J&J SPORTS PRODUCTIONS, INC. v. SANTILLAN, et al
Filing
21
MEMORANDUM OPINION & RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE L. PATRICK AULD signed on 12/28/2012, recommending that Defendant Lucia Santillan's Motion to Dismiss (Docket Entry 17 ) be granted in part and denied in part, in that the Court should dismiss the claim of conversion with prejudice, but should permit Plaintiff to amend the Cable Act claims. (Daniel, J)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
J & J SPORTS PRODUCTIONS, INC., )
)
Plaintiff,
)
)
v.
)
)
LUCIA SANTILLAN, individually
)
and d/b/a LA REGIA LATINA
)
MEXICAN RESTAURANT; and LA
)
REGIA CORP., a business entity )
d/b/a LA REGIA LATINA MEXICAN
)
RESTAURANT,
)
)
Defendants.
)
1:11CV1141
MEMORANDUM OPINION AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
The instant matter comes before the undersigned United States
Magistrate Judge on Defendant Lucia Santillan’s Motion to Dismiss
(Docket Entry 17). (See Docket Entry dated Aug. 28, 2012; see also
Docket Entries dated Dec. 30, 2011, and Mar. 1, 2012 (designating
case as subject to handling pursuant to this Court’s Amended
Standing Order No. 30 and assigning case to undersigned Magistrate
Judge, respectively).)1
For the reasons that follow, the Court
should grant the instant Motion in part and deny it in part.
1
Under said Standing Order, “[t]he magistrate judge to whom
the case is assigned will rule or make recommendations upon all
motions, both non-dispositive and dispositive.” M.D.N.C. Amended
Standing Order No. 30, ¶ 2; see also M.D.N.C. LR72.2 (“Duties and
cases may be assigned or referred to a magistrate judge . . . by
the clerk in compliance with standing orders . . . .”).
BACKGROUND
Plaintiff,
a
corporation
based
in
Campbell,
California,
brought the instant action against Defendant Lucia Santillan,
individually
and
doing
business
as
La
Regia
Latina
Mexican
Restaurant, a commercial establishment located in Durham, North
Carolina (“the Establishment”), as well as La Regia Corp., the
corporate owner of the Establishment.
(Docket Entry 1, ¶¶ 5-7.)
According to the Complaint, Plaintiff had exclusive nationwide
distribution rights to the program The Event: Manny Pacquiao v.
Joshua Clottey, WBO Welterweight Championship Fight Program (“the
Program”), airing on March 13, 2010.
further
alleges
exhibited
it
authorization.
Complaint
that
at
Defendants
the
relief
intercepted
Establishment
(Id. ¶ 12.)
seeks
(Id. ¶ 9.)
the
without
The Complaint
Program
and
Plaintiff’s
Based on these allegations, the
under
47
U.S.C.
§§
553
and
605
(collectively, “the Cable Act”) as well as for conversion under
North Carolina law.
(See id. ¶¶ 8-25.)
The Clerk of Court entered defaults against Defendants on
March 19, 2012.
(Docket Entry 9.)
The Court thereafter granted
Defendant Santillan’s Motion to Set Aside Default (Docket Entry
13).
(Docket Entry 16.)
Defendant Santillan subsequently filed
the instant Motion to Dismiss (Docket Entry 17), to which Plaintiff
has responded (Docket Entry 19) and Defendant Santillan has replied
(Docket Entry 20).
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DISCUSSION
Under Federal Rule of Civil Procedure 12(b)(6), a complaint
falls short if it does not “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (emphasis
its face.’”
added) (internal citations omitted) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)).
This standard “demands more
than an unadorned, the-defendant-unlawfully-harmed-me accusation.”
Id.
In other words, “the tenet that a court must accept as true
all of the allegations contained in a complaint is inapplicable to
legal conclusions.
of
action,
suffice.”
Threadbare recitals of the elements of a cause
supported
Id.
by
mere
conclusory
statements,
do
not
“[D]etermining whether a complaint states on its
face a plausible claim for relief and therefore can survive a Rule
12(b)(6) motion . . . requires the reviewing court to draw on its
judicial experience and common sense.”
Francis v. Giacomelli, 588
F.3d 186, 193 (4th Cir. 2009).
A. Cable Act Counts
In
the
instant
case,
Plaintiff’s
Complaint
alleges
following concerning Defendant Santillan:
6.
Plaintiff is informed and believes, and alleges
thereon that defendant, Lucia Santillan, is an owner,
and/or operator, and/or licensee, and/or permitee [sic],
and/or person in charge, and/or an individual with
dominion, control, oversight and management of the
commercial establishment doing business as La Regia
Latina Mexican Restaurant, 2601 Apex Hwy 55, Durham, NC
27713.
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the
. . .
12. With full knowledge that the Program was not to be
intercepted,
received
and
exhibited
by
entities
unauthorized to do so, each and every of the above named
defendants and/or their agents, servants, workmen or
employees did unlawfully publish, divulge and exhibit the
Program at the time of its transmission . . . . Said
unauthorized interception, publication, exhibition and
divulgence by each of the defendants were done willfully
and for purposes of direct or indirect commercial
advantage or private financial gain.
(Docket Entry 1, ¶¶ 6, 12.)
Liability under the Cable Act can
extend to an individual defendant who has “the right and ability to
supervise the violations and a strong financial interest in the
activity . . . .”
Joe Hand Promotions, Inc. v. Angry Ales, Inc.,
Civil Case No. 3:06cv73, 2007 WL 3226451, at *4 (W.D.N.C. Oct. 29,
2007) (unpublished) (citing J & J Sports Prods., Inc. v. Benson,
No. CV-06-119 (CPS), 2007 WL 951872, at *7 (E.D.N.Y. Mar. 27, 2007)
(unpublished)).
As to the allegations necessary to support a claim against an
individual under the Cable Act, “a division of authority” exists,
J & J Sports Prods., Inc. v. MayrealII, LLC, 849 F. Supp. 2d 586,
590 (D. Md. 2012) (comparing cases), a fact recognized by the
Parties (see Docket Entry 18 at 3; Docket Entry 19 at 3).
largely
agree
that,
in
order
to
show
individual
Courts
liability,
“[a]llegations of ownership of the establishment, without more, are
insufficient to establish personal liability under either section
[553 or 605].”
J & J Sports Prods., Inc. v. Dougherty, Civil
Action No. 12-cv-1255-JD, 2012 WL 2094077, at *2 (E.D. Pa. June 11,
-4-
2012) (unpublished); see also J & J Sports Prods., Inc. v. Centro
Celvesera La Zaona, LLC, No. 5:11-CV-00069-BR, 2011 WL 5191576, at
*3 (E.D.N.C. Nov. 1, 2011) (unpublished) (rejecting individual
liability under these circumstances:
“The only allegation in the
complaint that pertains to [the defendant] individually is the
allegation of his being the principal of the corporate defendant,
which defendants admit.
No allegation concerns his participation
in the offending conduct or obtaining any direct financial benefit
from that conduct.”); Joe Hand Promotions, Inc. v. Coaches Sports
Bar, 812 F. Supp. 2d 702, 703 (E.D.N.C. 2011) (“Apart from stating
that
[the
individual
establishment],
the
defendant]
complaint
is
does
the
not
principal
mention
him.
of
[the
Absent
allegations that he authorized, directed, or supervised the illegal
interception, [the plaintiff] cannot establish [the individual
defendant’s] individual liability.”).
On the other hand, courts generally find allegations that an
owner or operator held supervisory authority over the establishment
at issue sufficient to assert individual liability. See, e.g., Joe
Hand Promotions, Inc. v. Phillips, No. 06 Civ. 3624(BSJ)(JCF), 2007
WL 2030285, at *3 (S.D.N.Y. July 17, 2007) (unpublished) (finding
liability available where complaint alleged individual defendant
was
“principal
and
sole
proprietor
of
[establishment],
had
supervisory capacity and control over its activities on the day [in
question],
and
received
a
financial
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benefit
from
them”),
recommendation adopted, 2007 WL 2245351 (S.D.N.Y. Aug. 3, 2007)
(unpublished); see also J & J Sports Prods., Inc. v. Tellez, No.
11-CV-2823, 2011 WL 6371521, at *3-4 (E.D.N.Y. Dec. 20, 2011)
(unpublished) (sustaining claim where complaint alleged individual
defendant “‘is an officer, director, shareholder and/or principal
of’ [establishment] and ‘the individual with supervisory capacity
and control over the activities occurring within the establishment
on [date in question]’”); J & J Sports Prods., Inc. v. Benson, No.
CV-06-1119 (CPS), 2007 WL 951872, at *1, *7 (E.D.N.Y. Mar. 27,
2007) (unpublished) (allowing individual liability claim where
complaint alleged individual defendants were “officers, directors,
shareholders
and/or
principals
of
and
doing
business
as
[establishment] . . . [and] were the individuals with supervisory
capacity
and
control
over
activities
occurring
within
the
Establishment on [date in question]”).
However, where a complaint does not allege that an individual
defendant possessed supervisory capacity or participated directly
in unlawful conduct, courts have gone in different directions.
Some have treated an allegation of ownership and boilerplate
language about participation as to all defendants or their agents,
such as set forth in the instant Complaint (see Docket Entry 1,
¶ 12), as sufficient to survive a motion to dismiss.
See, e.g.,
J & J Sports Prods., Inc. v. L & J Grp., LLC, No. RWT 09cv3118,
2010
WL
816719,
at
*2
(D.
Md.
-6-
Mar.
4,
2010)
(unpublished)
(declining to dismiss where complaint alleged individual defendants
were principals and co-owners of establishment and that “each and
every of the above named Defendants and/or their agents, servants,
workmen or employees did unlawfully publish, divulge and exhibit
the Program”).
Others require more.
See, e.g., MayrealII, 849 F.
Supp. 2d at 591-92 (finding allegations insufficient to support
individual
liability
distinguishing
between
where
the
complaint
individual
alleged,
defendants
“without
and
[the
establishment], that ‘[d]efendants and/or their agents, servants,
workmen or employees did unlawfully publish, divulge and exhibit
the Program,’ and that the violation ‘by each of the Defendants
[was] done willfully and for purposes of direct or indirect
commercial advantage or private financial gain’”); see also J & J
Prods., Inc. v. Cole’s Place, Inc., Civil Action No. 3:10CV-732-S,
2012 WL 469918, at *2 (W.D. Ky. Feb. 13, 2012) (unpublished)
(“Simply referring to the owner and the corporation collectively as
‘the Defendants’ [in alleging they ‘willfully intercepted and
transmitted
the
broadcast’]
is
insufficient
to
identify
[the
individual defendant’s] individual role in the misconduct, if any.
Without more, such general allegations are insufficient, even
though admitted by default, to establish that [the individual
defendant] ‘had a right and ability to supervise’ the violations,
as
well
as
an
misconduct.’”).
obvious
and
direct
financial
interest
in
the
The language deemed insufficient in MayrealII is
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nearly identical to the language in the instant case.
Compare
MayrealII, 849 F. Supp. 2d at 591-92, with Docket Entry 1, ¶ 12.
The court in MayrealII considered the ruling in L & J Group
and declined to follow it for persuasive reasons.
849 F. Supp. 2d at 591.
See MayrealII,
“Where a complaint pleads facts that are
‘merely consistent with’ a defendant’s liability, it ‘stops short
of the line between possibility and plausibility of entitlement to
relief,’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at
557), and therefore does not state a claim. Here, as in MayrealII,
the
Complaint
alleges,
“without
distinguishing
between
the
individual defendant[] and [the corporate owner],” MayrealII, 849
F. Supp. 2d at 591, that “[D]efendants and/or their agents,
servants, servants, workmen or employees did unlawfully publish,
divulge and exhibit the Program at the time of its transmission
. . . .” (Docket Entry 1, ¶ 12).
Such allegations represent “a
mere ‘formulaic recitation of the elements of [the] cause of
action.’”
MayrealII, 849 F. Supp. 2d at 592 (quoting Twombly, 550
U.S. at 555).
The Complaint “alleges no facts to show that
[Santillan] had personal knowledge of, or the ability to supervise
and control, the alleged unlawful interception of the Program,” id.
(See Docket Entry 1, ¶¶ 1-25.)
In responding to the instant Motion, Plaintiff requested that,
“[i]f this Court determines that Plaintiff has not stated a valid
claim against the individual Defendants, this Court should grant
-8-
Plaintiff leave to amend its Complaint to cure any deficiencies
therein and to supplement its allegations against the individual
Defendants.”
(Docket Entry 19 at 9.)
In light of the division of
authority surrounding the pleading requirements for individual
liability,
Plaintiff
Complaint.
the
an
undersigned
opportunity
agrees.
to
The
correct
the
Court
should
deficiencies
allow
in
its
See Fed. R. Civ. P. 15(a)(2) (“The court should freely
give leave [to amend] when justice so requires.”); see also Joe
Hand Promotions, Inc. v. Okafor, No. 5:11-CV-618-BO, at 4 (E.D.N.C.
June 12, 2012) (unpublished) (noting division of authority and
granting plaintiff leave to amend complaint that failed to state
claim as to individual defendants).2
B.
Defendant
Santillan’s
Conversion
instant
Motion
also
asserts
Plaintiff’s conversion claim fails under Rule 12(b)(6).
Entry 17 at 1.)
that
(Docket
In this regard, her supporting brief argues that
the Complaint lacks sufficient allegations “to support a piercing
of the corporate veil,” as purportedly required to hold her liable
for conversion.
(Docket Entry 18 at 5.)
2
Plaintiff has responded
Defendant Santillan contends that the Court should deny
leave to amend because such action “would encourage Plaintiff to
continue filing such deficient complaints on a fishing expedition
for default judgments, safe in the knowledge that if a claim is
defended by counsel, it can simply move for leave to amend.”
(Docket Entry 20 at 4.) If this Recommendation stands, Plaintiff
will have notice of the allegations deemed necessary by this Court
in this context and, going forward, the Court can police any abuse
of the sort forecast by Defendant Santillan.
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(with citation of authority) that “conversion is an intentional
tort [and that] . . . it is not necessary to pierce the corporate
veil for intentional torts.”
(Docket Entry 19 at 8.)
Santillan
offered no rebuttal to Plaintiff’s argument or authority on point.
(See Docket Entry 20 at 1-4.)
Setting aside the veil-piercing issue, however, it appears
that Plaintiff’s conversion claim fails as a matter of law on other
grounds not subject to correction by amendment. More specifically,
“North
Carolina
law
defines
conversion
as
‘an
unauthorized
assumption and exercise of the right of ownership over goods or
personal chattels belonging to another, to the alteration of their
condition or the exclusion of an owner’s rights.’”
Precision
Components, Inc. v. C.W. Bearing USA, Inc., 630 F. Supp. 2d 635,
642 (W.D.N.C. 2008) (emphasis added) (quoting Norman v. Nash
Johnson & Sons’ Farms, Inc., 140 N.C. App. 390, 414, 537 S.E.2d
248, 264 (2000)).
“In North Carolina, only goods and personal
property are properly the subjects of a claim for conversion.
claim for conversion does not apply to real property.
A
Nor are
intangible interests such as business opportunities and expectancy
interests subject to a conversion claim.” Norman, 140 N.C. App. at
414, 537 S.E.2d at 264; see also DirecTV, Inc. v. Benson, 333 F.
Supp. 2d 440, 456 (M.D.N.C. 2004) (Beaty, J.) (finding right to
access satellite signals an intangible property right and therefore
not subject to conversion claim under North Carolina law).
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Plaintiff in this case alleges that, “[b]y its acts as
aforesaid in interception, exhibiting, publishing, and divulging
the Program at the above-captioned address, the aforementioned
[D]efendants, tortuously [sic] obtained possession of the Program
and wrongfully converted it to its [sic] own use and benefit.”
(Docket Entry 1, ¶ 23.)
The right to access or transmit the
Program is not a tangible good, nor is the Program itself.
DirecTV, 333 F. Supp. 2d at 456.
See
The Complaint thus fails to state
a claim for conversion under North Carolina law.3
3
The fact that Defendant Santillan failed to raise this
ground for dismissal does not affect the Court’s authority to
dismiss on this basis.
See Mildfelt v. Circuit Ct. of Jackson
Cnty., Mo., 827 F.2d 343, 345 (8th Cir. 1987) (“A district court
has the power to sua sponte dismiss a complaint for failure to
state a claim.”); Aloi v. Quinlan, Civ. A. No. 92-126 SSH, 1992 WL
165990, at *2 n.5 (D.D.C. June 9, 1992) (“Although the issues
raised by the Court were not briefed by either party to this
action, the Court finds that dismissal is appropriate under the
circumstances of this case: defendants were served, defendants did
move for dismissal for failure to state a claim (albeit on
different grounds), and plaintiff was on notice and responded
(several times) to such motion.”); Jensen v. Conrad, 570 F. Supp.
91, 99-100 (D.S.C. 1983) (“[T]he court is constrained to raise sua
sponte the viability of the plaintiff’s claim against [the
defendant] under the South Carolina Wrongful Death Act . . . . As
set forth in 5 C. Wright and A. Miller, Federal Practice and
Procedure § 1357 (1973): ‘Even if a party does not make a formal
motion, the court on its own initiative may note the inadequacy of
the complaint and dismiss it for failure to state a claim.’”),
aff’d on other grounds, 747 F.2d 185, disapproved in part on other
grounds, DeShaney v. Winnebago Cnty. Dep’t of Soc. Servs., 489 U.S.
189, 197-98 & n.4 (1989); Rogers v. Fuller, 410 F. Supp. 187, 192
(M.D.N.C. 1976) (Ward, J.) (“[T]he Court will, sua sponte, dismiss
those claims for failure to state a claim upon which relief can be
granted.”).
Indeed, in discussing the authority of a district
court to dismiss a complaint sua sponte, the United States Court of
Appeals for the Fourth Circuit has observed that, “[w]here the face
of a complaint plainly fails to state a claim for relief, a
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CONCLUSION
The Complaint fails to state a claim under the Cable Act or
under North Carolina law regarding conversion. However, because no
relevant authority made clear what allegations a plaintiff had to
present under the Cable Act for purposes of individual liability,
the Court should give Plaintiff an opportunity to amend the
Complaint as to those counts.
IT IS THEREFORE RECOMMENDED that Defendant Lucia Santillan’s
Motion to Dismiss (Docket Entry 17) be granted in part and denied
in part, in that the Court should dismiss the claim of conversion
with prejudice, but should permit Plaintiff to amend the Cable Act
claims.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
December 28, 2012
district court has ‘no discretion’ but to dismiss it.” Eriline Co.
S.A. v. Johnson, 440 F.3d 648, 655 n.10 (4th Cir. 2006) (quoting 5A
Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 1357 (2d ed. 1990)).
Moreover, to the extent some
courts (including the Fourth Circuit in an unpublished opinion)
have required notice and an opportunity to respond before any sua
sponte dismissal, see, e.g., Carroll v. Fort James Corp., 470 F.3d
1171, 1176-77 (5th Cir. 2006); Webb v. Environmental Prot. Agency,
No. 90-2106, 914 F.2d 1493 (table), 1990 WL 139665, at *1 (4th Cir.
Sept. 27, 1990) (unpublished), Plaintiff has notice via this
Recommendation and a chance to respond via objection under Federal
Rule of Civil Procedure 72(b).
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