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FM Industries, Inc. v. Citicorp Credit Services, Inc.

United States Court of Appeals for the Seventh Circuit
614 F.3d 335 (2010)


FM Industries, Inc. (FM) (plaintiff) published computer software whose copyright FM later registered. Prior to registration, FM licensed the software to Citicorp Credit Services, Inc. (Citicorp) (defendant). After a dispute over fees, FM sued Citicorp for infringing its copyright. FM also sued the Law Offices of Ross Gelfand, LLC (defendant), Citicorp’s outside counsel, for continuing to use the software after the license was terminated. Through its attorney Wayne Rhine, FM sought more than $15 billion in statutory damages and $235 million in actual damages. FM sought to depose Citicorp’s chairman despite there being no link between the chairman and the lawsuit. FM filed discovery demands on a number of nonparty law firms without complying with Federal Rule of Civil Procedure (FRCP) 45. FM missed numerous discovery deadlines, yet sought $815 million in sanctions against the defendants when they missed a single deadline by one day. The district court dismissed FM’s claims for damages, because (1) its late registration date made statutory damages unavailable and (2) FM had not proven actual damages. Other claims were set for trial. When attorney Rhine was tasked, pursuant to federal and local rules, to prepare a pretrial order, he flouted the obligation repeatedly. After Rhine failed to prepare an adequate draft upon the court’s admonition, the court dismissed FM’s claims. FM moved for reconsideration but did not proceed to work on the pretrial order. Eleven weeks later, the court ordered FM to pay the defendants’ attorneys’ fees. The court held Rhine personally liable for approximately $37,500 in attorneys’ fees attributable to his vexatious proliferation of proceedings. The court also held another attorney who had been retained to assist in the case, William McGrath, jointly and severally liable for most of the fees charged to Rhine. FM appealed.

Rule of Law


Holding and Reasoning (Easterbrook, C.J.)

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