Bridgeport Music, Inc. v. London Music, U.K.

Decision Date12 November 2004
Docket NumberNo. 3:01-0711.,3:01-0711.
Citation345 F.Supp.2d 836
PartiesBRIDGEPORT MUSIC, INC., et al. v. LONDON MUSIC, U.K., et al.
CourtU.S. District Court — Middle District of Tennessee

Richard S. Busch, Ramona P. DeSalvo, King & Ballow, Nashville, TN, for Bridgeport Music, Inc., Southfield Music, Inc.

Philip Michael Kirkpatrick, Stewart, Estes & Donnell, Amy J. Everhart, Bowen, Riley, Warnock & Jacobson, PLC, Nashville, TN, for London Music, U.K., Universal-Songs of Polygram International, Inc., Songs of Polygram International, Inc., Universal Music Publishing, Inc., individually suc Polygram Music Publishing, Inc., Universal Records, Inc., Universal Music Group, Inc.

MEMORANDUM

HIGGINS, District Judge.

Currently pending are motions (Docket Entries No. 84, 89) from both sides of this litigation addressing whether the defendants are entitled to an award of costs and fees as the result of the stipulation of dismissal of this action. For the reasons set forth below, the defendants' motion for costs and fees shall be denied, and the plaintiffs' motion for denial of such fees and costs shall be granted.

I. HISTORY

This action was opened on August 1, 2001, upon the severance of the particular claims presented herein from the original and unworkably extensive Case No. 3:01-0412. The plaintiffs filed their First Amended Complaint on September 28, 2001 (Docket Entry No. 10). Defendants filed a motion (filed October 22, 2001; Docket Entry No. 15) to dismiss or strike certain claims, which was denied, (Order entered November 5, 2001; Docket Entry No. 20), and answered the complaint on November 21, 2001. (Docket Entry No. 26). On February 4, 2002, the defendants filed a notice (Docket Entry No. 48) of motion for partial summary judgment, the motion having been filed in a related case but pertaining in part to this action. This case was stayed by Order of the Court from February 8, 2002, until September 5, 2002 (see Docket Entries No. 49, 50), and again from March 3, 2003 until its termination. (Docket Entry No. 73). In the interim, the Court denied the defendants' summary judgment motion without prejudice. (Docket Entry No. 60). On March 5, 2004, the Court lifted the stay for the limited and sole purpose of permitting written discovery to be submitted on April 12. (Docket Entry No. 81). Instead, pursuant to Rule 41(a)(1) of the Federal Rules of Civil Procedure, the parties submitted their stipulation of dismissal with prejudice on April 9, which the Court entered as the judgment in this matter on April 13, 2004. (Docket Entry No. 83).

II. PREVAILING PARTIES
A. Legal Nature of a Stipulation of Dismissal

The current dispute hinges on whether the stipulation of dismissal with prejudice pursuant to Rule 41(a)(1) makes the sole remaining defendants by that point, the Universal defendants, prevailing parties entitled to attorney fees under section 505 of the Copyright Act. 17 U.S.C. § 505 provides as follows:

In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs.

Oft-cited law within this circuit and elsewhere has historically stood for the proposition that a plaintiff's voluntary dismissal of his action makes the defendant a prevailing party entitled to costs and fees. See Uniflow Mfg. Co. v. Superflow Mfg. Corp., 10 F.R.D. 589 (N.D.Ohio 1950); Zenith Ins. Co. v. Breslaw, 108 F.3d 205, 207 (9th Cir.1997) (later abrogated on other grounds); Schwarz v. Folloder, 767 F.2d 125, 130 (5th Cir.1985). The reasoning behind these holdings is that a voluntary dismissal with prejudice results in the same practical outcome as a judgment for the defendant on the merits — a conclusion to the litigation and a bar to further litigation on the same issue between the parties. As the Sixth Circuit has stated, "[a]n adjudication in favor of the defendants, by court or jury, can rise no higher than this." Smoot v. Fox, 340 F.2d 301, 303 (6th Cir.1964).

Based on this reasoning, the Eastern District of Tennessee held last year that a defendant was a prevailing party under 28 U.S.C. § 2412(a)(1) where the United States voluntarily dismissed its enforcement action:

The order entered by this Court ... dismissing the government's claims against Alpha with prejudice based on the government's Rule 41(a)(2) voluntary dismissal is a judicially sanctioned material alteration in the legal relationship between Alpha and plaintiff United States. It is tantamount to a judgment on the merits and is sufficient to confer on Alpha the status of a prevailing party for the purpose of awarding costs and attorney's fees pursuant to 28 U.S.C. § 2412.

United States v. Estate of Rogers, No. 1:97-CV-461, 2003 WL 21212749, at * 5 (E.D.Tenn. April 3, 2003) (going on to deny fees on other grounds). While there is some logic to this conclusion, it simply does not square with the explicit proclamations regarding what is required to be a prevailing party by the Supreme Court in Buckhannon Board and Care Home v. West Va. Dept. of Health and Human Resources, 532 U.S. 598, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001).

In rejecting the catalyst theory as a basis for a plaintiff's prevailing party status in a case where the defendant voluntarily changed its offending behavior, Buckhannon clarified that a prevailing party is one who has been awarded some relief by the court, by virtue of a judgment on the merits or court-ordered consent decree, effecting a material alteration of the legal relationship of the parties. Id. at 603-604, 121 S.Ct. 1835. The Court noted that it had never awarded attorney fees for a "nonjudicial alteration of actual circumstances," and explained that voluntary conduct by a party is insufficient:

A defendant's voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change. Our precedents thus counsel against holding that the term "prevailing party" authorizes an award of attorney's fees without a corresponding alteration in the legal relationship of the parties.

Id. at 605, 121 S.Ct. 1835.

Nevertheless, the Rogers court emphasized the practical effects of voluntary dismissal with prejudice, and overlooked the legal nature of voluntary dismissal. It is true that a plaintiff's voluntary dismissal with prejudice has the same practical effect as a Rule 12(b)(6) dismissal on the merits — finality of the case and a res judicata bar to further litigation. However, those same effects are achieved every time a case is dismissed as the result of a private settlement between the parties, and it is clear in this Circuit that such settlements do not confer prevailing party status. Buckhannon at 604 n. 7, 121 S.Ct. 1835; Toms v. Taft, 338 F.3d 519, 529 (6th Cir.2003). This is because "private settlements do not entail the judicial approval and oversight" necessary to amount to an award of relief by the court. Buckhannon at 604 n. 7, 121 S.Ct. 1835.

Under Buckhannon, then, it is the nature of and judicial involvement in the outcome, rather than its practical effects, that determine whether one party has prevailed. Simply stated, if a plaintiff who achieves finality in a case by extracting a large monetary settlement from a defendant is not a prevailing party, then neither is the defendant who achieves only finality. Both the plaintiff who receives a large settlement and the defendant who benefits from voluntary dismissal have realized the best practical outcome of their cases, but neither has been awarded relief on the merits by the court. While the effects of a voluntary dismissal may make it "tantamount to" a judgment on the merits, it is still not a judgment on the merits for Buckhannon's purposes.

In contrast to Rogers, and more on point, the Southern District of New York determined last year that the defendant to a copyright case was not a prevailing party under slightly different circumstances from those now before this Court. In Chambers v. Time Warner, Inc., 279 F.Supp.2d 362 (S.D.N.Y.2003), the plaintiffs' original allegations of federal and state claims were dismissed on the merits by the district court. The Second Circuit Court of Appeals reversed on procedural grounds, and on remand the plaintiffs filed an amended complaint, with the court's permission, which did not allege federal copyright claims against the defendant record companies. The parties entered a stipulation of dismissal for lack of subject matter jurisdiction on the state claims against the record companies, and the record companies sought attorney fees as prevailing parties on the federal copyright claims that had been effectively withdrawn by the plaintiff. The court held that the appellate court's reversal of the dismissal on the merits prevented that from being the basis for prevailing party status. It went on to conclude that the plaintiffs' omission of the copyright claims in their amended complaint was a voluntary act taken in the absence of any judicial determination, oversight or involvement and therefore did not satisfy Buckhannon's requirements for prevailing party status.

Similarly, the voluntary dismissal taken under Rule 41(a)(1) in the present case did not entail any determination, oversight or involvement by the court, aside from the perfunctory act of entering judgment to terminate the case. This resolution simply cannot constitute the judicially sanctioned change in the parties' legal relationship required by Buckhannon in order for one party to prevail over the other.1

The Sixth Circuit has not squarely addressed the question at issue. On appeal in the Rogers case, the court avoided the issue by finding that even if the defendant was a prevailing party, the district court had properly exercised its...

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