United States District Court, C.D. California
Justin Sterling, Attorneys Present for Plaintiffs.
Jeff Katosfsky, Lindsay Singer, Attorneys Present for Defendants.
CIVIL MINUTES - GENERAL
CHRISTINA A. SNYDER, District Judge.
Proceedings: PLAINTIFF'S MOTION TO DISMISS COUNTERCLAIMS (ECF No. 48, filed October 17, 2014)
DEFENDANT'S MOTION TO DISMISS THE SECOND AMENDED COMPLAINT (ECF No. 54, filed October 20, 2014)
On February 6, 2014, plaintiff Dr. Alisa Wolf ("Wolf") filed this lawsuit against defendants Joseph "Joey" Travolta, doing business as Inclusion Films ("Travolta"), Inclusion Wear, LLC ("Inclusion Wear"), Little Documentary Films, LLC, and Does 1 through 100 (collectively "defendants" or "counterclaimants"). ECF No. 1. Wolf filed the operative Second Amended Complaint ("SAC") on September 29, 2014. ECF No. 39. Also on September 29, 2014, defendants filed an Amended Answer to the First Amended Complaint and Counterclaims ("CC"). ECF No. 40. The parties' dispute concerns the authorship and ownership of a filmmaking course designed for students with autism. The SAC asserts claims for (1) copyright infringement, (2) unfair competition, (3) interference with economic relationship, (4) breach of fiduciary duty, (5) misappropriation of trade secrets, and (6) conversion. See generally SAC. Defendants have counterclaimed for (1) intentional interference with prospective economic relations and (2) negligent interference with economic relations. See generally CC.
On October 17, 2014, Wolf filed a motion to dismiss the counterclaims. ECF No. 48. Defendants filed an opposition on November 3, 2014, ECF No. 64, and Wolf filed a reply on November 10, 2014, ECF No. 70. On October 20, 2014, defendants filed a motion to dismiss the SAC. ECF No. 54. Wolf filed an opposition on November 3, 2014, ECF No. 63, and defendant filed a reply on November 10, 2014, ECF No. 73. On November 24, 2014, the Court held a hearing at which counsel for the parties appeared. For the reasons stated below, the Court grants in part and denies in part defendants' motion, and grants Wolf's motion.
II. LEGAL STANDARD
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a complaint or counterclaim. "While a [pleading] attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a [claimant's] obligation to provide the grounds' of his entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). "[F]actual allegations must be enough to raise a right to relief above the speculative level." Id.
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all material allegations in the pleading, as well as all reasonable inferences to be drawn from them. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). The pleading must be read in the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). However, "[i]n keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a [pleading], they must be supported by factual allegations." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950 (2009); Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) ("[F]or a [pleading] to survive a motion to dismiss, the non-conclusory factual content, ' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.") (citing Twombly and Iqbal); Sprewell, 266 F.3d at 988; W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Ultimately, "[d]etermining whether a [pleading] states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 129 S.Ct. at 1950.
Unless a court converts a Rule 12(b)(6) motion into a motion for summary judgment, a court cannot consider material outside of the counterclaim (e.g., facts presented in briefs, affidavits, or discovery materials). In re American Cont'l Corp./Lincoln Sav. & Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev'd on other grounds sub nom Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court may, however, consider exhibits submitted with or alleged in the counterclaim and matters that may be judicially noticed pursuant to Federal Rule of Evidence 201. In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999); Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).
As a general rule, leave to amend should be freely granted. Fed.R.Civ.P. 15(a). However, leave to amend may be denied when "the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency." Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).
III. DEFENDANTS' MOTION TO DISMISS THE SAC
1. Allegations of the Second Amended Complaint
Wolf's SAC alleges the following facts, the truth of which the Court assumes for purposes of the motion to dismiss the SAC only. Wolf is the founder, CEO, and Executive Director of Actors for Autism ("AFA"), a non-profit engaged in the provision of educational and vocational training programs for young persons on the autistic spectrum or with other special needs. SAC ¶¶ 3, 11. These programs include a course in filmmaking offered to persons with developmental disabilities. Id. ¶ 10. AFA is also in the business of securing "vendorization" agreements with regional centers and contracts with other entities to offer its curriculum and courses. Id.
Wolf contends that she authored a filmmaking course curriculum entitled "Practical Film Vocational Program" ("PFVP"), which she designed to comply with the "strict guidelines of Title 17 of the California Code of Regulations that contain the regulations pertaining to the Development of Developmental Services and the vendorization process for regional centers." Id. ¶ 16. Wolf asserts that she "wrote the curriculum on her own without the contribution of others." Id. ¶ 17. Wolf registered a version of the PFVP with the U.S. Copyright Office in 2006, id. ¶ 18, and offers courses based on this curriculum through AFA, id. ¶ 19.
Travolta served as President of AFA, and also served on AFA's Board of Directors. Id. ¶ 12. Wolf asserts that Travolta's position of President was a figurehead position in which "his duties consisted of promoting the organization in the entertainment community" and performing other duties given to him by Wolf, the organization's Executive Director. Id. ¶ 13. According to Wolf, Travolta breached fiduciary duties to AFA and Wolf by persuading entities with which AFA and Wolf were negotiating to change the name on contracts from AFA to Travolta, and to make payments out to Travolta personally. Id. ¶ 15. Wolf specifically alleges that Travolta persuaded Dr. Vivian David at the San Mateo-based Stepping Stones Center for Autistic Spectrum Disorders to change the name on a summer camp contract, and also convinced Oakland University to change the name on a contract. Id. ¶ 52. Travolta was asked to resign from his position as President of AFA based on these alleged breaches of fiduciary duty, and for stealing vendorization agreements and contracts negotiated by AFA and Wolf. Id. ¶ 20. Wolf alleges that Travolta took AFA equipment with him when he resigned from AFA, including computers that had Wolf's curriculum stored on them, and has refused to return AFA property despite repeated requests. Id. ¶¶ 21, 78. Wolf contends that Travolta stole this curriculum to secure more contracts and vendorization agreements "that would otherwise be negotiated with AFA." Id. ¶ 21.
Wolf asserts that defendants continue to use "an infringing curriculum which is substantially similar" to Wolf's curriculum, and retain Wolf's intellectual property and AFA equipment. Id. ¶¶ 22, 23. Wolf alleges that defendants have copied large portions of her curriculum, including lengthy verbatim passges, into their Inclusion Films program guide. Id. ¶ 33. Wolf asserts that defendants have used this infringing material to secure contracts with sponsoring agencies including Futures Explored, Oakland University, and Kern County Regional Center. Id. Wolf also asserts that defendants have made false representation to the public about Wolf for the purpose of diverting business from Wolf and AFA to defendants. Id. ¶ 42. Wolf contends that, due to defendants' infringement and misrepresentations, organizations serving the autism community "have come to believe that AFA copied its program" from defendants, or that Wolf and AFA "support, associate, and/or promote the use" of defendants' infringing curriculum. Id. ¶ 34.
2. Versions of the Curriculum Submitted by Wolf
Defendants' motion to dismiss the copyright infringement claim is based in large part on Wolf's alleged failure to identify and produce the document for which she obtained a copyright registration. The First Amended Complaint ("FAC") attached a curriculum entitled "Actors for Autism Practical Film Program Proposal, " dated September 5, 2006, and containing a copyright symbol next to "Alisa Wolf, M.Ed." See ECF No. 9 Ex. A ("Version 1"). This document is fifteen pages long. Id. The FAC also attached a screen shot of a United States Copyright Office web page reflecting a copyright registration (number TX0006421919) in Wolf's name for material with a publication date of May 10, 2006. Id. Ex. B. In their opposition to Wolf's motion for a preliminary injunction, defendants pointed out that the date of Version 1 of the curriculum postdated that of the copyright registration. See ECF No. 27 at 2.
In her reply to the opposition to her motion for a preliminary injunction, Wolf submitted a document titled "Practical Film Vocational Program for People with Developmental Disabilities" and dated May 10, 2006-the same date as that on the copyright registration. See ECF No. 28-1 Ex. B ("Version 2"). Although the highlighted passages that Wolf claims defendants copied are almost exactly the same, the May 10 curriculum is only five pages long. Id.
Wolf attached to the SAC the same Version 2 of the curriculum. See SAC Ex. A. The SAC also stated that a "Litigation Statement Form has been submitted to the U.S. Copyright Office for a certified copy of deposit which will be further amended to this Complaint once received." SAC ¶ 16. The SAC asserted the same copyright registration number (TX 6-421-919) as that in the FAC. Id. ¶ 18.
On November 10, 2014, Wolf requested judicial notice of a U.S. Copyright Office Certificate of Registration for number TX 6-421-919. See ECF No. 71. Wolf also requested judicial notice of a U.S. Copyright Office Certified Copy of Deposit marked with the same registration number. See ECF No. 72. The PFVP contained in this Certificate of Deposit ("Version 3") is approximately four pages long, is dated May 10, 2006, and appears to have a substantially identical cover page to the previously submitted May 10, 2006 document. Id. The next page of Version 3 contains a "Mission Statement" section that is identical to that contained in Version 2, an "Entrance Criteria" section that is identical to that contained in Version 2, and a "Referral Process" section that is significantly different from the equivalent section in Version 2. Id. The third page of Version 3 includes an "Exit Criteria" section that includes one paragraph that is identical to an equivalent paragraph in Version 2, but also includes two additional paragraphs. Id. The last page of Version 3 contains ...