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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
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`
`Case No. 2:10-cv-03633-ODW(RZx)
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`ORDER DENYING DC’S MOTION
`FOR ATTORNEYS’ FEES [562]
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`DC COMICS,
`
`
`v.
`
`
`PACIFIC PICTURES CORPORATION;
`IP WORLDWIDE, LLC; IPW, LLC;
`MARC TOBEROFF; MARK WARREN
`PEARY; JEAN ADELE PEAVY, LAURA
`SIEGEL LARSON; DOES 1–10,
`inclusive,
`
`
`Plaintiffs,
`
`
`
`Defendants.
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`
`
`
`
`I.
`INTRODUCTION
`In 2010, DC Comics filed suit against (among others) the heirs of Superman co-
`creator Joseph Shuster, alleging that the heirs’ attempted copyright-grant termination
`was ineffective. DC also sought to invalidate three agreements between the heirs and
`Defendants Marc Toberoff and Pacific Pictures Corporation under 17 U.S.C.
`§ 304(c)(6)(D). After two years of acrimonious litigation, the Court granted partial
`summary judgment on both claims in DC’s favor.
`DC now moves for $500,000 in attorneys’ fees under the Copyright Act’s fee-
`shifting statute, 17 U.S.C. § 505. But DC seeks fees only against Toberoff, and only
`on its third claim concerning the heirs’ 2001 and 2003 agreements with Pacific
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`Pictures and the 2008 consent agreement between the Shuster and Siegel heirs.
`Defendants oppose DC’s fees request, arguing that DC succeeded only minimally and
`that Defendants had not asserted any frivolous or unreasonable defenses during the
`litigation. After considering the various factors expounded by the United States
`Supreme Court, as well as public-policy considerations, the Court DENIES DC’s
`Motion for Attorneys’ Fees.1
`II. FACTUAL AND PROCEDURAL BACKGROUND
`In November 2001, Defendants Mark Warren Peary and Jean Adele Peavy
`entered
`into a “Joint Venture Agreement” with Defendant Pacific Pictures
`Corporation, purportedly assigning any interest the heirs would recapture from the
`1992 Shuster termination notice to the venture. The parties reaffirmed this agreement
`in 2003. But in 2004, the parties rescinded both agreements. In 2008, the Shuster
`heirs and the Siegel heirs entered into a consent agreement, which prohibited either
`family from entering into an agreement with DC without the other’s approval.
`On August 20, 2012, DC moved for partial summary judgment on its first,
`second, and third claims. (ECF No. 458.) DC’s first claim sought a declaratory
`judgment that the Shuster heirs’ purported 2003 termination notice was ineffective
`under the Copyright Act for five alternative reasons. (FAC ¶¶ 105–34.) Under its
`third claim, DC sought a declaratory judgment that the 2001 and 2003 Pacific Pictures
`agreements and a 2008 consent agreement all violated 17 U.S.C. § 304(c)(6)(D). (Id.
`¶¶ 165–73.) DC argued that, as the allegedly terminated grantee, it was the only party
`with which the Shuster heirs could enter into an agreement regarding the Superman
`rights expected to be recovered from the 2003 termination. (ECF No. 458, at 31–33.)
`Defendants filed a cross-motion for partial summary judgment on the same
`claims. (ECF No. 478.) With respect to DC’s first claim, Defendants argued that
`Mark Warren Peary validly terminated the 1992 agreement in 2003 under 17 U.S.C.
`
`
`1 After carefully considering the papers filed with respect to this Motion, the Court deems the matter
`appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15.
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`§ 304(d). (Id. at 19–30.) Defendants also asserted that DC had no right to exclusively
`negotiate with the heirs under § 304(c)(6)(D). (Id. at 33–34.)
`On October 17, 2012, the Court granted partial summary judgment in DC’s
`favor on its first and third claims. (ECF No. 507.) The Court found that the 1992
`agreement between DC and the Shuster heirs revoked and regranted the heirs’
`Superman rights, thereby precluding the heirs from invoking § 304(d)’s termination
`provision. (ECF No. 507, at 8–13.) On DC’s third claim, the Court determined that
`the 2001, 2003, and 2008 agreements violated § 304(c)(6)(D), as they predated the
`purported termination notice’s October 2013 effective date. (Id. at 16–17.) On
`December 11, 2012, the Court accordingly issued partial judgment. (ECF No. 540.)
`Despite its victory on both its first and third claims, DC now moves for
`$500,000 in attorneys’ fees only against Marc Toberoff and Pacific Pictures2 and only
`for prosecuting its third claim. (Notice of Mot. 2 (ECF No. 562, at 3).) DC chose not
`to seek fees from Peary and Defendant Jean Adele Peavy, asserting that they too
`“were the victims of Marc Toberoff and his illicit schemes to interfere with DC’s
`rights for his own private gain.” (Id.) Defendants timely opposed on February 4,
`2013. (ECF No. 576.) That Motion is now before the Court for decision.3
`III. LEGAL STANDARD
`Under the “American Rule,” the prevailing party ordinarily is not entitled to
`collect attorneys’ fees from the losing party absent explicit statutory authority to the
`contrary. Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human
`Res., 532 U.S. 598, 602 (2001). Section 505 of the Copyright Act provides that a
`court may, in its discretion, award reasonable attorneys’ fees to the prevailing party in
`“any civil action under this title.” 17 U.S.C. § 505.
`/ / /
`
`
`2 Pacific Pictures has since been dissolved. (Adams Decl. Ex. 21 (ECF No. 463-4, at 28).)
`3 While Defendants have appealed the partial-summary judgment ruling, the Court finds it
`appropriate to resolve the attorneys’-fees motion now to avoid “piecemeal appeals.” Masalosalo by
`Masalosalo v. Stonewall Ins. Co., 718 F.2d 955, 957 (9th Cir. 1983).
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`The United States Supreme Court has expounded four nonexclusive factors a
`district court should consider in determining whether to award attorneys’ fees under
`this section: (1) frivolousness; (2) motivation; (3) objective unreasonableness in both
`the factual and legal components of the case; and (4) the need to advance
`compensation and deterrence goals. Fogerty v. Fantasy, Inc., 510 U.S. 517, 535 n.19
`(1994). The Ninth Circuit also considers the prevailing party’s degree of success.
`Wall Data Inc. v. L.A. Cnty. Sheriff’s Dep’t, 447 F.3d 769, 787 (9th Cir. 2006).
`Despite these vague factors, the Ninth Circuit has emphasized that an attorneys’-fees
`award is “reposed in the sound discretion of the district courts.” Fantasy, Inc. v.
`Fogerty, 94 F.3d 553, 555 (9th Cir. 1996).
`IV. DISCUSSION
`DC moves for attorneys’ fees solely against Toberoff and Pacific Pictures and
`only based on DC’s third claim. DC argues that since Defendants have agreed that the
`2001 and 2003 Pacific Pictures agreements were invalid, they should have stipulated
`to judgment in DC’s favor on the third claim and saved DC from having to spend
`$500,000 prosecuting that claim.
`Defendants respond that DC did not obtain any meaningful relief against
`Toberoff or Pacific Pictures, because Defendants voluntarily rescinded the Pacific
`Pictures agreements in 2004—six years before this litigation commenced. Defendants
`also assert that nothing they argued was frivolous or objectively unreasonable,
`considering the scant authority interpreting § 304(c)(6)(D). The Court considers each
`party’s arguments in turn.
`A. Degree of success DC obtained
`The United States Supreme Court has interpreted that a party must have
`obtained “a corresponding alteration in the legal relationship of the parties” to be
`considered a “prevailing party” under a federal fee-shifting statute. Buckhannon, 532
`U.S. at 602. The Ninth Circuit has adopted this Buckhannon test in the Copyright Act
`attorneys’-fees context.  Cadkin v. Loose, 569 F.3d 1142, 1149 (9th Cir. 2009).
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`DC argues that it obtained precisely the relief it sought through the Court’s
`partial-summary-judgment Order: a declaration that the 2001, 2003, and 2008
`agreements violated § 304(c)(6)(D). (Mot. 2–3.) Even though Toberoff and Pacific
`Pictures were not parties to the 2008 consent agreement, DC contends that its third
`claim nevertheless targeted Toberoff’s conduct in “orchestrating [the] lock-up
`agreements.” (Reply 4.)
`Defendants disagree, arguing that since Defendants voluntarily canceled the
`Pacific Pictures agreements in 2004 and never asserted that they were valid, DC did
`not achieve any significant alteration in the parties’ legal relationship. (Opp’n 1, 4, 6–
`9.) Further, Toberoff contends that he is not personally liable for any of DC’s
`attorneys’ fees, because he was not a party to the 2008 consent agreement and only
`acted as the Shuster heirs’ attorney. (Id. at 9–10.)
`In its partial-summary-judgment Order, the Court reasoned that the “multiple
`agreements purporting to grant or otherwise encumber” the alleged rights to be
`recovered from the 2003 termination ran afoul of § 304(c)(6)(D) and were therefore
`invalid. (ECF No. 507, at 17.) These agreements, as noted in the Court’s partial
`judgment, were the 2001 and 2003 Pacific Pictures agreements and the 2008 consent
`agreement between the Shuster and Siegel heirs. (ECF No. 540.) So, even though
`Defendants voluntarily terminated the 2001 and 2003 agreements, the 2008 consent
`agreement remained in full force until the Court invalidated it. This nullification did
`indeed alter the legal relationship between DC and the Shuster heirs: without it, DC is
`now free to negotiate with either family without the other family’s consent.
`But DC achieved only limited success on its third claim. While DC’s first
`claim—under which it retained the rights to Superman—was worth millions of
`dollars, its third claim stands in stark contrast. DC simply obtained the freedom to
`unilaterally negotiate with one family (the Shusters) over rights the Shuster heirs do
`not have. The Ninth Circuit’s degree-of-success factor contemplates that a party’s
`favorable judgment falls on a continuum. DC’s exiguous success on its third claim
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`ranks at the lower end of that spectrum, thus weighing against an attorneys’-fees
`award. See Park, ex rel. Park v. Anaheim Union High School Dist., 464 F.3d 1025,
`1036 (noting that a court may deny attorneys’ fees when “plaintiff’s success on a legal
`claim can be characterized as purely technical or de minimis”).
`B.
`Frivolousness and objective unreasonableness
`The Ninth Circuit recently held that “a losing party’s claim can be a relevant
`indicator of whether the [Copyright] Act’s primary objective is being served by the
`litigation.” SOFA Entm’t, Inc. v. Dodger Prods., Inc., No. 10-56535, 2013 WL
`1004610, at *5 (9th Cir. Mar. 11, 2013) (slip op.) (internal quotation marks omitted);
`see also Twentieth Century Fox Film Corp. v. Entm’t Distrib., 429 F.3d 869, 883 (9th
`Cir. 2005). The Supreme Court has not defined objective unreasonableness in the
`copyright context. But in another area, the Court noted that an argument is “frivolous
`where it lacks an arguable basis either in law or in fact.” Neitzke v. Williams, 490 U.S.
`319, 325 (1989).
`DC asserts that since Defendants declined to stipulate to judgment on DC’s
`third claim, DC was “forced” to, among other things, prosecute that claim, defend
`against motions to dismiss, and prepare its partial-summary-judgment motion.
`(Mot. 4.) DC also argues that Defendants’ opposition to the third claim ran counter to
`a “right” the Ninth Circuit allegedly recognized in favor of original grantees like DC.
`(Reply 8); see also Milne ex rel. Coyne v. Stephen Slesinger, Inc., 430 F.3d 1036 (9th
`Cir. 2005). Since the Court approvingly cited Milne in its partial-summary-judgment
`Order, DC asserts that Defendants “had no basis to oppose DC’s Third Claim.”
`(Reply 8–9.)
`Defendants respond that they always agreed that the 2001 and 2003 Pacific
`Pictures agreements were invalid and never debated their legality during the litigation.
`(Opp’n 4; see also ECF No. 191, at 8 (conceding that the agreements were void “ab
`initio”); Peary Dep. 225:16–17, June 29, 2011 (ECF No. 305–37, at 227) (Toberoff
`and the Shuster heirs agreed that the Pacific Pictures agreements were “not the best
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`approach to take”).) Defendants also point to their argument that the September 2004
`invalidation of the 2001 and 2003 agreements rendered DC’s third claim moot.
`(Adams Decl. Ex. 13.)
`Instead, Defendants assert that they only argued that DC had no “right” to an
`exclusive-negotiation period under § 304(c)(6)(D) or standing to sue under that
`section. (Id. at 11.) Defendants continually cited to Bourne Co. v. MPL
`Communications, Inc., 675 F. Supp. 859, 865 (S.D.N.Y. 1987), a case in which the
`district court held that terminated grantees have no statutory first-refusal right under
`§ 304(c)(6)(D). Id. at 865–67. Defendants also contended throughout the litigation
`that their position was supported by the plain text of the statute, DC’s counsel’s
`arguments in other cases, treatises, and the Magistrate Judge’s decision in this case.
`(Opp’n 11–13.)
`DC impliedly asks the Court to adopt an after-the-fact style of reasoning, that is,
`because Defendants did not ultimately prevail, their defense must have been
`unreasonable. But it is hardly shocking that Defendants did not stipulate to judgment
`against them and instead engaged in the adversarial process. Stipulating to judgment
`on DC’s third claim undoubtedly would have saved both sides time and money. But
`stipulating to judgment would have swept much more into the judgment than just the
`2001 and 2003 agreements’ invalidity—Plaintiff also sought a declaratory judgment
`on two other grounds and an injunction.
`Defendants also had a legal foundation for their argument that DC lacked any
`exclusivity right or standing to sue under § 304(c)(6)(D). Though Defendants did not
`ultimately prevail, their argument rested on several different primary and secondary
`authorities. Litigants are given broad latitude to advocate their positions, so long as
`they comport with Rule 11. Defendants sought to explore the boundaries of a
`relatively green area of copyright law and did so without traversing the bounds of
`reasonableness. As the United States Supreme Court cautioned, “it is important that a
`district court resist the understandable temptation to engage in post hoc reasoning by
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`concluding that, because a plaintiff did not ultimately prevail, his action must have
`been unreasonable or without foundation.” Christiansburg Garment Co. v. Equal
`Emp’t Opportunity Comm’n, 434 U.S. 412, 421–22 (1978); Brooks v. Cook, 938 F.2d
`1048, 1055 (9th Cir. 1991). The Court heeds that advice.
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`DC’s argument that Defendants’ motions and arguments contributed to the
`“bloat” of the case is similarly unavailing. (Reply 8); see also Love v. Assoc’d
`Newspapers, Ltd., 611 F.3d 601, 615 (9th Cir. 2010). Defendants spent a rather slim
`10 percent of their briefing space in each of their filings on the third claim—hardly the
`circumlocution DC claims.
`The Court accordingly finds that Defendants’ position was neither frivolous nor
`objectively unreasonable, further counseling against an attorneys’-fees award.
`C. Motivation
`In considering whether to award attorneys’ fees, courts consider the motivations
`of both parties in pursuing the litigation. Twentieth Century Fox Film Corp. v.
`Streeter, 438 F. Supp. 2d 1065, 1075 (D. Ariz. 2006).
`DC does not directly address Fogerty’s motivation factor. But Defendants
`argue that DC improperly seeks attorneys’ fees exclusively against Toberoff as the
`Shuster heirs’ attorney. Defendants contend that since they voluntarily terminated the
`2001 and 2003 Pacific Pictures agreements, only the 2008 consent agreement
`remained ripe for judicial evaluation. But Toberoff was not a party to that agreement;
`he merely signed the agreement “as to form.” (Toberoff Dep. 274:4, Sept. 18, 2012
`(ECF No. 576-2, at 6).)
`Defendants’ motivation in defending themselves is hardly astonishing. Just like
`DC, the Shuster heirs risked losing their multimillion-dollar Superman rights. Most
`litigants would find Superman’s substantial value sufficient motivation to defend their
`position.
`What is surprising is DC’s motivation in seeking attorneys’ fees solely against
`one Defendant. DC’s entire Motion smacks of animus toward Toberoff. Despite the
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`fact that the parties spent the vast majority of their briefing on the first claim, arguing
`extensively over the purported termination’s effect, DC does not seek attorneys’ fees
`based on that significant claim. Instead, DC singles out one Defendant—Toberoff—
`for a punitive attorneys’-fees award based on an agreement to which he was not a
`party. Toberoff only signed the 2008 consent agreement as the Shuster heirs’
`attorney. And when a fee-shifting statute does not expressly permit an attorneys’-fees
`award against the losing party’s counsel, “the appropriate inference is that an award
`against attorneys is not authorized.” Healey v. Chelsea Res., Ltd., 947 F.2d 611, 624
`(2d Cir. 1991), cited with approval in Heckethorn v. Sunan Corp., 992 F.2d 240, 242
`(9th Cir. 1993). DC therefore is not entitled to attorneys’ fees from Toberoff simply
`because he served as the heirs’ attorney.
`D. Compensation and deterrence
`Ordinarily § 505 attorneys’-fees awards “serve the purpose of encouraging
`private enforcement and deterring infringements.” Frank Music Corp. v. Metro-
`Goldwyn-Mayer Inc., 886 F.2d 1545, 1556 (9th Cir. 1989). The Ninth Circuit has
`noted particular concern that copyright holders will not prosecute infringement actions
`when the amount at stake is low. Magnuson v. Video Yesteryear, 85 F.3d 1424, 1432
`(9th Cir. 1996). Indeed, the Seventh Circuit has even gone so far as to establish a
`presumption of entitlement to attorneys’ fees “when the monetary stakes are small.”
`Gonzales v. Transfer Techs., Inc., 301 F.3d 608, 610 (7th Cir. 2002) (Posner, J.).
`In contrast, millions of dollars were at stake here. There is little concern that
`potential copyright claimants like DC will lack an incentive to bring suit to assert their
`rights when such a substantial amount of money is involved. Even though DC seeks
`some $500,000 in attorneys’ fees, that considerable amount pales in comparison to the
`Superman rights’ value.
`There is also no infringement to deter here. The overwhelming majority of
`§ 505 cases deal with awarding attorneys’ fees in infringement cases—and for good
`reason. It makes smart public-policy sense to discourage those who trespass on
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`others’ property rights. But it makes less sense to punish those who assert a good-
`faith claim in a copyright and happen to lose during litigation. Indeed, when there are
`two competing copyright claimants in a case, one will always lose. Such is the
`adversarial system.
`Citing to Milne, DC argues that § 304(c)(6)(D) exists to deter parties like
`Toberoff and Pacific Pictures from “trafficking in future [copyright interests].”
`(Mot. 3); Milne, 430 F.3d at 1047. DC contends that the $500,000 attorneys’-fees
`award will discourage “traffickers” like Toberoff and reimburse DC for pursuing its
`third claim. (Mot. 3.) DC also argues that the award will compensate it for its
`inability to freely negotiate with the Shusters.
`Defendants disagree, arguing that Congress enacted § 304(c)(6)(D) to protect
`authors and their heirs, not grantees like DC. (Opp’n 16.) Defendants further contend
`that awarding attorneys’ fees against an attorney who agreed to litigate a termination
`case on a contingency basis would discourage other attorneys from taking similar
`cases in the future. (Id.)
`Regardless whether Congress enacted § 304(c)(6)(D) to benefit grantees or
`authors, DC inappositely relies upon the statute’s protective purpose. If Toberoff
`engaged in any “trafficking,” it was with the 2001 and 2003 agreements—both of
`which Defendants voluntarily rescinded six years before DC filed this case. It makes
`little sense to punish someone for agreements that no longer existed, especially
`considering that Defendants never asserted the validity of the 2001 and 2003
`agreements during the litigation.
`If anything, DC would want to protect itself against the 2008 consent
`agreement, which remained a contested issue up until the Court’s partial-summary-
`judgment Order. Yet DC did not target any of the parties to that agreement, just their
`attorney. Yet as discussed above, attorneys are generally not liable under fee-shifting
`statutes for their clients’ conduct. Healey, 947 F.2d at 624.
`/ / /
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`E.
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`Equitable and public-policy considerations
`The Ninth Circuit has recognized that the most important factor for a court to
`consider in awarding attorneys’ fees is whether the award will further the purposes of
`the Copyright Act. Mattel, Inc v. MGA Entm’t, Inc., 705 F.3d 1108, 1111 (9th Cir.
`2013); SOFA Entm’t, Inc., 2013 WL 1004610, at *5; see also Fogerty, 510 U.S. at
`524. The Supreme Court noted that the “primary objective of the Copyright Act is to
`encourage the production of original literary, artistic, and musical expression for the
`good of the public.” Fogerty, 510 U.S. at 524.
`Absent bad faith or other reprehensible conduct by the losing party, a § 505
`attorneys’-fees award presents a clash between competing policy goals. On one hand,
`§ 505 seeks to compensate the prevailing party for successfully vindicating its
`copyright claim. On the other end, courts do not want chill legitimate advocacy by
`defendants. Brayton Purcell LLP v. Recordon & Recordon, 487 F. Supp. 2d 1124,
`1129 (N.D. Cal. 2007). Resolving these dichotomous objectives depends on a case’s
`equitable circumstances. Streeter, 438 F. Supp. 2d at 1074.
`The Court finds that the balance of the equities weighs against awarding
`attorneys’ fees to DC. While the 2001 and 2003 agreements were facially invalid, the
`issue of what rights, if any, DC had under § 304(c)(6)(D) to bring suit against the
`Shuster heirs was more nebulous. As the Supreme Court aptly explained,
`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 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 . . . .
`Fogerty, 510 U.S. at 527.
`Punishing Toberoff and Pacific Pictures with a $500,000 attorneys’-fees award4 would
`send a clear message to copyright defendants that litigating a claim with good-faith,
`
`
`4 Because the Court decides that DC is not entitled to attorneys’ fees, the Court expresses no opinion
`on the reasonableness on DC’s requested amount.
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`supported defenses is wrong. That is undoubtedly not a message this Court wants to
`send to Toberoff or others.
`
`V. CONCLUSION
`For the reasons discussed above, DC’s Motion for Attorneys’ Fees is DENIED.
`
`IT IS SO ORDERED.
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`April 4, 2013
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` ____________________________________
` OTIS D. WRIGHT, II
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` UNITED STATES DISTRICT JUDGE
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