NANCY F. ATLAS, SENIOR UNITED STATES DISTRICT JUDGE.
On February 8, 2019, the Court referred all motions and other pretrial matters in this case to United States Magistrate Judge Dena Palermo pursuant to 28 U.S.C. § 636(b)(1)(A) and (B). Order of Referral of All Matters [Doc. # 124]. On March 26, 2019, Magistrate Judge Palermo issued a Order and Report and Recommendation on Cross Motions for Partial Summary Judgment ("R&R") [Doc. # 134], recommending that this Court grant Plaintiff Federation of State Massage Therapy Board's ("FSMTB") Motion for Partial Summary Judgment [Doc. # 111], and deny Defendant's Cross-Motion for Summary Judgment [Doc. # 116].
Defendants filed timely Objections to the R&R,
Defendants first argues that a factual dispute exists over whether Defendants' infringement of FSMTB's copyright was intentional. The Court is unpersuaded. As the Magistrate Judge Palermo correctly observed, copyright infringement is a strict liability tort and willfulness is only relevant to the court's discretionary determination of whether to enhance or reduce damages after liability is established. See Guzman v. Hacienda Records & Recording Studio, Inc., No. 6-12-CV-42, 2014 WL 6982331, at *5 n.9 (S.D. Tex. Dec. 9, 2014) (Costa, J.) ("Courts have observed that `copyright infringement is a strict liability tort,' but only to indicate that plaintiffs do not need to prove a defendant's mental state to prosecute a copyright claim." (quoting Educ. Testing Serv. v. Simon, 95 F.Supp.2d 1081, 1087 (C.D. Cal. 1999))), aff'd, 808 F.3d 1031 (5th Cir. 2015); Cullum v. Diamond A Hunting, Inc., No. SA-07-CV-0076 FB (NN), 2010 WL 3655863, at *3 (W.D. Tex. Sept. 13, 2010) ("[I]ntent or knowledge is not an element of infringement...."), report and recommendation adopted in part and rejected in part on other grounds, No. SA-07-CA-76-FB, 2010 WL 5817541 (W.D. Tex. Dec. 22, 2010); Educ. Testing Serv. v. Miller, No. CIV. A. 88-2819(RCL), 1991 WL 212181, at *4 (D.D.C. Sept. 30, 1991) (Lamberth, J.) (holding that defendant's "claim that he did not intend to violate [plaintiff's] copyright is no defense to infringement"). Because FSMTB does not move for summary judgment on damages, Defendants' mental state is not relevant at this stage.
Defendants next argue that FSMTB's copyright and breach of contract claims are subject to a viable defense of illegality based on language discrimination. Defendants also assert that FSMTB engaged in antitrust violations, establishing a viable defense to FSMTB's copyright infringement claims. Defendants did not raise these arguments in their original summary judgment briefing, and the arguments are not properly before the Court. See McPeak-Torres v. Texas, No. CV G-12-075, 2015 WL 12748276, at *1 (S.D. Tex. Jan. 22, 2015) (Costa, J.) ("Because Defendants are not entitled to raise arguments for the first time in their objections to the Magistrate Judge's Report and Recommendation that were not asserted in their Motion, these new arguments are not properly before the Court for consideration." (citing Freeman v. County of Bexar, 142 F.3d 848, 851 (5th Cir. 1998); Cupit v. Whitley, 28 F.3d 532, 535 n.5 (5th Cir. 1994); and Paterson-Leitch Co., Inc. v. Mass. Mun. Wholesale Elec., Inc., 840 F.2d 985, 990-91 (1st Cir. 1988))).
The Court, based on its de novo review, agrees fully with Magistrate Judge Palermo's R&R. The R&R will be adopted as this Court's Memorandum and Order. Accordingly, it is hereby
Dena Hanovice Palermo, United States Magistrate Judge
Before the Court are the Parties' cross motions for partial summary judgment.
The Federation is a non-profit 501(c)(3) corporation that administers and holds copyrights for the national Massage and Bodywork Licensing Examination ("MBLEx") for massage professionals. Persinger Decl. ¶¶ 3-4, 19, ECF No. 111-1; Ex. A-1, ECF No. 111-2. Licensing agencies in 44 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands rely on MBLEx results among other criteria to evaluate applicants for massage therapy licensure. Id. ¶ 5. The MBLEx is developed in compliance with national testing guidelines and provides a unified set of nationally-verified, entry-level standards for the safe and competent practice of
The development of exam questions requires substantial time and effort. Id. ¶ 12. Questions are drafted by representative groups of practitioners from across the country based on surveyed content relevant to the field. Id. ¶¶ 13-16. Each new question is reviewed by a committee of subject matter experts as well as edited to ensure the item is clear and there is only one correct answer. Id. ¶ 17. Every five years, the Federation reviews current practices and standards in the field to ensure the exam stays up to date. Id. ¶ 18.
The Federation requires test takers to agree multiple times to keep the exam content confidential, does not release exam questions, requires test takers to present two forms of identification and undergo biometric security procedures, and does not permit test takers to bring personal items into the testing room. Id. ¶¶ 8, 20-21, 30-31, 34, 37-43, ECF No. 111-1; Ex. A-2, ECF No. 111-3; Ex. A-3, ECF No. 111-4; Ex. A-4, ECF No. 111-5; Ex. A-5, ECF No. 111-6; Ex. A-6, ECF No. 111-7; Ex. A-7, ECF No. 111-8; Ex. A-8, ECF No. 111-9.
Between 2010 and 2012, Defendant Tesla Mendez became aware that several MBLEx test preparation programs in Los Angeles publicly advertised that they used MBLEx questions and answers that were translated from English into Mandarin Chinese. T. Mendez Decl. ¶ 21, ECF No. 117. Tesla Mendez took such a course that used actual MBLEx questions before taking the exam. T. Mendez Dep. 19:12-22:13, ECF No. 111-13. In 2013, Tesla Mendez took and passed the MBLEx and received a California license in massage and bodywork. T. Mendez Dep. 26:2-8, 28:13-16, ECF No. 118-2; Persinger Decl. ¶ 45, ECF No. 111-1.
In November 2015, Tesla Mendez formed MMTC-CA in California to provide a similar MBLEx test preparation service. T. Mendez Decl. ¶¶ 24, 53, ECF No. 117; T. Mendez Dep. 39:21-40:4, ECF No. 118-2; Ex. S at 108, ECF No. 117-1. To that end, Plaintiff purchased actual MBLEx questions and answers from a woman in Sacramento, California for $500.00. T. Mendez Decl. ¶ 65, ECF No. 117; T. Mendez Dep. 92:25-93:15, 108:24-111:11, 136:4-6, ECF No. 118-2; J. Mendez Dep. 24:8-12, ECF No. 111-12; Ex. D at 11, 13, ECF No. 111-14. Tesla Mendez also formed a Texas branch of her company, MMTC-TX, in July 2016. T. Mendez Dep. 43:6-12, 68:22-24, ECF No. 118-2; T. Mendez Decl. ¶ 54, ECF No. 117; Ex. U at 113, ECF No. 117-1.
MMTC-CA and MMTC-TX administered a test preparation program for the MBLEx. T. Mendez Dep. 47:18-48:11, 67:9-12, ECF No. 118-2. Tesla Mendez copied the purchased exam questions verbatim into a simulated exam software. Id. 93:16-94:13, 99:4-12. Students could take the simulated exams containing actual MBLEx questions on a computer in MMTC-CA's and MMTC-TX's classrooms, or through an online account with a web-based application
MMTC-CA and MMTC-TX also showed students a video in which an instructor reviewed the questions, provided the answers in both English and Chinese with explanations, explained key terminology, and taught memorization techniques for key terms and to identify correct answer choices. Id. 95:9-96:8, 96:25-98:9, 99:25-101:6. MMTC-CA and MMTC-TX also provided students with a glossary of key terms and phrases to memorize. T. Mendez Dep. 24:3-25:24, ECF No. 111-13. Collectively across California and Texas, MMTC-CA and MMTC-TX served and profited from hundreds of students, estimated to be between 800 and 1,500. T. Mendez Dep. 116:21-117:7, ECF No. 118-2.
Tesla Mendez was the sole director, officer, and shareholder of both companies, with one exception. Id. 40:15-25; T. Mendez Decl. ¶¶ 49, 52, ECF No. 117. In or about July 2016, Tesla Mendez added her husband,
While Jorge Mendez did not obtain any massage therapy education, he took the MBLEx in April 2015 and March 2016 for the benefit of MMTC-CA. Persinger Decl. ¶¶ 47, 49, ECF No. 111-1; J. Mendez Dep. 10:2-11:11, ECF No. 111-12; J. Mendez Dep. 3:11-23, 26:8-10, ECF No. 111-12; T. Mendez Dep. 120:16-121:15, 140:8-142:6, ECF No. 118-2; T. Mendez Decl. ¶ 64, ECF No. 117; Ex. D at 13, ECF No. 111-14. When Jorge Mendez took the MBLEx in April 2015 in California, he wore a small recording device on one of the buttons on his shirt. J. Mendez Dep. 9:15-10:1, 13:13-17, ECF No. 111-12; Persinger Decl. ¶ 48, ECF No. 111-1; Ex. A-9, ECF No. 111-10. While Defendants dispute that Jorge Mendez recorded actual test questions while taking the MBLEx, it is undisputed that he wore the camera into the testing room while it was recording video and did not remove it or turn it off.
MMTC-CA and MMTC-TX discontinued operations in or about July 2017.
Rule 56 of the Federal Rules of Civil Procedure provides for the entry of summary judgment against a party who fails to make a sufficient showing of the existence of an element essential to its case and on which it will bear the burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986);
"Initially, the movant bears the burden of presenting the basis for the motion and the elements of the causes of action upon which the nonmovant will be unable to establish a genuine dispute of material fact." Stewart v. U.S. Bank Nat. Ass'n, 107 F.Supp.3d 705, 707 (S.D. Tex. 2015). "The burden then shifts to the nonmovant to come forward with specific facts showing there is a genuine dispute for trial. A dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. (internal quotation marks and citations omitted).
"This burden will not be satisfied by `some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.'" Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005) (quoting Little, 37 F.3d at 1075). "`[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial,' and summary judgment as a matter of law must be granted." Brown v. U.S. Postal Inspection Serv., 206 F.Supp.3d 1234, 1242 (S.D. Tex. 2016) (quoting Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548).
The non-movant must identify specific evidence in the record and articulate how that evidence supports its claim. Baranowski v. Hart, 486 F.3d 112, 119 (5th Cir. 2007). However, the court must draw all reasonable inferences in the light most favorable to the non-moving party. Connors v. Graves, 538 F.3d 373, 376 (5th Cir. 2008); see also Nola Spice Designs, LLC v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015).
Plaintiff moved for partial summary judgment on its claims for copyright infringement as to all Defendants (including personal liability against Tesla Mendez and Jorge Mendez), contributory copyright infringement as to Jorge Mendez, breach of contract as to both Tesla Mendez and Jorge Mendez, and for costs and attorneys' fees.
Plaintiff moved for summary judgment on its copyright infringement claim against all Defendants. ECF No. 111 at 6. To prove copyright infringement, Plaintiff must show (1) ownership of a valid copyright and (2) actionable copying. Flowserve Corp. v. Hallmark Pump Co., No. 4:09-CV-675, 2011 WL 1527951, at *3 (S.D. Tex. Apr. 20, 2011) (citing Bridgmon v. Array Sys. Corp., 325 F.3d 572, 576 (5th Cir. 2003)). Actionable copying "is the copying of constituent elements of the work that are copyrightable" and has two elements: (1) factual copying and (2) substantial similarity between the copyrighted
"A certificate of registration `constitutes prima facie evidence of the validity of the copyright....'" Flowserve Corp., 2011 WL 1527951, at *3 (citing 17 U.S.C. § 410(c)). This creates a rebuttable presumption that the copyright is valid. Glasscraft Door I, L.P. v. Seybro Door & Weathership Co., No. H-08-2667, 2009 WL 3460372, at *3 (S.D. Tex. Oct. 22, 2009) (citing Norma Ribbon & Trimming, Inc. v. Little, 51 F.3d 45, 47 (5th Cir. 1995)).
Plaintiff presented five certificates of registration from the United States Copyright Office for the MBLEx. Persinger Decl. ¶ 19, ECF No. 111-1; Ex. A-1, ECF No. 111-2. Defendants failed to present any argument or evidence disputing the certificates' validity or that the subject matter of the certificates is not copyrightable. See Flowserve Corp., 2011 WL 1527951, at *5 (finding this element is met where defendant did not point to any evidence that plaintiff does not hold a valid copyright). Thus, as the certificate of registration is valid prima facie evidence and Defendants have provided no controverting evidence, there is no genuine issue of material fact and Plaintiff has established that it owns a valid copyright to the MBLEx questions.
Factual copying addresses "whether the alleged infringer copied, or `actually used the copyrighted material in his own work.'" Flowserve Corp., 2011 WL 1527951, at *3 (citing Bridgmon, 325 F.3d at 576). Factual copying may be established by direct or circumstantial evidence. Glasscraft Door I, L.P., 2009 WL 3460372, at *2 (citing Bridgmon, 325 F.3d at 576). "Direct evidence of copying is rarely available because it includes evidence such as party admissions, witness accounts of the physical act of copying, and common errors in the works of plaintiffs and the defendants." Nat'l Conf. of Bar Exam'rs v. Multistate Legal Studies, Inc., 458 F.Supp.2d 252, 256 (E.D. Pa. 2006) (quoting Rottlund Co. v. Pinnacle Corp., 452 F.3d 726, 732 (8th Cir. 2006)).
"As direct evidence of copying is rarely available, factual copying may be inferred from (1) proof that the defendant had access to the copyrighted work prior to creation of the infringing work and (2) probative similarity." Flowserve Corp., 2011 WL 1527951, at *3 (citing Peel & Co. v. Rug Market, 238 F.3d 391, 394 (5th Cir. 2001)). "Access has been defined to include an opportunity to view the copyrighted work." Id. (citing Ferguson v. Nat'l Broad. Co., Inc., 584 F.2d 111, 113 (5th Cir. 1978)). Probative similarity requires evidence that "the works, `when compared as a whole, are adequately similar to establish appropriation.'" Id. (citing Gen. Univ. Sys. v. Lee, 379 F.3d 131, 142 (5th Cir. 2004)). "Alternatively, factual copying may be established without a showing of access `if the two works are so strikingly similar as to preclude the possibility of independent creation.'" Id. (citing Gen. Univ. Sys., 379 F.3d at 142).
"This is the rare case in which there is direct evidence that defendants copied plaintiffs work." Multistate Legal Studies, Inc., 458 F. Supp. 2d at 256. Defendants do not contest, and in fact openly
Furthermore, Defendants and their employees provided students with the answers to the exam questions.
Even if this were insufficient as direct evidence, there is sufficient circumstantial evidence to establish factual copying because Defendants had access to the copyrighted material and there is probative similarity between the copyrighted work and Defendants' exam questions. See Flowserve Corp., 2011 WL 1527951, at *3 (citing Peel, 238 F.3d at 394). In terms of access, Tesla Mendez took the MBLEx, took a MBLEx preparation course that used actual MBLEx questions,
Jorge Mendez also took the MBLEx twice and could have accessed the MBLEx questions that he knew his wife purchased from a third party.
Furthermore, there is a probative similarity between alleged infringing work and Plaintiff's MBLEx questions. Plaintiff prepared a side by side comparison of 500 questions Defendants produced in the form of five practice exams alongside Plaintiffs actual MBLEx questions.
"Copying is actionable only if there is substantial similarity between the copyrighted design and the alleged copy." Glasscraft Door I, L.P., 2009 WL 3460372, at *4. "To determine whether an instance of copying is legally actionable, a side-by-side comparison must be made between the original and the copy to determine whether a layman would view the two works as `substantially similar.'" Flowserve Corp., 2011 WL 1527951, at *4 (quoting Creations Unlimited, Inc. v. McCain, 112 F.3d 814, 816 (5th Cir. 1997)). The similarity must relate to "the protectable aspects of the allegedly infringed work." Multistate Legal Studies, Inc., 458 F. Supp. 2d at 256-57 (citing Dam Things from Denmark v. Russ Berrie & Co., 290 F.3d 548, 562 (3d Cir. 2002)). While substantial similarity is often a question for the factfinder, summary judgment is appropriate "when the similarities between plaintiffs and defendant's works are so overwhelming as to preclude the possibility of independent creation" and the court finds that no reasonable juror could reach a contrary conclusion. Flowserve Corp., 2011 WL 1527951, at *4 (citations omitted).
As discussed above, approximately 284 of Defendants' practice questions are verbatim copies of Plaintiffs questions, and at least another 166 are near verbatim.
Furthermore, it is clear that Defendants copied material that was entitled to copyright protection. Courts across the country have uniformly and unequivocally held that secure licensing examination questions are entitled to copyright protection.
Defendants' counterarguments to Plaintiff's motion for copyright infringement are that (1) the MBLEx questions were easily accessible and widely used by many Chinese-language MBLEx test preparation programs, and (2) Defendants' infringement was not intentional or willful. ECF No. 116 at 17-20. Defendants assert they believed that, because MBLEx questions were widely used and other companies openly advertised their use of MBLEx questions, it was permissible for them to use the questions in their own test preparation program.
Defendants cite no case law to establish that publicly accessible material cannot be entitled to copyright protection or that these allegations negate any element of Plaintiffs claim.
During oral argument, Defendants argued that Plaintiff must demonstrate unauthorized copying to prevail on its claim.
Defendants' argument is without legal or factual support. Contrary to this argument, courts have held that copyright owners do not have to sue every potential infringer to preserve their rights. See, e.g., Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 518 F.Supp.2d 1197, 1224-25 (C.D. Cal. 2007) (rejecting argument that plaintiff waived right to enforce copyright because plaintiff allowed others to infringe, on the basis that there is no authority requiring a copyright holder "to pursue either all infringers or none at all" and this "would create a rule whereby Plaintiffs would be barred from suing any of the millions upon millions of direct infringers... unless all were sued."). Furthermore, Plaintiff produced uncontroverted evidence that it brought lawsuits against two other MBLEx preparation companies in New York and New Jersey for selling MBLEx questions. Persinger Decl. ¶ 33, ECF No. 111-1.
Further, Defendant failed to produce evidence that other similar test preparation companies did not have a license or other authorization from Plaintiff to use MBLEx questions. Oral Arg. at 12:05-12:07. Defendants also produced no competent summary judgment evidence that Plaintiff had personal knowledge that other companies were offering test preparation programs using actual MBLEx questions. Id. at 11:56-11:57. The Court notes that Tesla Mendez explained in her declaration that several Chinese language MBLEx test preparation services advertised the use of actual MBLEx questions and attached several such advertisements. T. Mendez Decl. ¶¶ 2-22, 25, ECF No. 117; Ex. A-R at 1-106, ECF No. 117-1. However, the advertisements are in Mandarin Chinese and were not translated. See, e.g., Ureteknologia De Mexico S.S. De C.V. v. Uretek (USA), Inc., No. H-16-2762, 2018 WL 4680603, at *10 (S.D. Tex. Sept. 28, 2018) (sustaining objection to summary judgment evidence that was not translated from foreign language into English because material must be accessible to the court and litigants) (citing Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560, 579, 132 S.Ct. 1997, 182 L.Ed.2d 903 (2012) (Ginsburg, J., dissenting)). Although Tesla Mendez attested to their authenticity and some of their content in her declaration (and Plaintiff did not object), the lack of translation makes it difficult for the Court to determine that Plaintiff was aware of the advertisements or that the advertisements specifically said the companies used real MBLEx questions, rather than simply advertised MBLEx preparation courses. See also Oral Arg. 12:35-12:36.
In addition, to the extent Defendants attempt to assert an estoppel defense, assuming it applies in this context, they failed to produce evidence establishing the elements of estoppel. See, e.g., Paramount Pictures Corp. v. Carol Pub. Group, 11 F.Supp.2d 329, 337-38 (S.D.N.Y. 1998) (court held defendant failed to establish essential elements and estoppel was inapplicable to the copyright claim based on plaintiffs failure to sue other potential copyright infringers because,
Defendants' second argument that they did not willfully infringe is also without merit. "[C]opyright infringement is a strict liability tort" and "plaintiffs do not need to prove a defendant's mental state to prosecute a copyright claim." Guzman v. Hacienda Records & Recording Studio, Inc., No. 6-12-CV-42, 2014 WL 6982331, at *5 n.9 (S.D. Tex. Dec. 9, 2014) (citing Simon, 95 F. Supp. 2d at 1087), aff'd, 808 F.3d 1031 (5th Cir. 2015); see also Miller, 1991 WL 212181, at *4 (defendant's "claim that he did not intend to violate [plaintiff's] copyright is no defense to infringement...."). "Even an innocent infringer is liable for infringement." Cullum v. Diamond A Hunting, Inc., No. SA-07-CV-76, 2010 WL 3655863, at *3 n.35 (W.D. Tex. Sept. 13, 2010) (quoting Fitzgerald Pub. Co., Inc. v. Baylor Pub. Co., Inc., 807 F.2d 1110, 1113 (2d Cir. 1986)), report and recommendation adopted in part and rejected in part on other grounds, 2010 WL 5817541 (W.D. Tex. Dec. 22, 2010). Willfulness is only relevant to the court's discretionary determination of whether to enhance or reduce damages after a plaintiff establishes liability.
Plaintiff moved for summary judgment to hold Tesla Mendez and Jorge Mendez personally liable. ECF No. 111 at 21-24. "[A]ll participants in copyright infringement
These elements are easily satisfied as to Tesla Mendez. She was the founder and owner of MMTC-CA and MMTC-TX. T. Mendez Dep. 39:21-40:1, 43:6-12, 68:22-24, ECF No. 118-2; T. Mendez Decl. ¶¶ 53-54, ECF No. 117. Aside from Jorge Mendez's director position, Tesla Mendez was the sole officer, director, and shareholder. T. Mendez Dep. 40:15-25, ECF No. 118-2; T. Mendez Decl. ¶¶ 49, 52, ECF No. 117. "The Fifth Circuit has previously held that a sole shareholder and president of a corporation had `the ultimate authority to police the conduct of his employees." Univ. Music-MGB Songs v. Clayton's Beach Bar & Grill L.L.C., No. 17-CV-16, 2017 WL 1753497, at *3 (S.D. Tex. Apr. 17, 2017) (citing Broad. Music, Inc. v. Hobi, Inc., 20 F.3d 1171, 1994 WL 144812, at *2 (5th Cir. 1994)), report and recommendation adopted, 2017 WL 1710628 (S.D. Tex. May 3, 2017).
In addition, Tesla Mendez obtained the MBLEx questions specifically to develop test preparation programs using the actual questions. T. Mendez Decl. ¶¶ 21, 23-24, 65, ECF No. 117; T. Mendez Dep. 92:25-93:15, 108:24-111:11, ECF No. 118-2; J. Mendez Dep. 24:8-12, ECF No. 111-12; Ex. D at 11, ECF No. 111-14. She was responsible for handling MMTC-CA's and MMTC-TX's finances and financial records. T. Mendez Dep. 3:1-9, ECF No. 125-3. Overall, the evidence shows Tesla Mendez took the lead in directing the operations of MMTC-CA and MMTC-TX.
Tesla Mendez also had a financial interest as the sole shareholder. She earned a salary and commissions. T. Mendez Dep. 58:14-59:14, ECF No. 118-2. Tesla Mendez and Jorge Mendez jointly purchased and still own a property in Texas that was used as MMTC-TX's office, but took the loan in MMTC-TX's name. Id. 67:21-68:14, 70:16-23; T. Mendez Dep. 6:8-7:22, ECF No. 125-3; Ex. D at 4-5, ECF No. 111-14.
These elements are likewise met as to Jorge Mendez. He was listed as the only director for MMTC-CA, other than Tesla Mendez, for some period of time in the corporate filings with the California Secretary of State. T. Mendez Dep. 41:1-14, ECF No. 118-2; Ex. E, ECF No. 111-15. He was a signatory to MMTC-CA's bank account and had authority to sign company checks. T. Mendez Dep. 41:1-14, ECF No. 118-2; Ex. D at 5, 6, ECF No. 111-14. More importantly, he actively participated in the unlawful distribution of MBLEx questions when he materially contributed to his wife's business, including by wearing
Even though Jorge Mendez did not earn a salary from MMTC-CA or MMTC-TX, he had a financial interest in the corporate Defendants because when MMTC-CA was first established, he allowed MMTC-CA to operate out of his business premises and loaned $10,000 to MMTC-CA through his company. T. Mendez Dep. 41:15-42:1, ECF No. 118-2; Ex. D at 7, ECF No. 111-14. Jorge Mendez also benefited financially from the corporate Defendants, which funded a personal trip for him in 2016 to visit his wife in Texas. Ex. D at 4, ECF No. 111-14. He further testified that the income MMTC-CA and MMTC-TX generated appeared on his and his wife's joint income tax returns. J. Mendez Dep. 20:14-18, 25:13-16, 29:25-30:5, ECF No. 118-1. Plaintiff does not need to show that Defendants "actually made money by infringing on the copyright, simply that [their] financial interests were implicated." Univ. Music-MGB Songs, 2017 WL 1753497, at *3 (citing Hobi, Inc., 20 F.3d at *2); see also Hobi, Inc., 20 F.3d at *2 (finding defendant had a financial interest in the activities, "regardless of whether he was making a profit or losing money on the venture.").
Notably, Defendants make no argument in response to Plaintiff's motion as to joint and several liability or to Plaintiffs cited case law establishing that all participants in copyright infringement are jointly and severally liable.
Plaintiff moved for summary judgment on its breach of contract claim against Tesla Mendez and Jorge Mendez for breaching confidentiality obligations and providing inaccurate information on their registration applications, and also against Jorge Mendez for bringing a camera into the exam. ECF No. 111 at 25-29. "Under Texas law, the elements of a breach of contract claim are: `(1) a valid contract, (2) the plaintiff performed or tendered performance[,] (3) the defendant breached the contract, and (4) the plaintiff was damaged as a result of the breach.'" Page v. JP Morgan Chase Bank, N.A., 605 F. App'x 272, 275 (5th Cir. 2015) (quoting Doss v. Homecomings Fin. Network, Inc., 210 S.W.3d 706, 713 (Tex. App.-Corpus Christi 2006, pet. denied)).
Plaintiff produced evidence establishing that when candidates apply for and take the MBLEx, test takers enter into valid contracts agreeing to treat the exam as confidential, to report any suspected violations of confidentiality, to not disclose or reproduce any exam questions,
This evidence establishes that both Tesla Mendez and Jorge Mendez agreed to these terms when they applied to sit for the MBLEx and each time they sat for the exam. Neither Defendant makes any argument that these contracts were invalid or
Plaintiff's evidence establishes that it performed on the contracts with Defendants. In contrast, Defendants make no argument and present no evidence that the Federation in any way failed to tender performance.
Plaintiff presented sufficient evidence to establish that Tesla Mendez and Jorge Mendez breached the contracts' terms regarding (1) confidentiality, (2) providing accurate information about their education, and (3) not bringing personal items into the testing room.
It is undisputed that Tesla Mendez accessed actual test questions through a test preparation course before she first took the MBLEx. T. Mendez Dep. 19:12-22:13, ECF No. 111-13. It is undisputed that Tesla Mendez sought out for purchase, reproduced, and distributed MBLEx questions and answers through MMTC-CA and MMTC-TX to hundreds of test takers.
Plaintiff provided evidence that Tesla Mendez and Jorge Mendez provided inaccurate information about their education on their application forms. Even though Tesla Mendez passed the MBLEx the first time she took it, she applied to take it a second time. Persinger Decl. ¶¶ 45-46, ECF No. 111-1; T. Mendez Dep. 118:6-119:15, ECF No. 118-2. On Tesla Mendez's second application to retake the MBLEx, she indicated that she attended Angeles College for massage and bodywork. Persinger Decl. ¶ 46, ECF No. 111-1. In her deposition, however, Tesla Mendez testified that she only attended California Vocational Cosmetology College, which she listed on her first MBLEx application. Id. ¶ 44; T. Mendez Dep. 22:22-28:12, ECF No. 118-2; Ex. A-2, ECF No. 111-3.
On both of Jorge Mendez's applications, he indicated that he attended California Vocational Cosmetology College. Persinger Decl. ¶¶ 47, 49, ECF No. 111-1. However, in his deposition he conceded he never
Tesla Mendez and Jorge Mendez provided no contrary evidence that they in fact attended these institutions, or that they did not list these institutions on their applications. Thus, Plaintiff established that Tesla Mendez and Jorge Mendez breached the contract terms that required them to provide accurate information about their education.
Tesla Mendez and Jorge Mendez attempt to create a dispute of fact as to this breach of contract claim, alleging they did not intend to record any exam questions because they already had the questions, Jorge Mendez only recorded the check in procedures, and they only used the portion of the recording that included the exam check in procedures before entering the exam room.
However, regardless of whether the camera recorded only the check in process or actual test questions, it is undisputed that Jorge Mendez wore the camera into the testing facilities, and, while it was recording, into the exam room and did not remove it or turn it off.
Regarding the fourth element, Plaintiff has produced sufficient evidence that Tesla Mendez and Jorge Mendez's breach compromised the integrity of the exam. Persinger Decl. ¶¶ 8, 10, 21, ECF No. 111-1. Plaintiff must retire the compromised
Plaintiff also requests an award of costs and attorneys' fees under the federal Copyright Act. ECF No. 111 at 29-30. The Copyright Act gives the district court discretion to award "full costs" and "a reasonable attorney's fee to the prevailing party" in a copyright infringement action. 17 U.S.C. § 505; see also Kirtsaeng v. John Wiley & Sons, Inc., ___ U.S. ___, 136 S.Ct. 1979, 1983, 195 L.Ed.2d 368 (2016). In deciding whether to award attorneys' fees, the court may consider several non-exclusive factors including frivolousness, motivation, objective unreasonableness of the losing party's position, and considerations of compensation and deterrence. Kirtsaeng, 136 S.Ct. at 1985, 1988-89 (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994)). The award should promote the purposes of the Copyright Act. Hunn, 789 F.3d at 589. "[A]n award of attorney's fees to the prevailing party in a copyright action is the rule rather than the exception and should be awarded routinely." Id. at 588-59 (quoting Virgin Records Am., Inc. v. Thompson, 512 F.3d 724, 726 (5th Cir. 2008)).
Defendants do not dispute that a prevailing party in a copyright action is entitled to attorneys' fees. ECF No. 116 at 26. Moreover, the copyright infringement in this case, willful or not, "harmed the public as well as [Plaintiff]." Multistate Legal Studies, Inc., 458 F. Supp. 2d at 262 (awarding attorney's fees). The Federation has a compelling interest to protect the integrity of the MBLEx and to ensure the safety of future massage and bodywork practitioners' clients. "By exposing its students to the questions likely to appear on the [exam], [Defendants] undermined the integrity of the [ ] examination, possibly causing the admission of unqualified applicants." Id.; accord Nat'l Bd. of Med. Exam'rs, 2011 WL 7615071, at *11 (awarding attorney's fees). The need to deter such infringement is vital. Nat'l Bd. of Med. Exam'rs, 2011 WL 7615071, at *11. Accordingly, Plaintiff should be awarded reasonable costs and attorneys' fees upon submission of affidavits setting forth Plaintiffs costs and attorneys' fees.
Defendants moved for partial summary judgment on its defenses to Plaintiff's claims of alter ego, undercapitalization, or other corporate veil piercing claims. ECF No. 116 at 26-29. Plaintiff contends that Defendants' cross motion should be denied because it is untimely, it is moot because Plaintiff does not need to pierce the corporate veil, and Plaintiff can establish a genuine dispute of material fact. ECF No. 125 at 10-14. The Court agrees with Plaintiff on the first argument regarding timeliness
On December 20, 2018, the parties filed a joint request to modify the deadlines for dispositive motions. ECF No. 105. The District Judge granted the request, extending the dispositive motion deadline to January 4, 2019 and the response deadline to February 1, 2019. ECF No. 107. On February 1, 2019, Defendants filed a cross motion for partial summary judgment embedded in their opposition to Plaintiffs motion for partial summary judgment. ECF No. 116. "Rule 16(b) provides that once a scheduling order has been entered, it `may be modified only for good cause and with the judge's consent.'" Spangler v. Mourik, L.P., No. H-16-349, 2017 WL 3412117, at *3 (S.D. Tex. Aug. 8, 2017) (quoting Marathon Fin. Ins., Inc., RRG v. Ford Motor Co., 591 F.3d 458, 470 (5th Cir. 2009)). In addition, Rule 6(b)(1) permits post-deadline extensions only "on motion made after the time has expired if the party failed to act because of excusable neglect." FED. R. CIV. P. 6(b)(1) (emphasis added).
Defendants filed their cross motion for summary judgment nearly a month after the dispositive motion deadline without a motion seeking leave to amend the operative Scheduling Order or offering any explanation of good cause or excusable neglect for the delay. See Spangler, 2017 WL 3412117, at *4 (denying plaintiff's cross motion for summary judgment that was filed at the same time as opposition to defendant's motion for summary judgment three weeks beyond due date without moving to amend the Scheduling Order or showing good cause). Thus, Defendants' cross motion for summary judgment is untimely and should be denied.
The Court orders that Defendants' request for judicial notice, ECF No. 123, is
In addition, the Court recommends that:
Signed at Houston, Texas, on March 26, 2019.