Yellow Pages Photos, Inc. v. Ziplocal, LP

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 16-11868
Non-Argument Calendar
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D.C. Docket No. 8:12-cv-00755-RAL-EAJ
YELLOW PAGES PHOTOS, INC.,
Plaintiff-Appellant,
versus
ZIPLOCAL, LP,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(January 24, 2017)
Before TJOFLAT, MARCUS and FAY, Circuit Judges.
PER CURIAM:
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Yellow Pages Photos, Inc. (“YPPI”) appeals the District Court’s award of
$69,354.76 in attorney’s fees and $20,211.37 in nontaxable costs against Ziplocal
LP (“Ziplocal”). These amounts represent approximately 4.9% of the fees and
6.8% of the nontaxable costs YPPI requested and YPPI asserts that such a dramatic
reduction constituted an abuse of discretion. Further, YPPI argues that the District
Court’s use of a mathematical formula to award fees and costs in proportion to
YPPI’s degree of success in litigating its claims was impermissible. YPPI also
contends that it is presumptively entitled to recovery of full costs under our
precedent. The District Court’s failure to award full costs without a “sound basis”
for doing so was error. We agree and find that reducing YPPI’s request for fees
and costs in strict, mathematical proportion to the results obtained at trial was an
abuse of discretion.
The current litigation over fees and costs is the most recent entry in a
lengthy civil dispute involving a series of stock photographic images YPPI
grouped for sale under subject matter headings specifically designed for use by the
phonebook industry. Yellow Pages Photos, Inc. v. Ziplocal, LP, 795 F.3d 1255,
1260 (11th Cir. 2015). In March of 2004, YPPI signed a contract with Ziplocal
consisting of two documents: a Site License Purchase Agreement (“SLPA”) and an
End User License Agreement (“EULA”). Id. at 1260–61. Under these
agreements, Ziplocal agreed to purchase a license to use all of YPPI’s current
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photographic content, as well as 120 additional subject matter headings as they
were developed. Id. at 1261. The contract between Ziplocal and YPPI also
required Ziplocal to prevent unauthorized users from accessing YPPI’s photos and
forbade Ziplocal from transferring any “images to any outside parties or
individuals unless authorized by YPPI.” Id. Significantly, the agreement between
YPPG and Ziplocal contained a provision allowing the prevailing party to collect
fees and costs “[i]n the event of legal action to enforce [the contract] or in
conjunction with the use of [YPPI’s licensed photos].”
Six years after reaching this initial agreement, Ziplocal entered into an
agreement with a larger firm, Yellow Pages Group, LLC (“YPG”), who began
selling its phone books to Ziplocal for local distribution. Yellow Pages Photos,
Inc., 795 F.3d at 1262. YPG employees modified and otherwise updated
Ziplocal’s local phonebooks to prepare them for distribution. Id. As part of this
process, Ziplocal provided YPG with YPPI’s licensed photos. Some of these
photos also appeared in subsequent YPG publications. Id. Ziplocal never
requested or received YPPI’s permission to transfer its licensed photos to YPG. Id.
Upon discovering this unlicensed use of its images, YPPI brought suit alleging that
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Ziplocal breached its licensing contract with YPPI and, as a result, also infringed
YPPI’s copyrights.1 Id.
Following a lengthy and contentious trial, the jury concluded that Ziplocal
breached its contract, but no damages flowed from the breach. Id. at 1263. The
jury also found that YPPI’s copyright was infringed and awarded $123,000 in
statutory damages against YPG and $1.00 of actual damages against Ziplocal. Id.
Finally, the jury determined that Ziplocal was a contributory infringer of YPPI’s
copyright and awarded an additional $100,000 in actual damages. Id. All these
findings were subsequently upheld on appeal. Id. at 1286.
After trial, YPPI filed several motions seeking fees and costs against both
YPG and Ziplocal pursuant to both Section 505 of the Copyright Act and the
licensing agreement between the parties. YPPI argued that it was entitled to
$1,422,661.75 in attorney’s fees and $269,484.96 in nontaxable costs. 2 The
District Court declined to make a final award of costs and fees until the completion
of the initial appeals process. Nonetheless, it did hold that YPPI was the prevailing
party and accordingly was entitled to recover fees and costs under its license
1
YPPI also asserted a copyright infringement claim against YPG. Yellow Pages Photos, Inc.,
795 F.3d at 1262.
2
YPPI also argued that it was entitled to $98,435.73 in taxable costs, which is not at issue on this
appeal. YPPI’s claim for attorney’s fees and costs accounts includes substantial self-imposed
reductions. In particular, Plaintiff subtracted time spent litigating personal jurisdiction, time
spent briefing and litigating the definition of a ‘work’ for copyright purposes, and time spent
preparing a motion for sanctions during discovery.
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agreement with Ziplocal. The District Court declined to award attorney’s fees
under Section 505 of the Copyright Act. YPPI properly renewed its motions for
fees and costs after the initial appeal process concluded, and this court affirmed the
jury verdict.
This appeal concerns the District Court’s March 24, 2016 order granting
YPPI’s Motions for Fees and Costs, but dramatically reducing the amounts
requested. The District Court found that some reduction in YPPI’s request for
attorney’s fees was appropriate based on the block billing practices engaged in by
YPPI, the contentiousness of the litigation, and the District Court’s apparent belief
that hours spent pursuing YPPI’s copyright claims were not recoverable pursuant
to the licensing agreement providing the basis for the fee award. Accordingly, the
order provided for a 35% across the board reduction in attorney’s fees and set the
lodestar amount at $924,730.14.
After determining this presumptively reasonable lodestar amount, the
District Court reduced the award by an additional 92.5% to reflect YPPI’s relative
degree of success in the litigation. The court explained that YPPI’s $100,001
recovery against Ziplocal, was “approximately 10% of the lowest amount Plaintiff
sought . . . and approximately 5% of the top range [of damages sought].”
Accordingly, the court split the difference between those two figures, and awarded
exactly that percentage of the lodestar amount in fees. The court performed an
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identical calculation with respect to nontaxable costs. The court apparently
accepted the amount of costs provided by YPPI, $269,486.36, but applied a 92.5%
reduction, ultimately awarding only $20,211.37 in nontaxable costs. The District
Court relied on the same analysis discussed above to justify this reduction.
We review fees and costs awards under an abuse of discretion standard. See,
e.g., Cullens v. Georgia Dept. of Trans., 29 F.3d 1489, 1491 (11th Cir. 1994). An
abuse of discretion occurs when a district court commits a clear error of judgment,
fails to follow the proper legal standard or process for making a determination, or
relies on clearly erroneous findings of fact. See, e.g., Gray ex rel. Alexander v.
Bostic, 613 F.3d 1035, 1039 (11th Cir. 2010). This standard necessarily implies a
range of choices, and we will affirm even if “we would have decided the other way
if it had been our choice.” Id. (citations omitted). Even though determining a
reasonable fee is within the sound discretion of the trial judge, this discretion is not
unlimited. Id. at 1039–40. The district court must provide a clear explanation of
the rationale supporting a fee award. Id.As the award of attorney’s fees and costs is essentially factual in nature, the
district court’s superior understanding of the litigation clearly places it in the best
position to calculate such an award when appropriate. See Cullens v. Georgia
Dept. of Trans., 29 F.3d 1489, 1492–93 (11th Cir. 1994). Unquestionably, the
district court possesses wide discretion in calculating the amount and
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reasonableness of such an award. Id. Here, the District Court carefully complied
with the Supreme Court’s command in the landmark decision of Hensley v.
Eckerhart, and provided “a concise but clear explanation of its reasons for the fee
award.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). Nonetheless, the District
Court erred in refusing to count hours expended in pursuit of YPPI’s copyright
claims against Ziplocal in its initial lodestar calculation.
Florida law explicitly provides that “claims arise out of a contract if they are
inextricably intertwined with the contract.” Dolphin LLC v. WCI Communities,
Inc., 715 F.3d 1243, 1250 (11th Cir. 2013) (citation omitted). Undoubtedly,
YPPI’s copyright infringement claims arose directly out of its contract with
Ziplocal. If the contract allowed Ziplocal to share YPPI’s photos with unapproved
third parties, then no infringement would have occurred since the use of the
copyrighted images by YPG would have been properly licensed. See Yellow Pages
Photos, Inc., 795 F.3d at 1266. So, to prevail on its copyright infringement
claims, YPPI needed to prove that the license agreement it signed with Ziplock
was breached. And, YPPI did, in fact, prevail on its copyright claims against
Ziplock and was awarded nominal damages, as well as an additional $100,000 in
actual damages, based on a theory of contributory infringement. It is unclear why
the District Court felt that reasonable attorney’s fees would not flow to YPPI based
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on this successful copyright action.3 In any event, the contractual attorney’s fees
provision which the District Court used to justify its fee award expressly
contemplated the award of fees based on litigation “in conjunction with the use of
the product.” This language is clearly broad enough to cover YPPI’s copyright
action. Accordingly, YPPI is entitled to reasonable attorney’s fees for hours
expended on those claims.
The District Court also erred in substantial reducing the lodestar amount
after completing its initial calculation. Although the district court retains
discretion to reduce the lodestar, that amount embodies a presumptively reasonable
fee. Perdue v. Kenny ex rel. Winn, 559 U.S. 542, 554 (2010). The Supreme Court
held that the lodestar should only be altered “in those rare circumstances in which
[it] does not adequately take into account a factor that may properly be considered
in determining a reasonable fee.” Id.; see also Resolution Trust Corp. v. Hallmark
Builders, Inc., 996 F.2d 1144, 1150 (11th Cir. 1993) (noting that “courts have
severely limited the instances in which a lawfully found lodestar amount may be
3
The question of whether claims are inextricably intertwined usually arises when a court seeks
to apportion fees among unsuccessful and successful claims. See Popham v. City of Kennesaw,
820 F.2d 1570, 1578 (11th Cir. 1987). If the court finds that the unsuccessful claims were based
on different facts and legal theories from the successful claims “the court cannot award any fee
for services on the unsuccessful claims.” Id. (citation omitted). If the successful and
unsuccessful claims are intertwined and share a “common core” of facts or a related legal theory
then a reasonable fee is allowed as to all hours expended on both sets of claims. Id. at 1578–79
(citation omitted). Here, the district court found YPPI was successful on all of its claims against
Ziplocal. Thus, while the lodestar amount can be properly reduced based on the relative degree
of success enjoyed by the plaintiff, the lodestar itself should include the hours reasonably
expended on all YPPI’s claims.
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adjusted to a higher or lower level”). However, it is appropriate to alter the
lodestar to reflect attorney success or the lack thereof. See, e.g., Norman v.
Housing Auth. of City of Montgomery, 836 F.2d 1292, 1302 (11th Cir. 1998). A
comparison of damages sought to the damages received is an appropriate
measurement of the relative success of litigation. See Popham v. City of
Kennesaw, 820 F.2d 1570, 1580–81 (11th Cir. 1987).
But, the Supreme Court has frowned on a strictly mathematical approach
calculating attorney’s fees based on a ratio of total claims to successfully litigated
claims, explaining that “[s]uch a ratio provides little aid in determining what is a
reasonable fee in light of all the relevant factors.” Hensley, 461 U.S. at 435 n.11.
In the civil rights context, the Supreme Court explicitly rejected a proportionality
requirement between the amount of damages awarded and the amount of damages
initially sought by the plaintiff. See City of Riverside v. Rivera, 477 U.S. 561, 574
(1986). This Circuit followed the Supreme Court’s lead and explained that while
the amount of damages is relevant to assessing the degree of success enjoyed by
the plaintiff, the “court may not employ a cash register approach in which setting a
fee is merely an arithmetical function.” Cullens, 29 F.3d at 1493. In this context,
“[t]he risk is too great that a multiple-of-damages approach will subsume, or
override, or erode other relevant considerations, or place undue tensions upon
them” even if “the use of the multiplier [is] explained and justified.” Id. at 1494.
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The District Court here, like the court in Cullens, did not “pull a
[mathematical formula] out of the air. . . [it] spelled out its intellectual process.”
Id. at 1494. The court noted the damages actually awarded by the jury were only
5% of the maximum amount sought by YPPI and approximately 10% of the
minimum damages sought.4 The court then found the mid-range of these
percentages, 7.5%, and concluded that this reflected the amount of success YPPI
enjoyed and accordingly represented the percentage of the lodestar amount YPPI
was entitled to receive. It is difficult to frame this process as anything other than a
rote application of a mathematical formula to ensure proportionality between the
litigation success of the plaintiff and a subsequent award of attorney’s fees.
Furthermore, the District Court does not provide additional justifications for its
dramatic reduction in the lodestar. While the trial judge certainly enjoys the
discretion to reduce its award of fees to reflect the limited litigation success of
YPPI, our precedent forecloses the cash register approach relied on here. See
Cullens, 29 F.3d at 1494.
4
The court also criticized the amount of time spent litigating the definition of “work,” even
though YPPI had already deducted those hours from the initial fee request submitted to that
court. That factor was presumably already included in the initial lodestar calculation, based on
both this self-imposed deduction and the court’s own refusal to credit all hours spent on the
infringement claim in the calculation of the lodestar. Accordingly, the difficulty identifying the
time spent litigating the definition of ‘work’ could not serve as a justification for a further
reduction in attorney’s fees. See Bivins v. Wrap It Up, Inc., 548 F.3d 1348, 1352 (11th Cir.
2008) (explaining that reconsidering factors used to make the initial lodestar calculation to
justify subsequent adjustments to that amount constituted impermissible double-counting).
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Additionally, the contract between YPPI and Ziplocal explicitly entitles the
winning party to recover “its attorney’s fees and costs.” The contractual language
here does not even limit the recovery of fees to a reasonable amount. Instead, the
language of the contract plainly suggests a full recovery of the fees expended in
litigation related to the contract. Such a provision was almost certainly intended to
allow the parties to enforce even minor breaches of the contract without regard to
relative costs. And, significantly, the trial judge relied entirely on the contract to
justify an award of fees in the first instance. By allowing contractual attorney’s
fees, but also reducing them by over 90%, the District Court denied YPPI the
benefit of its bargain and effectively rendered the contractual fees provision
meaningless.
At the end of the day, the substantive reasonableness of the amount awarded
is the touchstone of our evaluation of a district court’s award of fees and costs.
Here, the reduction of the presumptively reasonable lodestar amount, which
already incorporated substantial self-imposed cost reductions, by an additional
92.5% was unreasonable, even in light of YPPI’s limited litigation success. Such a
significant reduction in fees functioned as a penalty and undermined the
contractual provision that enabled the award of attorney’s fees in the first instance.
Further, the amount of the reduction was explicitly based on the application of a
proportional modifier representing the degree of success YPPI enjoyed at trial.
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Both the Supreme Court and our circuit precedent prohibit this sort of “cash
register approach” to the award of attorney’s fees. Accordingly, the court abused
its discretion in awarding only $69,354.76 after calculating a presumptively
reasonable lodestar amount of attorney’s fees as $924,730.14.
Similarly, the District Court abused its discretion by applying the same cash-
register approach to the award of nontaxable costs under the fees and cost
provision of the licensing agreement between YPPI and Ziplocal. Based on this
contractual entitlement, which is not limited to taxable costs under 28 U.S.C. §
1920, the District Court should have considered amounts it denied as taxable costs,
the $6,118.76 incurred with D4-LLC and the $20,527 incurred with e-Hounds, Inc,
as nontaxable costs. Yellow Pages Photos, Inc. v. Ziplocal, LP, 795 F.3d 1255,
1260–61 (11th Cir. 2015). Under Rule 54(d) “there is a strong presumption that
the prevailing party will be awarded costs.” Mathews v. Crosby, 480 F.3d 1265,
1276 (11th Cir. 2007) (citation omitted). Of course, the trial judge possesses
discretion with respect to awarding costs but that discretion is not unlimited and a
denial of costs is “‘in the nature of a penalty for some defection [on the part of the
prevailing party] in the course of the litigation.’” Chapman v. AI Transport, 229
F.3d 1012, 1038–39 (11th Cir. 2000) (citation omitted). To overcome the
presumption and deny full costs under Rule 54(d), the trial judge must “have and
state a sound reason for doing so.” Id. at 1039.
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It is true that Rule 54(d), and the presumption of costs allowed under the
rule, ordinarily apply only to the costs that Congress defined as taxable under 28
U.S.C. § 1920. See Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 441
(1987) (explaining that “§ 1920 defines the term ‘costs’ as used in Rule 54(d)”).
These enumerated categories of taxable costs provided by § 1920 limits the
discretion of federal courts to award costs under Rule 54(d). See Arcadian
Fertilizer, L.P. v. MPW Indus. Services Inc., 249 F.3d 1293, 1296 (11th Cir. 2001).
But, both the Supreme Court and this Circuit have long recognized that contractual
provisions can circumvent these restrictions on taxable costs. See Crawford
Fitting, 482 U.S. at 444; Arcadian Fertilizer, 249 F.3d at 1296. Here, the parties’
contract contains broad enough language to cover the award of both taxable and
nontaxable costs to litigation arising out of the contract. As the District Court
correctly noted, under Florida law, “[p]rovisions in ordinary contracts awarding
attorney's fees and costs to the prevailing party are generally enforced.” Lashkajani
v. Lashkajani, 911 So.2d 1154, 1158 (Fla. 2005); see also Price v. Tyler, 890 So.2d
246, 250 (Fla. 2004). And, “[t]rial courts do not have the discretion to decline to
enforce such provisions, even if the challenging party brings a meritorious claim in
good faith.” Id.So, the District Court did correctly decide to award nontaxable costs to
YPPI, unquestionably the prevailing party. But rather than simply awarding costs
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pursuant to the contract, the Court again reduced YPPI’s nontaxable costs by
92.5% after applying a mathematical ratio derived from comparing YPPI’s jury
award with the damages it originally requested. The District Court provides no
further analysis to justify its dramatic reduction in the nontaxable costs provided
for under the contract. This ruling effectively ignores our established precedent
which provides that that shifting costs in favor of the prevailing party, is
appropriate even in the case of a nominal award, so long as the prevailing party
“‘obtains judgment on even a fraction of the claims advanced.’” Lipscher v. LRP
Pub., Inc., 266 F.3d 1305, 1321 (11th Cir. 2001) (citation omitted). Although a
reduction in costs can be justified, at least in part, on the grounds of minimal
success, the District Court’s rote application of a mathematical formula does not
provide a sufficient basis to overcome the strong presumption in favor of a costs
award under the contract. Nor does a review of the record suggest any misconduct
on the part of YPPI sufficient to justify such an extreme reduction in costs even
absent a contractual entitlement. In short, the substantial reduction applied to the
nontaxable costs requested by YPPI undermined the intent of the parties and
denied YPPI the full benefit of its bargain with Ziplocal. No “sound basis” for this
reduction in nontaxable costs was provided and consequently the District Court
abused its discretion in making the award.
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Accordingly, we REVERSE the District Court’s order and REMAND the
case for further proceedings not inconsistent with this opinion.
SO ORDERED.
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