Gerig v. Krause Publications, Inc., 98-1043-JTM.

• Citation: 58 F.Supp.2d 1261
• Decision Date: 15 July 1999
• Docket Number: No. 98-1043-JTM.,98-1043-JTM.
• Parties: Steven W. GERIG, Plaintiff, v. KRAUSE PUBLICATIONS, INC., a Wisconsin corporation, Defendant.
• Court: U.S. District Court — District of Kansas

Page 1261

58 F.Supp.2d 1261

Steven W. GERIG, Plaintiff, v. KRAUSE PUBLICATIONS, INC., a Wisconsin corporation, Defendant.

No. 98-1043-JTM.

United States District Court, D. Kansas.

July 15, 1999.

Robert W. Coykendall, Susan R. Schrag, Morris, Laing, Evans, Brock & Kennedy, Chtd., Wichita, KS, for Plaintiff.

Jack Focht, Foulston & Siefkin L.L.P., Wichita, KS, Andrew Jackson Gray, IV, Simor L. Moskowitz, Jacobson, Price, Holman & Stern, PLLC, Washington, DC, for Defendant.

MEMORANDUM ORDER

MARTEN, District Judge.

Currently pending before the court in this action for breach of contract and copyright infringement action is the motion to dismiss of defendant Krause Publications. As an alternative to dismissal, Krause seeks to strike the plaintiff Steven Gerig's claims for statutory damages and attorney's fees. In its motion, Krause claims Gerig's amended complaint should be dismissed for two reasons: (1) an earlier filed action pending in Wisconsin captioned Krause Publications, Inc., v. Steve W. Gerig, Case No. 98-C-1218 (E/D.Wis.) takes precedence over this action; and (2) Gerig's claim does not arise under the Federal Copyright Act, 17 U.S.C. § 101 et seq. and diversity jurisdiction is lacking because the amount in controversy does not exceed $75,000. Even if the court were to have subject matter jurisdiction over Gerig's claims, Krause argues, Gerig's request for statutory damages and attorney's fees should be dismissed because statutory damages and attorney's fees are not available for alleged infringing acts predating registration of the claimed works.

I. Facts

During the period of 1991-1994, Krause hired Gerig on approximately 15 occasions to take photographs of home decorating styles (the "Images"). Krause paid Gerig an "assignment" fee for all of the photographs taken on each occasion. Krause subsequently included some of the photographs in various issues of Collector's Mart Magazine. On October 8, 1997, Krause published a book titled, Decorating With Collectibles (the "Book"), which Gerig alleges included approximately 70 photographs taken by him during the photography sessions. Gerig's amended complaint arises out of Krause's alleged use of the Images in the Book.

II. Procedural History

On February 9, 1998, Gerig filed a complaint in this court against Krause alleging copyright infringement and breach of contract. On April 8, 1998, Krause filed a motion to dismiss, noting that Gerig had not pleaded or obtained registration of the works at issue with the Copyright Office, a jurisdictional prerequisite to the filing of a copyright infringement action in federal court. It further argued diversity jurisdiction did not exist on Gerig's contract claim because he did not meet the amount in controversy requirement. It is undisputed that none of the works Gerig alleged had been infringed had been registered with the Copyright Office as of February 9, 1998.

In November of 1998, at Gerig's request, the parties stipulated to the dismissal of this action. According to Krause's counsel, there were no preconditions or other "strings" tied to Gerig's request. On November 18, 1998, Krause's counsel signed the stipulation prepared by Gerig's counsel and returned it to her for filing with the court. On December 16, 1998, assuming this case had been dismissed pursuant to the stipulation, Krause filed a declaratory judgment action in the U.S. District Court for the Eastern District of Wisconsin, seeking a declaratory judgment that, under the Copyright Act, it is not liable to Gerig as a result of the use of Gerig's Images in the Book. That action is still pending, and Krause claims the Wisconsin court has subject matter jurisdiction under the Declaratory Judgment Act, 28 U.S.C. §§ 2201 et seq.

Gerig's counsel never filed the stipulation of dismissal with this court, which Krause claims is a breach of the parties' agreement. On January 12, 1999, this court granted Krause's motion to dismiss this action for lack of subject matter jurisdiction, noting that Gerig could later file a "new action" when a jurisdictional basis had been established. In doing so, the court did not note the breach of contract claim. On March 4, 1999, after he obtained the requisite registrations, Gerig filed an amended complaint in this court. On March 17, 1999, the court set aside its January 12, 1999 order and reopened the case.

III. Subject Matter Jurisdiction

A. The Contract Claim — Diversity Jurisdiction

At the time Gerig filed this case, his copyright claim did not provide the basis for subject matter jurisdiction because he had not yet received the proper registrations. See, e.g., M.G.B. Homes v. Ameron Homes, 903 F.2d 1486, 1488-89 (11th Cir.1990) (Trial court properly dismissed the entire claim without prejudice to file a new complaint once the copyright registration was obtained.); Boyle v. Stephens, Inc., No. 97Civ.1351(SAS), 1997 WL 529006, at *3 (S.D.N.Y. Aug. 26, 1997) (finding no viable copyright infringement claim for plaintiff whose registration was pending, but not yet completed); Dielsi v. Falk, 916 F.Supp. 985, 994 (C.D.Cal.1996) (dismissing plaintiff's infringement claims without prejudice — "Plaintiff's failure to plead that he has applied for a copyright registration deprives this court of subject matter jurisdiction over his copyright claim."); International Trade Management v. United States, 553 F.Supp. 402, 403 (Cl.Ct.1982) (dismissing the action until the Copyright Office permitted or denied plaintiff's copyright). Therefore, Gerig's contract claim must provide the basis for subject matter jurisdiction. When a contract claim provides the basis for subject matter jurisdiction in the federal courts, jurisdiction is based on diversity of citizenship.

The diversity statute, 28 U.S.C. § 1332(a)(1), provides: "The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between ... citizens of different states." This case is between citizens of different states — Gerig is a Kansas resident, and Krause is a business organized under the laws of Wisconsin and has its principal place of business in Iola, Wisconsin. Therefore, the sole question that remains is whether the amount in controversy exceeds $75,000.

For purposes of federal jurisdiction, the determination of the value of the matter in controversy is a federal question to be decided under federal standards. Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 352, 81 S.Ct. 1570, 6 L.Ed.2d 890 (1961). However, federal courts must "look to state law to determine the nature and extent of the right to be enforced in a diversity case." Id. at 352-53, 81 S.Ct. 1570. "The general federal rule has long been to decide what the amount in controversy is from the complaint itself, unless it appears or is in some way shown that the amount stated in the complaint is not claimed `in good faith.'" Id. at 353, 81 S.Ct. 1570 (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288, 58 S.Ct. 586, 82 L.Ed. 845 (1938)); see also Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.), cert. denied, 516 U.S. 863, 116 S.Ct. 174, 133 L.Ed.2d 114 (1995) ("The amount in controversy is ordinarily determined by the allegations of the complaint.") In other words, when deciding whether the amount in controversy is met, "the sum claimed by the plaintiff controls if the claim is apparently made in good faith." St. Paul Mercury Indem. Co., 303 U.S. at 288, 58 S.Ct. 586 (footnote omitted); see also Gibson v. Jeffers, 478 F.2d 216, 220 (10th Cir.1973) ("The test to determine amount in controversy is not the sum ultimately found to be due, but the sum demanded in good faith.") Allegations in the complaint need not be specific, but the plaintiff must allege sufficient facts to convince the court that "recoverable damages will bear a reasonable relation to the minimum jurisdictional floor." Gibson, 478 F.2d at 221. "It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal." St. Paul Mercury Indem. Co., 303 U.S. at 289, 58 S.Ct. 586.

Generally speaking, the judicially established legal-certainty test makes it very difficult for the defendant to secure a dismissal of a case on the ground that it does not appear to satisfy the statutory jurisdictional amount requirement. Only three situations clearly meet the legal certainty standard for purposes of defeating the court's subject matter jurisdiction: 1) when the terms of a contract limit the plaintiff's possible recovery; 2) when a specific rule of substantive law or measure of damages limits the amount of money recoverable by the plaintiff; and 3) when independent facts show that the amount of damages was claimed by the plaintiff merely to obtain federal court jurisdiction.

14B Charles Alan Wright et al., Federal Practice and Procedure; Jurisdiction § 3702, at 97-101 (3d ed.1998) (footnotes omitted). If the jurisdictional amount is challenged, the burden of proving jurisdiction falls on the party asserting it. Gibson, 478 F.2d at 221.

"[W]here a litigant has a right, based on contract, statute, or other legal authority, to an award of attorney's fees if he prevails in the litigation, a reasonable estimate of those fees may be included in determining whether the jurisdiction minimum is satisfied." Sarnoff v. American Home Prod. Corp., 798 F.2d 1075, 1078 (7th Cir.1986); see also Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1340 (10th Cir.1998) ("[A] reasonable attorney's fee alone, when added to the $41,028.51, would push the amount of plaintiff's claim in Count III above $50,000, without consideration of the pre-judgment interest or other costs and expenses sought"); Conrad Assocs. v. Hartford Accident & Indem. Co., 994 F.Supp. 1196, 1198 (N.D.Cal.1998) ("The amount in controversy includes claims for general and special damages (excluding costs and...