Manhattan Review, LLC v. Tracy Yun

• Court: Court of Appeals for the Second Circuit
• Decided: March 25, 2019
• Docket: 17-4046-cv
• Status: Published

Opinion

17‐4046‐cv Manhattan Review, LLC, et al. v. Tracy Yun, et al.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

August Term 2018

(Argued: October 23, 2018 Decided: March 25, 2019)

No. 17‐4046‐cv

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MANHATTAN REVIEW LLC and JOERN MEISSNER, derivatively on behalf of MANHATTAN REVIEW LLC,

Plaintiffs‐Appellants,

‐v.‐

TRACY YUN, MANHATTAN ENTERPRISE GROUP LLC, d/b/a MANHATTAN ELITE PREP, and CHRISTOPHER KELLY,

Defendants‐Appellees.1

Before: LIVINGSTON and LOHIER, Circuit Judges, and CROTTY, District Judge.2

Plaintiffs‐Appellants Manhattan Review LLC and Joern Meissner appeal the district court’s judgment granting attorneys’ fees and costs to Defendants‐

The Clerk of Court is respectfully instructed to amend the caption as set forth 1

above. Judge Paul A. Crotty, of the United States District Court for the Southern District 2

of New York, sitting by designation.

1 Appellees Manhattan Enterprise Group LLC and Christopher Kelly pursuant to section 505 of the Copyright Act, 17 U.S.C. § 505, and section 35(a) of the Lanham Act, 15 U.S.C. 1117(a). Each of those provisions authorizes the district court to award fees to the “prevailing party” in a lawsuit. Plaintiffs‐Appellants sued Defendants‐Appellees for violations of the Copyright and Lanham Acts, but Defendants‐Appellees obtained a dismissal of Plaintiffs‐Appellants’ complaint on collateral estoppel grounds. We hold that Defendants‐Appellees meet the definition of “prevailing party” under both fee‐shifting provisions. Accordingly, the judgment of the district court is AFFIRMED.

FOR PLAINTIFFS‐APPELLANTS: THOMAS P. HIGGINS, Higgins & Trippett LLP, New York, NY.

FOR DEFENDANTS‐APPELLEES: TRACY YUN, New York, NY, pro se.

JUSTIN KUEHN, Moore Kuehn, PLLC, New York, NY, for Manhattan Enterprise Group, LLC, d/b/a Manhattan Elite Prep.

CHRISTOPHER KELLY, New York, NY, pro se.

PER CURIAM:

Plaintiffs‐Appellants Manhattan Review LLC (“Manhattan Review”) and

Joern Meissner (“Meissner”) appeal the judgment of the district court (Kaplan, J.;

Francis, M.J.) granting attorneys’ fees and costs to Defendants‐Appellees

Manhattan Enterprise Group LLC, d/b/a Manhattan Elite Prep (“Manhattan

Enterprise”), and Christopher Kelly (“Kelly”) pursuant to section 505 of the

Copyright Act, 17 U.S.C. § 505, and section 35(a) of the Lanham Act, 15 U.S.C. §

1117(a). A separate summary order filed simultaneously with this opinion

2 addresses the balance of Plaintiffs‐Appellants’ arguments on appeal. This

opinion addresses Plaintiffs‐Appellants’ argument that Defendants‐Appellees do

not meet the definition of a “prevailing party” under section 505 of the Copyright

Act or section 35(a) of the Lanham Act. We reject that argument and hold that

Defendants‐Appellees do meet the definition of a “prevailing party” under those

provisions.

Background

This appeal concerns litigation over the corporate status of Manhattan

Review, a test preparation business formed by Meissner and Defendant‐Appellee

Tracy Yun (“Yun”) in March 2005. See Manhattan Review LLC v. Yun (“Manhattan

Review I”), No. 16 Civ. 102, 2016 WL 6330474, at *1 (S.D.N.Y. Aug. 15, 2016), report

and recommendation adopted, 2016 WL 6330409 (S.D.N.Y. Oct. 26, 2016). In 2011,

after a falling‐out between Yun and Meissner, Yun allegedly formed Manhattan

Enterprise as a competitor to Manhattan Review. See Manhattan Review LLC v.

Yun (“Manhattan Review II”), No. 16 Civ. 102, 2017 WL 1330334, at *1 (S.D.N.Y.

April 10, 2017), report and recommendation adopted, 2017 WL 3034350 (S.D.N.Y. July

17, 2017). In operating Manhattan Enterprise, Yun allegedly used Manhattan

Review’s assets and intellectual property, including trademarks and copyrighted

3 test preparation materials, without Meissner’s consent. In December 2011, Yun

also filed a Certificate of Cancellation of Manhattan Review’s status as an LLC

with the Delaware Secretary of State.

In March 2012, Meissner, individually and derivatively on behalf of

Manhattan Review, sued Yun and Manhattan Enterprise in New York state court

on various state law claims. The court initially dismissed Meissner’s derivative

claims due to the outstanding Certificate of Cancellation, holding that Meissner

could not sue on behalf of Manhattan Review given its cancelled status. Seeking

to rehabilitate those claims, Meissner filed a Certificate of Correction with the

Delaware Secretary of State, challenging the validity of Yun’s Certificate of

Cancellation. After obtaining a Certificate of Good Standing for Manhattan

Review, Meissner filed a motion to vacate the state court’s dismissal of the

derivative claims. The state court denied that motion on the ground that

Meissner had not shown that issuance of the Certificate of Good Standing effected

a nullification of the Certificate of Cancellation.3

That order has subsequently been affirmed on appeal. Meissner v. Yun, 150 3

A.D.3d 455, 55 N.Y.S.3d 163 (1st Dep’t 2017).

4 In January 2016, Plaintiffs‐Appellants Manhattan Review and Meissner

(suing only derivatively on his company’s behalf) filed suit in federal court against

Defendants‐Appellees Yun, Manhattan Enterprise, and Kelly. Plaintiffs‐

Appellants’ First Amended Complaint alleged, inter alia, copyright infringement

pursuant to section 501 of the Copyright Act, 17 U.S.C. § 501, trademark

infringement pursuant to section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and

various state law causes of action. Defendants‐Appellees moved to dismiss the

First Amended Complaint, arguing, inter alia, that Plaintiffs‐Appellants lacked

standing to assert their claims. The magistrate judge recommended dismissing

certain state law claims and allowing Plaintiffs‐Appellants to amend their

complaint. The district court adopted those recommendations on October 26,

2016, see Manhattan Review I, 2016 WL 6330409, at *1, and Plaintiffs‐Appellants filed

a Second Amended Complaint repleading their Copyright Act and Lanham Act

claims. None of Plaintiffs‐Appellants’ three complaints mentioned the prior state

court action.

Defendants‐Appellees moved to dismiss the Second Amended Complaint.

They argued that the state court orders precluded Plaintiffs‐Appellants from

bringing their federal suit. The magistrate judge agreed, holding that the “state

5 court[‘s] determin[ation] that the Certificate of Good Standing was not a proper

nullification of the Certificate of Cancellation” was “decisive of Manhattan

Review’s capacity to bring direct claims as well as Dr. Meissner’s capacity to bring

derivative claims.” Manhattan Review II, 2017 WL 1330334, at *6. Because

Plaintiffs‐Appellants had received a full and fair opportunity to litigate that

question in state court, collateral estoppel barred their claims. Id. at *7. On July

17, 2017, the district court adopted the magistrate judge’s recommendations to

dismiss the Second Amended Complaint and deny Plaintiffs‐Appellants leave to

file a third amended complaint. See Manhattan Review II, 2017 WL 3034350, at *1.4

Defendants‐Appellees then sought an award of attorneys’ fees pursuant to

section 505 of the Copyright Act and section 35(a) of the Lanham Act. The

magistrate judge recommended granting Defendants‐Appellees’ motion in part

and awarding Defendants‐Appellees $48,160.50 in attorneys’ fees and $593.54 in

costs. On December 5, 2017, the district court adopted that recommendation in

its entirety. Plaintiffs‐Appellants timely appealed the district court’s award of

fees.

Plaintiffs‐Appellants appealed the district court’s order, but subsequently 4

withdrew their appeal.

6 Discussion

Both the Copyright Act and the Lanham Act authorize district courts to

award attorneys’ fees to the “prevailing party” in a lawsuit. See 17 U.S.C. § 505;

15 U.S.C. § 1117(a). A district court’s decision to award attorneys’ fees under the

Copyright Act or the Lanham Act is reviewed for abuse of discretion. See

Matthew Bender & Co. v. West Publ’g Co., 240 F.3d 116, 121 (2d Cir. 2001) (Copyright

Act); Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 194 (2d Cir. 1996) (Lanham

Act). Whether a litigant qualifies as a “prevailing party” constitutes a question

of law warranting de novo review. See Preservation Coal. of Erie Cty. v. Fed. Transit

Admin., 356 F.3d 444, 450 (2d Cir. 2004).

“Prevailing party” carries a consistent definition across the federal fee‐

shifting statutes. See Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health &

Human Res., 532 U.S. 598, 603 n.4 (2001). A “prevailing party” in a fee‐shifting

statute is “one who has favorably effected a ‘material alteration of the legal

relationship of the parties’ by court order.” Garcia v. Yonkers Sch. Dist., 561 F.3d

97, 102 (2d Cir. 2009) (quoting Buckhannon, 532 U.S. at 604). Not only must the

party seeking fees “achieve some ‘material alteration of the legal relationship of

7 the parties,’ but that change must also be judicially sanctioned.” Roberson v.

Giuliani, 346 F.3d 75, 79 (2d Cir. 2003) (quoting Buckhannon, 532 U.S. at 604).

Plaintiffs‐Appellants argue that Defendants‐Appellees do not meet the

definition of “prevailing party” because they obtained a dismissal of Plaintiffs‐

Appellants’ complaint solely on collateral estoppel grounds. See Manhattan

Review II, 2017 WL 1330334, at *7. We reject that argument. As the magistrate

judge properly recognized in considering Defendants‐Appellees’ fee request,

“Manhattan Review, in its present form, is [now] incapable of maintaining an

action” against Defendants‐Appellees. Sp. App. 17. That result constitutes a

“material alteration of the legal relationship of the parties,” Buckhannon, 532 U.S.

at 604, because Defendants‐Appellees are no longer suable by Plaintiffs‐

Appellants. Accordingly, we hold that Defendants‐Appellees qualify as a

“prevailing party” under both section 505 of the Copyright Act and section 35(a)

of the Lanham Act.

Plaintiffs‐Appellants contest this determination principally by arguing that

a “prevailing party” must have obtained at least some relief on the merits of her

claim. That argument is foreclosed by recent Supreme Court precedent. In

CRST Van Expedited, Inc. v. E.E.O.C., 136 S. Ct. 1642 (2016), the Supreme Court held

8 that “a defendant need not obtain a favorable judgment on the merits in order to

be a ‘prevailing party.’” Id. at 1651. The Court reasoned that a defendant has

“fulfilled its primary objective whenever the plaintiff’s challenge is rebuffed,

irrespective of the precise reason for the court’s decision,” and that therefore “[t]he

defendant may prevail even if the court’s final judgment rejects the plaintiff’s

claim for a nonmerits reason.” Id. Here, Defendants‐Appellees have “fulfilled

[their] primary objective” by obtaining a dismissal of Plaintiffs‐Appellants’

complaint on collateral estoppel grounds. Id. That the district court did not

reach the merits of Plaintiffs‐Appellants’ Copyright Act and Lanham Act claims

does not affect the analysis.

Ten years before CRST, we held in Dattner v. Conagra Foods, Inc., 458 F.3d 98

(2d Cir. 2006) (per curiam), that a defendant who had obtained a dismissal on

forum non conveniens grounds was not a prevailing party because the plaintiff could

pursue his claims against the defendant in another forum. Id. at 103. Whatever

the ongoing vitality of that holding in the wake of CRST, it has no application to

the circumstances before us today. As the magistrate judge aptly noted,

Manhattan Review cannot immediately re‐file suit against Defendants‐Appellees

in another forum, but must instead proceed to the Delaware Court of Chancery if

9 it wants to remove the impediment to its ability to sue. The circumstances of a

forum non conveniens dismissal, following which a plaintiff can immediately

proceed in a more convenient forum, are therefore inapposite.

* * *

The remaining issues presented in this appeal are resolved by a separate

summary order filed simultaneously with this opinion. For the reasons stated

above and for the reasons stated in that order, the judgment of the district court is

AFFIRMED.