Opinion
Civil Action No. 04-876, Section "K"(1).
August 12, 2004
ORDER
Before the Court is a Motion to Dismiss or Stay (Rec. Doc. No. 13) filed by defendant Christopher Dorsey. Having reviewed the pleadings, memoranda and the relevant case law, the Court GRANTS defendant's motion in part and finds that these proceedings should be stayed, for the reasons set forth below.
Background
These parties have previously come before this Court in litigation involving an identical set of operative facts. See Dorsey v. Money Mack Music, et al., No. Civ.A. 03-2022, 304 F. Supp.2d 858 (E.D. La. 2003). In that case, Christopher Dorsey ("Dorsey") originally filed suit in the Civil District Court for the Parish of Orleans on June 25, 2003, seeking preliminary and permanent injunctive relief and accounting on allegations of breach of contract and breach of fiduciary duties. Defendants, including Cash Money Records ("CMR"), removed the action to this Court on July 15, 2003, on the ground that plaintiff's allegations raised a federal question under the Copyright Act of 1976 ("the Act"), 17 U.S.C. § 101, et seq, and that plaintiff's state law claims were preempted under § 301 of the same and 28 U.S.C. § 1338(a). On December 1, 2003, this Court remanded the action to state court, where it is still pending. See Dorsey, 304 F. Supp.2d 858.
CMR filed the instant action on March 26, 2004, seeking "declaratory, injunctive and other relief" for rights allegedly arising under the Copyright Act. See Rec. Doc. No. 1. At issue are the Exclusive Recording Agreement (the "Recording Agreement") executed by the parties on November 1, 1998, and a Songwriter's Agreement (the "Songwriter's Agreement") executed by the parties on May 1, 1998. Under these agreements, which are also a part of the currently pending state court litigation, Dorsey allegedly assigned to CMR all right, title and interest in several sound recordings and their underlying musical compositions, including the albums entitled Chopper City in the Ghetto and Checkmate ("the CMR Albums"). On November 1, 2002, Dorsey and CMR ended their alleged contractual relationship via two Termination and Release Agreements (the "Termination Agreements").
CMR avers that it "owns all rights, title and interest (without limitation) in the statutory copyrights in and to the CMR albums," and that Dorsey's state court pleadings and "false representations made to the public generally" have "greatly and irreparably damaged CMR." Rec. Doc. No. 1, at 3-4. Accordingly, CMR requests: (1) a judgment declaring that it owns all statutory copyrights and other exclusive rights in and to the CMR Albums; (2) an order enjoining Dorsey or his agents from representing that he owns or has an interest in the statutory copyrights or other exclusive rights to the CMR Albums; (3) an order for an accounting of all profits that Dorsey has allegedly derived from his acts of copyright infringement; and (4) damages for losses resulting from Dorsey's alleged acts of copyright infringement. Id., at 6.
On July 1, 2004, defendant Dorsey filed the instant motion to dismiss or alternatively to stay this action, pending the outcome of the state court litigation. Dorsey argues that CMR is not entitled to declaratory judgment, because, "[w]hen a lawsuit involving closely-related issues is currently pending in state court, issuing a declaratory judgment in district court is the equivalent of issuing an injunction." Defendant's Motion to Dismiss or Stay, at 3 ( citing Travelers Insurance Co. v. Louisiana Farm Bureau, Inc., 996 F.2d 774, 776 (5th Cir. 1993)). Dorsey contends that federal courts should abstain from entertaining a declaratory judgment action when:
(1) A declaratory defendant has previously filed a cause of action in state court against the declaratory plaintiff;
(2) The state case involves the same issues as those involved in the federal case;
(3) The district court is prohibited from enjoining the state proceedings under the Anti-Injunction Act.
Defendant's Motion to Dismiss or Stay, at 3-4 ( citing Traveler's, 996 F.2d at 776; see also The Sherwin-Williams Company v. Holmes County, 343 F.3d 383 (5th Cir. 2003)).
Dorsey avers that all three of these criteria weigh against issuing a declaratory judgment. First, Dorsey filed suit in state court. Second, although the state case does not involve all the same legal issues as the federal case, both cases involve closely-related fact issues. Most importantly, CMR's copyright claims in its federal case depend upon the validity of the contracts in dispute in the state case. Dorsey contends therefore that a state court adjudication voiding the contracts would have a collateral estoppel effect on CMR's proof of copyright claims, and, conversely, any attempt to adjudicate CMR's copyright claim in federal court would necessarily involve a determination of the validity of the disputed contracts. Finally, Dorsey argues that any attempt to enjoin the state court proceedings is barred by the Anti-Injunction Act, 28 U.S.C. § 2283.
CMR replies in opposition that this Court has the authority to grant declaratory relief, because it has exclusive subject matter jurisdiction over claims arising under the Copyright Act. In oral argument, CMR stated that Dorsey had, in essence, slandered its title (copyright) as a result of the state court litigation. CMR also maintains that the pending state court litigation is not "parallel" to the instant complaint, because the former involves issues of state contract laws, and the latter involves issues arising under the federal Copyright Act.
Legal Standard:
"Since its inception, the Declaratory Judgment Act has been understood to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). Before Wilton, there was disagreement among the circuits as to whether the discretionary standard set forth in Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942), or the "exceptional circumstances" test developed in Colorado River Water Conservation Dist. V. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), governed a district court's decision to abstain from entertaining a declaratory judgment action during the pendency of parallel state court proceedings. In Wilton, the Supreme Court finally resolved this dissension:
Distinct features of the Declaratory Judgment Act, we believe, justify a standard vesting district courts with greater discretion in declaratory judgment actions than that permitted under the `exceptional circumstances' test of Colorado River and Moses H. Cone. . . . The statute's textual commitment to discretion, and the breadth of leeway we have always understood it to suggest, distinguish the declaratory judgment context from other areas of the law in which concepts of discretion surface.515 U.S. at 286-87. Thus, the Court explained,
Consistent with the nonobligatory nature of the remedy, a district court is authorized, in the sound exercise of its discretion, to stay or to dismiss an action seeking a declaratory judgment before trial or after all arguments have drawn to a close. In the declaratory judgment context, the normal principal that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration.Id., at 288.
In St. Paul Ins. Co. v. Trejo, 39 F.3d 585 (5th Cir. 1994), the United States Court of Appeals for the Fifth Circuit identified seven nonexclusive factors to guide a district court's exercise of discretion to accept or decline jurisdiction over a declaratory judgment action. These are:
(1) whether there is a pending state action in which all of the matters in controversy may be fully litigated;
(2) whether the plaintiff filed suit in anticipation of a lawsuit filed by the defendant;
(3) whether the plaintiff engaged in forum shopping in bringing the suit;
(4) whether possible inequities in allowing the declaratory plaintiff to gain precedence in time or to change forums exists;
(5) whether the federal court is a convenient forum for the parties and witnesses;
(6) whether retaining the lawsuit in federal court would serve the purposes of judicial economy; and
(7) whether the federal court is being called on to construe a state judicial decree involving the same parties and entered by the court before whom the parallel state suit between the same parties is pending.Id. at 590-91. Every circuit has a similar test. See e.g., Sherwin-Williams Co. v. Holmes County, et al., 343 F.3d 383, 390-91 (5th Cir. 2003) (discussing the factors used in each circuit's formulation of this test). Other factors that courts have considered include the inconvenience and burden to the litigants of traveling to the federal forum, and any inequitable conduct by the party seeking declaratory judgment. Charles Alan Wright, et al., Federal Practice and Procedure § 2758 (3d ed. 1998). Additionally, "[t]he courts properly decline relief if the declaratory-judgment procedure, and the federal forum, is being used for `procedural fencing' or `in a race for res judicata.'" Id. ( citing Odeco Oil Gas Co., Drilling Div. v. Bonnette, 4 F.3d 401 (5th Cir. 1993)).
In Sherwin-Williams, the Fifth Circuit reviewed the dismissal of an action by plaintiff for declaratory judgment as to certain issues of liability to the Mississippi school districts and counties named as defendants for the cost of lead paint abatement. Although the suits were originally brought in state court, they were eventually removed to federal court, and no state court cases were pending when the district court declined to exercise its jurisdiction over the declaratory judgment action. Nevertheless, in its discussion of the first of the seven Trejo factors, the Court found that the absence of a pending state case was not dispositive. Id. at 394. The Court stated that
a per se rule requiring a district court to hear a declaratory judgment action is inconsistent with the discretionary Brillhart and Wilton standard. . . . The lack of a pending parallel state proceeding should not automatically require a district court to decide a declaratory judgment action, just as the presence of a related state proceeding does not automatically require a district court to dismiss a federal declaratory judgment action.Id. The Court further explained that "[i]f there is a pending related state proceeding but it is not `parallel' because it does not involve all the same parties or issues, the federal district court properly considers the extent of similarity between the pending state court and federal court cases in deciding which court should decide the dispute, rather than relying on a per se rule." Id. at note 5. Other authorities have similarly explained that in deciding whether to abstain from a declaratory judgment action pending state proceedings, the real question for the court is which action "will most fully serve the needs and convenience of the parties and provide a comprehensive solution of the general conflict." Wright, et al., supra § 2758.
In the instant case, plaintiff avers that this Court should exercise jurisdiction over this declaratory judgment action, because it does not involve "all of the same issues" as the state court suit. Plaintiff's Opposition to Motion to Dismiss or Stay, at 10. However, as the Fifth Circuit has explained, the issues need not be strictly "parallel." Sherwin-Williams, 343 F.3d at 394. Rather, the court must consider "the extent of similarity between the pending state court and federal court cases in deciding which court should decide the dispute, rather than relying on a per se rule." Id.
Plaintiff also contends that this Court has the authority to grant declaratory relief because this action arises under the copyright laws, which are under the exclusive jurisdiction of federal districts courts. Sherwin-Williams also involved the presence of federal questions in the declaratory judgment action. In that case, appellees argued that despite these federal law issues, the case primarily involved issues of state tort law, and that a declaratory judgment suit involving a mixture of federal and state law issues, Where state law issues predominate, should be dismissed. Id. at 395. Neither Brillhart nor Wilton involved federal law issues in their respective declaratory judgment actions, and the Fifth Circuit had not previously recognized this as one of the Trejo factors.
In the absence of binding precedent, the Sherwin-Williams Court examined cases from the Eighth Circuit and the Second Circuit, which "held that a district court should consider the presence of federal questions when deciding whether to dismiss a declaratory judgment suit." Id. See Verizon Communications, Inc. v. Inverizon Int'l, Inc., 295 F.3d 870 (8th Cir. 2002); Youell v. Exxon Corp., 74 F.3d 373 (2d Cir. 1996). However, the Fifth Circuit found these cases distinguishable, in some respects, from Sherwin-Williams. In Verizon, for example, the federal Lanham Act was the "gravamen" of the federal complaint, whereas in Sherwin-Williams, both the federal law issues and state tort law issues were important to the outcome of the case. Sherwin-Williams, 343 F.3d at 396. In Youell, the facts raised novel issues of federal admiralty law; the question of statutory preemption in Sherwin-Williams, by contrast, was not novel. Id. The Court concluded that "[t]he presence of federal law questions, their relationship to state law questions, the ability of the federal court to resolve state law issues, and the ability of a state court to resolve the federal law issues are important to deciding whether a state or federal court should be the one to decide the issues raised in the federal court declaratory judgment action." Id. In short, the presence of federal law questions was added to the list of Trejo factors, but it was not, in itself, dispositive.
The case at bar is similarly distinguishable from the federal question cases cited in Sherwin-Williams. Plaintiff's federal copyright claims are founded upon disputed contracts with defendant, and a declaration of copyright ownership would necessarily involve an adjudication of the validity of those contracts, which are controlled by state law, not federal law. The Fifth Circuit made an analogous distinction in Goodman v. Lee, 815 F.2d 1030 (5th Cir. 1987). In Goodman, the Fifth Circuit distinguished plaintiff-appellant Goodman's copyright claim from the three cases relied upon by the district court, Rotardier v. Entertainment Co. Music Group, 518 F. Supp. 919 (S.D.N.Y. 1981); Keith v. Scruggs, 507 F. Supp. 968 (S.D.N.Y. 1981); and Harrington v. Mure, 186 F. Supp. 655 (S.D.N.Y. 1960):
The Rotardier, Keith, and Harrington cases concerned ownership disputes arising from contractual agreements between the parties. In Rotardier, for example, the plaintiff assigned the copyrights for a musical score to the defendant with the understanding that if certain conditions were not met, the copyrights would be reassigned back to the plaintiff. A dispute arose, and Rotardier filed suit in federal district court. The court dismissed the complaint, stating that "[t]he controlling issue involves a dispute over title to a copyright arising from an alleged breach of contract. The determination of this issue is dependant upon principles of common law and equity, not the federal copyright laws." 518 F. Supp., at 921. Thus, the issue involved a contract, the subject of which was a copyright. Goodman's claim, in clear contrast, involves the validity of the copyright itself under the Copyright Act.Goodman, 815 F.2d at 1032.
This case, too, involves certain contracts, the subject of which are copyrights. Those contracts are already being adjudicated in the pending state court proceeding. Consistent with the Wilton standard and the well-settled law of the Fifth Circuit, the Court has considered the extent of similarity between these state court and federal court cases, and the ability of each court to resolve issues of state and federal law. And although these cases are not strictly "parallel," both require an adjudication of the validity of the disputed contracts, under state law. The Court thus finds that considerations of practicality and wise judicial administration counsel the exercise of its discretion to stay this proceeding until those state law issues are properly adjudicated. Accordingly,
IT IS ORDERED that defendant's Motion to Dismiss or Stay (Rec. Doc. No. 13) these proceedings is hereby DENIED with respect to dismissal, and GRANTED with respect to a stay.
IT IS FURTHER ORDERED that this matter be STAYED pending resolution of the aforementioned state court proceeding in the Civil District Court for the Parish of Orleans.