EMI Blackwood Music, Inc. v. KTS Karaoke, Inc.

15-2308-cv
EMI Blackwood Music, Inc. v. KTS Karaoke, Inc.

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
20th day of July, two thousand sixteen.

Present:
DEBRA ANN LIVINGSTON,
SUSAN L. CARNEY,
Circuit Judges,
TIMOTHY C. STANCEU,
Judge.*
_____________________________________

EMI BLACKWOOD MUSIC INC., EMI APRIL
MUSIC INC., COLGEMS-EMI MUSIC INC., EMI
GOLD HORIZON MUSIC CORP., EMI U
CATALOG INC., EMI UNART CATALOG INC.,
JOBETE MUSIC CO., INC., STONE DIAMOND
MUSIC CORPORATION,

Plaintiffs-Appellees,

v. 15-2308-cv

KTS KARAOKE, INC. DBA KTSKARAOKE.COM,
TIMMY SUN TON,

Defendants-Appellants.†
_____________________________________

*
The Honorable Timothy C. Stanceu, Chief Judge of the United States Court of International Trade,
sitting by designation.
†
The Clerk of Court is directed to modify caption as above.
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For Plaintiffs-Appellees: Donald S. Zakarin and Ross M. Bagley, Pryor
Cashman LLP, New York, N.Y.

For Defendants-Appellants: Sujit P. Soni, The Soni Law Firm, Pasadena, CA

Defendants-Appellants appeal from an order in the United States District Court for the

Southern District of New York (Stanton, J.) entered on June 30, 2015.

UPON DUE CONSIDERATION WHEREOF it is hereby ORDERED,

ADJUDGED, AND DECREED that the order of the district court is AFFIRMED.

Plaintiffs-Appellees EMI Blackwood Music Inc., EMI April Music Inc., Colgems-EMI

Music Inc., EMI Gold Horizon Music Corp., EMI U Catalog Inc., EMI Unart Catalog Inc.,

Jobete Music Co., Inc., and Stone Diamond Music Corporation (together, “EMI”) are music

publishers that own or administer the copyrights or exclusive rights under copyright of numerous

musical compositions.

On February 1, 2013, EMI commenced a copyright infringement action in the United

States District Court for the Southern District of New York (Stanton, J.) against, among others,

Defendants-Appellants KTS Karaoke, Inc., a company that distributes and sells karaoke-related

products and equipment, and Timmy Sun Ton, the president of that company (together, “KTS”).

In the complaint, EMI alleged that KTS had distributed, without a license, karaoke recordings of

certain musical compositions to which EMI owned the copyright.

Following briefing of KTS’s motion to dismiss, EMI reached a settlement agreement

with KTS’s insurance carrier. In that agreement, KTS’s insurance carrier agreed to pay EMI

more than $1 million, and EMI agreed to a dismissal with prejudice of the claims against KTS.

The district court entered an order dismissing the claims, and the court incorporated a provision

from the settlement agreement stipulating that the claims be reinstated before the district court if

the payment was not timely performed as outlined in the agreement.
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 On May 27, 2015, the remaining defendants were voluntarily dismissed from the case

pursuant to a separate settlement agreement. Following this dismissal, on June 11, 2015, KTS

filed a motion seeking attorneys’ fees, contending that it was the “prevailing party” under

17 U.S.C. § 505. KTS sought $232,959.50 in attorneys’ fees and $23,736.38 in costs. EMI

opposed the motion, arguing, inter alia, that KTS was in no way a prevailing party in this case,

particularly since the district court had never issued a decision on the merits of the dispute.

On June 30, 2015, the district court denied KTS’s motion. In a handwritten

memorandum endorsement, the district court explained that “these defendants obtained no ruling

in their favor on the merits of the action.” Joint App’x 1030. The district court further

explained that “[r]egardless of the form of its termination,” the dispute would not have been

resolved without KTS’s settlement payment of more than $1 million. Id. To that end, “they

cannot rationally be viewed as prevailing parties.” Id. This appeal followed.

I. Discussion

On appeal, KTS argues that the dismissal with prejudice entitles it to an award of

attorneys’ fees as the prevailing party in the litigation. It further argues that the district court

abused its discretion because its denial of KTS’s motion was based on an erroneous

determination of law because the dismissal itself constituted a ruling in favor of KTS.

We review a district court’s decision whether to award attorneys’ fees under the

Copyright Act for abuse of discretion. Matthew Bender & Co. v. W. Pub. Co., 240 F.3d 116,

121 (2d Cir. 2001). “Where, as here, an appellant contends that the district court committed an

error of law in ruling on an award of attorney’s fees, we review that ruling de novo.” Roberson

v. Giuliani, 346 F.3d 75, 78 (2d Cir. 2003).

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 The Copyright Act provides that a district court, in its discretion, “may . . . award a

reasonable attorney’s fee to the prevailing party.” 17 U.S.C. § 505. “[A] district court

determining whether to exercise its discretion to award fees under the Copyright Act ‘may

consider such factors as (1) the frivolousness of the non-prevailing party’s claims or defenses;

(2) the party’s motivation; (3) whether the claims or defenses were objectively unreasonable; and

(4) compensation and deterrence.’” 16 Casa Duse, LLC v. Merkin, 791 F.3d 247, 264 (2d Cir.

2015) (quoting Bryant v. Media Right Prods., Inc., 603 F.3d 135, 144 (2d Cir. 2010)).

At issue here is whether KTS can be understood as a “prevailing party” under the statute.

We have explained that a “prevailing party” in a fee-shifting statute is “one who has favorably

effected a ‘material alteration of the legal relationship of the parties’ by court order.” Garcia v.

Yonkers Sch. Dist., 561 F.3d 97, 102 (2d Cir. 2009) (quoting Buckhannon Bd. & Care Home, Inc.

v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598, 604 (2001)). Not only must the party

seeking fees “achieve some ‘material alteration of the legal relationship of the parties,’ but that

change must also be judicially sanctioned.” Roberson, 346 F.3d at 79. A settlement agreement

might bear such a “judicial imprimatur,” in certain circumstances. Id. at 82-83.

Assuming that the settlement agreement here both materially altered the legal relationship

between the parties and bore such a judicial imprimatur, we cannot find that KTS was a

prevailing party. After all, the settlement only effected this shift in the parties’ legal

relationship upon KTS’s insurer’s payment of more than $1 million to EMI. It is thus EMI that

could be said to have attained a favorable result. This Court has been offered no support for

KTS’s assertion that simply “a dismissal with prejudice constitutes a decision on the merits in

favor of the defendant.” Appellants’ Br. 15-16. KTS points to our decision in Chase

Manhattan Bank, N.A. v. Celotex Corp., 56 F.3d 343, 345 (2d Cir. 1995) as authority. But this

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case stands instead for the proposition that “[a] voluntary dismissal with prejudice is an

adjudication on the merits for purposes of res judicata.” Id. (emphasis added). That does not

mean that a voluntary dismissal with prejudice, pursuant to a settlement agreement, renders a

defendant a prevailing party in a copyright action for purposes of attorneys’ fees when, as here,

said defendant’s insurer has paid substantial sums to achieve this result. The district court acted

well within its discretion to deny this request for fees.

II. Conclusion

We have considered KTS’s remaining arguments and find them to be without merit.

Accordingly, we AFFIRM the order of the district court.

FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk

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