Ryan v. Editions Ltd. W., Inc.

• Citation: 114 U.S.P.Q.2d 1802,786 F.3d 754
• Decision Date: 19 May 2015
• Docket Number: 13–15061.,Nos. 12–17810,s. 12–17810
• Parties: Victoria RYAN, Plaintiff–Appellee/Cross–Appellant, v. EDITIONS LIMITED WEST, INC., a California corporation; Artselect, Inc., Defendants–Appellants/Cross–Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

786 F.3d 754
114 U.S.P.Q.2d 1802

Victoria RYAN, Plaintiff–Appellee/Cross–Appellant
v.
EDITIONS LIMITED WEST, INC., a California corporation; Artselect, Inc., Defendants–Appellants/Cross–Appellees.

Nos. 12–17810
13–15061.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 11, 2015.
Filed May 19, 2015.

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Michael A. Painter (argued), Isaacman, Kaufman & Painter, P.C., Los Angeles, CA, for Defendants–Appellants/Cross–Appellees.

Richard A. De Liberty (argued), Santa Rosa, CA, for Plaintiff–Appellee/Cross–Appellant.

Appeal from the United States District Court for the Northern District of California, Paul S. Grewal, United States Magistrate Judge, Presiding. D.C. No. 5:06–CV–04812–PSG.

Before: MICHAEL DALY HAWKINS, RICHARD A. PAEZ, and MARSHA S. BERZON, Circuit Judges.

OPINION

HAWKINS, Circuit Judge:

After many years of litigation and several appeals to the Ninth Circuit, artist Victoria Ryan prevailed on a contributory copyright infringement claim against a publisher of her artwork, Editions Limited West, Inc. (“ELW”). The district court awarded Ryan attorney fees pursuant to a fee-shifting provision contained in the parties' publishing contract (the “Agreement”). Both parties appeal.

The primary appeal, initiated by ELW, presents us with an issue of first impression: Does the Copyright Act of 1976 preclude enforcement of a contractual attorney fees provision in copyright-based litigation? On cross appeal, we are asked whether the district court abused its discretion in calculating the amount of fees to be awarded, excluding the issue of damages from trial, or denying Ryan's motion for sanctions and motion for leave to amend her complaint.

We have jurisdiction under 28 U.S.C. § 1291. We conclude the Copyright Act does not bar an award of attorney fees under the circumstances but hold that the district court abused its discretion by categorically excluding the majority of Ryan's requested fees without adequate explanation. Therefore, we vacate the district court's order awarding Ryan attorney fees and remand for further proceedings consistent with this opinion. In all other regards, we affirm the rulings of the district court.

FACTUAL BACKGROUND

Ryan is an artist working in pastel on paper. ELW is a publisher of art posters. In 1995, Ryan and ELW executed the Agreement under which ELW received a license to publish a limited number of Ryan's pastel artworks as posters, and in exchange, ELW agreed to pay Ryan royalties. The Agreement also provides that “[i]n the event that litigation is instituted

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with regard to this Agreement, the prevailing party shall be entitled to its costs of the suit, including reasonable attorney's fees.”

In the years following Ryan and ELW's execution of the Agreement, the production and sale of derivative works of art, such as canvas transfers, giclées, and wall murals, became increasingly popular. Many of these derivative works are produced through varying processes of transferring an art image from a poster onto another medium. Although the Agreement expressly granted ELW a license to produce and sell posters of Ryan's original works, it did not explicitly address the subsequent use of those posters for the production of derivative works.

Not long after derivative works began to rise in popularity, Ryan began to notice that retailers were offering canvas transfer and wall mural reproductions of her art for sale. Believing that ELW (or, at a minimum, its posters) may be involved, Ryan contacted ELW to inquire about the production and sale of these derivative works. After several unsuccessful demands, Ryan initiated litigation.

PROCEDURAL HISTORY

Ryan filed her complaint against ELW in August 2006, alleging that ELW was knowingly supplying the entity ArtSelect, among others, with posters of Ryan's artwork for the purpose of creating derivative works in violation of the Agreement, the Copyright Act, and California law. ELW answered, denying Ryan's allegations, and discovery commenced.¹

After the close of discovery, ELW filed a series of motions for partial summary judgment. In its first motion, ELW sought adjudication limiting the amount of Ryan's recoverable damages. Specifically, ELW argued that Ryan had produced evidence of only one act of infringement—ArtSelect's sale of a canvas transfer of Ryan's pastel entitled Primavera I for which ArtSelect made $1.72 in profit. The district court held that Ryan was not entitled to statutory damages or attorney fees under the Copyright Act and that if Ryan succeeded on the liability portion of the infringement claims, her recoverable damages for those claims would be limited to $1.72. In separate motions, ELW sought and obtained summary judgment in its favor on all of Ryan's claims. Meanwhile, Ryan filed a competing motion for summary judgment seeking a determination that she was the prevailing party within the meaning of the Agreement despite the fact that ELW obtained judgment in its favor on all claims. The district court denied Ryan's motion, and Ryan appealed to this court.

In her first appeal before us, Ryan challenged the summary judgment rulings along with several discovery orders. Ryan v. Editions Ltd. W., Inc., 417 Fed.Appx. 699 (9th Cir.2011) [hereafter Ryan I ]. We affirmed the district court's discovery orders and grant of summary judgment on all claims except the copyright infringement claims. Id. at 702. We reversed

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the grant of summary judgment on Ryan's contributory and vicarious copyright infringement claims with the following instruction: “If the district court finds ELW liable for contributory or vicarious copyright infringement, it should reconsider whether Ryan is the prevailing party under the broad language of the contract, and whether she is entitled to a permanent injunction against ELW.” Id. at 701.

The case returned to the district court on remand, and the parties prepared for trial on Ryan's copyright infringement claims. Prior to the agreed-upon bench trial, Ryan filed a motion seeking an award of sanctions based on ELW's alleged spoliation of evidence. The district court denied Ryan's motion, relying on the court's earlier determination, affirmed in Ryan I, that the majority of allegedly spoliated documents were not relevant. The district court further found that Ryan had obtained any potentially relevant documents from other sources and that her remaining allegations of spoliation were speculative. In the same order, the district court instructed the parties that the upcoming trial would be limited to issues regarding ELW's liability for vicarious or contributory copyright infringement, Ryan's entitlement to injunctive relief, and Ryan's status as the prevailing party under the Agreement.

The parties proceeded to trial. On the final day of trial, ELW's president testified that ELW gave its clients permission to create canvas transfers of its posters if the artist in question did not have any restrictions in his or her publishing contract with ELW. In contrast, in an earlier deposition, ELW's president had testified that ELW generally would obtain express consent from its artists prior to authorizing a client's use of a poster for a canvas transfer. Based on this change in testimony, Ryan moved for leave to amend her complaint to add a claim of fraud. The district court denied Ryan's motion.

After the bench trial concluded, the district court found in favor of Ryan on her contributory copyright infringement claim. Although the court found that Ryan failed to present any evidence to “substantiate a claim to any portion of ELW's profits or any other damages award,” it held that Ryan was entitled to injunctive relief. The district court also found that Ryan was the prevailing party within the meaning of the Agreement and ordered Ryan to submit supporting evidence for a claim of attorney fees.

Ryan submitted the affidavit of her attorney as well as contemporaneous billing logs, demonstrating fees in the amount of $328,077.50 along with interest and costs. The requested fees represent the total fees incurred in prosecuting all claims and appeals. The district court district court awarded Ryan $51,363.81 in fees, which it believed represented the amount associated with Ryan's contributory copyright infringement claim.

STANDARD OF REVIEW

We review the district court's award of attorney fees for abuse of discretion. Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 977–78 (9th Cir.2008). We review factual findings for clear error and the interpretation of governing legal principles de novo. Id. at 977. Whether copyright preemption applies is a question of law subject to de novo review. Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079, 1089 (9th Cir.2005). We review a district court's denial of a motion for leave to amend and denial of a motion for sanctions based on spoliation of evidence for abuse of discretion. Campbell v. Bd. of Trs. of Leland Stanford Junior Univ., 817 F.2d 499, 506 (9th Cir.1987) (motion to amend);

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