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Close-Up International, Inc. v. Berov

November 13, 2007

CLOSE-UP INTERNATIONAL, INC., KINOVIDEOOBYEDINENIE KRUPNIY PLAN AND FEDERAL STATE UNITARY ENTERPRISE KINOKONTSERN MOSFILM, PLAINTIFFS,
v.
JOSEPH BEROV, NATASHA ORLOVA, THE RIGMA AMERICA CORPORATION AND GROUP, RUSSIAN ENTERTAINMENT AND WHOLESALE, INC. D/B/A ST. PETERSBURG PUBLISHING HOUSE AND GROUP AND RUSSIAN DISTRIBUTERS INC., DEFENDANTS.



The opinion of the court was delivered by: Trager, J

MEMORANDUM AND ORDER

Plaintiffs Close-Up International, Inc., Kinovideoobyedinenie Krupniy Plan and Federal State Unitary Enterprise Kinokontsern Mosfilm (collectively "Close-Up" or "plaintiffs") seek attorney's fees and costs from defendants Joseph Berov and the Rigma America Corporation and Group (collectively "Berov" or "defendants").*fn1 Plaintiffs also seek an award of prejudgment interest. Defendants have made a cross-motion pursuant to Rule 60(b)(6) seeking a reduction in the judgment.

The parties are presumed to be familiar with the facts of this case. For the following reasons, plaintiffs are awarded $323,004.88 for attorney's fees and costs. Plaintiffs' motion for prejudgment interest is denied. Defendants' cross-motion for a reduction in the judgment is also denied.

(1) Attorney's Fees

a. Eligibility for Attorney's Fees

Plaintiffs are seeking costs and attorney's fees pursuant to the Copyright Act, 17 U.S.C. § 505, which provides that:

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.

The Copyright Act elsewhere states that attorney's fees are only awarded for works that were registered at the time of infringement or within three months after the first publication of the work. 17 U.S.C. § 412.

"Attorney's fees are not to be awarded automatically to a prevailing party, . . . but 'only as a matter of the court's discretion.'" Knitwaves Inc. v. Lollytogs Ltd., 71 F.3d 996, 1011 (2d Cir. 1995) (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994)). When deciding whether to award attorney's fees, courts have been instructed to consider "several nonexclusive factors" including "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Matthew Bender & Co. v. West Publ'g Co., 240 F.3d 116, 121 (2d Cir. 2001) (quoting Fogerty, 510 U.S. at 534 n.19). A court's award of attorney's fees must also be "faithful to the purposes of the Copyright Act." Id. (quoting Fogerty, 510 U.S. at 534 n.19).

Based on these factors, an award of attorney's fees is appropriate in this case. Specifically, defendants were guilty of willful infringement of plaintiffs' protected works, behavior which was "objectively unreasonable" in light of the requirements of the Copyright Act. Berov's primary defense against plaintiffs' claims of infringement was that his actions were authorized by a "Certificate of Authority," but this defense was entirely without merit. An award of attorney's fees in this case conforms with the goals of the Copyright Act, which encourages owners to protect their works in court, and which attempts to deter the willful infringement of protected materials. See Kepner-Tregoe, Inc. v. Vroom, 186 F.3d 283, 289 (2d Cir. 1999) (affirming award of attorney's fees under the Copyright Act as "justified based on the court's finding of willfulness" and "in line with the statutory goal of deterrence"); Yash Raj Films (USA) Inc. v. Movie Time Video USA, Inc., No. 04-CV-5107 (JG) (RML), 2007 U.S. Dist. LEXIS 68357, at *12 (E.D.N.Y. July 26, 2007) (Magistrate Judge's Report and Recommendation) (finding that "an award of attorney's fees is justified where the infringement was willful"); Getaped.com, Inc. v. Cangemi, 188 F. Supp. 2d 398, 406 (S.D.N.Y. 2002) ("An award of attorney's fees is justified, inter alia, where the infringement was willful, as here.").

Therefore, plaintiffs are entitled to an award of attorney's fees under the Copyright Act. Next, each of defendants' objections to plaintiffs' fee request will be considered in turn.

b. Apportionment of Fees Between Registered and Non-Registered Works

Both sides agree that to be eligible for attorney's fees under the Copyright Act, a work must be registered at the time of the first infringement or registration must be made within three months after the first publication of the work. See 17 U.S.C. § 412. The jury found that defendants were liable for infringing 383 works, of which nine were registered with the Copyright Office before infringement or within three months of first publication. Defendants ask that the attorney's fees application "be apportioned between the 374 works that were not registered pre-infringement and the 9 (or less than 2.5% of the total works in issue) that were." Defs.' Opp. Br. at 10. Plaintiffs counter that their fee request should not be reduced at all, because "it is impossible to separate time between the registered and unregistered works." Pls.' Opening Br. at 16.

Both of these positions are untenable. The starting point for this analysis should be the amount of time that plaintiffs' attorneys would have spent on this case if only the nine registered acts were at issue. See Knitwaves, Inc. v. Lollytogs, Ltd, No. 92 Civ. 6285 (JSM), 1996 U.S. Dist. LEXIS 2650 (S.D.N.Y. Mar. 7, 1996), aff'd, No. 96-7402, 1996 U.S. App. LEXIS 30737 (2d Cir. Nov. 22, 1996). Clearly, defendants cannot reasonably claim that plaintiffs' attorneys would have spent 97.5% less time on this case if they were only litigating the nine registered works. Other courts have agreed that it is inappropriate to reduce attorney's fees by the harsh mathematical formula requested by defendants. See id., 1996 U.S. Dist. LEXIS 2650, at *3-4; Itar-Tass Russian News Agency v. Russian Kurier, Inc., No. 95 Civ. 2144 (JGK), 1997 U.S. Dist. LEXIS 8297, at * 10 (S.D.N.Y. June 13, 1997) (awarding 50% of requested attorney's fees where only 28 of the 345 infringed works were registered under the Copyright Act).

On the other hand, plaintiffs are wrong to claim that their attorneys would have spent just as much time on this case if only the nine registered works were at issue. It is true, as plaintiffs' prior attorney Julian Lowenfeld ("Lowenfeld") argues in his supporting declaration, that the legal work on this case prior to the damages phase would have been the same "regardless of the number of films registered." See Lowenfeld Decl. ¶ 12. But even Lowenfeld acknowledges that "a distinction exists in the portion of the case which involved establishing and proving damages." Id. ¶ 13. Because of this distinction, some apportionment of the attorney's fees between registered and non-registered works is required.

This is most apparent in the trial phase of this case. When the jury trial on damages began, plaintiffs sought statutory damages for eleven motion pictures that they claimed were registered under the Copyright Act. Trial Tr., June 11, 2007, 19:2-9. This demand for statutory damages, at a maximum of $150,000 per infringed work, stated a claim for at most $1.65 million. Yet on the eve of trial plaintiffs also requested a prejudgment attachment order for $10 million, see Docket Entry ("DE") 192, and issued a press release claiming that they expected damages to "range from 11 to 57 million dollars," see Richards Decl. Ex. F. Clearly, plaintiffs expected damages far in excess of the statutory damages available to them under the Copyright Act. Plaintiffs' legal work in preparation for and during the trial on damages reflected that expectation.

The bulk of plaintiffs' evidence at trial demonstrated how defendants' infringement affected plaintiffs' sales of Russian-language videotapes. This evidence was primarily necessary to prove actual damages, not statutory damages for the registered works. The cost of presenting this evidence is, therefore, not properly reimbursable under the Copyright Act.

Plaintiffs insist, however, that all of this evidence was necessary to establish willfulness and their claim for the maximum statutory damages for the registered works. It is certainly true that some of this evidence was made necessary by Berov's refusal to concede willful infringement.*fn2 Nonetheless, plaintiffs had already been granted summary judgment on liability prior to trial. See DE 154. There was little question that Berov's infringement was willful. Therefore, if only the statutory damages for these nine registered works was at stake, it seems likely that a jury damages trial could have been avoided, or that the parties might have reached a settlement agreement, after Berov was found liable for infringement in May 2006.

In order to apportion the attorney's fees between the registered and non-registered works for the damages phase of this case, plaintiffs' fee request for the work done by Harvey Shapiro ("Shapiro") and his firm Sargoy, Stein, Rosen & Shapiro will be reduced by half. Although there is no perfect mathematical formula to be applied, a 50% reduction in the Shapiro fees appears appropriate here for three reasons. First, this 50% reduction is suggested by the damages awarded to plaintiffs at trial. The full jury award was $2.754 million, of which $1.35 million was for statutory damages under the Copyright Act and $1.404 million was for infringement of the other 374 works. The fact that the registered works accounted for slightly less than half of the plaintiffs' final damage award indicates that a 50% reduction is appropriate. Second, this formula has been followed by other courts in similar circumstances. See Itar-Tass Russian News Agency v. Russian Kurier, Inc., No. 95 Civ. 2144 (JGK), 1997 U.S. Dist. LEXIS 8297, at * 10 (S.D.N.Y. June 13, 1997) (awarding 50% of attorney's fees where only 28 of the 345 infringed works were registered under the Copyright Act).

Third, this reduction is supported by Shapiro's own description of his efforts. According to Shapiro's supporting affirmation, less than half of his attorney's fees were incurred between June 1, 2005 and April 30, 2007, when Shapiro was working on issues (including Berov's objections to Shapiro's representation of Close-Up, a motion to hold defendants in contempt and the motion for summary judgment) which related to all of the works in this case. Shapiro Aff. ¶ 8. The rest of Shapiro's fees were incurred after May 1, 2007, largely because of the jury trial on damages. Id. ¶ 9. Reducing Shapiro's fees by half will allow plaintiffs to be fully reimbursed for the earlier work Shapiro performed on this case, while also recognizing that the work preparing for and conducting the damages trial was primarily (though not exclusively) related to the non-registered works for which attorney's fees are unavailable.

c. Objections to Knapp Fees

Defendants object to the fee request for plaintiffs' prior counsel, Charles E. Knapp ("Knapp"), because it is not supported by contemporaneous time records. Plaintiffs' request is documented only by a July 9, 2003 retainer agreement which specified that plaintiffs would pay Knapp a $25,000 flat fee plus 10% of any money judgment recovered in this action. Ganem Aff. Ex. P. According to plaintiffs, Knapp collected the $25,000 but relinquished his contingency fee when he ceased representing plaintiffs in 2005. See Ganem Aff. ¶¶ 27-29.

As defendants point out, it is a well-settled rule in the Second Circuit that "any attorney . . . who applies for court-ordered compensation in this Circuit . . . must document the application with contemporaneous time records. These records should specify, for each attorney, the date, the hours expended, and the nature of the work done." New York State Assoc. for Retarded Children v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983). See also Riordan v. Nationwide Mut. Fire Ins. Co., 977 F.2d 47, 53 (2d Cir. 1992) (explaining strict rule in New York federal courts requiring the denial of a motion for fees for failure to provide contemporaneous time records); Schwartz v. Chan, 142 F. Supp. 2d 325, 330-31 (E.D.N.Y. 2001) (same).

Plaintiffs argue that the requested fee for Knapp is reasonable in light of the actual number of hours that Knapp worked on this case. It is likely that Knapp, who was primarily working on a contingency basis, performed enough hours of work to support plaintiffs' fee claim. Nonetheless, a federal court in this Circuit cannot award fees without contemporaneous documentation of the work performed. Therefore, the request for Knapp's $25,000 fee is denied without prejudice. Plaintiffs may renew the request within thirty days along with contemporaneous evidence of the hours worked. Because it appears that Knapp did not keep contemporaneous time records, he may submit evidence of his efforts in the case (such as letters written and transcripts of hearings he attended) along with an affidavit describing his work and the time that he spent on these activities.

d. Objections to FTM Entertainment Law Firm Fees

Defendants similarly object to the fee request for FTM Entertainment Law Firm ("FTM"), which is supported only by a one-page July 16, 2007 invoice summarizing "[l]egal fees for professional services on Berov case for the period from May 2002 through May 2007." Ganem Aff. Ex. Q. The FTM invoice, unlike the Knapp retainer agreement, at least includes a summary of the type of legal work done on this case, the hours performed and FTM's billable rates. This summary information, if included in an attorney affidavit and supported by contemporaneous records, is adequate to support an attorney fee request. See Cruz v. Local Union ...


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