In Re McGraw-hill Global Educ. Holdings LLC
On a Petition for Writ of Mandamus from the United States District Court for the Eastern District of Pennsylvania Related to District Court No. 2-16-cv-06248 District Judge: The Honorable Cynthia M. Rufe
Argued March 21, 2018
Before: SMITH, Chief Judge, HARDIMAN, and ROTH, Circuit Judges.
(Filed: November 21, 2018)
Christopher P. Beall
Fox Rothschild
100 Park Avenue
17th Floor
New York, NY 10178
Michael Beylkin
Fox Rothschild
1225 17th Street
Denver, CO 80202
Beth L. Weisser
Fox Rothschild
2000 Market Street
[ARGUED]20th Floor
Philadelphia, PA 19103
Counsel for McGraw-Hill Global Education Holdings LLC and McGraw-Hill School Education Holdings LLC
Gregory Albright
Harmon Seidman Bruss & Kerr
485 Dorset Street
Cambria, CA 93428
Counsel for Bob Krist
Maurice Harmon [ARGUED]
Harmon & Seidman
11 Chestnut Street
New York, PA 18938
Counsel for Ed Kashi and Bob Krist
SMITH, Chief Judge.
These consolidated mandamus petitions require us to decide whether two professional photographers bringing separate copyright infringement actions are bound by a forum selection clause in contracts they did not sign. We conclude that the photographers are not bound because they are not intended beneficiaries of the agreements, nor are they closely related parties. Our conclusion means that one District Court got it right, and the other got it
I. Background
Ed Kashi and Bob Krist are professional photographers. Kashi resides in Montclair, New Jersey, while Krist resides in New Hope, Pennsylvania. To market their photographs, Kashi and Krist entered into representation agreements with Corbis Corporation, a stock photography agency. The agreements provided Corbis authority to sub-license the photographers’ works to third parties on a non-exclusive, fixed-duration basis. In exchange, Kashi and Krist received a percentage of the fees negotiated by Corbis. The fees were reported to the photographers in periodic royalty statements. The royalty statements listed each photograph licensed and the fees collected, but did not identify the product in which the photograph would be used or specify the scope of the license. In addition to the royalty statements, the photographers had the right to request an audit once a year of Corbis’ records with respect to their images.
The legal terms of the representation agreements were robust. Exemplar agreements in the record1 include assignment of rights to recover, as well as forum selection clauses. Paragraph 6, titled “Protection of Accepted Images,” reads:
Corbis, in its sole discretion and without obligation to do so, shall have full and complete authority to make and settle claims or to institute proceedings in Corbis’ or your name but at Corbis’ expense to recover damages for Accepted Images lost or damaged by customers or other parties and for the unauthorized use of Accepted Images. You shall provide reasonable assistance in Corbis’ efforts in
connection with such claims or proceedings. Any recovery, after payment of all costs and expenses including outside attorneys’ fees, shall be treated as Revenue and you shall receive the appropriate royalty, or 100% in the case of lost/damaged images. Following your notification, if Corbis declines to bring such a claim within sixty (60) days, we shall notify you, and you may bring actions in your own name at your own expense and retain all recoveries.
Krist App‘x 132 (emphasis added). A forum selection clause in paragraph 12.3, titled “Law,” reads:
This Agreement shall be governed by the laws of the State of New York, irrespective of its conflict of law rules. In any action arising out of this Agreement, you consent to personal jurisdiction and the exclusive venue of the state and federal courts sitting in New York City, New York.
MHE App‘x 308, 320, 332, 354; Krist App‘x 133.2
Each invoice incorporated by reference Corbis’ standard “Terms and Conditions,” which governed the transaction alongside the terms set forth in the PPAs. Both the Terms and Conditions and the PPAs included mandatory, exclusive forum selection clauses, with nearly identical language. Titled “Choice of Law / Jurisdiction / Attorneys’ Fees,” the clause reads in part:
Any dispute regarding this Agreement shall be governed by the laws of the State of New York, and by Titles 15, 17 and 35 of the U.S.C., as amended, and the parties agree to accept the exclusive jurisdiction of the state and federal courts located in New York, New York, regardless of conflicts of laws.
MHE App‘x 284 (2014 PPA); cf. id. at 237 (Terms and Conditions revised Nov. 19, 2001). The only material difference between the forum selection clauses in the PPAs and in the Terms and Conditions is that the PPAs specify “New York, New York” as the forum, id. at 284, while the Terms and Conditions specify “New York, USA,” id. at 237.3
In 2016 and 2017, respectively, Krist and Kashi each brought a copyright action against McGraw-Hill in the Eastern District of Pennsylvania. Krist and Kashi both allege that McGraw-Hill used their photographs beyond the terms of the Corbis licensure agreements, in violation of federal copyright law. The photographers allege a range of ways in which their photographs were used without permission, including exceeding the allowed number of publications printed, the geographic distribution area, the type of medium, and the time period for publication. In each proceeding, McGraw-Hill moved to transfer venue under
The Honorable Wendy Beetlestone, presiding over the Kashi action, denied the transfer motion. Judge Beetlestone reasoned that because Kashi‘s claims are based purely on copyright law, the action is not a “dispute regarding th[e] Agreement[s],” and thus not subject to the forum selection clauses contained in the Corbis–McGraw-Hill agreements. MHE App‘x 5. Judge Beetlestone further concluded that, absent an applicable forum selection clause, McGraw-Hill had not met its burden under
The Honorable Legrome Davis, considering a parallel motion in the Krist action, reached the opposite conclusion. Judge Davis determined that the dispute is a dispute regarding the agreements, because the copyright claims depend upon the interpretation of the Corbis–McGraw-Hill agreements. Judge Davis held that despite Krist‘s status as a non-signatory, he was subject to the forum selection clause as an intended third-party beneficiary. Judge Davis also concluded that it was foreseeable that Krist would be bound under the Corbis forum selection clause. In light of those findings, Judge Davis granted the
McGraw-Hill proceeded to file a petition for a writ of mandamus, asking this Court to direct a transfer of the Kashi action. Krist also petitioned for a writ of mandamus, doing so after his motion for reconsideration was denied. Krist asks this Court to direct a vacatur of the transfer order. The petitions were consolidated and referred to this panel. They present a range of doctrinal issues bearing on the ultimate question: whether either District Court erred in such a manner that mandamus is warranted. Numerous other actions implicating the Corbis forum selection clause have been adjudicated in the Eastern District of Pennsylvania, which have similarly yielded divergent results. The petitioners argue that the divergence of views speaks to the need for a ruling on mandamus. We agree that clarity is needed, yet the reasoned divergence of views militates against granting the writ.
II. Jurisdiction, Standard of Review, and Applicable Law
A. Jurisdiction
Our jurisdiction over this mandamus action falls under the All Writs Act, codified at
Because Judge Davis ordered a transfer, the Krist action is no longer pending in the Third Circuit. Yet we still retain jurisdiction over transferred cases until the transferee court “proceeds” with the action. Howmedica, 867 F.3d at 400. “[O]nce the transferee court proceeds with the transferred case, the decision as to the propriety of transfer is to be made in the
For example, in Howmedica the plaintiff waited twenty-seven days before seeking mandamus, and the transferee court had issued two case management orders during that time. 867 F.3d. at 400. In In re United States, the government waited thirty-three days to seek mandamus, and the transferee court had already issued a scheduling order. Id. at 382, 384; Order, United States v. Streeval, No. 01-cv-0084 (M.D. Tenn. June 6, 2001), ECF No. 12). In both cases, we concluded that our jurisdiction was proper because the petitioners had acted with sufficient dispatch. Id.
Here, the transfer was docketed in the Southern District of New York (S.D.N.Y.) on October 24, 2017. The operative start date for our purposes is, however, October 6, 2017, when the case was reassigned to Judge Rufe and Krist‘s motion for reconsideration was “implicitly denied.” Krist Pet‘r 5, 10. Krist filed his petition for a writ of mandamus in this Court on November 8, 2017. That amounts to thirty-three days between the October 6, 2017 transfer and the November 8, 2017 filing of Krist‘s mandamus petition. Krist Pet‘r 5. As for action in the transferee court, Krist filed a letter motion requesting a stay on November 9, 2017. The Honorable Loretta Preska in the S.D.N.Y. granted the stay on December 4, 2017, after receiving notification that this Court had referred the mandamus petition to a merits panel. Judge Preska entered no other orders on the transferred action. Thus, the transferee court cannot be said to have “proceeded” with the action.
Krist‘s thirty-three day delay is the same as has previously been deemed “sufficient dispatch.” And because the transferee court has not “proceeded” with the action, we retain jurisdiction.
B. Mandamus Standard
Relief via a writ of mandamus is “extraordinary” and is typically appropriate “only upon a showing of (1) a clear abuse of discretion or clear error of law; (2) a lack of an alternate avenue for adequate relief; and (3) a likelihood of irreparable injury.” United States v. Wright, 776 F.3d 134, 146 (3d Cir. 2015). The writ will issue only if the party seeking the writ “meets its burden to demonstrate that its right to the writ is clear and indisputable.” Sunbelt Corp., 5 F.3d at 30 (quoting Carteret Sav. Bank, F.A. v. Shushan, 919 F.2d 225, 232 (3d Cir. 1990)).
These mandamus actions arise out of motions to transfer venue under
Despite the elimination of the second and third factors, the first factor, “a
Moreover, we retain discretion to deny the writ even in the face of such errors. Commc‘n Workers of Am., 932 F.2d at 208. We have admonished judges to “proceed both carefully and courageously” in exercising their discretion. Lusardi, 855 F.2d at 1070.
C. Venue Transfer Standard
Under
The
In 2013, the Supreme Court held that the traditional balancing test is modified when a forum selection clause applies to a dispute. Atlantic Marine, 571 U.S. at 63. In the face of a valid forum selection clause, a district court modifies its analysis in three ways. First, no weight is given to the plaintiff‘s choice of forum. Id. Second, the court does not consider arguments about the parties’ private interests. Id. at 64. Instead, “a district court may consider arguments about public-interest factors only.” Id. Third, “when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a
D. Applicable Law
Federal law controls the question of whether to enforce a forum selection clause. Howmedica, 867 F.3d at 407 n.11 (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 32 (1988)); Jumara, 55 F.3d at 877; Phillips v. Audio Active Ltd., 494 F.3d 378, 384 (2d Cir. 2007) (“[F]ederal law should be used to determine whether an otherwise mandatory and applicable forum clause is enforceable . . . because enforcement of forum clauses is an essentially procedural issue.“). However, “[t]he interpretation of a forum selection clause is an analytically distinct concept from the enforceability of that clause.” Collins v. Mary Kay, Inc., 874 F.3d 176, 181 (3d Cir. 2017). “The question of the scope of a forum selection clause is one of contract interpretation.” John Wyeth & Brother Ltd. v. CIGNA Int‘l Corp., 119 F.3d 1070, 1073 (3d Cir. 1997). Our case law directs us to use state law to determine the scope of a forum selection clause—that is, “‘whether the claims and parties involved in the suit are subject’ to the clause.” Collins, 874 F.3d at 180 (quoting Martinez v. Bloomberg LP, 740 F.3d 211, 217 (2d Cir. 2014)). State law, therefore, typically governs whether the clause covers a particular claim, as well as whether the clause applies to a non-signatory as an intended beneficiary or closely related party. Collins, 874 F.3d at 183-85 (applying Texas law to determine whether plaintiff‘s New Jersey Wage Payment Law claim fell within the scope of forum selection clause); E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 196–98 (3d Cir. 2001) (applying Delaware law to determine whether party was third-party beneficiary or closely related); Martinez, 740 F.3d at 221–24 (explaining that federal law should not be used to determine the scope of a forum selection clause in a federal-question case); cf. Wyeth, 119 F.3d at 1074 (acknowledging applicability of English law but applying “general contract law principles” in light of the parties’ briefing).
Parties are generally free to specify which law governs a contract‘s interpretation, and may agree to modify the choice specified in the contract. See Adams v. Raintree Vacation Exch., LLC, 702 F.3d 436, 438 (7th Cir. 2012). The Corbis forum selection clause includes a choice of law provision specifying the laws of the State of New York. See MHE App‘x 284 (2014 PPA). Yet for purposes of determining whether the claims are subject to the clause, the parties cite federal case law. For purposes of determining whether the clause can be applied to Kashi and Krist, the photographers cite New York law and federal case law governing third party beneficiaries, and only federal case law as to the closely related parties doctrine. McGraw-Hill cites only federal case law. Of course, McGraw-Hill seeks to enforce an agreement containing a New York choice of law clause and thus can hardly object to the invocation of New York law in analyzing whether Kashi and Krist are intended beneficiaries. See Collins, 874 F.3d 180–81. In these circumstances—notwithstanding our usual approach of applying state law to both the claim and party components of the question of scope—as the parties agree in their briefing about the law governing two of the three components, we will accept the parties’ stipulation. See Wyeth, 119 F.3d at 1074; Adams v. Raintree Vacation Exch., LLC, 702 F.3d 436, 438 (7th Cir. 2012); Phillips, 494 F.3d at 386. We will therefore apply federal law to evaluate whether the clause covers the claims, New York law to assess whether the photographers should be bound by the clause as intended beneficiaries, and federal law in evaluating whether Kashi and Krist are closely related parties.
Finally, if we determine that the disputes fall within the scope of the forum selection clause and that the clause applies to the non-signatory photographers, we will look to this Court‘s precedent to determine whether we would enforce the clause for purposes of the
III. Analysis
There are four substantive issues that bear on whether the forum selection clause applies to the photographers and whether transfer was appropriate. First, we must consider whether Kashi and Krist are bound by the terms of the agreements between McGraw-Hill and Corbis—agreements neither Kashi nor Krist signed. Under traditional principles of contract law, non-signatories may be bound by a forum selection clause if they are intended third-party beneficiaries of the contract, or if they are closely related parties. See DuPont, 269 F.3d at 194–99 (considering doctrines in the context of an arbitration clause); In re Prudential Ins. Co. of Am. Sales Practice Litig. All Agent Actions, 133 F.3d 225, 229 (3d Cir. 1998) (“As this court has previously recognized, ‘a variety of nonsignatories of arbitration agreements have been held to be bound by such agreements under ordinary common law contract and agency principles.‘“) (quoting Barrowclough v. Kidder, Peabody & Co., Inc., 752 F.2d 923, 938 (3d Cir. 1985) (citations omitted), overruled on other grounds by Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1112 (3d Cir. 1993)); Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1298 n.9 (3d Cir. 1996) (noting that arbitration agreements are “a specialized kind of forum-selection clause“) (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974)). Second, our cases and those of other circuits establish that we will not enforce a forum selection clause against a non-signatory unless such enforcement was foreseeable to the non-signatory. Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d Cir. 1983), overruled on other grounds by Lauro Lines v. Chasser, 490 U.S. 495 (1989); Howmedica, 867 F.3d at 407 n.13 (listing cases). Third, the dispute itself must fall within the scope of the forum selection clause. The parties do not invoke New York substantive law on this point. Instead, the parties make much of whether, under this Court‘s
precedent, any asserted license is part of the plaintiffs’ prima facie case or merely a defense. Fourth, we consider whether the Atlantic Marine-modification to the
A. Are Kashi and Krist bound by the forum selection clause?
Contrary to the District Court‘s ruling in the Krist action, we conclude that the photographers were not intended third-party beneficiaries of the agreements between McGraw-Hill and Corbis. Nor are they bound under the closely related parties doctrine. The photographers therefore are not subject to the forum selection clause.
i. The photographers are not intended third-party beneficiaries.
A non-signatory may be bound by a contractual forum selection clause if he is an intended third-party beneficiary to
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either
(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
(2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.
Restatement (Second) of Contracts § 302 (1981) (“Restatement“).
The touchstone is the parties’ intent, primarily as reflected in the language of their contract: “The intention to benefit the third party must appear from the four corners of the instrument . . . [and] must be that of both parties to the . . . contract.” Stainless, Inc. v. Employers Fire Ins. Co., 69 A.D.2d 27, 33–34 (N.Y. App. Div. 1979), aff‘d, 406 N.E.2d 490 (N.Y. 1980). “A court in determining the parties’ intention should consider the circumstances surrounding the transaction as well as the actual language of the contract.” Subaru Distribs. Corp., 425 F.3d at 124 (quoting Restatement § 302, Reporter‘s Note cmt. a). As an example, “[a] contractual requirement that the promisor render performance directly to the third party shows an intent to benefit the third party.” Id. (emphasis added). As the First Circuit has explained: “The structure of the performance required under the particular contract often provides the critical indicum [sic] of intent in third party beneficiary cases. Unless the performance required by the contract will directly benefit the would-be intended beneficiary, he is at best an incidental beneficiary.” Pub. Serv. Co. of New Hampshire v. Hudson Light & Power Dep‘t, 938 F.2d 338, 342 (1st Cir. 1991).
McGraw-Hill makes two arguments for why the photographers are intended beneficiaries of its agreements with Corbis. First and foremost, McGraw-Hill argues that the photographers benefit directly from the agreements. Second, it argues that the listing of the photographers’ names on the Corbis invoices demonstrates McGraw-Hill‘s and Corbis’ intent to benefit the photographers.
We reject McGraw-Hill‘s first argument out-of-hand. The photographers were not entitled to any compensation as a direct result of the Corbis–McGraw-Hill agreements. The photographers receive compensation only by operation of the separate representation agreements they entered into with Corbis. McGraw-Hill points to no provision of the PPAs or invoices that directly entitles either photographer to anything. Moreover, McGraw-Hill‘s “direct” beneficiary theory is contrary to the examples provided in the Restatement. As an illustration from the Restatement explains: “B contracts with A to buy a new car manufactured by C. C is an incidental beneficiary, even though the promise can only be performed if money is paid to C.” Restatement cmt. e. ills. 17. The manufacturer in that illustration is not a party to the sale, and it is not owed performance under the
Judge Davis reasoned that the limitations contained in agreements between McGraw-Hill and Corbis directly benefit the photographers. He explained that Krist benefits from the limitations on the use of the copyrighted material, including limitations on the size of the images, numbers of copies, and duration of use. Krist App‘x 375. Judge Davis stated that “[p]rovisions limiting the actions of a contracting party that are intended to benefit a third party make the third party an intended beneficiary.” Id. For this proposition, Judge Davis cited an illustration from the Restatement. In it, a downstream landowner is an intended beneficiary of a contract between an operator of a fertilizer plant and a municipal sewer authority because the contract includes a term intended to prevent harm to that landowner, namely, a term requiring the removal of specified types of waste from the fertilizer plant‘s wastewater. Id. (citing Restatement cmt. d. ills. 10). We cannot agree. Krist is the exclusive owner of the rights to reproduce, distribute, and display the photographs by virtue of the
Judge Davis also reasoned that the invoices’ “specific listing of the copyright holder for each licensed image evidences the intent of the parties to benefit the copyright holders.” Krist App‘x 376. Kashi and Krist do not offer a strong rebuttal to this reasoning. At oral argument, counsel for the photographers suggested that the identification of the photographers was for the sole purpose of enabling the publisher to list a photo credit, as was required for purposes of the publication. Oral Arg. 22:33–22:50. Overall, Judge Davis did not place strong emphasis on this point, and the invoices alone do not provide sufficient evidence of an intent to bestow contractual rights or benefits on the photographers. For example, in one of the illustrations from the Restatement quoted above, although the name of the car manufacturer will likely be listed on the contract between the buyer and seller, the manufacturer is still not an intended beneficiary of that contract.
Finally, the photographers argue that McGraw-Hill should be estopped from asserting an intended third-party beneficiary argument because of a position it took in prior litigation over the Corbis agreements. McGraw-Hill argues vigorously against estoppel. In light of our conclusion that the photographers are not intended third-party beneficiaries, we need not consider the application of estoppel. We do, however, take note of McGraw-Hill‘s previous arguments.
In an earlier case in the Southern District of New York, a photographer in privity with Corbis attempted to assert rights under the Corbis–McGraw-Hill agreements, including a provision that entitled Corbis to bill the publisher “ten (10) times the normal license fee for any unauthorized use.”5 Defending against the photographer‘s
ii. The photographers are not closely related parties.
McGraw-Hill invokes another doctrine to argue that the photographers should be bound as non-signatories to the Corbis–McGraw-Hill agreements: the closely related parties doctrine.6 The
“In determining whether a non-signatory is closely related to a contract, courts consider the non-signatory‘s ownership of the signatory, its involvement in the negotiations, the relationship between the two parties and whether the non-signatory received a direct benefit from the agreement.” Carlyle Inv. Mgmt. LLC v. Moonmouth Co. SA, 779 F.3d 214, 219 (3d Cir. 2015) (permitting non- signatory to enforce forum selection clause against signatory under the closely related parties doctrine).
Here, it is clear that the photographers are not in an ownership or subsidiary relationship with Corbis. The record establishes only that they were in privity with Corbis for the purpose of licensing artwork. Moreover, there is no evidence that the photographers were involved in contract negotiations between Corbis and McGraw-Hill. Finally, the photographers did not, in any natural reading of the word, receive a “direct” benefit from the Corbis–McGraw-Hill agreements. Accordingly, there is precious little basis for applying the closely related parties doctrine.
iii. Despite error, mandamus is not warranted on this issue alone.
Having concluded that the District Court in Krist erred in its conclusion that Krist has intended third-party beneficiary status and in transferring his case on the basis that the forum selection clause applied to him, we must next consider whether this error was a “clear and indisputable abuse of discretion or . . . error of law.” Howmedica, 867 F.3d at 401. We do not find Judge Davis’ error here so clear as to meet that standard. Judge Davis was correct that the photographers were identified in each invoice. And while we disagree with his conclusion that the invoices rendered Krist a direct beneficiary, the result, as it pertains to this conclusion, cannot be said to “approach[] the magnitude of an unauthorized exercise of judicial power.” Commc‘n Workers of Am., 932 F.2d at 208. Even if we were to conclude that this error did meet that standard, we retain discretion over whether to grant the writ. Id. We discern no basis for exercising that discretion.
Many photographers have sought to invoke the terms of the Corbis–McGraw-Hill agreements in order to pursue breach of contract claims against McGraw-Hill. While arguments raised in other cases do not bind us, we do consider the larger jurisprudential landscape in the context of mandamus. We acknowledge the existence of a sharp split in the decisions of judges
Even so, we proceed to analyze other issues addressed by the two District Court judges, because a clear and indisputable error on any determination necessary for transfer might warrant mandamus.
B. Was enforcement foreseeable?
Foreseeability is a prerequisite to applying the closely related parties doctrine. That is, before binding a non-signatory as a closely related party, we require a finding that enforcement of the clause by or against the non-signatory would be foreseeable. See Howmedica, 867 F.3d at 407 n.13; Magi XXI, Inc. v. Stato della Citta del Vaticano, 714 F.3d 714, 723 (2d Cir. 2013) Lipcon v. Underwriters at Lloyd‘s, London, 148 F.3d 1285, 1299 (11th Cir. 1998); Hugel v. Corp. of Lloyd‘s, 999 F.2d 206, 209 (7th Cir. 1993). Likewise, we require a foreseeability finding when enforcing a forum selection clause against an intended beneficiary. In Coastal Steel, we held that the plaintiff could not avoid a forum selection clause on account of its third-party beneficiary status. 709 F.2d at 203. We reasoned:
Coastal chose to do business with Farmer Norton, an English firm, knowing that Farmer Norton would be acquiring components from other English manufacturers. Thus it was perfectly foreseeable that Coastal would be a third-party beneficiary of an English contract, and
that such a contract would provide for litigation in an English court.
Id. As the quoted language indicates, Coastal Steel recognized not only that it was foreseeable that the non-signatory would be a third-party beneficiary, or that the contract would contain a forum selection clause, but also that the forum selection clause would provide for a specific forum convenient to the signatory.
Judge Davis recognized the foreseeability requirement in Krist. He first concluded that it was foreseeable to Krist that Corbis would contract with licensees, and that Krist may be a third-party beneficiary to those agreements. Krist App‘x 377. This much is obvious: Krist entered into an agreement with Corbis for the very purpose of having Corbis sub-license his photographs. And because Krist was owed monetary compensation under his agreement with Corbis, it was foreseeable that he may have been deemed an intended beneficiary of those agreements. It is also foreseeable that Corbis’ contracts with licensees would contain forum selection clauses. After all, the photographers’ own contracts with Corbis contained such clauses, and as the District Court reasoned, they are quite common. Id. (citing secondary source material). But the District Court made no finding that Krist could have foreseen that those clauses would specify New York, New York as a forum. While the District Court noted that Corbis’ standard Terms and Conditions were published on Corbis’ webpage, the District Court made no finding that Krist had ever visited the webpage or had seen an explicit reference to those terms and conditions. The fact that it was possible for Krist to access the Terms and Conditions on the website does not establish that it was foreseeable that he would be subject to those terms as a third-party beneficiary. See James v. Glob. TelLink Corp., 852 F.3d 262, 267–68 (3d Cir. 2017) (publication of terms of use on website is not alone sufficient to bind). As the photographers argue, there is “no evidence these Terms & Conditions or the FSC therein were ever ‘reasonably communicated’ or otherwise made known to Kashi. Although Kashi received royalty statements from Corbis that provided limited information, Kashi did not receive copies of the Invoices that Corbis issued to MHE.” Kashi Resp. 7.
A foreseeability finding in the context of forum selection clauses must have some evidentiary basis, other than pure speculation, that the party sought to be bound had an awareness of the clause, its contents, and that it might be defensively invoked. Krist argues for a higher bar. He argues that foreseeability requires a finding that the clause and its contents had been “reasonably communicated” to the party against whom enforcement is sought. Krist Pet‘r 19 (citing Phillips v. Audio Active Ltd., 494 F.3d 378, 383 (2d Cir. 2007)). But our case law, notably Coastal Steel, did not set such a high bar, and we decline to raise that bar today. What Coastal Steel does require is that the actual forum be foreseeable, and that there be some evidentiary basis for such a finding.
In light of this standard, we conclude that Judge Davis’ foreseeability finding was insufficient. The online Terms and Conditions cannot suffice, and Judge Davis made no finding as to the foreseeability of a specific forum. Yet we cannot say, on the record before us, that this error was so clear as to warrant mandamus. Indeed, there was other evidence in the record on which Judge Davis could have relied to bolster his foreseeability finding: namely the exemplar representation agreements. Krist has not refuted—and Kashi has conceded—that the photographers’ representation agreements with Corbis contained a forum selection clause that specified New
C. Do the copyright claims fall within the scope of the Corbis FSC?
Judge Davis held that the copyright claims depend upon the licenses because unauthorized use is part of the plaintiff‘s prima facie case in the copyright context. The Second Circuit employs this approach when only the scope of the license is at issue. Bourne v. Walt Disney Co., 68 F.3d 621, 631 (2d Cir. 1995). In other words, where the plaintiff concedes the existence of a license, the burden may fall on the plaintiff, in the first instance, to demonstrate that the scope was exceeded. We have yet to consider that doctrine and have no cause to consider it today. Indeed, the plaintiffs doggedly refuse to concede the existence of licenses, even when pressed at oral argument. Oral Arg. 27:36–29:30. But that refusal to concede is not the reason we decline to adopt the Bourne rule. Rather, we recognize that on the facts of the cases before us, we could not hold plaintiffs to such a prima facie burden.
The licenses obtained by McGraw-Hill were not granted by the photographers directly but by Corbis as a sub-licensor. And the royalty statements received by the photographers lacked specific detail as to the scope of each license granted. Kashi Resp. 7, 37 (citing Kashi Supp. App‘x 1). As such, it stands to reason that the photographers may not be aware of each license issued, or the scope of each license. Because they were not themselves directly privy to those licenses, we cannot expect them to plead unauthorized use as part of a prima facie case. As the Seventh Circuit recognized when considering this very issue, “‘proving a negative is a challenge in any context,’ and if there is evidence of a license, it is most likely to be in the possession of the purported licensee.” Muhammad-Ali v. Final Call, Inc., 832 F.3d 755, 761 (7th Cir. 2016) (quoting Vieth v. Jubelirer, 541 U.S. 267, 311 (2004)).
The Seventh Circuit took the opportunity in Muhammad-Ali to clarify the elements of a prima facie claim for copyright infringement. We do the same here. Both McGraw-Hill‘s arguments and Judge Davis’ opinion cite to Dun & Bradstreet Software Servs., Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3d Cir. 2002), for the elements of a copyright infringement claim. According to that precedential opinion: “To establish a claim of copyright infringement, a plaintiff must establish: (1) ownership of a valid copyright; and (2) unauthorized copying of original elements of the plaintiff‘s work.” Id. at 206. As an initial matter, that statement appears to be dictum—it is a proposition not essential to the determination of the case. Further, Dun & Bradstreet‘s inclusion of “unauthorized” as part of the second element appears to be an error. The precedent Dun & Bradstreet cites as support of the listed elements, Whelan Assocs., Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1231 (3d Cir. 1986), and Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823, 831 (10th Cir. 1993), do not include the term “unauthorized” in their listing of the second element. Nor has the Supreme Court held that unauthorized copying is the second element of a copyright claim. Feist Publ‘ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991) (“To establish infringement, two elements must be proven: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.“). We can only conclude that use of the word “unauthorized” was erroneous. Because Whelan predated Dun & Bradstreet, its explication of the elements controls. The traditions of this Court dictate that a panel decision may not overrule the holding of a previous panel. Reilly v. City of Harrisburg, 858 F.3d 173, 177 (3d Cir. 2017), as amended (June 26, 2017) (citing Internal Operating Procedures of the Third Circuit Court of Appeals § 9.1); United States v. Monaco, 23 F.3d 793, 803 (3d Cir. 1994) (same).
Having determined that the license is not part of the photographers’ prima facie case, we turn to the text of the
forum selection clause. We interpret a forum selection clause in accordance with its plain meaning. See Reading Health Sys. v. Bear Stearns & Co., 900 F.3d 87, 99 (3d Cir. 2018) (citing Illinois Nat. Ins. Co. v. Wyndham Worldwide Operations, Inc., 653 F.3d 225, 231 (3d Cir. 2011); Great Am. Ins. Co. v. Norwin Sch. Dist., 544 F.3d 229, 243 (3d Cir. 2008); Restatement (Second) of Contracts § 202 (1981)). The clause in the Corbis agreements reads:
Any dispute regarding this Agreement shall be governed by the laws of the State of New York, and by Titles 15, 17 and 35 of the U.S.C., as amended, and the parties agree to accept the exclusive jurisdiction of the state and federal courts located in New York, New York, regardless of conflicts of laws.
MHE App‘x 284 (2014 PPA). Of immediate significance is use of the noun “dispute,” which is used as opposed to, for example, “claim.” Under Wyeth, this Court construes the word “dispute” as being broader than “claim.” 119 F.3d at 1074. The Seventh Circuit has held likewise, explaining that “the forum selection clause does not apply just to the litigation of claims that arise out of, concern, etc., the contract; it applies to the litigation of disputes that arise out of, concern, etc., the contract.” Abbott Labs. v. Takeda Pharm. Co., 476 F.3d 421, 424 (7th Cir. 2007). The Second Circuit disagrees. In Phillips, 494 F.3d at 391, the forum selection clause applied not just to “claims” but to “proceedings.” But the Court held that “reference to proceedings” did not require it “to take into consideration the source of rights or duties asserted on defense.” Id. Unlike the Second Circuit, we hold that the word “disputes” allows the contract to be implicated by way of an affirmative defense.
But we must also consider the second word: the preposition “regarding.” In Wyeth the forum selection clause applied to “any dispute arising under or out of or in relation to this Agreement.” 119 F.3d at 1072. The Court noted that “arising in relation to” is broader than “arising under.” Id. at 1075. It explained:
The ordinary meaning of the phrase “arising in relation to” is simple. To say that a dispute “arise[s] . . . in relation to” the 1990 Agreement is to say that the origin of the dispute is related to that agreement, i.e., that the origin of the dispute has some “logical or causal connection” to the 1990 Agreement. Webster‘s Third New International Dictionary, 1916 (1971).
Wyeth, 119 F.3d at 1074. See also Flanagan v. Prudential-Bache Sec., Inc., 495 N.E.2d 345, 350 (N.Y. 1986) (holding that “respecting,” which is defined as “‘with regard or relation to: regarding, concerning,‘” has a broader connotation than “arising out of“) (quoting Webster‘s Third New International Dictionary, at 1934).
“Regarding” may thus be equated with “relates to,” a phrase Wyeth defines as having some “logical or causal connection.” 119 F.3d at 1074. Here, the disputes have a logical or causal connection to the agreements, at least for the majority of the claims. As Krist‘s Complaint suggests, McGraw-Hill obtained access to the photographs through its licensure agreements with Corbis. Krist App‘x 6 (Krist Complaint ¶ 10). Those licenses were for limited use, yet McGraw-Hill “print[ed] or distribut[ed] more copies of the [p]hotographs than authorized.” Id. at 7 (Krist Complaint ¶¶ 11-13). Kashi‘s Complaint makes the same allegations. MHE App‘x 164-65 (Kashi Complaint ¶¶ 9-12). These allegations establish a logical and causal connection between the Corbis-McGraw-Hill agreements and the copyright infringement actions. It may be said that the “dispute” here is whether McGraw-Hill violated the plaintiffs’ copyrights by exceeding the scope of its licenses.
As an additional point, the forum selection clause specifies the federal copyright statutes as a source of law: “Any dispute regarding this Agreement shall be governed by the laws of the State of New York, and by Titles 15, 17 and 35 of the U.S.C., as amended . . . .” MHE App‘x 284 (emphasis added). The reference to copyright law suggests that the clause was intended to encompass such disputes. See, e.g., Lefkowitz v. John Wiley & Sons, Inc., No. 13-cv-1662, 2013 WL 4079923, at *1 (E.D. Pa. Aug. 13, 2013) (Baylson, J.) (“[T]he forum selection clause specifically envisions that ‘any dispute regarding this Agreement’ includes copyright infringement claims because the clause expressly states that disputes shall be governed by, inter alia, Title 17 of the United States Code (i.e., the title of the Code that governs copyright claims).“).
Based on this Court‘s precedent, which the parties cite for interpretation of the clause, we hold that the photographers’ copyright actions are “disputes regarding” the Corbis-McGraw-Hill agreements because the face of the complaints contemplate that licenses existed, and the language of the forum selection clause is broad enough to encompass actions in which the agreements are raised as an affirmative defense. See MHE App‘x 164 (Complaint ¶¶ 8-9) (reference to invoices issued by Corbis); Krist App‘x 6 (Complaint ¶ 10) (same).
We also note our case law which suggests that to bind non-signatories to a forum selection clause, the claim must arise in relation to the contract. DuPont, 269 F.3d at 197-98. Given the unique nature of copyright claims, we recognize that we should not permit a party to avoid a forum selection clause simply by pleading non-contract claims. See Coastal Steel, 709 F.2d at 203 (“[W]here the relationship between the parties is contractual, the pleading of alternative non-contractual theories of liability should not prevent enforcement of such a bargain.“); Crescent Int‘l, Inc. v. Avatar Cmtys., Inc., 857 F.2d 943, 944-45 (3d Cir. 1988) (same). So where the copyright holder is an intended third-party beneficiary or closely related party and the natural language of the forum selection
In conclusion, Judge Davis reached the correct result about the scope of the forum selection clause, but did so, in part, for the wrong reason. Because of the mistaken placement of a word in Dun & Bradstreet, Judge Davis was incorrect in reasoning that a copyright claim “depends on” the agreements by virtue of the pleading standard. However, Judge Davis was correct in concluding that the text of the forum selection clause is broad enough to encompass actions pleaded only under the Copyright Act. That conclusion would be consequential if the photographers were signatories to the Corbis forum selection clause, were intended third-party beneficiaries, or were closely related parties. But because the photographers are none of those things, the scope of the forum selection clause is of little consequence.8 Indeed, the only consequence for our purposes is to determine that Judge Davis’ conclusion regarding the scope of the forum selection clause is not a basis for granting mandamus relief.
D. The reach of Atlantic Marine
The final doctrinal question raised by these actions is distinct. Apart from his determinations regarding the applicability of the forum selection clause, did Judge Davis err in conducting his
conclude that no such error occurred and Howmedica did not so require.
As discussed in Section II.C., Atlantic Marine modified the traditional
The parties in Atlantic Marine were all signatories to the agreement and thus bound by the forum selection clause. We now consider whether Atlantic Marine applies to a case in which one party is a contracting party and the other, though not a signatory, is nevertheless bound by a forum selection clause as an intended third-party beneficiary or closely related party.
Krist argues that our Howmedica decision controls the result. In Howmedica, we addressed a situation in which signatory plaintiffs sought to bind non-signatory defendants to a forum selection clause as closely related parties, but we rejected their contention that the closely related parties doctrine applied. See 867 F.3d at 407 & n.13. Having determined those non-signatories were not bound by the clause, we concluded they were properly treated as “non-contracting parties” and we announced an analytical framework to determine how forum selection clauses affect the
Kashi and Krist read Howmedica as adopting a “bright-line” rule: Atlantic Marine applies only to signatory parties. Kashi Resp. 30; Krist Pet‘r 12. Under their reading, even if they are bound by the forum selection clause, their private interests must be considered on a
This argument is most easily analyzed through use of a counterfactual. Suppose a non-signatory intended third-party beneficiary brings a breach of contract claim, as would be his right under traditional principles of contract law. Despite his non-signatory status, he is fully aware of the contract and its terms. Indeed, he expressly bases his claim on the terms of the contract. The contract also contains a forum selection clause, and his breach of contract claim falls within the scope of that clause. As such, there is no question that the non-signatory is bound by the forum selection clause. Despite being bound by that clause, the plaintiff files his breach of contract suit in a jurisdiction other than the one specified in the clause. The signatory defendant invokes the forum selection clause and moves to transfer venue under
The latter must be true. Such an eyes-wide-open plaintiff—one who gets the benefit of the parties’ bargain and has the corresponding right to sue—would be bound by the terms of the forum selection clause just as the signatories would be.
The facts before us are different, but the underlying principle is the same. The Atlantic Marine modification applies to the
IV. Conclusion
These petitions raise complicated issues concerning forum selection clauses. We conclude that the District Court in Kashi reached the correct result in declining to transfer the action. We conclude that the District Court in Krist erred in transferring the action, but the error was not clear
ROTH, Circuit Judge, Dissenting in Part and Concurring in Part
Kashi and Krist came to court with exactly the same claim against McGraw-Hill; their license agreements with Corbis were identical; they both defended against identical McGraw-Hill motions to transfer; and they even had the same lawyer. Yet, the District Courts came to opposite conclusions—the Kashi court denied McGraw-Hill‘s transfer motion and the Krist court granted it. Now, on petitions for mandamus, the two cases have been consolidated. Even though the majority finds that the Krist court erred in transferring the case, it fails to correct the error and leaves opposing District Court decisions untouched. The majority prioritizes adherence to the strict standards of mandamus relief over judicial consistency and equal treatment of the parties. I do not.
The majority concludes that even though the District Court in Krist should not have granted McGraw-Hill‘s motion to transfer, mandamus is not warranted. Specifically, in Krist‘s case, it holds that the judge‘s error in transferring the action was not “a clear and indisputable abuse of discretion or . . . error of law,” and even if it was, there is no basis for exercising our discretion to grant the writ.1 It emphasizes the incredibly high bar petitioners must meet in order to receive mandamus relief and tells us that even if petitioners do meet the bar, the court can still deny mandamus.2 However, the majority fails
to grapple with the fact that its decision permits the incongruous and unfair treatment of essentially indistinguishable litigants. Krist is left in the dust of this decision, correct on the law but without his remedy.
Leaving undisturbed contradictory decisions in these two identical and consolidated cases promotes judicial inconsistency. Litigants—and the public at large—expect courts to come to the same conclusion when presented with the same claims and facts. Allowing opposite results in two consolidated cases with the same legal issues and the same factual background—even when done in the name of adherence to the strict standards of mandamus relief—erodes the integrity of and the public trust in the courts.3 Indeed, in other contexts, federal courts have corrected contradictory, yet factually analogous, lower court decisions in the name of judicial consistency.4
Therefore, I propose a modified mandamus standard when considering whether to grant a writ in consolidated petitions. First, we should consider whether denying mandamus would create an inconsistent result or unequal application of law. If so, the petitioner need not show “a clear abuse of discretion or clear error of law.”5 Rather, it is sufficient for the petitioner to show simply reversible error. In other words, the first factor in the three-factor test for granting
mandamus relief6 would not be such a “high bar”7 in a consolidated petition like this one. If we were to apply this modified standard here, because “the District Court in Krist erred in its conclusion . . . and in transferring his case,”8 the Krist court committed reversible error. Krist met the modified standard for factor one. We would then grant Krist‘s writ.9
As the majority reminds us, relief via a writ of mandamus is extraordinary and judges should “proceed both carefully and courageously in exercising their discretion” to grant a writ.10 There are good reasons why mandamus relief is rare and difficult to achieve. Such relief disrupts a case‘s “flow through the judicial system” and “is contrary to the common law policy of avoiding piecemeal appellate review of cases.”11 If every potentially erroneous decision could be resolved on a writ of mandamus, our appellate courts would be overwhelmed and litigants would await final resolution of their cases far longer than they already do.12
However, these concerns are minimized here due to the limited application of this proposed modification. The lower standard for factor one of the mandamus test would only apply to (1) consolidated petitions for mandamus; (2) where the district courts had come to opposite decisions on substantially similar facts; and (3) where denying mandamus would create incompatible results and/or an unequal application of law. Such cases are extremely rare. This narrow exception makes room in our mandamus jurisprudence for judicial consistency and equal administration of justice without risking significant disruptions in litigation
For these reasons, I respectfully dissent from the majority‘s decision to deny mandamus in Krist, and concur with the ruling that mandamus is not warranted in Kashi.
Notes
The parties do dispute whether the forum selection clauses contained in Kashi and Krist‘s representation agreements are “identical in substance” to those contained in the McGraw-Hill agreements. Compare MHE Resp. 3 n.2 with Krist Reply 17. We consider this argument below in Section III.B. We have already recognized the importance of judicial consistency to the integrity of courts in the context of judicial estoppel. This doctrine “generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.” New Hampshire v. Maine, 532 U.S. 742, 749 (2001) (quoting Pegram v. Herdrich, 530 U.S. 211, 227, n.8 (2000)). Because this rule prevents the “risk of inconsistent court determinations” it “protect[s] the essential integrity of the judicial process.” New Hampshire v. Maine, 532 U.S. 742, 751 (2001).