Opinion
11 Civ. 5013 (NRB)
10-23-2012
ARDIS HEALTH, LLC, CURB YOUR CRAVINGS, LLC, and USA HERBALS, LLC, Plaintiffs, v. ASHLEIGH NANKIVELL, Counter-Claimant, v. JORDAN FINGER, Counter-Defendant.
Attorney for Counter-Claimant Gail I. Auster, Esq. Law Offices of Gail I. Auster & Associates, PC 910 West End Avenue, Suite 1A New York, NY 10025 Attorneys for Counter-Defendants David E. Valicenti, Esq. Christopher Michael Hennessey, Esq. Cohen Kinne Valicenti & Cook LLP 28 North Street, Third Floor Pittsfield, MA 01201
MEMORANDUM AND ORDER
Ardis Health, LLC ("Ardis"), Curb Your Cravings, LLC ("CYC"), and USA Herbals, LLC ("USA Herbals") (collectively, the "Companies") commenced this action against their former employee, Ashleigh Nankivell ("Nankivell"), seeking damages and injunctive relief arising from Nankivell's alleged conversion and unlawful use of the Companies' intellectual and tangible property following her termination from employment. Nankivell counterclaimed against the Companies and filed a third-party complaint against their owner, Jordan Finger ("Finger"), alleging, inter alia, that they violated her state law property rights and subjected her to a hostile work environment. In the instant motions, the Companies and Finger (collectively, the "movants") seek dismissal of Nankivell's counterclaims and third-party complaint. For the reasons set forth below, the motions are granted.
BACKGROUND
The Background is derived from the Memorandum and Order dated October 19, 2011; the Second Amended Answer and Counterclaims ("Countercls."), filed November 11, 2011; and the Verified Amended Third-Party Complaint ("Third-Party Compl."), filed December 9, 2011.
Ardis, CYC, and USA Herbals are a group of closely-affiliated companies that develop herbal, natural health, wellness, and beauty products and market them online. The Companies operate under the direction, ownership, and control of Finger. In October 2008, Finger hired Nankivell to work as a Video Producer for CYC. (Third-Party Compl. ¶ 9.) Shortly thereafter, Nankivell began working as a Video and Social Media Producer at USA Herbals. (Id. ¶¶ 10-11.) In her most recent position, Nankivell produced videos, designed websites, and posted marketing content to websites and blogs. (Id. ¶ 11.) On approximately June 23, 2011, Finger terminated Nankivell, allegedly for cause. (Id. ¶ 90.) This litigation followed.
I. The Companies' Action Against Nankivell
The complete factual background of the Companies' action against Nankivell is set forth in the Court's prior opinion, familiarity with which is assumed. Ardis Health, LLC v. Nankivell, No. 11 Civ. 5013 (NRB), 2011 WL 4965172, at *1-2 (S.D.N.Y. Oct. 19, 2011).
In July 2011, the Companies filed suit against Nankivell, seeking damages and injunctive relief arising from Nankivell's alleged conversion of the Companies' intellectual and tangible property following her termination. The Companies alleged that Nankivell refused to return a laptop and other work equipment, together with passwords and login information for work-related websites, email accounts, social medial accounts, and third-party servers. The Companies also objected to Nankivell's display of content from the Whatsinurs website on her personal webpages.
In August 2011, the Companies moved for a preliminary injunction against Nankivell, requiring her to (i) return the laptop, passwords, and login information and (ii) refrain from using any and all of the Companies' proprietary content and trademarked or copyrighted works. By Memorandum and Order dated October 19, 2011, the Court ruled that the Companies were entitled to recover the passwords and other login information, but not the laptop. Id., at *2-4. The Court also declined the Companies' request to enjoin Nankivell from displaying Whatsinurs content on her personal websites. Id., at *4-5. II. Nankivell's Counterclaims Against the Companies and Third-Party Complaint Against Finger
The original motion also requested the return of other equipment, including a video camera. However, the Companies later withdrew that part of the motion.
For the purposes of the instant motions, the Court assumes Nankivell's allegations to be true. Kuck v. Danaher, 600 F.3d 159, 161 n.2 (2d Cir. 2010), We note, however, that Nankivell attempts to support her claims by including additional factual allegations in her opposition brief. The Court may only consider the allegations that Nankivell asserts in the pleadings. See, e.g., Reliance Ins. Co. v. Polyvision Corp., 474 F. 3d 54, 57 (2d Cir. 2007) (noting that it is "error" for a district court to consider allegations outside the complaint and its exhibits when resolving motions brought under Rule 12(b)(6) and Rule 12(c) of the Federal Rules of Civil Procedure).
Shortly after the Court ruled on the Companies' motion for injunctive relief, Nankivell counterclaimed against the Companies and filed a third-party complaint against Finger. Nankivell's claims arise from the alleged (i) work she contributed to the Whatsinurs project; (ii) destruction of Nankivell's personal property; and (iii) perpetuation of a hostile work environment.
Although Nankivell styles her claims against Finger in the form of a third-party complaint, this is inappropriate for two reasons. First, Nankivell does not contend that Finger "is or may be liable to [her] for all or part of the claim[s]" that the Companies assert against her. Fed. R. Civ. P. 14(a)(1). Second, Nankivell filed the complaint more than 14 days after serving her original answer without first obtaining the Court's leave. Id.
Nonetheless, Finger's joinder to this action would be appropriate under Rule 13(h) of the Federal Rules of Civil Procedure. The claims that Nankivell asserts against Finger, but not against the Companies, similarly would be permissible under Rule 18(a) of the Federal Rules of Civil Procedure.
A. The Whatsinurs Project
Nankivell alleges that, in June 2010, she began developing a business concept called "Whatsinurs." (Third-Party Compl. ¶ 12.) The purpose of the project was to create a web-based portal, located at Whatsinurs.com, that would allow shoppers of health and beauty products to interact with one another. (Id. ¶ 14.) Nankivell claims that her work on Whatsinurs was not related to her employment with the Companies, but was the subject of an independent partnership. (Id. ¶ 17.)
According to Nankivell, on or around June 21, 2010, she entered into an oral partnership agreement with Finger and another associate, Karl Alomar ("Alomar"), to develop the Whatsinurs concept. (Id. ¶ 14.) Nankivell alleges that the parties agreed to incorporate a limited liability company -- "Lukuani LLC doing business as Whatsinurs.com" -- and to share its profits equally. (Id. ¶¶ 16, 19.) According to Nankivell, the parties also agreed to perform various tasks in furtherance of the putative partnership. (Id. ¶ 21.)
Nankivell alleges that Alomar worked as a contractor through Lukuani Inc., his own computer-based company. (Third-Party Compl. ¶ 15.) Neither Alomar nor Lukuani Inc. is a party to this suit.
Nankivell claims that she was responsible for developing the Whatsinurs website, which she did: She completed Alpha and Beta versions of the website over the course of the year. (Id. ¶¶ 22, 26.) Nankivell alleges that she did not receive remuneration for her work, but toiled under the expectation of future partnership profits. (Id. ¶ 19.)
Meanwhile, Finger allegedly agreed to incorporate the LLC, reserve the Whatsinurs.com domain name, and file trademark and copyright applications. (Id. ¶ 27.) According to Nankivell, Finger never incorporated the LLC. (Id. ¶ 32.) Although Finger did register the domain name and file trademark and copyright applications, he did so under the names of his own companies, rather than the putative partnership. (Id. ¶ 40.)
Finger registered the Whatsinurs.com domain name on behalf of Movie Star Looks and filed the trademark and copyright applications under the name of Ardis Health. (Id. ¶ 40.) Nankivell alleges that she does not have ownership interests in either of these companies. (Id. ¶ 41.)
According to Nankivell, Finger also agreed to draft a partnership equity agreement (the "Founders Agreement") to formalize the parties' relationship. (Id. ¶ 27.) Despite Nankivell's prodding, Finger did not deliver the Founders Agreement until June 13, 2011 -- approximately one year after the parties formed the putative partnership. (Id. ¶¶ 34-35.) The Founders Agreement did not allocate an equal equity interest to Nankivell, as she expected. (Id. ¶ 93.) Instead, it allocated a ten percent interest to Nankivell while "maximize[ing]" Finger's share. (Id. ¶¶ 93, 185.)
Nankivell alleges that, approximately one week after Finger circulated the Founders Agreement, Finger asked her whether she had signed the agreement. (Id. ¶ 95.) Nankivell told Finger that her attorney was reviewing the document. (Id. ¶ 96.) Approximately three days later, Finger sent Nankivell an email, purportedly terminating her employment for cause (the "Termination Email"). (Id. ¶¶ 95, 98.) In the Termination Email, Finger asked Nankivell how much time she intended to devote to the Whatsinurs project going forward. (Id. ¶ 104.) However, to this date, the Founders Agreement remains unsigned. (Id. ¶¶ 95-96.)
As a result of the foregoing, Nankivell claims that she owns the Whatsinurs website and related intellectual property, either in whole or in part. She asserts various claims against the movants, including breach of fiduciary duty, fraudulent inducement, conversion, unjust enrichment, and quantum meruit.
B. Destruction of Personal Property
Nankivell alleges that, during the course of her employment, the Companies destroyed her laptop, video camera, and digital camera and failed to reimburse her. (Countercls. ¶¶ 160-74.) Accordingly, Nankivell asserts a counterclaim against the Companies for destruction of personal property.
C. Hostile Work Environment
Nankivell claims that the movants discriminated against her on the basis of sex by creating a hostile work environment. Specifically, Nankivell alleges that Finger relocated the Companies' holiday party from a karaoke bar to a strip club (Third-Party Compl. ¶ 51); repeatedly invited his employees to join him at strip clubs for a lunchtime "treat" (id. ¶ 58); showed Nankivell a sexually explicit scene from a television show and commented on the lead actress's breasts (id. ¶¶ 62-63); described his sexual encounters with a stripper and various other women (id. ¶¶ 65-71); and consulted with Nankivell about inappropriate business proposals, such as the hiring of burlesque dancers to perform at an upcoming conference (id. ¶¶ 72-74). Nankivell brings claims against the movants under the New York Human Rights Law, N.Y. Exec. Law § 290 et seq., and the New York City Human Rights Law, N.Y.C. Admin. Code § 8-107 et seq.
III. The Instant Motions
Finger moves to dismiss the claims against him under Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Rule 12(b)(6)"), and the Companies move for a judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure ("Rule 12(c)").
DISCUSSION
I. Jurisdiction
The Companies apparently dispute that this Court has jurisdiction over Nankivell's counterclaims. (Answer to Countercl. ¶ 146.) Although the Companies do not pursue this contention, the Court maintains the authority -- and, indeed, the obligation -- to satisfy itself that subject matter jurisdiction exists. Kalson v. Paterson, 542 F.3d 281, 286 n.10 (2d Cir. 2008).
Where, as here, there is no diversity of citizenship on which to ground a defendant's state law counterclaims, supplemental jurisdiction, as codified in 28 U.S.C. § 1367, provides the only basis for jurisdiction. Jones v. Ford Motor Credit Co., 358 F. 3d 205, 213 (2d Cir. 2004). That statute provides:
Indeed, "[S]ection 1367 has displaced, rather than codified, whatever validity inhered in the earlier view that a permissive counterclaim requires independent jurisdiction (in the sense of federal question or diversity jurisdiction)." Jones, 358 F.3d at 213.
[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.28 U.S.C. § 1367(a).
Disputes form "part of the same case or controversy within § 13 67 when they derive from a common nucleus of operative fact." Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 335 (2d Cir. 2006) (internal quotation marks omitted). Thus, supplemental jurisdiction exists if "the facts pertinent to the federal and state claims substantially overlap," or "if presentation of the federal claim necessarily would bring the facts underlying the state claim before the court." BLT Rest. Grp. LLC v. Tourondel, 855 F. Supp. 2d 4, 10 (S.D.N.Y. 2012) (internal quotation marks and alterations omitted).
Here, the Court has original jurisdiction over the Companies' claims under the Copyright Act of 1976 (the "Copyright Act"), 17 U.S.C. § 101 et seq., and the Lanham Act, 15 U.S.C. § 1051 et seq. These claims arise from Nankivell's allegedly unlawful use of the Whatsinurs website, over which Ardis Health maintains copyright and trademark protection.
In response to the Companies' allegations, Nankivell asserts a host of counterclaims including breach of fiduciary duty, fraud in the inducement, conversion, unjust enrichment, and quantum meruit -- that seek either to (i) challenge the movants' ownership of the Whatsinurs website and related intellectual property or (ii) recover the value of Nankivell's services performed in connection with the Whatsinurs project. The Court has supplemental jurisdiction over these counterclaims because they arise from, and will invite substantial proof concerning, the same broad areas of historical fact as the Companies' federal copyright and trademark claims.
The same cannot be said of Nankivell's counterclaims for destruction of personal property and sex discrimination. Critically, neither of these counterclaims alleges any facts that are relevant or related to the Companies' copyright and trademark claims. See Bu ex rel. Bu v. Benenson, 181 F. Supp. 2d 247, 254 (S.D.N.Y. 2001) (state law claims are not part of the same case or controversy when they "involve different rights, different interests, and different underlying facts" than the federal law claims). Accordingly, these counterclaims do not arise out of a "common nucleus of operative fact," and, thus, are not subject to the Court's supplemental jurisdiction.
Therefore, we dismiss for lack of subject matter jurisdiction Nankivell's first, second, and eighth counterclaims against the Companies, as well as her first and second counterclaims against Finger. However, we maintain supplemental jurisdiction over the remaining state law counterclaims, which we will now address for their sufficiency.
II. Legal Standards
The same standard applies to motions brought under Rule 12(c) and Rule 12(b)(6). Bank of N.Y. v. First Millennium, Inc., 607 F.3d 905, 922 (2d Cir. 2010). In each case, the pleadings must include "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Where a plaintiff or, in this case, a counter-claimant -- has not "nudged [its] claims across the line from conceivable to plausible," both dismissal and a judgment on the pleadings are appropriate. Id.
In applying these standards, we accept as true all factual allegations in the pleadings and draw all reasonable inferences in the non-moving party's favor. Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 185 (2d Cir. 2012). However, we "give no effect to assertions of law or to legal conclusions couched as factual allegations." Id. (internal quotation marks and alterations omitted). III. Breach of Fiduciary Duty: Nankivell Has Failed to Allege the Existence of a Partnership
To state a claim for breach of fiduciary duty, a party must allege "(i) the existence of a fiduciary duty; (ii) a knowing breach of that duty; and (iii) damages resulting therefrom." Johnson v. Nextel Commc'ns, Inc., 660 F. 3d 131, 138 (2d Cir. 2011). Where, as here, the claim is premised upon fraudulent conduct, the party must also satisfy the heightened pleading standards of Rule 9(b) of the Federal Rules of Civil Procedure. Naughright v. Weiss, 826 F. Supp. 2d 676, 695 (S.D.N.Y. 2011); Abercrombie v. Andrew Coll., 438 F. Supp. 2d 243, 274 (S.D.N.Y, 2006). In other words, the party "must set forth specific facts constituting the alleged relationship with sufficient particularity to enable the court to determine whether, if true, such facts could give rise to a fiduciary relationship." World Wrestling Entm't, Inc. v. Jakks Pac., Inc., 530 F. Supp. 2d 486, 504 (S.D.N.Y. 2007) (internal quotation marks omitted).
Nankivell claims that Finger owed her a fiduciary duty by virtue of a partnership between them. It is undisputed, however, that the parties did not execute a written partnership agreement. Therefore, the relevant inquiry is whether Nankivell has averred specific facts, pled with particularity, demonstrating the existence of a partnership in fact. See Czernicki v. Lawniczak, 904 N.Y.S.2d 127, 131 (N.Y. App. Div. 2010) ("When there is no written partnership agreement between the parties, the court must determine whether a partnership in fact existed. . . .").
Nankivell also describes her business relationship with Finger as a "joint venture." (Third-Party Compl. ¶¶ 17, 19-20.) The distinction is immaterial for the purpose of the instant motions. See Scholastic, Inc. v. Harris, 259 F.3d 73, 84 (2d Cir. 2001) ("Under New York law joint ventures are governed by the same legal rules as partnerships, because a joint venture is essentially a partnership for a limited purpose.") (internal citations omitted); see also infra note 11.
To plead the existence of a partnership in fact, a party must allege (i) the sharing of profits and losses; (ii) joint control and management of the business; (iii) the contribution by each party of property, financial resources, effort, skill, or knowledge; and (iv) the intent to form a partnership. Anwar v. Fairfield Greenwich Ltd., 728 F. Supp. 2d 372, 403-04 (S.D.N.Y. 2010); see also Moses v. Savedoff, 947 N.Y.S.2d 419, 423 (N.Y. App. Div. 2012) (articulating the same factors). Although none of these factors is determinative, some of them weigh more heavily than others. For example, an agreement to share losses is "indispensible" to partnership formation. Steinbeck v. Gerosa, 151 N.E.2d 170, 178 (N.Y. 1958); see also Moses, 947 N.Y.S.2d at 423 ("[I]t is axiomatic that the essential elements of a partnership must include an agreement between the principals to share losses as well as profits.") (internal quotation marks omitted).
When analyzing the existence of a partnership in fact, courts may also consider additional factors, including the ownership of partnership assets, joint liability to creditors, compensation, the contribution of capital, and loans to the organization. See, e.g., Ashlock v. Slone, Ho. 10 Civ. 453 (PAE), 2012 WL 3055775, at *7 (S.D.N.Y. July 26, 2012); Czernicki, 904 N.Y.S. 2d at 131.
Here, the pleadings are bereft of any allegation that the parties agreed to share losses. Without this "indispensable" ingredient, Nankivell cannot plead the existence of a partnership in fact. See, e.g., Latture v. Smith, 766 N.Y.S.2d 906, 906-07 (N.Y. App. Div. 2003) (finding that plaintiff failed to set forth a legally cognizable cause of action based on an oral partnership agreement when he "failed to plead a mutual promise or undertaking to share the burden of the losses of the alleged enterprise, an indispensable element of a partnership or joint venture"); Poon v. Roomorama, LLC, No. 09 Civ. 3224 (RMB), 2009 WL 3762115, at *4 (S.D.N.Y. Nov. 10, 2009) (dismissing a claim for breach of fiduciary duty when the "[p]laintiff d[id] not appear to have committed to the sharing of any losses").
While it is true that Nankivell stood to lose the value of the services she rendered in connection with the putative partnership, "the value of services is not sufficient to satisfy the required sharing of losses element." Kidz Cloz, Inc. v. Officially For Kids, Inc., 320 F. Supp. 2d 164, 172 (S.D.N.Y. 2004) (internal quotation marks omitted); see also Cosy Goose Hellas v. Cosy Goose USA, Ltd., 581 F. Supp. 2d 606, 620-21 (S.D.N.Y. 2008) (collecting cases).
Nankivell's failure to allege an agreement to share losses also belies any conclusion that the parties formed a joint venture. See, e.g., Zeising v. Kelly, 152 F. Supp. 2d 335, 348-49 (S.D.N.Y. 2001) (dismissing a claim for breach of fiduciary duty, premised on the existence of a joint venture, when the plaintiffs failed to allege an agreement to share losses); Morea v. Saywitz, Nos. 09 Civ. 4410 (JG)(LB), 09 Civ. 3935 (JG)(LB); 2010 WL 475302, at *3 (E.D.N.Y. Feb. 8, 2010) (same).
The pleadings are similarly deficient with respect to the intent element. Nankivell does not allege any facts that enable the Court to conclude that Finger and/or Alomar intended to form a partnership. Instead, she relies on two documents that allegedly evince the parties' intent: (i) the Founders Agreement and (ii) the Termination Email. Neither document supports Nankivell's position.
In considering the instant motions, the Court may consider "any statements or documents incorporated in [the pleadings] by reference," as well as any "documents that [Nankivell] either possessed or knew about and upon which [she] relied in bringing the suit." Rothman v. Gregor, 220 F.3d 81, 88-89 (2d Cir. 2000).
Nankivell alleges that the Founders Agreement "acknowledged and confirmed" her "status as a founding partner." (Third-Party Compl. ¶ 92.) In reality, however, the Founders Agreement suffers the same defect as Nankivell's allegations: it does not contemplate a loss-sharing arrangement. Thus, even if executed, the Founders Agreement would not have created a valid partnership under New York law. See Chanler v. Roberts, 606 N.Y.S.2d 649, 650 (N.Y. App. Div. 1994) ("[A]n undertaking to share in profits without submitting to the burden of making good the losses renders such an agreement a nullity under partnership law."). Accordingly, to the extent the document evinces the parties' intent, it does nothing to bolster Nankivell's claims.
Nankivell's reliance on the Termination Email is equally misplaced. According to the pleadings, the Termination Email "acknowledged that [Nankivell's] participation in Whatsinurs was independent of her status as an employee." (Third-Party Compl. ¶ 105.) To be sure, the Termination Email "inquired how much time [Nankivell] intended to devote to the Whatsinurs venture going forward." (Id. ¶ 104; see also Decl. of Jordan Finger in Supp. of Pls.' Mot. for Prelim. Inj. ("Finger Decl."), Ex. K ("[W]e should still discuss what your commitment is to work on Whatsinurs.")) At the same time, however, the Termination Email also demanded the return of "creative assets" related to the Whatsinurs project. (Finger Decl., Ex. K.) Thus, contrary to Nankivell's contention, the document far from "proves" that "Whatsinurs was a venture separate and apart from Nankivell's salaried employment." (Am. Mem. of Law in Opp'n to Pls.' and Third-Party Def.'s Mot. to Dismiss at 2.)
Based on the foregoing, we find that Nankivell has not pled the existence of a partnership in fact. Accordingly, we dismiss her counterclaims for breach of fiduciary duty (counterclaims ten, eleven, twelve, and thirteen against Finger).
IV. Nankivell's Fraudulent Inducement Claim Fails as a Matter of Law
Under New York law, "'general allegations that defendant entered into a contract while lacking the intent to perform it are insufficient to support a fraud claim.'" Garrett v. Music Publ'g Co. of Am., LLC, 740 F. Supp. 2d 457, 465 (S.D.N.Y. 2010) (internal alterations omitted) (quoting Wall v. CSX Transp., Inc., 471 F.3d 410, 416 (2d Cir. 2006)). "To maintain a fraud claim based on intentionally-false statements indicating an intent to perform under a contract," a party must "(i) demonstrate a legal duty separate from the duty to perform under the contract; (ii) demonstrate a fraudulent misrepresentation collateral or extraneous to the contract; or (iii) seek special damages that are caused by the misrepresentation and unrecoverable as contract damages." Miller v. Holtzbrinck Publishers, L.L.C., 377 Fed. App'x 72, 74 (2d Cir. 2010) (internal quotation marks and alterations omitted).
Here, Nankivell explicitly bases her fraudulent inducement claim upon allegations that Finger entered into the putative partnership agreement while lacking the intent to perform it. Nankivell alleges that Finger promised her that she would be an equal equity partner in the Whatsinurs partnership (Third-Party Compl. ¶¶ 203-04), but did "not intend" for her to be an equal equity partner and, indeed, never provided her an equal equity interest (id. ¶¶ 206, 209). Although Nankivell endeavors to establish a separate legal duty by invoking her "fiduciary relationship with Finger" (id. ¶ 207), the pleadings fail to demonstrate the existence of such a relationship, as discussed supra. Thus, we find that Nankivell's fraudulent inducement claim fails as a matter of law. We dismiss counterclaim fourteen against Finger.
V. Nankivell's Conversion Claims Are Preempted by the Copyright Act and/or Fail to State a Claim
Nankivell asserts claims against the movants for conversion of the Whatsinurs website, domain name, trademark, trade dress, and copyright. We find that the Copyright Act preempts Nankivell's claim for conversion of the website, and that Nankivell has failed to state a claim for conversion of the copyright, trademark, trade dress, and domain name.
A. The Copyright Act Preempts Nankivell's Claim for Conversion of the Website
Section 301 of the Copyright Act preempts a state law claim when (i) the work at issue falls within "the type of works protected by the Copyright Act under 17 U.S.C. §§ 102 and 103" and (ii) the state law claim "seeks to vindicate 'legal or equitable rights that are equivalent' to one of the bundle of exclusive rights already protected by copyright law under 17 U.S.C. § 106." Barclays Capital Inc. v. Theflyonthewall.com, Inc., 650 F.3d 876, 892 (2d Cir. 2011) (quoting 17 U.S.C. § 301).
The first prong, referred to as the "subject matter requirement," is satisfied when the state law claim "applies to a work of authorship fixed in a tangible medium of expression and falling within the ambit of one of the categories of copyrightable works." Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 305 (2d Cir. 2004). The work "need not consist entirely of copyrightable material" but must "only fit into one of the copyrightable categories in a broad sense." Id.; see also Integrative Nutrition, Inc. v. Acad. of Healing Nutrition, 476 F. Supp. 2d 291, 296 (S.D.N.Y. 2007).
The second prong, referred to as the "general scope requirement," is satisfied when the state-created right may be abridged by an act that would, "in and of itself," infringe an exclusive right of copyright. Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424, 430 (2d Cir. 2012) (internal quotation marks omitted). "In other words, the state law claim must involve acts of reproduction, adaptation, performance, distribution[,] or display." Briarpatch, 373 F.3d at 305. If the cause of action requires an extra element "instead of or in addition to" these acts, then the state-created right does not fall within the general scope of copyright, and preemption will not apply. Forest Park Pictures, 683 F.3d at 430 (internal quotation marks omitted).
Here, Ardis Health registered a copyright for the Whatsinurs website, which Nankivell claims she owns in whole or in part. Under these circumstances, one would have thought that Nankivell would (i) seek a declaration that she is the sole author of the Whatsinurs website and, thus, the sole owner of its copyright; (ii) seek a declaration that the website qualifies as a "joint work" within the meaning of 17 U.S.C. § 101; or (iii) simply raise these arguments in defense to the Companies' copyright infringement claim. Curiously, however, Nankivell goes to great lengths to avoid these obvious claims -- and, thus, the traps they might entail -- and opts instead to bring a claim for state law conversion. Our speculation aside, we proceed to consider whether Nankivell's effort survives federal preemption.
Given the work for hire doctrine, it is far from clear that Nankivell would prevail on any claims brought under the Copyright Act. See, e.g., Fleurimond v. New York Univ., -- F. Supp. 2d --, No. 09 Civ. 3739 (ADS)(AKT), 2012 WL 2813996 (E.D.N.Y. July 10, 2012).
The parties do not dispute that the Whatsinurs website falls within the subject matter of copyright. The only point of contention is whether Nankivell's conversion claim contains an "extra element" that spares it from preemption.
The Court recognizes the existence of authority, remarkably absent from Nankivell's brief, supporting the proposition that a website, in and of itself, does not necessarily satisfy the subject matter requirement. See, e.g., Budsgunshop.com, LLC v. Sec. Safe Outlet, Inc., No. 10 Civ. 390 (KSF), 2012 WL 1899851, at *10 (E.D. Ky. May 23, 2012), In this case, however, Nankivell explicitly anchors her conversion claim in the website's "design" and "distinctive look" (Third-Party Compl. ¶ 122), both of which fall within the general ambit of federal copyright law. Accord Kantemirov v. Goldine, No. 05 Civ. 1362 (HRL), 2005 WL 1593533, at *4 (N.D. Cal. June 29, 2005); see also Integrative Nutrition, Inc., 476 F. Supp. 2d at 296. To the extent that the claim also encompasses non-copyrightable aspects of the website, "these are not sufficient to remove [the claim] from the broad ambit of the subject matter categories." Briarpatch, 373 F. 3d at 306. Indeed, "[i]t bears repeating that a work need not consist entirely of copyrightable material in order to satisfy the subject matter requirement." Integrative Nutrition, Inc., 476 F. Supp. 2d at 296.
We begin our analysis with the cause of action itself. Under New York law, "conversion is the unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights." Thyroff v. Nationwide Mut. Ins. Co., 460 F.3d 400, 403-04 (2d Cir. 2006) (internal quotation marks and alteration omitted) (quoting Vigilant Ins. Co. of Am. v. Hous. Auth., 660 N.E.2d 1121, 1126 (N.Y. 1995)). Courts in this Circuit routinely hold that conversion claims are not qualitatively different from copyright actions and, thus, are preempted. See, e.g., Miller, 377 Fed. App'x at 74; Harper & Row Publishers, Inc. v. Nation Enters., 723 P.2d 195, 200-01 (2d Cir. 1983), rev'd on other grounds, 471 U.S. 539 (1985); Miller v. Holtzbrinck Publishers, LLC, No. 08 Civ. 3508 (HB), 2008 WL 4891212, at *2-3 (S.D.N.Y. Nov. 11, 2008). To determine whether Nankivell's claim meets the same fate, we must analyze the property rights she seeks to protect, the theories under which she seeks to protect them, and the rights she seeks to enforce. Briarpatch, 373 F.3d at 306.
The gravamen of Nankivell's claim is that she "created" the Whatsinurs website, including its "design" and "distinctive look," and that the movants exercised "unauthorized dominion" over the work and presented it to the public as their own. (Third-Party Compl. ¶¶ 120-26.) In other words, Nankivell asserts protectable interests in a copyrighted work (the website and its content) that allegedly belong to her by virtue of authorship. Among the rights Nankivell seeks to protect is her ability to display the work to the public. This claim falls squarely within the general ambit of federal copyright law. See, e.g., Archie Comic Publ'ns, Inc. v. DeCarlo, 141 F. Supp. 2d 428, 432 (S.D.N.Y. 2001) (finding a conversion claim preempted when authorship was the only basis for the plaintiff's alleged rights in the subject work); see also Harley v. Nesby, No. 08 Civ. 5791 (KBF)(HBP), 2012 WL 1538434, at *5 (S.D.N.Y. April 30, 2012) (noting that a conversion claim cannot stand as a matter of law when it asserts property interests in a copyrighted work).
Although Nankivell does not raise the issue, the Court notes that, in Harper & Row, the Court of Appeals for the Second Circuit suggested, in dictum, that a conversion claim may survive Copyright Act preemption when it alleges the physical possession of a copyrighted work. See 723 F.2d at 201 (reasoning that such a tort would involve acts that are "qualitatively different from those proscribed by copyright law."); see also Nimmer on Copyrights § 1.01. Here, Nankivell claims that the movants exercised "unauthorized dominion" over the website. (Third-Party Compl. ¶ 124.) However, this allegation cannot serve as a prophylactic for preemption because Nankivell's claim is explicitly rooted in intangible property rights that are not capable of physical possession. See supra note 14.
To avoid this result, Nankivell argues that her conversion claim contains "extra elements" insofar as it alleges that (i) Finger breached a fiduciary duty, (ii) the movants do not rightfully own any property interests in the website, and (iii) the movants' copyright registration is invalid. Nankivell's argument not only fails as a matter of law, but also serves to illustrate the broader shortcomings of her pleadings.
Nankivell's argument fails as a matter of law because it is the elements of the cause of action, not the facts pled to prove them, that dictate whether a particular claim involves rights equivalent to those set forth in the Copyright Act. See, e.g., Kregos v. Associated Press, 3 F.3d 656, 666 (2d Cir. 1993); see also Tire Eng'g & Distrib., LLC v. Shandong Linglong Rubber Co., Ltd., 682 F. 3d 292, 310 (4th Cir. 2012) ("[T]he focus under § 301 is not on the conduct or facts pled, but on the elements of the causes of action.") (internal quotation marks omitted). Nankivell does not and cannot contend that, inter alia, a defendant's possession of an invalid copyright is a necessary element of a conversion claim.
In any event, Nankivell only alleges these "extra elements" by way of shotgun pleading. (Third-Party Compl. ¶ 119.) As courts in this District have recognized, such pleading "illustrates utter disrespect for Rule 8 of the Federal Rules of Civil Procedure." Manbeck v. Micka, 640 F. Supp. 2d 351, 366 (S.D.N.Y. 2009) (internal quotation marks and alterations omitted).
Indeed, Nankivell's assertion of such "extra elements" only reinforces the Court's conclusion that the claim is a copyright action in disguise. If Nankivell truly wished to challenge the ownership of copyrighted material, she should have litigated this claim under the Copyright Act rather than endeavoring to shoehorn it into a state law conversion action. Because she has failed to do so, we must dismiss Nankivell's third counterclaim against the movants as preempted. In any event, the pleadings also fail to state a claim, as discussed infra.
B. Nankivell Fails to State a Claim for Conversion of the Copyright, Trademark, Trade Dress, and Domain Name
To state a claim for conversion under New York law, a party must allege that (i) "the party charged has acted without authorization" and (ii) "exercised dominion or a right of ownership over property belonging to another," and that (iii) "the rightful owner ma[de] a demand for the property" and (iv) such demand was "refused." Lenard v. Design Studio, -- F. Supp. 2d --, No. 08 Civ. 10560 (JPO), 2012 WL 3642402, at * 9 (S.D.N.Y. Aug. 24, 2012) (internal quotation marks omitted). "Where the original possession is lawful, a conversion does not occur until the [party charged] refuses to return the property after demand or until he sooner disposes of the property." Thyroff v. Nationwide Mut. Ins. Co., 360 Fed. App'x 179, 180 (2d Cir. 2010) (internal quotation marks omitted).
Here, Nankivell acknowledges that the movants' initial possession of the property, to the extent the property could be possessed, was lawful insofar as it arose in the context of the putative partnership. However, Nankivell does not allege that she demanded return of the property, or that the movants refused any such demand. Accordingly, Nankivell fails to state a claim for conversion, and we must dismiss her fourth, fifth, sixth, and seventh counterclaims alleged against the movants. See, e.g., Lenard, 2012 WL 3642402, at *9 (dismissing conversion claim for failure to allege demand); Stadt v. Fox News Network LLC, 719 F. Supp. 2d 312, 322 (S.D.N.Y. 2010) (same); Tornheim v. Blue & White Food Prods. Corp., 868 N.Y.S.2d 279, 280-81 (N.Y. App. Div. 2008) (same). VI. The Copyright Act Preempts Nankivell's Claims for Unjust Enrichment and Quantum Meruit
The movants argue that Nankivell's conversion claims are inactionable because they involve intangible property. While this is certainly true with respect to at least some of the property interests, see, e.g., Harris v. Coleman, -- F. Supp. 2d --, No. 11 Civ. 3450 (SAS), 2012 WL 1744976, at *7 (S.D.N.Y. May 16, 2012) (describing a trademark as "intangible intellectual property having no existence apart from the good will of the product or service it symbolizes") (internal quotation marks omitted), the Court need not reach this issue in light of the other shortcomings in Nankivell's pleadings.
Applying New York law, a court "may analyze quantum meruit and unjust enrichment together as a single quasi contract claim." Leibowitz v. Cornell Univ., 584 F.3d 487, 509 n.9 (2d Cir. 2009). --------
"Courts have generally concluded that the theory of unjust enrichment protects rights that are essentially 'equivalent' to rights protected by the Copyright Act; thus, unjust enrichment claims related to the use of copyrighted material are generally preempted." Weber v. Geffen Records, Inc., 63 F. Supp. 2d 458, 462 (S.D.N.Y. 1999) (internal quotation marks omitted); see also Briarpatch, 373 F.3d at 306-07.
Here, there is no reason to depart from this conclusion. Nankivell's unjust enrichment and quantum meruit claims apply to the Whatsinurs website, which undisputedly falls within the subject matter of the Copyright Act. See supra note 14. Furthermore, Nankivell bases her claims on the movants' public use and display of the website (Third-Party Compl. ¶¶ 171, 176), a right protected by 17 U.S.C. § 106. Therefore, we dismiss the eighth and ninth counterclaims against Finger, as well as the ninth and tenth counterclaims against the Companies, as preempted.
CONCLUSION
For the foregoing reasons, the motions (docket nos. 35 and 36) are granted. Dated: New York, New York
October 23, 2012
/s/_________
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE Copies of the foregoing Order have been mailed on this date to the following; Attorney for Counter-Claimant Gail I. Auster, Esq.
Law Offices of Gail I. Auster & Associates, PC
910 West End Avenue, Suite 1A
New York, NY 10025 Attorneys for Counter-Defendants David E. Valicenti, Esq.
Christopher Michael Hennessey, Esq.
Cohen Kinne Valicenti & Cook LLP
28 North Street, Third Floor
Pittsfield, MA 01201