Case 4:04-cv-04170-KES Document 69 Filed 07/19/05 Page 1 of 27 PageID #: 693
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`UNITED STATES DISTRICT COURT
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`DISTRICT OF SOUTH DAKOTA
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`SOUTHERN DIVISION
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`CIV. 04-4170-KES
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`ORDER GRANTING
`PLAINTIFF’S MOTION TO
`AMEND PLEADINGS AND
`GRANTING IN PART AND
`DENYING IN PART
`DEFENDANT’S MOTION FOR
`JUDGMENT ON THE
`PLEADINGS
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`))))))))))
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`PINNACLE PIZZA COMPANY, INC.,
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` Plaintiff,
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` vs.
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`LITTLE CAESAR ENTERPRISES,
`INC.,
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` Defendant.
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`Plaintiff, Pinnacle Pizza Company, Inc., sued defendant, Little Caesar
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`Enterprises, Inc., (LCE) for breach of contract and several other causes of
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`action related to the alleged misappropriation of an advertising slogan.
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`Pinnacle moves to amend its complaint: (1) to clarify its original complaint;
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`(2) to add LC Trademarks, Inc., and Ilitch Holdings, Inc., as co-defendants;
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`(3) to add a claim that LCE violated South Dakota franchise statutes; and
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`(4) to add a claim for cancellation of the LCE trademark on the phrase “Hot ‘n
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`Ready.” LCE opposes the motion. Plaintiff’s motion for leave to amend is
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`granted.
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`LCE moves for judgment on the pleadings on all of Pinnacle’s claims, as
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`amended, except the breach of contract claim. LCE’s motion for judgment on
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`the pleadings is granted in part and denied in part.
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`UNITED STATES DISTRICT COURT
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`DISTRICT OF SOUTH DAKOTA
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`SOUTHERN DIVISION
`
`CIV. 04-4170-KES
`
`ORDER GRANTING
`PLAINTIFF’S MOTION TO
`AMEND PLEADINGS AND
`GRANTING IN PART AND
`DENYING IN PART
`DEFENDANT’S MOTION FOR
`JUDGMENT ON THE
`PLEADINGS
`
`))))))))))
`
`PINNACLE PIZZA COMPANY, INC.,
`
` Plaintiff,
`
` vs.
`
`LITTLE CAESAR ENTERPRISES,
`INC.,
`
` Defendant.
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`Plaintiff, Pinnacle Pizza Company, Inc., sued defendant, Little Caesar
`
`Enterprises, Inc., (LCE) for breach of contract and several other causes of
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`action related to the alleged misappropriation of an advertising slogan.
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`Pinnacle moves to amend its complaint: (1) to clarify its original complaint;
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`(2) to add LC Trademarks, Inc., and Ilitch Holdings, Inc., as co-defendants;
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`(3) to add a claim that LCE violated South Dakota franchise statutes; and
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`(4) to add a claim for cancellation of the LCE trademark on the phrase “Hot ‘n
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`Ready.” LCE opposes the motion. Plaintiff’s motion for leave to amend is
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`granted.
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`LCE moves for judgment on the pleadings on all of Pinnacle’s claims, as
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`amended, except the breach of contract claim. LCE’s motion for judgment on
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`the pleadings is granted in part and denied in part.
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`MOTION TO AMEND PLEADINGS
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`Motions to amend are freely granted when justice so requires. Fed. R.
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`Civ. P. 15(a). Leave to amend is denied only if evidence exists “such as undue
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`delay, bad faith, or dilatory motive on the part of the movant, repeated failure
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`to cure deficiencies by amendments previously allowed, undue prejudice to the
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`opposing party by virtue of allowance of the amendment, [or] futility of the
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`amendment.” Roberson v. Hayti Police Dep’t, 241 F.3d 992, 995 (8 Cir. 2001)
`th
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`(citing Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 9 L. Ed. 2d 222
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`(1962)).
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`Pinnacle moves for leave to amend the complaint to add LC Trademarks,
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`Inc. (LCT) as a defendant. Pinnacle alleges that LCT holds trademarks that
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`LCE uses, including the trademark in “Hot n’ Ready.” LCE does not oppose
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`the motion as to the claims that survive its motion for judgment on the
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`pleadings. Therefore, the motion is granted.
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`Pinnacle also moves for leave to add Ilitch Holdings, Inc. (IHI), as a
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`defendant. Pinnacle alleges that IHI owns or controls LCE and employs the
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`management personnel responsible for the alleged misconduct at the heart of
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`the case. LCE contends that the proposed addition of IHI is futile because IHI
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`does not own or control LCE. LCE argues that even if IHI did control LCE, it
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`would not be vicariously liable for the acts of LCE employees because it is a
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`separate corporate entity and there is no justification for piercing the
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`corporate veil.
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`While there exists a presumption against piercing the corporate veil, a
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`plaintiff should be given the opportunity to test its claim on the merits as long
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`as the underlying facts or circumstances are a proper subject for relief. See
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`Foman, 371 U.S. at 182. In this case, Pinnacle has alleged an alternative
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`claim of unjust enrichment against LCE and IHI. Because this is a proper
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`subject for relief, and LCE has not shown that it would be prejudiced by the
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`addition of IHI as a party, the motion for leave to amend to add IHI as a party
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`defendant is granted. LCE, IHI, and LCT shall hereinafter be referred to
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`collectively as LCE.
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`LCE’s only objection to the proposed amendments to the causes of
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`action set forth in the complaint is that of futility. As a result, the court
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`grants Pinnacle’s motion to amend the causes of action set forth in the
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`complaint and will consider LCE’s allegation of futility as part of the
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`discussion on whether LCE is entitled to judgment on the pleadings pursuant
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`to Federal Rule of Civil Procedure 12(c).
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`BACKGROUND
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`According to the amended complaint, James Fischer and Mike Nichols
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`formed Pinnacle in 1991 to operate three Little Caesars franchises in Sioux
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`Falls, South Dakota. Pinnacle entered into a franchise agreement with LCE, a
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`Michigan corporation. Pinnacle alleges the contract grants LCE ownership
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`over improvements or modifications of the Little Caesars system, but specifies
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`that “in no event shall advertising created by Franchise Owner be considered
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`to be an improvement or modification in the Little Caesar System.” Pinnacle
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`contends that the contract recognizes its ownership interests in its original
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`advertising materials in Section XII(B) of the contract. This clause provides
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`that “Little Caesar may not use the original advertising materials created by
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`franchise owner without its prior written consent.”
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`Fischer claims he created the advertising slogan “Hot n’ Ready” while
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`returning from a Little Caesars franchisee convention in 1997. “Hot n’ Ready”
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`referred to a promotion that Fischer allegedly created, which offered a pre-
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`cooked medium pepperoni pizza for $4. Instead of waiting in the restaurant
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`for the pizza to be cooked, or calling ahead to make sure that it would be ready
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`when the customer arrived, the pizza was already cooked and ready to go
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`when the customer entered Pinnacle’s Little Caesars restaurants.
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`Pinnacle alleges that it began promoting “Hot n’ Ready” pizzas in radio
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`and newspaper advertisements on May 7, 1997. Pinnacle added placards and
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`traffic signs with the “Hot n’ Ready” slogan to its ad campaign. Pinnacle
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`alleges that its sales increased dramatically on days it advertised “Hot n’
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`Ready” pizzas.
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`Pinnacle alleges that LCE noticed the dramatic increase in sales at
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`Pinnacle’s franchises and began advertising “Hot n’ Ready” pizzas at LCE’s
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`restaurants without obtaining Pinnacle’s permission in violation of the
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`franchise agreement. Pinnacle alleges that LCE eventually required all 2,500
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`of its franchises to advertise “Hot n’ Ready” pizzas. As a result of the “Hot n’
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`Ready” slogan, Little Caesars franchises have increased sales dramatically,
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`while sales at other pizza chains have declined. Pinnacle alleges that LCE
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`secretly attributes its growth in revenue to the “Hot n’ Ready” slogan. In an
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`effort to deceive its competitors and prevent them from imitating the
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`campaign, LCE publicly reported that changes in its pizza recipe and new
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`management techniques caused the increase in sales.
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`Pinnacle sued LCE for breach of contract, breach of its duty of good
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`faith and fair dealing, conversion, misappropriation of an advertising idea,
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`unjust enrichment, and imitation of trademark. Pinnacle is seeking a money
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`judgment, punitive damages, a statutory penalty of $100 for each wrongful
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`use of its trademark, costs and attorney’s fees, and other relief the court
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`deems fair and equitable. LCE moves for judgment on the pleadings pursuant
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`to 28 U.S.C. § 12(c).
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`STANDARD OF REVIEW
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`The court considers a motion for judgment on the pleadings pursuant to
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`Federal Rule of Civil Procedure 12(c) under the same standards as a motion to
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`dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Westcott v. City
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`of Omaha, 901 F.2d 1486, 1488 (8 Cir. 1990). See also Wiles v. Capitol
`th
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`Indemnity Corp., 280 F.3d 868, 870 (8 Cir. 2002). Rule 12(b)(6) requires the
`th
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`court to review only the pleadings to determine whether they state a claim
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`upon which relief can be granted. In considering a motion to dismiss, the
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`court assumes all facts alleged in the complaint are true, construes the
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`complaint liberally in the light most favorable to the plaintiff, and should
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`dismiss only if “it appears beyond a doubt that the plaintiff can prove no set of
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`facts which would entitle the plaintiff to relief.” Coleman v. Watt, 40 F.3d
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`255, 258 (8 Cir. 1994). “The issue is not whether a claimant will ultimately
`th
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`prevail but whether the claimant is entitled to offer evidence to support the
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`claims. Indeed it may appear on the face of the pleadings that a recovery is
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`very remote and unlikely but that is not the test.” Scheuer v. Rhodes, 416
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`U.S. 232, 236, 94 S. Ct. 1683, 1686, 40 L. Ed. 2d 90 (1974), overruled on
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`other grounds by Davis v. Scherer, 468 U.S. 183, 191, 104 S. Ct. 3012, 3017,
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`82 L. Ed. 2d 139 (1984).
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`I.
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`Choice of Laws
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`DISCUSSION
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`First, the court must determine whether the laws of Michigan or South
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`Dakota apply. LCE contends that Michigan law applies to all of Pinnacle’s
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`claims, while Pinnacle argues that South Dakota law applies. In diversity
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`cases, federal courts apply the choice of law rules of the forum state to
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`determine which state’s substantive law applies. Retail Associates, Inc. v.
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`Macy’s East, Inc., 245 F.3d 694, 697 (8 Cir. 2001). Thus, the court will apply
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`South Dakota’s choice of law rules.
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` In South Dakota, parties may stipulate in a contract to the application
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`of a particular state’s law. Dunes Hospitality, LLC v. Country Kitchen Int’l
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`Inc., 623 N.W.2d 484, 488 (S.D. 2001). The addendum to the franchise
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`agreement provides in pertinent part:
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`A. The law regarding franchise registration, employment,
`covenants not to compete, and other matters of local concern will
`be governed by the laws of the State of South Dakota; but as to
`contractual and all other matters, this agreement and all
`provisions of this instrument will be and remain subject to the
`application, construction, enforcement and interpretation under
`the governing law of Michigan.
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`B. Any provision which designates jurisdiction or venue or
`requires the Franchise Owner to agree to jurisdiction or venue in a
`forum outside of South Dakota is void with respect to any cause of
`action which is otherwise enforceable in South Dakota.
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`Choice of law provisions, however, “are subject to limitation and
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`invalidation by the overriding public policy of the forum state.” Id. (quotations
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`omitted). See also Wright-Moore Corp. v. Ricoh Corp., 908 F.2d 128, 132 (7th
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`Cir. 1990) (choice of law provision violated public policy against allowing
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`parties to contract out of the protections of Indiana franchise law).
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`Declarations of South Dakota public policy are found in the constitution,
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`judicial decisions and statutes. State ex rel. Meierhenry v. Spiegel, Inc., 277
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`N.W.2d 298, 300 (S.D. 1979). South Dakota franchise protection laws provide
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`that “Any provision in a franchise agreement . . . requiring the application of
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`the laws of another state is void with respect to a claim otherwise enforceable
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`under this chapter.” SDLC 37-5A-51.1.
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`A. Contract Claims
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`The amended complaint alleges a cause of action for breach of contract.
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`Because Pinnacle’s breach of contract claim is not a claim that is otherwise
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`enforceable under SDCL ch. 37, the court finds that SDCL 37-5A-51.1 does
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`not constitute overriding public policy of South Dakota sufficient to invalidate
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`the forum selection clause of the franchise agreement regarding the breach of
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`contract claim.
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`Pinnacle claims in the alternative that the “local concern” provision in
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`the addendum to the franchise agreement supports application of South
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`Dakota law to this claim. The addendum also states, however, that Michigan
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`law applies to contractual matters. When provisions conflict in a contract and
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`when full weight cannot be given to each, “a specific provision controls a
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`general one.” AFSCME v. Sioux Falls School Dist., 605 N.W.2d 811, 814 (S.D.
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`2000) (quoting State v. Greger, 559 N.W.2d 854, 864 (S.D. 1997). Because the
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`contract reference to contractual matters is more specific than a reference to
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`matters of local concern, the court finds that the more specific provision
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`controls. Thus, the court finds that Michigan law applies to the breach of
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`contract claim.
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`Pinnacle also alleges a claim for breach of good faith and fair dealing.
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`The South Dakota Supreme Court recognizes a claim for breach of the implied
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`covenant of good faith and fair dealing, but not a new cause of action in tort.
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`Garrett v. BankWest, Inc., 459 N.W.2d 833, 843 (S.D. 1990). A claim for
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`breach of an implied covenant of good faith and fair dealing has not been
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`recognized by the Michigan courts, and is properly subject to dismissal. Belle
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`Isle Grill Corp. v. City of Detroit, 666 N.W.2d 271, 279 (Mich. App. 2003).
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`Paragraph B of the addendum refers to voiding contract provisions which
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`designate jurisdiction or venue “with respect to any cause of action which is
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`otherwise enforceable in South Dakota.” The court seeks the parties’
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`understanding of this contract provision before determining whether Michigan
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`or South Dakota law applies. Neither party briefed the effect of this contract
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`provision with respect to the survival of a claim, such as the breach of good
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`faith and fair dealing claim, which is enforceable only under South Dakota
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`law. Because it has not been addressed by the parties, the court directs the
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`parties to brief this issue.
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`B. Claims for Violation of South Dakota Franchise Laws
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`Pinnacle alleges in its amended complaint that LCE violated South
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`Dakota franchise laws, namely SDCL 37-5A-66(7) and 37-5A-83. South
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`Dakota franchise protection laws provide that “Any provision in a franchise
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`agreement . . . requiring the application of the laws of another state is void
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`with respect to a claim otherwise enforceable under this chapter.” SDLC 37-
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`5A-51.1. Pinnacle’s claim for violations of the South Dakota franchise laws is
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`a claim “otherwise enforceable under this chapter.” See id. See also SDCL 37-
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`5A-66(7), 37-5A-83. Because the choice of law provision in the addendum
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`contradicts South Dakota public policy as set forth in state law, the court will
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`not enforce it. Thus, the court finds that South Dakota law applies to this
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`cause of action.
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`C.
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`Tort Claims
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`Pinnacle alleges two tort claims, namely conversion and
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`misappropriation. Because both of these causes of action are preempted by
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`federal copyright law, see infra, the court need not discuss whether South
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`Dakota or Michigan law applies.
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`D. Unjust Enrichment
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`The choice of law provision in the contact provides that Michigan law
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`applies to all causes of action except franchise registration, employment,
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`covenants not to compete, or other matters of local concern. There is no
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`overriding matter of South Dakota public policy that would override or
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`invalidate this contract provision with regard to an unjust enrichment claim.
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`In fact, both Michigan and South Dakota recognize a cause of action for
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`10
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`unjust enrichment and require the same measure of proof. Under Michigan’s
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`cause of action for unjust enrichment, a plaintiff must prove that the
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`defendant received a benefit from the plaintiff and that permitting the
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`defendant to retain the benefit would result in inequity to the plaintiff. Belle
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`Isle Grill Corp., 666 N.W.2d at 279-80. Under South Dakota’s cause of action
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`for unjust enrichment, a plaintiff must show: (1) that defendant received a
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`benefit; (2) defendant was aware he was receiving a benefit, and (3) that it is
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`inequitable to allow defendant to retain this benefit without paying for it.
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`Hofeldt v. Mehling, 658 N.W.2d 783, 788 (S.D. 2003). Thus, the court finds
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`that Michigan law applies to the unjust enrichment claim.
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`II.
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`Preemption
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`Second, the court must determine whether Pinnacle’s claims survive a
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`motion for judgment on the pleadings after applying the appropriate state law.
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`LCE contends that the state-law conversion and misappropriation claims are
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`preempted by federal copyright law. “The Copyright Act provides the exclusive
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`source of protection for ‘all legal and equitable rights that are equivalent to any
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`of the exclusive rights within the general scope of copyright as specified by
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`section 106 of the Copyright Act.’” National Car Rental Sys., Inc. v. Computer
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`th
`Associates Int’l, Inc., 991 F.2d 426, 428 (8 Cir. 1993) (quoting 17 U.S.C.
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`§ 301). A state-law cause of action is preempted if the work is within the
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`subject matter as defined by §§ 102 and 103 of the Copyright Act, and the
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`state-law right is equivalent to any of the exclusive rights within the general
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`scope of copyright as defined in § 106. Id. This is known as the “subject
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`matter requirement” and the “general scope” or “equivalency requirement” in
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`preemption analysis. See Stromback v. New Line Cinema, 384 F.3d 283, 300
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`(6 Cir. 2004).
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`A.
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`Subject Matter Requirement
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`For this case, § 102 is the relevant statute defining the subject matter
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`that may be covered by the Copyright Act:
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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 . . . 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 . . . literary
`works [and] sound recordings.
`
`(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. § 102. Congress defines literary works as “works . . . expressed in
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`words, numbers, or other verbal or numerical symbols . . . regardless of the
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`nature of the material objects.” 17 U.S.C. § 101.
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`“Advertisements are clearly copyrightable, although the appropriate
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`Section 102(a) category for such protection may vary, depending upon the
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`content.” 1-2 Nimmer on Copyright § 2.08 [4]. Copyright law covers
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`commercial items including mundane advertisements. American Direct
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`12
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`Marketing, Inc. v. Azad Int’l, Inc., 783 F. Supp. 84, 87 (E.D.N.Y. 1992). Ideas
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`may not be copyrighted. 17 U.S.C. § 102. Slogans are not subject to
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`copyright. 37 C.F.R. § 202.1. “Items otherwise copyrightable will not be
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`denied copyright simply because of their advertising purpose, but they do not
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`gain any greater protection than non-advertising materials.” Fabrica Inc. v. El
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`Dorado Corp., 697 F.2d 890, 894 (9 Cir. 1983). In order to be protected by
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`copyright, the advertising must still fall within one of the areas of
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`copyrightable subject matter designated in 17 U.S.C. § 102. Id.
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`Several circuit courts have held that the Copyright Act may preempt a
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`state law cause of action even when the subject matter at issue would not be
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`copyrightable. See Wrench LLC v. Taco Bell Corp., 256 F.3d 446, 455 (6 Cir.
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`2001) (inclusion of uncopyrightable expressions within copyrightable material
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`does not remove the work from the subject matter of copyright); National
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`Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 849-850 (2d Cir. 1997)
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`(holding that subject matter of copyright under § 301 includes
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`“uncopyrightable” as well as “copyrightable” elements); United States ex rel.
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`Berge v. Board of Trustees of the Univ. of Ala., 104 F.3d 1453, 1463 (4 Cir.
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`1997) (finding that “scope and protection are not synonyms,” and holding that
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`uncopyrightable ideas that make up copyrightable works are within subject
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`matter of copyright); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1453 (7 Cir.
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`1996)(finding that uncopyrightable data underlying a copyrightable computer
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`13
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`program are within subject matter of copyright). In other words, “the shadow
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`actually cast by the Act’s preemption is notably broader than the wing of its
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`protection.” Berge, 104 F.3d at 1463. The Eighth Circuit Court of Appeals
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`has not ruled on the issue. 1
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`“Copyrightable material often contains uncopyrightable elements within
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`it, but § 301 preemption bars state law misappropriation claims with respect
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`to uncopyrightable as well as copyrightable elements.” National Basketball
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`Ass’n, 105 F.3d at 849. For example, the fact that portions of a book may
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`consist of uncopyrightable material does not take the work as a whole outside
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`the subject matter of the act. Id. (citing Harper & Row Publishers, Inc. v.
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`Nation Enterprises, 723 F.2d 195, 200 (1983) rev’d on other grounds, 471 U.S.
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`539, 105 S. Ct. 2218, 85 L. Ed. 2d 588 (1985). “Were this not so, states would
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`be free to expand the perimeters of copyright protection to their own liking, on
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`the ground that preemption would be no bar to state protection of material not
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`meeting federal statutory standards.” Id. See also Murray Hill Publications,
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`Inc. v. ABC Communications, Inc., 264 F.3d 622, 637 (6 Cir. 2001) (finding
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`1
` In Hartman v. Hallmark Cards, Inc., the court held that § 301 of the
`Copyright Act preempted a common law misappropriation claim because it was a
`mere reformulation of the plaintiff’s failed copyright claim. 833 F.2d 117, 121
`th
`(8 Cir. 1987). In that case, however, the subject matter was a script covered by
`the Copyright Act. Id. at 120.
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`14
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`Copyright Act preempted conversion claim involving unoriginal line in movie,
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`even though line was not eligible for copyright protection).
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`Section 301 is intended to create a uniform method of enforcing and
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`protecting intellectual property rights by preempting state law claims. Daboub
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`v. Gibbons, 42 F.3d 285, 288 (5 Cir. 1995). The House Report states:
`th
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`The intention of section 301 is to preempt and abolish any rights
`under the common law or statutes of a State that are equivalent to
`copyright and that extend to works coming within the scope of the
`Federal copyright law. The declaration of this principle in section
`301 is intended to be stated in the clearest and most unequivocal
`language possible, so as to foreclose any conceivable
`interpretation of its unqualified intention that Congress shall act
`preemptively, and to avoid the development of any vague
`borderline areas between State and Federal protection.
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`Id. at 290 n.8 (citing Notes of Comm. on the Judiciary, House Report No. 94-
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`1476). Congress can only accomplish its goals if the “subject matter of
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`copyright” includes all works of a type covered by § 102, even if federal law
`
`does not copyright that particular item. ProCD, Inc. v. Zeidenberg, 86 F.3d
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`1447, 1453 (7 Cir. 1996); cf. Bonito Boats, Inc. v. Thunder Craft Boats, Inc.,
`th
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`489 U.S. 141, 156, 109 S. Ct. 971, 103 L. Ed. 2d 118 (1989) (holding that
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`same principle applies in patent law.)
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`Pinnacle contends that no part of “Hot n’ Ready” is copyrightable, and
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`therefore, its claims survive preemption. Pinnacle urges the court to follow the
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`approach adopted by the Eleventh Circuit Court of Appeals, which held that
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`for purposes of preemption analysis, the subject matter of copyright only
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`15
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`Case 4:04-cv-04170-KES Document 69 Filed 07/19/05 Page 16 of 27 PageID #: 708
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`includes materials that are substantively qualified for copyright protection.
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`Dunlap v. G & L Holding Group, Inc. 381 F.3d 1285, 1295 (11 Cir. 2004).
`th
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`In Dunlap, the appellant had filed a conversion claim against his former
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`employer, alleging that it stole his idea for a gay and lesbian online bank. Id.
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`at 1288. The district court granted partial summary judgment in favor of the
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`defendant and found that Dunlap’s claim was preempted by the Copyright Act.
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`Id. at 1289. The Court of Appeals reversed and held that because ideas may
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`not be copyrighted, a conversion claim alleging theft of an idea is not
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`preempted. Id. at 1295. The court noted that “the assertion that an element
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`which is not protected by copyright is included in the subject matter of
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`copyright is completely illogical.” Id. If the Dunlap case had involved more
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`than just the theft an idea, however, the conversion claim would have been
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`preempted. “Where a work of original authorship embraces more than simply
`
`an idea, preemption would be appropriate. But where, as here, there is no
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`work that is claimed to have been pirated—only an idea which lends itself to
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`very few expressions—there is merger and no preemption.” Id. (Emphasis in
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`original).
`
`Pinnacle has been advertising “Hot n’ Ready” pizzas in newspapers,
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`leaflets, radio spots, and banners since May 1997. Pinnacle’s complaint refers
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`to the subject of this case as advertising, an idea or concept, and a slogan. At
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`oral argument, Pinnacle described “Hot n’ Ready” as advertising, an idea, and a
`
`16
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`Case 4:04-cv-04170-KES Document 69 Filed 07/19/05 Page 17 of 27 PageID #: 709
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`slogan protected by trademark law instead of the Copyright Act. Tr. 39-41. In
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`its amended complaint Pinnacle alleges LCE violated Section XII(B) of the
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`Franchise Agreement, which provides that “Little Caesar may not use the
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`original advertising materials created by Franchise Owner without its prior
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`written consent.” Pl. Am. Compl. at 4.
`
`Unlike the plaintiff in Dunlap, Pinnacle’s claim involves both
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`copyrightable materials, such as newspaper ads, flyers and radio ads, not just
`
`an uncopyrightable slogan or idea. Because of the presence of copyrightable
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`materials, this case is similar to cases involving conversion of non-
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`copyrightable portions of copyrightable materials in which the courts have
`
`found the state-law claims are preempted because they were within the
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`subject matter of the Copyright Act. See, e.g., Murray Hill, 264 F.3d at 637,
`
`Harper & Row, 723 F.2d at 200. As long as a work fits within the general
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`subject matter of §§ 102 and 103, the Act prevents the states from protecting
`
`it even if it fails to achieve federal statutory copyright because it is too minimal
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`or lacking in originality to qualify. Dunlap, 381 F.3d at 1296. In light of the
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`persuasive authority cited above, the court finds that Pinnacle’s state-law
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`claims alleging conversion and misappropriation are within the “subject
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`matter” of the Copyright Act.
`
`17
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`
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`Case 4:04-cv-04170-KES Document 69 Filed 07/19/05 Page 18 of 27 PageID #: 710
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`B.
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`Equivalency Requirement
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`Courts analyze equivalency by applying a functional test to determine
`
`whether the state-law claim is equivalent to any of the exclusive rights granted
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`to copyright holders in § 106. Strombeck, 384 F.3d at 301 (citing Data
`
`General Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1164 (1 Cir.
`st
`
`1994). Section 106 gives the copyright owner “exclusive rights to do and to
`
`authorize” reproduction of copyrighted works or the preparation of derivative
`
`materials from them. 17 U.S.C. § 106. This includes the right to refuse to
`
`license the exploitation of its work. Orson, Inc. v. Miramax Film Corp., 189
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`F.3d 377, 385 (3 Cir. 1999). To avoid preemption, the state law action must
`d
`
`include an extra element “beyond mere reproduction or the like.” National Car
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`Rental, Inc., 991 F.2d at 431. The extra element must change the nature,
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`rather than the scope, of the action. Stromback v. New Line Cinema, 384 F.3d
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`283, 301 (6 Cir. 2004).
`th
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`1.
`
`Misappropriation
`
`Pinnacle alleges that LCE misappropriated its property interest in its
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`“Hot n’ Ready” advertising promotion. Pinnacle alleges that it developed the
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`advertising promotion with its time, money and skill, creating a property right,
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`that LCE gained an unfair advantage and have wrongfully benefited from
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`Pinnacle’s toil, and that LCE damaged Pinnacle by wrongly appropriating the
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`property.
`
`18
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`
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`Case 4:04-cv-04170-KES Document 69 Filed 07/19/05 Page 19 of 27 PageID #: 711
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` Courts faced with similar misappropriation claims have routinely found
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`them preempted by the Copyright Act because they allege an act that infringes
`
`upon one of the exclusive rights granted by § 106. Stromback, 384 F.3d at
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`302. See also 1 Nimmer § 1.01[B][1][f][iii] (“Except for a few stray rulings,
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`legions of cases . . . have held preempted claims for misappropriation”)
`
`(citations omitted). Applying Michigan law, the Sixth Circuit Court of Appeals
`
`in Strombeck held that the federal Copyright Act preempted a commercial
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`misappropriation claim. Id. Similarly, the Eighth Circuit Court of Appeals
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`found that a state-law misappropriation claim is preempted by federal law.
`
`See Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 121 (8 Cir. 1987). While
`th
`
`a misappropriation claim would survive preemption if it alleged an extra
`
`element, such as a confidential or fiduciary relationship, see Stromback, 384
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`F.3d at 302, Pinnacle’s claim does not make such an allegation. Therefore,
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`this claim is preempted.
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`2.
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`Conversion
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`Pinnacle alleges LCE committed the tort of conversion by exercising
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`control and dominion over Pinnacle’s property right in its “Hot n’ Ready”
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`advertising campaign. It alleges that the franchise agreement gave Pinnacle
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`ownership of its local advertising. Pinnacle further alleges that LCE used the
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`converted property to earn millions of dollars, and that Pinnacle is entitled to
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`recover all the profits that LCE earned from the alleged conversion. Under
`
`19
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`Case 4:04-cv-04170-KES Document 69 Filed 07/19/05 Page 20 of 27 PageID #: 712
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`Michigan law, conversion is “any distinct act of domain wrongfully exerted
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`over another’s personal property in denial of or inconsistent with the rights
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`therein.” Foremost Ins. Co. v. Allstate Ins. Co., 486 N.W.2d 600, 606 (Mich.
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`1992). Under South Dakota law, conversion is the unauthorized exercise of
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`control or dominion over personal property in a way that repudiates an
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`owner’s right in the property or in a manner inconsistent with such right.
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`Ward v. Lange, 553 N.W.2d 246 (S.D. 1996).
`
`Pinnacle has not alleged a violation of an additional element that would
`
`distinguish a state law conversion claim from a federal copyright action. See
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`Murray Hill, 264 F.3d at 637 (holding Michigan conversion claim preempted
`
`by federal Copyright Act because plaintiff would not have to prove anything
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`beyond violation of copyright law). As in Pinnacle’s misappropriation claim,
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`the alleged conversion would infringe the exclusive rights protected by § 106 of
`
`the Copyright Act. See id. Because it has failed to allege an extra element and
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`its conversion claim falls within the subject matter of the Act, the court finds
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`that Pinnacle’s conversion claim is preempted.
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`III. Other Claims
`
`A.
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`Breach of Duty of Good Faith and Fair Dealing
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`Pinnacle alleges that LCE breached its duty of good faith and fair
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`dealing. LCE contends that the claim must be dismissed unless Pinnacle can
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`show that it was completely denied the benefit of the bargain by LCE’s bad
`
`20
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`Case 4:04-cv-04170-KES Document 69 Filed 07/19/05 Page 21 of 27 PageID #: 713
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`faith. A claim for breach of an implied covenant of good faith and fair dealing
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`has not been recognized by the Michigan courts, and is properly subject to
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`dismissal. Belle Isle Grill Corp., 666 N.W.2d at 279. The court reserves ruling
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`on whether this claim should be dismissed until it receives additional briefing
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`from the parties on the choice of laws issue in section I.A.
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`B.
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`Unjust Enrichment
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`Pinnacle has alleged LCE was unjustly enriched when it stole Pinnacle’s
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`advertising campaign. LCE argues that the claim must be dismissed because
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`the parties had an express contract that addresses the advertising issue.
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`“However, a contract cannot be implied in law while an express contract
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`covering the same subject matter is in force between the parties.” H.J. Tucker
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`& Assoc. v. Allied Chucker & Eng’g Co., 595 N.W.2d 176 (Mich. App. 1999).
`
`When a written contract between the parties does not directly address the
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`circumstances presented, however, an unjust enrichment claim may proceed
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`and it is error to dismiss such a claim. Rozenberg v. Retriev
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