Case: 3:15-cv-00298-wmc Document #: 64 Filed: 08/12/16 Page 1 of 9
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF WISCONSIN
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`AMY LEE SULLIVAN d/b/a DESIGN KIT,
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`OPINION AND ORDER
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` 15-cv-298-wmc
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`Plaintiff,
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`Defendant.
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`v.
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`FLORA, INC.,
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`In her amended complaint, Amy Sullivan alleges that defendant Flora, Inc.
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`violated 17 U.S.C. § 101 by improperly using plaintiff’s copyrighted materials. Before
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`this court is defendant’s Rule 12(b)(7) motion to dismiss plaintiff’s amended complaint
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`for failure to join Designomotion, Inc., and Eva Kao, who were named as defendants in
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`plaintiff’s original complaint but then were voluntarily dismissed without prejudice by
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`plaintiff’s unilateral filing of Rule 41(a)(1) notices. (Dkt. #18.) The remaining
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`defendant, Flora, contends that because plaintiff created the materials in dispute jointly
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`with these two other parties, those parties are required to determine actual ownership of
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`the materials. Flora further contends that ownership of these materials must be resolved
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`before this court decides any infringement claim. For the reasons set forth below, the
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`court finds that Rule 19(a) does not require joinder of these two parties. Therefore, it
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`will deny defendant’s motion to dismiss for failure to join a required party.
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`Also before the court is plaintiff’s motion for leave to file a second amended
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`complaint, adding an unjust enrichment claim (dkt. #26), which the court will grant for
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`the reasons provided at the end of this opinion.
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`Case: 3:15-cv-00298-wmc Document #: 64 Filed: 08/12/16 Page 2 of 9
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`BACKGROUND
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`On February 15, 2013, Sullivan entered into an agreement with Designomotion,
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`Inc., to produce artwork for two videos, entitled “Flora 7-Sources” and “Flor-Essence.”
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`These videos were for Designomotion’s client, Flora, Inc. Eva Kao, a Designomotion
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`employee, helped develop the videos. Sullivan completed the artwork for both videos by
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`May 31, 2013.
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`On October 15, 2013, Sullivan discovered that Flora had reused her artwork from
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`these two videos in new promotional advertising. Sullivan contacted Flora the next day
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`about this usage. Some of the images were subsequently removed by October 17.
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`On November 6, 2013, Sullivan obtained a copyright for the illustrations she
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`provided for the “Flora 7-Sources” video. On December 12, 2013, she also obtained a
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`separate copyright for the illustrations she provided for the “Flor-Essence” video.
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`On the same date, December 12, 2013, Sullivan again contacted Flora about
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`unauthorized use of her work, and she proposed a licensing agreement for continued use
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`of her illustrations. Flora declined. Since obtaining her copyrights, Sullivan alleges that
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`Flora (1) has reused her protected artwork on several occasions and (2) continues to do
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`so, all without her consent.
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`On May 20, 2015, Amy Sullivan filed her original complaint against three
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`defendants: Flora, Inc., Designomotion, Inc., and Eva Kao. This complaint claimed
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`damages for federal copyright infringement, contributory copyright infringement, breach
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`of license agreement, breach of covenant of good faith and fair dealing, trade dress
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`infringement, and false designation of origin under the Lanham Act. (Dkt. #1.) It also
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`Case: 3:15-cv-00298-wmc Document #: 64 Filed: 08/12/16 Page 3 of 9
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`sought declaratory judgment for ownership of the copyrighted material in dispute.
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`On August 4, 2015, plaintiff voluntarily dismissed both Designomotion, Inc. and
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`Kao from her complaint. In response, Flora both answered the complaint and filed a
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`motion to dismiss for failure to join a necessary or indispensable party under Rule 19.
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`(Dkt. ##15, 18.) While plaintiff later filed an amended complaint, she again listed Flora
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`as the sole remaining defendant. (Dkt. #17.) The amended complaint did, however,
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`only claim damages for federal copyright infringement against Flora, and it also did not
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`include any claim for a declaratory judgment as to the ownership of the materials at
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`issue. In response, Flora renewed her original objection by filing a second motion to
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`dismiss for failure to join a necessary or indispensable party under Rule 19, which
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`remains pending before the court.
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`I. Motion to Dismiss Pursuant to Rule 12(b)(7)
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`OPINION
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`Under Rule 19(a)(1), a so-called “required party” is “subject to service of process
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`and whose joinder will not deprive the court of subject-matter jurisdiction must be joined
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`as a party if:”
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`(A) in that person’s absence, the court cannot accord
`complete relief among existing parties; or
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`(B) that person claims an interest relating to the subject of
`the action and is so situated that disposing of the action in
`the person’s absence may:
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`(i) as a practical matter impair or impede the person’s ability
`to protect the interest; or
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`Case: 3:15-cv-00298-wmc Document #: 64 Filed: 08/12/16 Page 4 of 9
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`(ii) leave an existing party subject to a substantial risk of
`incurring double, multiple, or otherwise
`inconsistent
`obligations because of the interest.
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`Fed. R. Civ. P. 19(a)(1). If the absentee party is found to be a required party under Rule
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`19(a)(1), but cannot feasibly be joined in suit, then the court must proceed to Rule 19(b)
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`to determine whether to proceed without the party or dismiss the lawsuit. Askew v. Sheriff
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`of Cook Cnty., Ill., 568 F.3d 632, 634 (7th Cir. 2009). If an action cannot proceed
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`without the required party, than the party is deemed “indispensable” and the proceeding
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`must be dismissed.
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`Flora argues that Designomotion and Kao are required parties under Rule 19 for
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`two overlapping (if not identical) reasons. First, Flora argues that both Designomotion
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`and Kao have claimed an interest in the copyrighted materials and proceeding in their
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`absence would impair their ability to protect that interest. As an initial matter, it is
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`unclear that either of the absent parties has claimed an interest in the copyrighted
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`materials. To support its argument, Flora relies heavily on allegations contained in
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`plaintiff’s original complaint, but dropped from her amended complaint, which allege
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`that Designomotion and Kao both improperly claimed an ownership interest in her
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`materials. While it is true that the court may look to extrinsic evidence outside of the
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`amended complaint in deciding a Rule 19 challenge, a since withdrawn allegation of
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`ownership is not enough to establish that either company claimed interest in copyrighted
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`materials. See Ladenberger v. Nat’l Tech. Transfer, Inc., No. 99 C 5348, 2000 WL 1349247,
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`at *4 (N.D. Ill. Sept. 19, 2000) (noting that courts need more than a mere allegation of
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`ownership to establish a claimed interest). The court is therefore unpersuaded that these
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`Case: 3:15-cv-00298-wmc Document #: 64 Filed: 08/12/16 Page 5 of 9
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`dropped allegations alone justify compulsory joinder under Rule 19.
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`Nor have Designomotion or Kao sought to intervene in this case. Typically, a
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`party elects to intervene in cases where its interest may be inadequately represented by
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`the current parties. See Fed. R. Civ. P. 24. For this reason, courts may factor an
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`absentee’s choice not to seek to intervene in determining the presence of a claimed
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`interest. Ladenberger, 2000 WL 1349247, at *4. Indeed, the Seventh Circuit prefers for
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`“the absent party [to] claim [the] interest” in compulsory joinder cases. Davis Cos. v.
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`Emerald Casino, Inc., 268 F.3d 477, 483 (7th Cir. 2001). The fact that both
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`Designomotion and Kao have chosen to abstain from the litigation since being dismissed
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`suggests that they have no interest in the materials, or at least not a substantial one. Id.
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`(“[U]nder Rule 19(a) it is the absent party that typically must claim such an interest.”);
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`see also States v. Bowen, 172 F.3d 682, 689 (9th Cir. 1999) (holding that a district court
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`properly found joinder unnecessary where an absent party was aware of litigation but did
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`not personally claim an interest in the matter); Ladenberger, 2000 WL 1349247, at *4
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`(noting that a court may factor a party’s choice not to intervene into Rule 19 analysis).
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`Finally, Flora points to two letters allegedly showing that Designomotion played a
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`significant role in developing the copyrighted materials, and therefore it possesses an
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`ownership interest in them. (Terpstra Decl., Ex. 1 (dkt. #20-1) 2 (“In fact, the Flor-
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`Essence Video is not your sole work. It was a collaborative multimedia effort authored
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`by Designomotion, the client (Flora), as well as a team of 6 artists hired by
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`Designomotion.”); Steger Decl., Ex. A (dkt. #25-1) 2 (“Both projects were collaborative
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`efforts that involved contributions from Mr. Silver, Ms. Sullivan and other artists
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`Case: 3:15-cv-00298-wmc Document #: 64 Filed: 08/12/16 Page 6 of 9
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`engaged by Designomotion.”). After reviewing both letters, the court is unpersuaded. As
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`an initial matter, the letters do not claim that the allegedly infringed materials were
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`actually the product of joint collaboration. Instead, they focus primarily upon the
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`collaborative production of the final videos, rather than the elements plaintiff alleges she
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`produced singlehandedly.1
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`Second, Flora argues that plaintiff’s copyrights improperly designate her as the sole
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`owner of the materials by failing to acknowledge that the materials were jointly created
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`with Designomotion and Kao. Upon this first dubious proposition, Flora adds another
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`by arguing that as alleged owners, they must be joined to this litigation to resolve
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`ownership of the materials before the court could proceed with an infringement claim. In
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`fact, the copyrights as written support a finding that neither unnamed “owner” of the
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`copyrighted materials need to be joined to this litigation to determine infringement.
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`Stated another way, the one thing clearly in dispute is plaintiff’s ownership of the
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`copyrighted materials, even in the absence of Designomotion or Kao.
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`In short, Flora disputes plaintiff’s ownership of the copyrighted materials, and
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`nothing bars Flora from raising that as a defense. Obviously, plaintiff will need to
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`demonstrate an ownership interest in the alleged infringed materials and Flora disputes
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`it. Neither Designomotion nor Kao need to be part of this lawsuit to make such a
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`showing. Nor is there anything preventing Flora from taking discovery from either in an
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`1 Plaintiff raises a challenge to the letters based on hearsay, which the court rejects. Flora is not
`relying on the letters for the truth of the matter asserted -- that Designomotion and others
`actually have an ownership interest in the copyrighted works -- but rather relies on them to
`demonstrate a state of mind -- that Designomotion asserts such a claim.
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`Case: 3:15-cv-00298-wmc Document #: 64 Filed: 08/12/16 Page 7 of 9
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`effort to challenge plaintiff’s copyright claim.
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`In denying defendant’s motion, the court does bind plaintiff to the scope of the
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`copyright infringement claims made against Flora in the amended complaint. The court
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`would also consider a motion by the absentee parties to intervene in this litigation, if
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`they wish, but nothing prevents this lawsuit proceeding without them.
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`II. Motion for Leave to File Second Amended Complaint
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`Plaintiff seeks leave to file a second amended complaint adding an alternative
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`claim for unjust enrichment based on possible benefits defendant received outside of the
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`United States, should she fail to demonstrate that Flora’s foreign profits fall within the
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`exception to the so-called “rule of extraterritoriality.” (Pl.’s Br (dkt. #27) 2.) In
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`opposition, defendant does not argue that such a claim is preempted by copyright law, 17
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`U.S.C. § 301(a), and for good reason -- plaintiff’s unjust enrichment claim is premised on
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`activities that fall outside of the boundaries of copyright law. See Zimnicki v. Neo-Neon
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`Int'l, Ltd., No. 06 C 4879, 2009 WL 3805591, at *3 (N.D. Ill. Nov. 9, 2009) (“‘[F]ederal
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`copyright law does not apply to extraterritorial acts of infringement,’ the Copyright Act
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`‘does not preempt causes of action premised upon possible extraterritorial infringement.’”
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`(quoting Allarcom Pay Television, Ltd. v. Gen. Instrument Corp., 69 F.3d 381, 387 (9th Cir.
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`1995))).
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`Instead, defendant contends that such a claim is futile because plaintiff will not be
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`able to establish the elements of an unjust enrichment claim. (Def.’s Opp’n (dkt. #31) 1
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`(arguing that plaintiff “cannot establish that Flora knew Plaintiff was conferring a benefit
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`on Flora”). In so arguing, however, defendant conflates the pleading standard with that
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`Case: 3:15-cv-00298-wmc Document #: 64 Filed: 08/12/16 Page 8 of 9
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`required at summary judgment. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (holding that
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`a complaint survives a motion to dismiss if it “contain[s] sufficient factual matter,
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`accepted as true, to ‘state a claim to relief that is plausible on its face.’” (quoting Bell Atl.
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`Corp. v. Twombly, 550 U.S. 544, 570 (2007))). Here, plaintiff’s proposed complaint
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`sufficiently alleges the elements of an unjust enrichment claim -- (1) Sullivan conferred a
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`benefit in the form of Flora publishing foreign language versions of her illustrations; (2)
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`Flora appreciated the benefit based on Sullivan notifying Flora of their unlawful use; and
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`(3) Flora accepted and retained the benefit under circumstances making it inequitable for
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`it to retain the benefit without payment. See Lindquist Ford, Inc. v. Middleton Motors, Inc.,
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`658 F.3d 760, 766 (7th Cir. 2011). (See also Pl.’s Reply (dkt. #35) 4-6 (describing
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`allegations in the Proposed 2d Am. Compl. (dkt. #26-1) ¶¶ 21-44).)
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`Inexplicably, the defendant’s opposition also dwells on plaintiff’s efforts to seek
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`discovery on foreign profits. However, that issue has already been addressed by
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`Magistrate Judge Crocker in response to a motion to compel discovery, and appropriately
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`so. (See Pl.’s Mot. to Compel (dkt. #40); Order (dkt. #49).) Regardless, the parties’
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`dispute about the scope of discovery has little, if anything, to do with plaintiff’s motion
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`to amend under Rule 15(a)(2).
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`Finally, defendant asserts generally that it will be prejudiced by a further
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`amendment to the complaint, especially in light of the fact that plaintiff could and
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`should have sought leave earlier. This argument goes nowhere as well. Plaintiff’s
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`alternative claim for unjust enrichment is based on the same set of facts as those
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`proposed in her first amended complaint, and while perhaps plaintiff could have asserted
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`Case: 3:15-cv-00298-wmc Document #: 64 Filed: 08/12/16 Page 9 of 9
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`this claim sooner, she did so well in advance of the dispositive motion deadline. Indeed,
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`in its summary judgment motion, defendant also moved for summary judgment on the
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`proposed unjust enrichment claim. (Def.’s Opening Br. (dkt. #52) 3.) As such, the court
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`finds the proposed amendment appropriate under Rule 15(a)(2).
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`IT IS ORDERED that:
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`ORDER
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`1) Defendant Flora, Inc.’s motion to dismiss (dkt. #18) is DENIED.
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`2) Plaintiff Amy Sullivan’s motion for leave to file a second amended
`complaint (dkt. #26) is GRANTED. Defendant’s answer is due on or
`before August 26, 2016.
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`Entered this 12th day of August, 2016.
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`BY THE COURT:
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`/s/
`________________________________________
`WILLIAM M. CONLEY
`District Judge
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