Case 2:13-cv-00198-SVW-JCG Document 47 Filed 01/03/14 Page 1 of 6 Page ID #:1046
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:13-cv-0198-SVW-JCGx
`Roberto Cordero v. Patrick McGonigle et al.
`
`Case No.
`Title
`
`Date
`
`January 3, 2013
`
`Present: The
`Honorable
`
`STEPHEN V. WILSON, U.S. DISTRICT JUDGE
`
`N/A
`Paul M. Cruz
`Court Reporter / Recorder
`Deputy Clerk
`Attorneys Present for Defendants:
`Attorneys Present for Plaintiffs:
`N/A
`N/A
`IN CHAMBERS ORDER REMANDING TO STATE COURT
`
`Proceedings:
`
`I. INTRODUCTION
`
`This case is about whether plaintiff Roberto Cordero entered into a contract with Defendants to
`obtain a one-third ownership interest in defendant Med Informatix, Inc. Cordero contends that he
`entered into such an agreement with Defendants, and that he acquired a one-third ownership interest in
`consideration for the transfer of software he had developed. Cordero also asserts that Defendants
`breached this agreement, depriving Cordero of his expected ownership interest.
`
`On November 19, 2012, Cordero filed a complaint in the Superior Court for the State of
`California against Defendants (Patrick McGonigle, Thomas McGonigle, and Med Informatix, Inc.).
`Defendants removed the case to this Court on January 10, 2013. (Dkt. 1). Defendants contend that this
`Court has subject matter jurisdiction over the case because a claim by Codero arises under the Copyright
`Act of 1976. After review, the Court concludes that Plaintiff’s complaint does not state a claim that
`arises under the Copyright Act. Because such a claim is the only basis for federal jurisdiction, the Court
`REMANDS the case to state court.
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`CV-90 (10/08)
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`Case 2:13-cv-00198-SVW-JCG Document 47 Filed 01/03/14 Page 2 of 6 Page ID #:1047
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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:13-cv-0198-SVW-JCGx
`Roberto Cordero v. Patrick McGonigle et al.
`
`Case No.
`Title
`
`Date
`
`January 3, 2013
`
`\\
`II. BACKGROUND
`
`Sometime prior to the incorporation of Defendant Med Informatix, Inc. in 1994, Cordero alleges
`that he developed two software applications: the Medical Practice Management (MPM) and Medical
`EHR software applications. (Compl., ¶ 10).1 After the incorporation of Med Informatix in 1994,
`Plaintiff alleges he transferred both the MPM and EHR applications to the Defendants in consideration
`for the issuance of one-third of the stock of Med Informatix. (Id. ¶ 11). The transfer was purportedly
`made pursuant to an oral agreement. (Id. ¶ 13).
`
`Up until August 2012, Cordero believed that Defendants had performed under the oral
`agreement and that he was a one-third owner of Med Informatix. (Id. ¶ 16). However, in August 2012,
`a third party entered into negotiations to purchase Med Informatix, and in the course of negotiations
`Cordero learned that he had not been issued stock in the Company. (Id. ¶ 19).
`
`Cordero contends that Defendants breached their oral agreement by not providing him with an
`ownership interest in Med Informatix as promised. (Id. ¶¶ 19-21). On January 10, 2013, Codero filed
`the instant action asserting claims for breach of contract and fraud, and seeking damages and a
`declaration that the oral contract with Defendants was valid. (Id. ¶¶ 22-49). Alternatively, Cordero’s
`complaint states that in the event the Court does not find in favor of Plaintiff on his breach of contract
`claim, Plaintiff requests a declaration that the 1994 source code for the software transferred to
`Defendants remains Plaintiff’s sole and separate property, including all derivative work authored by
`Plaintiff since 1994. (Id. ¶ 25).
`
` The parties agree that Cordero’s state law breach of contact and fraud claims do not provide this
`Court with jurisdiction. However, Defendants contend that Cordero’s contingent claim for a declaration
`of ownership of the software arises under the Copyright Act of 1976. Plaintiff’s complaint asserts the
`declaration of ownership claim as a contingent claim. That is, Cordero only asks the Court to issue a
`
`1 On May 14, 2013, Plaintiff filed a First Amended Complaint. (Dkt. 30). However, in
`determining jurisdiction in a removal case, the Court must look at the case at the time of removal. Later
`changes to pleadings do not impact removal jurisdiction. See Pintando v. Miami-Dade Housing
`Agency, 501 F.3d 1241, 1243 n.2 (11th Cir. 2007) (“[T]he district court must look at the case at the time
`of removal to determine whether it has subject-matter jurisdiction.”); Rutter Group, California Practice
`Guide: Federal Civil Procedure Before Trial § 2B-70.1 (2013) (same). As such, the Court relies on the
`original complaint in this Order.
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`CV-90 (10/08)
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`Case 2:13-cv-00198-SVW-JCG Document 47 Filed 01/03/14 Page 3 of 6 Page ID #:1048
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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:13-cv-0198-SVW-JCGx
`Roberto Cordero v. Patrick McGonigle et al.
`
`Case No.
`Title
`
`Date
`
`January 3, 2013
`
`declaration that he is the owner of the software if the Court determines that there was no contract
`transferring the software to Defendants in exchange for an ownership interest in Med Informatix. Such
`contingent federal claims likely do not provide this Court with jurisdiction. See Pizzo v. Bekin Van
`Lines Co., 258 F.3d 629, 635-36 (7th Cir. 2001). However, as discussed below, here the Court
`determines that even if the declaration of ownership claim was not contingent, it would not arise under
`the Copyright Act and thus does not provide this Court with federal jurisdiction.
`
`III. SUBJECT MATTER JURISDICTION
`
`This Court may sua sponte review a notice of removal in order to determine if it has proper
`jurisdiction. Kwai Fun Wong v. Beebe, 732 F.3d 1030, 1036 (9th Cir. 2013) (“[C]ourts are obligated to
`consider sua sponte requirements that go to subject-matter jurisdiction.”) (internal quotation marks and
`alterations omitted). In the instant case, Defendants assert that the Court has subject matter jurisdiction
`because Plaintiff’s complaint requests a declaration of ownership of software protected by copyright.
`
`A. Jurisdiction Over Copyright Claims
`
` “The federal courts have exclusive jurisdiction over ‘any civil action arising under any Act of
`Congress relating to . . . copyrights.’” Schlastic Entm’t Inc. v. Fox Entm’t Group, Inc., 336 F.3d 982,
`985 (9th Cir. 2003) (citing 28 U.S.C. § 1338). To determine whether a claim arises under an Act of
`Congress relating to copyrights, the Ninth Circuit has adopted the Second Circuit’s T.B. Harms test.
`Under T.B. Harms, a district court must exercise jurisdiction if “(1) the complaint asks for a remedy
`expressly granted by the Copyright Act; (2) the complaint requires an interpretation of the Copyright
`Act; or (3) federal principles should control the claims.” Justmed, Inc. v. Byce, 600 F.3d 1118, 1123-24
`(9th Cir. 2010) (citing T.B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir. 1964)). “The test outlined
`in T.B. Harms is essentially a reiteration of the ‘well-pleaded complaint’ rule that federal jurisdiction
`exists only when a federal question is presented on the face of a properly pleaded complaint.” Id.
`
`The Ninth Circuit has held that if the only copyright claim in a complaint is a request for a
`declaration of ownership, the action will generally not arise under the Copyright Act. See Topolos v.
`Caldway, 698 F.2d 991, 994 (9th Cir. 1983) (“[W]hen [copyright] ownership is the sole question for
`consideration . . . federal courts [are] without jurisdiction.”). Rather, to arise under the Copyright Act,
`the request for a declaration of ownership must be sought in conjunction with an action seeking a
`remedy under the Copyright Act, such as a claim for infringement, or alternatively the ownership issue
`must require application of the work-for-hire doctrine. See Topolos, 698 F.2d at 993 (“‘If [a] claim
`involves copyright infringement or other matter directly related to the interpretation and enforcement of
`the Copyright Act, jurisdiction has been upheld. On the other hand, where it has been determined that
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`Case 2:13-cv-00198-SVW-JCG Document 47 Filed 01/03/14 Page 4 of 6 Page ID #:1049
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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:13-cv-0198-SVW-JCGx
`Roberto Cordero v. Patrick McGonigle et al.
`
`Case No.
`Title
`
`Date
`
`January 3, 2013
`
`the claim is essentially for some common law or state-created right, most generally for a naked
`declaration of ownership or contractual rights, jurisdiction has been declined, even though the claim
`might incidentally involve a copyright or the Copyright Act.’” (quoting Royalty Control Corp. v. Sanco,
`Inc., 175 U.S.P.Q. 641, 642 (N.D. Cal. 1972))); Justmed, 600 F.3d at 1124 (“[A]lthough a complaint
`may not state a Copyright Act claim on its face, federal jurisdiction may be appropriate if resolution
`requires application of the work-for-hire doctrine of the Copyright Act . . . .”).
`
`
`There is no mention in Plaintiff’s complaint of a claim for copyright infringement or any other
`remedy provided by the Copyright Act. Thus, because ownership of the copyrighted software would be
`the “sole question for consideration” relating to the Copyright Act, Topolos, 698 F.2d at 994, the Court
`is without jurisdiction to hear this claim absent a determination that the ownership question at issue
`would require the application and interpretation of the work-for-hire doctrine. See JustMed, 600 F.3d at
`1123-25.
`
`1. Work-For-Hire Doctrine
`
`In JustMed, the Ninth Circuit held that even if the only copyright issue before a federal court is
`an ownership issue, the court still has subject matter jurisdiction if the claim requires application of the
`work-for-hire doctrine under the Copyright Act. See 600 F.3d at 1124. The facts of that case were as
`follows: a software company brought suit against a software programmer who had taken a particular
`software program from the company’s computers that he contended was his own. Id. at 1121-22. The
`company sued the programmer in state court, asserting state-law claims for misappropriation of a trade
`secret, conversion, breach of fiduciary duty, and intentional interference with a prospective economic
`advantage. Id. at 1122-23. The defendant-programmer then removed the case to federal court,
`contending that the case required determination of ownership of the software under the Copyright Act.
`Id. at 1123.
`
`Raising the issue of jurisdiction sua sponte on appeal, the Ninth Circuit held that the ownership
`issued did present a matter that arose under the Copyright Act because it required analysis of the work-
`for-hire doctrine. Id. at 1123-25. The Ninth Circuit noted that the Supreme Court had provided a
`framework for analyzing work-for-hire issues in Community for Creative Non-Violence v. Reid, 490
`U.S. 730 (1989), and that as a result, resolution of work-for-hire matters required interpretation of the
`Copyright Act. Id. at 1124. In the case before it, the Ninth Circuit held that the work-for-hire doctrine
`applied because the plaintiff-company’s state law claims were predicated on ownership of the
`copyrighted software, and copyright ownership ordinarily “vests initially in the author or authors of the
`work,” which in JustMed was the software programmer. Id. at 1125 (quoting 17 U.S.C. § 201(a)).
`Thus, the court noted that the software company would only be the owner of the software under the
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`Case 2:13-cv-00198-SVW-JCG Document 47 Filed 01/03/14 Page 5 of 6 Page ID #:1050
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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:13-cv-0198-SVW-JCGx
`Roberto Cordero v. Patrick McGonigle et al.
`
`Case No.
`Title
`
`Date
`
`January 3, 2013
`
`work-for-hire exception, which provides that “the employer or other person for whom [a] work [is]
`prepared is considered the author” and owns the copyright if the original author was an employee of the
`employer. Id. (quoting 17 U.S.C. § 201(b)); see also Reid, 490 U.S. at 751. Thus, even though the only
`copyright-related matter to be resolved was an ownership issue, the court held that the necessary
`application of the work-for-hire doctrine provided the court with subject matter jurisdiction over the
`claim. JustMed, 600 F.3d at 1125.
`
`The instant case is distinguishable from JustMed, as the work-for-hire doctrine does not need to be
`applied. This is not a case where the plaintiff has pled that he is the owner of a copyright because of the
`work-for-hire doctrine. Rather, Cordero’s complaint only states that he was the author of the MPM and
`EHR software at issue. As noted above, under the Copyright Act ownership of a work vests initially in the
`author of the work. 17 U.S.C. § 201(a). Thus, assuming there was no contract transferring Cordero’s
`interest in the software to Defendants in consideration for an ownership interest in Med Informatix, Inc.,
`the software is Cordero’s unless the Defendants assert a separate defense to his ownership.
`
`The Defendants may claim that Med Informatix owns the software, even if there was no contract
`between the parties, based on the work-for-hire doctrine if Defendants contend that Cordero produced
`portions of the software while he was an employee of Med Informatix. However, unlike in JustMed, here
`the application of the work-for-hire doctrine would be as a defense. And as the court in JustMed noted, the
`T.B. Harms test is “essentially a reiteration of the ‘well-pleaded complaint’ rule that federal jurisdiction
`exists only when a federal question is presented on the face of a properly pleaded complaint.” Id. at 1124;
`see also Pena v. Downey Sav. and Loan Ass’n, 929 F. Supp. 1308, 1312 (C.D. Cal. 1996) (“A case may not
`be removed on the basis of a federal defense even if the defense is anticipated in the complaint . . . .” (citing
`Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987)). Thus, the work-for-hire doctrine does not need to
`be applied to Cordero’s ownership claim.
`
`IV. CONCLUSION
`
`The only claim asserted in Cordero’s complaint that implicates the Copyright Act is a claim for a
`declaration of ownership. The Ninth Circuit has held that declarations of ownership, absent a claim for
`copyright infringement or another remedy provided for in the Copyright Act, and absent a need to apply the
`work-for-hire doctrine, do not arise under the Copyright Act for purposes of federal subject matter
`jurisdiction under 28 U.S.C. § 1338. Because Cordero’s declaration of ownership is the only claim cited
`to support removal, the case is REMANDED.
`
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`Case 2:13-cv-00198-SVW-JCG Document 47 Filed 01/03/14 Page 6 of 6 Page ID #:1051
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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:13-cv-0198-SVW-JCGx
`Roberto Cordero v. Patrick McGonigle et al.
`
`Case No.
`Title
`
`Date
`
`January 3, 2013
`
`CV-90 (10/08)
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