Opinion ID: 745282
Heading Depth: 2
Heading Rank: 4

Heading: The Award of Attorney's Fees to Genesis

Text: 100 On October 2, 1996, the district court issued an amended order awarding Genesis $95,075.75 in attorney's fees incurred in defending against ERG's first and second causes of action, the Inflatimation claims. ERG appeals this award on two grounds: (1) the district court committed clear error by awarding any attorney's fees to Genesis since ERG's Inflatimation claims were properly brought and since Genesis was an admitted infringer; and (2) the district court's award of $95,075.75 was an unreasonable amount and, therefore, an abuse of discretion. 101
102 We have established that an award of attorney's fees to a prevailing defendant that furthers the underlying purposes of the Copyright Act is reposed in the sound discretion of district courts. Fantasy, 94 F.3d at 555. Moreover, [S]uch discretion is not cabined by a requirement of culpability on the part of the losing party. Id. 103 Within this framework, district courts are given wide latitude to exercise equitable discretion. See generally, Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994). Some of the factors that can affect a district court's decision are: (1) the degree of success obtained; (2) frivolousness; (3) motivation; (4) the objective unreasonableness of the losing party's factual and legal arguments; and (5) the need, in particular circumstances, to advance considerations of compensation and deterrence. Id. at 534 n. 19, 114 S.Ct. at 1033 n. 19; see also Jackson v. Axton, 25 F.3d 884, 890 (9th Cir.1994). 104 In the instant case, the district court decided to exercise this discretion by denying recovery of attorney's fees to both Aerostar and Genesis for defending against ERG's derivative copyright claim on the ground that the legal issues were quite novel and ERG's arguments quite plausible. In direct contrast, the district court held that Genesis should be awarded attorney's fees for defending against ERG's two copyright causes of action based on the Inflatimation characters since it was objectively unreasonable for ERG to have maintained those claims for almost three years without any evidentiary basis. 105 ERG argues that the district court was incorrect to award these attorney's fees since ERG's Inflatimation claims were properly brought and since Genesis admitted to wrongdoing. The record does not support ERG's contention that Genesis admitted to wrongdoing, however. Indeed, although Genesis's opposition memorandum to ERG's September, 1992 preliminary injunction motion did acknowledge that Genesis employees had distributed advertising materials containing pictures of ERG-manufactured costumes--the basis for the Inflatimation claims--Genesis soon cleared up any confusion by stating that the only brochures it ever distributed depicting ERG costumes were done with the full authorization of Mr. Breed, the president and sole shareholder of ERG. 106 ERG's contention that Genesis was an admitted infringer is especially hard to believe given the fact that at the May 11, 1995 hearing on Genesis and Aerostar's motions for summary judgment, ERG did not even try to argue for the validity of its first and second causes of action. Quite to the contrary, ERG's counsel candidly conceded that ERG had no evidence whatsoever to substantiate its claims of copyright infringement of the Inflatimation Elf and Soldier costumes. 107 ERG attempts to justify its retention of these claims on the ground that it would have been legal malpractice for its counsel to remove such perfectly valid claims from the complaint. Given the fact that ERG had no evidence at all to support these claims--even after three years and numerous depositions--it would hardly have been legal malpractice to drop such claims. In fact, ERG's counsel really should not have even included the claims in the first place. Thus, this argument does not convince us that the award of attorney's fees was not warranted. See Hughes v. Novi American, Inc., 724 F.2d 122, 125 (Fed.Cir.1984) (stating that the fact that a plaintiff's lawyer knows that the plaintiff's copyright claims are not valid is a factor meriting an award of attorney's fees). 108 Therefore, because the evidence in the record reveals that ERG never had any evidence to support its Inflatimation claims, the district court properly found that it was objectively unreasonable for ERG to have maintained these claims. Accordingly, the district court did not err in deciding to award attorney's fees to Genesis as the prevailing party. See, e.g., Fantasy, 94 F.3d at 560 (holding that, Since the reasons given by the district court in this case are well-founded in the record and are in keeping with the purposes of the Copyright Act, the court acted within its discretion in awarding a reasonable attorney's fee); Diamond v. Am-Law Pub. Corp., 745 F.2d 142, 148 (2d Cir.1984) (holding that where the plaintiff's copyright infringement claim was without a reasonable legal basis, an award of attorney's fees to the defendants was a proper exercise of judicial discretion). 109
110 It is well-established law that a party entitled to attorney's fees as a prevailing party on a particular claim, but not on other claims in the same lawsuit, can only recover attorney's fees incurred in defending against that one claim or any related claims. See, e.g., Hensley v. Eckerhart, 461 U.S. 424, 434-35, 103 S.Ct. 1933, 1939-40, 76 L.Ed.2d 40 (1983); Ackerman v. Western Elec. Co., Inc., 860 F.2d 1514, 1520 (9th Cir.1988). Indeed, as the Supreme Court commented in Hensley: 111 In some cases a plaintiff may present in one lawsuit distinctly different claims for relief that are based on different facts and legal theories. In such a suit, even where the claims are brought against the same defendants ... counsel's work on one claim will be unrelated to his work on another claim ... The congressional intent to limit awards to prevailing parties requires that these unrelated claims be treated as if they had been raised in separate lawsuits, and therefore no fee may be awarded for services on the unsuccessful claim. 112 Hensley, 461 U.S. at 434-35, 103 S.Ct. at 1940; see also Smith v. Robinson, 468 U.S. 992, 1006-07, 104 S.Ct. 3457, 3465-66, 82 L.Ed.2d 746 (1984); Schwarz v. Sec. of Health & Human Services, 73 F.3d 895, 903 (9th Cir.1995) (affirming the district court's decision to refuse to award fees incurred on claims for which attorney's fees were not available where the course and conduct about which she [plaintiff] complained [in these other claims] ... were entirely distinct and separate from the claims upon which fees were awarded). 113 In the instant case, ERG's second amended complaint raised twelve causes of action. Exercising its discretion, the district court decided that attorney's fees should only be awarded to Genesis for those fees Genesis incurred in defending against ERG's two copyright claims based on the Inflatimation Elf and Soldier costumes. Those two copyright claims alleged that Genesis employees had distributed to third parties advertising materials and brochures depicting ERG-made costumes without ERG's authorization or consent. The crux of these claims, therefore, was whether such unauthorized distributions ever took place. The crux of the overall litigation and the other causes of action, on the other hand--besides the derivative copyright infringement claim--was whether an agency relationship existed between Genesis and ERG. In addition, all of the other causes of action--except for the derivative copyright claim--involved completely different legal theories and questions. Further, the mere fact that the Inflatimation claims were a part of this overall case and involved the same parties does not mean that these claims arose from the same course and conduct as the other claims. See Schwarz, 73 F.3d at 903. As should be readily apparent, therefore, the Inflatimation claims presented distinctly different claims for relief that are based on different facts and legal theories from the other causes of action in the overall litigation. See Hensley, 461 U.S. at 434, 103 S.Ct. at 1940. Accordingly, under the rule requiring segregation of attorney's fees, id. at 434-35, 103 S.Ct. at 1939-40, the district court should not have awarded Genesis any attorney's fees incurred in doing work on these other claims. 114 The district court's original order regarding attorney's fees and its amended order reflect the district court's awareness of these principles. The district court even noted that it had the discretion to ask Genesis to submit its detailed time records or original bills so that the appropriate segregation could occur. The district court declined to impose such a requirement in the instant circumstances, however. Instead, the district court relied exclusively on the declaration submitted by Genesis's counsel detailing the hours spent on the Inflatimation claims to conclude that $95,075.75 in attorney's fees had been incurred in defending against the Inflatimation claims. 115 The Supreme Court has detailed a district court's obligations pursuant to the requirement that attorney's fees be awarded only for time spent on allowable claims as follows: 116 There is no precise rule or formula for making these determinations. The district court may attempt to identify specific hours that should be eliminated, or it may simply reduce the award to account for the limited success. The court necessarily has discretion in making this equitable judgment. This discretion, however, must be exercised in light of the considerations we have identified. 117 Hensley, 461 U.S. at 436-37, 103 S.Ct. at 1941. In line with the Supreme Court's directive, we have held that a district court can abuse its discretion in certain circumstances by not requiring the party requesting attorney's fees to submit any materials besides summaries of the time expended to litigate a matter. See Intel v. Terabyte Int'l, Inc., 6 F.3d 614, 623 (9th Cir.1993). Given the instant circumstances, we feel that the district court abused its discretion by concluding that the summaries submitted in conjuction with the declaration of Genesis's counsel were sufficient to determine exactly how many hours Genesis spent solely defending against the Inflatimation claims. Indeed, in these circumstances, we believe that the district court erred in not requiring Genesis to submit its original time records and billing statements so that ERG--and the district court--could determine whether the fees being claimed were truly for time spent in defending against the Inflatimation claims. See Intel, 6 F.3d at 623. 118 In making its determination that $95,075.75 should be awarded as attorney's fees to Genesis for defending against the Inflatimation claims, the district court relied on the declarations submitted by Genesis's attorney and the billing summaries submitted in conjunction therewith. Genesis provided the district court with one chart summarizing all of the time spent and the fees incurred in defending against all three of ERG's copyright claims--the two Inflatimation claims and the derivative copyright claim--and with a second chart summarizing the time spent exclusively on the Inflatimation claims. According to these summaries, over $70,000 in legal fees were incurred by Genesis in defending solely against the Inflatimation claims from September, 1992 to September, 1993. Given the facts surrounding this case, this amount is so surprising that the district court abused its discretion by not requiring Genesis to submit its original time records and billing statements so that the district court could determine if the claimed attorney's fees were incurred solely for the Inflatimation claims and not for other unrelated causes of action. 119 In September, 1992, Genesis told ERG that regardless of whether the unauthorized distributions complained of in ERG's Inflatimation claims had ever taken place, such allegedly violative acts would no longer occur since all of Genesis's advertising materials containing the allegedly unauthorized depictions of ERG-made costumes had been exhausted. Thus, to Genesis, the issue had become moot by this time. Based on this view, Genesis informed ERG that it would stipulate to the fact that ERG would no longer be harmed--if ERG had ever been--by such distributions. Accordingly, by September, 1992, most of the force behind ERG's two Inflatimation copyright claims had all but disappeared. That this is true is further evidenced by the fact that ERG stopped pursuing these claims after its motion for a preliminary injunction was taken off calendar by the district court on September 17, 1992 on the ground that there was no threat of further harm to ERG from such distributions. 12 120 Despite this turn of events, ERG still included these two claims in its subsequently filed first and second amended complaints. As a result, Genesis deemed it necessary--out of an appropriate abundance of caution--to prepare for the possibility that ERG would once again attempt to vigilantly prosecute these claims at some point. Given the fact that the Inflatimation claims had lost most of their force since ERG would no longer suffer any such harm, however, it is clear that by September, 1992, there was no real reason for Genesis to conduct anything more than cursory legal and factual preparations regarding these two Inflatimation claims. Consequently, we are skeptical that Genesis could have spent over $70,000 in legal fees on these two claims from September, 1992 to September, 1993. 121 Genesis's claimed $70,000 in legal fees incurred post-September, 1992 is also notable due to the fact that these two copyright claims involved very simple legal and factual issues. Indeed, as was mentioned before, the entire Inflatimation claims revolved around the simple and easily discoverable--especially for Genesis--factual issue of whether Genesis employees had distributed any advertising materials depicting ERG's costumes without ERG's authorization. Extensive discovery was not necessary to answer this question. Nor was extensive travel necessary. Of even more import, by September of 1992, Genesis had all the information it needed--it knew that the materials had been distributed at one time, and it knew that they were no longer being distributed. Accordingly, Genesis's claim that it spent over $70,000 in legal fees on these claims alone after September, 1992 should have at least raised some suspicions such that the district court should have required Genesis to submit its original billing records. 122 These suspicions should have been heightened even more by a comparison of this $70,000 figure with the amount of attorney's fees that Genesis claimed it expended in defending against the derivative copyright infringement suit. As our earlier discussion reveals, the derivative copyright claim involved infinitely more complex and intricate factual and legal issues than ERG's two Inflatimation copyright claims. Indeed, it is principally for this reason that the district court decided not to award any attorney's fees at all to Genesis or Aerostar for defending against the derivative copyright claim, even though both parties were statutorily entitled to such fees. 123 Given this context, it should come as quite a surprise that, according to the prepared declaration and billing summaries submitted by Genesis to the district court, the entire amount of attorney's fees incurred by Genesis in defending against the derivative copyright action was only $43,343.75. In other words, after September, 1992--by which time the Inflatimation copyright claims had really lost all of their force and legitimacy--Genesis apparently spent almost twice as much money defending against the unsubstantiated Inflatimation copyright claims as it ever expended for its defense of the novel and complex derivative copyright lawsuit. 124 In light of the forgoing, the district court abused its discretion by not requiring Genesis to submit its original time records and billing statements. Absent such records and absent a summary of the total amount of attorney's fees incurred by Genesis in defending against all of ERG's causes of action between September, 1992 and September, 1993, the district court could not properly ensure that the attorney's fees it was granting to Genesis were solely for fees related to the Inflatimation copyright claims. In sum, because this overall litigation involved numerous other claims for which attorney's fees were not awarded--almost all of which contained more complicated factual and legal questions than the Inflatimation copyright claims--and because the amount of attorney's fees Genesis claimed were incurred to defend solely against the Inflatimation claims was so high, the district court abused its discretion by not requiring the submission of more detailed billing records. See Intel, 6 F.3d at 623. As a result, we vacate the district court's award of $95,075.75 in attorney's fees to Genesis and remand the case to the district court for further consideration. 13