Chapman v. New York State Div. For Youth

• Decision Date: 14 October 2008
• Docket Number: Docket No. 05-7010-cv.
• Citation: 546 F.3d 230
• Parties: Bruce CHAPMAN and Handle With Care Behavior Management System, Inc., Plaintiffs-Appellants, v. NEW YORK STATE DIVISION FOR YOUTH, New York State Office of Children & Family Service, New York State Department of Social Services, John Johnson, Commissioner of New York State Office of Children and Family Services, and former Commissioner of the New York State Division for Youth, in his official and individual capacity, Margaret Davis, former Director of Training for the New York State Division for Youth, and former Director of Training for New York State Office of Children and Family Services, in her official and individual capacity, Patsy Murray, former Associate Training Technician for the New York State Division for Youth, and current position as Trainer for New York State Office of Children and Family Services, in her official and individual capacity, Cornell University, Jeffrey Lehman, President of Cornell University, in his official and individual capacity, Doctor Hunter Rawlings, III, former President of Cornell University, in his official and individual capacity, New York State College of Human Ecology, Family Life Development Center, Residential Child Care Project, Therapeutic Crisis Intervention, Martha Holden, Project Director of the Residential Child Care Project and Therapeutic Crisis Intervention Trainer and Coordinator, in her official and individual capacity, Michael Nunno, Project Director of the Residential Child Care Project and Therapeutic Crisis Intervention Trainer and Coordinator, in his official and individual capacity, Hillside Children's Center, Dennis Richardson, President and CEO of Hillside Children's Center, in his official and individual capacity, Douglas Bidleman, Employee of Hillside Children's Center and Therapeutic Crisis Intervention Trainer, in his official and individual capacity, Defendants-Cross-Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

546 F.3d 230

Bruce CHAPMAN and Handle With Care Behavior Management System, Inc., Plaintiffs-Appellants, v. NEW YORK STATE DIVISION FOR YOUTH, New York State Office of Children & Family Service, New York State Department of Social Services, John Johnson, Commissioner of New York State Office of Children and Family Services, and former Commissioner of the New York State Division for Youth, in his official and individual capacity, Margaret Davis, former Director of Training for the New York State Division for Youth, and former Director of Training for New York State Office of Children and Family Services, in her official and individual capacity, Patsy Murray, former Associate Training Technician for the New York State Division for Youth, and current position as Trainer for New York State Office of Children and Family Services, in her official and individual capacity, Cornell University, Jeffrey Lehman, President of Cornell University, in his official and individual capacity, Doctor Hunter Rawlings, III, former President of Cornell University, in his official and individual capacity, New York State College of Human Ecology, Family Life Development Center, Residential Child Care Project, Therapeutic Crisis Intervention, Martha Holden, Project Director of the Residential Child Care Project and Therapeutic Crisis Intervention Trainer and Coordinator, in her official and individual capacity, Michael Nunno, Project Director of the Residential Child Care Project and Therapeutic Crisis Intervention Trainer and Coordinator, in his official and individual capacity, Hillside

Children's Center, Dennis Richardson, President and CEO of Hillside Children's Center, in his official and individual capacity, Douglas Bidleman, Employee of Hillside Children's Center and Therapeutic Crisis Intervention Trainer, in his official and individual capacity, Defendants-Cross-Defendants-Appellees.

Docket No. 05-7010-cv.

United States Court of Appeals, Second Circuit.

Argued: October 25, 2007.

Decided: October 14, 2008.

Guy L. Heinemann, Guy L. Heinemann, P.C. (Irene M. Vavulitsky, Guy L. Heinemann, P.C., and Hilary Adler, Law Offices of Hilary Adler, Gardiner, N.Y., on the brief), New York, N.Y., for Plaintiffs-Appellants.

Andrea Oser, Assistant Solicitor General (Daniel Smirlock, Deputy Solicitor General, on the brief), for Eliot Spitzer, Attorney General of the State of New York, Albany, N.Y., for Defendants-Appellees, New York

State Division for Youth, New York State Department of Social Services; New York State Office of Children & Family Services, John Johnson; Margaret Davis, and Patsy Murray.

Nelson E. Roth (Valerie L. Cross and Norma W. Schwab, on the brief) Office of the University Counsel, Ithaca, N.Y., for Defendants-Appellees, Cornell University, Jeffrey Lehman, Hunter Rawlings, III, New York State College of Human Ecology, Family Life Development Center, Residential Child Care Project, Therapeutic Crisis Intervention, Martha Holden, and Michael Nunno.

David H. Walsh, Petrone & Petrone, P.C., Syracuse, N.Y., for Defendants-Appellees, Hillside Children's Center, Dennis Richardson, and Douglas Bidleman.

Before: WALKER, STRAUB, and POOLER, Circuit Judges.

JOHN M. WALKER, JR., Circuit Judge:

Plaintiffs-appellants Bruce Chapman and Handle With Care Behavior Management System, Inc., (collectively "HWC") market a training program ("Handle With Care") that teaches individuals a safe technique for physically restraining others. HWC sued three groups of defendants alleging generally that they had infringed HWC's copyright and adversely affected the market for such restraint services in violation of the antitrust laws.

Specifically, HWC sued various New York state agencies and their officers and agents (collectively "the state defendants"). The state defendants include: the New York State Office of Children and Family Services ("OCFS"), which in 1998 succeeded the New York State Division for Youth ("DFY") and the New York State Department of Social Services ("DSS") also named as defendants; John Johnson, the former Commissioner of DFY and the current Commissioner of OCFS; Margaret Davis, the former Director of Training for DFY and the current Director of Training for OCFS; and Patsy Murray, a former Associate Training Technician for DFY and current Trainer for OCFS.

HWC also sued Cornell University and the New York State College of Human Ecology (the "College") and related persons and entities (collectively "the Cornell defendants"). The Cornell defendants include: Cornell University; Jeffrey Lehman, Cornell's then-current president; Hunter Rawlings III, Cornell's former president; the College and subsidiaries the Family Life Development Center, the Residential Child Care Project, and Therapeutic Crisis Intervention ("TCI"); and Project Directors of the Residential Child Care Project and TCI Trainers and Coordinators, Martha Holden and Michael Nunno.

Finally, HWC sued Hillside Children's Center ("HCC"), a private childcare provider and residential treatment center, and two of its officers, Dennis Richardson, HCC's president, and Douglas Bidleman, HCC's Coordinator for Sociotherapy (collectively "the Hillside defendants").

The state and Cornell defendants moved to dismiss the complaint pursuant to Fed. R.Civ.P. 12(b)(6), and the Hillside defendants moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(c). The district court granted both motions as to all of plaintiffs' federal claims and declined to exercise supplemental jurisdiction over the remaining state law claims. The federal claims dismissed were: (1) copyright infringement against the state defendants; and (2) conspiracy to monopolize and restrain trade, together with monopoly, restraint of trade, and unfair competition, against all defendants.

The district court dismissed plaintiffs' copyright claim on the basis that the contract at issue unambiguously granted the state defendants the right to copy plaintiffs' materials indefinitely. We disagree with that conclusion, find the contract ambiguous, and remand the case to the district court to determine the duration of the license to copy plaintiffs' materials granted under the contract.

With regard to the antitrust claims, the district court held that the plaintiffs failed to offer a plausible relevant market in which the defendants monopolized the trade for restraint services or engaged in restraint of trade or unfair competition with respect thereto. We agree that the plaintiffs have failed to define a plausible market and conclude that the plaintiffs cannot establish that the defendants have substantial market power in the market for restraint services properly defined. Accordingly, we affirm the district court's dismissal of plaintiffs' antitrust claims and vacate the district court's dismissal of the copyright claim against the state defendants.

BACKGROUND

For purposes of reviewing a motion to dismiss, we assume the accuracy of the plaintiffs' allegations in their complaint. Patane v. Clark, 508 F.3d 106, 111 (2d Cir.2007) (per curiam). "[O]ur review is limited to undisputed documents, such as a written contract attached to, or incorporated by reference in, the complaint." Official Comm. Of Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, L.L.P., 322 F.3d 147, 160 n. 7 (2d Cir.2003) (citing Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42, 47 (2d Cir.1991)).

OCFS (previously DFY and DSS) operates juvenile facilities and monitors child care providers in the state of New York. The New York legislature mandated that OCFS:

promulgate regulations concerning standards for the protection of children in residential facilities and programs operated or certified by the division, from abuse and maltreatment ... Such standards shall ... establish as a priority that: ... administrators, employees, volunteers and consultants receive training in ...: the characteristics of children in care and techniques of group and child management including crisis intervention.

N.Y. Exec. Law § 501(12); see also N.Y. Soc. Serv. Law § 462(1)(c). To that end, state regulations require that each supervised child care facility "submit[] its restraint policy to [OCFS]" and prohibit the use of "any method of restraint unless it has ... been approved in writing by [OCFS]." 18 N.Y. Comp.Codes R. & Regs. § 441.17(c).

In 1987, New York State purchased HWC's method for use in its own facilities. That year, DFY contracted with HWC to provide training in HWC's methods to its staff (the "1987 contract"). The 1987 contract provided that HWC would train 120 DFY staff members over fifteen days in HWC's methods. It further provided that HWC would furnish DFY with one "copy of Handle With Care (copyrighted) which [DFY] may reproduce in whole or in part as required by [DFY]" and "a videomaster of the restraint program to be used by [DFY's] master trainers in conducting training programs for facility staff." Finally, the contract stated that "[t]his agreement shall commence January 1, 1988 and end March 31, 1988." There is no dispute that HWC fulfilled its obligations under the 1987 contract and trained 120 DFY staff, some of whom were master trainers, during the relevant three-month term. In 1997, however, after two incidents at DFY facilities in which children were harmed by the use of improper restraint techniques, DFY requested that HWC provide retraining to its staff.

The resulting contract (the "1997 contract") provided that HWC would "update and recertify existing [DFY] Crisis Management/Physical Restraint trainers in the techniques encompassed in the Handle With Care program;" that it would "deliver twelve (12) days of training to approximately one hundred twenty (120) existing [DFY] trainers;" and that DFY had "the right to reproduce all training materials."¹ The contract provided that the "agreement shall commence May 1, 1997 and end August 31, 1997." Additionally, HWC required DFY staff members to sign individual...