Troma Entertainment, Inc. v. Centennial Pictures Inc. et al
MEMORANDUM DECISION AND ORDER, granting in part and denying in part 64 Motion to Dismiss; granting in part and denying in part 65 Motion to Dismiss for Failure to State a Claim. Because personal jurisdiction is lacking, there is no basis for v enue in this district. The remaining question is whether the Court should dismiss this action, as Robbins and Lauter have requested, or transfer it to the Central District of California, which is a proper venue and in which defts are subject to personal jurisdiction. Pltff has seven days to advise the Court whether it has any position on this issue, failing which the action will be dismissed. (Ordered by Judge Brian M. Cogan on 4/09/2012) c/m by chambers. (Galeano, Sonia)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
TROMA ENTERTAINMENT, INC.,
DECISION AND ORDER
CENTENNIAL PICTURES INC., et al.,
IN CLERK'S OFFICE
COGAN, District Judge.
Defendants prose have moved to dismiss this copyright infringement action on numerous
grounds, principally lack of personal jurisdiction or improper venue. For the reasons set forth
below, the motions are granted in part.
Viewing the facts in the light most favorable to plaintiff, see Thomas v. Ashcroft, 470
F.3d 491,495 (2d Cir. 2006); A.l. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir.
1993); Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55,57 (2d Cir. 1985), defendants
engaged in a rather brazen theft of plaintiff's intellectual property.
Plaintiff, a New York corporation, is the author or exclusive distributor of two popular,
cult, "spoof' films called "Citizen Toxie, Toxic Avenger IV," and "Poultrygeist, Night of the
Chicken Dead" (together, the "Films"). Plaintiff has contacts all over the world with film
distributors, including, as most relevant to this action, Germany, and has entered into periodic
license agreements for the Films in various geographic markets.
In September of 2009, defendant Lauter, a California resident, who operates through a
d/b/a called "Pan Global Entertainment," represented to a German company called Intravest
Beitelgungs GMBH ("Silverline") that he had the German distribution rights for the Films. In
fact, he had no such rights at all. There was not even a colorable basis for him to claim that he
did. But Silverline entered into a contract with him, taking an assignment of his German
distribution rights, based on Lauter's representations of rights ownership in the agreement. To
get Silverline the Films, Lauter simply went to Amazon.com 's German website, Amazon. de,
bought the films for a nominal sum like any consumer would, and provided them to Silverline,
which ultimately broadcasted them in Germany.
Contemporaneously with Lauter's execution of the agreement with Silverline, Lauter's
partner-in-crime, the defendant Robbins, also a California resident, approached plaintiff by email
from Los Angeles in an effort to acquire the rights. Robbins did not tell plaintiff that Lauter had
conveyed or was about to convey rights that he did not possess. He merely represented that he
and his partner had a contact with a Gennan company that might be willing to buy a license for
the German exhibition of the Films. After much back and forth, plaintiff sent Robbins an email
authorizing him not to enter into a deal with the unnamed German company, but to hold himself
out as agent for plaintiff so that he could obtain a bid for the Films and present the bid to
plaintiff for its approval. The email provided that if plaintiff accepted whatever deal Robbins
might present, Robbins would get a percentage of the licensing fee. At no time did Troma either
ratify the deal that Lauter had made- indeed, it did not even know of that deal- nor did it grant
Robbins any discretion in finalizing terms for such a deal.
Robbins and Lauter attempted to portray this limited authority to Silverline as an absolute
right to grant it a license to exhibit the Films in Germany, but Silverline became increasingly
ding unqualified proof of their authority' in the form of a
susptctous and began eman
Nevertheless, Silverline had
commumcat"10n "rom plaintiff• which plaintiff had not given.
exhibited the Films in Germany and ended up paymg some or
all fthe consideration on which it
had agreed with Lauter to him or Robbins.
Plaintiff did not learn that the Films had been fraudulently licensed and exhibited in
Germany until nearly a year later. It then brought this action against Lauter and Robbins for
Robbins and Lauter are neither present nor doing business in New York. Plaintiff
therefore predicates personal jurisdiction on the long-arm provision ofN. Y. C.P.L.R.
§302(a)(3)(ii). That statute allows a court in New York to exercise personal jurisdiction over an
out-of-state defendant when the nondomiciliary "commits a tortious act without the state causing
injury to person or property within the state .. .if he ... expects or should reasonably expect the
act to have consequences in the state and derives substantial revenue from interstate or
international conunerce." Id.
For our purposes, the present case turns on whether defendants caused plaintiffs injury
"within the state." In the context of conunercial torts, the New York courts have made it clear
that the mere presence of the plaintiff in New York (generally, a New York resident or a business
headquartered in New York), is not sufficient, by itself, to deem the injury to have occurred in
New York. The bank accounts of the plaintiff may be in New York, and they may ultimately
have a smaller balance as a result of the nondomiciliary's tort, but that does not mean that the
injury occurred "within the state." See Fantis Foods v. Standard Importing Co., 49 N.Y.2d 317,
326, 425 N.Y.S.2d 783, 786-87 (1980) ("It has ... long been held that the residence or domicile
of the injured party within a State is not a sufficient predicate for jurisdiction, which must be
based upon a more direct injury within the State and a closer expectation of consequences within
the State than the indirect financial loss resulting from the fact that the injured person resides or
is domiciled there."). To suffer an injury in New York, there thus must be something more than
mere presence- some form of"plus factor." This plus factor may be that the defendant has
stolen employees who were working for the plaintiff in New York and possessed trade secrets,
see Sybron Corp. v. Wetzel, 46 N.Y.2d 197, 413 N.Y.S.2d 127 (1978), or, more commonly, that
sales that the plaintiff might have made to New York-based customers have been diverted to the
American Eutectic Welding Alloys Sales Co. v. Dvtron Alloys Corp., 439
F.2d 428 (2d Cir. 1971) (no "injury within the state" where lost sales were to customers in
Kentucky and Pennsylvania). But there must be something beyond the plaintiffs New York
At first blush, this case would appear to fall squarely within the rule that mere New York
residence is not enough to find an injury within the state. Lauter and Robbins did nothing in
New York nor did they steal any New York sales, whether actual or potential. They stole a sale
to a potential German customer, just as the defendants in American Eutectic stole sales to out-ofstate customers. Plaintiff has not and cannot point to any contacts concerning the sale to
Silverline between defendants and New York other than plaintiffs location.
Plaintiff, however, contends that the New York Court of Appeals' recent decision in
Penguin Group (USA), Inc. v. American Buddha, 16 N.Y.3d 295, 921 N.Y.S.2d 171(2011),
created a new and special rule applicable to copyright cases. Plaintiff contends that under this
decision, the Court of Appeals recognized copyrights as a "bundle of rights" possessed by the
copyright holder, and because those rights are attached to a New York plaintiffs residence, the
"injury within the State" occurs in New York when those rights are infringed. In effect, plaintiff
argues that any time there is a copyright infringement - anywhere in the world - and the
copyright is held by a New Yorker, then the defendant has caused an injury "within the state."
I agree that Penguin Group created a special rule attendant to copyrights - but I disagree
with plaintiff that the mere infringement of a copyright held by a New Yorker is sufficient to
trigger application of this rule. What Penguin Group was concerned with was not just
copyrights, but the use of the internet to sell or exhibit purloined copyrighted material to anyone,
including potential New York buyers. The defendant in Penguin Group had obtained copies of
plaintiffs copyrighted works and had uploaded them to the internet from its servers in Arizona
and Oregon, making those works available to not only the defendant's 50,000 subscribers, but
anyone with an internet coiUlection. In finding that this act had inflicted injury on the plaintiff
"within the state," the Court of Appeals held:
[I]t is clear that the Internet itself plays an important role in the jurisdictional
analysis in the specific context of this case. . ..
The crux of Penguin's copyright infringement claim is not merely the unlawful
electronic copying or uploading of the four copyrighted books. Rather, it is the
intended consequence of those activities- the instantaneous availability of those
copyrighted works on American Buddha's Web sites for anyone, in New York or
elsewhere, with an Internet colll1ection to read and download the books free of
!d. at 304-05,921 N.Y.S.2d at I 75-76 (emphasis added). The emphasized language
demonstrates that Penguin Group fits quite comfortably within those prior cases finding injury
within the state where sales to potential New York customers are diverted. It expands current
law, if at all, only by its assumption that since anyone can access the internet, New Yorkers can
too. The Court of Appeals confirmed this by noting that
the absence of any evidence of the actual downloading of Penguin's four works by
users in New York is not fatal to a finding that the alleged injury occurred in New
York. In Sybron, we made clear that a tort committed outside the state that was
likely to cause harm through the loss of business inside the state was sufficient to
establish personal jurisdiction regardless of whether damages were likely
recoverable or even ascertainable.
!d. at 306, 304 N.Y.S.2d at 176-77 (citation omitted).
The Court further made it clear that it was the peculiar combination of the nature of
copyright ownership and the use of the internet that required this special rule:
The concurrence of these two elements - the function and nature of the Internet
and the diverse ownership rights enjoyed by copyright holders situated in New
York -leads us to view this case as closer to Sybron than Fantis Foods....
[O]ur decision today does not open a Pandora's box allowing any nondomiciliary
accused of digital copyright infringement to be haled into a New York court when
the plaintiff is a New York copyright owner of a printed literary work.
!d. at 306-07,304 N.Y.S.2d at 177-78.
The last sentence quoted above precisely states plaintiff's theory and rejects it. This is
not an internet case. True, Lauter bought the Films from Amazon.de, but downloading is quite
different from uploading, the latter of which makes the copyrighted material available to any
purchaser or viewer, including New Yorkers. Lauter could have just as easily walked into a
retail outlet and bought the DVDs to accomplish the scheme alleged here. Indeed, if the
defendant in Penguin Group had somehow blocked internet access to the copyrighted works for
New Yorkers- allowing anyone in the world to view them except New Yorkers- or had refused
to permit sales to New Yorkers, it seems clear that the Court of Appeals would have reached the
For this reason, plaintiff's reference to the fact that it has German customers and that, in
fact, subsequent to defendants' contract with Silverline, it licensed the Films to a German
-distributor, does not alter the analysis. Nor does it matter that with regard to these German
customers, plaintiff uses the internet for sales and communications. Personal jurisdiction has to
be predicated on defendants' actions, not plaintiff's. One actual German customer is not the
same as some potential or actual New York customers who use the internet, and the loss of the
latter is required for long ann jurisdiction under C.P.L.R. §302(a)(3)(ii). Personal jurisdiction is
Because personal jurisdiction is lacking, there is no basis for venue in this district. See
28 U.S.C. § 1400(a). The remaining question is whether the Court should dismiss this action, as
Robbins and Lauter have requested, or transfer it to the Central District of California, which is a
proper venue and in which defendants are subject to personal jurisdiction. Plaintiff has seven
days to advise the Court whether it has any position on this issue, failing which the action will be
_____ ...L __ _._ ____.;4.._
Dated: Brooklyn, New York
April 9, 2012
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