funds, and no other jurisdictional basis was alleged by Priority." (Bridgeport Mem. in Supp. of Mot. for Reconsideration or Reargument, Aug. 18, 1994, at 6 n.2 (citation omitted)). Neither plaintiff Priority Records, Inc. ("Priority") nor defendant Tercer Mundo, Inc. ("Tercer") appears to have commented on this point. In any event, subject matter jurisdiction must always be examined by a federal court, sua sponte if need be. Lloyds Bank PLC v. Norkin, 817 F. Supp. 414, 416 (S.D.N.Y. 1993).
Priority's Complaint for Interpleader and Declaratory Relief (the "Complaint") premises subject matter jurisdiction on 28 U.S.C. § 1335.
Subject matter jurisdiction over this action pursuant to that statute is not challenged, and the requirements of the statute are satisfied in that the amount in controversy exceeds $ 500, the claimants -- Bridgeport and Tercer -- are of diverse citizenship,
and Priority has deposited the funds at issue with the Court. 28 U.S.C. § 1335.
Bridgeport has thus raised the question of how far the Court's subject matter jurisdiction extends. There can be no doubt that the Court can determine such issues as are necessary to the ultimate determination of the rights, as between the parties, to the funds presently on deposit with the Court. But does it extend further?
There is, certainly, some confusion in the case law in this area. See 7 Wright, Miller & Kane, Federal Practice & Procedure, at 591-600 (§ 1715) (1986). There is some authority to support Bridgeport's view that the Court should limit itself in the present action "only to a determination of who owns the interpled funds." (Bridgeport Mem. in Supp. of Mot. for Reconsideration or Reargument, Aug. 18, 1994, at 6 n.2.) In Humble Oil & Ref. Co. v. Copeland, 398 F.2d 364, 368 (4th Cir. 1968), cited by Bridgeport (id.), the court said that "interpleader is based upon in personam jurisdiction which extends only to the funds deposited in court." See also Metropolitan Life Ins. Co. v. Enright, 231 F. Supp. 275, 278 (S.D. Cal. 1964) ("no jurisdiction in interpleader to grant judgment in personam as to subject matter apart from that deposited in court").
One district court in this circuit, though, has taken a broader view. Bell v. Nutmeg Airways Corp., 66 F.R.D. 1 (D. Conn. 1975). In that case, an interpleader action brought under 28 U.S.C. § 1335, the court considered, and rejected, a motion to dismiss a counterclaim brought by a defendant, declining to follow several Tenth Circuit decisions which were "based on the assumption that the interpleaded fund constitutes the exclusive subject matter of the complaint and that where the plaintiff disclaims any interest in the fund, he simply is not in an adversary relationship to the defendant-claimants." 66 F.R.D. at 3. Rather, the court said, "nothing in [Fed. R. Civ. P. 13] can be read as a bar to the filing of either compulsory or permissive counterclaims in interpleader actions. Nor are there any serious policy considerations which militate against the maintenance of such claims." Id. at 4.
The leading commentary agrees with the Bell decision. "The better approach is to allow the assertion of a counterclaim in accordance with the principles of Rule 13 and rely on the separate trial mechanism to furnish a corrective when the counterclaim would unduly complicate the interpleader proceeding." 7 Wright, Miller & Kane, Federal Practice & Procedure, at 592 (§ 1715) (1986).
Cross-claims in interpleader actions brought under 28 U.S.C. § 1335 present a different problem. In such an action, defendants-claimants may be served "where the claimants reside or may be found." 28 U.S.C. § 2361. See Great Western Cities, Inc. v. Curtis, 588 F. Supp. 73, 76 (S.D.N.Y. 1984) (Weinfeld, J.); 7 Wright, Miller & Kane, Federal Practice and Procedure, at 557 (§ 1711) (1986). Thus, it is questionable whether a defendant-claimant, brought into a statutory interpleader action in a forum in which he is amenable to service only because of the nationwide service provision of 28 U.S.C. § 2361, can be subject to a cross-claim. See Great Western, id.; 7 Wright, Miller & Kane, Federal Practice & Procedure, at 596-98 (§ 1715) (1986). The last mentioned authority, however, suggests a "sensitive and flexible approach" as "highly desirable." Id. at 598.
An inflexible rule prohibiting the assertion of cross-claims in actions under the act ignores the desirability of adjudicating these claims in conjunction with the interpleader in a single action when they are closely related to the original dispute over the stake. Indeed, this is precisely the type of situation that has motivated the federal courts to develop the doctrines of ancillary and pendent jurisdiction -- the need for a mechanism to achieve the efficiency of adjudicating similar claims in one action without running afoul of subject matter jurisdiction limitations. There is no reason why this philosophy should not be applied to closely related cross-claims in actions under the interpleader statute. Certainly nothing in the statute itself prohibits employing what in effect is a notion of ancillary personal jurisdiction.
Id. (footnotes omitted). Professor Chafee is cited as supporting this view, at least "in a few cases where the speedy administration of justice will be clearly promoted without serious injury to the objecting nonresident." Id. (quoting Zechariah Chafee, Jr., Broadening the Second Stage of Federal Interpleader, 56 Harv. L. Rev. 929, 938 (1943)).
How should all of this be applied in the present case? That requires some consideration of what is, or has been attempted to be put, at issue. In general, the dispute centers on the ownership of copyrights in musical compositions by one George Clinton, said to be "a professional musician based in Michigan, who was a major figure in the 'funk' music business." ("Cross-Claim Against [Tercer]" portion of Answer of Bridgeport, P 7.) Priority "has released and is releasing into the marketplace recordings containing musical compositions created many years ago by . . . George Clinton. . . ." (Complaint, P 8.) Priority commenced this action to obtain a determination as to whom royalty payments and accountings due under 17 U.S.C. § 115 should be made.
Unfortunately, a pervasive problem throughout the papers submitted by the parties has been a lack of clarity as to precisely which compositions of George Clinton are at issue. The pleadings refer to three groups of such compositions.
First, there are the compositions set forth on the three-page list annexed to the September 9, 1993 letter of Neville L. Johnson to Steve Dreth annexed as Exhibit A to the Complaint.
Second, there are the compositions identified in paragraph 6 of the "Counterclaim Against [Priority]" portion of the Answer of Bridgeport.
Third, the "Cross-Claim Against [Tercer]" portion of the Answer of Bridgeport speaks, collectively, of a group of compositions of George Clinton described as the "Malbiz copyrights" ("Cross-Claim Against [Tercer]" portion of Answer of Bridgeport, PP 10, 17, 18, 19, 21), to which Bridgeport asserts rights superior to Tercer (or its principal, Nene Montes). (Id. P 19.)
In or about April of 1992, Bridgeport recorded in the Copyright Office an "agreement" dated March 4, 1982, and an addendum to that "agreement" to be effective also on March 4, 1982. (See Order at 3-5; copies of such recorded documents are annexed as Exhibit 1 to the Answer of Bridgeport.) The "agreement" (Ex. 1 to Answer of Bridgeport, Bates No. 322) identifies nine compositions of George Clinton. The addendum (id., Bates Nos. 323-324) appends an Exhibit "A" (id., Bates Nos. 325-326) consisting of a two-page list of compositions of George Clinton, and an Exhibit "B" titled "Transfer of Copyright" (id., Bates Nos. 327-328) which is followed by a one-page list titled "Exhibit 'B'" (id., Bates No. 329) of compositions of George Clinton. Such two-page list and one-page list of compositions together comprise the same three-page list annexed (and retitled "Exhibit 1") to the letter from Neville L. Johnson to Steve Dreth which is annexed as Exhibit A to the Complaint, described above. According to Priority, the "Malbiz Catalog" (which the Court assumes to mean the same thing as the "Malbiz copyrights" referred to in the Answer of Bridgeport) consists of the compositions of George Clinton listed on the two-and one-page lists just described, i.e., the three-page list annexed to the letter annexed as Exhibit A to the Complaint. (See Aff. James E. Daniels, Esq., May 5, 1995, P 2.
) The Court will hereinafter refer to such works as the "Malbiz Catalog."
Priority, however, did not commence this action to determine adverse claims to the entire Malbiz Catalog. The Complaint alleges that Priority "has released and is releasing into the marketplace recordings containing musical compositions created many years ago by one George Clinton" (Complaint P 8) without specifically identifying those compositions. In response to the Court's request at the April 14, 1995 oral argument of Bridgeport's motion for reconsideration or reargument, however, Priority has now, at the Court's request, provided "a listing of all songs used by Priority to which competing claims are asserted by defendants [Bridgeport] and [Tercer]." (Daniels Aff., May 5, 1995, P 1.) Exhibit 1 to the Daniels Affidavit "identifies all the Malbiz songs used by Priority, whether in their entirety or through sampling uses." (Id., P 3.) There appear to be 39 works on this list, all of which are part of the Malbiz Catalog.
The Daniels Affidavit also annexes, as Exhibit 5, a list of seven "Non-Malbiz Songs" to which, according to Mr. Daniels, "Bridgeport asserts rights which defendant Tercer does not dispute. These songs, known as the Ohio Players music, are not in the Malbiz Catalog." (Daniels Aff., P 7.)
The Daniels Affidavit also annexes, as Exhibit 6A, a list of four albums (and constituent songs) "royalties generated by Priority's use of songs on [which] four albums . . . have not been paid into the Court registry for the reason that advances against royalties made by Priority to Tercer have not yet been recouped and therefore no payments made." (Daniels Aff., P 8.)
Priority views royalties on its uses of the songs on the four albums as in dispute, even though royalties have not been paid into Court, presumably because, upon future sales of works embodying Priority's uses, the time will come when there will be royalties and accountings due under 17 U.S.C. § 115, the right to which will be in dispute. The four albums listed on Exhibit 6A to the Daniels Affidavit appear to be the same as those referred to in paragraph 6 of the "Counterclaim Against [Priority]" portion of the Answer of Bridgeport, and the individual songs identified in that paragraph of the Answer of Bridgeport are listed on Exhibit 6A to the Daniels Affidavit.
Finally, Bridgeport has suggested that other Clinton compositions, apparently not a part of the Malbiz Catalog or included in the four albums identified in Exhibit 6A to the Daniels Affidavit, should be considered to be at issue in this case. (See Transcript, April 14, 1995, at 45-47.)
Determination of the appropriate subject matter of this action comprises two inquiries: first, which works of George Clinton are to be included; and, second, which claims regarding such works are to be entertained.
The Court concludes that the following works of George Clinton are the subject matter of the present action:
(i) The Malbiz Catalog, i.e., those compositions which are listed on the three-page list appended to the September 9, 1993 letter of Neville A. Johnson to Steve Dreth which is annexed as Exhibit A to the Complaint as filed.
(ii) Those additional compositions which are listed on Exhibit 6A to the May 5, 1995 Affidavit of James E. Daniels (as corrected by Mr. Daniels' May 26, 1985 letter to the Court) as included in the four albums also listed on Exhibit 6A, which additional compositions are not included in the Malbiz Catalog.