474 F.3d 227 (6th Cir. 2007), 05-1715, Chirco v. Crosswinds Communities, Inc.

Docket Nº:05-1715.
Citation:474 F.3d 227, 81 U.S.P.Q.2d 1414
Party Name:Michael A. CHIRCO; Dominic J. Moceri, Plaintiffs-Appellants, v. CROSSWINDS COMMUNITIES, INC., and Bernard Glieberman, Defendants-Appellees.
Case Date:January 10, 2007
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 227

474 F.3d 227 (6th Cir. 2007)

81 U.S.P.Q.2d 1414

Michael A. CHIRCO; Dominic J. Moceri, Plaintiffs-Appellants,

v.

CROSSWINDS COMMUNITIES, INC., and Bernard Glieberman, Defendants-Appellees.

No. 05-1715.

United States Court of Appeals, Sixth Circuit.

January 10, 2007

Argued: June 6, 2006.

Appeal from the United States District Court for the Eastern District of Michigan at Detroit No. 03-74600—Denise Page Hood, District Judge.

Page 228

COUNSEL

ARGUED:

Stephen F. Wasinger, WASINGER, KICKHAM & HANLEY, Royal Oak,

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Michigan, for Appellants.

Douglas P. LaLone, Warn, Hoffmann, Miller & LaLone, Auburn Hills, Michigan, for Appellees.

ON BRIEF:

Stephen F. Wasinger, Wasinger, Kickham & Hanley, Royal Oak, Michigan, Julie A. Greenberg, Gifford, Krass, Groh, Sprinkle, Anderson & Citkowski, Troy, Michigan, for Appellants.

Douglas P. LaLone, Warn, Hoffmann, Miller & Lalone, Auburn Hills, Michigan, Bernard J. Cantor, Harness, Dickey & Pierce, Troy, Michigan, for Appellees.

Before: DAUGHTREY and COLE, Circuit Judges; GRAHAM, District Judge[*]

OPINION

MARTHA CRAIG DAUGHTREY, Circuit Judge.

The plaintiffs, Michael Chirco and Dominic Moceri, are Detroit-area real estate developers who brought suit against Crosswinds Communities and its principal shareholder, Bernard Glieberman, alleging that the defendants had copied the plaintiffs' architectural design for a "twelve-plex" condominium building, which was protected by copyright and to which they had exclusive rights of construction. The district court granted summary judgment to the defendants, finding that they had been prejudiced by unnecessary delay between the time the plaintiffs had learned that construction was planned (or, alternatively, the time that construction was undertaken) and the time that the complaint was filed, even though the action was filed within the three-year statute of limitations provided by the Copyright Act in 17 U.S.C. § 507(b). On appeal, the dispositive question is whether the equitable doctrine of laches can be held to trump the statutorily-prescribed period for filing suit under § 507(b). To the extent that the plaintiffs in this case are seeking only monetary damages and injunctive relief, we give effect to the Sixth Circuit's presumption that the statute of limitations must prevail. However, to the extent that the relief sought is destruction of the condominium complex that allegedly infringes the plaintiffs' copyright, the facts before us suggest that this is indeed the extraordinary case in which the defense of laches is properly interposed. We thus remand the case to the district court for clarification of the nature of the relief sought in this action and for such further proceedings as are appropriate.

FACTUAL AND PROCEDURAL BACKGROUND

Working with an architectural firm, the plaintiffs designed plans for residential developments that sought to maximize space utilization and aesthetic appeal. According to statements made by Moceri in an affidavit:

14. [The plans that were developed] describe a unique twelve unit residential building. The fronts and backs are identical in appearance, so there is no "back" of the building. There are four units on the first floor as well as a row of six single car garages on the first floor at each end of the building. There are eight units on the second floor, of which 4 are over garages. Each of the four second floor units which are constructed over a garage are placed on three garages, which allows the building to be built as four distinct quadrangles with fire rated walls separating each quadrangle. Each of the twelve garages

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has direct access to its assigned residential unit without requiring the occupants to go outside or use a common hallway to access their units.

15. One of the unique aspects of the [plans] is the way that it can occupy a site. Because the garages are on the side of the building and because the garages of adjoining buildings face each other, the driveway orientation is quite compact, which allows the buildings to be spaced just 64 feet from each other. This allows relatively high density of the units, and an efficiency of infrastructure design and implementation, thus allowing significant cost savings for this work.

16. Because of the unique utilization of space and its architectural design, the ... condominiums can be built with high density but with tremendous appeal to governmental authorities, customers, and neighboring property owners.

The plaintiffs obtained copyrights on November 28,1997, for the architectural plans for two developments known as Knollwood Manor and Aberdeen Village, as well as for the constructed buildings at those developments. Chirco and Moceri allege that, on December 31, 2000, Glieberman, as an officer and agent of Charter Oak Homes and American Heritage Homes, began building the Heritage Condominium development in Waterford Township, Michigan, according to plans based directly upon or copied from the copyrighted plans and architectural works for Knollwood Manor and Aberdeen Village. Only three months later, on April 1, 2001, the plaintiffs filed suit against Glieberman, Charter Oak Homes, and American Heritage Homes in federal district court, alleging copyright infringement and seeking injunctive and monetary relief.

During the discovery period for that federal law suit, Chirco v. Charter Oak Homes, Inc. (No. 01-71403), the plaintiffs obviously learned of Glieberman's intention to build yet another development that allegedly infringed upon the plaintiffs' copyrights, because plans for a Glieberman project known as Jonathan's Landing in Howell, Michigan, were found in the plaintiffs' files, dating from April 16, 2001. Six months later, on October 16, 2001, the plaintiffs made a request of local officials for copies of the plans for the Jonathan's Landing project through the Michigan Freedom of Information Act. Those plans were then sent to the plaintiffs a week later, but no action was taken by Chirco and Moceri, even in May 2002, when Glieberman and Crosswinds Communities, Inc., broke ground for the 252-unit development. In fact, the plaintiffs took no steps to prevent the second alleged infringement of their copyrights until November 14, 2003, when the plaintiffs filed a second federal law suit against Glieberman, Chirco v. Crosswinds Communities, Inc. (No. 03-74600). By that time, 168 of the planned 252 units had been constructed, 141 of them sold, and 109 already occupied by the buyers.

Eventually, the defendants filed a motion for summary judgment in the second law suit, Chirco v. Crosswinds Communities, Inc., arguing that the plaintiffs' attempts to recover for copyright infringement were barred by the equitable doctrine of laches. The district judge agreed, ruling that the plaintiffs knew of the Jonathan's Landing construction for at least 18 months prior to the filing of the federal action. The district court further stated:

Defendants have shown prejudice in this case. As of the filing of the Complaint, more than 168 units were built, 109 of which were occupied. Plaintiffs have not shown why they did not diligently pursue the claim as to Jonathan's Landing as early as May 9, 2002, or

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perhaps earlier. Plaintiffs have not shown that the Jonathan's Landing case was in fact covered in Case No. 01-71403, a case in which Crosswinds is not a party. There is no mention of the Jonathan's Landing project in the Amended Complaint. Defendants had no notice that Plaintiffs were going to sue them regarding this project.

Consequently, the district judge granted the defendants' summary judgment motion and dismissed case 03-74600 with prejudice. The plaintiffs now appeal that ruling.

DISCUSSION

Ordinarily, an appellate panel reviews "a district court's resolution of a laches question for an abuse of discretion." City of Wyandotte v. Consol. Rail Corp., 262 F.3d 581, 589(6thCir. 2001). However, when a reviewing court is presented with a threshold question of law as to whether the laches doctrine is even applicable in a particular situation, as we are here, our review is de novo. See, e.g., Kellogg Co. v. Toucan Golf, Inc., 337 F.3d 616, 623 (6th Cir. 2003).

In this circuit, laches is understood to be "a negligent and unintentional failure to protect one's rights." Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 894 (6th Cir. 1991). "A party asserting laches must show: (1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting it." Herman Miller, Inc. v. Palazzetti Imports and Exports, Inc., 270 F.3d 298, 320 (6th Cir. 2001). Thus:

[L]aches does not result from a mere lapse of time but from the fact that, during the lapse of time, changed circumstances inequitably work to the disadvantage or prejudice of another if the claim is now to be enforced. By his negligent delay, the plaintiff may have misled the defendant or others into acting on the assumption that the plaintiff has abandoned his claim, or that he acquiesces in the situation, or changed circumstances may make it more difficult to defend against the claim.

11A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure § 2946 at 117 (2d ed.1995) (quoting de Funiak, Handbook of Modern Equity § 24 at 41 (2d ed.1956)).

The plaintiffs insist that laches is not available as an affirmative defense in this case, however, because the Copyright Act itself references a specific period during which actions under the statute may be brought, and because Chirco and Moceri filed their complaint within that time frame. Indeed, 17 U.S.C. § 507(b) provides that "[n]o civil action shall be maintained...

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