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Nureau Ink, LLC v. Zomba Recording

November 29, 2006

NUREAU INK, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, AND ANTHONY C.WILLIAMS, II, AN INDIVIDUAL, PLAINTIFFS,
v.
ZOMBA RECORDING, LLC, A DELAWARE LIMITED LIABILITY COMPANY, FORMERLY KNOWN AS ZOMBA RECORDING CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Hon. Napoleon A. Jones, Jr. United States District Judge

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

Before the Court is Defendant Zomba Recording, LLC's ("Defendant") Motion to Dismiss or Stay Action. [Doc. No. 18.] Plaintiffs Nureau Ink, LLC and Anthony C. Williams II ("Plaintiffs") have filed an Opposition, and Defendant has filed a Reply. [Doc. Nos. 27, 32.] Additionally, Plaintiffs and Defendant have both filed Motions for Leave to File Supplemental Declarations. [Doc. Nos. 51, 54.] For the reasons discussed below, this Court GRANTS Defendant's Motion to Dismiss for improper venue.

Background

San Diego-based Plaintiff Williams is an accomplished professional singer who owns Mo'Soule Steppyn Records, Inc ("MSSR"). (See Def.'s Mem. of P. and A. at 2.) Plaintiff Williams and MSSR entered into a recording contract with Rescue Records of Chula Vista in 1997. (See Pls.' Decl. of Anthony C. Williams at 1.) Rescue Records released Plaintiff Williams' debut album, Pronounced-Toenay ("the Album"). Due to the success of the Album, Plaintiff Williams and MSSR entered into a separate contract with Tommy Boy Music to aid in the distribution and promotion of Plaintiff Williams' music. (See Pls.' Opp'n at 2.) Zomba Recording Corporation, the predecessor to Defendant, eventually acquired the Rescue Records and Tommy Boy Music contracts. (See Pls.' Opp'n at 2; Def.'s Mem. of P. and A. at 4.) Zomba Recording and Defendant are based in New York, have their principal places of business in New York, and maintain all books and business activities in New York. (See Def.'s Decl. of Daniel B. Zucker at 1.)

In 2000, Zomba Recording, Plaintiff Williams, and MSSR entered into a new recording contract ("Zomba contract").*fn1 (See id.) The Zomba contract contains the following forum selection clause:

Any action or proceeding arising under this Agreement shall be brought exclusively in the state or Federal courts located within the State of New York, County of New York, and the parties hereto irrevocably consent to the in personam jurisdiction and venue of such courts for any and all such actions or proceedings, and waive any right to seek to transfer or dismiss any said action or proceeding on the grounds of lack of personal jurisdiction, improper venue, or inconvenient forum. (Def.'s Ex. 1 at 12-13.) In 2004, Defendant indisputably succeeded to Zomba Recording's interest to the parties' contract. (See Def.'s Mem. of P. and A. at 5; Def.'s Decl. of Daniel B. Zucker at 1.) At around the same time, Plaintiff Williams formed the recording company Nureau Ink, LLC. (See Pls.' Opp'n at 3.) Nureau Ink is not related to MSSR, has not succeeded in interest to the Zomba contract with Defendant, and has not participated in that agreement. See id.)

In February of 2006, in accordance with the forum selection clause, Defendant filed an action in the Supreme Court of the State of New York against Plaintiff Williams and MSSR, seeking declaratory relief and damages ("the New York action"). (See Def.'s Mem. of P. and A. at 6.) Defendant did not begin to serve the summons and complaint until April 27, 2006. (See On April 24, 2006, Plaintiff Williams and Nureau Ink, but not MSSR, filed the instant action in this Court. (See id. at 7); [Doc. No. 1.] In the Complaint, Plaintiffs request a judicial determination that the contract between Plaintiffs and Defendant is unenforceable and allege that Defendant has engaged in unfair business practices. (Pl's Compl. at 11-12.) In addition, Plaintiff Williams alone, without Nureau Ink, alleges false advertising, breach of contract, and constructive trust and accounting. (Id. at 12-16.) After filing the Complaint in this Court, Plaintiffs also commenced an administrative claim with the California Labor & Workforce Development Agency. (See Pls.' Opp'n. at 4.)

In response to Plaintiffs' actions, Defendant filed this Motion to Dismiss or Stay Action in this Court. [Doc. No. 18]. Plaintiffs have filed an Opposition, and Defendant has followed with a Reply. [Doc. No. 27, 32.] On October 26, 2006, Defendant moved ex parte for leave to file the Supplemental Declaration of Jonathan D. Davis indicating that on October 23, 2006, the Supreme Court of the State of New York denied Plaintiff Williams and MSSR's motion to dismiss Defendant's case in New York. (See Suppl. Decl. of Jonathan D. Davis); [Doc. No. 51.] In addition, the New York court issued an Order to Show Cause and Temporary Restraining Order, enjoining Plaintiff Williams and MSSR from advancing their case in California, and set a hearing for arguments as to why a preliminary injunction should not be granted. (See Suppl. Decl. of Jonathan D. Davis at 7.) Accordingly, Defendant's ex parte request for leave to supplement the record with this Supplemental Declaration IS GRANTED.

On November 15, 2006, Plaintiffs filed a Motion for Leave to File a Supplemental Request for Judicial Notice. [Doc. No. 54.] The Court GRANTS Plaintiff's Motion and TAKES judicial notice that the New York court found that with respect to the injunction "[s]ince Nureau, In[k], LLC. is not a party before [the court], [the injunction] obviously does not cover Nureau, In[k], LLC." (See Pls.' Suppl. Req. Judicial Notice at 10.)

Legal Standard

The Court of Appeals for the Ninth Circuit has held that a Federal Rule of Civil Procedure Rule 12(b)(3) motion to dismiss for improper venue is the proper procedural vehicle for motions to dismiss premised upon the enforcement of a forum selection clause. See Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). Under Rule 12(b)(3), a court need not accept the pleadings as true, and may consider facts outside the pleadings to determine if the forum selection clause should be enforced. See id. This interpretation of Rule 12(b)(3) is consistent with the Supreme Court's standard for resolving forum selection clause cases. See id.; see generally Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991).

In ruling on a Rule 12(b)(3) motion, the court must draw all reasonable inferences and resolve all factual conflicts in favor of the party seeking to avoid enforcement of the clause. See Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1139 (9th Cir. 2004). These motions are typically made early in litigation when the record is undeveloped, and granting a Rule 12(b)(3) motion would prematurely terminate the case in the selected forum. See id. If the facts asserted by the non-moving party are sufficient to preclude enforcement of the forum selection clause, that party is entitled to remain in its chosen forum for suit unless and until the district court has resolved all material factual issues that are in genuine dispute. See id.

Discussion

Defendant requests that the Court dismiss the action and enforce the forum selection clause. (See Def.'s Mem. of P. and A. at 17.) In the alternative, Defendant requests the Court to stay this action or abstain pending the results from the New York action. (See id.)

Plaintiffs argue that this case must proceed in California because the forum selection clause does not apply to some of Plaintiffs' claims, and does not govern all parties necessary to the action. (See Pls.' Opp'n at 5-12.) Plaintiffs also contend that the clause itself contravenes California public policy, and that enforcement of the clause would deprive Plaintiffs of certain remedies available only in California. (See id. at 13, 17.) Even if the clause is enforceable, Plaintiffs contend that the case must be litigated in California because Nureau Ink is a necessary and indispensable party to the litigation, and is not subject to personal jurisdiction in New York. See id. at 11-12.)

The Forum Selection Clause

Plaintiffs assert that the Zomba contract: (1) does not govern Plaintiffs' claims relating to the Album, and (2) does not govern Nureau Ink, a party allegedly necessary to this action. (See Pls.' Opp'n at 5, 6, 11.) For the reasons set forth below, the Court FINDS that the forum ...


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