Copyright lawyer Richard Liebowitz ducked sanctions, but not harsh words, for his negotiating tactics with Hearst Communications Inc. over a photo capturing Donald Trump crashing a wedding.

A New York federal magistrate judge found no hard evidence Liebowitz materially lied and that alleged deception didn’t ultimately prejudice Hearst, which unlike other outlets accused of infringing the photo, refused to settle. U.S. Magistrate Judge James L. Cott of the U.S. District Court for the Southern District of New York called it a “close call” in a March 5 ruling, noting that it isn’t the first time Liebowitz’ and his firm’s reputation—a lawyer’s “one treasured possession"—has been called into question.

The ruling highlights the fine line walked by Liebowitz, a prolific copyright litigant and ally of photographers in the digital era, but whose tactics have also stirred controversy. It’s also a window into the non-public world of settlement negotiation, in particular the latitude generally granted by courts for exaggeration, as long as it doesn’t rely on factual misrepresentations.

Otto sued five media companies for use of his photo of Trump crashing a wedding where Otto was a guest, including Hearst for using the photo in Esquire. Hearst had alleged Liebowitz misrepresented a license from Warner Brothers for the photo as a stand-alone license rather than a part of a settlement to gain leverage in settlement negotiations. The magistrate judge noted there was no transcript memorializing the off-the-record conference and called the court’s memory on the specifics “hazy.”

Negotiations failed, any misconception was corrected during discovery and Hearst acknowledged it hadn’t been prejudiced, Cott said in his ruling.

In December 2018, a district court judge ruled against the fair use defense of Hearst, the only company not to settle. A damages trial is scheduled for July.

‘Fraud upon the Court’

The alleged misrepresentation of Warner Brother’s unsigned $9,500 license for the photo—which Otto was supposedly on the verge of executing—occurred during a settlement conference in Oct. 23, 2017. Otto settled with Warner Brothers four days later, with the licensing agreement attached as an exhibit. Hearst also alleged a copy of the agreement produced during discovery in December 2017 but not as part of the settlement, and that Otto falsely claimed during a subsequent deposition that the licensing deal was executed before the settlement.

Hearst moved for sanctions against Liebowitz and Otto in March 2018, seeking a $50,000 fine and $22,600 in attorney fees along with admonishment of both. It called their efforts “fraud upon the court” that sank negotiations by inflating damages through “doctored evidence.”

Otto and Liebowitz counter-moved for a judgment of civil contempt and sanctions against Hearst, demanding $10,100 in attorney fees and a court order ordering Hearst counsel to complete ethics training. They said Hearst violated an order protecting the “sanctity” of off-the-record settlement conferences.

Cott’s ruling said “the court can understand Hearst’s frustration,” but said the court required clear evidence of conduct “entirely without color and taken for improper purposes.” He called Liebowitz separating the agreement from the license “posturing about the value of Otto’s” argument, “as lawyers often do.” He called Hearst’s claim it derailed negotiations “self-serving” and “ultimately unproveable.”

The ruling declined to weigh the merits of Otto’s contention that he thought he had the right to present the license and settlement separately. But it said they are at least “colorable.” Even if Otto perjured himself during his deposition, the court added, it was an isolated case that wasn’t sanctionable and was corrected four days later.

But the ruling “strongly cautions Liebowitz and his law firm to be mindful of overplaying their hands (or worse) during settlement negotiations.” It said lawyers’ clients and the court are “ill-served” if they lose trustworthiness.

Cott also rejected Otto’s cross-motion against Hearst. He ruled Otto had not shown Hearst’s seeking of sanctions were in bad faith, given its “plausible claims” that were not without merit.

The case is Jonathan Otto v. Hearst Communications Inc., S.D.N.Y., No. 17-4712, 3/5/19