Kraljevich v. Courser Athletics, Inc.

• Decision Date: 23 August 2022
• Docket Number: 21-cv-9168 (PKC)
• Parties: JOHN KRALJEVICH, Plaintiff, v. COURSER ATHLETICS, INC., GREGG SPIRO, MICHAEL PETRY and LAURIE SPIRO, Defendants.
• Court: U.S. District Court — Southern District of New York

JOHN KRALJEVICH, Plaintiff,
v.
COURSER ATHLETICS, INC., GREGG SPIRO, MICHAEL PETRY and LAURIE SPIRO, Defendants.

No. 21-cv-9168 (PKC)

United States District Court, S.D. New York

August 23, 2022

OPINION AND ORDER

P. KEVIN CASTEL UNITED STATES DISTRICT JUDGE.

Plaintiff John Kraljevich moves for the entry of default judgment against defendants Michael Petry and Laurie Spiro (collectively, the “Petrys”). Rule 55(b), Fed.R.Civ.P. (Doc 45.) The Petrys cross-move to vacate the Clerk's Certificate of Default and to dismiss the Complaint for insufficient service of process, improper venue and failure to state a claim. Rules 12(b)(3), (5) & (6), Fed.R.Civ.P. For reasons that will be explained, Kraljevich's motion for default judgment will be denied and the Petrys' motion to vacate the Certificates of Default will be granted. The Court concludes that service of process was proper. Because the Court concludes that the parties' forum selection clause is valid, enforceable and covers the existing dispute, the action will be transferred to the District of Massachusetts. It is not necessary for the Court to reach so much of the motion as seeks to dismiss the Complaint for failure to state a claim.

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BACKGROUND

The Complaint alleges that defendants Courser Athletics, Inc., Michael Petry, Gregg Spiro and Laurie Spiro are “willfully infringing Mr. Kraljevich's copyrighted works by manufacturing, importing, distributing and selling high-priced athletic sneakers that copy Mr. Kraljevich's shoe designs without his authorization” and have “fail[ed] to compensate Mr. Kraljevich for services that he provided.” (Doc 1 (“Compl't”) ¶¶ 1, 2.)

In particular, it alleges that Kraljevich and Michael Petry met in 2005 while working together for a third-party footwear brand and remained friends over the following years. (Compl't ¶ 13.) Around early 2018, Kraljevich approached Petry about co-founding a new luxury athletic footwear brand: “Courser.” (Id. ¶ 15.) Michael Petry served as Courser's Chief Executive Officer, Kraljevich served as the Chief Creative Officer, and Gregg Spiro later joined as Chief Financial Officer. (Id. ¶ 18.)

From 2018, Kraljevich, Petry and Spiro worked together for approximately one and a half years to build the Courser brand. (Id. ¶ 19.) Kraljevich was primarily responsible for the design, development and production of a pair of luxury sneakers to serve as Courser's initial product offering. (Id. ¶ 20.) In this role at Courser, Kraljevich alleges that he “authored numerous copyrightable images of shoes, including digital drawings of the top, bottom, and sides of shoes, and photographs of prototypes at various angles[.]”^[1] (Id. ¶ 21.) In April 2020, Kraljevich registered two copyrights related to the Shoe Design: (1) registration number VAu001397981, and (2) registration number VAu001396841. Kraljevich alleges that he is the author of the Shoe Design and that the Petrys are not co-authors of the Shoe Design and did not provide any independently copyrightable contributions. (Id. ¶¶ 23-25.)

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The Complaint alleges that at the time Kraljevich authored the Shoe Design, “he was not an employee of Courser” and “there was no signed work made for hire agreement with any of the Defendants.” (Id. ¶¶ 30, 31.) Rather, “Mr. Petry and Mr. Spiro represented to Mr. Kraljevich that he was a shareholder in the COURSER brand and Mr. Kraljevich reasonably considered himself partners with Mr. Petry in co-founding the COURSER brand.” (Id. ¶ 34.) Nevertheless, Kraljevich never received any share certificates in Courser, never received tax documents from Courser identifying him as a shareholder, never entered into a formal partnership or shareholder's agreement with respect to his affiliation with Courser, and never “received any financial renumeration from Defendants for his authoring of the Shoe Design.” (Id. ¶¶ 35-36.)

In July 2019, Kraljevich requested that Courser identify him as an employee. (Id. ¶ 37.) On July 29, 2019, Kraljevich executed an employment agreement with Courser, with Spiro signing the employment agreement on behalf of the company (the “Employment Agreement”, Doc 41, Ex. D). (Id. ¶ 39.) Among other things, the Employment Agreement stated that Kraljevich would receive an annual salary of $180,000, paid twice per month, and that all copyrightable works Kraljevich conceived as an employee of Courser would be considered “works made for hire.” (Id. ¶ 40.) Kraljevich alleges that he conceived of the Shoe Design prior to entering into the Employment Agreement, and therefore the Shoe Design is not a work made for hire. (Id. ¶ 43.)

Kraljevich alleges that around November or December 2019, Spiro and the Petrys began excluding Kraljevich from Courser's corporate activities during the same time that Courser was in the early stages of launching the sneaker developed based on the Shoe Design. (Id. ¶¶ 45-48.) On July 8, 2020, Kraljevich sent the defendants a letter demanding that they

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cease and desist from exploiting his intellectual property and that they pay him for work performed but for which he was not compensated. (Id. ¶ 49.) The parties attempted to mediate these issues in October 2020, but the dispute was not resolved. (Id. ¶¶ 50-51.) In December 2020, Kraljevich alleges that Courser began selling sneakers on its website that were based on the Shoe Design and therefore infringed upon Kraljevich's copyrights. (Id. ¶¶ 52-59.) On November 5, 2021, Kraljevich filed the Complaint in this action.

Kraljevich filed the Complaint against Courser Athletics, Inc., Michael Petry, Gregg Spiro and Laurie Petry. Defendants Courser and Gregg Spiro advised the Court through counsel that a settlement in principle had been reached between Courser, Spiro and Kraljevich, and on February 4, 2022, the claims against Courser and Gregg Spiro were dismissed.^[2] (Docs 25 & 33.) Thus, the instant action proceeds against the Petrys only.

Kraljevich asserts vicarious and contributory copyright claims against the Petrys (Counts II and III), as well as a breach of an implied contract relating to his employment (Count V).

DISCUSSION

Kraljevich moves for default judgment against the Petrys. The Petrys, in turn, move to vacate the Certificates of Default and to dismiss the complaint for insufficient service of process, improper venue and failure to state a claim.

The Court declines to enter a default judgment and vacates the certificates of default. It concludes that service of process was proper and, while venue is also proper, it will

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enforce the forum selection clause that underlies the venue motion and transfer the action to the District of Massachusetts. It is not necessary for the Court to address whether the Complaint fails to state a claim for relief.

I. The Petrys' Rule 55(c) motion.

The Court will first address the Petrys' motion to vacate the Certificates of Default entered against them pursuant to Rule 55(c). For the following reasons, the Petrys' Rule 55(c) motion is granted.

The Petrys were purportedly served with the summons and complaint on December 4, 2021 (Docs 21 & 22) and failed to timely appear to defend against Kraljevich's claims. On February 3, 2022, Kraljevich moved for a Clerk's Certificate of Default against the Petrys, and the Clerk's Certificate of Default was entered that same day. (Docs 30 & 32.) On February 28, 2022, the initial pre-trial conference was held, and after the initial pre-trial conference attorneys filed notices of appearance on...