Lgs Architects, Inc. v. Concordia Homes

• Decision Date: 11 January 2006
• Docket Number: No. 04-16677.,04-16677.
• Citation: 434 F.3d 1150
• Parties: LGS ARCHITECTS, INC., a Nevada Corporation; LGS Nevada, a Nevada Corporation, Plaintiffs-Appellants. v. CONCORDIA HOMES OF NEVADA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

434 F.3d 1150

LGS ARCHITECTS, INC., a Nevada Corporation; LGS Nevada, a Nevada Corporation, Plaintiffs-Appellants. v. CONCORDIA HOMES OF NEVADA, Defendant-Appellee.

No. 04-16677.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 13, 2005.

Filed January 11, 2006.

Michael J. McCue, Lewis and Roca LLP, Las Vegas, NV, argued the cause for the appellants; W. West Allen, Lewis and Roca LLP, Las Vegas, NV, was on the briefs.

John M. Naylor, Lionel Sawyer & Collins, Las Vegas, NV, argued the cause for the appellee; Samuel S. Lionel, Lionel Sawyer & Collins, Las Vegas, NV, was on the brief.

Appeal from the United States District Court for the District of Nevada; Robert C. Jones, District Judge, Presiding. D.C. No. CV-04-00574-RCJ.

Before: BEEZER, O'SCANNLAIN, and KLEINFELD, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We must decide whether an architectural firm is entitled to a preliminary injunction prohibiting a client from using its copyrighted designs on projects that fall outside the scope of their licensing agreement.

I.

In November 2001, LGS Architects, Inc. ("LGS") and Concordia Homes of Nevada ("Concordia") entered into a licensing agreement that authorized Concordia to use two of LGS's architectural plans to construct Arbor Glen I, a master-planned community of eighty houses in northwestern Las Vegas. The parties later signed two "Additional Service" agreements, each of which authorized Concordia to use another of LGS's architectural plans in the construction of Arbor Glen I. LGS has registered all four of these plans with the United States Copyright Office.

The licensing agreement is based upon the language of the American Institute of Architects' Standard Form of Agreement for Residential Projects, and it provides that

[a]ll architectural documents prepared by Architect pursuant to this contract are instrumentalities of the Architect's services and are Architect's property solely for use by the Client on this project and no other. Any other use of such architectural documents is prohibited unless the Client first obtains express written authorization from Architect. Such authorization may be subject to an appropriate reuse fee as determined be [sic] Architect.

Licensing Agreement ("Licensing Agr.") Ex. A ¶ B.1. The licensing agreement's Standard Rate Schedule establishes a "reuse fee" of "$3,600.00 plus $60.00 / unit plotted" "for using plans developed under this contract in locations other than the original location" and reiterates that the "Client must procure the written permission of the Architect prior to the commencement of such reuse of said plans." Id. Ex. C. These provisions are also applicable to the parties' "Additional Service" agreements. See Authorization for Additional Services (Nov. 18, 2002) ("All other terms and conditions of the original contract[]shall remain in effect as related to these Additional Services."); Authorization for Additional Services (Mar. 14, 2002) (same).

In July 2003, Concordia decided to use LGS's four Arbor Glen I plans to construct houses in the adjacent Arbor Glen II community. LGS requested that Concordia sign a new licensing agreement before reusing its plans. Concordia was unwilling to do so, however, because it believed that Arbor Glen II was covered by the original licensing agreement's reuse provisions. Relying upon those provisions, Concordia remitted a reuse fee of $10,860 to LGS, which represented $60.00 for each of the 181 additional homes planned for Arbor Glen II. LGS refused to accept this payment because Concordia omitted the $3,600 "base reuse fee" for which the licensing agreement provides.¹ Concordia concedes that it miscalculated this payment and alleges that it later attempted to correct this error by offering LGS a $3,600 base reuse fee, which LGS rejected. LGS contends that no such offer was ever made.

Notwithstanding this dispute about whether Concordia made a second payment attempt, the parties agree that LGS never accepted a reuse fee from Concordia and that it never gave Concordia written authorization to use the architectural plans to construct Arbor Glen II. Concordia nevertheless proceeded with the construction of Arbor Glen II based upon LGS's architectural plans. The project, which was eventually scaled back from 181 to 68 houses, was completed in August 2004, and all of the houses have now been sold.

In May 2004, LGS filed suit against Concordia in the United States District Court for the District of Nevada alleging copyright infringement and breach of contract. LGS moved for a preliminary injunction 1) prohibiting Concordia from constructing and selling houses based upon LGS's architectural plans, 2) prohibiting Concordia from reproducing, distributing, or publicly displaying those plans, and 3) ordering Concordia to return the disputed plans. Without setting forth findings of fact or conclusions of law, the district court denied the preliminary injunction motion on the ground that LGS does not have a likelihood of success on the merits. LGS timely filed this interlocutory appeal from the district court's denial of its preliminary injunction motion.

Concordia thereafter filed a motion to dismiss the appeal on the ground that the completion of Arbor Glen II has mooted LGS's preliminary injunction request. The motion was denied by the Appellate Commissioner without prejudice to Concordia raising the mootness issue before the merits panel.

II.

Concordia now renews its argument that this interlocutory appeal is moot, and we therefore first determine whether we possess jurisdiction to entertain this appeal.

A.

Article III of the United States Constitution requires the existence of a live case or controversy throughout all stages of federal judicial proceedings. See Gator.Com Corp. v. L.L. Bean, Inc., 398 F.3d 1125, 1128-29 (9th Cir.2005) (en banc). Accordingly, "[w]here the activities sought to be enjoined already have occurred, and the appellate courts cannot undo what has already been done, the action is moot, and must be dismissed" for lack of jurisdiction. Bernhardt v. County of Los Angeles, 279 F.3d 862, 871 (9th Cir.2002); see also Am. Tunaboat Ass'n v. Brown, 67 F.3d 1404, 1407 (9th Cir.1995) (holding that an appeal from the denial of a preliminary injunction prohibiting the federal government from temporarily closing certain tuna fisheries was moot because the fisheries had reopened by the time the appeal was argued).

Here, one of the forms of relief sought by LGS is a preliminary injunction prohibiting Concordia from constructing new homes based upon its architectural plans. To the extent that LGS is seeking to enjoin the construction of Arbor Glen II, its request for relief is moot because that project has been completed. We are powerless to undo such a fait accompli.

B.

Concordia argues that not only is LGS's request to enjoin Arbor Glen II moot but that this entire appeal is moot because Concordia has represented that it will not make future use of the disputed architectural plans. To that end, Concordia states in its answering brief that it "does not intend to use the Arbor Glen I plans at any time in the future . . . and has no intent to reproduce, prepare derivative works, distribute, or publicly display the plans." Ans. Br. 17. Concordia's president submitted an affidavit to the district court that included a nearly identical statement.

It is exceedingly rare, however, for a defendant's voluntary termination of allegedly wrongful activity to render an appeal moot. "Voluntary cessation of challenged conduct moots a case . . . only if it is absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur." Adarand Constructors, Inc. v. Slater, 528 U.S. 216, 222, 120 S.Ct. 722, 145 L.Ed.2d 650 (2000) (per curiam) (internal quotation marks omitted). In Federal Trade Commission v. Affordable Media, LLC, 179 F.3d 1228, 1232 (9th Cir. 1999), for example, the district court issued a preliminary injunction ordering the defendants to cease their participation in a fraudulent telemarketing business. On interlocutory appeal, the defendants argued that the request for injunctive relief was moot because they had voluntarily discontinued their involvement in the business. Id. at 1237. We rejected the defendants' mootness argument and explained that "an action for an injunction does not become moot merely because the conduct complained of was terminated, if there is a possibility of recurrence, since otherwise the defendant's [sic] would be free to return to [their] old ways." Id. (internal quotation marks and emphasis omitted; second alteration in original); see also Jacobus v. Alaska, 338 F.3d 1095, 1103 (9th Cir.2003) (holding that a § 1983 action challenging Alaska's campaign finance laws was not moot, even though the statutes in question had been repealed, because the State's voluntary cessation of its alleged wrongdoing did not foreclose the possibility of future reenactment).

Concordia's representation that it has no intention to use LGS's architectural plans in the future does not make it "absolutely clear" that Concordia will permanently refrain from future infringement. If the opposite were true, any defendant could moot a preliminary injunction appeal by simply representing to the court that it will cease its wrongdoing. Indeed, it is not even apparent from the record whether Concordia has presently discontinued its use of LGS's copyrighted material. Although all of the houses in Arbor Glen II have now been sold, Concordia nowhere avers that it has ceased reproducing, distributing, or publicly displaying the plans in connection with that project.²

The First Circuit's decision in CMM Cable Rep., Inc. v. Ocean Coast Properties, Inc. — the case upon which Concordia principally relies — is not to the contrary. 48 F.3d 618(1st Cir.1995). There, the court concluded that an appeal from the denial of a preliminary injunction was moot because the radio...