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holding that a defendant had not clearly violated an order to turn over recording files when plaintiffs were merely "uncertain about whether they ha[d] received" all of the files
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Case No. 17–cv–1212 (WMW/TNL)
10-26-2017
PAISLEY PARK ENTERPRISES, INC.; and Comerica Bank & Trust, N.A., as Personal Representative of the Estate of Prince Rogers Nelson, Plaintiffs, v. George Ian BOXILL; Rogue Music Alliance, LLC; and Deliverance, LLC, Defendants.
Anne E. Rondoni Tavernier, Christopher D. Pham, Grant D. Fairbairn, Joseph J. Cassioppi, Lora Mitchell Friedemann, Fredrikson & Byron, PA, Minneapolis, MN, for Plaintiffs. Anthony R. Zeuli, Brent E. Routman, Paige S. Stradley Merchant & Gould PC, Minneapolis, MN, Christopher L. Brown, Brown & Rosen LLC, Boston, MA, for Defendants.
Anne E. Rondoni Tavernier, Christopher D. Pham, Grant D. Fairbairn, Joseph J. Cassioppi, Lora Mitchell Friedemann, Fredrikson & Byron, PA, Minneapolis, MN, for Plaintiffs.
Anthony R. Zeuli, Brent E. Routman, Paige S. Stradley Merchant & Gould PC, Minneapolis, MN, Christopher L. Brown, Brown & Rosen LLC, Boston, MA, for Defendants.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS AND DENYING PLAINTIFFS' MOTION FOR AN ORDER TO SHOW CAUSE FOR CIVIL CONTEMPT
Wilhelmina M. Wright, United States District JudgeThis lawsuit arises from a dispute over the release of recordings of musical performances by Prince Rogers Nelson (Prince) that were not released during his lifetime. On May 22, 2017, the Court issued an Order enjoining Defendants from distributing the disputed recordings while this lawsuit is pending. Two motions are now before the Court. Defendants move to dismiss several counts of Plaintiffs' Amended Complaint. (Dkt. 70.) Plaintiffs move for an order to show cause for civil contempt, asserting that Defendants have failed to comply with the Court's May 22, 2017 Order in certain material respects. (Dkt. 88.) For the reasons addressed below, Defendants' motion to dismiss is granted in part and denied in part, and Plaintiffs' motion for an order to show cause for civil contempt is denied.
Although the parties have submitted affidavits and other evidence in conjunction with the motions for injunctive relief previously filed in this case, the factual allegations in this section are taken solely from Plaintiffs' Amended Complaint. Because the present motion to dismiss is brought under Rule 12(b)(6), to decide the motion, the factual allegations in the Amended Complaint are accepted as true, and material outside the pleadings are not considered. Blankenship v. USA Truck, Inc. , 601 F.3d 852, 853 (8th Cir. 2010) (factual allegations accepted as true); Hamm v. Rhone–Poulenc Rorer Pharms., Inc. , 187 F.3d 941, 948 (8th Cir. 1999) (explaining that if the court considers material outside the pleadings in deciding a motion under Rule 12(b)(6), the motion must be converted to one for summary judgment).
This lawsuit pertains to previously unreleased recordings of the internationally renowned recording artist Prince, who died in April 2016. Plaintiffs Paisley Park Enterprises, Inc., and Comerica Bank & Trust, N.A., as Personal Representative of the Estate of Prince Rogers Nelson, allege that Defendants George Ian Boxill, Rogue Music Alliance, LLC (RMA), and Deliverance, LLC (Deliverance), unlawfully possess and have attempted to commercially exploit several sound recordings of Prince.
Boxill is a sound engineer who worked with Prince during Prince's lifetime. In 2004, Boxill executed a Confidentiality Agreement with Paisley Park Enterprises. The Confidentiality Agreement provides that recordings and other physical materials that resulted from Boxill's work with Prince "shall remain Paisley's sole and exclusive property, shall not be used by [Boxill] in any way whatsoever, and shall be returned to Paisley immediately upon request." The Confidentiality Agreement provides that the term "Paisley" includes "Paisley Park Enterprises and all its affiliated and related entities, and the confidentiality obligations to ‘Paisley’ hereunder shall extend and apply equally to any information or material of any kind concerning Prince Rogers Nelson or any of his family members, agents, business managers, and other representatives."
In 2006, Boxill recorded Prince's performances that comprise the five songs at issue in this lawsuit: "Deliverance," "No One Else," "I Am," "Touch Me," and "Sunrise Sunset" (collectively, the "Prince Recordings"). Plaintiffs assert that they own copyrights in the Prince Recordings, and Plaintiffs filed applications to register those copyrights in April 2017. Paisley Park Enterprises also owns the trademark PRINCE® for use in connection with "phonograph records, audiotapes, compact discs, and videotapes embodying musical performances." In April 2017, Defendants began distributing the Prince Recordings through the website www.princerogersnelson.com, using the name "Prince" to promote and sell the Prince Recordings via the website.
Based on these allegations, Plaintiffs commenced this lawsuit and sought a temporary restraining order. Plaintiffs' Amended Complaint asserts fourteen counts against Defendants. Count One seeks permanent injunctive relief against all Defendants. Count Two asserts a breach-of-contract claim against Boxill for his alleged violations of the Confidentiality Agreement. Counts Three and Four assert conversion and replevin claims against all Defendants, alleging that Defendants wrongfully possess the Prince Recordings and demanding their return. Count Five alleges that Boxill is liable for damages resulting from theft of the Prince Recordings. Count Six alleges that all Defendants have misappropriated Plaintiffs' trade secrets by providing copies of the Prince Recordings to third parties. Count Seven alleges that RMA and Deliverance tortuously interfered with the Confidentiality Agreement between Boxill and Paisley Park Enterprises. Count Eight asserts a copyright-infringement claim against all Defendants. Counts Nine and Ten assert trademark-infringement claims against RMA and Deliverance. Count Eleven alleges that RMA and Deliverance violated the Minnesota Deceptive Trade Practices Act, Minn. Stat. § 325D.44 (2016). Count Twelve asserts that RMA and Deliverance violated Prince's common-law right of publicity. Count Thirteen alleges cybersquatting against RMA. Finally, Count Fourteen seeks a declaratory judgment that Prince is the sole author of the Prince Recordings and Boxill has no right to produce or distribute derivative works.
On October 6, 2017, Plaintiffs voluntarily dismissed without prejudice and without costs to any party Count Four (Replevin) and Count Six (Misappropriation of Trade Secrets) of their Amended Complaint.
Plaintiffs sought a preliminary injunction to prevent Defendants from distributing the Prince Recordings. On May 22, 2017, this Court issued an Order enjoining Defendants from "publish[ing] or otherwise disseminat[ing] any unreleased recordings that comprise the work of Prince Rogers Nelson that are alleged to be within the scope of the Confidentiality Agreement." The Order also requires Defendants to "deliver all recordings acquired through Boxill's work with Paisley Park Enterprises, Inc., including original recordings, analog and digital copies, and any derivative works," to Plaintiffs' counsel for use in this litigation. Finally, the Order requires Defendants to "cease the use of the trademark PRINCE® in connection with the promotion, sale, and distribution of the song ‘Deliverance.’ "
Defendants now move to dismiss the Amended Complaint for lack of personal jurisdiction or, alternatively, to dismiss certain claims for failure to state a claim on which relief can be granted. Plaintiffs move for an order to show cause for civil contempt, in which they assert that Defendants have failed to comply with the Court's May 22, 2017 Order.
ANALYSIS
I. Defendants' Motion to Dismiss
Defendants' motion to dismiss asserts that Plaintiffs' right-of-publicity, breach-of-contract, conversion, theft, tortious-interference-with-contract, copyright-infringement, and trademark-infringement claims all fail to state a claim on which relief can be granted. Defendants also contend that this lawsuit must be dismissed because the Court lacks personal jurisdiction over the Defendants.
A. Personal Jurisdiction
The Court first addresses the contention of Defendants, who are not residents of Minnesota, that the Court lacks personal jurisdiction over them. If the Court lacks jurisdiction, the Amended Complaint must be dismissed and Defendants' remaining arguments are moot. The parties contest whether Plaintiffs have alleged sufficient facts to establish personal jurisdiction over Defendants in Minnesota. Plaintiffs maintain that Defendants waived their challenge to personal jurisdiction by failing to raise it in response to Plaintiffs' motions for a temporary restraining order and a preliminary injunction. Alternatively, Plaintiffs argue that each Defendant is subject to specific personal jurisdiction in Minnesota.
If a party fails to challenge personal jurisdiction in a Rule 12 motion or responsive pleading, the defense is waived. Fed. R. Civ. P. 12(h)(1) ; Yeldell v. Tutt , 913 F.2d 533, 539 (8th Cir. 1990). But the parties' dispute regarding waiver need not be resolved because, even if properly challenged, personal jurisdiction exists here. When personal jurisdiction is challenged, a plaintiff must plead facts sufficient to "support a reasonable inference that the defendant can be subjected to jurisdiction within the state." K–V Pharm. Co. v. J. Uriach & CIA, S.A. , 648 F.3d 588, 591–92 (8th Cir. 2011) (internal quotation marks and alteration omitted). A federal court applies state law when determining the bounds of its personal jurisdiction. Walden v. Fiore , 571 U.S. 277, 134 S.Ct. 1115, 1121, 188 L.Ed.2d 12 (2014). Minnesota's long-arm statute extends jurisdiction to the maximum limit permitted by due process. Wessels, Arnold & Henderson v. Nat'l Med. Waste, Inc. , 65 F.3d 1427, 1431 (8th Cir. 1995) (citing Minn. Stat. § 543.19 ). Therefore, a federal district court in Minnesota need only determine whether its exercise of personal jurisdiction comports with due process. Id. Personal jurisdiction over the defendant may be general or specific. Toomey v. Dahl , 63 F.Supp.3d 982, 989 (D. Minn. 2014). "Specific jurisdiction is jurisdiction over causes of action arising from or related to the defendant's actions in the forum state." Wessels, Arnold & Henderson , 65 F.3d at 1432 n.4. Here, Plaintiffs assert specific personal jurisdiction.
Due process requires that a nonresident defendant have sufficient minimum contacts with the forum state such that the maintenance of the lawsuit does not offend "traditional notions of fair play and substantial justice." World–Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 291–92, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) (internal quotation marks omitted). This legal standard requires an act by which the defendant purposely avails itself of the privilege of conducting activities within the forum state so as to invoke the benefits and protections of the forum state's laws. Fastpath, Inc. v. Arbela Techs. Corp. , 760 F.3d 816, 821 (8th Cir. 2014). This Court employs the following five factors to determine the sufficiency of a nonresident defendant's contacts with the forum state: (1) the nature and quality of contacts with the forum state, (2) the quantity of contacts, (3) the relation of the cause of action to the contacts, (4) the interest of the forum state in providing a forum for its residents, and (5) the convenience of the parties. Id.
Defendants are not residents of Minnesota. Although Boxill argues that he has neither performed work in Minnesota nor had any other contacts with the state since 2008, the allegations against him in this lawsuit arise from both the work that he performed in Minnesota and the Confidentiality Agreement that he signed here. Minnesota has an interest in providing a forum for its residents who become embroiled in disputes with consultants they have hired to perform work in Minnesota. Clearly, the allegations in the Amended Complaint establish sufficient minimum contacts to exercise personal jurisdiction over Boxill.
The minimum-contacts analysis for RMA and Deliverance is more complex. Neither RMA nor Deliverance has a presence in Minnesota, and neither conducts business in Minnesota. But Plaintiffs argue that the commercial Internet activity of RMA and Deliverance makes them subject to suit in Minnesota. See Johnson v. Arden , 614 F.3d 785, 796 (8th Cir. 2010) (citing Zippo Mfg. Co. v. Zippo Dot Com, Inc. , 952 F.Supp. 1119, 1124 (W.D. Pa. 1997) ). The Zippo test requires courts to examine the "nature and quality of a defendant's presence on the Internet" to determine whether minimum contacts with the forum state are established. Minn. Pub. Radio v. Va. Beach Educ. Broad. Found. , 519 F.Supp.2d 970, 974 (D. Minn. 2007). "If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper." Zippo Mfg. Co. , 952 F.Supp. at 1124. By contrast, personal jurisdiction does not arise from "[a] passive Web site that does little more than make information available to those who are interested in it." Id. Interactive websites on which users can exchange information with a host computer occupy a middle ground. Id. In this middle ground, courts determine whether to exercise personal jurisdiction "by examining the level of interactivity and commercial nature of the exchange of information that occurs" on the website. Id. But if a defendant's website neither targeted the forum state nor knowingly interacted with residents of the forum state, some courts have rejected personal jurisdiction over the defendant. See, e.g. , Toys "R" Us, Inc. v. Step Two, S.A. , 318 F.3d 446, 454 (3d Cir. 2003) (stating that the mere act of operating a commercially interactive website "should not subject the operator to jurisdiction anywhere in the world"); ALS Scan, Inc. v. Dig. Serv. Consultants, Inc. , 293 F.3d 707, 714 (4th Cir. 2002).
Here, RMA and Deliverance created a website for the purpose of selling the Prince Recordings. When they did so, RMA and Deliverance knew or should have known that, even after his death, Prince is particularly popular in his home state of Minnesota and that his Minnesota fans would comprise a strong market for the Prince Recordings. These facts establish that Defendants' commercial conduct through the website was directed, at least in part, at the state of Minnesota. Under the Zippo test, the Court has personal jurisdiction over RMA and Deliverance.
RMA and Deliverance also are subject to personal jurisdiction in Minnesota on alternative grounds. Under the effects test articulated in Calder v. Jones , jurisdiction is proper in the state where the effect of the defendant's tortious conduct is felt. 465 U.S. 783, 789–90, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). Plaintiffs allege that RMA and Deliverance have interfered with the Confidentiality Agreement and deprived Plaintiffs of their property interest in the Prince Recordings. Under these allegations, a diminution in value of Prince's estate that is attributable to the tortious actions of RMA and Deliverance is the primary effect of RMA's and Deliverance's tortious conduct. And, Plaintiffs assert, that injury accrued primarily in Minnesota. Consequently, also when applying the effects test to the facts presented here, personal jurisdiction over RMA and Deliverance is proper in this Court.For the foregoing reasons, Defendants' motion to dismiss for lack of personal jurisdiction is denied.
B. Sufficiency of the Pleadings to State a Claim on Which Relief Can Be Granted
A complaint must allege sufficient facts such that, when accepted as true, a facially plausible claim for relief is stated. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Fed. R. Civ. P. 12(b)(6). When applying this pleading standard, a district court accepts as true the factual allegations in the complaint and draws all reasonable inferences in the plaintiff's favor. Blankenship v. USA Truck, Inc. , 601 F.3d 852, 853 (8th Cir. 2010). The factual allegations need not be detailed, but they must be sufficient to "raise a right to relief above the speculative level" and "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). When an affirmative defense to a claim is raised pursuant to Rule 12(b)(6), dismissal is warranted only when the affirmative defense "is apparent on the face of the complaint." C.H. Robinson Worldwide, Inc. v. Lobrano , 695 F.3d 758, 764 (8th Cir. 2012) (internal quotation marks omitted). The phrase "on the face of the complaint" includes public records and materials attached to or necessarily embraced by the complaint. Id. (internal quotation marks omitted).
a. Right of Publicity
Defendants argue that Plaintiffs' right-of-publicity claim must be dismissed because Minnesota law does not recognize a postmortem right of publicity. Plaintiffs counter that whether a postmortem right of publicity exists under Minnesota law is an unresolved question that should be answered in the affirmative.
The Minnesota Supreme Court has not addressed whether the right of publicity survives a person's death. In a case that invokes the court's diversity jurisdiction, a federal court addresses an unresolved question of state law by predicting how the state supreme court would resolve the issue if addressing it. State Farm Fire & Cas. Co. v. Ewing , 269 F.3d 888, 890 (8th Cir. 2001). To formulate this prediction, the federal court considers "relevant state precedent, analogous decisions, considered dicta, scholarly works and any other reliable data." Ventura v. Titan Sports, Inc. , 65 F.3d 725, 729 (8th Cir. 1995).
The clear weight of authority from jurisdictions that have addressed this issue supports a conclusion that the right of publicity is a property right that is enforceable by a decedent's estate. See, e.g. , Acme Circus Operating Co. v. Kuperstock , 711 F.2d 1538, 1544 (11th Cir. 1983) (concluding that right of publicity survives death and is enforceable by the estate); State ex rel. Elvis Presley Int'l Mem'l Found. v. Crowell , 733 S.W.2d 89, 98–99 (Tenn. Ct. App. 1987) (reaching same conclusion and collecting cases). Scholarly works are in accord. See Restatement (Third) of Unfair Competition § 46 cmt. g (1995) (stating that "[t]he interest in the commercial value of a person's identity is in the nature of a property right and is freely assignable to others"). It appears that only the United States Court of Appeals for the Sixth Circuit, applying Tennessee law, has considered and rejected a postmortem right of publicity. Memphis Dev. Found. v. Factors Etc., Inc. , 616 F.2d 956, 959–60 (6th Cir. 1980) ; accord J. Thomas McCarthy, The Rights of Publicity and Privacy § 9:17 (2d ed. 2017) (citing same).
Plaintiffs cite In re Estate of Reynolds , in which the Arizona Court of Appeals concluded, consistent with the majority approach, that the right of publicity is descendible. 235 Ariz. 80, 327 P.3d 213, 217 (Ariz. Ct. App. 2014). The Reynolds decision is instructive. Relying on decisions from the Sixth, Eighth, Tenth, and Eleventh Circuits, the Reynolds court explained that "the right of publicity is more akin to a property right, the breach of which is measured by resulting pecuniary loss, than a personal right whose violation results in emotional injury." Id. at 216. Because the right of publicity is a freely assignable property right, the Arizona Court of Appeals concluded that "the right of publicity is descendible, and therefore may be enforced by a decedent's estate." Id. at 217.
In Ventura , the Eighth Circuit concluded that a right of publicity exists as a matter of Minnesota common law, and that the right of publicity is distinct from the tort of invasion of privacy. 65 F.3d at 730. In reaching this conclusion, the Eighth Circuit, like the Reynolds court, reasoned that the right of publicity "protects pecuniary, not emotional, interests" and described the underlying policy interest as "akin to the policy underlying the protection of trade names, which Minnesota recognizes." Id. While acknowledging that the Minnesota Supreme Court had not yet had the occasion to recognize invasion of privacy and its four causes of action, the Eighth Circuit opined that the Minnesota Supreme Court likely would recognize the right of publicity because the right of publicity protects a person's commercial interest in his or her identity rather than the "privacy and solicitude of private personae" protected by invasion of privacy. Id.
The four causes of action comprising invasion of privacy are intrusion upon seclusion, appropriation, publication of private facts, and false light publicity. Lake v. Wal–Mart Stores, Inc. , 582 N.W.2d 231, 233 (Minn. 1998).
Three years after the Eighth Circuit concluded in Ventura that a right of publicity exists under Minnesota law, the Minnesota Supreme Court recognized three of the four causes of action underlying the tort of invasion of privacy, including appropriation. Lake v. Wal–Mart Stores, Inc. , 582 N.W.2d 231, 233 (Minn. 1998). Relying on the Restatement, the Lake court explained that, as a tort, appropriation "protects an individual's identity and is committed when one ‘appropriates to his own use or benefit the name or likeness of another.’ " Id. (quoting Restatement (Second) of Torts § 652C (1977) ). Although the Minnesota Supreme Court's recognition of the tort of invasion of privacy is founded on its determination that "[t]he heart of our liberty is choosing which parts of our lives shall become public and which parts we shall hold close," the court observed that the right of privacy originates from the common law's protection of "an individual's person and property." Id. at 234–35. Other sections of the Restatement (Second) of Torts support the determination that appropriation, like the right of publicity, protects a property right. See § 652C cmt. a. (observing that "the right created by [appropriation] is in the nature of a property right"); § 652I (noting that, of the four invasion of privacy causes of action, appropriation alone can support a posthumous cause of action); § 652I cmt. b (likening appropriation to an impairment of a property right).
In light of the Ventura court's characterization of the right of publicity as a property right and the Lake court's reliance on the Restatement's recognition that an estate may maintain an action for appropriation after an individual's death, Plaintiffs persuasively argue that the majority approach is a viable doctrine subject to adoption by the Minnesota Supreme Court, warranting recognition of the right of publicity as a property interest that is enforceable by the decedent's estate.
Defendants argue that the Court should decline to adopt the view that the right of publicity can be enforced by a person's estate after death because the Minnesota Legislature considered but did not pass the "Prince Act," which would have created a statutory postmortem right of publicity. But the only question that is relevant to the Court's analysis is how the Minnesota Supreme Court—not the Minnesota Legislature—would resolve the question. See Lucas v. Brown & Root, Inc. , 736 F.2d 1202, 1205 (8th Cir. 1984) (explaining that courts in common-law jurisdictions are an independent source of law, subject to correction by the legislative branch). Further, legislative inaction generally "lacks persuasive significance because several equally tenable inferences may be drawn from such inaction." Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A. , 511 U.S. 164, 187, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994) (quoting Pension Benefit Guar. Corp. v. LTV Corp. , 496 U.S. 633, 650, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990) ).
As the Reynolds court noted, some courts have concluded that the right of publicity is descendible only if the decedent used the decedent's identity for commercial purposes during the decedent's lifetime. 327 P.3d at 217 n.3. Here, the Court need not decide whether such a limitation exists under Minnesota law because Prince unquestionably used his own identity and likeness for commercial purposes during his lifetime.
Defendants argue that they should not be held "responsible for violating a law ... that they had no reason to believe existed when the alleged violations occurred." This argument is unavailing. The Eighth Circuit decided Ventura in 1995, and an overwhelming majority of courts that have addressed the issue have concluded that the right of publicity exists and is assignable. Given these developments of the law, the possibility of being held liable for violating Prince's right of publicity, even after his death, was more than a remote and fleeting possibility.
The right of publicity under Minnesota common law is descendible and enforceable by the decedent's estate. Therefore, Defendants' motion to dismiss Plaintiffs' right-of-publicity claim is denied.
b. Breach of Contract
Defendants next argue that the breach-of-contract claim against Boxill based on the Confidentiality Agreement must be dismissed for two reasons: (1) Plaintiffs waived the right to enforce the Confidentiality Agreement and (2) enforcement of the Confidentiality Agreement is barred by the statute of limitations. Because several of Plaintiffs' other claims—conversion, theft, and tortious interference with contract—are premised on the applicability of the Confidentiality Agreement, Defendants assert that those claims also must be dismissed. Plaintiffs advance two arguments in response. First, Plaintiffs argue that the Amended Complaint states a plausible breach-of-contract claim. Second, Plaintiffs counter that waiver and the statute of limitations are affirmative defenses to a breach-of-contract claim that are not established on the face of the Amended Complaint.
To prevail on a breach-of-contract claim under Minnesota law, Plaintiffs must prove formation of a contract, performance of any conditions precedent to the right to demand performance by the defendant, and breach of the contract by the defendant. Lyon Fin. Servs., Inc. v. Ill. Paper & Copier Co. , 848 N.W.2d 539, 543 (Minn. 2014). Here, the Confidentiality Agreement that Boxill signed establishes the formation of a contract. Paisley Park Enterprises performed its obligations under the Confidentiality Agreement when it provided Boxill the opportunity to work with Prince. And in paragraph 2 of the Confidentiality Agreement, Boxill disclaims any property interest in "without limitation, records, documents, photographs or other physical material" connected to his work with Paisley Park Enterprises. The Confidentiality Agreement also provides that such materials "shall not be used by [Boxill] in any way whatsoever, and shall be returned to Paisley immediately upon request." The Amended Complaint alleges that Boxill removed the Prince Recordings from Paisley Park and provided those recordings to third parties, including Defendants RMA and Deliverance, in violation of the Confidentiality Agreement. These allegations state a plausible breach-of-contract claim against Boxill.
The Confidentiality Agreement, which Plaintiffs attached to the complaint, provides that it "shall in all respects be interpreted, enforced and governed by the laws of the State [of] Minnesota."
Defendants assert two affirmative defenses as a basis for dismissal: waiver and the statute of limitations. Minn. R. Civ. P. 8.03 ; accord Golden v. Lerch Bros. , 203 Minn. 211, 281 N.W. 249, 253 (1938) (statute of limitations); Loppe v. Steiner , 699 N.W.2d 342, 347 (Minn. Ct. App. 2005) (waiver). Defendants argue that Plaintiffs waived the right to enforce the Confidentiality Agreement against Boxill when Prince engaged Boxill to perform services expressly prohibited by the Confidentiality Agreement. The Confidentiality Agreement provides that Boxill "shall not photograph, tape, film or otherwise record any likenesses, performances or activities of [Prince]." Yet, Boxill argues, he could not have performed his work as a sound engineer without violating this provision of the Confidentiality Agreement. Defendants also argue that the six-year statute of limitations has expired on Plaintiffs' claim for breach of the Confidentiality Agreement because the claim accrued in 2006 when Boxill first recorded Prince in violation of the express terms of the Confidentiality Agreement. Plaintiffs counter that neither affirmative defense is established on the face of the complaint.
A party to a contract can waive the right to enforce the terms of the contract. Valspar Refinish, Inc. v. Gaylord's, Inc. , 764 N.W.2d 359, 366–67 (Minn. 2009). Waiver is the intentional relinquishment of a known right and generally is a question of fact that rarely can be inferred as a matter of law. White v. City of Elk River , 840 N.W.2d 43, 51 (Minn. 2013). Waiver can be express or implied; the requisite knowledge can be actual or constructive, and the intent to waive can be inferred from conduct. Id. Here, Defendants argue that Prince waived the right to enforce the Confidentiality Agreement against Boxill by engaging him to perform services that violated the terms of the Confidentiality Agreement. But even if this conduct waived Plaintiffs' right to enforce the provision of the Confidentiality Agreement that prohibited Boxill from recording Prince, without more, it does not follow that such waiver extinguished all of Plaintiffs' rights under the Confidentiality Agreement. Not one factual allegation in the Amended Complaint supports Defendants' contention that Plaintiffs have waived all of their rights under the Confidentiality Agreement. To the contrary, Plaintiffs allege that they have demanded Boxill's compliance with the Confidentiality Agreement.
Breach-of-contract claims are subject to a six-year statute of limitations that begins to run when the cause of action accrues, even if the aggrieved party is unaware of the facts constituting the breach. Jacobson v. Bd. of Trs. of the Teachers Ret. Ass'n , 627 N.W.2d 106, 110 (Minn. Ct. App. 2001). As alleged in the Amended Complaint, the breaches of the Confidentiality Agreement are Boxill's distribution of the Prince Recordings to third parties, including RMA and Deliverance, and Boxill's refusal to return upon demand the Prince Recordings to Paisley Park Enterprises. The Amended Complaint does not specify the dates on which Boxill allegedly distributed the Prince Recordings to third parties. But it does allege that Plaintiffs demanded the return of the Prince Recordings in March 2017. This legal action commenced in April 2017. If discovery discloses other breaches of the Confidentiality Agreement that occurred before April 2011, claims arising from those breaches might be barred. But at this early stage of the litigation, the Amended Complaint does not clearly establish that Plaintiffs' breach-of-contract claim is barred by the statute of limitations.
Because the Amended Complaint alleges facts that, if proved, would establish the elements of a breach-of-contract claim, Plaintiffs have stated a plausible claim for relief. Defendants' affirmative defenses of waiver and statute of limitations are not clearly established on the face of the Amended Complaint. Therefore, those defenses do not warrant dismissal of Plaintiffs' breach-of-contract claim for failure to state a claim on which relief can be granted. Consequently, Defendants' motion to dismiss as it pertains to the breach-of-contract claim is denied.
Defendants also argue that Plaintiffs' state-law claims predicated on the applicability of the Confidentiality Agreement (conversion, theft, and tortious interference with contract) should be dismissed. But because Defendants have failed to establish that the Confidentiality Agreement is inapplicable or unenforceable, Defendants necessarily have not demonstrated that these other contract-based claims should be dismissed at this early stage of the litigation. Having presented no other legal basis for the dismissal of these claims, Defendants are not entitled to the relief they seek. Defendants' motion to dismiss as to Plaintiffs' conversion, theft, and tortious-interference-with-contract claims is denied.
c. Copyright Infringement
Defendants argue, as they did in opposition to the motion for a preliminary injunction, that Plaintiffs' copyright-infringement claim fails as a matter of law because Plaintiffs lack valid copyright registrations in the disputed recordings. Plaintiffs counter that if the Court interprets Section 411(a) of the Copyright Act so as to permit an application for copyright registration to satisfy the statutory registration requirement, the Amended Complaint states a plausible claim for copyright infringement.
Section 411(a) of the Copyright Act provides, in relevant part:
[N]o civil action for infringement of the copyright in any United States work shall be instituted until ... registration of the copyright claim has been made in accordance with this title. In any case, however, where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute a civil action for infringement if notice thereof, with a copy of the complaint, is served on the Register of Copyrights.
17 U.S.C. § 411(a). The Eighth Circuit has not directly addressed whether a plaintiff can institute an action for infringement under the Copyright Act during the period after the plaintiff has filed an application for copyright registration, but before registration has been obtained from the Copyright Office. See Asche & Spencer Music, Inc. v. Principato–Young Entm't, Inc. , 147 F.Supp.3d 833, 835 (D. Minn. 2015). The decisions of other courts are divided as to whether the application for copyright registration satisfies the statutory requirement of registration of the copyright claim as a prerequisite to filing a copyright-infringement lawsuit. Compare Cosmetic Ideas, Inc. v. IAC/Interactivecorp , 606 F.3d 612, 621 (9th Cir. 2010) (adopting the "application" approach); Apple Barrel Prods., Inc. v. Beard , 730 F.2d 384, 386–87 (5th Cir. 1984) (same); Tri–Mktg., Inc. v. Mainstream Mktg. Servs., Inc. , Civil No. 09-13, 2009 WL 1408741, at *3 (D. Minn. May 19, 2009) (same); with Fourth Estate Pub. Benefit Corp. v. Wall–Street.com, LLC , 856 F.3d 1338, 1341–42 (11th Cir. 2017) (adopting the "registration" approach); La Resolana Architects, PA v. Clay Realtors Angel Fire , 416 F.3d 1195, 1201 (10th Cir. 2005) (same), abrogated in part by Reed Elsevier, Inc. v. Muchnick , 559 U.S. 154, 130 S.Ct. 1237, 176 L.Ed.2d 18 (2010) ; Asche , 147 F.Supp.3d at 836–38 (same); Patrick Collins, Inc. v. Does 1–26 , 843 F.Supp.2d 565, 568–70 (E.D. Pa. 2011) (same).
Plaintiffs argue that although the Eighth Circuit has not directly addressed the issue, the Eighth Circuit likely would conclude that an application satisfies the statutory registration requirement. In support of this argument, Plaintiffs rely on the Eighth Circuit's statement that "the copyright owner may not sue for infringement under the federal Copyright Act until the owner has delivered ‘the deposit, application, and fee required for registration’ to the United States Copyright Office." Action Tapes, Inc. v. Mattson , 462 F.3d 1010, 1013 (8th Cir. 2006) (quoting 17 U.S.C. § 411(a) ). In Action Tapes , however, the Eighth Circuit did not address whether a distinction between an application and a registration under Section 411(a) exists. Instead, the court concluded that the "visual arts" copyright registrations that Action Tapes had obtained before filing suit were not copyrights in a computer program within the meaning of a different statute. See Action Tapes , 462 F.3d at 1013–14.
Courts requiring registration focus on the plain language of Section 411(a), which states, "[N]o civil action for infringement of the copyright in any United States work shall be instituted until ... registration of the copyright claim has been made in accordance with this title." 17 U.S.C. § 411(a) (emphasis added). Section 411(a) also provides that if an application is filed, along with the required deposit and fee, and registration is refused, the applicant may initiate an action for infringement so long as notice is served on the Register of Copyrights. Id. Because registration is a prerequisite to initiating a lawsuit and 17 U.S.C. § 410(a) provides that registration of a claim occurs only "after examination" of the application, many courts have concluded that Section 411(a) unambiguously requires registration (or the refusal thereof) to occur before an infringement lawsuit is initiated. See, e.g. , Fourth Estate Pub. Benefit Corp. , 856 F.3d at 1341 ; Asche , 147 F.Supp.3d at 836. Additional support for the registration approach is gleaned from the statement of the Copyright Office that "[t]he mere submission of an application to the U.S. Copyright Office does not amount to a registration." U.S. Copyright Office, Compendium of U.S. Copyright Office Practices § 625.5 (3d ed. 2017), available at https://copyright.gov/comp3. Because it appears in an internal agency manual, however, this statement is entitled to deference only to the extent it has "the power to persuade." Alaska Stock, LLC v. Houghton Mifflin Harcourt Publ'g Co. , 747 F.3d 673, 684–85 (9th Cir. 2014) (internal quotation marks omitted).
By contrast, courts adopting the application approach tend to conclude that because the statute is ambiguous as to whether the statutory requirement of registration is satisfied by filing an application, the purpose of the statute should govern. In reaching the conclusion that the statutory language is ambiguous, the Ninth Circuit relied on other sections of the Copyright Act that "blur[ ] the line between application and registration and favor[ ] the application approach." Cosmetic Ideas , 606 F.3d at 617. Those other provisions of the Copyright Act make the application —not the approval or rejection of the registration—the critical event, the Ninth Circuit concluded. Id. at 618. Because of the statute's textual ambiguity, the Ninth Circuit considered "the broader context of the statute as a whole and the purpose of the statute." Id. (internal quotation marks omitted). In doing so, the court concluded that requiring a plaintiff to wait until the Copyright Office has acted on an application before filing suit is unwarranted when the plaintiff will be permitted to proceed whether the application is approved or rejected. Id. at 619. Relying on Cosmetic Ideas , Plaintiffs argue that several practical and policy considerations weigh in favor of the application approach.
Plaintiffs also characterize the application approach as the one adopted by "the majority of circuits." But as the Eleventh Circuit's recent summary of the various circuits' approaches to this issue makes clear, the authorities are nearly equally divided. See Fourth Estate Pub. Benefit Corp. , 856 F.3d at 1340.
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Having carefully considered the arguments of the parties, this Court is not persuaded to disregard the plain language of the statute. Section 411(a) requires the dismissal of a copyright-infringement action if the plaintiff has applied for, but has not yet received, a valid copyright registration from the Copyright Office. The statute provides that "no civil action for infringement of the copyright in any United States work shall be instituted until ... registration of the copyright claim has been made in accordance with this title." 17 U.S.C. § 411(a). Nothing in that language or in the agency's interpretation of that language indicates that an application for copyright registration satisfies the registration requirement. Statutory terms matter. The policy considerations advanced by Plaintiffs do not provide a sufficient basis for the Court to disregard the plain language of Section 411(a). This conclusion also is consistent with the well-reasoned approach taken by other courts in this District. See, e.g. , Asche , 147 F.Supp.3d at 836–38.
Because the plain language of Section 411(a) makes registration of a copyright a prerequisite to initiating an action for copyright infringement and Plaintiffs as yet have only applied for copyright registrations, Defendants' motion to dismiss is granted as to Plaintiffs' copyright-infringement claim and that claim is dismissed without prejudice.
d. Trademark Infringement
Finally, Defendants argue that Plaintiffs' trademark-infringement claims must be dismissed because the PRINCE® trademark does not cover digital distribution and the Internet. Plaintiffs counter that their allegations that Defendants are using the PRINCE® trademark to sell music recordings online are sufficient to state plausible claims for relief.
To prevail on a trademark-infringement claim, a plaintiff must prove ownership of a valid trademark and a likelihood of confusion between the registered mark and the defendant's alleged infringing use. Davis v. Walt Disney Co. , 393 F.Supp.2d 839, 843 (D. Minn. 2005). When determining whether the defendant's use of a trademark is likely to cause confusion among consumers as to the source of an allegedly infringing product, a district court considers six non-exclusive factors: (1) the strength of the plaintiff's mark; (2) the similarity between the plaintiff's mark and the alleged infringer's mark; (3) the degree of competition between the products; (4) the alleged infringer's intent to "pass off" its product as that of the plaintiff; (5) incidents of actual confusion; and (6) the type of product, the product's cost, and the conditions of purchase. Everest Capital Ltd. v. Everest Funds Mgmt., L.L.C. , 393 F.3d 755, 759–60 (8th Cir. 2005). The Amended Complaint alleges that Plaintiffs own the trademark "PRINCE®" for use with "phonograph records, audiotapes, compact discs, and videotapes embodying musical performances" and that consumers associate the PRINCE® trademark with Plaintiffs. The Amended Complaint further alleges that Defendants' promotional materials for the Prince Recordings use the PRINCE® trademark in an attempt to "benefit from the fame and goodwill associated with Prince Rogers Nelson." Because the PRINCE® trademark is strongly associated with Prince Rogers Nelson, Plaintiffs argue, a consumer seeing the Prince Recordings for sale on Defendants' website likely would mistakenly believe that the Prince Recordings were released or authorized by Plaintiffs. These allegations state plausible claims for trademark infringement because Plaintiffs allege both that Defendants used the PRINCE® trademark to sell music, the same type of product sold by Plaintiffs using the PRINCE® trademark, and that Defendants attempted to pass off the Prince Recordings as authorized by Plaintiffs.
Consequently, the Court denies Defendants' motion to dismiss Plaintiffs' trademark-infringement claims.
II. Plaintiffs' Motion for an Order to Show Cause for Civil Contempt
Plaintiffs seek an order to show cause why Defendants RMA and Deliverance, as well as their principals, should not be held in civil contempt for violating the Court's May 22, 2017 Order. Defendants argue that Plaintiffs have not demonstrated by clear and convincing evidence that RMA and Deliverance failed to comply with the Order.
A party seeking contempt sanctions bears the burden of proving by clear and convincing evidence facts warranting a civil contempt order. Chi. Truck Drivers v. Bhd. Labor Leasing , 207 F.3d 500, 504 (8th Cir. 2000). An overarching goal of a court's contempt power is "to ensure that litigants do not anoint themselves with the power to adjudge the validity of orders to which they are subject." Id. Civil contempt may be used to coerce a party to comply with a court order, to compensate the alleged contemnor's opponent for losses sustained, or both. Id. at 505. "[A] mere ‘present inability to comply’ is a defense to civil contempt," so long as the inability to comply is not self-induced and the party has in good faith made all reasonable efforts to comply. Id. at 506 (quoting United States v. Rylander , 460 U.S. 752, 757, 103 S.Ct. 1548, 75 L.Ed.2d 521 (1983) ).
Plaintiffs' motion, filed on June 7, 2017, asserts that RMA and Deliverance have violated the Court's May 22, 2017 Order in three respects: (1) deleting digital files, (2) failing to deliver compact discs to Plaintiffs' counsel, and (3) failing to deliver vinyl records to Plaintiffs' counsel. In their June 14, 2017 response, Defendants stated that no files had been deleted from the Dropbox account in which the files were stored and that Defendants were working with their vendors to have the compact discs and vinyl records delivered to Plaintiffs' counsel.
Plaintiffs supplemented their original filing on July 20, 2017. Based on Plaintiffs' counsel's supplemental declaration and the parties' representations at the hearing on this motion, it appears that as of July 20, 2017, Defendants had delivered the compact discs and all but 25 of the 5,000 vinyl records that were produced. It also appears that no files were deleted from the disputed Dropbox account. Plaintiffs do not unambiguously allege that Defendants possess digital files and have refused to turn them over. Instead, Plaintiffs apparently are uncertain about whether they have received copies of all of the original recording files. At the hearing on July 28, 2017, Defendants represented to the Court that they have provided Plaintiffs all files in Defendants' possession that are subject to the Court's May 22, 2017 Order. Because the record does not establish by clear and convincing evidence that RMA and Deliverance are violating the Court's May 22, 2017 Order, Plaintiffs' motion for an order to show cause for civil contempt is denied.
Also at the July 28, 2017 hearing, the parties addressed whether the $1 million bond posted by Plaintiffs to secure the temporary restraining order is sufficient to secure the preliminary injunction order. The bond that was executed on May 4, 2017, and filed with the Court on May 11, 2017, states that it covers "such damages as may be sustained by reason of said Temporary Restraining Order if the Court finally decides that the [Plaintiffs] are not entitled thereto." Based on this language, it is not clear whether the bond also covers the preliminary injunction order. Within 14 days after the date of this Order, Plaintiffs are directed to either verify in writing that the bond issued on May 4, 2017, secures the preliminary injunction order or post a new bond in the amount of $1 million to secure the preliminary injunction order.
ORDER
Based on the foregoing analysis and all the files, records and proceedings herein, IT IS HEREBY ORDERED :
1. Defendants' motion to dismiss, (Dkt. 70), is GRANTED with respect to Count Eight of the Amended Complaint, which is DISMISSED WITHOUT PREJUDICE , and DENIED in all other respects, as outlined herein.
2. Plaintiffs' motion for an order to show cause for civil contempt, (Dkt. 88), is DENIED .
3. Within 14 days after the date of this Order, Plaintiffs must verify in writing that the bond issued on May 4, 2017 secures the preliminary injunction order or post a new bond in the amount of $1 million to secure the preliminary injunction order.