In re McGraw-Hill Global Education Holdings LLC, 112118 FED3, 17-2826

Docket Nº:17-2826, 17-3444
Opinion Judge:SMITH, CHIEF JUDGE.
Party Name:In re: MCGRAW-HILL GLOBAL EDUCATION HOLDINGS LLC; MCGRAW-HILL SCHOOL EDUCATION HOLDINGS LLC, Petitioners In re: BOB KRIST, Petitioner
Attorney:Christopher P. Beall Michael Beylkin Fox Rothschild Beth L. Weisser [ARGUED] Counsel for McGraw-Hill Global Education Holdings LLC and McGraw-Hill School Education Holdings LLC Gregory Albright Harmon Seidman Bruss & Kerr Counsel for Bob Krist Maurice Harmon [ARGUED] Harmon & Seidman Counsel for ...
Judge Panel:Before: SMITH, Chief Judge, HARDIMAN, and ROTH, Circuit Judges. ROTH, Circuit Judge, Dissenting in Part and Concurring in Part
Case Date:November 21, 2018
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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In re: MCGRAW-HILL GLOBAL EDUCATION HOLDINGS LLC; MCGRAW-HILL SCHOOL EDUCATION HOLDINGS LLC, Petitioners

In re: BOB KRIST, Petitioner

Nos. 17-2826, 17-3444

United States Court of Appeals, Third Circuit

November 21, 2018

Argued March 21, 2018

On a Petition for Writ of Mandamus from the United States District Court for the Eastern District of Pennsylvania Related to District Court Nos. 2-17-cv-01818 District Judge: The Honorable Wendy Beetlestone

On a Petition for Writ of Mandamus from the United States District Court for the Eastern District of Pennsylvania Related to District Court No. 2-16-cv-06248 District Judge: The Honorable Cynthia M. Rufe

Christopher P. Beall Michael Beylkin Fox Rothschild Beth L. Weisser [ARGUED] Counsel for McGraw-Hill Global Education Holdings LLC and McGraw-Hill School Education Holdings LLC

Gregory Albright Harmon Seidman Bruss & Kerr Counsel for Bob Krist

Maurice Harmon [ARGUED] Harmon & Seidman Counsel for Ed Kashi and Bob Krist

Before: SMITH, Chief Judge, HARDIMAN, and ROTH, Circuit Judges.

OPINION OF THE COURT

SMITH, CHIEF JUDGE.

These consolidated mandamus petitions require us to decide whether two professional photographers bringing separate copyright infringement actions are bound by a forum selection clause in contracts they did not sign. We conclude that the photographers are not bound because they are not intended beneficiaries of the agreements, nor are they closely related parties. Our conclusion means that one District Court got it right, and the other got it wrong. But mandamus is an extraordinary remedy. Because the erring District Court's mistakes were not clear or indisputable, we decline to issue the writ.

I. Background

Ed Kashi and Bob Krist are professional photographers. Kashi resides in Montclair, New Jersey, while Krist resides in New Hope, Pennsylvania. To market their photographs, Kashi and Krist entered into representation agreements with Corbis Corporation, a stock photography agency. The agreements provided Corbis authority to sub-license the photographers' works to third parties on a non-exclusive, fixed-duration basis. In exchange, Kashi and Krist received a percentage of the fees negotiated by Corbis. The fees were reported to the photographers in periodic royalty statements. The royalty statements listed each photograph licensed and the fees collected, but did not identify the product in which the photograph would be used or specify the scope of the license. In addition to the royalty statements, the photographers had the right to request an audit once a year of Corbis' records with respect to their images.

The legal terms of the representation agreements were robust. Exemplar agreements in the record1 include assignment of rights to recover, as well as forum selection clauses. Paragraph 6, titled "Protection of Accepted Images," reads:

Corbis, in its sole discretion and without obligation to do so, shall have full and complete authority to make and settle claims or to institute proceedings in Corbis' or your name but at Corbis' expense to recover damages for Accepted Images lost or damaged by customers or other parties and for the unauthorized use of Accepted Images. You shall provide reasonable assistance in Corbis' efforts in connection with such claims or proceedings. Any recovery, after payment of all costs and expenses including outside attorneys' fees, shall be treated as Revenue and you shall receive the appropriate royalty, or 100% in the case of lost/damaged images. Following your notification, if Corbis declines to bring such a claim within sixty (60) days, we shall notify you, and you may bring actions in your own name at your own expense and retain all recoveries.

Krist App'x 132 (emphasis added). A forum selection clause in paragraph 12.3, titled "Law," reads: This Agreement shall be governed by the laws of the State of New York, irrespective of its conflict of law rules. In any action arising out of this Agreement, you consent to personal jurisdiction and the exclusive venue of the state and federal courts sitting in New York City, New York.

MHE App'x 308, 320, 332, 354; Krist App'x 133.2

Acting upon its authority under the representation agreements, Corbis sub-licensed Kashi and Krist's photographs to McGraw-Hill Global Education Holdings LLC and McGraw-Hill School Education Holdings LLC (collectively "McGraw-Hill" or "MHE"), publishers of educational materials for K-12, college, and post-graduate students. Corbis utilized a two-step process in sub-licensing photographs to McGraw-Hill. First, Corbis negotiated a series of master agreements known as "Preferred Pricing Agreements" (PPAs), which set forth volume-based pricing and other terms. Second, Corbis issued invoices for all of McGraw-Hill's licensure purchases. The invoices constituted McGraw-Hill's license to use each image. They detailed the scope of the license, including limitations "by publication, number of copies, distribution area, image size, language, duration and/or media (print or electronic)." MHE App'x 165. The invoices also listed the price to be paid by McGraw-Hill for each image, and included the name of the photographer responsible for the work.

Each invoice incorporated by reference Corbis' standard "Terms and Conditions," which governed the transaction alongside the terms set forth in the PPAs. Both the Terms and Conditions and the PPAs included mandatory, exclusive forum selection clauses, with nearly identical language. Titled "Choice of Law / Jurisdiction / Attorneys' Fees," the clause reads in part: Any dispute regarding this Agreement shall be governed by the laws of the State of New York, and by Titles 15, 17 and 35 of the U.S.C., as amended, and the parties agree to accept the exclusive jurisdiction of the state and federal courts located in New York, New York, regardless of conflicts of laws.

MHE App'x 284 (2014 PPA); cf. id. at 237 (Terms and Conditions revised Nov. 19, 2001). The only material difference between the forum selection clauses in the PPAs and in the Terms and Conditions is that the PPAs specify "New York, New York" as the forum, id. at 284, while the Terms and Conditions specify "New York, USA," id. at 237.3

In 2016 and 2017, respectively, Krist and Kashi each brought a copyright action against McGraw-Hill in the Eastern District of Pennsylvania. Krist and Kashi both allege that McGraw-Hill used their photographs beyond the terms of the Corbis licensure agreements, in violation of federal copyright law. The photographers allege a range of ways in which their photographs were used without permission, including exceeding the allowed number of publications printed, the geographic distribution area, the type of medium, and the time period for publication. In each proceeding, McGraw-Hill moved to transfer venue under 28 U.S.C. § 1404(a). It argued that the disputes implicate the Corbis-McGraw-Hill agreements, and that per the terms of those agreements, the proper venue was the United States District Court for the Southern District of New York.

The Honorable Wendy Beetlestone, presiding over the Kashi action, denied the transfer motion. Judge Beetlestone reasoned that because Kashi's claims are based purely on copyright law, the action is not a "dispute regarding th[e] Agreement[s]," and thus not subject to the forum selection clauses contained in the Corbis-McGraw-Hill agreements. MHE App'x 5. Judge Beetlestone further concluded that, absent an applicable forum selection clause, McGraw-Hill had not met its burden under § 1404(a) to warrant a transfer.

The Honorable Legrome Davis, considering a parallel motion in the Krist action, reached the opposite conclusion. Judge Davis determined that the dispute is a dispute regarding the agreements, because the copyright claims depend upon the interpretation of the Corbis- McGraw-Hill agreements. Judge Davis held that despite Krist's status as a non-signatory, he was subject to the forum selection clause as an intended third-party beneficiary. Judge Davis also concluded that it was foreseeable that Krist would be bound under the Corbis forum selection clause. In light of those findings, Judge Davis granted the § 1404(a) transfer. 4

McGraw-Hill proceeded to file a petition for a writ of mandamus, asking this Court to direct a transfer of the Kashi action. Krist also petitioned for a writ of mandamus, doing so after his motion for reconsideration was denied. Krist asks this Court to direct a vacatur of the transfer order. The petitions were consolidated and referred to this panel. They present a range of doctrinal issues bearing on the ultimate question: whether either District Court erred in such a manner that mandamus is warranted. Numerous other actions implicating the Corbis forum selection clause have been adjudicated in the Eastern...

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