By: Meghan Falk

In sharp contrast to Jerry Seinfeld’s fictional trip to the courthouse, where he ended up in prison for “criminal indifference” in the series finale of Seinfeld, a judge ruled on February 26, 2021 that Seinfeld be reimbursed for legal fees after arguing against an “opportunistic” copyright lawsuit.[1] 

In early 2018, Seinfeld’s one-time collaborator, Christian Charles, brought a lawsuit against Seinfeld asserting he owned copyrights in Comedians in Cars Getting Coffee.[2]  The show featured Seinfeld interviewing guests while driving in vintage cars, and it moved to Netflix in 2017.[3]  The original dispute boiled down to a statute of limitations issue. 

In a light most favorable to Charles, he had “produced a treatment for Comedians in Cars Getting Coffee and worked with Seinfeld to shoot the pilot.”[4]  Seinfeld insisted that Charles’s involvement was “limited to a work-for-hire directing role” and he “repeatedly rejected Charles’s requests for backend compensation” although he paid Charles’s production company over $100,000 for the pilot.[5]  Seinfeld ultimately produced and distributed the show without crediting Charles, and the pilot premiered in 2012.[6] 

The Copyright Act imposes a three-year statute of limitations period.[7]  Since this claim turned on who owned the copyright, the “clock beg[an] to run when the claimant receive[d] notice that someone else claim[ed] sole authorship or ownership of the disputed work.”[8]  The Court held that Charles had notice as early as 2011, when Seinfeld refused to send backend compensation, and as late as 2012, when the pilot aired without crediting Charles.[9]  Therefore, the statute of limitations expired in 2015––at the latest.  In 2017, Netflix and Seinfeld reached a $100 million distribution deal.[10]  After the news of this deal became public late in 2017, Charles contacted Seinfeld and demanded mediation; Charles ultimately sued for copyright infringement in February 2018.[11] 

The district court held that Charles’s claim was time-barred as it was outside of the statute of limitations.[12]  The Second Circuit affirmed.[13]  Charles further appealed to the Supreme Court and certiorari was denied.[14]  The magistrate judge recommended that Seinfeld should not receive any monetary awards in the form of attorney’s fees, which Seinfeld then challenged. [15]  Seinfeld’s reimbursement of attorney’s fees was the issue presented in this most recent decision.[16]

Under Section 505 of the Copyright Act, a court may require the losing party to pay attorney’s fees of the prevailing party in a copyright action.[17]  This awarding of fees, however, is not automatic and is a discretionary matter for the court.[18]  The ultimate awarding of fees hinges on “the objective reasonableness of the losing party’s position,” as courts are more willing to “award fees against a party whose arguments lack a factual or legal basis.”[19]  Charles argued that his suit was not objectively unreasonable because of a recent Sixth Circuit decision, Everly v. Everly.[20]  The Everly court utilized a different timeline for determining when a copyright claim for an author’s termination-of-transfers rights had accrued, holding that the claim does not accrue until another party repudiates the claimant’s status as author.[21]  The Everly court was clear to state its holding only applied to “an authorship claim without a corresponding ownership claim.”[22]

Charles attempted to frame his claim as one about authorship rather than ownership, to make the argument that it was not time-barred.[23]  But, to sue for copyright infringement, an individual must own the copyright, and therefore authorship would only work as a path to ownership.[24]  In rejecting Charles’s claim, the court pointed to two parts of the Everly decision that would make it inapplicable here: (1) the Sixth Circuit relied on Second Circuit precedent “that would bar Charles’s claims”[25]; and (2) “[c]ases involving the termination-of-transfers right . . . are different from ‘ownership cases in which a defendant has raised a statute of limitations defense based on the defendant’s repudiation of the plaintiff’s authorship.’”[26] 

The court ultimately held that Charles’s claim was not “objectively reasonable,”[27] and stated that it was “quite confident that Charles’s case would have met the same end in the Sixth Circuit.”[28]  The court furthered that Charles’s claim was merely “opportunistic.”[29]  It reasoned that Charles “received a substantial payment for his work on the show’s pilot and brought suit only years later once Seinfeld had signed a lucrative distribution deal with Netflix.”  The court backed up its award of damages, arguing that “[s]ubstantial deterrence” serves to counterbalance “the prospect of a huge payday [which] may entice litigants to pursue claims with little or no merit.”[30]  The court deferred consideration of the amount of fees “pending further briefing.”[31]

While Seinfeld’s legal team was happy with the result, Charles’s attorney “told Law360 that his client believe[d] this ruling [was] the ‘worst possible decision for a copyright owner’ and that it would ‘engender further mistrust of the legal system.’”[32]  However, Charles was not the owner of the copyright and the decision will arguably benefit copyright owners who rightfully defend their rights to that copyright protection.  It protects them from having to spend a lot of their own money fending off claims that merely seek to take advantage of the success of the copyright owner. 

There has been evidence that opportunistic IP litigation is a problem that has been growing.[33]  They’ve grown as a result of intellectual property becoming more valuable and higher numbers of copyrights and other forms of intellectual property.[34]  These lawsuits “impose direct and indirect costs on defendants and society.”[35] 

Ultimately, the decision appears to be one that should serve as deterrence to others who seek to bring such “opportunistic” claims.  Typically, defendants have settled such opportunistic claims because of fear of the high costs of litigation,[36] however, this decision may incentivize them to defend at the cost of the opportunistic plaintiff.  It’s not reasonable to bring a copyright claim more than two years after the statute of limitations has run, especially if it’s right after a $100 million pay-day for the copyright owner.  In awarding fees, the court hoped to deter others from bringing cases with nothing objectively reasonable backing them up factually or legally.


[1] Charles v. Seinfeld, No. 18-cv-1196, 2021 U.S. Dist. LEXIS 36461, at *12–13 (S.D.N.Y. Feb. 26, 2021).

[2] Id. at *1.

[3] Bill Donahue, Seinfeld Wins Legal Fees After Beating ‘Comedians’ Case, Law360 (Feb. 26, 2021, 1:17 PM), https://www.law360.com/articles/1359395/print?section=ip.

[4] Seinfeld, 2021 U.S. Dist. LEXIS 36461, at *2.

[5] Id.

[6] Id.

[7] 17 U.S.C. § 507(b).

[8] Seinfeld, 2021 U.S. Dist. LEXIS 36461, at *12–13.

[9] Id. at *4.

[10] Id. at *2.

[11] Id. at *2–3.

[12] Id. at *4; Charles v. Seinfeld, 410 F. Supp. 3d 656, 661 (S.D.N.Y. 2019).

[13] Seinfeld, 2021 U.S. Dist. LEXIS 36461, at *4; Charles v. Seinfeld, 803 F. App’x 550, 552 (2d Cir. 2020).

[14] Seinfeld, 2021 U.S. Dist. LEXIS 36461, at *5; Charles v. Seinfeld, No. 20-661, 2020 WL 7327869, at *1 (U.S. Dec. 14, 2020)

[15] Seinfeld, 2021 U.S. Dist. LEXIS 36461, at *5.

[16] Id.

[17] 17 U.S.C. § 505.

[18] Seinfeld, 2021 U.S. Dist. LEXIS 36461, at *5.

[19] Id.

[20] 958 F.3d 442 (6th Cir. 2020).                                                                                                                

[21] Seinfeld, 2021 U.S. Dist. LEXIS 36461, at *7–8, 10; Everly, 958 F.3d at 452–53.  In this claim, the author must be put on notice specifically that their claim of authorship is disputed for the clock to begin to run on the statute of limitations. 

[22] Everly, 958 F.3d at 453.

[23] Seinfeld, 2021 U.S. Dist. LEXIS 36461, at *9.

[24] Id.  The court used the correct rule for a copyright infringement claim centering on ownership, which requires that the clock start running for the statute of limitations when the person is put on notice that someone else claims to own the copyright. Id. at *10.

[25] Id. at *11.

[26] Id.

[27] Id. at *6.

[28] Id. at *11.

[29] Id. at *12.

[30] Id.

[31] Id. at *13.

[32] Donahue, supra note 3.

[33] Michael J. Meurer, Controlling Opportunistic and Anti-Competitive Intellectual Property Litigation, 44 B.C. L. Rev. 509, 516 (2003).

[34] Id. at 519.

[35] See id. (referencing the costs of settlement payments, direct legal costs, and indirect costs to defendants seeking to minimize their exposure to such suits).

[36] Id. at 516.

548

By Eric Jones

On March 2, 2016, the Fourth Circuit issued a published opinion in the civil case Stahle v. CTS Corporation.  The District Court for the Western District of North Carolina had dismissed Kent Stahle’s complaint with prejudice, finding it was barred by the statute of repose in North Carolina General Statutes Section 1-52(16).  Relying on its own precedent and precedent in North Carolina Supreme Court cases, the Fourth Circuit reversed and remanded.

The Alleged Toxic Contaminants

CTS is a Delaware corporation which operated CTS of Asheville, a now-dissolved North Carolina corporation, in Buncombe County, NC.  As part of its manufacturing, CTS used a variety of toxic solvents from 1959 until it dissolved in 1983.  CTS of Asheville allegedly dumped large quantities of these toxic contaminants, including trichloroethylene, onto its property and into a stream known as Dingle Creek.

From 1959 until 1968, Stahle lived on Dingle Creek downstream of CTS of Asheville’s manufacturing plant.  During this period, Stahle was exposed to the waters of Dingle Creek, including contaminants allegedly placed there by CTS of Asheville.  Stahle was diagnosed with leukemia many years later, and filed suit against CTS alleging that its negligence in dumping toxic contaminants into Dingle Creek caused his leukemia.

The District Court Proceedings

Before the district court, CTS moved to dismiss Stahle’s complaint, arguing it was time-barred by North Carolina General Statutes Section 1-52(16).  In pertinent part, that section reads “for personal injury . . . the cause of action . . . shall not accrue until bodily harm to the claimant . . . becomes apparent . . . . Except as provided . . . no cause of action shall accrue more than 10 years from the last act or omission of the defendant giving rise to the cause of action.”  CTS asserted that its last possible act or omission affecting Stahle occurred in 1968, when Stahle moved away from Dingle Creek, thus barring any claims brought by Stahle after 1978.

Despite Stahle’s arguments that the Fourth Circuit and the North Carolina Supreme Court do not apply Section 1-52(16) to claims arising from disease, the district court concluded that Section 1-52(16) was unambiguous on its face and contained no exception for disease.  Thus, because Stahle’s disease was not discovered until well after the ten-year statute of repose, the district court dismissed his complaint.

The Standard of Review

As the Fourth Circuit explained, a district court’s grant of a motion to dismiss is reviewed de novo, as are all questions of statutory interpretation.  Because jurisdiction in federal court was premised on diversity, the Fourth Circuit was bound to apply North Carolina state law.  Unfortunately, the North Carolina Supreme Court has never directly addressed the proper interpretation of Section 1-52(16), forcing the Fourth Circuit to “anticipate whether the Supreme Court of North Carolina would rule that North Carolina General Statutes Section 1-52(16) bars Stahle’s action.”

Fourth Circuit Precedent

In its holding, the Circuit Court emphasized several Fourth Circuit decisions which “anticipated North Carolina law on the subject of disease claims and personal injury statutes of repose.”  First and foremost, the Circuit relied on the 1986 case Hyer v. Pittsburgh Corning Corp., where the Court concluded that the North Carolina Supreme Court “does not consider disease to be included within a statute of repose directed at personal injury claims unless the Legislature expressly expands the language to include it.”  In reaching that holding, the Hyer Court relied heavily on a North Carolina Supreme Court decision, Wilder v. Amatex Corp., which held that “the legislature intended [a latent injury statute of repose in another section] to have no application to claims arising from disease.”  In the case at bar, the Fourth Circuit reaffirmed its prior analysis of North Carolina Supreme Court precedent, holding that “unlike latent injury claims, ‘disease presents an intrinsically different kind of claim’ and … that ‘North Carolina has always recognized” the distinction.’”

The Fourth Circuit also took “a small measure of comfort in the fact that although [the Hyer decision and other related holdings] have been on the books and applied for several decades, neither the North Carolina General Assembly nor the North Carolina courts have taken exception to our expressed understanding of North Carolina law.”  In particular, the Circuit noted that “the General Assembly has acted at least eight times since Wilder to amend various statutes of repose and limitations without undoing any judicial application of the law relating to claims arising from disease.”  During one amendment, in fact, the Court noted that the General Assembly had specifically provided that “[n]othing in this act is intended to change existing law relating to product liability actions based upon disease.”

North Carolina Precedent

To strengthen its holding, the Fourth Circuit next discussed the scope of Section 1-52(16) using only North Carolina Supreme Court precedents in the absence of any Fourth Circuit precedent.  The Court explained that the district court had erred by reading the statutory section in isolation, when the North Carolina Supreme Court “does not read segments of a statute in isolation.”  In context, the Court held that “Section 1-52(16) appears plainly to apply to some—but not all—personal injury claims.”  Specifically, it applies to “latent injuries,” or personal injuries for which bodily harm to the claimant becomes apparent only at some point after the injury.  Thus, “because North Carolina law clearly establishes that a disease is not a latent injury,” the Fourth Circuit concluded again that the Supreme Court of North Carolina would not consider Section 1-52(16) to be applicable to Stahle’s disease claim.

The Lack of a Certified Question Procedure in North Carolina

In an early footnote, the Circuit noted in passing that North Carolina does not have any certification procedures, which allow a federal court to certify questions of state law to the state supreme court in order to get a concrete and indisputable interpretation.  In a concurring opinion, Judge Thacker noted that if North Carolina had certified question procedures, the case would have been much simpler.  In fact, Thacker noted that North Carolina is “the only state in the Fourth Circuit” without such procedures, and remains “the only state in the nation never to have enacted some form of certification procedure.”  Thacker further noted that “four circuits [including the Fourth Circuit] have addressed this state law in question, all with different views of the statute’s scope.”  Thacker ended her concurrence with a hope that North Carolina would “act swiftly to create a certified question mechanism, giving its own state courts a chance to influence the interpretation of the laws operating within its borders, rather than leaving it to the federal courts to divine how North Carolina should operate.”

The Fourth Circuit Reversed and Remanded

Despite the increased complexity and decreased certainty because of a lack of certified questions in North Carolina, the Fourth Circuit reversed the district court’s interpretation of North Carolina state law.  Because the Fourth Circuit concluded that Section 1-52(16) applies only to latent injuries, which North Carolina law clearly distinguishes from disease, the Circuit held that Stahle’s claim was not barred by the ten-year statute of repose.  The Court supported the holding not only with decades of precedent from the North Carolina Supreme Court and the Fourth Circuit, but also with statutory interpretation principals.

By: Michael Klotz

Today, in Douglas C. Dunlap v. Texas Guaranteed, the Fourth Circuit reaffirmed that a plaintiff has the burden of establishing that fraud by a defendant could not have been discovered through a reasonable investigation, providing an exception to the standard statute of limitations. Under Va. Code Ann. § 8.01-243(A), a two year statute of limitations begins to run from the date that a fraud is discovered by the plaintiff or when it could have been discovered “by the exercise of due diligence.” Unless a plaintiff can establish that the fraudulent conduct could not have been discovered within the previous two years, any lawsuit on this grounds is barred.

What does the “exercise of due diligence” mean?

The standard of “due diligence” is such “prudence, activity, or assiduity” as a “reasonable and prudent man” would exercise under the “relative facts of the special case.” In Dunlap, the court affirmed the district court’s dismissal of the case on the grounds that it was barred by the statute of limitations. The plaintiff did not present sufficient evidence that the exercise of due diligence would not have revealed the fraud. Thus, Dunlap demonstrates that in order to overcome the statute of limitations through the undiscovered fraud exception, the burden is on a plaintiff to demonstrate that he did not have a reasonable opportunity to discover the underlying conduct.