Chemeon Surface Tech. v. Metalast Int'l, Inc.
| Decision Date | 08 June 2021 |
| Docket Number | Case No. 3:15-cv-00294-CLB |
| Parties | CHEMEON SURFACE TECHNOLOGY, Plaintiff, v. METALAST INTERNATIONAL, INC., et al., Defendants. |
| Court | U.S. District Court — District of Nevada |
Before the court are three motions for attorney's fees filed by Defendant Wendi Semas-Fauria ("Wendi") (ECF No. 466), Defendant Greg D. Semas ("Greg") (ECF No. 469), and Defendant David M. Semas ("David") (collectively referred to as "Defendants"). (ECF Nos. 633, 634.) Plaintiff Chemeon Surface Technology, LLC responded to the motions (ECF Nos. 638, 639, 642, respectively), and Defendants replied. (ECF Nos. 643, 644, 650, respectively.) For the reasons discussed below, the motions are denied.
This dispute stems from the breakup of a business and disagreement over the terms of a subsequent settlement agreement between Plaintiff Chemeon Surface Technology, LLC ("Chemeon"), Counter-defendants Dean Meiling ("Dean") and Madylon Meiling ("Madylon") (collectively referred to as "Counter-defendants" or "the Meilings"), and Defendants and Counterclaimants David, Metalast International, Inc. ("MI-INC"), and Metalast International, LLC ("MI-LLC"). The court conducted a bench trial on November 9, 10, 12, 13, and 17, 2020. (ECF Nos. 600, 603, 605, 606, 608.) The court issued its Findings of Fact and Conclusions of Law on February 23, 2021. (ECF No. 627.) The court found in favor of Defendants as to all claims that proceeded to trial, except the court found that Chemeon did not breach the implied covenant of good faith and fair dealing when they breached the 2015 Settlement Agreement. (See id.) Thus, having found Defendants to be the prevailing party as to the bulk of the claims in this case, the court ordered Chemeon to respond to Greg and Wendi's previously filed motion for attorney's fees and granted leave for any party to file a motion for attorney's fees. (Id. at 42-43.) The court now addresses the motions.
Under the "American rule," litigants generally must pay their own attorney's fees in absence of a rule, statute, or contract authorizing such an award. See Alyeska Pipeline Co. v. Wilderness Soc'y, 421 U.S. 240, 247 (1975); MRO Commc'ns, Inc. v. Am. Tel. & Tel. Co., 197 F.3d 1276, 1280-81 (9th Cir. 1999). Nonetheless, the decision to award attorney's fees is left to the sound discretion of the district court. Flamingo Realty, Inc. v. Midwest Dev., Inc., 879 P.2d 69, 73 (Nev. 1994).
"'In an action involving state law claims, [federal courts] apply the law of the forum state to determine whether a party is entitled to attorneys' fees, unless it conflicts with a valid federal statute or procedural rule.'" Cataphora Inc. v. Parker, 848 F. Supp. 2d 1064, 1067 (N.D. Cal. 2012) ().
Before the court can decide if an attorney's fee award is appropriate, it must first determine who is the prevailing party. A party prevails for purposes of an attorney's fee award if the party has "achieved a material alteration in the legal relationship of the parties that is judicially sanctioned." Klamath Siskiyou Wildlands Ctr. v. U.S. Bureau of Land Mgmt., 589 F.3d 1027, 1030 (9th Cir. 2009) (quotation omitted). "The material alteration in the legal relationship of the parties must be relief that the would-be prevailing party sought...." Id.
"The threshold for sufficient relief to confer prevailing party status is not high." Saint John's Organic Farm v. Gem Cnty. Mosquito Abatement Dist., 574 F.3d 1054, 1059 (9th Cir. 2009). Even an award of nominal damages will suffice to confer prevailingparty status, although the "nature and quality of relief may affect the amount of the fees awarded." Id. A party need not prevail on all its claims to be the prevailing party. San Diego Police Officers' Ass'n v. San Diego City Emps.' Ret. Sys., 568 F.3d 725, 741 (9th Cir. 2009).
Chemeon brought the following claims against Defendants: (1) misappropriation of trade secrets (Nevada law), (2) declaratory relief of no trademark infringement, (3) cancellation of "Metalast" registration, (4) cancellation of logo trademarks, (5) common law trademark infringement, (6) copyright infringement, (7) intentional interference with prospective economic advantage, (8) unfair competition, (9) statutory deceptive trade practices/consumer fraud, (10) unjust enrichment, (11) breach of fiduciary duty, (12) breach of operating agreement, (13) contractual breach of implied covenant of good faith and fair dealing, (14) tortious breach of implied covenant of good faith and fair dealing, (15) conversion, (16) civil conspiracy, and (17) breach of contract—employment agreement. (ECF No. 535.) Claims 1, 3, and 7-17 were dismissed in favor of Defendants on summary judgment. (See ECF Nos. 411, 481.) The court granted Chemeon's motion for summary judgment on its claims related to the cancellation of the logo marks (Claim 4) after Defendants conceded that they abandoned their interest in the logo marks. (See ECF No. 411.) The court also granted, upon reconsideration, Chemeon's Claim 2 as to wordmarks only. (See ECF No. 425.) Thus, Part of Claim 2 related to attorney's fees and Claims 5 and 6 were presented at trial, where the court ultimately found in favor of Defendants on all remaining claims. (See ECF No. 627 at 42.)
Defendants brought the following counterclaims against Chemeon: (1) breach of contract, (2) bad faith, (3) trademark dilution, (4) trademark infringement, (5) trademark infringement and unfair competition under Nevada law, (6) trademark dilution under Nevada law, and (7) specific performance of settlement. (ECF No. 51.) Pursuant to stipulation of the parties, Defendants voluntarily dismissed Counterclaims 3-6. (See ECF Nos. 181, 199.) Thus, Counterclaims 1, 2, and 7 were presented at trial where the courtultimately found in favor of Defendants on Counterclaims 1 and 7, and in favor of Chemeon on Counterclaim 2. (See ECF No. 627 at 42.)
Defendants prevailed on the vast majority of claims in this litigation filed against each individual defendant.1 (See ECF Nos. 411, 481, 627.) By contrast, the only claims that were found in Chemeon's favor were: (1) counterclaims that were dismissed pretrial by stipulation of the parties; and (2) two claims related to the cancellation of the logo marks based on Defendants' pretrial concession that they were abandoning their rights in those marks. (See ECF Nos. 181, 199, 627.) In addition, at trial, Chemeon only successfully defended one counterclaim that it did not breach the settlement agreement in bad faith. A party is not deemed a prevailing party if those dismissals did not materially alter the legal relationship of the parties. See Klamath, 589 F.3d at 1030. Ultimately, it was Defendants—not Chemeon—that achieved a material alteration in the legal relationship of the parties that they sought, which included dismissal of virtually all claims asserted against them pretrial, and at trial, a finding that Chemeon breached the settlement agreement. (Id.)
Accordingly, the court finds that Defendants are the prevailing party for purposes of awarding both fees and costs.2 Having made this determination, the court will now turn to the question of attorney's fees.
David argues he is entitled to attorney's fees under: (1) the MI-LLC Operating Agreement; (2) the Employment Contract; (3) the Copyright Act (17 U.S.C. § 505); (4) the Lanham Act (15 U.S.C. § 1117(a)); (5) the Uniform Trade Secrets Act (NRS § 600A.060(1)); and (6) NRS § 18.010(2)(b). (ECF No. 633.) Each is discussed in turn.
As to the Operating Agreement and Employment Contract, the court (Judge Du) has already found that Plaintiff is not a party to the Operating Agreement (See ECF No. 481 at 7), or the Employment Contract (See ECF No. 411 at 24-25), and therefore the fee-shifting provisions do not apply. "The law of the case doctrine ... posits that 'when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.'" United States v. Park Place Associates, Ltd., 563 F.3d 907, 925 (9th Cir. 2009) (quoting Arizona v. California, 460 U.S. 605, 618 (1983)). The Ninth Circuit has held that the law of the case doctrine applies not only to legal conclusions, but to decisions regarding factual issues as well. See Pit River Home and Agricultural Coop. Ass'n v. United States, 30 F.3d 1088, 1096-97 (9th Cir. 1994). "A court [has] discretion to depart from the law of the case where: (1) the first decision was clearly erroneous; (2) an intervening change in the law has occurred; (3) the evidence on remand is substantially different; (4) other changed circumstances exist; or (5) a manifest injustice would otherwise result." United States v. Alexander, 106 F.3d 874, 876 (9th Cir. 1997). Here, nothing has been presented to the court that would warrant a departure from the law of the case. Thus, David is not entitled to fees under either the Operating Agreement or the Employment Contract, as Plaintiff was not a party to either agreement/contract.
Under the Copyright Act, the court has discretion to award attorney fees to a prevailing copyright infringement party. 17 U.S.C. § 505; see also Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994) (). "In applying [§ 505], district courts are charged with two tasks: first, deciding whether an award of attorneys' fees is appropriate, and second, calculating the amount of fees to be awarded." Traditional Cat Ass'n v. Gilbreath, 340 F.3d 829, 832-33 (9th Cir. 2003). The United States Supreme Court provided a set of non-exclusive factors to guide this determination in Fogerty v. FantasyInc.,...
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