(6) engagement in unfair business practices by Biafra and Mordam
Records; and (7) injunctive relief to preserve Decay Music's
exclusive rights to exploit the Catalog against Biafra and
Defendant Mordam counter-claimed in interpleader for resolution
of to whom it should pay royalties: Decay Music or Alternative
Tentacles. Mordam distributes records at wholesale for
Alternative Tentacles pursuant to an oral agreement with Biafra.
Defendant Biafra removed the case to federal court on the basis
that the complaint, in particular counts one and seven, pled a
claim arising under the Copyright Act. As one of his affirmative
defenses, Biafra contended that plaintiffs' claims are barred in
whole or in part by Biafra's rights as an author in the sound and
video recordings and in the underlying musical compositions.
According to Biafra, he retained individual title to his rights
in the works and licensed his rights to Alternative Tentacles.
Biafra claimed that Decay Music merely acts as an administrator
for the purposes of distributing royalties and that the
partnership has no rights in the underlying works.
Biafra counterclaimed with ten causes of action: (1)
declaratory judgment that he is an author with rights in the
works that have not been assigned or licensed and which he is
free to exercise; (2) breach of fiduciary duty; (3) breach of
contract; (4) conversion; (5) defamation; (6) intentional
inducement of breach of contract; (7) intentional interference
with prospective economic advantage; (8) conspiracy; (9) unfair
competition under California Business and Professions Code §
17200; and (10) injunctive relief under the Copyright Act.
Plaintiffs moved to have the case remanded to state court for
lack of federal subject matter jurisdiction. The Court agreed and
remanded the case to state court on grounds that co-authors
cannot pursue claims of infringement against one another or each
other's licensees as a matter of law and thus the only claims
present were matters of state law. Plaintiffs now move for costs
and attorney's fees incurred with respect to removal and remand.
B. Legal Standard
At its discretion, the court may order "payment of just costs
and any actual expenses, including attorney fees, incurred as a
result of the removal." 28 U.S.C. § 1447(c); see Moore v.
Permanente Medical Group, Inc., 981 F.2d 443, 446 (9th Cir.
1992). In deciding whether or not to award costs and attorney's
fees, the Court should consider whether removal was improper,
looking both at the nature of the removal and of the remand. See
id. The purpose of an award is not to punish the removing party
but instead to reimburse the party who sought remand for
litigation costs incurred as a result of unnecessary removal.
See id. at 447. The availability of costs and attorney fees
replaces the former requirement of posting of a bond; however, it
serves the same purpose — to discourage improper removal. See
28 U.S.C. § 1447, commentary.
An award of costs and fees pursuant to section 1447(c) is a
"collateral matter over which a court normally retains
jurisdiction even after being divested of jurisdiction on the
merits." Moore, 981 F.2d at 445.
Plaintiffs contend that the Court's finding that remand was
appropriate for lack of subject matter jurisdiction justifies an
award of costs and attorney fees without further consideration.
Should the Court disagree, plaintiffs also argue that defendant's
removal motion was meritless and thus plaintiffs should be
reimbursed for their expenses incurred in seeking remand.
Plaintiffs base their theory that they are entitled to an award
of costs without further consideration where the Court decides to
remand for lack of subject matter jurisdiction on a decision by
the Second Circuit. See Morgan Guar. Trust Co. v.
Republic of Palau, 971 F.2d 917, 923 (2d Cir. 1992). However,
the Ninth Circuit has held that the Court should give some
consideration to the merits of the removal action in deciding
whether or not to award costs and fees. See Moore, 981 F.2d at
446-47. Defendant argues that the standard the Court should apply
is a determination of whether or not defendant's arguments were
colorable. This argument is based on pre-amendment precedent that
held that a finding of bad faith was required before attorney
fees could be awarded. See McCann v. Alaska Airlines, Inc.
758 F. Supp. 559, 567 (N.D.Cal. 1991) (citing to Schmitt v. Insurance
Co. of North America, 845 F.2d 1546 (9th Cir. 1988)). Pursuant
to Ninth Circuit authority under section 1447(c), as amended, bad
faith is no longer the standard; instead, the Court should
consider whether removal was improper and whether reimbursement
of expenses is an appropriate remedy for the incursion of an
unnecessary expense. See Moore, 981 F.2d at 446-47. Thus the
Court finds some consideration of the merits of defendant's
decision to remove the action to federal court is required.
Plaintiffs contend that removal was not warranted because none
of defendant's bases for removal were colorable. First,
plaintiffs argue that defendant should have known that a federal
defense could not confer subject matter jurisdiction under the
well-pleaded complaint rule. Second, plaintiffs claim defendant
had no basis upon which to believe that the state law contract
claims were preempted by the Copyright Act because hundreds of
decision have stated that matters of title and ownership are
issues of state law. Third, plaintiffs contend that Biafra's
attempt to characterize plaintiffs first and seventh causes of
action as actions for infringement was illogical because
plaintiffs are barred by law from suing a co-author for
infringement. In addition, plaintiffs urge the Court to consider
the fact that Biafra had a fiduciary obligation to preserve the
partnership assets of Decay Music. According to plaintiffs, the
removal effected a wasting of partnership assets.
Plaintiffs seek an award of $12,160.50 which is comprised of
the following amounts: $9,763 in attorney's fees incurred in
opposing removal; $197.50 in costs, which includes telephone
charges, copy costs, travel costs, computer research, and other
expenses; and $2,200 in attorney's fees incurred in preparing the
motion for costs and fees.
In response to plaintiffs' arguments on the merits, defendant
argues that its removal was proper. Defendant contends that
removal was based on colorable arguments in a complex area of law
with uncertain authorities.
First, defendant claims that the matter of federal preemption
over claims pled as state actions that involve materials
protected under the Copyright Act is a murky and unsettled area
of the law and therefore removal on this basis was not improper.
However, any review of the relevant authorities should have
persuaded defendant that although preemption doctrine may be
murky with respect to certain contract-related issues, such as
termination, (1) title and ownership disputes over copyrights are
matters for determination under state common and contract law,
and (2) preemption with respect to a defense against those state
claims is irrelevant to the determination of federal subject
matter jurisdiction. See Vestron, Inc. v. Home Box Office,
Inc., 839 F.2d 1380, 1381 (9th Cir. 1988) (affirmative defenses
are irrelevant to a determination of subject matter
jurisdiction); Oddo v. Ries, 743 F.2d 630, 632 (1984)
(determinations of ownership of a copyright and claims for
accounting are matters of state law); Dolch v. United Cal.
Bank, 702 F.2d 178, 180 (9th Cir. 1983) (contractual matters
with respect to ownership of copyrights are for the state
courts). Thus defendant should have known that he could not
prevail on removal under these theories.
Defendant's argument at removal that plaintiffs' seventh claim
actually pled a claim for copyright infringement did require the
Court to consider whether the claim was a contract claim or an
infringement claim. As written, the claim sought injunctive
relief but did not explicitly invoke any contractual basis on
which it had a right to exclude defendant from using the works in
question. Such a claim is reminiscent of one seeking relief from
copyright infringement. The Court concluded, however, that
because the parties are co-authors and because plaintiff sought
relief in state court plaintiff was merely seeking injunctive
relief as an adjunct to the state contract claims rather than
using a state law remedy to obtain relief equivalent to that
available under the Copyright Act.
It would have been possible for the Court to retain
jurisdiction over the seventh cause of action had it decided it
was a disguised claim for infringement. However, had the Court
retained jurisdiction over the seventh cause of action, the Court
then would have had before it a claim of infringement against a
co-author, which as discussed in the Court's prior order is a
cause of action that is barred as a matter of law. Thus the
Court's next course of action would have been to dismiss the
seventh cause of action for failure to state a claim upon which
relief could be granted and to remand the remaining state claims
for lack of subject matter jurisdiction. In either case, the
result would have been remand of the case for lack of subject
matter jurisdiction. Thus under any interpretation of the seventh
cause of action, removal would not have resulted in this Court
hearing the case. Removal therefore generated an unnecessary
expense for plaintiffs.
Plaintiffs have made the further argument that defendant's
decision to remove was an act of forum shopping because defendant
plans to file a separate federal copyright action. In doing so
plaintiffs ignore the fact that if, as defendant claims is true,
defendant is sole author of some of the works in question and has
not assigned his rights in those works to plaintiffs in writing,
then defendant has a legitimate federal copyright action for
infringement against plaintiffs with respect to their efforts to
exercise control over those works. It is not forum shopping to
threaten to bring an action in federal court which one is
entitled to bring.
Although the Court does not find the forum shopping argument to
be a persuasive basis for awarding costs and fees, the facts that
(1) subject matter jurisdiction would not be available over this
case under any interpretation of the seventh cause of action and
(2) defendant's motion raised issues that were well settled in
case law provide the Court with a satisfactory basis upon which
to conclude that defendant's decision to remove was improper and
resulted in unnecessary expense to plaintiffs. The fact that
partnership assets were wasted in the process is an additional
factor that weighs in favor of an award of costs and fees.
For the foregoing reasons, the Court GRANTS the motion and
hereby awards costs and attorney's fees to plaintiffs in the
amount of $12,160.50.
IT IS SO ORDERED.
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