Attorney’s Fees Awards Not Controlled by Losing Party’s Reasonableness Arguments

Before ending its 2015-2016 term, the U.S. Supreme Court issued an opinion in Kirtsaeng v. John Wiley & Sons, Inc.  – for a second time.  SCOTUS issued its first Kirtsaeng opinion in March 2013.  That time, the Court ruled that Kirtsaeng did not infringe Wiley’s copyrights by selling books in the U.S. that were published abroad by Wiley.  I posted on the Court’s decision in First Sale Doctrine Not Limited by Geography, Rules U.S. Supreme Court.

Whether the lower courts erred in denying Kirtsaeng’s motion for attorney’s fees brought Kirtsaeng before the Court the second time.  The Court determined that the lower courts may not have understood the full scope of their discretion to award attorney’s fees and remanded the case for further consideration of Kirtsaeng’s attorney’s fees motion.

Section 505 of the Copyright Act provides that

In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.

17 U.S.C. §505.

The question presented here is whether a court, in exercising that authority, should give substantial weight to the objective reasonableness of the losing party’s position. The answer, as both decisions below held, is yes—the court should. But the court must also give due consideration to all other circumstances relevant to granting fees; and it retains discretion, in light of those factors, to make an award even when the losing party advanced a reasonable claim or defense.

(Opinion pdf page 4).

The district court and the Second Circuit both refused to award attorney’s fees to Kirtsaeng on the basis that Wiley took an objectively reasonable position in pursuing the original case. 

The Court noted that the attorney’s fees statute does not provide standards for courts to use in determining whether to award attorney’s fees.  Both Wiley and Kirtsaeng asked the Court to channel district court discretion towards the purposes of the Copyright Act, but disagreed on the approach.  Wiley argued that giving substantial weight to the reasonableness of a losing party’s position best serves the Act’s objectives.  Kirtsaeng argued that special consideration should be given to whether a lawsuit meaningfully clarified copyright law by resolving an important and close legal issue. 

The Copyright Act strikes a balance between encouraging and rewarding authors to create and enabling others to build on that work.  Attorney’s fees awards should encourage lawsuits that promote those two purposes.  The Court thought that Wiley’s approach would be more likely to meet those ends than Kirtsaeng’s approach.  But the Court also ruled that objective reasonableness cannot be the controlling factor.

Section 505 confers broad discretion on district courts and, in deciding whether to fee-shift, they must take into account a range of considerations beyond the reasonableness of litigating positions.  That means in any given case a court may award fees even though the losing party offered reasonable arguments (or, conversely, deny fees even though the losing party made unreasonable ones). Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals.

And on that score, Kirtsaeng has raised serious questions about how fee-shifting actually operates in the Second Circuit. To be sure, the Court of Appeals’ framing of the inquiry resembles our own: It calls for a district court to give ‘substantial weight’ to the reasonableness of a losing party’s litigating positions while also considering other relevant circumstances. But the Court of Appeals’ language at times suggests that a finding of reasonableness raises a presumption against granting fees—and that goes too far in cabining how a district court must structure its analysis and what it may conclude from its review of relevant factors. Still more, district courts in the Second Circuit appear to have overly learned the Court of Appeals’ lesson, turning ‘substantial’ into more nearly ‘dispositive’ weight. As Kirtsaeng notes, hardly any decisions in that Circuit have granted fees when the losing party raised a reasonable argument (and none have denied fees when the losing party failed to do so).  For these reasons, we vacate the decision below so that the District Court can take another look at Kirtsaeng’s fee application. In sending back the case for this purpose, we do not at all intimate that the District Court should reach a different conclusion. Rather, we merely ensure that the court will evaluate the motion consistent with the analysis we have set out—giving substantial weight to the reasonableness of Wiley’s litigating position, but also taking into account all other relevant factors.

(Opinion pdf pages 13 – 15).

This case is Kirtsaeng v. John Wiley & Sons, Inc., No. 15-375, U.S. Supreme Court.

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