12‐1883‐cv Troma Entertainment v. Robbins, et al.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term, 2013

(Argued: April 29, 2013 ; Final Submission: July 25, 2013; Decided: September 6, 2013)

Docket No. 12‐1883‐cv

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

TROMA ENTERTAINMENT, INC.,

Plaintiff‐Appellant,

‐ v ‐

CENTENNIAL PICTURES INC., PAN GLOBAL ENTERTAINMENT, LLC,

Defendants,

LANCE H. ROBBINS, KING BRETT LAUTER,

Defendants‐Appellees.

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

Before: JACOBS and SACK, Circuit Judges, and RAKOFF, District Judge.*

* The Honorable Jed S. Rakoff, United States District Judge for the Southern District of New York, sitting by designation. Appeal by the plaintiff‐appellant from a judgment of the United

States District Court for the Eastern District of New York (Brian M. Cogan, Judge)

dismissing its lawsuit for lack of personal jurisdiction over defendants‐appellees

and for improper venue. We agree with the district court that the plaintiff‐

appellantʹs allegations concerning personal jurisdiction fail to establish a non‐

speculative and direct New York‐based injury that goes beyond economic losses

suffered in the state, as required by the provision of New York Stateʹs long‐arm

statute pursuant to which jurisdiction is asserted,

(a)(3)(ii).

The district court was therefore correct in declining to exercise personal

jurisdiction over the defendants‐appellees, and accordingly dismissing the

lawsuit against them.

Affirmed.

STUART REISER (Manuel A. Arroyo, Rachel Schulman, Esq., on the brief), Shapiro, Croland, Reiser, Apfel & Di Iorio, LLP, Hackensack, NJ, for Plaintiff‐Appellant.

Lance H. Robbins, pro se, North Hollywood, CA.

King Brett Lauter, pro se, Marina Del Rey, CA.

Brian Marc Feldman, John P. Bringewatt, Harter Secrest & Emery LLP, Rochester, NY, pro bono

2 amicus curiae at the request of the Court in support of the Defendants‐Appellees.*

SACK, Circuit Judge:

The subject of this appeal is the reach of New York Stateʹs long‐arm

statute in the context of alleged infringement of intellectual property. At issue is

section 302(a)(3)(ii) of the New York Civil Practice Law and Rules, and in

particular its requirement that the allegedly tortious conduct of the individual

over whom personal jurisdiction is asserted under that section ʺcaus[ed] injury to

person or property within the state.ʺ

(a)(3). The district court

concluded that plaintiff‐appellant Troma Entertainment, Inc., (ʺTromaʺ) had

failed to allege such an in‐state injury, and therefore dismissed its lawsuit against

defendants‐appellees Lance H. Robbins and King Brett Lauter for want of

personal jurisdiction. We agree with the district court and therefore affirm.

* Robbins and Lauter are proceeding pro se, as they did before the district court. After oral argument, we appointed Brian Feldman, Esq., as pro bono amicus curiae in support of Robbinsʹs and Lauterʹs position. The Court expresses its thanks to Mr. Feldman and his colleagues at the law firm of Harter Secrest & Emery LLP, for accepting the appointment and for their highly professional assistance.

3 BACKGROUND

The following facts are drawn from the allegations in Tromaʹs

complaint, which are taken as true for purposes of resolving this appeal. See Licci

ex rel. Licci v. Lebanese Canadian Bank, SAL,

(2d Cir. 2012).

Troma is a New York‐based corporation in the business of

producing and distributing ʺcontrolled budget motion pictures.ʺ Compl. ¶ 5.

Two such motion pictures are spoof films titled ʺCitizen Toxie, Toxic Avenger

Part IV,ʺ created by Troma, and ʺPoultrygeist: Night of the Chicken Dead,ʺ to

which Troma owns distribution rights.

In October 2009, Troma authorized one Lance Robbins to represent it

in negotiations concerning the licensing of distribution rights to Citizen Toxie

and Poultrygeist to a German distributor. Such authorization was supposed to

lapse after thirty days if no agreement was reached. Thirty days passed with

Robbins apparently unable to negotiate a deal with a German distributor. At

least that was what Tromaʹs officers thought.

As it turned out, Robbins, in cahoots with codefendant King Brett

Lauter, had, a week prior to receiving authorization, entered into a distribution

license in Germany with an outfit called Intravest Beteiligungs GMBH

(ʺIntravestʺ). Troma alleges that Robbins and Lauter falsely assured Intravest

4 that they owned the rights to the films; purchased, as any retail customer might,

German‐language DVD copies of the films from Amazon.comʹs German website;

delivered those DVDs to Intravest; and pocketed the proceeds of the agreement,

without ever notifying Troma that the agreement even existed. None of these

actions is alleged to have taken place in New York.

Troma learned in August 2010 that Intravest, ʺvia pay‐per‐channel

distribution on Silverline AGʹs Movie Channels,ʺ id. ¶ 18, had been broadcasting

Citizen Toxie and Poultrygeist in Germany. Troma filed suit on March 7, 2011,

against Robbins, Lauter, and two entities that are no longer parties to this

litigation, in the United States District Court for the Eastern District of New York.

Its complaint alleges copyright infringement under federal law, and state law

claims of common law fraud and tortious interference with prospective economic

advantage.

In March 2012, Robbins and Lauter, both proceeding pro se, filed

motions to dismiss for want of personal jurisdiction. In a memorandum decision

and order filed April 10, 2012, the district court (Brian M. Cogan, Judge)

concluded that New York Stateʹs long‐arm statute did not permit it to exercise

personal jurisdiction over Robbins and Lauter in the Eastern District of New

York. Troma Entertainment, Inc. v. Centennial Pictures Inc.,

,

5 327‐30 (E.D.N.Y. 2012). It concluded that the allegations in Tromaʹs complaint,

taken as true, did not make out a prima facie showing that Robbinsʹs and Lauterʹs

conduct ʺcaus[ed] injury within [New York],ʺ

(a)(3)(ii), as

required by the provision of New York Stateʹs long‐arm statute pursuant to

which Troma asserted personal jurisdiction. Troma, 853 F. Supp. 2d at 329‐30.

On April 18, 2012, after Troma advised the district court that it did

not wish to pursue a transfer of the action to the Central District of California ‐‐

where personal jurisdiction over the defendants could be exercised ‐‐ the court

entered judgment dismissing Tromaʹs lawsuit for lack of jurisdiction and

improper venue.

Troma appeals.

DISCUSSION

The only issue before us is whether the district court erred in

determining that it lacked personal jurisdiction over Robbins and Lauter under

New York Stateʹs long‐arm statute. ʺA plaintiff bears the burden of

demonstrating personal jurisdiction over a person or entity against whom it

seeks to bring suit.ʺ Penguin Group (USA) Inc. v. American Buddha (ʺPenguin Iʺ),

(2d Cir. 2010). At this stage of the proceedings, a plaintiff need

only make a ʺprima facie showing that jurisdiction exists.ʺ

at 34‐35. In other

6 words, a complaint will survive a motion to dismiss for want of personal

jurisdiction so long as its allegations, taken as true, are ʺlegally sufficient

allegations of jurisdiction.ʺ

(internal quotation marks omitted). ʺWe

review a district courtʹs legal conclusions concerning its exercise of jurisdiction de

novo, and its underlying factual findings for clear error.ʺ Marvel Characters, Inc. v.

Kirby, ‐‐‐ F.3d ‐‐‐,

,

(2d Cir.

Aug. 8, 2013).

In order to exercise personal jurisdiction over a defendant, a district

court must possess a statutory basis for doing so.

. With few exceptions not applicable to the case at bar, the existence of such

a statutory basis ʺis determined by the law of the state in which the court is

located,ʺ Spiegel v. Schulmann,

(2d Cir. 2010) ‐‐ here, New York.

Troma asserts that personal jurisdiction may be exercised in the

Eastern District over Robbins and Lauter through section 302(a)(3)(ii) of New

Yorkʹs long‐arm statute. See

(a)(3)(ii). That provision confers

personal jurisdiction over an individual who ʺcommits a tortious act without the

state causing injury to person or property within the state . . . if he . . . expects or

should reasonably expect the act to have consequences in the state and derives

substantial revenue from interstate or international commerce.ʺ Id.; see Penguin I,

7

(discussing the requirements for establishing jurisdiction under

section 302(a)(3)(ii)). At issue here is the requirement that the alleged tortious

conduct ʺcaus[ed] injury within [New York].ʺ

Troma argues that Robbins and

Lauterʹs alleged infringement caused such injury in the state because it resulted

in ʺa loss of sale and a generalized harm . . . to [Tromaʹs] exclusive distribution

rightʺ over Citizen Toxie and Poultrygeist. Appellantʹs Br. at 9.

It is well‐settled that ʺresidence or domicile of the injured party

within [New York] is not a sufficient predicate for jurisdictionʺ under section

302(a)(3). Fantis Foods, Inc. v. Standard Importing Co.,

,

,

(1980). Honoring this principle, we have

rejected as insufficient to support the exercise of jurisdiction over a defendant

allegations of ʺremote or consequential injuries such as lost commercial profits

which occur in New York only because the plaintiff is domiciled or doing

business here.ʺ Lehigh Valley Indus. v. Birenbaum,

(2d Cir. 1975); see

also American Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp.,

(2d Cir. 1971) (rejecting as insufficient ʺharm in New York in the sense that

any sale lost anywhere in the United States affects [the plaintiffʹs] profitsʺ). In

sum, ʺ[T]he suffering of economic damages in New York is insufficient, alone, to

8 establish a direct injury in New York for

(a)(3) purposes.ʺ

Penguin I,

(internal quotation marks omitted).

Troma maintains that its allegations amount to more than the

assertion of mere economic injury within the state. It relies principally on the

New York Court of Appealsʹ decision in Penguin Group (USA), Inc. v. American

Buddha (ʺPenguin IIʺ),

,

,

(2011), in

which the Court answered a question we had certified to it. The plaintiff in that

case, Penguin Group, alleged that defendant American Buddha had infringed its

copyrights over four books by uploading copies of the books to its Internet

website and ʺmaking them available free of charge to its 50,000 members and

anyone with an Internet connection.ʺ

, 964 N.E.2d at 160, 921 N.Y.S.2d at

172. Penguin Group brought suit in the United States District Court for the

Southern District of New York, asserting personal jurisdiction within the state

pursuant to section 302(a)(3)(ii). Penguin I,

.

When the issue reached us on appeal, we noted that ʺ[n]either the

New York Court of Appeals nor this Court has decided what the situs of injury is

in an intellectual property case.ʺ

. We recognized also that ʺthe fact that

the alleged infringement . . . was conducted by means of the Internet and online

libraries . . . may affect the [jurisdictional] analysis.ʺ

. Finding ourselves

9 unable to predict how the New York Court of Appeals would resolve the

jurisdiction issue in that case, we certified to it the question: ʺIn copyright

infringement cases, is the situs of injury for purposes of determining long‐arm

jurisdiction under

(a)(3)(ii) the location of the infringing action

or the residence or location of the principal place of business of the copyright

holder?ʺ

The Court of Appeals accepted our certification, but narrowed our

question to address only the situation presented to it in that matter: ʺcopyright

infringement cases involving the uploading of a copyrighted printed literary

work onto the Internet.ʺ Penguin II, 16 N.Y.2d at 301, 964 N.E.2d at 161, 921

N.Y.S.2d at 173. The Court concluded that, under the circumstances presented,

the situs of the injury was the location of the copyright owner ‐‐ New York.

The Court of Appeals rested this conclusion on ʺthe convergence of

two factors.ʺ Id. at 304, 964 N.E.2d at 163, 921 N.Y.S.2d at 175. The first was the

nature of the alleged infringement, viz., the uploading and making available of

Penguin Groupʹs copyrighted works by means of the Internet. ʺThe crux of

Penguinʹs copyright infringement claim,ʺ the Court reasoned, ʺis not merely the

unlawful electronic copying or uploading of the four copyrighted books.ʺ Id. at

304, 964 N.E.2d at 163, 921 N.Y.S.2d at 175. ʺRather, it is the intended

10 consequences of those activities ‐‐ the instantaneous availability of those

copyrighted works . . . for anyone, in New York or elsewhere, with an Internet

connection to read and download the books free of charge.ʺ Id. at 304‐05, 964

N.E.2d at 163‐64, 921 N.Y.S.2d at 175‐76. Because, the Court concluded, the

injury occasioned by uploading is so widely dispersed, and the place of

uploading largely ʺinconsequential,ʺ ʺthe out‐of‐state location of the infringing

conductʺ ‐‐ the other possible situs of injury ‐‐ ʺcarries less weight in the

jurisdictional inquiry.ʺ Id. at 305, 964 N.E.2d at 164, 921 N.Y.S.2d at 176.

The second factor upon which the Court of Appeals rested its

decision was ʺthe unique bundle of rights granted to copyright owners.ʺ Id. at

305, 964 N.E.2d at 164, 921 N.Y.S.2d at 176. Infringement of intellectual property,

the Court reasoned, could not only cause ʺindirect financial loss,ʺ but could also

ʺdiminish[] the incentive to publish or write,ʺ or engender ʺmarket confusion,ʺ

presumably leading to the diminution of the value of the rights themselves. Id. at

306, 964 N.E.2d at 164, 921 N.Y.S.2d at 176 (quotation marks omitted). Such

injury to intellectual property rights held by New York copyright owners goes

beyond mere economic loss suffered in New York. The Court concluded that this

was enough to establish the situs of injury as the location of the copyright owner,

at least in a case in which, as the Court had already explained, the ʺnature and

11 function of the Internetʺ render the location of the infringing conduct of

diminished relevance.

The Court carefully cabined its holding. First, as noted above, it

modified the question we certified so as to address only copyright infringement

accomplished by uploading to the Internet. And it explicitly declined ʺto address

whether a New York copyright holder sustains an in‐state injury pursuant to

N.Y. C.P.L.R. 302(a)(3)(ii) in a copyright infringement case that does not allege

digital piracy,ʺ citing, without endorsing either, two federal district court cases

from our Circuit reaching opposing conclusions on the question. Id. at 307 n.5,

964 N.E.2d at 165 n.5, 921 N.Y.S.2d at 177 n.5 (citing McGraw Hill Companies, Inc.

v. Ingenium Technologies Corp.,

(S.D.N.Y. 2005), and Freeplay

Music, Inc. v. Cox Radio, Inc., 04 civ. 5238,

,

(S.D.N.Y. June 23, 2005)).

As Troma appears to acknowledge, the Court of Appealsʹ decision in

Penguin II is too narrow to control this case. The plaintiff in Penguin levied

allegations of a form of infringement that works an injury that is virtually

impossible to localize ‐‐ the uploading and making available of copyrighted

materials, free of charge, to anyone with an Internet connection. Troma has

alleged no such injury. Nowhere in Tromaʹs complaint can one find an allegation

12 suggesting that Robbins and Lauterʹs tortious conduct harmed Troma in a way

that cannot be ʺcircumscribedʺ to a particular locality. Penguin II,

, 964 N.E.2d at 164, 921 N.Y.S.2d at 176. This case is therefore more like

ʺtraditional commercial tort casesʺ in which ʺthe place where [the plaintiffʹs]

business is lost or threatenedʺ exerts a significant gravitational influence on the

jurisdictional analysis. Id. Whether that place is California ‐‐ where Robbins and

Lauter allegedly hatched their scheme ‐‐ or Germany ‐‐ where they put it into

effect ‐‐ we need not say. It is not New York.

Troma is left, then, to rely on the Court of Appealsʹ endorsement of

the theory that out‐of‐state infringement may harm the bundle of rights held by a

New York‐based copyright owner in New York. We acknowledge that this is a

plausible theory after Penguin II and agree with Tromaʹs characterization of the

Court of Appealsʹ articulation of it. But it is just that: a theory of injury that ‐‐

certainly in cases of the uploading and making available of copyrighted works,

but also perhaps in isolation ‐‐ may satisfy section 302(a)(3)ʹs injury requirement

in a particular case. We find nothing in the Court of Appealsʹ opinion, however,

that relieves intellectual property owners of the obligation, in each case, to allege

facts demonstrating a non‐speculative and direct New York‐based injury to its

intellectual property rights of the sort Penguin II recognized.

13 Tromaʹs allegations, taken as true, do not satisfy this requirement.

Troma alleges that Robbins and Lauter, in essence, usurped two potential

licensing agreements in Germany, and it maintains that this caused what it labels

ʺgeneralized harm (i.e., statutory damages as a result of [defendantsʹ] willful

infringement) to its exclusive distribution right.ʺ Appellantʹs Br. at 13. We

conclude that Tromaʹs assertion of such an injury, in light of the allegations in its

complaint, is far too speculative to support a finding that Troma suffered injury

in New York within the meaning of section 302(a)(3)(ii).

Infringement comes in many stripes. It is not the case that any

infringement anywhere can be said to diminish incentives to engage in a creative

enterprise, or to harm, beyond the immediate loss of profits, the continuing value

of one or more of a copyright holderʹs bundle of rights. Certainly the availability

of the statutory damage remedy under the copyright laws does not establish

automatically that this sort of injury has occurred. And we think it entirely

implausible that the infringement alleged by Troma ‐‐ discrete, geographically

circumscribed theft of the opportunity to license distribution of copyrighted

works ‐‐ would cause such an injury.

Troma has not articulated a non‐speculative and direct injury to

person or property in New York that goes beyond the simple economic losses

14 that its New York‐based business suffered. It is well settled that such economic

losses are not alone a sufficient basis for personal jurisdiction over the persons

who caused them. Troma has thus not made out a prima facie showing of

personal jurisdiction under section 302(a)(3)(ii). The district court correctly

concluded that it did not have the power to exercise personal jurisdiction over

Robbins and Lauter.

CONCLUSION

For the foregoing reasons, the judgment of the district court is

affirmed.

15