Lefkowitz v. McGraw-Hill Global Education Holdings, LLC
Docket: No. 13 Civ. 5023(KPF)
Court: District Court, S.D. New York; June 2, 2014; Federal District Court
Lester Lefkowitz has filed a lawsuit against McGraw-Hill Global Education Holdings, LLC, and McGraw-Hill School Education Holdings, LLC, alleging copyright infringement and breach of contract due to the unauthorized use of his stock photographs beyond the licensed scope. Defendants sought dismissal of these claims under Federal Rule of Civil Procedure 12(c). The court denied the motion regarding copyright infringement, noting that Lefkowitz adequately alleged his claim and that there were insufficient facts to determine if the statute of limitations applied. However, the breach of contract claim was dismissed because Lefkowitz was estopped from asserting it.
Lefkowitz, a professional photographer based in New York, owns exclusive rights to the photographs listed in Exhibit 1 of his First Amended Complaint (the "Lefkowitz Images"), which are registered with the U.S. Copyright Office. He had entered into agreements with The Stock Market (TSM) in 1997 and 2000, allowing TSM to issue limited licenses for the Lefkowitz Images and designating TSM as his exclusive agent for licensing. The agreements stipulated that TSM could not license images on a buy-out or exclusive basis without Lefkowitz's consent. In 2000, TSM's rights were assigned to Corbis Corporation, which Lefkowitz accepted with the understanding that existing terms remained intact.
Additionally, Lefkowitz signed a Photographer Representation Agreement with Corbis in 2003, allowing Corbis to grant limited-use licenses for his photographs. This agreement granted Corbis the authority to pursue claims against unauthorized use or damages of the images, with any recoveries treated as revenue, ensuring Lefkowitz would receive royalties or full compensation for lost or damaged images. If Corbis declined to pursue a claim within 60 days of notification, Lefkowitz could initiate his own actions at his expense.
Defendants McGraw-Hill Global Education Holdings, LLC and McGraw-Hill School Education Holdings, LLC are accused of copyright infringement concerning Plaintiff's photographs, specifically the Lefkowitz Images, which appeared in educational materials published between 1998 and 2011. Plaintiff claims that TSM and Corbis granted limited licenses to the Defendants for these images, explicitly restricting usage based on factors like copy quantity and distribution area. However, neither party has submitted the actual licensing agreements to the Court. Instead, Plaintiff provided two Corbis license agreements, asserting that they govern the licensing terms.
Under these agreements, Corbis retains the right to charge ten times the normal fee for unauthorized use, in addition to other potential penalties. Plaintiff identifies 294 alleged infringement instances in an exhibit, detailing each with relevant information such as copyright registration numbers and license limits. Plaintiff contends that Defendants exceeded their licensed rights by exceeding print quantities, displaying images online without permission, distributing in unauthorized territories, and creating specific editions without consent.
Furthermore, Plaintiff claims that the royalty statements used to compile the exhibit lacked detailed license terms and that Defendants possess the necessary licensing information. Additionally, Plaintiff alleges a pattern of infringement by Defendants, citing six previous lawsuits for copyright violations and five instances where Defendants admitted to exceeding license scopes, indicating a systemic disregard for copyright laws.
Plaintiff initiated this litigation on April 1, 2013, in the United States District Court for the Eastern District of Pennsylvania. Defendants sought dismissal of the complaint under Federal Rule of Civil Procedure 12(b)(6) or a venue transfer to the Southern District of New York based on forum selection clauses. On June 19, 2013, Judge Berle M. Schiller granted the motion to transfer the case to the new district. Subsequently, on July 31, 2013, Defendants requested a pre-motion conference for a potential second motion to dismiss, which Plaintiff opposed, arguing that Defendants were barred from filing a successive motion. A telephone conference on September 18, 2013, led to an order for supplemental letter briefs addressing the timeliness of Defendants' proposed motion.
On October 28, 2013, the Court ruled that Defendants could not file a second motion to dismiss and instead should file a motion for judgment on the pleadings. The Court also permitted Plaintiff to amend his complaint, requiring the amended complaint to be filed by November 4, 2013. The amended complaint included claims for copyright infringement and breach of contract, seeking a permanent injunction against Defendants, impoundment and destruction of infringing materials, actual or statutory damages, attorneys' fees, court costs, and additional sums related to unauthorized usage under the Corbis Agreements.
Defendants filed their answer and motion for judgment on the pleadings on December 6, 2013. Plaintiff opposed on January 3, 2014, with the motion fully submitted by January 10, 2014. Subsequent notices of supplemental authority were filed by both parties throughout January to May 2014.
Federal Rule of Civil Procedure 12(c) allows a party to move for judgment on the pleadings after the pleadings are closed but before trial, applying the same standard as a motion to dismiss under Rule 12(b)(6). When evaluating such a motion, all reasonable inferences must be drawn in favor of the plaintiff, assuming the truth of well-pleaded factual allegations to evaluate whether they plausibly support a claim for relief. A plaintiff needs to present sufficient factual allegations to make their claims plausible rather than merely conceivable, as established in Twombly. Rule 8(a)(2) requires only a short and plain statement of the claim, providing fair notice to the defendant without necessitating heightened fact pleading. However, courts are not bound to accept conclusory allegations or legal conclusions disguised as factual assertions. Besides the complaint, courts may consider attached exhibits, incorporated statements, and documents for which judicial notice can be taken.
The plaintiff adequately alleges a claim for copyright infringement by specifying the original works involved, asserting ownership and registration of copyrights, and detailing the acts of infringement by the defendants. The First Amended Complaint (FAC) states that the plaintiff is the copyright owner of the Lefkowitz Images, which are registered with the U.S. Copyright Office, fulfilling necessary legal requirements. The FAC includes the Lefkowitz Chart as an exhibit to identify the original works. It claims that the defendants exceeded the limited licenses granted, which were restricted by various factors like the number of copies and media types. The FAC provides sufficient detail to give the defendants fair notice of the claims and the grounds for them, in line with Rule 8.
Defendants failed to show that Plaintiffs' copyright infringement claims are barred by the statute of limitations. A civil action for copyright infringement must be initiated within three years of the claim's accrual. The dispute centers on whether to apply an injury rule, where claims accrue at each act of infringement regardless of the copyright holder’s knowledge, or a discovery rule, where claims accrue only upon the aggrieved party's awareness of the injury. Defendants advocate for the injury rule, asserting that claims prior to April 1, 2010, are time-barred, while Plaintiffs argue for the discovery rule, contending that Defendants have not adequately supported their statute of limitations defense. The Second Circuit had not previously established a clear accrual rule for federal copyright claims, but the prevailing trend shifted toward the discovery rule following the Second Circuit's ruling in Psihoyos v. Wiley, Sons, Inc. Consequently, the court here applies the discovery rule. As the First Amended Complaint does not specify when Plaintiffs discovered the alleged infringement, insufficient facts exist to determine if the copyright claims should be dismissed. Therefore, Defendants' motion to dismiss these claims is denied.
Regarding the breach of contract claim, Plaintiffs are estopped from asserting this claim due to the doctrines of claim preclusion and issue preclusion, collectively known as res judicata. Claim preclusion bars the relitigation of the same claim, while issue preclusion prevents relitigation of issues that were previously resolved in a valid court determination. Plaintiffs seek to enforce the Corbis Agreements, claiming Defendants breached these contracts by exceeding the licenses and failing to pay the agreed fees. However, Defendants argue that Plaintiffs are barred from this claim because of a prior judgment in Lefkowitz v. Houghton Mifflin Harcourt Publ’g Co.
Plaintiff lacks standing to enforce the Corbis Agreements, as previously determined in the Massachusetts Action, where he was the plaintiff. Plaintiff acknowledges being bound by this ruling but argues that the issue preclusion requirement of identical issues is not met, asserting that the Massachusetts court did not address his principal-agency argument and that the defendants have not shown that the issues in both cases are the same. These arguments are rejected, as the requirements for issue preclusion are satisfied. A court can dismiss claims based on res judicata or collateral estoppel in a Rule 12(b)(6) motion when it is clear from the complaint and judicially noticeable facts that claims are barred by law. The Supreme Court has stated that there need not be a perfect identity of issues for preclusion to apply; rather, it must be determined whether the issues are substantially the same, whether any controlling facts or legal principles have significantly changed since the prior litigation, and whether special circumstances warrant an exception to preclusion. No such changes or special circumstances have been identified since the Massachusetts decision, and courts have previously applied collateral estoppel regarding standing.
Collateral estoppel has been applied to the issue of standing in this case, referencing a prior ruling where the Court found that the Plaintiff was collaterally estopped due to lack of standing, leading to the dismissal of the case. The breach of contract claim in the current action is nearly identical to one previously adjudicated in the Massachusetts Action, where the Plaintiff claimed that Houghton Mifflin Harcourt Publishing Co. (HMH) misused his photographs, violating copyrights and license agreements. The allegations include that Corbis acted as the Plaintiff's agent in licensing the photographs, that HMH entered into license agreements related to the Plaintiff's images, and that HMH breached these agreements by exceeding license terms and failing to pay the required fees.
The Plaintiff sought damages based on the claim that HMH was liable to pay ten times the license fee for unauthorized use, as stipulated in the agreements. HMH had moved to dismiss the breach of contract claim in the Massachusetts Action, asserting that the Plaintiff lacked standing to enforce the Corbis Agreements. Judge F. Dennis Saylor IV concluded that the Plaintiff did not provide sufficient grounds to establish standing as a third-party beneficiary under New York law and rejected the Plaintiff's argument that an assignment of rights from Corbis granted him standing to sue. Consequently, the Massachusetts court dismissed the Plaintiff's claims due to lack of standing.
The current case raises the same standing issue concerning the breach of contract claims against a party that licensed the Plaintiff's photographs from Corbis, relying on the same agreements analyzed by Judge Saylor, with the choice-of-law provision in the Corbis Agreements indicating that New York law governs the matter.
Plaintiff argues that the Massachusetts district court did not evaluate the principal-agency argument he presents in this case, but the addition of this argument does not alter the legal analysis. The principle of collateral estoppel prevents Plaintiff from relitigating his standing to pursue an Establishment Clause claim, as established in Hollander, which emphasizes that attempts to introduce alternative grounds for standing are ineffective. The differences in images between the two cases are irrelevant since the rulings in Massachusetts rely on the same agreements that are pertinent to Plaintiff's standing here. Specifically, the 1988 Agreement governs both the ‘Thin Line Between Love and Hate’ and ‘Love Gonna Pack Up’ recordings, thus barring re-litigation of ownership issues related to the latter.
Regarding the standing for the breach of contract claim tied to the Corbis Agreements, the issue was already litigated and decided in the Massachusetts Action, a point Plaintiff does not contest. The current ruling is confined to Plaintiff's standing under these agreements, which he included in his First Amended Complaint (FAC). Plaintiff may still establish standing through other agreements not currently invoked, allowing for the dismissal of his breach of contract claim to be without prejudice.
The court also confirms that Plaintiff had a “full and fair opportunity” to litigate the standing issue in the Massachusetts Action, a fact he does not dispute. The legal principle asserts that a party with a full and fair opportunity to litigate an issue may be estopped from addressing it again in a subsequent case.
Plaintiff's involvement in the Massachusetts Action precludes him from claiming he lacked a "full and fair opportunity" to litigate the relevant issues. The Massachusetts court's determination that Plaintiff lacked standing was essential for dismissing his breach of contract claim, satisfying the requirement for collateral estoppel. The Court finds no sufficient basis for Plaintiff to assert standing to enforce the contracts between Corbis and the defendant, leading to the granting of the defendant’s motion to dismiss. As all elements of collateral estoppel are met, Plaintiff is barred from claiming standing to pursue a breach of contract against the Defendants, making it unnecessary to evaluate the merits of that claim. Consequently, the breach of contract claim is dismissed without prejudice. Defendants' motion is partially granted, allowing dismissal of copyright infringement claims related to works not listed on the Lefkowitz Chart, while other claims remain. A pretrial conference is scheduled for June 25, 2014. Additionally, a related case, Lefkowitz v. John Wiley & Sons, Inc., involves similar claims and arguments, with the Court's opinions in both cases issued simultaneously, reflecting their overlapping issues. Facts presented are taken from Plaintiff’s First Amended Complaint and judicially noticeable public records.
Factual allegations in a legal complaint must sufficiently establish a right to relief above mere speculation, assuming all allegations are true. Defendants’ memorandum is referred to as “Def. Br,” while Plaintiff’s opposition is “PL Opp,” and Defendants’ reply is “Def. Reply.” Multiple instances of infringement may involve the same photographs, complicating the correlation between the number of alleged infringements and images. The Court references instances of infringement as lines from the Lefkowitz Chart. Plaintiff requested Defendants disclose unauthorized uses of his photographs before filing the complaint, but they did not respond. Initially, McGraw-Hill Companies, Inc. was named as the defendant, but was later replaced by McGraw-Hill Global Education Holdings, LLC and McGraw-Hill School Education Holdings, LLC by court order. Under Federal Rule of Civil Procedure 12, parties cannot raise omitted defenses in subsequent motions. Plaintiff’s claims are not limited to the works in the Lefkowitz Chart; he contends Defendants exceeded license terms for both identified and unidentified works. Claims regarding unspecified photographs are dismissed, following legal precedents. The mere existence of other lawsuits does not substantiate Plaintiff’s claims; rather, it is the context of those lawsuits and Defendants’ admissions that lend plausibility to his allegations. For one specific image, Plaintiff only identified the publication, and there is a dispute regarding his access to license information. The Court assumes for pleading purposes that Plaintiff lacks access to this information, and he is not required to provide it to meet pleading standards. The Court notes relevance to the Supreme Court's decision in Petrella v. Metro-Goldwyn-Mayer, Inc.
The excerpt clarifies the application of the injury rule versus the discovery rule in federal copyright infringement claims, particularly in the context of the Supreme Court's decision in Petrella. The Court ruled that laches does not bar claims filed within the three-year statute of limitations for copyright infringement but did not determine when such claims accrue. It noted that nine Courts of Appeals have adopted a discovery rule, which triggers the limitations period when a plaintiff discovers or should have discovered the injury. The Petrella decision hinted at skepticism towards the discovery rule but did not overturn existing precedents.
In copyright cases, a claim is actionable within three years of the infringing act. The excerpt asserts that the Second Circuit's precedent, particularly the Psihoyos case, remains authoritative despite any implications from Petrella favoring the injury rule. The court has federal question jurisdiction under 28 U.S.C. § 1331 and jurisdiction over copyright claims under § 1338, thus obviating the need to consider New York state preclusion law, which is consistent with federal standards.
The plaintiff claims his breach of contract action under the Ten Times Provision pertains solely to the defendants' failure to pay, rather than their unauthorized use of the Lefkowitz Images. However, the First Amended Complaint (FAC) appears to assert breaches in both respects, although the court notes it does not need to resolve this inconsistency. Lastly, the plaintiff was not barred from raising a principal-agency argument in a related Massachusetts action, having done so in his opposition papers.
