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Hyperquest, Inc. v. N'Site Solutions

June 18, 2008

HYPERQUEST, INC., PLAINTIFF,
v.
N'SITE SOLUTIONS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge

MEMORANDUM OPINION AND ORDER

This Court's May 1, 2008 memorandum order ("Order," a copy of which is attached for convenience in reference) was mercifully brief because it merely had to adopt the excellent presentation by N'Site Solutions, Inc. ("N'Site") and Unitrin Direct Insurance Company ("Unitrin") that called for the dismissal of the action brought against them by HyperQuest, Inc. ("HQ"). N'Site (acting for itself and co-defendant Unitrin) has followed up with a motion for a large award of attorney's fees and expenses under 17 U.S.C.A. §505.*fn1 With HQ having responded to the motion in terms of N'Site's entitlement or lack of entitlement to such an award,*fn2 the motion is ripe for decision.

Just as was true of HQ's substantive opposition to the motion to dismiss, its current opposition has regrettably been viewed through an astigmatic lens. Here is its introduction at Mem. 1-2:

N'Site's Motion must be denied because it is based on a false premise--that N'Site is a "prevailing party" under 17 U.S.C. §505. Long-standing federal case law, including binding precedent from the Supreme Court, holds that a party such as N'Site, which achieves dismissal based on a lack of subject matter jurisdiction, is not a prevailing party under a federal fee-shifting statute. Furthermore, the fact that this Court dismissed HQ's claims for lack of subject matter jurisdiction means that this Court lacks jurisdiction to award attorneys' fees to N'Site, because 17 U.S.C. §505 does not itself confer subject matter jurisdiction. Therefore, N'Site is not entitled to an award of attorneys' fees under 17 U.S.C. §505.

That reference to "a false premise" is particularly ironic, for that pejorative characterization applies squarely to HQ's own gravamen for urging the purported absence of subject matter jurisdiction over the copyright claim that it had advanced in the litigation. This memorandum opinion and order should not, however, be overly critical in that respect, for the Order itself has admittedly contributed to that misapprehension in a substantial way by following the "lack of subject matter jurisdiction" locution that the parties had employed in addressing the dismissal motion.

Jurisdiction, like Joseph's fabled coat of many colors, is a term with many shades of meaning, used in many different ways. This Court had already planned to use that biblical reference in preparing its notes for this opinion*fn3 when research turned up the thoughtful opinion by Judge Easterbrook (quoting Justice Frankfurter in that regard) in Am. Nat'l Bank & Trust Co. v. City of Chicago, 826 F.2d 1547, 1552-53 (7th Cir. 1987), which discussed that very subject in particularly poignant fashion.*fn4

Subject matter jurisdiction was truly at issue in the lead case that HQ's response cites in support of its contention, Torres-Negron v. J&N Records, LLC, 504 F.3d 151, 164-65 (1st Cir. 2007): Because plaintiff in that case had failed to register the claimed copyright, which registration is expressly made a prerequisite to bringing suit under the Copyright Act (Section 411(a)), the federal district court there had no jurisdiction--no power--to adjudicate the substantive copyright issue. That being the case, defendant could not qualify as a "prevailing party" on the merits of the litigation, hence could not invoke Section 505.*fn5

By sharp contrast, what was at issue in this case was not subject matter jurisdiction in the real sense, but rather the standing (or more accurately the lack of standing) of HQ to file suit in a case in which (1) a copyright indisputably existed and (2) this Court had ample power to decide all issues of that copyright's validity and its claimed infringement as between N'Site and Unitrin on the one hand and the party entitled to enforce it (not HQ, but copyright owner and HQ licensor Safelite Group, Inc.) on the other. In the Order this Court rejected HQ's litigative effort definitively and with prejudice because of its lack of standing, not because of any absence of power--of subject matter jurisdiction--on the part of this Court. On that score this Court cannot (and would not attempt to) improve on the incisive explanation of the distinction between those two concepts in Rent Stabilization Ass'n v. Dinkins, 5 F.3d 591, 594 n.2 (2d Cir. 1993)(emphasis in original): However, standing and subject matter jurisdiction are separate questions. See, e.g., Baker v. Carr, 369 U.S. 186, 198-208, 82 S.Ct. 691, 699-05, 7 L.Ed.2d 663 (1962)(treating the two separately). While standing, which is an issue of justiciability, see Flast v. Cohen, 392 U.S. 83, 98-99, 88 S.Ct. 1942, 1951-52, 20 L.Ed.2d 947 (1968), addresses the question whether a federal court may grant relief to a party in the plaintiff's position, subject matter jurisdiction addresses the question whether a federal court may grant relief to any plaintiff given the claim asserted. Thus, although both subject matter jurisdiction and standing (as well as other questions of justiciability) act to limit the power of federal courts to entertain claims, that is, act to limit the courts' "jurisdiction" in the broadest sense of the term, the two must be treated distinctly.*fn6 Indeed, perhaps the ultimate irony in HQ's response lies in the fact that it cites to Seventh Circuit cases that directly torpedo its argument. There is no question that the Order dismissed HQ's action with prejudice--because HQ lacks standing, it cannot bring suit again. And that being so, here is last month's squarely applicable teaching in Mostly Memories, Inc. v. For Your Ease Only, Inc., No. 06-3560, 2008 WL 2168642, at *5 (7th Cir. May 27)(citations omitted, emphasis added):

While an award of attorney's fees under §505 is entrusted to the district court's discretion, we have held that the prevailing party in Copyright Act litigation is presumptively entitled to an award of fees under §505. In the case of prevailing defendants, we have described this presumption as "very strong."

There is no question that a dismissal with prejudice makes the defendant the prevailing party for purposes of an award of attorney's fees under §505.

Lastly in this respect, HQ's citation to and discussion of Riviera Distribs., Inc. v. Jones, 517 F.3d 926, 928 (7th Cir. 2008) glosses over (or more precisely ignores entirely) the fact that Riviera's discussion there could also have been written for this case:

The district court denied Midwest's request for fees, ruling that it is not the prevailing party. The judge wrote that he "did not in any way pass on the merits of the litigation.... [T]here has been no evidence of lack of merit to [Riviera's] copyright infringement claims and no finding with respect to the merits of the case.

The Court therefore does not believe that [Midwest is] entitled to prevailing party status on ...


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