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PEYSER v. SEARLE BLATT & CO.

March 1, 2004.

STEPHEN PEYSER d/b/a ONE BY DIANA and DIANE MOSS, Plaintiffs, -v- SEARLE BLATT & CO., LTD., STEVE SEARLE, ALICE BLATT SEARLE, CAROL HORN, RONI RABL, INC., NEIMAN-MARCUS GROUP, INC., and E.N.K. PRODUCTIONS, INC. Defendants


The opinion of the court was delivered by: GERARD E. LYNCH, District Judge

OPINION AND ORDER

This Opinion and Order addresses two Reports and Recommendations ("R&Rs") of the Honorable Michael H. Dolinger, United States Magistrate Judge, with respect to applications for attorneys' fees by different sets of defendants, as well as a letter received from plaintiffs requesting a status conference and the opportunity to examine various documents and exhibits in the case file. The first R&R, dated December 4, 2003, concerns a motion for fees pursuant to the Copyright Act, 15 U.S.C. § 505, by Searle Blatt & Co., Searle Blatt, and Alice Blatt*fn1 ("the Searle Defendants"). The motion was granted by the Honorable Whitman Knapp, United States District Judge, to whom the case was previously assigned, in December 2001. See Peyser v. Searle Blatt & Co., Ltd., No. 99 Civ. 10785 (WK), 2001 U.S. Dist. LEXIS 20844 (S.D.N.Y. Dec. 13, 2001). The matter was then referred to Judge Dolinger for calculation of the amount of the award, and Page 2 the December 4 R&R sets forth his recommendation. The second, dated February 13, 2004, concerns a motion by defendants Carol Horn and E.N.K. Productions, Inc. ("the Horn Defendants"), seeking attorneys fees as a sanction under Rule 11 and the court's inherent power, as a result of plaintiffs' repetitive motions seeking rehearing of Judge Knapp's August 2000 decision on defendants' summary judgment motions. See Peyser v. Searle Blatt & Co., Ltd., No. 99 Civ. 10785 (WK), 2000 WL 1071804 (S.D.N.Y. Aug. 2, 2000).

I. The February 13 R&R

  Judge Dolinger recommends denial of the Horn Defendants' motion. Putting to one side certain procedural flaws in the motion, Judge Dolinger concludes that although plaintiffs' rehearing applications were "clearly and entirely meritless" (2/13/04 R&R at 6; internal quotes and alterations omitted), and the question whether plaintiffs acted with "improper purpose" is "a close one" (id.), on balance the plaintiffs, who appear pro se, should be found to have been motivated by "obsession or even monomania rather than a desire to inflict burdens on the defendants" (id. at 7). He therefore recommends that the motion be denied for failure to establish an improper purpose by clear evidence. The R&R required that any objections to that recommendation be filed with this Court within ten days of service of the R&R, pursuant to 28 U.S.C. § 636(b)(1)(C) and Fed.R.Civ.P. 72. (Id. at 8.)

  The Horn Defendants have not filed objections to the R&R. The plaintiffs have requested additional time to file objections to this and to another R&R issued by Judge Dolinger on the same date. Unlike the latter R&R, however, which recommended granting the remaining defendants' motion for summary judgment, the R&R regarding attorneys' fees recommends a decision in favor of plaintiffs, rendering their objections moot. Based on this Court's Page 3 independent review of the record, as well as on the absence of objections from the party whose motion is being denied, Judge Dolinger's characteristically thorough and well-reasoned R&R is adopted as the opinion of the Court, and the Horn Defendants' motion for attorneys' fees or other sanctions is denied.

  II. The December 4 R&R

  The December 4 R&R, in contrast, recommended an award of $20,689.11 in fees and disbursements against plaintiffs in favor of the Searle Defendants. (12/4/03 R&R at 14-15). In an earlier opinion, this Court overruled most of plaintiffs' objections and adopted so much of the R&R as calculated the appropriate amount of fees and disbursements relevant to the plaintiffs' somewhat limited copyright claims against the Searle defendants. Peyser v. Searle Blatt & Co., Ltd., No. 99 Civ. 10785 (GEL), 2004 WL 307300 (S.D.N.Y. Feb. 17, 2004).

  As Judge Knapp had noted, however, an award of attorneys' fees under the Copyright Act is discretionary. Although Judge Knapp found that an award was appropriate here based on "considerations of compensation and deterrence," 2001 U.S. Dist. LEXIS 20844, at *16, in light of the "objective unreasonableness" of plaintiffs' claims, id. at *12-*15, he referred the calculation to Judge Dolinger with instructions not only to determine how much of defendants' fees were attributable to defending against the copyright claim, but also to recommend an award that would not be "excessive in light of Plaintiffs' resources," since the Copyright Acts aims at `"compensation and deterrence where appropriate, but not ruination'" of the plaintiffs. Id. at *20, quoting Lieb v. Topstone Industries, Inc., 788 F.2d 151, 156 (3d Cir. 1986).

  Judge Dolinger followed these instructions as best he could, but was unable to determine whether the fee award otherwise appropriate would be "ruinous" due to the plaintiffs' failure to Page 4 present evidence "that would cast any light on the plaintiffs' financial wherewithal . . . or the impact that the proposed fee award would have on them." (12/4/03 R&R at 13-14.) Since plaintiffs, amidst a plethora of irrelevant arguments, did present at least some such evidence to this Court in objecting to the R&R, the Court gave plaintiffs a further opportunity, despite their failure timely to submit such information to Judge Dolinger, "to submit sworn complete statements of assets and liabilities, and sworn statements of income received in 2000, 2001, 2002, and 2003, supported by copies of IRS forms 1040 submitted for the 2001 and 2002 tax years." 2004 WL 307300 at *6.

  As anyone familiar with this litigation could predict, plaintiffs failed to follow this simple instruction, instead submitting both more and less than the Court invited. Rather than a clear statement of assets owned and debts owed by the two plaintiffs, plaintiffs submitted what appears to be a running account of receipts and expenses of the business "One By Diana/' supplemented by additional schedules of expenses, the relation of which to the running account is not explained. No tax forms are provided.*fn2 Although there is no straightforward statement of assets and liabilities, as requested by the Court, plaintiffs do provide a schedule of "Outstanding Debts" owed by each of them. The debts are not all clearly labeled or explained.*fn3 Technically speaking, moreover, all that is sworn to be "true and correct" is the cover affirmation identifying the Page 5 exhibit; there is no sworn statement that the list of debts is accurate and complete.

  As was made clear in the Court's previous order, the defect of plaintiffs' previous affirmation was that it was "insufficiently precise, in that it does not expose the affiant to the risk of a successful perjury prosecution" if the plaintiffs turned out to have substantial assets not disclosed in the affirmation. 2004 WL 307300 at *5. For just that reason, the Court asked for a sworn statement listing all assets and liabilities, to be backed up by tax forms that had been submitted to the Government under penalty of perjury.

  Nevertheless, the sworn statements that plaintiffs did submit go far to establishing financial hardship. Both defendants claim substantial debts. (Aff., Ex. 5.) The cash receipts of their business have declined from nearly $133,000 in 2000 to under $30,000 in 2003, and according to Peyser, the business lost money every year from 2000 to 2003. (Peyser Decl. ¶ 12.) Peyser declares a few limited assets, claims to have exhausted his savings, and asserts that he has earned no income since 1999 (Peyser Decl. ¶¶ 2, 4, 6, 7, 12, 13). Moss's declaration, fairly read, asserts that both plaintiffs subsist on a small pension from the New York City Teachers' Retirement System and Social Security Disability Insurance, and that she has no other savings or investments. (Moss Decl. ¶¶ 7-11.) Both plaintiffs complain of a variety of disabling medical conditions, which clearly create extraordinary expenses and interfere with plaintiffs' earning additional income. (Peyser Decl. ¶¶ 14-16; Moss Decl. ¶¶ 3-6.)

  Taking into account all this material (which was apparently not in the record before the Magistrate Judge), it is clear that the attorneys' fees award recommended by Judge Dolinger would be an insupportable expense for plaintiffs. The Searle defendants urge that they have no intention of executing on any judgment, beyond attaching the copyright itself, which they claim Page 6 would put an end to this litigation. (D. Reply Aff. ¶ 8.) But the Court cannot enter a crippling judgment on the assurance of the party that would hold the judgment that it would not exercise its legal rights. Nor, for that matter, would the proposal to extinguish this litigation by transferring ownership of the copyright in question serve the interests of justice. For one thing, it would not terminate all of plaintiffs' claims, which sound in unfair competition as well as in copyright. (See Complaint ¶¶ 109-111.) Moreover, plaintiffs' copyright claims, such as they are, should be adjudicated on the merits, not extinguished because of the plaintiffs' poverty. This is particularly so given that Judge Dolinger has recently issued a Report and Recommendation recommending summary judgment for the remaining defendants. If that R&R is adopted, the litigation will finally come to an end; if it is not, and summary judgment is denied, the remaining claims will finally be ripe for trial on the merits, which they should in that case receive.

  It is clear that the pursuit of this litigation has already been "ruinous" to the plaintiffs. The award of attorneys' fees would be merely one more blow, and perhaps not the most serious one, to which plaintiffs' obsessive litigation tactics have exposed them. Moreover, those tactics have also imposed substantial, and in large part unjustified, expenses on the defendants, for which an award of fees in the amount recommended would be only a small recompense. Nevertheless, Judge Knapp made clear, in accord with the governing law, that the fee award should not be in an amount that would be "excessive in light of Plaintiffs' resources." 2001 U.S. Dist. LEXIS 20844, at *20. Plaintiffs' financial submissions convince me that the award of the full amount of fees, and indeed of any more than nominal fees, would be excessive ...


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