MATSUMOTO
Motion granted.
Jeffrey Morgan, Stephen G. Weizenecker, Barnes & Thornburg LLP, Atlanta, GA, Marlene Koury, Taline Sahakian, Constantine Cannon LLP, New York, NY, for Plaintiffs. Alex V. Chachkes, Philipp Smaylovsky, Shasha Yunzhi Zou, Silvia Araxie Babikian, Orrick, Herrington & Sutcliffe LLP, New York, NY, for Defendants.
MEMORANDUM & ORDER
MATSUMOTO, District Judge:
On March 12, 2014, plaintiffs Acorne Productions, LLC and Shant Mardirossian (“plaintiffs”) commenced this case in Supreme Court of the State of New York, Kings County, alleging various New York state law causes of action against Zareh Tjeknavorian and Alina Tjeknavorian (“defendants”) in connection with defendants' alleged failure to deliver a film they had agreed to create about the Armenian Genocide. ( See generally Am. Compl., ECF No. 1, at 67.) On April 7, 2014, defendants removed the case to federal court asserting that plaintiffs' claims arise under the Copyright Act. (Notice of Removal, ECF No. 1, at 1.) In addition, following removal, defendants answered plaintiffs' amended complaint and asserted counterclaims for a declaratory judgment and for breach of contract. (Defs. Am. Answer & Counterclaims (“Defs. Am. Answer”) ¶¶ 185–203, ECF No. 13.)
Presently before the court is plaintiffs' motion to remand the instant case to New York state court and for attorneys' fees and costs. Plaintiffs argue that this court does not have jurisdiction over the parties' claims. ( See Pls. Mot. to Remand, ECF No. 16.) Defendants oppose the remand. The court heard oral argument on the motion, at the parties' request, on June 17, 2014. For the reasons set forth below, the plaintiffs' motion to remand is granted and the case is remanded. Plaintiffs' motion for attorneys' fees is denied.
I. Standard of Review on Motion for Remand
Following the removal of an action to federal court, “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). Defendants bear the burden of demonstrating that federal subject matter jurisdiction exists. See, e.g., Wilds v. United Parcel Serv., Inc., 262 F.Supp.2d 163, 171 (S.D.N.Y.2003) (citing, inter alia, United Food & Comm. Workers Union, Local 919, AFL–CIO v. CenterMark Props. Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir.1994)) (“On a motion to remand, the party seeking to sustain the removal, not the party seeking remand, bears the burden of demonstrating that removal was proper.” (internal quotation marks omitted)). “Unless that burden is met, the case must be remanded back to state court. At [the motion to remand] stage ..., the party seeking remand is presumed to be entitled to it unless the removing party can demonstrate otherwise.” Id. (quoting Bellido–Sullivan v. Am. Int'l Grp., Inc., 123 F.Supp.2d 161, 163 (S.D.N.Y.2000)). Therefore, in the context of a motion to remand, “federal courts construe the removal statute narrowly, resolving any doubts against removability.” Sherman v. A.J. Pegno Constr. Corp., 528 F.Supp.2d 320, 325 (S.D.N.Y.2007) (quoting Lupo v. Human Affairs Int'l, Inc., 28 F.3d 269, 274 (2d Cir.1994)).
II. Whether Plaintiffs' Claims Arise Under the Copyright Act
Having reviewed the Amended Complaint, as well as the parties' briefs and the arguments made before the court on June 17, 2014, the court finds that plaintiffs' claims do not arise under the Copyright Act. Therefore, this court lacks subject matter jurisdiction over plaintiffs' claims.
a. Legal Standard for Federal Jurisdiction Based on Copyright Claims
It is axiomatic that “[f]ederal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (citations omitted). Congress has mandated that the federal courts have exclusive jurisdiction over actions arising under the Copyright Act. 28 U.S.C. § 1338(a) (“district courts ... have original jurisdiction of any civil action arising under any Act of Congress relating to ... copyrights. No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to ... copyrights.”).
The mere fact that “a case concerns a copyright does not necessarily mean that it is within the jurisdiction of the federal district court,” however. Jasper v. Bovina Music, Inc., 314 F.3d 42, 46 (2d Cir.2002); see also Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343, 347 (2d Cir.2000) (“Whether a complaint asserting factually related copyright and contract claims ‘arises under’ the federal copyright laws for the purposes of [28 U.S.C.] Section 1338(a) poses one of the knottiest procedural problems in copyright jurisprudence.” (internal quotation marks and citation omitted)). The well-established test for determining whether a case arises under the Copyright Act was first articulated by the Second Circuit in T.B. Harms Co. v. Eliscu, 339 F.2d 823 (2d Cir.1964). See Bassett, 204 F.3d at 349–50 (reaffirming the applicability of the T.B. Harms test in the Second Circuit and noting that the test “has been adopted by all the circuits that have considered the question [of] whether a suit arises under the Copyright Act ..., if the disputed issues include non-copyright matters.”). Under the T.B. Harms test, “a suit ‘arises under’ the Copyright Act if: (1) ‘The Complaint is for a remedy expressly granted by the Act, e.g. a suit for infringement or for the statutory royalties for record reproduction;’ or (2) ‘The Complaint asserts a claim requiring construction of the Act.’ ” Cohen v. Versatile Studios, Inc., No. 13–CV–8280, 2014 WL 1584055, at *2 (S.D.N.Y. Apr. 21, 2014) (quoting Bassett, 204 F.3d at 349).
A suit may also arise under the Copyright Act if “a distinctive policy of the Act requires that federal principles control the disposition of the claim;” however, the Second Circuit called this basis for jurisdiction “more doubtful[ ]” and noted that the “general interest that copyrights ... should be enjoyed by their true owner is not enough to meet this last test.” T.B. Harms, 339 F.2d at 828.
b. Application to Plaintiffs' Claims
In their Amended Complaint, plaintiffs allege the following claims under state common law: 1) constructive trust; 2) preliminary and permanent injunctive relief; 3) promissory estoppel; 4) quantum meruit; 5) unjust enrichment; 6) negligent misrepresentation; 7) breach of contract; and 8) an action for an accounting. (Am. Compl. ¶¶ 56–114.) Plaintiffs' requested relief includes: the creation of a constructive trust consisting of the film, any equipment, notes and other relevant materials, and the transfer of the corpus of that trust to plaintiffs; an injunction requiring the delivery of the completed film and related materials to plaintiffs; a judgment ordering the delivery of the film and related materials to plaintiffs, including the assignment of the copyrights, or, in the alternative, an award of compensatory damages; a complete accounting; and reasonable attorneys' fees and costs. ( Id. at 23–26.)
None of plaintiffs' claims meet the T.B. Harms test for causes of action that arise under the Copyright Act. First, none of the remedies plaintiffs seek is expressly provided for in the Act. See Bassett, 204 F.3d at 348 (citing 17 U.S.C. §§ 502–05) (noting that injunctive relief to restrain infringement of a copyright, impoundment remedies, statutory damages, and attorney's fees and costs are remedies expressly provided by the Copyright Act). Second, plaintiffs' claims do not necessitate construction of the Act; instead, they require interpretation of the parties' agreement to determine whether defendants have met or breached their obligations under that agreement.
Defendants argue that plaintiffs' claims, while ostensibly state law causes of action, nonetheless arise under federal copyright law because plaintiffs seek ownership of the rights to the film. The Second Circuit has made clear, however, that “if [a] case concerns a dispute as to ownership of a copyright, and the issue of ownership turns on the interpretation of a contract, the case presents only a state law issue.” Jasper, 314 F.3d at 46 (citing T.B. Harms, 339 F.2d at 826); see also Estate Examinations Co., Inc. v. ECG Enters., Inc., No. 06–CV–3024, 2006 WL 3248003, at *4 (E.D.N.Y. Nov. 7, 2006) (“Where disputes arise under an agreement between parties, resolution depends on state contract law, not the Copyright Act.”). Any question of ownership implicated by plaintiffs' common law claims can be resolved through interpretation of the parties' agreement under state law. As such, plaintiffs' claims do not requirement interpretation of the Copyright Act and this court lacks federal question jurisdiction over those claims.
III. Whether Defendants' Counterclaims Arise Under the Copyright Act
Defendants have brought counterclaims for breach of contract and for a declaratory judgment that defendants are owners of the copyright. For the reasons set forth below, defendants' counterclaims do not arise under the Copyright Act, and the court, therefore, lacks jurisdiction over the counterclaims.
a. Legal Standard for Federal Jurisdiction Based on Copyright Counterclaims
Generally, “the presence or absence of federal question jurisdiction is governed by the well-pleaded complaint rule. That rule provides that federal question jurisdiction exists only when the plaintiff's own cause of action is based on federal law, and only when plaintiff's well-pleaded complaint raises issues of federal law.” Marcus v. AT & T Corp., 138 F.3d 46, 52 (2d Cir.1998) (internal citations omitted). In 2011, however, Congress enacted the Leahy–Smith America Invents Act (“AIA”), which permits “any party [who] asserts a claim for relief arising under any Act of Congress relating to ... copyrights” to remove the action to district court. 28 U.S.C. § 1454(a), (b)(1) (emphasis added); see also Andrews v. Daughtry, 994 F.Supp.2d 728, 731, No. 13–CV–408, 2014 WL 184398, at *3 (M.D.N.C. Jan. 15, 2014) (noting that this provision of the AIA was enacted in response to the Supreme Court's decision in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826, 122 S.Ct. 1889, 153 L.Ed.2d 13 (2002), which held that a counterclaim could not form the basis for federal question jurisdiction). Defendants did not invoke 28 U.S.C. § 1454 at the time they removed plaintiffs' complaint and, instead, relied only on the general removal statute, 28 U.S.C. § 1441 and the procedures provided by 28 U.S.C. § 1446.
The scope of section 1454 has not yet been discussed by the Court of Appeals for the Second Circuit or by any district court in New York. All district courts that have interpreted this provision of the America Invents Act have concurred, however, that the statute permits removal of copyright or patent counterclaims. See, e.g., Inselberg v. N.Y. Football Giants, Inc., No. 14–CV–1317, 2014 WL 2763464, at *7 n. 7 (D.N.J. June 18, 2014); Mirowski Family Ventures, LLC v. Boston Scientific Corp., No. 13–CV–2627, 2014 WL 2574615, at *4 (D.Md. June 5, 2014); Daughtry, 994 F.Supp.2d at 731–32, 2014 WL 184398, at *3; Univ. of Ky. Research Found. v. Niadyne, Inc., No. 13–CV–16, 2013 WL 5943921, at *5 (E.D.Ky. Nov. 5, 2013).
If defendants' counterclaims, which were asserted after removal, arise under the Copyright Act, this court would have jurisdiction over the counterclaims, and could exercise supplemental jurisdiction over plaintiffs' claims. See 28 U.S.C. § 1454(d)(1) (“If a civil action is removed solely under this section, the district court” “shall remand all claims that are neither a basis for removal under subsection (a) nor within the original or supplemental jurisdiction of the district court”).
b. Application to Defendants' Counterclaims
As previously noted, after the removal of plaintiffs' action, defendants asserted counterclaims for (1) a declaratory judgment that defendants are the sole owners of materials created in connection with the film and (2) for breach of contract. (Am. Answer ¶¶ 194, 203.) Because the court agrees with the parties that the breach of contract counterclaim does not arise under the Copyright Act, only the declaratory judgment counterclaim will be discussed here. ( See Tr. of Oral Argument at 36.) The court finds that the declaratory judgment counterclaim does not arise under the Copyright Act and that, consequently, the court lacks jurisdiction over the counterclaim pursuant to 28 U.S.C. § 1454.
As noted, defendants' counterclaims were asserted in their Amended Answer, which was filed after removal of the case to federal court. In light of the recent enactment of Section 1454 and the lack of case law interpreting it, even if defendants had invoked § 1454 as a basis for removal, it is doubtful that § 1454 would justify removal based only on the complaint, before the counterclaims were filed. In any event, the court finds that the counterclaims do not arise under the Copyright Act, and, thus, will not address this question.
Like plaintiffs' claims, defendants' declaratory judgment counterclaim does not arise under the Copyright Act but, rather, asks the court to parse the terms of the agreement between the parties. The declaratory judgment remedy is not expressly stated in the Copyright Act; it is available by virtue of a separate statute, The Declaratory Judgment Act. See 28 U.S.C. § 2201. The counterclaim also does not require interpretation of the Copyright Act because the issue of who owns the copyright is dictated by the parties' agreement, and not a term of the Act. See, e.g., Merchant v. Levy, 92 F.3d 51, 55 (2d Cir.1996) (“Unlike a case where a dispute as to copyright ownership arises under an agreement between the parties, resolution of which depends on state contract law, copyright ownership by reason of one's status as a co-author of a joint work arises directly from the terms of the Copyright Act itself.” (internal citation omitted)).
Defendants argue, relying on the Second Circuit's decision in Jasper, that it will be necessary for any presiding court to determine whether the agreement between the parties constituted a writing sufficient under the Copyright Act to transfer ownership of the copyright. The court finds Jasper to be distinguishable, however. In that case, an action for royalties, the issue was whether the “addendum agreeing to a contract that purports to transfer a copyright owner's rights [was] a [ 17 U.S.C.] Section 204(a) writing,” thus requiring interpretation of that section of the Copyright Act. 314 F.3d at 47. The Second Circuit found that Jasper was “the rare contract interpretation case that does present a substantial issue as to whether the contract qualifies as a section 204(a) writing.” Id. But the Second Circuit cautioned “that almost every case involving contract interpretation, appropriate for state court determination, could be recharacterized as ... appropriate for a federal court simply by framing the issue to be whether the disputed contract qualified as a writing within the meaning of section 204(a).” Id.
In general, copyright “vests initially in the author or authors of the work.” 17 U.S.C. § 201(a). An exception to this rule is the “work for hire doctrine.” Pursuant to this doctrine, “an employer or other person for whom the work was prepared” is deemed the author for purposes of the Copyright Act and owns the copyright, unless the parties agree otherwise in a signed, written agreement. 17 U.S.C. § 201(b). The work for hire doctrine does not apply in this case, however, because the parties agree that the film was not a work for hire. (Defs. Am. Answer ¶ 190; Pls. Answer ¶ 190.) Copyright ownership may be transferred “in whole or in part by any means of conveyance.” § 201(d)(1). Pursuant to the Copyright Act, copyright ownership may only be transferred by a written instrument that has been signed by the owner. 17 U.S.C. § 204(a).
In the instant case, the dispute involves what the parties agreed to, not the compatibility with, or interpretation of, that agreement within the context of the Act. In this respect, the court finds T.B. Harms, where the Second Circuit held that federal jurisdiction did not exist, to be more readily analogous to the instant case. In T.B. Harms, it was unclear whether one of the defendants had validly assigned his interest in the copyright to plaintiff, and plaintiff sought a declaratory judgment that he was a sole owner of the copyright. See Bassett, 204 F.3d at 348 (summarizing the background of the T.B. Harms decision).
Here, defendants' counterclaim seeks a declaratory judgment that they are the sole owners of all materials relating to the film and monetary damages for their breach of contract claim. Defendants' requested relief is not dependent on or derived from the Copyright Act. As in T.B. Harms, none of the claims or counterclaims allege a copyright claim, such as infringement, or otherwise seek relief expressly provided by the Copyright Act. See T.B. Harms, 339 F.2d at 828; see also Bassett, 204 F.3d at 355. For these reasons, the court finds that defendants' declaratory judgment counterclaim does not arise under the Copyright Act and that this court does not have jurisdiction pursuant to 28 U.S.C. § 1454.
Moreover, the court is unable to find prior federal cases, where, as here, ownership is dictated by the terms of the parties' agreement and a party has sought a declaratory judgment regarding ownership. The court must “construe the removal statute narrowly, resolving any doubts against removability,” Sherman, 528 F.Supp.2d at 325, and accordingly grants plaintiffs' motion to remand.
IV. Plaintiffs' Motion for Attorneys' Fees
Plaintiffs have moved for an award of attorneys' fees and costs pursuant to 28 U.S.C. § 1447(c), which provides that “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” Granting this award is within the district court's discretion. Certain Underwriters at Lloyd's London v. Art Crating, Inc., No. 12–CV–5078, 2014 WL 123488, at *2 (E.D.N.Y. Jan. 10, 2014). The Supreme Court has held, however, that, “absent unusual circumstances, attorney's fees should not be awarded when the removing party has an objectively reasonable basis for removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 136, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005).
Although the court finds that there is no basis for federal jurisdiction in this case, defendants' rationales for removal were objectively reasonable, particularly given the complexity and uncertainty of the law in this area. Accordingly, plaintiffs' motion for attorneys' fees and costs is denied.
CONCLUSION
For the foregoing reasons, the court finds that plaintiffs' claims and defendants' counterclaims do not arise under the Copyright Act and that there is no basis for federal jurisdiction in this case. The case is therefore remanded. Plaintiffs' motion for attorneys' fees is, however, denied. The Clerk of Court is directed to remand this case to the Supreme Court of the State of New York, Kings County and to close the case.
SO ORDERED. -------- Notes: