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VIACOM INTERN. v. MELVIN SIMON PROD.

October 2, 1991

VIACOM INTERNATIONAL, INC., PLAINTIFF,
v.
MELVIN SIMON PRODUCTIONS, INC. AND KOALA PRODUCTIONS, LTD., DEFENDANTS.



The opinion of the court was delivered by: Sweet, District Judge.

  OPINION

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.

The Parties

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 remedies.

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 Viacom's 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 1988).

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 ...


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