Robinson v. R & R Pub. Inc., Civil Action No. 95-00833.

• Decision Date: 26 August 1996
• Docket Number: Civil Action No. 95-00833.
• Court: U.S. District Court — District of Columbia
• Parties: Michele L. ROBINSON, Plaintiff, v. R & R PUBLISHING INC., and Joseph M. Rees, Defendants.

943 F.Supp. 18

Michele L. ROBINSON, Plaintiff, v. R & R PUBLISHING INC., and Joseph M. Rees, Defendants.

Civil Action No. 95-00833.

United States District Court, District of Columbia.

August 26, 1996.^*

Bruce A. McDonald of Dykema Gossett, P.L.L.C., Washington, DC, for Plaintiff.

Martin Lobel of Lobel, Novins & Lamont, Washington, DC, for Defendants.

MEMORANDUM OPINION

CHARLES R. RICHEY, District Judge.

INTRODUCTION

On July 9-10, 1996, the Court took testimony, accepted the submission of evidence, and heard argument from the parties in the above-captioned case. Based on the pleadings, the testimony and argument, the entire record herein, and the law applicable thereto, and for the reasons expressed below, the Court shall enter final judgment for the defendants and against the plaintiff in the above-captioned case as provided herein.

BACKGROUND

On May 3, 1995, the plaintiff, Michele L. Robinson, sued the defendants, R & R Publishing and Joseph M. Rees, alleging copyright infringement, unfair competition, false representation, fraud, breach of license, and common law unfair competition.¹ Robinson's allegations arise from her claim to ownership of a copyright in the work that is the subject of dispute in this case, entitled "Standards of Medical Care: The Comparative Guide to Medical Practice Guidelines and Outcomes Research" [hereinafter "Standards of Medical Care"]. The plaintiff seeks, among other things, a declaratory judgment that she owns the copyright to Standards of Medical Care and seeks an injunction against infringement of that copyright by the defendants. On May 24, 1995, the defendants filed an Answer, denying any wrongdoing, claiming ownership to the subject work, and asserting several counterclaims, including breach of fiduciary duty, copyright infringement,² federal unfair competition, false representation, fraud, and common law unfair competition. The following relevant facts have been stipulated to or are uncontested by the parties.

Robinson is a highly skilled health care writer, journalist, and editor. The concept of creating Standards of Medical Care was Robinson's idea and was an outgrowth of work for a prior employer that she had done in her capacity as editor-in-chief of a newsletter called "Report on Medical Guidelines and Outcomes Research." During the summer of 1991, Robinson meet with Rees, a recognized expert in the healthcare field, to discuss a joint effort to produce Standards of Medical Care.

Together, Robinson, Rees, and Sherry J. Saunders, incorporated R & R Publishing, Inc., for the purpose of publishing Standards of Medical Care. On September 27, 1991, the organizational meeting of R & R was held pursuant to a waiver of notice signed by Robinson. At the meeting, Robinson was elected a director and vice-president and Rees was elected a director and president. The Articles of Incorporation were approved by the District of Columbia on October 2, 1991.

On September 28, 1991, Rees and Saunders, who owned all of the stock in R & R, entered into a contract with Robinson, giving her a one year option to purchase half of the stock in the corporation for $2500. Robinson never exercised that option. In October of 1991, a bank account for the corporation was opened and Robinson was listed as a signatory on the account. However, Robinson never exercised that authority and never issued any check on behalf of the corporation.

Robinson's working relationship with the defendants during the relevant period of time existed solely for the purpose of creating, marketing, and selling Standards of Medical Care. Neither defendant ever had the right to assign any projects to Robinson other than her work on Standards of Medical Care. At all relevant times, Robinson had complete discretion over when and how long to work, provided that she complied with mutually agreed upon deadlines. Robinson was exclusively responsible for the decision to hire the individuals who assisted her in her work on Standards of Medical Care, including Pam Abbot and Gary Stephenson, both of whom were paid by R & R Publishing. The parties never executed a work-for-hire agreement, a written assignment, or any other document expressly transferring or assigning any interest or license in the copyright to Standards of Medical Care. During the time that Robinson was an officer and director of R & R, she received $48,875 as compensation for her work.

In April of 1992, Standards of Medical Care was first published by R & R, carrying on its front page a copyright notice in the name of "R & R Publishing, Inc." At all times from and after the date of its first publication, the work carried on its front page a copyright notice in the name of "R & R Publishing, Inc."

As 1992 drew to a close, the relationship between Robinson and Rees deteriorated. Robinson attempted unsuccessfully to negotiate with Rees over the terms and conditions of her continued involvement with R & R. On September 1, 1993, although not authorized to do so by the defendants, Robinson filed an application in her name with the United States Register of Copyrights for copyrights to Volume I of Standards of Medical Care. Robinson's revised applications were granted about one year later, as Copyright Registration Nos. TX 3-603-962, TX 3-804-048, and TX 3-804-047. On September 2, 1993, Robinson's attorney sent a letter to Rees, which stated: "This letter is formal notice that Ms. Robinson has decided to terminate her interest in R & R Publishing as both an Officer and Director of the corporation." On September 13, 1993, R & R submitted an application to the United States Register of Copyrights for registration of its copyright in and to Standards of Medical Care, which was granted in United States Copyright Registration No. TX 3-709-706.

Among other things, the plaintiff seeks a remedy for the alleged infringement of her copyright by the defendants subsequent to the time she resigned as an officer and director of the corporation. She seeks to enjoin the work's further publication by the defendants. Furthermore, she seeks declaratory judgment that the copyright is hers and seeks the cancellation of the registration of the work in R & R's name. The defendants believe that they are entitled to continue publishing Standards of Medical Care without compensating Robinson in any additional sums. They believe they have the exclusive and permanent right to the continuing stream of income generated by the sales of Standards of Medical Care into the indefinite future.

The defendant R & R claims it is entitled to judgment in its favor on the ground that the plaintiff breached her fiduciary duty as an officer and director by her claim of copyright ownership. The defendant Rees claims he is entitled to judgment on the ground that the plaintiff has failed to allege any facts that would justify holding Rees personally liable for any actions he took as an officer and director of R & R Publishing, Inc. In her Opposition, the plaintiff argues that the defendants' positions are not supported by the law.

At all times pertinent to the plaintiff's claims herein, she was an officer and director of the defendant corporation. The plaintiff incorporated the corporation, although she did not contribute to its initial financing. She had an opportunity to buy into the corporation, but declined to do so. She was paid by the corporation, and as an officer and director, she had a fiduciary obligation to provide to the corporation not only services, but her work product. The Court shall hold that the plaintiff violated this fiduciary duty by her actions and as more particularly hereinafter set forth.

DISCUSSION

I. THE PLAINTIFF USURPED A CORPORATE OPPORTUNITY WHEN SHE SOUGHT COPYRIGHT PROTECTION FOR STANDARDS OF MEDICAL CARE IN HER OWN NAME.

It is fundamental that officers and directors of a corporation occupy a fiduciary relationship to the corporation and its stockholders and must act in utmost good faith in managing corporate affairs. Mayflower Hotel Stockholders Protective Comm. v. Mayflower Hotel Corp., 173 F.2d 416, 418 (D.C.Cir.1949) (citations omitted). A corporate fiduciary's duty of loyalty to the corporation undergirds the "corporate opportunity doctrine," which, generally stated, provides that

if there is presented to a corporate officer or director a business opportunity which the corporation is financially able to undertake, is, from its nature, in the line of the corporation's business and is of practical advantage to it, is one in which the corporation has an interest or a reasonable expectancy, and, by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of [the] corporation, the law will not permit [the officer or director personally] to seize the opportunity.... And, if, in such circumstances, the interest of the corporation are betrayed, the corporation may elect to claim all of the benefits of the transaction for itself, and the law will impress a trust in favor of the corporation upon the property, interests, and...