9th Cir: Bypasses Rule 11 Safe Harbors Whacks Attorney for $258,000

On April 26, 2010 I posted here on the Seventh Circuit hitting an attorney with a $60,000 sanction for litigating a copyright action.  The sanction was based on 28 U.S.C. section 1927 and the court's inherent power.  Notable in that case was that the sophisticated adversary had not made a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure, nor had the court issued a show cause order pursuant to Rule 11.

Now comes Lahiri v. Universal Music and Video, --- F.3d ----, 2010 WL 2246401 (9th Cir. June 7, 2010).  This time, using 29 U.S.C. section 1927 - and again no Rule 11 motion discernable from the opinion, and the plaintiff's attorney is whacked for $258,206.04.

The facts involve the attorney, supposedly a sophisticated copyright practitioner, who took what the court determined to be a bad faith position based on Indian law of copyright, which governed ownership to the soundtrack of a film.   The court determined that he misrepresented Indian law, that Indian law is written in English, and that there was no need for the attorney to rely on an Indian law expert since Indian law is written in English.

This, like the Seventh Circuit's decision, is terrible precedent.  The Circuit courts are criminalizing the practice of law and depriving attorneys of property without due process of law.  If it took $258,000 in legal fees to prove that the guy was wrong, his error -- or even what the court found to be a misrepresentation -- could not have been so obvious.

If your adversary lies, you bring it to the judge's attention through a Rule 11 motion, which has a 20 day safe harbor.  If the judge thinks the lawyer lied, the judge, following Rule 11 is supposed to order the attorney to show cause under Rule 11 why he ought not be sanctioned.

Now, using 28 U.S.C. section 1927, federal judges are passing the blame for cases that they let languish (here for five years) onto the losing lawyer, criminalizing his actions ex post facto.

§ 1927. Counsel’s liability for excessive costs



Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.
 
In the harsh light of the rear view mirror, attorneys on either side of a case get things wrong, make blunders, or misrepresent facts (sometimes good faith mistakes, sometimes bad faith).  That is the nature of litigation practice.   As we all know, practically every attorney in Los Angeles thinks of him/herself as an experienced copyright practitioner.

When federal judges have decided to take out a pen and criminalize the losing attorney for making losing or unreasonable arguments, it is a very dangerous time for our system of justice.  28 USC 1927 talks about vexatiously multiplying the proceedings.  In this case, the guy made one Lanham Act claim and one copyright claim.  The defendant made two summary judgment motions and won, then claimed over $800,000 from the loser.

If the guy was so wrong, why didn't UMG's counsel Loeb & Loeb make a Rule 11 motion?  If they thought his arguments were frivolous, why did they sit on their hands rather than following Rule 11?   And how did they run up an 800K bill for two summary judgment motions?

In the Copyright Litigation Handbook, I devote much discussion to attorney sanctions: what gets you into trouble, and how to avoid it.   Unfortunately, the situation is getting more dangerous, and no one feels sorry for lawyers.  Put aside your schadenfreude and think hard about what this means for you, your firm, and the quality of justice in America.

 Purchase Copyright Litigation Handbook from West here  

SDNY: Copyright Transfer Termination Notices Subject California Copyright Heirs To Jurisdiction In New York

Kirby & Roussos Courtesy Wikipedia

In Marvel Worldwide, Inc. v. Kirby, 2010 WL 1655253 (April 14, 2010), SDNY Judge Coleen McMahon found that two defendants, heirs of comic artist Jack Kirby, submitted themselves to transactional jurisdiction under New York's long-arm statute by sending copyright transfer termination notices pursuant to 17 USC 304(c).   The decision discusses acts by non-domiciliaries that may trigger jurisdiction over foreign defendants for the purposes of being subjected to claims relating to the transaction in New York and uses the "minimum contacts" of International Shoe and Worldwide Volkswagen.

The Kirby heirs sent a notice of termination and Marvel responded with a declaratory judgment action.  The heirs moved to dismiss and simultaneously filed an action in California.   The court distinguished transfer termination notices from cease and desist letters which, if properly drafted and addressed (see Copyright Litigation Handbook Chapter 6) ordinarily (there are exceptions and murky case law), absent other contacts with the forum, should not, standing alone, subject the sender to personal jurisdiction in a foreign jurisdiction.

The Marvel v. Kirby decision does not discuss the copyright venue statute, 28 U.S.C. 1400 which provides:

§ 1400. Patents and copyrights, mask works, and designs

(a) Civil actions, suits, or proceedings arising under any Act of Congress relating to copyrights or exclusive rights in mask works or designs may be instituted in the district in which the defendant or his agent resides or may be found.

(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.