IP Law Daily Photographer not sanctioned for misleading statements made during settlement conference
Wednesday, March 6, 2019

Photographer not sanctioned for misleading statements made during settlement conference

By Joseph Arshawsky, J.D.

A photographer’s alleged misrepresentations about the existence of a third-party license agreement made during settlement conference did not amount to bad faith or fraud upon the court.

Defendant Hearst Communications, Inc.’s ("Hearst") motion for sanctions against photographer Jonathan Otto and his counsel at Liebowitz Law Firm, PLLC ("Liebowitz") was denied by the federal district court in Manhattan, because the conduct did not rise to the level of committing a fraud on the court. Hearst’s motion for sanctions alleged that Otto and Liebowitz made material representations regarding a license agreement with third-party Warner Bros. at a settlement conference in this case. Otto’s cross-motion for contempt and sanctions against Hearst was also denied, because Hearst appropriately used confidential settlement communications in its filings under seal (Otto v. Hearst Communications, Inc., March 5, 2019, Cott, J.).

Otto captured a photograph of President Trump (the "Photograph") with his iPhone camera while attending a friend’s wedding in June 2017 at a Trump-owned golf club in New Jersey. Hearst obtained the Photograph from a third party’s social media account and published it in an online article entitled "President Trump is the Ultimate Wedding Crasher" on one of its websites. Otto brought this lawsuit alleging that Hearst infringed his copyright in the Photograph by reproducing and publicly displaying it on its website without a license. Otto and Liebowitz attended a settlement conference on October 23, 2017, along with counsel and a representative for Hearst. Hearst alleged that "near the outset of the conference, Liebowitz represented to Hearst’s counsel and the Court that Otto was on the verge of executing a license for the Photograph for the sum of $9,500." Hearst contended that "after being presented with the claimed draft license, its counsel repeatedly asked Liebowitz and the Court whether the Purported License was in settlement of Otto’s claims against another media entity," to which it alleges "Liebowitz stated that it was not." On October 27, 2017, Otto settled with third-party Warner Bros. and attached to the settlement agreement was the license agreement between them. On December 10, 2018, the court granted Otto’s motion for summary judgment on Hearst’s liability for copyright infringement and denied Hearst’s cross-motion on its fair use defense. Hearst moved for sanctions against Otto and Liebowitz for misrepresentations made during the settlement conference. The court denied the motion, while still disapproving of their misconduct. The court also denied Otto’s cross-motion for contempt.

Sanctions. The court analyzed Hearst’s sanctions motion under its inherent powers, "as doing so will best enable it to efficiently and comprehensively assess both the conduct of Otto and his counsel during both the settlement conference and the course of discovery." The court declined to impose sanctions against Otto and his counsel because Hearst has not established with "clear and convincing evidence" that their conduct at the October 23 settlement conference or during discovery was the product of "bad faith," or amounted to a "fraud upon the court." Also, while Hearst diligently searched for the facts about Otto’s licensing and settlement agreement with Warner Bros., Hearst acknowledged that "it has suffered relatively little prejudice," especially given the fact that if what was proffered by Otto and his counsel at the conference was inaccurate, it still did not induce a settlement. Hearst also admitted that the alleged misrepresentations made during the course of discovery were "corrected," such that the record at trial will not be tainted by any ongoing misrepresentation.

Settlement conference. There is a "long-standing tension between a lawyer’s duty of zealous advocacy to his client and the duties of candor and fair dealing with others," and determining whether a lawyer’s advocacy tips the scale to a finding of sanctionable behavior is a fact-specific determination. "While the Court is troubled by the allegations surrounding Liebowitz’s purported misuse of the Warner Bros. license for purposes of attempting to set a damages figure at the settlement conference, it is not persuaded that sanctions are warranted under the particular circumstances of this case." First, Liebowitz’s alleged misrepresentations were not memorialized or recorded. The court’s recollection of the conference was hazy at best. Second, no settlement was reached based on the misrepresentations. Third, Hearst did not disprove the representations with evidence that existed at the time the representations were made. Otto’s settlement with Warner Bros was October 27, 2017, thus no license or settlement existed as of the October 23 settlement conference. The court could not conclude that the challenged conduct rose to the level of bad faith. Hearst made serious allegations about Liebowitz’s conduct during the settlement conference, but without a factual record or legal authority to support its position, Hearst has not met its burden. "Having reached that conclusion, the Court, however, does not in any way condone Liebowitz’s alleged practice of attempting to use a so-called stand-alone license as a bargaining chip in other cases."

Document production. Hearst argued that on December 7, Liebowitz "produced a doctored, repaginated version of the Purported License without redactions or indications that it was part of the Complete [settlement] Agreement." The court found Otto’s severability argument was at least colorable. Even assuming that Otto’s production of the complete settlement agreement with Warner Bros. on December 15—eight days after his production of only the licensing agreement on December 7—constitutes bad faith, "motivated by delay or other improper purposes," any alleged misrepresentation was corrected, the delay in uncovering the facts about Otto’s licensing and settlement agreement with Warner Bros. was minor, and Hearst did not suffer any significant prejudice. Thus, Otto’s document production does not warrant sanctions or amount to a "fraud upon the court."

Deposition testimony. Even if Hearst had established that Otto perjured himself, the court would not impose sanctions against him because "an isolated instance of perjury, standing along, will not constitute fraud upon the court." Hearst has simply not established that Otto’s personal conduct was "part of a deliberate and unconscionable scheme to interfere with the Court’s ability to adjudicate the case fairly."

Rules of professional conduct. While there was not a sufficient basis for the court to impose sanctions against Liebowitz for violations of the professional rules of conduct, the motion was a close call. If a license has been obtained as part of a settlement in another case, then the firm should be transparent in that regard and not try, as leverage, to pawn a license off as something other than a settlement.

Otto’s cross-motion. Otto’s cross motion is without merit because Hearst and its counsel have not engaged in contemptible conduct. Although settlement negotiations are confidential for most purposes, their contents may be revealed as necessary for the decision of an issue of alleged misconduct in them.

This case is No. 1:17-cv-04712-GHW-JLC.

Attorneys: James H. Freeman (Liebowitz Law Firm, PLLC) for Jonathan Otto. Ravi Viren Sitwala for Hearst Communications, Inc.

Companies: Hearst Communications, Inc.

MainStory: TopStory Copyright NewYorkNews

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