Section 505 of the Copyright Act provides that the court may, in its discretion, award full costs, including reasonable attorneys’ fees, to the prevailing party in a claim arising under the Copyright Act. 17 U.S.C. § 505. In 1941, the Ninth Circuit ruled that when a party voluntarily dismisses her claim without prejudice after the court ordered a more definite statement, the defendant is the prevailing party, and therefore entitled to attorneys’ fees. Corcoran v. Columbia Broadcasting System, Inc., 121 F.2d 575, 576 (9th Cir. 1941). The Corcoran court expressly rejected the plaintiff’s contention that the dismissal without prejudice does not confer prevailing party status on the defendants.
Last month, the Ninth Circuit changed its mind and overruled Corcoran after 68 years. In Cadkin v. Loose, 569 F.3d 1142 (9th Cir. 2009), the Ninth Circuit held that a voluntary dismissal without prejudice does not confer prevailing party status for a claim brought under the Copyright Act.
Emil Cadkin filed his complaint in federal court alleging several claims, including a claim for copyright infringement. Nearly four years later, Loose filed his motion to dismiss, which the district court granted with leave to amend. Cadkin filed his amended complaint, and again Loose filed a motion to dismiss. Cadkin filed a motion to remand, seeking to have the case transferred to state court, and attached a second amended complaint. The court denied the remand motion on the grounds that a case originally brought in federal court cannot be remanded to state court, and the parties treated the second amended complaint as the operative pleading. Notably, the second amended complaint did not include a claim based on copyright and in fact contained only state law claims.
Loose again moved to dismiss, claiming the state law claims were preempted by the Copyright Act. Cadkin both opposed the motion and filed his own notice of voluntary dismissal without prejudice. The district court entered the dismissal. The defendants then sought attorneys’ fees under Section 505 of the Copyright Act. Following the binding precedent of Corcoran, the district court granted the motions for attorneys’ fees, awarding $225,575 to the Loose Trust defendants and $63,151 to defendant May-Loo.
The ruling would have been simple for the Ninth Circuit to affirm based on Corcoran, which was directly on point and controlling authority. However, the Ninth Circuit used the opportunity to review Corcoran in light of a 2001 Supreme Court case, Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598. In Buckhannon, the Court ruled that “prevailing party” status turns on whether there has been a “material alteration of the legal relationship of the parties.” The Ninth Circuit had recently held that a dismissal without prejudice does not alter the legal relationship of the parties in a similar fee shifting statute. Oscar v. Alaska Dep’t of Educ. & Early Dev., 541 F.3d 978, 981 (9th Cir. 2008). Defendants here argued that neither Buckhannon nor Oscar were copyright cases, and should not be controlling. However, because the Supreme Court based its ruling on the definition of “prevailing party” found in Black’s Legal Dictionary, the fact that Buckhannon was not based on copyright did not prevent the Ninth Circuit from using it in that context.
Following Oscar, the Ninth Circuit explained that “because a dismissal without prejudice is not a decision on the merits and plaintiff was free to re-file his complaint in federal court, dismissal without prejudice does not alter the legal relationship of the parties because the defendant remains subject to the risk of re-filing.” Cadkin, 569 F.3d at 1148. A subtle distinction here is that the ability of a plaintiff to file a complaint in state court after the voluntary dismissal, but not federal court, does alter the legal relationship and establish the defendant as the prevailing party. This was the case in Miles v. California, 320 F.3d 986 (9th Cir. 2003). The key, then, is whether the plaintiff can re-file his complaint in federal court.
The defendants here argued that Cadkin was not free to re-file his complaint for copyright infringement, and so even after Buckhannon, they were prevailing parties. Defendants argued that when Cadkin filed his second amended complaint and omitted his copyright claim, he waived it, and was therefore precluded from re-filing his claim. The Court acknowledged that it has “consistently held that all causes of action alleged in an original complaint which are not alleged in an amended complaint are waived.” However, it went on to say that it has “never applied this waiver rule to a new lawsuit filed after a voluntary dismissal without prejudice.” Cadkin, 569 F.3d at 1149. The Court pointed to a past case in which it “squarely held waiver in one lawsuit does not carry over to a subsequent lawsuit following a voluntary dismissal without prejudice under Rule 41(a).” Id. Thus, while Cadkin would have been precluded from filing an amended complaint with a copyright claim, he was not precluded from filing a new complaint with a copyright claim.
There are some traps for the unwary here. First, while the Court made it more difficult to get attorney fees if the plaintiff voluntarily withdraws the case, it has not completely closed the door. Indeed, if the plaintiff dismisses with prejudice, the defendant is still the prevailing party and may seek fees. Similarly, it appears that if there was some other bar to plaintiff filing another lawsuit, such as the statute of limitations, then even a voluntary dismissal without prejudice may render the defendant the prevailing party. When in doubt, it is probably wise to ask defendants to stipulate to dismissal and include a provision that each side is responsible for its own costs and fees. On the other side of the coin, if you represent the defendant, think twice before agreeing to such a request.