Case 2:15-cv-02075-SVW-E Document 23 Filed 07/24/15 Page 1 of 5 Page ID #:393
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:15-cv-02075-SVW-E
`Royal Printex, Inc. v. LA Printex Industries, Inc. et al.
`
`Case No.
`Title
`
`Date
`
`July 21, 2015
`
`STEPHEN V. WILSON, U.S. DISTRICT JUDGE
`Present: The Honorable
`N/A
`Paul M. Cruz
`Tape No.
`Court Reporter / Recorder
`Deputy Clerk
`Attorneys Present for Defendants:
`Attorneys Present for Plaintiffs:
`N/A
`N/A
`IN CHAMBERS ORDER GRANTING IN PART Plaintiff’s Motion to
`Remand and for Sanctions [16]
`
`Proceedings:
`
`I.
`
`INTRODUCTION
`
`This action arises from a dispute regarding the existence and breach of a license agreement. On
`February 4, 2015, plaintiff Royal Printex, Inc. (“Royal”) sued defendants L.A. Printex Industries, Inc.
`(“LAP”), Jae S. Nah (“Nah”), and Moon Gie Jung (“Jung”), in California State Court. Plaintiff asserts
`claims for: (1) breach of contract; (2) declaratory relief determining the existence of a valid and binding
`license agreement and the parties’ respective rights and duties in connection therewith; (3) fraud; and (4)
`negligent misrepresentation. (Dkt. 1.) On March 19, 2015, Defendants removed the case to this Court,
`asserting that this Court has jurisdiction because the cases arises under copyright law. (Dkt. 1.)
`
`Currently before the Court is Plaintiff’s motion to remand the case and for sanctions. (Dkt. 16.)
`For the reasons discussed below, the Court GRANTS IN PART the motion and REMANDS the case,
`but DENIES the motion for sanctions.
`
`II.
`
`FACTUAL BACKGROUND
`
` LAP formerly operated textile printing machinery. (Compl. ¶ 2.) In 2010, LAP allegedly
`dismantled and liquidated its printing machinery, and instead contracted with their party printers to print
`its designs onto blank fabric. (Id.) Jung is allegedly LAP’s former general manager. (Compl. ¶ 11.)
`
`During 2010, LAP allegedly commissioned Royal to print textiles for it. (Compl. ¶ 12.) Royal
`asserts that it invoiced LAP for each printing job after the job was completed. (Compl. ¶ 12.) Royal
`asserts that LAP failed to pay Royal’s invoices. (Compl. ¶¶ 12–13.) In November 2010, Jung allegedly
`negotiated an oral, nonexclusive copyright license agreement as an alternate payment arrangement with
`Royal. (Compl. ¶ 14.) The terms of the alleged agreement purportedly dictate that: (1) LAP would
`:
`PMC
`
`Initials of Preparer
`
`CV-90 (06/04)
`
`CIVIL MINUTES - GENERAL
`
`Page 1 of 5
`
`

`
`Case 2:15-cv-02075-SVW-E Document 23 Filed 07/24/15 Page 2 of 5 Page ID #:394
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:15-cv-02075-SVW-E
`Royal Printex, Inc. v. LA Printex Industries, Inc. et al.
`
`Case No.
`Title
`
`Date
`
`July 21, 2015
`
`provide Royal with computer aided design (“CAD”) files for all of its copyright designs; (2) LAP would
`receive $.10 per yard of LAP’s designs printed by Royal, which would first be applied toward LAP’s
`unpaid balance; and (3) once the balance was paid off, “Royal would continue to use the LAP designs at
`the royalty rate of $0.10 per yard and issue payment to LAP in accordance therewith.” (Compl. ¶ 15.)
`
`Allegedly pursuant to the license agreement, Jung delivered to Royal a hard drive with CAD
`files of all of LAP’s designs. (Compl. ¶ 16.) Over the next few years, Royal periodically used LAP’s
`designs, keeping track of its usage in a spread sheet. (Compl. ¶ 17.) However, Royal purportedly did
`not print enough yardage with LAP’s designs to pay off LAP’s outstanding balance. (Compl. ¶¶ 17, 20.)
`
`On February 7, 2014, LAP allegedly repudiated the license agreement and denied having any
`agreement with Royal regarding the use of LAP’s designs. (Compl. ¶ 21.) Royal claims that it asked
`Jung to confirm the existence of the oral licensing agreement between LAP and Royal, and asserts that
`he refused to acknowledge its existence. (Compl. ¶ 22.)
`
`
`III.
`
`LEGAL STANDARD
`
`Removal jurisdiction is generally disfavored. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.
`1992). But it is proper if the case could have been filed in federal court originally. 28 U.S.C. § 1441. A
`removing defendant bears the burden of showing that remand is proper. Calicraft Distributors, LLC v.
`Castro, No. CV 15-01041 BRO AJW, 2015 WL 1789014, at *3 (C.D. Cal. Apr. 17, 2015).
`
`Federal courts have exclusive jurisdiction over “any civil action arising under any Act of
`Congress relating to . . . copyrights.” Scholastic Entm’t, Inc. v. Fox Entm't Grp., Inc., 336 F.3d 982, 985
`(9th Cir. 2003) (alteration in original) (quoting 28 U.S.C. § 1338). However, “just because a case
`involves a copyright does not mean that federal subject matter jurisdiction exists.” Id.; see also Topolos
`v. Caldewey, 698 F.2d 991, 993 (9th Cir. 1983) (“For instance, federal courts do not have jurisdiction
`over a suit on a contract simply because a copyright is the subject matter of the contract.”). Thus,
`federal courts have consistently found that jurisdiction under § 1338 does not exist where a case
`involving a copyright presents only questions of contract law. See id. at 986; Dolch v. United California
`Bank, 702 F.2d 178, 180 (9th Cir.1983). Nevertheless, this “balancing act” between federal and state
`interests “is further complicated by the interdependence of contract and copyright claims, which can
`camouflage the genuine issues to be resolved.” Scholastic Entm’t, 336 F.3d at 986.
`
`The Ninth Circuit applies the test for determining whether a case arises under copyright law set
`forth in T.B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir.1964). Under this test, a case arises under
`copyright law within the meaning of § 1338 if: “(1) the complaint asks for a remedy expressly granted
`
`CV-90 (06/04)
`
`CIVIL MINUTES - GENERAL
`
`Page 2 of 5
`
`Initials of Preparer
`
`:
`PMC
`
`

`
`Case 2:15-cv-02075-SVW-E Document 23 Filed 07/24/15 Page 3 of 5 Page ID #:395
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:15-cv-02075-SVW-E
`Royal Printex, Inc. v. LA Printex Industries, Inc. et al.
`
`Case No.
`Title
`
`Date
`
`July 21, 2015
`
`by the Copyright Act; (2) the complaint requires an interpretation of the Copyright Act; or (3) federal
`principles should control the claims.” Scholastic Entm’t, 336 F.3d at 986. This 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.
`
`The Ninth Circuit has found that a case requiring solely a determination of ownership of
`copyright as a matter of contract law does not arise under copyright law. Dolch, 702 F.2d at 180–81. In
`contrast, where the question of ownership (even as a matter of contract law) is solely a threshold issue to
`a determination of infringement, federal jurisdiction will lie. Vestron, Inc. v. Home Box Office, Inc., 839
`F.2d 1380, 1382 (9th Cir. 1988)
`
` “As the master of the complaint, a plaintiff may defeat removal by choosing not to plead
`independent federal claims.” Calicraft Distribs., 2015 WL 1789014, at *5 (quoting ARCO Envtl
`Remediation, LLC v. Dep't of Health and Envtl. Quality, 213 F.3d 1108, 1114 (9th Cir.2000)).
`Nevertheless, a plaintiff may not defeat removal through “artful pleading”—which occurs when “a
`plaintiff fails to plead necessary federal questions in the complaint.” Id.
`
`IV.
`
`ANALYSIS
`
`A.
`
`Plaintiff’s Motion to Remand
`
`Plaintiff asserts that this case should be remanded because it is purely a state law case that does
`not arise under copyright law. Thus, because there is no other possible basis for jurisdiction over this
`case, Plaintiff requests that it be remanded to state court.1
`
`Plaintiff asserts state law claims for breach of contract, fraud, and negligent misrepresentation.
`Plaintiff also seeks a declaratory judgment regarding the existence of a license agreement and the
`parties’ respective rights and obligations under such agreement.
`
`Plaintiff does not seek any remedy expressly granted by the Copyright Act. Moreover, none of
`Plaintiff’s claims requires an interpretation of the Copyright Act. For example, there is no dispute
`regarding the validity of LAP’s copyrights. Instead, Plaintiff’s claims require the Court to determine
`such questions as: whether Jung was authorized to contract on LAP’s behalf regarding its copyrights,
`whether Jung negligently or intentionally misrepresented his authority to contract on LAP’s behalf
`
`1There is no allegation that the parties are of diverse citizenship as required by 28 U.S.C. §
`1332—both LAP and Royal are allegedly California corporations. (Compl. ¶¶ 1–2.) Nor is there any
`allegation of any other basis for exercising federal question jurisdiction under 28 U.S.C. § 1331.
`:
`PMC
`
`Initials of Preparer
`
`CV-90 (06/04)
`
`CIVIL MINUTES - GENERAL
`
`Page 3 of 5
`
`

`
`Case 2:15-cv-02075-SVW-E Document 23 Filed 07/24/15 Page 4 of 5 Page ID #:396
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:15-cv-02075-SVW-E
`Royal Printex, Inc. v. LA Printex Industries, Inc. et al.
`
`Case No.
`Title
`
`Date
`
`July 21, 2015
`
`regarding its copyrights, whether Jung and Royal entered into a valid licensing agreement, and the terms
`of any licensing agreement entered between LAP and Royal. Each of these questions raises purely state
`law issues. See Segundo Suenos, LLC v. Jones, 494 F. App’x 732, 734 (9th Cir. 2012) (finding that a
`suit seeking a declaratory judgment to be recognized as an assignee with respect to royalties was a state
`contract claim rather than a federal copyright claim); Dolch v. United California Bank, 702 F.2d 178,
`180 (9th Cir. 1983) (stating that the validity of an assignment of renewal rights without consideration is
`a state law question); Hepburn v. Concord Music Grp., LLC, No. 2:14-CV-09237-CAS, 2015 WL
`2084576, at *4 (C.D. Cal. May 4, 2015) (finding that claim for declaration of defendants’ status as
`“assignees, transferees, licensees, and managers” of various copyrights did not arise under copyright law
`because it would require interpretation of contracts and other chain of title documentation rather than the
`Copyright Act). Additionally, there is no “distinctive policy” of the Copyright Act requiring federal
`principles to control the disposition of Plaintiff’s claims. See T.B. Harms, 339 F.2d at 828.
`
`The fact that this is an allegedly indefinite license does not change this conclusion. While an
`issue about the scope, nature, or assignability of the termination right provided by 17 U.S.C. § 203
`would be an issue of copyright law, there is no such issue alleged. While Royal alleges that LAP
`wrongfully repudiated the contract, it does not allege that LAP did so under the guise of terminating a
`license pursuant to § 203. Instead, Royal alleges that LAP denied the contract’s existence in the first
`place. In Scholastic Entertainment, the Ninth Circuit distinguished its opinion in Rano v. Sipa Press,
`Inc., 987 F.2d 580 (9th Cir. 1993). The Court distinguished Rano based on the fact that Rano involved
`an indefinite license while Scholastic Entertainment involved a license with a finite term. Scholastic
`Entm’t, 336 F.3d at 988. Thus, unlike in Rano, the case in Scholastic Entertainment did not arise under
`copyright law. Id. at 988–89. However, the Ninth Circuit did not hold that all contract claims involving
`a license of indefinite duration arise under the Copyright Act. Thus, because this case does not involve
`any issue of termination, it does not arise under the Copyright Act.
`
`Similarly, the fact that LAP could have asserted a counterclaim for copyright infringement does
`not make this a case arising under the Copyright Act. Metro Ford Truck Sales, Inc. v. Ford Motor Co.,
`145 F.3d 320, 326–27 (5th Cir. 1998). The fact that LAP could have initiated an infringement action
`(which it did in a separate case), in which Royal could have counterclaimed for a declaratory judgement
`(which it apparently did), is also unavailing. Royal is the master of its complaint and may choose to
`assert only a state law cause of action even where both federal and state law causes exist. Bernhard v.
`Whitney Nat. Bank, 523 F.3d 546, 551 (5th Cir. 2008). While Royal could have sought a declaration of
`noninfringement, it chose not to do so. Instead, it framed its declaratory judgment request in terms of
`contract law. Because there is no request for a determination regarding infringement, the state contract
`issue is the sole issue to be decided rather than a threshold determination. Moreover, while Royal’s
`litigation choice may be deliberately strategic, it is not a case of improper “artful pleading.”
`
`CV-90 (06/04)
`
`CIVIL MINUTES - GENERAL
`
`Page 4 of 5
`
`Initials of Preparer
`
`:
`PMC
`
`

`
`Case 2:15-cv-02075-SVW-E Document 23 Filed 07/24/15 Page 5 of 5 Page ID #:397
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`2:15-cv-02075-SVW-E
`Royal Printex, Inc. v. LA Printex Industries, Inc. et al.
`
`Case No.
`Title
`
`Date
`
`July 21, 2015
`
`Finally, LAP’s reliance on ABB Inc. v. Cooper Indus., LLC, 635 F.3d 1345 (Fed. Cir. 2011) is
`inapt. ABB is an out-of-circuit case addressing whether a declaratory judgment claim arises under patent
`law for purposes of § 1338. See generally id. Moreover, that case is distinguishable because it was
`originally filed in federal court—thus the presumption against removal did not apply. See id. at
`1347–48. Also, the amended complaint there at issue expressly sought a declaration of
`noninfringement.
`For the aforementioned reasons, the Court GRANTS Royal’s motion to remand and REMANDS
`the case to California state court.
`
`B.
`
`Plaintiff’s Request for Sanctions
`
`Absent “unusual circumstances”, the Court may award sanctions under 28 U.S.C. § 1447(c)
`“only where the removing party lacked an objectively reasonable basis for seeking removal.” Lussier v.
`Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2008). Here, the Court cannot say that LAP
`lacked an objectively reasonable basis for removal. The Court thus DENIES Plaintiff’s request for
`sanctions.
`
`V.
`
`ORDER
`
`1. For the aforementioned reasons, the Court GRANTS Plaintiff’s motion to remand the case
`and REMANDS this action to the Superior court of the State of California.
`
`2. For the aforementioned reasons, the Court DENIES Plaintiff’s motion for sanctions.
`
`CV-90 (06/04)
`
`CIVIL MINUTES - GENERAL
`
`Page 5 of 5
`
`Initials of Preparer
`
`:
`PMC