BILL DIODATO PHOTOGRAPHY LLC, Plaintiff, -against- AVON PRODUCTS, INC., Defendant.
12 Civ. 847(RWS)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
September 21, 2012
Sweet, D.J.
OPINION
Attorney for Plaintiff
LEBOWITZ LAW OFFICES LLC
777 Third Avenue, 35th Floor
New York, NY 10017
By: Marc Andrew Lebowitz, Esq.
Keith M. Getz, Esq.
Attorney for Defendant
FROSS ZELNICK LEHRMAN & ZISSU, P.C.
866 United Nations Plaza
New York, NY 10004
By: Roger L. Zissu, Esq.
Alexander Lloyd Greenberg, Esq.
Defendant Avon Products (“Avon” or the “Defendant“) has moved pursuant to
Prior Proceedings
A detailed recitation of the prior proceedings and the facts alleged in Plaintiff‘s complaint is provided in the August 7 Opinion. See Bill Diodato Photography LLC v. Avon Prods., No. 12 Civ. 847, 2012 WL 3240428, at *1-2 (S.D.N.Y. Aug. 7, 2012). Familiarity with those prior proceedings and alleged facts is assumed.
On February 2, 2012, Plaintiff filed its complaint in the Southern District of New York alleging five causes of action, including (1) copyright infringement, (2) breach of contract, (3) account stated with respect to invoices sent between October 2004 and October 2008, (4) account stated with respect to an invoice sent in September 2008 and (5) conversion. On April 4, 2012, Defendant filed a motion to dismiss all five counts pursuant to
The Applicable Standard
Defendant requests reconsideration of the August 7 Opinion pursuant to
The reason for the rule confining reconsideration to matters that were “overlooked” is to “ensure the finality of decisions and to prevent the practice of a losing party examining a decision and then plugging the gaps of a lost
Defendant‘s Motion To Reconsider Is Granted
According to Defendant, the August 7 Opinion erred in allowing Plaintiff‘s claim for breach of contract and Plaintiff‘s two claims for account stated to proceed. Defendant contends that had the August 7 Opinion analyzed the agreements at issue in the litigation rather than rely solely on Plaintiff‘s allegations in the complaint, these claims would have been dismissed. Because the August 7 Opinion failed to consider agreements that were properly before the Court at the motion to dismiss stage, Defendant‘s motion for reconsideration is granted.
Defendant‘s motion to reconsider is based on 19 invoices Defendant submitted to the Court in connection with its motion to dismiss. These 19 invoices were attached to two separate declarations. Seven invoices were attached to a declaration from Suzann Frobose, an Avon employee, whose declaration stated that Plaintiff provided photography services for Defendant‘s catalogs from 2001 to 2006 and that
Defendant‘s motion to reconsider is granted because the August 7 Opinion overlooked the agreements presented to the Court and inappropriately relied on Plaintiff‘s allegations rather than the contracts’ text. It is well-settled that a court cannot consider documents outside the pleadings on a Rule 12(b)(6) motion to dismiss unless the documents are incorporated by reference in the complaint or
“In the event that a plaintiff alleges a claim based on a written instrument, as is the case here, the court may consider such an instrument in ruling on a Rule 12(b)(6) motion even if it was not attached to the complaint and made a part thereof[.]” Rapoport v. Asia Elec. Holding Co., Inc., 88 F. Supp. 2d 179, 184 (S.D.N.Y. 2000) (quoting Sazerac Co., Inc. v. Falk, 861 F. Supp. 253, 257 (S.D.N.Y. 1994)). If the documents contradict the allegations of a plaintiff‘s complaint, the documents control and the Court need not accept as true the allegations in the complaint. Id. In its briefing concerning the motion to dismiss, Defendant made reference to the invoices Plaintiff sent Defendant and attached them as exhibits to declarations submitted in support of the briefing. Notwithstanding these submissions, the August 7 Opinion‘s discussion of Plaintiff‘s claims for breach
Review Of The Agreements Reveals That Plaintiff Has Pled A Valid Cause Of Action For Breach Of Contract
According to Defendant, the August 7 Opinion erroneously failed to dismiss Plaintiff‘s breach of contract claim. Defendant contends that the Court should have relied on the agreements now before the Court to find that Plaintiff failed to plead an enforceable agreement under New York law. Defendant also contends that the Court should have followed precedent cited by Defendant in the motion to dismiss pleadings and held that Plaintiff‘s breach of contract claim is preempted by the Copyright Act.
1. Plaintiff Has Stated A Valid Cause Of Action For Breach Of Contract
As was noted in the August 7 Opinion, “[u]nder New York law, an action for breach of contract requires proof of (1) a contract; (2) the performance of the contract by one
By reusing Diodato LLC‘s copyrighted images, AVON breached the one (1) year limited usage license set for the in the Original Invoices.
By using Diodato LLC‘s copyrighted images in international catalog campaigns, AVON breached the scope of use set forth in the Original Invoices, which limited the scope of use to United States catalogs.
Diodato LLC has, at all times, fully performed all of its obligations to AVON under the Original Invoices.
By virtue of AVON‘s breach, Diodato LLC has been damaged in an amount to be determined at trial.
Compl. ¶¶ 49-52. As such, Plaintiff‘s breach of contract claim is premised on two wrongs Defendant allegedly committed in violation of the parties’ agreements: (1) Defendant allegedly used Plaintiff‘s images beyond the one-year license term, and (2) Defendant allegedly used Plaintiff‘s images outside the United States. An examination of the agreements
With respect to the second alleged wrongdoing, namely that Defendant violated an agreement by using Plaintiff‘s photographs in catalogs outside the United States, the agreements before the Court contain no provisions concerning the geographic scope of the license afforded to Defendant. Furthermore, Plaintiff‘s opposition to Defendant‘s motion to reconsider fails to answer Defendant‘s contention that there was no provision limiting Defendant‘s use of the images to catalogs in the United States. Accordingly, Plaintiff has failed to state a valid cause of action for breach of contract under the theory that Defendant used Plaintiff‘s images in a geographic region the parties’ agreements prohibited.
However, with respect to the first alleged wrongdoing, Plaintiff has provided a sufficient basis upon
Defendant rejects this contract theory, contending that the language quoted above is an unenforceable “agreement to agree.” “[A] mere agreement to agree, in which a material term is left for future negotiations, is unenforceable.” Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105, 109, 436 N.Y.S.2d 247, 417 N.E.2d 541 (1981) (citation omitted). Defendant adopts the position that, because the agreements before the Court only require that the fee for use beyond the one-year license term be “negotiated,” the contract is without the material terms necessary to be enforceable. “To create a binding contract, there must be a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms.” Express Indus. & Terminal Corp. v. N.Y. State Dep‘t of Transp., 93 N.Y.2d 584, 589, 693 N.Y.S.2d 857, 715 N.E.2d 1050 (1999) (citation omitted). There must be “an objective meeting of the minds sufficient to give rise to a binding and enforceable contract.” Id. Reviewing the agreements before the Court reveals that the parties’ intended the license term to be one year, and there is a clear expression that, if Defendant wished to use the images following that one-year period, the parties would be obligated to negotiate a fee to be paid to Plaintiff prior to Defendant‘s continued use of the images. The agreements Defendant cites contain no information suggesting that the parties’ did not have the intent to form a contract, as the agreements provide Plaintiff with a fee, Defendant with a one-year license to use Plaintiff‘s images and various conditions
2. Plaintiff‘s Breach Of Contract Claim Is Not Preempted By The Copyright Claim
As was noted in the August 7 Opinion, the Copyright Act provides for preemption of state law claims that are interrelated with copyright claims. “The Copyright Act exclusively governs a claim when: (1) the particular work to which the claim is being applied falls within the type of works protected by the Copyright Act . . . and (2) the claim seeks to vindicate legal or equitable rights that are equivalent to one of the bundle of exclusive rights already protected by copyright law[.]” Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 305 (2d Cir. 2004). The first requirement “is satisfied if the claim applies to a work of authorship fixed in a tangible medium of expression and falling within the ambit of one of the categories of
Whether a breach of contract claim is preempted by a copyright claim represents a difficult question, as “[c]ourts in this district have continued to disagree on how to analyze preemption of breach of contract claims.” BanxCorp v. Costco Wholesale Corp., 723 F. Supp. 2d 596, 614 (S.D.N.Y. 2010). In Canal+ Image UK Ltd. v. Lutvak, 773 F. Supp. 2d 419, 441-445 (S.D.N.Y. 2011), the Honorable Richard J. Holwell provides a detailed discussion of how courts in this District have addressed the issue. Some courts, following Architectronics, Inc. v. Control Systems, Inc., 935 F. Supp. 425 (S.D.N.Y. 1996), have held that “the ‘extra element’ that saves a contract claim from preemption is the promise itself.” Id. at 439; see also Canal+ Image UK, 773 F. Supp. 2d at 442-443 (collecting cases). Other courts, following American Movie Classics Company v. Turner Entertainment Co., 922 F. Supp. 926 (S.D.N.Y. 1996), have held that “a breach of contract claim is preempted if it is merely based on allegations that the defendant did something that the copyright laws reserve exclusively to the plaintiff (such as unauthorized reproduction, performance, distribution or display).” Id. at 931; see also Canal+ Image UK, 773 F. Supp. 2d at 443 (collecting cases). “The crux of the dispute between the parties, therefore, is whether the promise inherent in any agreement, by itself, provides the extra element necessary to make a breach of contract claim qualitatively different from a copyright infringement claim.” Canal+ Image UK, 773 F. Supp. 2d at 443 (quoting eScholar, LLC v. Otis Educational Sys., Inc., 387 F. Supp. 2d 329, 332 (S.D.N.Y. 2005)).
In support of the proposition that the breach of contract claim is preempted, Defendant contends that there is no agreement between the parties for Defendant to pay Plaintiff for use beyond the one-year license term, and, as such, after the one-year licenses expired, the parties were “strangers” to one another and any post-termination reuse by
A number of our sister circuits have accordingly concluded that at least some contract claims involving the subject matter of copyright do not contest rights that are the equivalent of rights under the Copyright Act, and thus are not preempted. [Citations to other circuits’ case law and treatise omitted.] Of course, preemption cannot be avoided simply be labeling a claim “breach of contract.” A plaintiff must actually allege the elements of an enforceable contract (whether express or implied-in-fact), including offer, acceptance, and consideration, in addition to adequately alleging the defendant‘s breach of the contract.
. . .
Here the Complaint specifically alleges that the contract includes by implication a promise to pay for the use of Forest Park‘s idea. See Complaint ¶ 11 (alleging that it was understood when Forest Park met with Sepiol that they were “pitching . . . ideas with the object of persuading USA Network to purchase those ideas for commercial development) (emphasis added); id. ¶ 25 (“USA Network voluntarily accepted Plaintiffs’ ideas knowing full well that Plaintiffs had submitted those ideas in confidence and for economic gain, and with the clear expectation of payment in the event those ideas were utilized by USA Network . . .“) (emphasis added). The alleged contract does not simply require USA Network to honor Forest Park‘s exclusive rights under the Copyright Act (assuming the material at issue to be copyrightable); it requires USA Network to pay for the use of Forest Park‘s ideas. A claim for breach of a contract including a promise to pay is qualitatively different from a suit to vindicate a right included in the Copyright Act and is not subject to preemption.
Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424, 431-33 (2d Cir. 2012). A review of the agreements before the Court reveals that, similar to the contract at issue in Forest Park where the agreement does “not simply require USA Network to honor Forest Park‘s exclusive rights under the Copyright Act . . .; it requires USA Network to pay for the use of Forest Park‘s ideas,” Forest Park, 683 F.3d at 432-33, the agreements in the present action do not simply require Defendant to honor Plaintiff‘s rights under the Copyright Act, but rather obligate Defendant to negotiate a fee prior to use of the images beyond the one-year licensing term. A claim that Defendant failed to honor its agreement
Upon Reconsideration, Plaintiff‘s Claims For Account Stated Are Dismissed
In addition to requesting reconsideration concerning the breach of contract claim, Defendant has also moved to reconsider the August 7 Opinion‘s denial of Defendant‘s motion to dismiss Plaintiff‘s claims for account stated. With respect to Plaintiff‘s two claims for account stated, the August 7 Opinion held:
An account stated claim requires “an agreement between the parties to an account based upon prior transactions between them . . . .” LeBoeuf, Lamb, Greene & MacRae, L.L.P. v. Worsham, 185 F.3d 61, 64 (2d Cir. 1999) (internal quotation marks and citations omitted). “To state a claim for an account stated, the plaintiff must plead that: (1) an account was presented; (2) it was accepted as correct; and (3) debtor promised to pay the amount stated.” IMG Fragrance Brands, LLC v. Houbigant, Inc., 679 F. Supp. 2d 395, 411 (S.D.N.Y. 2009) (internal quotation marks and citations omitted). An agreement to pay the account presented “may be implied if a party receiving a statement of account keeps it without objecting to it within a reasonable time or if the debtor makes partial payment.” Worsham, 185 F.3d at 64 (internal quotation marks and citations omitted). “[U]nless fraud, mistake or other equitable
considerations are shown, the party who receives a statement of account must examine the statement and make all necessary objections in order to avoid implication of an agreement.” Feingold v. Chrismas, 818 F. Supp. 2d 763, 768-69 (S.D.N.Y. 2011) (citing Kramer, Levin, Nessen, Kamin & Frankel v. Aronoff, 638 F. Supp. 714, 719 (S.D.N.Y. 1986)). According to Defendant, the fact that invoices were sent illustrates that the parties had not come to an agreement regarding the appropriate amount to be charged. Defendant contends that the parties here were no longer engaged in an ongoing business relationship, that Plaintiff was merely demanding payment and that these demands for payment were not met with silence but rather led to meetings by the parties and their counsel to review the facts and negotiate a resolution. To support its position, Defendant cites the 1916 New York Court of Appeals case Newburger-Morris Co. v. Talcott, in which then-Judge Cardozo stated, “There is no doubt that an account stated may sometimes result from the retention of accounts current without objection. But the rest does not always follow. It varies with the circumstances that surround the submission of the statements, and those circumstances include, of course, the relation between the parties.” 219 N.Y. 505, 511, 114 N.E. 846 (1916).
As noted above, in evaluating a motion to dismiss, the issue “is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.” Villager Pond, 56 F.3d at 378. Here, the Complaint alleges that Plaintiff sent various invoices to Defendant and that Defendant did not object to those invoices. As such, the Complaint pleads sufficient facts to establish a claim for account stated, and Defendant‘s motion to dismiss the two account stated counts of the Complaint is denied.
Diodato, 2012 WL 3240428, at *10-11. According to Defendant, the issue of whether each of the invoices constitutes an account stated is a question of law, not a question of fact.
Defendant, citing the standard relied upon in the August 7 Opinion, see Diodato, 2012 WL 3240428, at *10 (citing IMG Fragrance Brands, 679 F. Supp. 2d at 411), contends that the August 7 Opinion inappropriately assessed whether Plaintiff adequately alleged that “an account was presented.” Again, citing cases relied upon by the August 7 Opinion, Defendant contends that “[a]n account stated claim requires an agreement between the parties to an account based upon prior transactions between them[.]” Diodato, 2012 WL 3240428, at *10 (quoting LeBoeuf, 185 F.3d at 64). However, as noted above, Defendant contends that any ongoing agreements between the parties terminated with the expiration of the last original one-year license for the use of Plaintiff‘s photographs. According to Defendant, because the agreements submitted to the Court on the motion to dismiss did not
According to Plaintiff, the 2008 and 2010 invoices at issue in Plaintiff‘s account stated claims are contracts between Plaintiff and Defendant under which Defendant, in advance, promised to pay Plaintiff an additional usage fee for additional usage. Plaintiff rejects the contention that these invoices were communications demanding monetary relief for Plaintiff‘s copyright claims. Instead, according to Plaintiff, these invoices were Plaintiff‘s demand that
Notwithstanding Plaintiff‘s contentions, the allegations in the complaint, when reviewed in conjunction with the agreements before the Court, are insufficient to establish that the parties “agreed on a balance of indebtedness.” Newburger-Morris, 114 N.E. at 848. The invoices Plaintiff describes and attaches to the complaint are “for unauthorized uses of its images.” Compl. ¶¶ 23, 25. The complaint further alleges that “the particular unauthorized uses identified in the 2008 Infringement Invoices and 2010 Infringement Invoices are part of Avon‘s pattern and practice of using of plaintiff‘s photographic images in excess of the one year usage license.” Compl. ¶ 26. As described above, the agreements before the Court establish that “[i]f catalog images are to be used for longer than 1 year, a fee must be negotiated prior to use.” Because the fee must be “negotiated,” it cannot be stated that the parties agreed upon what that fee would be. Accordingly, a review of the agreements before the Court establish the lack of “an
Conclusion
Based on the conclusions set forth above, Defendant‘s motion to reconsider is granted. Upon reconsideration, Plaintiff‘s claim for breach of contract remains a validly pled cause of action, but Plaintiff‘s claims for account stated are dismissed.
It is so ordered.
New York, NY
September 21, 2012
ROBERT W. SWEET
U.S.D.J.