All too frequently, I encounter plaintiffs whose claims never should have been filed, would never have been filed, if they or their counsel had conducted an adequate pre-filing investigation of the merits of their claim.
Even worse, and particularly untenable, are those who continue to maintain their claim once the material defect that an adequate pre-filing investigation would have revealed is brought to their attention.
Many times in a copyright claim, the only requirement to conclusively decide a case is to compare the works at issue side by side, perhaps with the assistance of expert. In many instances, it would not take an expert more than a minute to determine that the works at issue are different, distinct and non-duplicative.
Why does this matter? Why should plaintiffs and their counsel always make certain to conducted an adequate pre-filing investigation, and not merely shoot-from-the-hip and leave questions for later? Because there’s real money at stake for both sides.
When determining if an award of attorneys fees should be granted pursuant to 17 U.S.C. Section 505, bad faith or frivolousness on the part of the plaintiff can be an influential consideration. Fantasy, Inc. v. Fogerty, 94 F.3d 553, 558 (9th Cir. 1996); see also Lumiere (Rights) Limited v. Baker & Taylor, Inc., 116 F.3d 484 (9th Cir. 1997) (appellants’ copyright claims were, if not frivolous, at least factually unsupported, and an award of fees may deter other such suits).
Likewise, the obligation to pay the defendants’ fees may not rest solely on the plaintiff (who may believe him/herself protected by the fact that they are “judgment proof”). The financial burden may fall upon both the counsel and the client. Under 28 U.S.C. § 1927, “an attorney of record may be personally required to pay costs, expenses, and attorneys’ fees that are caused by counsel’s unreasonable and vexatious conduct.” Baker v. Urban Outfitters, 431 F. Supp. 2d 351, 362 (S.D.N.Y. 2006). The statute provides:
Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.
28 U.S.C. § 1927.
Notably, courts in copyright cases can—and have—awarded prevailing defendants their attorneys’ fees under 28 U.S.C. § 1927 numerous times. See, e.g., Baker v. Urban Outfitters, Inc., 431 F. Supp. 2d 351, 363-67 (S.D.N.Y. 2006) (granting defendant’s motion for attorneys’ fees under 28 U.S.C. § 1927 against plaintiff’s attorneys for unreasonably promoting expensive and time consuming litigation, including: (1) seeking statutory damages that were precluded by the plain language of the Copyright Act; (2) inclusion of a tortious misappropriation of goodwill claim, though clearly preempted by the Copyright Act; (3) seeking actual damages that were “too extravagant to be maintained”; (4) documentary evidence of bad faith (e.g., attorney correspondence seeking payment from “deep pocketed” defendants); (5) withholding evidence in discovery; and (6) filing baseless motions); Tillman v. New Line Cinema, 375 Fed. Appx. 664, 667 (7th Cir. 2010) (affirming award of attorneys’ fees after defense summary judgment and sanctions against plaintiff’s attorney’s under 28 U.S.C. § 1927 for unreasonably multiplying the proceedings. According to the court, not only did the plaintiff take inadequate steps to investigate the supposed inconsistencies underlying his conspiracy theory, but he made no effort to identify any particular expression in the allegedly infringing work that is substantially similar to copyright-protected expression in plaintiff’s work).
Further, any continuance of an action after the disclosure of a material defect that a pre-filing investigation should have revealed may also result in the defendant bringing a motion pursuant to FRCP Rule 11.
As you know, Rule 11 requires an attorney to certify every filing, and by doing so creates an affirmative duty of investigation both as to law and as to fact to deter frivolous actions and meritless claims. Fed. R. Civ. P. 11; see Business Guides, Inc. v. Chromatic Communications Enterprises, Inc., 498 U.S. 533, 550 (1991). By signing, an attorney certifies that he/she has done a reasonable inquiry, and to the best of his/her knowledge:
“(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; [and]
(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery.”
Fed. R. Civ. P. 11 (b)(2)-(3).
The Rule 11 certification represents that counsel has done a prefiling examination of the facts that is reasonable under the circumstances. Zaldivar v. City of Los Angeles, 780 F.2d 823, 831 (9th Cir. 1986). “Reasonable inquiry” requires attorneys to seek credible information rather than proceed on mere suspicions. California Architectural Building Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1472 (9th Cir. 1987). The test is “whether a reasonable inquiry would have revealed there was no basis in law or fact for the asserted claim.” (internal quotes omitted). Ali v. Mid-Atlantic Settlement Services, Inc., 233 F.R.D. 32, 39 (D. D.C. 2006).
Further, counsel cannot blindly rely on their clients representations. Lloyd v. Schlag, 884 F.2d 409, 413 (9th Cir. 1989). The reasonableness standard is objective, and if the pleading is legally unreasonable or without factual foundation, sanctions are warranted. Zaldivar v. City of Los Angeles, 780 F.2d 823, 831 (9th Cir. 1986). Reasonableness is measured at the time paper is filed, but if the same position is advocated again in the litigation, the reasonableness is measured at the time of later affirmation. Fed. R. Civ. P. 11 (b); see e.g., Battles v. City of Ft. Meyers, 127 F.2d 1298, 1300 (11th Cir. 1997). Postfiling developments may also be relevant for determining the reasonableness of the prefiling inquiry. For example it may show that the plaintiff’s counsel should have known from the outset that there was no evidentiary basis for the complaint. See Jones v. International Riding Helmets, Ltd., 49 F.3d 692, 695 (11th Cir. 1995). If after a complaint is filed, discovery demonstrates that a fraud has been perpetrated and the claim is unfounded, failure to withdraw the frivolous pleading or conduct a further reasonable inquiry is sanctionable. See e.g., Childs v. State Farm Mut. Auto. Ins. Co., 29 F. 3d 1018, 1026 (5th Cir. 1994).
Thus, if a reasonable inquiry by the attorney and his/her client would have revealed, at a minimum, that the works at issue are entirely different from one another, and thus, the allegations of infringement are unsupported by existing law and fact (as substantially similarity of the works is an essential element), the plaintiff’s counsel faces serious risk of sanctions under Rule 11. See e.g., Llyod, supra, 884 F.2d at 412 (“We hold that a reasonable attorney would have discovered that a copyright infringement suit cannot be brought unless and until the copyright transfer has been properly recorded, and ascertained that the recordation has been accomplished.”)
Based on this, a plaintiff’s counsel who finds him or herself in this position, should negotiate a fast exit to such an action. Pressing forward with such lawsuits hurts the parties, the judicial system, and the counsel who doggedly pursues them.
Jonathan Pink is an intellectual property attorney specializing in copyright and trademark matters. He is resident in the Los Angeles and Irvine offices of Bryan Cave, LLP and can be reached at firstname.lastname@example.org.