United States District Court, S.D. New York
OPINION AND ORDER
ALISON J. NATHAN, District Judge.
Plaintiffs in this case have filed suit alleging that Defendants were involved in a scheme (the "Chop Shop") to unlawfully purchase copies of Plaintiffs' textbooks sold abroad and re-sell them in the United States. (TAC ¶¶ 1, 3). The Third Amended Complaint asserts claims against all Defendants for direct copyright infringement; contributory copyright infringement; removal, alteration, and falsification of copyright management information; and trademark counterfeiting. It further asserts claims for fraud against Defendants Michael Elmudesi, Letiva Capital Corp. ("Letiva"), and David Griffin, described in the Complaint as the "Dominican Defendants, " and for contributory copyright infringement against Griffin. Elmudesi, Letiva, and Griffin have filed a total of five motions to dismiss. Three of those motions assert lack of personal jurisdiction or, in the alternative, that the Court should transfer this case due to improper venue or in the interests of convenience under 28 U.S.C. § 1404(a). Elmudesi and Letiva also move to dismiss each claim, to the extent it is asserted against them, for failure to state a claim under Rule 12(b)(6). The Court determines that transfer is warranted and therefore need not reach Defendants' motions on personal jurisdiction or the merits.
I. FACTUAL BACKGROUND
A. Allegations in the Third Amended Complaint
The Third Amended Complaint alleges that Plaintiffs are a group of educational publishers who, among other things, publish International Editions of their textbooks for sale in geographic markets outside the United States. (TAC ¶ 29). Sold at discounted prices to allow students in developing countries to afford these materials, the International Editions are conspicuously marked with a notice that the textbook is authorized for sale only in a particular country or prohibited for sale in specified regions-typical excluding North America. (TAC ¶¶ 29-30). Plaintiffs also sell U.S. Editions of these books internationally at a discount for a similar reason ("Overseas U.S. Editions"), and also may label these products as "not-for-sale in the United States." (TAC ¶ 30).
In roughly June 2008, Griffin and his partner Charles Jones purchased SE Book Company ("SEB") and, in early 2009, also purchased College Book Rental Company, LLC ("CBR"). (TAC ¶¶ 2, 35). At some point not specified by the Third Amended Complaint, they also created a third company, Blackrock Investments, LLC ("Blackrock"), as the primary owner of SEB. (TAC ¶ 35, 51). They used these companies to execute a scheme to purchase Plaintiffs' International Editions and Overseas U.S. Editions at a discount, alter those books, and resell them in the United States. (TAC ¶¶ 35-36).
At the beginning of this scheme, Griffin and Jones caused SEB to acquire such books and altered them in a number of ways to remove indications they were not for sale in the United States, including the following: using black electrical tape or "Used Book" stickers to cover up labels and markings, using hot irons or baby powder to remove stickers, and filing off logo stamps. (TAC ¶¶ 36-37). However, in early 2011, following a tour of a printing facility, Griffin and Jones decided that they would acquire printing and binding equipment to create fake covers and pages of U.S. Edition books that they would then rebind onto the books they acquired internationally, allowing them to sell or rent these books as apparently legitimate U.S. Editions. (TAC ¶ 5, 38). To facilitate this plan, Jones purchased Excess LLC d/b/a Innovative Printing ("Innovative Printing") to disassemble the books purchased by SEB or CBR and, with the cooperation of certain outside vendors, reproduce U.S. Edition covers and rebind these books with the inaccurate cover. (TAC ¶¶ 39). In addition to the counterfeit covers, many of the textbooks had their copyright pages removed, as these pages-if left in the books-would have provided ISBN numbers or other information for the books that would have suggested the books had been altered or were not for sale in the United States. (TAC ¶¶ 4, 31-32, 47-48).
Among the suppliers for the International Editions and Overseas U.S. Editions were Elmudesi and Letiva, who are alleged to have been drawn into the Chop Shop scheme by Griffin. (TAC ¶ 53). Specifically, Griffin contacted Elmudesi, a prior business associate with ties to the Dominican Republic, to discuss setting up such a company to purchase books directly from the publishers on the pretense that they would be distributed in that country. (TAC ¶ 53). This plan was refined and finalized on a trip Griffin took with Jones, among others, to the Dominican Republic, leading to the creation of Letiva and other companies. (TAC ¶ 54). Letiva was then used to purchase textbooks under the pretense of purchasing them for international distribution, but instead selling them to SEB and others. (TAC ¶ 54). Griffin is alleged to have actively overseen the business plan for Letiva, including at meetings in the United States. (TAC ¶¶ 55).
Plaintiffs identify two specific transactions in which the "Dominican Defendants" are claimed to have participated. First, in March 2009, the Dominican Defendants represented to one of the Plaintiffs, Pearson Education Inc. ("Pearson"), that it desired to purchase books for sale in the Dominican Republic, and on April 29, 2009, Letiva's general manager Luis Guilamo falsely certified to Pearson that the destination of the books was the Dominican Republic. (TAC ¶ 56a). Plaintiffs alleges that, in reliance on these false statements, Pearson sold a number of Overseas U.S. Editions at a substantial discount. (TAC ¶ 56a). Pearson's price quote and invoice provided that the "sole and exclusive jurisdiction to hear and determine any dispute or controversy arising under or concerning th[e] contract" would rest either in the New York County state courts or, "if the jurisdictional prerequisites exist at the time, " the Southern District of New York. (TAC ¶ 56b & n.2). Second, in April 2009, the Dominican Defendants made similar representations to Plaintiff Cengage Learning, Inc. ("Cengage") that they intended to purchase books for sale in the Dominican Republic, leading Cengage to sell books to the Dominican Defendants at a discounted rate; these books were sold to SEB, rather than within the Dominican Republic. (TAC ¶ 56c).
Plaintiffs allege that the Dominican Defendants knew these statements were false when they made them and, indeed, that "[t]he entire purpose and intent of these companies was to deceive the Publishers into selling them Overseas U.S. [Editions] and/or International Edition books at dramatic discounts." (TAC ¶¶ 57, 59). In light of these facts, Plaintiffs contend that "[w]hen Defendants Elmudesi and Levita sold International Editions to SEB, they knew or should have known that those books would be altered to be sold in the United States." (TAC ¶ 36). Plaintiffs also allege that Griffin, as an "owner/investor in... businesses" like Letiva profited from their earnings and positioned himself as a broker of each purchase transaction, earning a commission from each sale. (TAC ¶ 58).
In addition to the allegations in the Third Amended Complaint, Plaintiffs have submitted a declaration from Jones, with whom they have entered into a settlement agreement, describing Griffin's role in the Chop Shop and, particularly, in SEB, CBR, and Blackrock. Griffin, Elmudesi, and Letiva have each also submitted their own declarations attesting to their limited contacts with New York. Griffin also challenges the veracity of Jones' affidavit as contradictory to a previous declaration he has submitted in another action.
Griffin attests that he is a Nashville, Tennessee resident and, with the exception of ten vacation visits over his 57 year life, has little or no connection with New York. (Griffin Decl. ¶¶ 2, 18). Specifically, he attests that he has not transacted business or engaged in business dealings with anyone in New York, and that he has not contracted to supply goods or services in New York; does not reside or have an office in New York; does not have a telephone, bank account, or mailing address in New York; does not rent or own property in New York; and does not have any employees or agents in New York. (Griffin Decl. ¶¶ 9-15). Moreover, he claims that he was merely a "passive investor" in CBR, SEB, and Blackrock, that Jones controlled these companies through a management company in which he has no ownership interest, and that he has never managed these companies' daily operations. (Griffin Decl. ¶¶ 3-5). He denies any knowledge of the rental or sale of textbooks into New York, denies knowledge of any business dealings by Jones or the other named Defendants in New York, and denies any role in any transactions with New York residents. (Decl. ¶¶ 7, 17). Finally, he attests that his investments in SEB, CBR, and Blackrock did not involve any actions in New York, that he had has never transacted business with Plaintiffs in New York or elsewhere, and that he never agreed to be bound by any agreements between Pearson and Letiva. (Griffin Decl. ¶¶ 6, 8, 16).
In response, Plaintiffs submit Jones's declaration, created as part of his obligations pursuant to his settlement agreement with Plaintiffs. (Jones Decl. ¶ 3). In most respects, Jones's declaration corroborates the allegations in the Third Amended Complaint regarding the scope of Griffin's activities. (See, e.g., Jones Decl. ¶¶ 5-6, 13). For example, Jones notes the extent of Griffin's investment and ownership of CBR, SEB, and Blackrock; that Griffin had the ability to influence how the companies used the money he invested by, for example, rejecting a proposed website; and that he requested and received regular reports on these companies' performance, sometimes on an hourly basis. (Jones Decl. ¶ 6-7). He likewise attests that he and Griffin communicated by telephone on "virtually a daily basis, " sometimes exchanging calls and texts multiple times per day, and visited the facilities in person or sent his representatives to discuss the companies' business. (Jones Decl. ¶¶ 8-10). Jones also states that Griffin attended a tradeshow to represent the companies, met with textbook suppliers, and let the ...