Alliance for Water Efficiency v. James Fryer , 892 F.3d 280 ( 2018 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17-1326
ALLIANCE FOR WATER EFFICIENCY,
Plaintiff-Appellee,
v.
JAMES FRYER,
Defendant-Appellant.
____________________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 14 C 115 — Jeffrey Cole, Magistrate Judge.
____________________
ARGUED NOVEMBER 9, 2017 — DECIDED JUNE 5, 2018
____________________
Before RIPPLE, MANION, and SYKES, Circuit Judges.
SYKES, Circuit Judge. James Fryer and the Alliance for
Water Efficiency set out to produce a study about drought.
Unfortunately, the collaboration ran dry, and the Alliance
sued Fryer under the Copyright Act, 17 U.S.C. §§ 101 et seq.
The lawsuit proved to be far less troublesome than the
ensuing settlement. While the parties were supposed to part
ways and publish their own reports, they instead find them-
selves in the fourth year of protracted litigation.
2 No. 17-1326
The parties’ disputes center on their obligations under
the settlement. Years ago the district court ordered Fryer to
turn over certain data sets to the Alliance and refrain from
acknowledging a number of organizations in his study. On
appeal we reversed solely on the acknowledgment issue.
Alliance for Water Efficiency v. Fryer, 808 F.3d 1153 (7th Cir.
2015). Fryer then returned to the district court and sought
restitution for injuries caused by the court’s erroneous
injunction. He also moved for attorney’s fees under § 505 of
the Copyright Act for having prevailed in the first appeal. A
magistrate judge denied both motions and Fryer appealed.
We affirm. Fryer does not present genuine claims for res-
titution; he seeks to relitigate unrelated claims for breach of
the settlement. His request for attorney’s fees is also unsuc-
cessful because he did not prevail on the Alliance’s copyright
claim as § 505 requires. The parties compromised their
positions, obtained some relief, and walked away from the
underlying lawsuit. At no time has any court entered judg-
ment on the Alliance’s copyright claim.
I. Background
In 2011 James Fryer and the Alliance for Water Efficiency
began to collaborate on a report about the economic effects
of drought in the western United States. The Alliance agreed
to corral funding and other organizations to support the
project, and Fryer led the research team to produce the
study. Both sides carried out their respective duties for a
time. The Alliance amassed a number of funders and spon-
sors, and Fryer collected and analyzed reams of data from
various public water utilities.
No. 17-1326 3
Regrettably, the partnership collapsed. In April 2013
Fryer circulated a draft of the report, but the Alliance ex-
pressed concern with the analysis and methodology. Months
of negotiations ensued and the parties were still unable to
resolve their differences. As a result, the Alliance sought to
remove Fryer from the study and continue on without him.
Fryer strongly objected. He claimed sole ownership of the
report and refused to turn over his work product, including
the underlying data he had collected.
The Alliance responded in federal court and sued Fryer
under the Copyright Act, alleging it was the rightful owner
of both the report and the utility data under the “work made
for hire” doctrine. See Billy–Bob Teeth, Inc. v. Novelty, Inc.,
329 F.3d 586, 591 (7th Cir. 2003). Fryer moved to dismiss, but
the district court never had occasion to issue a ruling. The
parties reached an oral settlement in a hearing before a
magistrate judge on March 13, 2014. Now more than four
years later and on their second appeal, the parties continue
to litigate their obligations under the agreement.
The settlement’s provisions are cobbled together from a
hearing transcript. Three of them are relevant here. First,
Fryer agreed to turn over his data sets from the public
utilities in exchange for $25,000. If any utility had disclosed
its data pursuant to a confidentiality agreement, the Alliance
was required to secure a release before Fryer had to comply.
Second, Fryer was allowed to publish his own report, but he
could not acknowledge the Alliance’s involvement. The
Alliance was similarly permitted to issue its own study so
long as it didn’t mention Fryer or the California Department
of Water Resources. Third, the parties agreed to enter a joint
stipulation to dismiss the Alliance’s suit with prejudice upon
4 No. 17-1326
“execution” of the settlement. But because the parties have
litigated virtually nonstop ever since, they have not yet
entered this stipulation. The district court where this suit
was first filed has continued to exercise jurisdiction over the
case.
Over the next several months, both sides thought the
other was shirking its duties under the settlement. Fryer
refused to turn over data he acquired from the City of Santa
Rosa, California, because the Alliance hadn’t yet secured the
relevant release. The Alliance disagreed and demanded the
data because the City had never negotiated a confidentiality
agreement. Fryer also sought to acknowledge sponsors other
than the Alliance in his report, but this time the Alliance
refused to play ball. It had originally recruited these organi-
zations and was worried their support could imply the
Alliance’s tacit approval of Fryer’s project. Fryer found this
concern to be beside the point. He had agreed to omit men-
tion of the Alliance, not anyone else. Fryer further claimed
he never would have agreed to a broad nondisclosure term.
As a matter of academic integrity, he believed his report was
unpublishable without recognizing these organizations.
The parties were unable to resolve these disputes and en-
tered motions to enforce the settlement before the magistrate
judge. The judge ruled in favor of the Alliance on both
issues. He concluded that the Alliance was entitled to the
Santa Rosa data and that Fryer was bound by the settlement
to refrain from acknowledging the disputed organizations
unless they contacted him first and asked to be recognized.
The ruling was memorialized in an opinion on October 22,
2014, and final judgment was entered on January 7, 2015.
No. 17-1326 5
Fryer promptly appealed to this court. At oral argument
we noted that the magistrate judge’s January 2015 order did
not satisfy the requirements for an injunction under
Rule 65(d)(1) of the Federal Rules of Civil Procedure. Rather
than “state its terms specifically” and “describe in reasona-
ble detail … the acts restrained or required,” FED. R. CIV.
P. 65(d)(1), the order simply instructed the parties to comply
with the October 2014 opinion. The parties accordingly
returned to the magistrate judge to express our concern, and
he entered a formal injunction. He ordered Fryer to refrain
from acknowledging or even contacting the disputed organ-
izations unless they reached out to him first. The judge then
required the Alliance to pass along Fryer’s contact infor-
mation so the organizations could get in contact and assent
to acknowledgement if they wished. Surprisingly, the in-
junction made no mention of the Santa Rosa data.
We therefore limited our review to the acknowledgement
issue and reversed the magistrate judge in a December 2015
opinion. First, we concluded that the Alliance’s underlying
copyright claim did not confer federal-question jurisdiction
because it was so poorly pleaded. The Alliance did not allege
the necessary predicate of a work-made-for-hire claim: that
the disputed work product was “either the output of an
employee” or “produced under a written instrument … that
[says] the work shall be considered a work made for hire.”
Alliance for Water Efficiency, 808 F.3d at 1156 (internal quota-
tion marks omitted). Nonetheless, we concluded that subject-
matter jurisdiction was secure under the diversity jurisdic-
tion: diverse parties presented a contract dispute that ex-
ceeded the amount-in-controversy requirement. We then
moved to the merits. In our view the March 2014 oral settle-
ment was plain. Fryer had agreed to forgo acknowledging
6 No. 17-1326
the Alliance and no one else. He was free to mention any
other funder or sponsor.
Fast forward to this appeal. Fryer was not content to win
his case and publish his report as he desired. Rather he went
back to the magistrate judge to request restitution for inju-
ries allegedly caused by the erroneous injunction. He also
sought attorney’s fees under § 505 of the Copyright Act for
having prevailed in the previous appeal. The judge was
unpersuaded and denied Fryer’s motions for restitution and
attorney’s fees. Fryer now appeals.
II. Discussion
Our review is limited. We set aside a ruling on a motion
for restitution only if the judge abused his discretion. See
Miles v. Indiana, 387 F.3d 591, 598 (7th Cir. 2004). The same is
true of a decision to deny attorney’s fees. See Budget Cinema,
Inc. v. Watertower Assocs., 81 F.3d 729, 731 (7th Cir. 1996). “An
abuse of discretion occurs if the district court reaches erro-
neous conclusions of law or premises its holding on a clearly
erroneous assessment of the evidence.” Gastineau v. Wright,
592 F.3d 747, 748 (7th Cir. 2010) (internal quotation marks
omitted).
A. Restitution
District courts are overturned now and again. When that
happens, the victorious appellant might seek to recover what
he lost while living under an erroneous judgment. In some
circumstances, federal law provides a restitutionary remedy.
District courts can order restitution “so far as possible to
correct what has been wrongfully done.” Baltimore & O.R.
Co. v. United States, 279 U.S. 781, 786 (1929). This is “one of
the equitable powers[] inherent in every court of justice.”
No. 17-1326 7
Arkadelphia Milling Co. v. St. Louis Sw. Ry. Co., 249 U.S. 134,
145–46 (1919).
Restitution is a limited form of relief, though. The court
simply returns to the appellant what the appellee gained by
virtue of the now-vacated order. See id. at 145 (“[A] party
against whom an erroneous judgment or decree has been
carried into effect is entitled … to be restored by his adver-
sary to that which he has lost thereby.”); Thomas v. UBS AG,
706 F.3d 846, 853 (7th Cir. 2013) (noting restitution is appro-
priate when “the defendant has received something that of
rights belongs to the plaintiff”). This is not an opportunity to
relitigate grievances unrelated to what was incorrectly
decided.
Yet that’s exactly what Fryer endeavors to achieve here.
He has gussied up unrelated contract disputes in a motion
for restitution and thus seeks relief beyond what we have
power to give. And even if we overlooked this fatal flaw,
Fryer’s claims are dubious and unsubstantiated. The magis-
trate judge did not abuse his discretion when he rejected
these arguments and denied the motion for restitution.
Fryer’s first argument relies heavily on the timeline of
this litigation. He claims he was ready to publish his report
sometime in 2014, but he was barred from doing so until we
reversed the injunction in December 2015. This gave the
Alliance over a year to publish its report without any compe-
tition, and it ultimately did so in late July 2015. Fryer now
seeks over $105,000 in “restitution” for having lost the
opportunity to publish his report first.
This is not a genuine claim for restitution. The magistrate
judge did not prohibit Fryer from publishing his report; we
8 No. 17-1326
certainly never identified or addressed such an order on
appeal. The injunction below merely instructed Fryer to
forgo certain acknowledgments if he decided to issue his
study. If Fryer lost anything, it was the right to publish a
report with various acknowledgments for much of 2015.
That can’t be the basis for restitution. Setting aside
Fryer’s failure to address this point, it’s entirely speculative
what the Alliance might have gained because of the injunc-
tion. See TAS Distrib. Co. v. Cummins Engine Co., 491 F.3d 625,
631 n.8 (7th Cir. 2007). A determination of that sort would
require us to evaluate a counterfactual: a world in which
Fryer published his report and the Alliance was conferred
some comparative advantage by virtue of weakened compe-
tition. But all we have is the Alliance’s publication and
Fryer’s silence. Perhaps the Alliance reaped an even greater
benefit as a result, but we cannot redress Fryer’s self-inflicted
wound. See Moran Foods, Inc. v. Mid-Atl. Mkt. Dev. Co., LLC,
476 F.3d 436, 440 (7th Cir. 2007).
Fryer continues to resist the premise rather than dispute
the conclusion. He argues that even if he was never barred
from publishing his study, we should construe the injunc-
tion to be an equally weighty practical impediment to publi-
cation. We decline to do so. Fryer’s primary “evidence” to
support this contention is a series of citations to his own
declaration in which he repeatedly affirms that undefined
“principles” of academic scholarship did not allow him to
publish a report without recognizing its funding and spon-
sorship. Whether or not this is correct, it doesn’t make much
of a difference. The injunction’s scope was limited. It created
a modest opt-in regime where the Alliance passed along
Fryer’s contact information and Fryer could acknowledge
No. 17-1326 9
any organization that asked to be mentioned. It is difficult to
see this as an insuperable obstacle to publication, especially
on Fryer’s version of the facts. He claims the Alliance was
the only party disappointed with his work product. If this
were truly so, we imagine the remaining organizations
would have contacted Fryer of their own accord and asked
to be recognized in the study. That they declined to do so
isn’t attributable to the injunction.
Finally, even if we entertained Fryer’s claim, he gives us
no reasonable sense of what he’s entitled to. His $105,000
figure misses the mark; it reflects allegedly unpaid work
Fryer performed for the Alliance back in 2011. We fail to see
the relevance of this to Fryer’s restitution claim, and Fryer is
noticeably silent on the matter. Ultimately this underscores
what should now be clear: Fryer’s request for restitution
extends far beyond whatever gain the injunction conferred
on the Alliance. He isn’t really seeking restitution at all.
Fryer’s remaining grounds for relief suffer from the same
flaw. He next seeks roughly $26,000 because the injunction
ordered him to turn over the Santa Rosa data. The judge
concluded that the order was sound, but we needn’t go that
far. Our opinion in the first appeal never resolved the fight
over the Santa Rosa data. In fact we had no authority to
consider the question because “no such requirement ap-
pear[ed] in the injunction or in any judgment satisfying Fed.
R. Civ. P. 58.” Alliance for Water Efficiency, 808 F.3d at 1157.
The upshot is that we never decided whether the judge’s
ruling on this data was “wrongfully done.” Baltimore & O.R.
Co., 279 U.S. at 786. Fryer concedes as much in his opening
brief. That admission is deadly: Restitution is not available
for an order that was never disturbed on appeal.
10 No. 17-1326
Fryer’s last complaint is that the Alliance unduly delayed
in paying him once he finally handed over the Santa Rosa
data. He seeks over $1,100 as “restitution” for interest he
might have received absent the delay. This claim is even
farther afield of what an appropriate restitution claim should
look like. Fryer first presented the interest issue to the magis-
trate judge in his motion for restitution, meaning it arose
only after our decision in the first appeal. It therefore could
not have been the subject of a lower-court order we later
reversed. Moreover, even if the magistrate judge had origi-
nally addressed the question, we did not. Our review was
limited to the acknowledgment question, so the same must
be true of claims for restitution. Fryer cannot revive a waived
claim via a motion for restitution.
B. Attorney’s Fees
Federal courts have discretion to award attorney’s fees to
the prevailing party on a copyright claim. 17 U.S.C. § 505.
Fryer believes he is entitled to fees from the first appeal
because he prevailed against the Alliance. Specifically, he
points to our conclusion that the copyright claim was so
poorly pleaded that it did not confer federal-question juris-
diction. See Alliance for Water Efficiency, 808 F.3d at 1156. To
Fryer’s mind this implies we took his side and rejected the
merits of the Alliance’s underlying lawsuit.
Not so. It is axiomatic that a federal court must pin down
subject-matter jurisdiction before proceeding to the merits.
See, e.g., Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94
(1998). In the first appeal, we considered the copyright claim
only in that context. Then once jurisdiction was satisfied, we
turned to the only lower-court decision Fryer had appealed:
an injunction enforcing a settlement. The parties’ disagree-
No. 17-1326 11
ment was effectively a contract dispute, see Air Line Stewards
& Stewardesses Assoc., Local 550 v. Trans World Airlines, Inc.,
713 F.2d 319, 321 (7th Cir. 1983), so we were limited to
deciding the contract question. We did not and could not
opine on the merits of a copyright claim that was never
before us. The parties had settled that claim and thereby
insulated it from our review.
No matter, Fryer claims. He assures us he prevailed in
the settlement because he beat back the copyright claim and
secured the right to publish his report. This argument also
falls flat. A defendant does not prevail under § 505 just
because the parties settle. That’s nothing more than “a
voluntary change” in the adversary’s conduct. Buckhannon
Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res.,
532 U.S. 598, 600 (2001). What the law requires is a “judicially
sanctioned change in the legal relationship of the parties.” Id.
at 605 (emphasis added). Whether on the merits, by consent
decree, or on motion, a court must enter judgment on the
copyright claim. See Evans v. Jeff D., 475 U.S. 717, 720 (1986)
(noting fees may be awarded “after a case has been settled
by the entry of a consent decree”); Riviera Distribs., Inc. v.
Jones, 517 F.3d 926, 928 (7th Cir. 2008) (holding that the
copyright defendant prevailed because the court granted the
plaintiff’s motion for voluntary dismissal). That’s what’s
missing here. All we have is a private settlement and a series
of disputes about what it means. Much ink has been spilled
over these contract claims, but no court has weighed in on
anything else. We have not stamped our “judicial imprima-
tur” on the parties’ reordered rights and responsibilities.
Buckhannon, 532 U.S. at 605 (emphasis omitted).
12 No. 17-1326
C. Rule 38 Sanctions
We have one final matter to address. The Alliance moved
for sanctions against Fryer under Rule 38 of the Federal
Rules of Appellate Procedure. Sanctions are appropriate if an
appeal is frivolous, meaning “the arguments made are
merely cursory,” Duff v. Cent. Sleep Diagnostics, LLC, 801 F.3d
833, 844 (7th Cir. 2015); “wholly undeveloped,” Smeigh v.
Johns Manville, Inc., 643 F.3d 554, 566 (7th Cir. 2011); or
“lacking in substance and foreordained to lose,” Berwick
Grain Co. v. Ill. Dep’t of Agric., 217 F.3d 502, 505 (7th Cir.
2000) (internal quotation marks omitted).
This does not strike us as such an appeal. The scope of
restitution in this context is rarely litigated; this was not a
case where the appellant ran bullheaded into battle, helpless-
ly exposed to obvious slings. See Mars Steel Corp. v. Cont’l
Bank N.A., 880 F.2d 928, 938–39 (7th Cir. 1989) (en banc). In
fact, the Alliance failed to recognize some of the critical
arguments that ultimately decide this case. With attorney’s
fees, for example, the Alliance eschewed any discussion of
judicial imprimatur and instead insisted that Fryer did not
prevail because he secured precious little from the settle-
ment. The Alliance also argued that the magistrate judge
properly denied fees even if Fryer had prevailed. Both of
these questions present much closer calls, especially since a
prevailing party “is presumptively entitled to reimburse-
ment of its attorneys’ fees.” Riviera, 517 F.3d at 928. In light
of this, we cannot conclude that sanctions are appropriate.
AFFIRMED.