CARL J. BARBIER, District Judge.
Before the Court are Defendants' Motion to Dismiss pursuant to Rule 12(b)(6), or alternatively, Rule 12(b)(1) or 12(b)(3)
This controversy between Plaintiff, Sinners and Saints, LLC ("SS LLC") and Defendants, Noire Blanc Films, LLC ("Noire Blanc") and Anchor Bay Entertainment, LLC ("Anchor Bay") (collectively "Defendants") arises out of the filming and production of the motion picture Sinners and Saints in various locations throughout the United States, including Louisiana and California. On April 3, 2012, SS LLC filed the instant action against Noire Blanc and Anchor Bay. (Rec. Doc. 1) Plaintiff served Anchor Bay on April 5, 2012, and has not yet served Noire Blanc.
Plaintiff, SS LLC, alleges that it is a Louisiana limited liability company ("LLC") with its principal place of business in Louisiana, that Noire Blanc is a California LLC with its principal place of business in California, and that Anchor Bay is a Delaware LLC with its principal place of business in Michigan. (Supp. Compl., Rec. Doc. 32, p. 2, ¶¶ 4-6) SS LLC alleges that it "is, and at all times relevant to the matters alleged ... was engaged in the business of creating, producing, distributing, and marketing motion pictures intended for commercial exhibition and/or broadcast through various means." (Supp. Compl., Rec. Doc. 32, p. 2, ¶ 7) SS LLC further alleges that in 2008, it was "engaged to provide production services and production management for the motion picture entitled Sinners and Saints." (Supp. Compl., Rec. Doc. 32, p. 2, ¶ 8) SS LLC claims that it employed many of the above-the-line and below-the-line personnel and many of the actors and actresses who appeared in Sinners and Saints, including but not limited to, Tom Banks, the Director of Photography, Mark Clark, the Producer, and over thirty Sinners and Saints cast members. (Supp. Compl., Rec. Doc. 32, p. 2, ¶ 9) Plaintiff alleges that each of these personnel executed contracts for the work and/or services provided and that pursuant to agreements with these personnel, SS LLC obtained the exclusive rights to use each employee's name and likeness in connection with their work in Sinners and Saints and became the rightful owner of the results and proceeds of its employees' work. (Supp. Compl., Rec. Doc. 32, p. 2, ¶ 11)
SS LLC asserts that on June 7, 2012,
SS LLC alleges that Noire Blanc knowingly and willfully incorporated the results and proceeds of SS LLC's employees' work in Sinners and Saints without authorization or written transfer of SS LLC's ownership of the results and proceeds of its employees' work and has infringed copyright to SS LLC's work by selling illegal and unauthorized copies of Sinners and Saints, containing the results and proceeds of SS LLC's employees' work. (Supp. Compl., Rec. Doc. 32, p. 4, ¶ 14) SS LLC further alleges that without obtaining SS LLC's consent, Noire Blanc and Anchor Bay "entered into an agreement whereby Anchor Bay agreed to be the exclusive manufacturer, distributor, and marketer of Sinners and Saints" and that they are "currently manufacturing, distributing, and/or delivering Sinners and Saints through various other mediums." (Supp. Compl., Rec. Doc. 32, p. 4, 16) SS LLC alleges that these activities are directly competitive with SS LLC's commercial plans and activities. According to SS LLC, through these activities, Noire Blanc and Anchor Bay engaged in copyright infringement. (Supp. Compl., Rec. Doc. 32, p. 6, ¶¶ 23-26) SS LLC also contends that Noire Blanc's alleged misappropriation of the results and proceeds of SS LLC's employees' work constituted conversion under Louisiana law. (Supp. Compl., Rec. Doc. 32, p. 7, ¶¶ 27-31) SS LLC also contends that Defendants' alleged conduct constitutes unlawful, unfair, and/or fraudulent business practice in violation of Louisiana law.
SS LLC contends that as a direct result of Noire Blanc and Anchor Bay's activities in manufacturing, distributing, and marketing Sinners and Saints, it has suffered and will suffer damage in the form of: (1) destruction of the commercial value of its property, (2) lost past and future revenues and profits, (3) injury to its business goodwill and its relationships with current and prospective customers, and (4) lost past and future opportunities to expand its business goodwill. (Supp. Compl., Rec. Doc. 32, pp. 5-6, ¶¶ 19-22, 25) SS LLC contends that it is entitled to the following relief: (1) an order enjoining Defendants, their officers, agents, employees, and all other persons acting in concert with them from manufacturing, advertising, producing, distributing, and placing Sinners and Saints on the market,
On May 17, 2012, Noire Blanc and Anchor Bay filed their first motion to dismiss, arguing, inter alia, that SS LLC's copyright claims should be dismissed on the grounds that SS LLC had failed to allege registration of a copyright—a prerequisite to a copyright infringement claim.
Defendants, Noire Blanc and Anchor Bay make the following arguments in their motion to dismiss:
First, Defendants argue that SS LLC's supplemental complaint should be dismissed pursuant to either Rule 12(b)(1) for lack of subject matter jurisdiction or Rule 12(b)(3) for improper venue, because SS LLC and Noire Blanc executed a Production Services Agreement ("PSA") that contains an arbitration provision under which they agreed to arbitrate, rather than litigate their disputes.
(PSA, Ex. 1 to Def.'s Mot. to Dismiss, Rec. Doc. 34-1, p. 12, ¶ 21) (emphasis added).
The PSA further provides:
(PSA, Ex. 1 to Def.'s Mot. to Dismiss, Rec. Doc. 34-1, p. 12, ¶ 19)
Based on the foregoing, Defendants contend: (1) that SS LLC entered a valid PSA, (2) that all of SS LLC's claims in its supplemental complaint "arise out of or relate to," the PSA, and (3) that SS LLC is thus required to submit the claims raised in the instant lawsuit to arbitration.
In its opposition, SS LLC contends it is a Louisiana LLC that was formed on November 24, 2008 to provide production financing, production services, and production management for the Louisiana filming of Sinners and Saints. In support of its claim that it was formed on November 24, 2008, SS LLC has attached certified copies of all documents on file with the Louisiana Secretary of State, including SS LLC's Articles of Organization and Initial Report.
Based on the foregoing, SS LLC argues that it is not a party to the PSA and that there is thus no valid agreement requiring SS LLC to arbitrate the claims it asserts against Noire Blanc and Anchor Bay in the instant lawsuit. First, SS LLC argues that when Mark Clark "allegedly executed" the PSA on Plaintiff's behalf on January 20, 2008, prior to Plaintiff's formation as an LLC on November 24, 2008, his signature was ineffective to bind SS LLC to the PSA and merely bound Mark Clark personally. Second, SS LLC argues that Clark was never a managing member of SS LLC and, therefore, lacked authority to bind SS LLC to the PSA. Third, SS LLC argues that the PSA is void as to SS LLC, because it constituted a transfer of all or substantially all of SS LLC's assets effectuated without the approval of a majority of SS LLC's two members, as required under Louisiana law. SS LLC also contends that the claims it has asserted in this lawsuit are outside the scope of the arbitration agreement, because they do not arise out of or relate in any way to the PSA that Clark executed with Noire Blanc.
In response to Defendants' 12(b)(6) arguments, SS LLC asserts in its opposition that registration of a copyright is not a prerequisite to receive copyright protection, and that by filing an application to register its copyright after commencing the instant copyright infringement suit, it has satisfied the registration requirement in § 441(a) regardless of whether the registration is ultimately granted or refused. SS LLC also contends that it continues to enjoy the full protection of copyright related to the results and proceeds of its employees' work, because no valid agreement has been executed on behalf of SS LLC transferring its copyright claim to the results and proceeds of its employees' work. SS LLC contends that its claim for conversion is founded on supplemental jurisdiction, because it is directly related to the copyright infringement claim, which provides original jurisdiction. However, SS LLC also asserts that it is asserting copyright infringement and conversion claims in the alternative, and that in the event that the court finds a copyright infringement claim does not lie, the Court still has diversity jurisdiction over the suit. SS LLC also asserts that its state law claim for unfair trade practices are not preempted. SS LLC contends that the Fifth Circuit has developed a test to analyze pre-emption claims based on the Copyright
SS LLC asserts that, under this test, its claim under the Louisiana Unfair Trade Practices Act ("LUTPA") is not preempted, because to recover under LUTPA, a plaintiff must prove "fraud, misrepresentation, or other unethical conduct," which constitutes an "extra element," differentiating a copyright claim from a LUTPA claim. SS LLC also argues that its claim for an accounting is not preempted. SS LLC argues that "[b]ecause it has alleged that Defendants are violating copyright by selling copies of [Sinners and Saints] containing the results and proceeds of [SS LLC's] employee's [sic] work, [SS LLC] is entitled to discover whatever profits the infringers have obtained through an accounting." (SS LLC's Opp., Rec. Doc. 35, p. 14) SS LLC contends that under the Copyright Act, it is entitled to recover the actual damages it suffered as a result of the infringement and any profits the infringer obtained through the infringement. SS LLC contends that the purpose of the accounting is to determine the exact amount of money Defendants received by "exploiting" Sinners and Saints. SS LLC argues that the Court may combine this form of equitable relief with a judgment. Finally, SS LLC requests that the Court grant it an opportunity to amend its complaint to overcome any pleading defect(s) if the Court grants Defendants' motion.
In their reply, Defendants argue that there is no dispute that the terms of the PSA require SS LLC's claims to be arbitrated rather than litigated. They contend that the only dispute is whether the PSA is valid and that the only evidence on this point is the PSA itself and Clark's affidavit. Defendants contend that the PSA states, in precise language, that it is "dated as of January 20, 2008," while Clark's affidavit states that the PSA was signed in November of 2010, and back-dated because the PSA was meant to address actions that the parties had already taken with respect to Sinners and Saints prior to the date the parties executed the PSA. Defendants assert that there is no evidence rebutting Clark's assertion in his affidavit that he signed the PSA in November of 2010. Defendants also contend that Clark, as a member of SS LLC, was authorized to sign the PSA in November of 2010, because SS LLC's articles of organization neither limit the authority of members to bind the LLC nor state that the LLC will be manager-managed. Defendants contend that because SS LLC admits that Clark is a member, Clark can manage SS LLC and was authorized to sign the PSA. Defendants contend, citing multiple Fifth Circuit authorities, that challenges to the validity of a contract as a whole are subject to arbitration while challenges to the validity of an arbitration clause in a contract are to be decided by the courts. According to Defendants, SS LLC's claim that the PSA is invalid, because SS LLC was not in existence when Clark signed the PSA, is an attack on the PSA as a whole, not the arbitration clause in the PSA. Therefore, Defendants contend that SS LLC's claims must be arbitrated rather than litigated.
Defendants further contend that Plaintiff's copyright infringement claim should
As a preliminary matter, Defendants styled their motion to dismiss based on the arbitration clause in the PSA as a Rule 12(b)(1) or Rule 12(b)(3) motion to dismiss. This raises the threshold question whether a motion to dismiss based on an arbitration clause should properly be considered as a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, or as a Rule 12(b)(3) motion to dismiss for improper venue.
Circuits are split on the issue of whether Rule 12(b)(1) or 12(b)(3) is the proper motion for seeking dismissal based on a forum-selection or arbitration clause. Lim v. Offshore Specialty Fabricators, Inc., 404 F.3d 898, 902 (5th Cir.2005). The Fifth Circuit has not definitively decided whether Rule 12(b)(1) or Rule 12(b)(3) is the proper vehicle for a motion to dismiss based on an arbitration clause. Noble Drilling Servs., Inc. v. Certex USA, Inc., 620 F.3d 469, 472, n. 3 (5th Cir.2010) (noting that "[o]ur Court has not previously definitively decided whether Rule 12(b)(1) or Rule 12(b)(3) is the proper rule for motions to dismiss based on an arbitration or forum-selection clause") (alterations added) (citations omitted). Nevertheless, the Fifth Circuit has noted that arbitration clauses are indistinguishable from forum-selection
Both parties have submitted evidence beyond the complaint in connection with Defendants' motion. On a Rule 12(b)(3) motion to dismiss for improper venue, the court may consider, in addition to the complaint and its proper attachments, other evidence in the record. Ambraco, Inc. v. Bossclip B.V., 570 F.3d 233, 238 (5th Cir.2009) (citations omitted). "On a Rule 12(b)(3) motion to dismiss for improper venue, the court must accept as true all allegations in the complaint and resolve all conflicts in favor of the plaintiff." Braspetro Oil Servs. Co. v. Modec (USA), Inc., 240 Fed.Appx. 612, 615 (5th Cir.2007) (citing Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1138 (9th Cir. 2004)).
To determine whether parties should be compelled to arbitrate a dispute, courts perform a two-step inquiry. Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th Cir.2003). "`First, the court must determine whether the parties agreed to arbitrate the dispute.'" Id. (quoting R.M. Perez & Assocs., Inc. v. Welch, 960 F.2d 534, 538 (5th Cir.1992)). In making this initial inquiry, the court must determine: "`(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement.'" Will-Drill Res., Inc., 352 F.3d at 214 (quoting Am. Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 538 (5th Cir.2003)). "In determining whether an agreement to arbitrate exists, [courts] apply `ordinary contract principles.'" Will-Drill Res., Inc., 352 F.3d at 214 (quoting Fleetwood Enters. Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002)). It is "well settled that where the dispute at issue concerns contract formation, the dispute is generally for courts to decide." Granite Rock Co. v. Int'l Brotherhood of Teamsters, et al., ___ U.S. ___, ___, 130 S.Ct. 2847, 2847, 177 L.Ed.2d 567 (2010) (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). If the court determines that the parties agreed to arbitrate the dispute, the Court then considers the second step of the inquiry, "`whether any federal statute or policy renders the claims nonarbitrable.'" Will-Drill Res., Inc., 352 F.3d at 214 (quoting R.M. Perez & Assocs., Inc., 960 F.2d at 538). "Although there is a strong federal policy favoring arbitration, `this federal policy favoring arbitration does not apply
The Defendants argue that all of SS LLC's claims must be submitted to arbitration, because SS LLC and Noire Blanc executed a valid and enforceable PSA that requires SS LLC to submit all of its claims to arbitration in California. They further argue, relying on Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), Brown v. Pacific Life Ins. Co., 462 F.3d 384 (5th Cir.2006), and Primerica Life Ins. Co. v. Brown, 304 F.3d 469 (5th Cir.2002), that "any argument" against the validity of the PSA is an attack against the entire contract between SS LLC and Noire Blanc, not just on the arbitration clause in the PSA and, as such, must be submitted to arbitration. Defendants assert that these authorities stand for the proposition that the Federal Arbitration Act requires all attacks on the validity of the entire contract between the parties to be submitted to the arbitrator, while permitting the federal courts to decide only specific attacks to the validity of the arbitration agreement. Defendants characterize SS LLC's various claims as a claim that the entire PSA between SS LLC and Noire Blanc is void for "lack of capacity to contract," and assert that any doubt about whether the PSA is binding on SS LLC is for the arbitrator, rather than this Court, to decide. Defendants also point out, citing Sherer v. Green Tree Servicing LLC, 548 F.3d 379, 381 (5th Cir.2008), that there is a federal policy favoring arbitration and that Plaintiff only raises claims "arising out of or relating to" the PSA, which, pursuant to the language of the arbitration clause, must be raised in arbitration rather than litigation.
The Court is not convinced. Although Defendants are correct that there is a federal policy favoring arbitration, that policy does not bear on the threshold question of whether the parties agreed to arbitrate the dispute. Moreover, the Court finds there is an issue in this case as to whether an agreement to arbitrate exists between SS LLC and Noire Blanc. SS LLC is asserting that it is neither a party to nor bound by the PSA that contains the arbitration clause, because its agent— Clark—acted outside of the scope of his authority in signing it. SS LLC's argument is based on the following uncontroverted allegations that Garcia makes in his affidavit: (1) that SS LLC was a member-managed LLC, (2) that he and Clark were the only two members of SS LLC, (3) that the results and proceeds of the work performed by SS LLC employees constituted substantially all of SS LLC's assets, (4) that Clark never consulted him about the PSA he signed with Noire Blanc which purports to divest SS LLC of all of its rights in the results and proceeds of its' employees work, and (5) that he did not sign any resolution authorizing the transfer of the results and proceeds of SS LLC's right to the results and proceeds of its employees' work. Based on this, SS LLC contends that it is not a party to the PSA and that there is no valid agreement requiring SS LLC to arbitrate the claims it asserts against Noire Blanc and Anchor Bay in this lawsuit, because the PSA constituted a transfer of all or substantially all of SS LLC's assets effectuated without the approval of a majority of SS LLC's two members, as required under Louisiana law. Under Will-Drill Resources, SS LLC's claim is properly characterized as a challenge to the very existence of an arbitration agreement that is properly decided by this Court, not the arbitrator:
Will-Drill Resources, 352 F.3d at 218 (citing Jolley v. Welch, 904 F.2d 988, 993-94 (5th Cir.1990); Sphere Drake Ins. Ltd. v. All Am. Ins. Co., 256 F.3d 587 (7th Cir. 2001); Sandvik AB v. Advent Int'l Corp., 220 F.3d 99 (3d Cir.2000); Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136 (9th Cir.1991); Snowden v. CheckPoint Check Cashing, 290 F.3d 631, 637 (4th Cir.2002)) (emphasis added).
In the very next sentence of its opinion, the Will-Drill Resources court distinguished Primerica Life Ins. Co., and Prima Paint Corp. on the ground that they involved situations where the parties formed an agreement which contains an arbitration clause and later attempted to contest its continued validity or enforcement:
Will-Drill Resources, 352 F.3d at 218 (citing Primerica Life Ins. Co. v. Brown, 304 F.3d 469 (5th Cir.2002); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)).
In this case, there is an unresolved threshold question about whether SS LLC and Noire Blanc ever formed an agreement containing an arbitration clause. To decide this threshold question, the Court must determine whether Clark exceeded the scope of his authority when he executed the PSA on behalf of SS LLC. Since SS LLC is a Louisiana LLC, the Court looks to Louisiana law in determining the extent of Clark's authority to bind SS LLC to the PSA. Under Louisiana law, in a member-managed LLC, each member is a mandatory of the LLC for all matters in the ordinary course of its business,
