Tropical Paradise Resorts, LLC v. JBSHBM, LLC

TROPICAL PARADISE RESORTS, LLC, d/b/a RODEWAY INN & SUITES,a Florida Limited Liability Company, Plaintiff, v. JBSHBM, LLC, a Florida Limited Liability Company,and POINT CONVERSIONS, LLC, a Delaware Limited Liability Company, Defendants.

POINT CONVERSIONS, LLC, a Delaware Limited Liability Company, Counterclaim Plaintiff, v. TROPICAL PARADISE RESORTS, LLC, d/b/a RODEWAY INN & SUITES,

a Florida Limited Liability Company, and CHOICE HOTELS INTERNATIONAL, INC.,

a Maryland Corporation, Counterclaim Defendants.

CASE NO. 18-CV-60912-BLOOM/VALLE

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

April 30, 2021

REPORT AND RECOMMENDATION TO DISTRICT JUDGE

THIS MATTER is before the Court upon Plaintiff/Counter Defendant Tropical Paradise Resorts LLC's ("Rodeway") and Counterclaim Defendant Choice Hotels International, Inc.'s ("Choice," and together with Rodeway, the "Counterclaim Defendant's") Motion for Prevailing Party Fees and Costs pursuant to Florida's Deceptive and Unfair Trade Practices Act (ECF No. 147) (the "Motion"). United States District Judge Beth Bloom has referred the Motion to the undersigned for a Report and Recommendation. (ECF No. 148).

Having reviewed the Motion, Defendant/Counterclaim Plaintiff Point Conversions, LLC's Response in Opposition to the Motion (ECF No. 151), Counterclaim Defendants' Reply (ECF No. 152), the Notices of Supplemental Authority (ECF Nos. 153, 154), and the Notice of Previously Awarded Fees and Costs (ECF No. 160), and being otherwise duly advised in the matter, the undersigned recommends that the Motion be GRANTED IN PART AND DENIED IN PART. As discussed below, the undersigned recommends that the Counterclaim Defendants be awarded $233,657.73 in attorneys' fees and $16,037.52 in costs.

I. BACKGROUND

The procedural history of this case is set forth in the prior opinions of the District Court and Eleventh Circuit, which are incorporated by reference. See (ECF Nos. 112, 142); Tropical Paradise Resorts, LLC v. JBSHBM, LLC, No. 18-CV-60912, 2018 WL 4932282, at *1 (S.D. Fla. Oct. 10, 2018), aff'd sub nom. Tropical Paradise Resorts, LLC v. Point Conversions, LLC, 806 F. App'x 966 (11th Cir. 2020); see also In re Point Conversions, LLC, 830 F. App'x 319, 320 (Fed. Cir. 2020); Point Conversions, LLC v. Lopane, No. 20-CV-61549, 2021 WL 328533, at *2 (S.D. Fla. Jan. 8, 2021), report and recommendation adopted, 2021 WL 327536 (S.D. Fla. Feb. 1, 2021) (discussing Point Conversions' litigation history, including this case and other actions in federal and state courts). Below is a summary of the proceedings relevant to the instant Motion.

Rodeway is a franchisee of Choice, a hotel franchisor for more than 11 hotel brands, with approximately 6,400 properties worldwide. (ECF No. 20 ¶¶ 15-16). On April 20, 2018, Rodeway commenced this action for declaratory judgment and damages against Defendants JBSHBM, LLC ("JBSHBM") and Point Conversions, LLC ("Point Conversions") (collectively, "Defendants")pursuant to Fla. Stat. §§ 501.991 et seq. for violations of the Patent Troll Prevention Act and conspiracy to violate the Patent Troll Prevention Act. See (ECF No. 1).

On May 31, 2018, Rodeway filed a First Amended Complaint. See (ECF No. 20). The First Amended Complaint alleged that Defendant JBSHBM is the owner of 31 patents relating to loyalty reward point innovations, including United States Patent No. 9,704,174 ("the 174 patent"). Rodeway alleged concern that JBSHBM would sue it for infringement of the 174 patent. Id. ¶ 40; see also Point Conversion, LLC v. Tropical Paradise Resorts, LLC, 339 F. Supp. 3d 1350 (S.D. Fla. 2018) (Point Conversions' prior case removed to this District and subsequently remanded). Thus, in this action, Rodeway sought a declaratory judgment of non-infringement of the 174 patent against JBSHBM (Count 1) and a finding that the 174 patent is invalid (Count 2) and unenforceable (Count 3). See generally (ECF No. 20). Rodeway also sought to recover damages against JBSHBM for bad faith assertions of patent infringement, in violation of the Patent Troll Prevention Act (Count 4), and damages against Point Conversions for conspiracy to violate the Patent Troll Prevention Act (Count 5). Id.

On June 8, 2018, JBSHBM filed with the Court a letter it had sent to Rodeway in which JBSHBM "convenant[ed] not to sue Rodeway for infringement of the [174 patent] under the Patent Act [then] or in the future." See (ECF Nos. 22-1 at 3, 112 at 2). On June 11, 2018, Point Conversions filed its Answer, Affirmative Defenses, and Counterclaims to Rodeway's First Amended Complaint. See generally (ECF No. 23). The counterclaims were alleged against Rodeway (the initial Plaintiff) and, for the first time, against Choice, the franchisor. Id. (spanning 40 pages and 106 paragraphs). Thereafter, on July 30, 2018, Point Conversions filed its First Amended Counterclaims against Rodeway and Choice, which expanded the counterclaims (to 55 pages and 354 paragraphs). See generally (ECF No. 50).

According to Point Conversions' First Amended Counterclaims, Point Conversions had the exclusive rights to the only software legally permitted to convert reward points across program boundaries. Id. ¶¶ 15-16. Point Conversions asserted state law claims against Rodeway and Choice under Florida's Deceptive and Unfair Practices Act ("FDUTPA") and conspiracy to violate FDUTPA, among other claims. Id. ¶¶ 173-338.

On October 10, 2018, the District Court dismissed Rodeway's declaratory judgment claims against JBSHBM (Counts 1, 2, and 3), concluding that the Court lacked subject matter jurisdiction. (ECF No. 112 at 5-8); Tropical Paradise Resorts, 2018 WL 4932282, at *4. The District Court also declined to exercise jurisdiction over Rodeway's state law claims alleging violations of the Patent Troll Prevention Act (Counts 4 and 5). (ECF No. 112 at 8-9); Tropical Paradise Resorts, 2018 WL 4932282, at *4.

Additionally, and relevant to the instant Motion, the District Court dismissed Point Conversions' FDUTPA counterclaims against Rodeway and Choice.¹ (ECF No. 112 at 9-11). Tropical Paradise Resorts, 2018 WL 4932282, at *4-5. The District Court wrote:

The Court finds that Point Conversions' state law counterclaims necessitate a determination of patent law issues. Judge Altonaga reached a similar conclusion in remanding to state court an action involving the same nucleus of facts brought by Point Conversions against Rodeway for state law claims:

Before [Point Conversions] can obtain relief on any of its claims, a court will necessarily have to determine whether the licensed patents from JBSHBM are valid. If a court concludes [Rodeway] did not infringe [Point Conversions'] licensed patents, [Rodeway] cannot have deprived [Point Conversions] of any intellectual property right [Point Conversions] asserts, thereby defeating all of [Rodeway's] claims.

Point Conversions, LLC v. Tropical Paradise Resorts, LLC, No. 18-cv-60809 at 5 (S.D. Fla. June 13, 2018). [In the instant action], Point Conversions' FDUTPA claims [also] require a determination of whether the patents at issue are valid to ascertain whether the value of the products Rodeway and Choice Hotels providedto their customers was diminished by the alleged "litigation liability." Accordingly, Point Conversions' state law [FDUTPA] counterclaims are preempted.

(ECF No. 112 at 10); Tropical Paradise Resorts, 2018 WL 4932282, at *5 (citations omitted).

On November 1, 2018, Point Conversions filed a Motion for Reconsideration of the District Court's Order dismissing Point Conversions' FDUTPA counterclaims. See generally (ECF No. 116). On January 2, 2019, the District Court denied Point Conversions' Motion for Reconsideration and found that "Point Conversions' FDUTPA counterclaims depend entirely on whether Rodeway and Choice Hotels infringed the patent at issue . . . . Point Conversions' FDUTPA counterclaims are merely a parallel way of enforcing patent rights." (ECF No. 134 at 5); Tropical Paradise Resorts, LLC v. JBSHBM, LLC, No. 18-CV-60912, 2019 WL 78983, at *2 (S.D. Fla. Jan. 2, 2019).

On January 30, 2019, Point Conversions appealed the District Court's orders on the Motion to Dismiss and the Motion for Reconsideration to the Eleventh Circuit. (ECF No. 135). On May 26, 2020, the Eleventh Circuit affirmed per curiam the District Court's dismissal of the claims. See generally Tropical Paradise Resorts, 806 F. App'x at 966. In relevant part, the Eleventh Circuit found that the District Court's conclusion was "well-reasoned" in that "Point Conversions' claims arising under [FDUTPA] are preempted by patent law." Id.

Notwithstanding the Eleventh Circuit's affirmance of the District Court's dismissal of the claims and counterclaims, Point Conversions continued to litigate. More specifically, Point Conversions requested that the Eleventh Circuit transfer the case to the Federal Circuit (which request the Eleventh Circuit denied) and filed a motion for rehearing en banc (which the Eleventh Circuit also denied). See Point Conversions, LLC v. Tropical Paradise Resorts, LLC, No. 19-10553 (11th Cir. 2020) (filings dated 6/8/2020, 6/16/2020, 7/16/2020, 7/21/2020, and 7/29/2020).

Undeterred, Point Conversions subsequently filed a Petition for Writ of Mandamus before the Federal Circuit requesting that the Federal Circuit direct the District Court in South Florida to vacateits order, or alternatively, direct the Eleventh Circuit to transfer the case to the Federal Circuit for lack of subject matter jurisdiction. See In re Point Conversions, No. 20-152 (Fed. Cir. 2020) (Petition for Writ of Mandamus filed on 10/2/2020). On November 25, 2020, the Federal Circuit dismissed Point Conversions' Petition for Writ of Mandamus. Point Conversions, 830 F. App'x at 320. The Federal Circuit found that the proper course was for Point Conversions to seek review of the Eleventh Circuit's decision in the United States Supreme Court, which has jurisdiction to review decisions by the Eleventh Circuit.² Id.

On December...