Telos Holdings, Inc. v. S.A.A.R. SrL et al
Filing
71
MEMORANDUM OPINION OF THE COURT: Motions filed by Believe and SAAR will be granted, claims against Believe and SAAR will be dismissed, and the court will order further proceedings relative to the Hadaway Defendants. Signed by District Judge Aleta A. Trauger on 8/7/2015. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(jw)
UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
ONE MEDIA IP LIMITED, as
successor-in-interest to TELOS HOLDINGS,
INC. d/b/a Point Classics,
)
)
)
)
Plaintiff,
)
)
v.
)
)
S.A.A.R. SrL, BELIEVE SAS d/b/a BELIEVE )
DIGITAL GROUP and BELIEVE US, HENRY )
HADAWAY ORGANISATION, LTD., HHO
)
LICENSING LIMITED, HENRY HADAWAY, )
And DOES 1-10, inclusive,
)
)
Defendants.
)
Case No. 3:14-cv-0957
Judge Aleta A. Trauger
MEMORANDUM
Pending before the court are motions to dismiss for lack of personal jurisdiction under
Rule 12(b)(2) filed by defendants S.A.A.R., SrL. (“SAAR”) (Docket No. 19) and Believe S.A.S.
(“Believe”) (Docket No. 38), to which the plaintiff filed Responses in opposition (Docket Nos.
22 and 45), each defendant filed a Reply (Docket Nos. 28 (SAAR) and 55 (Believe)), the
plaintiff filed a Supplemental Response relative to Believe (Docket No. 63), and the parties,
following discovery, filed supplemental briefs (Docket Nos. 68 (plaintiff), 69 (Believe), and 70
(SAAR)). For the reasons stated herein, the motions will be granted.
BACKGROUND
I. Overview
Plaintiff One Media IP Limited, as successor-in-interest to Telos Holdings, Inc. d/b/a
Point Classics (“One Media”), is a corporation organized under the laws of the United Kingdom.
Defendant SAAR is an Italian company, defendant Believe is a French company, defendant
1
Henry Hadaway is a U.K. citizen, and defendants Hadaway Organisation Limited and HHO
Licensing Limited (both affiliated with Hadaway himself) (collectively with Hadaway, the
“Hadaway Defendants”) are U.K. companies. One Media alleges that the defendants infringed
its copyright interests in a set of classical music recordings, which the court will refer to as the
“Catalog.” SAAR and Believe have filed separate motions to dismiss under Rule 12(b)(2),
contending that the court lacks personal jurisdiction over them. 1
After reviewing the parties’ briefs, the court permitted the parties to conduct limited
jurisdictional discovery. (Docket No. 65.) The parties conducted discovery and have filed
additional briefs and evidentiary materials. The court’s summary of the facts is drawn from the
parties’ submissions, including declarations and other evidentiary materials (some authenticated,
some not). (See, e.g., Docket Nos. 19, 22, 28, 45, 63, 68, and 69.) 2
II. Facts
A. One Media’s Rights to the Catalog
1
Despite receiving service (Docket Nos. 32, 33, and 36), the Hadaway Defendants did not
respond to the First Amended Complaint. The plaintiff filed a Motion for Entry of Default
(Docket No. 42), in which it quoted counsel for the Hadaway Defendants as having stated “they
will not be taking any part in the proceedings nor otherwise submitting to the jurisdiction of the
Tennessee court.” On October 21, 2014, the Clerk docketed an Entry of Default against the
Hadaway Defendants under Rule 55(a). The plaintiff has not moved for a default judgment
under Rule 55(b).
2
Among other materials, SAAR filed the Declaration of Boris Julius Guertler (Docket No. 19,
Ex. 1), Believe filed the Declaration of Anne Hindermeyer (Docket No. 38, Ex. A), the
Declaration of Kyle P. O’Malley with attached exhibits (Docket No. 69) and the Declaration of
Jim Long filed in a previous case (id., Ex. J thereto), and the plaintiff filed the Declaration of Jim
Long (Docket No. 22, Ex. C) and the Declaration of Jason Turner (plaintiff’s counsel) (id., Ex.
D).
2
Through a series of assignments, corporate mergers, and the like, chain of title to One
Media’s copyright interest in the Catalog traces back to the 1980s. 3 Although One Media’s
discovery responses are vague on the subject (O’Malley Decl., Ex. P), it appears that the
recordings on the Catalog were originally published in Eastern Europe in the 1980s and that title
to them was held (at some early stage) by an entity affiliated with the Hungarian government.
From March 31, 1992 through June 23, 2000, several different European-based companies held
title to the Catalog. 4
In June 2000, title to the Catalog shifted to a series of United States-based companies
affiliated with an American individual named Jim Long. On June 23, 2000, Long’s company
OneMusic Corporation (“OneMusic”), a Texas corporation for which Long served as CEO,
acquired the rights to the Catalog. On November 1, 2000, OneMusic assigned its interest in the
Catalog to Point Classics, LLC (the “LLC”), a Tennessee limited liability company of which
Long was a Member. (See Docket No. 68, Exs. A and B (Resp. to Interrogatory No. 14.).) 5 On
the Tennessee Secretary of State website, the LLC is listed as having a “Principal Office” at an
address in Malibu, California. 6 (O’Malley Declaration, Ex. K.) At any rate, between 2001 and
3
Information concerning the chain of title to these catalogs remains vague. The court’s
discussion of the corporate relationships and chain of title is based on the information in the
record and is made solely for purposes of resolving the motion. The court’s factual findings
should not be taken as preclusive findings of fact for any other purpose.
4
The Long Affidavit, which attempts to trace the chain of title to the Catalog and the associated
licenses, is difficult to follow. The court has done its best to make sense of its incomplete
descriptions of the transactions.
5
In its Supplemental Brief, One Media represents that Long and his wife became the sole
Members of Point Classics LLC “circa 2000 at the time the LLC acquired the Catalog.”
6
In a sworn interrogatory response, One Media represents that the LLC had an office in
Nashville from July 2000 “through an unknown date” and that the LLC had two “additional
3
2005, the LLC obtained Certificates of Registration from the United States Copyright Office for
the compositions within the Catalog (the “Copyright Registrations”). (Docket No. 68, Ex. C
(collectively).)
The Amended Complaint alleges that, on August 18, 2006, the LLC entered into a threeyear limited licensing agreement with Henry Hadaway Organisation Limited (“HHO #1”) related
to the Catalog (the “PC/HHO #1 License”). According to the Amended Complaint, the PC/HHO
#1 License expressly forbade HHO #1 from granting sublicenses related to the Catalog.
On December 11, 2007, the LLC filed Articles of Termination (bearing Long’s December
8, 2007 signature) with the Tennessee Secretary of State. (See O’Malley Decl., Ex. H.) On
December 18, 2007, the LLC filed a Notice of Dissolution (bearing the December 1, 2007
signature of Robert Sullivan as “Attorney” for the LLC), which indicated that the LLC’s
members had approved the company’s dissolution. A notice from the Tennessee Secretary of
State indicates that the effective date of the dissolution was December 18, 2007. According to
One Media, the Tennessee Secretary of State never accepted or recorded the LLC’s Articles of
Termination. 7
locations” at a P.O. Box and at a specific address in Malibu, California. The court agrees with
the defendants that the interrogatory response is evasive and fails to clarify which of these three
addresses constituted the LLC’s principal place of business at any given point in time. The court
explicitly advised the plaintiff to identify these data points with clarity, which the plaintiff failed
to do. For purposes of the pending motions, the court will rely on the Tennessee Secretary of
State website, which necessarily reflects the LLC’s representations to the public about its
principal place of business. Indeed, public records indicate that Long has owned the Malibu
property at the address identified in the interrogatory response since at least 2000.
7
One possible explanation is that the LLC filed materials in the wrong order. The LLC filed
Articles of Termination on December 11, 2007, one week before filing the Notice of Dissolution
and 20 days before spinning off its assets. In fact, it appears that the appropriate order would
have been to file the Notice of Dissolution first, to spin off the assets second, and to file Articles
4
On December 31, 2007 – during the term of the PC/HHO #1 License – the LLC assigned
its interests in the Catalog to Telos Holdings, Inc. (“Telos”), a Texas corporation owned by the
Longs. (O’Malley Decl., Ex. L.) In the agreement, the LLC assigned to Telos “all of the
Assignor’s right, title and interest in” the Catalog, “together with all copyrights and all other
rights in and to the Master recordings throughout the world under any law, statute, treaty or
regulation, now or later existing or enacted, for the use of the Master Recordings or infringement
of the copyright in them or any other legal or equitable right to the use and ownership of them in
all fields of use now or later existing throughout the world and otherwise throughout the universe
by means or technology now known or later existing.” Long signed on behalf of each party to
the agreement. Telos did not record an assignment of copyright with the Library of Congress,
nor did the LLC make any updated filing with the Tennessee Secretary of State.
Although the plaintiff continues to represent that the LLC conducted “winding down
business activities” after 2007, it has not provided evidence of actual business activity after
December 31, 2007. 8 On July 16, 2009, presumably because the LLC had never made a
of Termination third. On December 18, 2007 (one week after filing the Articles of Termination)
the LLC filed its Notice of Dissolution. Upon receiving that notice, the Secretary communicated
to the LLC as follows: “When the limited liability company has distributed all of its assets it
must file articles of termination of limited liability company existence with the secretary of
state.” (O’Malley Decl., Ex. H, Page ID #: 2230.) As this communication indicates, the
Secretary expected the LLC to file Articles of Termination only after it had spun off its assets,
and the communication essentially ignores the LLC’s premature December 11, 2007 filing. As
explained herein, this sequence of transactions may account for two subsequent developments:
(1) the Secretary did not administratively dissolve the LLC until July 2009; and (2) in 2014, the
LLC purported to operate as a continuing general partnership in an effort to ensure that the
LLC’s successor-in-interest (Telos) was able to properly transfer assets to the plaintiff (a
transaction detailed herein).
8
In an interrogatory response, the plaintiff avers that the LLC’s “winding down” activities
through July 2014 “included, among other things, continued litigation enforcing its exclusive
5
supplemental filing or otherwise paid its annual fee, the Tennessee Secretary of State
administratively dissolved the LLC. (Pltfs. Supp. Mem., Ex. D.)
On July 17, 2009, Telos informed Hadaway that, effective August 18, 2009 (the last date
of the three-year term), the PC/HHO #1 License would be terminated. 9 (O’Malley Decl., Ex. G.)
Hadaway confirmed the termination of the agreement in writing. Neither Telos nor its
predecessors-in-interest entered into an operative license with Hadaway after the HHO #1/PC
License had expired in August 2009.
On July 1, 2014, Telos sold its interests in the Catalog to the plaintiff, One Media, a
British company that does not appear to be affiliated with Jim Long. In the agreement, Telos
represented that it owned, controlled, and had exclusive rights to the exploitation of the Catalog
rights to the Point Classics Catalog, assignment of assets to Telos Holdings, Inc. and Plaintiff
[One Media], and recording various documents with the USPTO and Library of Congress.”
Docket No. 68, Ex. B, Resp. to Interrogatory No. 15.) The record does not bear out this
representation. For example, perusing the court docket, there is no indication that the LLC
actively litigated a case after December 2007. See Platinum Entm’t v. Point Classics, LLC, 3:01cv-1413 (Consent Judgment filed November 18, 2003); Point Classics, LLC v. MP3.com, et al.,
3:03-v-1154 (Agreed Order of Dismissal filed October 31, 2005); and Point Classics, LLC v.
Sheridan Sq. Entm’t, Inc., et al., 3:07-cv-0065 (Agreed Order of Dismissal filed April 3, 2007).
In all related cases filed after December 2007, Telos – not the LLC – appeared as the plaintiff-ininterest, including an appearance in one case filed less than one month after the December 2007
asset transfers from the LLC to Telos Holdings. See Telos Holdings, Inc. d/b/a Point Classics v.
X5 Group AB, et al., 3:08-cv-0079 (filed January 25, 2008); Telos Holdings, Inc. v. Cascade, et
al., 3:09-cv-0380 (filed April 28, 2009).
9
The Amended Complaint alleges that “[t]he PC/HHO #1 License was terminated by Point
Classics via email on July 17, 2009, effective August 18, 2009.” Given that the LLC no longer
existed by that point and that Telos had acquired the LLC’s interest in the Catalog by that date,
the reference to “Point Classics” necessarily means that it was Telos (doing business as “Point
Classics”) that terminated the license, not the LLC. This is one of many instances in which the
Amended Complaint fudged the distinction between the LLC (a company incorporated in
Tennessee) and Telos (a company with no Tennessee connection).
6
and that it agreed to assign to One Media “all of its rights in and to the Catalog[.]” (O’Malley
Decl., Ex. F.) The agreement defined the “rights” conveyed as “the exclusive right throughout
the world and its solar system to exploit and use the Recordings by all and any means and in all
media for the life of copyright of the Recordings . . . .” The agreement also indicated that Telos
irrevocably assigned “all and any of Telos’s right to receive accountings and payments from
Licensees pursuant to the terms of the Licenses,” as well as “all and any of Telos’s rights in
territories outside of the United States of America in and to the words ‘Point Classics’ and the
distinctive hand and baton design . . . .” The agreement also contains a representation by Telos
that “all Rights in and to the Catalogue were assigned by Point Classics to Telos pursuant to an
agreement in writing dated 31st December 2007 since which time Telos’s ownership of the
Rights and the Catalogue has not been subject to successful challenge.” (Id. at ¶ 7.9(m)
(emphasis added).) On the same date, the LLC, “d/b/a Point Classics and Point Classics general
partnership,” entered into a separate agreement with One Media, in which it represented that it
had “previously assigned its rights of exploitation in and to the Catalogue, but has not effectuated
all assignments from PC to Telos[.]” In return for consideration of $1.00, the LLC (or purported
general partnership) assigned all of its remaining interests in the Catalog to One Media. Long
signed the agreement on behalf of “Point Classics LLC d/b/a Point Classics general partnership.”
On October 3, 2014 – several months after selling its rights to One Media in July 2014 –
Telos recorded with the Library of Congress an assignment of rights from Point Classics LLC.
As best the court can discern, the recordation document reflected the December 2007 transfer of
interests in the Catalog from the LLC to Telos (as opposed to a contemporaneous transaction
between those two entities). On the same date, the LLC and Telos entered into an “Assignment
7
of Copyrights,” in which Telos states that it “heretofore acquired all of the assets of Point
Classics” in the Catalog and “desires to transfer all such rights” to One Media.
B. SAAR and Believe’s Alleged Infringement of the Catalog
SAAR and Believe have distributed recordings of the Catalog under license agreements
that One Media claims were not valid. One Media contends that, from the year 2000 forward, it
only licensed the Catalog to a Hadaway entity once, specifically for the three-year period from
August 2006 to August 2009 (under the PC/HHO #1 License), and that the three-year license
prohibited HHO #1 from sublicensing the Catalog. Three sets of licensing transactions involving
a Hadaway entity, SAAR, Believe, or a predecessor-in-interest to Believe indicate that licensing
activity occurred outside the PC/HHO #1 License.
First, on March 1, 2000 (a few months before Long’s company, OneMusic, acquired the
Catalog in July 2000), defendant HHO Licensing Limited (“HHO #2”) entered into a licensing
agreement with SAAR (“SAAR/HHO #2 Agreement”). In the agreement, HHO #2 granted
SAAR a non-exclusive right to use the Catalog in Italy, to manufacture, sell, and distribute
records of the Catalog in Italy, and to export records of the recordings to other countries within
the European Union. The SAAR/HHO #2 Agreement is not in the record, and SAAR has not
identified whether this agreement had an intended termination date. According to One Media,
HHO #2 had no right to sublicense the Catalog to SAAR at that time. It is not clear from the
record whether, after entering into the SAAR/HHO #2 Agreement, SAAR licensed or otherwise
profited from exploitation of the Catalog before October 2007. 10
10
One Media alleges that the Long-affiliated owners of the Catalog (One Music as of June 2000,
the LLC as of November 2000, and Telos as of December 2007) were unaware of the
SAAR/HHO#2 Agreement until approximately 2013.
8
Second, on October 15, 2007, SAAR and a company called MTunes Digital Distribution
GmbH (“MTunes”) entered into a “Non Exclusive License Agreement [for] Digital Music
Distribution” (the “MTunes/SAAR Agreement”). (Docket No. 68, Ex. H.) In the
MTunes/SAAR Agreement, SAAR represented that it “owns or controls” digital distribution
rights in an attached list (presumably including the Catalog), while MTunes represented that it
owned, operated, and controlled “an infrastructure based on software technology, related
databases and file servers for the purpose to make Master Recordings available to consumers for
purchase as downloads of digital files [illegible] Partner Websites.” As the court understands the
agreement, it essentially constituted a sublicense from SAAR to MTunes, which marketed the
sublicensed digital music files “worldwide” through third-party websites (with which it had
existing contractual relationships) for retail sale to consumers. The agreement was entered into
in Hamburg, Germany and stated that it would be governed by German law. In approximately
October 2008, Believe acquired MTunes and became its successor-in-interest relative to this
agreement. In its initial submissions to the court concerning its Rule 12(b)(2) motion, Believe
made no mention of the MTunes/SAAR Agreement.
Third, in April 2013, Believe entered into a distribution agreement with SAAR (the
“Believe/SAAR Agreement”), whereby Believe acquired a sublicense from SAAR to distribute
SAAR’s recordings and music videos through Believe’s digital distribution network (again, the
third-party websites with which Believe had existing relationships, such as iTunes). (Docket No.
68, Ex. I.) The agreement defined the relevant territory as the “World.” 11 One Media contends
11
Curiously, the agreement exempts distribution through YouTube, Spotify, and Google Music.
(See id., Appendix B.)
9
that, if Believe had conducted a copyright search (even a basic search on the Copyright Office’s
website), it would have determined that the LLC owned copyrights to the works at the time. 12
In August 2013, Telos allegedly discovered that SAAR was marketing portions of the
Catalog on SAAR’s website and that recordings that Telos had not licensed were presently
available for retail sale on third-party websites such as iTunes. On August 27, 2013, Telos sent a
letter to SAAR, informing it of the potentially infringing activity and demanding that SAAR
provide a copy of the license upon which it was relying for distribution of the Catalog. At some
point thereafter, SAAR responded and claimed authority to exploit the works under the March
2000 SAAR/HHO #2 Agreement. As the court understands it, One Media contends that SAAR’s
position was (and remains) without merit because (1) HHO #2 had no right to grant the license,
(2) even if the SAAR/HHO # 2 was valid at the time it was made, it had expired, or (3) even if
the license from HHO #2 were valid and had not expired, SAAR’s worldwide distribution of the
Catalog violated the geographic limitations set forth in the SAAR/HHO #2 Agreement 13.
At some point, Telos also discovered Believe involvement in the potentially infringing
activity, pursuant to its sublicense from SAAR and its agreements with online retail music
websites. The plaintiff asserts that Telos sent one or more cease and desist letters to Believe as
well. One Media contends that, for at least some period of time after being notified of the
12
Again, it does not appear that “Point Classics LLC” in fact owned the copyright after
December 2007, when the LLC transferred all of its assets to Telos and filed Articles of
Termination and a Notice of Dissolution. It appears that the LLC and Telos simply failed to
notify the Library of Congress of the assignment. Thus, even if it is true that a post-December
2007 search of the Library of Congress website would have identified the LLC as the owner of
the copyright, in actuality Telos held all interests in the copyrights.
13
The plaintiff alleges that, by this point, the PC/HHO #1 License had expired (as of August
2009) and that no Hadaway entity had a valid license to the Catalog after the expiration of that
license.
10
potential infringement, both SAAR and Believe continued to permit the online sale of the
Catalog in the United States and United Kingdom iTunes stores.
C. Believe and SAAR’s Purported Connections to Tennessee
1. Believe
Believe is a “digital music aggregator” that obtains licenses from music rights holders
and, in turn, sub-licenses those rights to digital music distributors such as Amazon.com and
iTunes, which sell music files to consumers at the retail level.
For example, effective November 5, 2006, Believe entered into an agreement with
Amazon Digital Services, Inc. (“Amazon”) (a Washington state company), whereby Believe
sublicensed its interests in certain digital music files in the Catalog to Amazon for retail sale
within “[t]he United States of America, its territories and possessions.” (O’Malley Decl., Ex. C
(at Page ID # 2194-2197).) The agreement states that it is governed by Washington law and
contains a forum selection clause requiring any disputes to be litigated in King County,
Washington. (Id.) Similarly, effective August 16, 2011, Believe entered into a Content License
Agreement with Google, Inc. (a Delaware corporation with offices in California), whereby
Believe granted to Google digital files for sale in the “Google Music Store.” (O’Malley Decl.
Ex. C. (at Page ID # 2198-2209).) The “territory” covered by the agreement is defined as “the
world[.]” The agreement states that it is governed by California law and that all disputes must be
litigated in Santa Clara, California. (Id.) Believe entered into similar agreements with other
retail distributors having no relationship to Tennessee, such as Google/YouTube (“world”
territory, governed by English law, venued in English courts), Spotify (a Swedish corporation,
“world” territory, governed by English and Welsh law, venued in English courts), and iTunes (a
California company, “territory” defined as the U.S. and numerous other Central and South
11
American countries, governed by California law, venued in the Northern District of California),
among others. (Id. at Page ID # 2202-2218.) In each of these agreements, Believe agreed to
deliver digital files to the distributors, who controlled the music on their own servers from that
point forward. The record contains no indication that any of the servers were maintained in
Tennessee. None of the contracts refer to Tennessee, although Tennessee is a constituent
element of the territory covered by each agreement – either as a geographic entity within the
“world” or as a State within the “United States.”
Excluding two purchases by plaintiff’s counsel, Believe’s records reflect only nine
downloads (eight single tracks and one album) by Tennessee consumers over a six-year period.
(O’Malley Decl., Ex. D.) 14 In a summary of data produced by Believe and SAAR, Believe
estimates that global commerce in the works totaled approximately 53,000 Euro for the 20102015 time frame and that Believe engaged in approximately 3,400 Euro of commerce (excluding
Believe’s retained percentage) in the United States for the 2008-2014 time frame, including just
11 downloads by Tennessee consumers (nine by non-counsel) through third-party websites. 15
Believe is not licensed or qualified to do business in Tennessee, it has not appointed an
agent for service of process in Tennessee, it has no employees in Tennessee, it does not own or
lease real or personal property in Tennessee, it is does not maintain bank accounts in Tennessee,
14
The itemized list of downloads does not include a specific date for each download. There are
a total of eleven downloads, two of which were likely made by plaintiff’s counsel. (See Docket
No. 22, Ex. D., Turner Declaration.) Downloads by counsel do not provide a factual predicate
for personal jurisdiction. Reynolds Int’l Amateur Athletic Fed’n, 23 F.3d 1110, 1119 (6th Cir.
1994).
15
Although the plaintiffs complain about the sufficiency of Believe’s production of records, the
court previously granted the plaintiff leave to file a Motion to Compel. (Docket No. 67.) The
plaintiff did not take advantage of that opportunity. It also does not appear that the plaintiff
conducted any depositions.
12
it has not negotiated or entered into any contracts, license agreements, or distribution agreements
in Tennessee, it does not do business in Tennessee, and it has not conducted any business in
Tennessee or collected license fees in Tennessee.
2. SAAR
SAAR is a digital music aggregator that obtains licenses to digital music recordings and
sublicenses them to other music aggregators (such as Believe), which in turn sublicense the
recordings to retail music websites such as iTunes.
As explained in a previous section, SAAR entered into (1) the March 2000 SAAR/HHO
#2 Agreement that (purportedly) gave it a limited right to market the Catalog, (2) the October
2007 SAAR/MTunes Agreement that granted MTunes worldwide distribution rights, and (3) the
October 2013 SAAR/Believe Agreement that granted Believe worldwide distribution rights. 16
All of these agreements were formed abroad, the MTunes and Believe agreements provided for
“world” or “worldwide” distribution, and none of the agreements referenced Tennessee in any
fashion. However, as the court has stated relative to Believe, Tennessee is a constituent
geographic element of the market covered by each of these agreements.
SAAR operates an Italian-language website (www.saarrecords.it or
www.saarrecords.com/ita). Certain links on the website allow users to access videos and music
recordings, but none of the recordings are available for direct sale from SAAR. Users can search
SAAR’s catalog of music and can click on links that redirect them to iTunes to purchase the
music. Users may also search SAAR’s catalog and request licenses from it. The plaintiff has
produced unauthenticated, undated screenshots showing that, at an unspecified time, at least
16
Although it is not clear from the record, the court will assume that these agreements each
related to the Catalog.
13
some of the recordings at issue appeared on the SAAR licensing portal. Users can access that
portal by clicking on a “licensing” link, at which point the user can enter information to search
SAAR’s catalog of music and make a request to SAAR to license particular recordings. The
form does not include any location information. Sending the form results in a request to SAAR
for a license, but it does not guarantee that SAAR will grant the request or that SAAR will even
respond. Anyone can fill out the request form, regardless of their location.
SAAR is not licensed to do business in Tennessee, it has not appointed an agent for
service of process in Tennessee, it has no offices or facilities in Tennessee, it does not own or
lease any property in Tennessee, it has not negotiated any contracts or entered into any contracts
in Tennessee, it conducts no business in Tennessee, and it has not paid or collected any licensing
fees in Tennessee.
D. Procedural History
On April 8, 2014, Telos filed a Complaint against SAAR and “Believe Digital,” alleging
federal copyright infringement claims, with respect to which it requested declaratory and
injunctive relief. (Docket No. 1.)
As discussed above, on July 1, 2014, Telos transferred its interests in the Catalog to One
Media. Accordingly, on July 30, 2014, One Media filed a First Amended Complaint (“FAC”)
that (1) substituted “One Media IP Limited as successor-in-interest to Telos Holdings, Inc.” as
the plaintiff; (2) restyled the “Believe” defendant as “Believe SAS d/b/a Believe Digital Group
and Believe US”; and (3) added the Hadaway Defendants and several unnamed “John Doe”
entities as defendants. 17
17
The FAC also added a claim for unfair competition and includes a request for an accounting.
14
In contrast to SAAR and Believe, the Hadaway Defendants failed to respond to the FAC.
On October 21, 2014, upon motion, the Clerk entered a Notice of Default against the Hadaway
Entities. (Docket No. 56.) The plaintiff has not moved for a default judgment.
On August 14, 2014, SAAR filed a Motion to Dismiss under Fed. R. Civ. P. 12(b)(2).
(Docket No. 19.) On September 24, 2014, Believe filed a Motion to Dismiss under Fed. R. Civ.
P. 12(b)(2). (Docket No. 38.)
RULE 12(B)(2) STANDARD
To survive a motion to dismiss for lack of personal jurisdiction under Fed. R. Civ. P.
12(b)(2), a plaintiff must prove that jurisdiction is proper over each defendant individually. SFS
Check, LLC v. First Bank of Del., 774 F.3d 351, 355-56 (6th Cir. 2014). Thus, One Media, as
the party seeking assertion of personal jurisdiction, bears the burden of showing that personal
jurisdiction exists. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991); see also
CompuServe, Inc., v. Patterson, 89 F.3d 1257, 1261-62 (6th Cir. 1996). When, as here, the
district court allows discovery on the motion, the court should consider the facts offered by both
parties and rule according to the preponderance of the evidence. SFS Check, 774 F.3d at 356.
Because the court finds no “real dispute” concerning the facts or the extent of discovery, there is
no need for an evidentiary hearing, and the burden is on One Media to show that jurisdiction
exists over each defendant by a preponderance of the evidence. Dean v. Motel 6 Operating L.P.,
134 F.3d 1269, 1272 (6th Cir. 1998). 18
18
In their supplemental briefing, Believe and SAAR argue that the preponderance of the
evidence standard applies (as opposed to the lesser prima facie burden), whereas the plaintiff is
silent on the appropriate standard. The plaintiff has not sought leave to respond to the
defendant’s articulation of the evidentiary standard, which the court construes as a tacit
admission that, as the court has concluded, the preponderance of the evidence standard applies
here. The court granted the parties the opportunity to conduct unfettered jurisdictional
15
ANALYSIS
I. Legal Standard for Specific Personal Jurisdiction
The plaintiff concedes that the court lacks general personal jurisdiction over SAAR and
Believe. The parties agree that the motion turns on whether the court has specific personal
jurisdiction over those defendants, that the federal and Tennessee minimum contacts analysis
merge into a federal due process analysis because Tennessee’s Long-Arm Statute reaches to
federal constitutional limits, and that the court must therefore apply the three-part Mohasco test
set forth by the Sixth Circuit. See S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th
Cir. 1968). The Mohasco test has three elements, all of which must be met for personal
jurisdiction to be found:
(1) “[T]he defendant must purposefully avail himself of the privilege of acting in
the forum state or causing a consequence in the forum state.”
(2) “[T]he cause of action must arise from the defendant’s activities” in the forum
state.
(3) “[T]he acts of the defendant or consequences caused by the defendant must
have a substantial enough connection with the forum state to make the
exercise of personal jurisdiction reasonable.”
Id. Although all three elements must be satisfied, it is the “purposeful availment” element of the
test that is the sine qua non of specific personal jurisdiction. Id. at 381-82.
With respect to purposeful availment, the Sixth Circuit has adopted the “stream of
commerce ‘plus’ approach,” under which “[t]he placement of a product into the stream of
discovery. The court also specifically granted the plaintiff leave to file a motion compel
concerning the only discovery dispute that it raised during jurisdictional discovery, but the
plaintiff did not file a motion. At any rate, even if the court were to apply the lesser prima facie
burden and to construe all facts in the light most favorable to the plaintiff, it would still conclude
that the plaintiff has not made out a prima facie case of personal jurisdiction over Believe or
SAAR for essentially the same reasons expressed herein.
16
commerce, without more, is not an act of the defendant purposely directed toward the forum
State.” Bridgeport Music, Inc. v. Still N The Water Publ’g, 327 F.3d 472, 479-80 (quoting Asahi
Metal Indus. Co., Ltd., v. Superior Court, 480 U.S. 102 (1987) (O’Connor, J.) (plurality op.)).
As described in Bridgeport:
Purposeful availment is something akin to a deliberate undertaking to do or cause
an act or thing to be done in the forum state or conduct which can be properly
regarded as a prime generating cause of the effects resulting in the forum state,
something more than a passive availment of the forum state’s opportunities. The
purposeful availment requirement is satisfied when the defendant’s conduct and
connection with the forum are such that he should reasonably anticipate being
haled into court there. The purposeful availment requirement ensures that a
defendant will not be haled into a jurisdiction solely as a result of random,
fortuitious, or attenuated contacts, or of the unilateral activity of another party or a
third person. The emphasis in the purposeful availment inquiry is whether the
defendant has engaged in some overt actions connecting the defendant with the
forum state. If a plaintiff can demonstrate purposeful availment, the absence of
physical contacts with the forum state will not defeat personal jurisdiction over a
non-resident defendant.
327 F.3d at 478-79 (internal citations, quotations, and brackets omitted). 19
Personal jurisdiction requires a forum-by-forum analysis. J. McIntyre Mach. v. Nicastro,
131 S. Ct. 2780, 2789 (2011). “The question is whether a defendant has followed a course of
conduct directed at the society or economy within the jurisdiction of a given sovereign.” Id.
19
In Asahi, Justice O’Connor and three other justices endorsed the “stream of commerce plus”
approach. By contrast, Justice Brennan and three other justices endorsed the “stream of
commerce” approach, under which “jurisdiction premised on the placement of product into the
stream of commerce is consistent with the Due Process Clause.” 480 U.S. at 117. Subsequent to
Asahi, some circuits adopted Justice O’Connor’s more stringent approach, while others adopted
Justice Brennan’s more lenient approach. See, e.g., Dehmlow v. Austin Fireworks, 963 F.2d 941,
947 (7th Cir. 1992) (adopting “stream of commerce” test); Bridgeport, 327 F.3d at 479-80
(adopting “stream of commerce plus” test). In J. McIntyre Mach. v. Nicastro, 131 S. Ct. 2780,
2789 (2011), the Supreme Court again did not resolve this split, and the competing opinions in
that case demonstrated a continuing schism within the Court on this issue. See AFTG-TG, LLC
v. Nuvoton Tech. Corp., 689 F.3d 1358, 1362-63 (Fed. Cir. 2012) (discussing Asahi and
Nicastro).
17
Courts within this circuit agree that, because the Supreme Court in Nicastro did not resolve the
circuit split concerning the “stream of commerce” approach and the “stream of commerce plus”
approach, the Sixth Circuit’s “stream of commerce plus” approach continues to control. See,
e.g., Lindsey v. Cargotec USA, Inc., 2011 WL 4587583, at *7 (W.D. Ky. Sept. 30, 2011)
(discussing continuing validity of Bridgeport standard post-Nicastro).
In Eaves v. Pirelli Tire, 2014 WL 1883791 (D. Kan. May 12, 2014) – a case relied upon
by Believe – a federal district court examined the post-Nicastro landscape in detail and identified
the following factors that federal courts had found to be relevant to the purposeful availment
analysis in the stream of commerce plus context: (1) the defendant’s direction or control over the
flow of the product into the forum; (2) the quantity of the defendant’s particular product
regularly flowing into the forum; and (3) the distinctive features of the forum that connect it with
the product in question. Id. at *14. Here, the court finds these factors to be relevant
considerations in the purposeful availment analysis. 20
As to websites, a defendant purposely avails itself of the privilege of acting in a state
through its website if the website is interactive to a degree that reveals specifically intended
interaction with residents of the state. Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883
(6th Cir. 2002) (citing Zippo Mfg. Co. v. Zippo Do Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa.
1997)). “The level of contact with a state that occurs simply from the fact of a website’s
availability on the Internet is therefore an ‘attenuated’ contact that falls short of purposeful
availment.” Neogen, 282 F.3d at 890. Under the Zippo “sliding-scale” test, which the Sixth
Circuit endorsed in Neogen, the sliding scale ranges from “one end of the spectrum . . . where a
20
The parties have not cited any analogous post-Nicastro authority within the Sixth Circuit
concerning the purposeful availment element.
18
defendant clearly does business over the internet,” in which case jurisdiction is proper, to the
“opposite end . . . where a defendant has simply posted information on an Internet [website]
which is accessible to users in foreign jurisdictions[,]” in which case jurisdiction is not proper.
Zippo, 952 F. Supp. at 1124. In the middle of these extremes lie “interactive [websites] where a
user can exchange information with the host computer. In these cases, the exercise of
jurisdiction is determined by examining the level of interactivity and commercial nature of the
exchange of information that occurs on the [website].” Id.
II. Application
A. Believe
1. Purposeful Availment
One Media has not met its burden to show that Believe purposely availed itself of the
privilege of transacting business in Tennessee.
First, Believe did not control the flow of product into Tennessee specifically. Believe
contracted with retail distribution websites located outside of Tennessee, those distributors
controlled the digital files outside of Tennessee after delivery from Believe, and users contracted
with those entities (not Believe) to purchase the digital files. Thus, Believe did not directly
contract with end consumers in Tennessee. Furthermore, none of the contracts with retail
websites is specific to Tennessee (as opposed to the United States as a whole or the entire world),
none of the contracting parties were Tennessee entities, and none of the contracts were formed in
Tennessee or invoked Tennessee law. The plaintiffs have not shown that Believe specifically
marketed its product to Tennesseans directly or indirectly or that Believe otherwise specifically
directed any sales to occur in Tennessee. Believe’s broad intention to target the United States
through a third party is not sufficient to establish purposeful availment. See, e.g., Williams v.
19
Romarm, 756 F. Supp. 777, 785 (D.C. Cir. 2014); AESP v. Signamax, 29 F. Supp. 3d 683, 69091 (E.D. Va. 2014) (no specific personal jurisdiction when “record reflects no more than that
defendant might expect that the products would eventually be sold somewhere in the United
States, including [the forum state]”). As explained in Bridgeport, knowledge that a licensee was
likely to distribute compositions nationally, coupled with its lack of objection to Tennessee sales,
if such sales were ever to occur, is insufficient conduct upon which to predicate purposeful
availment. 327 F.3d at 480.
Second, the quantity of recordings that end users ultimately purchased from third parties
with whom Believe contracted is negligible – just nine relevant downloads over a six-year
period. In opposition to Believe’s argument on this point, the plaintiff references several out-ofcircuit cases concerning whether the plaintiffs sufficiently pleaded or proved claims for vicarious
copyright infringement under the Rule 12(b)(6) or Rule 56 standard, a legally (and procedurally)
distinct issue that sheds no light on the personal jurisdiction minimum contacts analysis here.
See Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996) (determining that plaintiff
sufficiently alleged a vicarious contributory copyright infringement claim against a flea market
operator); Polygram Int’l Publ’g, Inc. v. Nevada/TIG, Inc., 855 F. Supp. 1314 (1994) (granting
summary judgment to operators of awards ceremony, where plaintiffs failed to prove requisite
elements of vicarious copyright liability claim); Gershwin Publ’g Corp. v. Columbia Artists
Mgmt., 443 F.2d 1159 (2d Cir. 1971) (holding that concert promoter could be held vicariously
liable for infringement by performing artists in concerts that it organized and promoted). This
factor weighs strongly against a finding of purposeful availment.
Third, there are no distinctive features of Tennessee that connect it with the recordings in
the Catalog. The recordings appear to have been made in Eastern Europe in the 1980’s and to
20
have been owned by European companies through the year 2000. The plaintiff has not identified
anything special about Tennessee – relative to other states – with respect to commerce in
classical music creation or recording. Indeed, there is nothing in the record indicating that
Believe had any specific intention to target Tennessee, and the minimal sales figures bear that
out.
Finally, Believe operates a non-interactive website that is accessible throughout the
world. It offers nothing for sale on the website. The website evinces no interactivity directed at
Tennessee and provides no support for exercising personal jurisdiction over Believe.
Given that all relevant factors weigh against a finding of purposeful availment, the court
finds that the plaintiff has not demonstrated that Believe purposely availed itself of the privilege
of transacting business in Tennessee. 21
2. Whether the Cause of Action Arises from Tennessee Contacts
This element presents a more nuanced question than the defendants acknowledge. One
Media alleges that SAAR and Believe marketed the Catalog worldwide without a valid license.
Does that broad infringement claim “arise from” the handful of consumer downloads from thirdparty websites that took place in Tennessee? As explained in the previous section, the court has
found that the downloads – even if the product of infringement – did not amount to purposeful
availment in Tennessee relative to Believe under the stream of commerce plus approach. Having
reached that conclusion, the court is constrained to find that One Media’s claims do not “arise
from” contacts that are insufficient to establish purposeful availment in the first place.
21
Without purposeful availment, the plaintiff cannot satisfy the Mohasco test. For that reason,
the plaintiff has not met its burden to show that personal jurisdiction exists over Believe. In the
interest of completeness, the court will also address the other two Mohasco elements.
21
3. Whether Tennessee Has an Interest in Resolving This Conflict
The final element of the Mohasco test is whether the acts of the defendant or
consequences caused by the defendant have a sufficient connection with the forum state to make
the exercise of personal jurisdiction reasonable. This element turns on whether Tennessee has an
interest in resolving the conflict. Mohasco, 401 F.2d at 384.
Particularly in its pre-discovery submissions to the court, the plaintiff has devoted much
of its attention to establishing this element of the Mohasco test. In an effort to do so, it has
maintained that the LLC’s relationship to this lawsuit implicates a strong Tennessee connection
because the LLC has a present financial interest in the lawsuit and because it continues to be
injured by the defendants’ infringing activity.
The plaintiff’s representations concerning the LLC are misleading. The LLC sold its
assets to Telos in December 2007 and should have dissolved immediately thereafter. However,
it appears that the LLC simply erred in completing some of the necessary paperwork, such as (1)
filing Articles of Termination after spinning off its assets and notifying the Tennessee Secretary
of State of its intention to dissolve, and (2) informing the Library of Congress of the assignment
from the LLC to Telos. This apparent lack of diligence required some “housecleaning” efforts
when Telos sold its interests in the Catalog to One Media in July 2014. After the asset transfer,
in December 2007, Telos also appeared in this court multiple times to protect its interests in the
Catalog, including at least one sworn representation to the court that it owned the copyright
interests at stake. Moreover, aside from the fact that it was incorporated in Tennessee and
apparently utilizes Tennessee lawyers, the plaintiff has failed to substantiate whether and when
the LLC actually operated in Tennessee, as opposed to Malibu, California, where Long appears
to have resided for the past 15 years and where the LLC at some point maintained an office. The
22
court is left with the firm conclusion that, in an effort to create the impression that the lawsuit
belongs in Tennessee, the plaintiff has attempted to exaggerate the historical and (at best)
negligible connections between the LLC and Tennessee and to manufacture an illusory present
financial interest in this lawsuit by that long-defunct entity. Under the circumstances, it is
disingenuous for the LLC to claim a true financial stake in this lawsuit through 2014.
Even if it were the case that infringing activity before December 2007 were relevant to
the minimum contacts analysis, the plaintiff has not adduced evidence showing that any
Tennessee customers actually downloaded Catalog recordings before December 2007. Absent
any infringing activity relative to Tennessee consumers before December 2007, the loose
affiliation between the LLC and Tennessee is essentially irrelevant. In light of these conclusions,
the court finds that the plaintiff has not shown that it would be reasonable for the court to
exercise personal jurisdiction over Believe.
In sum, the plaintiff has not satisfied any of the Mohasco factors relative to Believe. The
court will therefore dismiss all claims against Believe for lack of personal jurisdiction.
B. SAAR
As an initial matter, for essentially the same reasons as Believe, the plaintiff has not
shown that SAAR has sufficient minimum contacts with Tennessee. Moreover, the evidence
relative to SAAR is even weaker than the evidence relative to Believe.
The plaintiff has not shown purposeful availment by SAAR relative to Tennessee. SAAR
sublicensed the recordings for “worldwide” distribution, evincing no intent to market the product
in Tennessee specifically. SAAR’s agreements were entered into in Europe and bore no
relationship to Tennessee. The plaintiff has not shown that SAAR controlled the flow of
downloads into the United States or Tennessee specifically (through third parties or otherwise).
23
The handful of downloads at issue (nine, according to Believe’s records) have not been traced to
SAAR’s website and, even if the downloads were traceable to SAAR’s licensing agreement with
Believe, the number of downloads is commercially insignificant. Also, the plaintiff has not
shown that SAAR made purchases of the recordings available on its website or that any
Tennessee consumers actually utilized SAAR’s website to do so.
Because SAAR has no contacts with Tennessee other than directing that another
distribute to market the recordings throughout the world, there is no basis to conclude that the
plaintiff’s claims “arise from” SAAR’s contacts with this forum.
It would not be reasonable to exercise jurisdiction over SAAR here. It is an Italian
company with a principal place of business in Italy, it operates a universally accessible Italian
language website that does not target Tennessee, and it does not make purchases available for
sale on its website. The plaintiff has not shown that SAAR caused, or that it intended to cause,
consequences in Tennessee (namely, the purchase of the recordings at issue by Tennessee
consumers) that would make it reasonable for this court to exercise jurisdiction over SAAR.
In sum, the court finds that the plaintiff has not established any element of the Mohasco
test relative to SAAR. The court will therefore dismiss all claims against SAAR for lack of
personal jurisdiction.
C. Policy Issue
The plaintiff argues that it is unfair to allow foreign music distributors to insulate
themselves from liability for wrongdoing simply by using a national or worldwide online retail
distributor (such as iTunes) to avoid the “minimum contacts” necessary to support personal
jurisdiction in any particular State.
24
This is a legitimate policy argument, particularly in instances where, as here, the
infringing online sales are relatively diffuse across states and, in absolute terms, relatively
minimal in any particular state. In some sense, under current legal doctrines, an online music
distributor can allow for purchases by Americans without actually creating sufficient contacts in
any particular state to satisfy the Mohasco test. This could force domestic music rights holders
to litigate against foreign music distributors on their home turf (in France, the UK, or Italy, for
example), which could become prohibitively expensive and less predictable for plaintiffs than
litigating in American courts accustomed to adjudicating infringement claims under the
Copyright Act. Viewed through this lens, the plaintiff’s attempt to litigate against distributors
such as Believe and SAAR in Tennessee (or in any other state in which an infringing download
is made) may be more legitimate than Believe and SAAR acknowledge. 22
Here, the court’s concern is alleviated by the facts that (1) Tennessee has no meaningful
connection to the claims, and (2) the plaintiff is (at least now) a British entity that can obtain
recourse through European courts, with which it may be more familiar than Telos. Be that as it
may, if there is a fundamental problem with the Sixth Circuit Mohasco standard as it applies to
worldwide or nationwide distribution agreements entered into by foreign online music
distributors, it will be for the Sixth Circuit (not the district court) to redefine the legal standard to
address that specific context – assuming that it can be done within Constitutional due process
limits.
22
The court expresses no opinion as to whether personal jurisdiction could be exercised over
Believe or SAAR in another state, where the quantum of contacts may be different and the state
may have a legitimate interest in resolving the claims. Furthermore, the court expresses no
opinion as to whether the “stream of commerce” approach (as opposed to the “stream of
commerce plus” approach) would have merited a different result here.
25
III. Belated Request to Transfer
In its post-discovery supplemental brief, the plaintiff purports to move the court to
transfer the case to the Eastern District of New York under 28 U.S.C. §§ 1404 or 1406. As
Believe points out, the request is procedurally improper under M.D. Tenn. Civ. L.R. 7.01(a).
The court will deny this request on procedural grounds, without expressing any opinion
concerning the propriety of jurisdiction in New York.
IV. The Hadaway Defendants
The Clerk previously entered a default judgment against the Hadaway Defendants. The
court’s disposition of the motions will result in the dismissal of Believe and SAAR on
jurisdictional grounds, but it will not resolve the pending claims against the Hadaway
Defendants. The court therefore will set a deadline for the plaintiff to notify the court as to how
it will proceed against the Hadaway Defendants.
CONCLUSION
For the reasons stated herein, the Rule 12(b)(2) motions filed by Believe and SAAR will
be granted, claims against Believe and SAAR will be dismissed, and the court will order further
proceedings relative to the Hadaway Defendants.
An appropriate order will enter.
_____________________________
ALETA A. TRAUGER
United States District Judge
26
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