WILLIAM J. MARTÍNEZ, District Judge.
This is a copyright infringement lawsuit. Plaintiff Jason Langley ("Langley"), a professional photographer, sues CanaDream Corporation ("CanaDream"), an RV rental company, for using one of Langley's copyrighted photographs on a CanaDream website without Langley's permission. (See generally ECF No. 1.) Currently before the Court are two motions:
Because the Motion to Enforce Settlement could moot the Motion to Dismiss, the Court will address it first. For the reasons explained below, the Court finds that the parties never entered into a sufficiently definite settlement, and so the Motion to Enforce Settlement will be denied. CanaDream's alternative request for an order directing the parties to attend an early neutral evaluation will also be denied as futile in the present circumstances. As for the Motion to Dismiss, it is filed under Federal Rule of Civil Procedure 12(b)(6), but its arguments are patently not Rule 12(b)(6) arguments, and so are frivolous. For that reason, the Motion to Dismiss will also be denied and Langley's counsel will be admonished.
"A trial court has the power to summarily enforce a settlement agreement entered into by the litigants while the litigation is pending before it." Shoels v. Klebold, 375 F.3d 1054, 1060 (10th Cir. 2004) (internal quotation marks omitted). Because settlement agreements are contracts, "[i]ssues involving the formation and construction of a purported settlement agreement are resolved by applying state contract law." Id. at 1060. This is true "even when there are federal causes of action in the underlying litigation." Gates Corp. v. Bando Chem. Indus., Ltd., 4 F. App'x 676, 682 (10th Cir. 2001).
Colorado public and judicial policies favor voluntary agreements to settle legal disputes. See Colo. Ins. Guar. Ass'n v. Harris, 827 P.2d 1139, 1142 (Colo. 1992). However, a court may enforce a settlement agreement only if it constitutes an enforceable contract. See H.W. Houston Constr. Co. v. District Court, 632 P.2d 563, 565 (Colo. 1981). In Colorado, "[i]n order for a settlement to be binding and enforceable, there must be a `meeting of the minds' as to the terms and conditions of the compromise and settlement." Id. "[T]he evidence must show that the parties agreed upon all essential terms." I.M.A., Inc. v. Rocky Mountain Airways, Inc., 713 P.2d 882, 888 (Colo. 1986). Stated somewhat differently, "[t]o have an enforceable contract it must appear that further negotiations are not required to work out important and essential terms." New York Life Ins. Co. v. K N Energy, Inc., 80 F.3d 405, 409 (10th Cir. 1996) (citing Am. Mining Co. v. Himrod-Kimball Mines, Co., 235 P.2d 804, 807-08 (Colo. 1951)).
In September 2007, Langley took a high-quality photograph of Bear Lake in Rocky Mountain National Park. (¶ 8;
CanaDream is an Alberta-based company that rents RVs, including through an office in Aurora, Colorado. (¶ 2.) Beginning in September 2015 and continuing at least through June 2018, CanaDream used the Bear Lake photograph on one of its websites, www.ameridream-rv.com (also now defunct), to advertise a suggested RV vacation itinerary through Colorado and Wyoming. (¶¶ 11-12; see also ECF No. 1 at 9.) CanaDream did not have Langley's permission to use the photograph. (¶ 16.)
Langley filed this lawsuit on June 26, 2018. (ECF No. 1.) On October 25, 2018, he moved for an extension of time to complete service of process, explaining that his counsel, Mr. David Deal, had mailed waiver-of-service packets but they had been "returned marked `refused,'" and so, as of late August 2018, Mr. Deal was relying on the assistance of the Canadian government to serve process. (ECF No. 11 at 1-2.) As of that time, Mr. Deal had "not received confirmation of service." (Id. at 2.) The magistrate judge granted this motion, extending Langley's service deadline to December 21, 2018. (ECF No. 13.)
Sometime before December 18, 2018—and still before Mr. Deal had received word from the Canadian government about service of process—CanaDream retained Colorado counsel, Mr. James Juo, who sent a letter to Mr. Deal claiming that any alleged infringement had been innocent and that the accused image had been removed from the website as of October 5, 2016, well before June 2018 (as alleged in the complaint). (ECF No. 17 at 9, ¶ 31.)
The following day (December 19), Mr. Deal and Mr. Juo had a telephone conversation to discuss possible settlement. (Id. ¶ 33; ECF No. 18 at 2-3.) Mr. Deal claims that, during that telephone call, Mr. Juo would neither confirm nor deny whether CanaDream had been served with process. (Id.) Mr. Deal also agreed with Mr. Juo that the complaint's assertion that the infringing photograph had been on CanaDream's website as of June 2018 was a mistake and would be corrected by amendment, if needed. (Id. at 3.)
On December 20, 2018, Mr. Juo e-mailed Mr. Deal to follow up on the previous day's telephone conversation. (ECF No. 37-1 at 5-6.)
(Id.)
Mr. Juo responded to this offer on December 27, 2018. (Id. at 3-4.) After again arguing what he believed to be CanaDream's strengths on the merits of the case, he addressed the settlement offer as follows: "Nonetheless, to avoid incurring litigation expenses in this low-value case, CanaDream counter-offers $1400, which represents $750 (minimum statutory damages) plus the `costs' of $650 outlined in your prior email." (Id. at 4 (underscoring in original).) Later that same day, Mr. Deal replied, "Thank you for the email. I have discussed this case at length with my client (mostly during the months your client was busy avoiding service). His offer of $2,900.00 is firm. If this means we are forced to try the case, so be it." (Id. at 3.)
In the late morning of January 8, 2019, Langley filed a return of service from the Canadian authorities showing that CanaDream had been served with process on November 2, 2018. (ECF No. 14.) In the mid-afternoon of January 8, Mr. Juo continued the settlement e-mail thread by announcing that
CanaDream is willing to pay $2900 in exchange for:
Please let me know immediately if Plaintiff accepts. (ECF No. 37-1 at 2 (formatting in original).) Mr. Deal soon replied, "Thank you for the email. Your client turned down our $2,900.00 offer and it is no longer available. I will consult my client and get back to you with our position." (Id.)
CanaDream argues that Langley's December 20, 2018 offer to settle for $2,900 remained on the table, despite CanaDream's counteroffer, through January 8, 2019; and that, on January 8, CanaDream accepted. (ECF No. 37 at 2-3.) In response, Langley does not argue that CanaDream's January 8 e-mail (with its specific requests and its conclusion, "Please let me know immediately if plaintiff accepts") demonstrates that there was no meeting of the minds regarding essential terms. Cf. I.M.A, 713 P.2d at 888; H.W. Houston, 632 P.2d at 565. Langley also does not contest CanaDream's assertion that Mr. Deal's December 27, 2018 e-mail, in which he reported that the $2,900 offer "is firm," was a "reiterate[ion]" of that offer, meaning it remained open for acceptance. (ECF No. 37 at 3.)
Langley instead responds as follows:
(ECF No. 39 at 4-5.)
Langley cites nothing to support his claim that the parties always understood that Langley offered $2,900 to settle in light of uncertainty about the ability to effect timely service of process. The parties' e-mail correspondence says nothing about this (see ECF No. 37-1), and Mr. Deal's declaration regarding the parties' December 2018 telephone conversations likewise does not claim as much (see ECF No. 18-1). Moreover, when Mr. Deal stated in his January 8, 2019 e-mail that the $2,900 offer was "no longer available," his only explanation was that CanaDream had "turned [it] down." (ECF No. 37-1 at 2.) He said nothing about circumstances having changed in light of successful service of process.
Thus, Langley's opposition argument lacks merit. But the Court is still not convinced that a settlement agreement came into existence. CanaDream's position must necessarily be that Mr. Juo's January 8 e-mail constituted an acceptance of Langley's December 20 offer, as conveyed by Mr. Deal's e-mail of that date. The December 20 e-mail has only one explicit settlement term: that the parties will "settle the matter for $2,900.00." (ECF No. 37-1 at 5.) If this Court were to declare, "That is your settlement agreement, case dismissed,"
It is probably fairly implied that the purported settlement agreement encompasses various other terms that accompany all settlements—terms that no party would do without when settling a lawsuit, such as dismissal of the lawsuit with prejudice within a reasonable amount of time. But the Court need not decide just how far an agreement on the dollar amount alone could go without making other terms explicit. In light of the copyright nature of this case and the facts as alleged, the Court finds that the purported settlement lacks a material term, namely, whether CanaDream is buying a license to use Langley's photograph, or whether CanaDream is agreeing never to use it again. In these circumstances, the lack of that term makes the purported settlement too indefinite to be enforceable.
Accordingly, the Court may not declare that Mr. Juo's January 8 e-mail constituted an acceptance of the December 20 offer and therefore a formation of an enforceable settlement agreement. In turn, the Court may not grant CanaDream's primary request for relief in its Motion to Enforce Settlement.
CanaDream alternatively asks the Court to order the parties to participate in an early neutral evaluation because CanaDream "is concerned that counsel for [Langley] has an unrealistic view of the merits and value of this case." (ECF No. 37 at 4.) See also D.C.COLO.LCivR 16.6(a) ("A district judge . . . may direct the parties to engage in an early neutral evaluation or other alternative dispute resolution proceeding."). However, the undersigned's practice is not to order the parties to an early neutral evaluation, settlement conference, or other similar proceeding, without both sides' affirmative interest in such a proceeding. Langley has not expressed such interest, so the Court will enter no such order at this time.
Accordingly, the Motion to Enforce Settlement is denied in its entirety.
Under Rule 12(b)(6), a party may move to dismiss a claim or counterclaim in a complaint for "failure to state a claim upon which relief can be granted." The 12(b)(6) standard requires the Court to "assume the truth of the [counterclaimant's] well-pleaded factual allegations and view them in the light most favorable to the [counterclaimant]." Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007). In ruling on such a motion, the dispositive inquiry is "whether the [counterclaim] contains `enough facts to state a claim to relief that is plausible on its face.'" Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Granting a motion to dismiss "is a harsh remedy which must be cautiously studied, not only to effectuate the spirit of the liberal rules of pleading but also to protect the interests of justice." Dias v. City & Cnty. of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009) (internal quotation marks omitted). "Thus, `a well-pleaded [counterclaim] may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.'" Id. (quoting Twombly, 550 U.S. at 556).
CanaDream pleads two ostensible counterclaims. The first is "Declaratory Judgment of Innocent Infringement." (ECF No. 17 at 5 at 7.) This refers to 17 U.S.C. § 504(c)(2), which provides in relevant part, "In a case where the infringer sustains the burden of proving, and the court finds, that such infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages [from $750] to a sum of not less than $200." CanaDream alleges that the allegedly infringing website was designed by "[a] third party in South Africa" and that CanaDream "believed that the images used for the website . . . had been obtained through a Shutterstock subscription." (Id. ¶¶ 7-8.) In addition, CanaDream alleges that it has a "policy of regularly conducting an annual IP audit of its websites" and that it caught and removed Langley's photo in October 2016. (Id. at 6, ¶¶ 10-12.)
CanaDream's second counterclaim is for "Violation of 28 U.S.C. § 1927 for Vexatious Litigation." (ECF No. 17 at 8-10.) Here, CanaDream alleges that Langley's insistence on continuing to litigate, especially after CanaDream's assent to the $2,900 settlement price, is vexatious. (See generally id.)
The Court questions whether CanaDream has pleaded anything that is properly framed as a counterclaim. Innocent infringement is an affirmative defense. By definition, it first requires infringement, so to plead it as a counterclaim is necessarily to admit infringement—which contradicts CanaDream's denial of the infringement allegations in Langley's complaint. (Compare ECF No. 1 at 3, ¶ 16 with ECF No. 17 at 2, ¶ 16.) As for 28 U.S.C. § 1927, the Court is aware of no case—and CanaDream cites none—holding that the statute creates a cause of action, as opposed to a remedy a party may request by way of motion. But Langley makes none of these arguments, so the Court will not definitively rule on them in this posture.
Concerning CanaDream's innocent infringement counterclaim, Langley argues for dismissal as follows:
(ECF No. 18 at 5.) Langley then goes on to describe the doctrine of vicarious liability, which could potentially hold CanaDream liable for the South African entity's actions based on CanaDream's supervisory authority and financial interest. (Id. at 6 (citing Shapiro, Bernstein and Co. v. H.L. Green Co., 316 F.2d 304 (2d Cir. 1963), and A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)). With this background, Langley continues,
(Id.) Finally, Langley notes that
(Id. at 7 (citation omitted).)
These arguments, as Rule 12(b)(6) arguments, are frivolous on their face. They have nothing to do with the various applicable standards under Rule 8, Rule 12, or Twombly/Iqbal. This should have been obvious to Mr. Deal from the structure of the argument generally. But, at the very least, an attorney who finds himself writing phrases like the following should know that he is far afield from any Rule 12(b)(6) challenge:
The Court therefore rejects Langley's arguments for dismissing CanaDream's first counterclaim.
Langley attacks CanaDream's vexatious litigation claim by citing to an attached declaration from Mr. Deal, providing his side of the story regarding service of process and settlement negotiations. (Id. at 7-8 (citing ECF No. 18-1).) Langley's argument is, in essence, that when the full story is told (including consideration of materials outside the pleadings), CanaDream and Mr. Juo are the real bad actors and "should not be rewarded for their behavior." (Id. at 9.)
Again, these arguments, as Rule 12(b)(6) arguments, are frivolous on their face.
The Court therefore rejects Langley's arguments for dismissing CanaDream's second counterclaim.
For the foregoing reasons, Langley's Motion to Dismiss fails in its entirety. The
Court also admonishes Mr. Deal for filing a frivolous motion, and warns him that further abuse of the judicial process will result in an order to show cause why he should not be sanctioned.
For the reasons set forth above:
1. Langley's Motion to Dismiss (ECF No. 18) is DENIED; and
2. CanaDream's Motion to Enforce Settlement Agreement, or, in the Alternative, Set Early Neutral Evaluation (ECF No. 37) is DENIED.
