Family Feud: Counterclaims Too Little, Too Late

By on June 27, 2024
Posted In Copyrights

The US Court of Appeals for the Seventh Circuit affirmed a district court’s ruling that aggrieved family members’ counterclaims for various intellectual property matters were long overdue and subject to a laches defense. Sumrall v. LeSEA, Inc., Case No. 23-2833 (7th Cir. June 12, 2024) (Scudder, Pryor, St. Eve, JJ.)

During Lester Frank Sumrall’s life, he created a legacy that began as a church, later blossoming into the Lester Sumrall Evangelical Association (LeSEA). Through LeSEA, Sumrall delivered his ministry from Indiana to the rest of the world via television, travel, writings and media productions. These works, including books and films (many of which Sumrall registered for copyrights in his or LeSEA’s name) are the subject of dispute. Particularly in dispute was the ownership of the “Traveler Photo,” a picture that Sumrall’s grandson Lester took during a ministry trip to China while Lester worked for LeSEA.

Sumrall’s death raised issues regarding succession. After his death, Sumrall’s sons, Peter, Stephen and Frank, took over LeSEA. Peter and Stephen relayed to Frank and others that Sumrall left all his assets to the ministry. Eight years later, Lester researched Indiana’s intestate succession law. Believing that Sumrall died without a will, Lester thought Frank should have inherited one-third of Sumrall’s estate. Under this belief, Frank granted Lester power of attorney to legally pursue his interest in the estate. For 12 years, Lester took no further legal action.

After learning that Sumrall did indeed have a will, Lester petitioned an Indiana probate court to open an estate for Sumrall in 2017. One of Lester’s cousins produced the will that granted some personal items to Sumrall’s grandchildren, with the remainder of his estate divided among his sons equally. The probate court denied the petition, reasoning that the estate was devoid of assets.

This case began with LeSEA’s trademark infringement claims against Lester and a competitor Lester created, the LeSEA Broadcasting Corporation. Those claims were resolved after Lester stopped using LeSEA’s name and therefore were not on appeal.

At issue in the appeal were counterclaims brought by the Lester Sumrall Family Trust against LeSEA, LeSEA’s affiliate corporations, and Lester’s uncles and cousins who are currently involved in the ministry (collectively, LeSEA). Lester and the trust asserted that:

  • LeSEA unrightfully took ownership of Sumrall’s copyrights.
  • LeSEA unlawfully used the Traveler Photo in its materials.
  • The trust was entitled to damages for its state law claims.
  • LeSEA unlawfully continued to use Sumrall’s right of publicity.

The Seventh Circuit rejected the appellants’ assertion that they owned Sumrall’s copyrighted works. The Court ruled that the appellants’ copyright claim arose under the Copyright Act, which bars suits three years after they accrue. The Court explained that an ownership claim accrues “when plain and express repudiation of co-ownership is communicated to the claimant.” Here, repudiation occurred when Sumrall died 28 years prior to the counterclaim and Stephen and Peter declared in “plain and express” terms that LeSEA owned the copyrights and the remainder of the estate.

As for the Traveler Photo, the Seventh Circuit, citing the Restatement (Second) of Agency § 228, found LeSEA owned the photo because Lester captured the photo as an employee acting within the scope of his employment. Concluding that “no reasonable jury could conclude this photo fell outside that scope,” the Seventh Circuit agreed with the district court that summary judgment on this issue was proper.

The Seventh Circuit also affirmed the dismissal of state law claims for damages under laches. The district court had explained that “[i]n civil matters this ancient equitable doctrine consists of three elements: inexcusable delay in asserting a right; implied waiver from knowing acquiescence in existing conditions; and circumstances resulting in prejudice to the adverse party.” The Seventh Circuit had noted its prior ruling that “laches . . . is the mirror image of equitable estoppel,” which also tolls damages claims. Here, the trust argued that federal laches law should apply. The Seventh Circuit applied the Erie doctrine, which calls on federal courts applying state law to use state substantive law and federal procedural rules, and reasoned that laches, like a statute of limitations, is substantive. The Seventh Circuit therefore agreed that the district court properly applied state law, which unlike federal laches law makes laches “equally available in suits at law” as it is for suits in equity.

The Seventh Circuit did not grant the appellants’ request to revive their claim that LeSEA continued to use Sumrall’s right of publicity unlawfully. The Court reasoned that the trust took too long to amend its claim. Before the district court, the trust argued that Frank was the owner of “Dr. Sumrall’s Works,” but excluded Sumrall’s right of publicity from its definition of those works. Therefore, the Seventh Circuit agreed that the district court’s dismissal of the claim was proper.

Tyler Jackson, a summer associate in the Chicago office, also contributed to this article.

Kathleen Lynch
Kathleen (Kat) Lynch focuses her practice on intellectual property litigation and trademark enforcement matters. Read Kat Lynch's full bio.