Opinion
No. 03 CV 2468 (RLC).
December 22, 2004
DONALDSON, CHILLIEST McDANIEL. New York, New York, Attorney for Plaintiff, XAVIER R. DONALDSON Of Counsel.
KIRKPATRICK LOCKHART LLP, New York, New York, Attorney for Defendants, EUGENE LICKER, Of Counsel.
OPINION
This diversity case is before the court on a Rule 12(b)(6), F.R. Civ. P. motion to dismiss. Defendant contends that plaintiff's state law claims, with the exemption of fraud, are preempted by the federal Copyright Act, 17 U.S.C. § 301, and generally fail as a matter of law. Defendant also seeks dismissal of plaintiff's claim for fraud under both Rule 12(b)(6), F.R. Civ. P. and Rule 9(b), F.R. Civ. P.
Factual Background
Plaintiff Calvin Stewart, a New York State resident, is a fashion designer who specializes in creating clothing and lingerie designs as well as video productions for fashion shows. Defendant, the World Wrestling Entertainment, Inc. ("WWE"), is a foreign corporation authorized to do business in the State of New York. Prior to May 2002, the WWE was known as the World Wrestling Federation Entertainment, Inc. The WWE is an integrated media and entertainment company engaged in the development, promotion and marketing of television programming, pay-per-view programming and live arena events, and the licensing and sale of branded consumer products.
Plaintiff has named both the World Wrestling Entertainment, Inc. and the World Wrestling Federation Entertainment, Inc. as defendants in this suit. Defendants seek to dismiss the World Wrestling Federation Entertainment, Inc. as a defendant from this case.
Plaintiff alleges that starting September 22, 2000, he presented defendant with new and novel lingerie design ideas and a marketing strategy for a fashion show. According to the complaint, plaintiff developed his ideas and concepts for defendant's benefit over the course of the next year through correspondence and numerous meetings with WWE representatives, both in defendant's Connecticut and New York offices. As a result of these discussions, plaintiff obtained permission to use defendant's logo to produce sample designs to be shown to the WWE's Consumer Products Division. On September 26, 2001, plaintiff presented the WWE with lingerie samples as well as a video illustrating the fashion show concept he had developed. Following the September 26, 2001 meeting, however, defendant discontinued communications with plaintiff. Nine months later, on June 29, 2002, a television program produced by the WWE entitled `WWE Divas Lingerie' aired on cable television. Plaintiff claims that the television show, which was subsequently sold nationally for profit by the WWE through DVD and VHS sales, was substantially similar to the video presented to defendant. Moreover, plaintiff alleges that the WWE began utilizing his lingerie ideas and concepts in its New York City restaurant. Plaintiff claims that defendant misappropriated his ideas and concepts and that no authorization was given nor any compensation received for their use. Plaintiff has filed this suit for breach of confidential relationship, misappropriation, unjust enrichment, conversion, breach of implied contract and fraud.
Choice of Law
As this case has contacts with two states — New York and Connecticut — we initially consider the applicable state law. When a federal court sitting in diversity faces a choice of law conflict, it may apply only one of the laws, and must choose between them according to the choice of law principles of the state in which it sits — in this instance New York. Banker v. Nighswander, Martin Mitchell, 37 F.3d 866, 871 (2d Cir. 1994) (citing Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941)). Similarly to the Connecticut choice of law rule, New York focuses on which jurisdiction has the greater interest in a dispute. Compare Travelers Indem. Co. v. Levy, 195 A.D.2d 35, 38, 606 N.Y.S.2d 167 (1st Dep't. 1993), with O'Connor v. O'Connor, 201 Conn. 632, 519 A.2d 13 (Conn. 1986) ("the New York approach to choice of law, which evaluates and balances the contacts of jurisdictions involved in a choice of law controversy in order to apply the law of the jurisdiction that is the "center of gravity" of the controversy is commonly viewed as having merged with [Connecticut's] Restatement Second approach.") (citations omitted). Thus, "the choice of law for tort causes of action is based upon the place which has the most significant contacts with the matter in dispute, thereby giving the place with the most interest in the problem paramount control over the legal issues arising in the case." Elgin Sweeper Co. v. Melson, Inc., 884 F.Supp. 641, 650 n. 12 (N.D.N.Y. 1995). Connecticut's interest in the dispute stems from the fact that defendant is a Connecticut corporation and that some of the meetings took place in its Connecticut offices. We believe however, that New York's interests in the dispute outweigh these contacts. Both parties have significant ties to New York: plaintiff is a New York resident and defendant is authorized to do business in the state and has both offices and stores in New York. Many of the meetings between the two parties took place in defendant's New York offices, defendant allegedly sold plaintiff's lingerie concept in its New York restaurant and defendant allegedly conducted fashion shows in New York utilizing plaintiff's ideas. Moreover, whatever harm incurred to plaintiff due to the alleged misappropriation of his ideas and concepts was felt in New York. Thus taking into account both Connecticut's and New York's interests in the present case, the court holds that New York's contacts with the dispute predominate and that New York law shall govern.
Legal Standard
When deciding a Rule 12(b)(6), F.R. Civ. P. motion to dismiss, the Court must take all allegations in the complaint as true and draw all reasonable inferences in favor of plaintiff. Ortiz v. Cornetta, 867 F.2d 146, 149 (2d Cir. 1989). A complaint should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Nevertheless, the complaint must contain allegations concerning each of the material elements necessary to sustain recovery under a viable legal theory. AIM Intern. Trading, L.L.C. v. Valcucine S.p.A., 2003 WL 21203503, at *3 (S.D.N.Y.) (Leisure, J.).
The court's consideration of a motion to dismiss is limited to the factual allegations in the complaint, documents incorporated by reference in the complaint, matters of which judicial notice may be taken, and documents either in plaintiff's possession or of which plaintiff had knowledge and relied on in bringing suit. Brass v. Am. Film Tech., Inc., 987 F.2d 142, 150 (2d Cir. 1993). When a party "introduces matter extraneous to the pleadings, the Court must convert the motion to dismiss into a motion for summary judgment or exclude the extraneous documents from consideration." AIM Int'l Trading, L.L.C., 2003 WL 21203503, at *3.
For purposes of ruling on the present motion, the court incorporates defendant's February 9, 2001 letter — granting plaintiff permission to obtain and design fabric bearing the defendant's logo — into the complaint. Plaintiff has both cited and relied upon this letter in his complaint and the court may properly take it into consideration.
Discussion
Copyright Preemption
Defendant contends that, with the exception of fraud, the Copyright Act preempts all of plaintiff's state law claims. The Copyright Act provides in pertinent part:
[A]ll legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright . . . are governed exclusively by this title. [N]o person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.17 U.S.C. § 301(a). Pursuant to this statute, federal copyright law preempts a state law claim when the following two conditions are satisfied. First, the subject matter of the work in which the state law claims are asserted must fall within the subject matter of federal copyright law, as defined in 17 U.S.C. §§ 102 and 103. Second, the rights asserted under state law must be equivalent to the rights protected by the Copyright Act. See Harper Row Publishers, Inc. v. Nation Enterprises, 723 F.2d 195, 200 (2d Cir. 1983), rev'd on other grounds, 471 U.S. 539, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985); Universal City Studios, Inc. v. T-Shirt Gallery, 634 F.Supp. 1468, 1475 (S.D.N.Y. 1986) (Sprizzo, J.).
Copyright protection subsists in "original works of authorship fixed in any tangible medium of expression." 17 U.S.C. § 102(a). Works of authorship include literary works, musical works, dramatic works, pantomimes and choreographic works, pictorial, graphic and sculptural works, motion pictures and other audiovisual works, sounds recordings and architectural works. Id.
(1) Subject Matter of Plaintiff's State Law Claims
Plaintiff argues that the misappropriation of an idea, as distinguished from its tangible expression, does not constitute subject matter covered by federal copyright law. Plaintiff maintains that it was his ideas and concepts which were stolen and thus that his claims are exempt from preemption. Although plaintiff is correct in asserting that ideas are generally not given copyright protection, it is well established that the scope of preemption under § 301 is not the same as the scope of copyright protection and that the former is in fact broader than the latter. Katz Dochermann Epstein, Inc. v. Home Box Office, 1999 WL 179603, at *2 (S.D.N.Y.) (Griesa, J.). Courts have made clear, for instance, that although the Copyright Act does not protect mere ideas alone, the scope of § 301 preemption includes state law claims with respect to uncopyrightable as well as copyrightable material, precisely because if the law was otherwise, "states would be free to expand the perimeters of copyright protection to their own liking, on the theory that preemption would be no bar to state protection of materials not meeting federal statutory standards." Harper Row Publishers, Inc., 723 F.2d at 200.
On the facts alleged in the present case, the ideas at issue cannot be meaningfully separated from their tangible expression for preemption purposes. Plaintiff's complaint makes clear that the majority of his claims do not arise solely from the ideas and concepts orally conveyed to the WWE, but also depend substantially upon the misappropriation of the video and clothing samples — the tangible expression of those ideas — submitted to defendant. See Katz Dochermann Epstein, Inc., 1999 WL 179603, at *3 (finding that the idea of an ad campaign could not be meaningfully separated from the literary and musical work expressing that idea). Indeed, Stewart relies heavily on the alleged similarities between his video and lingerie samples and defendant's televised program and its WWE-marketed lingerie items. Given both the broader scope of § 301 and the fact that the video and lingerie samples fall within the subject matter of the Copyright Act for preemption purposes, we hold that, with the exception of plaintiff's breach of implied contract claim for the reasons recited below, the subject matter of the work in which the state law claims are asserted fall within the subject matter of copyright law.
The video is clearly an "audiovisual work" as defined by § 101 of the Copyright Act and this court has indicated that clothing designs, though generally not copyrightable, nevertheless do fall within the subject matter of copyright for preemption purposes. Morris v. Buffalo Chips Bootery, Inc., 160 F.Supp.2d 718, 721 (S.D.N.Y. 2000) (Rakoff, J.).
(2) Equivalency of State Protected Rights to Federal Copyright Law Protected Rights
The second prerequisite for preemption is that the rights asserted under state law be equivalent to the rights protected by copyright law. For that determination to be made, the court must find that the state law claims are not "qualitatively different" from the rights protected under the Copyright Act. Wolff v. Institute of Electrical and Electronics Engineers, Inc., 768 F.Supp. 66, 69 (S.D.N.Y. 1991) (Haight, J.). Where the state law claims are qualitatively different, they will not be preempted. This Circuit applies an "extra element" test to determine whether the state law claims are indeed qualitatively different:
[I]f an "extra element" is "required instead of or in addition to the acts of reproduction, performance, distribution or display, in order to constitute a state-created cause of action," then the right does not lie `within the general scope of copyright,' and there is no preemption . . . A state law claim is not preempted if the "extra element" changes the nature of the action so that it is qualitatively different from a copyright infringement claim.Computer Assocs. Int'l, Inc., v. Altai, Inc., 982 F.2d 693, 716 (2d Cir. 1992) (quoting 1 Melville B. Nimmer David Nimmer, Nimmer on Copyright § 1.01[B], at 1-14-15 (1991); and citing Mayer v. Josiah Wedgwood Sons, Ltd., 601 F.Supp. 1523, 1535 (S.D.N.Y. 1985) (Leisure, J.)). Accordingly, the Court will conduct an "extra element" inquiry with regards to each of the state law claims defendant maintains are preempted by the Copyright Act.
All but plaintiff's fraud claim.
(a) Breach of Confidential Relationship
For a breach of confidence claim to be established, plaintiff must show that the parties either stood in a relationship imposing a duty of trust or confidentiality, or that they entered into an agreement establishing such a confidential relationship. Under New York law, a confidential relationship is "synonymous with fiduciary relationship and . . . [exists] generally where the parties do not deal on equal terms and one trusts and relies on the other." Sachs v. Cluett Peabody Co., 265 A.D. 497, 39 N.Y.S.2d 853, 856 (N.Y.App.Div. 1943), aff'd, 291 N.Y. 772, 53 N.E.2d 241 (1944); see McGhan, 608 F.Supp. at 285. Courts will find a duty not to reveal confidential information only when the recipient has accepted the confidential relationship. See Smith v. Weinstein, 578 F.Supp. 1297, 1307 (S.D.N.Y. 1984) (Sofaer, J.). Such a relationship may arise either explicitly by contract, or implicitly by the actions of the parties or other circumstances. See Klein v. Ekco Products Co., 135 N.Y.S.2d 391, 395-96 (N.Y.Sup.Ct. 1954).
Plaintiff maintains that the two parties' interaction led to the creation of a confidential relationship and that defendant breached that relationship by exploiting plaintiff's ideas and materials without approval or remuneration. As a general rule, courts have found that the Copyright Act does not preempt such claims because they involve the extra element of a confidential promise or duty of trust between the parties. See Computer Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 717 (2d Cir. 1992) (trade secret claims); A. Brod, Inc. v. SK I Co., 998 F.Supp. 314, 323 (S.D.N.Y. 1998) (Sotomayor, J.) (alleged constructive trust); Brignoli v. Balch Hardy Scheinman, Inc., 645 F.Supp. 1201, 1205-08 (S.D.N.Y. 1986) (Sweet, J.) (alleged agreement not to disclose or use confidential information or trade secrets); Smith, 578 F.Supp. at 1307 (alleged breach of trust based on relationship).
Moreover, whether such a confidential relationship exists is ultimately a question to be determined by the trier of fact and all a plaintiff must do to withstand a motion to dismiss is allege certain facts that would create this relationship. McGhan v. Ebersol, 608 F.Supp. at 285; Hogan v. DC Comics, 1997 WL 570871, at *5 (N.D.N.Y.). Here, plaintiff contends that he and defendant were on unequal bargaining grounds and that the extent of their interaction gave rise to a confidential relationship. Defendant, in an attempt to rebut this claim draws heavily from Markogianis v. Burger King Corp., 1997 WL 167113 (S.D.N.Y.) (Keenan, J), in which the court found no confidential relationship and in favor of preemption. Markogianis at *4. We disagree with the extent of defendant's characterization of the similarities between Markogianis and this case. As described by the court in Markogianis, the two parties only had sporadic communications and never actually met in person to discuss plaintiff's materials. Id. We believe that the repeated in-person contacts between plaintiff and defendant and the apparent cooperative effort between them to develop the ideas presented sufficiently differentiate the present case before the court for motion to dismiss purposes. We hold that, accepting all of the allegations in the complaint as true, plaintiff has sufficiently alleged a breach of confidential relationship claim and that it is not preempted.
In Markogianis, plaintiffs were the owners of a copyrighted educational concept geared to children that they presented to defendant Burger King through a series of written correspondences. Though Burger King eventually chose not to adopt the concept, plaintiff claimed that Burger King subsequently did adopt an entirely new marketing approach which misappropriated plaintiff's ideas. In ruling to dismiss plaintiff's breach of confidential relationship claim, the court ultimately found that the level of activity between the two parties was insufficient to give rise to a confidential relationship.
(b) Misappropriation
To properly allege a claim for misappropriation, plaintiff must show: (1) the existence of a confidential or fiduciary relationship between the parties; and (2) that the idea is novel and concrete. McGhan, 608 F.Supp. at 284. These "extra elements", if properly pleaded, are sufficient to render preemption improper.
As previously discussed, plaintiff has sufficiently alleged the existence of a confidential relationship between the parties. In addition, the novelty and concreteness of the ideas presented are issues best established or refuted through the discovery process. Where, as here, plaintiff has sufficiently alleged that his ideas were novel and concrete, granting of the motion to dismiss would be inappropriate.
Plaintiff alleges, for example, that defendant acknowledged the novelty and originality of the ideas presented during the course of their meetings. Compl. ¶ 29.
(c) Unjust Enrichment
In order to recover for unjust enrichment under New York law, it must be established that plaintiff enriched defendant and that the circumstances were such that it would be unjust to permit defendant to refuse to make any restitution to plaintiff. Werlin v. Reader's Digest Ass'n, Inc., 528 F.Supp. 451, 465 (S.D.N.Y. 1981) (Ward, J.). "The overwhelming majority of courts in this circuit have held that an unjust enrichment claim based upon the copying of subject matter within the scope of the Copyright Act is preempted." Boyle v. Stephens, Inc., 1998 WL 690816, at *6 (S.D.N.Y.) (Scheindlin, J.), citing Patrick v. Francis, 887 F.Supp. 481, 484 (W.D.N.Y. 1995) ("[t]he claim that unauthorized copying of plaintiff's work unjustly enriched defendants is equivalent to exclusive rights within the general scope of copyright").
In contrast to the breach of confidential relationship and misappropriation claims, plaintiff has failed to identify any element of its unjust enrichment claim which would render it qualitatively different from a copyright infringement action. The gravamen of plaintiff's cause of action is that defendant obtained plaintiff's new and valuable ideas and materials, exploited them without plaintiff's permission and thereby enriched himself. As such, nothing in the complaint sufficiently changes the nature of the unjust enrichment claim to differentiate it from a federal copyright action. The claim is thus preempted.
(d) Conversion
In order to sustain a cause of action for conversion it must be established that: (1) defendant acted without authorization; (2) defendant exercised dominion or a right of ownership over property belonging to another; (3) the rightful owner made a demand for the property; and (4) the demand for the return was refused. Seanto Exports v. United Arab Agencies, 137 F.Supp. 2d 445, 451 (S.D.N.Y. 2001) (Motley, J.), citing Heneghan v. Cap-A-Radiator Shops, 506 N.Y.S.2d 132, 134 (N.Y.App.Div. 1986). Where the original possession is lawful, "conversion does not occur until the defendant refuses to return property after demand or until he sooner disposes of the property." Id. In addition, as the Second Circuit has stated, "if unauthorized publication is the gravamen of their claim, then it is clear that the right they seek to protect is coextensive with an exclusive right already safeguarded by the [Copyright] Act — namely, control over reproduction and derivative use of copyrighted material. As such, their conversion claim is necessarily preempted." Harper Row Publishers, Inc., 723 F.2d at 201.
The thrust of plaintiffs conversion claim is that defendant took his ideas and materials and exploited them without his permission. The claim thus appears to be preempted. Moreover, plaintiff's claim fails as a matter of law. Plaintiff has not alleged that he requested the return of his property nor that defendant ever refused such a request and, to the extent plaintiff claims that defendant solely converted his ideas as opposed to anything tangible, New York law fails to recognize a claim for conversion of intangible property. RAO v. Verde, 635 N.Y.S.D.2d 660, 661 (N.Y. 1995). Plaintiff's conversion claim is therefore dismissed.
(e) Breach of Implied Contract
Under New York law, a contract will be implied in fact when the parties clearly intended payment to the extent of the use of plaintiff's ideas, though they did not set forth that intention in express language. Werlin, 528 F.Supp. at 465. A party may by contract, express or implied, agree to pay for ideas, even though such ideas could not be protected by copyright law. Smith, 578 F.Supp. at 1307. Rights under such an agreement are qualitatively different from copyright claims. Id.
Plaintiff generically labels his claim "Breach of Implied Contract" and does not specify whether he is referring to an implied-in-fact contract or an implied-in law contract, or both. In so much as plaintiff bases his claim on a breach of an implied-in-law contract, the claim is dismissed for the same reasons as plaintiff's unjust enrichment claim, namely that there are no elements which render such a claim qualitatively different from a copyright infringement action.
In contrast to plaintiff's other state law claims, it is possible under a breach of implied contract claim to separate the ideas and concepts presented by plaintiff from their tangible expressions. See Katz Dochermann Epstein, Inc., 1999 WL 179603, at *4 ("Whereas the facts alleged in the complaint make it impossible to separate a claim of misappropriation of KDE's idea from a claim of misappropriation of the copyrightable literary work through which that idea was expressed to HBO, KDE's contract claim seeks to enforce a promise to pay for the use of the idea alone, regardless of any subsequent rights KDE may have acquired under the Copyright Act to the storyboards, sample print ads, and other copyrightable work it prepared."). Plaintiff's allegation that the WWE made an implied promise to pay for the value of his ideas is entirely separate and apart from any claim for copyright infringement involving the video and lingerie samples. As such the subject matter of the state law claim does not fall within the subject matter of the Copyright Act. Thus, plaintiff's claim for breach of implied contract is not preempted and defendant's motion to dismiss is denied.
Fraud
Finally, defendant seeks dismissal of the fraud claim on two counts: that plaintiff failed to plead necessary elements of the claim and that the complaint was not plead with the particularity required by Rule 9(6), F.R. Civ. P.
In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally. Rule 9(b), F.R. Civ. P.
To state a cognizable cause of action for fraud, plaintiff must allege: (i) a misrepresentation or omission of a material fact; (ii) which was false and known to be false by defendant; (iii) made for the purpose of inducing plaintiff to rely on it; (iv) justifiable and reasonable reliance on the material misrepresentation or omission; and (v) resulting injury. Lana Holding Co. v. Smith Barney, Inc., 646 N.Y.S.2d 76, 80 (N.Y. 1996), citing Channel Master Corp. v. Aluminum Ltd. Sales, 151 N.E.2d 833 (N.Y. 1958).
Plaintiff's complaint does not sufficiently plead the required elements of fraud. Plaintiff has failed to allege that the WWE made any misrepresentation or omissions of material facts or that any such misrepresentations or omissions were false and known to be false by the WWE. Moreover, the complaint also fails to claim that plaintiff justifiably and reasonably relied on such misrepresentations or omissions of material fact. As such, plaintiff's claim for fraud must be dismissed.
Conclusion
Defendant's motion to dismiss is granted with regards to plaintiff's claims for unjust enrichment, conversion and fraud. The motion to dismiss is denied as to plaintiff's breach of confidential relationship, misappropriation and breach of implied contract claims. Defendant the World Wrestling Federation Entertainment, Inc., in so much as it is simply the former name of the WWE, is dismissed from the suit.