`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF TEXAS
`HOUSTON DIVISION
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`GARY GUAJARDO, et a].,
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`Plaintiffs,
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`V.
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`FREDDIE RECORDS, INC., et al.,
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`Defendants.
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`0
`§
`4
`§
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`CIVIL ACTION NO. H- 10-2024
`MEMBER CIVIL ACTION NOS.
`§ H-10-2995andH-11-1774
`§
`5
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`MEMORANDUM AND RECOMMENDATION
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`Pending in this case that has been referred pursuant to 28 U.S.C. 636 (b)(l)(A) and (B) is
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`the Martinez Defendants' Motion to Dismiss Plaintiffs' Third Amended Complaint or in the
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`Alternative Motion for More Definite Statement (Document No. 92). Having considered the motion,
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`the response, the allegations in Plaintiffs' Third Amended Complaint, and the applicable law, the
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`Magistrate Judge RECOMMENDS, for the reasons set forth below, that the Martinez Defendants'
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`Motion to Dismiss be GRANTED in PART and DENIED in PART, and that the alternative Motion
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`for More Definite Statement be GRANTED.
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`I.
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`Background and Procedural History
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`This is essentially a copyright infringement case. Plaintiffs are either musicians, or
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`heirs/representatives ofmusicians, who claim that Defendants have used their "musical compositions
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`and sound recordings without obtaining the appropriate licenses or permission." Third Amended
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`Complaint (Document No. 90) at 16. Through several amendments, and the consolidation of two
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`related cases, Civil Action Nos. H- 10-2995, and H- 1 1 - 1774, this case now has eight plaintiffs, and
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`twenty-three defendants. From the outset, however, the main, targeted defendants were: Freddie
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`Records, Inc. n1Wa Big F, Inc., and Freddie Martinez, Sr., both of whom have filed for bankruptcy
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`and against whom all claims have now been stayed. (Document No. 23 & 86). In addition, as to all
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`the remaining defendants, the fraud, fraudulent transfer and constructive trust claims have been
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`stayed. (Document No. 88). That leaves currently pending Plaintiffs' claims against the Martinez
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`~efendants' of copyright infringement, breach of contract, declaratory judgment, misappropriation
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`of name, image and likeness, negligence, and conspiracy, alter ago and pattern of wrongful activity.
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`The Martinez Defendants seek dismissal of those claims pursuant to FED. R. CIV. P. 12(b)(6).
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`11.
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`Standard of Review
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`A.
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`Rule 12(b)(6)
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`Rule 12(b)(6) provides for dismissal of an action for "failure to state a claim upon which
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`relief can be granted." FED. R. CIV. P. 12(b)(6). "To survive a motion to dismiss, a complaint must
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`contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its
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`face."' Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp.
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`v. Twombly, 550 U.S. 544, 570 (2007)). A claim is said to be plausible if the complaint contains
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`"factual content that allows the court to draw the reasonable inference that the defendant is liable for
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`' The "Martinez Defendants" are all individuals and entities that appear to be related to
`Freddie Martinez, Sr. and Freddie Records, Inc., the two Defendants who are in bankruptcy and
`against whom all proceedings have been stayed. As defined by Plaintiffs in their Third Amended
`Complaint, the Martinez Defendants include: Freddie Records, Inc. n/Wa Big F, Inc.; Freddie
`Martinez, Sr.; Freddie Martinez, Jr.; John Martinez; Marc J. Martinez; JoAnn Martinez; Lee
`Martinez, Jr.; Brothers Trei, Ltd., Sterling Management, Inc.; A.R. Martinez Family Limited
`Partnership; Martzcom Music, L.L.C.; Marfre L.L.C.; Discos Freddie S.A. de C.V.; John Martinez,
`L.L.C.; SCMP, L.L.C.; Purple Sky Enterprises, L.L.C.; John Martinez as Custodian for Elizabeth
`Martinez, Lauren Martinez, and Madeline Martinez; Martinez Land and Buffalo Company, L.L.C.;
`and ELM Land and Buffalo Company, LLC.
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`Case 4:10-cv-02024 Document 130 Filed in TXSD on 08/29/12 Page 3 of 20
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`the misconduct alleged." Iqbal, 129 S.Ct. at 1949. Plausibility will not be found where the claim
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`alleged in the complaint is based solely on legal conclusions, or a "formulaic recitation of the
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`elements of a cause of action." Twombly, 550 U.S. at 555. Nor will plausibility be found where the
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`complaint "pleads facts that are merely consistent with a defendant's liability" or where the
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`complaint is made up of "'naked assertions devoid of further factual enhancement.'" Iqbal, 129 S.Ct.
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`at 1949 (quoting Twombly, 550 U.S. at 557)). Plausibility, not sheer possibility or even
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`conceivability, is required to survive a Rule 12(b)(6) motion to dismiss. Twombly, 550 U.S. at 556-
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`557; Iqbal, 129 S.Ct. at 1950-1951.
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`In considering a Rule 12(b)(6) motion to dismiss, all well pleaded facts are to be taken as
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`true, and viewed in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232,236
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`(1974). But, as it is only facts that must be taken as true, the court may "begin by identifying the
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`pleadings that, because they are no more than conclusions, are not entitled to the assumption of
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`truth." Iqbal, at 1950. It is only then that the court can view the well pleaded facts, "assume their
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`veracity and [ ] determine whether they plausibly give rise to an entitlement to relief." Iqbal, at
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`1950.
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`B. More Definite Statement
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`Under Fed. R. Civ. P. 12(e), "[a] party may move for a more definite statement of a pleading
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`to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot
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`reasonably prepare a response." A party seeking a more definite statement "must point out the
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`defects complained of and the details desired." Id. Whether to grant a motion for more definite
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`statement is left to the "sound and considered discretion" of the "Trial Judge as he presides over the
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`continuous process of adjudication from commencement of the litigation through pleadings, pretrial
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`discovery, trial, submission and decision." Mitchell v. E-Z Way Towers, Inc., 269 F.2d 126,130 (5'h
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`Cir. 1959).
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`C.
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`Amendment
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`Under FED. R. CIV. P. 15(a)(2) leave to amend should be freely given "when justice so
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`requires." When a claim is subject to dismissal under Rule 12(b)(6) for failure to state a claim,
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`"district courts often afford plaintiffs at least one opportunity to cure pleading deficiencies. . . unless
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`it is clear that the defects are incurable or the plaintiffs advise the court that they are unwilling or
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`unable to amend in a manner that will avoid dismissal." Great Plains Trust Co. v. Morgan Stanley
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`Dean Witter & Co., 331 F.3d 305, 329 (5th Cir. 2002).
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`111. Discussion
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`A.
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`Copyright Infringement Claim(s)
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`In the copyright infringement claim against the Martinez Defendants, Plaintiffs allege that
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`they "wrote the music and lyrics for numerous original compositions, all of which are copyrightable
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`under the laws of the United States," that Plaintiffs "have complied with, or are complying with, the
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`statutory registration and deposit requirements of the Federal Copyright Act of 1976 as [to] the
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`works at issue," that "the Martinez Defendants intentionally continue to use Plaintiffs' original
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`musical compositions and sound recordings without obtaining the appropriate licenses or permission
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`from Plaintiffs," that "Plaintiffs never executed a written assignment of copyrights or ownership in
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`their musical compositions and sound recordings," and that "the Martinez Defendants willfully
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`infringed and continue to willfully infringe upon Plaintiffs' common law and statutory copyrights."
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`Third Amended Complaint (Document No. 90) at 16-17. Plaintiffs seek "a finding that Plaintiffs
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`are the owners of said copyrights," and damages associated with the alleged infringement thereof.
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`The Martinez Defendants, in their Motion to Dismiss or for More Definite Statement, argue
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`that Plaintiffs' copyright infringement claims are subject to dismissal under Rule 12(b)(6) because
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`"Plaintiffs' Third Amended Complaint fails to plead registration or the Copyright Office's receipt
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`of an application for registration." Motion to Dismiss (Document No. 92) at 16. In addition, the
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`Martinez Defendants argue that Plaintiffs' allegations of copyright infringement are conclusory and
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`fail to "1) identify the particular copyrighted work at issue; (2) identify the [constituent] element[s]
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`of the work[s] that were copied; 3) identify who copied the [constituent] elements; 4) identify how
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`the [constituent] element[s] were copied; and 5) when the [constituent] element was copied." Id. at
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`17.
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`Pursuant to 17 U.S.C. 5 41 1(a), "no civil action for infringement of the copyright in any
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`United States work shall be instituted until preregistration or registration of the copyright claim has
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`been made in accordance with this title." In the absence of a copyright registration, or a pending
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`application for such, a copyright infringement claim is subject to dismissal under FED. R. CIV. P.
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`12(b)(6) for failure to state a claim. Real Estate Innovations, Inc. v. Houston Ass'n of Realtors, Inc.,
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`422 Fed. Appx. 344, 348, 201 1 WL 1453929 *3 (Sh Cir.), cert. denied, 132 S.Ct. 249 (201 I)..
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`Here, there is no direct or particularized allegation by Plaintiffs that they have either
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`registered their copyrights or have made applications for such. What Plaintiffs have alleged is that
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`they have "complied with, or are complying with, the statutory registration and deposit requirements
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`of the Federal Copyright Act of 1976 as [to] the works at issue [in this case]" Third Amended
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`Complaint (Document No. 90) at 16. In considering a Rule 12(b)(6) motion, these allegations are
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`Case 4:10-cv-02024 Document 130 Filed in TXSD on 08/29/12 Page 6 of 20
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`to be taken as true. So taken, Plaintiffs have alleged their compliance with the registrationldeposit
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`requirements of 17 U.S.C. $ 4 1 1 (a).
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`As for the Martinez Defendants' complaints that Plaintiffs have pled nothing more than
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`conclusory allegations of copyright infringement, taking all of Plaintiffs' factual allegations as true,
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`and in a light most favorable to Plaintiffs, Plaintiffs have stated a claim for copyright infringement
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`against the Martinez Defendants. Plaintiffs have identified the works that are subject to copyright
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`protection, and have alleged the Martinez Defendants used, and continue to use, those works without
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`permission or authorization. Bridgmon v. Array Sys. Corp., 325 F.3d 572,576 (5th Cir. 2003) (the
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`elements of a copyright infringement claim are "(1) ownership of a valid copyright and (2) actionable
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`copying, which is the copying of constituent elements of the work that are copyrightable."). While
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`Plaintiffs have not alleged what each of the Martinez Defendants independently did that constitutes
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`infringement, Plaintiffs do allege that the Martinez Defendants have acted in concert and that the
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`"the Martinez Defendants and their various entities and enterprises are alter egos of each other."
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`Third Amended Complaint (Document No. 90) at 22. Given these allegations, Plaintiffs' copyright
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`infringement claim is not subject to dismissal under Rule 12(b)(6). See e.g. Price v. New Light
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`Church, Civil Action No. 4:lO-cv-2540,2011 WL 1376745 at "3-4 (S.D. Tex. 201 1) (Ellison, J)
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`(finding that reference to several defendants collectively did not warrant the dismissal of the
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`plaintiffs copyright infringement claims).
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`The Martinez Defendants are, however, entitled to a more definite statement of Plaintiffs'
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`copyright infringement claim(s). See id. (requiring plaintiff to file a more definite statement of her
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`copyright claims to address the "ambiguity regarding the identity of the precise composition of the
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`Defendants that allegedly committed the wrongful acts"). In particular, each defendant is entitled
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`to know how they are alleged to have infringed on Plaintiffs' copyrights and what actions or conduct,
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`as to each copyrighted work, constitutes infringement. Although this information may be obtained
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`through discovery, each defendant is entitled to fair notice, through the pleadings, of the conduct
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`Plaintiffs are alleging support their claim of copyright infringement as against each defendant. This
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`particularly so given that two of the defendants who make up what Plaintiffs refer to collectively in
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`their pleadings as the "Martinez Defendants" are in bankruptcy and all claims against them have
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`been stayed.
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`B.
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`State Law Claims
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`Plaintiffs have asserted state law claims against the Martinez Defendants of misappropriation
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`of name, image and likeness, breach of contract, negligence and conspiracy. In addition to arguing
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`that Plaintiffs have not pled their state law claims with the sufficiency or plausibility required by
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`Twombly, the Martinez Defendants argue that the state law claims are pre-empted by the Copyright
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`Act.
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`Under 17 U.S.C. § 301(a), state laws or state law claims that create "legal or equitable rights
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`that are equivalent to any of the exclusive rights within the general scope of the copyright as
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`specified by section 106" are preempted by the Copyright Act. Section 106 of the Copyright Act
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`grants copyright owners the "exclusive" rights to reproduce, distribute, perform and display the
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`copyrighted work.2 In determining what state law claims are preempted, the two-part test set forth
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`* 17 U.S.C. 8 106 provides:
`Subject to sections 107 through 122, the owner of copyright under this title has the
`exclusive rights to do and to authorize any of the following:
`(1) to reproduce the copyrighted work in copies or phonorecords;
`(2) to prepare derivative works based upon the copyrighted work;
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`in Carson v. Dynegy, Inc., 344 F.3d 446,456 (Yh Cir. 2003) is utilized. Under that two part test, the
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`state law cause of action "is examined to determine whether it falls 'within the subject matter of
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`copyright' as defined by 17 U.S.C. 3 102." Id. Section 102 defines the "subject matter of copyright"
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`as follows:
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`(a) Copyright protection subsists, in accordance with this title, in original works of
`authorship fixed in any tangible medium of expression, now known or later
`developed, from which they can be perceived, reproduced, or otherwise
`communicated, either directly or with the aid of a machine or device. Works of
`authorship include the following categories:
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`(1) literary works;
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`(2) musical works, including any accompanying words;
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`(3) dramatic works, including any accompanying music;
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`(4) pantomimes and choreographic works;
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`(5) pictorial, graphic, and sculptural works;
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`(6) motion pictures and other audiovisual works;
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`(7) sound recordings; and
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`(3) to distribute copies or phonorecords of the copyrighted work to the public by sale
`or other transfer of ownership, or by rental, lease, or lending;
`(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes,
`and motion pictures and other audiovisual works, to perform the copyrighted work
`publicly;
`(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes,
`and pictorial, graphic, or sculptural works, including the individual images of a
`motion picture or other audiovisual work, to display the copyrighted work publicly;
`and
`(6) in the case of sound recordings, to perform the copyrighted work publicly by
`means of a digital audio transmission.
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`(8) architectural works.
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`(b) In no case does copyright protection for an original work of authorship extend to
`any idea, procedure, process, system, method of operation, concept, principle, or
`discovery, regardless of the form in which it is described, explained, illustrated, or
`embodied in such work.
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`17 U.S.C. fj 102 If the state law cause of action is based on or relates to the "subject matter of
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`copyright," then the state law cause of action is "examined to determine if it protects rights that are
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`equivalent to any of the exclusive rights of a federal copyright, as provided in 17 U.S.C. fj 106."
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`Carson, 344 F.3d at 456 (citing Gemcraft Homes, Inc. v. Sumurdy, 688 F.Supp. 289,294 (E.D. Tex.
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`1988)). If the state law cause of action is "equivalent," it is preempted by the Copyright Act; if it
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`is not "equivalent," it is not preempted.
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`A state law cause of action is not "equivalent" if "'one or more qualitatively different
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`elements are required to constitute the state-created cause of action being asserted."' Id. (quoting
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`Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772, 787 (5th Cir. 1999)). In other words,
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`equivalence is determined by comparing the qualitative elements ofthe state law cause of action with
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`the qualitative elements of a claim for copyright infringement. If the qualitative elements are the
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`same, the state law cause of action is equivalent to a claim of copyright infringement and is
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`preempted. Carson, 344 F.3d at 456-57.
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`Here, applying the two-part test set forth in Carson, it is clear that Plaintiffs' claims are
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`based on, or relate to, Plaintiffs' alleged copyrighted works. Plaintiffs' state law causes of action
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`for misappropriation, breach of contract, and negligence, however, are not, as they have been pled,
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`equivalent to claims of copyright infringement. As set forth more fully below, Plaintiffs'
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`misappropriation, breach of contract and negligence claims all have qualitatively different elements
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`than a claim of copyright infringement. In addition, with respect to the misappropriation claim, it
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`is not the copyright that is at issue, but the Martinez Defendants' alleged use of Plaintiffs' names,
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`images and likenesses to further their alleged copyright infringement. See Brown v. Ames, 201 F.3d
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`654,656 (Sh Cir.) (a claim of misappropriation of name image or likeness is not preempted by the
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`Copyright Act because a name or likeness is not copyrightable), cert. denied, 53 1 U.S. 925 (2000).
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`As for the breach of contract claim, courts have generally concluded that such claims are not
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`preempted by the Copyright Act because they involve a contract promise, "an element in addition
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`to mere reproduction, distribution or display." Taquino v. Teledyne Monarch Rubber, 893 F.3d
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`1488, 1501 (Sh Cir. 1990), cited with approval in Real Estate Innovations, Inc., 422 Fed. Appx. at
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`*349. The same holds true in this case given Plaintiffs' allegations that the Martinez Defendants
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`"failed to comply with the terms of their agreements with Plaintiffs." Third Amended Complaint
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`(Document No. 90) at 17. Finally, the negligence claim is based on the Martinez Defendants' failure
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`to implement and use reasonable mechanisms "to monitor and document the manufacturing,
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`distribution [and] sales" of Plaintiffs' works. Third Amended Complaint (Document No. 90) at 20.
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`Because the elements of Plaintiffs' misappropriation, breach of contract and negligence claims are
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`qualitatively different than the elements of Plaintiffs' copyright infringement claim, such claims are
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`not preempted by the Copyright Act.
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`Whether such claims have been sufficiently alleged under Twombly and Iqbal is a separate
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`inquiry.
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`1.
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`Misappropriation
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`In support of their claim of misappropriation of name, image and likeness, Plaintiffs allege
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`that the "Martinez Defendants have exploited the name, images, and likenesses of Plaintiffs without
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`Case 4:10-cv-02024 Document 130 Filed in TXSD on 08/29/12 Page 11 of 20
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`express written permission. Specifically, the Martinez Defendants have used Plaintiffs' names,
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`images, and likenesses to promote Defendants' own unauthorized exploitation of Plaintiffs' Works."
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`Third Amended Complaint (Document No. 90) at 18.
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`The elements of a state law claim for misappropriation of name, image or likeness are: "(i)
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`that the defendant appropriated the plaintiffs name or likeness for the value associated with it, and
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`not in an incidental manner or for a newsworthy purpose; (ii) that the plaintiff can be identified from
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`the publication; and (iii) that there was some advantage or benefit to the defendant." Matthews v.
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`Wozencraft 15 F.3d 432, 437 (Sh Cir. 1994). Here, taking Plaintiffs' allegations in the Third
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`Amended Complaint as true, and in a light most favorable to Plaintiffs, a claim has been stated for
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`misappropriation of name, image or likeness. Plaintiffs allege that the Martinez Defendants have
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`used their names, images and likenesses, and that the Martinez Defendants did so to further their
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`sales of Plaintiffs' copyrighted works. While Plaintiffs' allegations do not identify, on a defendant-
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`by-defendant basis, the actions supporting the misappropriation claim, neither Twombly or Iqbal
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`require such pleading, particularly where there are allegations that the Martinez Defendants were all
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`acting in concert, with their various entities and enterprises all being alter egos of each other.
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`Plaintiffs' state law claim of misappropriation of name, image and likeness is therefore not subject
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`to dismissal under Rule 12(b)(6).
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`The Martinez Defendants are, however, entitled to a more definite statement of that claim.
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`In particular, the Martinez Defendants are entitled to know how each defendant is alleged to have
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`misappropriated each Plaintiffs name, image or likeness.
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`2.
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`Breach of Contract
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`In support of their breach of contract claim against the Martinez Defendants, Plaintiffs allege
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`that the "Martinez Defendants failed to comply with the terms of their agreements with Plaintiffs .
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`. . failed to protect Plaintiffs' Works and the rights therein, failed to remit to Plaintiffs the revenue
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`derived from exploitation of Plaintiffs' Works, and failed to provide Plaintiffs with a proper
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`accounting." Third Amended Complaint (Document No. 90) at 17
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`In Texas, the elements of a breach of contract claim include: "(1) the existence of a valid
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`contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the
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`defendant; and (4) damages sustained by the plaintiff as a result of the breach." Smith Int 'I, Inc. v.
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`Egle Group, LLC, 490 F.3d 380,387 (5th Cir. 2007). Here, a careful review of the allegations in the
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`Third Amended Complaint reveals no allegation of a valid contract as between most of the Plaintiffs
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`and the Martinez Defendants. In particular, with respect to many of the Plaintiffs, the allegations
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`are that there were no contracts or agreement:
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`Hugo Cesar Guerrero: . . . . Plaintiff never signed a contract or entered into a
`songwriting agreement, recording agreement, or producing agreement with any of the
`Defendants. . . .
`Ysidro Ortiz, Jr.: . . . . Ortiz never entered any agreement, recording agreement, or
`producing agreement with any of the Defendants. . . .
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`Arturo Rene Serrata: . . . Serrata never signed a recording or songwriting agreement
`at any time with any of the Martinez Defendants. . . .
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`Plaintiffs' Third Amended Complaint (Document No. 90) at 1 1, 13, 15. With respect to another
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`Plaintiff, all that is alleged is that the Martinez Defendants made them certain "promises":
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`Gary Guajardo: . . . . The Martinez Defendants falsely represented to Guajardo that
`if he conveyed possession of his Works to them, it would be to his financial benefit
`and misrepresented the Martinez Defendants' intentions, obligations and
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`Case 4:10-cv-02024 Document 130 Filed in TXSD on 08/29/12 Page 13 of 20
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`actions. The Martinez Defendants also promised that they would help protect his
`rights and interests in his Works. . . .
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`Plaintiffs' Third Amended Complaint (Document No. 90) at 10 (emphasis in original). And, for
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`other Plaintiffs (Adan Sanchez, Leticia Salcedo, Ruben Guanajuato), there are no allegations at all
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`of any agreement or promise. Third Amended Complaint (Document No. 90) at 12,14,15- 16. Only
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`with respect to Plaintiff Arnold Martinez is there any allegation of a contract or agreement:
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`Arnold Martinez: . . . . The Martinez Defendants promised Martinez, both verbally
`and in writing, that they would include his songs on compilation albums and promote
`the songs, yet failed to do so. . . . The Martinez Defendants manipulated Gilbert
`Martinez [Arnold Martinez' father] to enter a non-standard and unfavorable
`Exclusive Composer's Agreement with Marfre Music Publishing, Inc. Per this
`agreement, the Martinez Defendants agreed to pay Gilbert Martinez a 1 y? royalty for
`each record sold. However, the Martinez Defendants breached the Agreement, and
`while this rate is per se overreaching and unfair, Defendants never remitted royalties
`to Gilbert Martinez or his family for any of his Works or for any records sold.
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`Third Amended Complaint (Document No. 90) at 12- 13.
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`In light of these allegations, Plaintiffs' subsequent overarching allegation in the Third
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`Amended Complaint that the Martinez Defendants "failed to comply with the terms of their
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`agreements with Plaintiffs" is nothing more than a legal conclusion. With the exception of the
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`breach of contract claim by Plaintiff Arnold Martinez, there are no facts from which a reasonable
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`inference could be made that the remaining Plaintiffs entered into valid, enforceable contracts with
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`the Martinez Defendants. All Plaintiffs, other than Plaintiff Arnold Martinez, have failed to state
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`breach of contract claim(s) against the Martinez Defendants and those claims are subject to dismissal
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`under Rule 12(b)(6). See e.g., Real Estate Innovations, Inc., 422 Fed. Appx. at 349-350 (upholding
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`dismissal of the breach of contract claims where plaintiff failed to plead "the existence of a contract
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`between it and the defendants or the factual basis for a breach of any such contract.").
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`Notwithstanding Plaintiffs' failure to state a claim for breach of contract against the Martinez
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`Defendants (other than Plaintiff Arnold Martinez), Plaintiffs should be allowed to amend their
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`complaint to cure these pleading deficiencies, if possible.
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`3.
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`Negligence
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`In support of their negligence claim, Plaintiffs allege that "Defendants' conduct is negligent
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`and grossly negligent in that Defendants failed to conduct their business in the same or similar
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`fashion as would a reasonably prudent record company, publisher, manufacturer, accountant and
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`distributor," that "the Martinez Defendants neglected to set up systems or any reasonably prudent
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`mechanism with which to monitor and document the manufacturing, distribution, sales or other
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`exploitation of Works," that the Martinez Defendants "failed to exercise ordinary care to assure that
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`the rights of others weren't damaged in the course of Defendants' activities," and that "[nlo controls
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`were in place to assure that cash transactions and in-house manufacturing were handled in
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`accordance with generally acceptable accounting principles." Third Amended Complaint (Document
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`No. 90) at 20-2 1.
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`In Texas, to state a negligence claim, Plaintiffs must allege with facts that the Martinez
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`Defendants owed them a duty, that the Martinez Defendants breached that duty, and that the breach
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`proximately caused harm to Plaintiffs. Davis v. Dallas County, 541 F. Supp. 2d 844,850 (N.D. Tex.
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`2008) (quoting W: Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005)). "The threshold inquiry
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`in a negligence case is whether the defendant owes a legal duty to the plaintiff." Centeq Realty, Inc.
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`v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995).
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`Here, Plaintiffs have not alleged in their Third Amended Complaint that they were owed a
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`duty by the Martinez Defendants. While Plaintiffs argue in their Response to the Martinez
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`Case 4:10-cv-02024 Document 130 Filed in TXSD on 08/29/12 Page 15 of 20
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`Defendants' Motion to Dismiss that the Third Amended Complaint does contain such allegations,
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`they are nowhere to be found. In addition, to the extent such allegations can reasonably be inferred
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`from the allegations that are in the Third Amended Complaint, they are insufficient to state a claim
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`for negligence against the Martinez Defendants. That is because Plaintiffs have not articulated from
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`where such a duty arises. "A duty represents a legally enforceable obligation to conform to a
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`particular standard of conduct." Way v. Boy Scouts of America, 856 S. W.2d 230, 233 (Tex.
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`App.-Dallas 1993). Here, there are no allegations that set forth a legally enforceable obligation on
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`the part of the Martinez Defendants. In addition, there are no allegations as to any particular
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`standard of conduct to which Plaintiffs seek to hold the Martinez Defendants. Moreover, given
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`Plaintiffs' allegations that the Martinez Defendants did not "comply with the terms of their
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`agreements," "failed to remit to Plaintiffs the revenue derived from exploitation of Plaintiffs'
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`Works," and "failed to provide Plaintiffs with a proper accounting," any "duty" to be gleaned from
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`the pleadings can only be said to arise from the parties' contractual dealings. Such contractual
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`dealings, and any duty arising therefrom, cannot support a negligence claim. See King v. Ames, Civil
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`Action No. 3 :95-CV-3 1 80-G, 1997 WL 864 16 (N.D. Tex. 1997) (finding no duty, apart from that
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`created by contract to support musician's negligence claim, which was based on defendants alleged
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`failure "to act as a reasonably prudent record company"), aff'd in part, 179 F.3d 370, 375 (Sh Cir.
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`1999) ("the district court found that the only duty Ames may have breached was created by contract.
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`. . . we agree with the district court.")
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`Because there no allegations in the Third Amended Complaint that the Martinez Defendants
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`owed Plaintiffs a duty, and no allegations from which it could be concluded that there existed a
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`extra-contractual duty as between Plaintiffs and the Martinez Defendants, Plaintiffs have not stated
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`Case 4:10-cv-02024 Document 130 Filed in TXSD on 08/29/12 Page 16 of 20
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`a claim for negligence against the Martinez Defendants. Plaintiffs' negligence claim(s) are therefore
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`subject to dismissal under Rule 12(b)(6). Plaintiffs, however, should be afforded one opportunity
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`to amend their complaint to state, if possible, a negligence claim against the Martinez Defendants.
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`4.
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`ConspiracyIAlter Egomattern of Wrongful Activity
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`In their conspiracy, alter ego, and pattern of wrongful activity claim, Plaintiffs allege:
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`72.
`The Defendants are members of a combination of two or more persons. The
`object of this combination was to accomplish an unlawful purpose, or a lawful
`purpose by unlawful means. Defendants had a meeting of the minds on the object
`or course of action, and one or more of the Defendants committed an unlawful, overt
`act to further the object or course of action. Further, the Martinez Defendants and
`their various entities and enterprises are alter egos of each other.
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`Defendants have engaged in a pattern of racketeering activity. Defendants
`73.
`have received income from their violation and disregard of federal copyright laws,
`and have invested such income in the acquisition and operation of their various
`enterprises - including the construction of a high-tech recording facility and the
`purchase of an exotic animal ranch. These fraudulent activities occurred over an
`extended period of time [and] involve a large number of persons and entities. Some
`entities involved in the conspiracy were created for the express purpose of concealing
`Defendants' unlawful acts and wrongfully acquired assets. Defendants' wrongful
`acts are not isolated events, confined to one Plaintiff or a single violation of copyright
`infringement.
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`74.
`Plaintiffs acted in good faith and relied on Defendants' accountings, promises
`and representations regarding royalty payments. Defendants[] took advantage of
`Plaintiffs and conspired to exploit Plaintiffs' properties and wrongfully profit from
`the exploitation. Defendants' continuous and related pattern of behavior is the
`proximate cause of Plaintiffs' injuries, and they are jointly and severally l