Scholastic Inc. v. Daemmrich et al
Filing
41
MEMORANDUM AND OPINION re: 26 MOTION to Dismiss Complaint for Declaratory Relief. filed by Bob Daemmrich Photography, Inc., Bob Daemmrich. Defendants' motion to dismiss is GRANTED, and the Complaint is DISMISSED, without prejudice. The Clerk of Court is directed to terminate the open motion at Document 26 and close the case. SO ORDERED. (Signed by Judge Vernon S. Broderick on 6/8/17) (yv)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
SCHOLASTIC, INC.,
:
:
Plaintiff,
:
:
- against :
:
BOB DAEMMRICH and BOB DAEMMRICH :
PHOTOGRAPHY, INC.,
:
:
Defendants. :
:
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6/8/2017
15-CV-9550 (VSB)
MEMORANDUM & OPINION
Appearances:
Beth I. Goldman
Craig B. Whitney
Edward H. Rosenthal
Frankfurt, Kurnit, Klein & Selz PC
New York, New York
Counsel for Plaintiff
Christopher Seidman
Maurice J. Harmon
Harmon & Seidman LLC
Grand Junction, Colorado
Counsel for Defendants
VERNON S. BRODERICK, United States District Judge:
Before me is the motion of Defendants Bob Daemmrich and Bob Daemmrich
Photography, Inc. (“Defendants”) under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6)
to dismiss Plaintiff’s complaint for declaratory relief. (Doc. 26.) Because I find that Plaintiff’s
complaint is an improper anticipatory declaratory judgment action, Defendants’ motion is
GRANTED, and this case is dismissed without prejudice. Defendants’ concurrent request for
oral argument on their motion is denied as moot.
Background1
Scholastic is “the world’s largest publisher and distributor of children’s books and a
leader in educational publications and children’s media.” (Compl. ¶ 14.)2 Scholastic regularly
licenses stock images to include in its publications. (Id.) Bob Daemmrich, through his photo
agency or through Stock Photo Houses,3 supplies photographs to publishers for use in their
publications. (Id. ¶ 15.)
Scholastic has a relationship with each of the Stock Photo Houses, and has previously
entered into comprehensive agreements that permit Scholastic to use the images represented by
the Stock Photo Houses under specific terms and conditions, including the images at issue in this
case. (Id. ¶ 16.) “In the regular course of its business dealings with the Stock Photo Houses,
Scholastic provided the Stock Photo Houses with good faith, pre-publication estimates of the
type of use that would be made of a particular Stock Photo House-represented photograph,
including the estimated print run,” and “[t]he amount invoiced by the Stock Photo House and
paid by Scholastic would be based upon such estimates.” (Id. ¶ 17.) If Scholastic thereafter
exceeds some aspect of its estimates, the Stock Photo House is entitled to seek additional
payment from Scholastic on behalf of the photographer it represents. (Id. ¶ 18.) However, none
of the Stock Photo Houses has ever made a demand for payments related to the images
1
The following factual summary is drawn from the allegations of the complaint. I assume the facts alleged in the
complaint to be true. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 n.1 (2002). My references to the
complaint’s allegations should not be construed as a finding as to their veracity, and I make no such findings.
However, for purposes of the Rule 12(b)(1) motion, “jurisdiction must be shown affirmatively, and that showing is
not made by drawing from the pleadings inferences favorable to the party asserting it.” Morrison v. Nat’l Australia
Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (quoting APWU v. Potter, 343 F.3d 619, 623 (2d Cir. 2003)). “In
resolving a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) a district court may consider
evidence outside the pleadings.” Id.
2
“Compl.” refers to the Complaint for Declaratory Judgment, filed on December 7, 2015 (“Complaint”). (Doc. 1.)
3
“Stock Photo Houses” refers to Daemmrich’s agents, Corbis, Inc., Getty Images, Inc., Photo Edit, Inc., Stock,
Boston, Inc., and the Image Works, Inc. (Compl. ¶ 1.)
2
Daemmrich claims were infringed. (Id. ¶ 19.)
On November 30, 2015, Daemmrich’s counsel sent an email seeking an “audit” of
Scholastic’s use of 446 images licensed to Scholastic by the Stock Photo Houses. (Id. ¶ 20.)
The email included five separate spreadsheets listing the uses for each Stock Photo House, (id.
¶ 20 & n.1), and attached a six-month tolling agreement. The email also requested that
Scholastic “advise by December 10, 2015 if Scholastic will disclose its uses (print runs, image
size, geographic distribution area, textbook language, electronic uses) of Daemmrich images, and
sign the attached tolling agreement so that the parties may negotiate a settlement of Scholastic’s
infringements.” (Id. Ex. A.) The email noted that Daemmrich would fully cooperate with any
reasonable requests by Scholastic for more information from Daemmrich to evaluate these
claims. (Id.) Daemmrich also promised to provide registration certificate numbers and dates of
registration for the Corbis-licensed images as soon as Daemmrich received that information from
Corbis. (Id.) The email further stated that if Scholastic was “not interested in tolling and prefiling negotiations to resolve Daemmrich’s claims” that Scholastic should advise Daemmrich’s
counsel, who would “file a lawsuit forthwith.” (Id.) Finally, the email noted that if Daemmrich
did not hear from Scholastic by December 10, 2015, counsel would assume that Scholastic was
not interested in a pre-filing resolution and would “proceed with litigation in Daemmrich’s home
district,” which Scholastic presumes in the Complaint is the Western District of Texas.4 (Id.
¶¶ 21, 27, 29, Ex. A.)
Daemmrich’s email did not identify the basis for the assertion of copyright infringement
or include the copyright registration details for the images allegedly infringed upon. (Compl.
4
Daemmrich filed an action for copyright infringement against Scholastic in the Western District of Texas on
December 11, 2015. (See Pl.’s Opp. 2, 5.) “Pl.’s Opp.” refers to Plaintiff Scholastic Inc.’s Opposition to
Defendants’ Motion to Dismiss the Complaint. (Doc. 32.)
3
¶ 22.) In fact, in “many instances” Daemmrich did not identify the Scholastic publication in
which the images were allegedly used and/or the date of the publication. (Id.) According to
Scholastic, it is “possible” that Daemmrich’s copyright infringement claims include images used
in publications Scholastic is currently selling or intends to sell in the future. (Id. ¶ 24.)
As a result of the foregoing, Scholastic brought a claim for declaratory relief, including a
judgment declaring that Daemmrich has no legal basis to “audit” Scholastic’s use of its images
and a judgment declaring non-infringement. (Id. at 8.) Scholastic further asserts that it has
numerous defenses to Daemmrich’s copyright infringement claims. (Id. ¶ 30.)
Procedural History
Plaintiff commenced this action by filing its Complaint for declaratory relief on
December 7, 2015. (Doc. 1.) On January 6, 2016, Defendants submitted a letter requesting a
pre-motion conference on their anticipated motion to dismiss, (Doc. 9), and on January 11, 2016,
Plaintiff filed its letter in response, (Doc. 12). I set a pre-motion conference for February 25,
2016, (Doc. 13), but after receiving a joint request on February 24, 2016 to adjourn the
conference to give the parties “the opportunity to pursue settlement discussions and possible
mediation,” (Doc. 20), I adjourned the pre-motion conference until April 14, 2016, (Doc. 21.)
After receiving two letters from Defendants attaching supplemental authority in advance
of the pre-motion conference, (Docs. 22, 23), I held the pre-motion conference on April 14,
2016, (see Dkt. Entry Apr. 14, 2016). In accordance with the briefing schedule set during that
conference, Defendants filed their motion to dismiss on May 16, 2016, (Docs. 26–29), Plaintiff
filed its opposition on June 14, 2016, (Docs. 30–32), and Defendants filed their reply on June 24,
2016, (Docs. 33–34). Defendants also filed five notices of supplemental authority, on July 25,
2016, October 21, 2016, December 5, 2016, April 24, 2017, and May 31, 2017. (Docs. 35–39.)
4
Legal Standards
A.
First-Filed Rule
Under the first-filed rule, “in determining the proper venue, ‘where there are two
competing lawsuits, the first suit should have priority.’” N.Y. Marine & Gen. Ins. Co. v. Lafarge
N. Am., Inc., 599 F.3d 102, 112 (2d Cir. 2010) (alteration omitted) (quoting D.H. Blair & Co. v.
Gottdiener, 462 F.3d 95, 106 (2d Cir. 2006)). The first-filed rule does not require identical
lawsuits, but rather applies when there are “substantially similar parties and claims” before both
courts. In re Cuyahoga Equip. Corp., 980 F.2d 110, 116–17 (2d Cir. 1992). In according
deference to the principles of judicial administration and conservation of resources, the first-filed
rule considers that “[b]ecause parties ‘should be free from the vexation of concurrent litigation
over the same subject matter,’ there is a strong presumption that a later lawsuit will be dismissed
in favor of the first-filed lawsuit.” Dish Network, L.L.C. v. Am. Broad. Cos., Inc., No. 12 Civ.
4155(LTS)(KNF), 2012 WL 2719161, at *2 (S.D.N.Y. July 9, 2012) (quoting Adam v. Jacobs,
950 F.2d 89, 93 (2d Cir. 1991)).
However, this presumption “is not to be applied in a ‘rigid’ or ‘mechanical’ way.” Id.
(quoting Dornoch Ltd. v. PBM Holdings, Inc., 666 F. Supp. 2d 366, 369 (S.D.N.Y. 2009)). In
fact, the presumption is adequately rebutted “(1) where the ‘balance of convenience’ favors the
second-filed action, and (2) where ‘special circumstances’ warrant giving priority to the second
suit.” Emp’rs Ins. of Wausau v. Fox Entm’t Grp., Inc., 522 F.3d 271, 275 (2d Cir. 2008)
(internal citations omitted). Special circumstances can include situations where “the first-filed
lawsuit is an improper anticipatory declaratory judgment action.” Id. “An improper anticipatory
action is one made under the apparent threat of a presumed adversary filing the mirror image of
that suit in another court.” Dish Network, 2012 WL 2719161, at *2 (quoting Reliance Ins. Co. v.
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Six Star, Inc., 155 F. Supp. 2d 49, 55 (S.D.N.Y. 2001)). These anticipatory filings “often take
the form of declaratory judgments.” Ontel Prods., Inc. v. Project Strategies Corp., 899 F. Supp.
1144, 1150 (S.D.N.Y. 1995). However, the “mere fact that an action is brought as one for a
declaratory judgment ‘does not necessarily mean that it constitutes an anticipatory filing for
purposes of an exception to the first filed rule.’” Id. (alterations omitted) (quoting 800-Flowers,
Inc. v. Intercontinental Florist, Inc., 860 F. Supp. 128, 132 (S.D.N.Y. 1994)).
B.
Declaratory Judgment Act
The Declaratory Judgment Act provides that “[i]n a case of actual controversy within its
jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may
declare the rights and other legal relations of any interested party seeking such declaration,
whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). The appropriateness of
relief is within the district court’s discretion. See Jenkins v. United States, 386 F.3d 415, 417 (2d
Cir. 2004); see also Wilton v. Seven Falls, Co., 51 U.S. 277, 287 (1995) (the Declaratory
Judgment Act “confers a discretion on the courts rather than an absolute right upon the litigant”
(quoting Public Serv. Comm’n of Utah v. Wykoff Co., 344 U.S. 237, 241 (1952))). “The Second
Circuit has provided two factors to help district courts properly exercise the broad discretion
conferred by the Declaratory Judgment Act: ‘(1) when the judgment will serve a useful purpose
in clarifying and settling the legal relations in issue; and (2) when it will terminate and afford
relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.’” Dish
Network, 2012 WL 2719161, at *3 (quoting Bentley v. The Wellpoint Cos., Inc., No. 11 Civ.
8963(CM), 2012 WL 546991, at *4 (S.D.N.Y. Feb. 17, 2012)). In making this decision, a
district court may consider “equitable, prudential, and policy arguments.” MedImmune, Inc. v.
Genentech, Inc., 549 U.S. 118, 136 (2007).
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An action seeking declaratory relief can be deemed anticipatory and denied the
presumption of priority under the first-filed rule where the declaratory judgment action was
“filed in response to a direct threat of litigation that gives specific warnings as to deadlines and
subsequent legal action.” Dish Network, 2012 WL 2719161, at *4 (quoting Emp’rs Ins. of
Wausau, 522 F.3d at 276). “[I]f a court finds that a declaratory judgment action was brought in
anticipation of the coercive suit for the purpose of gaining ‘home field advantage,’ the coercive
suit is given precedence.” Id. at *3 (quoting Reliance Ins., 935 F. Supp. at 478). Furthermore,
“courts have found no ‘useful purpose’ and declined to exercise jurisdiction over a declaratory
judgment complaint where a coercive suit exists that will settle the legal issues for which
declaratory judgment was sought.” Id. at *4 (citing Amusement Indus. v. Stern, 693 F. Supp. 2d
301, 311 (S.D.N.Y. 2010) (citing cases)); cf. Cont’l Cas. Co. v. Coastal Sav. Bank, 977 F.2d 734,
737 (2d Cir. 1992) (useful purpose served where legal and factual issues in declaratory judgment
action and state court litigations were different).
Discussion
To be certain, a declaratory judgment action is “always, to a degree, anticipatory.” Dish
Network, 2012 WL 2719161, at *4. Here, however, I find that Scholastic’s filing of the current
declaratory judgment action was, in fact, specifically guided by its anticipation of an impending
legal action and, therefore, falls within the “special circumstances” exception to the first-filed
rule.
As an initial matter, Scholastic’s declaratory judgment action was brought a mere week
after receiving Daemmrich’s email, and just three days before the December 10, 2015 deadline
given by Daemmrich after which, absent response from Scholastic, Daemmrich would “proceed
with litigation in Daemmrich’s home district” by filing a lawsuit. (See Compl. Ex. A.) See Dish
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Network, 2012 WL 2719161, at *4 (“Dish filed its complaint less than 24 hours after the article
was published, bolstering the inference that Dish took the article’s claims of impending coercive
litigation seriously.”). Although Daemmrich’s counsel did not give a precise date by which he
would file a copyright infringement lawsuit, his email was clear that such a lawsuit would be
filed in short order, and Scholastic understood it as an “explicit threat to ‘file a lawsuit
forthwith.’” (See Compl. ¶ 27, Ex. A.) In fact, the email even identified the forum in which the
lawsuit would be filed by pointing to Daemmrich’s home district, which Scholastic itself
identifies as “the Western District of Texas.” (See id. ¶¶ 21, 29.) See Ontel, 899 F. Supp. at
1150 (a filing is improper “where it attempts to exploit the first-filed rule by securing a venue
that differs from the one that the filer’s adversary would be expected to choose”).
Finally, the length of the Complaint—ten pages, inclusive of an attached exhibit—has
been found in similar circumstances to be “indicative of hasty preparation.” See Dish Network,
2012 WL 2719161, at *4 (length and content of complaint “indicative of hasty preparation”
where it was thirteen pages long, failed to name parties who held copyrights, did not list relevant
copyrights or contractual provisions at issue, and only described offending services in conclusory
fashion). Here, although referring to the spreadsheets submitted by Daemmrich in connection
with its email to Scholastic and charging Daemmrich with failing to provide information as to
the copyright registrations, the bases for infringement, or, in some instances, the publications in
which the photographs appear, (see Compl. ¶¶ 3, 20 n.1, 22), Scholastic fails to specifically
identify, among other things, (1) any of Daemmrich’s photographs it purportedly used, (2) any of
its publications alleged to contain Daemmrich’s photographs, (3) the purported licenses it has
with the Stock Photo Houses that are at issue, and (4) the specific limitations of the licenses of
the Stock Photo Houses that it may have violated. This is clearly indicative of a hastily prepared
8
complaint. Additionally, the lawsuit in Texas will settle the legal issues for which declaratory
judgment is being sought in this District. Therefore, I find that Scholastic’s Complaint was an
improper anticipatory filing, and I dismiss this action without prejudice to Scholastic.5
Conclusion
For the foregoing reasons, Defendants’ motion to dismiss is GRANTED, and the
Complaint is DISMISSED, without prejudice. The Clerk of Court is directed to terminate the
open motion at Document 26 and close the case.
SO ORDERED.
Dated: June 8, 2017
New York, New York
______________________
Vernon S. Broderick
United States District Judge
5
Scholastic also notes that “some of the Stock Photo House licenses . . . contain New York forum-selection
clauses.” (Pl.’s Opp. at 2-3.) Scholastic does not identify how many licenses contained forum selection clauses, but
does contend that the complaint in the Texas action omitted the Corbis-issued licenses referenced in Daemmrich’s
email “presumably because the forum-selection clauses in the agreements between Scholastic and Corbis require
those uses to be litigated in New York.” (Id. at 20 n.8.) Scholastic argues that non-infringement claims based on
those licenses “must be adjudicated in this Court.” (Id. at 3.) As noted above, Scholastic did not identify in its
Complaint the specific licenses it had with the Stock Photo Houses or the terms of those licenses, including the
referenced forum selection clauses contained in the Corbis-issued licenses. In any event, I find that any arguments
related to forum selections clauses would be more properly considered in the Western District of Texas, the court
that will be deciding the majority of the claims and may hear any appropriate counterclaims.
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