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Canal Image Uk Ltd v. Steven Lutvak and Robert L. Freedman

June 16, 2011

CANAL IMAGE UK LTD., PLAINTIFF,
v.
STEVEN LUTVAK AND ROBERT L. FREEDMAN,
DEFENDANTS.



The opinion of the court was delivered by: Richard J. Holwell, District Judge:

MEMORANDUM OPINION AND ORDER

The Court dismissed this action for copyright infringement and breach of contract on March 29, 2011. See Canal Image UK Ltd. v. Lutvak, 2011 WL 1158439 (S.D.N.Y. Mar. 29, 2011) (Canal I).Defendants Steven Lutvak and Robert L. Freedman ("Defendants") now move pursuant to Federal Rule of Civil Procedure 54(d)(2) for an award of attorney's fees under 17 U.S.C. § 505. For the reasons that follow, the motion is denied.

BACKGROUND

The Court assumes the parties' familiarity with the procedural history of this case and the prior decision of the Court on defendants' motion to dismiss.

Plaintiff Canal Image UK Ltd. ("Canal") owns the copyright to the film Kind Hearts and Coronets, released by Ealing Studios in 1949 (the "Film"). The Film is adapted from Roy Horniman's 1907 novel Israel Rank ("the Novel"), which has passed into the public domain. The Novel is the story of an eponymous protagonist, the son of Jewish father and a noble mother whose marriage to a Jewish man caused her family, the Gascoynes, to disinherit her. Raised acutely aware of his disinheritance, and shunned by his true family's banking house and his childhood love, the protagonist hatches a plan to murder the eight people between him and the family's noble title. As he carries out the plan, the protagonist joins the banking house and his increased stature and wealth enable him to have an affair with his former flame and marry the sister of one his victims. When the protagonist takes the final step and poisons Lord Gascoyne himself, he takes the title but is arrested for the crime. However, he is exonerated when a governess at the family's estate falsely confesses to the murder because she has fallen in love with the protagonist.

The Film tells essentially the same story as the Novel, with a few differences summarized in Canal I. The Film has become famous for the tour de force carried off by Sir Alec Guinness in playing each of the protagonist's victims. In its complaint, Canal alleged that "having all of the murder victims played by the same leading comic actor is central to the artistic expression of the Film" and "affects, and is inextricably intertwined with, not just the tone but all of the dramatic situations in the Film, including its 'total concept and feel.'" (Compl. ¶ 20.)

Defendants are a lyricist and a songwriter. On April 1, 2003, Canal and Defendants entered into a licensing agreement (the "Agreement") pursuant to which Canal provided Defendants with "the exclusive authorization, to the extent of the interests of [Canal] . . . to adapt the Film . . . as a live stage musical presentation" until October 1, 2004. (emphasis added). On that date, Defendants were to provide Canal with all materials necessary for Canal to decide whether to produce the "live stage musical presentation." If Canal elected to do so, it would "have the sole right to enter into agreements to . . . present the Play with [Defendants] on terms to be negotiated in good faith." However, if Canal elected not to produce the play, the Agreement provided that Defendants' "rights [t]hereunder shall immediately terminate" and Defendants "shall immediately thereafter cease dealing in and with any materials written or created by you which represent, incorporate or embody the Film or any elements in the Film, including without limitation the text, characters, and situations in the Film, all of which elements shall be deemed to have reverted to [Canal]."

Defendants submitted the required materials pursuant to releases dated September 1, 2004 which incorporated the terms of the Agreement, but Canal decided not to produce Defendants' musical. (Garmise Aff. Exs. A, B.) However, Defendants proceeded with developing their adaption ("the Musical") which has appeared at workshops but not in any theater. According to Defendants, the musical was scheduled to run in the 2010-2011 season at the La Jolla Playhouse in La Jolla, California and Defendants were prepared to sign an agreement "with a producer, who was to fund a portion of the La Jolla production in exchange for . . . rights to subsequent productions of the Musical." (Dec. of S. Lutvak, Apr. 14, 2011 ("Lutvak Dec."), ¶¶ 4-5; Dec. of R. Freedman, Apr. 14, 2011 ("Freedman Dec."), ¶ 4.) However, Defendants contend that, after Canal filed its complaint, "the potential producer elected not to sign the proposed agreement" and the La Jolla Playhouse canceled the scheduled production. (See Lutvak Dec. ¶¶ 6-7; Freedman Dec. ¶ 5.)

On February 19, 2010, Canal filed suit for copyright infringement and breach of contract. Canal alleged that Defendants "have simply taken the same musical which they previously called Kind Hearts and Coronets, changed the title and the names of certain characters, made other immaterial changes, and have now announced a pre-Broadway commercial production of that musical." (Compl. ¶ 16.) In particular, Canal alleged that Defendants' musical "retained the central and most memorable expressive part of Kind Hearts and Coronets: the comedy inherent in having all eight of the aristocratic murder victims played by a single actor. . . ." (Id. ¶ 19.)

Defendants moved [18] under Federal Rule of Civil Procedure 12(b)(6) to dismiss the complaint for failure to state a claim for which relief can be granted, or, in the alternative, for summary judgment pursuant to Rule 56(c). In a memorandum opinion and order dated March 29, 2009, the Court granted the motion. See Canal I, 2011 WL 1158439.The Court dismissed the copyright claim on the ground that no reasonable jury could find the works substantially similar. See id. at *16. The Court dismissed the contract claim as preempted by the Copyright Act. See id. at *21.

On April 14, 2011, Defendants moved [43] pursuant to Federal Rule of Civil Procedure 54(d)(2) for an award of attorney's fees under 17 U.S.C. § 505.

LEGAL STANDARD

"Section 505 of the Copyright Act provides that a district court may 'in its discretion . . . award a reasonable attorneys fee to the prevailing party' in a copyright action." Bryant v. Media Right Prods., Inc., 603 F.3d 135, 144 (2d Cir. 2010) (quoting 17 U.S.C. § 505). "This fee-shifting provision is symmetrical: costs and attorney's fees are equally available to prevailing plaintiffs and defendants." Baker v. Urban Outfitters, Inc., 431 F. Supp. 2d 351, 357 (S.D.N.Y. 2006) (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994)). Since "a successful defense of a copyright infringement action may further the policies of the Copyright Act every bit as much as a successful prosecution of an infringement claim by the holder of a copyright," "defendants who seek to advance a variety of meritorious copyright defenses should be encouraged to litigate them to the same extent that plaintiffs are encouraged to litigate meritorious claims of infringement." Id. at 527.

"Prevailing plaintiffs and prevailing defendants are to be treated alike, but attorney's fees are to be awarded to prevailing parties only as a matter of the court's discretion." Id. at 534. "There is no precise rule or formula for making these determinations, but instead equitable discretion should be exercised. . . ." Id. (quotation marks omitted)."When determining whether to award attorneys fees, district courts may consider such factors as (1) the frivolousness of the non-prevailing party's claims or defenses; (2) the party's motivation; (3) whether the claims or defenses were objectively unreasonable; and (4) compensation and deterrence." Bryant, 603 F.3d at 144 (citing Fogerty, 510 U.S. at 534 n. 19).

Since "fee awards are at bottom an equitable matter," the Second Circuit has stated that "courts should not hesitate to take the relative wealth of the parties into account." Shangold v. Walt Disney Co., 275 Fed.Appx. 72, 74 (2d Cir. 2008). However, the law in this Circuit is somewhat unsettled as to whether the parties' resources are relevant to whether fees should be awarded or only to the amount of fees the Court has already chosen to award. Some courts have stated that "[c]courts assessing attorney's fee applications in copyright actions may consider the relative financial strengths of the parties in determining whether an award of fees is appropriate." Contractual Obligation Prods., LLC v. AMC Networks, Inc., 546 F. Supp. 2d 120, 132 (S.D.N.Y. 2008); see also Leibovitz v. Paramount Pictures Corp., No. 94 Civ. 9144, 2000 WL 1010830, at *5 (S.D.N.Y. July 21, 2000). However, Judge Sweet has advanced the view that decisions which "have treated a financial disparity between the parties as a factor to be weighed in determining whether an award should issue rather than simply the magnitude of such an award . . . . were premised on mistaken or opaque prior constructions of the holding in Williams [v. Crichton, No. 93 Civ. 6829, 1995 WL 449068 (S.D.N.Y. July 26, 1995)]". Penguin Books U.S.A., Inc. v. New Christian Church of Full Endeavor, Ltd., No. 96 Civ. 4126, 2004 WL 728878, at *6 (S.D.N.Y. Apr. 6, 2004). Indeed, the court in Williams stated only that "[a]mong the relevant factors to be considered in determining the amount of an award under 17 U.S.C. § 505 is 'the relative financial strength of the parties.'" Williams, 1995 WL 449068, at *1 (emphasis added) (quoting Lieb v. Topstone Indus., Inc., 788 F.2d 151, 156 (3d Cir. 1986)).*fn1 Hence Judge Sweet has taken the position "that financial disparities may be a factor considered in determining the magnitude of an award once it has been resolved that such an award is appropriate." Penguin Books U.S.A., Inc., 2004 WL 728878, at *5. *fn2

The role of other factors is far more settled. "The third factor-objective unreasonableness-should be given substantial weight." Bryant, 603 F.3d at 144. Hence "[s]ome courts within the Circuit have concluded that the objective unreasonableness of a claim is sufficient by itself to warrant the imposition of attorneys' fees." Silberstein v. Fox Entm't Group, Inc., 536 F. Supp. 2d 440, 443 (S.D.N.Y. 2008); see also Crown Awards, Inc. v. Discount Trophy & Co., Inc.,564 F. Supp. 2d 290, 294 (S.D.N.Y. 2008)("Objective unreasonableness of a party's claims or defenses is sufficient to subject a party to an award of attorneys' fees under § 505."). But while objective unreasonableness may be sufficient, it is not necessary to an award of attorney's fees. True, "the imposition of a fee award against a copyright holder with an objectively reasonable litigation position will generally not promote the purposes of the Copyright Act." Matthew Bender & Co., Inc. v. West Pub. Co.,240 F.3d 116, 122 (2d Cir. 2001). "This is not to say, ...


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