Raucci v. Candy & Toy Factory

• Decision Date: 02 November 2015
• Docket Number: CIVIL ACTION NO. 15-3385
• Citation: 145 F.Supp.3d 440
• Court: U.S. District Court — Eastern District of Pennsylvania
• Parties: William Raucci, Individually and as Assignee of CRE8 Design and Development, Inc. v. The Candy & Toy Factory and Pablo Fernandez Atela

145 F.Supp.3d 440

William Raucci, Individually and as Assignee of CRE8 Design and Development, Inc.

v.The Candy & Toy Factory and Pablo Fernandez Atela

CIVIL ACTION NO. 15-3385

United States District Court, E.D. Pennsylvania.

Signed November 2, 2015

Gavin P. Lentz, Vincent Van Laar, Bochetto & Lentz, PC, Philadelphia, PA, for William Raucci Individually and as Assignee of Cre8 Design and Development, Inc. Barry L. Cohen, Sean Sebastian Litz, Royer Cooper Cohen Braunfeld LLC, Conshohocken, PA, for The Candy & Toy Factory and Pablo Fernandez Atela.

MEMORANDUM OPINION

Savage

, District Judge

William Raucci (“Raucci”) has sued The Candy and Toy Factory (“TCTF”) and Pablo Fernandez Atela (“Atela”), who manufactured and sold interactive candy products designed by him. Raucci's claims arise from an alleged oral agreement to pay Raucci royalties from the sales of those products. In his complaint, he alleges causes of action for breach of contract, violations of the Copyright Act and the Lanham Act, unjust enrichment, accounting, and conversion. He seeks damages and injunctive relief.

After removing the case from state court, the defendants have moved to dismiss the complaint. First, they argue that all causes of action are time-barred by the statutes of limitations. Second, they invoke Pennsylvania's gist of the action doctrine to bar the conversion claim. Third, they contend an unjust enrichment claim cannot coexist with a contract claim. Fourth, they argue that injunctive relief under the Copyright Act is not available because Raucci did not attach copyright registrations to his complaint. Fifth, they assert that Raucci has failed to state a cause of action under the Lanham Act because he was not a producer of the goods. Sixth, they maintain that Raucci's state law claims for conversion and unjust enrichment are preempted by the Copyright Act. Finally, they contend Raucci has failed to plead specifically the history of the assignment of rights under the royalty agreement from CRE8 Design and Development, Inc. (“CRE8”), the company through with Raucci operates.

We shall grant the motion as to Raucci's Lanham Act claims because he is not the producer of the products TCTF manufactured. In addition, the Copyright Act preempts his unjust enrichment claim and his conversion claim, to the extent it seeks relief for conversion of royalty payments.

We shall deny the motion in all other respects. Because there is a factual dispute about when the causes of action accrued, we are unable to determine whether the statutes of limitations were tolled. As the defendants have conceded, the gist of the action doctrine does not apply at this stage because they deny the existence of a contract. Raucci adequately pleaded the assignment of rights from CRE8 to him, and he was not required to attach copyright registrations to his complaint.

Factual and Procedural Background¹

Raucci is an industrial engineer and creator of various “interactive candy products.”² TCTF, a Spanish company, manufactures and distributes such products worldwide.³ Sometime in 2003, Pablo Fernandez Atela, the owner and CEO of TCTF, solicited Raucci to design a stream of products for TCTF.⁴ Atela and Raucci orally agreed that TCTF would pay a three percent royalty on sales of products Raucci created.⁵

As agreed, Raucci designed numerous products for TCTF.⁶ When Raucci delivered a new design to TCTF, he advised that he was asserting a copyright on it, and TCTF agreed to honor the royalty agreement.⁷ Over time, Raucci designed twenty-three products under the royalty agreement and filed copyrights for each.⁸

TCTF made the agreed-upon royalty payments to Raucci until 2007.⁹ Once the payments stopped in 2007, Raucci believed that TCTF had ceased selling his products.¹⁰ Then, in 2014, while attending a trade show in Germany, Raucci learned that TCTF was still marketing products Raucci had designed.¹¹ TCTF continues to market, distribute and sell more than sixteen of the products designed by Raucci—including one known as “Chick N' Chat,” of which TCTF has sold over ten million units.¹²

Raucci, individually and as assignee of CRE8, filed his complaint in the Philadelphia Court of Common Pleas on May 13, 2015. The defendants timely removed the action.

Standard of Review

When considering a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6)

, all well-pleaded allegations in the complaint are accepted as true and viewed in the light most favorable to the plaintiff. Holk v. Snapple Beverage Corp. , 575 F.3d 329, 334 (3d Cir.2009) (quoting Phillips v. Cnty. of Allegheny , 515 F.3d 224, 231 (3d Cir.2008) ). A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), giving the defendant “fair notice of what the...claim is and the grounds upon which it rests.” Erickson v. Pardus , 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Although this standard “does not require ‘detailed factual allegations'... it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

A complaint is subject to dismissal if the plaintiff fails to plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

(citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). The plaintiff must allege facts that indicate “more than a sheer possibility that a defendant has acted unlawfully.” Id . Pleading only “facts that are ‘merely consistent with’ a defendant's liability” is insufficient and cannot survive a motion to dismiss. Id. (citing Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ). With these standards in mind, we shall accept as true the facts as they appear in Raucci's complaint and draw all possible inferences from those facts in his favor.

Statutes of Limitations

The statute of limitations for a state law cause of action is governed by the applicable state limitations period. Mest v. Cabot Corp. , 449 F.3d 502, 510 (3d Cir.2006)

. For federal causes of action, the federal statute provides the statute of limitations. See, e.g. , Kingvision Pay-Per-View

,

Corp. v. 898 Belmont, Inc. , 366 F.3d 217, 220 (3d Cir.2004). When the federal statute is silent on the limitation period, the analogous state statute generally supplies it. Id.

Typically, the statute of limitations starts running on the date of the injury or the conduct causing the injury. Morgan v. Petroleum Prods. Equip. Co. , 92 A.3d 823, 828 (Pa.Super. 2014)

(citing Pocono Int'l Raceway, Inc. v. Pocono Produce, Inc. , 503 Pa. 80, 468 A.2d 468, 471 (1983) ). When applying a state limitations period, we use state tolling principles. Knopick v. Connelly , 639 F.3d 600, 606 (3d Cir.2011) ; Moyer v. United Dominion Indus., Inc. , 473 F.3d 532, 547 (3d Cir.2007).

The discovery rule tolls the running of the statute of limitations during the time that the plaintiff did not know or could not have known that he had been injured and the defendant caused the injury. Morgan , 92 A.3d at 828

. It is no excuse that the plaintiff simply did not know of the injury. The plaintiff has an obligation to exercise reasonable diligence to inform himself of the facts and circumstances giving rise to his cause of action and to initiate suit within the limitations period. Crouse v. Cyclops Indus. , 560 Pa. 394, 745 A.2d 606, 611 (2000) (citing Hayward v. Med. Ctr. of Beaver Cnty. , 530 Pa. 320, 608 A.2d 1040, 1042 (1992) ). The application of the discovery rule is a question of fact. Id.

(quoting White v. Owens

–

Corning Fiberglas

,

Corp. , 447 Pa.Super. 5, 668 A.2d 136, 144 (1995) ). “[O]nly where the facts are so clear that reasonable minds cannot differ may the commencement of the limitations period be determined as a matter of law.” Id. (citing Hayward , 608 A.2d at 1043 ). Thus, when Raucci discovered or should have discovered that the defendants breached the contract is for the jury to decide.

A federal claim accrues “when a plaintiff has a complete and present cause of action.” Petrella v. Metro – Goldwyn – Mayer, Inc. , ––– U.S. ––––, 134 S.Ct. 1962, 1969, 188 L.Ed.2d 979 (2014)

(quoting Bay Area Laundry & Dry Cleaning Pe

nsion Trust Fund v. Ferbar Corp. of Cal. , 522 U.S. 192, 201, 118 S.Ct. 542, 139 L.Ed.2d 553 (1997) ). The statute of limitations may be equitably tolled where the defendant has actively misled the plaintiff respecting the plaintiff's cause of action. Oshiver v. Levin, Fishbein, Sedran & Berman , 38 F.3d 1380, 1387 (3d Cir.1994) (citing Sch. Dist. of City of Allentown v. Marshall , 657 F.2d 16, 19–20 (3d Cir.1981) ). Equitable tolling is available in all types of cases, including contract, copyright and conversion. Gunn v. First Am. Fin. Corp. , 549 Fed.Appx. 79, 82 (3d Cir.2013) (contract); William A. Graham Co. v. Haughey , 568 F.3d 425, 436 (3d Cir.2009) (copyright); St. John's University, N.Y. v. Bolton , 757 F.Supp.2d 144, 187 (E.D.N.Y.2010) (contract, conversion, and unjust enrichment). Like the discovery rule, equitable tolling requires the plaintiff to exercise reasonable diligence to discover the injury. Oshiver , 38 F.3d at 1390. Whether the defendant concealed or withheld information, or provided false information creates an issue of fact that cannot be resolved at the motion to dismiss stage.

Here, Raucci's federal and state causes of action are not time-barred if the discovery rule or equitable tolling applies. Raucci alleges that he did not discover that the defendants were continuing to market, distribute and/or manufacture products he designed until 2014.¹³ In addition, he alleges that the defendants “lulled” him “into believing that no further royalties were owed and that defendants had ceased...