632 F.3d 822 (3rd Cir. 2011), 09-4495, Barefoot Architect, Inc. v. Bunge

Docket Nº:09-4495, 09-4600.
Citation:632 F.3d 822
Opinion Judge:SMITH, Circuit Judge.
Party Name:BAREFOOT ARCHITECT, INC., Appellant/Cross-Appellee v. Sarah BUNGE; Thomas F. Friedberg; Tracy Roberts; Springline Architects, L.L.C., Appellees/Cross-Appellants.
Attorney:Shawn E. Goodman, Werner Sabo, Sabo & Zahn, Chicago, IL, Steven Hogroian, Kotas & Hogroian, St. John USVI, for Appellant/Cross-Appellee. Thomas F. Friedberg, Law Offices of Friedberg and Bunge, Robert L. Kenny, San Diego, CA, Henry C. Smock, Kyle R. Waldner, Smock & Moorehead, St. Thomas, VI, for...
Judge Panel:Before: McKEE, Chief Judge, FUENTES and SMITH, Circuit Judges.
Case Date:January 14, 2011
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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632 F.3d 822 (3rd Cir. 2011)

BAREFOOT ARCHITECT, INC., Appellant/Cross-Appellee


Sarah BUNGE; Thomas F. Friedberg; Tracy Roberts; Springline Architects, L.L.C., Appellees/Cross-Appellants.

Nos. 09-4495, 09-4600.

United States Court of Appeals, Third Circuit.

January 14, 2011

Submitted Pursuant to Third Circuit L.A.R. 34.1(a) Dec. 16, 2010.

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[Copyrighted Material Omitted]

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Shawn E. Goodman, Werner Sabo, Sabo & Zahn, Chicago, IL, Steven Hogroian, Kotas & Hogroian, St. John USVI, for Appellant/Cross-Appellee.

Thomas F. Friedberg, Law Offices of Friedberg and Bunge, Robert L. Kenny, San Diego, CA, Henry C. Smock, Kyle R. Waldner, Smock & Moorehead, St. Thomas, VI, for Appellees/Cross-Appellants.

Before: McKEE, Chief Judge, FUENTES and SMITH, Circuit Judges.

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SMITH, Circuit Judge.

Before the Court are a set of cross-appeals from three separate orders issued by the District Court of the United States Virgin Islands. Pursuant to Rule 12(b)(6), the District Court dismissed three of the five counts of the defendants' counterclaim; the defendants appeal in part. After discovery, the District Court granted summary judgment to the defendants as to the plaintiff's two federal claims; the plaintiff appeals in part. The summary judgment order also dismissed without prejudice the plaintiff's remaining territorial-law claim pursuant to 28 U.S. C. § 1367(c), on the ground that no federal causes of action remained in the case. A separate order filed a few days later sua sponte dismissed the defendants' two remaining territorial-law counterclaims for the same reason; the defendants appeal. We will affirm the entry of summary judgment on the plaintiff's copyright claim, but will vacate the District Court's decisions dismissing the counterclaims.


Sarah Bunge and Thomas Friedberg (" the owners" ) wanted to build a home in the Virgin Islands. They approached Michael Milne, an architect who at the time was vice-president and director of the Virgin Islands architectural firm Village Vernacular, Inc. While still a Village employee, Milne began work on the project. The owners executed a letter of intent and paid a $1,000.00 deposit to hire Village on June 10, 1999. Milne prepared a series of sketches and preliminary drawings for the project, and the owners paid another $6,650.00 to Village on October 5, 1999. All the drawings and all of Milne's correspondence throughout 1999 bore Village's imprint. In April 2000, Milne submitted conceptual drawings for the project to the Virgin Islands Department of Planning and Natural Resources, the local permitting body; these drawings were also marked with Village's legend.

Village was, however, in the process of getting out of the active practice of architecture, so Milne needed someplace else to ply his trade. At some point in 1999 or 2000-the record contains no evidence of the exact date-Milne formed a second corporation, Barefoot Architect, Inc., where he continued his architecture practice and served as owner and president. Bunge and Friedberg wanted to continue working with Milne, and on August 31, 2000 they entered into a standard American Institute of Architects (AIA) contract to engage Barefoot's architectural services. The agreement calls for a contract price of $123,495.00 covering " basic services," a category defined in the contract's Article 2. The contract also defines " additional services," which were to be billed at $85.00 per hour over and above the " basic services" price.

By June 7, 2001, the owners had paid more than the entire " basic services" price, but had yet to receive full construction drawings. Barefoot nevertheless demanded that it be paid a further $281,698.43 for " contingent additional services," which it claims to have rendered on account of major changes to the project initiated by the owners. Neither side was happy with this state of affairs; angry correspondence ensued. The owners refused to pay for the " contingent additional services," and on December 11, 2001, Milne sent them a letter on Barefoot letterhead stating that his firm was suspending its architectural services pursuant to subparagraph 8.1 of the contract. The owners reacted by hiring Tracy Roberts of Springline Architects, LLC to replace Barefoot and to finish the project.

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Barefoot filed suit on July 27, 2004, alleging that Bunge, Friedberg, Roberts, and Springline had violated its copyright in the home design. The complaint also asserted claims for violation of the Lanham Act and breach of contract. In addition to an answer, the defendants filed five counterclaims: breach of contract, fraud, breach of fiduciary duty, violation of the Lanham Act, and tortious interference with contractual relations. Barefoot moved to dismiss the counterclaims, and on June 22, 2007 the District Court granted the motion as to the fraud, Lanham Act, and tortious interference claims, leaving the contract and fiduciary duty counterclaims intact.

On September 9, 2008-after the court's decision on the motion to dismiss-Barefoot and Village executed a " Memorandum of Transfer," which purported to memorialize an October 5, 1999 oral transfer of the copyright to the project's design from Village to Barefoot. Milne signed this memorandum on behalf of both firms (as Village's vice-president and director, and as Barefoot's president); Glenn Speer, as Village's president, also signed on his firm's behalf.

The defendants then moved for summary judgment, which the District Court granted with respect to the Copyright Act and Lanham Act claims. The court proceeded to decline supplemental jurisdiction over Barefoot's breach-of-contract claim, dismissing it without prejudice. Shortly thereafter, the District Court sua sponte dismissed the remaining counts of the counterclaim (for breach of contract and of fiduciary duty), which were also territorial-law claims over which it declined to exercise supplemental jurisdiction.

The parties cross-appealed. Barefoot asks only that we reinstate its copyright claim. The defendants/counterclaimants limit their appeal to the tortious interference, breach of contract, and breach of fiduciary duty counterclaims.


We have jurisdiction pursuant to 28 U.S. C. § 1291. We review district court decisions regarding both summary judgment and dismissal for failure to state a claim under the same de novo standard of review. Giles v. Kearney, 571 F.3d 318, 322 (3d Cir.2009) (summary judgment); Santiago v. GMAC Mortg. Group, Inc., 417 F.3d 384, 386 (3d Cir.2005) (motion to dismiss). Summary judgment should be granted only when the record " shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). While " [t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor" in determining whether a genuine factual question exists, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), summary judgment should not be denied unless there is sufficient evidence for a jury to reasonably find for the nonmovant. Id. at 249, 106 S.Ct. 2505; Giles, 571 F.3d at 322. To withstand a Rule 12(b)(6) motion to dismiss, " a complaint must contain sufficient factual matter, accepted as true, to ‘ state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, __ U.S. __, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

The doctrine of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), applies to cases decided by the federal courts over what would be state-law claims if the Virgin Islands were a state. Edwards v. HOVENSA, LLC, 497 F.3d 355, 360-61 (3d Cir.2007). Thus we apply the rule of decision that the Virgin

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Islands Supreme Court would apply in adjudicating issues of territorial law. The Virgin Islands Code provides that " [t]he rules of the common law, as expressed in the restatements of the law approved by the American Law Institute, and to the extent not so expressed, as generally understood and applied in the United States, shall be the rules of decision in the courts of the Virgin Islands in cases to which they apply, in the absence of local laws to the contrary." 1 V.I.C. § 4.



The District Court granted summary judgment and dismissed Barefoot's copyright claim on the ground that Barefoot did not own the copyright to the architectural plans at the time those rights were allegedly infringed, and that it thus lacks standing to assert a copyright infringement action. The court reasoned as follows. When Milne originally created the copyrighted work, he was an employee of Village. Under the works-for-hire doctrine, Village is presumed to own the copyrights to works created by its employees during the course of their employment. See 17 U.S. C. § 201(b). Plaintiff concedes this much to be true, but argues that Village effectuated a transfer of the copyright in question to Barefoot in 1999, such that Barefoot was the rightful owner at the time that the alleged infringement began. The District Court disagreed, concluding that there was no evidence to support such a transfer, and that Barefoot therefore had not raised a genuine question of fact as to whether it owned the copyright at the relevant point in time.

Ownership of a copyright is freely transferrable " by any means of conveyance or by operation of law." 17 U.S. C. § 201(d). However, a transfer (other than one by operation of law) " is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent." 17 U.S. C. § 204(a). No such writing existed in this case until the " Memorandum of Transfer" dated September...

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