Shirokov v. Dunlap, Grubb & Weaver, PLLC

• Decision Date: 27 March 2012
• Docket Number: CIVIL ACTION NO. 10-12043-GAO
• Parties: DMITRIY SHIROKOV, on behalf of himself and all other similarly situated, Plaintiff, v. DUNLAP, GRUBB & WEAVER, PLLC, et al., Defendants.
• Court: U.S. District Court — District of Massachusetts

DMITRIY SHIROKOV, on behalf of himself and all other similarly situated, Plaintiff,
v.
DUNLAP, GRUBB & WEAVER, PLLC, et al., Defendants.

CIVIL ACTION NO. 10-12043-GAO

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

March 1, 2012
Dated: March 27, 2012

ORDER

O'TOOLE, D.J.

After careful review of the magistrate judge's thorough and meticulous Report and Recommendation (dkt. no. 79), the parties' respective objections thereto, and other relevant pleadings and submissions, including particularly the original motion papers, I ADOPT the Report and Recommendation without change. Accordingly, for the reasons set forth in the Report, the following orders are made:

1. The motion of the defendant GuardaLey, Limited, to dismiss the Second Amended Complaint as to it is GRANTED.

2. The motions to dismiss the Second Amended Complaint of the defendants Dunlap, Grubb & Weaver PLLC, United States Copyright Group, Thomas Dunlap, and Nicholas Kurtz (dkt. no. 28) and Achte/Neunte Boll Kino Beteiligungs GmbH & Co. KG (dkt. no. 46) are

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GRANTED as to Counts 4, 6, 7, 9, 10, 12, 14-17, and 19, but are otherwise DENIED, provided, however, that Count 11 stands only as a claim for declaratory judgment and not a claim for damages.

3. The motion for sanctions (dkt. no.30) is DENIED.

It is SO ORDERED.

George A. O'Toole, Jr.
United States District Judge

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DMITRI Y SHIROKOV, on behalf of himself and all others similarly situated, Plaintiff,
v.
DUNLAP, GRUBB & WEAVER PLLC, et al., Defendants.

Civil Action No. 10-12043-GAO

REPORT AND RECOMMENDATION ON DEFENDANTS' MOTIONS TO DISMISS THE SECOND AMENDED COMPLAINT [Docket Nos. 28, 42, and 46]

Boal, M.J.

In this proposed class action, Plaintiff Dmitriy Shirokov ("Shirokov") alleges that the defendants defrauded him and thousands of similarly situated individuals. He alleges that the defendants entered into a scheme to profit from copyright infringement allegations through fraud and extortion, which caused members of the class to make millions of dollars in excess settlement payments to the defendants. According to Shirokov, with the help of defendants GuardaLey, Limited ("GuardaLey") and the United States Copyright Group ("USCG"), defendants Thomas Dunlap ("Dunlap"), Nicholas Kurtz ("Kurtz") and law firm Dunlap, Grubb & Weaver PLLC ("DGW"), misrepresented defendant Achte/Neunte Boll Kino Beteiligungs Gmbh & Co KG's ("Achte") rights in the movie Far Cry to the United States Copyright Office (the "Copyright Office"), federal courts and class members. In summary, Shirokov alleges that the defendants told him and class members that Achte was entitled to statutory damages and

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attorneys' fees for Shirokov and others' alleged copyright infringement, knowing that Achte was not entitled to those remedies.

All of the defendants have moved to dismiss the Second Amended Complaint. For the following reasons, this Court recommends that the District Judge assigned to this case GRANT the motions in part and DENY them in part.

I. PROCEDURAL HISTORY

Shirokov filed his original complaint on November 24, 2010. (Docket No. 1). In response, the Dunlap Defendants filed a motion to dismiss the complaint and a motion for sanctions under Rule 11 of the Federal Rules of Civil Procedure. (Docket Nos. 4, 6).

On February 8,2011, Shirokov filed a First Amended Complaint. (Docket No. 10). The Dunlap Defendants filed renewed motions to dismiss and for sanctions under Rule 11 on February 22, 2011. (Docket Nos. 15,17).

On March 9,2011, the District Court granted Shirokov's motion to file a Second Amended Complaint and Shirokov Filed such complaint on March 18, 2011. (Docket Nos. 25 and 26). All defendants have moved to dismiss the Second Amended Complaint. (Docket Nos. 28, 42, 46). The Dunlap Defendants have also filed a renewed motion for sanctions under Rule 11. (Docket No. 30). On May 13 and 24, 2011, the District Court referred the pending motions to this Court for a report and recommendation.

The pending motions have been the subject of extensive briefing by the parties. (See Docket Nos. 29, 36,44, 48, 51, 55, 56, 64-66, 71 -73, 77). The Court heard oral argument on February 15, 2012.

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II. FACTS¹

A. The Defendants

Defendant DGW is a Virginia law firm with offices in Leesburg, Virginia, Washington, D.C., and Naples, Florida. (Second Amended Complaint ("Complaint"), 134). DGW holds itself out as having special expertise in intellectual property law, and in copyright law specifically. (Complaint, ¶ 58). Defendant Dunlap is an attorney and the managing partner at DGW and USCG. (Complaint, ¶ 36). Defendant Kurtz is an attorney at DGW. (Complaint, ¶ 37).

Defendant USCG is a Virginia corporation that acts as a registered alias for a partnership between DGW and GuardaLey. (Complaint, ¶ 35). USCG also acts as a registered alias of several corporations with ties to DGW. (Id.).

GuardaLey, a German company with offices in the United Kingdom, is a partner with DGW in managing USCG. (Complaint, ¶ 38). Defendant Achte is a German limited partnership in the business of motion picture creation and distribution. (Complaint, ¶ 39).

B. The Alleged "Copyright Scheme"

Shirokov alleges that DGW, in connection with USCG, Dunlap, Kurtz, GuardaLey, and Achte, has developed a lucrative trade "in monetizing copyright infringement allegations." (Complaint, ¶ 2). GuardaLey monitors and records online instances of alleged copyright infringement of motion pictures. (Complaint, ¶ 4). USCG provides information of the alleged infringement to film industry clients, but cautions them that civil prosecution of copyright claims is not "practical," in light of the financial status of individual infringers. (Id.).

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On the basis of GuardaLey's records, the Dunlap Defendants typically file a single civil complaint in the United States District Court for the District of Columbia against hundreds of John Does from all over the country, regardless of the jurisdiction where the alleged infringements took place. (Complaint, ¶ 6). The complaint alleges mass online infringement and petition the court to issue subpoenas to Internet Service Providers ("ISPs"), seeking contact information for the alleged infringers. (Id.).

The Dunlap Defendants use the information provided by the ISPs to send to the alleged infringers virtually identical "litigation settlement demand" letters. (Complaint, ¶ 7). The letters demand $1,500 from each recipient, increasing to $2,500 if not sent promptly, under deceptive threats of impending litigation. (Id.). The Dunlap Defendants and their clients, however, have no intention of litigating these claims to resolution, and indeed do not have the capacity to do so, should the alleged infringers not pay the amount demanded. (Complaint, ¶ 8).

Shirokov alleges that he and the class members received these settlement demand letters from the Dunlap Defendants on behalf of Achte. (Complaint, ¶¶ 158-161 and Exhibit N thereto). Shirokov alleges that the defendants acted together in an effort to coerce him and other class members to pay the amounts demanded, even though the Dunlap Defendants knew that Achte could never prevail on its claims for statutory damages. (Complaint, ¶¶ 15, 24, 176, 178-182).

C. Achte's Copyright

Achte is a German film production company that has made over twenty feature-length motion pictures. (Complaint, ¶ 91). One of its pictures, Far Cry, was filmed in Canada in the summer of 2007. (Complaint, ¶ 98). Far Cry was first released in theaters in Germany on October 2, 2008. (Complaint, ¶ 99). It premiered on over 200 different screens in the first week of release. (Id.).

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Far Cry was first released in United States theaters on December 17, 2008. (Complaint, ¶ 100). The film was first published on DVD on April 14, 2009, when the DVD was offered for sale in the Netherlands. (Complaint, ¶ 101). Far Cry was also offered for sale to the public in the United Kingdom and Italy on September 7, 2009 and October 14, 2009, respectively. (Complaint, ¶ 102-103). The film was commercially released on DVD in the United States and Canada on November 24, 2009. (Complaint, ¶ 104).

DGW submitted a copyright registration application for Far Cry to the Copyright Office. (Complaint, ¶ 111). The application falsely stated that Far Cry was first published on November 24, 2009. (Id.). Defendants knew that the statement that Far Cry was first published on November 24, 2009 was false. (Complaint, ¶ 115). Accordingly, Shirokov claims that Achte's registration for Far Cry is invalid. (Complaint, ¶ 22).

Shirokov alleges that DGW and Achte intentionally lied to the Copyright Office about the first publication date in order to maximize the infringement damage awards that Achte could pursue. (Complaint, ¶¶ 11-12). Properly registered works, asserts Shirokov, enjoy the benefits of statutory damage awards of between $750 and $30,000 for each infringed work and $150,000 for each infringed work if the infringement was committed willfully. (Complaint, ¶ 43). If DGW and Achte had been truthful about the first publication date, however, Achte would be limited to recovering actual damages for each alleged act of infringement. (See generally Complaint at ¶^ 44-57, 90-130). For every act of...