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noting that the Copyright Act has a “three-year statute of limitations”
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20-cv-2552 (ENV) (RML)
2021-08-15
MORNINGSTAR FILMS, LLC and Grandmaster Jhong Ukh Kim, Plaintiffs, v. Julius R. NASSO, J.R. Nasso Productions, LLC, Darc Film, LLC, Phillip Goldfine, Industry Releasing, Inc. and Hollywood Media Bridge, LLC, Defendants.
Francelina Maria Perdomo, Kyle George Kunst, Gallet Dreyer & Berkey, LLP, New York, NY, Gary Robert DeFilippo, Law Offices of Gary R. Defilippo, PC, Staten Island, NY, for Plaintiffs. Robert J. Hantman, Hantman & Associates, New York, NY, for Defendants J.R. Nasso Productions, LLC, Darc Film, LLC, Phillip Goldfine, Industry Releasing, Inc., Hollywood Media Bridge, LLC.
Francelina Maria Perdomo, Kyle George Kunst, Gallet Dreyer & Berkey, LLP, New York, NY, Gary Robert DeFilippo, Law Offices of Gary R. Defilippo, PC, Staten Island, NY, for Plaintiffs.
Robert J. Hantman, Hantman & Associates, New York, NY, for Defendants J.R. Nasso Productions, LLC, Darc Film, LLC, Phillip Goldfine, Industry Releasing, Inc., Hollywood Media Bridge, LLC.
MEMORANDUM & ORDER
VITALIANO, D.J.
Plaintiffs Jhong Ukh Kim and Morningstar Films, LLC bring this copyright infringement action against Julius R. Nasso, J.R. Nasso Productions, LLC, Darc Film, LLC, Phillip Goldfine, Industry Releasing, Inc. and Hollywood Media Bridge, LLC. Defendants now move to dismiss pursuant to Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure and, in the alternative, request that the Court abstain from hearing the case. For the reasons set forth below, defendants’ motion is granted in part and denied in part.
The facts are drawn from the complaint and taken as true, with all reasonable inferences drawn in plaintiffs’ favor. Vietnam Ass'n for Victims of Agent Orange v. Dow Chem. Co. , 517 F.3d 104, 115 (2d Cir. 2008). As to the exhibits submitted with the parties’ briefing, the Court declines to convert the instant motion to one for summary judgment, so in resolving the 12(b)(6) motion may consider only "statements or documents incorporated by reference, and documents on which the complaint heavily relies," and matters of which judicial notice may be taken. Singh v. Wells , 445 F. App'x 373, 375 (2d Cir. 2011) ; see also Palin v. New York Times Co. , 940 F.3d 804, 811 (2d Cir. 2019) (courts may consider documents "integral" to the complaint, such as "a contract, agreement, or other document essential to the litigation"). The Court will not consider the parties’ affidavits or other documents outside the four corners of the complaint, such as the parties’ text messages and emails, except to the extent they bear on the matter of personal jurisdiction. See CutCo Indus., Inc. v. Naughton , 806 F.2d 361, 364 (2d Cir. 1986) ; Red Fort Cap., Inc. v. Guardhouse Prods. LLC , 397 F. Supp. 3d 456, 476 (S.D.N.Y. 2019) ("[I]t is axiomatic that the Complaint cannot be amended by the briefs in opposition to a motion to dismiss.") (internal citation and quotation marks omitted); Dkts. 10-6, 10-7, 10-9, 14-2. The Court takes judicial notice of items docketed in the Richmond County Supreme Court action and the corporate registration documents filed with the California Secretary of State, which are matters of public record whose accuracy is undisputed. See, e.g. , Dkts. 10-3, 10-8, 13-3–13-9.
This case arises from disputes over the distribution of the movie entitled "Darc ". Interpersonal relationships among many of the parties, apparently, long antedated its production. Jhong Ukh Kim, for example, had known Julius R. Nasso, even more prominent as a film producer, for decades when, in 2014, Nasso approached Kim seeking his participation in the production of Darc. Compl., Dkt. 1, ¶ 21. Nasso had been given the plot and characters for the film from actor Tony Schiena, who asked Nasso to get involved as a producer. Id. ¶ 28. Nasso, in turn, asked Kim to help finance and act in the movie. Id. A personage in his own right, Kim is a karate Grand Master, having earned one of only three ninth-degree black belts in the world, and has trained thousands of students and won various awards for his work. Id. ¶¶ 21–25. Nasso also asked Kim's three sons, who were also trained in karate, to participate. Id.
Phillip Goldfine, another long-time friend of Nasso, controlled a web of motion picture making companies, including 5G Productions, Inc., Industry Releasing, Inc. and Hollywood Media Bridge, LLC. Id. ¶ 29. Over the years, Nasso and Goldfine had collaborated on several cinema projects. Id. ¶ 30. While Kim and Nasso were on a trip to Los Angeles in November 2014, Nasso introduced Kim to Goldfine. Id. ¶ 29. At some point thereafter, Goldfine became involved in the production of Darc. Id.
Venturing on, in December 2014, Kim and Nasso created Morningstar, LLC to develop and produce Darc. Id. ¶ 32. It was agreed by the venturers that Morningstar would become the exclusive owner of all intellectual property related to Darc , including its copyrights. Id. ¶ 33. It was also agreed that no contract or agreement purporting to bind Morningstar would be valid unless it was executed by all of Morningstar's managers: Kim, Nasso and Schiena. Id. ¶¶ 32, 34. Although Nasso would, in February 2016, assign his Morningstar membership units to Darc Film, LLC, a Nevada entity of which he is the sole manager, this transaction did not transfer ownership of Darc ’s copyrights. Id. ¶¶ 35–36.
Production of the movie would prove more than just a dream. It came to fruition in Vancouver, Canada, beginning in early 2015 and running through February 2018. Id. ¶¶ 37–38. The U.S. copyright for Darc was registered on February 20, 2018 in Morningstar's name, receiving registration number PAu003910215. Id. ¶ 38.
Looking ahead to the film's release, and, apparently, on his own, Kim had, in or around October 2017, retained the services of Elsa Ramo, a California-based attorney with experience negotiating and finalizing agency agreements to distribute films. Id. ¶ 39. At that time, Ramo's firm began negotiating an agency agreement with Goldfine's 5G Productions, Kim says, on behalf of Morningstar, which, if consummated, would have allowed 5G Productions to market and distribute Darc. Id. ¶ 40. The negotiations between 5G Productions, Nasso and Kim continued through March 2018. Id.
Unbeknownst to Kim, plaintiffs charge, Nasso had already struck an agreement on behalf of Morningstar with Goldfine for Goldfine to distribute Darc through another company of his, Industry Releasing. Id. ¶ 42; Nasso Aff., Dkt. 10-4, at Exs. E–F (providing the agreement). That agency agreement was entered into on October 30, 2017. Compl. ¶ 43. Although a draft version contained a signature line for Kim, the final agreement contained only signature lines for Nasso and Goldfine, on behalf of their respective corporate entities. Id. ¶¶ 44, 46. The agency agreement signed by Nasso with Industry Releasing makes clear that the distribution rights for Darc that are the object of the agreement are the distribution rights owned by Morningstar. Id. ¶¶ 43, 46. There was no indication in the executed agreement, however, that either Kim or Schiena had consented, much less had done so in writing as, plaintiffs claim, is required by the print venture agreement. See id. ¶¶ 32, 34, 44, 46; Nasso Aff. at Exs. E–F.
The proposed agency agreement and distribution agreement are incorporated by reference in and are integral to the complaint. Compl. ¶¶ 43–47. As such, they are properly considered on this motion.
Goldfine's distribution company moved swiftly. Without Kim's knowledge and consent, plaintiffs complain, Goldfine and Industry Releasing entered into distribution agreements with Amazon Prime, which made Darc available for rent or purchase in the United States, and Netflix, which began streaming Darc on May 1, 2018 in the United States, Germany, France, Italy and the Netherlands. Id. ¶¶ 47–48; Dkt. 10-5.
Going on offense first, on June 6, 2018, Nasso filed a lawsuit against Kim and his wife in Richmond County Supreme Court. See id. ¶ 49; State Compl., Dkt. 13-3. Nasso alleged that Kim had failed to take the necessary steps to distribute the film, and moved for an order requiring Kim to sign the agency agreement with Industry Releasing. Compl. ¶¶ 50–51. The motion was denied. Id. ¶ 51. After Nasso filed the state action, James Bruce, the director of finance for Industry Releasing and Hollywood Media Bridge, wrote to Nasso directing him to cease distribution of Darc until Kim had signed an agreement. Id. ¶ 54. Goldfine was copied on the email. Id. Undeterred, on September 25, 2018, Goldfine and Industry Releasing recorded a lien on Darc ’s copyright chain of title and a mortgage on Darc , which were later assigned to another entity. Id. ¶¶ 55–57, 60.
Notwithstanding the shots fired during the legal wrangling, Goldfine and Hollywood Media Bridge continue to distribute Darc. Id. ¶ 58. Netflix and Amazon continue to stream Darc in the United States. Id. Kim and Morningstar have not received any funds or royalties relating to the film. Id. ¶ 59. While continuing to defend Nasso's action against him in state court, Kim, along with Morningstar, filed the instant action on June 8, 2020, bringing one claim of copyright infringement related to Darc's distribution. Id. ¶¶ 61–77; Dkt. 10-3.
Discussion
I. Personal Jurisdiction
Three of the six defendants—Goldfine, Industry Releasing and Hollywood Media Bridge (the "California defendants")—challenge personal jurisdiction, moving to dismiss the case against them under Federal Rule of Civil Procedure 12(b)(2). See Defs.’ Mem., Dkt. 10-11, at 8–10. Jurisdictional challenges to a court's authority over a defendant or its power to entertain the subject matter of the lawsuit at all take priority over motions to dismiss sought on other grounds. They must be resolved by the court before moving on to any substantive dismissal motion. See Polera v. Bd. of Educ. of Newburgh Enlarged City Sch. Dist. , 288 F.3d 478, 481 (2d Cir. 2002) ; Arrowsmith v. United Press Int'l , 320 F.2d 219, 221 (2d Cir. 1963). On such questions, the plaintiff bears the burden to establish a court's personal jurisdiction over all defendants. See Troma Entm't, Inc. v. Centennial Pictures Inc. , 729 F.3d 215, 217 (2d Cir. 2013). To defeat a motion contesting the existence of in personam jurisdiction, a plaintiff need only make a prima facie showing of jurisdiction, through legally sufficient allegations of jurisdictional facts. See id. ; Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A. , 722 F.3d 81, 84 (2d Cir. 2013). When considering a motion to dismiss for lack of personal jurisdiction, the district court may rely on pleadings and affidavits submitted by plaintiffs or conduct an evidentiary hearing. See CutCo Indus., Inc. v. Naughton , 806 F.2d 361, 364 (2d Cir. 1986) ; Henkin v. Gibraltar Priv. Bank & Tr. Co. , No. 16-CV-5452 (LDW), 2018 WL 557866, at *2 (E.D.N.Y. Jan. 22, 2018) (quoting Dorchester , 722 F.3d at 86 ). "[T]he showing a plaintiff must make to defeat a defendant's claim that the court lacks personal jurisdiction over it ‘varies depending on the procedural posture of the litigation.’ " Dorchester , 722 F.3d at 84 (quoting Ball v. Metallurgie Hoboken-Overpelt, S.A. , 902 F.2d 194, 197 (2d Cir. 1990) ). Although "[e]ventually personal jurisdiction must be established by a preponderance of the evidence, either at an evidentiary hearing or at trial," "where the issue is addressed on affidavits, all allegations are construed in the light most favorable to the plaintiff and doubts are resolved in the plaintiff's favor, notwithstanding a controverting presentation by the moving party." A.I. Trade Fin., Inc. v. Petra Bank , 989 F.2d 76, 79–80 (2d Cir. 1993).
To determine whether a federal district court has personal jurisdiction over an out-of-state defendant in a federal question case, the court engages in a two-step analysis. See Best Van Lines, Inc. v. Walker , 490 F.3d 239, 243–44 (2d Cir. 2007) ; Sunward Elecs., Inc. v. McDonald , 362 F.3d 17, 22, 24 (2d Cir. 2004). When, as here, a plaintiff eschews any claim that general jurisdiction exists over the contesting defendant, the district court first considers whether the long arm statute of New York, as the forum state, confers specific jurisdiction over defendants, then confirms that this exercise of jurisdiction comports with federal due process protections. See Best Van Lines, Inc. , 490 F.3d at 244 ; Sunward Elecs., Inc. , 362 F.3d at 22, 24 ; N.Y. C.P.L.R. § 302. New York's long arm statute, as relevant here, allows courts to exercise personal jurisdiction over an out-of-state defendant who commits a tortious act outside the state if the defendant "expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce." N.Y. C.P.L.R. § 302(a)(3)(ii). Instructively, the court in Royalty Network v. Dishant.com, LLC broke down this provision into four factors: (1) tortious activity out of state, (2) causing injury in New York, (3) that was reasonably foreseeable to the defendants, (4) who derived substantial revenue from interstate commerce. 638 F. Supp. 2d 410, 423 (S.D.N.Y. 2009).
The California defendants also argue that this Court lacks general jurisdiction over them. See Defs.’ Mem. at 9 (citing Daimler AG v. Bauman , 571 U.S. 117, 122, 134 S. Ct. 746, 751, 187 L. Ed. 2d 624 (2014) ; N.Y. C.P.L.R. § 301(a)(1) ). While they are correct, they answer a question that was not asked. General jurisdiction is plainly inapplicable here; only specific jurisdiction need be present since plaintiffs argue the action arises out of defendants’ contacts with New York.
Since this is a copyright infringement case, heading up plaintiffs’ effort to make a prima facie showing of jurisdiction are the facts of the alleged tortious conduct committed by defendants, that is, their infringement of Morningstar's distribution rights to Darc. Specifically, Kim relies on his plausibly pleaded allegations that defendants’ distribution of Darc without their permission constituted copyright infringement. See Compl. ¶¶ 61–77; Pls.’ Opp'n Mem., Dkt. 13, at 17–25. Defendants, perhaps surprisingly, do not deny committing the complained-of acts, instead raising various affirmative defenses. See Defs.’ Mem. at 8–10, 14–21. Regardless, the court's analysis on this prong is "distinct from an inquiry into the ultimate liability on the merits," such that "plaintiff need not actually prove that defendant committed a tort but rather need only state a colorable cause of action." Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez , 305 F.3d 120, 125–27 (2d Cir. 2002). In any event, copyright infringement constitutes tortious activity, and plaintiffs state a colorable claim for it, satisfying the first factor. Royalty Network Inc. , 638 F. Supp. 2d at 423.
The nature of copyright infringement, especially when committed via internet streaming services, has created complexities for courts assessing the second factor: whether the infringement caused injury in New York. As a general matter, under C.P.L.R. § 302(a)(3), personal jurisdiction is not established simply because the injured plaintiffs are domiciled in New York. Fantis Foods, Inc. v. Standard Importing Co. , 49 N.Y.2d 317, 326, 425 N.Y.S.2d 783, 402 N.E.2d 122 (1980). Additionally, suffering "mere economic injury within the state" is "insufficient, alone, to establish a direct injury in New York." Troma Entm't, Inc. , 729 F.3d at 218 (internal citations and quotation marks omitted). As with most things, the digital age has brought a challenge to the spatial reality that had been bedrock to determining the constitutional reach of a state's jurisdiction under its long arm statute. In "copyright infringement cases involving the uploading of copyrighted printed literary work onto the Internet"—the New York Court of Appeals has held that "the situs of injury for purposes of determining long-arm jurisdiction over a non-resident defendant under New York law" is "the residence or location of the principal place of business of the copyright holder," and not "the location of the infringing action." Penguin Grp. (USA) Inc. v. Am. Buddha ("Penguin II "), 16 N.Y.3d 295, 301–02, 921 N.Y.S.2d 171, 946 N.E.2d 159 (2011). Yet courts have read Penguin II , which answered a question certified by the Second Circuit, very narrowly, as controlling only in digital piracy cases. See, e.g. , Troma Entm't, Inc. , 729 F.3d at 219–20 ; PharmacyChecker.com, LLC v. Nat'l Ass'n of Boards of Pharmacy , No. 19-CV-7577 (KMK), 530 F.Supp.3d 301, 323 n.8 (S.D.N.Y. Mar. 30, 2021) ; Adwar Casting Co., Ltd. v. Star Gems Inc. , 342 F. Supp. 3d 297, 304–05 (E.D.N.Y. 2018) ; Freeplay Music, LLC v. Dave Arbogast Buick-GMC, Inc. , No. 16-CV-442 (NRB), 2017 WL 449913, at *5–7 (S.D.N.Y. Jan. 18, 2017) ; Verragio, Ltd. v. Malakan Dimond Co. , No. 16-CV-4634 (CM), 2016 WL 6561384, at *3–4 (S.D.N.Y. Oct. 20, 2016).
At any rate, the seminal decision interpreting Penguin II is the Second Circuit's in Troma , a case brought by the New York-based production company Troma Entertainment, Inc., which owned the distribution rights to two films it had produced. See Troma Entm't, Inc. , 729 F.3d at 216. Defendants entered into a distribution agreement in Germany without Troma's knowledge. Id. at 216–17. Defendants falsely represented to the German distribution company that they owned the rights to the films, purchased German-language copies of them, delivered them to the German company and secretly pocketed the proceeds. Id. at 217. The scheme was allegedly concocted in California, and none of the alleged misconduct occurred in New York. Id. at 220. Troma argued that since its principal place of business was in New York and it owned the copyrights, New York courts had personal jurisdiction over the non-domiciliary defendants under Penguin II . The Second Circuit found Penguin II inapplicable because Troma's case did not involve digital piracy. Instead, it resembled a traditional commercial tort case, in which the situs of injury is the place where plaintiff lost business. Id. Accordingly, plaintiffs could not rely on their domicile and had to show "a non-speculative and direct injury to person or property in New York that goes beyond the simple economic losses that its New York-based business suffered." Id. Yet Troma alleged only "generalized harm (i.e., statutory damages as a result of [defendants’] willful infringement) to its exclusive distribution right." Id. This was insufficient. Although the court indicated that injury to "the continuing value of one or more of a copyright holder's bundle of rights" could suffice, there, it was "entirely implausible that the infringement alleged by Troma—discrete, geographically circumscribed theft of the opportunity to license distribution of copyrighted works—would cause such an injury." Id. Because Troma alleged only that the out-of-state defendants caused it economic loss in the state and not direct injury to its intellectual property rights, New York courts lacked personal jurisdiction over defendants. Id.
The facts in the instant case bear a striking similarity: a New York-based production company with ownership of a copyright, Morningstar, was cut out of a distribution deal with California-based parties regarding a film they had produced in Canada. No digital piracy occurred, so Penguin II is not controlling and plaintiffs’ New York domicile does not establish jurisdiction. See Freeplay Music, LLC , 2017 WL 449913, at *6. To support the exercise of personal jurisdiction over the California defendants, then, plaintiffs must "allege facts demonstrating a non-speculative and direct New York-based injury to [their] intellectual property rights," harming their "continuing value." Troma Entm't, Inc. , 729 F.3d at 220. Yet Morningstar and Kim allege only business losses and make conclusory assertions about their intellectual property rights, of the sort rejected in Troma and its progeny. As to business losses, plaintiffs allege they have not received royalties from Darc and have faced "substantial damages to its business" such as "loss of income and profits." Compl. ¶¶ 59, 76. Yet Second Circuit precedent makes clear that "the assertion of mere economic injury within the state" does not create jurisdiction, regardless of whether that economic harm stems from copyright infringement. Troma Entm't, Inc. , 729 F.3d at 218. For example, in a case brought by a New York-based copyright holder against an Ohio company that used plaintiff's songs in online advertisements without authorization, the court applied Troma and held that plaintiff's alleged "loss of ... a potential customer and the corresponding loss of licensing revenue" was mere economic loss insufficient to confer jurisdiction. Freeplay Music, LLC , 2017 WL 449913, at *6. Another court reached the same conclusion in a case where a New York-based license holder claimed it lost sales when the out-of-state defendant infringed on its jewelry design copyright. Verragio, Ltd. , 2016 WL 6561384, at *3. Plaintiffs’ allegations that the California defendants’ distribution deals caused them lost royalties and other profits in New York are no different; they do not create specific jurisdiction under the long arm statute.
Plaintiffs also allege they have faced the "dilution of the value of [their] rights." Compl. ¶ 76. Although Troma did not rule out the possibility that a copyright holder could establish jurisdiction by adequately alleging continuing harm to the value of its unique bundle of rights, plaintiffs’ allegation is conclusory and of the sort readily rejected by courts applying Troma. Cf. Troma Entm't, Inc. , 729 F.3d at 220. For example, in a case where the copyright holder alleged that the out-of-state defendant damaged its copyrights by posting unauthorized images online, the court found that "[t]he conclusory allegations as to the loss of [plaintiff's] rights as a copyright holder are similar to the allegations rejected by the Troma court" and held there was no personal jurisdiction. Adwar Casting Co. , 342 F. Supp. 3d at 304 ; see also Freeplay Music, LLC , 2017 WL 449913, at *6 (finding no jurisdiction where plaintiff "merely repeats conclusory allegations that its rights as a copyright holder have been violated"); Freeplay Music, LLC v. Nian Infosolutions Priv. Ltd. , No. 16-CV-5883 (JGK) (RWL), 2018 WL 3639929, at *12 (S.D.N.Y. July 10, 2018), report and recommendation adopted , 2018 WL 3632524 (July 31, 2018) (same, where plaintiff "seeks only statutory damages for generalized harm and ... simply has not pled (or shown in its submissions) the requisite specific injury to its unique bundle of copyright rights"). To establish personal jurisdiction, plaintiffs would have to allege, in a non-conclusory fashion, that the California defendants caused harm to their unique bundle of rights as copyright holders, such as by " ‘diminish[ing] the incentive to publish or write,’ or engender[ing] ‘market confusion ....’ " Troma Ent., Inc. , 729 F.3d at 219 (quoting Penguin II , 16 N.Y.3d at 305, 921 N.Y.S.2d 171, 946 N.E.2d 159 ).
Consistent with the pleadings, the situs of plaintiffs’ injury at the hands of the California defendants could be California, since it is where plaintiffs seem to assert that the California defendants "hatched their scheme" to enter into the unauthorized agreements and "put it into effect" by signing them, but that is of no matter. For plaintiffs have not, as they must, made such a connection to New York. Troma Entm't, Inc. , 729 F.3d at 220 ; see also Compl. ¶¶ 42–47; Nasso Aff. at Exs. E–F (listing Industry Releasing as California-based distributor of Darc ); Dkt. 10-5 at 2–3 (distribution agreement listing Industry Releasing as a California company and Netflix as having a California address). Plaintiffs’ failure to plead direct injury to their intellectual property rights in New York is, therefore, fatal to their efforts to establish personal jurisdiction over the California defendants pursuant to C.P.L.R. § 302(a)(3)(ii). See Troma Entm't, Inc. , 729 F.3d at 220 ; Royalty Network Inc. , 638 F. Supp. 2d at 423. Accordingly, defendants’ 12(b)(2) motion to dismiss for lack of personal jurisdiction over Goldfine, Industry Releasing and Hollywood Media Bridge is granted, and the claims against them are dismissed without prejudice.
II. Colorado River Abstention
In an effort to short-circuit litigation beyond that previously brought by Nasso and Darc Films LLC, defendants seek dismissal under the doctrine of Colorado River abstention. See Defs.’ Mem. at 10–14. In certain exceptional circumstances, a federal court may abstain from exercising jurisdiction when parallel state-court litigation may fully resolve the dispute and conserve judicial resources. Colo. River Water Conservation Dist. v. United States , 424 U.S. 800, 817, 96 S. Ct. 1236, 1246, 47 L. Ed. 2d 483 (1976). Guided by Colorado River , courts typically undertake a six-factor analysis, heavily weighted in favor of exercising jurisdiction. See FDIC v. Four Star Holding Co. , 178 F.3d 97, 101 (2d Cir. 1999). As plaintiffs note, however, the calculus changes in cases involving claims over which the federal courts possess exclusive jurisdiction. See Pls.’ Opp'n Mem. at 8–12. In such cases, the absence of "broad state court jurisdiction that would enable the state court to dispose of the entire matter, including the issues before the federal court," renders abstention "clearly improper." Andrea Theatres, Inc. v. Theatre Confections, Inc. , 787 F.2d 59, 62 (2d Cir. 1986) ; see also Colo. River Water Conservation Dist. , 424 U.S. at 817, 96 S.Ct. 1236 (describing the "comprehensive disposition of litigation" as a rationale for abstention).
Nasso filed a complaint against Kim and his wife in Richmond County Supreme Court on June 6, 2018, one month after the film's release. See Compl. ¶ 49; State Compl. In that action, Nasso seeks damages for breach of contract and breach of fiduciary duties and injunctive relief ordering Kim to perform his duties to Morningstar by helping promote and distribute Darc. See Defs.’ Mem. at 2; Compl. ¶ 50; State Compl. ¶¶ 63–84. While the state and federal cases arise out of the same facts and between some of the same parties, Colorado River abstention does not apply because the instant case, involving a single claim of copyright infringement, is one over which the federal courts have exclusive jurisdiction. See 28 U.S.C § 1338(a) ; Bassett v. Mashantucket Pequot Tribe , 204 F.3d 343, 347 (2d Cir. 2000) (holding federal courts have exclusive jurisdiction over copyright infringement claims, including those arising from alleged contractual breach); Philogene v. Duckett , No. 17-CV-7224 (WHP), 2018 WL 3946447, at *3 (S.D.N.Y. Aug. 16, 2018) (rejecting defendants’ request to abstain in copyright infringement case). In accord with this solid precedent, therefore, defendants’ invitation to abstain from hearing this case is declined.
III. Failure to State a Claim
The remaining defendants move to dismiss for failure to state a claim of copyright infringement. See Defs.’ Mem. at 14–18. To overcome such a motion, made pursuant to Rule 12(b)(6), the complaint "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S. Ct. 1937, 1940, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929 (2007) ). This "plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. It is black letter, of course, that in deciding such matters, the district court must accept as true all factual statements alleged in the complaint and draw all reasonable inferences in favor of the nonmoving party. Vietnam Ass'n for Victims of Agent Orange v. Dow Chem. Co. , 517 F.3d 104, 115 (2d Cir. 2008). It may, in reaching its decision, consider documents that are attached to, integral to or referenced in the complaint. See Palin v. New York Times Co. , 940 F.3d 804, 811 (2d Cir. 2019) ; Chambers v. Time Warner, Inc. , 282 F.3d 147, 152–53 (2d Cir. 2002).
In assessing the plausibility of a copyright infringement claim, the motion court must be satisfied that the complaint sufficiently alleges that (1) plaintiffs own a valid copyright and (2) defendants copied original elements of the work without authorization or violated another of the exclusive rights afforded copyright owners pursuant to the Copyright Act. See Kwan v. Schlein , 634 F.3d 224, 229 (2d Cir. 2011) ; UMG Recording, Inc. v. Escape Media Grp., Inc. , No. 11-CV-8407 (TPG), 2014 WL 5089743, at *19 (S.D.N.Y. Sept. 29, 2014). It is undisputed that Morningstar is the sole owner of a valid, registered copyright to Darc. Compl. ¶¶ 1, 38, 64; Defs.’ Mem. at 7. Plaintiffs claim defendants knowingly infringed on that copyright by copying, publishing, displaying, exporting and distributing Darc to Netflix and Amazon in the United States and abroad without Kim's consent, which was required to enter into distribution agreements on behalf of Morningstar. Compl. ¶¶ 65–67. Plaintiffs also claim defendants infringed by providing copies of Darc to third parties. Id. ¶ 68; see also 17 U.S.C. § 106(1) (right to reproduce copies); id. § 106(3) (right to distribute copies).
Plainly, these allegations suffice to state a prima facie claim of copyright infringement as a general matter. The question, however, is whether plaintiffs have stated a claim against each defendant individually, as they must because dismissal will be determined as to each individually. See Curry v. Comm'n on Hum. Rts. , No. 18-CV-4221 (BMC), 2018 WL 11219906, at *1 (E.D.N.Y. Aug. 2, 2018) ("[P]laintiff must provide a short, plain statement of claim against each defendant so that they have adequate notice of the claims against them."); Ferrara v. Maturo , No. 17-CV-0360 (JCH), 2017 WL 4273291, at *4 (D. Conn. Sept. 26, 2017) (examining whether plaintiff "has sufficiently stated a claim for relief against each defendant directly and individually").
A. Nasso
The first named defendant, Nasso argues that plaintiffs have failed to state a claim against him individually because he acted only on behalf of Morningstar and is protected by its corporate form, while plaintiffs counter that Nasso is directly or vicariously liable for the infringement. See Compl. ¶¶ 74–75; Defs.’ Mem. at 16.
i. Direct and Vicarious Liability
A claim of copyright infringement based on a theory of direct liability is stated if the plaintiff plausibly pleads that the alleged infringer engaged in " ‘volitional conduct’ that ‘cause[d]’ the infringement." Wolk v. Kodak Imaging Network, Inc. , 840 F. Supp. 2d 724, 742 (S.D.N.Y. 2012), aff'd sub nom. Wolk v. Photobucket.com, Inc. , 569 F. App'x 51 (2d Cir. 2014) (quoting Cartoon Network LP, LLLP v. CSC Holdings, Inc. , 536 F.3d 121, 131 (2d Cir. 2008) ). Plaintiffs allege that Nasso engaged in intentional infringement by negotiating and entering into the contracts that resulted in the unauthorized copying and distribution of Darc , rendering Nasso directly liable. Compl. ¶¶ 17–18, 42–47, 60, 65–69.
But, that is not the only path to a sufficient pleading. "[V]icarious liability for copyright infringement can be established where a corporate officer had (1) a right and ability to supervise the company's activities and (2) an obvious and direct financial interest in the exploitation of copyrighted materials by the corporate entity." J & J Sports Prods., Inc. v. Ahuachapan Corp. , 422 F. Supp. 3d 652, 659 (E.D.N.Y. 2019) (internal citation and quotation marks omitted). As a Morningstar manager, Nasso had the right and ability to supervise the company's activities. Compl. ¶¶ 3, 11, 32, 35; Nasso Aff. at Ex. A ("Morningstar Operating Agreement"). Plaintiffs state that Nasso possessed a direct financial interest in the exploitation of Darc and has profited from his infringement. Compl. ¶ 77. Specifically, he directed royalties from Darc to his companies J.R.N. Productions, B.C. and Darc Investors, LLC. Id. ¶¶ 17–18. Although plaintiffs add that they have not received records stating the amount of royalties Nasso has received from the distribution deals, Nasso undoubtedly had a financial interest in Darc ’s distribution when he committed the alleged infringement and may eventually realize economic benefits from it. Id. ¶ 59. Therefore, plaintiffs have sufficiently alleged that Nasso is directly and vicariously liable for the infringement of their copyright to stave off this challenge.
ii. Liability Waiver and Indemnification
Nasso argues that he is, nonetheless, shielded from liability by Morningstar's operating agreement. See Defs.’ Mem. at 20–21. Nasso points to the agreement's liability waiver, which states that managers are not "liable to Company or the Members for any loss or damage resulting from any mistake of fact or judgment or any act or failure to act unless the mistake, act, or failure to act is the result of fraud, gross negligence, or willful misconduct." See id. ; Morningstar Operating Agreement, art. 4.6. As plaintiffs note, however, this provision's explicit exclusion of "willful misconduct" encompasses their claim against Nasso for willful copyright infringement. See Pls.’ Opp'n Mem. at 22–23. Plaintiffs claim Nasso entered into a distribution deal without their consent despite knowing that consent was required. Compl. ¶¶ 42–47, 60, 69. Nasso cannot, therefore, rely on this provision to escape liability at the Rule 12 stage.
The Court does not evaluate the indemnification argument with respect to the California defendants, as the claims against them are dismissed due to lack of personal jurisdiction. For the same reason, it also does not address their apparent authority argument.
Nasso also cites the indemnification clause in Morningstar's operating agreement, which provides that Morningstar is to indemnify and hold Nasso harmless "[t]o the greatest extent of the law ... against any loss, cost, or expense ... including the defense of a judgment resulting from, any action brought by a Member," such as Kim. See Defs.’ Mem. at 20 (quoting Morningstar Operating Agreement, art. 8.1). Indemnification clauses such as this one likewise do not, as a matter of law, apply to willful or deliberate misbehavior. See N.Y. Limit. Liab. Co. § 420. Given that, at this point, Nasso's defense must be judged on the strength of plaintiffs’ allegations deemed true and with all inferences drawn in their favor, Nasso's contention that the Morningstar operating agreement absolves him of liability and indemnifies him against a potential damages award cannot succeed.
B. J.R. Nasso Productions
J.R. Nasso Productions moves to dismiss the claim against it, arguing plaintiffs fail to allege that it had any involvement with Darc , Morningstar or copyright infringement. Defs.’ Mem. at 7, 16. Plaintiffs’ sole allegation against J.R. Nasso Productions is that its name appeared, beside the Hollywood Media Bridge name, in the opening credits of the film, falsely indicating, they contend, that the two companies owned the copyright. Compl. ¶ 41. Defendants argue that this statement is too attenuated to implicate J.R. Nasso Productions in the alleged infringement, though they do not deny having Nasso as an owner. See Defs.’ Mem. at 16.
It is at this point that plaintiffs’ claims turn tissue-thin and the complaint founders. Their allegation that viewers seeing J.R. Nasso Productions's name in the opening credits would mistakenly view it as the copyright owner is speculative and conclusory. Many names of non-copyright owners, such as those of actors and directors, appear in film credits. More importantly, claims alleging that an entity has falsely represented itself as a copyright owner arise under the Lanham Act, not the Copyright Act, making this allegation unhelpful to plaintiffs’ bid to state a copyright infringement claim against J.R. Nasso Productions. See Waldman Pub. Corp. v. Landoll, Inc. , 43 F.3d 775, 781 (2d Cir. 1994). In fact, there are no infringement-related allegations against J.R. Nasso Productions. Indeed, an essential element of a copyright infringement claim is the allegation that a defendant had individually violated one of the copyright owner's exclusive rights, but plaintiffs do not plead facts showing J.R. Nasso Productions did so. See Kwan , 634 F.3d at 229. They do not claim, for example, that the company was involved in distributing or copying Darc , or was party to any unauthorized agreement. Its name does not appear on the allegedly unauthorized agency or distribution agreements, and plaintiffs do not allege that Nasso was acting on its behalf at any point when making those deals. See Nasso Aff. at Exs. E–F; Dkt. 10-5. Overall, plaintiffs’ sole allegation is not enough to state a copyright infringement claim against J.R. Nasso Productions and the claim against it must be dismissed.
IV. Affirmative Defenses
A. Equitable Estoppel
In their final effort to prevent the lights from going out on their motion, defendants raise a smattering of affirmative defenses, the first of which is equitable estoppel. See Defs.’ Mem. at 18–20. To prevail on an estoppel defense to a copyright claim, defendants must show that:
"(1) [P]laintiff had knowledge of defendant's infringing acts, (2) plaintiff either intended that defendant rely on his acts or omissions or acted or failed to act in such a manner that defendant had a right to believe that it was intended to rely on plaintiff's conduct, (3) the defendant was ignorant of the true facts; and (4) the defendant relied on plaintiff's conduct to its detriment."
LEGO A/S v. Best-Lock Constr. Toys, Inc. , 404 F. Supp. 3d 583, 617 (D. Conn. 2019) (quoting Dallal v. The New York Times Co. , No. 05-2924, 2006 WL 463386, at *1 (2d Cir. Feb. 17, 2006) ).
As is readily apparent from its mere stating, this inquiry is "peculiarly fact-specific" and, therefore, generally inappropriate for resolution on a motion to dismiss. Broad. Music, Inc. v. Hearst/ABC Viacom Ent. Servs. , 746 F. Supp. 320, 329–30 (S.D.N.Y. 1990). Tellingly, and fatally, none of the evidence that defendants point to in support of this defense, such as Kim's texts, emails and social media posts, is properly before the Court on this motion. See Defs.’ Mem. at 19–20; Dkts. 10-6, 10-7, 10-9. The complaint, meanwhile, clearly alleges that Kim was unaware of and did not consent to defendants’ allegedly infringing distribution deal. See Compl. ¶¶ 42–47. As such, defendants cannot prevail on this defense at this stage of the proceedings.
B. Laches
Defendants also raise the equitable defense of laches, which applies where plaintiffs have waited an unreasonably long time in filing a complaint, resulting in prejudice to defendants. See Defs.’ Reply, Dkt. 14, at 6–8; Hicks v. Leslie Feely Fine Art, LLC , No. 20-CV-1991 (ER), 2021 WL 982298, at *10 (S.D.N.Y. Mar. 16, 2021). Here, too, defendants’ timing is off. A laches defense is typically unavailable on a motion to dismiss, given its similarly fact-intensive nature. Hicks , 2021 WL 982298, at *10. Most importantly, the Supreme Court has held that defendants cannot prevail on a laches defense where plaintiffs’ claims were brought within the Copyright Act's three-year statute of limitations. Petrella v. Metro-Goldwyn-Mayer, Inc. , 572 U.S. 663, 686, 134 S. Ct. 1962, 1978, 188 L. Ed. 2d 979 (2014) ; see also LEGO A/S, 404 F. Supp. 3d at 616 (applying Petrella ). A copyright claim accrues, starting the three-year clock, "when an infringing act occurs." Petrella , 572 U.S. at 670, 134 S.Ct. 1962. The allegedly unauthorized agency agreement was entered into on October 30, 2017 and the distribution deal with Netflix in early February 2018, the Darc copyright was registered on February 20, 2018 and Netflix began distributing Darc on May 1, 2018, all within three years of the complaint's June 8, 2020 filing. See Compl. ¶¶ 38, 43, 47; Dkt. 10-5. While a laches defense in situations like this can rarely succeed as a matter of law, even at the threshold, it can fail as a matter of law. Indeed, that is the case here, where the facts are indisputable and fatal to the affirmative defense. Defendants’ laches defense fails in light of controlling Supreme Court precedent. The motion is denied and the defense is stricken.
C. Waiver
Defendants next seek dismissal based on the affirmative defense of waiver. See Defs.’ Reply at 6–8. "[A] claim of waiver requires proof of an ‘intentional relinquishment of a known right with both knowledge of its existence and an intention to relinquish it.’ " Capitol Records, Inc. v. Naxos of Am., Inc. , 372 F.3d 471, 482 (2d Cir. 2004) (quoting Airco Alloys Div., Airco Inc. v. Niagara Mohawk Power Corp. , 76 A.D.2d 68, 81, 430 N.Y.S.2d 179 (4th Dep't 1980) ). Waiver requires clear, unequivocal conduct and " ‘may not be inferred from mere silence or inaction.’ " Flo & Eddie, Inc. v. Sirius XM Radio Inc. , 80 F. Supp. 3d 535, 540 (S.D.N.Y. 2015) (quoting Bank of Am., N.A. v. 414 Midland Ave. Associates, LLC , 78 A.D.3d 746, 750, 911 N.Y.S.2d 157 (2d Dep't 2010) ). Defendants bear the burden to establish this defense. Mooney v. City of New York , 219 F.3d 123, 131 (2d Cir. 2000). Further, in copyright cases, courts "generally reject defenses predicated on a plaintiff's failure to act in the face of prior infringement." Flo & Eddie, Inc. , 80 F. Supp. 3d at 540.
As with the other grounds pegged to their affirmative defenses, and for similar reasons, defendants fall well short of their goal. For example, they baldly assert that Kim was aware of the agency and distribution agreements and supported Darc ’s distribution. Though defendants rely upon emails and text messages inadmissible at this juncture, see Defs.’ Reply at 6–8, the language within the four corners of the complaint and the other documents properly before the Court on this motion fail to show that Kim intentionally, knowingly waived any rights. The complaint does not mention any communications between the parties to this effect, nor does it state any other facts establishing that plaintiffs consented to defendants’ distribution and copying of the film. Rather, it states that defendants entered into an agency agreement without plaintiffs’ knowledge or consent, while plaintiffs were actively negotiating a different agreement for Darc ’s marketing and distribution, and have not shared any royalties with plaintiffs. Compl. ¶¶ 39–47, 59. Defendants have, therefore, failed to show that plaintiffs waived their rights to distribute Darc. They afford no basis for Rule 12 dismissal.
Conclusion
For the foregoing reasons, defendants’ 12(b)(2) motion to dismiss for lack of personal jurisdiction is granted as to Phillip Goldfine, Industry Releasing, Inc. and Hollywood Media Bridge, LLC. Defendants’ 12(b)(6) motion to dismiss for failure to state a claim is granted as to J.R. Nasso Productions, LLC and denied in all other respects. The complaint is dismissed without prejudice as to these four defendants. Leave to amend the claims against them is granted, provided that plaintiffs can do so in good faith within 30 days of the entry of this order on the docket.
So Ordered.