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Royal Printex, Inc. v. LA Printex Industries, Inc.

United States District Court, C.D. California

July 24, 2015

Royal Printex, Inc.
v.
LA Printex Industries, Inc. et al.

CIVIL MINUTES - GENERAL

STEPHEN V. WILSON, District Judge.

Proceedings: IN CHAMBERS ORDER GRANTING IN PART Plaintiff's Motion to Remand and for Sanctions [16]

I. INTRODUCTION

This action arises from a dispute regarding the existence and breach of a license agreement. On February 4, 2015, plaintiff Royal Printex, Inc. ("Royal") sued defendants L.A. Printex Industries, Inc. ("LAP"), Jae S. Nah ("Nah"), and Moon Gie Jung ("Jung"), in California State Court. Plaintiff asserts claims for: (1) breach of contract; (2) declaratory relief determining the existence of a valid and binding license agreement and the parties' respective rights and duties in connection therewith; (3) fraud; and (4) negligent misrepresentation. (Dkt. 1.) On March 19, 2015, Defendants removed the case to this Court, asserting that this Court has jurisdiction because the cases arises under copyright law. (Dkt. 1.)

Currently before the Court is Plaintiff's motion to remand the case and for sanctions. (Dkt. 16.) For the reasons discussed below, the Court GRANTS IN PART the motion and REMANDS the case, but DENIES the motion for sanctions.

II. FACTUAL BACKGROUND

LAP formerly operated textile printing machinery. (Compl. ¶ 2.) In 2010, LAP allegedly dismantled and liquidated its printing machinery, and instead contracted with their party printers to print its designs onto blank fabric. ( Id. ) Jung is allegedly LAP's former general manager. (Compl. ¶ 11.)

During 2010, LAP allegedly commissioned Royal to print textiles for it. (Compl. ¶ 12.) Royal asserts that it invoiced LAP for each printing job after the job was completed. (Compl. ¶ 12.) Royal asserts that LAP failed to pay Royal's invoices. (Compl. ¶¶ 12-13.) In November 2010, Jung allegedly negotiated an oral, nonexclusive copyright license agreement as an alternate payment arrangement with Royal. (Compl. ¶ 14.) The terms of the alleged agreement purportedly dictate that: (1) LAP would provide Royal with computer aided design ("CAD") files for all of its copyright designs; (2) LAP would receive $.10 per yard of LAP's designs printed by Royal, which would first be applied toward LAP's unpaid balance; and (3) once the balance was paid off, "Royal would continue to use the LAP designs at the royalty rate of $0.10 per yard and issue payment to LAP in accordance therewith." (Compl. ¶ 15.)

Allegedly pursuant to the license agreement, Jung delivered to Royal a hard drive with CAD files of all of LAP's designs. (Compl. ¶ 16.) Over the next few years, Royal periodically used LAP's designs, keeping track of its usage in a spread sheet. (Compl. ¶ 17.) However, Royal purportedly did not print enough yardage with LAP's designs to pay off LAP's outstanding balance. (Compl. ¶¶ 17, 20.)

On February 7, 2014, LAP allegedly repudiated the license agreement and denied having any agreement with Royal regarding the use of LAP's designs. (Compl. ¶ 21.) Royal claims that it asked Jung to confirm the existence of the oral licensing agreement between LAP and Royal, and asserts that he refused to acknowledge its existence. (Compl. ¶ 22.)

III. LEGAL STANDARD

Removal jurisdiction is generally disfavored. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). But it is proper if the case could have been filed in federal court originally. 28 U.S.C. § 1441. A removing defendant bears the burden of showing that remand is proper. Calicraft Distributors, LLC v. Castro, No. CV 15-01041 BRO AJW, 2015 WL 1789014, at *3 (C.D. Cal. Apr. 17, 2015).

Federal courts have exclusive jurisdiction over "any civil action arising under any Act of Congress relating to... copyrights." Scholastic Entm't, Inc. v. Fox Entm't Grp., Inc., 336 F.3d 982, 985 (9th Cir. 2003) (alteration in original) (quoting 28 U.S.C. § 1338). However, "just because a case involves a copyright does not mean that federal subject matter jurisdiction exists." Id.; see also Topolos v. Caldewey, 698 F.2d 991, 993 (9th Cir. 1983) ("For instance, federal courts do not have jurisdiction over a suit on a contract simply because a copyright is the subject matter of the contract."). Thus, federal courts have consistently found that jurisdiction under § 1338 does not exist where a case involving a copyright presents only questions of contract law. See id. at 986; Dolch v. United California Bank, 702 F.2d 178, 180 (9th Cir.1983). Nevertheless, this "balancing act" between federal and state interests "is further complicated by the interdependence of contract and copyright claims, which can camouflage the genuine issues to be resolved." Scholastic Entm't, 336 F.3d at 986.

The Ninth Circuit applies the test for determining whether a case arises under copyright law set forth in T.B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir.1964). Under this test, a case arises under copyright law within the meaning of § 1338 if: "(1) the complaint asks for a remedy expressly granted by the Copyright Act; (2) the complaint requires an interpretation of the Copyright Act; or (3) federal principles should control the claims." Scholastic Entm't, 336 F.3d at 986. This test is "essentially a reiteration of the well-pleaded ...


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