Allen v. McCrory

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA

WESTERN DIVISION

No. 5:15-CV-627-BO

FREDERICK L. ALLEN and NAUTILUS )

PRODUCTIONS, LLC, )

)

Plaintiffs, )

)

V. ) ORDER

)

ROY A. COOPER, et al., )

)

Defendants. )

This cause comes before the Court on plaintiffs’ motion for reconsideration, DE 105. The

appropriate responses and replies have been filed, and a hearing was held before the undersigned

on February 16, 2021, at Raleigh, North Carolina. For the reasons discussed below, the motion for

reconsideration is granted.

BACKGROUND

The shipwreck believed to be Queen Anne’s Revenge, the former flagship of Edward

Teach, more commonly known as the pirate Blackbeard, was discovered in 1996 off the coast of

Beaufort, North Carolina. Since 1998, plaintiffs, Frederick Allen and his production company,

Nautilus Productions, have been the substantially exclusive underwater photographers of the

shipwreck. During this time, plaintiffs have allegedly produced a substantial archive of video end

still images showing the underwater shipwreck and the efforts of diving teams and archaeologists

to recover various artifacts from the wreck. Allen registered thirteen copyrights in these materials

with the U.S. Copyright Office, each copyright covering a year’s worth of footage.

In 2013, defendant began arguing that the State of North Carolina and its Department of

Natural and Cultural Resources (DNCR) infringed, contributed to infringement, and induced

infringement of Allen’s registered copyrights by uploading Allen’s video-footage to the Internet

without Allen’s consent. On October 15, 2013, plaintiffs, the State, and the DNCR entered into a

written settlement agreement providing for payment to plaintiffs from the DNCR of $15,000 for

any copyrights it had infringed prior to that date. The agreement referred to some specific

instances of infringement, but none of the parties admitted to any wrongdoing. The agreement

also clarified preexisting agreements and divided plaintiffs’ video and photographic

documentation into two categories to clarify the parties’ respective rights. The State and the

DNCR paid plaintiffs the $15,000 provided by the settlement on February 3, 2014.

Plaintiffs commenced this action on December 1, 2015, alleging that the State and the

DNCR continued to infringe on plaintiffs’ copyrights after entry of the 2013 settlement

agreement. They further alleged that the State and the DNCR have published, performed, and/or

displayed plaintiff's video footage and that, in an effort to convert plaintiffs’ copyright assets to

state property without payment to plaintiff, defendants collectively wrote and obtained passage

of an amendment to an existing North Carolina statute to convert copyrighted works of plaintiffs

and others into public record. N.C. Gen. Stat. § 121-25(b).

In their complaint and amended complaint, plaintiffs sought a declaratory judgment that §

121-25(b) is void and unenforceable because it is preempted by the Copyright Remedy

Clarification Act (CRCA), 17 U.S.C. §§ 101 ef seg., and violates the Takings and Due Process

Clauses of the U.S. Constitution. U.S. Const. amends. V and XIV. Plaintiffs further alleged

claims of copyright infringement and unconstitutional taking pursuant to 42 U.S.C. § 1983, as

well as state law claims for unfair and deceptive trade practices and civil conspiracy. Defendants

moved to dismiss plaintiffs’ amended complaint, arguing that it is barred by the Eleventh

Amendment, that the individual defendants sued in their individual capacities are protected by

qualified and legislative immunity, that the complaint fails to state a plausible claim for relief,

that plaintiffs lack standing to challenge § 121-25(B) as amended, and that this Court should

abstain from issuing an opinion of first impression regarding North Carolina’s public record

statute. Fed. R. Civ. P. 12(b)(1)-(2), (6).

On March 23, 2017, this Court entered an order denying in part and granting in part

defendants’ motion to dismiss. The order allowed the claims for a declaratory judgment that §

121-25(b) is void and unenforceable and for copyright infringement to move forward upon

finding that North Carolina’s Eleventh Amendment immunity for those counts was validly

abrogated by the CRCA. The order dismissed the remaining claims for unconstitutional taking

pursuant to § 1983, unfair and deceptive trade practices, and civil conspiracy because of

sovereign immunity. In dismissing the § 1983 claim, the Court relied on Hutto v. South Carolina

Retirement System, 244 F. Supp. 3d 536 (4th Cir. 2010), and found, “under Fourth Circuit

precedent, that plaintiffs’ takings claims brought under § 1983 are barred by the Eleventh

Amendment when North Carolina courts are available for such a claim to be brought.” Allen v.

Cooper, 244 F. Supp. 3d 525, 540 (E.D.N.C. Mar. 23, 2017) (citing Hutto, 773 F.3d at 552).

Defendants appealed this Court’s March 23, 2017 order on April 21, 2017, and plaintiffs

cross-appealed on May 5, 2017. This Court granted plaintiffs’ motion to stay the case on May

11, 2017, pending a final appellate decision. On July 10, 2018, the Fourth Circuit reversed this

Court’s decision. To effect the Fourth Circuit’s mandate, on August 24, 2018, this Court entered

an order dismissing plaintiffs’ claims against North Carolina, the DNCR, and the public officials

acting in their official capacity without prejudice and dismissing the claims against the public

officials in their individual capacities with prejudice. This Court granted plaintiffs’ motion to

stay on September 27, 2018, until after the U.S. Supreme Court ruled on plaintiffs’ petition for

certiorari, and the Supreme Court granted the writ of certiorari on June 3, 2019. On April 24,

2020, the Supreme Court affirmed the Fourth Circuit's finding that there was no abrogation of

sovereign immunity based on Article I's Intellectual Property Clause or § 5 of the Fourteenth

Amendment in this case.!

On September 4, 2020, plaintiffs filed the instant motion for reconsideration asking this

Court to reconsider its 2017 order dismissing the claim for unconstitutional taking pursuant to §

1983. Plaintiffs claim that, although this Court relied on then-prevailing law at the time it

dismissed plaintiffs’ takings claim, precedent has been changed by the Supreme Court’s decision

in Knick v. Township of Scott, 139 S. Ct. 2162 (2019), dated June 21, 2019. According to

plaintiffs, that change in the law constitutes a valid reason justifying reconsideration of this

Court’s previous order and reinstitution of the case. Plaintiffs also argue that, now that the

Supreme Court has rejected the CRCA as a prophylactic abrogation statute, it is appropriate to

consider plaintiffs’ claim for case-by-case abrogation based on an actual violation of his

constitutional rights under United States y. Georgia, 546 U.S. 151 (2006).

DISCUSSION

At the outset, this Court notes that plaintiffs have filed their motion pursuant to Rule 60

of the Federal Rules of Civil Procedure. Defendant has not objected to plaintiff moving pursuant

to Rule 60. Under that rule, a court may relieve a party from a final order for a limited set of

circumstances, including mistake, fraud. and newly-discovered evidence. Fed. R. Civ. P. 60(b).

' Following the Supreme Court’s decision, the case proceeded against defendant Friends of Queen Anne's Revenge.

On August 17, 2020, plaintiffs filed a stipulation of voluntary dismissal dismissing the action, with prejudice,

against defendant Friends of Queen Anne's Revenge, which stipulated to this dismissal. DE 104.

In addition to the specific categories for relief listed, Rule 60(b)(6) allows for a relief for “any

other reason that justifies relief.” /d. “To obtain relief from a judgment under Rule 60(b), a

moving party must first show (1) that the motion is timely, (2) that he has a meritorious claim or

defense, and (3) that the opposing party will not suffer unfair prejudice if the judgment is set

aside.” United States v. Welsh, 879 F.3d 530, 533 (4th Cir. 2018). The movant bears the burden

of showing timeliness. Moses v. Joyner, 815 F.3d 163, 166 (4th Cir. 2016). Under Rule 60(b)(6),

the party must also show the existence of “extraordinary circumstances.” Gonzalez v. Crosby,

545 U.S. 524, 535 (2005).

However, Rule 60(b) is applicable only to final orders. Roberson v. Paul Smith, Inc., No.

5:07-CV-284-F, 2011 U.S. Dist. LEXIS 42978, at *5 (E.D.N.C. Apr. 20, 2011) (citing

Fayetteville Inv'rs y. Commercial Builders, Inc., 936 F.2d 1462, 1469 (4th Cir. 1991); McLaurin

v. E. Jordan Iron Works, Inc., 666 F. Supp. 2d 590, 596 n.2 (E.D.N.C. 2009)). Final judgments

adjudicate and resolve all claims as to all parties. See Benedict v. Hankook Tire Co., No. 3:17-cv-

109, 2018 U.S. Dist. LEXIS 58616, at *5 (E.D. Va. Apr. 5, 2018); Moore v. Lightstorm Entm't,

No. RWT-11-3644, 2013 U.S. Dist. LEXIS 112366, at *8 (citing Millville Quarry Inc. v. Liberty

Mut. Fire Ins. Co., 217 F.3d 839, [published in full-text format at 2000 U.S. App. LEXIS

17495], at *8 (4th Cir. 2000) (unpublished)).

In this case, the Court's order dismissed only some of the defendants and some of the

claims. Since the order did not resolve all claims as to all parties, it was not a final order. See

Quigley v. United States, 865 F. Supp. 2d 685, 699 (D. Md. 2012) (finding that an order

dismissing claims against only one defendant was not a final judgment) (quoting Fed. R. Civ. P.

54). Rule 60(b) 1s not applicable. Rather than deny the motion because it cites to Rule 60(b), the

Court will construe plaintiffs’ Rule 60(b) motion as a Rule 54(b) motion to reconsider. /d. (citing

Fayetteville Inv’rs, 936 F.2d at 1469-70).

Rule 54(b) governs “any order or decision, however designated, that adjudicates fewer

than all the claims or the rights and liabilities of fewer than all the parties.” Pursuant to this rule,

“{a]n interlocutory order is subject to reconsideration at any time prior to the entry of a final

judgment.” Fayetteville Inv 'rs, 936 F.2d at 1469. “‘[A] district court retains the power to

reconsider and modify its its [sic] interlocutory orders’ at any time prior to final judgment, and

the exercise of such ‘power is committed to the sound discretion of the district court.” Roberson,

2011 U.S. Dist. LEXIS 42978, at *5—6 (quoting Am. Canoe Ass’n v. Murphy Farms, Inc., 326

F.3d 505, 514-15 (4th Cir. 2003)). A court may revise such an order “under the same

circumstances in which it may depart from the law of the case: (1) ‘a subsequent trial

produc[ing]| substantially different evidence’; (2) a change in applicable law; or (3) clear error

causing manifest injustice.” Car/son v. Bos. Sci. Corp., 856 F.3d 320, 325 (4th Cir. 2017) (noting

the similarity of this standard to that applicable to Rule 59(e) motions, except that the law-of-the-

case standard allows for new evidence discovered during litigation as opposed to evidence not

available at trial to serve as basis for reconsideration motion) (alteration in original) (citing Am.

Canoe, 326 F.3d at 515). This is a lower standard than that of Rule 60(b). See Am. Canoe, 326

F.3d 505, 514-15 (4th Cir. 2003) (“Motions for reconsideration of interlocutory orders are not

subject to the strict standards applicable to motions for reconsideration of final judgments.”).

I. Plaintiffs’ Takings Claim under Knick

In determining whether to grant a motion to reconsider pursuant to Rule 54(b), a district

court may look to the Rule 60(b) principles, although it is not bound by that rule. See Fayetteville

Inv rs, 936 F.2d at 1470 (favorably citing a case that used parts of Rule 60(b) in reaching its

conclusion on a motion to reconsider an interlocutory order). Since the parties have argued the

motion based on the Rule 60(b) principles and since Rule 60(b) is a more stringent standard than

that of Rule 54(b), the Court considers these principles in its analysis. Regardless of whether the

Court addresses the issue of reconsideration on the standard of Rule 60(b) or Rule 54(b),

plaintiff's request for relief is granted.

Timeliness

Plaintiffs filed this motion for reconsideration three-and-a-half years after this Court

entered its order dismissing plaintiffs’ takings claim. However, plaintiffs argue that their motion

to reconsider is nevertheless timely because plaintiffs gave notice of their intent to seek

reconsideration just thirteen months after Knick allegedly changed the previously-applicable

Fourth Circuit precedent and less than ninety days after the lawsuit returned to this Court from

the Supreme Court. Courts must determine, based on the circumstances in the case, whether a

delay in filing a Rule 60(b) motion is reasonably timely. Wells Fargo Bank, N.A. v. AMH Roman

Two NC. LLC, 859 F.3d 295 (4th Cir. 2017); see also Cox v. Horn, 757 F.3d 113, 122 (3rd Cir.

2014) (finding that “a district court must consider the full measure of any properly presented

facts and circumstances attendant to the movant’s request” when determining whether a Rule

60(b)(6) motion is timely); Days Inn Worldwide, Inc. v. Patel, 445 F.3d 899, 906 (6th Cir. 2006)

(What constitutes a reasonable time depends on the facts of each case.”).

Upon considering the particular circumstances of this case, the Court finds that plaintiffs’

delay in filing this motion is reasonably timely. At no point in this case have plaintiffs been

dilatory in pursuing the action. Plaintiffs appealed this Court’s 2017 order, and they defended

against defendants’ appeals to both the Fourth Circuit and the Supreme Court. Although

plaintiffs filed the instant motion three-and-a-half years after this Court’s order of dismissal,

based on the facts of this case, this Court determines the starting point for the timeliness inquiry

should be the date the Supreme Court affirmed the Fourth Circuit's judgment in this case, or

April 24, 2020, rather than the date this Court entered its order of dismissal. Afoses, 815 F.3d at

165—66 (using the date of a Supreme Court decision creating a change in habeas procedural law

as the starting point for the Rule 60(b) timeliness inquiry, rather than the date of the Court's

order of dismissal filed nine years prior to the motion for reconsideration at issue); Werner v.

Carbo, 731 F.2d 204, 207 (4th Cir. 1984) (using the date the Supreme Court denied certiorari to

the former decision on appeal as the starting point for the Rule 60(b) timeliness inquiry).

The Court further finds that a delay of eighty-two days between the Supreme Court's

order and plaintiff's request to seek reconsideration is reasonably timely. See id. at 207 (finding a

Rule 60(b) motion timely following a delay of less than eleven weeks); Wells Fargo Bank, 859

F.3d at 300 (suggesting a three-and-a-half-month delay in filing a Rule 60(b) motion may be

reasonable assuming the moving party was diligent in seeking relief) (citing Bouret-Echevarria

v. Caribbean Aviation Maint. Corp., 784 F.3d 37 (1st Cir. 2015)); Jones v. United States, No.

5:13-CR-141-FL-1, 2020 U.S. Dist. LEXIS 6206, at *10 (E.D.N.C. Jan. 10, 2020) (finding a

Rule 60(b) motion timely when filed approximately four months after the court entered

judgment); Kerr v. United States, No. 5:08-CR-302-FL-1, 2020 U.S. Dist. LEXIS 1036, at *7

(E.D.N.C. Jan. 3, 2020) (finding a Rule 60(b) motion timely when filed approximately three

months after the court entered judgment).

Meritorious Claim or Defense

This Court must also determine whether plaintiffs’ claim that the Supreme Court’s

decision in Knick changed Fourth Circuit precedent is meritorious. In its 2017 order, this Court

relied on Hutto and found, “under Fourth Circuit precedent. that plaintiffs’ takings claims

brought under § 1983 are barred by the Eleventh Amendment when North Carolina courts are

available for such a claim to be brought.” A//en, 244 F. Supp. 3d at 540.

In Knick, plaintiff sued a municipality, the Township of Scott in Pennsylvania, alleging

that an ordinance passed by the municipality violated the Takings Clause of the Fifth

Amendment. 139 S. Ct. at 2168. The district court dismissed the takings claim because plaintiff

had not pursued an inverse condemnation action in state court, but the Supreme Court granted

certiorari to reconsider the issue of whether property owners must seek just compensation under

state law in state court before bringing a federal takings claim. Jc. at 2169. Upon consideration of

the issue, the Supreme Court found that “a government violates the Takings Clause when it takes

property without compensation, and that a property owner may bring a Fifth Amendment claim

under § 1983 at that time.” /d. at 2177. It also concluded that, “because the violation is complete

at the time of the taking, pursuit of a remedy in federal court need not await any subsequent state

action.” /d. Based on this conclusion, the Supreme Court overruled the doctrine of Williamson

County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985),

which held that a plaintiff could not bring a federal takings claim in federal court until a state

court had denied his claim for just compensation under state law in a state court. /d. at 2169,

2179,

1. Applicability of Knick

In Hutto, the Fourth Circuit held that “the Eleventh Amendment bars Fifth Amendment

taking claims against States in federal court when the State’s courts remain open to adjudicate

such claims.” 773 F.3d at 552. Knick involved a suit against a municipality, rather than a State.

Since local governments have no claim to sovereign immunity, Jinks v. Richland Cty., 538 US.

456, 466 (2003) (“{M]unicipalities, unlike States, do not enjoy a constitutionally protected

immunity from suit.”), Knick did not address the issue of sovereign immunity.

Defendants argue that since Knick did not directly address the issue of sovereign

immunity, Knick cannot have overturned Hiutfo. However, the Court finds it necessary to

consider the reasoning of the Supreme Court in Knick. After considering the main points the

Supreme Court relied upon in Knick, the Court finds that Knick would have reached the same

conclusion had it involved a taking by a state government rather than a township.

In reaching its conclusion in Knick. the Court relied upon three primary points. First, the

Court relied on the long-standing principle that “‘{t]he Fifth Amendment right to full

compensation arises at the time of the taking, regardless of post-taking remedies that may be

available to the property owner.” Knick, 139 S. Ct. at 2170. See also Jacobs v. United States, 290

U.S. 13, 17 (1933) (holding that a property owner found to have a valid takings claim is entitled

to compensation as if it had been “paid contemporaneously with the taking”) (citing Seaboard

Air Line Ry. Co. v. United States, 261 U.S. 299, 306 (1923)); First English Lutheran Church of

Glendale v. Cty. of Los Angeles. 482 U.S. 304, 315 (1987) (finding that a property owner has a

constitutional claim for just compensation at the time of the taking because of “the self-executing

character” of the Takings Clause “with respect to compensation”). Second, the Court found that

Williamson County created a preclusion trap in which a plaintiff “cannot go to federal court

without going to state court first: but if he goes to state court first and loses, his claim will be

barred in federal court.” Knick, 139 S. Ct. at 2167. Finally, the Court relied on the argument that

the Fifth Amendment and the federal civil rights statutes “guarantee[] *a federal forum for claims

of unconstitutional treatment at the hands of state officials,’ and the settled rule is that

10

‘exhaustion of state remedies is not a prerequisite to an action under § 1983.’” /d. (quoting Heck

v. Humphrey, 512 U.S. 477, 480 (1994)).

After applying each of the Supreme Court’s primary points to the case at hand, the Court

finds that the reasoning in Knick still applies, even though this case involves the issue of

sovereign immunity, and that Huffo’s holding that sovereign immunity applies to cases against

States in federal courts when the State’s courts remain open to adjudicate such claims is fatally

undermined. First, the constitutional violation here, as in Knick, arose at the time of the taking

without regard to post-taking remedies available to plaintiffs, including any potential state

proceedings. Knick established that “[t]he fact that the State has provided a property owner with

a procedure that may subsequently result in just compensation cannot deprive the owner of his

Fifth Amendment right to compensation under the Constitution, leaving only the state law right.”

Id. at 2171. Plaintiffs may bring a federal constitutional claim despite the availability of other

compensation remedies, such as an inverse condemnation claim under state law. /d. (“The

availability of any particular compensation remedy, such as an inverse condemnation claim

under state law, cannot infringe or restrict the property owner’s constitutional claim.”). The

Supreme Court, in reaching its decision, relied on First English, stating that “in the event of a

taking, the compensation remedy is required by the Constitution.” /d. at 2171 (quoting First

English, 482 U.S. at 316). In doing so, the court decisively endorsed the decision in First

English, including its statement that the Constitution, “of its own force. furnish[es] a basis for the

court to award money damages against the government,” notwithstanding principles of sovereign

immunity. /d. at 2172 (quoting First English, 482 U.S. at 316 n.9).

In reaching its decision, the Hutto court relied on a line of tax cases under the Due

Process Clause, holding that due process requires a remedy to recover payments pursuant to an

11

unlawful tax, but that States may choose whether to provide a pre-payment or post-payment

remedy. See 773 F.3d at 551-52 (citing McKesson Corp. v. Div. of Alcoholic Beverages &

Tobacco, 496 U.S. 18 (1990): Reich v. Collins, 513 U.S. 106 (1994)). However, the Supreme

Court notes in Knick that “the analogy from the due process context to the takings context is

strained.” 139 S. Ct. at 2174. Unlike in the due process context, “[a] later payment of

compensation may remedy the constitutional violation that occurred at the time of the taking, but

that does not mean the violation never took place... . A bank robber might give the loot back,

but he still robbed the bank.” /d. at 2172.

Therefore. the Takings Clause requires a compensatory remedy without regard to what

remedies state law may provide. /d. at 2170. Even though Knick was not a sovereign immunity

case, its conclusion that a compensatory remedy is constitutionally-required was necessary to its

decision and is contrary to Huffo’s conclusion that state sovereign immunity can bar takings

claims brought under the Fourteenth Amendment. See also Fitzpatrick v. Bitzer, 427 U.S. 445,

456 (1976) (noting that the Fourteenth Amendment's “sections by their own terms embody

limitations on state authority,” including state sovereign immunity).

Second, using Hutto to require plaintiffs to exhaust their state takings remedies before

turning to federal court creates the same preclusion trap Knick objected to. Knick noted that

requiring a plaintiff to seek just compensation under state law generally precludes any

subsequent federal suit, leaving a takings plaintiff “in a Catch-22: He cannot go to federal court

without going to state court first; but if he goes to state court and loses, his claim will be barred

in federal court.” 139 S. Ct. at 2167. Thus, just like Williamson County's ripeness rule, Hutto’s

holding that a federal plaintiff must sue in state court to avoid sovereign immunity “hand[s]

authority over federal takings claims to state courts.” Jd. at 2170 (quoting San Remo Hotel, L.P.

12

v. City and Cty. of San Francisco, 545 U.S. 323, 350 (2005) (Rehnquist, C.J., concurring in

judgment) (alteration in original)).

Third, enforcing Hutto after Knick by allowing States to take responsibility for federal

takings litigations flies in the face of both the Fourteenth Amendment and federal rights statutes

enforcing the Amendment. The Fourteenth Amendment itself promises access to federal

remedies in federal court. See, e.g, McNeese v. Bd. of Ed. for Cmty. Unit Sch. Dist. 187, 373

U.S. 668, 674 (1963) (holding that where plaintiffs assert the “depriv[ation] . . . of rights

protected by the Fourteenth Amendment . . . [s]uch claims are entitled to be adjudicated in the

federal courts”); Home Tel. & Tel. Co. v. City of Los Angeles, 227 U.S. 278 (1913) (rejecting

interpretation of the Fourteenth Amendment’s state action requirement that would have given

state courts the first say as to federal rights claims). Defendants argue that Knick specifies when

a plaintiff can bring a takings claim, but that only Hutto specifies the appropriate forum for such

a claim when the defendant is a State. However, Knick specifically notes that the Supreme Court

has consistently rejected interpretations of federal rights and remedies that would leave those

rights at the mercy of state courts. 139 S. Ct. at 2172 (“The ‘general rule’ is that plaintiffs may

bring constitutional claims under § 1983 ‘without first bringing any sort of state lawsuit, even

when state courts actions addressing the underlying behavior are available.*”) (quoting David

Dana & Thomas Merrill, Property: Takings 262 (2002)). Knick does, in fact, address the

appropriate forum for takings claims, and to hold otherwise would be to do exactly what Knick

sought to avoid: “relegate[]| the Takings Clause ‘to the status of a poor relation’ among the

provisions of the Bill of Rights.” /d, at 2170 (quoting Dolan y. City of Tigard, 512 U.S. 374, 392

(1994)).

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2. Other Court Decisions Following Knick

Defendants argue that every appellate court to consider the issue at hand had concluded

that Knick does not undermine the rule that sovereign immunity bars takings claims against

States in federal court. While it is true that several circuits have considered whether Knick

changed the states’ immunity in takings claims, the analysis has almost exclusively been limited

to whether Knick directly involved sovereign immunity. The Fifth Circuit and Tenth Circuit

merely stated that Knick did not address sovereign immunity, and then ended their analysis there.

See Williams v. Utah Dep’t of Corr., 928 F.3d 1209, 1214 (10th Cir. 2019) (“Knick did not

involve Eleventh Amendment immunity, which is the basis of our holding in this case.”); Bay

Point Props., Inc. v. Miss. Transp. Comm'n, 937 F.3d 454, 456 (Sth Cir. 2019) [T]he Court did

not even have occasion to re-consider sovereign immunity law in Knick.”). As previously

discussed, this reliance on the fact that Knick involved a taking by a municipality and thus did

not consider sovereign immunity is misplaced because Knick’s reasoning, which these courts

neglect to mention, fatally undermined Hutfo’s rule.

The Sixth Circuit went slightly further, but not by much. The court noted that “Knick says

nothing about sovereign immunity,” and then notes that Knick cited Ruckelshaus v. Monsanto

Co., 467 U.S. 986 (1984), which involved an administrative exhaustion procedure for federal

takings of property. Ladd y. Marchbanks, 971 F.3d 574, 579 (6th Cir. 2020). The Sixth Circuit

concluded that, if Congress could require administrative exhaustion as a condition of its waiver

of sovereign immunity, the Fifth Amendment’s Takings Clause did not abrogate sovereign

immunity. Jd. However, Ruckelshaus involved a claim for injunctive relief, which is a distinction

crucial to Knick’s reasoning. See Knick, 139 S. Ct. at 2175 (distinguishing respondents’ reliance

on cases concerning requests for injunctive relief from the case at hand).

14

Defendants also note that another judge in this district concluded that sovereign immunity

continued to apply after Knick. See Zito v. N.C. Coastal Res. Comm'n, 449 F. Supp. 3d 567

(E.D.N.C. 2020). However, this case is distinct because it involved a taking of real property, a

situation in which there is no federal preemption. /d. at 571-73. In fact, Zito acknowledged

~Hutto’s tension with Knick,” stating that plaintiffs raised “significant constitutional issues”

under Knick and that “the guarantee of a federal forum rings hollow for takings plaintiffs, who

are forced to litigate their claims in state court.” /d. at 582 (quoting Knick, 139 S. Ct. at 2167).

After reviewing the other cases considering the interplay between Hutto and Knick, this

Court finds that no other court has attempted to thoroughly consider the relevance of Knick’s

reasoning to state sovereign immunity in this context. Although the Court recognizes these non-

binding cases, there is nothing in these cases that leads the Court to doubt its conclusion that

Knick would have reached the same result had it involved a State.

3. Longstanding Principles of Sovereign Immunity

Defendants further argue that this Court should continue to follow Hutto because its

holding is consistent with the foundational principles of sovereign immunity. However, this

Court has previously detailed in this case what it believes to be the proper understanding of the

Eleventh Amendment: “The Eleventh Amendment was meant to be only what it purports to be

by its plain language: a bar of suits against states by citizens of other states or nations brought

under the federal courts’ diversity jurisdiction.” Allen, 244 F. Supp. 3d at 535. In support of its

reasoning that the line of cases beginning at least as far back as Hans y. Louisiana, 134 US. |

(1890), is incorrect and harmful to the country’s rule of law, this Court stated that the position

that the Eleventh Amendment was intended to constitutionalize a broad principle of sovereign

immunity contradicts both the historical evidence and the plain meaning of the Amendment and

15

that the founders wrote a Constitution founded upon the sovereignty of the people, rather than

that of the States. /d. at 535-540. While the Court does not deem it necessary to repeat its

statements regarding the proper interpretation of the Eleventh Amendment in detail, the Court

will respond to defendant's assertions that this kind of lawsuit strikes at the heart of North

Carolina’s sovereign immunity and that there is no historical evidence to show that the Framers

intended the Takings Clause to limit sovereign immunity or that the Fourteenth Amendment was

intended to abrogate States’ sovereign immunity from takings claims.

It is well-established that sovereign immunity is not absolute, and that the Fourteenth

Amendment was “enacted after the Eleventh Amendment and specifically designed to alter the

federal-state balance.” College Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527

U.S. 666, 670 (1999) (citing Fitzpatrick, 427 U.S. 445). After considering the text of the

Fourteenth Amendment and noting that it “quite clearly contemplate[d] limitations on [States’}

authority,” the Supreme Court concluded that whatever amount of sovereign immunity the States

retained upon ratification of the Constitution was unmistakably reined in by the passage of the

Fourteen Amendment. See Fitzpatrick, 427 U.S. at 448, 453, 456 ("| T]he Eleventh Amendment,

and the principle of state sovereign immunity which it embodies are necessarily limited by the

enforcement provisions of § 5 of the Fourteenth Amendment.” (citation omitted)). The

Fourteenth Amendment’s substance is not limited to Congress’s action, as “the substantive

provisions of the Fourteen Amendment . .. themselves embody significant limitations of state

authority.” /d. at 456. The States “surrender[ed] a portion of the sovereignty that had been

preserved to them by the original Constitution” when they enacted the Fourteenth Amendment.

Alden vy. Maine, 527 U.S. 706, 756 (1999) (citing Fitzpatrick, 427 U.S. 445).

16

Furthermore, the text of the Fifth Amendment supports a finding of automatic abrogation.

The Fifth Amendment Takings Clause is one of only two constitutional clauses that dictate a

particular remedy. Richard H. Fallon et al., /lart & Wechsler’s Federal Courts and the Federal

System 849 (4th ed. 1996) (noting that the Constitution refers explicitly to remedies only in the

Fifth Amendment’s Just Compensation Clause and in safeguarding the remedy of habeas corpus

against suspension by Congress), stipulating that private property shall not “be taken for public

use, without just compensation.” U.S. Const. amend. V. Although the Fifth Amendment only

applies to the federal government, the just compensation requirement was extended to the States

through the Fourteenth Amendment. See Chi., Burlington & Quincy R.R. Co. v. City of Chicago,

166 U.S. 226, 239 (1897) (finding that Fourteenth Amendment due process requires just

compensation when a state government takes private land for public use). Since the Constitution

explicitly requires “just compensation,” the text of the Fifth Amendment seems to require the

government to provide money damages despite any applicable sovereign immunity bars, and

there is no Eleventh Amendment language requiring a different outcome. Eric Berger, The

Collision of the Takings and State Sovereign Immunity Doctrines, 63 Wash. & Lee L. Rev. 493.

519 (2006) (citing SDDS, Inc. v. South Dakota, 650 N.W.2d 1, 8-9 (S.D. 2002)).

Structurally, the Takings Clause would be stripped of much of its meaning if the

government could simply bar suits for just compensation. State governments could take property

whenever they wanted without providing any compensation unless they chose to waive their

immunity. /d. at 525. Additionally, applying state sovereign immunity to the federal Constitution

voids the Constitution’s purpose of protecting the enumerated rights regardless of the State's

political whims. Jd. at 528-30 (“There is something deeply contradictory about including a right

in the Constitution and then constructing a sovereign immunity barrier to prevent injured parties

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from enforcing it.”). This takes on even more meaning when considered with the fact that the

Takings Clause is one of only two constitutional provisions that is remedially-oriented.

In conclusion, this Court finds that the reasoning of Knick and the longstanding principles

of sovereign immunity support a finding that plaintiffs have met the Rule 60(b) requirement of a

meritorious claim or defense, despite the decisions of other courts. Knick recognizes that the

Fifth Amendment requires just compensation for state takings and allows a plaintiff to

immediately bring a § 1983 claim in federal court upon the takings. Knick impliedly overrules

Hutto, upon which this Court initially relied in dismissing plaintiffs” takings claim, to the extent

Hutto requires state exhaustion or the election of a state remedy before proceeding in federal

court. Thus, since plaintiffs are no longer required to bring their takings claim in state court

before turning to federal court. this Court finds it unnecessary to consider defendant’s argument

that plaintiffs have viable state court remedies.

Unfair Prejudice

Defendants argue that plaintiffs fail to make a showing of any of the requisite procedural

criteria for Rule 60(b)(6) relief, but they do not make any specific arguments as to what

prejudice defendants would suffer if the instant motion to reconsider is granted. There is no

evidence that defendants have relied on the Court’s decision in a way that would cause unfair

prejudice. See Wells Fargo Bank, 859 F.3d at 300-01 (finding unfair prejudice when defendant

purchased property in reliance on the court's order). Instead, it appears only that defendants

would suffer the prejudice “present when any judgment is vacated: the protraction of

proceedings, the time and expense of a new trial, the loss of post-judgment interest.” Werner,

731 F.2d at 206-07. Such prejudice does not rise to the level of unfair prejudice. See id.; Liu v.

Ma, 1:15ev1026(JCC/TCB), 2016 U.S. Dist. LEXIS 173062, at *4 (E.D. Va. Dec. 14, 2016).

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Therefore, plaintiffs have satisfied the requirement of showing that defendants, the non-moving

party, will not suffer unfair prejudice if this Court's previous order Is set aside.

Extraordinary Circumstances

Plaintiffs argue that the change in law brought about by Knick constitutes “extraordinary

circumstances.” A court may grant relief under Rule 60(b)(6) if “such action is appropriate to

accomplish justice.” Dowell v. State Farm Fire & Cas. Auto. Ins. Co., 993 F.2d 46, 48 (4th Cir.

1993) (citing Klapprott v. United States, 335 U.S. 601, 615 (1949)). The Fourth Circuit has

established that “a change in decisional law subsequent to final judgment provides no basis for

relief under Rule 60(b)(6).” /d. However, there is a distinction between cases in which a final

judgment has been entered and cases where a final judgment has not been entered. See Holland

v. Virginia Lee Co., 188 F.R.D. 251, 252-53 (W.D. Va. 1999) (“[I]f the judgment in question has

been executed, and thus its effects are no longer prospective, modification of the judgment under

Rule 60(b)(6) ordinarily will be unavailable .... In contrast, where a change in law effects a

consent decree or permanent injunction, a court may indeed find extraordinary circumstances

present.”) (citing Hall v. Warden, Md. Penitentiary, 364 F.2d 495, 496 (4th Cir. 1966); Ritfer v.

Smith, 811 F.2d 1398, 1402 (11th Cir. 1987)). In those cases in which a judgment has not been

executed, a “significant change in the law or facts since the submission of the issue to the Court”

is a basis for a motion to reconsider. Henderson v. Clinton & Clinton, No. 5:13-CV-635-FL,

2014 U.S. Dist. LEXIS 119225, at *18 (E.D.N.C. Aug. 15, 2014) (considering a motion to

reconsider under Rule 59 of the Federal Rules of Civil Procedure) (quoting Above the Belt, Inc.

v. Mel Bohannan Roofing, Inc..99 F.R.D. 99, 101 (E.D. Va. 1983)). This is because

extraordinary circumstances are often implicated when prospective effect would be given to a

judgment now known to be improper. Holland, 188 F.R.D. at 253: contrast Agostini y. Felton,

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521 U.S. 203, 239 (“Intervening developments in the law by themselves rarely constitute the

extraordinary circumstances required for relief under Rule 60(b)(6). the only remaining avenue

for relief on this basis from judgments lacking any prospective component.”).

In this case. final judgment was never entered, and this Court was never asked to enter

final judgment. Therefore, the Fourth Circuit rule that a change in decisional law is not a basis

for relief under Rule 60(b)(6) does not apply. Instead of entering final judgment, this Court

awaited the outcome of the appellate proceedings before moving forward and stayed the matter

twice pending appeal, showing its retention of jurisdiction. In this posture, the concern that this

Court will give effect to a decision now known to be improper, see Holland 188 F.R.D). at 253,

outweighs the concern for finality, see Dowe//, 993 F.2d at 48 (stating that “[t]here must be an

end to litigation someday”) (quoting Ackermann v. United States, 340 U.S. 193, 198 (1950)).

Here, because final judgment has not been entered and because it would be against the interests

of justice to effect a decision now known to be improper, the Court finds that the change in

decisional law created by the Supreme Court’s decision in Knick constitutes an “extraordinary

circumstance” for the purposes of Rule 60(b)(6).

Defendants further argue that relief pursuant to Rule 60(b)(6) is inappropriate in this case,

as this is merely a substitute appeal. See Aikens v. Ingrum, 652 F.3d 496, 501 (“[I]f the reason

asserted for the Rule 60(b)(6) motion could have been addressed on appeal from the judgment,

we have denied the motion as merely an inappropriate substitute for an appeal.”). When plaintiffs

have made a ‘voluntary, deliberate, free, [and] untrammeled choice’ not to appeal the decision

of the district court.” plaintiffs “cannot be relieved of such a choice because hindsight seems to

indicate to [them] that [their] decision not to appeal was probably wrong.” Dowell, 993 F.2d at.

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(first quoting Ackermann, 340 U.S. at 200 (internal citation omitted); and then quoting id. at

198).

However, the reason asserted for this motion to reconsider, which is the change in Fourth

Circuit precedent resulting from the decision in Knick, could not have been addressed on appeal.

The Fourth Circuit decision affirming this Court’s dismissal of plaintiffs’ takings claim based on

sovereign immunity was entered on July 10, 2018, and mandate issued on August 17, 2018. The

Supreme Court did not decide Knick until June 21, 2019, well after the period during which

plaintiffs could have appealed the Fourth Circuit opinion on this basis. Knick, 139 S. Ct. 2162;

Sup. Ct. R. 13(1) petition for a writ of certiorari to review a judgment in any case .. . is

timely when it is filed with the Clerk of this Court within 90 days after entry of the judgment.”).

Even if the issue could have been addressed on appeal, this case is distinct from those of Aikens

and Dowell. In both of those cases, plaintiff sought to reopen the action through a Rule 60(b)(6)

long after final judgment has been entered. As previously discussed, final judgment was never

entered in this case, and this Court retained jurisdiction by staying the case pending appeal twice.

Therefore, this motion is not an improper or substitute appeal.

In conclusion, plaintiffs have shown that their motion to reconsider based on a change in

decisional law following Knick is timely, presents a meritorious claim, would not cause

defendant unfair prejudice, and presents extraordinary or compelling results. The Court therefore

finds that plaintiffs meet the standard for reconsideration under either Rule 54(b) or Rule 60(b).

Plaintiffs’ takings claim is no longer dismissed.

If. Plaintiffs’ Takings Claims Under Georgia

Plaintiffs also allege in their complaint that defendants intentionally infringed by

repeating copying even after express notice, and plaintiffs argue that these allegations would

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support a finding that defendants’ conduct violated the CRCA, the Fifth Amendment, and the

Fourteenth Amendment. Plaintiffs ask this Court to allow these claims to proceed under Georgia.

Plaintiffs seek reinstatement of their lawsuit and an opportunity to amend their complaint to

plead the consequences of defendants’ intentional infringements more fully.

This Court finds that reconsideration of its previous order of dismissal is appropriate in

this case under the Rule 54(b) standard. While the Court acknowledges that “[a] Rule 54(b)

motion should not be used as an opportunity to rehash issues already ruled upon because a

litigant is displeased with the result,” this is not the case here. Ashmore v. Williams, No. 8:15-cv-

03633-JMC, 2017 U.S. Dist. LEXIS 234, at *9 (D.S.C. Jan. 3, 2017) (citing U.S. Home Corp. v.

Settlers Crossing, LLC, No. DKC 08-1863, 2012 U.S. Dist. LEXIS 150160, at *10 (D. Md. Oct.

18, 2012)). This Court recognized in its 2017 opinion that Congress can abrogate state immunity

prophylactically, by imposing liability on States for all violations of a particular statute, or on a

case-by-case basis, by imposing liability on States where conduct violates both a federal statute

and plaintiffs’ constitutional rights. See Allen, 244 F. Supp. 3d at 534 (citing Georgia, 546 U.S.

at 158). Because this Court found that the CRCA was a valid prophylactic abrogation of state

sovereign immunity, it never considered whether plaintiffs have a valid claim for abrogation

under Georgia. Notably, this Court never expressly closed the door to a valid claim of case-by-

case abrogation under Georgia. Because this Court, the Fourth Circuit, and the Supreme Court

all passed on the Georgia issue, it is appropriate to consider this claim for case-by-case

abrogation following the Supreme Court’s decision rejecting the CRCA as a valid prophylactic

Statute.

The Court further finds that plaintiffs still have viable claims under Georgia. In Georgia,

the Supreme Court noted that °§ 5 [of the Fourteen Amendment] grants Congress the power to

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‘enforce ... the provisions’ of the Amendment by creating private remedies against the States

for actual violations of those provisions.” 546 U.S. at 158 (alteration in original). The court

specifically stated that “[t]his enforcement power includes the power to abrogate sovereign

immunity by authorizing private suits for damages against the States.” Jd. at 158-59 (citing

Fitzpatrick, 427 U.S. at 456). Based on these findings, the Georgia court unanimously concluded

that abrogation of sovereign immunity necessarily occurs when a plaintiff can establish both a

statutory violation of a federal law and a constitutional violation. Jd. When a plaintiff has

established both these elements, “the court need not examine whether that statute could validly

prohibit facially constitutional conduct.” Nat’! Ass’n of Bds. of Pharm. v. Bd. of Regents of the

Univ. Sys. of Georgia, No. 3:07-CV-084 (CDL), 2008 U.S. Dist. LEXIS 32116, at *25 (M.D. Ga.

Apr. 18, 2008), aff'd in part, vacated in part on other grounds, 633 F.3d 1297 (11th Cir. 2011).

At oral argument before the Supreme Court in the present case, the State conceded the legal

validity of the case-by-case abrogation under Georgia, stating that “whenever a plaintiff can

reasonably allege that there has been intentional copyright infringement and there are not

adequate remedies, then, under this Court’s Georgia decision, they can bring a direct

constitutional claim.” Tr. of Oral Arg., Allen v. Cooper, at 39-40 (Nov. 5, 2019).

In this case, plaintiffs have alleged that defendants’ conduct amounted to a taking without

compensation and simultaneously violated both the CRCA and the Fifth Amendment. Although

the Supreme Court ruled that the CRCA was unconstitutional insofar as it attempted to abrogate

sovereign immunity prophylactically, see Allen v. Cooper, 140 S. Ct. 994, 1007 (2020), the

* Defendants argue that they made no concessions justifying reconsideration of the prior dismissal of plaintiffs’

takings claim. The Court agrees with defendants, and notes that counsel for the State defendants did not concede that

the claims were viable in this case, even though counsel acknowledged that constitutional claims may more

generally be viable in federal courts under Georgia.

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statute remains whenever plaintiff alleges both a constitutional violation as well as a statutory

violation. Therefore, plaintiffs can still use the CRCA as a basis for its Georgia claim.

Defendant argues that plaintiffs’ Georgia argument fails on the merits. However,

plaintiffs seek an opportunity to amend to allege more facts to buttress the allegations of taking

without due process, intentional infringements, and those responsible. Rule 15 of the Federal

Rules of Civil Procedure provides that a party may amend his pleadings with leave of the court.

Fed. R. Civ. P. 15(a)(2). Further, Rule 15 directs that leave to amend be freely given when

Justice requires. /d. “This liberal rule gives effect to the federal policy in favor of resolving cases

on their merits instead of disposing of them on technicalities.” Laber v. Harvey, 438 F.3d 404,

426 (4th Cir. 2006) (citing Conley v. Gibson, 335 U.S. 41, 48 (1957)). The Court has determined

that Georgia serves as a valid basis for plaintiffs to bring their constitutional claims, and

plaintiffs will have the opportunity to show that defendants have intentionally deprived their

intellectual property without adequate state remedies to provide due process of law in an

amended complaint.

In conclusion, this Court finds that reconsideration of its prior order dismissing plaintiff's

takings and constitutional claims is appropriate in light of the Supreme Court’s decision in Knick

and its rejection of the CRCA as a valid prophylactic abrogation of state sovereign immunity.

Plaintiffs may amend their complaint to buttress their allegations of “ta modern form of piracy.”

Allen, 140 S. Ct. at 999.

CONCLUSION

For the foregoing reasons, plaintiffs’ motion for reconsideration [DE 105] is GRANTED.

Plaintiffs’ takings claim and constitutional claims under Georgia are no longer dismissed.

Plaintiffs may amend their complaint within twenty-one days of the date of entry of this order.

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SO ORDERED, this [ day of August, 2021.

terc_tee?’ lw.

TERRENCE W. BOYLE

UNITED STATES DISTRICT JUDGE

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