WINFREE, Justice.
Using three photographs taken from a neighboring subdivision's marketing materials — including one portraying the subdivision's stylized entrance sign — a realtor group listed adjacent property for sale on a multiple listing service website. The listing also contained a property appraisal stating that (1) based on plat-related information, existing legal access to the property might compromise the neighboring subdivision's gated community perimeter fencing, and (2) based on statements made to the appraiser by employees of the local electric association, the neighboring subdivision's electric service might be subject to legal issues. The subdivision's developer then sued the realtors for misappropriation of the photos, trade name infringement, and defamation. The superior court granted summary judgment to the realtors and awarded them enhanced attorney's fees; the developer appeals. Because there are no material factual disputes and the realtors are entitled to judgment as a matter of law, we affirm the superior court's grant of summary judgment (although in part on grounds not relied upon by the superior court). And because we cannot conclude that the superior court abused its discretion in awarding attorney's fees, we affirm that decision as well.
Alaskasland.com, LLC (Alaskasland) is the owner-developer of a gated subdivision located between the Parks Highway and the Susitna River. Asbury Moore is Alaskasland's general manager, and Duane Mathes is its real estate broker. Since 2008 Alaskasland has marketed its subdivided lots under the name "Susitna Shores," but the name was not registered. Alaskasland constructed a prominent concrete sign at the subdivision entrance featuring the Susitna Shores name and logo, and it has used the name and logo on its website and in printed marketing materials. Alaskasland estimates it spent almost 900 hours and approximately $160,000 on developing and distributing promotional materials for Susitna Shores. Of the subdivision's 37 lots, 15 had been sold by the time the superior court granted summary judgment in July 2013; the most recent sale was in May 2011.
In 2009 Bryan and Tara Goode inherited property (Goode property) from Florence Sawby. The Goode property is bounded on three sides by the Susitna Shores subdivision and on the fourth by the Susitna River. Alaskasland had been interested in purchasing the property and had unsuccessfully offered Sawby $45,000 for it in 2007.
Gregory Brooker appraised the Goode property and valued it at $150,000. His appraisal noted that "[t]he electric service in the [Susitna Shores] subdivision may be subject to legal issues due to the lack of [Matanuska
In August 2011 the Goodes listed their property for sale with realtor Kevin Cross, associated with Keller Williams Realty — Alaska Group (Keller Williams), for $146,000. Because the Goodes did not provide Cross any photographs of the property, his assistant located on the internet photographs that came from Alaskasland's website depicting: Susitna Shores' entrance sign with its stylized logo; Mt. McKinley; and Moore fishing with his family on a river. Mathes had taken the first two photographs himself and had obtained the third from Moore. The photographs were appended to the Goode property listing on the Alaska Multiple Listing Service (MLS) website. MLS maintains a comprehensive online database of real estate listings on both a realtor-only website, called the FlexMLS site, and a separate publicly accessible site. Brooker's appraisal also was appended to the Goode property listing on the FlexMLS website; it was never available on the publicly accessible MLS website.
In early November 2011 Mathes discovered that the Goode property was listed for sale and informed Moore. After viewing the MLS listing Moore determined that the three Alaskasland photographs were being used to market the Goode property, and Mathes promptly notified MLS that Cross was improperly using these photographs. Mathes then contacted Cross to express interest in purchasing the Goode property. Mathes asked Cross for a copy of the appraisal, which Cross immediately sent to him. Mathes apparently also viewed the appraisal through the FlexMLS site at various times. Mathes then conveyed to Cross an offer from Moore to purchase the Goode property for $95,000, which the Goodes promptly rejected.
In response to the information received from Mathes, MLS confirmed to Cross that the photographs appended to the Goode property listing "were taken from another licensee[']s listing and website" and that MLS was removing the photographs from the listing. In mid-December Cross notified Mathes that he had been informed the photographs were still viewable through other real estate listing sites due to a flaw in MLS's system, and that Cross had contacted the other sites to request that the photographs be removed immediately. Cross stated he was "assured that this is being taken care of," and Moore later confirmed he could not find the photographs on any other website after December 2011.
Because the Goodes had received only the one offer from Moore, they decided to cancel their listing in mid-December 2011. Shortly thereafter William Jacques, the Broker in Charge at Keller Williams, notified Cross that the appraisal remained a part of the cancelled listing on the FlexMLS site and that Moore and Mathes wanted it removed. Cross apparently was under the impression that cancelling the listing had removed the appraisal from the site. At some point Cross contacted MLS "to see what had to be done" to remove the appraisal. MLS removed the appraisal in early May 2013.
In January 2012 Alaskasland filed suit against Cross, Jacques, Keller Williams and another Keller Williams employee, and the Goodes (collectively the Realtors). The complaint, as later amended, alleged several common law causes of action: (1) "injunction" for harm from posting the photographs and appraisal; (2) misappropriation of Alaskasland's advertising materials, specifically the photographs from Alaskasland's website; (3) trademark and trade name infringement through use of the Susitna Shores sign photograph; (4) publication of false and defamatory information by posting the Brooker appraisal; (5) interference with existing and prospective business relationships; (6) conspiracy to defraud by false representations; and (7) negligent supervision of Cross and vicarious liability on the part of Keller Williams employees and the Goodes. Alaskasland sought a permanent injunction and damages.
Alaskasland moved for partial summary judgment on its misappropriation, trade name infringement, defamation, and negligent supervision claims. The Realtors opposed and cross-moved for summary judgment on all claims. After being granted permission during oral argument, the parties supplemented the record with expert reports. Shortly thereafter Moore reached an agreement with the Goodes to purchase their property for $155,000.
The superior court granted summary judgment to the Realtors on all claims. The court dismissed the "injunction" claim as moot because by then the photographs and the appraisal had been removed from the MLS website. The court noted that Alaska has not yet recognized the tort of misappropriation, but that even if it did, Alaskasland had failed to satisfy what the court considered the tort's elements: "1) time, labor, and money expended in the creation of the thing appropriated; 2) competition; and 3) commercial damage to the plaintiff."
Turning to the trade name and trademark infringement claims, the superior court explained that such claims require establishing both that: (1) "the symbol [is] recognizable to the public in a way that distinguishes it as unique to a particular business"; and that (2) "the defendant's actions ... cause a likelihood of confusion among the relevant buyer class."
The superior court then explained that a defamation claim requires establishing four elements: (1) "a false and defamatory statement of or concerning plaintiff"; (2) "unprivileged publication to a third party"; (3) "fault amounting to at least negligence"; and (4) "either per se actionability or special damages."
Noting that a claim for interference with business relationships requires a potential business relationship with a third party,
The parties then stipulated to dismissing all claims against the Goodes. Alaskasland moved for reconsideration of the grant of summary judgment, arguing in part that the court had failed to consider Alaskasland's expert reports or evidence of web hits to the Goode property MLS listing when the court concluded that Alaskasland had not suffered damages and that the appraisal had not been published. The court denied the motion.
The Realtors moved for attorney's fees, and the superior court awarded approximately $55,500 under Alaska Civil Rule 82, about 35% of the $158,688 in reasonably incurred actual fees. The court explained that it had varied the fee award upward under Rule 82(b)(3)(A), (E), (G), and (K) because Alaskasland's "claims lacked merit and because [it] unnecessarily increased the cost of litigation through the extent of the asserted claims and the motion practice that necessarily resulted from these numerous claims."
Alaskasland appealed the grant of summary judgment on its misappropriation, trade name infringement, defamation, and negligent supervision claims, as well as the attorney's fees award. We issued an order in August 2014 requiring the parties to be prepared to discuss at oral argument "whether Alaskasland's misappropriation claim for use of its photographs is preempted by section 301 of the federal 1976 Copyright Act."
"We review grants of summary judgment de novo."
Section 301 of the 1976 Copyright Act preempts state law claims attempting to vindicate "legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright" and arising from a work "within the subject matter of copyright."
Courts conduct a two-prong analysis modeled on section 301 to determine whether the Copyright Act preempts a state law claim.
The second prong of the preemption analysis focuses on whether the state law claim attempts to vindicate the "exclusive rights" available under section 106 of the Copyright Act,
The gist, then, of Alaskasland's misappropriation claim is that the photographs the Realtors appended to the Goode property listing and posted on the MLS website, especially the Susitna Shores concrete sign photo, represent the time and money Alaskasland expended advertising the Susitna Shores subdivision. Although Alaskasland concedes that creating the photographs "may have cost relatively little," it urges us to account for the time it spent promoting the trade name Susitna Shores in assessing the value of the photographs and argues specifically that the Realtors' use of the Susitna Shores sign photo for the Goode property listing was intended "to create the impression that [the Goode property] was in fact part of Susitna Shores." We address the contention that the Realtors "passed off" the Goode property as belonging to the Susitna Shores subdivision in a separate section.
Under the first prong of the federal copyright preemption analysis, we must determine whether Alaskasland's photographs "come within the subject matter of copyright as specified by sections 102 and 103 [of the Act]."
At oral argument before us Alaskasland contended that, because its misappropriation claim included an extra element, "the unauthorized use of plaintiff's goodwill and
And in explaining the nexus between its photographs and its advertising costs, Alaskasland stresses that the Realtors must have seen "value in the use of the `Susitna Shores' logo and likeness in marketing their own property, or else they would not have used the photos and logo to market the Goode Property." But Alaskasland does not further articulate its argument that its photo of a mountain and its photo of a family fishing represent the time and effort it expended in marketing Susitna Shores. And even if time, energy, and effort were expended in the creation of these two photographs, protection of this exertion falls exclusively under the ambit of the Copyright Act.
In response to our order directing the parties' attention to the Copyright Act's preemptive effect, Alaskasland contended at oral argument before us that its misappropriation claim included a claim for "passing off," defined as "selling a good or service of one person's creation under the name or mark of another."
At oral argument Alaskasland urged us to apply the definition of passing off articulated in Aagard v. Palomar Builders, Inc.
When deposed Moore stated that during a Susitna Shores open house in October 2011, one attendee specifically expressed interest in the Goode property, which Alaskasland did
Alaskasland contends that a genuine issue of material fact remains with respect to the damages it suffered from the Realtors' use of its stylized sign photo because dozens of people viewed the Realtors' Goode property listing online, and the listing included that photo. But that fact is not material.
In the same vein Alaskasland argues that its two expert reports create a genuine issue of material fact with respect to damages and that the superior court neglected to consider this evidence. Neglecting to mention the expert reports does not necessarily mean that the court failed to consider them in its ruling — the court stated that it would consider both parties' expert reports before issuing a decision, and it may simply have found them unhelpful.
The expert reports also detail the money Alaskasland spent advertising Susitna Shores by preparing "[a]rt," attending "[t]rade show[s]" and "other promotions," constructing its stylized sign, and designing and maintaining its website. Using this sum, $361,827, one expert reasons that Alaskasland spent "$15,870 per acre" in promoting the lots it sold and then contends that, because the Realtors marketed the 4.6 acre Goode property and because they used Alaskasland's "advertising [and] not just the photos,"
Alaskasland has not demonstrated that the Realtors "passed off" the Goode property to any deceived purchaser — rather, Alaskasland bought the property. Even assuming its passing off claim's validity for the sake of argument, Alaskasland has produced no evidence of deception or damages. Regardless of how Alaskasland characterizes its claim concerning the Realtors' use of the Susitna Shores sign photo, its claim necessarily fails.
Alaskasland urges us to follow other courts that "employ a `reasonable royalty' measure of damages in cases where [d]efendants did not profit from their misappropriation." A reasonable royalty "is a measure of damages for past infringement, often used in patent cases and in the context of trade secrets, but its use in trademark has been atypical."
A reasonable royalty cannot serve as a measure of damages here because the photograph of Alaskasland's concrete sign is simply not a trade secret, visible as it is to anyone traveling the Parks Highway. We decline to apply a measure of damages derived from trade secret law to the claim for misappropriation of the sign photograph as an end-run around the latter's damage requirement.
The cases Alaskasland invokes to support its argument are distinguishable. In Sheldon v. Metro-Goldwyn Pictures Corp. the United States Supreme Court approved the use of a reasonable royalty as a measure of damages only after copyright infringement liability had been established: The reasonable royalty calculation itself does not establish that an injury has occurred.
At oral argument before us Alaskasland conceded that its misappropriation or passing off claim was "bigger than" and therefore included its trade name and trademark infringement claims. We discern no meaningful difference between Alaskasland's passing off claim — alleging the Realtors marketed the Goode property as though it were within the Susitna Shores subdivision — and its common law trade name infringement claim, which also alleges that the Realtors used the sign photo to "creat[e] the impression that the Goode Property was part of Susitna Shores." "At common law ... tradename infringement was only one form of tort encompassed under the concept of unfair competition, a concept that also included passing off one's goods as those of another...."
As with a passing off claim, to recover damages under a trade name infringement claim "plaintiff must prove both causation and amount."
A defamation claim requires proof of four elements: "(1) a false and defamatory statement; (2) unprivileged publication to a third party; (3) fault amounting at least to negligence; and (4) either per se actionability or special damages."
The tort's first element — whether a statement is defamatory — is a question of law.
Alaskasland argues that there are two false and defamatory statements in Brooker's 21-page Goode property appraisal, which was available on the realtor-only FlexMLS website. The first statement concerns Susitna Shores' electric service:
(Emphases added.) Alaskasland argues that the electricity statement about possible legal issues is defamatory because MEA actually had accepted Susitna Shores' electric service, implying that it could not therefore be subject to "legal issues."
The second statement concerns Susitna Shores' gated security:
(Emphases added.) Alaskasland argues the gated security statement is defamatory because "no matter how the Goode Property was developed, Susitna Shores could always maintain the security of its gated community and road."
To determine whether the statement is an opinion we apply the four Sands factors: "`the type of language used, the meaning of the statement in context, whether the statement is verifiable, and the broader social circumstances in which the statement was made.'"
The first Sands factor considers "the type of language used."
The allegedly defamatory electricity statement — "The electric service in the surrounding subdivision may be subject to legal issues due to lack of MEA participation in construction of the infrastructure" — likely contains the phrase "may be" to connote Brooker's uncertainty about the existence of legal issues.
The gated security statement contains the cautionary and speculative terms "could be" and "probably." Brooker's use of hedging language would suggest to a reasonable reader that a compromise of the gated subdivision's integrity is only a possibility, not a certainty. Both statements contain declarative yet cautionary language.
The second Sands factor considers the statement's meaning in context.
The contextual meaning of the gated security statement becomes more apparent after viewing maps of the area, some of which were attached to Brooker's appraisal. Brooker stated that he relied on maps and photographs in arriving at his opinion of the property's value, noting that the Goode property's access easement crossed Susitna Shores' boat launch road. Similarly one map in the record, although not attached to the Brooker appraisal, shows that Susitna Shores' boat launch easement intersects the Goode property's access easement. In the context of the entire appraisal, including the maps, the statement that the gated subdivision's integrity might be compromised does not seem implausible.
The third Sands factor is "`whether the statement is verifiable.'"
Like the electricity statement, the gated security statement cannot be verified because it speculates that a future event is possible. Relying on the affidavit of its general manager, Asbury Moore, Alaskasland argues that "no matter how the Goode Property was developed, Susitna Shores could always maintain the security of its gated community and road." When deposed Moore stated: "[The Goodes] have access north and south. They don't have access east and west. So we could put up a fence and a gate [parallel to, but not intersecting, the Goode's access easement]." (Emphasis added.) That Moore
The fourth Sands factor examines "`the broader social circumstances in which the statement was made.'"
Weighing these four factors — Brooker's use of cautionary language, the single reference to legal issues in his lengthy appraisal, the maps attached to the appraisal, the statements' unverifiability, and the broader social circumstances in which the statements were made — we conclude that both statements are opinions.
Drawing all reasonable inferences in Alaskasland's favor, Brooker disclosed the following facts. With respect to the electricity statement, Brooker disclosed that he spoke to one MEA employee who could not produce a map of Susitna Shores' electric service and that he spoke to another MEA employee who said MEA did not participate in the infrastructure but did not disclose whether Susitna Shores' electric service was subject to legal "difficulty." From these two facts, Brooker hypothesized that Susitna
Brooker qualified his 21-page appraisal with a one-page "certificate of appraisal" certifying:
Because Brooker revealed the underlying facts on which his opinion relied, leaving readers of his appraisal free to form different opinions, we hold as a matter of law that the electricity statement is not defamatory.
With respect to the gated security statement, Brooker wrote: "Access along the [Goode property's] dedicated access easement ... has not yet been developed[;] however there is no legal impediment to developing this access[,] and it would cross the Susitna Shores boat ramp en route to the subject." This statement is a straightforward interpretation of the maps Brooker included in his appraisal. In more speculative terms Brooker wrote:
As evidenced by his use of the terms "unknown" and "assumed," Brooker disclosed that he was uncertain where the Goode property's undeveloped easement ran in relation to Susitna Shores' road and boat launch. This uncertainty likely informed Brooker's speculative opinion that the Goode property's access easement "could be developed and probably left open, thereby defeating the gated subdivision." (Emphases added.) These cautionary terms serve as "clear signals" to the reasonable reader that Brooker's opinion was "nothing more than conjecture and speculation" based on his stated assumptions, factual observations, and the informative maps and photographs he included in his appraisal.
The appraisal also contains an excerpt from a 2007 public zoning hearing on road access to Susitna Shores: "[T]he proposed frontage road within Susitna Shores will not be private or gated, providing unimpeded access to Big Su River Road and the public
In sum, Brooker disclosed that: (1) he did not know the exact locations of the Goode property's access easement and the subdivision's existing road in relation to each other; (2) the Goode property's access easement was not developed; (3) if it were developed, it would cross Susitna Shores' boat ramp road; and (4) the minutes from a 2007 public zoning hearing referenced a "proposed frontage road within Susitna Shores" that would "not be private or gated." In reaching his opinion, Brooker clearly stated each underlying factual premise and even included hearing minutes and maps in his appraisal. None of these factual premises is defamatory, and Brooker's ultimate opinion does not suggest as its basis other undisclosed, underlying, and defamatory facts. We therefore conclude as a matter of law that this statement, like the electricity statement, is a non-defamatory opinion, a mere speculation drawn from the stated assumptions and uncertainties.
"We have `consistently held that both the determination of prevailing party status and the award of costs and fees are committed to the broad discretion of the trial court.' `Therefore, any party seeking to overturn a trial court's decision in this regard [bears] a heavy burden of persuasion.'"
The superior court increased the Realtors' fee award to 35% of their actual fees or approximately $55,500. As the court explained:
The court also based the increased fee award on its observation that Alaskasland had brought "a complex lawsuit despite having sustained no damages."
Alaskasland raises three arguments against the fee award. It first argues that although the Realtors prevailed on each of the claims below, it was also a prevailing party because it succeeded in "compelling the removal of the Brooker appraisal from the internet." Alaskasland then asks us to exercise our discretion "and refrain from characterizing either [party] as the prevailing party, and from awarding [the Realtors] fees in this matter." Alaskasland conflates the standard of review for attorney's fees with the substantive law. This court reviews awards of attorney's fees for abuse of discretion,
"The prevailing party is the one who has successfully prosecuted or defended against the action, the one who is successful on the main issue of the action and in whose favor the decision or verdict is rendered and
But Alaskasland did not characterize the main issue of its lawsuit as the removal of the Brooker appraisal from the MLS website — it sought money damages. During oral arguments on the cross motions for summary judgment, counsel for Alaskasland suggested that expert reports would prove it suffered damages, arguing that when the Realtors used three of its photographs, they were actually misappropriating Alaskasland's entire Susitna Shores marketing effort. One expert's report asserted Alaskasland had suffered over $350,000 in damages and itemized such things as "Inflated Land Purchase Costs," "Photograph Usage Cost," and "Advertising (Promotion) Usage Cost." Another expert's report arrived at a similar damages figure by calculating dollar amounts for Alaskasland's "Advertising costs," "Art preparation time," "Trade show and all other promotions," "Entrance sign," and website design and maintenance. But Alaskasland did not prevail on its claims. We cannot say the superior court abused its discretion when it determined the Realtors were the prevailing party.
Alaskasland next argues that the Realtors incurred unreasonable or unnecessary fees because the case did not go to trial; it was "not overwhelmingly complex"; and the Realtors employed four attorneys who made no efforts to minimize fees. But, as the superior court reasoned, the Realtors were merely reacting to the complexity of the novel legal theories Alaskasland pled. Alaskasland brought a common law misappropriation claim that has never been recognized in Alaska. Alaskasland also brought a conspiracy to defraud claim seeking $100,000 on the theory that the Brooker appraisal had been fraudulently altered to disparage Susitna Shores and force Alaskasland to "acquiesce[] to a greatly inflated purchase price for the [Goode property]." The Goodes listed their property for $146,000, and Alaskasland made an unsuccessful offer of $95,000. Alaskasland then had the Goode property independently appraised at $35,000 and, on the strength of that appraisal, made a $50,000 offer, which was also rejected. Despite its conspiracy to defraud claim, Alaskasland bought the property for $155,000 shortly before the superior court granted summary judgment to the Realtors.
The superior court, and not this court, is optimally positioned to resolve whether the fees charged were unnecessary or unreasonable and whether too many attorneys were employed.
Finally, Alaskasland argues there are no grounds for an enhanced fee award. "We have held that `[i]n general, a trial court has broad discretion to award Rule 82 attorney's fees in amounts exceeding those prescribed by the schedule of the rule, so long as the court specifies in the record its reasons for departing from the schedule.'"
We AFFIRM the superior court's judgment.
The other case was Fournier v. Erickson, 202 F.Supp.2d 290 (S.D.N.Y.2002), also involving photographs and holding that two state law claims — unfair competition and tortious misappropriation of goodwill — were preempted by the Copyright Act because both were "grounded solely on the allegation of unauthorized copying and subsequent use of [the] ... photograph," and "neither of the ... claims contain[ed] or allege[d] an extra element that distinguish[ed] them from the copyright infringement claim." Id. at 298-99.