Incarcerated Entertainment LLC et al v. Cox
Filing
111
Order Granting Plaintiffs Motion for Summary Judgment. ORDER granting 77 Motion for Summary Judgment. The Court directs the Plaintiffs to file a proposed final judgment with the Court and send a word version of the proposed order to Chambers v ia email. The Clerk is directed to close this case. All pending motions are denied as moot. Motions Terminated: 100 MOTION FOR PERMISSION TO FILE SUR-REPLY IN OPPOSITION TO PLAINTIFFS MOTION FOR SUMMARY JUDGMENT filed by Matthew Bevan Cox, 77 Plaintiff's MOTION for Summary Judgment filed by Incarcerated Entertainment LLC, Efraim Diveroli, 110 MOTION for Sanctions for Plaintiffs Frivolous Pleadings and Motion Practice; Defendants Must Withdraw this Action Because It Lacks Subject Matter Jurisdiction filed by Matthew Bevan Cox, 101 MOTION Motion for Judgment on the Pleadings for Lack of Subject Matter Jurisdiction filed by Matthew Bevan Cox, 104 MOTION For Court to Tak e Judicial Notice in Support of Response in Opposition to Defendant's Motion for Judgment on the Pleadings re 101 MOTION Motion for Judgment on the Pleadings for Lack of Subject Matter Jurisdiction , 103 filed by Incarcerated Entertainment LLC. Signed by Judge Robert N. Scola, Jr on 9/27/2019. See attached document for full details. (amb)
United States District Court
for the
Southern District of Florida
Incarcerated Entertainment, LLC,
and Efraim Diveroli, Plaintiff,
v.
Matthew Bevan Cox, Defendant/
Counter-Plaintiff
)
)
)
)
Civil Action No. 18-21991-Civ-Scola
)
)
)
Order Granting Plaintiffs’ Motion for Summary Judgment
This matter comes before the Court upon Plaintiffs Incarcerated
Entertainment, LLC and Efraim Diveroli’s motion for summary judgment. (ECF
No. 77.) The Defendant filed a response (ECF No. 87) and the Plaintiffs timely
replied. (ECF No. 95.) Upon review of the record, the parties’ briefs, and the
relevant legal authorities, the Court grants the Plaintiffs’ motion. (ECF No. 77.)
I.
Background
Plaintiff Efraim Diveroli was awarded several hundred million dollars in
arms and ammunition contracts by the United States government during the
war on terror. He was later convicted of fraud and served time in prison. During
his time in prison, he met Defendant Cox and executed a work-for-hire co-author
agreement (the “Agreement”). (Compl. at 2, ECF No. 1.) According to the
Agreement, Cox would assist Diveroli in writing a memoir of Diveroli’s life. (Id. at
¶ 13.) Diveroli agreed to pay Cox 10% of royalties received by Cox for the book or
any disposition of the work and 5% of royalties received by Cox from the sale of
any derivatives of the work. (Id. at ¶ 15; ECF No. 1-3 at ¶ 11.) Under the terms
of the Agreement, “[a]ll copyrights, renewals, and extensions thereof, in and to
the material contained in the Work, shall be secured by [Diveroli] and held in his
name, as the sole and exclusive author and proprietor thereof, together with all
literary property and any other rights in the Work[.]” (ECF No. 1-3 at ¶ 2(a).)
On February 20, 2014, Diveroli registered his book, Once a Gun Runner,
with the United States Copyright Office. He then assigned his rights in the book
to Plaintiff Incarcerated Entertainment (“IE”). (ECF No. 1 at ¶ 19.) According to
the complaint, IE has attemped to pay Cox his percentage of the gross proceeds
for the sale of the book, but he has declined to provide payment instructions
because he owes over $5 million in restitution to the government. (Id. at ¶ 22.)
In 2016, Warner Bros. released the motion picture War Dogs, loosely based on
the story of Diveroli and his associates. (Id. at ¶ 20.)
Following the release of the movie, IE sued Warner Bros. alleging copyright
violations, conspiracy, and unfair competition. See Incarcerated Entm’t, LLC v.
Warner Bros. Pictures, No. 16-cv-1302-MSS-AAS (M.D. Fla. April 28, 2016). After
the lawsuit had been pending for almost a year, Defendant Cox sought to
intervene, claiming that he was the rightful owner of the book and copyright. (Id.
at ECF No. 106.) Before the district court could rule on the motion to intervene,
IE and Warner Bros. settled the dispute and filed a joint stipulation of dismissal
with prejudice. (Id. at ECF No. 143.) Cox filed two separate appeals related to
that case. The first was dismissed as moot by the Eleventh Circuit and the
second was voluntarily dismissed by Cox.
On November 14, 2017, IE and Diveroli filed a state court complaint
against Cox for declaratory judgment regarding the parties’ rights under the
work-for-hire agreement. See Incarcerated Entm’t, et al. v. Cox, No. 2017-026376CA-01 (11th Jud. Cir. Miami-Dade County). The state court complaint was
removed to the Southern District of Florida on January 1, 2018. See Incarcerated
Entm’t, et al. v. Cox, No. 18-20023 (S.D. Fla. Jan. 1, 2018) (Moreno, J.). Judge
Moreno dismissed the complaint without prejudice as duplicative of two cases
pending in the Middle District of Florida. (Id. at ECF No. 8.)
On December 27, 2017, Cox filed a lawsuit in the Middle District of Florida
against IE, Diveroli, and Warner Bros. claiming ownership of IE’s copyright. See
Cox v. Incarcerated Entm’t, LLC, et al., No. 17-cv-3108-T-35JSS (M.D. Fla. Dec.
27, 2017). On May 16, 2018, the district court dismissed the lawsuit after Cox
failed to timely serve the parties. (Id. at ECF No. 14.) Two days later, IE and
Diveroli filed the instant lawsuit against Cox seeking declaratory judgment
regarding the Plaintiffs’ rights under the Agreement and their exclusive copyright
to the book. (ECF No. 1.) The Plaintiffs now move for summary judgment on their
claim for declaratory relief. (ECF No. 77.)
II.
Legal Standard
Summary judgment is proper if following discovery, the pleadings,
depositions, answers to interrogatories, affidavits and admissions on file show
that there is no genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986); Fed. R. Civ. P. 56. In reviewing a motion for summary judgment, the
Court must “view the evidence and all factual inferences therefrom in the light
most favorable to the non-moving party, and resolve all reasonable doubts about
the facts in favor of the non-movant.” Feliciano v. City of Miami Beach, 707 F.3d
1244, 1247 (11th Cir. 2013) (quoting Skop v. City of Atlanta, Ga., 485 F.3d 1130,
1143 (11th Cir. 2007)). So, when a conflict arises between the facts presented by
the parties, the Court must credit the nonmoving party’s version. Id. The moving
party bears the burden of proof to demonstrate the absence of a genuine issue
of material fact. Celotex, 477 U.S. at 323. “In a case involving contract
interpretation, summary judgment is appropriate when the agreement is totally
unambiguous[.]” Dew Seven, L.L.C. v. Big Lots Stores, Inc., 354 F. App’x 415, 416
(11th Cir. 2009).
III.
Subject Matter Jurisdiction
As an initial matter, the Court will address subject matter jurisdiction in
this case. The Court raised this issue sua sponte earlier in the case (ECF No. 68)
and the Defendant raises it again in his response to the Plaintiffs’ motion for
summary judgment. (ECF No. 85 at 4-5.) The Defendant argues that this case
involves the interpretation of a contract under Florida law, and therefore does
not raise a federal question. (Id.) Upon careful review, the Court disagrees with
the Defendant’s analysis.
This is an action for declaratory judgment. “[T]he Declaratory Judgment
Act, does not, of itself, confer jurisdiction upon the federal courts; a suit brought
under the Act must state some independent source of jurisdiction, such as the
existence of diversity or the presentation of a federal question.” Borden v.
Katzman, 881 F.2d 1035, 1037 (11th Cir. 1989). There is no question that the
parties are not diverse. Therefore, the question is “whether, absent the
availability of declaratory relief, the instant case could nonetheless be brought
in federal court.” Anand Vihar LLC v. Evans Group Inc., No. 16-cv-841, 2016 WL
9526560, at *1 (M.D. Fla. July 6, 2016). To help answer this question, the
Eleventh Circuit has held that “a federal district court has subject-matter
jurisdiction over a declaratory judgment action if . . . plaintiff’s well-pleaded
complaint alleges facts demonstrating that defendant could file a coercive action
arising under federal law.” Household Bank v. JFS Group, 320 F.3d 1249, 1259
(11th Cir. 2003). “It follows then that district courts have subject matter
jurisdiction over a declaratory judgment action that anticipates a copyright
counterclaim.” Anand, 2016 WL 9526560 at *2.
Here, the Defendant claims that he is entitled to the copyright at issue and
filed a counterclaim for copyright infringement. (ECF No. 27.) Although the
Defendant voluntarily dismissed his counterclaim (ECF No. 72), he recently filed
another action in the Southern District of Florida against the Plaintiffs for
copyright infringement, among other causes of action. See Matthew Bevan Cox
v. Efraim Diveroli, et al., Case No. 19-cv-23483-BB (S.D. Fla. Aug. 20, 2019).
Because the Defendant could file, and has filed, a coercive counterclaim arising
under federal copyright law, the Court finds that it has subject matter
jurisdiction. See Anand, 2016 WL 9526560 at *2.
IV.
Analysis
The Plaintiffs seek summary judgment on their claim for declaratory relief,
arguing that the Agreement between Diveroli and Cox is unambiguous and
shows that the Defendant has no ownership right or interest in the work created
under the Agreement. (ECF No. 77 at 8.) In response, the Defendant does not
argue with the Plaintiffs’ interpretation of the contract terms. Instead, he argues
that the contract is invalid because (1) it lacks consideration; (2) was procured
by fraud; and (3) the Plaintiffs have unclean hands. Upon careful review of the
parties’ arguments, the Court grants the Plaintiffs’ motion.
The contract provides that Florida state law shall govern. (ECF No. 1-3 at
¶ 19.) Under Florida law, if the language of a contract is clear and unambiguous,
there is no need to resort to rules of contract construction. Gables Ins. Recovery,
Inc. v. Citizens Property Ins. Corp., 261 So. 3d 613, 624 (Fla. 3d DCA 2018). “In
the absence of an ambiguity on the face of the contract, it is well settled that the
actual language used in the contract is the best evidence of the intent of the
parties, and the plain meaning of that language controls.” Ferox, LLC v. ConSeal
Int’l, 175 F. Supp. 3d 1368, 1370 (S.D. Fla. 2016) (Gayles, J.) (citations and
quotations omitted). “The words should be given their natural, ordinary meaning,
and where the language is plain a court should not create confusion by adding
hidden meanings, terms, conditions or unexpressed intentions.” Id. (citations
and quotations omitted).
Here, the contract terms are clear and unambiguous. The contract
provides that:
All copyrights, renewals, and extensions thereof, in and
to the material contained in the Work, shall be secured
by [Diveroli] and held in his name, as the sole and
exclusive author and proprietor thereof, together with
all literary property and any other rights in the Work,
the
title
thereof,
and
the
characters
and
characterizations therein, in all language, forms, and
media now or hereafter known. The foregoing shall
include all literary rights, copyrights, and all intangible
property rights of any kind or nature whatsoever in any
oral or written material prepared for or by or made
available to, [Cox] in connection with the Work and all
intangible property rights in any tape recording made
pursuant hereto. With respect to any oral or written
material which shall not be directly or indirectly
included or incorporated in the work, all rights in and
to such material shall be the sole property of [Diveroli].
(ECF No. 1-3 at ¶ 2(a).) Moreover, the contract contemplated that the Plaintiff
would register it with the Copyright Office under his name. “On completion of
the work, it shall be registered in the name of [Diveroli], as the author and a copy
shall be registered with the Copyright Office.” (Id. at ¶ 2(c).) The Defendant
“understands and agrees that he shall have no right, title, or interest of any kind
or nature whatsoever in the Work or receive any compensation whatsoever
except as provided herein.” (Id. at ¶ 2(f).) Under the terms of the contract, the
Defendant is entitled to 10% gross royalties received by Diveroli “or any business
or corporation set up to receive income from the sale, license or disposition of
the Work.” (Id. at ¶ 11(b).) And 5% of gross royalties “actually received directly
by Diveroli or any business or corporation set up to receive income from the sale,
license or disposition of any derivatives and/or ancillary products developed
from the Work.” (Id. at ¶ 11(c).)
Based on the plain meaning of the contract, the Court finds that the
Plaintiff is the exclusive owner of the work and any copyright associated with it.
However, before the Court can enter summary judgment, it must address the
Defendant’s arguments.
The Defendant first attacks the contract by arguing that it lacks
consideration. (ECF No. 85 at 7.) The Defendant argues that he did not receive
a benefit nor did Diveroli suffer a detriment. (Id. at ¶ 33.) In order for a valid
contract to exist, the “parties involved must mutually assent to the terms, and
those terms must be supported by adequate consideration.” Canada v. Yak
America, No. 12-cv-22143, 2012 WL 4025745, at *2 (S.D. Fla. Sept. 12, 2012)
(King, J.). “Consideration is only required to rise to the level of a peppercorn.”
Delta Health Grp. Inc. v. Royal Surplus Lines Ins. Co., 327 F. App’x 860, 866 (11th
Cir. 2009). “It is axiomatic that a promise, no matter how slight, can constitute
sufficient consideration so long as a party agrees to do something that they are
not bound to do.” Canada, 2012 WL 4025745 at *3.
Here, there is no question that the contract was supported by
consideration. Under the contract, Diveroli agreed to pay Cox $500 upfront, 10%
of the royalties from the sale or license of the work, and 5% of the royalties for
any income from the sale or license of any derivatives of the work. (ECF No. 1-3
¶ 11.) According to Cox, this is “nothing more than a promise to do just a small
part of something that copyright law already mandated[.]” (ECF No. 85 at ¶ 34.)
There is no evidence in the record or legal citation supporting Cox’s contention
that copyright law “mandated” that Diveroli pay Cox royalties for the work.
Instead, it was an agreement by Diveroli to “do something that [he] [was] not
bound to do.” Canada, 2012 WL 4025745 at *3. Accordingly, the Court finds that
the contract was supported by adequate consideration.1
Cox next argues that the contract was procured by fraud. According to
Cox, Diveroli induced him to sign the contract by telling him that a lawyer had
said it was necessary for Cox to sign the contract so that the money from the
book would not be seized by the U.S. Government as part of Cox’s restitution.
Diveroli promised Cox that he would be taken care of no matter what. Cox was
given little time to review the contract before he signed it. (ECF No. 85 at 11.)
Cox was also falsely promised that he would be fairly credited for his work.
According to Cox, Diveroli made these misrepresentations to induce Cox to sign
the contract.
Cox’s arguments fail. Cox does not explain or cite to any record evidence
to support the narrative that he was somehow fraudulently induced to sign the
Agreement under a threat of a restitution order or other false pretenses. The only
citations in Cox’s motion are to Cox’s self-serving affidavit. “[C]onclusory,
uncorroborated allegations in an affidavit or deposition will not create an issue
of fact for trial sufficient to defeat a well supported summary judgment motion.”
Kearny Constr. Co. LLC v. Travelers Case. & Sur. Co. of Am., No. 09-cv-1850,
2017 U.S. Dist. LEXIS 154224, at *31 (M.D. Fla. Aug. 16, 2017). “[T]o defeat a
motion for summary judgment, [the party] must adduce specific evidence from
which a jury could reasonably find in his favor; the mere existence of a scintilla
of evidence in support of his position will be insufficient.” Goodman v. Kimbrough,
718 F.3d 1325, 1332 (11the Cir. 2013) (citations and quotations omitted).
Moreover, Cox cannot use his self-serving affidavit to contradict the terms of the
contract. “Under Florida law, a party cannot recover in fraud for alleged oral
misrepresentations that are adequately covered or expressly contradicted in a
later written contract.” Kennedy v. Deschenes, No. 17-60110, 2017 WL 2223050,
at *4 (S.D. Fla. May 19, 2017) (Scola J.). Here, the contract states that Cox
“acknowledges that by signing this Agreement that he has read and understands
this document[.]” (ECF No. 1-3 at ¶ 21.) He also agreed to relinquish all his rights
to the work. (Id. at ¶ 2(g) (Cox “hereby irrevocably and absolutely assigns,
conveys, and grants to [Diveroli]. . . all rights, title and interests of every kind,
nature and description in and to all of [Cox’s] services, rendered under this
Agreement[.]”)). Therefore, his claims that he was not aware of the terms or was
fraudulently induced to sign it must fail.
Cox also argues that he was never paid. (ECF No. 85 at ¶ 37.) However, that
would be more appropriately litigated as a breach of contract claim, not as an
attack on the adequacy of consideration.
1
Cox’s last argument is based on a theory of unclean hands. Cox repeats
his arguments regarding Diveroli’s “false statements” and failure to credit or pay
Cox for his work. (ECF No. 85 at 12.) The doctrine of unclean hands applies to
equitable actions, not actions at law. Regions Bank v. Old Jupiter, LLC, No. 1080188,2010 WL 5148467, *6 (S.D. Fla. Dec. 13, 2010) (Hurley, J.). “Suits for
declaratory judgment are a statutory creation enacted by Congress in the
Declaratory Judgment Act . . . and are neither inherently legal nor equitable in
nature.” Gulf Life Ins. Co. v. Arnold, 809 F.2d 1520, 1523 (11th Cir. 1987)
(citations omitted). “When determining whether a declaratory judgment action is
legal or equitable, courts have examined the basic nature of the issues involved
to determine how they would have arisen had Congress not enacted the
Declaratory Judgment Act.” Id. But for the Declaratory Judgment Act, the only
way this action could have arisen is as a suit for copyright infringement or breach
of contract. The contract claim is legal in nature but a copyright infringement
action may be equitable, when seeking injunctive relief, or legal, when seeking
damages. Although a close call, the Court finds that the Plaintiffs’ complaint is
primarily seeking a declaration of the Plaintiffs’ rights under the contract.
Therefore, it appears that the doctrine of unclean hands in inapplicable.
Furthermore, “even if the doctrine of unclean hands was available as a
defense to plaintiff's claims, defendant has failed to point to sufficient evidence
to create a question of fact as to this defense. The evidence cited by defendant is
insufficient to support a finding that plaintiff engaged in conduct rising to the
level of bad faith, trickery, deception, fraud, injustice or unfairness.” Trade Am
Int'l, Inc. v. Cincinnati Ins. Co., No. 08-cv-3711-GET, 2010 U.S. Dist. LEXIS
152568, at *21-22 (N.D. Ga. June 4, 2010).
Cox also invokes Rule 56(d) to argue that discovery is not completed and
additional discovery will shed light on Cox’s arguments. (ECF No. 85 at 13.)
Under Rule 56, “[i]f a nonmovant shows by affidavit or declaration that, for
specific reasons, it cannot present facts essential to justify its opposition, the
court may” defer consideration of the motion. Fed. R. Civ. P. 56(d). Cox has not
provided an affidavit or declaration putting forth specific reasons why he cannot
present evidence to support his position. Accordingly, this argument also fails.
V.
Conclusion
Based on the foregoing, the Court grants the Plaintiffs’ motion for
summary judgment. (ECF No. 77.) The Court directs the Plaintiffs to file a
proposed final judgment with the Court and send a word version of the proposed
order to Chambers via email. The Clerk is directed to close this case. All pending
motions are denied as moot.
Done and ordered, at Miami, Florida, on September 27, 2019.
________________________________
Robert N. Scola, Jr.
United States District Judge
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