United Feature Syndicate v. Miller Features Synd., 01 CIV. 2491(GEL).

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Citation216 F.Supp.2d 198
Docket NumberNo. 01 CIV. 2491(GEL).,01 CIV. 2491(GEL).
PartiesUNITED FEATURE SYNDICATE, INC., and Newspaper Enterprise Association, Inc., Plaintiffs, v. MILLER FEATURES SYNDICATE, INC., Richard Vroom, and Agnes Vroom, Defendants.
Decision Date11 March 2002

Jordan Berns, Baker & Hostetler LLP, Cleveland, OH (Paul P. Eyre and Nichol M. Schoenfield, Baker & Hostetler LLP, Cleveland, OH, and William Lee Kinnally, Jr., Gibney, Anthony & Flaherty, LLP, New York City) for Plaintiffs.

Neal A. DeYoung, New York City, for Defendants.


LYNCH, District Judge.

Plaintiffs United Feature Syndicate, Inc. ("UFS") and Newspaper Enterprise Association Inc. ("NEA")—together doing business as "United Media"—bring this diversity action alleging conversion of funds they claim to have been held in trust by defendant Miller Features, Inc. ("Miller Features") and two of its officers, defendants Richard Vroom and Agnes Vroom (together, "the Vrooms"). Miller Features is now in bankruptcy proceedings in Canada, and as a result, United Media has voluntarily discontinued the action against that defendant pursuant to Fed.R.Civ.P. 41(a)(1). However, United Media has not discontinued the action against the Vrooms, who move to dismiss pursuant to Fed.R.Civ.P. 12(b) on a variety of procedural and substantive grounds. For the reasons that follow, the Vrooms' motion to dismiss will be granted in part and denied in part.


For purposes of this motion to dismiss, the facts must be taken as pleaded by the plaintiffs. United Media—which is comprised of UFS, a New York corporation with principal place of business in New York, and NEA, a Delaware corporation with principal place of business in New York—is in the business of syndicating newspaper features, including a number of popular comic strips for which it holds registered U.S. copyrights. (Amend. Compl. ¶¶ 1-2, 9.) For approximately 100 years, United Media has licensed the rights to publish its features to Canadian newspapers, either directly or through agents that market United Media's features on its behalf. Miller Features, an Ontario corporation with its principal place of business in Toronto, is one such marketing agent. (Amend.Compl. ¶¶ 3, 10-11.) Miller Features was founded and operated by the Vrooms, both of whom are citizens of Canada and residents of Toronto. (Amend.Compl. ¶¶ 4-5.) The Canadian company initially agreed, orally, to serve as United Media's agent at some point in 1996; the parties later memorialized the terms of that oral agreement in a written Agency Agreement, dated July 8, 1998 (the "Written Agency Agreement"), that formally appointed Miller Features to serve as United Media's agent. Under the terms of the Written Agency Agreement, Miller Features agreed to promote United Media's features in Canada; to service the agreements between United Media and its Canadian clients by "collecting, disbursing, and accounting for payments made by Clients for the benefit of [United Media] ... and assuring that all Clients make such payments in a timely fashion", and to negotiate future agreements with prospective Canadian clients. (Amend. Compl. ¶¶ 12-13.)

The agreement obligated Miller Features to use all reasonable efforts to collect amounts owed to United Media by Canadian clients within 60 days after the end of the calendar month in which those amounts were due and to provide United Media with a monthly accounting of all amounts invoiced from United Media's Canadian clients and payable to United Media for that particular month. In consideration for providing these and other services as United Media's agent, Miller Features was paid a percentage-based commission on all amounts paid to United Media by its Canadian clients. The net amounts owed to United Media after deduction of these commissions were to be paid when the monthly accounting report was submitted. (Amend.Compl. ¶¶ 14-17.) United Media had the right to terminate the agreement by written notice in the event of any breach, and the effect of that termination was to render all amounts owed to United Media immediately due and payable. (Amend.Compl. ¶ 18.) Choice of law and forum selection provisions in the agreement provide that New York law governs and that the federal and state courts within this District are the exclusive fora for dispute resolution. (Amend. Compl Exh. B. ¶ 10.)

In addition to negotiating the agency agreements in New York, the Vrooms had numerous and repeated contacts with New York in connection with the agency relationship between United Media and Miller Features, attending numerous quarterly sales meetings at United Media's New York offices, communicating regularly with United Media by telephone and mail, and transmitting monthly accounting reports and funds collected from United Media's Canadian clients. (Decl. of Lisa Marie Wilson, July 16, 2001, at ¶¶ 5-14 & Exh. 1-2, 4-7, 9. ("Wilson Decl.")) While the Written Agency Agreement expired by its terms on December 31, 1999, Miller Features continued to perform its services as United Media's agent in accordance with the expired agreement's terms throughout the year 2000. (Amend.Compl. ¶ 20.) In November 2000, however, United Media became aware that Miller Features had fallen into arrears in its payments to United Media. The parties spent a few months attempting to negotiate a mutually acceptable repayment plan; as part of those negotiations, the Vrooms came to New York for a meeting with United Media in January 2001. (Amend.Compl. ¶ 22.) When these negotiations failed to resolve matters, United Media gave formal notice, in a letter sent to Miller Features on February 13, 2001, that it was terminating the Agency Agreement and advised Miller Features that United Media was owed approximately $248,043. (Amend. Compl. ¶ 23.) United Media requested immediate access, as provided for in Section 4(f) of the Agency Agreement, to all information pertaining to its Canadian client relationships—including the contact information for each client, a list of the specific features to which each client subscribed, and the rate and delivery fees for each feature. Since much of this information had been collected and maintained exclusively by Miller Features, United Media was unable to service its clients effectively upon termination of the agreement—indeed, in some instances, United Media was not even able to identify its Canadian clients. While United Media followed up its initial request in subsequent letters and telephone calls, the Defendants did not provide any of these records to United Media upon its request and, apparently, still have not done so. (Amend. Compl. ¶¶ 23-27.)

United Media also instructed Miller Features permanently to cease all of its dealings with United Media's Canadian clients, in accordance with Section 9(a) of the Agency Agreement. However, Agnes Vroom continued to contact United Media's Canadian clients after February 13, 2001, and instructed them to continue paying Miller Features for United Media's features. These communications apparently continued throughout March 2001 in spite of United Media's repeated requests for Miller Features and the Vrooms to cease, resulting in some confusion on the part of some of United Media's Canadian clients. (Amend.Compl. ¶¶ 23, 28-36.) Miller Features also continued to represent that it was serving as United Media's agent on its internet web site until April 2001, when the web site was shut down altogether. (Amend.Compl. ¶¶ 37-39.)

Miller Features filed for bankruptcy in Canada on March 13, 2001. (Amend. Compl. ¶ 10.) United Media initiated this action and moved for a preliminary injunction against Miller Features and the Vrooms on March 30, 2001, and filed an Amended Complaint on April 16, 2001. Pending a hearing on United Media's motion for the preliminary injunction, the Court restrained the defendants from contacting United Media's Canadian clients or engaging in certain conduct suggesting that Miller Features continued to be an agent of United Media or had any right to market United Media features. The Court vacated that restraining order following a hearing held on May 22, 2001, and shortly thereafter United Media voluntarily discontinued the action against Miller Features. United Media did not discontinue the action against the Vrooms or file another amended complaint.

Counts Two, Five, Six, Seven, and Nine of the Amended Complaint—which respectively allege breach of fiduciary duty, unjust enrichment, conversion, fraudulent conveyance, and federal copyright infringement —were originally asserted against all three defendants, and so remain pending against the Vrooms. (Amend. Compl. ¶¶ 43-47, 60-68, 74-78.) While Counts One, Three, and Four—which respectively allege breach of contract, entitlement to an accounting, and entitlement to the imposition of a constructive trust— are nominally asserted against Miller Features alone, United Media asserts in Count Eight that it should be permitted to lift the corporate veil and hold the Vrooms, as officers or shareholders of Miller Features, liable in their individual capacities for any wrongdoing by the corporation. (Amend. Compl. ¶¶ 48-59, 69-73.) Counts One, Three, and Four therefore remain before the Court, through the veil-piercing claim asserted in Count Eight, as claims asserted directly against the Vrooms.


Pursuant to Fed.R.Civ.P. 12(b), the Vrooms now move to dismiss this action on a variety of procedural grounds—lack of personal jurisdiction, forum non conveniens, international comity—and for failure to state a claim upon which relief may be granted.

I. Personal Jurisdiction

In order to defeat the Vrooms' jurisdiction-testing motion at this stage of the litigation, United Media need only make a prima facie showing of jurisdiction based on the factual allegations in its complaint and supporting affidavits. Ball v. Metallurgie...

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