDERED.
Dated:
New York, New York
November 12, 2013
_____________/s/______________
John G. Koeltl
United States District Judge
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