Plan Pros, Inc. v. Dultmeier Homes Co.

• Decision Date: 26 May 2021
• Docket Number: No. 19-4068-SAC-ADM,19-4068-SAC-ADM
• Parties: PLAN PROS, INC., et al., Plaintiffs, v. DULTMEIER HOMES CO., et al., Defendants.
• Court: U.S. District Court — District of Kansas

PLAN PROS, INC., et al., Plaintiffs, v. DULTMEIER HOMES CO., et al., Defendants.

No. 19-4068-SAC-ADM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

May 26, 2021

MEMORANDUM AND ORDER

Still pending in this case is the plaintiff Plan Pros, Inc.'s and Prime Designs, Inc.'s (jointly referenced as "Plan Pros'") motion for costs and attorneys' fees pursuant to 17 U.S.C. §§ 505 and 1203(b). ECF# 60. Both statutes provide that the court in its discretion may "award a reasonable attorney's fee to the prevailing party." Lingering questions over the plaintiffs' compliance with the consultation requirements in D. Kan. Rule 54.2 led this court to order more efforts to comply with the spirit and letter of this requirement. ECF# 65. After which, the parties reported wanting to discuss the possibility of mediation and then later pursued it. When their efforts failed to resolve the fee dispute, they asked the court to proceed with its ruling on the numerous issues and objections raised in their filings. ECF# 70. This order is that ruling.

In August of 2019, Plan Pros and Prime Designs, Inc. filed this suit against Dultmeier Homes Co. alleging copyright violations of their elevation artwork, and architectural drawings. In January of 2020, the plaintiffs amended their complaint adding A Design Discovery Inc. as a defendant. As part of their prayer for relief, Plan Pros asks in ¶ e for the "Plaintiffs' attorney fees" and in ¶ f for the "Plaintiffs' court costs, taxable costs, and the cost associated with the retention, preparation and testimony of expert witnesses." ECF# 24, p. 16.

Before discovery was completed, the final pretrial conference was held or any summary judgment motions were filed, the defendants Dultmeier Homes Co. and A Design Discovery Inc. (jointly referenced as "Dultmeier") jointly made an offer of judgment pursuant to Fed. R. Civ. P. Rule 68 on September 17, 2020, that stated in full, "COMES NOW all defendants and hereby jointly make an offer of judgment pursuant to Rule 68 as follows: 1. Defendants jointly offer plaintiffs $75,000.00 to resolve any and all issues by and between the parties." ECF# 56. One week later, the plaintiffs filed their notice that said they "hereby accept the Joint Offer of Judgment served on" them pursuant to Rule 68. ECF# 57. The Clerk thereafter entered judgment "pursuant to Fed. R. Civ. P. 68 and based upon the defendants' Joint Offer of Judgment . . . and the plaintiffs' Acceptance of Offer" stating that "the plaintiffs, Plan Pros, Inc. and Prime Designs, Inc., shall recover from the defendants, Dultmeier Homes, Co. and A Design Discovery, Inc., the sum of $75,000.00." ECF# 58, p. 1. Plan Pros thereafter filed its motion for costs including attorney's fees. ECF# 60.

In their motion, Plan Pros argues Dultmeier's Rule 68 offer of judgment did not include costs and attorney's fees which now must be addressed by the court. Dultmeier counters that their unambiguous offer of judgment included costs and attorney's fees which means the court should deny the plaintiffs' efforts to tack on more to what already has been resolved. This dispute turns on interpreting the offer of judgment within Rule 68's operational framework.

Rule 68 is intended to promote settlements, but it "does so only in the very limited context of restricting a defending party's liability for litigation costs." Felders v. Bairett, 885 F.3d 646, 655 (10th Cir. 2018) (citations omitted). In pertinent part, Rule 68(a) provides: "At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued." (underlining added). Interpreting the phrase, "with the costs then accrued," the Supreme Court in Marek v. Chesny, 473 U.S. 1, 6, 10 (1985), held in relevant part, (1) that a defendant's Rule 68 offer may be a lump sum that does not "itemize the respective amounts being tendered for settlement of the underlying substantive claim and for costs;" and (2) that Rule 68 "costs" includes attorney's fees "where the underlying statute defines 'costs' to include attorney's fees." Both holdings apply here.

This case comes under the second holding in Marek. The plaintiffs bring their action in part under the Copyright Act which includes aremedy provision at 17 U.S.C. § 505 that states, "the court may also award a reasonable attorney's fee to the prevailing party as part of the costs." Thus, "absent congressional expressions to the contrary, where the underlying statute defines 'costs' to include attorney's fees, we are satisfied such fees are to be included as costs for purposes of Rule 68." Marek v. Chesny, 473 U.S. at 8. Plan Pros may seek attorney fees as costs now unless Dultmeier's lump-sum Rule 68 offer also included costs/fees.

In deciding the lump-sum issue, the Supreme Court in Marek interpreted Rule 68 as follows:

The critical feature of this portion of the Rule is that the offer be one that allows judgment to be taken against the defendant for both the damages caused by the challenged conduct and the costs then accrued. In other words, the drafters' concern was not so much with the particular components of offers, but with the judgments to be allowed against defendants. If an offer recites that costs are included or specifies an amount for costs, and the plaintiff accepts the offer, the judgment will necessarily include costs; if the offer does not state that costs are included and an amount for costs is not specified, the court will be obliged by the terms of the Rule to include in its judgment an additional amount which in its discretion, see Delta Air Lines, Inc. v. August, supra 450 U.S., at 362, 365, 101 S.Ct., at 1153, 1156 (POWELL, J., concurring), it determines to be sufficient to cover the costs. In either case, however, the offer has allowed judgment to be entered against the defendant both for damages caused by the challenged conduct and for costs. Accordingly, it is immaterial whether the offer recites that costs are included, whether it specifies the amount the defendant is allowing for costs, or, for that matter, whether it refers to costs at all. As long as the offer does not implicitly or explicitly provide that the judgment not include costs, a timely offer will be valid.

This construction of the Rule best furthers the objective of the Rule, which is to encourage settlements. If defendants are not allowed to make lump-sum offers that would, if accepted, represent their total liability, they would understandably be reluctant to make settlement offers. As the Court of Appeals observed, "many a defendant would beunwilling to make a binding settlement offer on terms that left it exposed to liability for attorney's fees in whatever amount the court might fix on motion of the plaintiff." 720 F.2d, at 477.

Marek v. Chesny, 473 U.S. at 6-7 (italics in original). Central to the Court's interpretation of Rule 68 was that the offer must allow judgment to be entered both for damages and for costs. If the offer "recites" the inclusion of costs or "specifies an amount for costs," then the judgment will include costs upon the plaintiff's acceptance of the offer. 473 U.S. at 6. On the other hand, if the offer fails to "state that costs are included" or to specify "an amount for costs," then the court must enforce Rule 68 and "include in its judgment an additional amount" for costs in its discretion. Id. The Supreme Court's interpretation plainly emphasizes the importance of the Rule 68 offer using clear terms in addressing the matter of costs. This interpretation must influence the court in construing Dultmeier's offer of judgment.

Dultmeier argues its Rule 68 offer unambiguously included costs and fees, because it was a lump sum offer on the specified terms of "$75,000.00 to resolve any and all issues by and between the parties." ECF## 56 and 61, p.3. Using the Court's interpretation of Rule 68 in Marek as the operating framework, the court finds the issue is whether Dultmeier's offer of judgment "recites" the inclusion of costs, as the offer certainly does not specify an amount for costs. Neither the parties nor the court has found any controlling Tenth Circuit precedent directly applicable in deciding whether Dultmeier's offer, as so worded, necessarily recites the inclusion ofcosts and fees. Looking at the parties' cited research and conducting its own, the court believes the line of precedent most consistent with Marek leads to the result that Dultmeier's offer of judgment fails to recite the inclusion of costs and fees.

There is a line of circuit authority holding that when statutory attorney fees are awardable as costs then a Rule 68 offer must explicitly reference costs or specify an amount for costs in order for the offer to be construed as unambiguously including attorney fees. Sanchez v. Prudential Pizza, Inc., 709 F.3d 689, 692-94 (7th Cir. 2013) (Title VII case with the offer making no explicit reference to costs and fees); Lima v. Newark Police Dept., 658 F.3d 324, 330-331 (3rd Cir. 2011) (civil rights case with the offer making no explicit reference to costs and fees); Bosley v. Mineral County Com'n, 650 F.3d 408, 412-14 (4th Cir. 2011) (civil rights case with the offer making no explicit reference to costs and fees).

In Sanchez, the offer allowed judgment "in the amount of $30,000 including all of Plaintiff's claims for relief." 709 F.3d at 691. The court held that the burden of any silence or ambiguity about attorney fees falls on the offering defendant:

Because Rule 68 puts plaintiffs at their peril whether or not they accept the offer, the defendant must make clear whether the offer is inclusive of fees when the underlying statute provides fees for the prevailing party. As with costs, the plaintiff should not be left in the position of guessing what a court will later hold the offer means.

709 F.3d at 692 (quoting Webb v. James, 147 F.3d 617, 623 (7th Cir. 1998)). The Sanchez court...