Hon. Michael Simon in the United States District Court of Oregon issued an Order today affirming the findings and recommendations of Magistrate Judge Stacie Beckerman, ordering Cobler Nevada, LLC, the purported owner of the copyright to The Cobbler film, to pay defendant Thomas Gonzales $17,222.40 in attorney fees he incurred defending against a lawsuit that was dismissed against him.
David Madden, Esq. of Mersenne Law represented Mr. Gonzales.
FULL OPINION LINKED BELOW
Judge Stacie Beckerman issue the following opinion on December 2, 2016 in the US District Court in Oregon. Finding that Carl Crowell, the Salem, Oregon lawyer who has sued 100s of people for allegedly engaging in BitTorrent activity – none of which have made it to trial – continued to litigate the case against a person he knew was not liable.
Fierce Attorney David Madden represented the Defendant Gonzales, who was on the internet service contract for a group home that he owned. This is a significant case for Oregon BitTorrent litigation, as it is understood to the the first time the Oregon US District Court has ordered that attorney fees should be paid because of Carl Crowell’s litigation choices.
“When it initially filed this case, Plaintiff had a reasonable basis to allege that an unknown person had illegally downloaded Plaintiff’s movie. Thus, the claims were not frivolous, when filed. However, Plaintiff learned soon after filing the case that Gonzales, the IP address subscriber, did not reside at the group care home at which the alleged infringement was taking place, but instead merely paid for the Internet service. After deposing Gonzales, Plaintiff acknowledged that Gonzales was not the likely infringer. (See Carl Crowell Decl. ¶ 11, July 22, 2015 (“Based on my conversation with Mr. Gonzales, it does not appear that he is a regular occupant of the residence or the likely infringer.”).) Plaintiff also learned that many individuals had access to the Internet connection at the group home, and that Gonzales was not responsible for managing the Internet connection at the home. (See Thomas Gonzales Dep. 16:19-21, 17:11- 19, Oct. 20, 2015.) Nevertheless, Plaintiff did not dismiss its case, but instead decided to double down and name Gonzales as the defendant. (First Am. Compl., ECF No. 24.) When Gonzales filed a motion to dismiss the contributory infringement claim, Plaintiff did not dismiss the claim, but instead forced Gonzales to litigate the motion.
The Court finds that once Plaintiff learned that the alleged infringement was taking place at an adult group care home at which Gonzales did not reside, Plaintiff’s continued pursuit of Gonzales for copyright infringement was objectively unreasonable. Plaintiff’s discovery that Gonzales was not the infringer came before Gonzales accrued the fees submitted for approval, and therefore the requested fees relate to a time period during which Plaintiff’s continued pursuit of Gonzales was objectively unreasonable.
Gonzales alleges that Plaintiff has “filed hundreds of cases against thousands of Does across the United States” to extract “overreaching settlements.” (Def.’s Mot. Att’y Fees 10.) Gonzales accuses Plaintiff’s counsel of using legal process as a “lever” to force defendants into settlement. (Def’s Mot. Att’y Fees 5.) Gonzales claims that the Copyright Act permits Plaintiff to pursue cases “with absolutely no requirement to prove damages” and “an unwilling ‘client’ [i.e., the defendant] on the hook for all of its attorney’s fees.” (Id.)
Plaintiff responds that “money has never been a goal of plaintiff in this action—only addressing the persistent and pervasive infringing activity of Gonzales who was either personally responsible, or who willingly allowed . . . others to infringe plaintiff’s rights after hundreds of notices.” (Pl’s Resp. 4.) Plaintiff’s response is contradicted by its knowledge early in the litigation that Gonzales was not personally responsible for the alleged infringement, and later in the case that he is not legally responsible for the alleged infringement of others. Despite that knowledge, Plaintiff continues to attack Gonzales in its response to Gonzales’ fee motion, faulting Gonzales for many things, including his refusal to accept Plaintiff’s offer to settle the case, even though that offer required an admission of liability for infringement for which Plaintiff knew Gonzales was not responsible.
This Court has already highlighted its concerns with the litigation strategy pursued by Plaintiff and other plaintiff LLCs in the hundreds of BitTorrent cases filed in this district. See, e.g., Cobbler Nevada, LLC v. Anonymous Users of Popcorn Time, No. 3:15-cv-01550-SB, 2016 WL 4238639, at *4 (D. Or. Aug. 10, 2016) (denying plaintiff’s fee motion, and noting that “the threat of fee-shifting has emboldened Plaintiff’s counsel to demand thousands of dollars to settle a claim, even where the infringing defendant admits early in the case that they illegally downloaded the movie”); Glacier Films, Inc. v. Turchin, No. 3:15-cv-01817-SB, 2016 WL 4251581 (D. Or. Aug. 10, 2016) (same).4 At least one other judge in this district has also expressed concerns about the motivation driving some of these cases. See Countryman Nevada, LLC v. DOE-126.96.36.199, —F. Supp. 3d—, 2016 WL 3437598, at *7 (D. Or. 2016) (finding that Plaintiff’s counsel had “conducted  litigation in a manner calculated to increase the opposing party’s costs—and, at the same time, to increase the bases for [his] own fee petition”).
Although Plaintiff urges the Court to believe that “money has never been the goal” of this action, this Plaintiff and similarly-situated plaintiffs continue to demand large sums of money from individuals to settle these BitTorrent copyright claims. Many individuals agree to pay these large sums without the benefit of legal counsel. See Anonymous Users of Popcorn Time, 2016 WL 4238639, at *4. The Court shares Gonzales’ concern that Plaintiff is motivated, at least in large part, by extracting large settlements from individual consumers prior to any meaningful litigation. On balance, the Court has concerns about the motivation behind Plaintiff’s overaggressive litigation of this case and other cases, and that factor weighs in favor of fee shifting.
“When a litigant—whether plaintiff or defendant—is clearly correct, the likelihood that he will recover fees from the opposing (i.e., unreasonable) party gives him an incentive to litigate the case all the way to the end.” Kirtsaeng, 136 S. Ct. at 1986. If fees are shifted, “a person defending against a patently meritless copyright claim has every incentive to keep fighting, no matter that attorney’s fees in a protected suit might be as or more costly than a settlement.” Id. “Conversely, when a person . . . has an unreasonable litigating position, the likelihood that he will have to pay two sets of fees discourages legal action.” Id. at 1987. “The copyright holder with no reasonable infringement claim has good reason not to bring suit in the first instance (knowing he cannot force a settlement and will have to proceed to judgment)[.]” Id. These results “promote the Copyright Act’s purposes, by enhancing the probability that both creators and users (i.e., potential plaintiffs and defendants) will enjoy the substantive rights the statute provides.” Id.
Awarding Gonzales compensation for defending against Plaintiff’s contributory infringement claim provides similarly-situated litigants an incentive to defend their rights under the Copyright Act. Compensating Gonzales will encourage future defendants with valid defenses to litigate those defenses, even if the litigation is expensive. Conversely, and perhaps more importantly, awarding fees to Gonzales should deter Plaintiff in the future from continuing its overaggressive pursuit of alleged infringers without a reasonable factual basis.
Plaintiff’s claims against Gonzales were objectively unreasonable, and the Court has concerns about Plaintiff’s motivation in continuing to pursue those claims when it became clear that Gonzales was not responsible for the alleged infringement. To incent similarly-situated defendants to protect their rights under the Copyright Act, and to deter Plaintiff from overaggressive litigation tactics, the Court concludes that a fee award to Gonzales is appropriate.