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Wu v. Pearson Education

September 30, 2010

NORBERT WU, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
PEARSON EDUCATION, INC., DEFENDANT.



The opinion of the court was delivered by: Richard J. Holwell, District Judge

MEMORANDUM OPINION AND ORDER

This case concerns a copyright dispute between Norbert Wu ("Wu"), a photographer, and Pearson Education, Inc. ("Pearson"), a textbook publisher. Wu, through three photo bureau intermediaries, Minden Pictures ("Minden"), Peter Arnold, Inc. ("Arnold"), and Animals Animals ("AA"), licensed Pearson to use his photographs in its textbooks. Wu argues that Pearson exceeded those licenses and sues for copyright infringement, asserting as well a variety of state law claims. Pearson moves to dismiss or stay this case pending arbitration, or, in the alternative, to dismiss the complaint for various pleading deficiencies. It also moves to strike portions of the complaint pursuant to Rule 408 of the Federal Rules of Evidence because the information involved was obtained through settlement negotiations. During the pendency of this action, however, Pearson has admitted through interrogatories the same information it moves to strike from the complaint. Thus, while the Court does not condone skirting F.R.E. 408, this aspect of the motion has been rendered moot. For the reasons discussed below, the remainder of the motion is granted in part and denied in part.

BACKGROUND

The following information is drawn from the complaint. It does not constitute a finding of fact by the Court. Wu is a professional photographer. (Am. Compl. ¶ 9.) Pearson is a publisher of textbooks and other related educational materials. (Am. Compl. ¶ 10.) Pearson has included Wu's photographs in its publications (Am. Compl. ¶12). When it uses Wu's photographs, Pearson enters into licensing agreements with various photo bureaus, including Minden (e.g., Am Compl. ¶ 47), Arnold (e.g., Am. Compl. ¶ 102), and AA (Am. Compl. ¶ 43). Although Pearson contracted with the photo bureaus, Wu retains the registered copyright for all of his photographs that Pearson printed. (Am. Compl. ¶ 180.) These license agreements typically provide for the number of copies of the photograph Pearson may print, a number which is referred to as the "print run." (Am. Compl. ¶ 13.) Wu alleges that on numerous occasions Pearson exceeded the allowed print run without first seeking prior authorization or paying an additional licensing fee. (Am. Compl. ¶¶ 17-19.) He also alleges that Pearson knew at the time of contracting that it would likely print more than the print run it licensed and concealed its intentions to exceed the licensing agreement in order to get a better price on the licenses. (Am. Compl. ¶¶ 20-21.) In some cases, Pearson obtained additional licenses after it had already exceeded the initial print run without first disclosing its overruns. (Am. Compl. ¶¶ 155-56.)

Pearson has provided the licensing agreements covering the photographs it licensed through Minden and Arnold. (DX A-M.) The front of each licensing agreement contains a list of pictures that Pearson is licensing, the name of the photographer for each photograph, a price for each picture, the name of the book in which the pictures will be printed, and a print run. The back of each licensing agreement contains a form contract. Although the contractual terms used by Minden and Arnold differ from each other, each photo bureau uses the same form contract for each of its licensing agreements. The form contracts both contain similarly worded arbitration clauses which are set forth below. Neither party has produced a licensing agreement for the one picture allegedly obtained through AA. Wu's complaint alleges nine causes of action: copyright infringement (Count 1), breach of contract (Count 2), unjust enrichment (Count 3), fraud (Count 4), fraudulent concealment (Count 5), fraudulent inducement (Count 6), breach of the duties of good faith and fair dealing (Count 7), and two requests for declaratory judgment (Counts 8-9).

STANDARD OF REVIEW

On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court accepts as true all factual allegations in the complaint and draws all reasonable inferences in the plaintiff's favor. In re DDAVP Direct Purchaser Antitrust Litigation, 585 F.3d 677, 692 (2d Cir. 2009). The complaint's allegations, however, "must be enough to raise a right of relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Only a "plausible claim for relief survives a motion to dismiss." LaFaro v. New York Cardiothoracic Group, PLLC, 570 F.3d 471, 476 (2d Cir. 2009). Thus courts are "not bound to accept as true a legal conclusion couched as a factual allegation," and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949--50 (2009) (internal quotation marks omitted).

DISCUSSION

Pearson argues first that Wu's state law claims arising from Pearson's agreements with Minden and Arnold are subject to an arbitration agreement. Pearson asks the Court to stay Wu's remaining federal copyright claims pending arbitration of Wu's state claims. In the alternative, it moves to dismiss all claims under Rule 12(b)(6) for failure to state a claim upon which relief can be granted, and under Rule 9(b) for failure to plead fraud with particularity.

I. Plaintiff's State Claims are Subject to an Arbitration Provision

Both of the form licensing agreements Pearson has submitted to the Court contain provisions governing how disputes that arise from the agreements are to be resolved. Under the terms of both licensing agreements, all non-copyright claims are to be resolved through arbitration.*fn1 Paragraph 11 of the standard Arnold licensing agreement reads as follows:

11. Arbitration: A material part of this Contract is this agreement to arbitrate any disputes. Any and all disputes relating to this Contract, with the exception of copyright, including its validity, interpretation, performance, breach or other matter shall be settled by arbitration in New York City pursuant to the rules of the American Arbitration Association. Judgment upon any award rendered may be entered in the highest court having jurisdiction. The Laws of the State of New York shall govern the interpretation of this Contract. You agree the arbitrators have full authority to award costs of the arbitration, including legal fees, plus legal interest on any award. (DX-G, 2) (emphasis added).

The standard licensing agreement between Minden and Pearson contains a similar arbitration clause:

18. Any and all disputes, with the exception of copyright claims, arising out of, under or in connection with the agreement, including without limitation the validity, interpretation, performance and breadth hereof, shall be settled by arbitration in Santa Cruz County, California, pursuant to the rules of the American Arbitration Association. Judgment [sic] upon the award may be rendered in the highest court of the forum, State or Federal, having jurisdiction. This ...


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