Malibu Must Pay Defendants’ Legal Fees; Total Still TBD

In a decision that offers instruction on how judges evaluate the award of attorneys’ fees in civil litigation, U.S. District Judge Thomas M. Durkin of the Northern District of Illinois ruled last week that adult entertainment studio Malibu Media must pay “attorneys’ fees and costs in an amount yet to be determined” to William Mullins, who was named in copyright lawsuit Malibu filed in 2018.

As is the case with many of Malibu’s copyright complaints, this one began as an action against a John Doe defendant. In September 2018, Malibu filed its complaint against an unknown subscriber assigned to an IP address from which 11 Malibu movies allegedly had been downloaded, copied and distributed. Malibu later learned through a third-party subpoena that the unknown subscriber was William Mullins, then amended its complaint to name him as the defendant.

Mullins responded by moving to dismiss the complaint. While he conceded was the subscriber to the IP address, Mullins denied infringing on Malibu’s works and claimed that others had access to his wi-fi network.

The court denied Mullins’ motion to dismiss, finding that Malibu “had stated a plausible claim for relief, even if it was not clear from the pleadings who used his IP address to download and distribute the movies.” Accordingly, the court ordered the parties to engage in initial discovery and “encouraged counsel for Malibu to share the findings from her client’s pre-filing investigation.”

It was at this point that the case took a turn which ultimately led to Malibu voluntarily dismissing its complaint against Mullins – and that led to Durkin’s ruling last week.

After answering Malibu’s complaint and filing a counterclaim seeking declaratory relief stating Mullins had not infringed on Malibu’s works, at a later status hearing Mullins’ attorney told the court that “certain information related to Malibu’s pre-filing investigation had not yet been turned over.”

As related in Durkin’s opinion, Mullins’ attorney “pointed to specific digital files which, according to her, would show whether Malibu had a good-faith basis for filing its complaint against Mullins.”

“In response, counsel for Malibu pointed to an email she previously sent Mullins’ counsel in which she explained the findings of Malibu’s investigation,” Durkin wrote. “According to that email, Malibu’s investigator had discovered—in addition to the eleven Malibu movies discussed in the amended complaint—another 70 downloads from Mullins’ IP address that were ‘age-appropriate to Mullins and to [his] household.’ This information, however, did not satisfy Mullins’s counsel because she wanted specific digital files related to the pre-filing investigation. The Court gave the parties 90 days to continue discovery.”

Several weeks later, Malibu moved to dismiss its own claim and Mullins’ counterclaim, with each party bearing its own fees and costs. The court agreed to dismiss Malibu’s claim, but declined to dismiss Mullins’ counterclaim “because Mullins still had a right to clear his name of any wrongdoing.”

“To help bring the matter to a close, the Court ordered Malibu to turn over the digital files from the pre-filing investigation, and suggested that Malibu draft a statement declaring that Mullins did not infringe Malibu’s works,” Durkin noted in his opinion.

While the plaintiff did file a statement declaring that Mullins had not infringed, it did not turn over the digital files sought by Mullins’ counsel.

“Convinced that Malibu filed the amended complaint in bad faith, counsel continued to push for discovery and asked that the Court again order Malibu to turn over the digital files that supposedly formed the basis of the amended complaint,” Durkin recounted in his opinion. “The Court issued that order at a status hearing a few weeks later.”

At this point, there was another unexpected development in the case.

“In a turn of events, Malibu’s attorney then moved to withdraw her representation as counsel,” Durkin recounted. “She explained that she could no longer appear on Malibu’s behalf after having ‘demanded from my client and given them a deadline for the production of the documents that Mr. Mullins’ attorneys have sought. I have not received either those documents nor any reason that they cannot or should not be produced.’ The Court granted counsel’s motion, but not without warning Malibu that it will need to turn over the requested files or explain why it has not. Nearly a year has passed since that warning and Malibu has still refused to share the files.”

After the court dismissed Mullins’ counterclaim as moot, his attorneys filed the motion for fees and costs that led to Durkin’s opinion issued last week.

Turning to the factors that guide a decision on whether to award attorneys’ fees and costs, set by the case Fogerty v. Fantasy, Inc, Durkin began by evaluating whether the case was frivolous or exhibited “objective unreasonableness.”

“At first blush, Malibu’s claim does not seem frivolous,” Durkin wrote. “Malibu owned copyrighted movies, learned that someone using the IP address 73.176.168.82 downloaded those movies, retained an investigator to discover other activity attributable to the IP address, and served a third-party subpoena to uncover Mullin’s identity.”

As the judge immediately noted though, given the facts at hand in this case, he was compelled to look beyond that first impression.

“(D)ue to decisions Malibu and its counsel made subsequently, the analysis does not end there,” Durkin wrote.

“First, counsel admitted at a hearing that she did not know what information from Mullins was available to Malibu prior to filing the amended complaint,” Durkin continued. “This is especially troubling because counsel assured the Court that Malibu only names defendants in copyright infringement cases when ‘we ha[ve] a good-faith belief that the subscriber [is], in fact, the infringer.’ But what gives the Court even greater pause is Malibu’s continued failure to share with Mullins and his counsel the digital files from Malibu’s pre-filing investigation.”

Durkin noted that for “nearly a year, Mullins has repeatedly asked Malibu for those files because, according to Mullins, they would show whether Malibu had a good-faith basis for naming him as the defendant.”

“Inexplicably, Malibu has rebuffed those requests, failing to turn over the information despite several Court orders to do so,” Durkin added. “Malibu’s continued unwillingness to disclose this information casts doubt over the validity of its infringement claim. As the Court said at the January 27, 2020 status hearing, ‘my suspicion is raised when documents which would prove that the case was brought in good faith aren’t being turned over. It’s that simple.’ The Court cannot now conclude, nearly a year later, that Malibu’s claim was neither frivolous nor objectively unreasonable.”

While Durkin did rule in the studio’s favor on other portions of the Fogerty test, on balance he found that those factors, in combination with other considerations, weighed in favor of awarding Mullins attorneys fees and costs.

“Having considered the ‘totality of circumstances’ in this case, the Court finds that awarding attorneys’ fees in Mullins’ favor is appropriate,” Durkin wrote,” even while reiterating his “belief that at first glance this case does not seem to be a likely candidate for a fee award.”

“Someone using the IP address 73.176.168.82 infringed Malibu’s copyrights,” Durkin noted. “Malibu later learned that Mullins was the subscriber assigned to that address. Malibu then brought an amended complaint naming Mullins as the defendant, and the Court found that Malibu had stated a plausible claim for relief. Nothing about those events is noteworthy.”

But, Durkin added, “what separates this case from others is that Malibu has consistently refused to cooperate with Court orders requiring it to turn over certain pre-filing investigation files that would purportedly show whether the company had a good-faith basis for suing Mullins.”

“Malibu’s refusal not only constitutes misconduct for which fee-shifting is justified… but also throws into doubt the reasonableness of the infringement claim itself,” Durkin wrote. “Malibu was slow to drop that claim and has yet to disclose the good-faith basis for the lawsuit despite being ordered to do so. Attorneys’ fees will be awarded.”

Having written all that, Durkin wasn’t ready to say just how much Malibu must pay, because Mullins’ attorney submitted a proposed award the court cannot accept. After noting that he agrees with a few of Malibu’s objections to the proposed fee award, he instructed Mullins’ counsel to “prepare a new fee schedule that is in keeping with these findings.”

In closing his opinion, Durkin encouraged the parties to agree upon a sum, rather than making the court come up with one. In the process, the judge seemed to vent a small degree of frustration over the amount of time his court has been occupied with the case.

“Once a new schedule is available, the parties are strongly encouraged to find common ground and determine whether they can arrive at a mutually agreeable dollar amount,” Durkin wrote. “If no agreement can be made, the Court will decide the appropriate amount to award. It is in the parties’ interests, however, to bring this dispute to a swift and amicable conclusion as this case should have been resolved long ago.”

Click here to read Durkin’s full opinion.