UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
RTC, et al., Plaintiffs, v. ROBIN SCOTT, et al., Defendants.
No. 85-711-JMI (Bx)
85-7197-JMI (Bx)
MEMORANDUM OF DECISION
I.
INTRODUCTION
On the heels of the order dismissing plaintiffs'
amended complaints for discovery misconduct, defendants-
counterclaimants ("defendants") have moved for an order
awarding them 2.9 million dollars in attorneys' fees.
Defendants argue that they are entitled to all fees incurred
in defending the dismissed cases, citing the Lanham Act (15
U.S.C. 1170, the copyright statute (17 U.S.C. 505),
California contract law, and the court's inherent power to
sanction bad faith conduct.
Plaintiffs-counterdefendants ("plaintiffs") have
opposed the motion. After the motion was submitted,
plaintiffs requested that the Special Master defer ruling on
the motion for attorneys' fees until after they produced the
court-ordered discovery and conducted their own discovery
regarding the attorneys' fees.
II.
DISCUSSION
A. DEFENDANTS ARE ENTITLED TO ATTORNEYS' FEES
UNDER THE LANHAM ACT
Defendants have requested attorneys' fees pursuant to
the Lanham Act, which authorizes the court to award such
fees in an "exceptional case". See 15 U.S.C. 1117.
Courts have found an "extraordinary case" where the
"opposing party is guilty of 'extraordinary, malicious,
wanton and oppressive conduct'". Academy of Motion Picture
Arts v. Creative House, 944 F.2d 1446, 1457 (9th Cir.
1991), citing Transgo, Inc. v. Ajac Transmission Parts
Corp., 768 F.2d 1001, 1026 (9th Cir. 1985).
Plaintiffs have abused the federal court system by
using it, inter alia, to destroy their opponents, rather
than to resolve an actual dispute over trademark law or any
other legal matter. This constitutes "extraordinary,
malicious, wanton and oppressive conduct". As such, this
case qualifies as an "exceptional case" and fees should be
awarded pursuant to the Lanham Act.
B. DEFENDANTS ARE ENTITLED TO ATTORNEYS' FEES
UNDER THE COPYRIGHT STATUTE
Defendants have requested attorneys' fees pursuant to
the copyright stature, 17 U.S.C. 505. The statute reads
as follows:
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 prohibited by
this title, the court may also award a reasonable
attorney's fee to the prevailing party as part of the
costs. See 17 U.S.C. 505.
Despite this broad language, the Ninth Circuit has
consistently held that a prevailing defendant must show that
the plaintiffs' action was frivolous or brought in bad faith
in order to recover attorneys' fees. Jartech, Inc. v.
Clancy, 666 F. 2d 403, 407, (9th Cir. 1982), cert. denied,
459 U.S. 879, reh'q denied, 459 U.S. 1059, second reh'q
denied, 463 U.S. 1237 (1983); see also, Bibbero Systems,
Inc. v. Colwell, 893 F.2d 1104, 1108 (9th Cir. 1990)
(reaffirming the validity of the Jartech standard and
applying it to pretrial dismissals).
Defendants [ed. Mayos] have met their burden under the
Jartech standard. Plaintiffs' complaints were not
frivolous, but they were brought in bad faith. It is
abundantly clear that plaintiffs sought to harass the
individual defendants and destroy the church defendants
through massive overlitigation and other highly questionable
litigation tactics. The Special Master has never seen a
more glaring example of bad faith litigation than this.
Therefore, it is appropriate to award attorneys' fees
pursuant to the copyright statute.
C. THE COURT WILL NOT AWARD ATTORNEYS' FEES
BASED ON CALIFORNIA STATUTORY LAW
Plaintiffs [ed. Scientology] have argued that
California statutory law authorizing an award of attorneys
fees for the prevailing party on contract claims should not
be applied where, as here, the contract claims were
dismissed as non-justiciable under the first amendment
freedom of religion clauses.
Plaintiffs' argument is not without merit. Applying
state statutory law might impinge upon important
constitutionally guaranteed individual rights. California
contract law might collide with the first amendment in this
particular context.
Nevertheless, the court clearly has the power to award
attorneys' fees for the contract claims, and all other
claims, based upon its inherent power to sanction bad faith
litigation conduct. See, infra at 5-6. As set forth below,
the court will exercise that power. Therefore, the Special
Master need not, and will not, address this unsettled and
complex constitutional question.
D. DEFENDANTS ARE ENTITLED TO AN AWARD OF
ATTORNEYS' FEES UNDER THE BAD FAITH EXCEPTION
TO THE AMERICAN RULE
It is well established that, under the "American rule",
courts ordinarily will not award the prevailing party
attorneys' fees absent statutory authority to do so. See
e.q., Hensley v. Eckerhart, 461 U.S. 424, 429 (1983).
It is equally well established that there is an
exception to the American rule when the losing party has
engaged in bad faith or oppressive litigation tactics. See,
Alyeska Pipeling Service Co.v. Wilderness Society, 421 U.S
240, 258 (1975) ("Also, a court may assess attorneys' fees
for the willful disobedience of a court order . . . or when
the losing party has 'acted in bad faith, vexatiously,
wantonly, or for oppressive reasons'."); see also, Chambers
v. NASCO, Inc., _U.S._, 111 S.Ct. 2123, 2135 (1991) ("There
is, therefore, nothing in the other sanctioning mechanisms
or prior cases interpreting them that warrants a conclusion
that a federal court may not, as a matter of law, resort to
its inherent power to impose attorney's fees as a sanction
for bad faith conduct.")
As already stated, the Special Master finds that
plaintiffs engaged in egregious bad faith litigation
conduct. Therefore, to the extent that fees are not awarded
pursuant to the court's inherent power to sanction such bad
faith conduct.
E. THE SUBMITTED ATTORNEYS' FEES ARE FAIR
AND REASONABLE
The Special Master has reviewed the attorneys' bills
submitted by defendants with an eye towards the twelve
factors enunciated in Kerr v. Screen Extras Guild, Inc., 526
F.2d 67, 70 (9th Cir. 1975) -- the cornerstone "lodestar"
for attorneys' fees motions.
The defendants submission passes muster under this
lode-star test. The submission reflects that many attorneys
worked many, many hours on this case. However, the hours
are reasonable given the plethora of constitutional issues,
discovery stand-offs, appeals and, most importantly,
plaintiffs' practice of endlessly litigating issues.
The hourly rates are reasonable for federal civil
practice within the Central District of California. The
submission is complete and accurate. It does not contain
billings for the pending counterclaims or extraneous
matters. Redactions due to privileges are at a minimum and
appear fair. Overall, the submission is extensive and
convincing.
The Special Master has considered plaintiff's numerous
objections to the submission in writing and at the hearing
on the motion, but finds that these objections are
meritless. Therefore, the court will award the requested
amount of 2.9 million dollars.
A recommended order will follow.
* * *
IT IS ORDERED THAT plaintiffs' motion to defer ruling on
the motion for attorneys fees is DENIED. IT US FURTHER
ORDERED THAT defendants motion for attorneys' fees is GRANTED
and plaintiffs are to pay defendants 2.9 million dollars for
attorneys' fees.
IT IS SO ORDERED.
DATED: January 20, 1993
JAMES G. KOLTS
U.S. Special Master