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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
`
`
`
`Case No. 14-cv-11767
`Honorable Laurie J. Michelson
`Magistrate Judge R. Steven Whalen
`
`
`GOMBA MUSIC, INC., and
`HARRY BALK,
`
`Plaintiffs,
`
`
`
`
`
`v.
`
`
`
`CLARENCE AVANT and
`INTERIOR MUSIC CORP.,
`
`
`
`
`
`
`
`
`
`
`
`
`
`Defendants.
`
`
`
`
`
`INTERIOR MUSIC CORP.,
`
`Third-Party Plaintiff,
`
`v.
`
`SIXTO RODRIGUEZ,
`
`Third-Party Defendant.
`
`OPINION AND ORDER GRANTING IN PART AND DENYING IN PART
`DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ AMENDED
`COMPLAINT [18] AND GRANTING IN PART HARRY BALK’S
`MOTION TO AMEND THE COMPLAINT [27]
`
`This dispute involves the rights to songs that were composed and released commercially
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`more than forty years ago. Music publisher Harry Balk alleges that he owns all rights to the
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`songs based on an exclusive song-writing agreement between his company, Gomba Music, Inc.,
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`and the songs’ author, Sixto Rodriguez. But he says he did not learn that he had been defrauded
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`of his rights to the songs until they were featured in the Oscar-winning documentary Searching
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`for Sugarman in 2012. He filed this lawsuit in May 2014 on behalf of Gomba Music alleging
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`copyright infringement, fraudulent concealment, tortious interference with copyright, and fraud.1
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`(Dkt. 1.)
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`Defendants filed a motion to dismiss the Complaint. They argued that an action for
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`infringement of a copyright cannot be brought unless the copyright registration has first been
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`issued or denied. (Dkt. 13.) In response, Balk amended the Complaint. (Dkt. 15, First Am.
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`Compl. (“FAC”).) The First Amended Complaint stated: “Plaintiffs have withdrawn the
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`copyright infringement claim from this suit until such time as copyright filings made by Plaintiff
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`are registered or denied by the Copyright Office.” (Id. ¶ 12.) Defendants filed a second motion to
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`dismiss, which is now before the Court. (Dkt. 18, Mot. to Dismiss.) It has been fully briefed and
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`the Court heard oral argument on November 4, 2014. (See Dkt. 21, Resp. to Mot. to Dismiss;
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`Dkt. 24, Reply for Mot. to Dismiss.)
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`After the second motion to dismiss was filed, the Copyright Office denied Balk’s
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`application for copyrights to the compositions at the heart of this case. Balk therefore filed a
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`motion to amend the complaint to reinstitute his copyright infringement claim. (Dkt. 27, Mot. to
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`Am.; Dkt. 28, Proposed Second Am. Compl. (“PSAC”).) Defendants opposed, arguing that
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`permitting the amendment would be futile because Balk cannot state a claim. (See Dkt. 31, Resp.
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`to Mot. to Am.) The Court heard oral argument on this motion as well on November 4, 2014, and
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`will decide the motions together.
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`For the reasons that follow, Defendants’ Motion to Dismiss the First Amended Complaint
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`(Dkt. 18) is GRANTED as to Gomba Music and DENIED in all other respects. Balk’s Motion to
`
`
`1 As discussed below, the Gomba Music entity in whose name this suit was originally
`brought no longer exists. The true plaintiff is Harry Balk, who was the sole owner of Gomba
`Music and is the successor to its rights and claims. The Court therefore refers to Balk throughout
`this opinion as the party making claims and allegations, seeking to amend the Complaint, and
`opposing the motion to dismiss.
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`
`
`2
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`Amend the Complaint (Dkt. 27) is GRANTED IN PART. Balk is ORDERED to revise the
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`proposed Second Amended Complaint to reflect the dismissal of Gomba Music’s claims.
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`I. MOTION TO DISMISS STANDARD
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`The Federal Rules of Civil Procedure require that pleadings contain “a short and plain
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`statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A
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`plaintiff “must allege ‘enough facts to state a claim of relief that is plausible on its face.’”
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`Traverse Bay Area Int. Sch. Dist. v. Mich. Dep’t of Educ., 615 F.3d 622, 627 (6th Cir. 2010)
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`(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility means
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`that “the complaint has to ‘plead[] factual content that allows the court to draw the reasonable
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`inference that the defendant[s are] liable for the misconduct alleged.’” Ohio Police & Fire
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`Pension Fund v. Std. & Poor’s Fin. Servs., LLC, 700 F.3d 829, 835 (6th Cir. 2012) (alteration in
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`original) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “This standard does not require
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`detailed factual allegations, but a complaint containing a statement of facts that merely creates a
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`suspicion of a legally cognizable right of action is insufficient.” HDC, LLC v. City of Ann Arbor,
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`675 F.3d 608, 614 (6th Cir. 2012) (citation and internal quotation marks omitted).
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`The court must “accept all well-pleaded factual allegations as true and construe the
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`complaint in the light most favorable to plaintiffs.” Bennet v. MIS Corp., 607 F.3d 1076, 1091
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`(6th Cir. 2010). The court “need not, however, accept unwarranted factual inferences.” Id. (citing
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`Twombly, 550 U.S. at 570). Nor are “[t]hreadbare recitals of the elements of a cause of action,
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`supported by mere conclusory statements” entitled to an assumption of truth. Iqbal, 556 U.S. at
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`678. “[W]here the well-pleaded facts do not permit the court to infer more than the mere
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`possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader
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`is entitled to relief.’” Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
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`
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`3
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`The Sixth Circuit has noted that “a motion under Rule 12(b)(6), which considers only the
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`allegations in the complaint, is generally an inappropriate vehicle for dismissing a claim based
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`upon the statute of limitations,” unless “the allegations in the complaint affirmatively show that
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`the claim is time-barred.” Cataldo v. U.S. Steel Corp., 676 F.3d 542, 547 (6th Cir. 2012), cert.
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`denied, 133 S. Ct. 1239, 185 L. Ed. 2d 177 (2013).
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`II. MOTION TO AMEND STANDARD
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`When a party seeks to amend its pleading under Federal Rule of Civil Procedure 15(a)(2),
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`“[t]he court should freely give leave when justice so requires.” The factors to be considered are
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`“[u]ndue delay in filing, lack of notice to the opposing party, bad faith by the moving party,
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`repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing
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`party, and futility of amendment are all factors which may affect the decision.” Wade v.
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`Knoxville Utilities Bd., 259 F.3d 452, 458 (6th Cir. 2001) (quoting Head v. Jellico Hous. Auth.,
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`870 F.2d 1117, 1123 (6th Cir. 1989)). Defendants oppose amendment solely on grounds of
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`futility. A proposed claim is futile if it fails to state a claim upon which relief may be granted as
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`that phrase is used in Rule 12(b)(6). Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420
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`(6th Cir. 2000).
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`III. ORDER STRIKING CERTAIN EXHIBITS
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`On a motion to dismiss for failure to state a claim, the Court may consider “the
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`Complaint and any exhibits attached thereto, public records, items appearing in the record of the
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`case and exhibits attached to defendant’s motion to dismiss so long as they are referred to in the
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`Complaint and are central to the claims contained therein.” Bassett v. NCAA, 528 F.3d 426, 430
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`(6th Cir. 2008).
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`4
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`Defendants attached the following exhibits to their motion to dismiss: (1) articles of
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`incorporation for Gomba Music filed with the state of Michigan in June 2014, (2) state of
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`Michigan records regarding the incorporation of Gomba Music in 1965 and its dissolution in
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`1971, (3) original and renewal Gomba copyright registrations for “Forget It,” and (4) a snapshot
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`from www.amazon.com of the Cold Fact album reissue. (See Mot. to Dismiss Exhibits.) Balk’s
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`response to the motion to dismiss attaches the following exhibits: (A) an affidavit by Balk
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`regarding the corporate status of Gomba Music, (B) a July 25, 2014, letter from Michigan’s
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`Department of Licensing and Regulatory Affairs, (C) records of copyright applications filed in
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`the name of Gomba Music in March 2014, (D) a June 27, 2014 email from the Copyright Office
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`acknowledging receipt of copyright applications, and (E) the Copyright Office Catalog of
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`Copyright Entries for July–December 1969. (See Resp. to Mot to Dismiss Exhibits.)
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`The Court finds that Exhibits 1 to 3 to the motion to dismiss and Exhibits C and E to
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`Balk’s response to the motion to dismiss are public records and therefore may be considered.
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`See, e.g., Brown v. S. Florida Fishing Extreme, Inc., No. 08-20678, 2008 WL 2597938, at *1
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`(S.D. Fla. June 27, 2008) (“Official Certificates of Registration from the U.S. Copyright Office
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`are public records that may be considered in the instant motion without converting it into a
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`motion for summary judgment.”); Ajaxo, Inc. v. Bank of Am. Tech. & Operations, Inc., No. 2:07-
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`CV-945, 2007 WL 4180361, at *2 (E.D. Cal. Nov. 21, 2007) (taking judicial notice of copyright
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`registrations on a motion to dismiss); Grassmueck v. Barnett, 281 F. Supp. 2d 1227, 1232 (W.D.
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`Wash. 2003) (taking judicial notice of articles of incorporation on a motion to dismiss because
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`“[a]s certified public records kept by the Secretaries of State in Washington and Delaware, the
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`Articles fall directly into the category of items” that could be thus considered); see also Kaempe
`
`v. Myers, 367 F.3d 958, 965 (D.C. Cir. 2004) (holding that documents recorded by the U.S.
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`
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`5
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 6 of 30 Pg ID 490
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`Patent and Trademark Office were public records subject to judicial notice on a motion to
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`dismiss).
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`The Court further finds that Exhibit D (an email from the Copyright Office
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`acknowledging receipt of copyright applications) is closely related to Balk’s claims. But Exhibit
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`4 (the snapshot from amazon.com of the 2008 reissue of Cold Fact), and Exhibits A and B
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`(Balk’s affidavit and the letter from Michigan regarding Gomba’s corporate status) are not public
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`records and are not central to Balk’s claims. The Court therefore STRIKES Exhibit 4 to
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`Defendants’ Motion to Dismiss and Exhibits A and B to Balk’s Response to the Motion to
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`Dismiss.
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`IV. ALLEGATIONS OF THE COMPLAINTS
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`On July 25, 1966, Sixto Rodriguez signed an “Exclusive Writer Agreement” with Gomba
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`Music (“Gomba/Rodriguez Agreement”), which was solely owned and controlled by Harry Balk.
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`(FAC ¶ 8; FAC Ex. A.) The agreement provided:
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`FIRST: The Publisher [Gomba Music] hereby employs the Writer [Sixto
`Rodriguez], and the Writer undertakes and agrees to render his exclusive services
`in the writing and composing of original musical compositions, numbers and
`works to the Publisher, both alone and in collaboration with others, as designated,
`directed, selected and required by the Publisher.
`
`SECOND: It is understood and agreed, that as the product of all such services
`under this agreement, is to be made and created by the Writer for the Publisher for
`hire, all such product made and created by the Writer, alone or in collaboration
`with others, shall be the sole property of the Publisher, everywhere and forever,
`with all copyrights therein and all renewals and extensions thereof, throughout the
`world, . . . .
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`THIRD: During the term of this agreement the Writer shall not write or compose,
`or furnish or dispose of, any musical compositions, numbers, works or materials,
`or any rights or interests therein whatsoever, other than for and to the Publisher.
`
`(FAC Ex. A.) The Agreement was effective through July 25, 1971. (Id.)
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`
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`6
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 7 of 30 Pg ID 491
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`In March 1970, Defendant Clarence Avant’s record label, Venture Records, released
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`Cold Fact, an album performed by Sixto Rodriguez. (FAC ¶ 9; FAC Ex. B.) The album included
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`the following songs: “Sugar Man,” “Only Good for Conversation,” “Crucify,” “Establishment
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`Blues,” “Inner City Blues,” “I Wonder,” “Like Janis,” “Rich Folks Hoax,” and “Jane S. Piddy.”
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`(collectively, “the Cold Fact Compositions”).2 (FAC ¶ 11; FAC Ex. B.) All songs on the album
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`were published by Avant’s corporation, Defendant Interior Music. (FAC Ex. B.) The album
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`credits named Jesus Rodriguez and Sixth Prince, Inc., as the authors of the Cold Fact
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`Compositions. (Id.; FAC ¶ 14.) Jesus Rodriguez is described in the complaint as “purportedly
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`Sixto Rodriguez’s brother.” (First Am. Compl. ¶ 9.) The credits did not name Sixto Rodriguez as
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`an author of the Cold Fact Compositions. (Id. ¶ 14.)
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`The First Amended Complaint alleges “upon information and belief” that Interior Music
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`“entered into a series of individual song contracts with, among others, Jesus Rodriguez,”
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`covering “some or all” of the Cold Fact Compositions, and that “Avant instructed Sixto
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`Rodriguez to set up Sixth Prince, Inc. and Sandreven, Inc. as a part of the scheme to register
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`copyrights for musical compositions authored by Sixto Rodriguez and then assign those
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`copyrights to Interior.” (FAC ¶¶ 9–10.)
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`Sixto Rodriguez is the true author of the Cold Fact Compositions. (Id. ¶ 14.) Balk thus
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`maintains that under the Gomba/Rodriguez Agreement, the Cold Fact Compositions belong to
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`Gomba Music. (Id. ¶ 13.) Avant knew that Sixto Rodriguez was the true author of the Cold Fact
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`Compositions and knew that Sixto Rodriguez had an exclusive contract with Gomba Music. (Id.
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`2 The songs identified by the First Amended Complaint as “the Cold Fact Compositions”
`on which Balk’s claims are based comprise nine of the twelve songs on the album. Two other
`songs on the album are attributed to Gary Harvey, Mike Theodore, and Dennis Coffey. The
`twelfth song is “Forget It,” attributed to Jesus Rodriguez. (Balk says in his brief opposing the
`motion to dismiss that “Gomba assigned the rights to ‘Forget It’ to Jobete Music Co. Inc. in or
`about 1969.” (Resp. to Mot. to Dismiss at 18.))
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`
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`7
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 8 of 30 Pg ID 492
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`¶¶ 9, 13–14.) He intentionally left Sixto Rodriguez off of the credits for the Cold Fact
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`Compositions. (Id. ¶ 14.) Defendants knew that Jesus Rodriguez and Sixth Prince did not author
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`the Cold Fact Compositions and intentionally represented that they did. (Id. ¶ 18.)
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`When the album was released, Balk reviewed the credits to determine whether Sixto
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`Rodriguez was the author of the Cold Fact Compositions. (Id. ¶ 14.) He did not pursue a claim at
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`the time because Sixto Rodriguez was not named on the album credits. (Id.) The Complaint does
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`not allege that anyone ever told Balk that Sixto Rodriguez was the true author.
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`Sometime between February 23, 1970, and January 1, 1979, Defendants instructed Sixto
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`Rodriguez to assign the Cold Fact Compositions to Interior Music. (Id. ¶ 19.) Interior Music then
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`filed copyrights to the Cold Fact Compositions in its own name. (Id.)
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`The First Amended Complaint alleges “upon information and belief” that “Defendants
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`willfully, deliberately, and fraudulently provided, and instructed Sixto Rodriguez to provide,
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`false and material information to the Copyright Office by misstating the identity of the author
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`and owner of the Cold Fact Compositions on the Cold Fact copyright registrations in order to
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`deprive Plaintiffs of their rightful interest and to induce and cause the Copyright Office to
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`improperly grant the registrations.” (Id. ¶ 17.)
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`Cold Fact was a commercial failure in the United States but, unbeknownst to Sixto
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`Rodriguez, it became enormously popular in South Africa. (Id. ¶ 24.) This was chronicled in the
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`documentary Waiting for Sugar Man, which was released in July 2012 and won an Academy
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`Award. (Id. ¶ 24.) Interior Music was still listed as the publisher of the Cold Fact Compositions
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`on the Searching for Sugar Man Original Motion Picture Soundtrack released July 24, 2012. (Id.
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`¶ 22.)
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`
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`8
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 9 of 30 Pg ID 493
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`Balk “did not become aware of the fraud perpetrated on him and his company until
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`sometime after the release of the film.” (Id. ¶ 26.) He contacted Defendants about it on May 8,
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`2013. (Id. ¶ 32.) This suit was filed on May 2, 2014. The current complaint includes three
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`counts: (i) fraud on the copyright office, (ii) declaratory relief that Plaintiffs are the owners of the
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`Cold Fact Compositions, and
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`(iii)
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`fraudulent concealment/tortious
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`interference with
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`contract/fraud.
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`The proposed Second Amended Complaint includes these same three claims, as well as a
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`claim for copyright infringement. The copyright infringement claim is based on allegations that
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`Balk filed an expedited application for registration for the Cold Fact Compositions on June 27,
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`2014, and the application was refused on August 13, 2014. (PSAC ¶¶ 5, 12, 33–34, 61–68.)
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`V. ANALYSIS
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`At the hearing, Plaintiffs’ counsel agreed to dismiss Gomba Music as a plaintiff. Harry
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`Balk, who was added as a plaintiff by the First Amended Complaint, may proceed as the real
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`party in interest, as explained below. The Court then considers each count of the First and
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`Second Amended Complaints and finds that (1) Balk may assert a claim for declaratory
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`judgment for fraud on the copyright office; and (2) Balk adequately pled that the statutory
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`limitation periods for Balk’s declaratory judgment, tort, and Copyright Act claims were tolled by
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`fraudulent concealment.
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`A. Harry Balk and Gomba Music
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`When this action was filed, Gomba Music was the only plaintiff. But Gomba Music “was
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`administratively dissolved by the state for failure to file an annual report” in 1971. (Resp. to Mot.
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`to Dismiss at 1.) Balk states that this action “was originally filed in Gomba’s name based on
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`good faith communications with the State of Michigan that the State would retroactively
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`
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`9
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 10 of 30 Pg ID 494
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`reinstate the entity.” (Mot. to Am. at 7.) The State of Michigan, however, later “reversed itself
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`and denied retroactive reinstatement of Gomba Music Inc.” (Id.) A new corporation with the
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`same name was incorporated in Michigan on June 25, 2014, but Balk says that entity “is
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`unrelated to this action.” (Resp. to Mot. to Dismiss at 1.)3 Defendants argued that the claims of
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`Gomba Music must be dismissed because it no longer exists. (Mot. to Dismiss at 11; Resp. to
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`Mot. to Am. at 10–12.) Balk conceded the point at the hearing.
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`But when the First Amended Complaint was filed (as a matter of course within 21 days of
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`Defendants’ Motion to Dismiss, under Federal Rule of Civil Procedure 15(a)(1)(B)), Harry Balk
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`was added as a plaintiff. (Dkt. 15.) Balk argues that when Gomba Music dissolved, any interests
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`it held were transferred to him, as sole shareholder of the company, by operation of law. (Resp.
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`to Mot. to Dismiss at 8–10.) Defendants have not addressed the merits of this argument. The
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`Court finds that Balk’s argument is supported by the law.
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`A copyright may be transferred by operation of law without an instrument in writing.
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`This is clear under the current Copyright Act of 1976, which provides that “[t]he ownership of a
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`copyright may be transferred in whole or in part by any means of conveyance or by operation of
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`law . . . .” 17 U.S.C. § 201(d)(1). Although transfers typically must be in writing, that
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`requirement does not apply to transfers “by operation of law.” 17 U.S.C. § 204(a). But Balk
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`points out that the Cold Fact Compositions were created before 1976, and therefore the 1909
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`Copyright Act applied. (Resp. to Mot. to Dismiss at 8.) That Act was less clear on this issue. It
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`provided: “Copyright secured under this title or previous copyright laws of the United States may
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`be assigned, granted, or mortgaged by an instrument in writing signed by the proprietor of the
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`3 Because Balk acknowledges that the newly incorporated Gomba Music entity is not part
`of this action, the Court does not address Defendants’ argument that it does not have standing.
`(Resp. to Mot. to Am. at 11–12.) Where the Court refers to Gomba Music in this opinion, it
`refers solely to the entity that was dissolved in 1971.
`10
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 11 of 30 Pg ID 495
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`copyright, or may be bequeathed by will.” 17 U.S.C. § 28 (repealed 1978). Balk cites a Northern
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`District of California case in which the court found that “copyright transfers by operation of law
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`were valid” under the 1909 Act. (Resp. to Mot. to Dismiss at 8 (citing Fantasy, Inc. v. Fogerty,
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`664 F. Supp. 1345, 1356 (N.D. Cal. 1987), aff’d, 984 F.2d 1524 (9th Cir. 1993), rev’d on other
`
`grounds, 510 U.S. 517 (1994)).)
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`In Fantasy, Inc. v. Fogerty, the copyrighted work at issue was a song written in 1970.
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`Fantasy, 664 F. Supp. at 1355. The defendant argued that there was a broken link in the
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`plaintiff’s chain of title to the copyright because the company that owned the copyright, Galaxy,
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`was liquidated and dissolved in 1970, and there was no written instrument by which the
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`copyright was transferred to its sole shareholder, Argosy. Id. The court concluded that Argosy, as
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`Galaxy’s sole shareholder, acquired all assets of Galaxy including the subject copyright upon
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`Galaxy’s 1970 dissolution, and that the 1909 Copyright Act’s requirement that transfers be in
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`writing did not apply to copyright transfers by operation of law. Id. at 1356. The court “found no
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`case authority or legislative history indicating that the requirements of § 28 applied to transfers
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`by operation of law,” and “[i]n fact, case and treatise authority point to the opposite conclusion,
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`that copyright transfers by operation of law were valid under the 1909 Copyright Act.” Id. (citing
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`Brecht v. Bentley, 185 F. Supp. 890 (S.D.N.Y. 1960) (intestate succession); 18 C.J.S. Copyright
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`and Literary Property §§ 82–83 (1939) (“the transfer of copyright may be effected either by
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`operation of law or by voluntary assignment”).) The court also noted that “section 28’s
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`enumerated types of transfer, ‘assigned, granted, or mortgaged,’ denote voluntary action taken by
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`the copyright proprietor, thus § 28 appears unconcerned with involuntary transfers imposed by
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`law.” Id. And furthermore, the Fantasy court reasoned, the 1976 Copyright Act explicitly does
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`not require a writing for copyright transfers by operation of law, and “[w]here principles
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`11
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 12 of 30 Pg ID 496
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`compelled under the Copyright Act of 1976 are not precluded by decisions under the 1909 Act,
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`those principles should be implemented to the extent possible.” (Id., quoting Jerry Vogel Music
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`Co. v. Warner Bros. Inc., 535 F. Supp. 172, 175 (S.D.N.Y.1982).)4
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`Another court in this judicial district found a copyright transfer by operation of law was
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`valid where the copyright owner merged with another company to form a new limited liability
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`company, which later brought an infringement suit based on the copyright. Design Basics, L.L.C.
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`v. DeShano Co., No. 10-14419, 2012 WL 4321313, at *4–5 (E.D. Mich. Sept. 21, 2012). The
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`court found the LLC could claim ownership because Nebraska law, under which it was formed,
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`provided that a new limited partnership formed by merger possesses all the rights of each of the
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`merging entities. Id. The court noted that “[c]ases dealing with copyright transfers by operation
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`of law are scarce.” Id. at *4.
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`This Court finds the Fantasy and Design Basics courts’ reasoning persuasive. Michigan’s
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`Business Corporation Act provides that upon dissolution, a corporation’s “remaining assets shall
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`be distributed, except as otherwise provided in this section, in cash, in kind, or both in cash and
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`in kind, to shareholders according to their respective rights and interests.” Mich. Comp. Laws
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`§ 450.1855a; see also Pontiac Trust Co. v. Newell, 254 N.W. 178, 181 (Mich. 1934) (holding
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`that under Michigan law, “[o]rdinarily private corporations belong to the stockholders, and the
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`assets of a private corporation for profit, upon the dissolution of the corporation, belong to the
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`stockholders or members, as of the date of its dissolution.”). By operation of law, any rights that
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`Gomba Music had in the Cold Fact Compositions transferred to Balk as sole shareholder when
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`the corporation dissolved.
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`4 The decision was appealed on other grounds and affirmed by the Ninth Circuit. 984
`F.2d 1524. The Supreme Court granted certiorari to address the district court’s award of
`attorneys’ fees. 510 U.S. 517. In describing the case the Supreme Court noted that the plaintiff
`“obtained the copyright by assignment.” 510 U.S. at 519.
`12
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`Instead of addressing the merits of Balk’s argument that Gomba Music’s rights
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`transferred to him by operation of law, Defendants argue that Balk’s claim should be rejected
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`because it was not pleaded and because it contradicts the complaint, which states that Gomba
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`Music has filed an application for copyright registration for the Cold Fact Compositions. (Mot.
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`to Dismiss Reply at 2–3; FAC ¶ 11.) They also argue that Balk cannot be substituted as plaintiff
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`for Gomba Music because the failure to name the correct plaintiff was in bad faith. (Resp. to
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`Mot. to Am. at 2–3, 19–23.)
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`Federal Rule of Civil Procedure 17 provides that “[t]he court may not dismiss an action
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`for failure to prosecute in the name of the real party in interest until, after an objection, a
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`reasonable time has been allowed for the real party in interest to ratify, join, or be substituted
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`into the action,” after which “the action proceeds as if it had been originally commenced by the
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`real party in interest.” Fed. R. Civ. P. 17(a)(3). This rule was “designed to avoid forfeiture and
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`injustice when an understandable mistake has been made in selecting the party in whose name
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`the action should be brought.” Wright & Miller, 6A Fed. Prac. & Proc. § 1555 (3d ed.)
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`(collecting cases). Thus, it has been held that “the rule should be applied only to cases in which
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`substitution of the real party in interest is necessary to avoid injustice,” and not “when the
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`determination of the right party to bring the action was not difficult and when no excusable
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`mistake had been made.” (Id.)
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`Defendants argue that this case is like Lans v. Digital Equipment Corp., 252 F.3d 1320
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`(Fed. Cir. 2001). (See Resp. to Mot. to Am. at 20.) There, the Federal Circuit Court of Appeals
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`held that the district court did not abuse its discretion by denying leave to amend the complaint
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`where the plaintiff purported to own a patent he did not actually own, did not disclose the actual
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`owner until a defendant discovered he had assigned the patent, “and even then he equivocated.”
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 14 of 30 Pg ID 498
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`Lans, 252 F.3d at 1328. This case is different. Balk was the sole owner of Gomba Music (FAC
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`¶ 8), and the successor to its claims. He has explained that until recently he believed Michigan
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`planned to reinstate Gomba Music. (Mot. to Am. at 7.)5 And since learning otherwise, Balk says,
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`he has filed new copyright applications in his own name. (Id.) The court finds this explanation
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`reasonable and not the product of bad faith. Indeed, it is not clear what Balk would have gained
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`by bringing the action in Gomba Music’s name instead of his own.
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`It seems clear to the Court that Balk’s decision to sue in Gomba Music’s name was due to
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`his mistaken belief that the entity would be reinstated and that it was necessary to sue in
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`Gomba’s name because it was the original assignee of rights via the Gomba/Rodriguez
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`Agreement. The Court sees no reason not to allow substitution of Balk for the defunct company
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`he formerly owned as sole proprietor. See Knight v. New Farmers Nat. Bank, 946 F.2d 895
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`(table), 1991 WL 207056, at *2 (6th Cir. 1991) (“[T]he district court did not afford plaintiffs any
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`time to substitute the trustee after determining that the trustee was the real party in interest. We
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`believe the district court should first consider ratification or substitution by the trustee prior to
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`dismissing plaintiffs’ case.”).
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`The Court now turns to whether Balk has stated a claim.
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`B. Count I—Fraud on the Copyright Office
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`Count I of both the First Amended Complaint and the proposed Second Amended
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`Complaint is for “Fraud on the Copyright Office.” (FAC ¶¶ 33–45; PSAC ¶¶ 35–47.) Plaintiff
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`stated at the hearing that this claim was solely for declaratory judgment. Defendants argue that
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`this count should be dismissed because fraud on the copyright office is a defense to an
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`5 This assertion is supported by exhibits that the Court has struck because they cannot be
`considered on a Rule 12(b)(6) motion to dismiss for failure to state a claim. The Court considers
`the assertion here only for the limited purpose of determining under Rule 17 whether Balk made
`an excusable mistake by naming the wrong party when the action was filed.
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 15 of 30 Pg ID 499
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`infringement claim, not a stand-alone cause of action. (Mot. to Dismiss at 14–15; Resp. to Mot.
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`to Am. at 12.) They rely primarily on Esbin & Alter, LLP v. Zappier, No. 08 CIV. 313, 2011 WL
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`940228, 2011 U.S. Dist. LEXIS 27881 (S.D.N.Y. Mar. 17, 2011), in which the court dismissed
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`the defendant’s counterclaim for fraud on the copyright office but allowed defendant to assert it
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`as an affirmative defense to infringement. 2011 WL 940228, at *2–3.
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`Defendants are correct insofar as “Fraud on the Copyright Office is not an independent
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`claim but, rather, an attack on the prima facie validity provided under Section 410(c).” 5 Patry
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`on Copyright § 17:126. Nonetheless, some courts have permitted claims for declaratory
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`judgment that a copyright is invalid based on fraud on the copyright office. See, e.g., Shirokov v.
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`Dunlap, Grubb & Weaver, PLLC, No. 10-12043, 2012 WL 1065578, at *31 (D. Mass. Mar. 27,
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`2012) (rejecting defendants’ argument that claim for fraud on the Copyright Office was not a
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`recognized independent cause of action and should be dismissed and finding that “although
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`Shirokov may seek a declaration that Achte’s copyright is invalid based on fraud on the
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`Copyright Office, he cannot seek damages against the defendants on that basis.”); Crew
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`Knitwear, Inc. v. U.S. Textile Printing, Inc., No. CV07-7658, 2009 WL 305526, at *2 (C.D. Cal.
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`Feb. 6, 2009) (denying summary judgment on plaintiff’s fraud on the copyright office claim
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`despite defendants’ argument that it was not ripe for review; “[T]he Copyright Office has taken
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`action by affirmatively approving Defendants’ applications, relying upon the veracity of the
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`contents made therein.” (emphasis in original)); Automated Solutions Corp. v. Paragon Data
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`Sys., Inc., No. 1:05 CV 1519, 2008 WL 2404972, at *11 (N.D. Ohio June 11, 2008) (denying
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`plaintiff’s motion for judgment on the pleadings on defendant’s counterclaim for a declaratory
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`judgment of invalid copyright based on fraud on the copyright office); see also Too, Inc. v.
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`Kohl’s Dep’t Stores, Inc., 210 F. Supp. 2d 402, 405 (S.D.N.Y. 2002) (“Thus, if Too pled the
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`2:14-cv-11767-LJM-RSW Doc # 35 Filed 11/24/14 Pg 16 of 30 Pg ID 500
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`fraudulent misrepresentation to the Copyright Office component of its unfair competition action
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`as a free-standing claim, Too would be limited to its remedy under the Copyright Act, that is, to
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`use such information to rebut the presumption of a valid copyright as provided under 17 U.S.C.
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`§ 410.”); Lennon v. Seaman, 84 F. Supp. 2d 522, 526 (S.D.N.Y. 2000) (dismissing claim as not
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`ripe where “Plaintiff alleges fraud on the Copyright Office not as a defense to the enforcement of
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`a copyright, but as a cause of action seeking injunctive and declaratory relief. . . . However,
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`Plaintiff filed her Complaint before the Cop