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Reed v. Ezelle Investment Properties Inc.

United States District Court, D. Oregon, Portland Division

November 5, 2018

AARON C. REED, an individual, Plaintiff,
v.
EZELLE INVESTMENT PROPERTIES INC., doing business as ezelleinvestmentproperties.com, GLENN D. EZELLE JR., an individual, DOES 1-10 INCLUSIVE, Defendants.

          OPINION AND ORDER

          YOULEE YIM YOU UNITED STATES MAGISTRATE JUDGE.

         Plaintiff Aaron C. Reed (“Reed”) has brought this action for copyright infringement against defendants Glenn D. Ezelle Jr. (“Ezelle”) and Ezelle Investment Properties Inc. (“EIP”) (collectively “defendants”).[1] Before the court are cross-motions for summary judgment. For the reasons set forth below, Reed's motion is granted and defendants' motion is denied.

         BACKGROUND

         Reed is a professional photographer specializing in the production of fine-art nature photography. Decl. Aaron C. Reed ¶ 2 (“Reed Decl.”), ECF #26-1. Reed offers his works through his website in the form of museum quality fine-art prints. Id. ¶ 3. He sets strict production limits of between 50 and 200 prints for each work. Id. ¶ 4. His pieces sell for thousands of dollars each. Id., Ex. A (displaying invoices of $12, 000 for four pieces, $4, 250 for two pieces, $4, 800 for one piece, and $5, 000 for one piece). His customers pay a premium due to the artificial scarcity of each piece. Id. ¶¶ 4-5. Reed has expended great time and effort establishing his brand as a fine-art nature photographer and is very selective about when and how his works are used. Id. ¶ 18. While Reed endeavors to protect his intellectual-property rights to the best of his ability, he does not have the time or financial resources to stop the widespread copyright infringement of his photographs. Id. ¶¶ 7-8.

         In 2010, Reed took a photograph at the Japanese Garden in Portland, Oregon (“the Image”), and displayed it on his website. Joint Stip. Undis. Facts ¶ 1, ECF #22; id., Ex. A (showing a copy of the Image). Reed registered the Image as part of a group registration of photographs taken in 2010 and did not assert a claim in the selection, coordination, or arrangement of the works included within the group. Id. ¶ 4. On January 30, 2013, the Copyright Office issued registration certificate number VAu 1-119-527 for the group of photographs. Id. ¶ 3.

         Ezelle is a real estate broker licensed in Oregon and California and operates a real estate business. Decl. Glenn D. Ezelle Jr. ¶ 1 (“Ezelle Decl.”), ECF #24-2. He is the sole owner and president of EIP. Joint Stip. Undis. Facts ¶ 7, ECF #22. In 2016, Ezelle searched Google for “free images” to display on EIP's website and found the Image. Ezelle Decl. ¶ 2, ECF #24-2. It is unclear where Ezelle procured the Image. Decl. Ryan E. Carreon ¶ 4, Ex. B, ECF #35-1. Regardless, Ezelle maintains that he did not see a watermark or any other information suggesting the Image was copyrighted, and he believed he could use the Image for free. Ezelle Decl. ¶ 2, ECF #24-2. On September 7, 2016, Ezelle uploaded a copy of the Image to EIP's website where it was displayed in rotation with seven other photographs in five-second intervals at the top of the website's homepage. Joint Stip. Undis. Facts ¶¶ 9-10, ECF #22; id., Ex. C (showing screenshot of EIP website with the Image). The parties dispute the amount of website traffic the EIP website received during the relevant period.[2]

         In 2017, Reed discovered the Image on EIP's website and instructed his attorneys to contact Ezelle to try to resolve the matter. Reed Decl. ¶¶ 14, 19, ECF #26-1. In July 2017, through his attorneys, Reed sent Ezelle a cease-and-desist letter. Ezelle Decl., Ex. A, ECF #24-3. The communication included a Rapid Conditional Release License Agreement (“Proposed Settlement Agreement”), which provided Ezelle the option of immediately settling the matter for $5, 000. Id. The Proposed Settlement Agreement contained the following confidentiality clause:

The terms of this Agreement are confidential; provided however, that each Party may disclose the terms of this Agreement, as necessary to enforce its terms, in response to valid legal process or as otherwise required by law, and/or to its financial advisors and/or legal advisors.

         Proposed Settlement Agreement ¶ 7, ECF #24-3. It also provided that the “Agreement may not be modified or amended except by written agreement, signed by all Parties, ” and contained a severability clause. Id. ¶¶ 9, 11.

         Upon receipt of the letter, Ezelle immediately removed the Image from EIP's website and retained counsel. Ezelle Decl., Ex. D at 31, ECF #24-6. Several days later, Ezelle's counsel sent Reed's counsel an email, sparking negotiations via email that lasted a little under a month. Id. In two emails sent in late July 2017, Ezelle's counsel stated his belief that Reed had seeded the internet with his photographs with the intent of later bringing dubious legal claims. Higbee Decl. ¶¶ 12-14 & Ex. B, ECF #26-1. Ezelle's counsel also stated that he was writing an article about these practices in a legal magazine, and made several disparaging comments on online forums. Id. ¶¶ 9-10 & Ex. B, E. Nevertheless, to quickly resolve the matter without the expense of litigation, the parties made several attempts to settle the dispute. Reed Decl. ¶ 20, ECF #26-1; Ezelle Decl. ¶¶ 8-9, ECF #24-2.

         On August 11, 2017, Ezelle's counsel sent an email to Reed's counsel stating that “[a]t this juncture, we intend to do as previously mentioned, but in the amount of $1000. We are not making a settlement offer in this amount, although you are welcome to accept it. We are going to send a check, payable to Mr. Reed in the amount of $1000.” Ezelle Decl., Ex. D at 7, ECF #24-6 (emphasis added). Reed's counsel responded, “I have conveyed the $1000 offer to my client which he accepted. Please see attached the release agreement for your review. Please sign it and return it . . . .” Id. Ezelle returned the Proposed Settlement Agreement, but with lines drawn through the agreement's confidentiality clause. Ezelle Decl., Ex. C, ECF #24-5; id., Ex. D at 6-8, ECF #24-6. In response to inquiries from Reed's counsel regarding the modification of the agreement, Ezelle's counsel's said, “If the deletions are unacceptable, you can return the check to me.” Ezelle Decl., Ex. D at 7, ECF #24-6. Through counsel, Reed responded that the confidentiality clause was non-negotiable and demanded $20, 000 to settle the case. Reed Decl. ¶ 28, ECF #26-1; Ezelle Decl., Ex. D at 4, ECF #24-6. In a later email, Ezelle's counsel stated that “[t]he only thing we did not agree on was the confidentiality clause demanded by your office.” Ezelle Decl., Ex. D at 2, ECF #24-6.

         After negotiations fell through, Ezelle's counsel made what Reed considered additional disparaging comments on online forums characterizing Reed's efforts as “an ‘extrajudicial business model' driven by dishonest representation[s] . . . .” Higbee Decl., Ex. E, ECF #26-1; Reed Decl. ¶ 24, ECF #26-1. Reed considered the confidentiality clause to be non-negotiable, because he might otherwise suffer reputational harm from Ezelle's counsel's disparaging comments about his attempts to protect his intellectual property. Higbee Decl. ¶ 11 & Ex. D, ECF #26-1; Reed Decl. ¶¶ 23, 26, ECF #26-1; Decl. Naomi M. Sarega ¶ 7, ECF #26-1. Indeed, “Reed felt that he would not be able to fully combat any negative statements made by Defendants' counsel . . . without procuring a favorable judgment on the merits . . . .” Higbee Decl. ¶ 14, ECF #26-1; see also Reed Decl. ¶ 24, ECF #26-1. Reed then filed suit.

         STANDARDS

         A party is entitled to summary judgment if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FRCP 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “When judging the evidence at the summary judgment stage, the district court is not to make credibility determinations or weigh conflicting evidence, and is required to draw all inferences in a light most favorable to the nonmoving party.” Musick v. Burke, 913 F.2d 1390, 1394 (9th Cir. 1990); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.”). However, the “mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient . . . .” Id. at 252. “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation and quotation marks omitted).

         DISCUSSION

         Reed seeks a ruling that defendants infringed his copyright of the Image and an award of $15, 375 in statutory damages, $9, 825 in attorneys' fees, and $400 in costs. Pl.'s Mot. Summ. J. 6, ECF #26. Defendants contend that the parties entered into an enforceable settlement agreement, and alternatively argue that if such an agreement did not exist, they are innocent and not willful copyright infringers. Defs.' Mot. Summ. J. 3, ECF #24.

         I. Enforceability of Proposed Settlement Agreement

         This court first considers defendants' contention that the parties entered into an enforceable settlement agreement.

         A. Mirror Image Rule

         Under Oregon law, whether a contract exists is a question of law. Wieck v. Hostetter, 274 Or.App. 457, 471 (2015). A “contract is most commonly formed by an offer, an acceptance of that offer, and an exchange of consideration.” Moro v. State of Oregon, 357 Or. 167, 196 (2015). “Oregon applies an objective theory of contracts.” Wieck, 274 Or.App. at 471. That is, the existence and terms of a contract are determined by the evidence of the parties' communications and acts, not their subjective understandings. Rhoades v. Beck, 260 Or.App. 569, 572 (2014).

         Oregon follows the mirror image rule of offer and acceptance. Arboireau v. Adidas-Salomon AG, 347 F.3d 1158, 1163 (9th Cir. 2003). “In Oregon, it is settled that the acceptance of an offer must correspond to the offer at every point, leaving nothing open for future negotiations.” Id. (internal quotation and alterations omitted). “The acceptance must be positive, unconditional, unequivocal, and unambiguous, and must not change, add to, or qualify the terms of the offer.” C. R. Shaw Wholesale Co. v. Hackbarth, 102 Or. 80, 94 (1921). “Where the offeree . . . makes a counter offer or conditional acceptance which amounts to a counter offer, or makes an attempted acceptance which seeks to modify one or more of the terms of the offer, this operates as a rejection of the original offer.” Id. at 95-96. Before the counteroffer can become a contract, it must be accepted by the party who made the original offer. Id. at 96; see also Restatement (Second) of Contracts § 59 (“a reply to an offer which purports to accept but is . . . different from those offered is not an acceptance but is a counteroffer”).

         Here, there is no binding settlement agreement because Ezelle's purported acceptance modified a material term of the agreement and thus constituted a counteroffer. Reed's first email to Ezelle included a copy of the Proposed Settlement Agreement, which contained the confidentiality clause at issue. Ezelle Decl., Ex. A., ECF #24-3. The parties negotiated the settlement amount for the next several weeks. Id., Ex. D at 8-32, ECF #24-6. Ezelle proposed a settlement amount of $1, 000, and Reed sent Ezelle another copy of the Proposed Settlement Agreement to be signed and returned with payment. Ezelle Decl., Ex. D at 7, ECF #24-6. Ezelle mailed a $1, 000 check to Reed with a signed copy of the Proposed Settlement Agreement, but with the confidentiality provision crossed out. Id., Ex. C, ECF #24-5; id., Ex. D ...


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