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KBL Corp. v. Arnouts

February 9, 2009

KBL CORP., PLAINTIFF,
v.
ROBERT A. ARNOUTS, ARNOUTS ASSOCIATES ARCHITECTS, INC., DEFENDANTS.



The opinion of the court was delivered by: John G. Koeltl, District Judge

OPINION AND ORDER

The plaintiff, KBL Corp. ("KBL"), is a residential home builder in the New York area that has twice been sued by a popular national licensor of home designs, Frank Betz Associates, Inc. ("Betz"), for copyright infringement. The plaintiff settled both lawsuits and now brings this action for contribution, indemnification, and inducement to infringe against the defendants, Robert A. Arnouts and Arnouts Associates Architects, Inc. (collectively "Arnouts"), licensed architects hired by the plaintiff in connection with the home designs at issue in the Betz litigations. The defendants move to dismiss the action under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.

I.

On a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the allegations in the Complaint are accepted as true. Grandon v. Merrill Lynch & Co., 147 F.3d 184, 188 (2d Cir. 1998). In deciding a motion to dismiss, all reasonable inferences must be drawn in the plaintiff's favor. Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir. 1995); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). The Court should not dismiss the Complaint if the plaintiff has stated "enough facts to state a claim to relief that is plausible on its face." Twombly v. Bell Atl. Corp., 127 S.Ct. 1955, 1974 (2007); see also Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007).

While the Court should construe the factual allegations in the light most favorable to the plaintiff, the Court is not required to accept legal conclusions asserted in the Complaint. See Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007); Smith v. Local 819 I.B.T. Pension Plan, 291 F.3d 236, 240 (2d Cir. 2002).

II.

The following facts as alleged in the Complaint are accepted as true for the purposes of this motion to dismiss.

The plaintiff is a residential home builder in the Poughkeepsie, New York area. In the course of its business, the plaintiff engages licensed architects to provide services related to home designs and approval of proposed home plans. This is done in furtherance of complying with local laws and regulations as a precondition to receiving a Certificate of Occupancy for each home constructed. (See Compl. ¶¶ 8-9.)

The defendants are New York-licensed architects specializing in home designs and home plans. Specifically, the defendants are in the business of designing, drafting and modifying home plans, as well as marketing, advertising, and selling home plan designs through traditional print and Internet media. (See Compl. ¶¶ 10-11.)

The plaintiff engaged the defendants for architectural services prior to 2002, and the defendants provided services to the plaintiff until 2005. During that time period, prospective clients approached the plaintiff with proposed plans for home designs. Some of these proposed plans bore no indication of their original source. Others indicated that they were created by Betz, a popular national licensor of home designs. As a matter of course, the plaintiff passed along all of the proposed home plans that it received to the defendants for them to review, modify for compliance with local regulations, and approve. (See Compl. ¶¶ 12-16.)

The plaintiff provides the following representative example of its dealings with the defendants. The plaintiff received a photocopy of a proposed home design from a prospective client, through a broker. The photocopy was of a home design by Betz known as "Charlemagne." The design drawings included markings indicating that the design was the property of Betz. The plaintiff contracted with the defendants to produce construction drawings from the photocopy. The plaintiff raised with the defendants the possible need to obtain a license from Betz to use the Charlemagne design. The plaintiff made inquiries as to whether the defendants' software was compatible with that of Betz. The defendants assured the plaintiff that there was no need to purchase a license from Betz, because the finished plans would be significantly different from any version given to the plaintiff by the prospective client. The defendants modified the design drawings, and defendant Robert Arnouts filed his own copyright applications for the modified designs. Defendant Robert Arnouts advised the plaintiff to use the modified plans, and officially approved the plans. The plaintiff proceeded to construct multiple homes using the drawings. (See Compl. ¶¶ 17-23.)

On February 17, 2006, Betz filed a copyright infringement action against the plaintiff, No. 06 Civ. 1280. Betz did not file suit against the defendants, but did accuse them of copyright infringement, and reached a settlement with them prior to commencing No. 06 Civ. 1280. The plaintiff incurred legal fees and other business expenses as a result of defending the action. The plaintiff ultimately chose to settle the action, agreeing to pay Betz $85,000. However, the plaintiff failed to make the full payment, resulting in a judgment against it in the increased amount of $100,000. The plaintiff paid the judgment in full. (See Compl. ¶¶ 25-28.)

Following the dismissal of No. 06 Civ. 1280, Betz brought a second action against the plaintiff for copyright infringement, No. 07 Civ. 554, based on additional homes that the plaintiff had built that were not covered by the settlement in the first action. The home designs at issue in this second action had been approved by the defendants in the same manner that the home designs in the first action had been approved. In the second action, Betz sued the defendants for infringement as well as the plaintiff. Once again, the plaintiff incurred legal fees and other business expenses in defending the suit. Once again, it chose to settle the suit, agreeing to make a payment to Betz through its insurance carrier. Following ...


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