How about some fed courts to go with your morning coffee?  The 11th Circuit addressed a couple of interesting procedural issues  in a copyright suit yesterday.

Background

Nicholson filed a copyright infringement suit against Shafe in federal court.  The N.D. Ga. granted summary judgment for Shafe on the grounds that the work at issue was a joint work, thus barring an infringement action — an individual can’t infringe their own copyright.

Nicholson then filed a state law claim for an accounting arguing that, as is customary for joint authors, she was entitled to 50% of the profits that arose from the joint work.  Why file in state court?  See Jay Dratler, Licensing of Intellectual Property:

State law governs the accounting for and sharing of profits, whether or not there is an agreement.  Therefore, in the absence of diversity of citizenship or a federal claim from which an action for apportionment can pend, a claim for a share of a co-owner’s profits must be brought in state court.  The reason is that the legal theory underlying an accounting is constructive trust or restitution under state law.  Accordingly, an action for apportionment of profits has no basis for federal jurisdiction by itself.

The state trial court concluded that the federal ruling that the work at issue was a joint work was dicta.   The state court allowed the matter of what ownership rights Nicholson had in the publication and what if any compensation she was due go to a jury.   The  jury returned a verdict in favor of Shafe, finding that Nicholson was fully compensated for her work and had no ownership rights.  The Georgia State Appellate Court affirmed,  holding that collateral estoppel didn’t apply because the federal finding on the joint work wasn’t essential to the outcome.

However, while the appeal to the Georgia state appellate court was pending,  Nicholson had filed a “Complaint for Declaratory Judgment” in the N.D. Ga. alleging two causes of action: (1) declaratory judgment to establish that the Appellants and the Appellees were “equal co-owners of the subject work” and that the Appellants were entitled to an accounting; and (2) declaratory judgment to determine the applicability of federal preemption of copyright accounting matters.

The N.D. of Ga. dismissed the action sua sponte based on lack of jurisdiction, applying the Rooker-Feldman doctrine, and ordered sanctions for costs and attorneys’ fees.

The Rooker-Feldman doctrine

The Rooker-Feldman doctrine, speaking in broad terms, bars federal district courts from reviewing state court decisions.  As the 11th Circuit explained:

Underlying the analysis in Rooker and Feldman is the interpretation of two federal statutes: 28 U.S.C. § 1331 and 28 U.S.C. § 1257. First, section 1331 provides that federal district courts “shall have original jurisdiction of all civil actions arising” under federal law, not appellate jurisdiction. 28 U.S.C. § 1331. Second, section 1257 provides for Supreme Court review of state court judgments. . .  28 U.S.C. § 1257(a). Taken together, the Rooker-Feldman doctrine draws a “negative inference” from section 1257: “because Congress only provided for review of state court judgments by the Supreme Court, Congress therefore intended to preclude lower federal courts from exercising such review.”

The Northern District of Georgia decision based on Amos

The N.D. GA. found that Nicholson was barred from proceeding in federal court by using a four-factor test from Amos v. Glynn County Bd. of Tax Assessors, 347 F.3d 1249, 1266 n.11 (11th Cir.2003).

The 11th Circuit rejection of Amos

Judges Wilson, Cox and Fawsett reversed, calling into question the continued viability of the Amos test.  Wrote Judge Wilson:

Rather than apply Amos, we adhere to the language in Exxon Mobil, delineating the boundaries of the Rooker-Feldman doctrine: “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.” Exxon Mobil, 544 U.S. at 284.  Because the Appellants commenced the federal district court action before the end of state proceedings in Georgia, we find that the Rooker-Feldman doctrine does not apply here.

Was the state court proceeding at its end?

Lastly, the 11th Circuit addressed the issue of whether the state proceeding in Georgia was already at its end:   i.e. “whether the entry of judgment on a jury verdict in a state trial court pending appeal marks the end of state proceedings for purposes of the Rooker-Feldman doctrine.”  The 11th Circuit looked for “guidance” to Federacion de Maestros de Puerto Rico v. Junta de Relaciones del Trabajo de Puerto Rico, 410 F.3d 17, 21 (1st Cir.2005), although it refrained from explicitly adopting the 1st Circuit test.

In Federacio, the First Circuit found that state proceedings have “ended” in three situations:

• (1) “When the highest state court in which review is available has affirmed the judgment below and nothing is left to be resolved”;
• (2) “If the state action has reached a point where neither party seeks further action”; (“If a lower state court issues a judgment and the losing party allows the time for appeal to expire, then the state proceedings have ended”); and,
• (3) “if the state court proceedings have finally resolved all the federal questions in the litigation, but state law or purely factual questions (whether great or small) remain to be litigated.”

The 11th Circuit found that the second situation in Federacion implies that a state proceeding has not ended when a state court loser seeks “further action,” such as an appeal.  Thus, the 11th Circuit found that the federal action for an accounting was not barred by the state action, and likewise dismissed the District Court’s order for attorneys’ fees and costs.

In conclusion, we agree with our sister circuits (the First, Eighth and Tenth Circuits) and hold that state proceedings have not ended for purposes of Rooker-Feldman when an appeal from the state court judgment remains pending at the time the plaintiff commences the federal court action that complains of injuries caused by the state court judgment and invites review and rejection of that judgment. At the time of the filing of this action, the state proceeding in the Georgia courts had not ended but remained pending on appeal and therefore Rooker-Feldman did not divest the United States District Court for the Northern District of Georgia of jurisdiction.

Documents:

Jeanette C. Nicholson, PH.D. v. James C. Shafe, 07-02724 CV-BBM, 2009 WL 385579 (11th Cir. Feb 18, 2009).