Opinion
No. 3-04-CV-1228-BD.
January 26, 2005
MEMORANDUM OPINION AND ORDER
Defendant Blockbuster, Inc. ("Blockbuster") and Defendants Marc Bruder and Bruder Releasing, Inc. ("BRI Defendants") have filed separate motions to dismiss this declaratory judgment action for lack of subject matter jurisdiction. The BRI Defendants also seek dismissal for lack of personal jurisdiction. For the reasons stated herein, the motions to dismiss for lack of subject matter jurisdiction are denied and the BRI Defendants' motion to dismiss for lack of personal jurisdiction is granted.
I.
On October 15, 2001, Plaintiff Patrick Miele, a citizen of New York, and four other individuals entered into an Operating Agreement to organize Rhapsody, LLC, a California limited liability company ("the Company"). (BRI App., Exh. A). The purpose of the Company was to produce, exhibit and exploit a theatrical motion picture entitled Rhapsody, "and to exploit all ancillary rights connected therewith including soundtrack music rights, television, cable and Internet rights, merchandising, publication, radio and all other rights whether known or unknown in perpetuity and throughout the Universe." ( Id. at 002, § 1.3). In February 2002, Ron Perlstein, another member of the Company and its resident agent, negotiated a contract which purported to give the BRI Defendants the right to enter into distribution arrangements for the Rhapsody motion picture. (Plf. Compl. at 3, ¶ 13). Thereafter, on or about June 20, 2004, the BRI Defendants, acting as an agent for the Company, entered into an Acquisition Agreement with Blockbuster. This agreement provides, in pertinent part:
Rhapsody is a movie about two childhood friends, Jelly and Roughneck, who meet up again as adults. Jelly is a successful hip-hop producer. Roughneck is an ex-convict who recently has been released from jail. When Roughneck decides he is entitled to a piece of Jelly's success, Jelly resists his old friend. The movie stars Glenn Plummer and Fred Williamson, with appearances by Ice-T, M.C. Hammer, and Tone-Loc. The soundtrack includes performances by Cindy Herron Braggs of En Vogue and Chaka Khan.
The validity of the contract between Perlstein, as agent for Rhapsody, LLC, and the BRI Defendants is the subject of another lawsuit currently pending in New York federal court. Miele v. Perlstein, No. CV-04-1962 (E.D.N.Y., filed May 12, 2004).
Company hereby irrevocably and exclusively grants, assigns and conveys . . . to [Blockbuster] all rights in and to the Picture, whether directly or through sublicenses and the literary material or other material on which it is based . . . including, without limitation, the exclusive right, license and privilege under copyright, including all extensions and renewals of copyright, to distribute, exhibit, market, reissue, advertise, publicize, promote and otherwise exploit the Picture, trailers and all literary, music and other material embodied in the Picture, trailers, outtakes, "behind-the-scenes" footage . . . in all media, in all versions and all languages, by any and every means, methods, forms and processes and devices, now known or hereafter devised, including, without limitation, theatrical, non-theatrical . . ., all forms of television . . ., pay-per-view, video on demand, near video-on-demand, internet, digital, electronic, satellite, "Video Exploitation" (as defined below), merchandising . . ., book publication, theme park, soundtrack phonorecord and music publishing (collectively, the "Acquired Rights").
( Id., Exh. A at 4, § 7(a)). The term "Video Exploitation," as defined in the Acquisition Agreement, means "exploitation of the Acquired Rights by sale, license, lease or otherwise by all means of videograms (including, without limitation, video cassettes, laser discs, CD-rom, video CD, DVD, DIVX and any other similar device, know known or hereafter developed, embodying the Picture, as those terms are commonly understood in the entertainment industry)." ( Id., Exh. A at 4, § 7(b)).
Plaintiff contends that the BRI Defendants had no authority to enter into the Acquisition Agreement with Blockbuster, or to transfer soundtrack and music rights in Rhapsody, without specific written direction from a majority of the membership of the Company. ( Id. at 3-4, ¶¶ 12, 16). As a result of this unauthorized contract, plaintiff alleges that he "is no longer able to secure his sole investment rights to the soundtrack, and proportional rights of `RHAPSODY' without inevitable litigation." ( Id. at 4, ¶ 18). By this suit, plaintiff seeks a declaratory judgment invalidating the Acquisition Agreement and an injunction prohibiting any further distribution or sale of the motion picture and soundtrack. Blockbuster and the BRI Defendants counter that there is no "justicable controversy" between the parties and move to dismiss this case for lack of subject matter jurisdiction. The BRI Defendants have filed a separate motion to dismiss for lack of personal jurisdiction. The issues have been fully briefed by the parties and the motions are ripe for determination.
In his original complaint, plaintiff also sued the BRI Defendants for fraud. ( See Plf. Compl. at 4-5, ¶¶ 20-24). That claim was withdrawn after defendants pointed out that plaintiff failed to plead the elements of fraud with particularity as required by Fed.R.Civ.P. 9(b). See Plf. Vol. Dism., 11/19/04.
II.
The Declaratory Judgment Act authorizes federal district courts to "declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). However, an "actual controversy" between the parties is necessary to establish subject matter jurisdiction under the Act. See Cardinal Chemical Co. v. Morton International, Inc., 508 U.S. 83, 95, 113 S.Ct. 1967, 1974, 124 L.Ed.2d 1 (1993); Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 896 (5th Cir. 2000), citing Texas v. West Publishing Co., 882 F.2d 171, 175 (5th Cir. 1989), cert. denied, 110 S.Ct. 869 (1990). Hypothetical, conjectural, or conditional disputes based on factual situations that may never develop will not support a request for declaratory relief. Brown Root, Inc. v. Big Rock Corp., 383 F.2d 662, 665 (5th Cir. 1967). The question is "whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 57-58, 96 S.Ct. 1917, 1933, 48 L.Ed.2d 450 (1976), quoting Golden v. Zwickler, 394 U.S. 103, 108, 89 S.Ct. 956, 959, 22 L.Ed.2d 113 (1969); see also Middle South Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir. 1986).
Blockbuster and the BRI Defendants argue that there is no justicable case or controversy because plaintiff's claim for declaratory relief is not the result of any "present danger or dilemma" and seeks only an advisory opinion regarding the validity of the Acquisition Agreement. ( See Blockbuster Br. at 9; BRI Brief at 9). The court disagrees. In his complaint, plaintiff alleges that the BRI Defendants conveyed valuable distribution rights in the Rhapsody soundtrack to Blockbuster without authority. As long as the Acquisition Agreement remains in effect, plaintiff states that he "is legally prohibited from enforcing his protected and agreed contractual rights to market, sell and distribute the soundtrack of RHAPSODY." ( See Plf. Compl. at 5, ¶ 27). Whatever other jurisdictional defenses may be available to defendants, the court determines that "there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Simon, 96 S.Ct. at 1933.
The court is not convinced that plaintiff, acting in his own behalf, has standing to sue for declaratory and injunctive relief with respect to the Acquisition Agreement between the BRI Defendants and Blockbuster. It appears from the skeletal complaint filed by plaintiff and the paltry evidence submitted by the parties that any injury-in-fact resulting from the Acquisition Agreement was sustained by Rhapsody, LLC, not plaintiff. However, defendants have not moved to dismiss this case for lack of standing nor has this jurisdictional issue been briefed by the parties.
III.
The BRI Defendants, both of whom reside in California, also move to dismiss this case for lack of personal jurisdiction. The assumption of personal jurisdiction over a non-resident defendant in a diversity case must comport with due process. See Mink v. AAAA Development LLC, 190 F.3d 333, 335 (5th Cir. 1999). Due process for jurisdictional purposes consists of two elements. First, the defendant must have sufficient "minimum contacts" with the forum state. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945); Wilson v. Belin, 20 F.3d 644, 647 (5th Cir.), cert. denied, 115 S.Ct. 322 (1994). These "minimum contacts" may be analyzed in terms of specific jurisdiction or general jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984); Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 418 (5th Cir. 1993). Specific jurisdiction exists when the contacts with the forum state arise from, or are directly related to, the cause of action. Wilson, 20 F.3d at 647. General jurisdiction is proper when the defendant has other "continuous and systematic" contacts with the forum unrelated to the pending litigation. Id. If a non-resident defendant has sufficient minimum contacts with the forum state, the court then must consider whether the exercise of personal jurisdiction would "offend traditional notions of fair play and substantial justice." Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 114, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92 (1987). The plaintiff has the burden to establish a prima facie case of personal jurisdiction under both prongs of the due process analysis. Kelvin Services, Inc. v. Lexington State Bank, 46 F.3d 13, 14 (5th Cir. 1995).Here, plaintiff fails to allege, much less prove, that the BRI Defendants have sufficient minimum contacts with the State of Texas to establish general or specific jurisdiction. Instead, plaintiff relies exclusively on a forum selection clause in the Acquisition Agreement, which provides:
This Agreement shall be governed by the laws of the State of Texas applicable to agreements wholly entered and wholly performed within the state. The parties hereby submit and consent to the exclusive jurisdiction of the courts in Dallas County in the State of Texas and North Texas Federal Courts in any action brought under or relating to this Agreement.
(Plf. Compl., Exh. A. at 7, § 17). Ordinarily, such a contractual provision is prima facie valid and must be enforced unless the opposing party shows that enforcement would be unreasonable. Kelvin Services, 46 F.3d at 15, citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 1913, 32 L.Ed.2d 513 (1972). However, as the BRI Defendants correctly point out, plaintiff is not a party to the Acquisition Agreement. Therefore, in order to enforce the forum selection clause, plaintiff must establish a "close relationship" to a signatory to the contract. See Texas Source Group, Inc. v. CCH, Inc., 967 F.Supp. 234, 237 (S.D. Tex. 1997) (citing cases). No such relationship exists here. Although the BRI Defendants purported to enter into the Acquisition Agreement as an agent of Rhapsody, LLC, and plaintiff is a member of the Company, that relationship is simply too attenuated to allow plaintiff to enforce the forum selection clause as a nonparty. Cf. Hugel v. Corporation of Lloyd's, 999 F.2d 206, 209-10 (7th Cir. 1993) (binding corporations owned and controlled by contracting party); Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 n. 5 (9th Cir. 1988) (binding parent companies and individual directors of contracting party); Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202-03 (3d Cir.), cert. denied, 104 S.Ct. 349 (1983) (binding third-party beneficiary). Consequently, this court lacks personal jurisdiction over the BRI Defendants.
CONCLUSION
The motions to dismiss for lack of subject matter jurisdiction filed by Blockbuster and the BRI Defendants are denied. However, the BRI Defendants' motion to dismiss for lack of personal jurisdiction is granted. In light of the dismissal of this indispensable party, the court sua sponte questions whether the entire action should be dismissed. See FED. R. CIV. P. 19(b) (if an indispensable party cannot be joined, "the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed[.]"). Plaintiff and defendant shall address this issue in separate briefs, supported by argument and legal authority, by February 18, 2005. Alternatively, if both parties agree that dismissal is proper, a joint stipulation of dismissal shall be filed by that date.SO ORDERED.