Date: 09-27-2001

Case Style: Lipscher v. LRP Publications, Inc.

Case Number: 00-10370, 00-10387, 00-10654 and 00-11461

Judge: Wood

Court: United States Court of Appeals for the Eleventh Circuit

Plaintiff's Attorney: Jay D. Bennett of Alston & Bird, Atlanta, Georgia

Defendant's Attorney: Joseph D. Wargo, Jeanine L. Gibbs and Michael S. French of Kritzer & Levick, P.C., Atlanta, Georgia and Gene D. Lipscher of Alley, Maass, Rogers & Lindsy, P.A., Palm Beach, Florida for LRP Publications, Inc. and Joanne Flore.

James Charles Grant, Atlanta, Georgia of Law Bulletin Publishing Company

Description: These appeals, which were consolidated for argument and decision in this court, arise out of a lawsuit filed by Law Bulletin Publishing Company ("Law Bulletin") against LRP Publications, Inc. ("LRP") and Joanne Fiore, an employee of LRP. Law Bulletin is an Illinois company which publishes and sells the Cook County Jury Verdict Reporter and the Illinois Jury Verdict Reporter, both of which are newsletters summarizing individual jury verdicts. Law Bulletin maintains a computerized database of this information which customers can search online for a fee. LRP publishes national statistical and historical jury verdict materials including the Personal Injury Valuation Handbook. The Handbook is a nine-volume set compiling statistical information which allows an attorney to calculate a statistical range of potential jury verdicts for different types of personal injuries. LRP maintains a computerized database of its information, which is made available to customers through the online legal research companies Westlaw and Lexis, as well as on CD-ROM. LRP also offers a telephone service which allows customers to call in search requests to be performed by LRP employees. Fiore was employed by LRP until 1998 and served as the Florida registered agent for LRP.

In November 1997, Law Bulletin filed suit against LRP and Fiore, alleging that LRP surreptitiously obtained subscriptions to Law Bulletin's verdict reporters by posing as a Florida law firm named "Fiore and Cohen" and then used the information from the newsletters as its basis for reporting jury verdicts from Illinois. According to Law Bulletin's complaint, in April 1993, LRP requested a subscription to Law Bulletin's Illinois Jury Verdict Reporter. Law Bulletin, recognizing LRP as a competitor and a suspected data pirate, responded to the subscription request by a letter dated May 20, 1993. The letter noted that Law Bulletin was "already aware of concerns expressed by others in the industry that your company may be engaging in various forms of misconduct." Given these concerns, Law Bulletin sought assurances from LRP, stating in its letter "[i]f you are willing, however, to confirm that you would like to obtain our publication for your personal information only, and not for the purpose of copying, reproducing, or remarketing any portion of the publication or the selected information which it contains, I would be happy to enroll you as a subscriber." LRP did not reply to the letter, and no subscription was entered. Sometime thereafter, Law Bulletin entered into two separate subscription agreements with "Fiore and Cohen," an entity (3) which, unbeknownst to Law Bulletin, operated out of LRP's Florida satellite office. Law Bulletin alleges that LRP's reporting of Illinois jury verdicts was based entirely on the information obtained through the Fiore subscriptions.

The suit, which was originally filed in state court in Cook County, Illinois, was removed by the defendants in December 1997 to the United States District Court for the Northern District of Illinois. In January 1998, the court ordered the case transferred to the Southern District of Florida pursuant to 28 U.S.C. § 1404(a).

Law Bulletin's complaint alleged causes of action for breach of contract (Count 1); violations of both the Illinois Consumer Fraud Act, 815 Ill. Comp. Stat. 505/2, and the Uniform Deceptive Trade Practices Act, 815 Ill. Comp. Stat. 510/2, (Count 2); violations of the Lanham Act, 15 U.S.C. § 1125, (Count 3); and common law unfair competition (Count 4). On June 18, 1998, the district court granted partial summary judgment in favor of LRP, dismissing Counts 2 and 4 based on a finding that they were preempted by the Copyright Act of 1976, 17 U.S.C. § 301. The district court denied LRP's motion for summary judgment on Law Bulletin's contract claim, holding that it was not preempted. As discovery progressed on the remaining claims, the district court recognized that "special problems" exist when competitors are engaged in a lawsuit "because it often appears that part of the strategy is to find out what the competitor is doing and using that for your economic advantage in the future." Therefore, in July 1998, the district court limited discovery to matters relating only to liability, staying discovery on matters relating to damages. On October 16, 1998, the district court granted in part LRP's motion for a protective order pursuant to Fed. R. Civ. P. 26(c). The October 16 order granted a protective order "as to [LRP]'s use of third-party jury verdict publications," based on a finding that the allegations in the complaint dealt only with LRP's improper use of Law Bulletin's jury verdict publications.

The matter was ultimately bifurcated, and, on March 1, 1999, the parties began a jury trial as to liability on Law Bulletin's breach of contract and Lanham Act claims. At the close of Law Bulletin's evidence, the court entered a directed verdict under Fed. R. Civ. P. 50(a) in favor of LRP on the Lanham Act claims. LRP rested without presenting evidence. The only question before the jury was whether the defendants had breached two form subscription agreements Fiore had signed. Both subscription agreements contained a provision entitled "Law Bulletin's Copyright Recognized," which provided in part, We will not make any copies of any reports or disks for which this subscription is for, recognizing that the Law Bulletin Publishing Company has a copyright interest in each. Under no circumstances will we furnish any copies, or any of the information contained therein, in bulk form to any third-party, and we will not computerize, record, reproduce or re-market any portion of the publication or the selected material which it contains.

The jury determined LRP had breached the subscription agreements, and the court entered judgment in favor of Law Bulletin as to liability on the breach of contract claim.

A second round of discovery began as to damages. The district court, upon motion by LRP and Fiore, determined that, under Florida law, Law Bulletin could not proceed against both LRP, the principal, and Fiore, LRP's agent. Law Bulletin filed a notice of intent to proceed against LRP, and Fiore was removed as a defendant. Once again, discovery disputes arose between the parties. After numerous motions and a hearing, the district court held that information relating to LRP's profits and other sensitive financial information was not discoverable.

A jury trial on the issue of damages was scheduled to begin January 18, 2000. On November 1, 1999, LRP moved for summary judgment as to damages. The district judge heard oral argument on the motion on December 15, and issued a written ruling granting LRP's motion on December 23. According to the district court, Law Bulletin advanced two damage theories, seeking to recover damages based on its actual lost subscription sales and LRP's profits. The district court found that each of these theories failed as a matter of law. Because Law Bulletin had succeeded in proving liability, the district court awarded Law Bulletin nominal damages in the amount of $1.00.

Law Bulletin filed a timely appeal, Case No. 00-10387, challenging the dismissal of its state law and Lanham Act claims, the nominal damage award, and the district court's failure to order injunctive relief. (4) LRP filed a timely cross-appeal, Case No. 00-10654, arguing the district court erred in refusing to dismiss Law Bulletin's breach of contract claims based on either Copyright Act preemption or public policy grounds and in denying LRP's request for attorney's fees and costs as a prevailing party under the Lanham Act. On March 1, 2000, the district court entered an order granting Law Bulletin's request for costs under Fed. R. Civ. P. 54(d)(1). LRP appeals this order in Case No. 00-11461. The attorneys who represented Law Bulletin in the district court, Robert Kehoe, Jr. and Gene Lipscher, have also filed pro se appeals, Case Nos. 00-10370 and 00-10371, challenging sanctions the district court ordered against them personally for violation of a discovery protective order.

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Law Bulletin contends the district court erred in dismissing Counts 2 and 4 based on a finding that they were preempted by § 301 of the Copyright Act, 17 U.S.C. § 301. Law Bulletin claims the district court misconstrued its complaint in characterizing Counts 2 and 4 as resting solely on a "reverse passing off" theory. Law Bulletin asserts that these counts also encompassed claims of "acquisition misconduct" by LRP which are not preempted by the Copyright Act. Law Bulletin does not challenge the district court's finding of preemption with respect to Law Bulletin's "reverse passing off" claims in Counts 2 and 4. We believe Law Bulletin adequately pled claims of acquisition misconduct in its complaint by alleging LRP violated state law by "obtain[ing] a subscription to the Verdict Reporter by false pretense, knowing that [Law Bulletin] was willing to provide defendant LRP with a subscription only upon the safeguards described in Exhibit B [May 20, 1993 Letter]."

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The Copyright Act expressly preempts legal or equitable rights [under state law] that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103.

17 U.S.C. § 301(a). In Crow v. Wainwright, 720 F.2d 1224, 1225 -26 (11th Cir. 1983), this court recognized a two-part test to be applied in copyright preemption cases. Preemption occurs if the rights at issue (1) "fall within the 'subject matter of copyright' set forth in sections 102 and 103" and (2) "are 'equivalent to' the exclusive rights of section 106." Id.

On appeal, the parties agree the verdict reporters are not copyrightable. However, because the matter was decided on summary judgment, the district court assumed the verdict reporters satisfied the first prong based on the allegations in the complaint that the newsletters report "information in original editorial authorship that not only includes the selection, coordination, and arrangement of data that is of interest and importance to the trial bar but also includes substantial narrative authorship as to the reporting of the underlying events." In any event, we find that the first prong of the preemption test is met. The legislative history to § 301(a) states, As long as a work fits within one of the general subject matter categories of sections 102 and 103, the bill prevents the States from protecting it even if it fails to achieve Federal statutory copyright because it is too minimal or lacking in originality to qualify, or because it has fallen into the public domain.

H.R. Rep. No. 94-1476, at 131 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5747. As other circuits have recognized, one function of § 301(a) is to prevent states from giving special protection to works of authorship that Congress has decided should be in the public domain, which it can accomplish only if "subject matter of copyright" includes all works of a type covered by sections 102 and 103, even if federal law does not afford protection to them. ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1453 (7th Cir. 1996) (emphasis in original); see also Nat'l Basketball Ass'n v. Motorola, I nc., 105 F.3d 841, 849-50 (2d Cir. 1997). As the Supreme Court has noted, "it is beyond dispute that compilations of facts are within the subject matter of copyright." Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 345 (1991). Therefore, even if Law Bulletin's publications are not copyrightable, they are nevertheless within the subject matter of copyright.

We turn then to the second prong of the preemption test to determine whether Law Bulletin's acquisition misconduct claims encompass rights which are equivalent to the exclusive rights of § 106. As this circuit has recognized, "the [Copyright] Act 'preempts only those state law rights that may be abridged by an act which, in and of itself, would infringe one of the exclusive rights provided by federal copyright law.'" Foley v. Luster, 249 F.3d 1281, 1285 (11th Cir. 2001) (quoting Computer Assoc. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2d Cir. 1992)). The exclusive rights under the Copyright Act include the right to reproduce the copyrighted work, to prepare derivative works, and to distribute copies to the public. See 17 U.S.C. § 106. We employ an "extra element" test such that "if an extra element is required instead of or in addition to the acts of reproduction, performance, distribution or display, in order to constitute a state-created case of action, then the right does not lie within the general scope of copyright and there is no preemption." Foley, 249 F.3d at 1285.

As previously noted, the complaint alleged that LRP "obtained a subscription to the Verdict Reporter by false pretense, knowing that [Law Bulletin] was willing to provide defendant LRP with a subscription only upon the safeguards described in Exhibit B [May 20, 1993 Letter]." The safeguards set out in the May 20, 1993 letter are as follows:

If you are willing, however, to confirm that you would like to obtain our publication for your personal information only, and not for the purpose of copying, reproducing, or remarketing any portion of the publication or the selected information which it contains, I would be happy to enroll you as a subscriber. Please return a signed copy of this letter as confirmation of your agreement to these terms and we will add you to the subscription rolls.

Clearly the rights Law Bulletin is attempting to protect in its acquisition misconduct claims are copyright rights. Furthermore, obtaining access to a work is a necessary condition to copying it. There is no extra element which would remove Law Bulletin's acquisition misconduct claims from the general scope of copyright. The district court did not err in determining that Counts 2 and 4 of Law Bulletin's complaint were preempted.

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Count 3 of Law Bulletin's complaint alleged violations of both 15 U.S.C. § 1125(a)(1)(A) ("false designation of origin") and 15 U.S.C. § 1125(a)(1)(B) ("false advertising"). With respect to its false designation of origin claim, Law Bulletin asserts a "reverse passing off" theory, i.e., that LRP falsely held out its database as the product of its nationwide network of researchers when in fact the Illinois data had been pirated from Law Bulletin. (5) To prevail on a false designation of origin claim, a plaintiff must show it was either actually or likely to be damaged by the fact that the defendant used a "false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which [wa]s likely to cause confusion, or to cause mistake, or to deceive . . . as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person." See 15 U.S.C. § 1125(a)(1)(A).

The district court correctly granted judgment pursuant to Rule 50(a) on Law Bulletin's "reverse passing off" claim because Law Bulletin failed to present any evidence as to the likelihood of confusion, an essential element of the claim. Law Bulletin, citing Johnson v. Jones, 149 F.3d 494 (6th Cir. 1998), asserts that the likelihood of confusion is inherent given a showing that a defendant held out a plaintiff's product to be its own. Generally, courts in this circuit consider the following factors in assessing the likelihood of consumer confusion in Lanham Act trademark claims: (1) type of mark; (2) similarity of mark; (3) similarity of the products the marks represent; (3) similarity of the parties' retail outlets and customers; (5) similarity of advertising media; (6) defendant's intent; and (7) actual confusion. Frehling Enters., Inc. v. Int'l Select Group, Inc., 192 F.3d 1330, 1335 (11th Cir. 1999). While we agree with the Johnson court's observation that a "reverse passing off" claim is "slightly different from the run-of-the-mill Lanham Act case," 149 F.3d. at 503, nothing in Johnson supports a conclusion that the factors set out in Frehling Enterprises must be completely disregarded. In fact, while noting that the factors dealing with the relationship between the plaintiff's and defendant's marks were irrelevant, the Johnson court considered the similarity of products, the similarity in marketing channels, and the similarity in customers. 149 F.3d at 503. As Law Bulletin notes, the determination of likelihood of confusion is a question of fact. E. Remy Martin & Co., S.A. v. Shaw-Ross Int'l Imports, Inc., 756 F.2d 1525, 1529 (11th Cir. 1985). Nevertheless, Law Bulletin does not point to any evidence presented at trial which would show the likelihood of confusion other than the fact that LRP held out Law Bulletin's product as its own, a factor which will be present in any "reverse passing off" claim. Given this lack of evidence on an essential element, judgment as a matter of law is appropriate.

Law Bulletin's false advertising claim challenged two statements found in LRP's promotional material. The first statement was that LRP's database was "continuously updated by [its] national network of researchers." The second was, "All cases are verified with all participating attorneys." To succeed on its false advertising claim, Law Bulletin must show that it was or was likely to be damaged by the fact that LRP used a false representation of fact in commercial advertising which misrepresented "the nature, characteristics, qualities, or geographic origin of" its goods, services, or commercial activities. See 15 U.S.C. § 1125(a)(1)(B). In its motion for judgment as a matter of law, LRP asserted that Law Bulletin failed to present evidence of two essential elements - falsity and materiality. We need not address materiality, because we find Law Bulletin failed to present any evidence which would support a finding of falsity, and therefore, judgment as a matter of law is appropriate.

With respect to the first statement, that LRP's database was "continuously updated by [its] national network of researchers," Law Bulletin contends a jury could have found that LRP's updating was done by lifting case information from publications of Law Bulletin and other third-party publishers. As support, Law Bulletin points to the testimony of LRP President Kenneth Kahn who stated Law Bulletin publications were "processed as a part of putting together [LRP's] database," as well as the fact that content taken from Law Bulletin's publications could be found in LRP's database as available on Westlaw. In its reply brief, Law Bulletin states, "the reality is that LRP merely repackaged what it obtained from other publishers through false pretenses." There was, however, no evidence to that effect. There was no evidence LRP did not maintain a national network of researchers. Law Bulletin produced as an exhibit at trial a copy of one of Law Bulletin's publications that had been found in LRP's files with highlighting and handwritten notations on it, and Kahn agreed, pursuant to questioning, that LRP possessed other copies of Law Bulletin publications in a similar manner and these copies exhibited similar markings. However, the testimony at trial was that LRP did not just take the newsletters and key the entries into its computer system. Moreover, the questioning of Kahn by Law Bulletin's counsel highlighted several examples of cases in which discrepancies existed between the information as reported in Law Bulletin's publications and LRP's versions. Law Bulletin failed to present evidence which, if believed, would show LRP's database was not continuously updated by a nationwide network of researchers.

The second statement, "All cases are verified with all participating attorneys," appears only in advertisements for LRP's Personal Injury Valuation Handbook. As Law Bulletin concedes on appeal, there was no evidence presented at trial showing LRP failed to verify any of the cases in the Handbook. Law Bulletin instead asserts there was a jury question as to whether the statement applied only to the Handbook or to LRP's entire database. There was no evidence, however, from which a reasonable jury could conclude that the "All cases are verified" statement applied to the entire database. The advertisement upon which Law Bulletin most heavily relies is an advertisement for the Handbook which states, "With the handbooks you will have the most comprehensive nationwide database of personal jury verdicts, continuously updated by [LRP]'s national network of researchers. All cases are verified with all participating attorneys." Even though, as Law Bulletin points out, "[t]he statement about verification comes immediately after a statement about the database" (emphasis in original), the verification statement is a new and separate sentence. The statement was not used in promotional material for LRP's other products. (7) Law Bulletin presented no evidence linking the "All cases are verified" statement to anything other than the Handbook and has, therefore, failed to show that the second statement was false. Because both challenged statements are literally true and Law Bulletin put on no evidence to show the advertisements actually misled, deceived, or confused the consuming public, the district court correctly granted judgment as a matter of law on the false advertising claims.

Alternatively, Law Bulletin contends the Rule 50(a) judgment should be reversed because the district court erroneously restricted discovery, and as a result, Law Bulletin did not have a fair chance to marshal evidence that would have been sufficient to support its Lanham Act claims. Law Bulletin asserts LRP's "aggressive tactics and dilatory compliance successfully precluded Law Bulletin from deposing a single current LRP employee." Because of discovery disputes, the district court repeatedly extended the deadline for completing discovery. In the end, discovery was left open until the trial date, Monday, March 1, 1999. At a motions hearing on the afternoon of February 26, 1999, the parties addressed depositions of one former and several current LRP employees which were opposed by LRP. At the hearing, the district judge overruled LRP's objections, stating, "Well, we are going to trial on Monday. Take the depositions tomorrow. And I don't want anyone complaining they didn't get discovery." Law Bulletin did not move for a continuance at the hearing, but on appeal characterizes the district court's resolution as "an unrealistic mandate." On the morning of trial, counsel for Law Bulletin informed the court that the deposition of the former employee had been taken on the evening of February 26. However, counsel went on to state that no depositions had been taken of current LRP employees. Counsel requested that Law Bulletin be allowed to depose Joanne Fiore and Kenneth Kahn during breaks in the trial. The district judge responded that that would be fine, if the parties could work it out, but asked Law Bulletin, "Did you not think I was serious about my trial date? Did you wait too long?" Counsel for LRP then proceeded to detail the disputes the parties engaged in following the February 26 hearing regarding the depositions. The district judge interrupted, stating, "I don't want to hear any more of this really. I never should have let the discovery remain open until today. I just don't know what's going on in this case, but we're going to try it and get this case off the docket." LRP responded that it was ready to do that. The record does not indicate any response from Law Bulletin.

Law Bulletin contends it was an abuse of discretion for the district court not to postpone the trial to allow time for these depositions and other discovery. See Patterson v. United States Postal Serv., 901 F.2d 927, 929 (11th Cir. 1990) ("Matters pertaining to discovery are committed to the sound discretion of the district court and, therefore, we review under an abuse of discretion standard."). As previously noted, Law Bulletin did not request a continuance either at the hearing or on the morning of trial; however, Law Bulletin asserts that in light of the district court's statements, any request for a continuance would have been futile. We do not believe the district court's failure to continue the trial sua sponte constitutes an abuse of discretion. Discovery had been left open until the day of trial. At the time the district judge resolved the final discovery disputes on February 26, Law Bulletin did not inform the court that it was "unrealistic" to expect the depositions to be completed before trial. Law Bulletin never indicated that it was not prepared to go to trial on March 1; in fact, it was Law Bulletin which proposed taking the Fiore and Kahn depositions during breaks in the trial. The district court's Rule 50(a) judgment on Law Bulletin's Lanham Act claims is affirmed.

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Finally, Law Bulletin challenges the district court's nominal damage award. The district court granted summary judgment in favor of LRP on the damage issue, awarding Law Bulletin damages in the amount of $1.00. The parties agree Florida substantive law governs. Law Bulletin argues it is entitled to recover expectation damages which it characterizes as lost profits on the sales Law Bulletin could have made absent LRP's misconduct. Law Bulletin asserts that its damages should be measured by multiplying its standard fee for an online search by the number of searches conducted on the Illinois portion of LRP's database during the applicable time period. (8) In order to recover expectation damages, Law Bulletin must show the following: (1) it sustained losses as a proximate result of LRP's breach of contract, (2) the loss is not remote, contingent, or conjectural and the damages can be proven with reasonable certainty, and (3) the damages were reasonably foreseeable to LRP at the time the contracts were made. See Frenz Enters., Inc. v. Port Everglades, 746 So.2d 498, 504 (Fla. Dist. Ct. App. 1999). The district court held that Law Bulletin failed to satisfy any of the three elements. Because the district court decided the damage issue on a motion for summary judgment, we review de novo. Skurstenis v. Jones, 236 F.3d 678, 681 (11th Cir. 2000).

Under Florida law, "[i]n order to recover for lost future profits, a party must prove income and expenses of the business for a reasonable time prior to the alleged breach. If the party presents evidence only of gross receipts or fails to prove expenses with some specificity," an award of damages cannot stand. Clayton v. Howard Johnson Franchise Sys. Inc., 954 F.2d 645, 652 (11th Cir. 1992) (citations omitted). "[T]he evidence must establish lost profits with reasonable certainty such that an impartial and prudent mind would be satisfied." Id. (citations omitted). The only evidence Law Bulletin presented to show lost profits was the affidavit of Jeffery Bope, Executive Vice President of Law Bulletin. Bope's affidavit stated that, prior to 1999, Law Bulletin charged $40 per search for its online service. The fee was raised to $50 in 1999. Online customers also paid a general access fee which Bope characterized as "nominal" and, therefore, not included in Law Bulletin's damage claim. Bope stated that, at the time in question, Law Bulletin had the capability to handle all of the searches that were conducted on LRP's Illinois database without any additional expense to Law Bulletin. (9) Bope asserted the entire $40-$50 search fee would have constituted additional net profit to Law Bulletin. Law Bulletin did not present any evidence of past income or expenses for its online business. Law Bulletin refused to turn over income and expense information for its entire company based on the assertion that such was irrelevant. While the jury verdict segment represented only a small portion of Law Bulletin's business, the deposition testimony was that Law Bulletin did not keep separate information regarding net profits from the jury verdict searches. In opposing summary judgment, Law Bulletin did not produce any evidence of historical income or expenses relating to the jury verdict product, instead choosing to rely solely on the generalizations presented in Bope's affidavit. This evidence is not sufficient under Florida law to create a genuine issue of material fact as to lost profits. Summary judgment is appropriate.

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Click the case caption above for the full text of the Court's opinion.

Outcome: For the reasons stated above, the district court's order granting sanctions against Law Bulletin, Lipscher, and Kehoe is REVERSED, and this issue is REMANDED to the district court for further proceedings consistent with this opinion. The district court is AFFIRMED on all other issues. The parties shall bear their own costs.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: E-mail suggested corrections, comments and/or corrections to: Kent Morlan

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