We had previously covered the March 22, 2017 U.S. Supreme Court copyright ruling on designs on cheerleader uniforms. In Star Athletica, L.L.C. v. Varsity Brands Inc., a majority of the U.S. Supreme Court ruled that the two-dimensional designs on cheerleaders uniforms were at least in theory eligible for copyright protection. On August 10, 2017, seven years after this case was originally initiated, the trial court refused to send the case into overtime and dismissed Star’s complaint with prejudice in a way that serves as a reminder that, although a plaintiff can control when to bring a case, the plaintiff case lose control over when that case should be withdrawn. (Varsity Brands, Inc. v. Star Athletica, LLC, Case No. 10-02508 (W.D. Tenn. Aug. 10, 2017 & June 20, 2018).Facts
Varsity Brands designs, manufactures, and sells cheerleading uniforms, and has registered more than 200 U.S. copyrights for the two-dimensional designs appeared on this uniforms. These registered copyrights include combinations and arrangements of lines, curves, chevrons, angles, and shapes. Varsity Brands sued Star Athletica, a competitor, for infringing the following five of Varsity Brands’ registered copyrights.
The Court Opinions
Demonstrating the “widespread disagreement,” this case began in 2010 with a federal trial court ruling in favor of Star Athletica, on the grounds that the five registered designs did not qualify for copyright protection. That court ruled, on summary judgment, that the designs served the useful function of identifying the garments as cheerleading uniforms.
In contrast, the Sixth Circuit Court of Appeals reversed, holding that the graphic designs were “separately identifiable” and therefore capable of existing independently.
A majority of the U.S. Supreme Court agreed with the appeals court that the graphic designs were eligible for copyright protection. The Supreme Court then remanded the case back to the original trial court. On August 10, 2017, the trial court—over the objection of Star Athletica–dismissed the case with prejudice.
The August 10, 2017 Dismissal
Initially, Varsity brought claims of copyright infringement. Soon after, Star brought several counterclaims, including copyright misuse and fraud on the Copyright Office. During the initial trial court proceeding, that court dismissed most of the counterclaims and opined that the copyright misuse and fraud on the Copyright Office claims were probably affirmative defenses, rather than counterclaims Having been victorious at the U.S. Supreme Court, Varsity Brands entered into a settlement agreement with Star’s insurance carrier, whereby the carrier would pay an amount to Varsity Brands and the case would be dismissed with prejudice. Unfortunately, Star did not agree, and asked the court for a declaratory judgment on some copyright-related issues, specifically Star’s claims that Varsity had misused its copyright and/or had committed fraud on the Copyright Office.
In the U.S., a plaintiff can usually voluntarily dismiss its case (Federal Rule of Civil Procedure 41(a)(1)), but here, the defendant (Star) had already filed an answer and refused to stipulate to a dismissal. Pursuant to the Rule, under these circumstances, the case could only be dismissed by a court order. Specifically, the Federal Rules state that, once a defendant pleaded a counterclaim prior to being served with the motion to dismiss, the court may dismiss the case over the defendant’s objection “only if the counterclaim can remain pending for independent adjudication.” Federal Rule of Civil Procedure 41(a)(1)(B).
The question then became whether the Star’s claims of copyright misuse and fraud on the Copyright Office could remain pending for “independent adjudication.” Consistent with its earlier ruling, the trial court once again ruled, that they were affirmative defenses rather than counterclaims—and even if they were counterclaims, the trial court exercised its discretion to decline to exercise jurisdiction over those claims. Using the five-factor test the U.S. Supreme Court set out in Wilton v. Seven Falls Co., the court focused on the first two factors: (1) that exercising jurisdiction over the counterclaims would “reanimate an otherwise completed litigation” and (2) rather than clarifying any legal issues, exercising jurisdiction would simply raise the same issues. Consequently, the court dismissed the case with prejudice, but retained jurisdiction over enforcement of the settlement agreement between Varsity Brands and the insurer.
The June 20, 2018 Denial of Motions to Amend
As a result of the 2017 dismissal, both parties filed motions with the court. The defendant requested reconsideration/amendment of the judgment and the plaintiff sought to amend the judgment to include an award of attorneys’ fees. The judge denied both parties’ motions.
With respect to the plaintiff’s motion, the settlement agreement was a voluntary dismissal without a legal finding as to the merits, so the court’s final judgment did not confer “prevailing party” status on the defendant. Therefore, the request for attorneys’ fees was denied.
The defendant sought reconsideration of several elements of the 2017 ruling, including a request that the court clarify the legal relations of the parties. The court denied the motion, stating in part: “This case has continued for eight years. During this time, the Supreme Court, the Sixth Circuit, and this court have all provided clarification of the legal relations of the parties. Few cases receive such extensive court guidance.”
Conclusion
This case serves as a reminder that a plaintiff does not control all aspects of case filings. Once a defendant files an answer and counterclaims, the defendant has taken some procedural control. It could become much more difficult for a plaintiff to dismiss its claims and end what could continue as a prolonged and expensive affair.
