The opinion of the court was delivered by: Sweet, District Judge.
Defendants Melvin Simon Productions, Inc. ("MSP") and Koala
Productions, Ltd. ("Koala") have moved to dismiss the complaint
of Viacom International, Inc. ("Viacom") pursuant to 28 U.S.C. § 2201,
Rule 12(b)(2), (3) or (6), or in the alternative to
transfer this action to the United States District Court for
the Central District of California pursuant to 28 U.S.C. § 1404(a).
Viacom has moved to enjoin a subsequently filed
action. The motion to dismiss the action against Koala for lack
of jurisdiction is granted. The motion to dismiss the action
for declaratory relief is denied for the reasons set forth
below. The motion to transfer to the United States District for
the Central District of California is granted on the grounds,
as set forth below, that such a transfer would serve the
interests of justice.
The comprehensive and well drafted affidavits and memoranda
submitted on these motions establish conclusively that the
litigation between these parties has become a grudge match
between parties well matched in their ability to meet the costs
of litigation and to select highly skilled representation. In
a day when Congress legislates reform based upon the assumption
of cost and delay in civil litigation, see § 103(a) at the
Civil Justice Reform Act of 1990, 28 U.S.C. § 471, et seq.,
this action is paradigmatic and may demonstrate the detriment
suffered by the society by an aggressive exercise of the rights
granted by Congress.
Viacom is a Delaware corporation with a principal place of
business in New York City and with an office in North
Hollywood. Its principal activity is the distributing,
directing and coordinating of theatrical motion pictures for
exhibition on television.
MSP is an Indiana corporation with its principal place of
business in Los Angeles. It has in the past financed, produced
and licensed motion pictures, but has been largely inactive in
that regard since 1982.
Koala is a California corporation with its only office at
Beverly Hills. Its president and owner is Rudy Durand
("Durand"), and it produces music, films and commercials.
Background and Prior Proceedings
On September 19, 1978 MSP and Viacom entered into a licensing
agreement (the "Agreement") under which MSP granted to Viacom
the exclusive right, for a twenty-five year period, to license
sixteen specified motion pictures (the "Pictures") for
television exhibition throughout the world (with the exception
of prime time network television exhibition by ABC, CBS or
NBC). The Pictures had been or were to be produced by MSP, or
had been acquired by MSP from the original producers. In
exchange, Viacom was required to account for and pay to MSP
distribution fees (calculated as specified in the Agreement) on
a quarterly basis throughout the term of the Agreement. Viacom
was required to account for each Picture separately.
All of the Pictures were completed by 1981, none of them was
produced in New York, and all prints and tapes of the Pictures
were "reproduced" by Viacom in California. One of the Pictures
licensed to Viacom by MSP under the Agreement is "Tilt." In
1981, Durand and Koala brought suit in federal court in
California against numerous defendants, including MSP and
Viacom, asserting various federal and pendent state law claims
("Tilt I"). Tilt I was ultimately dismissed, but in the
meantime Durand and Koala had reasserted their state law claims
in an action in California Superior Court against MSP, Viacom
and others ("Tilt II"), claiming that Durand's right to make
the final edit of "Tilt" had been violated by a version of the
film exhibited in theaters and on television. Pursuant to the
indemnification provisions of the MSP-Viacom Agreement, MSP,
through the appointment and payment of counsel (in California),
provided Viacom with a defense to these litigations.
In the fall of 1990, as the trial of Tilt II was approaching,
MSP and the Tilt litigation plaintiffs reached agreement on a
proposed settlement for all parties. Viacom declined to the
settlement agreement, and in December 1990 MSP reached a
settlement with Durand and Koala that did not include Viacom as
a party under which MSP agreed to pay monies to the plaintiffs
and assigned to Koala any further right, title and interest in
"Tilt," and Koala agreed to indemnify MSP for any post
settlement liability relating to the Tilt II litigation.
Thereafter, on January 25, 1991, Viacom and two other parties
(NBC and Warner Bros.), settled with the Tilt litigation
plaintiffs and Viacom paid $50,000 as its share pursuant to
this settlement. By letter dated March 29, 1991, on behalf of
Viacom a quarterly accounting under the Agreement was rendered
to MSP in which Viacom deducted $59,028.22 comprising the
$50,000 settlement sum paid by Viacom, and $9,028.22 in alleged
attorneys' fees based upon an indemnification claim regarding
the settlement concerning "Tilt."
By letter dated April 2, 1991 on behalf of MSP, the deduction
was protested and payment was demanded of the withheld funds by
April 9, 1991, in default of which MSP would pursue its legal
On April 8, 1991 Viacom filed the present action against MSP
seeking a declaratory judgment.
On May 6, 1991 MSP brought suit against Viacom in the
Superior Court of California, County of Los Angeles, to recover
the withheld $59,028.22 and for related relief (the "California
Action"), which action was on May 21, 1991 removed to the
United States District Court for the Central District of
California. On May 24, 1991 MSP added Viacom's California
counsel as defendants. A motion to remand the California Action
was made by MSP on May 29, 1991 and has been stayed pending the
resolution of the instant motions.
On May 6, the same day MSP brought suit in California, Viacom
filed its Amended Complaint here, adding requests for two
further declarations against MSP alleging that MSP has
improperly "collaborated" with Koala in and as a result of the
settlement of the "Tilt" litigation, and seeking declarations
(a) that MSP is liable to indemnify Viacom for all costs,
expenses and liabilities arising out of the "collaboration"
with Koala and (b) that MSP's recent request under the
Agreement to inspect and/or copy the records relating to
distribution of the Pictures is null and void.
These motions followed and were heard and considered
submitted on June 27, 1991.
There is No Jurisdiction Over Koala
Personal jurisdiction over Koala in this case is asserted
under New York's long-arm statute, CPLR § 302(a). Viacom's
First Amended Complaint has not alleged that Koala performed
any act in New York but that it is the assignee of rights
acquired under a New York contract, entered into initially by
Viacom and MSP, relating to the ownership of "Tilt."
The "jurisdictional net cast by" CPLR § 302(a) subsection (1)
[transacting business] "reaches only a defendant that
`"purposefully avails itself of the privilege of conducting
activities within [New York], thus invoking the benefits and
protections of its law."'" Mayes v. Leipziger, 674 F.2d 178,
183 (2d Cir. 1982), quoting McKee Electric Co. v. Rauland-Borg
Corp., 20 N.Y.2d 377, 382, 283 N.Y.S.2d 34, 38, 229 N.E.2d 604,
607 (1967), quoting Hanson v. Denckla, 357 U.S. 235, 253, 78
S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958); Galgay v. Bulletin
Co., 504 F.2d 1062 (2d Cir. 1974); Don King Prod., Inc. v.
Douglas, 735 F. Supp. 522, 527 (S.D.N.Y. 1990) (central question
for § 302(a)(1) is whether defendant performed purposeful acts
in New York in relation to the contract which is the basis upon
which jurisdiction is asserted) (citations omitted).
Acquiring all rights to a twelve year old motion picture in
California from a California entity does not constitute an
activity equivalent to transacting business in New York.
The remaining provisions of § 302(a) are equally inapposite.
Viacom does not allege that Koala committed a "tortious act
within the state" [subsection 2]. Indeed, Viacom does not
allege that Koala committed "a tortious act" at all, or that
Koala has caused Viacom any injury, making subsection 3
inapplicable on those grounds alone. And the case does not
concern real property [subsection 4].
Thus, New York does not even purport to exercise jurisdiction
over a non-domiciliary on facts such as these. Beyond that, due
process would be violated if Koala were required to litigate
Viacom's claims in New York.
Koala engaged in no activity in New York. Koala settled a
California litigation with a California entity and obtained all
of MSP's right, title and interest in "Tilt." While some of the
rights in the Picture were subject to an already extent
long-term license to Viacom, and thereby entitled Koala to
receive monies from Viacom, the right to receive money from an
entity in New York does not constitute "transact[ing] business"
within New York.
The question on the issue of whether a non-resident can be
sued in a given locale in a given case is what the nonresident
has done and whether the defendant has purposefully injected
itself into the state, so that it "should reasonably anticipate
being haled into court there." World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490
(1980). Accord, Glass v. Harris, 687 F. Supp. 906, 909 (S.D.N Y
Viacom has also referred to principles of in rem jurisdiction
alleging that "rights to `Tilt' proceeds and any other rights
now claimed by Koala represent intangible property having a
situs in New York, as to which the courts of New York have
jurisdiction to adjudicate and declare rights and duties."
Viacom thus characterizes a claim that one party owes another
as an in rem dispute, requiring the claimant to litigate on
that ground alone in the state of the obligor.
However, under Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct.
2569, 53 L.Ed.2d 683 (1977), all assertions of state court
jurisdiction — in personam, in rem and quasi in rem — must be
evaluated by the minimum contacts standard of International
Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95
(1945) and its progeny. Moreover, quasi-in-rem jurisdiction
as indicated by Viacom's authorities
concerns situations where a plaintiff, seeking money from a
non-resident, attaches property of the non-resident in the
state, thereby obtaining jurisdiction over the nonresident to
the extent that the plaintiff may satisfy its judgment out of
the attached property. See also, e.g., D. Siegel, New York
Practice (2d ed. 1991) ("Siegel"), pp. 154, 158, 162-63;
quasi-in-rem jurisdiction requires that the property be seized,
attached. See e.g., CPLR § 314(3); Siegel, pp. 162-63.
In addition, CPLR § 302(a) requires not only that the
defendant have transacted business within New York or done
other specified acts, but also that the cause of action sued on
"arises from" that activity. See, e.g., McGowan v. Smith, 52
N Y2d 268, 437 N.Y.S.2d 643, 419 N.E.2d 321 (1981). In this
case, Viacom seeks not damages for any injuries but rather
declarations that Viacom does not owe Koala any money or other
specified obligations. Under the principles of Columbia
Pictures Industries, Inc. v. Schneider, 435 F. Supp. 742
(S.D.N.Y. 1977), aff'd, 573 F.2d 1288 (2d Cir. 1978), the
transaction of business by a defendant in New York does not
give rise to a declaratory judgment cause of action.
There, Columbia Picture Industries ("Columbia"),
headquartered in New York, brought an action in New York
against California residents for a declaration that Columbia
had not violated the antitrust laws, breached its contract with
defendants, or otherwise violated their rights in connection
with a motion picture and moved to enjoin the defendants'
later-brought action in California. The ...