Last Thursday, the Ninth Circuit held in an unpublished opinion, Criminal Productions, Inc. v. Cordoba, that a defendant is not entitled to attorneys' fees under the Copyright Act where a plaintiff voluntarily dismisses a complaint without prejudice as a matter of right. Plaintiff Criminal Productions had filed a lawsuit in the U.S. District Court for the District of Nevada against several Doe defendants (known only by their IP addresses) claiming that they violated its copyright in the 2016 film Criminal starring Kevin Costner and Ryan Reynolds. Specifically, Criminal Productions alleged that the defendants had used BitTorrent, a peer-to-peer computer file transfer service, to unlawfully disseminate its copyrighted film all over the Internet.
After discovering the owners of the IP addresses, Criminal Productions amended the complaint, named Tracy Cordoba as one of the defendants, and served her with the complaint as well as a demand letter. Cordoba responded to the letter with a "statement of innocence" attaching documentation that her IP address was not secure and offering her computer for investigation. Criminal Productions declined to investigate further and filed a notice of voluntary dismissal as to Cordoba under Federal Rule of Civil Procedure ("FRCP") 41(a)(1), which allows a plaintiff to voluntarily dismiss an action without a court order before a defendant files an answer or summary judgment motion. After dismissal, Cordoba moved for attorneys' fees, which the district court granted because it found that Cordoba was a "prevailing party" under the Copyright Act.
Prevailing Party Test
Ordinarily, parties are required to bear their own attorneys' fees in American courts. However, under various federal fee-shifting statutes, including Section 505 of the Copyright Act, a "prevailing party" may recover attorneys' fees. In Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598, 605 (2001), the U.S. Supreme Court held that a prevailing party is one who (1) obtains a "material alteration of the legal relationship of the parties" (2) that is "judicially sanctioned." Under this standard, the Court held that plaintiffs who obtain a "judgment on the merits" or a "court-ordered consent decree" are prevailing parties under the Fair Housing Amendments Act and the Americans with Disabilities Act. Consistent with other federal appellate courts, the Ninth Circuit in Cadkin v. Loose, 569 F.3d 1142, 1145 (9th Cir. 2009) extended Buckhannon's prevailing party test to the Copyright Act. In that case, the Ninth Circuit found that plaintiffs who voluntarily dismissed their copyright claims without prejudice under FRCP 41(a)(1) were not entitled to attorneys' fees as prevailing parties because they could re-file their claims in federal court and therefore no material alteration in the parties' relationship occurred.
In CRST Van Expedited, Inc. v. E.E.O.C., 136 S. Ct. 1642 (2016), the Supreme Court revisited Buckhannon under Title VII of the Civil Rights Act. While Buckhannon makes clear that a plaintiff obtaining a "judgment on the merits" is considered a prevailing party, the Court clarified that "a defendant need not obtain a favorable judgment on the merits in order to be a 'prevailing party.'" In the context of Title VII claims, the Court found that Congress "must have intended that a defendant could recover fees expended in frivolous, unreasonable, or groundless litigation when the case is resolved in the defendant's favor, whether on the merits or not." Thus, although the district court's dismissal based on the Equal Employment Opportunity Commission's failure to complete pre-suit obligations was not on the merits, the Supreme Court held that the defendant prevailed and awarded it attorneys' fees because the case was resolved in its favor.
The Ninth Circuit has subsequently applied CRST in two published opinions upholding Buckhannon's prevailing party test. In Wood v. Burwell, 837 F.3d 969 (9th Cir. 2016), involving the Equal Access to Justice Act, the court held that a procedural remedy may constitute a material alteration in the legal relationship of the parties. Because the lower court had determined that the U.S. Secretary of the Department of Health and Human Services' initial authorization of a Medicaid demonstration project violated the Administrative Procedure Act and compelled her to reconsider plaintiffs' objections and evidence, the plaintiffs had prevailed even though the Secretary later reapproved the project. Additionally, in Amphastar Pharms. Inc. v. Aventis Pharma SA, 856 F.3d 696 (9th Cir. 2017), covering the False Claims Act, the Ninth Circuit held that a defendant obtaining a dismissal based on lack of subject matter jurisdiction satisfied the material alteration requirement because a merits-based decision was not required under CRST.
Ninth Circuit Reaffirms Buckhannon Under Copyright Act
Relying on CRST, the district court in Criminal Productions determined that (1) Buckhannon's material alteration requirement applied only to plaintiffs and (2) CRST held that a defendant can be a prevailing party without a material alteration where the case is resolved in the defendant's favor and the plaintiff's claim was frivolous, unreasonable, or groundless. Since Criminal Productions had voluntarily dismissed the complaint after discovering that Cordoba's IP address was not secure, the district court found that its copyright claim was groundless and awarded attorneys' fees to Cordoba on that basis. On appeal, Criminal Productions argued that the "frivolous, unreasonable, or groundless" standard described in CRST was applicable only in Title VII cases and the Supreme Court never held that the material alteration test did not apply to defendants.
In reversing the grant of attorneys' fees to Cordoba as a prevailing party, the Ninth Circuit explicitly rejected Cordoba's argument that the prevailing party test in Buckhannon does not apply to defendants. The opinion explained that while CRST clarified that a defendant need not obtain a judgment on the merits to qualify as a prevailing party, CRST never held that defendants did not need to meet the material alteration requirement. In support, the Ninth Circuit pointed to its post-CRST decisions, Wood and Amphastar, which both affirmed the prevailing party test in Buckhannon. Accordingly, the court held that Cordoba did not obtain a material alteration in her legal relationship to Criminal Productions because the suit against her was dismissed without prejudice and therefore she was still at risk of Criminal Productions re-filing the complaint. Thus, Cordoba was not a prevailing party under the first requirement of Buckhannon.
Alternatively, the Ninth Circuit held that Cordoba could not be considered the prevailing party because the resolution of the lawsuit against her was not "judicially sanctioned." In particular, the court decided that a party must have a judgment or something similar formally delivered in its favor to be considered a prevailing party. Because Criminal Productions voluntarily dismissed its suit against Cordoba without judicial involvement under FRCP 41(a)(1), it therefore did not satisfy Buckhannon's second requirement and was not a prevailing party.
Implications
The decision in Criminal Productions, aside from its status as an unpublished and therefore non-precedential opinion, confirms that CRST did not alter the material alteration requirement set forth by Buckhannon regardless if the party seeking attorneys' fees is a plaintiff or defendant. Additionally, it is apparent that a defendant is not a prevailing party entitled to attorneys' fees under the Copyright Act if a plaintiff voluntarily dismisses the complaint without prejudice as a matter of right under FRCP 41(a)(1).
However, it remains an open question whether a defendant is a prevailing party when a plaintiff moves for voluntarily dismissal without prejudice under FRCP 41(a)(2), which requires court approval after a defendant has filed an answer or motion for summary judgment. Although the Ninth Circuit in Criminal Productions reviewed a voluntary dismissal without court approval under FRCP 41(a)(1), it did not expressly cast the ruling in such narrow terms. Rather, the court held that Cordoba did not obtain a material alteration in her relationship with Criminal Productions because the suit was dismissed without prejudice and it did not explicitly mention or distinguish FRCP 41(a)(1) or (a)(2).
Furthermore, it is unclear whether a voluntary dismissal without prejudice requiring a court order under FRCP 41(a)(2) constitutes a "judicially sanctioned" dismissal satisfying Buckhannon's second requirement. Pursuant to FRCP 41(a)(2), a court may grant a plaintiff's request for voluntary dismissal only "on terms the court considers just and proper." Does a voluntary dismissal with conditions constitute a dismissal with "judicial involvement" as stated in Criminal Productions? How about a voluntary dismissal granted without conditions, even though the court was nevertheless required to review the plaintiff's request? Or is the question moot anyway because no voluntary dismissal without prejudice will constitute a material alteration under the first requirement due to the risk of re-filing? The Ninth Circuit's decision does not come close to raising any of those questions, which remain unanswered for another day.
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