Incarcerated Entertainment LLC et al v. Cox

Filing 47

ORDER denying 29 Warner Bros.'s Motion to Stay Mr. Cox's Third-Party Claims. Signed by Magistrate Judge Edwin G. Torres on 11/6/2018. See attached document for full details. (js02)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 18-21991-Civ-SCOLA/TORRES
INCARCERATED ENTERTAINMENT,
LLC., a Florida Limited Liability
Corporation, and EFRAIM DIVEROLI,
an individual,
Plaintiffs,
v.
MATTHEW BEVAN COX, an individual,
Defendant.
______________________________________
MATTHEW BEVAN COX, an individual,
Counter-Plaintiff,
v.
INCARCERATED ENTERTAINMENT,
LLC, a Florida Limited Liability Corporation,
EFRAIM DIVEROLI, an individual; WARNER
BROS. PICTURES, a division of WB STUDIO
ENTERPRISES, INC.; and the ESTATE OF
ROSS REBACK,
Counter-Defendants.
______________________________________/

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ORDER ON WARNER BROS.’S
MOTION TO STAY MATTHEW COX’S THIRD-PARTY CLAIMS1
This matter is before the Court on Warner Bros. Pictures’ (“Warner”) motion
to stay against Matthew Cox (“Mr. Cox”). [D.E. 29]. Mr. Cox responded to Warner’s
motion on October 15, 2018 [D.E. 36] to which Warner replied on October 18, 2018.
[D.E. 42]. Therefore, Warner’s motion is now ripe for disposition. After careful
consideration of the motion, response, reply, relevant authority, and for the reasons
discussed below, Warner’s motion to stay the disposition of Mr. Cox’s third-party
claims is DENIED.
I.

BACKGROUND

Incarcerated Entertainment, LLC (“IE”) and Efraim Diveroli (“Diveroli”)
(collectively, “Plaintiffs”) filed this action on May 18, 2018 seeking a declaratory
judgment as to the rights and status of a book entitled Once a Gun Runner.
Plaintiffs’ complaint, however, is not the first time that they have litigated a case
against Mr. Cox. In 2016, Warner released the motion picture War Dogs. The
movie is a dark comedy based on the reported story of several young men from
Miami, including Diveroli, who secured a $300 million U.S. Defense Department
Warner referred to its motion as a request to stay Mr. Cox’s counterclaims
against Warner. But, by definition, Mr. Cox’s claims against Warner constitute a
third-party claim because IE sued Cox and Cox, in turn, filed a counterclaim
against IE and a third-party claim against Warner. See e,.g., Starr v. Prairie
Harbor Dev. Co., 900 F. Supp. 230, 233 (E.D. Wis. 1995) (“Third-party claims are
those in which a defendant claims a third-party is liable to the defendant for all or
part of the plaintiff's claim against the defendant,” whereas “[a]counterclaim is any
suit by a defendant against the plaintiff including any claims properly joined with
the claims against the plaintiff.”) (citing Fed. R. Civ. P. 13(a)-(c)). We therefore
construe Warner’s motion as a request to stay Mr. Cox’s third-party claims against
Warner.
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contract to supply arms to the Afghan Army – only to be convicted later for fraud.
IE is a company formed by Diveroli and his business partner, Ross Reback (“Mr.
Reback”), to monetize Diveroli’s life story by self-publishing his memoir Once a Gun
Runner.
In April 2016, IE sued Warner. IE’s first complaint accused Warner and
seven others of a conspiracy to steal secrets from Diveroli’s memoir and of
improperly using his name in the movie. Warner moved to dismiss showing that
none of these claims had any basis in law, and IE abandoned its first complaint and
hired new counsel. IE’s amended complaint asserted four new causes of action: (1)
violation of the Lanham Act (injunctive relief and damages), (2) violation of
Florida’s Deceptive and Unfair Trade Practices Act (injunctive relief), (3) and unfair
competition (damages) – the same claims that Mr. Cox now asserts against Warner.
The gravamen of IE’s amended complaint was that, in marketing War Dogs, Warner
unlawfully sold the film as the true story and as the unadulterated truth.
After the first lawsuit had been pending for approximately one year, Mr. Cox
sought to intervene claiming that he was the rightful owner of the book. In his
motion to intervene, Mr. Cox asserted that IE, Diveroli, and Mr. Reback conspired
to steal his copyright and violated contracts among them related to the book. Before
the case proceeded to summary judgment and after IE and Warner engaged in
mediation and discovery, the parties settled their dispute. IE then filed a joint
stipulation of dismissal with prejudice of all claims against all defendants. The
district court subsequently ordered the case dismissed with prejudice.

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On May 17, 2018, IE filed this lawsuit seeking a declaratory judgment that
IE – and not Mr. Cox – owns the copyright and to prevent Mr. Cox from asserting
additional claims based on his ownership of the book. On June 26, 2018, Mr. Cox
filed an eleven-count counterclaim against Diveroli and IE and a four-count thirdparty complaint against Warner.

On September 14, 2018, Mr. Cox filed an

amended third-party complaint asserting five counts against Warner. [D.E. 27].
II.

APPLICABLE PRINCIPLES AND LAW

The Court “has broad discretion to stay proceedings as an incident to its
power to control its own docket.” Clinton v. Jones, 520 U.S. 681, 706 (1997); Landis
v. N. Am. Co., 299 U.S. 248, 254 (1936) (“[T]he power to stay proceedings is
incidental to the power inherent in every court to control the disposition of the
causes on its docket with economy of time and effort for itself, for counsel, and for
litigants.”); Chrysler Int’l Corp. v. Chemaly, 280 F.3d 1358, 1360 (11th Cir. 2002)
(“At the outset, we stress the broad discretion district courts have in managing their
cases.”); Johnson v. Bd. of Regents of Univ. of Georgia, 263 F.3d 1234, 1269 (11th
Cir. 2001) (“[W]e accord district courts broad discretion over the management of pre
Stays of proceedings can also promote judicial economy, reduce confusion and
prejudice, and prevent possibly inconsistent resolutions. See Clinton, 520 U.S. at
706; see also American Mfrs. Mut. Ins. Co. v. Edward D. Stone, Jr. & Assoc., 743
F.2d 1519, 1525 (11th Cir. 1984). In determining whether a stay is appropriate,
courts examine the following four factors: (1) the likelihood of the moving party
ultimately prevailing on the merits, (2) the extent the moving party would be

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irreparably harmed, (3) potential for harm to the opposing party if the stay is issued
and (4) whether issuing a stay would be in the public interest. See Guirola–Beeche
v. U.S. Dep't of Justice, 662 F. Supp. 1414, 1417–18 (S.D. Fla. 1987). “Stay orders
will be reversed when they are found to be immoderate or of an indefinite
duration.” CTI–Container Leasing Corp. v. Uiterwyk Corp., 685 F.2d 1284, 1288
(11th Cir. 1982) (internal citations omitted).
In the absence of a dispositive motion, courts have also granted motions to
stay in consideration of the following factors: “(1) whether the litigation is at an
early stage; (2) whether a stay will unduly prejudice or tactically disadvantage the
non-moving party; (3) whether a stay will simplify the issues in question and
streamline the trial; and (4) whether a stay will reduce the burden of litigation on
the parties and on the court.” Grice Eng’g, Inc. v. JG Innovations, Inc., 691 F. Supp.
2d 915, 920 (W.D. Wis. 2010) (citing Tap Pharmaceautical Products, Inc. v. Atrix
Laboratories, Inc., 2004 WL 422697, at *1 (N.D. Ill. Mar. 3, 2004); Baxter
International, Inc. v. Fresenius Medical Care Holdings, Inc., 2008 WL 4395854, at
*3 (N.D. Ill. Sept. 25, 2008)).
For instance, one of the circumstances that have sometimes satisfied the
aforementioned factors is the possibility of avoiding unnecessary expenses while the
parties engage in mediation or settlement discussions that might conserve the
parties’ resources and promote judicial economy. See, e.g., ArrivalStar, S.A. v. Blue
Sky Network, LLC, 2012 WL 588806, at *2 (N.D. Cal. Feb. 22, 2012) (“The Court
concludes that Blue Sky has shown good cause to justify a stay of discovery pending

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mediation. The Court finds that staying discovery pending mediation will conserve
the resources of the parties and will not impose an inequity on any party.”); see also
Advanced Bodycare Sols., LLC v. Thione Int’l, Inc., 524 F.3d 1235, 1241 (11th Cir.
2008) (“[D]istrict courts have inherent, discretionary authority to issue stays in
many circumstances and granting a stay to permit mediation (or to require it) will
often be appropriate.”).
III.

ANALYSIS

Warner’s motion seeks to stay the disposition of Mr. Cox’s third-party claims
against Warner because Mr. Cox’s allegations are contingent on him prevailing
against IE. Warner argues that the primary issue underlying this case is who owns
the copyright to the book Once a Gun Runner. If the Court finds that IE owns the
book, then Mr. Cox has no standing to bring his false advertising and other claims
against Warner concerning the marketing of the movie War Dogs. As such, Warner
concludes that Mr. Cox’s third-party claims should not proceed until we determine
the underlying question of who owns the copyright to the book.2 Warner believes
that this is the most logical way to proceed because (1) if we find in favor of IE, Mr.

Warner suggests that it has invested substantial time and resources
defending itself in the first lawsuit, including expensive discovery. Warner believes
that it should not be forced to spend additional money and resources while Mr. Cox
and IE resolve their dispute as to who owns the book. However, Warner’s
contention misses the mark because it overlooks the fact that it may still be
subpoenaed irrespective of whether Mr. Cox’s third-party claims are stayed or not.
This means that, in the disposition of the underlying action, Warner may still be
subject to document productions and other discovery requests related to the
ownership of the copyright.
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Cox’s claims against Warner must fail, (2) Warner will face undue prejudice in the
absence of a stay, and (3) a stay will not prejudice Mr. Cox.
Mr. Cox’s response is that this case is about not only about a dispute over a
copyright but also about whether the initial lawsuit between IE and Warner was
dismissed in bad faith because of an agreement that Warner entered into with IE
for improper purposes. Mr. Cox claims that IE agreed to dismiss its lawsuit against
Warner after Warner agreed to pay IE a substantial sum of money so that Warner
could continue deceiving consumers into believing that the film War Dogs is a true
story.

Mr. Cox also argues that, if his third-party claims against Warner are

stayed, it would be costlier and more difficult for him to obtain the evidence he
needs to establish that IE participated in a conspiracy to facilitate a fraud.
After a thorough review of the arguments presented, we find that a stay of
Mr. Cox’s third-party claims against Warner will not necessarily conserve the
resources of the parties or the Court. Warner presents a viable argument that Mr.
Cox’s third-party claims may fail if IE is the owner of the copyright. But, Warner’s
argument overlooks the fact that there is a substantial likelihood that there will be
a duplication of discovery efforts if Mr. Cox prevails against IE. That is, Mr. Cox’s
claims presuppose the ownership of a copyright and an interconnected relationship
on whether IE and Warner participated in a fraud to prevent Mr. Cox from
establishing his ownership of Once a Gun Runner.
This means that the items produced in discovery are likely to touch upon both
Mr. Cox’s ownership of the copyright and any alleged fraud that took place between

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IE and Warner. And if this is true, then the Court and the parties will inevitably
engage in a duplication of discovery disputes and unnecessary litigation expenses –
both of which could have been conserved if the parties had participated in the
discovery process in the first instance. See Hamilton v. Suntrust Mortg. Inc., 2014
U.S. Dist. LEXIS 85885 (S.D. Fla. Jan. 3, 2014) (“Motions to stay discovery ‘are not
favored because when discovery is delayed or prolonged it can create case
management

problems

which

impede

the

Court’s

responsibility

to

expedite discovery and cause unnecessary litigation expenses and problems.’”)
(quoting Feldman v. Flood, 176 F.R.D. 651, 652 (M.D. Fla. 1997)). Accordingly, we
conclude that Warner’s motion to stay the disposition of Mr. Cox’s third-party
claims against Warner pending a determination of the ownership of the copyright
will create more case management problems than it solves and therefore Warner’s
motion is DENIED.3
IV.

CONCLUSION

For the foregoing reasons, it is hereby ORDERED AND ADJUDGED that
Warner’s motion to stay the disposition of Mr. Cox’s third-party claims is DENIED.
[D.E. 29].

Warner separately argues that Mr. Cox’s conspiracy claim should be denied
as a matter of law because it runs afoul of the Noerr-Pennington doctrine and the
First Amendment. But, the disposition of Warner’s motion is more appropriately
addressed in a motion to dismiss (which Warner filed on September 27, 2018 and
remains pending before the Court [D.E. 30]) – not a motion to stay – and therefore
Warner’s motion in this respect is also DENIED.
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DONE AND ORDERED in Chambers at Miami, Florida, this 6th day of
November, 2018.
/s/ Edwin G. Torres
EDWIN G. TORRES
United States Magistrate Judge

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