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LHF Productions, Inc. v. Kabala

United States District Court, D. Nevada

December 31, 2019

LHF Productions, Inc., a Nevada Corporation, Plaintiff
v.
Brian Kabala, Defendant

          ORDER GRANTING IN PART AND DENYING IN PART MOTIONS FOR ATTORNEY'S FEES AND COSTS: AWARDING KABALA COSTS AND AWARDING LHF PRODUCTIONS, INC. ATTORNEY'S FEES ECF NOS. 184, 197

          Jennifer A. Dorsey United District Judge

         I previously granted defendant Brian Kabala a with-prejudice dismissal of LHF Productions, Inc.'s copyright-infringement claims, but I dismissed Kabala's counterclaims for declaratory judgment and abuse of process based, in part, on LHF's special motion to dismiss under Nevada's anti-SLAPP laws and denied his request for reconsideration.[1] What remains to be determined is each party's request for attorney's fees and costs.[2] The with-prejudice dismissal makes Kabala a prevailing party under the Copyright Act, [3] but he has not shown that he is entitled to an attorney-fee award under the test that the United States Supreme Court set out in Fogerty v. Fantasy, Inc., [4] so I deny his request for attorney's fees and award him costs as “a matter of course” under Federal Rule of Civil Procedure 54(d)(1). LHF is also a prevailing party, having succeeded in litigating its anti-SLAPP motion for Kabala's abuse-of-process counterclaim. I award LHF attorney's fees, but I reduce the amount to $47, 154 to reflect only the fees that LHF incurred in litigating the anti-SLAPP motion and related matters.

         Background

         In August 26, 2016, LHF filed its initial complaint against 23 John and Jane Does whom it alleged used “the BitTorrent protocol and the internet to reproduce, distribute, display or perform the Plaintiff's copyrighted Work[: the film London has Fallen].”[5] That November, LHF amended its complaint to specifically identify defendant Brian Kabala after it traced copyright-infringement activity to an Internet Protocol (IP) address linked to Kabala's physical address.[6]Appearing pro se, Kabala filed a counterclaim for abuse of process and another “claim” for a “declaration of non-infringement.”[7] LHF file a motion for voluntary dismissal of its claims against Kabala, which I granted without prejudice.[8] I also dismissed Kabala's counterclaims against LHF without prejudice and with leave to amend.[9]

         Kabala retained counsel and, in January 2018, filed an amended counterclaim that raised the same previous claims: abuse of process and declaratory relief.[10] LHF responded with a flurry of dismissal motions. It moved to dismiss the counterclaims, reasoning that the dismissal of its copyright-infringement claim precluded any declaration of non-infringement and that Kabala could not show that LHF had an ulterior motive in bringing its initial suit, as required for his abuse-of-process claim.[11] LHF filed a special motion to dismiss under Nevada's anti-SLAPP statute for the abuse-of-process claim.[12] It also moved to dismiss the declaratory relief claim for lack of subject-matter jurisdiction because LHF had provided Kabala with a covenant not to sue and argued that there was no longer a live controversy.[13] Based on this covenant, LHF sought to convert the earlier without-prejudice dismissal to one with prejudice.[14] The parties also stipulated to stay discovery while I resolved the anti-SLAPP motion, but I denied that request.[15]

         In a lengthy order, I found that both of Kabala's counterclaims should be dismissed as a matter of law. Kabala could not obtain declaratory relief when LHF no longer had live claims in this case.[16] Applying Nevada's framework for resolving anti-SLAPP motions, I also dismissed Kabala's abuse-of-process claim.[17] I found that the counterclaim challenged LHF's good-faith right to petition the courts and that Kabala had not shown a probability of succeeding on the merits because he provided no evidence that LHF had an ulterior motive or committed an improper willful act when it filed its copyright-infringement action against him.[18] I also denied as moot LHF's motion to dismiss Kabala's counterclaim for declaratory judgment for lack of subject-matter jurisdiction and I closed this case.[19] Kabala then moved for reconsideration of that order, which I denied because there was no new evidence to reconsider or pertinent change in the law, and he could not satisfy his burden, even under NRS 41.600's prima-facie standard, to overcome LHF's anti-SLAPP motion.[20]

         Two pending motions remain: Kabala's motion for attorney's fees under the Copyright Act, in which he argues that he is entitled to an award based on the with-prejudice dismissal of LHF's copyright infringement claims against him.[21] And LHF's motion for attorney's fees under Nevada's anti-SLAPP law.[22] I resolve each in turn.

         Discussion A. Kabala's motion for attorney's fees under the Copyright Act

         1. Whether Kabala is a prevailing party under the Copyright Act

         “The Copyright Act of 1976, 17 U.S.C. § 505, provides in relevant part that in any copyright infringement action ‘the court may . . . award a reasonable attorney's fee to the prevailing party as part of the costs.'”[23] “A prevailing party is one who has been awarded some relief by the court. . . . The key inquiry is whether some court action has created a ‘material alteration of the legal relationship of the parties.'”[24] A with-prejudice dismissal constitutes a “‘material alteration of the legal relationship'” between two parties.[25]

         Kabala argues that he is the prevailing party under § 505 because he forced LHF to “throw in the towel” by moving to voluntarily dismiss its claims with prejudice.[26] LHF responds that Kabala is not entitled to attorney's fees because: (1) it voluntarily dismissed its claims before Kabala retained counsel; (2) Kabala could not incur attorney's fees under § 505 for the court's conversion of the dismissal to one with prejudice because the copyright-infringement claims were dead, precluding fees for any later discovery; (3) “no counsel for Kabala actually recorded any fees at all, whether for discovery, motion practice, communications, or consultation in defending against any of LHF's previously dismissed copyright claims or in order to secure the conversion of such dismissed claims to a dismissal with prejudice”; and (4) Kabala cannot be awarded attorney's fees on his declaratory-judgment claim because the court dismissed it with prejudice.[27] Kabala responds that because the first dismissal did not preclude LHF from refiling its claims, his attorney-fee motion for the with-prejudice conversion is within the scope of § 505.[28]

         That Kabala obtained a with-prejudice dismissal of LHF's copyright infringement claims is not debatable.[29] And it was not until then that the “material alteration of the legal relationship” between LHF and Kabala occurred because LHF remained free to refile its claims. Based on the subsequent litigation, Kabala obtained a covenant not to sue and LHF moved to convert its earlier without-prejudice voluntary dismissal to one with prejudice. As a result, Kabala is the prevailing party under § 505 and is presumptively eligible to recover attorney's fees.

         2. Whether the Fogerty factors support an award in Kabala's favor

         “In applying [§ 505], district courts are charged with two tasks: first, deciding whether an award of attorneys' fees is appropriate, and second, calculating the amount of fees to be awarded.”[30] The United States Supreme Court provided a set of non-exclusive factors to guide this determination in Fantasy Inc. v. Fogerty. The Fogerty factors are: “‘frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case)[, ] and the need in particular circumstances to advance considerations of compensation and deterrence.'”[31] The Ninth Circuit has added the following discretionary factors to the analysis: “the degree of success obtained in the litigation, the purposes of the Copyright Act, and ‘whether the chilling effect of attorney's fees may be too great or impose an inequitable burden on an impecunious [litigant].'”[32] “[The Ninth Circuit] recently re-affirmed [its] commitment to these factors, but emphasized that district courts should ‘accord substantial weight to' the ‘reasonableness of [the] losing party's legal and factual arguments.'”[33]

         a. Objective reasonableness and frivolousness

         The reasonableness and frivolousness inquiries are similar.[34] “[W]hen a litigant 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. [Afterall, t]he holder of a copyright that has obviously been infringed has good reason to bring and maintain a suit even if the damages at stake are small.”[35] Though a copyright holder may ultimately lose, that does not necessarily make its legal argument unreasonable.[36]

         Kabala argues that this factor weighs against LHF because, for two years, LHF misrepresented that it had PCAP and WORM data before eventually admitting that it did not.[37]Thus, Kabala contends, it was unreasonable for LHF to have Kabala “chase discovery” that LHF knew did not exist. LHF responds that there is no evidence to show that its arguments were unreasonable or baseless-the PCAP and WORM data is merely one method of capturing infringing activity and it had other evidence to support its infringement claim against Kabala.[38]

         I already addressed these arguments in my order denying Kabala's motion for reconsideration: LHF used a different “Detection System” in this case, which “accurately reported that by 1:52 a.m. on June 6, 2016, the IP address belonging to Kabala reported it had downloaded a complete copy of LHF's copyrighted [w]ork, had successfully distributed and was distributing pieces of that [w]ork, and have made the entire copy of the [w]ork available to be distributed to others, all via the BitTorrent protocol.”[39] The absence of specific PCAP or WORM data does not mean there was no evidence of infringement. LHF's counsel may have misunderstood which forensic program captured the data connecting Kabala to the torrenting activity, but that mistake does not undermine my previous conclusion that LHF had a basis for bringing its copyright-infringement claim against Kabala. Notwithstanding this evidence, LHF tried to settle with Kabala on multiple occasions, for as much as $5, 000 plus costs and with an agreement that LHF would not refile its claims.[40] But Kabala refused to settle unless LHF provided him a statement “affirming that Kabala didn't infringe LHF's copyright.”[41] LHF then moved to dismiss its claims, but Kabala pressed on. This case is entering its third year of litigation, and the parties have bloated the docket with drawn out discovery requests and endless motions to extend time. In sum, this factor weighs against Kabala and his request for an attorney's fee award.

         b. The degree of success obtained in the litigation

         “Actual success in an infringement action involves establishing the defendant's liability.”[42] Kabala argues that this factor falls in his favor because he succeeded in getting LHF to admit it did not have the PCAP data that it claimed to have, so its motion asking to convert the without-prejudice dismissal into a with-prejudice dismissal is the same as if I had granted summary judgment or a directed verdict in his favor.[43] LHF seems to concede that the with-prejudice dismissal constitutes success, but argues that a fee award is not justified based on the settlement offers that Kabala rejected.[44]

         The offers have no bearing on this factor. The with-prejudice dismissal makes Kabala a prevailing party and it shows that LHF did not succeed in establishing Kabala's liability. Additionally, the record shows that LHF failed to respond to Kabala's requests for admissions, prompting Kabala to move to have his first and second requests for admission deemed admitted.[45] As a result, the court deemed as admitted that “[Kabala] didn't infringe [LHF's] copyright.”[46] This factor weighs in Kabala's favor.

         c. Motivation

         Kabala argues that if LHF knew it didn't have the PCPA and WORM data then its motivation for bringing the suit was extortion.[47] But this argument is pure conjecture; I've already rejected Kabala's missing-data argument and he can't point to any evidence of improper motivation. The Copyright Act allows copyright holders like LHF to enforce a copyright even if it is ultimately unsuccessful. And the record shows that LHF repeatedly offered to settle and end this case, including an offer for $5, 000 plus costs and an agreement that LHF would not litigate its claims further.[48] But Kabala rejected those offers, set on obtaining a declaration that would “clear [his] name.”[49] So, I find that this factor weighs in LHF's favor.

         d. The purpose of the Copyright Act and considerations of compensation and deterrence

         “The most important factor in determining whether to award fees under the Copyright Act[ ] is whether an award will further the purposes of the Act.”[50] That purpose is to “‘encourage the production of original literary, artistic, and musical expression for the good of the public'” by discouraging infringement.[51] “‘A successful defense furthers the purposes of the Copyright Act just as much as a successful infringement suit does'”[52]; thus, determining whether objective unreasonableness of a party's position shines light on whether a fee award would undermine the Act's purpose.

         Based on the missing PCAP and WORM data, Kabala contends that LHF's lawsuit did not further the Copyright Act's purpose.[53] LHF responds that its lawsuit furthered one of the Act's purposes-discouraging infringement-and it contends that this court should not reward Kabala because there was evidence of infringement and it was entitled to damages but it decided not to pursue them.[54]

         This factor doesn't favor either party. On one hand, LHF furthered the Copyright Act's deterrence objective because LHF traced an IP address involved with torrenting its movie to Kabala. In light of the IP-address evidence, a fee award would undermine the Copyright Act's deterrence objective. On the other hand, Kabala mounted a successful defense: he obtained an admission that he did not infringe LHF's copyrights and a judgment on the merits. Thus, both party's positions advance the Copyright Act's objectives, and a fee award would neither compensate nor deter infringing activity.

         On balance, the bulk of the Fogerty factors weigh against an attorney-fee award. LHF's claims against Kabala were reasonable, non-frivolous, properly motivated, and consistent with the Copyright Act's objectives-all based on the IP address linking Kabala to infringing activity. While Kabala obtained a with-prejudice dismissal and admission of non-infringement, he did so after LHF offered to settle on multiple occasions and after it had moved to voluntarily dismiss its claims without prejudice. So I deny Kabala's motion for an award of $132, 688 in attorney's fees.

         B. Kabala's motion for costs

         Federal Rule of Civil Procedure 54(d)(1) provides that a prevailing party is entitled to statutory costs “as a matter of course.” Section 505 of the Copyright Act provides for an award of costs, so I find it appropriate to award Kabala costs here. Based on the bills of cost the defendants submitted on September 7, 2018, I conclude that Kabala is entitled to costs in the amount of $3, 526.98.

         C. LHF's motion for attorney's fees under Nevada's anti-SLAPP statute

         Nevada's anti-SLAPP law allows an “award of reasonable costs and attorney's fees to the person against whom the action was brought” and has obtained a dismissal.[55] Based on this language, it appears that an award for attorney's fees under NRS § 41.670(1)(a), like under California's anti-SLAPP statute, is mandatory.[56] However, the court has discretion in determining what amount is reasonable.[57]

         1. LHF's motion is timely

         Kabala argues that LHF's motion for attorney's does not comply with Local Rule 54-14 because it is late, among other reasons.[58] When I granted LHF's anti-SLAPP motion, I specifically stated that any motion for attorney's fees had to comply with Local Rule 54-14.[59]Local Rule 54-14 allows a moving party 14 days after the entry of a final judgment to file and serve its motion for attorney's fees. Because my final-judgment order issued on August 24, 2018, LHF had until September 7 to move for attorney's fees. However, Kabala decided to move for reconsideration of my ruling on the anti-SLAPP motion, so the parties stipulated to extend that deadline to 14 days after my ruling on the reconsideration motion.[60] On September 25, I denied the stipulation because I did not find good cause for the extension, granting LHF 10 more days to file its motion for attorney's fees.[61] LHF filed the motion on October 6[62]-one day late-explaining that it was only 10 minutes late and “there is good cause to permit a de minimis [delay]” because Nevada's anti-SLAPP statute favors an award of attorney's fees to a prevailing party and because “the Court took LHF by surprise” when it denied the stipulation, causing it to scramble to draft the motion and leaving no time to deal with “computer and filing issues.”[63]LHF moved for a retroactive extension under Rule 6(b), arguing that the delay was based on excusable neglect, and I granted the request on April 23, 2019.[64] Thus, the motion is deemed timely filed.[65]

         2. Scope and amount of recovery

         LHF originally sought $72, 674.50 for attorney's fees that it incurred litigating its anti-SLAPP motion and responding to discovery requests on Kabala's abuse-of-process counterclaim.[66] LHF adds that its response to Kabala's motion to reconsider and motion to strike LHF's opposition to that motion also fall under the scope of allowable recovery.[67] So, LHF moves to amend its billing history and now asks for $112, 362.50.[68] Kabala argues that a maximum of $11, 608 is appropriate, as this amount reflects only the fees for the anti-SLAPP motion and related legal research.[69] LHF replies that Kabala engaged in discovery to prove up his abuse-of-process claim, thus requiring LHF to respond to his requests and to incur expenses, which LHF contends is intertwined with the anti-SLAPP motion.[70]

         Kabala takes too narrow of a view in response. “[T]he anti-SLAPP statute is ‘intended to compensate a defendant for the expense of responding to a SLAPP suit . . . [T]he provision is broadly construed so as to effectuate the legislative purpose of reimbursing the prevailing defendant for expenses incurred in extracting [it]self from a baseless lawsuit.'”[71] The general rule is that a party can recover attorney's fees for the anti-SLAPP motion itself, “and not the entire action.”[72] In Graham-Sult v. Clainos, the Ninth Circuit explained that the general rule doesn't apply if “the entire action against the [prevailing party] was subject to the [anti-SLAPP] motion [such that] no causes of action against them survived it.”[73] In that case, the court allowed the prevailing party to recover additional expenses incurred in litigating the motion, including “time lawyers spent on the motion to dismiss, reply, other filings, document review, and preparing initial disclosures.”[74] Thus, the additional fees were appropriate because the anti-SLAPP motion disposed of the entire action. However, that holding was limited by an absence of controlling state law.[75] More recently, and based on a California appellate decision, the Ninth Circuit explained that the anti-SLAPP fee statute did not allow recovery for “‘matters unrelated to the anti-SLAPP motion, such as . . . summary judgment research,' because such matters are not ‘incurred in connection with the anti-SLAPP motion.'”[76] Nevada follows California law on this issue, [77] so awardable attorney's fees are limited to those incurred in litigating the anti-SLAPP motion itself and matters that arise out of that motion practice.

         Aside from the fees directly tied to its anti-SLAPP motion, LHF seeks $59, 868.40 in attorney's fees for responding to Kabala's discovery requests to prove his abuse-of-process claim.[78] LHF contends that the Graham-Sult rule extends to discovery that a court permits on issues that are “‘inextricably intertwined' with those issues raised in the anti-SLAPP motion.” LHF relies on the unpublished, out-of-jurisdiction order in Henry v. Bank of Am. Corp., among others, to support its position.[79] But its reliance on Henry is misplaced. The Henry court authorized depositions and document production so that the non-moving party could “complete limited discovery in responding to the anti-SLAPP motion, ”[80] and Henry predates the cabined view that the Ninth Circuit has more recently adopted for anti-SLAPP fee awards. Here, neither party identified additional discovery required to litigate the anti-SLAPP motion. To the contrary, they filed a stipulation to stay discovery pending my decision on the motion. So Henry is not helpful.

         LHF's anti-SLAPP motion turned on whether its complaint alleging copyright infringement and pre-filing correspondence constituted protected communications under NRS § 41.637, and it sought a dismissal of only the abuse-of-process claim.[81] The stipulation to stay discovery argued that the state-law automatic stay provision under NRS § 41.660(4)(e) and (f) applied in federal court, [82] but the parties failed to explain why the court should depart from the well-settled authority grounded in the Federal Rules of Civil Procedure and instead apply an automatic stay provision grounded in state law.[83] The stipulation also failed to explain why the court should stay all discovery when LHF's anti-SLAPP motion did not impact all of Kabala's counterclaims and discovery had been ongoing for months and was nearing its end.[84] Because at least some of the discovery was unrelated to the abuse-of-process claim and not directly connected to the anti-SLAPP motion, an award for those fees is inappropriate.

         LHF also seeks $47, 873 in attorney's fees for its opposition to Kabala's motion to reconsider and motion to strike LHF's response to the same and this motion for attorney's fees.[85]Kabala's motion to reconsider focused solely on my dismissal of the abuse-of-process claim based on my determinations that LHF's copyright-infringement lawsuit was a protected communication and that Kabala could not show that LHF had an ulterior motive or committed an improper act by filing its lawsuit thus meriting dismissal under Nevada's anti-SLAPP law.[86]Kabala's motion to reconsider was therefore directly connected to the anti-SLAPP motion, so LHF is entitled to an award of attorney's fees for that work. And, in the absence of controlling Nevada precedent, I defer to California's general rule that the fee award for a successful anti- SLAPP motion “includ[es] those necessary to establish and defend the fee claim.”[87] In sum, LHF may recover for attorney's fees for the anti-SLAPP motion, its opposition to Kabala's motion to reconsider and motion to strike LHF's response to that motion, and this motion for attorney's fees.

         3. Amount of recovery

         Calculating an award of attorney's fees is a two-step process. The court must first assess the reasonableness of fees under the lodestar method: computing a reasonable fee by multiplying (1) “the number of hours reasonably expended in the litigation” by (2) a “reasonable hourly rate.”[88] It must then determine whether the lodestar amount should be increased or reduced in light of the factors first outlined in Kerr v. Screen Extras Guild, Inc. that are not already incorporated into the lodestar calculation.[89] These factors, also found in this district's local rule 54-16, [90] are:

(1) the time and labor required; (2) the novelty and difficulty of the questions involved; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.[91]

         “This circuit requires that courts reach attorneys' fee decisions by considering some or all of” the Kerr factors, and “[a] mere statement that the court has considered the Kerr guidelines does not make a decision within the court's discretion.”[92] Nevertheless, the lodestar should only be modified in exceptional cases.[93]

         a. Reasonable hourly rate

         An hourly rate is reasonable when it is “in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation.”[94]LHF asks for $55, 729[95] for the work of Weide & Miller, Ltd.'s three attorneys: Christopher Austin (billing at $360 per hour), Brian Prince ($275), and Ryan Gile ($320); and two paralegals: Sally Wexler ($125) and Brianna Show ($110).[96] To support the reasonableness of its requested fees, LHF argues that it relied heavily on LHF's associate counsel whose hours are not reflected in the motion, [97] but it fails to submit any evidence to show that the rates for Austin, Gile, and Prince are reasonable.[98] LHF argues that Austin's $360 hourly rate and Gile's $320 hourly rate are “well withing the prevailing market hourly rates in this forum which range to $450 for partners and $250 for experienced associates.”[99] LHF provides evidence to show that qualities of its advocates and their levels of experience: Austin (20 years), Gile (10 years).[100] But LHF fails to submit any evidence to show that rates for its paralegals and attorney Prince are reasonable.

         Despite the lack of evidence, I recognize that the requested hourly rates of $360, $320, and $275 are under the “$400 or less” regular rate used by other courts in this district.[101] I also note that the reasonable hourly rate for paralegals in this district is between $75 and $125, a range that captures the rates of both Wexler and Show. I find no reason to deviate from the general trend.

         b. Reasonable hours expended

         To show that hours expended are reasonable under the lodestar calculation, a movant must “submit evidence supporting the hours worked.”[102] “Where the documentation of hours is inadequate, the district court may reduce the award accordingly.”[103] Ultimately, “the district court has discretion in determining the amount of a fee award. . . . But [i]t remains important . . . for the district court to provide a concise but clear explanation of its reasons for the fee award.”[104]

         Based on Austin and Gile's declarations and the billing records, the attorneys spent the following hours on the anti-SLAPP motion: Austin (14.8 hours) and Gile (5.9 hours); and the following hours for the opposition to Kabala's motion for reconsideration and related filings: Austin (131.3 hours) and Prince (2.2 hours).[105] All of paralegal Wexler's billing[106] and all but 1.5 hours of Show's billing[107] related to discovery and other matters beyond the scope of anti-SLAPP motion. Based on this billing, the lodestar in this case is $55, 254. These hours are supported by itemized billing invoices from Weide & Miller, and both Austin and Gile declare that they have reviewed the records and that the amounts incurred are reasonable.

         Although I find no basis to question the billing on the anti-SLAPP motion, I find attorney Austin's claimed time on the opposition to the motion for reconsideration excessive. Based on the billing records, he spent approximately 75 hours preparing that opposition.[108] The motion itself was just 18 pages long, and the opposition brief is 22 pages.[109] In the four days leading to the opposition's filing, Austin billed 48.1 hours on the document, with 19 of those hours billed the final filing day of October 16, 2018.[110] Although I recognize that the opposition also contained reports and declarations that required additional work, I find 75 hours on an opposition to a motion for reconsideration-$27, 000 in billings-excessive for this endeavor based on my own experience in both reviewing such bills as a jurist and light of my extensive ...


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