Hunter Structural, P.A. v. Arp Eng'g, Inc.
| Decision Date | 01 February 2018 |
| Docket Number | DOCKET NO. 3:17-cv-00086 |
| Parties | HUNTER STRUCTURAL, P.A. Plaintiff, v. ARP ENGINEERING, INC., and DAVID SZABO, Defendants. |
| Court | U.S. District Court — Western District of North Carolina |
THIS MATTER is before the Court upon Defendant David Szabo's Motion to Dismiss (Doc. No. 14) and Defendant Arp Engineering, Inc.'s Motion for Judgment on the Pleadings (Doc. No. 15). The issue is now ripe before this Court.
Plaintiff Hunter Structural, P.A., ("Hunter Structural" or Plaintiff) is a structural engineering firm. The principal owner of the firm is H. Eugene Hunter. Hunter Structural creates engineering drawings to be used for construction projects, and they are typically created using software for computer-aided design ("CAD"). Over the course of many years, Hunter Structural has created a large library of CAD files ("the CAD Files") that consist of "completed drawings for prior projects and files that contain individual design details developed by Mr. Hunter for engineering elements that may be used in future drawings." (Compl., ¶ 11). The CAD Files were kept on a secure Carbonite system.
Defendant David Szabo ("Szabo") is a structural designer and unlicensed engineer who was hired by Hunter Structural to assist with the drafting of various engineering drawings. In order to perform his obligations to Hunter Structural, Szabo was given access to the CAD Files. Hunter Structural terminated Szabo's services in December 2014. Szabo shortly thereafter began working for a competing structural engineering firm, Defendant Arp Engineering, Inc. ("Arp Engineering").
Hunter Structural filed a Complaint on February 27, 2017, and an Amended Complaint on April 14, 2017. Hunter Structural alleges that Szabo unlawfully copied and removed portions of the CAD Files, that Szabo and Arp Engineering—through use of the CAD Files—violated a copyright that Hunter Structural registered for on certain drawings (the "Take 5 Drawings"), and that Szabo and Arp Engineering have continued to benefit from the use of the unlawfully obtained CAD Files. As a result, Hunter Structural alleged seven causes of action: (1) Copyright Infringement, (2) Misappropriation of Trade Secrets, (3) Computer Trespass (Szabo only), (4) Conversion, (5) Unfair Competition, (6) Unjust Enrichment, and (7) Unfair and Deceptive Trade Practices.
Between the two Motions filed by Defendants, every cause of action is challenged except for the computer trespass claim against Szabo.
The Defendants raise three separate grounds for dismissal in their Motions: motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), motion to dismiss for failure to state a claim under Rule 12(b)(6), and motion for judgment on the pleadings under Rule 12(c).
There are two ways that a defendant may assert lack of subject matter jurisdiction in a motion to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure: facially or factually. Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009). And different standards of review apply to the two scenarios. Id. Accordingly, the Fourth Circuit has held that a court mustfirst determine whether the defendant is alleging a facial challenge to the sufficiency of the jurisdictional allegations in the complaint, or a factual challenge to the jurisdictional allegations in the complaint. Id. "[W]hen a defendant asserts that the complaint fails to allege sufficient facts to support subject matter jurisdiction, the trial court must apply a standard patterned on Rule 12(b)(6) and assume the truthfulness of the facts alleged." Id. at 193. But, "when the defendant challenges the veracity of the facts underpinning subject matter jurisdiction, the trial court may go beyond the complaint, conduct evidentiary proceedings, and resolve the disputed jurisdictional facts." Id.
There is an exception to this rule. If the defendant makes a factual challenge to the complaint but "the jurisdictional facts are inextricably intertwined with those central to the merits, the court should resolve the relevant factual disputes only after appropriate discovery." Id. An issue is inextricably intertwined—and thus should not serve as the basis for dismissal for lack of subject matter jurisdiction—when "the contested basis for jurisdiction is also an element of the plaintiff's federal claim." Rivanna Trawlers Unlimited v. Thompson Trawlers, Inc., 840 F.2d 236, 239 (4th Cir. 1988) (citing Bell v. Hood, 327 U.S. 678, 682 (1946)). This holds "unless the jurisdictional allegations are clearly immaterial or wholly unsubstantial and frivolous." Kerns, 585 F.3d at 193.
When faced with a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must "accept as true all well-pleaded allegations and . . . view the complaint in a light most favorable to the plaintiff." Mylan Labs, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). The Court "assume[s] the[] veracity" of these factual allegations, and "determine[s] whether they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). However, the court "need not accept as true unwarranted inferences, unreasonableconclusions, or arguments." E. Shore Mkts., Inc. v. J.D. Assocs. LLP, 213 F.3d 175, 180 (4th Cir. 2000). Thus, to survive a motion to dismiss, the plaintiff must include within his complaint "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Finally, a motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure is governed by the same standard as motions brought under Rule 12(b)(6). Massey v. Ojaniit, 759 F.3d 343, 347 (4th Cir. 2014). "The sole distinction between the two motions is that a court ruling on a Rule 12(c) motion may consider the answer as well as the complaint." In re Stucco Litigation, 364 F. Supp. 2d 539, 541 (E.D.N.C. 2005).
Both Defendants assert a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction with respect to Hunter Structural's copyright infringement claim. Following the procedure set forth by the Fourth Circuit in Kerns, this Court must first determine whether the defendants assert a facial or a factual challenge to Hunter Structural's complaint. Szabo's Motion challenges the facial sufficiency of the complaint. (Szabo Mem. in Support, 5). Arp Engineering's Motion goes further, arguing that even if the complaint is facially sufficient, the evidence provided in the Defendants' attachments shows that subject matter jurisdiction does not exist as a factual matter. (Arp Engineering Mem. in Support, 5).
We begin with the allegation that Hunter Structural's complaint is facially insufficient to merit subject matter jurisdiction. Under 28 U.S.C. § 1331, this Court has subject matter jurisdiction over any claim arising under the laws of the United States, including a claim forCopyright Infringement under 17 U.S.C. § 501. Because only plaintiffs that have standing to sue present a valid case or controversy under Article III of the Constitution, standing is a fundamental component of a court's subject matter jurisdiction. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 102 (1998).
Only the legal or beneficial owner of an exclusive right under a copyright has standing to bring a copyright infringement claim. 17 U.S.C. § 501(b). Copyright protection subsists "in original works of authorship fixed in any tangible medium of expression." Id. § 102(a). Authorship thus requires originality and a means of fixing that original work in tangible form. Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 355 (1991). Generally, "the author is the party who actually creates the work, that is, the person who translates an idea into a fixed, tangible expression entitled to copyright protection." Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 737 (1989). A corporation is the author of works prepared by its employees in the scope of their employment, as well as commissioned works in certain categories that are created by independent contractors, so long as the contractor expressly agrees "that the work shall be considered a work made for hire." 17 U.S.C. §§ 101, 201(b). Thus, in order to have standing, a corporate plaintiff must allege an exclusive right of ownership over a work based on the work of its employees or an agreement with an independent contractor.
Applying the same standard as for a motion under Rule 12(b)(6), the Court finds that Hunter Structural's complaint sufficiently alleges ownership of a valid copyright. Hunter Structural alleges ownership over engineering drawings, which, as architectural works, qualify as "original works of authorship" that can receive copyright protection. See 17 U.S.C. § 102(a)(8). As factual proof of ownership, Hunter Structural alleges that its employees provided the source of originality and the means of fixation for the Drawings within the scope of their employment.Specifically, it alleges that Mr. Hunter, the owner of Hunter Structural, designed and developed the plans and controlled and supervised the drafting of the Drawings by Szabo.
Additionally, Hunter Structural alleges that it actually applied for and was granted a copyright for its Take 5 Drawings. Hunter Structural claims that the registration number is VA-2-031-055 and the effective date is February 9, 2017. While a plaintiff does not actually need a registered copyright in order to have standing, Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 166 (2010), the existence of a copyright registration serves as prima facie proof of the validity of the copyright, M. Kramer Manufacturing Co. v. Andrews, 783 F.2d 421, 434 (4th Cir. 1986). Thus, the existence of the registration is a...
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