Monday, December 17, 2007

Statute of Limitations for Actions between Co-Owners

The First Circuit has struggled for years with a case involving the well-known Hummel figurines, drawings of which were created by Sister Berta Hummel in Germany in 1931. The most recent decision hopefully will put an end to what in my opinion has been meritless litigation pursued in one form or another for 40 years by a lawyer who went from representing one party to becoming a party himself, Cambridge Literary Properties, Ltd. v.W. Goebel Porzellanfabrik G.m.b.H & Co., KG, 2007 WL 4340860 (1s Cir. Dec. 13, 2007). The most recent decision raises important questions about the intersection of federal /state jurisdiction, state law actions for an accounting between co-authors, and the Copyright Act’s statute of limitations. The existence of a 10 page impassioned dissent describing the majority’s approach as “unprecedented and potentially pernicious” gives some flavor to the case.

The history and facts are complicated, so I have tried to distill them to their essence for our purposes. Sister Hummel and her convent conveyed rights to publish her drawings in a book (“Das Hummel-Buch”). The book had a preface and poems by a Margarete Seeman. The book was registered in the U.S. Copyright Office as a work for hire. Defendant Goebel through an assignment from the book publisher came to own rights in the book. Goebel also obtained rights directly from Sister Hummel and the convent for the right to make figurines of the drawings. Goebel assigned the right to distribute the figurines in the U.S. to Schmid Brothers. Goebel and Schmid had a fractious relationship, which led to litigation in which Schmid was represented by attorney Henry Hermann. The parties eventually settled by splitting 50-50 the renewal interest. Schmid went bankrupt, and Goebel bought the 50% it didn’t own.

One would think that would be the end of the matter, but Hermann had other ideas, even though he got $3,750,000 as a creditor in the Schmid bankruptcy for his fees. Hermann decided he could concoct a claim based on Seeman’s contribution to the book and formed plaintiff company to pursue his theory. He tracked down her heirs in Europe and got and assignment According to the court, he is the only employee of the company. Plaintiff sued Goebel not for copyright infringement, but for an accounting for profits, asserting diversity jurisdiction. The district court granted defendant’s motion for summary judgment; the summary judgment motion asserted that the Copyright Act’s three-year statute of limitations barred the state law action.

At this point, some readers may say, huh? How can a statute of limitations for copyright infringement bar a state law claim for an accounting of profits between co-authors brought under diversity jurisdiction? The answer according to the majority is that the accounting cause of action was predicated on there being co-authorship status; if there can be no such co-authorship claim because the statute of limitations bars even a facial assertion of co-authorship status, there can be no possible accounting cause of action. The majority found the copyright limitations indeed barred the co-authorship claim, and hence affirmed dismissal of the claim.

The dissent cried foul, accusing the majority of using federal law to trample on state law. That’s a little hard to accept under the facts of the case and with jurisdiction being based on diversity jurisdiction: the court of appeals was merely attempting to apply the law as it thought a state court would, and it thought a state court judge would also reach the predicate of whether there could be a facial claim to co-authorship. At this point, the dissent launched into a dissertation on whether the presence of a substantial federal question is sufficient to convey federal jurisdiction when plaintiff itself carefully avoids the invocation of a federal question in its well-pleaded complaint. The question to me is not one of preemption or even federal-state jurisdiction, but instead whether under the facts of this case, a plaintiff who had been involved for 40 years in attempting to seek a piece of the piece should be permitted to proceed with a state claim whose very viability was predicated on a federal right that it did not possess. I think the majority came to the right conclusion, although the issue is messy to the say the least.


CEP said...

I would suggest, instead, that the "correct" result would have been to stop abusing the concept of "jurisdiction" as a one-size-fits-all method of docket control, and impose sanctions under either FRCP 11(b) or 28 U.S.C. § 1927 (vexatious litigation).

In this particular instance, there's a decent chance — depending on exactly what turned up in discovery — that one could find an implied contractual coauthorship under the German copyright law in effect at the time. That's enough to support an accounting, or a claim for "unjust enrichment."

My point is just that reaching for the jurisdiction/preemption nuclear device to get rid of an abusive claim (or defense, although it's extremely rare for courts to be even-handed) damages both the device and the general law, particularly when there's a more-appropriate device available. After all, if Congress had meant the statute of limitations to apply to all actions related to a copyright not directly preempted in 17 U.S.C. § 301 and 28 U.S.C. § 1338(a), it could (and should) have said so... and new how to do so at the time (ERISA).

William Patry said...

But the case wasn't decided on jurisdictional grounds, but on statute of limitations.