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Redwall Live Corporation v. ESG Security, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

February 24, 2015

REDWALL LIVE CORPORATION, Plaintiff,
v.
ESG SECURITY, INC., Defendant.

ORDER ON MOTIONS TO DISMISS

SARAH EVANS BARKER, District Judge.

This cause is before the Court on two motions: (1) Plaintiff Redwall Live Corporation's Voluntary Motion to Dismiss [Docket No. 40], filed on July 18, 2014 pursuant to Federal Rule of Civil Procedure 41; and (2) Defendant ESG Security, Inc.'s Motion to Dismiss [Docket No. 41], filed on July 29, 2014 pursuant to Federal Rules of Civil Procedure 12(b)(6) and 41.[1] For the reasons and in the manner explained below, the motions are GRANTED-partly with prejudice and partly without prejudice.

Factual and Procedural Background

Plaintiff Redwall Live Corporation ("Redwall") is an Indianapolis consulting and design services firm engaged in the business of "strategic branding" and advertising. Am. Compl. ¶¶ 5, 7. Defendant ESG Security ("ESG"), also based in Indianapolis, provides security services and professional staff in the entertainment and hospitality industries. Id. at ¶ 6.

In June 2012, ESG engaged Redwall to "revamp its brand." Id. at ¶ 8. Pursuant to this contract, on which ESG made a $6500 down payment in July 2012, Redwall began preparing design for a new corporate logo and other imagery that was to appear on business cards, letterhead, envelopes, a new website, and promotional materials like printed brochures. Id. at ¶¶ 10-12, 16. By October 2012, ESG had approved Redwall's preliminary design concepts for a new website, letterhead, and envelope designs. Id. at ¶¶ 17-19. These design concepts never reached the final stage, however, because around November 2012 ESG stopped accepting deliverables from Redwall; Redwall maintains that at the time that the contractual relationship broke down, "nearly all of the agreed upon items from the comprehensive design plan [had been] completed by Redwall and... only a few approvals from ESG [were] outstanding." Id. at ¶ 21. According to Redwall, a balance of $12, 543.97 remains unpaid for its services rendered to ESG. Id. at ¶ 29.

ESG asserts that it began using the new corporate logo devised by Redwall-referred to by Redwall as the "Derivative Work"- shortly after it was delivered in the fall of 2012. Docket No. 42 at 2 (citing Docket No. 30, Exs. D, E). Some six months later, in May 2013, Redwall registered the Derivative Work as Registration No. VA1-874-872 with the United States Copyright Office. Am. Compl. ¶ 25. Redwall registered a variation on this design (as the "Third Derivative Work") around the same time. Id. at 26.

Redwall filed suit against ESG on November 25, 2013, asserting a copyright infringement claim under federal law, as well as state-law contract and unjust enrichment claims. See Docket No. 1. After ESG sent Redwall a letter asserting that the copyright claim lacked a viable basis because the material in question had been produced for hire and delivered to ESG, Redwall filed a supplementary registration with the Copyright Office in January 2014 to identify the Derivative Work and Third Derivative Work as, jointly, constituting a "derivative work or compilation" based on the ESG logo. Id. at 27; Docket No. 42 at 2. In exchanges of documents pursuant to this suit, Redwall has asserted that it never delivered a "final" logo to ESG, that the company never intended to deliver such a logo, and that any delivery that did occur was unauthorized by the company. In response, ESG has pointed to evidence that Redwall did, in fact, deliver a logo to ESG in a number of formats-and never communicated to ESG that it had any intention of placing restrictions on the logo's use. See Docket No. 42 at 3.

After the Court granted it leave to do so, Redwall filed an Amended Complaint on April 8, 2014. While discovery was still in its initial stages and before either party had moved for summary judgment, however, Redwall moved for voluntary dismissal of the action without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(2). Docket No. 40. Shortly thereafter, ESG moved to dismiss the Amended Complaint with prejudice or, in the alternative, without prejudice upon the condition that Defendant be awarded attorneys' fees. Docket No. 41.

Legal Analysis

The most salient feature of the parties' motions is that they desire the same outcome: the dismissal of Redwall's Amended Complaint. Their remaining disagreements concern how the Court should do so, and why.

Redwall seeks voluntary dismissal-without prejudice-under Rule 41. In doing so, it explains that the suit is simply no longer worth pursuing, and it draws a distinction between its federal and state claims. Redwall explains its motives thus: "Although Redwall filed claims for copyright infringement, it principally wanted to be paid for the services it had rendered to ESG, including development of ESG's new logo and website, and if it wasn't going to receive payment, Redwall wanted ESG to stop using Redwall's copyrighted works." Pl's Br. ¶ 8. Since ESG has not proved cooperative in resolving the matter to its satisfaction, Redwall now asserts that the game is not worth the candle. "Redwall has determined that, regardless of the merits of its claims, it does not make economic sense to continue to pursue its action against ESG. The amount of money involved is not significant... and the amount of legal fees incurred and that will continue to be incurred do not justify continuing.... The only beneficiaries from continuing this litigation are the lawyers." Id. at ¶ 11.

ESG is not content to let the matter rest so easily. "Because Redwall sought statutory damages, injunctive relief, and attorneys' fees under the Copyright Act, " ESG asserts, ESG "incurred substantial expense in preparing its defenses and counterclaims.... ESG is entitled to be compensated for the unnecessary expenses it has incurred to defend itself against Redwall's claims, which it now states are not worth pursuing." Docket No. 42 at 5. ESG therefore contends that the Amended Complaint should be dismissed with prejudice, rendering ESG the prevailing party under Section 505 of the Copyright Act and enabling it to collect reasonable attorneys' fees to make it whole for its unnecessary expense. Id. at 11.

Two threads emerge from these conflicting arguments. First, Redwall seeks to escape from court; while implicitly conceding the groundlessness of its copyright claim, it nonetheless seeks to preserve for itself the option of bringing its state-law contract claims in state court. Second, ESG demands recompense for its trouble in defending a copyright claim that, it insists, was futile from the beginning. We believe that the parties' desires can be partially reconciled, and the interests of justice and judicial efficiency best served, by granting each party's motion in part. As we explain further below, we therefore grant ESG's motion for ...


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