BanxCorp v. Costco Wholesale Corp.

• Decision Date: 14 July 2010
• Citation: 723 F.Supp.2d 596
• Court: U.S. District Court — Southern District of New York

723 F.Supp.2d 596

BANXCORP d/b/a BanxQuote, and Norbert Mehl individually d/b/a BanxQuote, Plaintiffs, v. COSTCO WHOLESALE CORPORATION, Capital One Financial Corporation, Capital One Bank (USA), N.A., and Capital One, N.A., inclusive,

Defendants.

Case No. 09-CV-1783 (KMK).

United States District Court, S.D. New York.

July 14, 2010.

Nelson E. Canter, Esq., Canter Law Firm P.C., White Plains, NY, for Plaintiffs.

Nancy Jill Mertzel, Esq., Gibbons P.C. (N.Y.), New York, NY, for Defendants.

KENNETH M. KARAS, District Judge:

Plaintiffs bring this case alleging copyright infringement, hot news misappropriation, fraud, breach of contract, unfair competition, and unjust enrichment in connection with Defendants' use of Plaintiffs' BanxQuote National Average Money Market and CD rates. Defendants move to dismiss the case in its entirety. For the reasons given herein, Defendants' Motion to Dismiss is granted in part and denied in part.

I. Background

A. Factual Background

For the purposes of this Motion to Dismiss, the Court accepts the allegations in the Second Amended Complaint (“SAC”) as true. Plaintiffs Norbert Mehl (“Mehl”) and BanxCorp do business as BanxQuote. (SAC ¶¶ 1-2.) BanxQuote publishes “database compilations and market research performance ind[ices] known as BanxQuote National Average Money Market and CD rates” (“BanxQuote Indices”). (Id. ¶ 21.) Plaintiffs describe the BanxQuote Indices as systematic compilations of selected banking, mortgage, and loan data that “are frequently used as original benchmarks to measure the rates and performance of the U.S. banking and mortgage markets.” (Id. ¶¶ 33-34, 36.)

Plaintiffs allege that Defendant Costco Wholesale Corporation (“Costco”) entered into an agreement with Defendant Capital One Financial Corporation through its subsidiaries (collectively, “Capital One”) to provide a co-branded direct banking service that offered high yield savings accounts (“HYSAs”) and certificate of deposit accounts (“CDs”) to Costco's members. (Id. ¶¶ 19-20.) On January 28, 2004, Capital One and BanxCorp entered into a limited, non-transferable license agreement (the “License Agreement”) commencing on January 12, 2004 with automatic annual renewals. (Id. ¶ 89.) The License Agreement permitted Capital One to access and use, for limited purposes, the BanxQuote Indices and the data contained therein. (Id. ¶¶ 89-91.) Plaintiffs allege that at the time Capital One entered into this agreement, it was acting on behalf of Costco (without disclosure), and that Capital One breached the License Agreement by redistributing the BanxQuote Indices to Costco in order to benefit the co-branded banking services. (Id. ¶¶ 88, 93.) Plaintiffs allege that they would not have entered into the License Agreement had they known of Capital One's intentions. (Id. ¶ 95.) Finally, Plaintiffs allege that data from the BanxQuote Indices have been distributed by Capital One and Costco in “direct mail, print advertisements, newspaper advertisements, websites, and marketing presentations” from December 2003 to December 2008. (Id. ¶¶ 95-96, 98.)

B. Procedural Background

Plaintiffs, proceeding pro se, filed their Complaint on February 25, 2009, and filed an Amended Complaint on March 25, 2009. After retaining counsel, Plaintiffs filed the SAC on September 2, 2009.

Plaintiffs allege seven causes of action. The two federal causes of action are Count One, which alleges copyright infringement based upon Defendants' improper use of the BanxQuote Indices (id. ¶¶ 106-16), and Count Three which alleges violation of the Digital Millennium Copyright Act (“DMCA”), based on allegations that when Defendants copied the BanxQuote Indices they altered or removed the copyright management information BanxCorp had associated with the data, (id. ¶¶ 126-33). The remaining causes of action arise under New York law. Count Two alleges hot news misappropriation of the time-sensitive data contained in the BanxQuote Indices. (Id. ¶¶ 117-25.) Count Four alleges fraud based on allegations that Defendants materially misrepresented their intentions with respect to their use of the BanxQuote Indices pursuant to the License Agreement. (Id. ¶¶ 134-43.) Count Five alleges breach of contract against Capital One only, based on the alleged distribution to, and use of the BanxQuote Indices by, Costco in violation of the License Agreement. (Id. ¶¶ 144-51.) Count Six alleges unfair competition based on allegations that Defendants' use of the BanxQuote Indices gave Defendants an unfair competitive advantage both in terms of decreased web traffic at Plaintiffs' websites, and in terms of direct competition in providing HYSAs and CDs. (Id. ¶¶ 121, 152-57.) Finally, Count Seven alleges unjust enrichment based on allegations that Defendants received value due to their wrongful use of the BanxQuote Indices. (Id. ¶¶ 158-61.) Defendants' Motion to Dismiss was fully submitted as of December 10, 2009. The Court held oral argument on May 11, 2010.

II. Discussion

A. Standard of Review

“On a Rule 12(b)(6) motion to dismiss a complaint, the court must accept a plaintiff's factual allegations as true and draw all reasonable inferences in [the plaintiff's] favor.” Gonzalez v. Caballero, 572 F.Supp.2d 463, 466 (S.D.N.Y.2008); see also Ruotolo v. City of New York, 514 F.3d 184, 188 (2d Cir.2008) (“We review de novo a district court's dismissal of a complaint pursuant to Rule 12(b)(6), accepting all factual allegations in the complaint and drawing all reasonable inferences in the plaintiff's favor.” (internal quotation marks omitted)). “In adjudicating a Rule 12(b)(6) motion, a district court must confine its consideration to facts stated on the face of the complaint, in documents appended to the complaint or incorporated in the complaint by reference, and to matters of which judicial notice may be taken.” Leonard F. v. Isr. Disc. Bank of N.Y., 199 F.3d 99, 107 (2d Cir.1999) (internal quotation marks omitted). ¹

The Supreme Court has held that “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citations omitted) (second alteration in Twombly ). Instead, the Court has emphasized that “[f]actual allegations must be enough to raise a right to relief above the speculative level,” id., and that “once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint,” id. at 563, 127 S.Ct. 1955. A plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Id. at 570, 127 S.Ct. 1955. If Plaintiffs “have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed.” Id. “Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show [n]’-‘that the pleader is entitled to relief.’ ” Ashcroft v. Iqbal, ---U.S. ----, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009) (internal citation omitted) (quoting Fed.R.Civ.P. 8(a)(2)) (alteration in original).

B. Federal Law Causes of Action

Defendants argue that Counts One (copyright infringement) and Three (DMCA violation) fail to state a claim. (Mem. of Law in Supp. of Defs.' Mot. to Dismiss (“Defs.' Mem.”) 3; SAC ¶¶ 106-16, 126-33.)

1. Count One: Copyright Infringement

There is no disagreement as to the elements Plaintiffs must establish to state a claim for copyright infringement. (Defs.' Mem. 3; Pls.' Mem. of Law in Opp'n to Defs.' Mot. to Dismiss (“Pls.' Mem.”) 4.) “ ‘To prevail on a claim of copyright infringement, the plaintiff must demonstrate both (1) ownership of a valid copyright and (2) infringement of the copyright by the defendant.’ ” Cameron Indus., Inc. v. Caravan, Ltd., 676 F.Supp.2d 280, 283-84 (S.D.N.Y.2009) (quoting Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 109-10 (2d Cir.2001)); see also Porto v. Guirgis, 659 F.Supp.2d 597, 608 (S.D.N.Y.2009) (requiring “ ‘ownership of a valid copyright, and [ ] copying of constituent elements of the work that are original’ ” (quoting Williams v. Crichton, 84 F.3d 581, 587 (2d Cir.1996))); Lewinson v. Henry Holt & Co., 659 F.Supp.2d 547, 559 (S.D.N.Y.2009) (same) (quoting Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991)); R.F.M.A.S., Inc. v. Mimi So, 619 F.Supp.2d 39, 51 (S.D.N.Y.2009) (requiring ownership of a valid copyright and “ ‘unauthorized copying of the copyrighted work’ ” (quoting Jorgensen v. Epic/Sony Records, 351 F.3d 46, 51 (2d Cir.2003))). The second element is further broken down into two components: “[t]o establish infringement, the copyright owner must demonstrate that ‘(1) the defendant has actually copied the plaintiff's work; and (2) the copying is illegal because a substantial similarity exists between the defendant's work and the protect[a]ble elements of the plaintiff's.’ ” Eyal R.D. Corp. v. Jewelex N.Y., Ltd., 576 F.Supp.2d 626, 641 (S.D.N.Y.2008) (quoting Yurman Design, 262 F.3d at 110); see also Cameron Indus., 676 F.Supp.2d at 284 (same); Psihoyos v. Nat'l Geographic Soc'y, 409 F.Supp.2d 268, 273 (S.D.N.Y.2005) (same) (quoting Knitwaves, Inc. v. Lollytogs Ltd., 71 F.3d 996, 1002 (2d Cir.1995)); Maharishi Hardy Blechman Ltd. v. Abercrombie & Fitch Co., 292 F.Supp.2d 535, 553 (S.D.N.Y.2003) (same).

In this case, Defendants concede that Plaintiffs have pled actual copying, and do not contest that, if the works at issue are protectable, Pl...