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Case: 1:10-cv-07141 Document #: 134 Filed: 08/17/12 Page 1 of 12 PageID #:1106
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`ESTATE OF JOE BROWN,
`
`Plaintiff,
`
`v.
`ARC MUSIC GROUP, et al.,
` Defendants.
`
`Case No. 10 C 7141
`Hon. Harry D. Leinenweber
`
`MEMORANDUM OPINION AND ORDER
`Before the Court are the Arc and Frederick Defendants’ Motions
`for Attorney’s Fees under the Copyright Act. The Motions are granted
`as to liability. Arc Defendants’ Motion is denied without prejudice
`in regards to apportionment. Both Defendants’ also moved for
`sanctions under 28 U.S.C. § 1927. Those Motions are denied.
`I. BACKGROUND
`Plaintiff, the Estate of Joe Brown, brought an action against
`the following Defendants: Arc Music Group and Opus 19 Music, LLC
`(the “Arc Defendants”), Music Sales Corporation (“Music Sales”),
`Frederick Music Company and Vincent Brandom (the “Frederick
`Defendants”), and Katrina Music Company and Willie C. Cobbs (the
`“Katrina Defendants”).
`Plaintiff brought claims against the Arc Defendants for
`copyright infringement, fraud, unjust enrichment and civil
`conspiracy. Plaintiff also sought an accounting and a constructive
`trust. Plaintiff alleged that, without authority, the Arc Defendants
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`filed copyright registrations and collected funds for compositions
`owned by the Plaintiff. The Court granted the Arc Defendants’ Motion
`to Dismiss, dismissing for failure to state a claim the copyright
`infringement, fraud, constructive trust, and civil conspiracy claims
`with prejudice in an order dated November 22, 2011. The Court
`dismissed the unjust enrichment and accounting claims without
`prejudice to allow the Plaintiff to replead those claims.
`From the Frederick Defendants, Plaintiff sought to recover for
`copyright infringement, trademark infringement, common law fraud, and
`conspiracy. Plaintiff alleged that the Frederick Defendants failed
`to pay royalties owed to the Plaintiff under a publishing agreement.
`Plaintiff’s Second Amended Complaint voluntarily dismissed its
`copyright and trademark infringement claims against the Frederick
`Defendants, and added claims of breach of fiduciary duty, unjust
`enrichment, accounting, and constructive trust. The Court granted
`the Frederick Defendants’ Motion to Dismiss, dismissing all claims
`with prejudice.
`The Arc and Frederick Defendants now move for attorneys’ fees
`pursuant to the Copyright Act (17 U.S.C. § 505) and for sanctions
`under 28 U.S.C. § 1927. Familiarity with the Court’s order of
`November 22, 2011 is presumed, and further facts are discussed below
`where relevant.
`
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`II. ANALYSIS
`A. Attorneys’ Fees Under the Copyright
`Act, 17 U.S.C. § 505
`The Copyright Act provides that a court has discretion to award
`the prevailing party reasonable attorneys’ fees. 17 U.S.C. § 505
`(2006). For this provision, prevailing plaintiffs and defendants are
`treated alike. Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994).
`The defendant is considered the prevailing party when the action is
`dismissed with prejudice. Riviera Distribs., Inc. v. Jones, 517 F.3d
`926, 928 (7th Cir. 2007).
`The Supreme Court in Fogerty listed four non-exclusive factors
`that courts use to guide their discretion regarding attorneys’ fees.
`These factors are frivolousness, motivation, objective factual and
`legal unreasonableness, and the need in particular circumstances to
`advance considerations of compensation and deterrence. Fogerty, 510
`U.S. at 534 n. 19 (citing Lieb v. Topstone Indus., Inc., 788 F.2d
`151, 156 (3d Cir. 1986)).
`The Seventh Circuit has further streamlined the Fogerty factors
`into just two important considerations: the strength of the
`prevailing party’s case and the amount of the relief obtained by the
`prevailing party. Assessment Techs. of WI, LLC v. WIREData, Inc.,
`361 F.3d 434, 436-437 (7th Cir. 2004). When the claim is frivolous
`and the prevailing party is a defendant who has not otherwise
`obtained damages (through a counterclaim, for example), the
`presumption to award attorneys’ fees is “compelling.” Id.
`
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`The prevailing party entitled to attorneys’ fees on a particular
`claim can only recover attorneys’ fees in defending against that one
`claim or any related claims, but not for unrelated claims. Entm’t
`Research Grp. v. Genesis Research Grp., 122 F.3d 1211, 1230 (9th Cir.
`1997).
`
`1. Arc Defendants
`Plaintiff’s copyright infringement action against the Arc
`Defendants centered on the following compositions: “This New
`Generation,” “Dark Road Blues,” and seventy-seven others attached in
`a list to the Complaint. Plaintiff alleged that the Arc Defendants
`filed copyright registrations, filed renewal registrations, and
`collected funds for these compositions without authorization.
`Plaintiff’s pleadings regarding “This New Generation” conceded
`that James Oden (“Oden”) was a co-author of the composition. Oden’s
`joint author status can be seen from Joe Brown’s own copyright
`registration, which lists Oden as a co-author. Plaintiff’s Complaint
`attempted to establish sole authorship by alleging that Oden was an
`employee at Lawn Music Co. (“Lawn”), a company Brown owned. (Brown’s
`estate is the successor to Lawn.) Even though Plaintiff pleaded that
`Oden was “work for hire under Lawn,” he did not allege sufficient
`facts in support such a relationship.
`Plaintiff additionally argued that Oden’s original registration
`was invalid because of Brown’s previous original registration.
`However, as the Court previously found, Oden was identified as a
`claimant in the original registration and could, therefore, file
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`another registration in his own name. See 37 C.F.R.
`§ 202.3(b)(11)(ii) (2006).
`The Arc Defendants, as successors of Oden, could not be liable
`to Plaintiff for copyright infringement because each author of a
`joint work holds an undivided interest in it. See 17 U.S.C. § 201(a)
`(2006). The joint authors of a copyright are akin to tenants in
`common, and each may use or license the joint work. Erickson v.
`Trinity Theatre, Inc., 13 F.3d 1061, 1068 (7th Cir. 1994). While
`joint authors cannot be liable to each other for copyright
`infringement, each must account to the other for a share of profits
`stemming from individual use or licensing. Gaiman v. McFarlane, 360
`F.3d 644, 652 (7th Cir. 2004). However, when joint authorship is
`conceded, as the Court found that it was here, the “appropriate
`remedy is a state law suit for accounting of profits.” Estate of Joe
`Brown v. Arc Music Grp., 830 F.Supp.2d 501, 517 (N.D. Ill. 2011)
`(citing Gaiman, 360 F.3d at 652). Plaintiff did not allege
`sufficient facts to provide the Arc Defendants with notice of a state
`law accounting claim based on co-ownership. The Court granted leave
`to the Plaintiff to replead an accounting action under a copyright
`co-ownership theory within thirty days of the Order. However,
`Plaintiff did not do so.
`With respect to “Dark Road Blues,” Plaintiff’s pleadings again
`conceded that Brown co-authored the work, in this case with
`songwriter Floyd Jones (“Jones”). Brown filed a copyright
`registration for this composition in 1961 that listed Brown and Jones
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`as claimants. Plaintiff again tried to establish sole ownership of
`the composition by alleging that Jones, in 1953, and Metric Music
`Company, in 1970, assigned Brown their interest in a composition
`called “On the Road Again.” “On the Road Again” was a separate work
`from “Dark Road Blues,” so neither of these assignments would have
`given Brown sole authorship rights in “Dark Road Blues.”
`The Arc Defendants, as successors of Jones, could not be sued
`for copyright infringement by Plaintiff as the co-author of “Dark
`Road Blues.” Again, however, leave was granted to replead accounting
`actions, which was not done.
`With respect the additional seventy-seven works attached to its
`Complaint, Plaintiff failed to attach any copyright registration
`certificates or even plead that these compositions had been
`registered by Plaintiff. Plaintiff also failed to even allege that
`it owned the copyrights to those songs. The Court held that without
`alleging any of this information, Plaintiff failed to state a
`copyright claim because Copyright registration is a well-known
`statutory prerequisite to filing a suit under the Copyright Act. 17
`U.S.C. § 411(a) (2006). Plaintiff also could not have credibly
`brought the infringement action without being the copyright owner of
`the listed songs. See 17 U.S.C. § 501(b)(2006).
`As noted above, the presumption for awarding attorneys fees to
`the prevailing party in a frivolous action who otherwise receives no
`damages is very strong in the Seventh Circuit. Here, the presumption
`was not rebutted as the Arc Defendant’s defense was exceedingly
`
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`strong. For “This New Generation” and “Dark Road Blues,” Plaintiff
`alleged copyright infringement against a co-author of the
`compositions, a recognized impossibility. For the listed works,
`Plaintiff alleged copyright infringement without first establishing
`copyright ownership or satisfying the registration prerequisite for
`infringement actions.
`It should have been apparent to Plaintiff that the infringement
`action was without merit. See Budget Cinema, Inc. v. Watertower
`Assocs., et al., 81 F.3d 729, 732-733 (7th Cir. 1996) (reversing
`district court’s denial of attorney fees when plaintiff filed
`infringement action before finalizing ownership interest and before
`effective date of copyright registration but still sought statutory
`damages and attorneys’ fees). If Watertower decrees that merely
`jumping the gun on ownership and registration merits attorney’s fees,
`then filing infringement counts against an admitted co-author for
`some works and failing to even allege ownership in other works must
`merit them as well. Accordingly, the Arc Defendants’ Motion for
`Attorneys’ Fees is granted as to liability in defending the
`infringement action.
`In addition to copyright infringement, Plaintiff’s claims
`against the Arc Defendants also included breach of a fiduciary duty,
`fraud, and civil conspiracy. The Arc Defendants contend they are
`entitled to attorneys fees for these dismissed counts as well. For
`Plaintiff’s fraud, constructive trust, and civil conspiracy claims to
`be sufficiently related to the copyright infringement claim, (and
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`thus merit attorneys’ fees under § 505) the claims must have arisen
`out of a “common core of facts” or “related legal theories.” Ustrak
`v. Fairman, 851 F.2d 983, 988 (7th Cir. 1988).
`The fiduciary duty, fraud and civil conspiracy counts were based
`on the allegations that the Arc Defendants filed copyright
`registrations for the Plaintiff’s compositions without authorization.
`Because this was the same course of alleged conduct that gave rise to
`Plaintiff’s copyright infringement action, the Arc Defendants are
`entitled to fees for defending these counts as well.
`The Arc Defendants concede they are not entitled to fees for the
`accounting and unjust enrichment counts that were dismissed without
`prejudice. Accordingly, The Arc Defendants requested $100,000,
`representing 72% of its actual fees and expenses totaling
`$138,936.33. The Arc Defendants give little information regarding
`how they arrived at this figure and must show where it comes from by
`submitting detailed original time records and billing statements.
`This Court has the discretion to ask the Arc Defendants to submit
`such materials, instead of relying exclusively on their declaration.
`See Entm’t Research Grp., 122 F.3d at 1230-31 (holding that district
`court abused its discretion in relying exclusively on the declaration
`of the party requesting attorneys’ fee to segregate time spent on
`each claim) (citing Hensley v. Eckerhart, 461 U.S. 424, 436-37
`(1983)).
`The Court recognizes that billing records for briefs might not
`indicate how much time was spent writing the accounting issue
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`sections versus the infringement issues sections. If the Arc
`Defendants are unable or unwilling to engage such hair-splitting, the
`Court is prepared to award Arc Defendants 50 percent of their fees,
`in recognition of the fact that the case was bifurcated along a line
`between the meritless infringement issues and the potentially
`meritorious accounting issues. In any event, as the Arc Defendants
`note, they must still submit documentation demonstrating the
`reasonableness of their fees.
`2. Frederick Defendants
`Plaintiff’s copyright infringement action against the Frederick
`Defendants arose from a publishing agreement, where Plaintiff granted
`sole and exclusive publication rights, and the rights to grant
`mechanical licenses in exchange for half of royalties received.
`Plaintiff alleged that the Frederick Defendants failed to pay
`royalties subject to this publishing agreement since 1976.
`In the Second Amended Complaint, Plaintiff voluntarily dismissed
`its copyright claims against the Frederick Defendants. The Frederick
`Defendants, therefore, prevailed for the purposes of 17 U.S.C. § 505
`when Plaintiff voluntarily dismissed its copyright claim with
`prejudice. See Riviera Distribs., 517 F.3d at 928. Thus, the
`Frederick Defendants are also presumptively entitled to attorneys’
`fees, especially after looking at the strength of the Frederick
`Defendants’ defense, which revolved around the statute of
`limitations.
`
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`The statute of limitations under the Copyright Act in this
`instance began to run when the royalty payments stopped, and
`prescribed a three-year window in which Plaintiff needed to bring its
`action. See 17 U.S.C. § 507(b) (2006). Furthermore, the Frederick
`Defendants assigned all of their rights and interests to Music Sales
`Corporation on July 1, 1996. This assignment included the
`responsibility to make royalty payments to writers and composers,
`relieving the Frederick Defendants of their royalty obligation to the
`Plaintiff. Because Plaintiff had far exceeded the statute of
`limitations for a copyright claim, the Frederick Defendants’ defense
`strengthens the presumption entitling them to attorneys’ fees. See
`Bridgeport Music, Inc. v. Lorenzo, 255 F.Supp.2d 795, 799 (M.D. Tenn.
`2003) (awarding attorneys’ fees when plaintiff brought claim outside
`of the statute of limitations). Accordingly, the Frederick
`Defendants’ Motion for Attorneys’ Fees pursuant to the Copyright Act
`is granted.
`In addition to its copyright infringement claim against the
`Frederick Defendants, Plaintiff also brought claims for trademark
`infringement, fraud, conspiracy, breach of fiduciary duty, unjust
`enrichment, accounting, and constructive trust. The trademark
`infringement claim was voluntary dismissed with prejudice in the
`Second Amended Complaint, and the remaining claims were dismissed
`with prejudice in the November 22 order. These claims were also
`based on the publishing agreement between Plaintiff and the Frederick
`Defendants. The publishing agreement and the Frederick Defendants’
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`failure to pay royalties were part of the common core of facts that
`also gave rise to the copyright infringement claim. Accordingly,
`because these claims were sufficiently related to the copyright
`infringement claim, and were equally outside of the statute of
`limitations and without merit, the Frederick Defendants do not need
`to apportion the time spent on defense of these claims. However,
`they must still submit a motion demonstrating the reasonableness of
`the attorney’s fees with attachments documenting billing and time
`records.
`
`B. Sanctions Under 28 U.S.C. § 1927
`The Arc and Frederick Defendants both filed Motions for
`attorney’s fees and costs pursuant to 28 U.S.C. § 1927, alleging that
`Plaintiff’s motion to reconsider the Court’s November 22, 2011
`Memorandum Opinion and Order dismissing Plaintiff’s Second Amended
`Complaint unnecessarily, unreasonably, and vexatiously multiplied the
`proceedings in this action.
`An award under Section 1927 must be supported by a finding of
`bad faith: vexatiousness has been defined as either subjective or
`objective bad faith. Kotsilieris v. Chambers, 966 F.2d 1181, 1184
`(7th Cir. 1992). But Kotsilieris made clear that even objectively
`unreasonable conduct does not, alone, equate to vexatiousness.
`Kotsilieris, 966 F.2d at 1184.
`The Court agrees that Plaintiff’s motion to reconsider was
`objectively unreasonable because it largely rehashed the issues of
`the motion to dismiss without reference to new facts or manifest
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`errors of law, which is required in a motion for reconsideration.
`Caisse Nationale de Credit Agricole v. CBA Indus., Inc., 90 F.3d
`1264, 1269 (7th Cir. 1996). As Kotsilieris notes, however,
`objectively unreasonable actions, alone, do not satisfy the
`vexatiousness requirement. Accordingly, Defendants’ Motions for
`Attorneys’ Fees and Costs pursuant to 28 U.S.C. § 1927 is denied.
`IV. CONCLUSION
`For the reasons stated herein, the Defendants’ Motions for
`Sanctions under 28 U.S.C. § 1927 are denied. The Frederick
`Defendants’ Motion for Attorney’s Fees under the Copyright Act is
`granted as to liability. The Arc Defendants Motion for Attorney’s
`Fees is granted as to liability, but denied without prejudice as to
`apportionment. The Arc Defendants must demonstrate proper
`apportionment between the infringement-related claims and the
`accounting-related claims. Alternatively, the Arc Defendants may
`submit a motion for 50 percent of their fees, which will be granted.
`Both the Frederick and Arc Defendants are to submit filings with the
`necessary documentation demonstrating the reasonableness of the fees
`to which they are entitled. The filings are due within thirty (30)
`days of entry of this order. Plaintiff has fourteen (14) days from
`that point to lodge any objections to reasonableness of the fees.
`IT IS SO ORDERED.
`
`DATE:8/17/2012
`
`Harry D. Leinenweber, Judge
`United States District Court
`
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