`*C_ase_2:1_§:cv—OO423—PM—KK Document 28 Filed 09/27/16 Page 1 of 11 Page|D #: 276
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`ZN L«’3J(E CHARLES.
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`SEP 2? 2815
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`TONY Ft
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`‘
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`ORE. CLERK
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`mam.»
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`UNITED STATES DISTRICT COURT
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`WESTERN DISTRICT OF LOUISIANA
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`LAKE CHARLES DIVISION
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`SCHUMACHER HOMES OF
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`* CIVIL ACTION NO. 2:16-cv—00423
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`JUDGE MINALDI
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`*
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`* *
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`*7
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`':
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`LOUISIANA, INC., et al.,
`Plaintiffs
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`v.
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`R.E. WASHINGTON CONSTRUCTION
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`* MAGISTRATE JUDGE KAY
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`LLC, et al.,
`Defendants
`*~k*>':*i<:':>':>l<:k************4:*>':>Y:>‘:9':*9:*9:>':>':>':>':>':*:'<*-k~kkid:*4:vldnl:*9:icicieic-Jvicicv'<:l::l<*-Jn'<*:':9:ivi:9<'J:=l<:':>':i::':4:
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`MEMORANDUM RULING
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`Before the court is a Motion to Dismiss Plaintiffs’ Claims (Rec. Doc. 14) filed by
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`defendants Angel and Michael Carroll (the Carrolls), an Opposition to the Motion to Dismiss
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`Plaintiffs’ Claims (Rec. Doc. 22) filed by plaintiffs Schumacher Homes of Louisiana, Inc. and
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`Schumacher Homes Operations, Inc. (collectively Schumacher), and a Reply (Rec. Doc. 23) filed
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`by the Carrolls. Also before the court is a Motion to Dismiss Cross-Claims (Rec. Doc. 15) filed
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`by the Carrolls, an opposition to the Motion to Dismiss Cross-Claims (Rec. Doc. 19) by R.E.
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`Washington Construction, LLC and Roy Washington (collectively Washington), and a reply
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`(Rec. Doc. 20) filed by the Carrolls. For the following reasons, the Carroll’s Motion to Dismiss
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`Plaintiffs’ Claims (Rec. Doc. 14) will be DENIED in part and GRANTED in part. And the
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`Carrolls’ Motion to Dismiss Cross-Claims (Rec. Doc. 15) will be DENIED in part and
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`GRANTED in part.
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`FACTS & PROCEDURAL HISTORY‘
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`In 2012, the Carrolls Visited a Schumacher showroom, and shortly after, Schumacher
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`prepared a custom home plan for the Carrolls, the Highpoint Custom Design. The Highpoint
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`Custom Design is based on two registered copyrights owned by Schumacher: the “Homestead
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`' All facts are based on the plaintiffs’ complaint (Rec. Doc. 1) unless otherwise noted.
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`1
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`1/99” architectural work and the “Homestead House Plan” technical drawings copyrights.
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`Schumacher provided the Carrolls access to the Highpoint Custom Design, and the Carrolls then
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`gave the custom-made plans to Washington and an unknown draftsperson. Washington maintains
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`that it was unaware that the plans were inspired by or created by Schumacher.2 The defendants
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`used Schumacher’s plans to design and construct a home that is substantially similar to the
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`Highpoint Custom Design and the two registered copyrights. In March 2016, Schumacher filed
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`suit against the Carrolls, Washington, and an unknown draftsperson, alleging five main claims:
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`copyright infringement of an architectural work, copyright infringement of technical drawings,
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`unfair competition under 15 U.S.C. § 1125, conversion under Louisiana state law, and unjust
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`enrichment under Louisiana state law.3 Washington filed an answer which included a cross-claim
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`against the Carrolls, seeking indemnity for any liability it might incur.
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`The Carrolls
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`filed a Motion to Dismiss
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`all claims
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`alleged against
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`them by
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`Schumacher (Rec. Doc. 14) and a Motion to Dismiss Cross-Claims alleged against them by
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`Washington (Rec. Doc. 15) regarding indemnity for the copyright infringement claims,
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`the
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`conversion claim, and the unjust enrichment claim.
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`LAW & ANALYSIS
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`An action can be dismissed under Rule 12(b)(6) of the Federal Rules of Civil Procedure
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`if the claimant fails “to state a claim upon which relief can be granted.” Motions to dismiss are
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`generally “viewed with disfavor and [should be] rarely granted.” Harrington v. State Farm Fire
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`& Cas. C0., 563 F.3d 141, 147 (5th Cir. 2009) (quoting Gregson v. Zurich Am. Ins. C0,, 322
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`F.3d 883, 885 (5th Cir. 2003)). “[The] Court construes the [claims] liberally in favor of the
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`[claimant], and takes all facts pleaded
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`as true.” Id. (quoting Gregsorz, 322 F.3d at 885). To
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`2 Answer (Rec. Doc. 10), para. 74.
`3 Compl. (Rec. Doc. 1). All of the claims were filed against all defendants, except for the unfair competition claim,
`which was filed against Washington only.
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`survive a motion to dismiss, a claimant must plead “enough facts to state a claim to relief that is
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`plausible on its face,” making the right to relief more than merely speculative. Bell Atl. Corp. v.
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`Twombly, 550 U.S. 544, 555, 570 (2007). “Determining whether a complaint [or counterclaim]
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`states a plausible claim for relief [is] a context-specific task that requires the reviewing court to
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`draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
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`A. Schumacher’s Copyright Claims
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`First, the Carrolls argue that Schumacher’s copyright infringement claims should be
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`dismissed. For the following reasons, the Motion to Dismiss the copyright claims will be denied.
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`Before bringing a copyright infringement action, a plaintiff must register or preregister its
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`copyright. 17 U.S.C. § 411(a). This registration requirement also applies to owner—created
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`derivative works, which are adaptations of original copyrighted material. See Creations
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`Unlimited, Inc. v. McCain, 112 F.3d 814, 816 (5th Cir. 1997), abrogated on other grounds by
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`Reed Elsevier, Inc. v. Muchnic, 559 U.S. 154 (2010). Therefore, to determine whether the
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`defendant infringed on a copyright when the action involves an unregistered derivative work, the
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`factfinder may only compare the allegedly infringing material to the registered, copyrighted
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`material. See id.
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`To present a valid a copyright infringement claim, a plaintiff must allege “(l) ownership
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`of a valid copyright and (2) unauthorized copying.” Peel & Co. v. The Rug Mkt., 238 F.3d 391,
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`394 (5th Cir. 2001) (citing Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772, 790 (5th
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`Cir. 1999); Norma Ribbon & Trimming, Inc. v. Little, 51 F.3d 45, 47 (5th Cir.l995)). The
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`factfinder can infer unauthorized copying from “(1) proof that the defendant had access to the
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`copyrighted work prior to creation of the infringing work and (2) probative similarity.” Id. The
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`copying is legally actionable, if the factfinder, after conducting a side-by-side comparison
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`between the original and the copy, determines that a layman would consider the works
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`“substantially similar.” Ia’. This comparison can be made in a 12(b)(6) Motion to Dismiss if both
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`the original and the copy are submitted with the pleadings. Randolph v. Dimension Films, 634 F.
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`Supp. 2d 779, 787 (S.D. Tex. 2009) (citing several cases including, Taylor v. IBM, 54 F. App'x
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`794 (5th Cir. 2002)).
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`Here, Schumacher sufficiently alleged that its infringed copyrights are registered. Based
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`on the complaint, the Highpoint Custom Design4 created for the Carrolls by Schumacher is a
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`nonregistered derivative of Schumacher’s registered “Homestead 1/99”5 architectural work and
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`“Homestead House Plan”6 technical drawings. Therefore, the allegedly copied blueprints created
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`by the defendants must be compared to the registered “Homestead 1/99” architectural work and
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`“Homestead House Plan”7 technical drawings and cannot be compared with the Highpoint
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`Custom Design. See Creations Unlimitea’, Inc., 112 F.3d at 816. While the Carrolls contend that
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`the Highpoint Custom Design is too different from the registered copyrights to be a derivative
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`work,8 this highly factual question cannot properly be resolved during a motion to dismiss where
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`the court must take all facts pleaded as true. See Harrington, 563 F.3d at 147. Furthermore,
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`whether the custom design was a derivative work is largely irrelevant to Schumacher’s copyright
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`claims because the alleged unauthorized copies must be compared to the registered copyrights
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`and not the Highpoint Custom Design. See Creations Unlimited, Inc., 112 F .3d at 816.
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`Schumacher also sufficiently alleged copyright infringement claims—that (1) it is the
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`owner of the copyrights and (2) the defendants copied them without authorization. See Peel &
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`Co., 238 F.3d at 394. Based on the complaint, Schumacher is the owner of valid copyrights to the
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`4 (Rec. Doc. 1-4).
`5 (Rec. Doc. 1-2).
`6 (Rec. Doc. 1-3).
`7 (Rec. Doc. 1-3).
`8 Memo. in Support (Rec. Doc. 14-1), pp. 8-10.
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`“Homestead 1/99” architectural work and “Homestead House Plan” technical drawings.9 The
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`complaint also alleges that the defendants copied these designs when they developed the
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`blueprints for the Carrolls’ new home because the defendants had access to the copyrights
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`through the Highpoint Custom Design and the home has substantial similarities to Schumacher’s
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`registered copyrighted designs. 10 See id. In a l2(b)(6) Motion, the court must take these facts
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`pleaded as true. Harrington, 563 F.3d at 147. Furthermore, the court carmot complete a side—by-
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`side comparison of the original designs and the allegedly copied design because the allegedly
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`copied designs are not included in the pleadings.” Therefore, the Carrolls’ Motion to Dismiss
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`the copyright infringement claims will be denied.
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`B. Schumacher’s State Law Claims
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`Second, the Carrolls argue that Schumacher’s state law claims of conversion and unjust
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`enrichment should be dismissed because (1) federal copyright laws preempts the claims and (2)
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`Schumacher failed to allege facts that support the claims. For the following reasons, the Motion
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`to Dismiss the conversion claim will be denied and the Motion to Dismiss the unjust enrichment
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`claim will be granted.
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`1. Preemption
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`Regarding the Carrolls’ preemption argument, “[t]he Copyright Act expressly preempts
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`all causes of action falling within its scope, with a few exceptions.” Daboub v. Gibbons, 42 F.3d
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`285, 288 (5th Cir. 1995). A cause of action is preempted if ( 1) it falls “within the subject matter
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`of copyright” and (2) “it protects rights that are ‘equivalent’ to any of the exclusive rights of a
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`federal copyright.” Id. at 289. A state conversion claim that is based on the interference of
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`9 See Compl. (Rec. Doc. 1), para. 16-17.
`'0 See Compl. (Rec. Doc. 1), para. 21-26.
`“ The complaint does include external pictures of the Carrolls’ finished house, but because this is not the complete
`copy, the pictures cannot be used for a side—by—side comparison. Exhibit Photos (Rec. Doc. 1-5).
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`5
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`intangible property is preempted by the Copyright Act, but a conversion claim based on the
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`interference of tangible property is not. See Carson v. Dynegy, Inc., 344 F.3d 446, 456-57 (5th
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`Cir. 2003). A conversion claim based on the defendant not returning physical plans and drawings
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`is not preempted because the plaintiff has been physically deprived of its property. See
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`McConley v. Boise Bldg. Sols. Mfg, L.L.C., No. CIV.A. 05-1006-A, 2006 WL 709599, at *5
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`(W.D. La. Mar. 21, 2006). On the other hand, generally “unjust enrichment claims are
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`qualitatively equivalent to a cause of action for copyright infringement and are preempted by the
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`Copyright Act,” unless the claims are based on a breach of contract or a fiduciary duty. Id.
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`(citing Dorsey v. Money Mack Music, Inc., 304 F. Supp. 2d 858, 865 (E.D. La. 2003); Asunto v.
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`Shoup, 132 F. Supp. 2d 445, 453 (E.D. La. 2000)).
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`Here, the Copyright Act does not preempt Schumacher’s conversion claim because the
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`claim is based on the plaintiffs physical deprivation of the Highpoint Custom Design, and the
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`complaint adequately alleges that the defendants possessed documents with the design.” The
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`Carrolls contend that the complaint is inadequate because it does not use the language that
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`Schumacher gave the Carrolls the Highpoint Custom Design.” However, the complaint alleges
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`that the Carrolls “had access to
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`the Highpoint Custom Design and that Schumacher
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`5:14
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`“provide
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`dnl5
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`them with the design. In a motion to dismiss, the court must construe the complaint
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`liberally in favor of the plaintiff, and therefore, these allegations are sufficient to allege a
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`conversion of physical property.
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`12 Compl. (Rec. Doc. 1), para. 62-65.
`‘3 Reply (Rec. Doc. 23), pp. 7-8.
`14 Compl. (Rec. Doc. 1), para. 21.
`15 Compl. (Rec. Doc. 1), para. 61.
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`However, Schumacher’s unjust enrichment claim is preempted by the Copyright Act
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`because the claim is based on the Carrolls
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`use of Schumacher Homes’ copyrighted works,
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`3“
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`9716
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`and is not based on a contractual or fiduciary breach. See McConley, 2006 WL 709599, at *5
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`(citing Dorsey, 304 F. Supp. 2d at 865; Asunto, 132 F. Supp. 2d at 453).
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`2. Failure to state a claim.
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`Second, regarding the Carrolls’ argument that Schumacher did not allege facts sufficient
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`to support its state law claims, the court analyzes only Schumacher’s conversion claim, because
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`the unjust enrichment claim is preempted. Under Louisiana law, a conversion is “[1] an act in
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`derogation of the plaintiffs possessory rights, and any wrongful exercise or assumption of
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`authority over another's goods, [2] depriving him of the possession, [3] permanently or for an
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`indefinite time.” Labbe v. Premier Bank, 618 So. 2d 45, 46 (La. App. 3 Cir. 1993). The Carrolls
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`contend that Schumacher failed to plead that they had physical possession over any documents.
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`However, as previously discussed, Schumacher’s allegations are sufficient to allege that the
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`Carrolls had possession of its physical property.” Therefore, Schumacher pleaded facts that
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`support a conversion claim.
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`C. Washington ’s Indemnification Claimfor Copyright Infringement
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`The Carrolls argue in their Motion to Dismiss Cross-Claims that Washington cannot
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`bring an indemnity claim for copyright infringement because no such right is provided for by the
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`Copyright Act. “A defendant liable under a federal statute has a right to contribution or
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`indemnification from another who has also violated the statute only if such right arises (1)
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`through the affirmative creation of a right of action by Congress, either expressly or implicitly,
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`or (2) Via the power of the courts to formulate federal law.” Envtl. Conservation Org. v. Bagwell,
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`16 Compl. (Rec. Doc. 1), para. 67.
`17 See Compl. (Rec. Doc. 1), para. 21, 61.
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`No. 4:03CV-807-Y, 2005 WL 2465003, at *3 (N.D. Tex. Sept. 30, 2005) (quoting Mags, Inc. v.
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`US. Dist. Ct. for the D. ofNev., 934 F.2d 209, 212 (9th Cir.1991)). While neither the Supreme
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`Court nor this circuit have definitively stated whether a defendant has a right to indemnify under
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`the Copyright Act, “numerous other courts have held that no such right exists.” Crispin v.
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`Christian Audigier, Inc., 839 F. Supp. 2d 1086, 1099—100 (C.D. Cal. 2011). See also Gaines v.
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`Fusari, No. CIV. 2:11-04433 WJM, 2013 WL 1934664, at *1 (D.N.J. May 8, 2013) (“[N]either
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`federal statutory law nor federal common law provide causes of action for indemnification or
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`contribution in Copyright Act cases”); Frank Betz Associates, Inc. v. Signature Homes, Inc., No.
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`CIV.A. 3206-0911, 2009 WL 2151304, at *3 (M.D. Tenn. July 13, 2009) (“It is generally, if not
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`entirely, accepted that there is no common law right of indemnification under the Copyright
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`Act”); Elektra Entm't Grp. Inc. v. Santangelo, No. 06 CIV 11520 SCR MDF, 2008 WL 461536,
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`at *2 (S.D.N.Y. Feb. 15, 2008) (“[Because] no such rights exist under either the Copyright Act or
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`federal common law. . .Defendants cannot proceed with their proposed third-party claim of
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`indemnification and/or contribution for copyright infringement”); Pure Country Weavers, Inc. v.
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`Bristar, Inc., 410 F. Supp. 2d 439, 448 (W.D.N.C. 2006) (“[N]o right of indemnification was
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`affirrnatively created (either expressly or implicitly) by Congress in the Copyright Act, and
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`this is not one of the ‘limited situations’ in which the Court should formulate federal common
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`law to create such a right.”). However, courts have held that indemnification claims can be
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`asserted under state statutes, if the statute under which it is asserted is not preempted by the
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`Copyright Act. See Frank Betz Associates, Inc., 2009 WL 2151304, at *4; Pure Country
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`Weavers, 410 F.Supp.2d at 448—49. For example in Pure Country Weavers, Inc. v. Bristar, Inc.,
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`the defendants brought third party indemnification claims based on a violation of a Georgia
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`statute that gave a warranty against infringement. 410 F. Supp. 2d at 448-49. The court allowed
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`the claim after it determined that the Georgia statute creating the right was not preempted by the
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`Copyright Act. Id. at 449.
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`Washington argues that its indemnification claim based on its potential liability under the
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`Copyright Act is a state law claim. 18 However, the right to indemnify for liability under a federal
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`statue must arise out of that statute or through federal common law. Envtl. Conservation Org. ,
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`2005 WL 2465003, at *3 (citing Mags., Inc., 934 F.2d at 212). A state law indemnification claim
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`must be based on a state statute that is not preempted by the Copyright Act. See Frank Betz
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`Associates, Inc., 2009 WL 2151304, at *4; Pure Country Weavers, 410 F.Supp.2d at 448-49.
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`Washington presented no argument that its claim for indemnification for the copyright
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`infringement claims was based on a state statute that would not be preempted by the Copyright
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`Act.” Therefore, this court follows the reasoning of numerous other courts that have addressed
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`this question and finds that because there is no right to indemnification under the Copyright Act,
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`Washington’s indemnification claim for copyright infringement will be dismissed.
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`D. Washington ’s Indemnification Claimfor Conversion and Unjust Enrichment
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`Finally, the Carrolls argue that Washington’s indemnification claims for the state law
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`claims of conversion and unjust enrichment should be dismissed. As an initial matter, the court
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`will dismiss the indemnification claim for unjust enrichment because as previously discussed the
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`unjust enrichment claim brought by Schumacher is preempted by the Copyright Act. However,
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`Washington’s indemnification claim for conversion will not be dismissed.
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`“Louisiana law allows claims for tort indemnity only when the third-party plaintiffs
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`negligence is passive or its fault is only technical or theoretical.” Threlkeld v. Haskins Law Firm,
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`922 F.2d 265, 267 (5th Cir. 1991). An indemnity claim should not be dismissed if “[t]here is [a]
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`18 Opposition (Rec. Doc. 19).
`19 See Opposition (Rec. Doc. 19).
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`
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`foreseeable combination of findings, Viewing the allegations of the pleadings
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`in the light most
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`favorable to [the party seeking indemnity], that could result in [that party] being cast in judgment
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`for mere technical or passive fault.” Id. at 267-68. Because “issues of fault, intent, negligence,
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`knowledge or ignorance, and/or good faith are not involved in actions for tortious conversion,” a
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`defendant may be liable for conversion without knowing that the property belonged to another.
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`Hagberg v. Manuel, 525 So. 2d 19, 22 (La. Ct. App. 1988) (citing Lincecum v. Smith, 287 So.2d
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`625 (La.App. 3rd Cir.l973), writ refused, 290 So.2d 904 (La.1974)).
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`In its answer Washington alleges that it had no knowledge that the plans furnished to it
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`by the Carrolls were inspired or created by Schumacher.” Based on this theory, Washington
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`could still be technically liable for the tort of conversion because its knowledge is irrelevant, but
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`Washington’s liability would be entirely caused by the negligent or intentional acts of the
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`Carrolls. Therefore, Washington’s indemnity claim for conversion should not be dismissed
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`because the facts alleged could result in Washington being liable for conversion based
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`principally on the negligent or intentional acts of the Carrolls. See Threlkela’, 922 F.2d at 267.
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`CONCLUSION
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`In conclusion, Schumacher has sufficiently pleaded facts to support its copyright
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`infringement claims based on its registered copyrights. Schumacher also pleaded facts to support
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`its state law conversion claim, a claim that is not preempted by federal copyright law. Therefore,
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`the Carrolls’ Motion to Dismiss Plaintiffs’ Claims (Rec. Doc. 14) will be DENIED regarding the
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`copyright infringement claims and the conversion claim. However, Schumacher’s unjust
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`enrichment claim is preempted by federal copyright law, and the Carrolls’ Motion to Dismiss
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`Plaintiffs’ Claims (Rec. Doc. 14). will be GRANTED regarding the unjust enrichment claim.
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`Additionally, Washington has sufficiently pleaded facts to support an indemnification claim for
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`2° Answer (Rec. Doc. 10), para. 74-80.
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`10
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`conversion, and the Carrolls’ Motion to Dismiss Cross-Claims (Rec. Doc. 15) will be DENIED
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`in regard to that indemnification claim. Washington’s indemnification claim for copyright
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`infringement will be dismissed because no such right exists under the Copyright Act, and its
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`indemnification claim for unjust enrichment will be dismissed because Schumacher’s unjust
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`enrichment claim is preempted. Therefore, the Carrolls’ Motion to Dismiss Cross-Claims (Rec.
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`Doc. 15) will be GRANTED regarding the indemnification claims for copyright infringement
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`and unjust enrichment.
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`Lake Charles, Louisiana, thimday of
`, 2016.
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`
`UNITED STATES DISTRICT JUDGE
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`ll