District court in a copyright case grants costs but not fees to defendant that tendered a more favorable offer of judgment to plaintiff than the verdict plaintiff received at trial, holding that defendant was not the prevailing party and could not recover attorneys’ fees under either Federal Rule 68 or the Copyright Act.
In this copyright action, defendant Chicago Gridiron, LLC, served the plaintiff Steven Woltmann with an offer of judgment under Federal Rule of Civil Procedure 68 of $5,000, which Woltmann rejected. At trial, the defendant stipulated to infringing nine of the plaintiff’s copyrights and the jury entered a verdict on damages of $3,700 in plaintiff’s favor. Gridiron moved for costs and attorneys’ fees under Rule 68 or, in the alternative, as the prevailing party under the Copyright Act, as well as for sanctions against plaintiff and his attorneys under 28 U.S.C. §1927.
The court held that the defendant could recover only his costs under Rule 68, because the jury verdict was less favorable than defendant’s offer of judgment. Rule 68 requires a plaintiff to pay any costs the defendant incurs after the defendant makes an offer of judgment if the judgment the plaintiff eventually receives is less favorable than the offer. Because the jury’s $3,700 verdict was less than Gridiron's $5,000 offer, the court held that Woltmann must pay the costs Gridiron incurred after the offer of judgment.
The court denied defendant’s request for attorneys’ fees. Under Seventh Circuit precedent, a defendant who makes a more generous Rule 68 offer than the verdict a winning plaintiff receives from a jury is not a prevailing party and therefore cannot recover attorneys’ fees under the Copyright Act. Gridiron likewise could not recover attorneys’ fees as part of costs under Rule 68. While the Supreme Court has held that attorneys' fees are included within the definition of costs for purposes of Rule 68 when the underlying statute includes attorneys’ fees in its definition of costs, and the Copyright Act defines costs to include attorneys' fees, Seventh Circuit precedent provides that a non-prevailing party under the Copyright Act cannot receive post-offer attorneys’ fees pursuant to Rule 68. The court also rejected as entirely without merit defendant’s “bold request” that the court ignore “clear and binding authority on this issue,” in favor of a much-criticized Eleventh Circuit decision allowing the recovery of attorneys’ fees under Rule 68 to a non-prevailing party in a copyright case.
The court also concluded that defendant had failed to establish any vexatious or bad faith conduct on the part of plaintiff’s counsel that warranted sanctions under 28 U.S.C. § 1927. Section 1927 provides that any attorney “who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." Defendant argued that counsel's allegedly “unreasonable” conduct warranted sanctions, leaving the “and vexatiously” language of the statute out of its motion papers. The court disagreed, however, holding that §1927 explicitly required that counsel act vexatiously, which is not the same as unreasonably and which past decisions in the Seventh Circuit have held to mean either with subjective or objective bad faith. Gridiron failed to establish that the counsel’s alleged conduct – filing three sanctions motions or including punitive damages and attorneys’ fees in its settlement position in contravention of Seventh Circuit precedent – were in bad faith or multiplied the proceedings vexatiously.
The court concluded that Gridiron was entitled to reasonable costs incurred after the offer of judgment, which costs, when ultimately determined, would be deducted from the judgment defendant owed the plaintiff.