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ESTATE OF HOGARTH v. EDGAR RICE BURROUGHS

November 3, 2004.

THE ESTATE OF BURNE HOGARTH; BURNE HOGARTH DYNAMIC MEDIA WORLDWIDE LLC; MICHAEL HOGARTH; RICHARD HOGARTH; and ROSS HOGARTH, as the children of deceased author Burne Hogarth, Plaintiffs,
v.
EDGAR RICE BURROUGHS, INC., Defendant.



The opinion of the court was delivered by: DENISE COTE, District Judge

OPINION AND ORDER

The defendant in this copyright action, having prevailed at trial and on appeal, brings a motion for an award of attorney's fees and expenses. For the following reasons, the motion for attorney's fees and expenses is granted in part and the motion for a bill of costs is granted in full. Edgar Rice Burroughs ("Burroughs") invented the character of Tarzan. His stories of Tarzan have been retold through books, movies, and in comic strips. Burroughs died in 1950. The corporate vehicle that holds the copyrights in Burroughs' work, Edgar Rice Burroughs, Inc. ("ERB"), is the defendant in this litigation. The shareholders in ERB are Burroughs' descendants.

  Burne Hogarth ("Hogarth") was a renowned illustrator of the story of Tarzan. In addition to drawing some of the Tarzan comic strips, he contributed to two illustrated books regarding Tarzan that were published by ERB in 1972 and 1976 (the "Books"). The Books were not commercially successful. Hogarth died in 1996.

  In 1999, Walt Disney Company ("Disney") produced the movie Tarzan. Before doing so, Disney and ERB executed three agreements that licensed the trademark Tarzan and characters and plots contained in certain stories written by Burroughs ("Disney License"). The licensed stories were listed in the Disney License and the Books were not among them. Two months after the official release of the movie, counsel for the Hogarth estate sent a cease and desist letter to Disney claiming copyright infringement. This litigation ensued.

  From its inception and throughout the course of the litigation, the driving force for the lawsuit was the plaintiffs' desire for a share in Disney monies paid to ERB. The plaintiffs are Hogarth's heirs. The principal roadblock to that recovery was the fact that they could not present any good faith claim that the movie's depiction of Tarzan was substantially similar to Hogarth's depiction of Tarzan in the Books. Although the plaintiffs initially asserted such a claim in the litigation, they abandoned it on the eve of trial. The only remaining claim that could entitle the plaintiffs to a share in the Disney money was a breach of contract claim. A 1970 Agreement between ERB and Hogarth had given Hogarth a right to share in revenues received from the "use of the artwork from the Books." Since the movie did not "use" any of that artwork, once the terms of the 1970 Agreement were properly construed, the contract claim was readily dismissed at trial. There was, therefore, no viable claim that gave the plaintiffs a legal right to share in the Disney money.

  The plaintiffs' claims, however, did include a complex issue of copyright law that required substantial discovery and legal analysis, to wit, whether Hogarth was the "author" of the Books, as indicated on the copyright registrations as they were originally filed, or whether the Books were "works for hire" such that Hogarth was not the "author" of the Books for purposes of copyright law. This Court concluded, and the appellate court agreed, that the Books were works for hire and that Hogarth held no copyright interest in them.

  Even if the ruling had gone in the plaintiffs' favor on the work for hire issue, however, that would not have entitled the plaintiffs to recover any of the Disney money because the movie's images of Tarzan were not substantially similar to Hogarth's depictions, ERB never gave Disney the right to use the Books, and Disney did not use the artwork from the Books in its film. Thus, had the plaintiffs won the work for hire argument, they would have had rights in the Books, which were long out of print and of no commercial value, but no right to recover any of the Disney money from ERB.

  Apparently well aware of the limitations to their claims, the plaintiffs' litigation strategy was designed to coerce a settlement from ERB and to avoid a trial if at all possible. Because of their tactics, the litigation was unnecessarily contentious and expensive and required extensive judicial supervision.

  The motion for sanctions does not seek recovery for all of the attorney's fees and costs incurred in defending this litigation. It seeks recovery for those fees and costs associated with the following discrete conduct:
1) inaccurate allegations in the complaint that contradict important documentary evidence in the plaintiffs' possession;
2) declarations submitted in opposition to defendant's early summary judgment motion that disregard that same evidence;
3) withholding that damning documentary evidence from the defendant until ordered by the Court to produce it;
4) the plaintiff's application to disqualify defense counsel on the eve of trial;
5) bad faith settlement discussions; 6) harassment of an ailing officer of ERB in order to coerce settlement;
7) improper and inaccurate disclosure of settlement discussions to the Court;
8) a frivolous copyright claim that Disney's artwork for the movie was copied from and substantially similar to Hogarth's illustrations in the Books;
9) assertion of a frivolous judicial estoppel argument;
10) harassment of defense counsel as he prepared for trial;
11) efforts to delay the trial; and
12) serving but not filing a post-trial motion to correct the record.
BACKGROUND
1. Complaint

  The plaintiffs filed the action on December 15, 2000. On January 26, 2001, they filed a First Amended Complaint ("Complaint"). The Complaint asserted twelve causes of action against ERB under the Copyright Act of 1909, 17 U.S.C. ยง 1, et seq., and for breach of contract. It sought a declaration that the plaintiffs were the sole owners of the renewal copyrights for the Books because they were not "works for hire," an accounting for a share of the Disney revenues received by ERB on breach of contract and related theories, and the return of certain physical property based on a breach of contract theory.

  ERB contends that the following passage in the Complaint is inconsistent with documentary evidence in the plaintiffs' possession and known to their counsel:*fn1

 
Hogarth's successful Dynamic series of art books were published by Watson-Guptill. At the end of the 1960's, Hogarth proposed to Watson-Guptill that it publish a new pictorial version of Edgar Rice Burroughs' novel, Tarzan of the Apes, to revolve around new and original artwork created by Hogarth. Hogarth suggested the project to ERB, either directly or through Watson-Guptill, and ERB agreed.
(Emphasis supplied).

  2. Motions for Summary Judgment and Disqualification of Counsel

  On January 31, 2001, ERB served a preemptive motion for summary judgment. The plaintiffs requested an immediate conference with the Court, indicating that they wished to move for the disqualification of ERB's counsel Mr. Zissu and a stay of summary judgment practice until that motion was resolved.

  At a conference on February 7, the parties described the factual background to the claims and their legal theories. A schedule for the summary judgment motion and motion for disqualification of defense counsel was set. On May 15, 2001, both motions were denied. Estate of Burne Hogarth v. Edgar Rice Burroughs, Inc., No. 00 Civ. 9569 (DLC), 2001 WL 515205 (S.D.N.Y. May 15, 2001) ("May Opinion").

  In making its summary judgment motion, ERB had argued that the Books were works for hire because ERB was the motivating factor in producing the Books. In rejecting the summary judgment motion, the May Opinion found that the plaintiffs had raised issues of fact regarding this precise issue. The May Opinion relied, inter alia, on two affidavits submitted by the plaintiffs:
[P]laintiffs have introduced evidence that Hogarth was the "motivating factor" for the creation of the Books, thus raising a material issue of fact as to whether the Books were created at Burroughs' "instance." Plaintiffs have submitted affidavits from the attorney [Arthur Schneck] who represented Hogarth during his negotiations with Burroughs over the 1972 and 1976 Books and from [Donald Holden] the Editorial Director from Watson-Guptill [the publisher of the Books,] both of whom state that it was Hogarth's idea to create the Books.
Id. at *4.

  Schneck's March 8, 2001 declaration represented that "[t]he negotiations between [the parties] confirmed that all parties expressly understood and agreed that the Hogarth Tarzan books would be created under a co-venture arrangement . . . not an employer-employee or work for hire arrangement," that Hogarth had developed the concept for the Books, and that Hogarth had chosen the Burroughs' stories that would be illustrated. Holden's affidavit reported his recollection that Hogarth made "essentially all of the contributions of content" to the Books. Both declarations were drafted by plaintiffs' counsel, Mr. David Smallman. Plaintiffs' brief in opposition to summary judgment represented that "Hogarth conceived the Hogarth Tarzan Books and approached ERB with his concept, not the other way around." As became apparent by the time of trial, neither man had competent, first hand knowledge to support the assertions in their declarations and those assertions were contradicted by important documents in the plaintiffs' possession.

  The second issue resolved in the May Opinion was the disqualification motion. In making its motion to disqualify Mr. Zissu, one of his partners, and their law firm Fross Zelnick, plaintiffs argued that the attorneys should be called to testify as witnesses at trial, and that their representation of ERB was a conflict of interest and created an appearance of impropriety. Hogarth, 2001 WL 515205, at *4. Mr. Zissu's law firm, Fross Zelnick, had a longstanding relationship with ERB. There was no evidence, however, that it had any connection to the Books in the 1970s. There was evidence that Mr. Zissu, who was employed at another firm at that period of time, had sent Marion Burroughs a blank form in 1979 to correct one of the copyright registrations for the Books. The May Opinion rejected the motion to disqualify, finding inter alia that the plaintiffs had not shown that either the law firm or Mr. Zissu were witnesses to events of moment in the litigation or that their testimony would be necessary or prejudicial to ERB. Id. at *5. The plaintiffs also argued that disqualification was necessary because Fross Zelnick had given limited advice to the Hogarth estate in 1998 and 1999 on matters unrelated to the Books. This was a particularly frivolous argument since the plaintiffs were fully informed of the relationship between Fross Zelnick and ERB at that time and had executed a waiver of any claim of conflict. Id. 3. June 13 Conference: Schedule Set for Litigation

  A schedule for the remainder of the litigation was set at a conference on June 13. Among other things, the Court reviewed the 1970 Agreement and observed that unless the plaintiffs could prove that Disney "used" the artwork contained in the Books that they had no claim against ERB for the Disney money. The plaintiffs took the position that they would be able to show that the movie "used" images and symbols from the Books. When it was suggested that discovery be bifurcated to focus on the Disney issues first, the plaintiffs argued that any bifurcation would lengthen discovery. The Court agreed not to bifurcate fact discovery, and fact discovery for all issues was scheduled to conclude on December 14. Each side was limited to six fact depositions and a firm trial date was set for March 2002.

  On August 30, Owen & Davis moved to withdraw as counsel of record for the plaintiffs and was replaced by two new law firms. Mr. Smallman, who had been involved in the litigation from its inception and was a close friend of one of the Hogarth heirs, remained counsel for the plaintiffs throughout the litigation.

  4. Plaintiffs' Failure To Produce Documents

  On September 28, ERB requested a conference to resolve discovery disputes, including the plaintiffs' failure to provide "key letters" between Hogarth and ERB which show that ERB "initiated" the book project. The plaintiffs had represented to defense counsel that they had no "documents `available' beyond those selected for their initial disclosure."

  In a letter of October 1, plaintiffs' new counsel responded with their own claims that ERB had not cooperated in discovery, specifically, in the production of documents from a 1976 California lawsuit between ERB and its former senior officer Robert M. Hodes ("Hodes"), the ERB representative who had worked extensively with Hogarth on the Books. The plaintiffs sought access to the California litigation files in order to investigate whether they could invoke the doctrine of judicial estoppel to prevail on their assertion that Hogarth had initiated and created the Books. In response to ERB's discovery issue, the plaintiffs represented that they had already "produced all responsive documents." They added that "all documents plaintiff had that might bear upon this case were produced by plaintiffs at the outset of the case."

  The plaintiffs' only document production to date had been made to the defendant in the plaintiffs' initial disclosure of July 9, 2001. At the time of the initial production, they described the 1,031 pages of documents that they produced as "all nonprivileged documents . . . that have been located to date and that are in the possession, custody and control of Plaintiffs that Plaintiffs may use to supports its [sic] claims or defenses. . . ."

  The July 9, 2001 production did not include any correspondence for the period before the execution of the November 16, 1970 contract between Hogarth and ERB. The plaintiffs did not provide any additional documents in response to ERB's July 17 Document Request and did not provide a response to that request signed by any attorney, as required by Rule 33, Fed.R. Civ. P. In response to the July 17 request for documents concerning all communications between Hogarth and Burroughs concerning the Books and the Tarzan character from 1970 to 1980, the plaintiffs responded in pertinent part that "the Hogarths have produced documents responsive to this Request in the document production made to ERB in connection with Plaintiffs' June 2001 [sic] Document Production. . . . [T]he Hogarths will produce documents responsive to this Request, to the extent that they locate any additional such documents other than those already produced." When pressed by defense counsel, Mr. Smallman continued to assert that no other documents were "available."

  A conference was held on October 5 to address the discovery issues. Owen & Davis and incoming counsel for the plaintiffs attended. It was revealed that Mr. Smallman had answered the defendants' document requests and interrogatories on behalf of the plaintiffs. The Court ordered the plaintiffs to respond within one week, completely and as required by the Federal Rules of Civil Procedure, to ERB's July document request and interrogatories. At plaintiffs' request, the Court reviewed several of the interrogatories that had been posed to them and reaffirmed their duty to answer the interrogatories. Of particular note for the pending motion for sanctions, the plaintiffs had resisted responding to and were ordered to answer interrogatories that required them to identify the "similarities" between the Books and the movie on which their copyright claims hinged. The Court rejected their argument that they needed discovery from Disney before they could identify the similarities. The plaintiffs repeatedly asked for an extension of discovery during the course of the conference; the requests were denied.

  In the course of the conference, defense counsel once again stated that unless the movie "used" images from the Books, there was no basis for the plaintiffs to claim a right to the Disney money. The plaintiffs acknowledged as much and reiterated their need for discovery from Disney. They represented that they needed the discovery to pursue their copyright claim, with its requirement of proof of access, and to pursue their contract claim, which hinged on Disney's use of the Books' images. The plaintiffs were reminded that they could take discovery of Disney so long as it were done within the schedule and parameters set for discovery.

  Finally, the plaintiffs observed that they were considering amending their Complaint by adding additional claims and joining Disney as a defendant. They asserted that the movie was infringing Hogarth's work. The defendant objected to any further amendment. The Court ruled that should any plaintiffs' motion to amend be granted, the case would be bifurcated such that any additional claims would be tried after the March trial. No motion to amend was filed. Following that conference, plaintiffs did respond to defendant's interrogatories. They described the similarity between the Books and film as follows:
A comparison of the artwork by Burne Hogarth in the Books and the 1999 animated Tarzan film shows that icons and symbols created by Burne Hogarth, that appear in the Books, but are not described in the Edgar Rice Burroughs stories . . . also appear in the Disney Tarzan film. For example, an image from the Books shows Tarzan holding up his hand juxtaposed against the hand of an ape, a key visual icon representing Tarzan's search for his own identity. . . . Other symbols appear in jungle foliage in the Disney animated Tarzan movie, such as an eye-shaped image, which Hogarth used repeatedly throughout the Books to represent the eye of God. The apes in the Books sleep in tree nests, above the ground. . . . Other strong visual images, such a [sic] Tarzan's father sawing a log, Tarzan's father shouldering a log, Tarzan as a boy swinging by an open jawed crocodile, and apes moving in single file around a jungle waterfall, are also not described in the Edgar Rice Burroughs stories, but appear in the Disney film. In addition, the dynamic movement of the Tarzan character, captured in the groundbreaking cinematic graphic novel form of the Books, appears in the . . . film. . . . The look and feel of the foliage in the Books was also used in the Tarzan animated movie by Disney.
  Within one week of the October 5 conference, plaintiffs produced more than a thousand additional pages of photocopied documents, as well as ten additional boxes of scripts, artwork, books, and other materials. Among the documents that were produced are four letters from Hodes reflecting communications that substantially undercut plaintiffs' contention that it was Hogarth's idea to create the Books. They are dated July 15, July 16, and October 19, 1970, and August 22, 1972. Each of these documents was important to the Findings of Fact at trial. See Estate of Burne Hogarth v. Edgar Rice Burroughs, Inc., No. 00 Civ. 9569 (DLC), 2002 WL 398696, at *3-4 (S.D.N.Y. Mar. 15, 2002) ("March Opinion"). The March Opinion described the four documents as follows:
 
Before receiving a reply from Hogarth, Hodes wrote on July 15, 1970, to suggest the production of "a quality, high priced edition of an adult version of TARZAN OF THE APES in graphic form." The next day, on July 16, 1970, Hodes wrote again, and described in detail his idea for a "graphic edition of TARZAN OF THE APES." Hodes saw the greatest hurdle as finding a U.S. publisher and believed it would be necessary to have all the artwork completed before approaching the publisher. Hodes envisioned a series of books on Tarzan followed by illustrated books on other Burroughs themes. Hodes proposed terms for the project that anticipated in many respects ERB's final agreement with Hogarth:
1. We would commission you to produce the work at a cost that would be paid one-half now and one-half out of the first proceeds of the book from all sources whatsoever. That one-half deferred payment is the extent of your speculation or risk.
2. We would undertake to find a U.S. publisher and to sell off the foreign rights. All expenses would be borne by us, and this, together with the sum paid to you, would be our risk.
3. The worldwide proceeds from the first book would go first to make up your deferment, and then to make up our own actual expenditures. After that, proceeds would be split 50-50.
4. Should the first book be successful, we would obtain sufficient worldwide advances to cover your and our costs of producing the next work, and so on for as long as the public continues to accept these books, with profits from all sources being divided equally. (emphasis removed).
Hodes continued: "I must leave all artistic considerations to you, but believe me, I know a market exixts [sic] abroad for such a series. If I had one completed book and the covers for about 10 more, I could make one trip to the Frankfurt Book Fair, open our own ERB exhibit there and come home with orders and advances from most of Europe."
Id. at *3-5 (emphasis supplied). The March Opinion went on to state:
In October 1970, Hodes wrote to Donald Holden ("Holden"), Editor of Watson-Guptill, with a copy to Hogarth, setting out the terms of a proposed agreement between ERB and Watson-Guptill for the publication of the 1972 Book. Hodes listed in pertinent part:
1. Your contract is directly with Edgar Rice Burroughs, Inc. We undertake to provide you with the services of Burne Hogarth to furnish you with artwork and text for your proposed illustrated book of Tarzan of the Apes. . . . You have no financial obligations whatsoever to Mr. Hogarth. We do.
2. You are responsible for designing and producing the book, and, in general, supervising Mr. Hogarth's work. . . . We reserve the right to require all parties to produce a book that reasonably and substantially tells the story of Tarzan of the Apes as Edgar Rice Burroughs told that story in his classic novel. . . . As for the artwork itself, we cannot and do not presume to influence or control the work of Mr. Hogarth.
3. ...

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