Papa Berg, Inc. et al v. World Wrestling Entertainment Inc. et al
Filing
49
ORDER granting in part and denying in part 38 Motion for Leave to File. (Ordered by Judge Jane J Boyle on 11/25/2013) (Judge Jane J Boyle)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
PAPA BERG, INC., et al.,
Plaintiffs,
v.
WORLD WRESTLING
ENTERTAINMENT, INC., et al.,
Defendants.
§
§
§
§
§
§
§
§
§
§
CIVIL ACTION NO. 3:12-CV-2406-B
MEMORANDUM OPINION AND ORDER
Before the Court is Plaintiffs’ Motion for Leave to Amend the Complaint (doc. 38) filed July
31, 2013. Plaintiffs Papa Berg, Inc. and James D. Papa (“Jimmy Papa”) (together, “Plaintiffs”) seek
leave to amend the original complaint (“Complaint”) by adding new claims and by re-asserting claims
previously dismissed without prejudice pursuant to the Court’s May 15, 2013 Memorandum Opinion
and Order (“May 15 Order”) (doc. 19), Papa Berg, Inc. v. World Wrestling Entertainment, Inc., No.
12-cv-2406, 2013 WL 2090547 (N.D. Tex. May 15, 2013). Defendants only oppose Plaintiffs’
Motion to the extent it seeks to re-assert the dismissed claims. For the reasons that follow, the Court
DENIES IN PART and GRANTS IN PART the Motion.
I.
BACKGROUND
Rather than re-state the relevant facts, previously outlined in the May 15 Order, the Court
begins by tracing the procedural history that brought the parties to this point in the case.
A.
Original Complaint and May 15 Order
1
On July 17, 2012, Plaintiffs filed their Complaint (doc. 1) against two business
entities—World Wrestling Entertainment, Inc. and Stephanie Music Publishing, Inc. (together,
“WWE”)1 —and two individuals/WWE employees—Michael Seitz a/k/a/ Michael Hayes (“Seitz”) and
James Alan Johnston (“Johnston”) (together, “Individual Defendants”) (collectively, “Defendants”).
The Complaint contained sparse factual details supporting the claims—vaguely asserted against all
four defendants—including one count of direct copyright infringement, one count of contributory
copyright infringement, and four related state law claims. At their first opportunity, Defendants
moved to, among other things, dismiss the Complaint on various grounds (doc. 10).
On May 15, 2013, the Court denied in part and granted in part Defendants’ Motion (doc.
19). Specifically, the Court dismissed without prejudice (1) all claims against the Individual
Defendants for (A) lack of personal jurisdiction and (B) failure to effectuate timely service, and (2)
the contributory copyright infringement claim for failure to properly plead the claim’s elements. The
May 15 Order also partially dismissed without prejudice Plaintiffs’ (3) state law claims on federal
copyright preemption grounds.
B.
Events following May 15 Order
Having dismissed their claims without prejudice, the Court anticipated Plaintiffs may attempt
to re-plead. To streamline the process, the Court instructed that any re-pleading “should” be done
“no later than thirty (30) days from the date of this Order.”2 May 15 Order at 28, Papa Berg, 2013
1
Stephanie Music Publishing, Inc. is named in the Amended Complaint as d/b/a World Wrestling
Entertainment, Inc. Am. Compl. ¶ 4. Stephanie Music is “coextensive with Defendant WWE and no longer exists
as a business entity.” Id. ¶ 13.
2
The May 15 Order also required that Plaintiffs submit a ten-page synopsis explaining why the repled claims overcame the deficiencies stated therein. While Plaintiffs’ Motion exceeds ten-pages, they did
make a good faith effort to comply with this requirement by providing less than ten pages of analysis on the
2
WL 2090547 at *14.
From there, the case proceeded on the remaining claims against the WWE. On June 6, 2013,
the Court issued a Scheduling Order (doc. 28) with the typical case management deadlines for this
sort of proceeding. Among the scheduled dates was a “Deadline for Motion for Leave to Join Parties
or Amend Pleadings,” set for July 31, 2013. The Scheduling Order did not mention the May 15
Order’s thirty-day deadline, which was set to expire June 14, 2013. And while a Joint Motion to
Clarify Defendants’ Deadline to Answer or Otherwise Respond to the Complaint indicated (as of
May 29, 2013) that Plaintiffs were considering re-pleading,3 the thirty-day deadline passed without
any submission from Plaintiffs.
Meanwhile, in June 2013, Plaintiffs, apparently at odds with their counsel of record in this
case, began to confer with prospective substitution counsel. Doc. 39, Papa’s Aff. ¶ 7. Jimmy Papa
avers that during his discussions with prospective counsel, he learned for the first time that Plaintiffs’
claims had been dismissed pursuant to the May 15 Order. Id. ¶ 8–9. By that time, the Court’s thirtyday deadline to re-plead had expired. Id. ¶ 10. Soon thereafter, Plaintiffs signed with their new
attorney, Id. ¶ 13–14, and filed a designation of new lead counsel with the Court on July 29, 2013
(doc. 37). Two days later—July 31, 2013—Plaintiffs filed this pending Motion for Leave to Amend
the Complaint (doc. 38).
C.
Motion for Leave and the Amended Complaint
The thirty-six page Amended Complaint, which Plaintiffs seek leave to file, differs
May 15 Order’s defects.
3
See Joint Mot., Doc. 21, ¶ 6 (“. . . Plaintiffs have not yet determined whether they will amend their
Original Complaint . . . .”).
3
significantly from the original sixteen page Complaint. With the proposed amendments, the new
complaint can be broken down into three groups of claims for purposes of this Motion. First, the
claims against the WWE not dismissed by the May 15 Order, including a direct copyright
infringement claim and what is essentially an unjust enrichment claim.4 Second, new claims and
parties not in the Complaint, including a vicarious liability claim against WWE and various claims
against three new defendants: Yuke’s Co., Ltd., Take Two Interactive Software, Inc., and VE Newco,
LLC.5 Third, claims dismissed by the May 15 Order (the “Re-pled Claims”), including claims against
the Individual Defendants and a contributory copyright infringement claim against WWE.
Defendants only contest Plaintiffs’ Motion to the extent it seeks leave to file the Re-pled
Claims. And since Plaintiffs’ Motion was filed before the expiration of the July 31, 2013 deadline to
move for leave to amend, the Court GRANTS Plaintiffs’ Motion to the extent it seeks leave to
amend the Complaint by adding new claims and parties, and new allegations supporting the claims
not dismissed by the May 15 Order. However, as Defendants’ correctly assert, Plaintiffs’ Motion was
filed (July 31, 2013) after the May 15 Order’s thirty-day deadline expired (June 14, 2014), and
therefore, the Motion is untimely in so far as it seeks leave to add the Re-pled Claims.6 In addition
4
The May 15 Order allowed Plaintiffs to pursue their original four state law claims to the extent they
sought recovery based on Defendants’ re-registration and subsequent diversion of royalties from third parties
not related to Defendants’ use of the songs Plaintiffs’ claim rights to. This is what the Amended Complaint
seeks recovery for through its unjust enrichment claim against WWE. See Am. Compl. ¶ 221–226. In other
words, Plaintiffs essentially took their four partially-dismissed state law claims from the Complaint and
incorporated them into a single unjust enrichment claim.
5
Specifically, the Amended Complaint asserts direct copyright infringement claims against all three
new defendants, a contributory copyright infringement claim against Yuke’s, and an unjust enrichment claim
against Take Two.
6
Contrary to Plaintiffs’ contentions, the May 15 Order’s thirty-day deadline governs Plaintiffs’
attempt to assert the Re-pled Claims. If the Court were to accept Plaintiffs’ position that the Scheduling
4
to timeliness, Defendants dispute whether the Re-pled Claims overcome the deficiencies noted in
the May 15 Order. These issues are now ripe for resolution.
II.
LEGAL STANDARD
A.
Plaintiffs May Seek Leave Pursuant to Rules 15(a) and 16(b)
The parties initially dispute the proper standard for determining whether the Re-pled Claims
should be permitted to go forward given the untimeliness of Plaintiffs’ request to amend. Plaintiffs
maintain that the untimely amendments should be examined under the analytical framework that
typically applies when parties move for leave after the scheduling order’s deadline to amend has
expired. Pl.’s Mot. 4. Under that framework, a court first determines, pursuant to Federal Rule of
Civil Procedure 16(b)(4), whether the plaintiffs has shown “good cause” to allow the untimely
motion, and then examines the motion under Rule 15(a)(2)’s more lenient standard. Valcho v. Dallas
County Hosp. Dist., 658 F. Supp. 2d 802, 814 (N.D. Tex. 2009).
Defendants, on the other hand, argue that the Court may summarily dismiss the untimely
amendments. Def.’s Resp. 3. Defendants contend that the Court has broad discretion to deny leave
when a specifically-ordered deadline to amend has expired. Id. at 3–4. Defendants further posit that
the analysis Plaintiffs advocate for only applies when a scheduling order deadline has expired. Id. 4.
Since the May 15 Order is not a scheduling order, Defendants maintain “there is no basis to apply
Rule 16(b)(4) in these circumstances.” Id. While the law here is not entirely clear, the weight of
Order’s deadline to amend applies, it would have to find that the Scheduling Order somehow nullified the
May 15 Order’s thirty-day deadline. But the Court never mentioned the May 15 Order’s specific mandate
regarding the timing of Plaintiffs’ re-pleading while routinely setting the case management schedule.
5
existing precedent favors Plaintiffs’ position.
First, though the Fifth Circuit affords lower courts a good deal of discretion to deny leave,
there are constraints to the exercise of that discretion. In the case Defendants rely most heavily
on—Norman v. Apache Corp., 19 F.3d 1017 (5th Cir. 1994)—the Fifth Circuit found, under the
particular facts presented, that the district court did not overstep the boundaries of its discretion in
denying leave. While Norman was less than clear about those boundaries, other Fifth Circuit cases
explicitly hold that, at the very least, a court’s discretion to deny leave is limited by Rule 15. See
Goldstein v. MCI WorldCom, 340 F.3d 238, 254 (5th Cir. 2003) (quoting S. Constructors Group, Inc.
v. Dynalectric Co., 2 F.3d 606, 611 (5th Cir. 1993)) (“[A] district court’s discretion to deny a litigant
leave to amend . . . ‘is limited because Rule 15 evinces a bias in favor of granting leave to amend.’”).
Accordingly, rather than rely on the similarities between this case and Norman to summarily deny
Plaintiffs’ Motion,7 the Court must, at the very least, explore the justifications for granting or denying
leave under Rule 15. See id. (“[A] district court may be reversed for failing to provide an adequate
explanation for denying [leave].”).
Second, the Court can find no reasonable basis to treat these circumstances differently simply
because the May 15 Order was not a scheduling order. For starters, the Court rejects Defendants’
suggestion that since—in their view—Rule 16(b)(4) does not apply here, Plaintiffs have no right to
file their untimely amendments. On the contrary, Rule 16(b)(4) typically stands as an obstacle for
7
Defendants cite Norman for the fact that, like in this case, the plaintiffs were afforded “the
opportunity to amend ‘for a limited period of time and [the plaintiff's] amended complaint was not filed within
those limits.’” Def.'s Resp. 3–4 (quoting Norman, 19 F.3d at 1022). The Fifth Circuit cited this fact to
illustrate the magistrate judge’s sound reasoning in initially striking the untimely amendment at issue. See
Norman, 19 F.3d at 1022. But unlike here, the untimely amendment at issue was filed over five months after
the “limited period of time” to amend expired, without any explanation for the delay or an accompanying
motion for leave (though one was later filed and denied). See id. at 1020–21.
6
tardy plaintiffs, requiring them to demonstrate “good cause to modify the schedul[e]” before applying
“the more liberal standard of Rule 15(a) . . . to the district court’s decision to grant or deny leave.”
S&W Enters., L.L.C. v. SouthTrust Bank of Alabama, NA, 315 F.3d 533, 536 (5th Cir. 2003). In any
event, the relevant law suggests Rule 16(b)(4) does, in fact, apply in these circumstances. As
Plaintiffs point out, Rule 16(b)(4) refers to a court’s “schedule,” not a scheduling order. Pl.’s Rep.
2; see FED. R. CIV. P. 16(b)(4) (“A schedule may be modified only for good cause and with the judge’s
consent.”). And while it appears the Fifth Circuit has typically applied Rule 16(b)(4) to expired
scheduling order deadlines, the Circuit’s consistent refrain is that district courts should be afforded
“broad discretion to preserve the integrity and purpose of the pretrial order.” S&W Enters., 315 F.3d
at 535–36 (emphasis added) (quotation marks and internal citations omitted). That rationale applies
equally to the May 15 Order’s thirty-day deadline, which is simply a “pretrial order” intended to
promote “court efficiency” and “expedite pretrial procedure.” Id. at 535. Therefore, the Court
concludes that its discretion to grant or deny Plaintiffs leave is defined by the standard analytical
framework governing untimely motions for leave to amend: Rules 16(b)(4) and 15(a)(2).
B.
Legal Standards Governing Rules 16(b)(4) and 15(a)(2)
Having determined the applicable legal rules, the Court now turns to the standards governing
these rules. As discussed before, when a plaintiff files an untimely motion for leave to amend the
complaint, the Court must first determine whether the plaintiff has shown good cause under Rule
16(b)(4) before evaluating the motion under Rule 15(a)(2)’s more lenient standard.8 Valcho, 658 F.
8
In what amounts to essentially the same analysis, the Fifth Circuit has alternatively applied a Rule
16(b)(4) factors test incorporating relevant aspects of the Rule 15(a)(2) analysis. See Filgueira v. U.S. Bank
Nat. Ass’n, — F.3d — , 2013 WL 5873357 at *1–3 (5th Cir. 2013) (finding Rule 16(b)(4)’s second
factor—importance of the amendment—lacking due to what is usually a Rule 15(a)(2) consideration: the
7
Supp. 2d at 814.
The Rule 16(b)(4) “good cause standard requires the ‘party seeking relief to show that the
deadlines cannot reasonably be met despite the diligence of the party needing the extension.’” S&W
Enters., 315 F.3d at 535 (quoting 6A Charles Alan Wright et al., Federal Practice and Procedure §
1522.1 (2d ed. 1990)). In determining whether good cause has been shown, courts consider “‘(1) the
explanation for the failure to timely move for leave to amend; (2) the importance of the amendment;
(3) potential prejudice in allowing the amendment; and (4) the availability of a continuance to cure
such prejudice.’” Meaux Surface Protection, Inc. v. Fogleman, 607 F.3d 161, 167 (5th Cir. 2010)
(quoting S&W Enters., 315 F.3d at 536).
Even if Plaintiffs establish “good cause” for their tardiness under Rule 16, the Court may still
deny leave if there is a justification for doing so under Rule 15(a)(2). See Veldekens v. GE HFS
Holdings, Inc., No. 06-3296, 2008 WL 190442 at *4 (S.D. Tex. Jan. 22, 2008) (“Even if the plaintiffs
were not required to satisfy the ‘good cause’ showing under Rule 16(b), this court would still deny
leave to amend . . . under Rule 15(a) because of the undue delay.”). Since Rule 15(a)(2) provides
that leave to amend should be granted “freely” as “justice so requires,” FED. R. CIV. P. 15(a)(2), “[a]
motion to amend ordinarily should be granted absent some justification for refusal.” Whitley v.
Hanna, 726 F.3d 631, 648 (5th Cir. 2013). The only apparent justification for denying leave
here—that is, the only justification offered by Defendants—is that Plaintiffs’ “amendment[s] would
be futile.” Id. Specifically, the Court may deny Plaintiffs’ Motion to the extent the Re-pled Claims
fail to overcome the deficiencies that led to their dismissal. See Simmons v. Sabine River Auth.
amendment would be futile).
8
Louisiana, 732 F.3d 469, 478 (5th Cir. 2013) (“Clearly, if a complaint as amended is subject to
dismissal, leave to amend need not be given.”) (quotation marks omitted).
III.
ANALYSIS
As discussed above, the Court must first evaluate whether Plaintiffs have shown “good cause”
for their untimely amendments under Rule 16(b)(4). Assuming good cause is shown, the Court must
next determine whether leave would be “futile” under Rule 15(a)(2) by examining the Re-pled
Claims in relation to the defects that led to their dismissal. For the claims against the Individual
Defendants, these defects include lack of personal jurisdiction, and failure to effectuate timely
service. For the contributory copyright infringement claim against the WWE, the defect at issue is
Plaintiffs’ failure to state a claim upon which relief may be granted. The Court addresses the issue
of good cause, followed by each of these defects, in turn.
A.
“Good Cause” Under Rule 16(b)(4)
Plaintiffs’ Motion for leave was filed seventy-seven days after the May 15 Order’s thirty-day
deadline. As discussed before, to determine whether Plaintiffs have shown “good cause” to allow
these untimely amendments under Rule 16(b)(4), the Court must consider four factors that center
on Plaintiffs’ explanation for their tardiness and any potential prejudice granting or denying leave
may cause.
Plaintiffs explain that their failure to re-plead in a timely fashion is the result of “the sheer
neglect of their previous counsel.” Pl.’s Mot. 4. Plaintiff Jimmy Papa avers that by the time he was
informed Plaintiffs’ claims had been dismissed, “the Court’s 30-day deadline to amend the pleadings
had expired.” Papa’s Aff. ¶ 10. Plaintiffs then immediately sought and hired new counsel, who filed
9
this Motion before the Scheduling Order’s July 31, 2013 deadline to move for leave to amend the
pleadings. Id. ¶¶ 13–14.
Defendants respond by pointing to the May 29, 2013 Joint Statement by the parties, which
stated that “Plaintiffs have not yet determined whether they will amend their Original Complaint.”
Joint Statement, Doc. 21, at 2. This, according to Defendants, reflects prior counsel’s conscious
decision not to re-plead the dismissed claims. Def.’s Resp. 2. Therefore, as Defendants see it,
Plaintiffs’ Motion should be rejected as an unjustifiable attempt to second-guess prior counsel’s
reasoned determination. Id. at 2. While Defendants present a strong argument, the relevant factors
governing the Court’s decision militate in Plaintiffs’ favor.
As to the first factor, Plaintiffs offer an adequate explanation for their untimely Motion.
When Plaintiffs’ learned the Re-pled Claims had been dismissed, the thirty-day deadline had already
expired. Regardless of what drove prior counsel’s inaction, Plaintiffs have shown that they proceeded
with reasonable diligence after learning of the dismissal by quickly hiring a new attorney and filing
this Motion before the Scheduling Order’s deadline to amend, which, to the uninitiated, could
reasonably be confused with the May 15 Order’s thirty-day deadline. Second, Plaintiffs’ amendments
are important to their case, because without them, Plaintiff will be unable pursue the Re-pled Claims
in this proceeding. Third, Defendants stand to suffer no cognizable prejudice if Plaintiffs are allowed
to re-plead given that this Motion would be timely under the Scheduling Order’s deadline to amend
the pleadings. And given that trial is nearly a year away, the fourth factor has no bearing on this
matter. In short, Plaintiffs offered an adequate explanation for their tardiness at an early point in the
proceedings where Defendants stand to suffer no prejudice. Accordingly, the Court finds Plaintiffs
have established “good cause” under Rule 16(b)(4).
10
B.
Futility of Claims Against Individual Defendants Under Rule 15(a)
Having determined Plaintiffs’ established good cause to amend pursuant to Rule 16(b)(4),
the Court now must evaluate its discretion to grant or deny leave under Rule 15(a). As discussed
earlier, the only apparent justification for denying Plaintiffs leave under Rule 15(a)—that is, the only
justification argued for by Defendants—is that the Re-pled Claims are “futile.” And as a reminder,
the Re-pled Claims are “futile” to the extent they fail to overcome the deficiencies that warranted
dismissal, as stated in the May 15 Order.
The first two (of three) deficiencies at issue relate to Plaintiffs’ claims against the Individual
Defendants, including an unjust enrichment claim against Seitz, and copyright infringement and
unjust enrichment claims against Johnston. Defendants argue that Plaintiffs’ Motion is futile to the
extent it seeks to re-assert these claims, because the Amended Complaint fails to overcome either
ground that led the Court to dismiss all claims against the Individual Defendants on May 15, 2013.
Specifically, Defendants point to Plaintiffs’ failure to establish personal jurisdiction and failure to
timely serve the Individual Defendants. The Court addresses each of these deficiencies in turn.
1.
Personal Jurisdiction Over Individual Defendants
In addressing this defect, the Court begins by discussing the May 15 Order’s relevant personal
jurisdiction findings while reviewing the applicable law along the way. The May 15 Order concluded
that asserting personal jurisdiction over the non-resident Individual Defendants would violate the
Fourteenth Amendment’s Due Process Clause.9 Specifically, the Court found the Individual
9
Generally, personal jurisdiction in Texas over a nonresident defendant carries two preconditions:
(1) the nonresident must be amendable to service of process under Texas’ long-arm statute; and (2) the
assertion of personal jurisdiction must comport with the Due Process Clause of the U.S. Constitution. Jones
v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir. 1992). But since personal jurisdiction
11
Defendants had not engaged in the requisite “minimum contacts” with Texas based on facts drawn
from Johnston’s affidavit,10 Seitz’s affidavit,11 and Plaintiffs’ Complaint, which failed to allege “any
contact whatsoever with Texas on behalf of either Individual Defendant.” May 15 Order at 15, Papa
Berg, 2013 WL 2090547 at *7. These facts, the Court concluded, failed to establish the Individual
Defendants’ “minimum contacts” under either the general and specific personal jurisdiction
analyses.12
As for specific jurisdiction, the Court found Plaintiffs failed to make out a prima facie case
under the first two steps of the Fifth Circuit’s three-part test, which requires "(1) minimum contacts
by the defendant purposefully directed at the forum state, (2) a nexus between the defendant's
contacts and the plaintiff's claims, and (3) that the exercise of jurisdiction over the defendant be fair
and reasonable." ITL Intern, Inc. v. Constenia, S.A., 669 F.3d 493, 498 (5th Cir. 2012) (citing
under Texas’ Long-Arm Statute is granted to the fullest extent allowed by the U.S. Constitution, the Court
need only determine whether personal jurisdiction over the Individual Defendants is constitutionally
permissible. See id. at 1067–68.
10
Johnston’s affidavit demonstrated that he is a resident of Connecticut, the music director of WWE
and that “he has no relevant contacts with Texas. . . .” May 15 Order 15, Papa Berg, 2013 WL 2090547 at
*8.
11
Seitz’s affidavit showed he (1) is a resident of Georgia and Vice President of creative
writing/booking for the WWE; (2) commuted to Dallas from Georgia for two-week blocks of time in the late
1980's, during which time he stayed with Papa; and (3) has been to Texas for WWE events sixteen times
since 2011, but otherwise has not had any substantive contacts with Texas in over twenty-five years. May
15 Order 15, Papa Berg, 2013 WL 2090547 at *8.
12
The "minimum contacts" test can be met by contacts giving rise to either general or specific
jurisdiction. Gundle Lining Constr. Corp. v. Adams Cnty. Asphalt, Inc., 85 F.3d 201, 205 (5th Cir. 1996).
"General personal jurisdiction is found when the nonresident defendant's contacts with the forum state, even
if unrelated to the cause of action, are continuous, systematic, and substantial." Marathon Oil Co. v. A.G.
Ruhrgas, 182 F.3d 291, 295 (5th Cir. 1999) (citation omitted). Specific personal jurisdiction exists when the
nonresident defendant's contacts with the forum state arise from or are directly related to the cause of action.
Gundle, 85 F.3d at 205.
12
Nuovo Pignone, SpA v. Stroman Asia M/V, 310 F.3d 371, 378 (5th Cir. 2002)). The Court also
rejected Plaintiffs’ argument that specific jurisdiction was proper under Calder v. Jones, which holds
that “an act done outside the state that has consequences or effects within the state will suffice as
a basis for jurisdiction in a suit arising from those consequences if the effects are seriously harmful
and were intended or highly likely to follow from the nonresident defendant’s conduct.” Guidry v.
U.S. Tobacco Co., 188 F.3d 619, 628 (5th Cir. 1999).
As for general jurisdiction, the Court concluded that the Individual Defendants had not had
the “substantial, continuous, and systematic contacts required for general jurisdiction.” May 15
Order at 16, Papa Berg, 2013 WL 2090547 at *9 (citing Johnston v. Multidata Sys. Int’l Corp., 523
F.3d 602, 609 (5th Cir. 2008); Helicopteros Nacionales de Colom., S.A. v. Hall, 466 U.S. 408, 414-19
(1984)). The Court reasoned that “Johnston has had no contact with Texas in at least ten years, and
Seitz’s only contact in the last 25 years has been sixteen trips for WWE live events, which do not
have any apparent connection with the [Copyrighted Works].”13 Id.
Now, Plaintiffs seek leave to re-assert their dismissed claims against the Individual
Defendants, arguing that new allegations in the Amended Complaint support specific jurisdiction
over Johnston, and specific and general jurisdiction over Seitz. Defendants counter that the new
allegations do not alter the May 15 Order’s ruling. To resolve this dispute, the Court analyzes, in
turn, its ability to assert personal jurisdiction over each Individual Defendant. See Rollys-Royce Corp.
v. Heros, Inc., 576 F. Supp. 2d 765, 772 (N.D. Tex. 2008) (quoting Action Embroidery Corp. v. Atl.
13
The May 15 Order (and original complaint) referred to various songs Plaintiffs allegedly hold rights
to as the “Protected Works.” The Court now adopts the Amended Complaint’s new terminology: the
Copyrighted Works.
13
Embroidery, Inc., 368 F.3d 1174, 1180 (9th Cir. 2004)) (“Personal jurisdiction must exist for each
claim asserted against [each] defendant.”).
i.
Personal Jurisdiction over Johnston
In their Motion, Plaintiffs ask the Court to assert specific personal jurisdiction over the
Amended Complaints’ unjust enrichment and copyright infringement claims against Johnston.
Plaintiffs argue that newly-presented facts14 establish specific personal jurisdiction over Johnston for
at least two reasons. First, Plaintiffs submit, pursuant to the stream of commerce doctrine, that
income Johnston derived from Texas-based sales of a WWE video game (“Legends of
Wrestlemania”) incorporating Johnston’s infringing song establish his minimum contacts in Texas.
Pl.’s Mot. 10. Second, Plaintiffs alternatively claim that jurisdiction is proper under the Calder effects
test, because Johnston’s out-of-state activity was calculated to cause harm to Plaintiffs in Texas. Id.
at 11.
Defendants counter that these new facts only concern WWE’s contacts in Texas—the
distribution of consumer goods into the stream of commerce—which cannot be imputed onto
Johnston for purposes of personal jurisdiction. Def.’s Resp. 8. As for the effects test, the Defendants
point the Court to its ruling in the May 15 Order. Id. For the reasons that follow, the Court
concludes, as it did before, that it lacks personal jurisdiction over Johnston.
First, the stream of commerce cases Plaintiffs rely on are inapposite here. These cases hold
14
See Am. Compl. ¶ 16 (stating Johnston’s contacts with Texas, including that the infringing song
Johnston created for a WWE video game made its way into the stream of commerce, and that Johnston’s
work on the infringing song was directed at and caused harmful effects in Texas); Papa Aff. ¶¶ 19–21
(averring that Papa purchased the infringing video game in Texas, it was widely available in Texas, and it
contains a derivative copy of Badstreet USA); Ex. E of App. Supp. Pl.’s Rep. (listing songs under Johnston’s
name on iTunes).
14
that minimum contacts may be established by showing “that the defendant delivered the product
into the stream of commerce with the expectation that it would be purchased by or used by
consumers in the forum state.” Ainsworth v. Moffett Engineering, Ltd., 716 F.3d 174, 177 (5th Cir.
2013). However, a defendant’s “contacts with” the forum state “are not to be judged according to
their employer’s activities there.” Calder v. Jones, 465 U.S. 783, 790 (1984); see also Lee v. Allen, 32
F.3d 566, at * 3 (5th Cir. 1994) (unpublished) (“[J]urisdiction over the employees of a corporation
may not be predicated on jurisdiction over the corporation itself, but must be based on their
individual contacts with the forum state.”). Here, the facts do not reasonably suggest that Johnston
played a role in the distribution of products his employer (WWE) and third parties delivered into the
stream of commerce.15 That Johnston participated in the creative development of Legends of
Wrestlemania, and indirectly benefitted from Texas-based sales, is not enough to impute onto him
“‘the unilateral activity of another party or third person.’” Ainsworth, 716 F.3d at 177 (quoting ITL
Int’l, 669 F.3d at 498); see also McFadin v. Gerber, 587 F.3d 753, 761–63 (5th Cir. 2009) (finding the
stream of commerce doctrine inapplicable where a third party sold knock-off handbags in Texas
loaned by the defendant, who “received, at most, a two-percent commission” and “did not direct [the
third party] to go to Texas”). Therefore, the Court again concludes that while “personal jurisdiction
is proper as to WWE under a stream of commerce theory, [Plaintiffs have] not established through
a prima facie case that [Johnston] put the allegedly infringing works into the stream of commerce.”
May 15 Order 16, Papa Berg, 2013 WL 2090547 at *8.
15
There are no facts or allegations indicating that Johnston had any role in the distribution of
products he helped develop. In fact, the Amended Complaint alleges that Legends of Wrestlemania was
distributed through third parties that WWE (not Johnston) entered into agreements with. See Am. Compl.
¶ 60–61, 69–71.
15
Second, Plaintiffs’ renewed effort to establish Johnston’s minimum contacts under Calder is
also unavailing. As noted before, “personal jurisdiction under the effects test is rare, and plaintiffs
must still show that a defendant purposefully availed itself of the benefits of the forum state or
purposely directed conduct at the forum state.” Id. (citing Stroman Realty v. Wercinski, 513 F.3d 476,
486 (5th Cir. 2008)). Nonetheless, Plaintiffs again press for personal jurisdiction under the effects
test, asserting that Johnston knowingly diverted royalties to himself, thereby harming Plaintiffs in
Texas. Pl.’s Mot. 11. Since this is substantively the same argument previously rejected, the Court
again concludes that “the effects test alone does not support personal jurisdiction over” Johnston.
May 15 Order 17, Papa Berg, 2013 WL 2090547 at *8. Moreover, even considering the effects
Johnston’s conduct had on Plaintiffs in Texas, the Court has no reasonable basis to conclude that
Johnston’s purely out-of-state activities were “purposely directed” at Texas or that he otherwise
“purposely availed [him]self of the privleges of conducting activities there.” McFadin, 587 F.3d at 759
(quotation marks omitted).
Accordingly, the Court concludes that Plaintiffs have failed to establish a prima facie case
of Johnston’s minimum contacts with Texas. Granting Plaintiffs leave to re-plead their claims against
Johnston would, therefore, be futile. As such, to the extent Plaintiffs seek leave to re-plead claims
against Johnston, their Motion is DENIED.
ii.
Personal Jurisdiction over Seitz
Plaintiffs next advocate for both specific and general personal jurisdiction over their unjust
enrichment claim against Seitz. In support, Plaintiffs assert contacts on the part of Seitz that are
substantively the same as the specific jurisdictional theories rejected above for Johnston. However,
Plaintiffs also submit a more direct set of Texas contacts for Seitz, including his: (1) creative efforts
16
on Badstreet USA in Texas, including co-writing, song recording, and music video recording; (2)
business agreements with Jimmy Papa executed in Texas; and (iii) various appearances in Texas for
WWE and other wrestling-related events.16 Defendants argue in response that the new allegations,
while more specific, “do not change, much less overcome” the facts in Seitz’s affidavit that the Court
relied on in dismissing Papa’s claims. Def.’s Resp. 7. While the Court agrees that it still lacks general
personal jurisdiction over Seitz, it finds that the new facts provided by Plaintiffs establish specific
personal jurisdiction over the unjust enrichment claim against Seitz.
In finding general jurisdiction lacking before, the Court cited Fifth Circuit precedent noting
that “the continuous and systematic contacts test [for general jurisdiction] is a difficult one to meet,
requiring extensive contacts between a defendant and a forum.” Johnston v. Multidata Sys. Int’l Corp.,
523 F.3d 602, 609 (5th Cir. 2008) (quoting Submersible Sys., Inc. v. Perforadora Cent., S.A. de C.V.,
249 F.3d 413, 419 (5th Cir. 2001)). The new allegations against Seitz, if anything, inch Plaintiffs
slightly closer to clearing this high hurdle. But facts showing Seitz’s sporadic visits to Texas for live
events, indirect income on products reaching Texas through the stream of commerce, and
agreements with Jimmy Papa dating back to the 1980s and early 1990s are simply not enough to
qualify as regular, systematic, and continuous contacts with Texas. See, e.g., Helicopteros Nacionales,
466 U.S. at 414–19.
Nonetheless, the newly-asserted facts are enough to establish specific personal jurisdiction
16
See Compl. ¶ 15 (alleging various contacts between Seitz and Texas); Papa Aff. ¶¶ 16–18 (averring
Seitz was in Texas to record Badstreet USA’s song and music video, and that Seitz signed contracts related
to Grand Theft Partners II in Texas); Conveyance of Musical Work, Ex. A of App. Supp. Pl.’s Rep. (contract
between Jimmy Papa and Seitz assigning rights in Badstreet USA to Jimmy Papa d/b/a Red Hot Music); Exs.
B–D, App. Supp. Pl.’s Rep. (showing Seitz was in Texas for a WWE event and that Seitz is credited in various
WWE products).
17
for purposes of the unjust enrichment claim against Seitz. Since specific jurisdiction “depends on an
affiliation between the forum and the underlying controversy,” Pervasive Software, Inc. v. Lexware
GmbH & Co. KG, 688 F.3d 214, 220 (5th Cir. 2012) (internal brackets and quotations omitted),
the Court initially considers the nature of Plaintiffs’ dispute with Seitz before proceeding to the Fifth
Circuit’s three-step analysis. The unjust enrichment claim asserted against Seitz is a “quasi-contact”
action in which “an obligation is imposed by law to do justice even though it is clear that no promise
was ever made or intended.” Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671, 683–84 (Tex.
2000). To establish their claim, Plaintiffs must show that Seitz “has obtained a benefit from
[Plaintiffs] by fraud, duress, or the taking of an undue advantage,” Heldenfels Bros., Inc. v. City of
Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992), or that Seitz “‘has wrongfully secured a benefit or has
passively received one which it would be unconscionable to retain.’” Douglass v. Beakley, 900 F. Supp.
2d 736, 752 (N.D. Tex. 2012) (quoting Villarreal v. Grant Geophysical, Inc., 136 S.W.3d 265, 270
(Tex. App. – San Antonio 2004)). Here, Plaintiffs’ theory of liability is that Seitz wrongfully listed
himself with BMI17 as publisher of Badstreet USA (and potentially other Copyrighted Works),
thereby unlawfully diverting royalties to himself. Am. Compl. ¶¶ 55–56, 227–31. With this in mind,
the Court turns to the three-step specific jurisdiction test.
As for the first step, the Court must examine whether Seitz “purposely directed” his conduct
at Texas or otherwise “purposely availed [him]self of the privleges of conducting activities there.”
McFadin, 587 F.3d at 759 (quotation marks omitted). The “touchstone” of the analysis here “is
17
“BMI” refers to Broadcast Music, Inc., a company that “collects license fees on behalf of songwriters
and music publishers and distributes them to the songwriters and music publishers as royalties.” Am. Compl.
¶ 27.
18
whether the defendant’s conduct shows that [he] ‘reasonably anticipates being haled into court.’”
Id. at 759 (quoting Luv n’ care, LTD v. Insta-mix, Inc., 438 F.3d 465, 470 (5th Cir. 2006)). Here, Seitz
purposely established a relationship with Jimmy Papa while commuting to Texas in the 1980s, during
which time he created and recorded Badstreet USA. This song became Seitz’s entrance music as a
wrestler and is still significant to his career nearly three decades later.18 Seitz later signed a contract
with Jimmy Papa in Texas, assigning all his rights in Badstreet USA in exchange for long-term
royalties paid by Plaintiffs. If a dispute ever arose as to Seitz’s right to receive these payments, the
contract provided that Texas law governed. See Stuart v. Spademan, 772 F.2d 1185, 1195 (5th Cir.
1985) (“[C]hoice-of-law provisions warrant some weight in considering whether a defendant has
purposely invoked the benefits and protections of a state’s laws for jurisdictional purposes.”). And
this long-term contract was not simply a one-shot deal. Seitz also formed a partnership with Jimmy
Papa in Texas for purposes of releasing a compilation of songs they co-wrote, and later signed over
his rights in the partnership to Plaintiffs in a contract signed in Texas and containing a Texas choice
of law clause. See Central Freight Lines, Inc. v. APA Transport Corp., 322 F.3d 383 (5th Cir. 2003)
(finding that the defendant “purposely directed its in-state and out-of state activities at a resident
of the forum” by, among other things, “establishing a long-term association with that resident”).
Finally, when Seitz allegedly re-listed himself as the publisher of Badstreet USA in 1996, he should
have been well-aware that the effects of his conduct would be felt by his former partner in Texas. See
Allred v. Moore & Peterson, 117 F.3d 278, 287 (5th Cir. 1997) (quoting Wallace v. Herron, 778 F.2d
391, 395 (7th Cir. 1985)) (“‘[T]he effects of an alleged intentional [action] are to be assessed as part
18
See Ex. C of App. Supp. Pl.'s Resp. (noting that Seitz was introduced at the WWE Hall of Fame
in 2009 with Badstreet USA playing).
19
of the analysis of the defendant’s relevant contacts with the forum.’”). Given his Texas-centered
business dealings with Plaintiffs, in-state collaboration on Badstreet USA, and out-of-state conduct
directed at Texas, “it is only fitting that [Seitz] be amendable to suit in that state.” Luv n’ care, 438
F.3d at 471.
For the second step, the asserted claim must “arise out of or result from the defendant’s forum
contacts.” Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 275 (5th Cir. 2006). In other words,
there must be a sufficient “nexus between the defendant's contacts and the plaintiff's claims.” ITL
Intern, 669 F.3d at 498 (quotation marks omitted). While Seitz’s wrongful conduct in this case—the
listing of himself as publisher in BMI and receipt of royalties—appears to have occurred outside of
Texas, Plaintiffs rely on Seitz’s in-state contacts to establish that the out-of-state conduct was
unlawful. Specifically, Plaintiffs allege that Seitz co-wrote and recorded Badstreet USA in Texas
(thereby creating any rights to the song while in the state), and that Seitz later assigned all his rights
in Badstreet USA (including publishing rights) to Plaintiffs in a contract signed in Texas. These
contacts directly relate to Seitz’s re-listing of himself as publisher in BMI, and receipt of Badstreet
USA royalties in an amount that differed from his agreed-split with Jimmy Papa. Moreover, as
discussed before, Seitz’s relevant out-of-state conduct caused foreseeable effects (i.e., contacts) on
Plaintiffs in Texas. Given the important of these contacts to their unjust enrichment claim, the
Court finds that Plaintiffs met their burden of presenting facts tracing a sufficient nexus between
Seitz’s contacts with Texas and the unjust enrichment cause of action.
Lastly, at step three, “the burden of proof shifts to the defendant to show that the exercise
of jurisdiction would be unreasonable.” Luv n’ care, 438 F.3d at 473. For a defendant to carry his
burden at this step, he “must make a compelling case.” Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208,
20
215 (5th Cir. 1999). Such a showing is “rare.” Id. While discussing personal jurisdiction for
Defendant WWE,19 the May 15 Order noted that “Defendants fail to argue that the exercise of
jurisdiction would be unreasonable and therefore fail to carry their burden.” May 15 Order at 12,
Papa Berg, 2013 WL 2090547 at *7. In their brief for this Motion, Defendants again focus only on
the first two steps of the analysis without addressing the third step. Therefore, the Court finds that
the Defendants have failed to show that personal jurisdiction over Seitz would be unfair or
unreasonable. As such, the Court concludes that it may lawfully assert personal jurisdiction over the
unjust enrichment claim asserted against Seitz.
To recap, the Court found that it lacks personal jurisdiction over Johnston, and therefore
denied Plaintiffs’ leave to re-assert claims against Johnston as doing so would be “futile” for purposes
of Rule 15(a). However, having found personal jurisdiction over Seitz to be proper, the Court rejects
Defendants’ contention that the Court should deny Plaintiffs’s Motion as “futile” on this ground.
2.
Untimely Service of Individual Defendants
The Court next examines the second ground cited by the May 15 Order for dismissing
Plaintiffs’ claims against Seitz: untimely service. Specifically, the Court must determine whether
Plaintiffs’ prior failure to timely serve the Individual Defendants renders Plaintiffs’ claim against Seitz
“futile” such that leave should be denied under Rule 15(a).20
In the May 15 Order, the Court dismissed Plaintiffs’ claims against Seitz (and Johnston) on
19
Though this was in the context of Defendant WWE, searching the Defendants’ prior briefing, the
Court finds this determination equally applicable to the Individual Defendants.
20
Since it denied Plaintiffs’ Motion as futile as it relates to the claims against Johnston, the Court
need not consider the issue of untimely service for the claims against Johnston.
21
the independent ground that Plaintiffs failed to timely serve the Individual Defendants in accordance
with Federal Rule of Civil Procedure 4(m). The Court exercised its discretion under Rule 4(m) to
dismiss the claims without prejudice after finding Plaintiffs failed to show good cause for their
untimely service.21
In the initial brief filed in support of their Motion, Plaintiffs did not address the issue of
service. Taking note of Plaintiffs’ oversight, Defendants contend that leave should now be denied
due to Plaintiffs’ renewed failure to show good cause for their untimely service or to otherwise explain
why the Court should deviate from the May 15 Order’s ruling. Def.’s Resp. 9. In reply, Plaintiffs
assert that since the Court has not yet accepted the Amended Complaint, no summons has been
issued, and thus “Defendants’ complaint regarding service is premature.” Pl.’s Rep. 7. While neither
argument is persuasive, the Court concludes that requiring Plaintiffs to overcome the deficiency of
untimely service would be contrary to the intent of the May 15 Order.
More to the point, the “excuse” Plaintiffs, through their prior attorney, offered for their
untimely service was that they “intended to seek discovery from WWE regarding their service
information and had not had this opportunity due to WWE’s extension for time to respond to the
Complaint.” May 15 Order at 19, Papa Berg, 2013 WL 2090547 at *9. This thin excuse prompted
the Court to exercise its discretion under Rule 4(m) to dismiss Plaintiffs’ claims even though the
Court could have extended the time for service. Nonetheless, requiring Plaintiffs to now show good
21
“Rule 4(m) permits a district court to dismiss a case without prejudice if the plaintiff fails to serve
the defendant within 120 days of filing the complaint.” Millan v. USAA Gen. Indem. Co., 546 F.3d 321, 325
(5th Cir. 2008). However, if “the plaintiff can establish good cause for failing to serve the defendant, the
court must extend the time for service.” Id. And even when the plaintiff fails to show good cause, “the court
has discretionary power to extend the time for service.” Id.
22
cause for their prior counsel’s failure to timely serve Seitz would place them in an untenable position,
which was not the Court’s intention. In dismissing the claims without prejudice due to deficient
service, the Court placed Plaintiffs in the same position they were in before the Complaint was filed.
See 4B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1137 (3d ed.
2002) (“A dismissal without prejudice under Rule 4(m) for failure to serve process is intended to
leave the plaintiff in the same position as if the action never had been filed.”); Black’s Law Dictionary
(9th ed. 2009) (defining “dismissed without prejudice” as “removed from the court’s docket in such
a way that the plaintiff may refile the same suit on the same claim”). Granting leave here would do
just that by requiring Plaintiffs to now serve Seitz in a timely manner. Consequently the Court
determines that Plaintiffs’ prior failure to timely serve Seitz does not bar them from re-filing their
claims against him. As such, the Court GRANTS Plaintiffs’ Motion to the extent it seeks leave to
amend the Complaint by adding an unjust enrichment claim against Seitz.
C.
Futility of Contributory Copyright Infringement Claim Against WWE Under Rule 15(a)
Lastly, the Court must determine whether to deny Plaintiffs’ Motion as “futile” under Rule
15(a) to the extent their Motion seeks to re-assert a contributory copyright infringement claim
against the WWE. Pursuant to Rule 12(b)(6), the May 15 Order dismissed Plaintiffs’ contributory
copyright infringement claim against (among others) the WWE for failure to state a claim upon
which relief may be granted. Specifically, the Court found that, rather than adequately plead the
claim’s elements, the Complaint’s theory of liability appeared “to be based on the alleged acts of the
Defendants that directly infringed [the Copyright Works].” May 15 Order at 22, 2013 WL 2090547
at *11. Defendants contend that the claim is again defective, because the supporting allegations “are
the same alleged acts that supposedly directly infringed Plaintiffs’ copyrights.” Def.’s Resp. 10. The
23
Court disagrees.
A defendant is liable for contributory copyright infringement “when it, with knowledge of the
infringing activity, induces, causes or materially contributes to infringing conduct of another.” Alcatel
USA, Inc. v. DGI Techs., Inc., 166 F.3d 772, 790 (5th Cir. 1999). Here, the Amended Complaint
alleges that the WWE, with knowledge of the infringing activity, induced, caused, or materially
contributed to the direct infringement of others by providing copies of infringing works that third
parties: distributed, incorporated into video games, and incorporated into ring-tones. Am. Compl.
¶¶ 210–211, 213–214. The Amended Complaint similarly alleges that the WWE provided support
to Johnston to develop a derivative of the Copyrighted Works. Id. ¶ 212. In contrast, the Amended
Complaint alleges that WWE directly infringed on the Copyrighted Works through its public display
of the songs in live events, on its website, on television, and in DVDs. Id. ¶¶ 122–125. While there
is some overlap between the allegations, the Amended Complaint clarifies that the contributory
copyright claim is not simply the direct claim’s facts summarily re-alleged under a different set of
elements. Instead, the claim’s supporting allegations are now based on a separate theory and its own
set of facts that plausibly show WWE knowingly contributed to the direct infringement of another.
Therefore, to the extent Plaintiffs seek leave to re-plead their contributory copyright infringement
claim against the WWE, their Motion is GRANTED.
IV.
CONCLUSION
For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART Plaintiffs’
Motion for Leave to Amend (doc. 38). Specifically, the Court DENIES the Motion to the extent it
seeks leave to re-plead claims against Defendant Johnston, who the Court again finds it lacks
24
personal jurisdiction over. These claims include one count of direct copyright infringement, one
count of vicarious liability for copyright infringement, and one count of unjust enrichment—all
against Johnston. For all other claims and allegations, the Motion is hereby GRANTED. Thus,
Plaintiffs’ remaining claims include: one count of direct copyright infringement against Defendants
WWE/Stephanie Music, Yuke’s, Take Two Interactive, and Gaiam Vivendi Entertainment; one
count of vicarious liability for copyright infringement against WWE/Stephanie Music; one count of
contributory copyright infringement against WWE/Stephanie Music and Yuke’s; and one count of
unjust enrichment against WWE/Stephanie Music, Seitz, and Take Two Interactive.
SO ORDERED.
SIGNED: November 25, 2013
_________________________________
JANE J. BOYLE
UNITED STATES DISTRICT JUDGE
25
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?