In re Tribune Co.
| Decision Date | 09 November 2009 |
| Docket Number | Adversary No. 09-50486 (KJC).,Bankruptcy No. 08-13141 (KJC). |
| Citation | 418 B.R. 116 |
| Parties | In re TRIBUNE COMPANY, et. al.<SMALL><SUP>1</SUP></SMALL> Debtors. Tribune Media Services, Inc., Plaintiff, v. Warren Beatty, Defendant. |
| Court | U.S. Bankruptcy Court — District of Delaware |
J. Kate Stickles, Cole, Schotz, Meisel, Forman & Leonard, Wilmington, DE, for Plaintiff.
Gregg M. Galardi, Skadden, Arps, Slate, Meagher, Wilmington, DE, for Defendant.
On December 8, 2008, the Tribune Company and its affiliates (the "Debtors") filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code (11 U.S.C. § 101 et seq.). Prior to the bankruptcy filing, on November 20, 2008, Warren Beatty ("Beatty") filed a complaint in the United States District Court for the Central District of California (the "2008 California Action") against one of the Debtors, Tribune Media Services, Inc. ("TMS"), for declaratory judgment in a dispute between Beatty and TMS over certain motion picture, television, and other rights in the published comic strip series entitled "Dick Tracy" (the "Dick Tracy Rights"). The 2008 California Action was stayed by the bankruptcy filing pursuant to Bankruptcy Code § 362(a).
(1) The Adversary Proceeding
On March 19, 2009, TMS commenced an adversary proceeding in this court (Adv. No. 09-50486) (the "Adversary Proceeding") seeking a declaratory judgment that, among other things, the Dick Tracy Rights are property of the estate pursuant to Bankruptcy Code § 541, and that Beatty is enjoined by the automatic stay of § 362(a) from asserting any rights or claim to control the Dick Tracy Rights. On May 8, 2009, Beatty filed, the "Defendant's Motion to Dismiss Complaint under Rule 12(b) for Improper Venue and Lack of Personal Jurisdiction" (the "Motion to Dismiss")(Adv.D.I.7). Beatty argues for dismissal based on (i) lack of personal jurisdiction because there is no federal statute authorizing nationwide service of process in bankruptcy cases, and TMS failed to plead facts on which this Court could find that Beatty has minimum contacts with the State of Delaware as required by the Delaware long-arm statute and constitutional due process requirements, and (ii) improper venue because, at the time the adversary complaint was filed, there was a prior action pending in California and, pursuant to the "first-filed rule," this Court should defer to the 2008 California Action.
TMS filed an answer opposing Beatty's Motion to Dismiss (Adv.D.I.11), arguing that this Court has personal jurisdiction over Beatty pursuant to Fed.R.Bankr.P. 7004 and that venue is proper pursuant to 28 U.S.C. § 1409. TMS also argues that the first-filed rule does not apply to a bankruptcy-related adversary proceeding. Beatty filed a Reply Brief (Adv.D.I.13) on June 2, 2009.
(2) The Stay Motion
On June 9, 2008, Beatty filed a motion for relief from the automatic stay under Bankruptcy Code § 362(d)(1) to proceed with the 2008 California Action (Main Case D.I. 1325)(the "Stay Motion"). The Debtors filed an objection to the Stay Motion (Main Case D.I. 1587), which was joined by the Official Committee of Unsecured Creditors (Main Case D.I. 1588). Beatty filed a reply to the objection (Main Case D.I. 1598).
In the Stay Motion, Beatty argues that cause exists for lifting the stay to allow the California District Court to determine the dispute over the Dick Tracy Rights because a similar dispute was heard previously by that Court, and because litigating the issues in Delaware causes a hardship for Beatty and his witnesses. The Debtors respond by arguing that this Court should determine the core issue of whether the Dick Tracy Rights are property of the bankruptcy estate and that Delaware is a more convenient forum for the Debtors since the bankruptcy case is pending here.
On July 28, 2009, this Court heard oral argument in support of the parties' respective positions on the Motion to Dismiss and the Stay Motion.3 For the reasons set forth below, the Motion to Dismiss will be denied and the Stay Motion will be granted.4
TMS is the owner of certain copyright and other rights in the cartoon character Dick Tracy and various works embodying that character. On or about August 28, 1985, TMS and Beatty entered into a written agreement in which TMS, among other things, granted the Dick Tracy Rights to Beatty, in accordance with and subject to the terms of the agreement (the "Dick Tracy Agreement"). Section 9 of the Dick Tracy Agreement also granted certain reversion rights to TMS, as follows:
In the event that, within five years after the initial domestic release of the picture, or any subsequent theatrical picture or television series or special, photography has not commenced on either another theatrical motion picture or television series or special, TMS may give Mr. Beatty notice of its intention to effect a reversion of all rights granted hereunder, provided that Mr. Beatty will continue to have such non-exclusive rights in the property as may be necessary to permit the continued exploitation in and by any and all media of any motion picture or television series or special produced pursuant to the rights granted herein or of rights therein or connected therewith. If within two years after receipt of said notice, such principal photography has not commenced, then TMS, by a further written notice to Mr. Beatty, may effect such a reversion.
Dick Tracy Agreement, ¶ 9 (Beatty Ex. 2). In 1990, a theatrical motion picture entitled "Dick Tracy" was successfully completed by Beatty, and TMS received substantial monies under the Dick Tracy Agreement arising from the production and distribution of the motion picture.
After TMS asserted that it had taken the necessary steps for reversion of the Dick Tracy Rights, in May 2005, Beatty filed a declaratory judgment action against TMS in the California Superior Court—Los Angeles County, which was removed to the United States District Court for the Central District of California (the "California District Court") under case number 05-cv-03938 (the "2005 California Action"). The issue in the 2005 California Action was, inter alia, whether TMS provided the requisite notice necessary to effectuate a reversion of the Dick Tracy Rights under the Dick Tracy Agreement. (See TMS Ex. 1.E.). The action was contested for over a year. (Beatty Ex. 8). On November 30, 2006, the California District Court approved the parties' stipulation to dismiss the 2005 California Action. (Id.)
On November 17, 2006, TMS served written notice of its intent to effect a reversion of all rights granted to Beatty in the Dick Tracy Agreement, unless he commenced principal photography on another "theatrical motion picture or television series or special" within two years. (TMS Ex. 2.B.). Beatty alleges that he began principal photography on a Dick Tracy television special on November 8, 2008. He further alleges that the special was scheduled to air in July 2009.6 (Stay Motion, ¶ 12). TMS received a letter, via email, dated November 14, 2008 from Beatty's counsel, asserting that Beatty "will be commencing" principal photography on a Dick Tracy television special. (Beatty Ex. 11, ¶ 20) However, TMS alleges that Beatty did not provide any evidence to TMS to show that a qualifying project had, in fact, begun. (TMS Objection, ¶ 9).
On November 18, 2008, TMS notified Beatty that all rights previously granted under the Dick Tracy Agreement had automatically reverted to TMS. (TMS Ex. 2.C.). On November 20, 2008, Beatty filed the 2008 California Action. On November 21, 2008, Beatty filed a Notice of Related Case and Request to Assign Matter to the Honorable Dean Pregerson in the California District Court (the "Request") under Rule 81-1.3.1 of the Local Rules for the California District Court. (Beatty Ex. 5). The Request was served upon TMS on November 25, 2008. (Beatty Ex. 6). Beatty argues that the Local Rules provided that TMS must object to the Request within five days of service, and that TMS did not so object. Consequently, on December 18, 2008, the Request was granted and the 2008 California Action was assigned to Judge Pregerson—the same Judge that presided over the 2005 California Action. (Stay Motion, ¶ 14).
TMS's answer to the complaint in the 2008 California Action was due on or about December 15, 2008, but the Debtors' chapter 11 bankruptcy case was filed in Delaware on December 8, 2008. On March 19, 2009, TMS commenced the Adversary Proceeding. On May 8, 2009, Beatty filed a motion to dismiss the Adversary Proceeding. On June 9, 2009, Beatty filed the Stay Motion.
According to Rule 12(b) of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Rule 7012 of the Federal Rules of Bankruptcy Procedure, the court should dismiss an adversary proceeding if (1) the Court lacks personal jurisdiction over the Defendant, or (2) venue is improper. See Fed.R.Civ.P. 12(b)(2) and (3). In reviewing motions to dismiss, the court should "accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiffs." Accardi v. IT Litigation Trust (In re FT Group, Inc.), 448 F.3d 661, 667 (3d Cir.2006); Carteret Savings Bank, F.A. v. Shushan, 954 F.2d 141, 142 n. 1 (3d Cir.1992).
Beatty argues that the adversary complaint should be dismissed because the Court lacks personal jurisdiction over him due to a lack of minimum contacts with this Court or the State of Delaware, and because he has not consented to personal jurisdiction in this Court. The Debtors respond that this Court has personal jurisdiction over Beatty pursuant to Bankruptcy Rule 7004 and the "nationwide contacts" test.
Under Bankruptcy Rule 7004, "a court has personal jurisdiction over a defendant if three requirements are met: (1) service of process has been made in accordance with...
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