CLARITY SOFTWARE, LLC v. FINANCIAL INDEPENDENCE GROUP, LLC
Filing
44
OPINION. Signed by Judge Mark R. Hornak on 9/30/14. (bdb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
CLARITY SOFTWARE, LLC
Plaintiff,
v.
FINANCIAL INDEPENDENCE
GROUP, LLC,
Defendant.
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Civil Action No.2: 13·cv· 795 -MRH
Consolidated With
Case No. 2: 12-cv-1609-MRH
OPINION
Mark R. Hornak, United States District Judge
In this civil action, Plaintiff Clarity Software, LLC ("Plaintiff') has sued Defendant
Financial Independence Group, LLC ("Defendant" or "FIG") for alleged infringement of certain
copyrighted software of which Plaintiff claims ownership. Specifically, the complaint alleges
that Plaintiff "is the owner of copyrighted Pen D' Calc R&EP Software, including, but not limited
to, the Inherited illustration Software Program, the Inherited IRA Program, and the Inherited
Annuity Program (collectively, the 'Software')."
Claims," pp. 1-2, ECF No. 1.)
(CompI., "Introduction and Summary of
Plaintiff claims that, without its consent or knowledge,
"Defendant has ... disseminated unlawfully developed derivative versions of the Software,
including its marketing presentation output, ... and has made it available to virtually anyone who
has access to the internet." (Id. at 2.)
1
Defendant disputes Plaintiff's ownership of the copyright in question and has filed a
motion for summary judgment on that basis (ECF No. 18) which is now pending before the
l
Court. For the reasons that follow, Defendant's motion for summary judgment will be granted.
I. Background2
A. Vincent Heck's Development ofthe PenD 'Calc Software
Plaintiff's sole member, Vincent Heck ("Heck") (AI21),3 is the developer of the
Software at issue in this case as well as its predecessor versions. In 1987, Heck developed the
original DOS-based version of the "PenD'Calc" software, a pension distribution calculator,
while serving as the sole shareholder of MicroBase Corporation. (A. 123.)
In 1993, MicroBase Corporation transferred its ownership of the copyright for the
PenD'Calc software to the newly-formed PenD'Calc Corporation (hereinafter, "PenD 'Calc").
(A 123.) In 1996, Heck began developing the 32-bit Windows-based version of the Software
that is the subject of this litigation. (A 124.)
Heck became the sole shareholder of PenD' Calc in 1997 or 1998. (A 123.) At the same
time, Heck was the sole owner of the copyright for the new 32-bit version of the Software, which
was licensed to PenD'Calc for distribution. (A 124.)
I
This Court has subject matter jurisdiction over the dispute pursuant to 28 U.S.C. § 1331.
The factual background is derived from the undisputed evidence of record and the disputed evidence of record
viewed in the light most favorable to Plaintiff, the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S.
242,255 (1986) (noting that, at the summary judgment stage, "[t]he evidence of the nonmovant is to be believed,
and all justifiable inferences are to be drawn in his favor").
2
References to the Defendant's appendix in support of its motion for summary judgment, filed at ECF No. 20-1,
will be designated ("A. _."). References to Plaintiffs appendix in opposition to Defendant's motion for summary
judgment, filed at ECF No. 25, will be designated ("A A _ _.").
J
2
B. Eric Wallace's 1995 Loan to PenD 'Calc
Eric Wallace ("Wallace"), Heck's friend and C.P.A., began advising Heck on financial
matters in the early 1990s. (A. 124; DCSMF ~l.t On December 14, 1995, Wallace made a loan
to PenD'Calc (the "1995 Loan") because he perceived an opportunity for a business relationship
that he thought would be beneficial to his own interests. (DCSMF
~';2-3.)
Heck guaranteed the
loan, both in his individual capacity and as PenD'Calc's president, shareholder, and director. (A.
5,98; DCSMF ~4).) The 1995 Loan was secured by PenD'Calc's corporate assets and by certain
of Heck's personal assets, including the copyright for the Software that Heck personally owned.
(DCSMF ~~5-8.)
C PenD 'Calc's Default on the 1995 Loan
In the late 1990's Heck encountered financial difficulties after falling ill. (A. 124.) As a
result of Heck's difficulties, PenD'Calc began to fall behind on trust fund tax payments.
(DCSMF
~13.)
By 2001, PenD' Calc owed the IRS approximately $60,000 in unpaid taxes and
penalties. (DCSMF
~14.)
At that time, the unpaid balance on the 1995 Loan owed to Wallace
also totaled approximately $60,000. (Id.
~
15.)
Wallace negotiated with the IRS on behalf of PenD'Calc and Heck in response to the
IRS's threat to shut down PenD'Calc over the unpaid trust fund taxes. (DCSMF
~16.)
In 2001,
Heck and Wallace entered into an escrow agreement pursuant to which PenD'Calc's client,
AXA, made payments to an escrow agent who then made payments to the IRS and Wallace. (Id.
References to Defendant's Concise Statement of Material Facts, ECF No. 20, and Plaintiffs corresponding
responses thereto, ECF No. 24, will be designated ("DCSMF ,_~."). References to Plaintiffs Additional
Undisputed Material Facts, ECF No. 24, and Defendant's corresponding responses thereto, ECF No. 34, will be
designated ("PAUMF , __.").
4
3
~17.)
Notwithstanding this arrangement, in 2003 PenD'Calc defaulted on the 1995 Loan.
(DCSMF ~19.)
D. The August 29, 2003 Settlement Agreement and the Putative Formation oj
"Clarity Sojnvare, LLC"
In connection with PenDTalc's loan default, Heck and Wallace agreed that Wallace
would take ownership of Heck's intellectual property rights. (A. 124.) To that end, Wallace
founded a new business under the name "Clarity Software, LLC" (hereinafter, "Clarity") for the
stated purpose of taking ownership of and marketing the Software. (A. 124; DCSMF
~22.)
Plaintiff contends that "Clarity Software, LLC" was formed on August 29, 2003. (DCSMF ~~ 32,
33.) Although Wallace could not state the exact date on which formed this new business, he
agreed in his deposition that August 29, 2003 could be the date. (DCSMF
~
32; A. 22-23.)
Wallace maintains that, at the time Clarity was formed, he directed an attorney to register the
entity as an LLC with the Pennsylvania Department of State. (See ECF No. 1-5,
~6.)
At all
times thereafter, Wallace operated the business under the assumption that the company had been
duly registered as an LLC. (Id.)
On August 29,2003, PenD'Calc, Clarity, Heck, and Wallace entered into a "Satisfaction,
Settlement, and Release Agreement" (the "2003 Agreement"). (A. 98-99.) Pursuant to the 2003
Agreement, all of PenD'Calc's assets and all of Heck's property rights in the Software were
purportedly transferred to Clarity and the 1995 Loan was ostensibly discharged. (A. 98-99, 124.)
Wallace retained Attorney William Weiler to draft the 2003 Agreement. (DCSMF
~
38.) Prior
to retaining Weiler, Wallace was aware that Weiler and Heck had a professional relationship,
which he believed encompassed Weiler working as the corporate attorney for PenD'Calc from
time to time. (Id. ~ 39.)
4
As of the date of the 2003 Agreement, Heck became the General Manager of Clarity, and
~~
PenD 'Calc was dissolved. (A. 124; DCSMF
37 43.) There was no written employment
agreement between Clarity and Heck relating to Heck's position as general manager. (DCSMF
~
44.)
Following Clarity'S putative assumption of PenD'Calc's assets and Heck's property right
to the Software pursuant to the 2003 Agreement, Clarity held itself out as an LLC and operated
under the business name "Clarity Software, LLC." Among other things, Clarity maintained a
checking account at PNC Bank and identified itself on state and federal tax filings as "Clarity
Software, LLC" under a federal tax identification number. (PAUMF
~~
2-4.) On September 21,
2004, a copyright for the Software was registered with the U.S. Copyright Office, with "Clarity
Software, LLC" listed as the claimant. (See ECF No. 1-6.)
E. Heck's Bankruptcy Proceedings
On December 31, 2003, Weiler, serving as Heck's personal attorney, filed a voluntary
petition for personal bankruptcy under chapter 13 of the bankruptcy code on behalf of Heck and
his wife. (DCSMF
~52.)
Heck assisted Weiler in the preparation of the "Chapter 13 Plan and
Schedules Dated 1123/04" that were filed on January 26, 2004. (Id.
~53.)
Upon filing for
bankruptcy, Heck estimated that he owed the IRS $220,000 in taxes, penalties, and interest that
had gone unpaid from 1996 through 2003. (Id.
~54.)
he owed over $178,000 to his secured creditors. (Id.
Heck's bankruptcy schedules indicated that
~55.)
The bankruptcy schedules did not list
or otherwise disclose the existence of either the 2003 Agreement or the transaction which
occurred pursuant to that agreement. (DCSMF
~~
56-59,61,63; A. 144-96.) Similarly, Heck's
employment as the general manager for Clarity was not listed on the January 23, 2004 schedules.
(Id.
~
60; A. 144-96.)
5
On May 24, 2014, Chapter 13 Trustee Ronda J. Winnecour filed "Objections to
Confirmation of Plan Dated January 23, 2004" in Plaintiff's Chapter 13 case. (DCSMF ~ 64; A.
197-202.) Among other things, the Trustee asserted that Heck had failed to list among his assets
certain bank accounts which he had been holding jointly with his uncle. (A. 198.)
The United States also filed objections to confirmation of the January 23, 2004 plan.
(DCSMF'1 65; A. 203-04.) The United States asserted that it had $65,435.36 in secured claims
against the debtors and $27,275.96 in unsecured priority claims which, the United States
contended, were required to be paid in full under the bankruptcy code. (A. 203.)
The United
States objected to the debtors' proposal under their Chapter 13 plan to make a $30,000 offer to
the Internal Revenue Service as a compromise payment of this debt. (Id.) (A. 203-04; DCSMF
~65.)
On July 12, 2004, Weiler
acting as Heck's bankruptcy counsel -- tiled a motion to
convert the debtors' chapter 13 case to a chapter 7 case. (DCSMF
~
67.) In the motion, debtors
asserted that they "are unable to make the proposed plan payments, as the income of the parties
will not be sufficient to pay the secured and priority unsecured claimants in full, and will
certainly not be sufficient to pay any amount to the general unsecured creditors." (A. 210;
DCSMF~
67.)
On July 22, 2004, following a hearing, the bankruptcy court granted the objections to the
~
68.)
~70.)
On
plan, converted the case to chapter 7 proceeding, and appointed a new trustee. (DCSMF
The court subsequently granted a Discharge of Debtor on November 12, 2004. (Id.
May 9, 2005, the Chapter 7 Trustee reported that there were no assets to administer for the
benefit of creditors to the estate. (Id.
(Id.
~72.)
The bankruptcy case was closed on July 7, 2006.
~73.)
6
F. The 2008 Assignment of Wallace's Interests in Clarity to Heck
In December of 2008, Heck and Wallace entered into an agreement (the "2008
Agreement") wherein Wallace transferred all of his interest in Clarity to Heck in consideration of
$1 and certain mutual releases set forth in the agreement. (DCSMF ~~ 75, 77.)
As a result of
this transfer, Heck became the "sole member" of Clarity. (See ECF No. 1-5, ~8; A. 124.)
G. The 2012 Lawsuit
On November 5, 2012 Clarity filed a federal lawsuit against Defendant and another entity
based on their alleged misappropriation and wrongful dissemination of the Software. See Clarity
Software, LLC v. Financial Independence Group, LLC, et al., Case No. 2:12-cv-1609-MRH
(W.D. Pa.) (the "2012 Lawsuit"). The First Amended Complaint (ECF No. 31) -- the operative
pleading in that case -- asserted a single count of copyright infringement against Defendant. 5
During the course of the 2012 Lawsuit, Defendant challenged Clarity's status as an LLC,
arguing that Clarity had never in fact been organized as an LLC in the Commonwealth.
Defendant filed a motion to dismiss the litigation on the grounds that "Clarity Software, LLC,"
the sole named plaintiff in that action, did not exist as a legal entity and therefore lacked both the
capacity to sue and the capacity to own a copyright. (See Case No.2: 12-cv-1609-MRH, ECF
No. 45.)
In response to this argument, Clarity attempted to address any potential jurisdictional
deficiency by formally registering (or, as it argues, re-registering) "Clarity Software, LLC" with
the Pennsylvania Department of State on March 7, 2013. (See Case No. 2:12-cv-1609-MRH,
At various points during the course of the 2012 Lawsuit, Clarity identified "Carolina Computer Partners" or
"Lucas Partners, Inc. d/b/a Carolina Computer Partners" as defendants. However, any claims against these parties
were ultimately dismissed for reasons not pertinent to the instant motion for summary judgment motion.
5
7
ECF No. 55-2 and id.. ECF No. 55-3.) Clarity also argued that, to the extent Heck (rather than
Clarity) was the real party in interest in the 2012 Lawsuit, Heck could be substituted into the
litigation or ratify it under Rule 17(a)(3) of the Federal Rules of Civil Procedure. (See Case No.
2:I2-cv-1609-MRH, ECF No. 51 at 11.)
Subsequently, this Court entered a Memorandum Order finding that there was insufficient
evidence to establish that "Clarity Software, LLC" was the properly named plaintiff in the 2012
Lawsuit or that the case could proceed as it was then styled. (See Case No. 2:12-cv-1609-MRH,
ECF No. 61 at 7.) The Court denied Defendant's motion to dismiss the 2012 Lawsuit without
prejudice and stayed the case pending an opportunity for Clarity to cure any jurisdictional
deficiencies by way of an amended pleading. (Id. at 8.)
Clarity subsequently sought leave to file a new, related action (see Case No.2: 12-cv
1609-MRH, ECF No. 62), and the Court granted that request (id. at ECF No. 64).
H The Instant Proceedings
Plaintiff - now proceeding as a duly organized limited liability company under the name
"Clarity Software, LLC" -- commenced this litigation on June 10, 2013, asserting one count of
copyright infringement against Defendant. (ECF No. 1).6 On November 15, 2013, Defendant
filed the instant motion for summary judgment (ECF No. 18) and supporting materials (ECF
Nos. 19 and 20).
On December 27, 2013, Plaintiff filed its memorandum (ECF No. 23),
counterstatement of facts (ECF No. 24), and appendix (ECF No. 25) in opposition to
Defendant's motion. Defendant filed its reply brief (ECF No. 33) and supporting appending
By text order dated July 17,20 13, the Court consolidated the 2012 Lawsuit at Case No.2: 12-cv-1609-MRH with
the instant litigation. Pursuant to the consolidation order, both cases are proceeding under the docket number for the
instant litigation.
6
8
(ECF No. 33-1) on January 17,2014, and Plaintiff filed its sur-reply (ECF No. 37) on January
29,2014. On February 6, 2014 the Court held oral argument. (ECF No. 38.)
As a result of the foregoing proceedings, the issues raised by Defendant's motion have
been adequately joined and are ripe for adjudication.
II. Standard of Review
Summary judgment is proper "if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to jUdgment as a matter oflaw." Fed.R.Civ.P. 56(a).
An issue is genuine only if the evidence is such that a reasonable jury could return a verdict for
the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "In
considering a motion for summary judgment, a court must draw all reasonable inferences from
the underlying facts in the light most favorable to the non-moving party." Emerson Radio Corp.
v. Orion Sales, Inc., 253 FJd 159, 162 (3d Cir. 2001). "When there is a disagreement about the
facts or the proper inferences to be drawn from them, a trial is required to resolve the conflicting
versions of the parties." Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 FJd 575, 581 (3d Cir.
2009) (internal quotation and marks omitted).
III. Discussion
The complaint in this action sets forth a single count of copyright infringement in
violation of the Copyright Act of 1976, as amended, 17 U.S.C. §§ 101 et seq. To bring a claim
for copyright infringement, a plaintiff must show (1) that he owned the copyrighted work and (2)
that the copyrighted work was copied by the defendant. Dun & Bradstreet Software Servs., Inc.
v. Grace Consulting, Inc., 307 FJd 197, 206 (3d Cir. 2002). The Copyright Act provides that
copyright ownership "vests initially in the authority or authors of the work," 17 U.S.C. §201 (a),
9
and that such ownership "may be transferred in whole or in part by any means of conveyance or
by operation of law," id. § 201(d). Therefore, the only proper plaintiff with standing in this
action for infringement, i.e., the real party in interest, is the one who owns the copyright.
Defendant has moved for summary judgment based on its argument that Plaintiff does
not own the copyright at issue in this litigation and, as a result, lacks standing. As Defendant
observes, the copyright for the Software was purportedly assigned by Heck to "Clarity Software,
LLC" pursuant to the 2003 Agreement. Defendant argues that "Clarity Software LLC" was not
organized as a Pennsylvania limited liability company until March 7, 2013; thus, the chain of
title was broken in 2003 and Plaintiff never acquired valid ownership of the copyright.
In its complaint, Plaintiff posits two theories in support of its ownership of the copyright.
First, Plaintiff alleges that, at the very least, "Clarity Software, LLC" existed as a "de facto LLC"
prior to March 7, 2013 and "was thus entitled to own and register the Copyright for the
Software." (Compi.
IJ 35, ECF No.
1.)7 Under this theory, Clarity'S recent registration as an
LLC on March 7, 2013 allegedly had "the legal effect of converting de-facto Clarity into a dejure LLC, assuming all of de-facto Clarity'S rights, property, and obligations." (Id.)
Assuming its prior capacity to own property as a de facto LLC is not recognized and that
ownership of the Software thereby remained with Heck as of August 29, 2003, Plaintiff contends
that it nevertheless acquired valid title of the copyright directly from Heck in 2013. According
to the complaint, "Heck and Clarity executed a Transfer Agreement, transferring Heck's
intellectual property (including the Software) to Clarity to the extent that it has not already been
transferred to Clarity." (Compl.lJ 36, ECF No. 1.)
7 Heck's purported transfer of rights in the Software to "Clarity Software, LLC" was registered with the U.S.
Copyright Office on September 21, 2004, according to the Certificate of Registration appended to the complaint.
(See ECF No. 1-6.)
10
In its brief in opposition to the pending summary judgment motion, Plaintiff asserted a
third basis for its ownership of the copyright. Plaintiff now contends that limited discovery has
unearthed "substantial documentation ... demonstrating Clarity's corporate existence" prior to
March 7, 2013. (Pl.'s Br. Opp. to Def.'s Mot. Summ. Judg. 3-4, ECF No. 23) (citing to AA.
003-254).) In other words, Plaintiff now appears to be contending that it was a de jure LLC at
all relevant times.
Defendant contends that Plaintiff cannot establish a valid chain of title to the copyright
under any of its theories. Defendant argues that Clarity's de jure existence as a registered LLC
could not have occurred before March 7, 20l3, when "Clarity Software, LLC" filed its certificate
of organization. Defendant further argues that Plaintiff could not have acquired title to the
copyright as a de facto LLC because: (i) such entities are not recognized under Pennsylvania law,
and (ii) there is insufficient evidence in any event to establish Plaintiff s de facto existence as an
LLC prior to 20 l3.
Based on these arguments, Defendant concludes that Heck maintained
ownership of the copyright as of August 29, 2003. Moreover, because Heck filed for bankruptcy
on December 31, 2003, Defendant contends that Heck's ownership of the copyright became
property of his bankruptcy estate, making the bankruptcy trustee the real party in interest to this
litigation. Finally, even assuming that title to the copyright validly passed to Plaintiff by virtue
of the 2003 Agreement, Defendant argues that Plaintiff is judicially estopped from asserting that
the transfer occurred because Plaintiff is now solely owned by Heck, and Heck failed to disclose
the transfer in connection with his bankruptcy proceedings.
A. Was Plaintiff a "De Jure" LLC as ofAugust 29, 2003?
The Court will first consider Plaintiff s theory that it was a de jure limited liability
company at all times relevant herein.
11
To establish de jure status as a limited liability company in Pennsylvania, an entity must
show that it filed a certificate of organization with the Commonwealth's Department of State.
Pursuant to the Limited Liability Company Law of 1994 (the controlling statute), "[a] limited
liability company is organized upon the filing of the certificate of organization in the department
[of state] or at any later effective time specified in the certificate of organization." 15 Pa. C.S.A.
§8914(b). This provision mirrors the corresponding provision of the Business Corporation Law
of 1988, which provides that "[ u]pon the filing of the articles of incorporation in the Department
of State or upon the effective date specified in the articles of incorporation, whichever is later,
the corporate existence shall begin." 15 Pa. C.S.A. § 1309(b). Thus, until the certificate of
organization is filed in the Department of State, de jure LLC existence cannot begin.
In this case, Defendant has produced uncontested evidence that, as of February 12, 2013,
the Pennsylvania Department of State had no record of Plaintiff s existence as "Clarity Software,
LLC" or otherwise. (A. 131-140, ECF No. 20-1.) There is also no dispute that Plaintiff filed a
certificate of organization with the Department of State on March 7, 2013 in an attempt to cure
any potential jurisdictional deficiencies relative to its standing. (See Case No. 2:12-cv-1609,
Pl.'s Proposed Sur-Reply 1, ECF No. 55-2; id. Ex. 3, ECF No. 55-3.) Because March 7, 2013 is
the earliest date for which "Clarity Software, LLC" can show proof of a duly filed certificate of
organization, Plaintiff could not have obtained de jure LLC status prior to that date.
Plaintiff nevertheless contends that "substantial evidence was unearthed" during
discovery which demonstrates its corporate existence prior to March 7, 2013. (Pl.'s Br. Opp.
Mot. Summ. J. 3-5, ECF No. 23.) In particular, Plaintiff points to: (1) documents received from
various offices of the Commonwealth that Plaintiff claims implicitly recognize its corporate
existence (AA. 003, 238-45, 250-54); (2) tax returns for the years 2003 through 2008, which
12
were filed under a federal tax identification number issued to "Clarity Software, LLC" (AA. 004
233); (3) documentation showing that "Clarity Software, LLC" regularly withheld federal and
state income taxes on behalf of its employees and paid all applicable payroll taxes and
unemployment compensation contributions (AA. 234, 244-47); and (4) records showing that
"Clarity Software, LLC" maintained a checking account at PNC Bank which, according to
Plaintiff, required documentation of the account holder's corporate status. Plaintiff also cites to
Wallace's deposition testimony that he retained a lawyer for the specific purpose of forming
Clarity Software as an LLC. (Wallace Dep. 47:6-22, A. 12, ECF No. 20-1.) Although Wallace
could not recall the identity of this lawyer, he recalled that she was a female solo practitioner
with an office in the North Hills of Pittsburgh. (Id.) Wallace further testified that he completed
"SS-4"s and "RCT-101,,9 forms and returned them to the lawyer for her to file. (Wallace Dep.
43:19-22, A. 11, ECF No. 20-1.) Based on the foregoing, Plaintiff contends "there is substantial
evidence that it was properly registered with the Commonwealth at some point" prior to March
of 2013, and "a reasonable jury could thus infer that the Department of State somehow lost its
record of Clarity'S organization or did not properly process it originally." (Pl.'s Br. Opp. Mot.
Summ. 1.5, ECF No. 23.)JO
The "SS-4" is a fonn utilized by the Internal Revenue Service entitled "Application for Employer Identification
Number." CA. 277-282.)
8
The "RCT-IOI" is a Pennsylvania Corporate Tax Report form utilized by the Commonwealth's Department of
Revenue. CA. 283-288.)
9
Plaintiff also contends that the "equities" weigh in favor of a finding that Clarity owns the Software in question, as
Heck has spent decades developing and refining the Software and has relied on it as his primary source of income
for over twenty-five years. (Heck Aff. ~~ 15-16, A. 123-27, ECF No. 20-1.) This argument might have potential
relevance with respect to consideration of whether Plaintiff is judicially estopped from asserting that it received title
to the copyright via the 2003 Agreement - an issue which this Court does not address in this Memorandum Opinion;
however, from an evidentiary standpoint, Plaintiffs argument based on equitable considerations is not relevant to
the Court's inquiry whether a reasonable jury could find that Plaintiff was a de jure LLC in 2003.
10
13
Having carefully considered this evidence, the Court is not persuaded that it can support a
reasonable inference of Plaintiffs de jure LLC existence prior to March 7, 2013. At most, the
state and federal forms and other records proffered by Plaintiff show that Clarity held itself out
as a limited liability company in the course of conducting its business; however, they do not
necessarily prove that "Clarity Software, LLC" actually existed as a duly organized LLC in
accordance with 15 U.S.c. §8914. As Defendant correctly notes, the fact that Plaintiff: (a)
received communications from the Pennsylvania Department of Revenue or Department of
Labor and Industry addressed to "Clarity Software, LLC," (b) obtained a federal tax
identification number for "Clarity Software, LLC," and (c) filed tax returns as a putative LLC
does not establish that "Clarity Software, LLC" was recognized by the Pennsylvania Department
of State as a properly organized limited liability company. Plaintiff has not pointed to any
evidence in the record establishing that these events could not occur in the absence of a properly
filed certificate of organization.
Plaintiff seemingly places special reliance on a November 1, 2007 "Account Review"
statement from the Pennsylvania Department of Revenue that lists the "date of incorporation or
certificate of authority" for "Clarity Software, LLC" as "January 1, 2003."
(AA. 003.)
However, Wallace testified that "January 1" is simply a date he provided in tax filings for the
sake of convenience in order to avoid questions from tax agencies regarding a business that was
started at a later point in the year. (Wallace Dep. 51:21-52:12, A. 13, ECF No. 20-1.) The
January 1, 2003 date is also inconsistent with Plaintiffs position that "Clarity Software, LLC"
was organized on August 29, 2003. (See A. 89, DCSMF ~ 32.)" Moreover, there is no evidence
Wallace could not state the precise date on which Clarity was formed, but he agreed that it could have been
August 29,2003. (Wallace Dep. 82:24-84:3, A. 22, ECF No. 20-1.)
II
14
in the record to establish that the "date of incorporation or certificate of authority" reflected on
the document is derived from official corporate records from the Commonwealth's Department
of State, as opposed to, e.g., a unilateral representation from Wallace.
Accordingly, the
"Account Review" statement does not constitute probative evidence as to whether or when a
certificate of organization was actually filed with the Commonwealth's Department of State.
As noted, there is evidence in the record showing that "Clarity Software, LLC" held a
checking account at PNC Bank. (A. 100-115.) Wallace testified that, to his recollection, PNC
Bank required him to submit "paperwork" and/or "documents" in order to open a bank account
in the name of an entity that was an LLC. (Wallace Dep. 78:4-22, A. 21, ECF No. 20-1.)
Plaintiff argues that, for purposes of summary judgment, we must credit Wallace's testimony and
thereby infer that the account could not have been opened absent proof that Clarity was indeed a
duly organized limited liability company.
Notably, however, the only documentation that PNC has on file with regard to Clarity's
bank account is Wallace's signature card.
(A. 115.)
No "corporate resolutions" or other
documentation relative to "Clarity Software, LLC" are in PNC's possession. (A. 110.) When
asked why he thought the bank did not have any other paperwork pertaining to "Clarity
Software, LLC" in its files, Wallace could only speculate that it was because "PNC is a very big
bank" with "tens of billions of bank accounts." (Id. 79:7-13.) As Defendant points out, there is
no evidence in the record to establish that, in 2003, PNC Bank's policy specifically required the
submission of a duly filed certificate of organization in order to open a bank account in the name
of an LLC. While Wallace testified generally to having submitted "documents," "information"
and/or "paperwork" to PNC Bank (Wallace Dep. 77:25, 78:5-11, 78:20-21, A. 20-21, ECF No.
20-1), he did not testify that he submitted a certificate of organization to PNC Bank. In fact, the
15
only document he specifically referenced in connection with opening the PNC Bank account is
the "LLC agreement" (Wallace Dep. 44:8-11, A. 11, ECF No. 20-1), which Wallace referenced
elsewhere in his deposition testimony as "the LLC document" that established the foundational
membership underlying agreement between Wallace and his wife as members of the LLC. (Id.
at 53:24-54:7, A. 14.)
Wallace maintains that he instructed a female attorney from the North Hills area to
organize Clarity as an LLC and, to that end, filled out forms for the attorney to file. (Wallace
Dep. 48:20-49:20, A. 12-13; id. at 52:23-53:19, A. 13-14, ECF No. 20-1;.) Wallace testified
that he was "sure that [the attorney] sent me the papers that were filed with the State of
Pennsylvania," but he admittedly did not have copies of those filings. (Id. 49:25-50-3, A. 13,
ECF No. 20-1.) Wallace further testified that he was billed $400 for the work and that part of the
bill encompassed a filing fee (id. 55:20-56:3, A. 14, ECF No. 20-1), but he was unable to
produce any documentation evidencing such billing or payment thereof. (Id. at 68:24-69:20, A.
18.) Even when Wallace's testimony is construed in the light most favorable to Plaintiff, at most
it references certain documentation he supplied to the attorney for filing, but it does not reference
the content of any document received from the Commonwealth's Department of State and, in
particular, does not reference the content of a certificate of organization. To the extent Wallace's
testimony could be construed as attempting to establish the content of documentation received
from the Department of State, it falls short of the requisite evidentiary standards established in
Federal Rules of Evidence 1004, 1005 and 1007.
As Defendant points out, in order to accept Plaintiff s theory of de jure LLC existence
based on the evidence of record in this case, a fact-finder would have to infer the following:
16
1. The unnamed attorney [hired by Wallace] prepared and actually sent the
certificate of organization to the Pennsylvania Department of State.
2. The Pennsylvania Department of State received, accepted and filed the
certificate of organization.
3. The Pennsylvania Department of State notified the attorney and/or Wallace of
its acceptance of the certificate of organization, sent a copy to Wallace and/or
his attorney.
4. The Pennsylvania Department of State then lost the certificate of organization,
along with all records of the submission and filing of the certificate of
organization (e.g., the entire physical file and electronic database record for
Clarity Software, LLC).
5. Wallace subsequently provided the certificate of organization to PNC Bank
when he opened Clarity Software, LLC's bank account, but PNC lost it, even
though PNC Bank still has the signature card that was completed when the
account was opened.
6. Wallace, the former President of the Pennsylvania Institute of Certified Public
Accountants, lost his copy of the certificate of organization and all records of
his communications with his attorney and the Department of State.
7. Everyone else associated with Clarity Software, LLC[ ] lost the certificate of
organization and all contemporaneous records.
(Def.'s Reply Supp. Def.'s Mot. Summ. 1. 9-10, ECF No. 33.)
The Court is in agreement with Defendant that no rational jury could make these findings
based on the evidence of record. "To defeat a motion for summary judgment, the nonmoving
party must show that there is more than merely 'a scintilla of evidence' supporting his position,
... or 'some metaphysical doubt as to the material facts. '" Spangler v. City ofPhi/a., 523 F.
App'x 142, 145 (3d Cir. 2013) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252
(I 986), and Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)).
Here, Plaintiff's evidentiary proffer fails to establish any genuine dispute as to the fact that a
17
certificate of organization for Clarity Software, LLC was not filed with the Pennsylvania
Department of State prior to March 7,2013. 12
Moreover, even if it could be inferred, as Plaintiff contends, that "Clarity Software, LLC"
was a validly formed LLC "at some [unspecified] point" prior to March 7,2013, this would not
be sufficient for purposes of establishing Plaintiff's ownership of the subject copyright. The key
date by which Plaintiff's de jure LLC existence must be shown is August 29, 2003, as that is the
date on which title to the copyright was supposedly transferred pursuant to the 2003 Agreement.
Because the record here is insufficient to support a reasonable finding that Clarity Software, LLC
existed as a duly organized, de jure limited liability company on August 29 2003, Plaintiff could
not have obtained title to the copyright in that particular capacity pursuant to the 2003
Agreement.
Plaintiff contends that Defendant's "assertion of defenses based on decade-old facts is unfairly prejudicial" to
Plaintiff (PI.'s Br. Opp. to Defo's Mot. Summ. 1. 1, ECF No. 23) and, therefore, "all gaps in the testimonial and
evidentiary record should thus be resolved with inferences that[,J had discovery been conducted close in time to the
events in question, facts would have been recovered favoring Clarity"(id. at 3). This argument overlooks the fact
that Plaintiff is the party that instigated this litigation and thereby dictated the timing ofthe defenses being raised
herein. Plaintiffs argument also overlooks the fact that, as the party asserting a copyright infringement claim,
"Clarity Software, LLC" bears the burden of proving standing by demonstrating its ownership of the subject
copyright. See Feist Publ'ns, Inc. v. Rural Tel. Servo Co., Inc., 499 U.S. 340, 361 (1991)(to establish copyright
infringement, a plaintiff must prove: (l) ownership of a valid copyright, and (2) copying of constituent elements of
the work that are original); Dun & Bradstreet Software Servs., Inc. v. Grace Consulting, Inc., 307 F.3d 197, 206
(same). By demonstrating that the Pennsylvania Department of State has no record of Plaintiffs existence prior to
March 7, 2013, Defendant essentially demonstrated a lack of evidence to establish Plaintiffs ownership of the
subject copyright -- an essential element of Plaintiffs case. Accordingly, under the well-recognized standard for
reviewing summary judgment motions, it is incumbent upon Plaintiff to point to evidence in the record
demonstrating that there is a genuine dispute for trial concerning this issue. For the reasons stated, Plaintiff has
failed to produce evidence from which a rational jury could conclude that a certificate of organization was properly
filed with the Department of State prior to 2013.
12
18
B. Was Plaintiff a "De Facto" LLC as ofAugust 29, 2003?
Plaintiffs alternative theory is that, even if it was not a de jure LLC prior to March 7,
2013, it was operating as a de facto LLC and thus validly acquired title to the copyright via the
2003 Agreement. Defendant challenges this theory on two fronts: first, that Pennsylvania does
not recognize de facto limited liability companies; second, that, in any event, Plaintiff cannot
demonstrate facts that would establish its de facto LLC status.
1. Are De Facto LLCs Recognized in Pennsylvania?
As noted, the Limited Liability Company Law of 1994 provides that an LLC comes into
being when its certificate of organization is filed in the Commonwealth's Department of State,
"or at any later effective time specified in the certificate of organization."
§8914(b).
15 Pa. C.S.A.
A similar rule applies with respect to corporations formed under the Business
Corporation Law of 1988 ("BCL"). See 15 Pa. C.S.A. §1309(b) (stating that corporate existence
begins "[u]pon the filing of the articles of incorporation in the Department of State or upon the
effective date specified in the articles of incorporation, whichever is later. ").
The BCL recognizes the existence of de facto corporate entities
In
certain limited
circumstances. The law provides that:
[w]here heretofore or hereafter any act has been or may be done or any transfer or
conveyance of any property has been or may be made to or by any corporation
created or intended to be created under any statute supplied[13] or repealed by this
part, in good faith, after the approval of the articles or application for a charter or
issuance of letters patent but without the actual recording of the original papers
with the endorsements thereon, or a certified copy thereof, in the office of any
recorder of deeds, as provided in such statutes then in force, the acts, transfers and
conveyances shall nevertheless be deemed and taken to be valid and effectual for
13 "Supplied" in this context means "effectively superseded by a later statute which comprehensively covers the
same subject matter, but which does not contain an express repeal of the supplied statute." See 15 Pa. C.S.A. §504,
1988 Committee Comment (citing 1 Pa. C.S.A. § 1971).
19
all purposes, regardless of the omission to record the original papers with the
endorsements thereon, or a certified copy thereof, as heretofore required by such
statutes. Every such corporation shall be deemed and taken to have been
incorporated on the date of approval of its articles or application for a charter or
on the date of issuance of its letters patent, whichever event shall have last
occurred.
15 Pa. C.S.A. §504 (internal footnote added).
By its plain terms, Section 504's recognition of de facto status applies only to "certain
defective corporations" created or intended to be created under predecessor statutes to the BCL.
ld.
There is no corresponding provision pertaining to "defective LLCs" under the Limited
Liabilities Company Law of 1994. 14 See generally 15 Pa. C.S.A. §§890 1-8998. Moreover,
Plaintiff has not cited any decision wherein a de facto limited liability company has been
recognized, and this Court has likewise been unable to locate any cases employing that concept.
Thus, there appears to be an absence of any clear precedent under Pennsylvania law for the
recognition of a de facto limited liability company.
2. Could a Jury Reasonably Find that Clarity was a De Facto LLC as of
August 29, 2003?
Even assuming, however, that a de facto LLC is a recognized entity under Pennsylvania
law, there is insufficient evidence in this record from which a jury could find that Clarity ever
achieved that status prior to its formal organization on March 7, 2003. The BCL's codification
of the de facto corporation doctrine has limited application; it applies only to corporations: (a)
14 As Defendant observes, one explanation for this might be that the de facto corporation doctrine was borne of an
era when corporation formation was a more decentralized and complicated process. By contrast, limited liability
companies are a newer type of entity whose formation is relatively straightforward and requires that the applicant
supply only rudimentary information. See generally 15 Pa. C.S.A. §§8912-8914. As a result, bona fide good faith
efforts to organize an LLC are unlikely to fail.
20
that were "created or intended to be created" under statutes superseded or repealed by the BCL; 15
and (b) that are or were involved in acts or transfers or conveyances of property (i) "in good
faith" (ii) "after the approval of the articles or application for a charter or issuance of letters
patent" (iii) "but without the actual recording of the original papers ... or a certified copy
thereof, in the office of any recorder of deeds" as required by the predecessor statute. 15 Pa.
C.S.A. §504 (emphasis added). When these circumstances exist, Section 504 ensures that "the
acts, transfers and conveyances shall nevertheless be deemed and taken to be valid and effectual
for all purposes," despite the fact that the corporation's approved incorporating documents (or
certified copies thereof) were not recorded in the office of the recorder of deeds, as the
predecessor statutes required. Id. Moreover, in such circumstances, "[e]very such corporation
shall be deemed and taken to have been incorporated on the date of approval of its articles or
application for a charter or on the date of issuance of its letters patent, whichever event shall
have last occurred."
ld. (emphasis added).
As this language demonstrates, one of the
prerequisites for de facto corporate status under the BCL is state approval of the relevant
corporate formation documents.
In this regard, the BCL' s codification of the "de facto corporation" doctrine is consistent
with the version of the doctrine that had previously developed under Pennsylvania common law.
De facto corporate status under Pennsylvania common law traditionally involved three
requirements: "First, there must [have been] a law or charter under which an organization might
15 Because §504 does not provide de facto status to corporations "created or intended to be created" under the BCL
and applies only to corporations ostensibly formed under predecessor statutes, Defendant contends that §504
manifests a legislative intent to abrogate the common law doctrine of de facto corporate status. Plaintiff disputes
this point, and the issue remains unsettled under Pennsylvania law. For present purposes, the Court need not decide
this legal issue because, even if the common law doctrine remains in force in Pennsylvania, Plaintiff cannot
demonstrate that it achieved de facto LLC status during the relevant time period.
21
be effected. Second, there must [have been] an attempt to organize which falls so far short of the
requirements of the law or charter as to be ineffectual.
Third, there must [have been] an
assumption and exercise of corporate powers, notwithstanding the failure to comply with the law
or charter." Appeal ofRiviera Country Club, 176 A.2d 704, 706 (Pa. Super. Ct. 1962) (citing In
re Gibbs' Estate, 27 A. 383 (Pa. 1893)).
Although Pennsylvania case law does not definitively spell out what constitutes a
sufficient "attempt to organize," the cases suggest that it requires issuance of a corporate charter
or other similar indicia of state-approved corporate status. See, e.g., In re Mt. Sharon Cemetery,
120 A. 700, 701 (Pa. 1923) (holding that individuals could not collaterally challenge the validity
of a company's corporate charter on the ground that the articles of incorporate failed to
adequately specify the place where the company's business would be transacted; company was at
least a de facto corporation, and therefore the validity of its formation could be attacked only by
the Attorney General); Pinkerton v. Penmylvania Traction Co., 44 A. 284, 285 (Pa. 1899)
(electric railway company was de facto corporation where its corporate charter had been issued
but certificate was not properly recorded as required by the governing statute); Spahr v.
Farmer's Bank, Carlisle, 94 Pa. 429, 1880 WL 13400 at *6 (Pa. May 13,1880) (where corporate
charter had been granted to certain persons to act as a corporation and they were "actually in the
possession and enjoyment of the corporate rights granted," persons were functioning as a de
facto corporation whose corporate existence and ability to contract could not be collaterally
challenged by parties dealing with them); Cochran v. Arnold, 58 Pa. 399, 1868 WL 7248 at *5
(May 5, 1868) (where business had obtained and recorded a certificate of association for
corporate purposes and had ostensibly met all the legal requirements for corporate formation,
business had at least a de facto existence, despite an alleged defect in its original certificate of
22
incorporation regarding statements about the capital paid into the business); Schmitt v. Potter
Title & Trust Co., 61 Pa. Super. 301,1915 WL 4530 at *3 (Pa. Super. May 6,1915) (entity was
de facto corporation where it failed to record its corporate charter in the recorder's office in
accordance with the governing statute but was otherwise functioning as a corporate entity).
C!
Appeal ofRiviera Country Club, 176 A.2d 704, 707 (Pa. Super. Ct. 1961 ) (club was not de facto
nonprofit corporation prior to January 18, 1960, when it obtained its charter; there was no
evidence of an attempt to organize prior to that date, and promotional and organizational
activities that preceded actual incorporation were insufficient to confer de facto corporate status);
MM Properties, Inc. v. Coolawalla Enterprises, Inc., No. Civ. A. 95-7598, 1997 WL 189377 * 11
(E.D. Pa. April 16, 1997) (court finding, after a bench trial, that plaintiff was not a de facto
corporation prior to March 14, 1994, the date on which it was lawfully incorporated, because
there was no attempt to incorporate prior to that date); Tan-Line Studios, Inc. v. Bradley, Civ. A.
No. 84-5925, 1986 WL 3764 * 11 (E.D. Pa. March 25, 1986) (defendants failed to establish the
existence of a de facto corporation where there was no proof of an effort in good faith to
incorporate, which is "an essential element of that concept") (citing Fletcher Cyc. Corp. §3777
(Perm Ed. 1982».
In sum, under both the BCL and Pennsylvania common law, de facto corporate status has
traditionally required the filing of corporate formation documents and approval of same by the
Commonwealth.
Applying this concept to the context of limited liability companies -- and
assuming only for the sake of argument that Pennsylvania courts would recognize the concept of
de facto LLCs, the Court concludes that de facto LLC status requires, at a minimum, colorable
compliance with the provisions of the Limited Liability Company Law of 1994, including
23
acknowledgment by the Commonwealth Department of State of a duly filed certificate of
organization.
Based on the record at hand, Plaintiff cannot demonstrate a triable issue of fact relative to
its alleged de facto LLC status prior to March 7, 2013. For the reasons previously discussed,
Plaintiff has not produced evidence sufficient to support a reasonable finding that there was an
attempt to organize Clarity as an LLC prior to March 7, 2013 by filing a certificate of
organization that was accepted and approved by the Commonwealth's Department of State.
Plaintiff has failed not only to produce a copy of any certificate of organization filed by "Clarity
Software, LLC" prior to March 7, 2013; it has also failed to produce any contemporaneous
documentation to suggest that a certificate of organization was ever filed. (DCSMF
~~
25-31.)
Plaintiff has presented testimony from Wallace that Wallace filled out forms and
instructed an attorney to file them and to organize Clarity as an LLC. Wallace does not recall
precisely when Clarity was formed, although he stated that it could have been August 29,2003.
(Wallace Dep. 83-23-84-: 1, A. 22, ECF No. 20-1.) Wallace does not recall the name of the
attorney he hired for this purpose, nor does he possess any documentation indicating that he
retained an attorney to form the company. (Wallace 44:12-13, A. 11; id. at 68:24-69:8, A. 18.)
Neither Plaintiff nor Wallace have any documentation showing that anyone paid the filing fee for
forming "Clarity Software LLC." (A. 95; Wallace Dep. 73:24-74:2, A. 19-20, ECF No. 20-1.)
Given the dearth of evidence in the record to support a colorable attempt to organize Clarity as
an LLC prior to March, 7, 2013, the Court cannot say there is a genuine, triable issue of fact
concerning Clarity'S de facto existence as an LLC as of August 29, 2003. 16
Because no
16 Plaintiff cites Western Roofing Co. v, Golant, 1987 Mass. App, Div. 36 (1987), for the proposition that reliance
upon an attorney to fonn a corporation is sufficient to achieve de Jacto status, despite the attorney's failure to file
24
reasonable jury could find that Plaintiff existed, either in de jure or de facto fonn as of August
29, 2003, Plaintiff could not have obtained title to the copyright via the 2003 Agreement. See
Lester Assoc. v. Commonwealth of Pa., 816 A.2d 394, 399 (Pa. Commw. Ct. 2003) (where
purported LLC did not exist and was not capable of taking title to property at the time that
certain real estate was purported conveyed to it, the deed was void ab initio and no legal transfer
of title to the property could have occurred).
C. Did Heck Validly Transfer Title to the Copyright to PlaintifJin 2013?
Given this Court's conclusion, as a matter of law, that "Clarity Software, LLC" did not
exist as either a de jure LLC or a de facto LLC on August 29, 2003 and could not have taken title
to the copyright as of that date, it follows that title to the copyright necessarily remained with
Heck as of August 29, 2003. Plaintiff insists that, under this scenario, it obtained valid title to
the copyright by virtue of a transfer agreement that was executed by Heck and Plaintiff following
"Clarity Software, LLC's" organization on March 7,2013.
This theory is also not viable because of the fact that Heck filed for Chapter 13
bankruptcy on December 31, 2003. As of that point, all of Heck's property, including his title to
the copyright, became part of his bankruptcy estate.
See 11 U.S.C. §541(a) (1) (The
incorporating documents. Based on our prior discussion of Pennsylvania law relative to de facto corporations, the
Court is not persuaded that Western Roofing's rule oflaw would be adopted by Pennsylvania courts. Furthermore,
Western Roofing does not appear to represent a consensus view among the various states. See, e.g., Fleischhauer v.
Feltner, 879 F.2d 1290, 1299 (6 th Cir. 1989) (business did not have defacto corporate status where the only
evidence in the record to support such a finding was two letters written on putative corporation's stationery and
defendant's remark that he thought he told his lawyer to incorporate the company; court found that "[t]hese efforts
fall far short of any good faith attempt to incorporate") Leber Assoc., LLC v. The Entertainment Group Fund, No. 00
Civ. 3759 LTS MHD, 2003 WL 21750211, at * IO (S.D.N.Y. July 29, 2003)("Merely giving instructions to an
attorney is insufficient as a matter of law to establish de facto status.") (applying Delaware law); Conway v. Samet,
300 N.Y.S. 2d 243,246 (N.Y. Sup. 1969) ("[m]ore is required to establish the defacto corporation defense than
giving instructions to an attorney").
25
commencement of a case under section 301, 302, or 303 of the Bankruptcy Code creates an
estate which is comprise of, among other things, "all legal or equitable interests of the debtor in
property as of the commencement of the case."); Kunkle v. Jasin, 420 F. App'x 198, 200 (3d Cir.
2011) (noting that a bankruptcy estate can encompass the debtor's intellectual property, such as
interests in copyrights) (citing United States v. Inslaw, Inc., 932 F.2d 1467, 1471 (D.C. Cir.
1991 )). In submitting his bankruptcy schedules, Heck did not list his ownership interest in the
copyright among his items of personal property (see A. 151). Consequently, that property was
apparently never administered by the Trustee after Heck's Chapter 13 filing was converted to a
Chapter 7 filing, and the copyright therefore could not have been abandoned to Heck by the
Bankruptcy Trustee. See 11 U.S.c. §554(c) ("Unless the court orders otherwise, any property
scheduled under section 521 (a)(l) of this title not otherwise administered at the time of the
closing of a case is abandoned to the debtor and administered for purposes of section 350 of this
title."); id. at §554(d) ("Unless the court orders otherwise, property of the estate that is not
abandoned under this section and that is not administered in the case remains property of the
estate."). See also Hutchins v. IR.S., 67 F.3d 40,43 (3d Cir. 1995) ("It is clear that an asset must
be properly scheduled in order to pass to the debtor through abandonment under 11 U.S.C.
§554.") (citing cases).
As a result of the foregoing, the Court agrees with Defendant that the Bankruptcy Trustee
is the real party in interest with respect to the subject copyright. Because Plaintiff has failed to
proffer evidence sufficient to establish that it owned the copyright at any time, either before or
after its formal organization on March 7, 2013, Plaintiff lacks standing to pursue the copyright
26
infringement claims set forth in the operative pleadings of these consolidated civil actions. 17
Moreover, because the Trustee is the real party in interest relative to the copyright in question,
Heck also lacks standing and cannot be substituted in place of Plaintiff as the real party in
interest to these consolidated copyright actions. IS
IV. Conclusion
For the foregoing reasons, Defendant's motion for summary judgment (ECF No. 18) is
granted, and judgment will be entered in its favor at both docket numbers. 19
An appropriate Order of Judgment will follow.
Dated:
9.. ~-1..d\
-
---------
Mark R. Hornak
United States District Judge
17 Defendant argues in the alternative that, even if Plaintiff somehow took title to Heck's copyright pursuant to the
2003 Agreement, Plaintiff is nevertheless judicially estopped from relying on or asserting such a transfer of title in
this case because Heck failed to disclose the transaction (or the 2003 Agreement) on his bankruptcy schedules. In
light of the Court's determination that Plaintiff has failed to demonstrate an issue offact relative to its ownership of
the copyright in question, the Court need not address Defendant's judicial estoppel argument.
18 Even if Heck could be substituted, there is no evidence of record to establish that Heck has a registration for the
copyright.
19 Both the First Amended Complaint in the 2012 Lawsuit (Case No.2: 12-cv-1609 at ECF No. 31), and the
Complaint in this lead case (No.2: 13-cv-795 at ECF No.1), assert a single cause of action against Defendant for
alleged copyright infringement. Although the Complaint in this lead case alleges additional facts relating to
Clarity's corporate status and alleged chain of ownership of the copyright in question, the two pleadings are
otherwise virtually identical with respect to the averments that form the basis for the alleged copyright infringement.
The primary difference between the two cases is that the 2012 Lawsuit was originated by "Clarity Software, LLC"
prior to its formal organization on March 7, 2013, wh iIe the lead case was commenced by Clarity Software, LLC as
a duly organized limited liability company. Because this Court has concluded, as a matter of law, that: (i) there is
insufficient evidence to support Clarity's existence as either a de jure LLC or a de/acto LLC as of August 29,2003;
(ii) "Clarity Software, LLC" could not have taken title to the copyright by virtue of the 2003 Agreement; (iii) the
copyright became part of Heck's bankruptcy estate as of December 31, 2003; and (iv) the copyright was never
administered or abandoned and remains part of Heck's bankruptcy estate, it necessarily follows that "Clarity
Software, LLC" cannot prevail in either of the two consolidated cases. Accordingly, the Court's decision to grant
summary judgment in favor of Defendant in this lead case necessarily requires entry ofjudgment in favor of
Defendant at Case No.2: 12-cv-1609 as well.
27
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