Marchione v. Playboy Enterprises Inc. et al

Filing 33

ORDER: Motion to Dismiss for Failure to State a Claim 18 is DENIED. Signed on 03/07/2013 by Magistrate Judge Mark D. Clarke. (rsm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MEDFORD DIVISION

STEVE MARCHIONE,

Civ. No. 1:12-cv-01535-CL

Plaintiff,
ORDER
V.

PLAYBOY ENTERPRISES, INC. and STEVE
CLAYTON, INC.,
Defendant.

CLARKE, Magistrate Judge.
This matter comes before the court on the motion to dismiss [# 18] filed by Defendant
Playboy Enterprises, Inc. ("Playboy"). Defendant Steve Clayton, Inc. ("Clayton") does not join
in the motion. The court has jurisdiction under 28 U.S .C. § 1332. For the reasons below,
Playboy' s motion is denied.

BACKGROUND
Plaintiffs claims are based on two separate transactions: the first between Playboy and
Clayton, and the second between Clayton and Plaintiff Marchione. In the first transaction,

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Playboy hired Clayton pursuant to an October, 2005 license agreement, which authorized
Clayton to create and market a unique guitar using Playboy's name and trademarks. The 2005
agreement also authorized Clayton to retain third party developers to assist in the design of the
Playboy-themed guitars. Under the terms, Clayton agreed to secure a written assignment from
any third party developer transferring all rights, title, and interest in the designs and work
product to Playboy. Clayton would then manufacture and sell the guitars from its facility in
Oregon. Clayton also agreed to pay Playboy guaranteed royalties on all sales of Playboy-themed
instruments.
In the second transaction, as outlined in the above license agreement, Clayton retained
the plaintiff as a third party developer to design three custom guitars using Playboy's name and
distinctive trademarks. This transaction took place under the terms of a June, 2006 development
agreement between Clayton and the plaintiff. Under the 2006 agreement, the plaintiff conveyed
all ownership rights in his designs and work product to Clayton; pursuant to the 2005 agreement,
Clayton then assigned the rights to Playboy. Plaintiff was to receive 3% ofthe net sales of the
guitars, according to the 2006 agreement.
Plaintiff claims that he duly performed all the terms and conditions of the contract with
Clayton, timely providing him with unique instrument designs. He claims that Clayton
manufactured and sold guitars based on his designs, and that Clayton continues to do so.
Additionally, Plaintiff alleges that his designs increased the value and sales volume of the guitars
in excess of the use of an alternative design, and he asserts that Playboy is currently accepting
more royalties for the sales of these guitars than it would have done with the use of an alternative
design.

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LEGAL STANDARD
Under FRCP 12(b)(6), a district court must dismiss a complaint if it fails to state a claim
upon which relief can be granted. The question presented by a motion to dismiss is not whether
the plaintiff will prevail in the action, but whether the plaintiff is entitled to offer evidence in
support of the claim. See Scheuer v. Rhodes, 416 U.S. 232,236 (1974), overruled on other
grounds .Qy Davis v. Scherer, 468 U.S. 183 (1984). In answering this question, the court must
assume that the plaintiffs' allegations are true and must draw all reasonable inferences in the
plaintiffs' favor. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). A
complaint need not make "detailed factual allegations," however, "a formulaic recitation of the
elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 55556 (2007). To survive a motion to dismiss under FRCP 12(b)(6), plaintiffs must allege sufficient
facts to "raise a right to relief above the speculative level." Id. at 555. That is, plaintiffs must
show that their claims not merely conceivable, but plausible. Id. at 570; Ashcroft v. Iqbal, 556
U.S 662, 679 (2009).

DISCUSSION
As against Defendant Playboy, the plaintiff asserts claims for unjust enrichment,
constructive trust, and quantum meruit. The parties agree that Oregon law should apply to these
claims. See Nelson v. Int'l Paint Co., 716 F.2d 640, 643 (9th Cir. 1983) ("In diversity cases, the
district court normally applies the substantive law of the forum state, including its choice of law
rules").
All three claims may be collapsed into one cause of action based on a quasi-contract
claim. First, "[t]he concept of constructive trust does not stand on its own as a substantive claim,
but exists solely as an equitable remedy, available to divest an individual who has been unjustly

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enriched of property that he or she ' ought not, in equity and good conscience, hold and enjoy."'
Tupper v. Roan, 349 Or. 211 , 219-20,243 P.3d 50, 56-57 (2010) citing Marston v. Myers et ux. ,
217 Or. 498, 509, 342 P.2d 1111 (1959). The concepts of constructive trust and unjust
enrichment thus are "intertwined" such that a constructive trust may be used to avoid unjust
enrichment when the plaintiff will not be made whole by money damages alone. See id.
Second, unjust enrichment and quantum meruit are both quasi-contract claims. See
Summer Oaks Ltd. P' ship v. McGinley, 183 Or.App. 645, 653 -54, 55 P.3d 1100, 1104-05 (2002)
(unjust enrichment); Safeport, Inc. v. Equip. Roundup & Mfg., Inc., 184 Or.App. 690, 706, 60
P.3d 1076 (2002) (quantum meruit). The elements of a quasi-contract claim are (1) a benefit
conferred, (2) awareness by the recipient that a benefit has been received, and, (3) under the
circumstances, it would be unjust to allow retention of the benefit without requiring the recipient
to pay for it. Jaqua v. Nike, Inc., 125 Or. App. 294, 298, 865 P.2d 442, 445 (1993).
Defendant Playboy argues that (1) no benefit was conferred on it, and (2) even if there
was a benefit conferred, it was not unjust. The two arguments are based on essentially the same
idea: that there was no direct relationship between Playboy and the plaintiff. Playboy asserts that
the royalties and the guitar designs were conferred upon it by Clayton, not by the plaintiff.
Additionally, Playboy claims that "Plaintiff did not negotiate or contract with Playboy for the
sale of its designs, and Playboy never had an obligation to "compensate" Plaintiff for its
designs." Motion to Dismiss, 8.
In its Reply brief [#24] , Playboy cites to three cases to support the idea that a benefit
must be conferred directly from the plaintiff to the defendant to support a claim for unjust
enrichment; the court finds none ofthese persuasive. See Dost v. NW Tree Servs. Inc., 3:11CV-00270-ST, 2011 WL 6794028 (D.Or. Dec. 21 , 2011) (holding that a claim for unjust

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enrichment fails when the defendants profited from loans made not to the plaintiff, but to
unknown third parties); Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip
Morris Inc., 185 F.3d 957, 961 (9th Cir. 1999) (holding that defendant tobacco companies had to
no legal obligation to pay smokers' medical bills; therefore plaintiffs payments of those bills did
not benefit the defendants) ; Nat. Trust, Ltd. Liab. Co. v. Gunderson, 132 F. Supp. 2d 1284, 1286
(D. Or. 2000) (holding that a defense of unjust enrichment was unavailable for a defendant
where it granted two promissory notes on the same piece of property that eventually became held
by a corporation and its subsidiary; foreclosing on both notes was not a "double recovery, and
therefore not unjust enrichment). These cases demonstrate that a quasi-contract cause of action
must allege an actual benefit to the defendant, or detriment to the plaintiff. They do not interpret
the cause of action as requiring a direct, uninterrupted relationship between the plaintiff and the
defendant, contractual or otherwise.
Plaintiff has alleged facts that state a claim for relief based on a quasi -contract cause of
action. First, plaintiff claims that a benefit was conferred on Playboy when it was paid royalties
over and above the royalties it would have received with the use of an alternative guitar design.
Plaintiff also claims that the ownership rights in his guitar designs are a benefit conferred on
Playboy. Second, plaintiff claims that Playboy was aware of these benefits because it
specifically contracted with Clayton to receive them. Plaintiff alleges that Playboy reviewed and
approved the plaintiffs designs before authorizing the manufacture and sale of the guitars, and
that Playboy was informed in writing that the plaintiff had not been compensated for the designs.
Finally, plaintiff claims that it would be unjust to allow Playboy to continue collecting royalties
and exercising ownership rights over the plaintiffs guitar designs while the plaintiff remains
uncompensated for those designs. The facts, as alleged in the complaint, state a plausible claim

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for relief under Oregon law; the fact that Clayton may have acted as a middleman will not
prevent Plaintiff from claiming that Playboy was unjustly enriched. Whether or not plaintiff can
ultimately prevail on that claim is not properly at issue in this motion to dismiss.
This would end the analysis but for Playboy' s claim that there is a fourth element to an
unjust enrichment cause of action that the plaintiff has not met. Citing Tum-A-Lum Lumber v.
Patrick, 95 Or. App. 719, 770 P.2d 964 (1989), Playboy asserts that, due to the plaintiffs
contract with Clayton, the plaintiff must first exhaust his remedies against Clayton before he can
bring a valid claim for relief against Playboy.
In Tum-A-Lum Lumber, a supplier brought suit against a landowner after the contractor
failed to pay the supplier under a construction contract for materials used in a job on the
landowner' s property. Id. at 721. The court held that a supplier cannot state a claim for unjust
enrichment against a landowner unless the supplier first exhausts all the remedies that it may
have had against the contractor. Id. The court, however, limited its holding to the facts of the
case, and noted specifically that the holding was supported by the policy underlying Oregon' s
construction lien statutes, which "are intended to provide notice to a landowner that the land may
be subject to a construction lien by a furnisher of materials and provide a remedy to a furnisher
or materials in plaintiffs circumstances." Id. at 721-22. The case at bar is not subject to the
construction lien statutes or notice requirements, and the court finds no reason to extend the
holding of Tum-a-Lum-Lumber to non-construction cases.
CONCLUSION
Plaintiff states a valid claim for relief. Therefore, defendant Playboy' s Motion to
Dismiss [#18] is DENIED.

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DATED this __ __ day of March, 2013.
-7...__

United States Magistrate Judge

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