Scott Breuer Construction, Inc. v. Koch et al

Filing 46

ORDER -Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS HEREBY ORDERED THAT: The motion for judgment on the pleadings of defendants Dennis and Linda Koch 21 is GRANTED. The motion for judgment on the pleadin gs of defendant Tri County Lumber, Inc. 41 is GRANTED.The motion for sanctions of defendants Dennis and Linda Koch against attorneys Gavin P. Craig and Song Lo 26 is DENIED. The second amended complaint 16 is DISMISSED WITH PREJUDICE. LET JUDGMENT BE ENTERED ACCORDINGLY. (Written Opinion). Signed by Judge Patrick J. Schiltz on 06/26/14. (BJS)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
SCOTT BREUER CONSTRUCTION, INC.,
d/b/a Scott Breuer Homes,

Case No. 12-CV-3182 (PJS/JSM)

Plaintiff,
ORDER
v.
DENNIS KOCH; LINDA KOCH; and TRI
COUNTY LUMBER, INC., a Minnesota
Corporation,
Defendants.

Song Lo, SONG LO LAW OFFICE; and Gavin P. Craig, GAVIN P. CRAIG, P.A., for
plaintiff.
James W. Hess and Brian R. Aho, HESS LAW OFFICE, P.A., for defendants Dennis
Koch and Linda Koch.
Adam P. F. Gislason, SNYDER GISLASON FRASIER LLC, for defendant Tri County
Lumber, Inc.
Plaintiff Scott Breuer Construction, Inc. (“SBC”) provides custom home design,
construction, and remodeling services. See Second Am. Compl. ¶ 3 [ECF No. 16]. In 2004,
defendants Dennis and Linda Koch contacted SBC and inquired about building a home using a
copyrighted design created by SBC, but then told SBC that they had decided not to use SBC’s
services. Id. ¶¶ 13-16. Four years later, Scott Breuer — president of SBC — drove past a home
that looked suspiciously like the copyrighted design about which the Koches had inquired. Upon
investigation, Breuer learned that the Koches lived in the home. Id. ¶ 17. Suspecting copyright
infringement, Breuer asked for permission to see the interior of the house and for copies of the
house’s floor plan, but the Koches refused his requests. Id. ¶ 20.

Another four years passed. Then, in December 2012, SBC sued the Koches for copyright
infringement. SBC later amended its complaint to include defendant Tri County Lumber, Inc.
(“Tri County Lumber”), the company that allegedly provided the Koches with the architectural
plans for the house. Id. ¶ 26.
This matter is before the Court on defendants’ motions for judgment on the pleadings
pursuant to Fed. R. Civ. P. 12(c). See ECF Nos. 21 & 41. Defendants argue that SBC’s claim is
barred by the statute of limitations, which requires that copyright claims be “commenced within
three years after the claim accrued.” 17 U.S.C. § 507(b). Defendants are plainly correct. The
parties agree that the “discovery” rule applies in determining when a claim accrues for purposes
of § 507(b). See ECF No. 23 at 6; ECF No. 31 at 4. “Under this rule, a cause of action accrues
and the statute of limitations begins to run when the plaintiff discovers, or with due diligence
should have discovered, the injury which is the basis of the litigation.” Comcast of Ill. X v.
Multi-Vision Elecs., Inc., 491 F.3d 938, 944 (8th Cir. 2007). Accordingly, SBC’s copyright
claim accrued on the date that SBC discovered (or reasonably should have discovered) that its
copyright had been infringed.
For the reasons stated on the record at the hearing on defendants’ motions, the Court
concludes that SBC discovered “the injury which is the basis of the litigation” no later than
December 2008. Id. SBC knew by December 2008 that:
•

the Koches had visited SBC’s model home “numerous times” and had said that
the model home was “exactly what they wanted,” Second Am. Compl. ¶ 14;

•

SBC had provided the Koches with an “information packet” regarding the model
home, id. ¶ 15;

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•

the Koches lived in a home that from the outside “appeared to be almost identical”
to the model home, and the portion of the interior of the home that Breuer was
able to see from the front door included “elements” of the copyrighted design,
such as angled stairs that were unique to SBC’s floor plans, id. ¶ 17; accord
Breuer Aff. ¶ 17 [ECF No. 16-2]1; and

•

the Koches refused to give Breuer access to the inside of their home, refused to
provide Breuer with floor plans to their home, and refused to provide SBC with
information about who built their home, see Second Am. Compl. ¶ 20; Breuer
Aff. ¶¶ 17-20.

Not surprisingly, Scott Breuer had “a strong suspicion” by December 2008 that the Koches had
infringed SBC’s copyright. Breuer Aff. ¶ 17. (Indeed, Breuer sent a letter to the Koches on
November 21, 2008, in which he explicitly threatened to “fil[e] a copyright lawsuit against you in
Federal Court.” Hess Aff. Ex. 1 [ECF No. 24-1]; accord Breuer Aff. ¶ 18.2)
Without question, then, SBC was aware of the “injury which is the basis of the litigation”
by December 2008. Comcast of Ill. X, 491 F.3d at 944. Also without question, SBC had
sufficient information by December 2008 to plead a plausible claim of copyright infringement.

1

The affidavit of Scott Breuer was filed as an attachment to SBC’s second amended
complaint. Although “‘matters outside the pleading may not be considered in deciding a Rule 12
motion . . . documents necessarily embraced by the complaint are not matters outside the
pleading.’” Ashanti v. City of Golden Valley, 666 F.3d 1148, 1151 (8th Cir. 2012) (quoting
Enervations, Inc. v. Minn. Mining & Mfg. Co., 380 F.3d 1066, 1069 (8th Cir. 2004)). Such
documents embraced by the complaint include “materials attached to the complaint.” C.H.
Robinson Worldwide, Inc. v. Lobrano, 695 F.3d 758, 764 (8th Cir. 2012) (quotation omitted).
Therefore, the Court has considered the Breuer affidavit in ruling on defendants’ motions for
judgment on the pleadings.
2

The Breuer affidavit refers to the November 21, 2008 letter and says that it is attached to
the affidavit as Exhibit 1. Breuer Aff. ¶ 18. It appears, however, that SBC’s attorneys failed to
attach the letter to the affidavit. Because the letter is technically not part of the “materials
attached to the complaint,” C.H. Robinson, 695 F.3d at 764, the Court has not relied on it in
granting defendants’ motions. The Court notes, however, that it is uncontested that the letter
referred to in the Breuer affidavit is attached as Exhibit A to the November 15, 2013 affidavit of
James W. Hess. See ECF No. 24-1.
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SBC conceded at the hearing on defendants’ motions that it learned nothing more about the
alleged infringement after December 2008.3 Logically, then, if SBC was able to plead a plausible
claim of copyright infringement on December 26, 2012 (as it did), SBC was able to plead the
exact same plausible claim of copyright infringement in December 2008. Under § 507(b), this
four-year delay — a delay for which SBC offers no explanation or excuse — is fatal to SBC’s
copyright claim. Defendants’ motions for judgment on the pleadings are therefore granted.
The Koches also move, pursuant to Fed. R. Civ. P. 11, for sanctions against SBC’s
counsel for filing a copyright claim that was obviously time barred and for continuing to pursue
that claim after repeatedly being told that it was time barred. See ECF No. 26. The Court agrees
that, for the reasons described above, no reasonable attorney could have concluded at the time
that the copyright claim was filed against the Koches that the claim was “warranted by existing
law or by a nonfrivolous argument for extending, modifying, or reversing existing law . . . .”

3

It appears that SBC may not have learned about Tri County Lumber’s involvement in the
alleged copyright infringement until after SBC filed its original complaint, as Tri County Lumber
was not named as a defendant until the second amended complaint was filed. Nevertheless,
SBC’s claim against Tri County Lumber must be dismissed for the same reason that its claim
against the Koches must be dismissed. Under the discovery rule, the statute of limitations begins
to run on the date that the injury was discovered or should have been discovered with due
diligence. See Comcast of Ill. X, 491 F.3d at 944; Union Pacific R.R. Co. v. Beckham, 138
F.3d 325, 330 (8th Cir. 1998). As explained above, SBC discovered its injury (the alleged
infringement of its copyrighted design) by December 2008. Accordingly, SBC was required to
pursue any copyright claims based on that injury within three years of December 2008, even if a
particular defendant’s role in causing that injury was not discovered until sometime later. Cf.
Goodhand v. United States, 40 F.3d 209, 212 (7th Cir. 1994) (describing the “general principle of
limitations law” that “[t]he statute of limitations begins to run upon the discovery of the injury,
even if the full extent of the injury is not discovered until much later.”); Fid. Nat’l Title Ins.
Co. of N.Y. v. Howard Sav. Bank, No. 02 C 643, 2004 WL 2106610, at *10 (N.D. Ill. Sep. 20,
2004) (“[T]he limitations period begins to run when the plaintiff knows his injury is wrongfully
caused, not when he realizes he has a cause of action against a particular defendant.”).
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Fed. R. Civ. P. 11(b)(2). Thus, both of SBC’s attorneys — Gavin P. Craig and Song Lo —
signed the complaint in violation of Rule 11.
Under Rule 11(c)(2), however, the Koches were required to serve their motion for
sanctions on Craig and Lo at least 21 days prior to filing that motion with the Court. There is no
evidence in the record that the Koches did so. Instead, the Koches (through their attorneys)
mailed Craig and Lo several letters requesting that SBC’s claims be withdrawn and asserting
that, should those claims not be withdrawn, the Koches would pursue Rule 11 sanctions. See
Hess Aff. Exs. B-G [ECF No. 29-1]. These informal demands do not satisfy the requirement of
Rule 11(c)(2) that the “motion for sanctions” itself be served on the parties at least 21 days prior
to being filed with the Court. See Roth v. Green, 466 F.3d 1179, 1191-93 (10th Cir. 2006);
Gordon v. Unifund CCR Partners, 345 F.3d 1028, 1030 (8th Cir. 2003); VanDanacker v. Main
Motor Sales Co., 109 F. Supp. 2d 1045, 1054-55 (D. Minn. 2000). Because the Koches did not
comply with the procedural requirements of Rule 11, their motion for sanctions must be denied.
ORDER
Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS
HEREBY ORDERED THAT:
1.

The motion for judgment on the pleadings of defendants Dennis and Linda Koch
[ECF No. 21] is GRANTED.

2.

The motion for judgment on the pleadings of defendant Tri County Lumber, Inc.
[ECF No. 41] is GRANTED.

3.

The motion for sanctions of defendants Dennis and Linda Koch against attorneys
Gavin P. Craig and Song Lo [ECF No. 26] is DENIED.
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4.

The second amended complaint [ECF No. 16] is DISMISSED WITH
PREJUDICE.

LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: June 26 , 2014

s/Patrick J. Schiltz
Patrick J. Schiltz
United States District Judge

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