Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 1 of 11
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF TEXAS
`AUSTIN DIVISION
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`LIGHTSOURCE ANALYTICS, LLC
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`V.
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`§
`§
` §
`GREAT STUFF, INC., GREAT
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`§
`SOLUTIONS, INC., JAMES TRACEY,
`AND JOHNATHAN TRACEY §
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`A-13-CV-931 LY
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`§§
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`REPORT AND RECOMMENDATION
`OF THE UNITED STATES MAGISTRATE JUDGE
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`TO: THE HONORABLE LEE YEAKEL
`UNITED STATES DISTRICT JUDGE
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`Before the Court are: Defendants’ Opposed Motion for 4-Minute Extension of Time, filed
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`on July 9, 2014 (Dkt. No. 50); Plaintiff’s Response to Defendants’ Motion for Extension of Time,
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`filed on July 14, 2014 (Dkt. No. 51); Defendants’ Reply in Support of their Motion for 4-Minute
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`Extension of Time (Dkt. No. 53). Also before the Court are: Defendants’ Motion for Attorney’s
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`fees, filed on June 23, 2014, 2014 (Dkt. No. 47); Plaintiff’s Response to Defendants’ Motion for
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`Attorney’s fees, filed on July 2, 2014 (Dkt. No. 48); and Defendants’ Reply in Support of Their
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`Motion for Attorney’s fees, filed on July 9, 2014 (Dkt. No. 49).
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`The Magistrate Judge submits this Report and Recommendation to the United States District
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`Court pursuant to 28 U.S.C. § 636(b)(1)(B), Federal Rule of Civil Procedure 72, and Rule 1(d) of
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`Appendix C of the Local Court Rules of the United States District Court for the Western District of
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`Texas.
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`The Court HEREBY GRANTS Defendants’ Opposed Motion for 4-Minute Extension of
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`Time (Dkt. No. 50), which moots Lightsource’s argument that the Motion for Attorney’s fees was
`untimely under Federal Rule of Civil Procedure 54(d)(2).
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 2 of 11
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`I. GENERAL BACKGROUND
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`On October 18, 2013, Plaintiff Lightsource Analytics, LLC (“Lightsource”) filed this lawsuit
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`against Great Stuff, Inc., Great Solutions, Inc., James Tracey and Johnathan Tracey (“Defendants”).
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`Lightsource alleges that it met with Defendants on August 28, 2012, to discuss developing a
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`marketing and advertising plan for Defendant Great Stuff, Inc.’s new RoboReel product (a motorized
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`device that reels in hoses or power cords). According to Lightsource, Defendants agreed to pay it
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`an estimated fee of $88,000 for the marketing and advertising plan. Lightsource alleges that
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`Defendants have failed to make all payments on the Agreement and owe Lightsource $30,111.09,
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`plus interest. Lightsource’s Amended Complaint alleges copyright infringement, breach of contract,
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`fraud, violation of Texas Theft Liability Act and suit on an account.
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`On November 22, 2013, Defendants filed a Motion to Dismiss arguing that Lightsource’s
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`fraud claim should be dismissed under Federal Rules of Civil Procedure 9(b) and 12(b)(6). On
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`February 27, 2014, the undersigned issued a Report and Recommendation to the District Judge
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`recommending that the Motion to Dismiss Lightsource’s fraud claim be denied. However, the
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`undersigned further recommended that the District Court order Lightsource to re-plead its fraud
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`claim to clarify “whether Lightsource is now alleging a partial intent not to perform under the
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`Agreement . . . and, at the same time, provide more factual details of the alleged fraud in order to
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`comply with Rule 9(b).” R & R at 6. On May 5, 2014, the District Court adopted the Report and
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`Recommendation in full and ordered Plaintiff to file an Amended Complaint by May 16, 2014. See
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`Dkt. No. 36.
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`After filing its Amended Complaint, Lightsource filed a Voluntary Notice of Dismissal under
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`Federal Rule of Civil Procedure 41 requesting that the District Court dismiss the action without
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 3 of 11
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`prejudice. On June 10, 2014, the District Court issued a Final Judgment in the case, pursuant to
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`Federal Rule of Civil Procedure 58. See Final Judgment (Dkt. No. 46). On June 23, 2014,
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`Defendants filed the Motion for Attorney’s fees requesting that the Court award them $256,432 in
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`attorney’s fees, as prevailing parties under the Copyright Act, 17 U.S.C. § 505.
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`II. ANALYSIS
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` As noted, Defendants argue that they are prevailing parties under the Copyright Act, 17
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`U.S.C. § 505, and are entitled to $256,432 in attorney’s fees. In Response, Lightsource argues that
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`the Notice of Dismissal terminated the case and the Court no longer has jurisdiction over the case
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`and therefore cannot issue an award of attorney’s fees. Alternatively, Lightsource argues that even
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`if the Court had jurisdiction to rule on the Motion for Attorney’s fees, it should be denied because
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`Defendants are not prevailing parties under the Copyright Act.
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`A.
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`Jurisdiction
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`The Court must first address whether it has jurisdiction to rule on the Motion for Attorney’s
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`fees. See Craven v. Director, Office of Workers Compensation Programs, 604 F.3d 902, 905 (5th
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`Cir. 2010) (“[T]he first question we must address is whether the Court has jurisdiction to hear the
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`instant appeal.”). Rule 41(a)(1)(A)(i) permits a party to dismiss his or her action by notice where
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`no answer or motion for summary judgment has been filed. FED. R. CIV. P. 41(a)(1)(A)(i).
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`Consistent with Rule 41(a)(1)(A)(i), Lightsource filed its Notice of Dismissal on June 9, 2014.
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`Lightsource argues that the Notice of Dismissal terminated the case and the Court no longer has
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`jurisdiction to rule on the Motion for Attorney’s fees.
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`In support its argument, Lightsource relies on Williams v. Ezell, 531 F.2d 1261, 1264 (5 Cir.
`th
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`1976), in which the Fifth Circuit held that the district court had no discretion to deny the plaintiff’s
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 4 of 11
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`voluntary dismissal, to attach any condition or burden to that dismissal, or to award attorney’s fees
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`after the plaintiff had filed the voluntary dismissal under Rule 41(a)(1). In Williams, after the
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`plaintiff filed its notice of dismissal, the district court denied the plaintiff’s “motion” for voluntary
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`dismissal and subsequently granted the defendant’s motion for attorney’s fees. The Fifth Circuit
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`explained that Rule 41(a)(1) “means precisely what it says” and that “a plaintiff is entitled as a matter
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`of right to dismiss its complaint where no responsive pleading has been filed even though a hearing
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`on a motion for injunctive relief had been held.” Id. at 1263. The Court further reasoned that “the
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`case was effectively terminated” at the time the Rule 41(a)(1) notice was filed. Therefore, the
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`district court “had no power or discretion” to deny the plaintiff’s right to dismiss the case “or to
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`attach any condition or burden to that right.” Id. 1264. “That was the end of the case and the attempt
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`to deny relief on the merits and dismiss with prejudice was void. Likewise, except for determining
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`appealability, the subsequent orders granting attorneys fees were a nullity.” Id.
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`Since Williams, however, the Supreme Court issued its decision in Cooter & Gell, v.
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`Hartmarx, 496 U.S. 384 (1990), in which it held that a voluntary dismissal under Rule 41(a)(1)(A)
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`did not deprive a district court of jurisdiction to award attorney’s fees under Rule 11. In Cooter,
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`after the defendant moved to dismiss the antitrust complaint as baseless and moved for sanctions
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`under Rule 11, the plaintiff filed a notice of dismissal under Rule 41(a)(1)(A). The dismissal did not
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`become effective until July 1984, when the district court granted petitioner’s motion to dispense with
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`notice of dismissal to putative class members. Before the dismissal became effective, the district
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`court heard oral argument on the Rule 11 motion. Three years later, the district court granted
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`Instead of filing a “notice of dismissal” the plaintiff filed a “motion for dismissal,” which
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`was not proper since no motion was needed since the defendant had yet to file an answer or a motion
`summary judgment in the case.
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 5 of 11
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`defendant’s motion for Rule 11 sanctions and imposed monetary sanctions including attorney’s fees.
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`The Court of Appeals affirmed and granted the defendant’s request to recover its attorney’s fees for
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`defending its Rule 11 award on appeal and remanded the case to the district court to determine the
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`amount of attorney’s fees. Plaintiff appealed, arguing that its Rule 41(a)(1) notice of dismissal
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`deprived the district court of jurisdiction to award attorney’s fees. The Supreme Court rejected this
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`argument finding that district courts may enforce Rule 11 even after the plaintiff has filed a Rule
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`41(a)(1) notice of dismissal. The Court found that a violation of Rule 11 is complete “when the
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`paper is filed” and thus a voluntary dismissal does not expunge the Rule 11 violation. Id. at 395. The
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`Court reasoned the following:
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` In order to comply with Rule 11's requirement that a court “shall” impose sanctions
`“[i]f a pleading, motion, or other paper is signed in violation of this rule,” a court
`must have the authority to consider whether there has been a violation of the signing
`requirement regardless of the dismissal of the underlying action. In our view, nothing
`in the language of Rule 41(a)(1)(i), Rule 11, or other statute or Federal Rule
`terminates a district court's authority to impose sanctions after such a dismissal.
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`Id.
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`The Supreme Court further stated “[i]t is well established that a federal court may consider
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`collateral issues after an action is no longer pending.” Id. For example, district courts are permitted
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`to award costs and attorney’s fees after an action is dismissed for lack of jurisdiction. Id. “[M]otions
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`for costs or attorney’s fees are ‘independent proceeding[s] supplemental to the original proceeding
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`and not a request for a modification of the original decree.’” Id. (quoting Sprague v. Ticonic National
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`Bank, 307 U.S. 161, 170 (1939)). “Thus, even ‘years after the entry of a judgment on the merits’
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`a federal court could consider an award of counsel fees.” Id. (quoting White v. New Hampshire
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`Dept. of Employment Security, 455 U.S. 445, 451, n. 13 (1982)). The Court concluded:
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 6 of 11
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`Like the imposition of costs, attorney’s fees, and contempt sanctions, the imposition
`of a Rule 11 sanction is not a judgment on the merits of an action. Rather, it requires
`the determination of a collateral issue: whether the attorney has abused the judicial
`process, and, if so, what sanction would be appropriate. Such a determination may
`be made after the principal suit has been terminated.
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`Id. at 396.
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`While the Fifth Circuit has not specifically addressed the apparent conflict between its
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`decision in Williams and the Supreme Court’s subsequent ruling in Cooter, the Fifth Circuit has
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`acknowledged that the law is “well-settled” that “voluntary dismissals do not deprive courts of the
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`jurisdiction to award attorneys’ fees.” Yesh Music v. Lakewood Church, 727 F.3d 356, 363 (5 Cir.
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`2013) (citing Cooter); see also, Ratliff v. Stewart, 508 F.3d 225, 231 (5 Cir. 2007) (holding that
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`request for attorney’s fees under 28 U.S.C. § 1927, like those under Rule 11, are part of the court’s
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`collateral jurisdicition). “[I]n light of the well-settled law” that voluntary dismissals under Rule
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`41(a) do not deprive district courts of jurisdiction to consider an award of attorney’s fees,
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`Lightsource’s argument that this Court does not have jurisdiction to consider Defendants’ Motion
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`for Attorney’s Fees is without merit.
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`The Supreme Court did reverse the portion of the Court of Appeals’ judgment remanding
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`the case to the district court for a determination of appellate attorney’s fees since “Rule 11 does not
`apply to appellate proceedings.” Id. at 406.
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`See also, First Time Videos, LLC v. Oppold, 559 F. App’x 931, 932 (11 Cir. 2014) (“The
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`Supreme Court has made clear that a federal court retains jurisdiction over collateral issues–
`including motions for attorney’s fees–after a complaint is dismissed.”); Sequa Corp. v. Cooper, 245
`F.3d 1036, 1037 (8 Cir. 2001) (relying on Cooter to find that “a voluntary dismissal without
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`prejudice under Rule 41(a)(1)(i) does not deprive a District Court of its authority to award costs.”);
`Brown v. Local 58, Intern. Broth. of Elec. Workers, AFL-CIO, 76 F.3d 762, 767 (6 Cir. 1996)
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`(same); Teece v. Kuwait Finance House (Bahrain) B.S.C., 2014 WL 2186887 at * 4 (N.D. Cal. May
`23, 2014) (same)
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 7 of 11
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`B.
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`Are Defendants Prevailing Parties?
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`Although the District Judge denied Defendants’ Motion to Dismiss, they nevertheless argue
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`that they are “prevailing parties” under the Copyright Act and thus are entitled to attorney’s fees.
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`Defendants argue that they are prevailing parties because Lightsource voluntarily dismissed its
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`claims under Rule 41(a) and after the case was closed, transferred ownership of the copyrights to
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`Defendants. Section 505 of the Copyright Act provides that:
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`In any civil action under this title, the court in its discretion may allow the recovery
`of full costs by or 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.
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`17 U.S.C. § 505 (emphasis added). In Fogerty v. Fantasy, Inc., 510 U.S. 517, 534–35 (1994), the
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`Supreme Court held that attorney’s fees should be awarded evenhandedly to both prevailing
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`plaintiffs and defendants in copyright actions. However, the recovery of attorney’s fees is not
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`automatic and “attorney’s fees are to be awarded to prevailing parties only as a matter of the court’s
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`discretion.” Id. at 534.
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`Although the Fifth Circuit has not addressed who is a “prevailing party” under the Copyright
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`Act, the circuit courts and district courts that have addressed the issue have applied the standard
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`established by the Supreme Court in Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health
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`& Human Res., 532 U.S. 598 (2001). In Buckhannon, after the case had been dismissed as moot,
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`the petitioners requested attorney’s fees as the “prevailing parties” under the Fair Housing
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`See, e.g., Balsley v. LFP, Inc., 691 F.3d 747, 772 (6th Cir. 2012) (applying Buckhannon to
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`the Copyright Act), cert. denied, 133 S.Ct. 944 (2013); Cadkin v. Loose, 569 F.3d 1142, 1145 (9th
`Cir. 2009) (same); Riviera Distribs., Inc. v. Jones, 517 F.3d 926, 928 (7th Cir. 2008) (same), cert.
`denied, 559 U.S. 1007 (2010); Torres–Negron v. J & N Records, LLC, 504 F.3d 151, 164 & n. 9 (1st
`Cir. 2007) (same).
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 8 of 11
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`Amendments Act of 1988 (“FHAA”) and the Americans with Disabilities Act of 1990 (“ADA”). 6
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`The petitioners had based their entitlement to attorney’s fees on the “catalyst theory,” which posits
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`that a plaintiff is a “prevailing party” if it achieves the desired result because the lawsuit brought
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`about a voluntary change in the defendant's conduct. The Supreme Court rejected this argument and
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`concluded that a prevailing party “is one who has been awarded some relief by the court.” Id. at 603.
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`The Court noted that it had previously reviewed the Civil Rights Act and had determined that
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`“Congress intended to permit the interim award of counsel fees only when a party has prevailed on
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`the merits of at least some of his claims.” Id. (quoting Hanrahan v. Hampton, 446 U.S. 754, 758
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`(1980) (per curiam)). “Our respect for ordinary language requires that a plaintiff receive at least
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`some relief on the merits of his claim before he can be said to prevail.” Id. (internal citations and
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`quotations omitted). In addition to judgments on the merits, the Court held that settlement
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`agreements enforced through a consent decree may serve as the basis for an award of attorney’s fees.
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`Id. at 604. Thus, “enforceable judgments on the merits and court-ordered consent decrees create the
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`‘material alteration of the legal relationship of the parties’ necessary to permit an award of attorney’s
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`fees.” Id. (quoting Texas State Teachers Assn. v. Garland Indep. Sch. Dist., 489 U.S. 782, 792
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`(1989)). The Court rejected the catalyst theory since “[i]t allows an award where there is no
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`judicially sanctioned change in the legal relationship of the parties.” Id. at 605. “Our precedents
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`thus counsel against holding that the term ‘prevailing party’ authorizes an award of attorney’s fees
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`without a corresponding alteration in the legal relationship of the parties.” Id.
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`Although Buckhannon concerned the fee-shifting provisions of the FHAA and ADA, the
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`Supreme Court’s analysis is clearly applicable to the fee-shifting provision of the Copyright Act.
`See Buckhannon, 532 U.S. at 602-03 & n. 4 (noting that the Court has consistently interpreted the
`fee-shifting provisions which have been authorized in numerous federal statutes).
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 9 of 11
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`Based upon the foregoing, a prevailing party “is one who has been awarded some relief by
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`the court” or, in other words there has been a “judicially sanctioned change in the legal relationship
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`of the parties.” Id. at 603, 605. In the instant case, although Lightsource voluntarily dismissed their
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`Complaint under Rule 41(a)(1) without prejudice, Defendants have not been awarded any relief by
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`the Court and there has not been a judicially sanctioned change in the legal relationship of the
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`parties. Accordingly, Defendants can not be considered prevailing parties under the Copyright Act.
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`See Cadkin, 569 F.3d at 1149 (holding that plaintiff’s voluntary dismissal under Rule 41(a)(1) did
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`not confer prevailing party status on defendants under the Copyright Act since it did not alter the
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`legal relationship between the parties); First Time Videos, LLC v. Oppold, 559 F. App’x 931, 932
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`(11th Cir. 2014) (holding that defendant could not be considered prevailing party under the
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`Copyright Act since plaintiff voluntarily dismissed its complaint under Rule 41(a)(1) and there was
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`no “court-ordered change in the legal relationship” between the parties.”); Patrick Collins, Inc. v.
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`Lowery, 2013 WL 6506260, at * 2 (S.D. Ind. Dec. 9, 2013) (holding that defendant was not
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`prevailing party under Copyright Act since complaint was dismissed under Rule 41(a)(1) and thus
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`no judicially sanctioned material alteration). The fact that Lightsource voluntarily signed over its
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`Although the District Judge entered a Final Judgment in this case, the order merely
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`acknowledged that Plaintiff had voluntarily dismissed the case under Rule 41(a)(1) the day before,
`and ordered the case to be closed.
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`While the Fifth Circuit has not addressed whether a Rule 41(a)(1) dismissal without
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`prejudice confers prevailing party status under the Copyright Act, it has addressed the issue in the
`context of other statutes and has similarly held that such voluntary dismissals do not confer
`prevailing party status to the non-moving party. See Alief Indep. Sch. Dist. v. Kenneth, 655 F.3d 412,
`418 (5 Cir. 2011) (noting that a voluntary dismissal of a complaint without prejudice does not
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`confer prevailing party status on a defendant under the IDEA); United States v. Minh Huynh, 334
`F. App’x 636, 639 (5 Cir.) (citing Buckhannon to find that government’s dismissal without
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`prejudice did not bestow prevailing party status on plaintiff under the Civil Asset Forfeiture Reform
`Act), cert. denied, 558 U.S. 970 (2009).
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 10 of 11
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`copyrights to Defendants after the case was voluntarily dismissed is also not sufficient to confer
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`prevailing party status on Defendants. As the Supreme Court explained in Buckhannon, “[a]
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`defendant’s voluntary change in conduct, although perhaps accomplishing what the plaintiff sought
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`to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change.” Id. at 605. “To
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`qualify as a ‘prevailing party,’ the [party] must secure either a judgment on the merits or a
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`court-ordered consent decree.” Hayes v. Petroleum Helicopters, Inc., 48 F. App’x 481, 481 (5 Cir.
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`2002) (“[T]he ‘prevailing party’ does not encompass a plaintiff who achieves his desired result
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`because he files a lawsuit which brings about a voluntary change in the defendant's conduct.”).
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`Because there was no court-ordered change in the legal relationship between Lightsource and
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`Defendants, Defendants are not prevailing parties under the Copyright Act and are therefore not
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`entitled to attorney’s fees.
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`III. RECOMMENDATION
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`Based upon the foregoing, the undersigned Magistrate Judge RECOMMENDS that the
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`District Court DENY Defendants’ Motion for Attorney’s fees (Dkt. No. 47).
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`IV. WARNINGS
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`The parties may file objections to this Report and Recommendation. A party filing objections
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`must specifically identify those findings or recommendations to which objections are being made.
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`The District Court need not consider frivolous, conclusive, or general objections. See Battle v.
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`United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
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`A party’s failure to file written objections to the proposed findings and recommendations
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`contained in this Report within fourteen (14) days after the party is served with a copy of the Report
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`shall bar that party from de novo review by the District Court of the proposed findings and
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`Case 1:13-cv-00931-LY Document 54 Filed 09/23/14 Page 11 of 11
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`recommendations in the Report and, except upon grounds of plain error, shall bar the party from
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`appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the
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`District Court. See 28 U.S.C. § 636(b)(1)(c); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass
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`v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).
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`To the extent that a party has not been served by the Clerk with this Report &
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`Recommendation electronically pursuant to the CM/ECF procedures of this District, the Clerk is
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`directed to mail such party a copy of this Report and Recommendation by certified mail, return
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`receipt requested.
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`SIGNED this 23 day of September, 2014.
`rd
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`_____________________________________
`ANDREW W. AUSTIN
`UNITED STATES MAGISTRATE JUDGE
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