Fair Isaac Corp. v. Fed. Ins. Co., Case No. 16-cv-1054 (WMW/DTS)

• Decision Date: 09 October 2019
• Docket Number: Case No. 16-cv-1054 (WMW/DTS)
• Citation: 408 F.Supp.3d 1019
• Parties: FAIR ISAAC CORPORATION, Plaintiff, v. FEDERAL INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — District of Minnesota

408 F.Supp.3d 1019

FAIR ISAAC CORPORATION, Plaintiff,

v.FEDERAL INSURANCE COMPANY, et al., Defendants.

Case No. 16-cv-1054 (WMW/DTS)

United States District Court, D. Minnesota.

Signed October 9, 2019

Allen Hinderaker and Heather Kliebenstein, Merchant & Gould PC, 80 South Eighth Street #3200, Minneapolis, MN 55402, for Plaintiff

Terrence Fleming, Christopher Pham, and Christian Hokans, Fredrikson & Byron, PA, 200 South Sixth Street #4000, Minneapolis, MN 55402, for Defendants

MEMORIANDUM OPINION AND ORDER

DAVID T. SCHULTZ, United States Magistrate Judge

INTRODUCTION

This is a hotly disputed, vigorously litigated copyright infringement case relating to business-rules software. Plaintiff Fair Isaac Corporation (FICO) claims Defendants Federal Insurance Company, et al. (Federal) have breached their license agreement for the software and have infringed FICO's copyright. FICO has asserted damages of $37 million for breach of contract, $34 million for copyright infringement, and has made a claim for recovery of Federal's profits under Section 504(b) of the Copyright Act in an amount between $2.5 billion and $31 billion.¹

FICO demanded a jury trial on all claims so triable. See Compl., Dkt. No. 1. Federal has moved to strike FICO's jury demand as to its claim for disgorgement of profits. The issue is whether FICO has a right to a jury trial on this claim under the Seventh Amendment to the United States Constitution. This question has been squarely addressed by very few courts, none of them within the Eighth Circuit. Therefore, the question whether FICO's claim for recovery of Federal's profits is a legal remedy on which it is entitled to a jury determination, or an equitable remedy on which it is not, is an issue of first impression within this circuit. For the reasons described below, this Court finds FICO does not enjoy a Seventh Amendment right to a jury determination on its claim for recovery of Federal's profits.

FACTS

FICO filed this action on April 21, 2016, and included in its original Complaint (and every subsequent filing) notice of its jury demand. See Compl. Dkt. No. 1. The case has been vigorously litigated over the past three-and-a-half years. The Court's docket includes 587 individual entries. There have been numerous motions, both dispositive and nondispositive. There is much at stake, both as to liability and as to damages. FICO's damages claims are, to say the least, robust. Its claim for breach of contract is valued at $37 million. Decl. of Terrance J. Fleming, Ex. 2, (Zoltkowski Reply Report) at 37, Dkt. No. 408. Its claim for actual copyright infringement damages is $34 million. Id. Its claim for recovery of Federal's profits, which seemingly ranges between $2.5 billion and $31 billion, dwarfs FICO's damages figures. Compare with Decl. of Heather Kliebenstein, Ex. 1, (Bakewell Report) at 67, Dkt. No. 424. Federal has moved to strike FICO's jury demand as to its claim for recovery of profits. This case is deemed trial ready as of December 9, 2019. Dkt. No. 205.

ANALYSIS

Rule 38 of the Federal Rules of Civil Procedure provides that "the right of trial by jury as declared by the Seventh Amendment to the Constitution – or as provided by a federal statute – is preserved to the parties inviolate." Thus, a party has a right to a jury trial when that right is either provided by federal statute or is within the jury trial right preserved by the Seventh Amendment. The Court therefore starts its substantive analysis with the text of the Copyright Act. However, before turning to that issue it is first necessary to address FICO's challenge to this court's authority to hear Federal's motion.

I. This Court's Authority

FICO contends that Federal's motion must be heard by the district judge rather than by the magistrate judge. Pl. Br. 2-3, Dkt. No. 345. To the extent FICO's argument is that the Article III judge must hear the matter and may not refer it to the magistrate judge, that argument is flatly wrong under both 28 U.S.C. § 636 and Rule 72, as the district judge may refer to the magistrate judge such dispositive and non-dispositive motions as she sees fit.

To the extent FICO's argument is that this motion is dispositive and has not been specifically referred, the Court finds the argument unavailing. The determination whether the present motion is "dispositive" or "non-dispositive" is consequential because it determines the standard under which the district judge will review the matter when the ruling is "appealed" – as it inevitably will be – to her. For the reasons that follow, it is this Court's view that the instant motion is a non-dispositive one for which an Order rather than a Report and Recommendation is the proper form of ruling.²

Section 636(b)(1) of Chapter 28 of the United States Code defines what is properly the subject of a magistrate judge's order, though it does not use the formulation and language of "dispositive" and "non-dispositive" as does Fed. R. Civ. P. 72. The statute provides that, in civil cases, a magistrate judge may "hear and determine any pretrial matter ... except a motion for injunctive relief, for judgment on the pleadings, for summary judgment, to [certify a class action], to dismiss for failure to state a claim upon which relief may be granted, and to involuntarily dismiss an action." 28 U.S.C. § 636(b)(1). Under the statute any "pretrial matter" other than those specifically excepted are the proper subject of an order by a magistrate judge. Id. When referred, those motions that are specifically excepted are properly the subject of a Report and Recommendation to the district judge. Id. Rule 72 of the Federal Rules of Civil Procedure uses the short-hand descriptions of "dispositive" and "non-dispositive" to convey this same distinction. Rule 72(a) defines "non-dispositive" as any "pretrial matter" that is "not dispositive of a party's claim or defense."

The present motion does not dispose of any party's claim or defense and is not one of the statutorily specified matters which a magistrate judge may not "hear and determine" but must make a Report and Recommendation to the district judge. Therefore, if Federal's motion is properly deemed a "pretrial matter," it is the proper subject of an order from this Court. Though not framed as such, that question seems to lie at the heart of FICO's objection to the undersigned's authority to hear and decide the matter. That is, FICO seems to imply that Federal's motion is not a "pretrial matter" because it touches an aspect of the trial process.

Rule 39(a) governs motions to strike a jury demand. Rule 39 (and Rule 38, which preserves inviolate the right to a jury trial) is placed within Title V ("Trials") of the Rules of Civil Procedure, thus lending superficial credence to FICO's argument.³

But a motion to strike a jury demand is in fact a matter resolved – necessarily – before trial and typically, as here, well before trial. It is, by that definition, a "pretrial matter."

More to the point, however, the little authority that directly addresses this issue supports Federal's position, not FICO's. See United Steelworkers of Am., AFL-CIO v. New Jersey Zinc. Co., Inc. , 828 F.2d 1001, 1008 (3d Cir. 1987) (magistrate judge's order on motion to strike jury demand is subject to appeal requirements of § 636(b)(1)(A) ); Lawrence v. Hanson , 197 F. Supp. 2d 533, 536 (W.D. Va. 2002) (right to a jury trial is not a dispositive issue); Smith v. Dickinson Operating Co. , Case No. 89-4216-S, 1991 WL 105208 at *1, 1991 U.S. Dist. LEXIS 7950 at *1 (D. Kan. May 29, 1991) (same); United States v. Carlson , Case No. 06-cv-00275-WYD-NEH, 2006 WL 2869122, at n.1 (D. Colo. Oct. 6, 2006) ; Wagner v. Richards , Case No. 12-cv-00817-WJ-SMV, 2014 WL 12789099, at *1 (D.N.M. Aug. 26, 2014) ; In re Vaughan Co. , Case No. 12-cv-0817 WJ/SMV, 2014 WL 12789686, at *2 (D.N.M. July 22, 2014).

The Court is aware of one case within this District in which the motion to strike a jury demand was treated as dispositive by the magistrate judge, Goodbye Vanilla, LLC v. Aimia Proprietary Loyalty U.S., Inc. , Case No. 16-cv-0013,⁴ 2016 WL 6806364, at *1, 2016 U.S. Dist. LEXIS 152775, at *1 (D. Minn. Sept. 8, 2016). The referral order in that case did not direct the motion be considered under Section 636(b)(1)(B), but rather left that determination to the magistrate judge, Case No. 16-cv-13, Dkt. No. 56, who, without explanation, treated it as requiring a Report and Recommendation rather than an Order. FICO apparently would have the Court infer from this fact that such treatment is the regular practice in this District or that the issue was carefully briefed and considered, neither of which is warranted on the facts presented.⁵

Because Federal's motion is a "pretrial matter" that does not dispose of any party's claims or defenses, this Court will consider the motion as arising under 28 U.S.C. § 636(b)(1)(A) and Rule 72(a). If Judge Wright determines this conclusion is erroneous, she will no doubt construe this Order as a Report and Recommendation and apply the appropriate standard of de novo review.

II. The Copyright Act

The Copyright Act does not expressly reference the right to a jury trial in an action for infringement, but merely provides that a copyright owner "is entitled ... to institute an action for any infringement." 17 U.S.C. § 501(b). Nor have the parties cited any decisions holding that the Act contains an express grant of a jury trial right. To the contrary, opinions cited by FICO in opposition to Federal's motion recognize that there is no statutory right to a jury trial under the Copyright Act. See Feltner v. Columbia Pictures Television, Inc. , 523 U.S. 340, 346, 118 S.Ct. 1279, 140 L.Ed.2d 438 (1998).

FICO argues that the statute implicitly grants a right to a jury trial by its careful parsing of language in the various remedial sections within the statute, §§ 502, 503, 504, and 505. Sections 502, 503, and 505 all specifically require "the court" to decide the remedy:...