Bridgeport Music, Inc. v. Universal-MCA Music ( 2009 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 09a0369p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
Plaintiffs-Appellees, -
BRIDGEPORT MUSIC, INC., et al.
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Nos. 08-5254/55/56/57/58/59/
v.
,
60/61/62/63/64/65/66/67/68/
> 69/70/71/72/73
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UNIVERSAL-MCA MUSIC PUBLISHING, INC.,
Defendants-Appellants. -
et al.,
N
Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
Nos. 01-01160/51/66/58/41/37/26/15/04; 01055/52/40/16;
00986/17/14; 00873/40/38; 00795—Todd J. Campbell, Chief District Judge.
Argued: October 8, 2009
Decided and Filed: October 21, 2009
Before: MARTIN, GUY, and McKEAGUE, Circuit Judges.
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COUNSEL
ARGUED: Russell J. Frackman, MITCHELL, SILBERBERG & KNUPP LLP, Los
Angeles, California, for Appellants. Richard S. Busch, KING & BALLOW, Nashville,
Tennessee, for Appellees. ON BRIEF: Russell J. Frackman, Marc E. Mayer, MITCHELL,
SILBERBERG & KNUPP LLP, Los Angeles, California, Philip M. Kirkpatrick,
DICKINSON WRIGHT, Nashville, Tennessee, for Appellants. Richard S. Busch, KING &
BALLOW, Nashville, Tennessee, for Appellees.
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OPINION
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RALPH B. GUY, JR., Circuit Judge. Ten Universal-affiliated defendants, all record
and music publishing companies, have appealed a second time from the district court’s
decision to deny the defendants’ request that attorney fees be imposed as a condition of
granting plaintiffs’ motions to voluntarily dismiss without prejudice the twenty cases at issue
pursuant to Fed. R. Civ. P. 41(a)(2). We remanded the matter after the first consolidated
1
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appeal “for a more detailed order specifically addressing the [defendants’] request for
reasonable terms and conditions relating to the dismissal of [plaintiffs’] complaints.”
Bridgeport Music, Inc. v. Universal-MCA Music Publishing, Inc., 481 F.3d 926, 927-28 (6th
Cir. 2007). Reviewing the orders entered after remand, we reject defendants’ contention that
the district court abused its discretion either by failing to provide specific reasons for its
decision, or by deciding not to impose attorney fees as a condition of dismissal under Rule
41(a)(2). The judgments are affirmed.
I.
The claims involved in this appeal were originally asserted in a single action filed
in May 2001 by the related entities Bridgeport Music, Southfield Music, Westbound
Records, and Nine Records, alleging 500 separate counts of copyright infringement and
various state law claims against approximately 800 defendants relating to the use of samples
in new rap recordings. As many of our decisions have chronicled, the district court severed
that action into 477 separate actions in August 2001—106 of which were brought against
one or more of the Universal-affiliated defendants. In February 2002, after a period of
intensive litigation, the district court stayed the proceedings in all but ten of the cases. While
those first ten cases were vigorously litigated and appealed—including motions for attorney
fees by prevailing defendants under 17 U.S.C. § 505—the rest of the cases were stayed
1
except for a brief period to allow for settlement discussions in early 2003.
The district court lifted the stay with respect to approximately 100 of the
remaining cases in 2004—including the twenty cases at issue—for the limited purpose
of allowing the exchange of written discovery. Specifically, the stay was lifted as to four
of the twenty cases in March 2004, and as to the other sixteen cases in September 2004.
Written discovery was exchanged in some of those cases, and plaintiffs offered to
dismiss a number of the cases with prejudice under Rule 41(a)(1). Defendants would not
1
The fee shifting provisions of the Copyright Act allow an award of fees to prevailing defendants
on equal footing with prevailing plaintiffs, but requires the weighing of the Fogerty factors discussed and
applied with varying results in five prior appeals. See Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994)
(“nonexclusive” factors include frivolousness, motivation, objective unreasonableness, and the need in
particular circumstances to advance considerations of compensation and deterrence).
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stipulate to the dismissals, however, apparently because the district court had ruled in
other Bridgeport cases that a voluntary dismissal with prejudice would not establish
prevailing-defendant status for the purpose of seeking attorney fees. See Bridgeport
Music, Inc. v. London Music, U.K., 345 F. Supp.2d 836 (M.D. Tenn. 2004), aff’d 226 F.
App’x 491 (6th Cir. 2007) (affirming but expressly declining to decide whether
voluntary dismissal with prejudice satisfied prevailing-party test).
On various dates between December 2004 and May 2005, plaintiffs filed motions
to dismiss each of the twenty cases without prejudice and asked that the parties be
ordered to bear their own costs and fees. Defendants opposed the motions and requested
that the district court either (1) dismiss the complaints with prejudice and an explicit
designation of defendants as “prevailing parties,” or (2) dismiss the complaints without
prejudice on the condition that plaintiffs be ordered to pay defendants’ reasonable
attorney fees and costs. Without holding a hearing or articulating its reasons, the district
court entered twenty cursory orders granting plaintiffs’ motions for voluntary dismissal
without prejudice and stating that the parties would bear their own costs and fees.
Defendants appealed, and this court concluded that the district court’s failure to
articulate any reasons for its decision precluded appellate review for abuse of discretion.
Vacating the judgments, the matter was remanded “for a more detailed order specifically
addressing the [defendants’] request for reasonable terms and conditions relating to the
dismissal of [plaintiffs’] complaints.” 481 F.3d at 931. This court expressly noted,
however, that the decision to remand was not meant to imply that the district court was
wrong on the merits.
On remand, the cases were referred to a magistrate judge who was familiar with
the litigation. Defendants filed a motion seeking attorney fees as a condition of
dismissal under Rule 41(a)(2). Plaintiffs responded in opposition, and further briefing
was provided with specific case-by-case analysis. After a full hearing, the magistrate
judge recommended that the defendants’ motions be denied. The magistrate judge, who
noted his involvement in the litigation since its inception, observed that neither plaintiffs
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nor defendants had been particularly prompt, brief, or clear when dealing with the
discovery requests and responses. After identifying some of the factors to be considered,
the magistrate judge explained as follows:
The Magistrate Judge has closely reviewed each of the individual
twenty cases and finds that Defendants should not be designated as
prevailing parties and should not be awarded payment of attorneys’ fees
and costs incurred in defending the dismissed actions. The Magistrate
Judge fully understands that each case is separate and fees and costs
could be awarded in any one of them. However, the Magistrate Judge
does not find distinguishing factors in any of these twenty cases.
Contrary to the Defendants’ contentions, prior to the Rhyme Syndicate
decision in July 2004, Bridgeport had a reasonable basis for bringing
these actions. [Bridgeport Music, Inc. v. Rhyme Syndicate Music, 376
F.3d 615 (6th Cir. 2004)]. Additionally, whether any use was de minimis
was not raised in any successful motion for summary judgment. Further,
in terms of any delay in dismissing these actions, neither side has
covered themselves in glory when requesting and responding to
discovery. Both sides could have acted quicker and spent less in
prosecuting and defending these cases. Therefore, neither party has
convinced the Magistrate Judge who is to blame for any delay. Also,
while the Defendants repeat their defense mantra of “Bridgeport knew of
the existence of prior licenses,” the Magistrate Judge notes that the
licenses themselves and the literally dozens of entities involved in their
creation, ownership, and licensing of each composition make it difficult
to determine who owns what without significant discovery taking place
for clarification. Further, there was a lengthy stay in discovery in these
actions. Additionally, Bridgeport’s costs benefit analysis reasoning is a
reasonable explanation for dismissal and there is no concrete evidence
provided by the Defendants that Bridgeport’s litigation strategies were
inappropriate. In fact, the Defendants took a firm position that they
would litigate the cases. Lastly, while Defendants’ supposition that they
would have been the prevailing parties had the litigation continued is
certainly possible, it is still mere speculation. As such, when reviewing
the factors to be considered, the Magistrate Judge finds that the
Defendants are not clearly prejudiced by these dismissals. Therefore,
Defendants are not entitled to a designation as prevailing parties nor are
they entitled [to] an award of attorney fees.
The Magistrate Judge would note that the argument over fees
should not become a secondary litigation that becomes more complex
and expensive than the original litigation. The amount of resources the
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parties and the Court spent litigating over fees has now likely consumed
more time and money than the original litigation. Undoubtedly there will
be another trip to the Sixth Circuit by whoever loses this round of
litigation. At some point, everyone is entitled to relief from more
litigation after the dismissal of the original case at issue.
Defendants interposed objections, arguing—as they do now—that the magistrate judge
failed to provide a sufficiently specific and detailed order, misapplied the legal standard,
and clearly erred in considering and weighing the facts and circumstances of each case.
The district court, in separate orders, overruled defendants’ objections, adopted the
magistrate judge’s report and recommendation, and denied defendants’ motion for
attorney fees in each of the twenty cases at issue. These consolidated appeals followed.
II.
When an answer or a motion for summary judgment has been served, and not all
of the parties who have appeared will stipulate to dismissal, “an action may be
dismissed at the plaintiff’s request only by court order, on terms that the court considers
proper.” FED. R. CIV. P. 41(a)(2) (2007).2 Unless the order states otherwise, a dismissal
under Rule 41(a)(2) is without prejudice. Id. A district court’s decisions with respect
to a motion for voluntary dismissal under Rule 41(a)(2) are reviewed for abuse of
discretion. DWG Corp. v. Granada Invs., Inc., 962 F.2d 1201, 1202 (6th Cir. 1992);
Grover by Grover v. Eli Lilly and Co., 33 F.3d 716, 718 (6th Cir. 1994); see also Duffy
v. Ford Motor Co., 218 F.3d 623, 629 (6th Cir. 2000) (stating that conditions placed on
a Rule 41(a)(2) dismissal are reviewed for abuse of discretion). It is an abuse of
discretion for the district court to rely on erroneous findings of fact, apply the wrong
legal standard, misapply the correct legal standard, or make a clear error in judgment.
Nafziger v. McDermott Int’l, Inc., 467 F.3d 514, 522 (6th Cir. 2006).
2
Rule 41(a)(2), which was amended effective December 1, 2007, previously provided that except
as provided for in Rule 41(a)(1), “an action shall not be dismissed at the plaintiff’s instance save upon
order of the court and upon such terms and conditions as the court deems proper.” The Advisory
Committee Notes indicate that the 2007 amendments to Rule 41 were intended to be stylistic only.
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At the outset, defendants argue that the district court abused its discretion by
failing once again to sufficiently explain its reasons—on a case-by-case basis—for not
requiring the payment of defendants’ attorney fees as a condition of dismissal under Rule
41(a)(2). This argument both misreads our prior decision and mischaracterizes the
district court’s decision. Our remand was based on a determination that the district
court’s implicit denial of defendants’ requests for attorney fees without articulating any
reasons for the denial precluded review under the abuse-of-discretion standard. 481 F.3d
at 930-31. We said that, as in DWG: “‘The difficulty we face is that the court’s silence
prohibits us from examining the soundness of its discretionary judgment. There may
well be convincing reasons for denying the motion for costs. But unless such grounds
are made explicit we cannot know for sure.’” 481 F.3d at 930 (quoting DWG, 962 F.2d
at 1202). Although the district court’s orders on remand remained brief, each order
adopted the magistrate judge’s findings and conclusions and explicitly denied
defendants’ request that attorney fees be imposed as a condition of dismissal under Rule
41(a)(2). We have no difficulty concluding that there was individual consideration of
the cases and that the record is sufficient to allow appellate review of the soundness of
the district court’s exercise of its discretion.
Turning to the merits, the purpose of Rule 41(a)(2) is to protect the nonmovant,
here the defendants, from unfair treatment. Grover, 33 F.3d at 718. “Generally, an
abuse of discretion is found only where the defendant would suffer ‘plain legal
prejudice’ as a result of a dismissal without prejudice, as opposed to facing the mere
prospect of a second lawsuit.” Id. (citation omitted). In determining whether such
prejudice would result, courts typically consider “the defendant’s effort and expense of
preparation for trial, excessive delay and lack of diligence on the part of the plaintiff in
prosecuting the action, insufficient explanation for the need to take a dismissal, and
whether a motion for summary judgment has been filed by the defendant.” Id.; see also
Doe v. Urohealth Sys., Inc., 216 F.3d 157, 160 (1st Cir. 2000). A Rule 41(a)(2)
dismissal may be conditioned on whatever terms the district court deems necessary to
offset the prejudice the defendant may suffer from a dismissal without prejudice.
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LeBlang Motors, Ltd. v. Suburu of Am., Inc., 148 F.3d 680, 685 (7th Cir. 1998); McCants
v. Ford Motor Co., 781 F.2d 855, 856 (11th Cir. 1986).
While such conditions often involve the payment of costs incurred by a
defendant, this court has expressly rejected the contention that the payment of defense
costs is universally required for voluntary dismissal under Rule 41(a)(2). Specifically,
in DWG, the defendant relied “on what it describe[d] as a nearly universal requirement
that voluntary dismissals are to be accompanied by payment of defense costs.” 962 F.2d
at 1202. This court held, however, that: “In fact, no such requirement or rule exists in
this or in any other Circuit. Although courts frequently impose defense costs on
plaintiffs granted a voluntary dismissal, no circuit court has held that such costs are
mandatory.” Id. (citing Stevedoring Servs. of Am. v. Armilla Intern., 889 F.2d 919, 921
(9th Cir. 1989)). Likewise, we resist defendants’ suggestion in this case that courts
should necessarily require payment of defense costs before allowing a plaintiff to
dismiss under Rule 41(a)(2). Nor are we persuaded that it was an abuse of discretion for
the district court to decide not to require payment of defendants’ costs in these cases.
Defendants specifically argue that the district court failed to heed this court’s
rejection of a “one-size-fits-all” explanation for plaintiffs’ motions to dismiss these cases
under Rule 41(a)(2). Actually, this court rejected the plaintiffs’ argument that the
adverse decision in Rhyme Syndicate could be a substitute for the district court’s
articulation of its reasons—particularly since the plaintiffs had conceded that only fifteen
of the twenty cases at issue were “directly impacted” by the rejection of plaintiffs’
royalty-receipt theory. We asked, “What about the other five cases?” Although the
findings on remand did not specify which cases were impacted by the Rhyme Syndicate
decision, it was not an abuse of discretion to reiterate that—as we have also held—the
failed theory was objectively reasonable. Bridgeport Music, Inc. v. WB Music Corp.,
520 F.3d 588, 594 (6th Cir. 2008); Bridgeport Music, Inc. v. Rhyme Syndicate Music,
376 F.3d 615, 628-29 (6th Cir. 2004). Even defendants do not dispute that the adverse
ruling directly impacted fifteen of the cases, explaining plaintiffs’ decision to seek
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dismissal. Finally, this finding was only part of the rationale adopted by the district
court on remand.
Focusing on the other five cases, defendants seem to argue that the claims were
not objectively reasonable because one case involved claims subject to a prior settlement
agreement; defendants denied owning or administering the allegedly infringing work in
two cases; and there were licenses that defendants argued would bar the claims in the
other two cases. Plaintiffs responded that the settlement was a matter of contention, that
there was an evidentiary basis to believe that defendants had administered the infringing
works notwithstanding their denials, and that the licenses defendants relied upon had
never been fully executed. It would be speculative to conclude that defendants would
have prevailed on a motion for summary judgment when no motion for summary
judgment was pending, and plaintiffs had—at the district court’s urging—weighed the
costs and benefits of continuing to litigate these cases. Nor have defendants shown that
it was clear error to find that some discovery was appropriate in order to determine the
significance of the licenses on which defendants relied as a bar to the infringement
claims.
Defendants also claim that the district court abused its discretion by not
considering whether plaintiffs should have dismissed their claims sooner, by failing to
analyze the prejudice to defendants, and by giving weight to the defendants’ litigation
conduct. On the contrary, the district court specifically considered whether there was
excessive delay on the part of plaintiffs, and concluded not only that the delay in these
cases could not clearly be attributed to plaintiffs alone, but also that plaintiffs’ cost-
benefit analysis provided a reasonable explanation for seeking dismissal in these cases.
Our familiarity with other cases arising out of this litigation confirms our determination
that the district court considered these cases individually and did not abuse its discretion
in finding that defendants would not suffer prejudice requiring the payment of a pro rata
share of attorney fees as a condition for dismissal under Rule 41(a)(2).
AFFIRMED.