Madison St. Props. v. The Marcus Corp.

• Docket Number: 20 CV 50471
• Decision Date: 11 September 2023
• Parties: Madison Street Properties, LLC, Plaintiff, v. The Marcus Corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

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Madison Street Properties, LLC, Plaintiff, v. The Marcus Corporation, Defendant.

No. 20 CV 50471

United States District Court, N.D. Illinois, Western Division

September 11, 2023

MEMORANDUM OPINION AND ORDER

Iain D. Johnston U.S. District Judge.

On April 12, 2023, the Court granted Madison Street Properties' (Madison) motion to voluntarily dismiss the case with prejudice under Rule 41. Dkt. 74. As anticipated in and allowed by that order, the Marcus Corporation (Marcus) now seeks an award of attorneys' fees under 15 U.S.C § 1117(a) of over $500,000.00. Dkt. 77, 78.

In an exercise of discretion, the Court denies Marcus' motion and does not award attorneys' fees under § 1117(a) because Marcus has failed to meet its burden to establish that this case is exceptional. This case doesn't stand out. The reasons supporting this discretionary ruling follow.

PRELIMINARY MATTERS

As a preliminary matter, although courts are duty bound to address them, it's safe to say that many courts don't like fee disputes. See, e.g., Ustrak v. Fairman, 851 F.2d 983, 987-88 (7th Cir. 1988). This Court is no exception. DR Distribs., LLC v. 21 Century Smoking, Inc., No 12 CV 50324, 2022 U.S. Dist. LEXIS 183697, at *2 (N.D. Ill. Oct. 6, 2022) (“If Dante were a judge, he would have placed fee litigation as an inner circle of judicial hell.”). One reason attorneys' fee petitions are distasteful is that often the attorneys' fee tail wags the merits dog. Sit N' Stay Servs. v. Hoffman, No. 17 CV 116 2019 U.S. Dist. LEXIS 17731, at *15 n.7 (W.D.N.Y. Feb. 1 2019). And fee litigation often becomes very personal between counsel with much vitriol and finger pointing, with the purpose being to punish opposing counsel and parties. Often, motions seeking attorneys' fees are akin to Frank Costanza's airing of grievances at Festivus. The filings for this motion have that flavor. Indeed, many of the flings in this case are lava hot. Rather than respond in kind, this Court will attempt to reduce the temperature with a calm analysis, showing how it exercised its discretion under Section 1117(a).

Section 1117(a) provides a statutory basis to award attorneys' fees. 15 U.S.C. § 1117(a). The statutory text is both similar to and different from other provisions, even those allowing for fees in intellectual property cases. Compare 35 U.S.C. § 285 with 17 U.S.C. § 505; see Live Face on Webb, LLC v. Cremation Soc'y of Ill., Inc., 77 F.4th 630 (7th Cir. 2023) (discussing § 505 which presumes the prevailing party is entitled to attorneys' fees). Section 1117(a) provides that a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). Two key terms in the text are “exceptional” and “may.”

Marcus prevailed in this litigation. Dkt. 74, at 6. But prevailing is a necessary, not sufficient, requirement under Section 1117(a). Munchkin, Inc. v. Luv N' Care, Ltd., 960 F.3d 1373, 1380 (Fed. Cir. 2020) (“That Munchkin's patent was ultimately held unpatentable does not alone translate to finding its defense of the patent unreasonable.”). The case must also be “exceptional.” “Exceptional” means “uncommon,” “rare” or “not ordinary.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 553 (2014). A fee award under this provision is not to be used as a penalty for failing to prevail. See Spineology, Inc. v. Wright Med. Tech., Inc., 910 F.3d 1227, 1231 (Fed. Cir. 2018). In determining whether a case is exceptional, the Seventh Circuit-like most circuits^[1]-adopted the Supreme Court's analysis of 35 U.S.C. § 285 in Octane Fitness, 572 U.S. at 554. See Lho Chi. River L.L.C. v. Rosemoor Suites, LLC, 942 F.3d 384, 388-89 (7th Cir. 2019) (Chicago River I). Under Section 1117(a), an exceptional case “stands out from others with respect to [1] the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or [2] the unreasonable manner in which the case was litigated.” Lho Chi. River L.L.C. v. Rosemoor Suites, LLC, 998 F.3d 962, 964 (7th Cir. 2021) (Chicago River II) (quoting Octane Fitness, 572 U.S. at 554). In determining whether a case is exceptional, a district court must exercise its discretion, considering the totality of the circumstances. Id.

Before beginning with the analysis under Section 1117(a), three larger issues must be addressed: (1) the influence of discretion in determining whether to award fees; (2) the burden of proof and which party bears that burden; and (3) the processes for determining the underlying facts to exercise discretion. Although the parties did not address these issues, they are critical in analyzing the motion.

First, in determining whether to award attorneys' fees under Section 1117(a), the district court has broad discretion. Indeed, in Chicago River II-the seminal Seventh Circuit case addressing Section 1117(a)-the Seventh Circuit explained the expansive scope of discretion.^[2] Under this standard, there need only be a basis in reason, meaning whether any reasonable person could agree. Chicago River II, 988 F.3d at 967. So, the standard of review is deferential, allowing appellate courts to routinely affirm the district courts. Id. In fact, under the abuse of discretion standard, two district judges faced with the same set of facts may arrive at opposite conclusions, with neither one committing an abuse of discretion. See United States v. Williams, 81 F.3d 1434, 1437 (7th Cir. 1996). But discretion is not without limits. Courts must correctly apply the law and not make clear factual errors. Chicago River II, 988 F.3d at 967. The court must provide a concise but clear explanation. Munchkin, 960 F.3d at 1378.

Second, which party bears the burden on an issue and the quantum of proof necessary to meet that burden is critical, particularly in a close case. See United States ex rel. Bilyew v. Franzen, 686 F.2d 1238, 1248 (7th Cir. 1982) (“If the evidence is closely balanced, then common sense indicates there is a reasonable possibility that who bears the burden of proof will determine the outcome.”); United States v. Thevis, 665 F.2d 616, 633 n.17 (5th Cir. 1982) (“In addition, the ‘clear and convincing' standard of proof dictates that close cases must be resolved in favor of the defendant.”). Like most matters, under Section 1117(a), the movant bears the burden. Munchkin, 960 F.3d at 1378. With respect to the standard, the law is slightly less clear. Chicago River II, 988 F.3d at 966 n.3. But the consensus of the circuits is that the standard of proof is a preponderance of the evidence. Munchkin, 960 F.3d at 1378; Verisign, Inc. v. XYZ.COM LLC, 891 F.3d 481, 484-85 (4th Cir. 2018). The one hiccup comes from the Fifth Circuit. In 2016, the Fifth Circuit rejected the clear and convincing standard. See Baker v. DeShong, 821 F.3d 620, 625 (5th Cir. 2016). But, in 2021, the Fifth Circuit adopted the clear and convincing standard. Spectrum Ass'n Mgmt. of Tex., L.L.C. v. Lifetime HOA Mgmt. L.L.C., 5 F.4th 560, 566-67 (5th Cir. 2021). This Court has no trouble rejecting the clear and convincing standard based on the weight of authority from the other circuits, the Fifth Circuit's failure to cite authority for the clear and convincing standard, the Seventh Circuit's explicit resistance to apply the clear and convincing standard unless statutorily or constitutionally required, Ramirez v. T&H Lemon, Inc., 845 F.3d 772, 778 (7th Cir. 2016), and the Supreme Court's rejection of that standard in Octane Fitness, 572 U.S. at 557. So, Marcus has the burden to establish by a preponderance of the evidence that the case is exceptional.

Third, although the ultimate determination to award attorneys' fees under Section 1117(a) is discretionary, when exercising that discretion district courts should consider certain factors, including frivolousness, motivation, objective unreasonableness, and the need to advance compensation and deterrence. Chicago River I, 942 F.3d at 388-89. Not surprisingly, the parties will have very different views on these considerations, which will require district courts to make findings as to these considerations. Among other tools and processes, this Court often looks to the guidance it provides jurors during trial. For example, Civil Pattern Jury Instruction 1.11 instructs jurors to use common sense in weighing evidence and consider the evidence in light of observations in life. Further, the instructions on deciding what to believe and prior inconsistent statements is useful. Civil Pattern Instruction 1.13 & 1.14. Likewise, once opinion witnesses overcome any Daubert challenges, their testimony is judged the same way as any other witness, so that this Court is not required to accept it; instead, this Court should consider the reasons for the opinion, the witness' qualifications, and the other evidence. Civil Pattern Instruction 1.21. After all, if these are legal principles jurors are instructed to use at trial, they are just as applicable to judicial fact finding. See DR Distribs., LLC v. 21 Century Smoking, Inc., 513 F.Supp.3d 839, 870 (N.D. Ill. 2021). Additionally, this Court often takes guidance from Occam's razor: when confronted with different explanations for an occurrence, the simplest is the most likely explanation. United States v. Withers, 960 F.3d 922, 934 (7h Cir. 2020) (Easterbrook, J. concurring); Siefert v. United States Dep't of Educ., 633 B.R. 365, 369 (Bankr. N.D. Ind. 2021). Again, these tools just provide guidance. They may not be foolproof, but they can be useful. Raila v. Cook Cnty. Officers Electoral Bd., No. 19 CV 7580, 2021 U.S. Dist. LEXIS 215458, at *1 (N.D. Ill. Nov. 8, 2021).

Alone, they are not determinative. This Court must still use good judgment and sound discretion.

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With these...