The Gerffert Company, Inc. v. William J. Hirten Company, LLC et al
Filing
72
MEMORANDUM AND ORDER adopting 55 Report and Recommendations; granting 18 Motion for Summary Judgment by James Dean and William J. Hirten Company, LLC; and, denying 60 APPEAL OF MAGISTRATE JUDGE DECISION to District Court by The Gerffert Company, Inc. re: 53 Order on Motion to Strike. So Ordered by Judge William E. Smith on 9/7/11. (Jackson, Ryan)
UNITED STATES DISTRICT COURT
DISTRICT OF RHODE ISLAND
___________________________________
)
THE GERFFERT COMPANY, INC.,
)
)
Plaintiff,
)
)
v.
)
C.A. No. 10-101 S
)
WILLIAM J. HIRTEN COMPANY, LLC,
)
JAMES DEAN, and ABC COMPANIES,
)
)
Defendants.
)
___________________________________)
MEMORANDUM AND ORDER
WILLIAM E. SMITH, United States District Judge.
Before
the
Court
infringement
dispute
(“Gerffert”)
and
are
between
Defendants
two
motions
Plaintiff
William
in
this
Gerffert
J.
Hirten
copyright
Company,
Inc.
Company,
LLC
(“Hirten LLC”), James Dean, and ABC Companies 1 (collectively,
“Defendants”).
Judge
David
The first is Plaintiff’s appeal of Magistrate
L.
Martin’s
Memorandum
and
Order
(ECF
No.
53
(hereinafter “Order”)) granting in part Defendants’ motion to
deem admitted its undisputed facts.
The second is Plaintiff’s
objection to the Magistrate Judge’s Report and Recommendation
(ECF No. 55 (hereinafter “R & R”)) granting Defendants’ motion
for summary judgment.
For the reasons below, both motions are
denied, and summary judgment will enter for Defendants.
1
ABC Companies are, as of yet, unspecified customers of
Hirten LLC.
The relevant facts, procedural background, and analysis are
fully set forth in the R & R, which the Court adopts in toto.
The Court limits its discussion to those facts pertinent to the
motions presently before it.
I.
Order Granting in Part Defendants’
Undisputed Facts Admitted
Motion
to
Deem
Its
The April 3, 2010 Order deemed admitted certain facts in
Defendants’
(corrected)
statement
of
undisputed
facts
(“SUF”)
based on Plaintiff’s failure to adequately or properly dispute
Defendants’ undisputed facts in its statement of disputed facts
(“SDF”).
Plaintiff appeals the Order.
As it is nondispositive,
this Court will defer to the conclusions of the Magistrate Judge
unless they are “clearly erroneous” or “contrary to law.”
Fed.
R. Civ. P. 72(a); 28 U.S.C. § 636(b)(1)(A).
The
Order
deemed
undisputed
facts 2
“cluttered”
with
“evidence
admitted
upon
finding
irrelevant
supporting
its
all
but
four
Plaintiff’s
material,
contention[s],”
of
SDF
(Order
(id.
Defendants’
variously
6),
at
lacking
7-8),
“not
responsive” or “not disput[ing] the fact which Defendants have
stated is undisputed,” and containing hearsay (id. at 8).
Magistrate
Judge
further
found
that
Plaintiff’s
The
“lengthy,
complex, and repetitious statement of disputed facts complicates
matters and greatly increases the burden on this Court.”
2
During
The Magistrate Judge found Defendants’ SUF ¶¶ 5, 30, 32,
and 33 disputed but not material.
2
this Court’s hearing on the matter, it inquired of Plaintiff’s
counsel
about
acknowledged
the
that
unusual
the
character
submission
of
“a
was
its
bit
SDF.
Counsel
unorthodox”
but
stated that Plaintiff “very much wanted to present his side of
the story in his own words, in his own voice.”
(Hr’g Tr. 5,
Feb. 10, 2011.)
L.R.
Cv.
56
is
not
intended
to
be
an
opportunity
for
parties to spin their version of the facts into a gratuitous,
self-serving narrative.
district
court’s
Rather, it is a means of “focusing a
attention
what
is--and
what
is
not--
Calvi v. Knox County, 470 F.3d 422,
genuinely controverted.”
427 (1st Cir. 2006).
on
Courts are therefore under no obligation
“to ferret through the record to discern whether any material
fact is genuinely in dispute.”
CMI Capital Mkt. Inv., LLC v.
González-Toro,
(1st
520
F.3d
58,
62
Cir.
2008).
The
First
Circuit has stressed the importance of complying with “local
rules similar to Local Rule 56,” stating:
Given the vital purpose that such rules serve,
litigants ignore them at their peril.
In the event
that a party opposing summary judgment fails to act in
accordance with the rigors that such a rule imposes, a
district court is free, in the exercise of its sound
discretion, to accept the moving party’s facts as
stated.
Rios-Jimenez
v.
Principi,
520
F.3d
(citations omitted).
3
31,
38
(1st
Cir.
2008)
The Magistrate Judge went beyond the call of duty by poring
through Plaintiff’s SDF and individually assessing whether, and
the extent to which, each of Defendants’ forty-five undisputed
facts
should
be
deemed
admitted.
Evincing
further
attentiveness, the Magistrate Judge in several instances deemed
admitted
only
portions
of
the
paragraphs
contained
in
Plaintiff’s SDF, excising any facts he thought were properly in
dispute.
In the face of this careful appraisal, Plaintiff’s
arguments on appeal, which essentially rehash those previously
rejected,
fail
to
demonstrate
that
the
Magistrate
Judge
committed clear error in granting in part Defendants’ motion to
deem admitted its SUF.
II.
The Order is affirmed.
Summary Judgment
The following is set forth in the R & R in further detail,
but is recounted here for ease of reference.
Gerffert
purchased
from
artist
Larry
In 2006, Plaintiff
Ruppert
a
non-exclusive
license to use certain works of art in a religious book (the
"Original Works").
(SUF ¶ 40.)
In July 2007, Dean, a Gerffert
employee at the time, approached Ruppert about modifying the
Original
Ruppert
Works
that
(the
the
“Modified
Modified
Works”).
Dean
were
the
Works
for
explained
use
of
a
to
new
company being formed called Hirten LLC, adding that Gerffert’s
president,
Gerffert’s
Stephen
assets
to
Panigel,
Hirten
planned
LLC.
4
(Id.
to
¶¶
retire
41-42.)
and
sell
Ruppert
created the Modified Works for $4,240 and invoiced the bill to
HMH Religious Manufacturing Co., a company owned and operated by
Dean.
LLC
(Id. ¶¶ 3, 43.)
registered
with
A month later, in August 2007, Hirten
the
State
of
refunded Dean for the Modified Works.
Delaware,
and
thereafter
(Id. ¶¶ 22, 44.)
On June
22, 2009, Ruppert assigned his entire interest in the Original
Works
to
Gerffert,
conferring
an
exclusive
license
(See Am. Compl., Ex. 2, ECF No. 16-3.)
copyrights.
to
the
On March 3,
2010, Gerffert, through counsel, informed Hirten LLC that it was
terminating whatever license it may have had in the Modified
Works.
(Panigel Reply Decl., Ex. L., ECF No. 30-4.)
Gerffert then brought suit against Defendants alleging that
(1)
Hirten
LLC’s
sales
of
a
religious
book
containing
the
Modified Works infringed its copyrights on the Original Works,
and (2) Dean breached his fiduciary duty and duty of loyalty by
commissioning
negotiations
the
Modified
between
Works
Gerffert
and
company, William J. Hirten, Inc.
and
by
Hirten
interfering
LLC’s
with
predecessor
Gerffert asks that any license
Hirten LLC received to use the Modified Works be held in a
constructive
trust
for
Gerffert
or
rescinded
as
fraudulently
obtained.
On April 24, 2010, Defendants moved for summary judgment
claiming that because Dean commissioned the Modified Works on
behalf of and for the use of Hirten LLC, and Ruppert understood
5
this,
Ruppert
conferred
upon
Hirten
LLC
an
exclusive license to use the Modified Works.
irrevocable
non-
Defendants further
aver that Dean did not violate any fiduciary duties owed to his
employer, Gerffert, because he commissioned the Modified Works
with Panigel’s implicit consent.
The Magistrate Judge heard
arguments and found as follows:
The
record
supports
Defendants’
contention
that
Ruppert granted Hirten LLC a non-exclusive license to
use
the
Modified
Works
in
a
communion
book.
Gerffert’s arguments for re[s]cission or imposition of
a constructive trust based on fraud lack evidentiary
support.
Similarly, its argument that any license
would not be to Hirten LLC ignores the declarations of
Dean
and
Ruppert, the
two
individuals
directly
involved in the transaction.
Because Hirten LLC paid
consideration for the license, it is not subject to
termination by Gerffert.
Lastly, Dean did not breach
any fiduciary duty to Gerffert after Panigel told Dean
that he was retiring and was going to sell or
liquidate the business.
(R & R 28). 3
Gerffert
now
objects
to
the
R
&
R,
claiming
that
it
erroneously: (1) disregards disputed material facts, (2) finds
the
Statute
of
Frauds
inapplicable
to
Ruppert
and
Dean’s
agreement concerning the Modified Works, (3) concludes that Dean
acted
as
a
commissioned
corporate
the
Modified
promoter
Works,
3
for
and
Hirten
(4)
LLC
confuses
when
the
he
legal
The R & R also found that Gerffert offered no evidence to
support its allegation that Dean interfered with negotiations
between Gerffert and Hirten LLC’s predecessor company.
The
Court agrees and will not address the matter further.
6
standard for contracts lacking a term of duration.
The Court
addresses each of these objections in turn.
A.
Whether the Existence of Disputed
Renders Summary Judgment Inappropriate
Gerffert
“plethora
argues
highly
of
that
disputed
judgment inappropriate.”
It
cites
several
believes
the
value.”
(Id.)
Magistrate
facts,
Judge
which
Facts
ignored
render
a
summary
(Pl.’s Obj. to R & R 8, ECF. No. 61.)
examples
Magistrate
the
Material
of
Judge
“issues
of
mistakenly
fact[s]”
“accept[ed]
that
on
it
face
However, upon reviewing the R & R and relevant
submissions, the Court is satisfied that the Magistrate Judge
rested his conclusions on undisputed facts.
Moreover, the fact
issues that Gerffert alleges are immaterial to the main issue in
this
case:
whether
Ruppert
conferred
to
Hirten
LLC
a
non-
exclusive license to use the Modified Works.
The Court adopts the R & R’s conclusion that he did.
“[A]n
implied nonexclusive license has been granted when (1) a person
(the licensee) requests the creation of a work, (2) the creator
(the licensor) makes that particular work and delivers it to the
licensee who requested it, and (3) the licensor intends that the
licensee-requestor copy and distribute his work.”
I.A.E., Inc.
v. Shaver, 74 F.3d 768, 776 (7th Cir. 1996) (citing Effects
Assocs. v. Cohen, 908 F.2d 555, 558-59 (9th Cir. 1990)); accord
7
John G. Danielson, Inc. v. Winchester-Conant Props., Inc., 322
F.3d 26, 41-42 (1st Cir. 2003).
Here, the material undisputed facts make clear that (1)
Dean commissioned Ruppert to create the Modified Works on behalf
of Hirten LLC, (2) Ruppert created the Modified Works for Hirten
LLC
and
invoiced
Dean,
and
(3)
Ruppert
understood
that
the
Modified Works were to be used and distributed by Hirten LLC.
(See generally SUF ¶¶ 41-44; Corrected Decl. of James Dean, ECF
No. 23; Decl. of Larry Ruppert, ECF No. 20-4.)
Hirten LLC
therefore received a non-exclusive license to use the Modified
Works
that,
once
insulated
it
from
exclusive
or
nonexclusive,
creates
defense to a claim of copyright infringement.”
908 F.2d at 559)).
attempt
to
liability
for
See I.A.E., 74 F.3d at 775 (“[T]he existence of a
infringement.
license,
conferred,
chip
an
affirmative
(citing Effects,
Gerffert’s remaining objections to the R & R
away
at
this
conclusion
on
various
other
grounds.
B.
Statute of Frauds
Gerffert objects to the Magistrate Judge’s rejection of its
argument that the agreement between Ruppert and Dean falls under
the statute of frauds.
Specifically, it argues that performance
of the non-exclusive license could not have commenced until the
Modified
Works
were
incorporated
(here, a religious book).
into
a
physical
embodiment
Thus, because Dean suggested that
8
this “would likely not occur for 18 months,” (Gerffert’s Mem. in
Supp. of Obj. to R & R 19, ECF No. 61 (citing Corrected Dean
Decl. ¶ 26)), Gerffert argues that Dean’s own words demonstrate
that the contract could not be fully performed within a year
from its making.
Gerffert’s
objection
fundamental
fails
for
two
misunderstanding
reasons.
of
the
First,
it
statute
of
displays
a
frauds.
The question is not whether performance “would likely
not occur” within one year (id.), but whether performance cannot
occur within one year.
See R.I. Gen Laws § 9-1-4.
Moreover,
the weight of authority suggests that the statute of frauds has
no
applicability
where,
as
here,
the
existence
of
a
non-
exclusive license is implied by the conduct of the parties and
asserted as an affirmative defense.
In contrast to an exclusive license, a nonexclusive
license does not amount to a transfer of copyright
ownership. . . . Therefore, a nonexclusive license is
not governed by the statute of frauds provision of 17
U.S.C. § 204, and may be granted “orally, or may even be
implied from conduct.”
3 Melvin B. & David Nimmer,
Nimmer on Copyright, § 10.03[A][7] (2001).
The
existence of a nonexclusive license, if granted to the
defendant in an infringement action, operates as an
affirmative defense to a claim of infringement. Johnson
v. Jones, 149 F.3d 494, 500 (6th Cir. 1998); I.A.E., 74
F.3d at 775; Effects, 908 F.2d at 559.
John G. Danielson, Inc. v. Winchester-Conant Props., Inc., 186
F.
Supp.
2d
1,
18
(D.
Mass.
2002);
accord
Holtzbrinck
Pub.
Holdings, L.P. v. Vyne Commc’ns, Inc., No. 97 CIV 1082(KTD),
9
2000 WL 502860, *6 (S.D.N.Y. Apr. 26, 2000) (“A license implied
by the law is an exception to the proscriptions of the Statute
of Frauds.”); Natkin v. Winfrey, 111 F. Supp. 2d 1003, 1012
(N.D. Ill. 2000) (“statute of frauds is simply inapplicable to a
copyright license implied by law from the parties’ conduct”).
C.
Whether the Non-Exclusive License is Revocable
Gerffert also objects to the R & R for concluding that
Hirten
LLC’s
non-exclusive
irrevocable.
license
Specifically,
to
Gerffert
the
Modified
contends
that
Works
is
when
it
acquired an exclusive license and copyrights to the Original
Works
in
2009,
those
rights
included
Ruppert’s
authority
to
terminate the non-exclusive license to the Modified Works, and
therefore it properly terminated any license Hirten LLC may have
had to the Modified Works through its March 3, 2010 letter from
counsel.
that
a
supported
Defendants counter by pointing to the established rule
non-exclusive
by
copyright
consideration.
See
license
is
Asset
Mktg.
irrevocable
Sys.,
Inc.
if
v.
Gagnon, 542 F.3d 748, 757 (9th Cir. 2008) (holding that “because
[plaintiff] paid consideration, this [non-exclusive] license is
irrevocable” (citing Lulirama Ltd. v. Axcess Broadcast Servs.,
Inc., 128 F.3d 872, 882 (5th Cir. 1997) (holding same))).
As
the R & R notes, if a license supported by consideration were
revocable, then it would be illusory.
10
(R & R 26.)
Gerffert
responds
consideration,
because
Fraioli,
it
the
is
763
notwithstanding
non-exclusive
of
A.2d
that,
an
license
unspecified
599,
602
(R.I.
the
is
duration.
2000).
existence
still
revocable
See
It
of
Hilton
is
true
v.
that,
“[w]here a contract formed in a particular state is silent with
respect
to
certain
terms,
state
rules
of
interpretation may serve to fill those gaps.”
enforcement
and
Latin Am. Music
Co. v. Am. Soc’y of Composers Authors & Publishers, 593 F.3d 95,
99 (1st Cir. 2010).
Thus, Gerffert asserts that its March 3,
2010 letter properly terminated any non-exclusive license Hirten
LLC may have had to the Modified Works because, in Rhode Island,
“when the duration of a contract is uncertain, the contract is
to be considered terminable at will.”
(quotation and citation omitted).
Hilton, 763 A.2d at 602
The R & R dismissed this
argument, finding that Gerffert’s Rhode Island authorities “deal
with employment contracts, not licenses.”
(R & R 25.)
In its objection to the R & R, Gerffert again stresses that
Rhode Island courts have “consistently held” that contracts of
unspecified duration are terminable at will, adding that this
Court has “framed the rule as applying to all service contracts
generally.”
(Gerffert’s Mem. in Supp. of Obj. to R & R 22
(citing
Ross-Simons
of
F.R.D.
386,
(D.R.I.
conveniently
395
omits
any
Warwick,
Inc.
v.
1998)).)
reference
11
to
Baccarat,
Inc.,
Gerffert,
this
Court’s
182
however,
unambiguous
pronouncement
Ross-Simons
in
that:
“Defendant
has
not
identified, nor has the Court found, any cases in which the
Rhode Island courts have extended this rule beyond employment
contracts.
Furthermore,
defendant
has
not
proposed
any
persuasive rationale to support such an expansion of the rule by
this Court.”
Ross-Simons, 182 F.R.D. at 395 (footnote omitted).
In the absence of such authority or any rationale suggesting why
a
non-employment
contract
of
an
indefinite
duration
is
(or
should be) terminable at will, this Court will not so find.
D.
Whether Dean Acted as a Corporate Promoter
Finally, Gerffert argues that the R & R’s determination
that Dean acted as corporate promoter for Hirten LLC when he
commissioned the Modified Works should be rejected.
A promoter
is “every person acting, by whatever name, in the forming and
establishing of a company at any period prior to the company
becoming fully incorporated.”
Dickerman v. N. Trust Co., 176
U.S. 181, 203-04 (1900) (quotation and citation omitted); accord
Café La France, Inc. v. Schneider Secs., Inc., 281 F. Supp. 2d
361, 373 (D.R.I. 2003) (“A corporate promoter is one who, alone
or with others, participates in the formation of a corporation
or some other joint business venture, and takes steps to put it
in
a
position
to
transact
the
intended.”).
12
business
for
which
it
is
In its objection, Gerffert does not attempt to contradict
Defendants’ evidence that Dean acted as a promoter.
argues
that
the
promoter
question
is
one
of
Rather, it
fact
and
that
Defendants “failed to provide sufficient evidence to support”
that Dean is, in fact, a promoter.
But merely asking for more
evidence is not enough to survive summary judgment.
Statchen v.
Palmer, 623 F.3d 15, 18 (1st Cir. 2010) (“[E]vidence from the
moving party as to specific facts can be accepted by the court
where no contrary evidence is tendered by the party opposing
summary judgment.”).
To present a genuine issue of material
fact, Gerffert must proffer admissible evidence tending to show
that a “reasonable jury” could not believe that Dean was acting
as a promoter for Hirten when he commissioned Ruppert to create
the Modified Works.
597
F.3d
464,
material
resolve
fact
it
in
469
is
See Lockridge v. The Univ. of Maine Sys.,
n.3
(1st
‘genuine’
favor
of
Cir.
only
either
2010)
‘if
a
(“A
dispute
reasonable
party.’”
about
jury
could
Santoni
(quoting
a
v.
Potter, 369 F.3d 594, 598 (1st Cir. 2004))).
There can be no doubt that Dean acted as a promoter for
Hirten LLC, whose registration with the State of Delaware on
August
10,
interest.
2007
conferred
From
April
Dean
2007
with
onward,
a
one-third
Dean
was
an
ownership
integral
participant in the negotiations leading up to the formation of
Hirten LLC, attending various business meetings as a presumptive
13
one-third owner.
(See SUF ¶¶ 11-16.)
Dean also participated in
a May 22, 2007 meeting with others in order to “finalize the
details of forming Hirten LLC.”
(Id. ¶ 16.)
meeting,
reached
Dean
and
two
others
Shortly after the
an
agreement
to
“go
forward” with the formation of Hirten LLC with each as a one(Id. ¶ 18.)
third owner.
Moreover, Dean and Ruppert (the only
relevant parties to the transaction) have both attested, under
oath,
that
when
Dean
approached
Ruppert
to
commission
the
Modified Works, they understood that Dean was commissioning the
Modified works on behalf of and for the use of Hirten LLC.
(See
id. ¶ 42; Decl. of James Dean ¶ 23, ECF No. 23; Decl. of Larry
Ruppert ¶ 2, ECF No. 20-4 (“Dean, on behalf of this new Hirten
company, commissioned me to make modifications to the artwork I
created in 2006.
I entered into an agreement to create this new
artwork to be used in a communion book to be sold by the newly
created
Hirten
company.”).)
After
Hirten
LLC
formed,
it
ratified the transaction with Ruppert and issued a credit to
Dean vis-à-vis HMH, a company owned and operated by Dean.
¶¶ 3, 43-44.)
“person
(SUF
In light of this undisputed evidence, Dean was a
acting,
by
whatever
name,
in
the
forming
and
establishing of a company at any period prior to the company
becoming fully incorporated.”
Dickerman, 176 U.S. at 203-04.
Thus, the Court adopts the R & R’s conclusion that there is no
14
triable issue as to whether Dean acted as a promoter when he
commissioned Ruppert to create the Modified Works. 4
III. Conclusion
For the reasons set forth above, Plaintiff’s appeal of the
Order is DENIED, objections to the R & R are DENIED, and
Defendants’ motion for summary judgment is GRANTED.
IT IS SO ORDERED:
/s/ William E. Smith
William E. Smith
United States District Judge
Date: September 7, 2011
4
Moreover, to the extent that Gerffert objects to the R &
R’s conclusion that Dean did not breach any fiduciary duties or
commit fraud against Gerffert, those objections fail for the
reasons set forth by the Magistrate Judge in §§ III(A)(1) & (4)
and III(B) on the R & R.
Furthermore, to the extent it was
argued at the hearing on this matter, the Court also rejects
Gerffert’s argument that Dean was precluded from transferring
the Modified Works to Hirten LLC in light of a bright-line rule
forbidding non-exclusive licensees from transferring their
licenses.
A non-exclusive licensee can transfer his license
with the permission of the copyright owner. See ITOFCA, Inc. v.
MegaTrans Logistics, Inc., 322 F.3d 928, 941 (7th Cir. 2003)
(collecting cases and commentaries).
For the reasons stated
above, it is clear that Ruppert knew that the Modified Works
were created for Hirten LLC.
15
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