Appellate Review of Decisions under Rule 56(h) (Bad Faith Affidavit on Summary Judgment) = Abuse of Discretion

Olem Shoe Corp. v. Washington Shoe Corp., 2015 U.S. App. LEXIS 434 (11th Cir. Jan. 12, 2015):

In this copyright case, Washington Shoe Company1 seeks reversal of the District Court's summary judgment ruling that Olem Shoe Corporation did not willfully infringe its copyrights. By its cross-appeal, Olem seeks reversal of the Court's holding that it infringed Washington Shoe's copyrights, although not willfully. Olem also asserts that the District Court abused its discretion by denying its Rule 60(b)(3) motion for relief from the judgment and its related Rule 56(h) motion for sanctions.

Because we find no error in the District [*2]  Court's holdings, we affirm.

I.

Washington Shoe designs and sells women's rain boots, including the Zebra Supreme boots and the Ditsy Dots boots. In the Fall of 2009 and early 2010, counsel for Washington Shoe sent Olem cease-and-desist letters claiming infringement of copyrights for the designs of Washington Shoe's Zebra Supreme and Ditsy Dots boots. Although the letters were accompanied by photographic representations of the boots, they did not identify, by registration number, the copyrighted designs themselves. After receiving the first letter, Olem contacted its intellectual property counsel, who then wrote Washington Shoe's counsel attempting to identify the designs that Washington Shoe claimed to have copyrighted:

With respect to the merits of your client's claims, however, you have provided us very little information to assess them and advice [sic] our client. While you have enclosed to your letter four pictures, there is little else. For example, we do not have a copyright certificate under which you would be claiming your client's exclusive copyright rights nor a description of the features of the alleged product trade dress that have acquired secondary meaning and thus become protectable.

We will appreciate receiving more information regarding your client's claims so we can formulate a meaningful response to your letter.

On November 9, 2009, Olem received a response from Washington Shoe identifying the copyright registration certificate number only for the Ditsy Dots design. Absent from the response [*4]  was a sample of the copyrighted design. "In abundance of caution," Olem cancelled a shipment of its polka dotted boots and then, after identifying "a zebra-like stripe boot design from the same supplier that had supplied [its] polka dots boot design," and "to prudently avoid problems, Olem voluntarily stopped selling [its] zebra-like stripe boot design." After learning that the United States Copyright Office could not locate the work submitted with the application for the Ditsy Dots design copyright registration, Olem filed an action for a declaration of non-infringement of copyrights and Washington Shoe counterclaimed to obtain relief for copyright infringement and other state and federal claims. Thereafter, on November 10, 2010, Washington Shoe filed corrective supplementary copyright registrations to address issues raised by Olem, and by an advisory opinion issued by the Copyright Office, with respect to both the Ditsy Dots and Zebra Supreme designs.

On summary judgment, the District Court dismissed all claims against Olem except for those for copyright infringement. As to those claims, the Court granted summary judgment to Washington Shoe [*5]  for copyright infringement, but granted summary judgment to Olem on Washington Shoe's claims of willful copyright infringement. Following a trial on damages, the jury returned a verdict in Washington Shoe's favor for $27,395.40, of which $6,334.34 was for infringement of the Zebra Supreme work and the remainder was attributable to infringement of the Ditsy Dots design.

Washington Shoe appealed the judgment to this Court and Olem cross-appealed. While the appeals were pending, Olem filed its motions for relief from the judgment and for sanctions. The appeals were then stayed pending the outcome of Olem's motions. The District Court denied Olem's motions on September 16, 2013, Olem appealed that denial on October 15, 2013,3 and the stay was lifted on October 18, 2013. On November 12, 2013, Olem moved to consolidate its appeals. On November 27, 2013, the motion was granted and the appeals were consolidated.

***

When determining that Olem had access to Washington Shoe's designs, the District Court considered and relied on the "evidence of wide dissemination" presented by Washington Shoe in the sworn statements. The District Court noted that, by the sworn statements, Washington Shoe had offered testimony that the "'Ditsy Dots and Zebra Supreme [boots had] been a huge commercial success, selling at national retailers such as Target stores[,]' and [that] Zebra Supreme boots [had] been available in Target stores 'for years.'" For Olem, it was the finding of access, through sales at Target stores, that led the District Court to find copyright infringement of Washington Shoe's Zebra Supreme boot design.

By its Rule 60(b)(3) and 56(h) motions, Olem claimed that, by presenting testimony in the form of sworn statements that the Zebra Supreme boots had been sold "in Target® stores for years," Washington Shoe had intentionally and fraudulently made misrepresentations to the District Court in bad faith and that those [*24]  misrepresentations had "singularly permitted the [District] Court to find access based upon wide dissemination." Olem argued that, as a result of Washington Shoe's misrepresentations, it was entitled to relief from the final judgment and the summary judgment orders, and it further sought sanctions, including attorney's fees and costs, dismissal of Washington Shoe's copyright claims, and entry of judgment in its favor.11

The District Court referred Olem's motions to a Magistrate Judge who held a non-evidentiary hearing and issued a report and recommendation. The Magistrate Judge found "no evidence of a deliberate scheme by Washington Shoe to . . . create [a] misrepresentation." Nonetheless, the Magistrate Judge recommended that the District Court review its summary judgment ruling to determine if the record supported a finding of wide dissemination.

After receiving the Magistrate Judge's report and recommendation, the District Court considered Olem's Rule 60(b)(3) and Rule 56(h) motions. Importantly, in its opinion, [*25]  the District Court, in addition to deciding these motions on their own, treated them as a motion to reconsider its initial summary judgment opinion. Thus, the District Court took another look at the reasons for its finding that Olem had infringed Washington Shoe's copyrights.

In doing so, the District Court first noted that it continued to find access based on wide dissemination. As to Olem's misrepresentation claims with respect to the availability of the Zebra Supreme design "for years," the District Court found that a purchase order was "indicative of a sale date prior to . . . September 28, 2009"12 and, because the sworn statements were dated March 11, 2010 and March 7, 2011, it was at least some evidence that the "for years" statement was not false. The Court also addressed the alleged misrepresentation regarding Target stores, and found that, "[a]lthough the Zebra Supreme boot was not available at Target brick-and-mortar stores, . . . there was access through wide dissemination based on the availability of the Zebra Supreme boot at Target.com." Thus, the District Court reaffirmed its finding of access.

***

C.

Although we have not previously stated the appropriate standard of review for the denial of a Rule 56(h) motion for sanctions, other courts have applied an abuse of discretion standard in this context. See, e.g., Hunt v. Branch Banking & Trust Co., 480 F. App'x 730, 732 (4th Cir. 2012) (citing Miltier v. Beorn, 896 F.2d 848, 855 (4th Cir. 1990)). Further, we review decisions concerning other Rule 56 motions for abuse of discretion. Jackson v. Cintas Corp., 425 F.3d 1313, 1316 (11th Cir. 2005) (citing Fla. Power & Light Co. v. Allis Chalmers Corp., 893 F.2d 1313, 1315 (11th Cir. 1990)) (applying abuse of discretion standard to denial of discovery under [*36]  Rule 56(f)). Thus, the denial of Olem's Rule 56(h) motion for sanctions will be reviewed for an abuse of discretion.

We find that the District Court did not abuse its discretion by declining to impose sanctions on Washington Shoe because the Court reasonably concluded, based on evidence presented by Washington Shoe, that Olem had not conclusively proven that the "for years" statement was false. Additionally, although the "Target stores" statements turned out to be false, the District Court reasonably exercised its discretion in concluding that the statements had not been submitted in bad faith and that there was access to the Zebra Supreme design through the availability of the Zebra Supreme boot at Target.com. Accordingly, we affirm the District Court's denial of Olem's Rule 56(h) motion for sanctions.

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