Opinion
CV-00-286-ST.
June 6, 2000
AMENDED FINDINGS AND RECOMMENDATION
INTRODUCTION
Plaintiffs, Brooks Brown, James Phillips, and Brian West, were at various times members of the band The Cherry Poppin' Daddies (the "Band"). They performed music and assisted in the production and release of certain of the Band's recordings (the "Recordings"). Plaintiffs allege that while the Band has received substantial compensation for the Recordings, they have not been compensated at all.
Plaintiffs originally filed this action in state court against various defendants, asserting six claims for relief: (1) breach of contract (First Claim for Relief); (2) unjust enrichment (Second Claim for Relief); (3) conversion (Third Claim for Relief); (4) unpaid wages under ORS 652.150 (Fourth Claim for Relief); (5) unfair competition (Fifth Claim for Relief); and (6) constructive trust (Sixth Claim for Relief). On February 25, 2000, defendants Mojo Records and SABP Enterprises Inc., dba Space Age Bachelor Pad Records ("SABP"), removed the case to this court. Defendants contend that this court has jurisdiction under 28 USC § 1338 because the Complaint, although alleging only state law claims, is in reality an action for copyright infringement under the Copyright Act, 17 USC § 101 et seq.
Now before the court is Mojo Records and SABP's Motion to Dismiss (docket #6) against all of plaintiffs' claims. For the reasons set forth below, that motion should be granted in part and denied in part.
STANDARDS
A motion to dismiss under FRCP 12(b)(6) will be granted only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 US 41, 45 (1957); Allwaste, Inc. v. Hecht, 65 F3d 1523, 1527 (9th Cir 1995); Parks Sch. of Bus., Inc. v. Symington, 51 F3d 1480, 1484 (9th Cir 1995). "The issue is not whether [the] plaintiff will ultimately prevail but whether the [plaintiff] is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 US 232, 236 (1974). Thus, the review is limited to the complaint, and all allegations of material fact are taken as true and viewed in the light most favorable to the nonmovant. Buckey v. County of Los Angeles, 968 F2d 791, 794 (9th Cir), cert denied, 506 US 999 (1992); Love v. United States, 915 F2d 1242, 1245 (9th Cir 1989).
ALLEGATIONS
Defendant Mojo Records is a California Limited Liability Company, not authorized to do business in the State of Oregon. Complaint, ¶ 1. Defendant SABP is an active Oregon corporation. Id, ¶ 2. Defendant the Band is a band of musicians whose members over time have included plaintiffs Brooks Brown, James Phillips, and Brian West, and defendants Steve Perry, Dan Schmid, Dana Heitman, Jason Moss, Sean Flannery, Ian Early, and Tim Donahue. Id, ¶ 3. Defendant Toilet Brain Music is either a foreign entity or an alter ego of defendant Steve Perry. Id, ¶ 4. Defendant Sony Music Entertainment, Inc. is a Delaware Corporation currently not authorized to do business in Oregon. Id, ¶ 5.
Plaintiff Brooks Brown ("Brown") was a member of the Band from approximately 1988 until 1994. Id, ¶ 6. During that time, he was instrumental in the production and release of several albums, including the albums "Ferociously Stoned" and "Rapid City Muscle Car." Id. In addition, he performed several recordings that were included on the album "Zoot Suit Riot." Id. As such, Brown holds a copyright interest in the master recordings for "Mister White Keys," "Dr. Bones," "Ding-Dong Daddy of the D-Car Line," "Pink Elephant," "Master and Slave," "Drunk Daddy," "Cherry Poppin' Daddy Strut," and "Shake Your Lovemaker." Id.
Plaintiff James Phillips ("Phillips") was a member of the Band from approximately January 1989 until the summer of 1992, and again from May 1994 until approximately May 1995. Id, ¶ 7. During that time, he was instrumental in the production and release of several albums, including the albums "Ferociously Stoned" and "Rapid City Muscle Car." Id. In addition, Phillips performed several recordings that were included on the album "Zoot Suit Riot." Id. As such, Phillips holds a copyright interest in the master recordings for "Dr. Bones," "Ding-Dong Daddy of the D-Car Line," "Master and Slave," "Drunk Daddy," "Cherry Poppin' Daddy Strut," and "Shake Your Lovemaker." Id. In addition, Phillips holds a copyright interest in the master recordings for "Irish Whiskey" and "Come Back to Me." Id.
Plaintiff Brian West ("West") was a member of the Band from approximately 1990 until 1995. Id, ¶ 8. During that time, he was instrumental in the production and release of several albums, including the albums "Ferociously Stoned" and "Rapid City Muscle Car." Id. In addition, Brian West performed several recordings that were included on the album "Zoot Suit Riot." Id. As such, he holds a copyright interest in the master recordings for "Mister White Keys," "Come Back to Me," "Pink Elephant," "Ding-Dong Daddy of the D-Care Line," "Master and Slave," "Drunk Daddy," and "Shake Your Lovemaker." Id.
DISCUSSION
Defendants Mojo Records and SABP move to dismiss all of plaintiffs' claims for relief because: (1) the breach of contract claim (First Claim for Relief), the unjust enrichment claim (Second Claim for Relief), and the unfair competition claim (Fifth Claim for Relief) fail to state a claim upon which relief may be granted and are preempted by the Copyright Act; (2) the conversion claim (Third Claim for Relief) fails to state a claim upon which relief may be granted, is preempted by the Copyright Act, and is barred by the state statute of limitations; (3) the unpaid wages claim (Fourth Claim for Relief) fails to state a claim upon which relief may be granted; (4) the constructive trust claim (Sixth Claim for Relief) is preempted by the Copyright Act and does not constitute a separate cause of action; and (5) the First, Second, Third, Fifth, and Sixth Claims for Relief are barred by the statute of limitations applicable to claims under the Copyright Act.I. Motion to Dismiss A. Breach of Contract Claim (First Claim for Relief)
The First Claim for Relief alleges that as co-owners of copyright interests in the Recordings for which defendants have received compensation, plaintiffs are entitled to their "prorated shares of the monies received by defendants for sales of the Recordings and music on the Recordings." Complaint, ¶ 9.
1. Failure to State a Claim Upon Which Relief May Be Granted
Because the Complaint prior to amendment by interlineation alleged an oral contract solely between "members of the band," Mojo Records and SABP, who are not alleged "members of the band," sought dismissal. By Order dated this same date, this court has granted plaintiffs' request to amend the Complaint by interlineation to allege an oral contract with defendants Mojo Records and SABP. Id, ¶ 10. Based on the amendment to the Complaint, this ground for dismissal is without merit.
2. Preemption
Mojo Records and SABP next contend that the gravamen of plaintiffs' claims, including the breach of contract claim, is that plaintiffs are entitled to profits as purported co-authors/co-owners of the Recordings. Such a claim, they argue, is equivalent to claims properly brought under the Copyright Act for a declaratory judgment that plaintiffs are co-owners of copyright interests in the Recordings and for an accounting for profits. Accordingly, they assert that plaintiffs' breach of contract claim is preempted by the Copyright Act.
a. Legal Standard
"Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowners of copyright in the work." 17 USC § 201(a). Federal copyright law grants the owner or co-owners of a copyright exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; and
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly.17 USC § 106.
The Copyright Act preempts overlapping state law claims in language that is "both explicit and broad." G.S. Rasmussen Assoc. v. Kalitta Flying Serv., 958 F2d 896, 904 (9th Cir 1992). It provides as follows:
[A]ll legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 . . . are governed exclusively by this title. . . . [N]o person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.17 USC § 301(a).
However, this broad preemption of state law claims is qualified as follows:
Nothing in this title annuls or limits any rights or remedies under the common law or statutes of any State with respect to . . . activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106.17 USC § 301(b)(3).
Accordingly, in order to avoid preemption, "the state claim must protect rights which are qualitatively different from the copyright rights The state claim must have an `extra element' which changes the nature of the action." Del Madera Properties v. Rhodes and Gardner, Inc., 820 F2d 973, 976 (9th Cir 1987), quoting Mayer v. Josiah Wedgwood Sons, Ltd., 601 F Supp 1523, 1535 (SDNY 1985).
b. Analysis
Plaintiffs allege that defendants breached an oral contract that in some way concerned the Recordings or proceeds from the Recordings. This is a claim, therefore, to enforce a right or rights based upon a contract which relates to copyrighted material and does not arise under the copyright statute. Courts readily distinguish between copyright claims and contract claims regarding copyrighted material and, generally, the latter claims are not preempted by the Copyright Act. The Ninth Circuit, for example, explains that:
Because Mojo Records and SABP filed a Motion to Dismiss, this court must accept as true plaintiffs' allegations of an oral contract. See Love, 915 F2d at 1245.
the federal grant of a patent or copyright has not been thought to infuse with any national interest a dispute as to ownership or contractual enforcement turning on the facts or on ordinary principles of contract law. Contract questions that depend on common law or equitable principles belong in state court. . . . The federal courts have consistently dismissed complaints in copyright cases that present only questions of contract law.Dolch v. United California Bank, 702 F2d 178, 180 (9th Cir 1983) (internal citations and quotations omitted); see also Borden v. Katzman, 881 F2d 1035, 1038 (11th Cir 1989) ("Contract questions that depend upon common law or equitable principles belong in state court even if they involve copyrights").
Asking whether contract rights are preempted as "equivalent to any of the exclusive rights within the general scope of copyright," the Seventh Circuit concludes that:
Three courts of appeals have answered "no." National Car Rental System, Inc. v. Computer Associates International, Inc., 991 F2d 426, 433 (8th Cir 1993); Taquino v. Teledyne Monarch Rubber, 893 F2d 1488, 1501 (5th Cir 1990); Acorn Structures, Inc, v. Swantz, 846 F2d 923, 926 (4th Cir 1988). . . . Rights "equivalent to any of the exclusive rights withing the general scope of copyright" are rights established by law — rights that restrict the options of persons who are strangers to the author. Copyright law forbids duplication, public performance, and so on, unless the person wishing to copy or perform the work gets permission; silence means a ban on copying. A copyright is a right against the world. Contracts, by contrast, generally affect only their parties; strangers may do as they please, so contracts do not create "exclusive rights."ProCD Inc. v. Zeidenberg, 86 F3d 1447, 1454-55 (7th Cir 1996).
Here, plaintiffs' contract claim is not preempted because it protects rights which are "qualitatively different" from the copyright rights. The claim has an "extra element" which changes the nature of the action. See Del Madera Properties, 820 F2d at 976. The "extra element" consists of proof of the alleged contractual relationship, its terms, and the conduct that allegedly violated those terms. Federal copyright law cannot provide the guidance necessary to analyze these issues. Rather, state law provides the necessary guidance in analyzing the existence, terms, and breach of a contract and such claims should not be preempted by federal law. See Dolch, 702 F2d at 180.
Furthermore, it appears that plaintiffs seek to enforce their contractual right to compensation, rather than, as the copyright law provides, to enforce an exclusive right to reproduce, distribute, and display certain works. Plaintiffs do not seek to prevent the use of the Recordings; they simply want to be paid according to their alleged contract. Thus, plaintiffs' breach of contract claim seeks to enforce rights qualitatively different than those created under the copyright laws and should not be deemed preempted.
B. Unjust Enrichment (Second Claim for Relief)
Plaintiffs do not provide much detail as to the basis for their unjust enrichment claim. Instead, they reallege the allegations in the First Claim for Relief and assert that "as a direct result of defendants' actions, defendants have been unjustly enriched to each respective plaintiff's detriment." Complaint, ¶¶ 11-12.
1. Failure to State A Claim Upon Which Relief May Be Granted
Mojo Records and SABP seek dismissal of this claim because it is based on the same allegation underlying the First Claim for Relief; namely that only the band members had an oral contract. Unjust enrichment claims, however, are not premised on the existence of a contract. The three elements of an unjust enrichment claim "are `a benefit conferred, awareness by the recipient that a benefit has been received, and under the circumstances, it would be unjust to allow retention of the benefit without requiring the recipient to pay for it.'" Jones v. Mishler, 161 Or App 544, 570, 983 P2d 1086, 1101 (1999), quoting Jaqua v. Nike, Inc., 125 Or App 294, 298, 865 P2d 442, 445 (1993). Because this claim is not premised upon the existence of a contractual relationship between the parties, it should not be dismissed for failure to state a claim against Mojo Records and SABP.
2. Preemption
Plaintiffs reallege in this claim that they collaborated with defendants in the creation of certain Recordings and are co-owners of copyright rights in the material. Plaintiffs' unjust enrichment claim is therefore in the nature of an alternative pleading, contending that even if the parties had no express oral contract, defendants have been unjustly enriched by retaining the share of proceeds rightfully belonging to plaintiffs as co-owners.
Plaintiffs' claim is essentially a claim for an accounting between co-owners. Such a claim is not preempted by the Copyright Act. "[A] suit to bring the co-owner of a copyright to account does not fall within the district court's jurisdiction over actions arising under the copyright law." Oddo v. Ries, 743 F2d 630, 633 fn2 (9th Cir 1984). In Oddo, the plaintiff and defendant formed a partnership to create and publish a book describing how to restore Ford pickup trucks. The partnership foundered, but eventually the book was published containing material contributed by the plaintiff. The plaintiff then sued the defendant for copyright infringement. The Ninth Circuit explained:
In the guise of a copyright infringement suit, this case presents an accounting problem between two partners. . . . The district court erred if it meant that [defendant] infringed the copyright. . . . As a partner, [defendant] is a co-owner of the partnership's asserts, including the copyrights. A co-owner of a copyright cannot be liable to another co-owner for infringement of the copyright.Id. at 632-33 (citations omitted).
The Ninth Circuit vacated the district court's award to the plaintiff of statutory damages and attorney fees under the Copyright Act, explaining that "[b]ecause [defendant] cannot be held liable for infringement of the copyrights in the manuscript and book that he co-owns with [plaintiff], his use of those copyrights cannot form the basis for any sort of award under the copyright act." Id. at 634.
In a more recent case involving both co-owners and copyrighted music recordings, the court considered numerous state claims brought by a punk rock band partnership and three of its four members against the fourth member relating to the management of their assets and seeking sought an accounting for the royalties due from their recordings. Dead Kennedys v. Biafra, 37 F Supp2d 1151 (ND Cal 1999). The defendant then removed the case to federal court, arguing that the claims were preempted under the Copyright Act. The court, however, disagreed and granted the plaintiffs' motion to remand for lack of subject matter jurisdiction, explaining with regards to one of the plaintiffs' claims that it
does not attempt to raise an infringement claim, but rather seeks resolution of the parties' respective rights and duties. Ownership and title rights are matters of common-law and do not arise under the Copyright Act. See Oddo, 743 F2d at 633. In essence, plaintiffs seek an accounting and determination of ownership rights, which are matters to be decided under state law. See id.Id. at 1154.
While the plaintiffs and defendants in Dead Kennedys were partners, not just joint authors/co-owners, the court pointed out that "[t]hese rules apply whether co-ownership arises from joint authorship or through co-ownership of rights through a partnership." Id. at 1153.
Here, defendants rely on Del Madera Properties, in which the Ninth Circuit held that the plaintiff's unjust enrichment claim was preempted:
The foundation of Del Madera's unjust enrichment claim is its contention that the defendants violated an implied promise, based on the parties' relationship, not to use the Tentative Map and supporting documents. But an implied promise not to use or copy materials within the subject matter of copyright is equivalent to the protection provided by section 106 of the Copyright Act. Therefore, this portion of Del Madera's unjust enrichment claim is also preempted.Del Madera Properties, 820 F2d at 977.
Del Madera, however, is distinguishable because the plaintiff was the sole copyright owner of the "Tentative Map and supporting documents" and asserted that the defendants "infringed its copyright by using the Tentative Map." Id. at 975. In other words, the facts closely mirrored a traditional copyright case in that one copyright owner claimed that a non-owner was infringing upon the owner's proprietary copyright rights. Here, in contrast, plaintiffs and defendants are alleged co-owners, and one co-owner cannot infringe upon another co-owner's copyright rights. See Oddo, 743 F2d at 632-33.
Also distinguishable is Systems XIX, Inc. v. L. Parker, 30 F Supp2d 1225 (ND Cal 1998) which held that the plaintiffs' claim of unjust enrichment was preempted by the Copyright Act. In Systems XIX, the court had to determine in the context of a motion for summary judgment whether the plaintiffs and defendants were co-owners of the copyrighted material in question. Therefore, the court applied federal copyright law in order to determine whether the authors "1) intended to merge their contributions into a unitary whole and 2) contributed copyrightable subject matter to the joint work." Id. at 1228. Here, plaintiffs' allegations must be taken as true, relieving the court of the need to determine whether plaintiffs are actually co-owners of the copyrighted materials.
As co-owners, plaintiffs' action for unjust enrichment essentially involves an accounting between the parties for the revenues generated by the Recordings. Plaintiffs do not seek to stop defendants from making use of the Recordings; they simply seek their rightful share of the proceeds from the Recordings. The Copyright Act prevents a non-owner from reproducing the work, preparing derivative works based upon the copyrighted work, distributing copies of the copyrighted work, performing the copyrighted work, and displaying the copyrighted work. 17 USC § 106. While protecting the rights of the owner or co-owners against all others, the Copyright Act should not preempt the traditional state law jurisprudence over matters relating to the ownership rights and duties that exist between co-owners. "The duty to account does not derive from the copyright law's proscription of infringement. Rather, it comes from `equitable doctrines relating to unjust enrichment and general principles of law governing the rights of co-owners.'" Oddo, 743 F2d at 633, quoting Harrington v. Mure, 186 F Supp 655, 657-58 (SDNY 1960). Thus, the Second Claim for Relief should not be deemed preempted by the Copyright Act.
C. Conversion (Third Claim for Relief)
Plaintiffs' Third Claim for Relief realleges the First and Second Claims for Relief and also alleges that defendants "have converted plaintiffs' ownership rights and property to plaintiffs' damages in sums to be determined at trial." Complaint, ¶¶ 13-14.
1. Failure to State A Claim Upon Which Relief May Be Granted
Mojo Records and SABP seek dismissal of this claim because it is premised on the same allegation underlying the First Claim for Relief; namely that only the band members had an oral contract. However, it is irrelevant whether the plaintiffs allege that they had a contract with these particular defendants. A claim for conversion is not premised on the existence of a contract at all, but is an "`intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel.'" Morrow v. First Interstate Bank of Oregon, N.A., 118 Or App 164, 171, 847 P2d 411, 415 (1993), quoting Mustola v. Toddy, 253 Or 658, 663, 456 P2d 1004, 1007 (1969). Because plaintiffs need not allege a contractual relationship between the parties in order to assert a claim for conversion, this argument for dismissing the Third Claim for Relief should be rejected.
2. Preemption
At oral argument, plaintiffs clarified that this claim alleges not only conversion of proceeds from the Recordings, but also conversion of physical property in the form of the master tape recordings. Generally speaking, conversion claims that involve tangible, rather than intangible, property are immune from preemption. See Worth v. Universal Pictures, Inc., 5 F Supp2d 816, 822 (CD Cal 1997). The Copyright Act protects reproduction, which does not necessarily interfere with the tangible property right in the item that is being copied. Data Gen. Corp. v. Grumman Sys. Support Corp., 795 F Supp 501, 505 (D Mass 1992). In Oddo, the Ninth Circuit stated that "[plaintiff] alleged conversion of the papers comprising his manuscript. Conversion of tangible property involves actions different from those proscribed by the copyright laws, and thus is not preempted." Oddo, 743 F2d at 635. Similarly, in Dead Kennedys, the court considered the plaintiffs' state law conversion claim alleging that the defendant converted royalties that rightfully belonged to plaintiffs. The court held that the Copyright Act did not preempt the conversion claim, explaining simply that "plaintiffs' conversion action . . . alleges conversion of royalties, not of the works themselves." Dead Kennedys, 37 F Supp2d at 1154.
Those cases that have found state law conversion claims preempted are distinguishable. For example, in Dielsi v. Falk, 916 F Supp 985 (CD Cal 1996), the plaintiff alleged that the defendants copied the ideas in plaintiff's script and then converted those ideas for their own profitable use. The court explained that the claim was more properly one for plagiarism or misappropriation, stating that "[g]enerally, the copying and distribution of literary intangible property does not state a claim for conversion." Id. at 992. The court concluded however, that no matter how it was framed, the plaintiff's claim was preempted because it did not add any additional element to the "essential claim that Plaintiff's ideas were misappropriated by Defendants. Such a claim is `part and parcel' of a copyright claim." Id.
Here in contrast, plaintiffs do not assert that their ideas were misappropriated by defendants. Instead they assert that they and defendants share ownership rights in the physical Recordings. Instead of seeking compensation for misappropriation of their ideas, plaintiffs' conversion claim seeks a share of the royalties collected by the defendants through their exercise of control over the Recordings which allegedly interferes with plaintiffs' ownership rights. Therefore, this Third Claim for Relief should not be deemed preempted by the Copyright Act.
3. State Statute of Limitations
Mojo Records and SABP assert that in the event that this Third Claim for Relief is not preempted, it is barred by the statute of limitations because it accrued at the latest in 1994 and 1995 when the plaintiffs left the band and ceased to be compensated. A claim for conversion is subject to the two-year limitations period set forth in ORS 12.110(1).
Nothing in the record demonstrates, however, when the last alleged act of conversion occurred so as to start the running of the statute of limitations. Assuming that the conversion claim is premised on the wrongful possession of master tape recordings, this court has no indication of when that conversion allegedly occurred. Therefore, based on the extremely limited record presently before the court, defendants' motion to dismiss this Third Claim for Relief based on the state statute of limitations should be denied.
D. Wage Claim (Fourth Claim for Relief)
The Fourth Claim realleges the First, Second, and Third Claims for Relief and asserts that "[f]ollowing the termination of each plaintiff's employment with the band, defendants owed the respective plaintiffs' wages and commissions in sums to be determined." Complaint, ¶¶ 15-18. Plaintiffs, however, do not allege that defendants were at any time plaintiffs' employers. Because defendants Mojo Records and SABP did not have an employer-employee relationship with plaintiffs, they seek dismissal of this claim. Plaintiffs concede this claim. Therefore, this Fourth Claim for Relief should be dismissed with prejudice as to these defendants.
E. Unfair Competition claim (Fifth Claim for Relief)
The Fifth Claim realleges the First through Fourth Claims for Relief and asserts that defendants' actions "constitute unfair competition to plaintiffs' rights and interests." Complaint, ¶¶ 19-20. Plaintiffs concede that this claim is preempted by the Copyright Act. Therefore, this Fifth Claim for Relief should be dismissed without prejudice.
F. Constructive Trust (Sixth Claim for Relief)
The Sixth Claim realleges the First through Fifth Claims for Relief and asserts that because "[d]efendants are indebted to plaintiffs for the value of The Recordings, no amount of which has been paid[,]" they are entitled to "the imposition of a constructive trust upon defendants for that value of said proceeds." Complaint, ¶¶ 21-23. Plaintiffs concede that the Sixth Claim for Relief should have been pled as a remedy instead of as a separate claim for relief, and request leave of the court to amend the Complaint. Because defendants will not be prejudiced, plaintiffs should be allowed to so amend the Complaint and the Sixth Claim for Relief should be dismissed with prejudice.
G. Copyright Act Statute of Limitations
Mojo Records and SABP's last argument in support of dismissal is based on the Copyright Act statute of limitations. At this point, plaintiffs' unfair competition claim (Fifth Claim for Relief) is the only claim preempted by the Copyright Act. The issue is whether this preempted claim is subject to, and barred by, this three-year statute of limitations.
At least one district court first found state law claims properly preempted by the Copyright Act and then later dismissed those same claims based on Copyright Act procedural grounds. See Dielsi, 916 F Supp at 993-95.
17 USC § 507(b) provides that "[n]o civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued."
This action was filed in state court on January 24, 2000. Therefore, any copyright claim must have accrued within three years prior to that date. Because plaintiffs allegedly left the band sometime in 1994 or 1995, Mojo Records and SABP argue that plaintiffs presumably were last compensated at that time. Based on this assumption, Mojo Records and SABP contend that any copyright action by plaintiffs based on the Recordings is now time barred.
Generally, a copyright claim accrues when the party asserting the claim knows or should have known of the infringement on which the claim is based. Roley v. New World Pictures, Ltd., 19 F3d 479, 481 (9th Cir 1994). Plaintiffs, however, do not present a claim for copyright infringement because they do not claim to be the sole owners of copyrights for the Recordings. Rather, plaintiffs assert that they are co-owners of copyright rights in the Recordings and deserve their share of compensation for use and sale of the Recordings. If plaintiffs were to present a copyright claim, they would naturally request a declaratory judgment that they are copyright co-owners of the Recordings. Such a claim accrues, and the statute of limitations begins to run, when a plain and express repudiation of co-ownership is made. Zuill v. Canadian, 80 F3d 1366, 1369 (9th Cir 1996). For example, an express assertion of sole authorship or ownership will start the copyright statute of limitations running. Id. at 1370. Similarly, an express refusal to pay royalties to the alleged co-owner will commence the statute of limitations period, as such a refusal is another form of "repudiation of co-ownership." Id.
In Zuill, the plaintiffs brought an action seeking: (1) a declaratory judgment that they were co-owners of the copyrighted "Hooked on Phonics" learning system; and (2) an accounting of the proceeds from that system. Id. at 1367-68. The defendant successfully argued that plaintiffs' claim for a declaratory judgment was barred by the three-year Copyright Act statute of limitations because the defendant had presented to the plaintiffs more than three years earlier a royalty agreement which indicated the defendant's belief that his company "was the sole owner and copyright holder of Hooked on Phonics." Id. at 1368. When the plaintiffs refused to sign the agreement, the defendant stated, "that's all I can give you. Take it or leave it" Id. "None of the parties recalled arguing about [defendant's] claim to be the sole owner of the copyright." Id. The court eventually found that the defendant's "plain and express repudiation . . . of any claim to co-ownership caused [plaintiffs'] action, if any, to accrue, so the district court properly found the action to be barred by the statute of limitations." Id. at 1371.
In this case, unlike Zuill, the court has no reason to presume that plaintiffs should have been aware of "repudiation of co-ownership" at some earlier date. Plaintiffs argue that at no time prior to the filing of the lawsuit did any of the defendants make a plain and express repudiation of the plaintiffs' copyright interests. To the contrary, plaintiffs argue that the various album-cover inserts list the plaintiffs as contributing musicians to the songs and albums indicated in the Complaint. Plaintiffs also argue that they would have had no reason to know that defendants were not sharing royalties because it is common practice for music royalties to be paid some time after albums are placed on the market and are being sold.
Neither party has presented evidence as to when or if plaintiffs attempted to assert claims of co-ownership at an earlier date which were rejected. Instead, on the limited factual allegations before this court, it appears that the first "repudiation" may have been when defendants chose to contest this lawsuit. As such, defendants did not plainly and expressly repudiate plaintiffs' claim of co-ownership at an earlier date and plaintiffs' preempted claim is not barred by the statute of limitations. Therefore, the Fifth Claim for Relief should be dismissed as preempted by federal copyright law, but without prejudice.
II. Jurisdiction
Because the Complaint now alleges no federal claim, this court must decide if it has continuing jurisdiction. Federal courts have exclusive jurisdiction "of any civil action arising under any Act of Congress relating to . . . copyrights." 28 USC § 1338. The meaning of "arising under" a patent or copyright statute for this purpose is the same as the meaning of "arising under" any other federal statute for purposes of general federal-question jurisdiction. Duncan v. Stuetzle, 76 F3d 1480, 1485-86 (9th Cir 1996). "Arising under" jurisdiction is measured by the "well-pleaded complaint" rule. Under this rule, "federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Rivet v. Regions Bank of Louisiana, 522 US 470, 475 (1998). "[A] right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action." Franchise Tax Bd. v. Const. Laborers Vac. Trust, 463 US 1, 10-11 (1983). Although the face of the Complaint alleges no federal claim, one of plaintiffs' state law claims is preempted by federal copyright law, and therefore "arise[s] under" federal law. Id. at 24 ("If a federal cause of action completely preempts a state cause of action any complaint that comes within the scope of the federal cause of action necessarily `arises under' federal law").
If a claim "arising under" federal law existed at the time of removal, the federal court has jurisdiction to adjudicate even though the federal claim has been dismissed from the case and only state law claims remain. Carnegie-Mellon Univ. v. Cohill, 484 US 343 (1988); Nishimoto v. Federman-Bachrach Assoc., 903 F2d 709, 715 (9th Cir 1990). With only state law claims remaining, the court may either continue to exercise its jurisdiction, remand the state law claims to state court, or dismiss the action. Sullivan v. Conway, 157 F3d 1092, 1095 (7th Cir 1998). The district court's decision to remand "remains discretionary and is dependant upon what will best accommodate the values of economy, convenience, fairness and comity." Harrell v. 20th Century Ins. Co., 934 F2d 203, 205 (9th Cir 1991).
Here, this court's continuing exercise of jurisdiction will serve "the values of economy, convenience, fairness and comity." For example, further discovery should shed light on the facts surrounding the authorship and ownership of the Recordings, conversion of royalties, and conversion of master tapes. With new or different facts, some or all of plaintiffs' remaining state law claims might properly be preempted. Plaintiffs may in fact elect to amend the Complaint to allege a claim or claims under the Copyright Act. Lastly, continuing jurisdiction by this court should occasion no undue hardship for the parties. Presumably, Mojo Records and SABP prefer this forum to state court, as they are responsible for removing the case. Plaintiffs, on the other hand, may wish to return to state court. If so, plaintiffs should file a motion to remand.
RECOMMENDATION
For the reasons stated above, defendants' Motion to Dismiss (docket #6) should be GRANTED IN PART and DENIED IN PART as follows:
1. GRANTED with prejudice with respect to the Fourth and Sixth Claims for Relief;
2. GRANTED without prejudice with respect to the Fifth Claim for Relief; and
3. DENIED with respect to the First, Second, and Third Claims for Relief.
SCHEDULING ORDER
Objections to the Findings and Recommendation, if any, are due June 23, 2000. If no objections are filed, then the Findings and Recommendation will be referred to a district court judge and go under advisement on that date.
If objections are filed, the response is due no later than July 10, 2000. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will be referred to a district court judge and go under advisement.