Assessment Techs. Inst. v. Parkes

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ASSESSMENT TECHNOLOGIES INSTITUTE, LLC, Plaintiff, v. CATHY PARKES d/b/a LEVEL UP RN, Defendant.

No. 19-2514-JAR

United States District Court, D. Kansas

February 25, 2022

MEMORANDUM AND ORDER

JULIE A. ROBINSON UNITED STATES DISTRICT JUDGE

This lawsuit is set for trial on April 5, 2022, on Plaintiff Assessment Technologies Institute, LLC's (“ATI”) remaining claims against Defendant Cathy Parkes, doing business as Level Up RN, arising out of her sale and distribution of nursing-education study material copyright infringement under the Copyright Act misappropriation of trade secrets under the Defend Trade Secrets Act (“DTSA”) and the Kansas Uniform Trade Secrets Act (“KUTSA”), unfair competition under Kansas law, and breach of contract under Kansas law. Before the Court is Plaintiff's Motion for a Bench Trial (Doc 376). The motion is fully briefed and the Court is prepared to rule. As explained more fully below, the Court grants Plaintiff's motion for a bench trial.

I. Background

Plaintiff filed this action on August 27, 2019, but did not file a jury trial demand. On October 1, 2019, Defendant filed a Jury Trial Demand in her Answer and in a separate document.^[1] On February 25, 2020, the parties submitted a joint report under Rule 26(f) to Magistrate Judge Kenneth Gale, contemplating a jury trial; the March 4, 2020 Scheduling Order set this matter for jury trial on November 9, 2021.^[2]

At the February 19, 2021 Pretrial Conference before Judge Gale, the parties raised for the first time a dispute about whether this trial should be before the Court or a jury.^[3] Judge Gale set briefing deadlines for the parties 45 days before trial on this issue. On February 26, 2021, due to outstanding discovery issues, the parties jointly requested and obtained a continuance of the trial date to April 5, 2022.^[4] It remains on the Court's April 5, 2022 trial calendar as a firm trial setting. In its January 5, 2022 Memorandum and Order ruling on the parties' summary judgment motions, this Court directed expedited briefing on Plaintiff's request for a bench trial. That motion is now before the Court and is fully briefed.

II. Discussion

The right to a jury trial “as declared by the Seventh Amendment to the Constitution-or as provided by a federal statute-is preserved to the parties inviolate.”^[5] The Seventh Amendment protects the jury trial right “[i]n Suits at common law, where the value in controversy shall exceed twenty dollars.”^[6] Defendant maintains that she has a right to a jury trial under the Copyright Act and the Seventh Amendment. Plaintiff contends that Defendant has no right to a jury trial under the statute or the Constitution, and that even if she does she waived her jury trial right by agreeing to ATI's Terms and Conditions, which include a jury trial waiver.

A. Right to a Jury Trial

Defendant claims she has a statutory and constitutional right to a jury trial because Plaintiff seeks recovery of Defendant's profits. The Supreme Court counsels that “[b]efore inquiring into the applicability of the Seventh Amendment, we must ‘first ascertain whether a construction of the statute is fairly possible by which the [constitutional] question may be avoided.'”^[7]

1. The Copyright Act

Under 17 U.S.C. § 504, an infringer is liable either for “the copyright owner's actual damages and any additional profits of the infringer, as provided by subsection (b); or” for “statutory damages, as provided by subsection (c).”^[8] Here, Plaintiff seeks disgorgement of profits under subsection (b); it does not seek actual damages.^[9] Under § 504(b):

The copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. In establishing the infringer's profits, the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.^[10]

This provision does not explicitly grant a right to have a jury assess the infringer's profits; it only explains the respective burdens of the parties in establishing the amount of profits to be disgorged.

In deciding that there was no statutory right to a jury trial for § 504(c) statutory damages, the Supreme Court reasoned in Feltner v. Columbia Pictures Television, Inc.:

The word “court” in [§ 504(c)] appears to mean judge, not jury. In fact, the other remedies provisions of the Copyright Act use the term “court” in contexts generally thought to confer authority on a judge, rather than a jury. See, e.g., § 502 (“court . . . may . . . grant temporary and final injunctions”); § 503(a) (“ [T]he court may order the impounding . . . of all copies or phonorecords”); § 503(b) (“As part of a final judgment or decree, the court may order the destruction or other reasonable disposition of all copies or phonorecords”); § 505 (“[T]he court in its discretion may allow the recovery of full costs” of litigation, and “the court may also award a reasonable attorney's fee”). In contrast, the Copyright Act does not use the term “court” in the subsection addressing awards of actual damages and profits, see § 504(b), which generally are thought to constitute legal relief.^[11]

Defendant argues that an award of profits under § 504(b) is a legal, rather than equitable, remedy based on this language in Feltner.^[12] But this Court is not persuaded that the above-quoted language from Feltner supports the conclusion that § 504(b) provides a right to a jury trial on disgorgement of profits.

The quoted language from Feltner is more than mere dicta since it is part of the Court's rationale for concluding that the statute does not confer a right to a jury trial on statutory damages. But the Court did not hold that the absence of the word “court” in subsection (b) confers a right to a jury trial on an award of profits.^[13] The Court's citations in support of its statement that § 504(b) remedies “generally are thought to constitute legal relief, ” are to cases about damages, not awards of profits.^[14] There is simply no clear provision in the Copyright Act that creates a jury trial right for disgorgement of profits, and this Court declines to infer congressional intent from the absence of the word “court” in § 504(b).^[15]

2. Seventh Amendment

The Court further finds that Defendant does not have a Seventh Amendment right to have the profits remedy decided by a jury. Under the Seventh Amendment, the phrase “Suits at common law” “refers to ‘suits in which legal rights [are] to be ascertained and determined, in contradistinction to those where equitable rights alone [are] recognized, and equitable remedies [are] administered.' The nature of the issues presented and the remedies sought determines whether an action qualifies as ‘legal.'”^[16] This is a two-part inquiry: “First, we compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, we examine the remedy sought and determine whether it is legal or equitable in nature.”^[17] This second part of the inquiry is “more important.”^[18] If the historical two-party inquiry does not yield a clear answer, the Court looks to “precedent and functional considerations.”^[19] Plaintiff does not dispute that the causes of action it asserts are legal. Thus, the Court assumes without deciding that at least one of Plaintiff's causes of action in this matter- copyright infringement, misappropriation of trade secrets, unfair competition, and breach of contract-encompass legal issues. But, as stated above, the remedies inquiry is more important, so Plaintiff focuses on that issue and argues that the remedies it seeks are strictly equitable. Plaintiff seeks the following relief: (1) “[d]isgorgement of Parkes's profits resulting from her infringement of ATI's copyrights and misappropriation of ATI's trade secrets”; (2) injunctive relief; (3) an accounting; and (4) attorneys' fees and costs.^[20] Defendant does not contest that Plaintiff's demand for injunctive relief, an accounting, and attorneys' fees and costs are equitable and properly decided by the Court. But Defendant maintains that disgorgement of profits is legal in nature and therefore a jury trial right attaches.

The general rule is that monetary relief is legal.^[21] There is no dispute that there would be a Seventh Amendment right to a jury trial if Plaintiff sought actual damages in this case. But the recovery of profits under § 504(b) is a hybrid remedy, as the Supreme Court explained in Petrella v Metro-Goldwyn-Mayer, Inc.: “Like other restitutional remedies, recovery of profits ‘is not easily characterized as legal or equitable,' for it is an ‘amalgamation of rights and remedies drawn from both systems.' Given the ‘protean character' of the profits-recovery remedy, we regard as appropriate its treatment as ‘equitable' in this case.”^[22] Indeed, the Tenth Circuit has described disgorgement of profits as “by nature an equitable remedy as to which a trial court is vested with broad discretionary powers.”^[23] The Federal Circuit considered whether the disgorgement of profits remedy was available at law in 1791 for copyright infringement and trade secret misappropriation and concluded that it was not.^[24] Defendant advances no argument that the disgorgement of profits remedy is being used in this case as a proxy for actual damages, which could support a claim that Plaintiff seeks legal relief.^[25] Therefore, the Court follows authority from the Supreme Court, Federal Circuit, and Tenth...