Opinion
No. 02-1734, SECTION "R" (5)
December 4, 2002
ORDER AND REASONS
Before the Court is plaintiffs' motion to remand this matter to state court pursuant to 28 U.S.C. § 1447(c) on the grounds that plaintiffs' causes of action do not arise under federal question jurisdiction. Defendants Priority Records, LLC and Sony Music Entertainment, Inc. claim that several of plaintiffs' causes of action arise under 28 U.S.C. § 1331 and 1338. For the following reasons, the Court GRANTS plaintiffs' motion to remand.
I. BACKGROUND
On August 14, 2000, this Court ruled on plaintiffs' and defendant Tuff-n-Rumble Management's ("Tuff City") cross motions for summary judgment on whether Tuff City owned a copyright interest in the song It Ain't My Fault, authored by plaintiffs in 1964 and registered with the U.S. Copyright Office on June 22, 1964. The Court examined the contracts between each plaintiff and Tuft City and found that plaintiffs transferred to Tuft City their ownership interests in the song in part. Therefore, the Court found that Tuft City did not infringe plaintiffs' copyright. Co-defendants Tuff City and No Limit Records then reached a settlement agreement, whereby Tuft City granted No Limit Records the right to license the song to third parties. Defendants Priority Records and Sony Music Entertainment allegedly entered into license agreements with No Limit Records to distribute versions of the song.
On May 1, 2002, plaintiffs filed this lawsuit in the Civil District Court for the Parish of New Orleans, seeking damages and a declaration of nullity. Their complaint alleges state law causes of action for no meeting of the minds, breach of contract, breach of mandate, fraud in the inducement, and unjust enrichment. Further, under the Louisiana Unfair Trade Practices Act, plaintiffs' complaint alleges unfair trade practices, unfair competition, and misappropriation. In June 2002, defendants Priority Records and Sony Music Entertainment removed the case to this Court pursuant to 28 U.S.C. § 1441(a). Defendants allege that, regardless of plaintiffs' casting of their causes of action in state law terms, this Court has federal question jurisdiction over the case based on federal copyright law and federal trademark law. See 28 U.S.C. § 1331, 1338; 17 U.S.C. § 101 et seq.; 15 U.S.C. § 1125 et seq. In their motion to remand pursuant to 28 U.S.C. § 1447(c), plaintiffs indicate that this Court has already ruled on plaintiffs' copyright claim. Additionally, plaintiffs assert that their causes of action are not equivalent to copyright, each requiring an additional element distinguishing it from copyright. Lastly, plaintiffs assert that federal courts do not have exclusive jurisdiction over Lanham Act trademark claims.
The Court rules on the parties' arguments as follows.
II. DISCUSSION
A. Legal Standard
Generally, a defendant may remove a civil action filed in state court if the federal court would have had original jurisdiction. See 28 U.S.C. § 1441(a). The removing party bears the burden of establishing the existence of federal jurisdiction. See Allen v. R H Oil Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995). The jurisdictional facts supporting removal must be examined at the time of removal, and they are strictly construed. See id.; Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988) (citing cases). If "at any time before final judgment" it appears that the Court lacks subject matter jurisdiction, the Court must remand the case to state court. 28 U.S.C. § 1447(c).
To determine whether a case was properly removed to federal court based on federal question jurisdiction, the court must examine plaintiff's claims under the well-pleaded complaint rule. See Rivet v. Regions Bank of Louisiana, 522 U.S. 470, ___, 118 S.Ct. 921, 924 (1998). The well-pleaded complaint rule provides that "federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Id. at 924 (quoting Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987)); see also Baker v. Farmers Elec. Coop., Inc., 34 F.3d 274, 278 (5th Cir. 1994). A plaintiff may choose not to plead federal claims in order to prevent removal, because the plaintiff is "the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law." Caterpillar, 482 U.S. at 392. The Fifth Circuit has held, however, that
the accepted rule in this circuit is that upon removal the removal court should inspect the complaint carefully to determine whether a federal claim is necessarily presented, even if the plaintiff has couched his pleading exclusively in terms of state law. . . . The reviewing court looks to the substance of the complaint, not the labels used in it.In re Ben Carter, 618 F.2d 1093, 1100-01 (5th Cir. 1980) (citing cases).
B. Copyright
Federal district courts have exclusive original jurisdiction over claims arising under congressional acts relating to copyrights. 28 U.S.C. § 1338(a); see also Goodman v. Lee, 815 F.2d 1030, 1031 (5th Cir. 1987); Cowboy Mouth, LLC, et al. v. Monkey Hill Productions, Inc., 1998 WL 831058 (E.D. La. 1998). The Copyright Act expressly preempts state law causes of action falling within its scope, with a few exceptions. 17 U.S.C. § 301(a); see also Daboub v. Gibbons, 42 F.3d 285, 288 (5th Cir. 1995). To determine whether the Copyright Act preempts a state law cause of action requires a two-step analysis. See Daboub, 42 F.3d at 288-89. First, the court must consider whether the cause of action falls within the subject matter of copyright. See id. Second, the court must decide whether the cause of action protects rights that are "equivalent" to any of the exclusive rights of a federal copyright. See 17 U.S.C. § 106, 301(b); Daboub, 42 F.3d at 289. The Copyright Act grants the copyright holder the exclusive right to reproduce, distribute, perform, and display the copyrighted work. See 17 U.S.C. § 106. A state law cause of action is equivalent to these rights if "the elements in plaintiff's [state law action] involve elements that would not establish qualitatively different conduct by the defendants than the elements for an action under the Copyright Act." Daboub, 42 F.3d at 290 (quoting Quincy Cablesystems, Inc. v. Sully's Bar, Inc., 650 F. Supp. 838, 850 (D. Mass. 1986)). Stated differently, a state law cause of action is not preempted if an extra element exists that makes the cause of action qualitatively different from a copyright infringement claim. See Rosciszewski v. Arete Associates, Inc., 1 F.3d 225, 230 (4th Cir. 1993); Computer Associates Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2d Cir. 1992); Taquino v. Teledyne Monarch Rubber et al., 893 F.2d 1488, 1501 (5th Cir. 1990); 1 MELVILLE B. NIMMER DAVID NIMMER, NIMMER ON COPYRIGHT § 1.01[B] (2002).
In this case, the first prong of the preemption test is not in dispute. The song It Ain't My Fault, a sound recording which was the basis for the contract at issue, is within the subject matter of copyright. Plaintiffs registered it with the U.S. Copyright Office on June 22, 1964, and the song was the subject of a copyright infringement lawsuit in this Court. The parties dispute whether the plaintiffs' causes of action for no meeting of the minds, breach of contract, breach of mandate, fraud in the inducement, unjust enrichment, unfair trade practices, unfair competition, and misappropriation meet the second part of the preemption test.
The Court must therefore determine whether an extra element exists that makes plaintiffs' state law causes of action qualitatively different from a copyright infringement claim. "[M]any state law rights that can arise in connection with instances of copyright infringement satisfy the extra element test, and thus are not preempted by [the Copyright Act]." Computer Associates, 982 F.2d at 717; see also Schoenberg v. Shapolsky Publishers, Inc., 971 F.2d 926, 931 (2d Cir. 1992). State law claims that have been held not preempted by the Copyright Act are breach of contract, breach of fiduciary duty or trust, breach of confidentiality, unfair competition, trade secret misappropriation, and fraud. See Daboub, 42 F.3d at 289-91; Computer Associates, 982 F.2d at 717; Taquino, 893 F.2d at 501; Trevino v. Boomtown, Inc. of Delaware, 2002 U.S. Dist. LEXIS 11317, *6 n. 10 (E.D. La. 2002); Asunto v. Shoup et al., 132 F. Supp.2d 445, 452 (E.D. La. 2000); Crooks, 92 F. Supp.2d at 586; Baptiste v. Khoury, 910 F. Supp. 277, 279 (W.D. La. 1996) (citing Cresci v. Music Publishers Holding Corp., 210 F. Supp. 253, 256 (1962)).
The Fifth Circuit has found that contract claims involved an extra element when the claims alleged, for example, failure to pay royalties or commissions, failure to provide accountings, disputes over assignment of a contract, misuse of funding, representing a competing company, processing data for third parties, and solicitation of customers. See, e.g., Computer Associates, 982 F.2d at 717; Taguino, 893 F.2d at 1501; Trevino, 2002 U.S. Dist. LEXIS 11317 at *6 n. 10 ("The ownership claim is not likely one `arising under' federal copyright law because the sole issue appears to be whether Trevino contractually assigned . . . his ownership rights to the federal copyrights . . ."); Asunto, 132 F. Supp. at 451, 452 ("[T]he promise that is implicit in every contract, but not necessary in an infringment action, provides the extra element that precludes preemption . . ."); Crooks, 92 F. Supp.2d at 586-87. In other words, when the "controlling issue involves a dispute over title to a copyright arising from an alleged breach of contract . . . dependent upon principles of common law and equity, not the federal copyright laws," the case is not preempted by the Copyright Act. Goodman, 815 F.2d at 1032 (quoting Rotardier v. Entertainment Co. Music Group, 518 F. Supp. 919, 921 (S.D.N.Y. 1981); citing Keith v. Scruggs, 507 F. Supp. 968 (S.D.N.Y. 1981), Harrington v. Mure, 186 F. Supp. 655 (S.D.N.Y. 1960)). A breach of contract claim is preempted when the claim "arises directly from the [Copyright Act]" and "resolution of the central issue in [the] case depends upon the application [sic] of [the] statutory definition [of the Copyright Act]." Id. (quoting Lieberman v. Estate of Chayefsky, 535 F. Supp. 90, 91 (S.D.N.Y. 1982) (finding that, unlike a breach of contract claim in which copyright ownership is based on an assignment, a breach of contract claim in which ownership is based on co-authorship arises directly from the Copyright Act)).
Further, the Fifth Circuit has recently held that because a claim under the Louisiana Unfair Trade Practices Act requires proof of fraud, misrepresentation, or other unethical conduct, "the relief it provides is not `equivalent' to that provided in the Copyright Act and, thus, it is not preempted." Computer Mgmt. Assistance Co. v. DeCastro et al., 220 F.3d 396, 404-05 (5th Cir. 2000).
The Court finds that all of plaintiffs' claims contain extra elements that render the claims qualitatively different from a copyright infringement claim. Plaintiffs' claims as to no meeting of the minds, fraud, and fraud in the inducement attack the validity of the contract by which Johnson transferred an interest in the song It Ain't My Fault to Tuff City. They amount to a dispute over a contract, the subject of which happens to be a copyrighted work, instead of a dispute that requires application of copyright law, such as one involving co-authorship and joint work issues. See Goodman, 815 F.2d at 1032. As such, the claims arise under contract law, not copyright law. Further, plaintiffs' claims of breach of contract, breach of mandate, and unjust enrichment raise issues over failure to provide accountings, royalty payments, and settlement proceeds. None of these claims arises directly under the Copyright Act, and their resolution does not depend on the application of the Copyright Act. See Goodman, 815 F.2d at 1032; Computer Associates, 982 F.2d at 717; Taguino, 893 F.2d at 1501; Asunto, 132 F. Supp. at 451; Crooks, 92 F. Supp.2d at 586-87; Baptiste, 910 F. Supp. at 279 (citing Cresci, 210 F. Supp. at 256). Lastly, according to the Fifth Circuit, plaintiffs' claims of unfair trade practices, unfair competition, and misappropriation under the Louisiana Unfair Trade Practices Act require proof of an extra element of fraud, misrepresentation, or other unethical conduct. See Computer Mgmt. Assistance, 220 F.3d at 404-05.
In its August 14, 2000 Order and Reasons, this Court determined that valid contracts existed between plaintiffs and Tuff City. Plaintiffs' meeting of the minds theory is an attempt to relitigate this issue of contract formation, which should be subject to preclusion rules in state court.
Defendants argue that the specific paragraphs in plaintiffs' complaint bringing claims under the Louisiana Unfair Trade Practices Act sound directly in copyright. The pertinent paragraphs provide:
75. Tuff City, has without the permission and authorization of Johnson, used Johnson's name, image, likeness and recorded performance in conjunction with the sale of the Recording, to the detriment of Johnson.
99. Tuff City has, without the permission and authorization of Wardell, used Wardell's name, image, likeness and recorded performance in conjunction with the sale of Recording 2, to the detriment of Wardell.
(Pls.' Complaint ¶¶ 75, 77, 99, 101.) Each of these paragraphs is followed by an unjust enrichment paragraph clarifying how Tuff City's actions were to the detriment of plaintiffs. The unjust enrichment paragraphs state that Tuff City never compensated the plaintiffs for using their names, images, likenesses, and song. Considered in context, these claims under the Louisiana Unfair Trade Practices Act sound in state law causes of action, not in copyright.
In light of the foregoing, the Court finds removal improper based on a theory that plaintiffs' state law causes of action are equivalent to copyright law. Now the Court turns to the issue of whether it has proper removal jurisdiction over plaintiffs' claims under the Lanham Act.
C. Trademark
Federal district courts do not have exclusive original jurisdiction over trademark claims. See 28 U.S.C. § 1338(a); Colonial Penn Group, Inc. v. Colonial Deposit Co., 834 F.2d 229, 234 (1st Cir. 1987); La Chemiste LaCoste v. Alligator Co., 506 F.2d 339, 345-46 (3d Cir. 1974); Connors v. Malik, 1997 U.S. Dist. LEXIS 17342 (W.D. Pa. 1997); 1st National Reserve, L.C. v. Vaughan et al., 931 F. Supp. 463, 465 (E.D. Tex. 1996); Gateway 2000, Inc. v. Cyrix Corp., 942 F. Supp. 985, 993 (E.D. Pa. 1996). A plaintiff can choose any one of three types of trademark actions: a state common law trademark infringement suit, a state law unfair competition suit, or a federal law trademark infringement suit. See, e.g., LaCoste, 506 F.2d at 345-46. When a plaintiff does not clearly state he is seeking relief under the Lanham Act, removal is improper. See, e.g., Vitarroz Corp. v. Borden, Inc., 644 F.2d 960, 963 (2d Cir. 1981); Vaughan, 931 F. Supp. at 993; Johnny's Pizza House, Inc. v. G H Properties, Inc., 524 F. Supp. 495, 497 (W.D. La. 1981).
In this case, as was their prerogative, plaintiffs did not raise the Lanham Act in their complaint, but instead chose state law causes of action of unfair trade practice, unfair competition, and misappropriation. ( See Pls.' Complaint ¶¶ 74-76, 98-100.) Defendants argue that plaintiffs' complaint invokes federal jurisdiction over trademarks because it alleges "worldwide" acts by defendants. Defendants cite no authority to support this argument. Courts have held that the Lanham Act does not bring all state claims of unfair competition or trademark infringement by those engaged in interstate commerce within federal question jurisdiction. See Boston Professional Hockey Ass'n, Inc. v. Dallas Cap Emblem Mfg., Inc., 510 F.2d 1004, 1010 (5th Cir. 1975) (citing Royal Lace Paper Works, Inc. v. Pest-Guard Products, Inc., 240 F.2d 814, 818 (5th Cir. 1957); American Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3, 27 (5th Cir. 1974) (same); Gateway, 942 F. Supp. at 992; Vaughan, 931 F. Supp. at 465-66. As the Gateway court explained,
That plaintiffs mentioned in their motion to remand that the Lanham Act provides concurrent jurisdiction does not prove that they intended to seek remedies under the Lanham Act, but rather seems to be an attempt to clarify the law in anticipation of defendants' preemption argument. Regardless, the plaintiffs' complaint is controlling.
According to [defendant's] argument, any trademark that is federally registered or used in interstate commerce would defeat a state law claim and require removal to the Federal Court. Indeed, adoption of [defendant's] argument would greatly frustrate the ability of state courts to address acts such as those allegedly committed by [defendant].Gateway, 942 F. Supp. at 992.
Defendants also argue that plaintiffs' complaint invokes the Lanham Act because it tracks the Act's language. Again, defendants cite no authority to support their theory. Courts have held that tracking of Lanham Act language in a plaintiff's pleading does not necessitate federal jurisdiction. See Gateway, 942 F. Supp. at 993; Vaughan, 931 F. Supp. at 467-68.
Accordingly, the Court finds that federal removal jurisdiction based on federal trademark law is improper.
III. CONCLUSION
For the foregoing reasons, the Court GRANTS plaintiffs' motion to remand and remands the case to the Civil District Court of the Parish of Orleans, Louisiana.