Opinion
01 Civ. 10791 (JSM)
November 6, 2002
Lauren A. Malanga, Esq., Epstein Becker Green, P.C., New York, NY, for Plaintiffs.
David Blasband, Esq., McLaughlin Stern, LLP, New York, NY, for Defendants.
OPINION AND ORDER
On November 3, 2001, Plaintiffs Meyer Ackerman and Julian Schlossberg filed this action for a declaratory judgment pursuant to 28 U.S.C. § 2201 and 2202. Plaintiffs want to produce the musicalCarnival based on the script written by Helen Deutsch, the author of the original screenplay on which the stage musical Carnival was based. Plaintiffs sought a declaration that the rights of the Defendants, who are successors in interest to Michael Stewart, who contributed to the stage version in 1961, are limited to the contributions he made to that derivative work.
In response to the Complaint, Defendants drafted papers in support of a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction, on the ground that Plaintiffs' action did not present a justiciable controversy under the Declaratory Judgment Act because Plaintiffs did not have the present intent and ability to produceCarnival. In the course of discovery on the issues raised by the motion, Plaintiffs' counsel reviewed the 1961 contract for the stage production. Plaintiffs claim that, upon reviewing the 1961 contract, they realized that they could proceed with the production of Carnival, without first obtaining a judicial declaration of their right to do so. Plaintiffs thus withdrew their Complaint pursuant to Fed.R.Civ.P. 41(a)(1)(1).
Defendants flow seek attorney's fees pursuant to 17 U.S.C. § 505 on the ground that Plaintiffs' action for a declaratory judgment was objectively unreasonable. Defendants argue that Plaintiffs should have reviewed the 1961 contract and other documents which were in the possession of their co-counsel before filing this action: "It was objectively unreasonable for plaintiffs to have required defendants to defend against a lawsuit that plaintiffs later decided was unnecessary, when that decision was based on documents they had previously relied upon in their complaint."
DISCUSSION
Under the copyright Act, a district court has the discretion to "allow the recovery of full costs by or against any party other than the United States or an officer thereof . . . [T]he court may also award a reasonable attorney's fees to the prevailing party as part of the costs." 17 U.S.C. § 505 (1996).
The first question to be decided is whether the Defendants are prevailing parties. There is authority for the proposition that where a complaint is dismissed without prejudice under Rule 41, the defendant cannot be considered a "prevailing party." Szabo Food Serv., Inc. v. Canteen Corp., 823 F.2d 1073 (7th Cir. 1987). However, some courts have found that a defendant in an action dismissed without prejudice under Rule 41 may be considered a "prevailing party" for purposes of awarding attorney's fees. See Great American Fun Corp. v. Hosung N.Y. Trading, Inc., No. 96 Civ. 2986, 1997 WL 129399, at *2 (S.D.N.Y. Mar. 21, 1997), in which Judge Kaplan of this Court quoted with approval the following passage from the decision of then District Judge Altimari in Fernandez v. Southside Hosp., 593 F. Supp. 840, 843 (E.D.N.Y. 1984):
Certainly, it cannot be said that a defendant always prevails when a plaintiff voluntarily dismisses his lawsuit without prejudice. It would be incorrect and illogical, however, to hold that a defendant never prevails upon such a voluntary dismissal. The answer, we believe, lies in examining the circumstances surrounding the voluntary dismissal. For example, where the complaint is clearly frivolous or there have been proceedings on the merits or substantial discovery, defendants have a stronger argument that they prevail when plaintiff voluntarily discontinues suit. On the other hand, where it has not been shown that the complaint is frivolous and there have been no proceedings on the merits nor substantial pre-trial proceedings, the argument must necessarily be less persuasive.
It may be appropriate to award fees to a defendant who has been subjected to a frivolous claim, as was the case in Szabo where discovery revealed that the plaintiff's copyrighted character had been copied from someone else's earlier work. Here, however, Plaintiff's claim was not frivolous and it was not abandoned because discovery revealed that it lacked merit. Rather, Plaintiffs had a good faith basis for their claim that Defendants had been interfering with their right to produce a version of Carnival based upon the original copyrighted script. They dismissed the action not because they came to doubt their rights, but rather because they became convinced that they had sufficient documentation to refute any claim that Defendants might make to a potential investor in their venture, that the work could not be produced without their consent. Thus, in dismissing the action, Plaintiff could not be considered to have been admitting that, had it continued, Defendants would have prevailed.
In any event, even if Defendants could be considered the prevailing party, the Court would not exercise its discretion to award them attorneys' fees. In exercising its discretion under 17 U.S.C. § 505, a court should consider factors such as "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Fogerty v. Fantasy, Inc., 510 U.S. 517, 535, 114 S.Ct. 1023, 1033 (1994) (internal quotation marks omitted). The Second Circuit has "accorded the objective reasonableness factor substantial weight in determinations whether to award attorney's fees." Matthew Bender Co., Inc. v. West Publ'g Co., 240 F.3d 116, 121 (2d Cir. 2001). There was nothing frivolous about Plaintiffs' assertion that as successors in interest to the reversion rights to the screenplay on which Carnival was based, they were entitled to a declaration that they could produce the musical based on the original script. Thus, it was not objectively unreasonable for them to commence this litigation to protect their rights from interference by the Defendants.
While Defendant argues that it was objectively unreasonable for Plaintiffs not to have reviewed the 1961 contract before commencing this action, that is not relevant. It makes no sense to say that a party cannot institute a lawsuit because there is too much evidence that it will prevail on the merits. Absent stronger evidence than Defendants have been able to produce here that the reason for the dismissal was a recognition by the plaintiff that it could not prevail on the merits, a party's right to discontinue an action without prejudice should not be burdened by the fear that the exercise of that right could give rise to a liability for attorneys' fees.
For the foregoing reasons Defendants' application for attorney's fees is denied. While the court finds Defendants' application to be without merit, it was not so frivolous as to entitle Plaintiffs to their attorneys' fees for responding to the motion. Therefore, Plaintiffs' application for attorneys' fees is also denied.
SO ORDERED.