Durgom v. Janowiak

• Decision Date: 12 August 1999
• Docket Number: No. E022422,E022422
• Citation: 74 Cal.App.4th 178,87 Cal.Rptr.2d 619
• Court: California Court of Appeals Court of Appeals
• Parties: , 99 Cal. Daily Op. Serv. 6552, 1999 Daily Journal D.A.R. 8349 John A. DURGOM, Plaintiff and Appellant, v. David J. JANOWIAK, Defendant and Respondent.

74 Cal. App. 4th 178

87 Cal. Rptr. 2d 619

JOHN A. DURGOM, Plaintiff and Appellant,

v DAVID J. JANOWIAK, Defendant and Respondent.

No. E022422.

COURT OF APPEAL OF CALIFORNIA, FOURTH APPELLATE DISTRICT, DIVISION TWO

74 Cal. App. 4th 178

87 Cal. Rptr. 2d 619

August 12, 1999, Decided

APPEAL from the Superior Court of Riverside County. Super. Ct. No. 87813. Robert G. Taylor, Judge.

The judgment is reversed. Janowiak has asked that each party bear its own costs. Durgom has not opposed this request, and we find it to be in the interests of justice. (See Cal. Rules of Court, rule 26(a).) Accordingly, each party shall bear its own costs.

Mitchell, Silberberg & Knupp, Robert C. Welsh and Marc E. Mayer for Plaintiff and Appellant.

McFadden & Associates and Robert J. McFadden, Jr., for Defendant and Respondent.

Opinion by Richli, J., with McKinster, Acting P. J., and Ward, J., concurring.

RICHLI

[180]

RICHLI, J.

According to the complaint in this action, defendant David J. Janowiak has failed to make payments to plaintiff John A. Durgom pursuant to an assignment of royalties from the copyrighted song, Nature Boy. After the parties had entered into an oral settlement agreement, on the record in open court, Janowiak moved to dismiss the action for lack of subject matter jurisdiction. Janowiak asserted that, as a matter of federal law, the beginning of the renewal term had revested the copyright in the author and had cut off Durgom's alleged right to receive royalties. Janowiak urged that the presence of this issue in the case invoked exclusive federal copyright jurisdiction.

The trial court agreed. It therefore refused to enforce the settlement agreement, and it dismissed the case. In doing so, it erred. Federal case law--much of it handed down by the United States Supreme Court--makes it clear that federal jurisdiction cannot be based solely on a federal defense. This is true even where the parties agree that the federal defense is the only disputed issue to be resolved. State courts are fully competent to adjudicate state-law breach of contract claims, even where the underlying contract involves the ownership, assignment, or license of a copyright, much less the mere assignment of royalties from a copyrighted work. Thus, despite Janowiak's federal copyright law defense, the trial court had jurisdiction.

I. FACTUAL AND PROCEDURAL BACKGROUND

On March 1, 1996, Durgom filed a complaint against Janowiak. It alleged that, in 1947, Eden Ahbez composed the song, Nature Boy. Ahbez had assigned 12.5 percent of the royalties from Nature Boy, through a series of intermediate assignments, to Durgom. Thereafter, Ahbez had assigned Nature Boy itself, through a series of intermediate assignments, to Janowiak. Janowiak (or his predecessor in interest) had stopped paying the assigned [181] royalties to Durgom (or his predecessor in interest). The complaint asserted causes of action for breach of contract, money had and received, and unfair business practices ( Bus. & Prof. Code, § 17200 et seq.). n1

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n1 The unfair business practices claim additionally alleged that: the unpaid royalties had escheated to the state (see Code Civ. Proc., § 1520, subd. (a)); Janowiak had a practice of failing to pay over such escheated royalties to the state Controller (see Code Civ. Proc., § 1530); and this prevented Durgom, as well as others similarly situated, from claiming them (see Code Civ. Proc., § 1540).

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On May 1, 1996, Janowiak filed an answer. Among numerous affirmative defenses was "that if in fact any contract existed between decedent E[d]en Ahbez, which is the foundation or predecessor contract to Plaintiff's suit herein, such contract was canceled and annulled and made of no further force and effect between the parties thereto . . . ."

On June 13, 1997, the parties entered into a settlement agreement, orally, but on the record and in open court. It provided that Durgom would receive 12.5 percent of all future royalties.

On July 11, 1997, Janowiak filed a motion to dismiss for lack of subject matter jurisdiction. In it, he asserted Ahbez had transferred Nature Boy to a corporation in exchange for royalties. Accordingly, it was the corporation which had held the copyright during the 28-year original copyright term. Ahbez, however, had renewed the copyright in his own name. Accordingly, it was Janowiak's position that, under federal copyright law, at the beginning of the renewal term, all rights to Nature Boy had revested in Ahbez, and Durgom's right to royalties had been cut off. Janowiak argued that, as a result, state law was preempted, and the action was in exclusive federal copyright jurisdiction.

On August 8, 1997, Durgom filed a motion to enforce the settlement agreement. ( Code Civ. Proc., § 664.6.)

On October 3, 1997, the trial court heard argument on the motion to dismiss, then took it under submission. It continued the hearing on the motion to enforce the settlement agreement.

On December 11, 1997, the trial court granted the motion to dismiss. It ruled: "[T]his action is preempted by 17 U.S.C. [§] 301, et seq. . . . The federal court has exclusive jurisdiction under 28 U.S.C. Section 1338(a). It is true, that plaintiff here seeks to recover under a breach of contract theory, which action would not normally be preempted. However, the issue presented here is whether the subject contract can be enforced after the copyright holder has renewed the copyright under 17 U.S.C. [§] 304. Under . . . [182] section 304 such renewal revests all rights back in the holder. Such revesting would terminate any contract rights. Consequently, the attempt to enforce a contract in this case directly raises the federal question of whether such enforcement conflicts with the federal copyright law." It also ruled that, because it lacked jurisdiction, it could not enforce the settlement agreement.

On December 24, 1997, the trial court entered judgment dismissing the action. Durgom filed a timely notice of appeal.

II. ANALYSIS

(1a) Federal courts have exclusive jurisdiction "of any civil action arising under any Act of Congress relating to patents . . . [or] copyrights . . . ." (28 U.S.C. § 1338(a).) The meaning of "arising under" a patent or copyright statute for this purpose is the same as the meaning of "arising under" any other federal statute for purposes of general federal question jurisdiction (see 28 U.S.C. § 1331). ( Duncan v. Stuetzle (9th Cir. 1996) 76 F.3d 1480, 1485-1486; see also Christianson v. Colt Industries Operating Corp. (1988) 486 U.S. 800, 808-809 and fn. 2 [108 S. Ct. 2166, 2173-2174, 100 L. Ed. 2d 811].)

"Arising under" jurisdiction is measured by the "well-pleaded complaint" rule. Under this rule, " '. . . federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.' [Citations.]" ( Rivet v. Regions Bank of La. (1998) 522 U.S. 470, 475 [118 S. Ct. 921, 925, 139 L. Ed. 2d 912].) " '[A] right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action.' [Citation.]" ( Franchise Tax Bd. v. Laborers Vacation Trust (1983) 463 U.S. 1, 10-11 [103 S. Ct. 2841, 2847, 77 L. Ed. 2d 420], quoting Gully v. First Nat. Bank (1936) 299 U.S. 109, 112 [57 S. Ct. 96, 97, 81 L. Ed. 70].)

"The mere fact that a controversy involves a patent or copyright does not give rise to federal jurisdiction. [Citations.]" ( Muse v. Mellin (S.D.N.Y. 1962) 212 F. Supp. 315, 316, affd. (2d Cir. 1964) 339 F.2d 888.) "[T]he word 'copyright' is not so compelling as to invoke federal jurisdiction upon its mere mention. Congress left a considerable residue of power in the state courts to pass on 'copyright questions,' including questions involving constructions of the copyright statute[] [citations]." (Ibid.)

"For example, '[f]ederal courts have no jurisdiction under [S]ection 1338(a) over actions that depend for their resolution on state laws governing [183] contract enforcement or construction, or the ownership or transfer of property interests.' [Citation.]" ( Lukasewych v. Wells, Rich, Greene, Inc. (S.D.N.Y. 1990) 747 F. Supp. 1089, 1092, quoting 2 Goldstein, Copyright (1989) § 13.2.1.2 p. 394; accord, Borden v. Katzman (11th Cir. 1989) 881 F.2d 1035, 1038 ["Contract questions that depend upon common law or equitable principles belong in state court even if they involve copyrights."]; Saturday Evening Post Co. v. Rumbleseat Press, Inc. (7th Cir. 1987) 816 F.2d 1191, 1194 ["[A] dispute over the terms of a copyright license is not deemed to arise under the Copyright Act . . . ."]; Dolch v. United California Bank (9th Cir. 1983) 702 F.2d 178, 180 ["Contract questions that depend on common law or equitable principles belong in state court."].)

(2a) It is particularly relevant here that "[s]tate and not federal courts have jurisdiction in contract actions for nonpayment of royalties arising out of the exploitation of copyrighted works." (3 Nimmer on Copyright (1999) § 12.01[A][2], p. 12-18, and cases cited, fns. omitted.) In Golden West Melodies, Inc. v. Capitol Records, Inc. (1969) 274 Cal. App. 2d 713 , the court held an action for royalties due under a licensing agreement for the use of a copyrighted song lay within state, not federal jurisdiction. It explained: " 'In all such cases it is necessary to distinguish between the copyright and a contract of which the copyright is the subject matter. If the suit is one brought to enforce a right based upon a contract which relates to a copyrighted production, the suit is one which arises out of the contract and is not one arising under the copyright statute, and the federal courts are without jurisdiction. [Citations.]' " ( Id., at pp. 717-718, quoting Danks v. Gordon (2d Cir. 1921) 272 Fed. 821, 827.)

(1b) It is part and parcel of the well-pleaded complaint rule...