Frost-Tsuji Architects v. Highway Inn, Inc. et al

Filing 34

ORDER DENYING MOTION TO DISMISS re 11 , 15 , 17 , 23 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 11/20/13. "Highway Inn and the Co-Defendants' motion to dismiss Counts I, II, III, VI and VII of the First Amended Co mplaint is denied." (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
FROST-TSUJI ARCHITECTS,
Plaintiff,
vs.
HIGHWAY INN, INC.; HO’OLA
MAU, LLC; BRYCE UYEHARA,
A.I.A., INCORPORATED; J.
KADOWAKI, INC.; FESTIVAL
MANAGEMENT CORPORATION; et
al,

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CIVIL NO. 13-00496 SOM/BMK
ORDER DENYING MOTION TO
DISMISS

Defendants.
_____________________________
ORDER DENYING MOTION TO DISMISS
I.

INTRODUCTION.
Before the court is a motion filed by Defendants

Highway Inn, Inc., and Ho’ola Mau LLC (collectively, “Highway
Inn”) to dismiss the First Amended Complaint filed by Plaintiff
Frost Tsuji Architecture (hereinafter “FTA”).

Co-Defendants

Bruce E. Uyehara, A.I.A., Inc., J. Kadowski, Inc., and Festival
Management Corporation (collectively, “Co-Defendants”)
substantively join Highway Inn’s motion.
See Local Rule 7.9.

ECF Nos. 15, 17, 23.

In its reply brief, Highway Inn appears to

withdraw its objection, on the present motion, to FTA’s Copyright
Act claim (Count IV), given FTA’s new allegations in the First
Amended Complaint.

See Reply Memo. at 3-4, ECF No. 25.

At the

hearing on the motion to dismiss, FTA voluntarily withdrew its
claim for “unlicensed use of plans and specifications” (Count V).

Therefore, the claims remaining before the court on the present
motion are FTA’s state law claims for breach of contract (Count
I), quantum meruit (Count II), unjust enrichment (Count III),
tortious interference with contractual relations (Count VI), and
civil conspiracy (Count VII).

ECF No. 11.

Highway Inn argues

that all of these claims are preempted by the federal Copyright
Act, 17 U.S.C. §§ 101 et seq.

The court denies Highway Inn’s

motion.
II.

BACKGROUND
In December 2012, Highway Inn hired FTA, an

architectural and interior design firm, to design and oversee the
development of a full-service restaurant.

ECF No. 22 ¶ 11.

The

parties signed and executed contracts under which FTA was to be
paid approximately $125,000 for a variety of services.

ECF No.

22-1.
The services allegedly promised by FTA are listed in
FTA’s First Amended Complaint as the following: “design a new
full services restaurant, finalize Highway Inn’s lease option,
obtain design approval from Festival, obtain the proper building
permits and approvals, manage Highway Inn’s consultant team,
confirm base building suitability and MEP status of existing
conditions, Concept, Schematic, Design Development, and
Construction of Document Phases, Construction Administration to
Certificate of Occupancy, handle all interior design, select a

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general contractor, and help with the bid for Highway Inn’s
kitchen equipment package.”

FTA also allegedly entered into a

separate contract with Highway Inn for: “resolving issues with
the trash enclosure, grease interceptor, scrubber, grease shaft,
roof duct and existing roof conditions, structural calculations,
creating a parking plan, and obtaining design review criteria and
sign criteria.”

First Amended Complaint ¶¶ 4-5, ECF No. 21.

FTA then created several designs, plans, and
specifications, and applied to register copyrights in these
materials.

ECF No 21 ¶¶ 13-14.

FTA alleges that Highway Inn

unilaterally terminated its contracts with FTA on April 25, 2013,
then refused to pay FTA an outstanding balance of $39,015.85,
plus interest.

Id. ¶¶ 17-18.

FTA further alleges that Highway Inn and the CoDefendants made copies of FTA’s designs and drawings and used
FTA’s work in the permitting and construction process.

Id. ¶ 19.

In particular, FTA alleges that the drawings submitted during the
permitting process by Bruce E. Uyehara, A.I.A., Inc., the firm
Highway Inn contracted with to replace FTA, are “nearly
identical” to those created and copyrighted by FTA.

Id.

FTA

also states that Highway Inn and the Co-Defendants “continue to
copy and use FTA’s designs and drawings,” even though FTA
“specifically disallowed” such copying and issued numerous

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written demands to cease and desist and to return the allegedly
copyrighted documents.

Id. ¶¶ 24-27.

On September 30, 2013, FTA filed its Complaint in this
court, asserting a violation of the Copyright Act, in addition to
various state law claims.

ECF No. 1.

The Complaint failed to

clearly allege that FTA had applied for registration to the
Copyright Office for its designs and drawings, which is an
essential element of a copyright claim.

Id.

As a result, on

October 10, 2013, Highway Inn sought dismissal of FTA’s copyright
claim.

ECF No. 11.

Highway Inn also argued that FTA’s state law

claims were preempted by the Copyright Act.

Id.

On October 28, 2013, FTA filed a First Amended
Complaint, which Highway Inn appears to concede cures the
deficiency with regard to FTA’s copyright claim.

However,

Highway Inn claims that “[b]ecause Plaintiff’s Amended Complaint
does not cure the preemption issues, the non-copyright claims
remain defective and should be dismissed.”
No. 25.

Reply Memo at 3, ECF

In other words, the only argument remaining before the

court on the present motion is whether any of FTA’s state law
claims is preempted by the federal Copyright Act.
III.

JURISDICTION.
This court has jurisdiction over FTA’s copyright claim

under 28 U.S.C. § 1338, because this is a “civil action arising
under [an] Act of Congress . . . relating to copyrights.”

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U.S.C. § 1338.

This court exercises supplemental jurisdiction

over FTA’s state law claims.
IV.

See 28 U.S.C. § 1367.

RULE 12(b)(6) STANDARD.
Under Rule 12(b)(6) of the Federal Rules of Civil

Procedure, review is generally limited to the contents of a
complaint.

Sprewell v. Golden State Warriors, 266 F.3d 979, 988

(9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th
Cir. 1996).

If matters outside the pleadings are considered, the

Rule 12(b)(6) motion is treated as one for summary judgment.

See

Keams v. Tempe Tech. Inst., Inc., 110 F.3d 44, 46 (9th Cir.
1997); Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir. 1996).
However, courts may “consider certain materials--documents
attached to the complaint, documents incorporated by reference in
the complaint, or matters of judicial notice--without converting
the motion to dismiss into a motion for summary judgment.”
United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
Documents whose contents are alleged in a complaint and whose
authenticity is not questioned by any party may also be
considered in ruling on a Rule 12(b)(6) motion to dismiss.

See

Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir. 1994).
On a Rule 12(b)(6) motion, all allegations of material
fact are taken as true and construed in the light most favorable
to the nonmoving party.

Fed’n of African Am. Contractors v. City

of Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996).

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However,

conclusory allegations of law, unwarranted deductions of fact,
and unreasonable inferences are insufficient to defeat a motion
to dismiss.

Sprewell, 266 F.3d at 988; In re Syntex Corp. Sec.

Litig., 95 F.3d 922, 926 (9th Cir. 1996).

The court need not

accept as true allegations that contradict matters properly
subject to judicial notice or allegations contradicting the
exhibits attached to the complaint.

Sprewell, 266 F.3d at 988.

Dismissal under Rule 12(b)(6) may be based on either:
(1) lack of a cognizable legal theory, or (2) insufficient facts
under a cognizable legal theory.

Balistreri v. Pacifica Police

Dept., 901 F.2d 696, 699 (9th Cir. 1988) (citing Robertson v.
Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.
1984)).
“[T]o survive a Rule 12(b)(6) motion to dismiss,
factual allegations must be enough to raise a right to relief
above the speculative level, on the assumption that all the
allegations in the complaint are true even if doubtful in fact.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (internal
quotation marks omitted); accord Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (“the pleading standard Rule 8 announces does not
require ‘detailed factual allegations,’ but it demands more than
an unadorned, the-defendant-unlawfully-harmed-me accusation”).
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff’s

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obligation to provide the ‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will
not do.”

Twombly, 550 U.S. at 555.

The complaint must “state a

claim to relief that is plausible on its face.”

Id. at 570.

“A

claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.”

Iqbal,

556 U.S. at 677.
V.

ANALYSIS.
The Copyright Act expressly preempts state law claims

that are “equivalent to any of the exclusive rights” protected
under the Act.

17 U.S.C. § 301.

The Ninth Circuit has adopted a

two-part test to determine whether a state law claim is preempted
by the Act.

First, a court must “determine whether the ‘subject

matter’ of the state law claim falls within the subject matter of
copyright as described in 17 U.S.C. §§ 1021 and 103.2.”

Laws v.

Sony Music Entm't, Inc., 448 F.3d 1134, 1137-38 (9th Cir. 2006).
If it does, a court must then “determine whether the rights
asserted under state law are equivalent to the rights contained
in 17 U.S.C. § 106, which articulates the exclusive rights of
copyright holders.”

Id.

“[T]he scope of the subject matter of copyright law is
broader than the protections it affords.”

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Montz v. Pilgrim Films

& Television, Inc., 649 F.3d 975, 979 (9th Cir. 2011).

As a

result, “the major focus of litigation [is normally] on the
second prong of the preemption test.”

Id. at 980.

“To survive

preemption [under the second prong], a state cause of action must
assert rights that are qualitatively different from the rights
protected by copyright.”

Id.

“If a state law claim includes an

‘extra element’ that makes the right asserted qualitatively
different from those protected under the Copyright Act, the state
law claim is not preempted by the Copyright Act.”

Altera Corp.

v. Clear Logic, Inc., 424 F.3d 1079, 1089 (9th Cir. 2005).
A.

FTA’s Breach of Contract Claim (Count I).

It is not disputed that the part of the contract
between FTA and Highway Inn for the provision of architectural
plans and drawings is within the “subject matter” of the
Copyright Act, and therefore satisfies the first prong of the
Ninth Circuit’s preemption test.

Eales v. Envtl. Lifestyles,

Inc., 958 F.2d 876, 880 (9th Cir. 1992) (“It is settled law that
architectural drawings and plans are . . . eligible for
protection under the copyright code.”).
However, the contract between FTA and Highway Inn is
also alleged to involve a number of services wholly unrelated to
the copyrightable subject matter.

For example, FTA alleges that

Highway Inn owes payment on contracts for, among other things,
“manag[ing] Highway Inn’s consultant team” and “obtain[ing] the

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proper building permits and approvals.”

These services are not

within the “subject matter of copyright as described in 17 U.S.C.
§§ 1021 and 103.2.”

Laws, 448 F.3d at 1137-38.

To the extent

FTA’s claims are based on these other contracted-for services,
they are not preempted by the Copyright Act.
Whether Highway Inn’s preemption argument is successful
as to the portion of FTA’s contract claim based on the allegedly
copyrighted material depends on whether the claim requires an
“extra element” that the copyright claim does not.
“Generally speaking, the rights created by a claim for
inducing breach of contract are not equivalent to rights granted
under the Copyright Act.”

Star Patrol Enterprises, Inc. v. Saban

Entm't, Inc., 129 F.3d 127 (9th Cir. 1997).

“Contract claims

generally survive preemption because they require proof of . . .
an extra element, [which is] agreement of payment for use of a
[service].”

Montz, 649 F.3d at 980.

The Ninth Circuit has

repeatedly held that contract claims are not preempted because
they contain the required “extra element,” which is the “the
bilateral expectation of compensation.”

Benay v. Warner Bros.

Entm't, Inc., 607 F.3d 620, 629 (9th Cir. 2010) (internal
quotation omitted).

See also Grosso v. Miramax Film Corp., 383

F.3d 965, 968 (9th Cir. 2004) (holding that the “promise to pay
[is] an ‘extra element’ for preemption purposes”).

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Highway Inn does not dispute that the promise to pay is
an extra element sufficient to avoid preemption.

They argue,

however, that preemption is proper because FTA has “premised its
breach of contract claim on the unlicensed use of copyrightable
subject matter, as opposed to purely the breach of a promise to
pay.”

Reply Memo at 6, ECF No. 25.

Highway infers this

“premise” from two sentences in FTA’s First Amended Complaint.
First, Highway Inn points to a sentence that states, “FTA
specifically disallowed the copying of its plans, designs and
drawings . . . so long as Highway Inn refused to meet its
contractual payment obligations.”
ECF No. 21.

First Amended Complaint ¶ 24,

Second, Highway Inn relies on a sentence that reads,

“Highway Inn’s right to copy and use FTA’s designs and drawings
was extinguished when it terminated FTA.”

Id. ¶ 20.

From these

two sentences, Highway Inn infers that FTA is not challenging
Highway Inn’s nonpayment under the contract, but rather the
continued and unlicensed use of FTA’s copyrightable drawings and
designs.

Id.
Highway Inn’s argument is unavailing.

Under any fair

reading of the First Amended Complaint as a whole, FTA is
premising its contract claim on Highway Inn’s promise to pay.
Count I of the First Amended Complaint states unequivocally that
“Highway Inn’s refusal to pay FTA for [its] services . . .
constitutes a breach of the [c]ontracts between FTA and Highway.”

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First Amended Complaint ¶ 34, ECF No. 21.

If such an

unequivocally stated claim based on an explicit contract is
preempted by the Copyright Act, it would be difficult to see how
any breach of contract claim related to copyrightable material
could survive preemption.
Circuit intends.

That is plainly not what the Ninth

Benay v. Warner Bros. Entm't, Inc., 607 F.3d

620, 629 (9th Cir. 2010).

(“Contract law . . . is the most

significant remaining state-law protection for . . . artistic
ideas.”).
During the hearing on the present motion, Highway Inn
placed particular reliance on Canal Image UK, Ltd. v. Lutvak, 773
F. Supp. 2d 419, 444 (S.D.N.Y. 2011).

Even if that authority

were binding on this court, it is plainly distinguishable from
this case.

In Lutvak, the plaintiff had granted the defendants

the contractual right (a license) to use the plaintiff’s
copyrighted material for one year, and the plaintiff’s “breach of
contract” claim asserted that the defendants had continued to use
the copyrighted material beyond the term of the license.

In that

situation, the plaintiff’s “exclusive right flowed from the
Copyright Act, not from the Agreement.”

Id. at 446.

The “breach

of contract” claim involved the use of a copyrighted product in
excess of the license governing such use.

Such an action is

clearly a Copyright Act claim styled as a “breach of contract”
claim.

The license granted a benefit that otherwise would reside

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solely with the owner of the copyright, rather than imposing a
restriction on what a defendant might claim was its unfettered
right.

Here, by contrast, the alleged contract imposed an

obligation to pay for the services Highway Inn allegedly
obtained.

This is not an obligation flowing from any provision

in the Copyright Act.

In other words, in this case, unlike in

Lutvak, the rights and obligations flow from the contract, not
the Copyright Act.
This court agrees that “[extra] elements [should] not
[be] treated as talismans but rather as indicia of overlap
between the claimed relief and the relief available under the
Copyright Act.”

Id. at 444.

But the breach of contract claim

here seeks a remedy plainly different from “the relief available
under the Copyright Act,” and the claim could survive even absent
a valid copyright or a viable Copyright Act claim.

In short,

Highway Inn’s preemption argument is without merit.
B.

FTA’s Quantum Meruit Claim (Count II).

“The basis of recovery on quantum meruit is that a
party has received a benefit from another which it is unjust for
him to retain without paying [for].”

Maui Aggregates, Inc. v.

Reeder, 50 Haw. 608, 610, 446 P.2d 174, 176 (1968).

When “a

party derives [a] benefit from services rendered by another, the
law reasonably implies a promise to pay on the part of the one
who has received such benefit [].”

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Id.

In other words, quantum

meruit is an alternative to a contract claim that is based on an
implied promise to pay.

It is well settled that an implicit

promise to pay, like an explicit one, is an extra element
sufficient to avoid preemption under the Copyright Act.

See

Grosso, 383 F.3d at 968 (holding that “an implied promise to pay
. . . [is] an ‘extra element’ for preemption purposes”).

Whether

or not FTA can ultimately proceed on the two alternative theories
of recovery embodied in breach of contract and quantum meruit
claims, neither claim is preempted by the Copyright Act and
subject to dismissal on the present motion.
C.

FTA’s Unjust Enrichment Claim (Count III).

“[A] claim for unjust enrichment requires . . . that a
plaintiff prove that he or she conferred a benefit upon the
opposing party and that the retention of that benefit would be
unjust.”

Durette v. Aloha Plastic Recycling, Inc., 105 Haw. 490,

504, 100 P.3d 60, 74 (2004).

If the benefit is “unjust” purely

because a party is making unlicensed use of a copyrighted
material, then the unjust enrichment claim may be preempted by
the Copyright Act.

See e.g., Del Madera Properties v. Rhodes &

Gardner, Inc., 820 F.2d 973, 977 (9th Cir. 1987) (holding that an
unjust enrichment claim based on the “ promise . . . not to use
[copyrighted material]” was preempted).

However, the unjust

character of the retention in this case is based on Highway Inn’s
alleged promise to pay.

Indeed, FTA specifically grounds its

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unjust enrichment claim on the assertion that Highway Inn “has
failed to pay the amounts due and owing to FTA.”
Complaint ¶ 41, ECF No. 21.

First Amended

Therefore, in order to be successful

on its unjust enrichment claim, as with its breach of contract
and quantum meruit claims, FTA must demonstrate that Highway Inn
made an unfulfilled promise to pay for its use of FTA’s designs
and drawings.

As with the previous claims, this promise to pay

is the extra element sufficient to survive preemption under the
Copyright Act.
D.

FTA’s Tortious Interference with Contract Claim
(Count VI).

To prevail on a claim for tortious interference with
contract, a plaintiff must prove: “(1) a contract between the
plaintiff and a third party, (2) the defendant's knowledge of the
contract, (3) the defendant's intentional inducement of the third
party to breach the contract, (4) absence of justification on the
defendant's part, (5) the subsequent breach of the contract by
the third party, and (6) damages to the plaintiff.”

Beclar Corp.

v. Young, 7 Haw. App. 183, 193, 750 P.2d 934, 940 (1988)
(internal quotation omitted).

Highway Inn argues, without

elaboration, that “the tort of interference with contract is
generally regarded as preempted by the Copyright Act if the
subject matter of the contract is copyrightable subject matter.”
Reply Memo at 7, ECF No. 25.

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However, Highway Inn cites no authority that supports
such a remarkably broad assertion.

The cases that Highway Inn

cite involve claims alleging that a defendant interfered with a
contract by the very act of reproducing a copyrighted work.

See,

e.g., Harper & Row Publishers, Inc. v. Nation Enterprises, 723
F.2d 195 (2d Cir. 1983).

In other words, in those cases, the act

of reproduction prevented a plaintiff from obtaining business
relationships or completing contracts that it would have obtained
or completed absent copyright infringement.

Id. at 201 (when

plaintiffs “allege[d] that [defendants] committed a[n
interference] tort ‘by destroying the exclusive right of an
author and his licensed publishers to exercise and enjoy the
benefit of the pre-book publication serialization rights’”).
However, a tortious interference claim is not preempted “where
the defendant interferes with the plaintiff's contractual rights
through conduct other than reproduction, preparation,
distribution, performance, or display of the copyrighted work.”
Sturdza v. United Arab Emirates, 281 F.3d 1287, 1305 (D.C. Cir.
2002) (internal quotation omitted).

In this case, FTA alleges

that “Uyehara, JKI and Festival intentionally induced Highway Inn
to breach its contract with FTA in an attempt to remove FTA from
the Project[.]”

First Amended Complaint ¶ 54, ECF No. 21.

While FTA’s allegations of this Count are sparse, they
appear to involve inducement through means--such as direct

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communication--that do not involve the reproduction of the
copyrighted materials.

To prevail on their tortious interference

claim, therefore, FTA will have to prove this inducement element
separately from any violation of the Copyright Act.

This

provides the “extra element” required to survive preemption.

See

also MDY Indus., LLC v. Blizzard Entm't, Inc., 629 F.3d 928, 957
(9th Cir. 2010) (holding that “since [Plaintiff] seeks to enforce
contractual rights that are not equivalent to any of its
exclusive rights of copyright, the Copyright Act does not preempt
its tortious interference claim”).
E.

FTA’s Civil Conspiracy Claim (Count VII).

The Hawaii Supreme Court has defined a civil conspiracy
as “a concerted action” by “a combination of two or more persons
or entities . . . to accomplish a criminal or unlawful purpose,
or to accomplish some purpose not in itself criminal or unlawful
by criminal or unlawful means.”

Robert's Hawaii Sch. Bus, Inc.

v. Laupahoehoe Transp. Co., Inc., 91 Haw. 224, 252, 982 P.2d 853,
881 (1999) (citation omitted).
constitute a claim for relief.”

“Civil conspiracy does not alone
Id. at 60.

on the presence of unlawful purpose or means.

Instead, it depends
In this instance,

the predicate unlawful acts are Highway Inn’s alleged violation
of the Copyright Act, and the Co-Defendants alleged tortious
interference with contract.

Highway Inn’s argument is that FTA’s

civil conspiracy claim must be dismissed because the claims on

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which it is based are “fatally defective.”

Because Highway Inn

no longer challenges FTA’s copyright claim on the present motion,
and because FTA’s tortious interference claim is not preempted,
this court sees no reason to dismiss the civil conspiracy count.
V.

CONCLUSION
Highway Inn and the Co-Defendants’ motion to dismiss

Counts I, II, III, VI and VII of the First Amended Complaint is
denied.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, November 20, 2013.

/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge

Frost-Tsuji Architects v. Highway Inn, Inc. et al; Civ. No. 1300496 SOM/BMK; ORDER GRANTING MOTION TO DISMISS IN PART AND
DENYING IN PART
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