16 Casa Duse, LLC v. Merkin

Background

16 Casa Duse, LLC sued Alex Merkin and A. Merkin Entertainment, LLC over a short film that Casa Duse produced and Merkin directed. Casa Duse asserted federal copyright claims and state-law claims for breach of contract, tortious interference with business relationships, and conversion. Merkin asserted breach-of-contract and copyright-related counterclaims.

In 2013, the district court granted summary judgment for Casa Duse on all of its claims and denied Merkin’s motion for summary judgment on his counterclaims. The court also awarded Casa Duse $185,579.65 in attorney’s fees and litigation costs: $175,634 under Section 505 of the Copyright Act and $9,945.65 as a sanction against defense attorney Maurice Reichman under 28 U.S.C. § 1927. The sanction was based on the court’s finding that Reichman had acted unreasonably and vexatiously by making frivolous claims and meritless arguments.

The Second Circuit affirmed the summary judgment ruling on the copyright claims but reversed the ruling on the tortious-interference claim and directed that judgment be entered for Merkin on that claim. It also directed the district court to reconsider the fee award. On remand, the district court denied Casa Duse’s request for fees and later denied reconsideration. The Second Circuit then vacated that denial and sent the matter back for further proceedings. It stated that the district court could consider sanctions under Section 1927 for the unappealed breach-of-contract and conversion claims, but could not award fees based on the tortious-interference claim.

Renewed Motion for Copyright Fees

Casa Duse sought fees and costs under 17 U.S.C. § 505, which gives a court discretion to award costs, including reasonable attorney’s fees, to a prevailing party in a Copyright Act case. The court explained that such awards are not automatic. It considered the factors identified by the Supreme Court, including:

- whether the losing party’s claims or defenses were frivolous; - the losing party’s motivation; - whether the claims or defenses were objectively unreasonable; and - compensation and deterrence.

The court concluded that the first three factors did not support an award. The Second Circuit had determined that Merkin’s copyright claims were not frivolous, objectively unreasonable, or patently meritless, and that the record did not show that he lacked belief in his claims or intended only to harass Casa Duse. Although the district court disagreed with that assessment, it stated that it could not disregard the Second Circuit’s conclusions.

The court also found that compensation and deterrence did not justify fees. It compared Merkin’s conduct with examples involving particularly serious litigation misconduct, including a false affidavit, discovery abuses, and aggressive or abusive litigation tactics. The court concluded that Merkin’s conduct was not comparable to those examples. It therefore denied fees and costs under Section 505, including costs associated with the appeals.

Requested Sanctions Under 28 U.S.C. § 1927

Section 1927 permits a court to require an attorney who unreasonably and vexatiously multiplies court proceedings to personally pay excess costs, expenses, and attorney’s fees. The court explained that sanctions generally require conduct amounting to, or closely resembling, bad faith.

The court found that any bad-faith finding concerning the copyright claims was effectively precluded by the Second Circuit’s conclusion that Merkin’s copyright claims were not frivolous, objectively unreasonable, or advanced in bad faith. Although the Second Circuit allowed consideration of sanctions concerning the breach-of-contract and conversion claims, Reichman died in February 2019, before Casa Duse filed the renewed motion.

The court identified several reasons not to impose sanctions on Reichman’s estate. Casa Duse did not seek substitution of Reichman’s estate after learning of his death and did not address the effect of his death on the sanctions request. The court also noted that sanctions require notice of the specific conduct at issue and an opportunity for the person to be sanctioned to respond. Reichman could not respond to the renewed motion, and the original sanctions briefing had focused on the copyright claims rather than specifically addressing the breach-of-contract and conversion claims.

Finally, the court emphasized that Section 1927 sanctions are discretionary and serve deterrence and punishment purposes. Imposing fees on Reichman’s heirs would not deter Reichman’s future conduct and would punish people who had no role in the alleged misconduct and did not appear to benefit from it. The court therefore declined to impose sanctions on Reichman’s estate.

Disposition

The court denied Casa Duse’s renewed motion for fees and costs, including its request for attorney’s fees under Section 505 and sanctions under Section 1927. The clerk was directed to terminate the motion at docket entry 142. The court also noted that Casa Duse still had a judgment and a Copyright Act fee award against the corporate defendant, which had not appealed the original ruling.