Nicolson V. Shafe 2d District Court Case

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

JEANNETTE C. NICHOLSON, Ph.D., an individual, and CAREER ASSESSMENT ATLANTA, INC., a Georgia Corporation, Plaintiffs,

CIVIL ACTION FILE

v.

NO. 1:07-CV-2724-BBM

JAMES C. SHAFE, an individual, CAREER TRAINING CONCEPTS, INC., a Georgia Corporation, and SALES AND MANAGEMENT TRAINING INSTITUTE OF ATLANTA, a previous Georgia Corporation, Defendants. ORDER

This declaratory judgment action is before the court on the Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted (the “Motion to Dismiss”) [Doc. No. 6], and the Motion for Rule 11 Sanctions (the “Rule 11 Motion”) [Doc. No. 11], both filed by Defendants. I.

Factual and Procedural Background On a motion to dismiss, the court accepts as true all factual allegations set out

in the plaintiff’s complaint. See Lotierzo v. Woman’s World Med. Ctr., Inc., 278 F.3d 1180, 1182 (11th Cir. 2002). Except as otherwise noted, the following facts are taken

from Plaintiffs’ November 1, 2007 Complaint. For this reason, the following account does not constitute findings of fact by the court. Pursuant to Federal Rule of

Evidence 201, the court takes judicial notice of the content of official court records in Nicholson v. Shafe, 1:03-CV-3573-BBM (the “First Federal Court Action”), and Nicholson v. Shafe, Superior Court of Gwinnett County, State of Georgia, No. 05A10673-1 (the “State Court Action”). See Fed. R. Evid. 201(b)(2); United States v. Capua, 656 F.2d 1033, 1038 n.3 (5th Cir. 1981);1 Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1278 (11th Cir. 1999). Plaintiff Jeannette C. Nicholson, Ph.D. (“Dr. Nicholson”) works in the field of career assessment and counseling. On or about September 1987, Dr. Nicholson at Defendants’ request created a career assessment test and set of predictive data to interpret the test responses for Defendants’ “Career Directions” program. The assessment included five columns of information entitled “What Your Scores Mean.” (Order, May 18, 2005, First Federal Court Action (“May 18, 2005 Order”), at 3 (granting summary judgment).) On October 12, 1987, Dr. Nicholson and Defendants executed a work-for-hire agreement in connection with the work Dr. Nicholson performed for “Career Directions.” On or about December 1993,

1

In Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981) (en banc), the Eleventh Circuit adopted all decisions of the Fifth Circuit rendered prior to October 1, 1981 as binding precedent.

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Dr. Nicholson at Defendants’ request created a new interest inventory test and set of predictive data, a computer scan sheet, a careers guide, and related materials (collectively, the “Subject Work”) for Defendants’ “Future Focus” program. The interest inventory included eleven columns of information entitled “What Your Scores Mean.” (Id. at 3-4.) No work-for-hire agreement was executed in connection with the Subject Work. On March 28, 2001, Dr. Nicholson filed a copyright registration for Columns 4, 5, 6, 7, 9, and 11 of the “What Your Scores Mean” portion of the interest inventory created for Future Focus. (Id. at 4.) On November 21, 2003, Plaintiffs filed the First Federal Court Action against Defendants. Plaintiffs asserted a claim that Defendants had infringed Plaintiffs’ registered copyright in the Subject Work, as well as several state law claims. In the May 18, 2005 Order, this court granted Defendants’ Motion for Summary Judgment. In considering Defendants’ Motion for Summary Judgment, this court was required to, and did, construe all evidence in favor of the Plaintiffs. Applying that approach, (May 18, 2005 Order 2 & n.1), the court found that the relevant parts of the Subject Work constituted a joint work for which Defendants were co-authors, rather than individual contributors to a collective work, as Dr. Nicholson had claimed in her certificate of copyright registration. It stated: In sum, the court finds that FutureFocus is comprised of inseparable and interdependent works, and that Nicholson intended for the new -3-

copyrighted columns to be incorporated into the original version of ‘What Your Scores Mean,’ for which Defendants already owned a copyright interest. Accordingly, the court holds that FutureFocus is a joint work. Because Defendants have a copyright interest in a portion of the work and were exercising their authority to exploit the work, Plaintiffs may not bring a copyright infringement action against Defendants. (Id. at 18.) The court noted in a footnote that “a co-owner of a copyright must account to other co-owners for any profits he earns from licensing or use of the copyright.” (Id. at 18 n.5 (citation and internal quotations omitted).) After judgment was entered in the First Federal Court action, on September 12, 2005, Plaintiffs filed the State Court Action in the Superior Court of Gwinnett County, seeking an accounting of profits arising from Defendants’ use of the Subject Work. In the State Court Action, Plaintiffs also brought causes of action for unjust enrichment, breach of fiduciary duty, common law fraud and deceit, constructive fraud, and conversion of the Subject Work. (Verified Compl. and Demand for Jury Trial, State Court Action, Ex. F to Mot. to Dismiss.)

On

February 12, 2007, Plaintiffs filed a document in the State Court Action entitled “Motions to Enter Res Judicata Findings of Federal Court, for Summary Judgment Thereon, and to Determine Pre-Trial Accounting Procedures.” (Ex. A to Pls.’ Resp. in Opp. to Defs.’ Mot. to Dismiss (the “Res Judicata Motion”).) In the Res Judicata Motion, Plaintiffs requested that the state court find that this court’s statement in the

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First Federal Court Action established that the Subject Work is a joint work for purposes of res judicata and collateral estoppel. The state court denied the Res Judicata Motion. (See Pls.’ Resp. in Opp. to Defs.’ Mot. to Dismiss (“Resp.”) 2 n.2, 5.) The state court also found that Plaintiffs’ request for an accounting sounded exclusively in federal copyright law and was federally preempted. (Pls.’ Compl. ¶ 27.) On October 9, 2007, the state court jury issued a general verdict for Defendants, necessarily based on the conclusion that Dr. Nicholson had no rights in the Subject Work. (See Resp. 5; Jury Charge, State Court Action; Decl. of Robert M. Ward, Jan. 10, 2008 ¶ 12.) On November 1, 2007, Plaintiffs filed a notice of appeal in the State Court Action and filed the instant action (the “Second Federal Court Action”). Plaintiffs’ Complaint asks this court to issue a declaratory judgment that Plaintiffs and Defendants are 50% co-owners of the Subject Work. (Pls.’ Compl. ¶¶ 31-32.) The Complaint also seeks a declaratory judgment “on the issue of whether federal preemption applies to Copyright accounting matters, and the extent of the bearing of same, if any, on or to the present Copyright accounting dispute.” (Id. ¶ 38.) In addition to declaratory relief, Plaintiffs ask this court to conduct and determine an accounting of Defendants’ profits in the Subject Work, and seek costs and attorneys’ fees. On November 21, 2007, Defendants filed the Motion to Dismiss. On January 8,

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2008, Defendants filed the Motion for Sanctions. The court now considers both motions. II.

Legal Standard Under Federal Rule of Civil Procedure 12(b)(6), a court may grant a motion

to dismiss when a complaint fails to state a claim upon which relief can be granted. To withstand a motion to dismiss, a complaint need not contain “detailed factual allegations,” but must “‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.’” Bell Atl. Corp. v. Twombly, --- U.S. ----, 127 S. Ct. 1955, 1964 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Here, the court must determine whether Plaintiffs “alleged enough facts to suggest, raise a reasonable expectation of, and render plausible” their claims. Watts v. Fla. Int’l Univ., 495 F.3d 1289, 1296 (11th Cir. 2007). The court construes the Complaint in Plaintiffs’ favor, and accepts the facts they allege as true. M.T.V. v. DeKalb County Sch. Dist., 446 F.3d 1153, 1156 (11th Cir. 2006).

Pursuant to Federal Rule of Civil Procedure 11 (“Rule 11”), a court may impose appropriate sanctions on an attorney who files a pleading that has no reasonable chance of success. Kaplan v. DaimlerChrysler, A.G., 331 F.3d 1251, 1255 (11th Cir. 2003); see Fed. R. Civ. P. 11(b), (c). Additionally, 28 U.S.C. § 1927 allows

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a court to award sanctions against a party or attorney that “multiplies the proceedings . . . unreasonably and vexatiously.” III.

Motion to Dismiss Defendants move to dismiss this action because it is barred by res judicata,

collateral estoppel, and the statute of limitations. Although Defendants did not move to dismiss on jurisdictional grounds, “[l]ongstanding principles of federal law oblige [the court] to inquire sua sponte whenever a doubt arises as to the existence of federal jurisdiction.” Vermeulen v. Renault U.S.A., Inc., 985 F.2d 1534, 1542 (11th Cir. 1993). A.

Lack of Subject Matter Jurisdiction Under Rooker-Feldman

This case must be dismissed for lack of subject matter jurisdiction pursuant to the judicially established Rooker-Feldman doctrine, based on the Supreme Court’s decisions in Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and Dist. of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). Under RookerFeldman, lower federal courts lack subject matter jurisdiction over a case where the plaintiff in essence seeks to overturn a state court judgment. The doctrine is based on the principle that “federal courts, other than the United States Supreme Court, have no authority to review the final judgments of state courts.” Siegel v. LePore, 234 F.3d 1163, 1172 (11th Cir. 2000).

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1.

Applicable Standard

The Supreme Court in Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280, 284 (2005), stated that the Rooker-Feldman doctrine applies to prevent a federal court’s exercise of jurisdiction over “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” Prior to that decision, the Eleventh Circuit stated that RookerFeldman barred jurisdiction where: (1) the party in federal court is the same as the party in state court; (2) the prior state court ruling was a final or conclusive judgment on the merits; (3) the party seeking relief in federal court had a reasonable opportunity to raise its federal claims in the state court proceeding; and (4) the issue before the federal court was either adjudicated by the state court or was inextricably intertwined with the state court's judgment. Amos v. Glynn County Bd. of Tax Assessors, 347 F.3d 1249, 1265 n.11 (11th Cir. 2003) (citations omitted). The Eleventh Circuit continued to cite these four criteria after Exxon Mobil. See, e.g., Morris v. Wroble, 206 Fed. Appx. 915, 918 (11th Cir. 2006); Herskowitz v. Reid, 187 Fed. Appx. 911, 913 (11th Cir. 2006); Mickens v. Tenth Judicial Circuit, 181 Fed. Appx. 865, 872-73 (11th Cir. 2006). Therefore, in addition to applying the Supreme Court’s Exxon Mobil holding, the court considers the Amos factors in deciding whether Rooker-Feldman applies in this case. See Herskowitz, 187 Fed. Appx. at 913 (“Because this is the type of case to which the -8-

Supreme Court, in Exxon Mobil, determined the Rooker-Feldman doctrine applies and the Amos elements are satisfied, we readily conclude the district court did not err by dismissing [the plaintiff’s] claims.”).2 2.

Plaintiffs Ask the Court to Rectify Injuries Caused By the State Court Judgment

A cursory review of Plaintiffs’ Complaint demonstrates that Plaintiffs, having lost in the State Court Action, ask the court to review and reject the state court judgment. See Exxon Mobil, 544 U.S. at 284. Plaintiffs filed the Complaint in the Second Federal Court Action after the jury found for Defendants in the State Court Action. The causes of action and remedies sought in the Complaint are based on alleged errors in the State Court Action. The Complaint asks the court to issue a declaration that Plaintiffs are co-owners of the Subject Work entitled to a 50% share of the profits from that work, in direct contradiction to the state court jury’s verdict.3 2

Two previous decisions of this court noted that the Eleventh Circuit Court of Appeals has issued no published opinions containing the Amos criteria since Exxon Mobil. Schuster v. Henry County, Case No. 1:05-CV-239-TWT, 2007 WL 1701795, at *2-*3 & n.1 (N.D. Ga. June 7, 2007) (Thrash, J.); Alyshah v. Hunter, Case No. 1:06-CV-0931-TWT, 2006 WL 2644910, at *5-*6 & n.2 (N.D. Ga. Sept. 13, 2006) (Thrash, J.). However, the recent unpublished Eleventh Circuit decisions are persuasive on the point that the Amos factors still guide Rooker-Feldman analysis in this Circuit. See also Morris, 206 Fed. Appx. at 919 n.4 (“We do not decide whether [Lance v. Dennis, 546 U.S. 459 (2006)] or Exxon Mobil require us to modify in any way our above four-part Amos test, because [the plaintiff’s] claims fail under either test.”). 3

Plaintiffs point out that the jury verdict was a general verdict not based on federal copyright law. However, the judge charged the jury: “[Dr. Nicholson] contends that she is a joint author of three (3) tests for use in counseling children and young adults

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The Complaint further asks the court to issue a declaration that federal copyright law does not preempt Plaintiffs’ request for an accounting in the state court, in direct contradiction to the finding of the state court judge.4 Finally, it asks the court to conduct the accounting that the state court, relying on its preemption ruling,

and . . . that as a joint author that she is a co-owner of the works . . . . The Defendants have filed an answer to the petition in which they dispute Dr. Nicholson’s contentions.” (Jury Charge, State Court Action at 1.) The jury’s finding for Defendants requires the conclusion that Plaintiffs were entitled to none of the profits from the Subject Work. Indeed, Plaintiffs state that the jury found that Dr. Nicholson had no rights in the Subject Work. (Resp. 5.) 4

With respect to this cause of action, some portions of Plaintiffs’ response brief sound as though Plaintiffs are requesting an advisory opinion. Plaintiffs explain that “[t]he Georgia State courts desperately need this Court’s learned counsel on such matters involving intellectual property and the application of federal law.” (Resp. 2 n.2.) Plaintiffs also explicitly “request that this Court issue an instructive opinion” on the subjects of federal pre-emption and res judicata. (Resp. 8 (emphasis added).) Advisory opinions are, of course, impermissible. Massachusetts v. Envtl. Prot. Agency, 127 S. Ct. 1438, 1452 (2007); Marbury v. Madison, 1 Cranch 137 (1803); Hayburn’s Case, 2 U.S. 408 (1792); see also Coffman v. Breeze Corp., 323 U.S. 316, 324 (1945) (“The declaratory judgment procedure . . . may not be made the medium for securing an advisory opinion in a controversy which has not arisen.”). In asking this court to resolve a split of authority on federal preemption, Plaintiffs aim to certify a question of federal law to a federal court. Federal courts in certain cases may certify questions of state law to state courts. Arizonans for Official English v. Arizona, 520 U.S. 43, 77 (1997) (“Through certification of novel or unsettled questions of state law for authoritative answers by a State’s highest court, a federal court may save time, energy, and resources and help build a cooperative judicial federalism.”) (citation and internal quotations omitted). By contrast, state courts are required to decide questions of federal law. Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 477-78 (1981); McKnett v. St. Louis & S.F. Ry. Co., 292 U.S. 230, 234 (1934) (“A state may not discriminate against rights arising under federal laws.”). This includes questions of whether federal law preempts state law. Exxon Shipping Co. v. Airport Depot Diner, Inc., 120 F.3d 166, 169-70 (9th Cir. 1997) (applying Rooker-Feldman because state courts must be allowed to decide questions of federal preemption, and jurisdiction to review those state court decisions “lies exclusively in the United States Supreme Court”).

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declined to conduct.

Though couched as a declaratory judgment suit, the

Complaint “[s]tripped to its essentials, . . . asks the federal district court to reverse a . . . state court order.” Kimball v. Florida Bar, 632 F.2d 1283, 1284 (5th Cir. 1980) (affirming dismissal of petition for declaratory and injunctive relief for lack of jurisdiction). Plaintiffs’ brief in response to the Motion to Dismiss further illustrates that this lawsuit is an attempted attack on a state court judgment by a state court loser. Plaintiffs explain that the state court “should have, . . . but did not” find that the Subject Work is a joint work under the doctrines of res judicata and collateral estoppel.5 (Resp. 2 n.2.) Plaintiffs also take issue with the state court’s decision that their request for an accounting was federally preempted, a point on which they contend courts are split. (Id. at 3-4 & n.3.) The result of these two errors by the state court, Plaintiffs argue, was that “the misled jury (perhaps understandably) decided

5

Plaintiffs argue that this court’s statements in the First Federal Court Action should have been res judicata in the State Court Action. The state court found that they were not. Defendants now argue that that finding, and others from the State Court Action, are res judicata in the Second Federal Court Action. Plaintiffs cannot escape the doctrines of res judicata and collateral estoppel by arguing that it was those doctrines that another court applied wrongly. See Parsons Steel, Inc. v. First Ala. Bank, 474 U.S. 518, 523-24 (1986) (“Once the state court has finally rejected a claim of res judicata, then the Full Faith and Credit Act becomes applicable and federal courts must turn to state law to determine the preclusive effect of the state court's decision.”). Perhaps mercifully, the court does not reach whether the state court’s findings are barred by res judicata or collateral estoppel in this action because it lacks jurisdiction to do so.

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that Dr. Nicholson had no rights in the [Subject] Work, and committed this error in the absence of any reference to, or understanding of, the real source of her rights–i.e., the Copyright Law.” (Id. at 5.) These alleged mistakes by the state court are the only basis on which Plaintiffs ask the court to issue a declaratory judgment, which they would apparently use in their appeal of the State Court Action. (See id. at 9.)6 Rooker-Feldman precludes jurisdiction under these circumstances.

See

Confederated Tribes of Colville Reservation v. Superior Court of Okanogan County, 945 F.2d 1138, 1141 (9th Cir. 1991) (dismissing on Rooker-Feldman grounds where “[a]ppellants seek a declaratory judgment from a federal district court that a state court’s interpretation of a federal statute was unlawful, before the intermediate and

6

One section of Plaintiffs’ response to the Motion to Dismiss argues that “Harmony in the Consecutive (and/or Concurrent) Jurisdiction Between the Federal and State Courts Requires Sequestration and Neutralization of Shafe’s Motion.” (Resp. 5.) The court does not know what it means to sequester or neutralize a motion. Additionally, Plaintiffs’ arguments in favor of “sequestration and neutralization” are internally inconsistent. On one hand, Plaintiffs argue that “an instruction from this Court on the scope, swathe and intended application of the principles of ‘federal pre-emption’ would be of great assistance to the Georgia Appellate Court.” (Id. at 9.) On the other hand, Plaintiffs suggest that the court stay the Motion to Dismiss “until the Georgia Appellate Court and the State Trial Court have had a full opportunity to act upon Dr. Nicholson’s cause of action, and to render a final decision thereon.” (Id. at 8.) The court cannot determine whether Plaintiffs are seeking to have this court rule on the case’s merits, in which case the court must address the Motion to Dismiss, or whether Plaintiffs seek to have the court refrain from deciding the Motion to Dismiss until appeals are complete, in which case it is unclear why Plaintiffs brought this action now. In any case, Plaintiffs’ reliance on the “consecutive jurisdiction and concurrent pendency” (id. at 6) of the State Court Action and the Second Federal Court Action is another indication that Plaintiffs are “inviting district court review and rejection of [the state court judgment].” Exxon Mobil, 544 U.S. at 284.

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highest appellate courts of [the state] have had the opportunity to review that decision”). For the same reasons this case falls within Exxon Mobil’s framework, the first, third, and fourth criteria set forth in Amos are met. See Amos, 347 F.3d at 1265 n.11. The parties in the State Court Action and the Second Federal Court Action are identical. The parties had a reasonable opportunity to raise their present claims to the state court. Indeed, they did raise each of those issues, and the state court adjudicated them against Plaintiffs. The thrust of Plaintiffs’ Complaint in this action is that the state court adjudicated each of those issues wrongly.

The only

outstanding issue is whether the state court judgment was a final judgment on the merits. 3.

State Trial Court Judgment is a Final Judgment

Plaintiffs sued, and lost, in the State Court Action before filing the Second Federal Court Action. However, they filed the Second Federal Court Action simultaneously with an appeal to the Georgia Appellate Court. Therefore, although the judgment of the state trial court was final, the appeals process has not yet concluded. Whether Rooker-Feldman bars federal court jurisdiction over such a case is somewhat unsettled. The Supreme Court in Exxon Mobil, 544 U.S. at 291, noted that in Rooker and Feldman, “the losing party in state court filed suit in

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federal court after the state proceedings ended,” but did not address the situation where a state trial court had issued a judgment but the state appeals court had not. Some circuits have held that Rooker-Feldman is inapplicable in such a case. See Federacion de Maestros v. Junta de Relaciones del Trabajo, 410 F.3d 17, 24-25 & n.10 (1st Cir. 2005); Dornheim v. Sholes, 430 F.3d 919, 923-24 (8th Cir. 2005); Bear v. Patton, 451 F.3d 639, 642 (10th Cir. 2006). Other circuits find that Rooker-Feldman applies to state trial court decisions, see, e.g., Pieper v. Am. Arbitration Ass’n, Inc., 336 F.3d 458, 463-64 (6th Cir. 2003); Confederated Tribes, 945 F.2d at 1141, and even interlocutory orders. See, e.g., Campbell v. Greisberger, 80 F.3d 703, 707 (2d Cir. 1996); Brown & Root, Inc. v. Breckenridge, 211 F.3d 194, 199 (4th Cir. 2000). The Eleventh Circuit has not directly ruled on the issue. Its most definitive statement on point, in a case decided before Exxon Mobil, is that “the [RookerFeldman] doctrine is not limited to state appellate court judgments.” Powell v. Powell, 80 F.3d 464, 467 (11th Cir. 1996) (applying Rooker-Feldman where plaintiff did not seek review of state trial court’s judgment to the Georgia Appellate Court, the Georgia Supreme Court, or the United States Supreme Court). Powell weighs in favor of applying Rooker-Feldman in this case.

However, some recent

unpublished Eleventh Circuit decisions imply that review by the highest state court is required to meet the final judgment requirement without explicitly stating that

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it is necessary. Morris, 206 Fed. Appx. at 918 (“[Plaintiff] obtained a final judgment from the highest state court in which review could be sought, because the state appellate court dismissed her appeal based on her contempt conduct and the Florida Supreme Court denied her mandamus petition that sought to compel the appellate court to hear her appeal.”); Ransom v. Georgia, 181 Fed. Appx. 776, 777 (11th Cir. 2006) (“[T]he prior state court ruling was a final judgment on the merits because the Georgia Supreme Court affirmed the trial court’s decision.”). In other cases, the Eleventh Circuit has found the final judgment requirement met by a judgment from a lower court. Herskowitz, 187 Fed. Appx. at 911-13 (final judgment requirement met when lower state appeals court reversed state trial court judgment); May v. Capote, 149 Fed. Appx. 913, 916 (11th Cir. 2005) (“[T]he prior state court ruling was a final judgment on the merits because a jury determined the valuation of [plaintiff’s] property in the underlying condemnation action and the state court denied [plaintiff’s] subsequent challenges to the jury’s determination.”). According to the weight of authority in this and other Circuits, the “sounder position” is that Rooker-Feldman applies to judgments by lower state courts such as the one at issue in this case. 18 James Wm. Moore et al., Moore’s Federal Practice § 133.30 (3d ed. 2007) (noting that this position is supported by the principle that the United States Supreme Court is the only federal court with appellate jurisdiction

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over state courts); see also Powell, 80 F.3d at 467; Pieper, 336 F.3d at 463 (“[W]e do not believe that lower federal courts should be prohibited from reviewing judgments of a state’s highest court but should somehow have free rein to review the judgments of lower state courts.”); Field Auto City, Inc. v. Gen. Motors Corp., 476 F. Supp. 2d 545, 553 (E.D. Va. 2007) (stating that the purposes of RookerFeldman are best served by applying the doctrine to state trial court judgments); Yonkers Elec. Contracting Corp. v. Local Union No. 3., Int’l Bhd. Elec. Workers, 220 F. Supp. 2d 254, 259 (S.D.N.Y. 2002) (“The preclusive nature of the Rooker-Feldman doctrine extends to lower state court judgments and even interlocutory decisions.”). Therefore, the Rooker-Feldman doctrine controls here. The court lacks subject matter jurisdiction over this action. B.

Court Lacks Jurisdiction to Address Remaining Issues

Because no subject matter jurisdiction exists, the court may not address the parties’ remaining arguments on the Motion to Dismiss. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998); Alyshah v. United States, 241 Fed. Appx. 665, 667-68 & n.3 (11th Cir. 2007). Certain authority from other circuits suggests that a court in this situation may dismiss on grounds of res judicata without resolving the Rooker-Feldman issue. See, e.g., Garcia v. Vill. of Mount Prospect, 360 F.3d 630, 634 n.5 (7th Cir. 2004) (“[G]iven the complexities of the doctrine, we refrain from

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determining definitively whether Rooker–Feldman does or does not apply. Rather, we affirm the district court's dismissal solely on res judicata grounds.”). However, the Eleventh Circuit rejects that approach. Powell, 80 F.3d at 465 (reversing district court’s grant of summary judgment based on res judicata, with instructions to dismiss for lack of subject matter jurisdiction under Rooker-Feldman); Cohen v. World Omni Fin. Corp., Nos. 06-14960, 07-10483, 2007 WL 4115961, at *3 (11th Cir. Nov. 20, 2007) (“[A]lthough the district court suggested in a footnote that it doubted its subject matter jurisdiction . . . it failed to explore the issue, choosing instead to grant summary judgment on res judicata grounds. In doing so, the district court violated its obligation to inquire into its subject matter jurisdiction.”); Indus. Commcn’s & Elecs., Inc. v. Monroe County, 134 Fed. Appx. 314, 318 (11th Cir. 2005) (reversing district court’s dismissal on collateral estoppel grounds because “[i]f the Rooker -Feldman doctrine prohibits a district court from hearing a case it must be dismissed for lack of subject matter jurisdiction”). But see Gordon v. Colin, Case No. 07-12028, 2008 WL 495935, at *2 (11th Cir. Feb. 26, 2008) (dismissing for failure to state a claim, noting that “[w]hether there is currently a final state court judgment [for Rooker-Feldman purposes] is unclear, and we decline to find a lack of subject matter jurisdiction under the Rooker-Feldman doctrine”). For this reason, the court

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does not address the issues of res judicata, collateral estoppel, or the statute of limitations. IV.

Motion for Sanctions Defendants ask the court to sanction Plaintiffs under Rule 11 and 28 U.S.C.

§ 1927. The court may impose sanctions regardless of the existence of subject matter jurisdiction. Willy v. Coastal Corp., 503 U.S. 131, 138 (1992) (holding that whether sanctions were warranted under Rule 11 was appropriately considered after dismissal for lack of subject matter jurisdiction, because such a determination “does not signify a district court’s assessment of the legal merits of the complaint”) (citation and internal quotations omitted); Chemiakin v. Yefimov, 932 F.2d 124, 12631 (2d Cir. 1991); cf. Roth v. Green, 466 F.3d 1179, 1193 (10th Cir. 2006) (upholding sanctions pursuant to 28 U.S.C. § 1927, but reversing sanctions pursuant to Rule 11, where district court dismissed on Rooker-Feldman grounds). Furthermore, the court is not required to conduct a hearing before imposing sanctions where the party sanctioned had an opportunity to defend its allegedly sanctionable conduct. See Baker v. Alderman, 158 F.3d 516, 526 (11th Cir. 1998). A.

Rule 11 Sanctions Are Warranted

A court may impose Rule 11 sanctions (1) when a party files a pleading that has no reasonable factual basis; (2) when the party files a pleading that is based on a legal theory that -18-

has no reasonable chance of success and that cannot be advanced as a reasonable argument to change existing law; or (3) when the party files a pleading in bad faith for an improper purpose. Kaplan, 331 F.3d at 1255 (citation and internal quotations omitted). A court deciding a motion for Rule 11 sanctions must determine “whether a reasonable attorney in like circumstances could believe his actions were factually and legally justified.” Id. Rule 11 sanctions are required if the court finds that a party’s attorney failed to conduct reasonable inquiry before filing a baseless lawsuit. Byrne v. Nezhat, 261 F.3d 1075, 1105-06 (11th Cir. 2001); Worldwide Primates, Inc. v. McGreal, 87 F.3d 1252, 1254 (11th Cir. 1996); see Miles v. State of Ga. Dept. of Revenue, 143 F.R.D. 302, 304 (S.D. Ga. 1992) (imposing Rule 11 sanctions for “utter failure of the plaintiffs’ counsel to research constitutional issues”); Gutierrez v. City of Hialeah, 729 F. Supp. 1329, 1332-33 (S.D. Fla. 1990) (imposing sanctions for plaintiffs’ counsel’s failure to conduct reasonable inquiry into applicable law using basic research tools). Rule 11 sanctions are warranted here because there is no legal theory on which Plaintiffs had a reasonable possibility of success in the Second Federal Court Action. Kaplan, 331 F.3d at 1255. In seeking to have this court “instruct” the Georgia Appellate Court on how to decide legal issues, Plaintiffs’ counsel (“Counsel”) argues against core principles of federalism at the heart of our legal

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system. See Powell, 80 F.3d at 467 (finding that Rooker-Feldman applies “for reasons that go to the heart of our system of federalism-the dual dignity of state and federal court decisions interpreting federal law”). If an attorney believes a state court issued a judgment based on an incorrect interpretation of federal law, it may appeal to the state appellate court, and then the state supreme court if applicable. If those appeals are unsuccessful, the only remedy is to petition the United States Supreme Court for a writ of certiorari. In the most basic sense, the law precludes the method Counsel employed here. E.g., 28 U.S.C. § 1257 (United States Supreme Court has exclusive federal jurisdiction to review state court judgments); ASARCO, Inc. v. Kadish, 490 U.S. 605, 622 (1989) (28 U.S.C. § 1257 precludes lower federal courts from reviewing state court decisions). The court assumes an understanding of federalism, as well as the basic appeals process in the federal and state court systems, on the part of lawyers. Furthermore, were Plaintiffs’ claims not dismissed under Rooker-Feldman, they would clearly be barred by res judicata and collateral estoppel. Res judicata prevents relitigation of claims that were or should have been brought in a prior suit involving the same parties and the same cause of action. Ragsdale v. Rubbermaid, Inc., 193 F.3d 1235, 1238 (11th Cir. 1999). Collateral estoppel prevents relitigation of issues actually litigated in a prior proceeding. Parklane Hosiery Co. v. Shore, 439

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U.S. 322, 327 (1979). Because Plaintiffs’ Complaint contains only claims against the same parties that were actually resolved in the State Court Action, they cannot sue on those claims again. Counsel has expressed familiarity with the doctrines of res judicata and collateral estoppel, but cites not one single authority to suggest that those doctrines do not apply here.7 Rather, in Plaintiffs’ response to the Motion to Dismiss, Counsel berates Defendants for their conduct in the State Court Action;8 disparages the state court for its allegedly erroneous rulings;9 makes inconsistent pronouncements as to 7

In fact, Plaintiffs’ response brief cites no authority at all other than to argue against the application of the statute of limitations, to support Plaintiffs’ views of the merits of the state court’s rulings, and to recite the maxim “[h]e who seeks equity must do equity.” (Resp. 14 n.8). 8

Counsel denounces Defendants as “masters of playing one court against the other” (Resp. 1), when it is Plaintiffs who have filed three lawsuits against Defendants. Counsel illustrates Defendants’ “unfair, unjust, unsupported, and inequitable ‘end run’ on . . . justice” (id. at 5), which “ploy” consists of nothing more than legal arguments before the state court to defend itself against Plaintiffs’ allegations. (Id. at 4-5.) Counsel uses a number of other colorful terms to describe Defendants’ actions and arguments, such as “unconscionabl[e]” (id. at 11), “arrogant” (id. at 12), “cynical gamesmanship” (id. at 1), “j’accuse” (Pls.’ Mem. in Opp. to Rule 11 Mot. 2), “scandalous” (id.), “tortuous” (id. at 4), “disrespectful” (id.), “crude” (id. at 6), and “a paradox, wrapped in a non sequitur, and secured together by an oxymoron.” (Id. at 11.) Ironically, Plaintiffs also accuse Defendants of “finger-pointing and name-calling.” (Id. at 9.) 9

Plaintiffs’ portrayal of the state court as a helpless victim of Defendants’ trickery is all the more troubling given that the state court decided the legal issues correctly, or from any perspective, at least reasonably. Plaintiffs themselves point out that the question of whether an accounting for profits from a jointly-owned copyright was federally preempted was on a question of first impression in this Circuit, for which authority is split. Furthermore, the state court rightly denied Plaintiffs’ motion to enter findings from the First Federal Court Action as res judicata. This court’s May 18, 2005 Order awarded summary judgment

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how this court should handle the Motion to Dismiss, see supra n.6; and implies that the court should issue, for the benefit of the state appellate court, the type of advisory opinion impermissible since 1792. See supra n.4. Even in Counsel’s response to the Rule 11 Motion, Counsel fails to cite any legal precedent in support of their theory for bringing this case.10 Counsel does not even bother to address the overwhelming authority against Plaintiffs. Plaintiffs’ lack of legal support indicates that Counsel failed to make reasonable inquiry into the law before filing this action. See Miles, 143 F.R.D. at 304.

to Defendants on Plaintiffs’ infringement lawsuit, construing facts in Plaintiffs’ favor. That Order in no way established that Plaintiffs were 50% co-owners of the Subject Work. Rather, this court explicitly stated in a later Order that it had “never directly addressed the issue of whether [Dr.] Nicholson's copyright was valid.” (Order, August 17, 2005, First Federal Court Action, at 11 (declining to award attorneys’ fees to Defendants).) In fact, the court made that statement in response to Plaintiffs’ argument to that effect. Id. at 10 (“Plaintiffs counter that the court has not directly ruled on whether [Dr.] Nicholson had a valid copyright interest.”). 10

Most of the cases cited in response to the Rule 11 Motion address the issue of the statute of limitations. Plaintiffs also cite cases for the proposition that parties cannot be sanctioned for raising an issue of first impression. For the sake of clarity, the court notes that it does not sanction Plaintiffs for raising an issue of first impression, but for raising that issue in this court after losing on it in the State Court Action. Finally, Plaintiffs cite a Seventh Circuit case to encourage the court to sanction Defendants for improperly filing the Rule 11 Motion. As should be apparent, the court declines Plaintiffs’ invitation to sanction Defendants. Plaintiffs advance the argument, for the first time in response to the Rule 11 Motion, that if the state court’s ruling on federal preemption was correct (a matter which Plaintiffs apparently dispute), then the state court had no jurisdiction over the action and its judgment was void. Their original Complaint notably does not seek a declaratory judgment that the state court judgment was void for lack of jurisdiction. In any event, Plaintiffs cite no authority to support this position, and the court located none.

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Counsel cannot have reasonably believed that Plaintiffs had a chance of success on any legal theory. See Fox v. Acadia State Bank, 937 F.2d 1566, 1571 (11th Cir. 1991) (upholding district court’s decision to award sanctions given “[t]he plaintiffs’ decision to proceed on a theory that was specifically precluded by the statute and unsupported by case law was unreasonable”). The Second Federal Court Action was therefore objectively frivolous and Rule 11 sanctions are in order. See Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1294 (11th Cir. 2002) (upholding Rule 11 sanctions where plaintiffs’ motion “was part of a pattern of re-argument and re-litigation that has marked their efforts in this lawsuit”); see also Willhite v. Collins, 459 F.3d 866, 869 (8th Cir. 2006) (upholding Rule 11 sanctions imposed by district court because it lacked jurisdiction based on Rooker-Feldman and even if it had had jurisdiction, claims were clearly barred by collateral estoppel); Smith v. Sulista, 127 Fed. Appx. 979, 980 (9th Cir. 2005) (upholding Rule 11 sanctions imposed by district court because action was barred under Rooker-Feldman and “constituted [plaintiff’s] fourth effort to collaterally attack disputed state court decisions in federal court”). B.

28 U.S.C. § 1927 Sanctions Are Warranted

28 U.S.C. § 1927 allows a court to sanction an attorney who has engaged in unreasonable and vexatious conduct, where such conduct has the effect of

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multiplying the proceedings. Hudson v. Int’l Computer Negotiations, Inc., 499 F.3d 1252, 1262 (11th Cir. 2007). Conduct is unreasonable and vexatious for this purpose only when it is objectively “so egregious that it is tantamount to bad faith,” id. (citation and internal quotations omitted), specifically “where an attorney knowingly or recklessly pursues a frivolous claim.” Schwartz v. Millon Air, Inc., 341 F.3d 1220, 1225 (11th Cir. 2003); see Amlong & Amlong, P.A. v. Denny’s, Inc., 500 F.3d 1230, 1241 (11th Cir. 2007).

An attorney’s conduct “multiplies

proceedings” when it “results in proceedings that would not have been conducted otherwise.” Peterson v. BMI Refractories, 124 F.3d 1386, 1396 (11th Cir. 1997). In this case, Counsel multiplied the proceedings in a manner tantamount to bad faith so as to warrant 28 U.S.C. § 1927 sanctions. Counsel filed a declaratory judgment suit in federal court attacking the state court’s rulings, while simultaneously appealing the state court judgment to the Georgia Appellate Court. Counsel unilaterally doubled the proceedings and created the inefficient, undesirable situation where one cause of action is litigated in two courts. The court also notes that the Second Federal Court Action is the third lawsuit Plaintiffs have filed based on the same cause of action. As explained above, it was frivolous. Counsel’s behavior in filing this baseless suit without the support of any legal precedent was objectively unreasonable and vexatious. The court awards sanctions

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under 28 U.S.C. § 1927. See Roth, 466 F.3d at 1195; Tropf v. Fid. Nat’l Title Ins. Co., 289 F.3d 929, 939 n.17 (6th Cir. 2002) (noting that district court that dismissed lawsuit under Rooker-Feldman could have imposed sanctions under 28 U.S.C. § 1927 in addition to Rule 11 sanctions). C.

Nature of Sanctions

Sanctions under Rule 11 may include “nonmonetary directives; an order to pay a penalty into court; or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of part or all of the reasonable attorney’s fees and other expenses directly resulting from the violation.” Fed. R. Civ. P. 11(c)(4). A Rule 11 Sanction “must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.” Id. A court may require an attorney in violation of 28 U.S.C. § 1927 “to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred” because of his unreasonable and vexatious multiplication of the proceedings. 28 U.S.C. § 1927. Defendants specifically request that the court enjoin Plaintiffs from filing future actions against Defendants, require Plaintiffs and Counsel to pay a monetary fine, and require Plaintiffs and Counsel to pay Defendants’ attorneys’ fees. The court grants Defendants’ requests, as set forth below.

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The court imposes monetary sanctions against Counsel. The court notes that as between Plaintiffs and Counsel, Counsel is primarily responsible for the sanctionable conduct in this case. Nothing indicates that Plaintiffs were the masterminds behind filing the Second Federal Court Action. See Byrne, 261 F.3d at 1118. Furthermore, requiring non-attorneys to pay a monetary penalty for a legally frivolous suit would be improper. See Miles, 143 F.R.D. at 305 (“[T]he sanctions may be imposed solely against the attorney responsible for the frivolous action, especially where the attorney, not the client, breached the duty of reasonable inquiry.”). Counsel is required to pay the court a fine of $1,000.00, in addition to Defendants’ reasonable attorneys’ fees in this action. The court finds this amount sufficient to deter Counsel from filing future lawsuits without the support of legal precedent. The court directs Defendants to submit proof of their fees within 10 days of the date of this Order. If Counsel disputes the fees, it may respond within 10 days of the date of Defendants’ submission. Moreover, the court finds an injunction appropriate because Plaintiffs have already filed three lawsuits based on the same underlying facts. The monetary sanctions against Counsel are insufficient to deter Plaintiffs from filing suit again with a new attorney. The court therefore enjoins Plaintiffs from filing future lawsuits against Defendants in this court based on the facts underlying the First

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Federal Court Action, the State Court Action, and the Second Federal Court Action, without first obtaining permission by court order. See Riccard, 307 F.3d at 1295 (upholding injunction against plaintiff prohibiting him from filing new actions because “[t]hree or four lawsuits over one employment relationship is enough”). V.

Summary For the foregoing reasons, Defendants’ Motion to Dismiss for Failure to State

a Claim Upon Which Relief Can be Granted [Doc. No. 6], and Defendants’ Motion for Rule 11 Sanctions [Doc. No. 11] are GRANTED.

This action is hereby

DISMISSED. Pursuant to Federal Rule of Civil Procedure 11 and 28 U.S.C. § 1927, Plaintiffs’ Counsel is ORDERED to pay Defendants’ reasonable attorneys’ fees in

this action and a fine in the amount of $1,000.00 to the court within 40 days of this Order.

The court DIRECTS Defendants to submit proof of their reasonable

attorneys’ fees within 10 days of the date of this Order. Plaintiffs’ Counsel may respond to Defendants’ submission within 10 days of the date of that submission. Pursuant to Federal Rule of Civil Procedure 11, Plaintiffs are ENJOINED from filing future lawsuits against Defendants in this court based on the facts underlying this case, without first having obtained a court order permitting such a filing.

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IT IS SO ORDERED, this 25th day of March, 2008.

s/Beverly B. Martin BEVERLY B. MARTIN UNITED STATES DISTRICT JUDGE

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