Knology Inc v. Insight Comm Co ( 2006 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 06a0310p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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Plaintiff-Appellee, -
KNOLOGY, INC.,
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No. 05-6391
v.
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INSIGHT COMMUNICATIONS CO., L.P., INSIGHT -
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Defendants-Appellants. -
KENTUCKY PARTNERS, L.P.,
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Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 00-00723—Thomas B. Russell, District Judge.
Argued: July 21, 2006
Decided and Filed: August 22, 2006
Before: MARTIN and SUTTON, Circuit Judges; JORDAN, District Judge.*
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COUNSEL
ARGUED: Laurence J. Zielke, PEDLEY, ZIELKE, GORDINIER & PENCE, Louisville,
Kentucky, for Appellants. Eric L. Ison, GREENEBAUM, DOLL & McDONALD, Louisville,
Kentucky, for Appellee. ON BRIEF: Laurence J. Zielke, PEDLEY, ZIELKE, GORDINIER &
PENCE, Louisville, Kentucky, for Appellants. Eric L. Ison, Holland N. McTyeire, Melissa Norman
Bork, GREENEBAUM, DOLL & McDONALD, Louisville, Kentucky, for Appellee.
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OPINION
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BOYCE F. MARTIN, JR., Circuit Judge. Insight Communications Company, L.P., and
Insight Kentucky Partners, L.P., (collectively “Insight”) appeal the district court’s denial of their
motion for costs based on the district court’s granting of Knology, Inc.’s motion for voluntary
dismissal with prejudice. The dismissal followed this Court’s ruling in an earlier appeal that Insight
was entitled to Noerr-Pennington immunity on Knology’s claims for damages, which reversed the
district court’s determination that only a portion of Knology’s claims were barred, as well as its
related grant of partial summary judgment in favor of Knology. On remand, both parties filed
*
The Honorable R. Leon Jordan, United States District Judge for the Eastern District of Tennessee, sitting by
designation.
1
No. 05-6391 Knology, Inc. v. Insight Communications Co., et al. Page 2
motions for dismissal with prejudice — Insight sought through its motion to have Knology pay its
costs in defending the lawsuit, while Knology’s motion sought dismissal with both parties bearing
their own costs. The district court granted Knology’s motion denying costs, and dismissed Insight’s
motion as moot. For the following reasons, we AFFIRM the district court’s decision.
I.
The prior panel decision in this case, issued on December 29, 2004, addressed Insight’s
interlocutory appeal of the district court’s partial grant of summary judgment in favor of Knology
on May 30, 2003. Knology, Inc. v. Insight Commc’ns Co., L.P., 393 F.3d 656 (6th Cir. 2004). The
facts set forth in that opinion provide helpful background for the present appeal:
Insight and Knology are cable television service providers. In 1998, the City of
Louisville, Kentucky, passed Ordinance 76, granting Insight a franchise to provide
cable services. The ordinance included a “level playing field” provision, which
states:
The rights and privileges granted by this ordinance to Operator are
not exclusive and nothing herein is intended to or shall be construed
so as to prevent the City from granting other . . . franchises . . .
provided, however, that [they] are neither “more favorable” nor “less
favorable” than those granted to Operator herein . . . . Any
subsequent franchise shall contain a provision suspending the
effective date for sixty (60) days during which time after prompt
written notice is given by the City to Operator, if Operator claims to
be aggrieved, parties shall seek a Declaration of Rights in a court of
competent jurisdiction during which time the effective date of the
subsequent franchise shall be suspended pending a final and
nonappealable decision resolving the issue.
Two years later, Louisville enacted Ordinance 114, creating Knology's franchise,
which provides
The Franchise created by this Ordinance shall become effective as to
any particular Franchisee sixty (60) days after the effective date of
the Board of Aldermen's Resolution accepting that Franchisee's bid;
provided, however, that if [Insight seeks] a Declaration of Rights . . .
the effective date of the Franchise . . . shall be suspended pending a
final and nonappealable decision resolving the issue.
As the ordinance anticipated, Insight then sued the City in state court, seeking a
declaration that the City granted Knology a more favorable franchise. That suit
triggered the ordinance provision suspending the effective date of Knology's
franchise until a final, nonappealable decision resolved the issue. Some thirteen
months later, the state court granted summary judgment for the City, finding that the
franchises were substantially similar. The Kentucky Court of Appeals affirmed, and
the Kentucky Supreme Court denied discretionary review.
Soon after Insight filed in state court, Knology sued Insight and the City in the
district court. Knology argued, among other things, that Insight’s state suit and its
invocation of the provision suspending Knology’s franchise violated the Sherman
Act, the Cable Act, and the First Amendment, and that Knology was therefore
entitled to damages under the Sherman Act and 42 U.S.C. § 1983. The district court,
No. 05-6391 Knology, Inc. v. Insight Communications Co., et al. Page 3
ruling on a motion for partial summary judgment, viewed Insight’s one act--filing
suit--as two acts, warranting two contrary holdings: Insight was immune under the
Noerr-Pennington doctrine for its act of filing the state court action, but not immune
for its invocation of the franchise suspension provision (by its act of filing the state
court action). The district court also ruled Insight was not immune from Knology's
§ 1983 claims, because it was a “state actor” when it invoked the suspension. That
reasoning led the court to enter summary judgment for Knology on its § 1983 First
Amendment claim.
Id. at 657-58. Insight sought and was granted an interlocutory appeal of the summary judgment
order. On that appeal, this Court disagreed with the district court’s reasoning that Insight’s filing
of suit constituted two acts. Id. at 659. Instead, it determined that the filing of the state court action
and the related suspension of Knology’s franchise were in fact a single act, and that Noerr-
Pennington immunity applied to both. Id. The Court’s opinion expressly stated: “Noerr-Pennington
bars all of Knology’s claims for damages against Insight arising out of the stay.” Id.
As Knology now points out, the district court’s original summary judgment order granted
it relief beyond its money damages claims, and that relief was not reversed by this Court. In the
summary judgment order, the district court also granted declaratory judgment in favor of Knology,
finding that the Automatic Stay provision violated federal law. Additionally, the district court
granted a permanent injunction, preventing the enforcement of the automatic stay provision to
suspend Knology’s franchise. This injunction was eventually modified pursuant to Insight’s motion
for reconsideration, but that modification only kept the injunction from applying against Insight,
which had no power to enforce the ordinance at any rate, while maintaining the unenforceability of
the stay provision generally. Also, in March 2001, shortly after the litigation was commenced,
Knology was granted a preliminary injunction temporarily preventing “the portion of the questioned
ordinance that has the effect of suspending Knology’s franchise.” Neither the declaratory judgment
nor the preliminary or permanent injunctions were reversed by this Court’s prior decision.
After this Court reversed and remanded the district court’s grant of summary judgment in
favor of Knology on its money damages claims, both sides filed motions to dismiss in the district
court. Insight’s motion claimed that dismissal was the only possible action in light of this Court’s
mandate on remand. Knology filed a competing motion for voluntary dismissal, with each side
bearing its own costs. In opposing Knology’s motion, Insight argued that it was entitled to costs
under Fed. R. Civ. P. 54(d), which provides that “costs shall be allowed as of course to the
prevailing party unless the court otherwise directs.” The district court granted Knology’s motion,
dismissing the case with each party to bear its own costs, and denied Insight’s motion as moot.
The district court reasoned that even though Knology ultimately lost on appeal its ability to
seek money damages in light of the Noerr-Pennington doctrine, it still prevailed on its declaratory
judgment claim regarding the validity of the automatic stay provision. Although this claim was
formally against the city, Insight vigorously opposed the court’s ruling. Given Knology’s partial
success, the district court deemed it inappropriate to award costs to Insight. In addition to
determining that Insight was not a prevailing party under Rule 54, the district court also found that
the case was “close and difficult,” and that Knology “conducted this litigation in a proper, good faith
manner.” Dist. Ct. Op. at 4. Thus, even if Insight could have been deemed a prevailing party, the
district court made clear that it would have exercised its discretion to refrain from awarding costs
in an apparent alternative holding. Insight now appeals the district court’s decision, seeking an order
instructing the District Court to award it costs for the lawsuit.
No. 05-6391 Knology, Inc. v. Insight Communications Co., et al. Page 4
II.
Insight attempts to argue that we should review de novo the district court’s denial of costs,
citing cases involving a district court’s application of a mandate from the court of appeals on
remand. This is a misleading position on Insight’s behalf, as nothing in this Court’s prior opinion
spoke to the issue of awarding costs under Rule 54. The prior panel’s opinion only spoke to the
issue of whether Insight was protected from Knology’s money damages claims based on Noerr-
Pennington immunity. It did not clearly reverse the district court’s declaratory judgment on the
validity of the automatic stay provision under federal law and did not address the injunctive relief
awarded to Knology. Thus it does not establish that Insight was a prevailing party on all of
Knology’s claims, nor can it be said that our present review involves the district court’s application
of a prior mandate from this Court.
As Knology correctly points out, in the context of attorney’s fees provided by statute, we
review a district court’s determination of prevailing party status under the clear error standard.
Gregory v. Shelby County, 220 F.3d 433, 447 (6th Cir. 2000) (applying clear error standard for
prevailing party status under 42 U.S.C. §1988). We see no reason why the same standard of review
should not apply to a determination of prevailing party status under Rule 54(d). The district court’s
decision denying costs to a prevailing party is reviewed for abuse of discretion. Singleton v. Smith,
241 F.3d 534, 539 (6th Cir. 2001). Rule 54(d) states that “costs other than attorney’s fees shall be
allowed as of course to the prevailing party unless the court otherwise directs.” This Court has held
that “this language creates a presumption in favor of awarding costs, but allows denial of costs at
the discretion of the trial court,” and thus a decision denying costs to a prevailing party is reviewed
for abuse of discretion. Id., at 539. This Court has also identified “several factors a losing party
may put forward that may be sufficient to justify a district court in overcoming the presumption in
favor of a cost award, including the losing party’s good faith, the difficulty of the case, the winning
party’s behavior, and the necessity of the costs.” Id.
III.
A. Prevailing Party Status
Under this Court’s precedent, there is no basis for reversing the district court’s denial of
costs. First, the district court’s determination that Knology did prevail on some of its claims is not
clearly erroneous. This Court’s reversal of the summary judgment entered on behalf of Knology
only applied to the money damages claims based on the automatic stay provision. That decision did
not reverse the district court’s declaratory judgment that the automatic stay was invalid under federal
law, which the district court described as “a very important issue.” Nor did it affect the injunctive
relief awarded to Knology. The basis of the district court’s finding of invalidity was that the
automatic stay provision conflicted with the Cable Act of 1992, 47 U.S.C. §541(a). This Court’s
opinion did not reach the merits of this ruling, but only determined that Noerr-Pennington immunity
barred money damages claims against Insight. This result supports the district court’s conclusion
that Knology prevailed in part over Insight.
Insight contends that this victory by Knology was only against the city of Louisville and that
for Rule 54 purposes, it is still the prevailing party over Knology, even though Knology itself may
have partially prevailed over the city. In support of this argument, Insight emphasizes that by
modifying the permanent injunction it issued against Insight with regard to enforcement of the stay
provision, the district court indicated that Insight in fact prevailed on this issue. As the district court
made clear, however, the city in fact agreed with Knology on this issue and agreed to release
Knology from the stay, and only Insight opposed this argument. Thus, according to the district
court, Insight — not the city — is the party responsible for this issue being litigated, and Knology’s
partial victory here can only be described as against Insight as “[i]t was Insight who fought that
No. 05-6391 Knology, Inc. v. Insight Communications Co., et al. Page 5
battle and lost.” Dist. Ct. Op. at 4. In fact, had the district court looked only to the nominal subject
of the injunction, rather than the real winner and loser on this point of contention, its prevailing party
analysis would have been incomplete. The district court’s more complete view of the litigation
supports the conclusion that there was no prevailing party when the lawsuit is examined in its
entirety, and that Insight is not presumptively entitled to costs.
Insight also contends that based on Knology’s voluntary dismissal of its case with prejudice,
Insight is by definition the prevailing party under Rule 54 and entitled to costs. Insight’s argument
is based on the formalistic view that by terminating its action without first amending the complaint,
Knology lost all of its claims, including the declaratory judgment claim on which it may have
initially prevailed. This is a correct statement of the law regarding the effect of a voluntary
dismissal. See Mgmt. Investors v. United Mine Workers, 610 F.2d 384, 393 (6th Cir. 1979). Even
so, however, it does not mean that there was no value to Knology of having the declaratory judgment
and injunctive relief entered on its behalf, even if it subsequently decided not to make any use of
those rulings.
The declaratory judgment was a victory for Knology, and could have provided it some
assistance in its attempt to alter the status quo. Knology also presumably benefitted from having
an injunction entered in its favor preventing enforcement of the automatic stay — even if it did not
enter the Louisville cable market at the time, the court’s order improved its ability to do so, or to
negotiate a favorable settlement or other related benefit. Its decision to dismiss the case voluntarily
with prejudice could well be based on an assessment of the value of the lawsuit and a conclusion that
given the unavailability of money damages, it no longer made economic sense for it to litigate. This
chosen route does not necessarily mean Knology was not a prevailing party on an issue on which
it had previously been granted relief. Indeed, the policy behind Rule 54(d) of providing a
disincentive for the prosecution of frivolous lawsuits would be undermined if a party like Knology
that prevailed in part and received some preliminary relief was dissuaded from making a business
decision to stop litigating because without additional success, it would be forced to pay its
opponent’s costs.
The district court’s determination as to prevailing party status would have justified its denial
of costs to either side, as Insight was not entitled to a presumption of costs under Rule 54(d).
B. Denial of Costs
Even if the district court had been “clearly erroneous” in its determination of prevailing party
status, which we hold it was not, it certainly did not abuse its discretion in its alternative holding
denying costs. This Court has stated that because “the issue [of costs] is in the discretion of the trial
court, it requires a substantial showing for us to rule that this discretion was abused. Generally, this
would require the lower court ignoring the criteria set by Sixth Circuit, or otherwise a certainty on
our part that a clear error in judgment was committed.” Singleton, 241 F.3d at 539-540. The criteria
on which this Court has focused include “the losing party’s good faith, the difficulty of the case, the
winning party’s behavior, and the necessity of the costs.” Id. The district court explicitly
considered those factors here, noting that “this was a close and difficult case,” “Knology conducted
this litigation in a proper, good faith manner,” and “Insight objected to [the declaratory judgment
ruling regarding the validity of the stay], driving up the costs of this litigation.” D. Ct. Op. at 4. In
addition to its conclusion that Knology achieved some partial success in its suit, the district court
found that these other factors “support this court’s ultimate decision that the parties should bear their
own costs.” Given its consideration of these factors, the district court certainly did not “ignore the
criteria set by the Sixth Circuit,” and there seems little basis to support a “certainty that an error was
committed.”
No. 05-6391 Knology, Inc. v. Insight Communications Co., et al. Page 6
Insight attempts to argue with the district court’s findings that the case was close and
difficult, that Knology acted in good faith, and that it drove up the cost of the litigation. Although
the prior panel decision from this Court reversed the district court’s Noerr-Pennington ruling by
determining that the filing of Insight’s state court lawsuit and the invocation of the automatic stay
provision were a single act rather than two separate acts, this is a fairly nuanced question on which
reasonable minds could differ. The district court was not wrong in later finding that this was a close
issue, despite Insight’s suggestion that the answer was obvious from the outset. A ruling now that
this was not at least a close question would require this Court to essentially determine that
reasonable minds could not differ on this point, which would insinuate that the district court was
consequently not guided by a reasonable mind. There is no basis for this panel to take such a
position, and Insight’s implicit request that we do so is condescending to the district court and
unjustified.
The district court’s denial of costs was not only based on its determination that the case was
close and difficult; it also found that Knology acted in good faith and that Insight was responsible
for driving up the costs of the litigation. These types of determinations illustrate why a determination
regarding costs is best left to the district court’s discretion, as it is clearly in the best position to
make such observations. Insight presents no principled basis for this Court to question these
findings. The district court correctly applied Sixth Circuit law in denying costs based on these
factors as well as the closeness of the case. See White & White, Inc. v. American Hosp. Supply
Corp., 786 F.2d 728, 730 (6th Cir. 1986) (“the district court’s denial of costs can be upheld on the
basis of the plaintiffs’ good faith, the defendant’s unnecessary costs, and the difficulty of the case.”).
Finally, Insight asks this Court to modify its precedent, asserting that “the Sixth Circuit is
in the minority in allowing a district court to deny the prevailing party costs based solely on the
closeness or complexity of a case.”1 A review of this Court’s precedent indicates that this is not a
correct summary — rather, the closeness of a case is one of several criteria mentioned as a basis for
denying costs. See Singleton, 241 F.3d at 539; White & White, 786 F.2d at 730 (“the district court’s
denial of costs can be upheld on the basis of the plaintiffs’ good faith, the defendant’s unnecessary
costs, and the difficulty of the case.”). Because this Circuit looks to several factors as a basis for
denying costs, and several of those factors are present here, this case does not present any basis to
re-examine our precedent regarding the denial of costs, even if this panel were inclined to entertain
such a request.
IV.
Insight’s present appeal relies on its disingenuous mischaracterizations of the prior panel’s
opinion, of this Court’s precedent governing the issuance of costs under Rule 54, and of the nature
of this case and the relief awarded to Knology by the district court. The district court’s denial of
costs to Insight was well-reasoned, and certainly cannot be described as an abuse of discretion. The
arguments Insight has presented to this Court are not well taken, and the district court’s denial of
Insight’s request for costs under Fed. R. Civ. P. 54(d) is therefore AFFIRMED.
1
At oral argument, counsel for Insight presented a modified version of this argument, claiming that this Circuit
is in the minority in considering the closeness of a case to be a factor at all in the decision to award costs. However
Insight might choose to frame its comparative analysis of federal case law on this issue, it has not presented any
principled basis for this panel to question the precedent of our Circuit which considers the closeness of a case to be one
factor among several in the district court’s decision regarding costs.