Opinion
No. 03 Civ. 5664 (JGK).
March 10, 2005
OPINION ORDER
This is an action for copyright infringement under 17 U.S.C. § 101, et seq. (the "Copyright Act") and 15 U.S.C. § 1125(a) (the "Trademark Act") and for unfair competition and unjust enrichment at common law. The plaintiff alleges that the defendants have engaged in the unauthorized copying, reproduction, and sale of sculptural works that infringe on the plaintiff's copyrighted sculptural works. The plaintiff seeks to recover damages and to enjoin the defendants from producing the allegedly infringing works.
Defendants Helmut Rackwitz ("Rackwitz") and Marco-Domo Internationales Interieur GmbH ("Marco-Domo") (collectively the "Frankfurt defendants") move to dismiss all claims against them pursuant to Federal Rule of Civil Procedure 12 (b) (2) arguing that this Court has no personal jurisdiction over them. Defendant Rackwitz also moves to dismiss all claims against him pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that the plaintiff has failed to state a claim upon which relief can be granted. For the reasons explained below, the motion to dismiss based on lack of personal jurisdiction is denied without prejudice to renewal after limited discovery with regard to the issue of personal jurisdiction over the Frankfurt defendants, and the motion to dismiss for failure to state a claim is denied.
I.
Unless otherwise stated, the following allegations are accepted as true for the purposes of these motions.
The plaintiff, Christian Impala Lechner, is a German citizen who resides in Bad Kohlgrub, Germany. (Amended Complaint ("Amd. Compl."), ¶ 7.) The plaintiff is a sculptress who creates bronze sculptures that she sells and shows in art galleries throughout Europe, the United States, and other countries. (Id., ¶¶ 7-8.) In 1997, the plaintiff produced a bronze sculpture in Germany entitled "Geese in Reeds" that depicts three geese taking flight through long reeds and cattails. (Id., ¶ 34.) The United States Copyright Office registered the copyright for Geese in Reeds on February 12, 2003. (United States copyright Certificate of Registration, No. VA 1-172-201, attached at Amd. Compl., Ex. D.)
Defendant Marco-Domo is a private limited liability company incorporated and organized under German law. (Affidavit of Marcus A. Ernst, dated March 18, 2004 ("Ernst Aff."), ¶ 9; Affidavit of Helmut Rackwitz, sworn to March 17, 2004 ("Rackwitz Aff."), ¶ 4.) Marco-Domo manufactures, distributes, and sells artistic works and sculptural lawn ornaments, including cast bronze sculptures. (Amd. Compl., ¶ 11.) Defendant Rackwitz, a German citizen, is the president and sole shareholder of Marco-Domo. (Rackwitz Aff., ¶ 1, 4.)
On or about February 2, 2002, the plaintiff and the Frankfurt defendants settled an infringement claim that the plaintiff initiated in Germany against the Frankfurt defendants for the production and sale of sculptures that were virtually identical to "Three Geese in Reeds." (Rackwitz letter dated Feb. 2, 2002, attached in Exs. H and I to Amd. Compl.) Rackwitz agreed not to manufacture or sell a sculpture called Three Ducks in Reeds because the plaintiff was the intellectual creator and holder of the intellectual property rights in the object. (Id.) Violation of this agreement was subject to a 100,000 payment. (Id.) In the course of the settlement negotiations, Rackwitz informed the plaintiff that the sculpture had been produced by Siam Handicraft Group, Ltd. ("Siam Handicraft"), a bronze caster in Bangkok, Thailand. (Rackwitz letter dated January 23, 2002, attached in Exs. H and I to Amd. Compl.) Rackwitz told the plaintiff that Siam Handicraft had been unaware that the sculpture was a protected model and that, upon being informed, Siam Handicraft assured Rackwitz it would no longer manufacture the infringing model. (Id.)
Following the settlement agreement, the plaintiff discovered that sculptures almost identical to the infringing model sold by Marco-Domo were being sold in the United States by Henri Studio, Inc. ("Henri Studio"), an Illinois corporation that designs, manufactures, and sells sculptures and sculptural products. (Amd. Compl., ¶ 23, 71-92.) These works are sold nationwide, including in New York. (Declaration of Steven Mancinelli, dated May 11, 2004, filed under seal, Ex. B). The allegedly infringing works were sold from a catalogue that was a duplicate of the Marco-Domo catalogue that included the infringing work that was the subject of the previous settlement between the plaintiff and the Frankfurt defendants. (Rackwitz Aff., ¶ 14.) Marco-Domo had given Henri Studio permission to use its catalogue. (Rackwitz Aff., ¶ 14.) In addition, Marco-Domo gave Henri Studio information regarding the printer that Marco-Domo used to print its catalogues and allowed the printer to invoice Marco-Domo for the catalogues, and Marco-Domo then invoiced Henri Studio. (Id.) Rackwitz claims that neither he nor Marco-Domo received any payment for these services. (Id.)
II. A.
A district court has "broad discretion" in deciding a motion under Rule 12(b)(2), including the discretion to conduct an evidentiary hearing if the Court believes one is warranted. See CutCo Indus. V. Naughton, 806 F.2d 361, 364 (2d Cir. 1986);see also Realuyo v. Villa Abrille, No. 01 Civ. 10158, 2003 WL 21537754, at *2 (S.D.N.Y. July 8, 2003), aff'd, 93 Fed. Appx. 297 (2d Cir. 2004); Clarendon Nat. Ins. Co. v. Lan, 152 F.Supp.2d 506, 515 (S.D.N.Y. 2001). To survive a motion to dismiss where no evidentiary hearing is held, the plaintiff need only make a prima facie case that the defendants are subject to the Court's personal jurisdiction. See PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997); Rubinbaum LLP v. Related Corporate Partners V, L.P., 154 F.Supp.2d 481, 486 (S.D.N.Y. 2001); see also Realuyo, 2003 WL 21537754, at *2. The Court must construe the pleadings and supporting affidavits in the light most favorable to the plaintiff. See PDK Labs, 103 F.3d at 1108; Rubinbaum, 154 F.Supp.2d at 486; see also Realuyo, 2003 WL 21537754, at *2.
Because there is no specific federal statute governing personal jurisdiction on a copyright claim, this Court must look to the provisions of state law. See Fort Knox Music Inc. v. Baptiste, 203 F.3d 193, 196 (2d Cir. 2000). The plaintiff alleges that the Court has personal jurisdiction over the Frankfurt defendants under New York Civil Practice Law Rules ("CPLR") § 302(a)(2). CPLR § 302(a)(2) provides for specific personal jurisdiction as to a cause of action, over a defendant who, in person or through an agent, "commits a tortious act within the state." CPLR § 302(a)(2). However, even if the Frankfurt defendants do fall within the meaning of CPLR § 302(a)(2), this Court may only exercise jurisdiction if doing so comports with constitutional due process guarantees. See Calder v. Jones, 465 U.S. 783, 788 (1984); Savin v. Ranier, 898 F.2d 304, 306 (2d Cir. 1990).
The plaintiffs claim, in the alternative, that even if the Court does not have personal jurisdiction pursuant to the New York long-arm statute, this Court has federal jurisdiction over the claim under Federal Rule of Civil Procedure 4(k)(2). Rule 4(k)(2) provides for jurisdiction over a defendant if the claim arises under federal law, if the defendant is not subject to the jurisdiction of the courts of general jurisdiction of any state, and if the exercise of jurisdiction is consistent with the Constitution and laws of the United States. Federal Rule of Civil Procedure 4(k)(2). Like CPLR § 302(a)(2), the exercise of jurisdiction under Federal Rule of Civil Procedure 4(k)(2) must also comport with the requirements of due process.
There are two parts to the due process test for personal jurisdiction: the "minimum contacts" inquiry and the "reasonableness" inquiry. Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996). The minimum contacts inquiry requires that the court determine whether the defendant has sufficient contacts with the forum state to justify the court's exercise of personal jurisdiction over the defendant. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); Metropolitan Life, 84 F.3d at 567. In determining whether minimum contacts exist, the court considers the relationship among the defendant, the forum, and the litigation. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984); Shaffer v. Heitner, 433 U.S. 186, 204 (1977); Chew v. Dietrich, 143 F.3d 24, 28 (2d Cir. 1998). The reasonableness inquiry requires the court to determine whether the assertion of personal jurisdiction over the defendant comports with "traditional notions of fair play and substantial justice" under the circumstances of the particular case. Calder, 465 U.S. at 788 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The Court must take into account five factors in this inquiry: (1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies. See Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 113-14 (1987);see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-77 (1985); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980); Metropolitan Life, 84 F.3d at 568.
B.
The plaintiff alleges that jurisdiction is proper under CPLR § 302(a)(2) under the theory of contributory infringement, whereby a defendant purposefully uses an intermediary to take advantage of a market without himself offering the goods for sale in the market. See Brought to Life Music, Inc. v. MCA Records, Inc., No. 02 Civ. 1164, 2003 WL 296561, at *4 (S.D.N.Y. Feb 11, 2003); Dan-Dee Int'l, Ltd. v. Kmart Corp., No. 99 Civ. 11689, 2000 WL 1346865, at *4, (S.D.N.Y. Sept. 19, 2000).
The plaintiff argues that jurisdiction is proper under this theory because there is evidence of an agreement between the Frankfurt defendants and Henri Studio whereby Henri Studio would sell the infringing work in the United States and pay a commission to the Frankfurt defendants through Siam Handicraft, over which the plaintiff alleges that Rackwitz exercises significant control. The plaintiff argues in the alternative that jurisdiction is proper over the Frankfurt defendants under Federal Rule of Civil Procedure 4(k)(2) because the cause of action falls under federal Copyright law and the defendant is not subject to the jurisdiction of any one state. With regard to the due process requirements with which jurisdiction under both CPLR § 302(a)(2) and Federal Rule of Civil Procedure 4(k) must comply, the plaintiff argues that the alleged agreement between the Frankfurt defendants and Henri Studio provides the minimum contacts necessary for the exercise of jurisdiction. Moreover, the plaintiff argues, because of this agreement the assertion of personal jurisdiction over the defendant comports with "traditional notions of fair play and substantial justice" under the circumstances of the case. Calder, 465 U.S. at 788 (quoting Milliken, 311 U.S. at 463).
Although the Copyright claim arises under federal law, it is unclear whether it fulfills the second requirement of Rule 4(k)(2) — that the defendant is not subject to personal jurisdiction in any state. At argument, counsel for the defendants stated that the defendants would not concede that personal jurisdiction over the defendants existed in Illinois, the location of the Henri Studio headquarters. However, since this Court finds that further discovery is necessary on the subject of whether the defendants have the minimum contacts necessary to comport with the requirements of due process, it is unnecessary at this point to reach the issue of whether personal jurisdiction over the defendants exists in Illinois or any other state.
The defendant alleges that there is no evidence of such a relationship between Henri Studio or Siam Handicraft and the Frankfurt defendants and that, moreover, the exercise of jurisdiction over the Frankfurt defendants would not comport with the requirements of due process. In his affidavit, defendant Rackwitz alleges that Marco-Domo does not now and has never owned any assets, conducted any business, or had any presence or financial activity in the United States. (Rackwitz Aff., ¶ 3.) He also alleges that Marco-Domo has never sold or distributed products, catalogs, items, or services in New York, has no agents or employees in New York and is not licensed to conducted business in New York, and has never conducted business in New York. (Id., ¶ 7, 8, 9.) Defendant Rackwitz states in his affidavit that neither Marco-Domo nor Rackwitz has ever maintained an office or facility, advertised, marketed, or promoted any product or service, had any real or personal property, maintained or hired employees, or entered into a contract in New York, nor has either Frankfurt defendant sold, shipped, or contracted to sell products in New York, presented products at a United States trade show or exhibition, or solicited business in New York. (Id., ¶ 11-13.)
On February 10, 2005, after this motion had been fully briefed, the plaintiff submitted a letter from Rackwitz on Marco-Domo letterhead dated July 16, 1998 that was obtained during a November 3, 2004 raid of the Frankfurt defendants' gallery, office, and storage facilities by the German police and German State Prosecutor. (Supplemental Declaration of Steven Mancinelli in Opposition to the Motion to Dismiss of Defendants Helmut R. Rackwitz and Marco-Domo Internationales Interieur GmbH, dated Feb. 10, 2005 ("Supp. Decl."), ¶ 4; Declaration of Thomas Krauss, dated Jan. 27, 2005 ("Krauss Decl."), attached as Ex. B to Supp. Decl.; Letter from Helmut R. Rackwitz, dated July 16, 1998 ("Rackwitz Letter"), attached as Ex. C to Supp. Decl.; Translation of Rackwitz Letter, dated Jan. 27, 2005 ("Transl. Rackwitz Letter"), attached as Ex. D to Supp. Decl.) In the letter, Rackwitz states that "Marco Domo produces exclusive objects for . . . two American . . . decoration storehouse[s]." (Transl. Rackwitz Letter.) This statement appears to be inconsistent with the statement in Rackwitz's affidavit that Marco-Domo "does not and has never . . . conducted any business . . . in the United States." (Rackwitz Aff., ¶ 3.)
The Frankfurt defendants argue that this letter is consistent with Rackwitz's representations in his affidavit because the letter "does not confirm any dealings between Marco Domo and the two customers that took place in the United States." (Letter from Samuel D. Levy, dated Feb. 17, 2005, at 1.) The letter does not provide any evidence that the business transactions with the American customers took place in the United States. However, the Frankfurt defendants offer no affidavit describing the details of the transactions and how the alleged sales to the United States customers took place outside the United States. There is also no sworn testimony as to the accuracy of the allegations of sales to the United States customers and no explanation of the amount and details of those sales. Most significantly, while the submissions of the Frankfurt defendants depend on the original sworn allegations of Rackwitz, there is no responsive declaration of Rackwitz affirming how his original sworn statements were accurate.
These recent submissions by the parties demonstrate that further discovery is warranted on the limited question of whether this Court has personal jurisdiction over the Frankfurt defendants. Although the plaintiff must make a prima facie showing of personal jurisdiction to withstand a motion to dismiss, the Court has discretion to order further discovery on the jurisdictional issue, provided that the plaintiff makes a threshold showing of jurisdiction and establishes that her position is not frivolous. See Strategem Dev. Corp. v. Heron Int'l D.V., 153 F.R.D. 535, 547 (S.D.N.Y. 1994) (finding that, although plaintiffs had not established prima facie showing that Court had personal jurisdiction over foreign defendant, plaintiff had made sufficient showing to warrant further discovery on whether foreign defendant exercised control over domestic defendant, subjecting foreign defendant to jurisdiction of Court); Alicea v. Lasar Mfg. Co., No. 91 Civ. 3929, 1992 WL 230203, at *2 (S.D.N.Y. Aug. 31, 1992); see also Manhattan Life Ins. Co. v. A.J. Stratton Syndicate (No. 782), 731 F.Supp. 587, 593 (S.D.N.Y. 1993). Here, further discovery may develop the details of the Frankfurt defendants' business dealings with United States customers and whether the Frankfurt defendants have transacted business in the United States. Moreover, the discovery can test the veracity of Rackwitz's denials of agreements with Henri Studio and Siam Handicraft. Therefore, the plaintiff may take limited discovery, solely with respect to the issue of jurisdiction as to the Frankfurt defendants, in the form of a deposition of Helmut Rackwitz, interrogatories directed to Helmut Rackwitz and Marco-Domo, and limited document requests. Discovery must be completed within sixty days.
III. A.
With respect to Rackwitz's motion pursuant to Federal Rule of Civil Procedure 12(b)(6), the allegations in the Complaint are accepted as true and all reasonable inferences are drawn in the plaintiffs' favor. See Grandon v. Merrill Lynch Co., 147 F.3d 184, 188 (2d Cir. 1998); Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir. 1995); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989). The Court's function is "not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). Therefore, the defendants' motion to dismiss for failure to state a claim should only be granted if it appears that the plaintiff can prove no set of facts in support of her claim that would entitle her to relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957);Grandon, 147 F.3d at 188; Goldman, 754 F.2d at 1065. In deciding the motion, the Court may consider documents that are referenced in the Complaint, documents that the plaintiff relied on in bringing suit and that are either in the plaintiffs' possession or the plaintiffs knew of when bringing suit, or matters of which judicial notice may be taken. See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002); see also Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993); Marcus v. Frome, 329 F.Supp.2d 464, 468 (S.D.N.Y. 2004); VTech Holdings Ltd. v. Lucent Techs., Inc., 172 F.Supp.2d 435, 437 (S.D.N.Y. 2001).B.
Rackwitz alleges that the plaintiff cannot maintain an independent claim against him. Rackwitz argues that, under both German and New York law, he cannot be held liable because the plaintiff has not made a sufficient showing to pierce the corporate veil of Marco-Domo.
This argument is without merit because the plaintiff alleges that Rackwitz participated in the alleged infringement of the plaintiff's work in his personal capacity. It is well-established that corporate officers can be held liable for the infringing acts of their corporations if they personally participated in the acts constituting infringement. See Luft v. Crown Publishers, Inc., 772 F.Supp. 1378 (S.D.N.Y. 1991) (holding individual who served as president and owned sixty-five percent of infringing company's stock vicariously liable for copyright infringement);Lauratex Textile Corp. v. Alton Knitting Mills Inc., 517 F.Supp. 900, 904 (S.D.N.Y. 1981); Wales Indus. Inc. v. Hasbro Bradley, Inc., 612 F.Supp. 510, 518, S.D.N.Y. 1985) ("An individual who causes a corporation defendant to infringe copyright and personally participates in the infringing activity is jointly and severally liable with the corporation for the infringement."); H.M. Kolbe Co. v. Shaff, 240 F.Supp. 588, 589-90 (S.D.N.Y.), aff'd, 352 F.2d 285 (2d Cir. 1965); see also Ez-Tixz, Inc. v. Hit-Tix, Inc., 919 F.Supp. 728, 732 (S.D.N.Y. 1996).
The Amended Complaint repeatedly alleges that Rackwitz personally participated in the alleged copyright infringement. The Amended Complaint alleges that Rackwitz, the sole shareholder and officer of Marco-Domo, provided Henri Studio with the means to produce the infringing work through his personal connection to and control over Siam Handicraft. (Amd. Compl., ¶¶ 17-22, 57-60.) The complaint also alleges that Rackwitz received a commission on Henri Studio's sales of the allegedly infringing work in the United States in exchange for facilitating the manufacture of the infringing works. (Id., ¶¶ 57-58.) Moreover, the complaint alleges that Rackwitz provided Henri Studio with the means to distribute the allegedly infringing work by providing Henri Studio with Marco-Domo's product catalogue. (Id., ¶ 55.) Taking all allegations in the complaint as true and drawing all inferences in favor of the plaintiff, the plaintiff could prove a set of facts that would entitle her to a claim against Rackwitz individually. The motion to dismiss based on a failure to state a claim is therefore denied.
CONCLUSION
For the reasons explained above, the motion to dismiss for lack of personal jurisdiction by defendants Rackwitz and Marco-Domo is denied without prejudice to renewal after a sixty-day period of discovery limited to the issue of personal jurisdiction over the Frankfurt defendants. Rackwitz's motion to dismiss for failure to state a claim is denied.