Phillips v. Audio Active Ltd., No. 05-7017 (2d Cir. 2007)

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05-7017 Phillips v. Audio Active Ltd. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT _______________ August Term, 2006 (Argued October 26, 2006 Decided July 24, 2007) Docket No. 05-7017-cv _______________ PETER PHILLIPS, professionally known as Pete Rock, Plaintiff-Appellant, v. AUDIO ACTIVE LIMITED, trading as Barely Breaking Even, STUDIO DISTRIBUTION and SANDBOX AUTOMATIC, INC., Defendants-Appellees, HIPHOPSITE.COM, Defendant. _______________ Before: CARDAMONE, WALKER, and STRAUB, Circuit Judges. _______________ Peter Phillips, p/k/a Pete Rock, appeals the November 30, 2005 decision and order and the December 8, 2005 final judgment of the United States District Court for the Southern District of New York (Daniels, J.) dismissing his complaint against defendant music companies for improper venue under Federal Rule of Civil Procedure 12(b)(3). Affirmed in part, reversed in part, and remanded. _______________ 1 2 3 4 5 6 7 8 9 10 _______________ PAUL A. CHIN, Law Offices of Paul A. Chin, New York, New York, for Plaintiff-Appellant. DOROTHY M. WEBER, New York, New York (Judith A. Meyers, Shukat Arrow Hafer Weber & Herbsman, LLP, New York, New York, of counsel), for Defendants-Appellees. _______________ 1 CARDAMONE, Circuit Judge: 2 A plaintiff may think that as the initiator of a lawsuit he 3 is the lord and master of where the litigation will be tried and 4 under what law. 5 forum selection and choice of law clauses his view of himself as 6 ruler of all he surveys may, like an inflated balloon, suffer 7 considerable loss of altitude. 8 faces in the appeal before us, where we revisit an issue last 9 addressed by us 15 years ago: But if he is a party to a contract that contains Such is the situation plaintiff what is the effect of a forum 10 selection clause on a complaint that asserts claims arising under 11 the Copyright Act? 12 Inc., 981 F.2d 679 (2d Cir. 1993). See Corcovado Music Corp. v. Hollis Music, 13 Plaintiff Peter Phillips, professionally known as Pete Rock 14 (plaintiff or appellant), is a musician who in 2002 entered into 15 a recording contract with defendant Audio Active Limited t/a 16 Barely Breaking Even (BBE), a music company. 17 fruit to two albums in 2004 and 2005. 18 was governed by the recording contract and, except for Phillips' 19 contention that BBE owes him money, it appears to have been 20 produced, released and distributed according to plan. 21 album is the source of the principal controversy between the 22 parties. 23 This contract gave The first album all agree The second In his complaint against BBE and defendants Studio 24 Distribution (Studio), Navarre Corporation (Navarre), 25 HipHopSite.com and Sandbox Automatic, Inc. (Sandbox) 26 (collectively defendants), Phillips averred that the recording 2 1 contract contemplated the first album only, and that the release 2 of the second album, over his objections, infringed his 3 copyrights in the 15 songs comprising the album. 4 moved to dismiss plaintiff's complaint on the basis of a forum 5 selection clause in the contract pursuant to which the parties 6 had agreed to litigate in England any proceeding arising out of 7 the contract. 8 9 BBE and Studio The United States District Court for the Southern District of New York (Daniels, J.) held the forum clause governed 10 Phillips' action, including his copyright claims relating to the 11 second album. 12 November 30, 2005 decision and order and its December 8, 2005 13 judgment granting BBE and Studio's Rule 12(b)(3) motion to 14 dismiss his complaint for improper venue. 15 that the district court erred in reading the forum clause to 16 require -- rather than permit -- proceedings to be brought in 17 England, that his copyright claims did not arise out of the 18 recording contract and should have been exempted from operation 19 of the forum clause, and that the clause should be set aside 20 because its enforcement would be unreasonable. 21 Phillips appeals from the district court's Plaintiff contends We agree with the district court's interpretation of the 22 clause as mandatory and its holding that enforcement of the 23 clause would not be unreasonable and affirm the dismissal of 24 Phillips' breach of contract claim. 25 remaining claims predicated on defendants' alleged infringement 3 However, plaintiff's 1 of his copyrights were improperly dismissed under the forum 2 selection clause. 3 4 5 BACKGROUND A. The Recording Contract Phillips entered into the recording contract with BBE in 6 September 2002 under the terms of which he agreed to provide his 7 services as a recording artist and producer to create musical 8 compositions, and BBE agreed to pay the costs of production and 9 to pay royalties to Phillips, including a $90,000 advance payable 10 in two installments. 11 The contract required Phillips to produce "no less than ten 12 (10) newly recorded and previously unreleased tracks . . . of no 13 less than sixty (60) minutes" and defined these tracks as the 14 "master recordings." 15 with a maximum anywhere in the contract, but the master 16 recordings were later defined as the album, which was 17 provisionally entitled "Soul Survivor 2." 18 to exploit all products of Phillips' services under the contract 19 and the entire copyright in the master recordings. 20 paragraph of the recording contract contains a choice of law and 21 forum clause that reads: 22 effect of this agreement and any or all modifications hereof 23 shall be governed by English Law and any legal proceedings that 24 may arise out of it are to be brought in England." 25 signed a letter agreement, which is attached to the recording 26 contract, authorizing Soul Brother Records, Inc. to offer The minimum number of tracks was not paired BBE acquired the right The final "[t]he validity[,] construction[,] and 4 Phillips also 1 Phillips' services under the contract and stating that the letter 2 agreement "shall be subject to the same laws and exclusive 3 jurisdiction as the above agreement." 4 from BBE in a first installment of his advance on royalties. 5 Pursuant to the contract, the balance of the advance was payable 6 upon delivery to BBE of the last of the master recordings. 7 B. Phillips received $55,000 Release of Second Album 8 In 2004 BBE released an album comprised of Phillips' musical 9 compositions entitled, as foreseen in the contract, Soul Survivor 10 2. 11 Soul Survivor 2, he composed and recorded additional music. 12 Plaintiff alleges that in 2004, BBE and Studio, a second 13 recording company, sought his permission to release the 14 additional songs, but Phillips, believing the tracks were not 15 ready for release, denied their request. 16 Navarre, a distribution company, nonetheless proceeded to release 17 a second album in August or September of 2004 containing 15 18 additional songs created by Phillips. 19 Sandbox and HipHopSite.com, both Internet-based distributors of 20 digital media, sold copies of the allegedly infringing album. 21 Plaintiff settled his claims against HipHopSite.com and these 22 were dismissed with prejudice by the district court on May 3, 23 2005. 24 25 26 While Phillips was preparing the songs that were released on C. BBE, Studio and Phillips asserts that Prior Legal Proceedings Plaintiff commenced the instant action in the Southern District of New York on January 26, 2005. 5 His second amended 1 complaint contained five counts against the defendants. 2 One stated that BBE had breached the recording contract by 3 failing to pay the second installment of the royalties advance. 4 Counts Two and Three were for direct and contributory copyright 5 infringement under the Copyright Act, 17 U.S.C. § 101 et seq., 6 and requested remedies provided by the Act. 7 asserted alternative state law claims for unjust enrichment and 8 unfair competition on the basis of defendants' exploitation of 9 the additional tracks. 10 Count Counts Four and Five On May 27, 2005 BBE and Studio moved to dismiss under Rules 11 12(b)(1), (3) and (6) on the grounds that the forum selection 12 clause in the recording contract required Phillips to bring his 13 suit in England. 14 and a final judgment dated December 8, 2005, the trial court 15 granted BBE and Studio's motion to dismiss for improper venue 16 under Fed. R. Civ. P. 12(b)(3). 17 the forum selection clause as mandatory rather than permissive, 18 and it held that Phillips had failed to show that enforcement of 19 the clause would be unreasonable. 20 copyright claims, Judge Daniels determined that any dispute 21 concerning the defendants' rights to exploit this music was 22 primarily contractual because the defendants had acquired 23 possession of the music legitimately under the contract. 24 Phillips appeals the November 30, 2005 decision and order and the 25 December 8, 2005 final judgment. In a decision and order dated November 30, 2005 The district court classified 6 With respect to plaintiff's 1 DISCUSSION 2 I 3 Forum Selection Clause A. 4 Dismissal Determining whether to dismiss a claim based on a forum 5 selection clause involves a four-part analysis. The first 6 inquiry is whether the clause was reasonably communicated to the 7 party resisting enforcement. 8 Gottdiener, 462 F.3d 95, 103 (2d Cir. 2006). 9 requires us to classify the clause as mandatory or permissive, 10 i.e., to decide whether the parties are required to bring any 11 dispute to the designated forum or simply permitted to do so. 12 See John Boutari & Son, Wines & Spirits, S.A. v. Attiki Imps. & 13 Distribs. Inc., 22 F.3d 51, 53 (2d Cir. 1994). 14 whether the claims and parties involved in the suit are subject 15 to the forum selection clause. 16 Lloyd's, 996 F.2d 1353, 1358-61 (2d Cir. 1993). See, e.g., D.H. Blair & Co. v. The second step Part three asks See, e.g., Roby v. Corp. of 17 If the forum clause was communicated to the resisting party, 18 has mandatory force and covers the claims and parties involved in 19 the dispute, it is presumptively enforceable. 20 63. 21 resisting party has rebutted the presumption of enforceability by 22 making a sufficiently strong showing that "enforcement would be 23 unreasonable or unjust, or that the clause was invalid for such 24 reasons as fraud or overreaching." 25 Shore Co., 407 U.S. 1, 15 (1972) (establishing federal standard 26 relating to enforcement of forum clauses applicable in admiralty See id. at 1362- The fourth, and final, step is to ascertain whether the 7 M/S Bremen v. Zapata Off- 1 and international transactions); see Bense v. Interstate Battery 2 Sys. of Am., Inc., 683 F.2d 718, 721 (2d Cir. 1982) (applying 3 Bremen standard to contractual dispute between domestic parties 4 in non-admiralty context). 5 6 B. Standard of Review Where the district court has relied on pleadings and 7 affidavits to grant a Rule 12(b)(3) motion to dismiss on the 8 basis of a forum selection clause, our review is de novo. 9 Asoma Corp. v. SK Shipping Co., 467 F.3d 817, 822 (2d Cir. 2006); See 10 Gulf Ins. Co. v. Glasbrenner, 417 F.3d 353, 355 (2d Cir. 2005) 11 (adopting standard applied in Rule 12(b)(2) dismissals to review 12 of Rule 12(b)(3) dismissals). 13 has made the requisite prima facie showing that venue is proper, 14 we view all the facts in a light most favorable to plaintiff. 15 See New Moon Shipping Co. v. Man B&W Diesel AG, 121 F.3d 24, 29 16 (2d Cir. 1997). 17 also reviewed de novo on appeal. 18 L.P., 267 F.3d 172, 178 (2d Cir. 2001). 19 In analyzing whether the plaintiff Contract interpretation as a question of law is C. Lee v. BSB Greenwich Mortgage Impact of Choice of Law Clause 20 In the absence of an applicable choice of law provision, it 21 is well established in this Circuit that the rule set out in M/S 22 Bremen applies to the question of enforceability of an apparently 23 governing forum selection clause, irrespective of whether a claim 24 arises under federal or state law. 25 Inv. P'ship, 740 F.2d 148, 156 (2d Cir. 1984) (applying M/S 26 Bremen in federal question case); Bense, 683 F.2d at 720-21 8 AVC Nederland B.V. v. Atrium 1 (same); Jones v. Weibrecht, 901 F.2d 17, 18-19 (2d Cir. 1990) 2 (reaffirming Second Circuit rule that Bremen standard applies to 3 diversity cases). 4 Here, where the parties have agreed that the validity, 5 construction and effect of the recording contract is to be 6 governed by English law, we confront a different legal issue. 7 analyzing a forum selection clause, what effect should we give to 8 a choice of law provision contained in the same contract? 9 Largely for the reasons we hold parties to their contractual In 10 promises to litigate in a specified forum, federal courts give 11 substantial weight to choice of law provisions. 12 F.2d at 1362-63 (discussing presumptive validity of choice of law 13 clauses in international transactions); State Trading Corp. of 14 India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409, 417 (2d 15 Cir. 1990) ("[A] contractual choice of law clause generally takes 16 precedence over choice of law rules . . . ."); Richards v. 17 Lloyd's of London, 135 F.3d 1289, 1292-93 (9th Cir. 1998) 18 (extending Bremen standard to evaluation of choice of law 19 clauses). 20 Lloyds, 140 F.3d 157, 162 (2d Cir. 1998) (incorporating choice of 21 law provision into multi-factor test to determine "points of 22 contact" between transaction and potential fora in admiralty 23 case). 24 See Roby, 996 But see Advani Enters., Inc. v. Underwriters at Despite the presumptive validity of choice of law clauses, 25 our precedent indicates that federal law should be used to 26 determine whether an otherwise mandatory and applicable forum 9 1 clause is enforceable under Bremen, i.e., step four in our 2 analysis. 3 essentially procedural issue, Jones, 901 F.2d at 19, while choice 4 of law provisions generally implicate only the substantive law of 5 the selected jurisdiction. 6 221 F.2d 189, 194 (2d Cir. 1955); cf. Woodling v. Garrett Corp., 7 813 F.2d 543, 551-52 (2d Cir. 1987) (explaining New York rule 8 honoring parties' choice of law to govern substantive but not 9 procedural issues). This is because enforcement of forum clauses is an See Siegelman v. Cunard White Star, Were it otherwise, choice of law provisions 10 selecting jurisdictions that disfavor forum clauses would put a 11 district court to the awkward choice of either ignoring the 12 parties' choice of law or invalidating their choice of forum. 13 See, e.g., Bense, 683 F.2d at 722 (declining to apply law 14 specified in contract where such application would render the 15 forum selection clause meaningless). 16 We find less to recommend the invocation of federal common 17 law to interpret the meaning and scope of a forum clause, as 18 required by parts two and three of our analysis. 19 discussion of the issue can be found in federal court decisions. 20 See Yavuz v. 61 MM, Ltd., 465 F.3d 418, 427 (10th Cir. 2006). 21 For example, we have turned to federal precedent to interpret 22 forum clauses, but the underlying choice of law question has been 23 left unaddressed. 24 federal precedent to ascertain meaning of forum clause where 25 parties had elected Greek law); Roby, 996 F.2d at 1361 (applying 26 federal precedent to assess scope of clause where parties had Little See, e.g., Boutari, 22 F.3d at 52-53 (applying 10 1 chosen English law); see also Manetti-Farrow Inc. v. Gucci Am., 2 Inc., 858 F.2d 509, 513 (9th Cir. 1988) ("[B]ecause enforcement 3 of a forum clause necessarily entails interpretation of the 4 clause before it can be enforced, federal law also applies to 5 interpretation of forum selection clauses."). 6 Nederland, 740 F.2d at 155 (noting that interpretation of Dutch- 7 language forum selection clause in contract among predominantly 8 Dutch principals executed in the Netherlands required application 9 of Dutch law). But see AVC See generally Jacob Webb Yackee, Choice of Law 10 Considerations in the Validity & Enforcement of International 11 Forum Selection Agreements: 12 L. & Foreign Aff. 43, 67 (2004) (describing practice of federal 13 courts reflexively to disregard choice of law provisions when 14 assessing forum selection clauses); Yavuz, 465 F.3d at 427 15 (same). Whose Law Applies?, 9 UCLA J. Int'l 16 The Tenth Circuit recently discussed the novel question 17 posed by contracts containing choice of law and forum provisions. 18 Yavuz, 465 F.3d at 427-31. 19 convention is governed by the Swiss law . . . . 20 is Fribourg," id. at 427, the court noted that before deciding 21 whether to enforce the clause, it had to resolve several 22 subsidiary questions: 23 permissive, and whether it governed all of plaintiff's claims. 24 Id. 25 clauses did not extend to the choice of law question before it 26 (and now before us) because the meaning of each forum or Reviewing a clause reading, "[t]his Place of courts whether the clause was mandatory or Yavuz observed that the Supreme Court's guidance on forum 11 1 arbitration provision before the Supreme Court in M/S Bremen and 2 its progeny has never been in question. Id. at 430. 3 In light of the Supreme Court's invocation of compelling 4 reasons to uphold contractual choice of law -- like choice of 5 forum -- provisions, Yavuz held that "under federal law the 6 courts should ordinarily honor an international commercial 7 agreement's forum-selection provision as construed under the law 8 specified in the agreement's choice of law provision," id. at 9 428-30; see also Abbott Labs. v. Takeda Pharm. Co., 476 F.3d 421, 10 423 (7th Cir. 2007) ("Simplicity argues for determining the 11 validity and meaning of a forum selection clause . . . by 12 reference to the law of the jurisdiction whose law governs the 13 rest of the contract in which the clause appears."). 14 Without the benefit of briefing by the parties on this 15 issue, we cannot understand why the interpretation of a forum 16 selection clause should be singled out for application of any law 17 other than that chosen to govern the interpretation of the 18 contract as a whole. 19 parties neither objected to the district court's citation to 20 federal precedent in its interpretation of the clause before us, 21 nor construed the clause under English law in their briefs. 22 will assume from the parties' briefing that they do not rely on 23 any distinctive features of English law and apply general 24 contract law principles and federal precedent to discern the 25 meaning and scope of the forum clause. 26 v. Uzan, 388 F.3d 39, 61 (2d Cir. 2004) ("[T]he parties' briefs See Yavuz, 465 F.3d at 428. 12 However, the We See Motorola Credit Corp. 1 assume that New York law controls this issue, and such implied 2 consent . . . is sufficient to establish choice of law."); John 3 Wyeth & Brother Ltd. v. CIGNA Int'l Corp., 119 F.3d 1070, 1074 4 (3d Cir. 1997) (Alito, J.) (applying general contract law 5 principles to interpret forum clause where parties made little 6 reference to English law). 7 8 9 10 II The Forum Clause Requires that any Covered Proceeding Be Brought in England Forum selection clauses may serve two distinct purposes. 11 Contracting parties may intend to agree on a potential situs for 12 suit so as to guarantee that at least one forum will be available 13 to hear their disputes. 14 confers jurisdiction in the designated forum, but does not deny 15 plaintiff his choice of forum, if jurisdiction there is otherwise 16 appropriate. 17 based on permissive choice of forum clause); AVC Nederland, 740 18 F.2d at 155 ("[A] jurisdiction-conferring clause . . . provid[es] 19 a plaintiff with a guaranteed forum, [but] does not deprive him 20 of the right to sue in another having personal jurisdiction over 21 the defendant."); see also Blanco v. Banco Indus. de Venez., 22 S.A., 997 F.2d 974, 980, 984 (2d Cir. 1993) (granting motion for 23 dismissal based on inconvenient forum despite permissive choice 24 of forum clause specifying forum chosen by plaintiff). 25 Alternatively, contracting parties may intend to agree in advance 26 on a forum where any and all of their disputes must be brought to 27 eliminate surprise of having to litigate in a hostile forum. A so-called permissive forum clause only See Boutari, 22 F.3d at 53 (reversing dismissal 13 1 Roby, 996 F.2d at 1363. 2 the Bremen presumption of enforceability. 3 A mandatory forum clause is entitled to Id. Our inquiry is one of contract interpretation. Hence, our 4 initial focus is on the language of the contract. 5 language provides that "any legal proceedings that may arise out 6 of [the agreement] are to be brought in England." 7 selection clause is viewed as mandatory when it confers exclusive 8 jurisdiction on the designated forum or incorporates obligatory 9 venue language. 10 Here that A forum See Boutari, 22 F.3d at 52-53. The district court found this clause mandatory. We agree. 11 The parties' use of the phrase "are to be brought" establishes 12 England as an obligatory venue for proceedings within the scope 13 of the clause. 14 lacking the specificity of a particular court or city, adequately 15 distinguishes the parties' language from the clause we reviewed 16 in Boutari. 17 phrase "[a]ny dispute . . . shall come within the jurisdiction of 18 the . . . Greek Courts" as a permissive clause because it dealt 19 solely with jurisdiction without indicating that such 20 jurisdiction was exclusive. 21 Boutari that obligatory venue language suffices to give mandatory 22 force to a forum selection clause. 23 Devine, 888 F.2d 957, 962 (2d Cir. 1989); Docksider, Ltd. v. Sea 24 Tech., Ltd., 875 F.2d 762, 764 (9th Cir. 1989). 25 mandatory force of the words "are to be" differentiates the 26 instant clause from the language used by the parties in Blanco, The reference to a particular location, although 22 F.3d at 52. In that case, we construed the Id. at 52-53. 14 We recognized in Id. at 53; see Seward v. Further, the 1 agreeing to certain fora in which their disputes "may" be 2 brought. 3 997 F.2d at 976, 979. Our distinct treatment of jurisdiction and venue in this 4 context is clear. 5 on two or more fora, the fact that the contract in Boutari 6 conferred jurisdiction on the courts of Greece did not preclude 7 the parties from commencing litigation in a court outside of 8 Greece. 9 that presented in this case -- mandating that a proceeding be 10 brought in England -- is incompatible with venue lying in New 11 York. 12 the stipulation in the letter agreement attached to the recording 13 contract that the former is subject to the same exclusive 14 jurisdiction as the latter. 15 Because jurisdiction may be properly conferred 22 F.3d at 52-53. However, contract language such as Our finding that the clause is mandatory is buttressed by III Scope of the Forum Selection Clause In the Instant Case 16 We turn now to decide whether the language in the recording 17 contract mandating that any legal proceedings that may arise out 18 of it be brought in England encompasses Phillips' suit. 19 important a forum selection clause is to the efficient 20 functioning of international business, see, e.g., Scherk v. 21 Alberto-Culver Co., 417 U.S. 506, 516-17 (1974), it is a creature 22 of contract. 23 federal court in New York will not be disregarded unless the 24 contract evinces agreement by the parties that his claims cannot 25 be heard there. 26 Shipping & Trading Inc., 252 F.3d 218, 224 (2d Cir. 2001) (noting However Plaintiff's choice of forum in bringing his suit in Cf. Louis Dreyfus Negoce S.A. v. Blystad 15 1 that an arbitration clause, a creature of contract, does not 2 compel arbitration of a dispute that parties did not intend to 3 submit to arbitration). 4 5 A. Breach of Contract Claim We dispose of the contract claim quickly. Phillips asserts 6 BBE breached the recording contract by failing to pay the second 7 installment on his advance on royalties due upon delivery of the 8 master recordings. 9 clause, if found mandatory and enforceable, does not apply to his He makes no argument that the forum selection 10 contract claim. 11 falls squarely under the forum selection clause: 12 establishes Phillips' right to receive, and BBE's duty to pay, 13 the installment and sets forth the relevant conditions. 14 15 B. The contract claim for money owed and due the contract Federal Copyright Infringement Claims The effect of the forum selection clause on Phillips' 16 copyright claims presents a more difficult question. 17 language of that clause frames our question: 18 copyright claims arise out of the recording contract? 19 The Do Phillips' Plaintiff implicitly offers a straightforward argument of 20 mutual exclusivity: Because his copyright infringement claims 21 arise under the Copyright Act, they cannot arise out of the 22 contract. 23 1964) (Friendly, J.), we held a claim arises under the Copyright 24 Act and accordingly falls within the jurisdiction of the federal 25 courts if "the complaint is for a remedy expressly granted by the 26 Act, e.g., a suit for infringement or for the statutory royalties In T.B. Harms Co. v. Eliscu, 339 F.2d 823 (2d Cir. 16 1 for record reproduction." 2 Mashantucket Pequot Tribe, 204 F.3d 343, 349, 355 (2d Cir. 2000) 3 (reaffirming Harms test in federal jurisdiction context). 4 Two and Three of Phillips' complaint allege direct and indirect 5 copyright infringement and request remedies under § 504 of the 6 Copyright Act, 17 U.S.C. § 504. 7 under the Copyright Act. 8 invoked. 9 F.2d 228, 229 (2d Cir. 1982) (holding defendant's interposition 10 of a contract as defense to copyright claims did not transform 11 copyright suit into breach of contract action). 12 Id. at 828; see Bassett v. Counts We agree these claims arise Thus, federal jurisdiction is properly See Kamakazi Music Corp. v. Robbins Music Corp., 684 The relevance of Harms to the present inquiry is where we 13 part from appellant. Despite its surface appeal, we are not 14 persuaded by Phillips' suggestion that a claim arising under the 15 Copyright Act for jurisdictional purposes cannot also "arise out 16 of" a contract for purposes of interpreting a forum selection 17 clause. 18 19 20 21 22 1. Federal Courts Have Repeatedly Found Statutory Claims to "Arise out of" Contract in Interpreting Scope of Contractual Provisions Insofar as Harms relies on the law invoked by the plaintiff 23 to state his claims, it is anchored in doctrines that have long 24 governed our exercise of "arising under" jurisdiction under 28 25 U.S.C. § 1331, whereby "[a] suit arises under the law that 26 creates the cause of action," Am. Well Works Co. v. Layne & 27 Bowler Co., 241 U.S. 257, 260 (1916) (Holmes, J.), and federal 28 jurisdiction is proper where the complaint "is so drawn as to 17 1 seek recovery directly under the Constitution or laws of the 2 United States," Bell v. Hood, 327 U.S. 678, 681 (1946). 3 Looking to cases involving similar contractual provisions 4 and claims under other laws of the United States, we see that 5 federal courts have routinely rejected Phillips' suggestion that 6 a claim arising under a law of the United States is exempt from 7 provisions governing disputes between contracting parties. 8 e.g., Scherk, 417 U.S. at 508-09, 520-21 (holding that claim 9 under Securities Exchange Act was covered by arbitration clause See, 10 in international contract governing "any controversy or claim 11 [arising] out of this agreement or the breach thereof"); Bense, 12 683 F.2d at 720 (finding complaint brought under federal 13 antitrust law arose from distribution agreement between parties); 14 Abbott Labs., 476 F.3d at 424 (rejecting plaintiff's argument 15 that breach of fiduciary duty claim arising under Delaware tort 16 law did not arise from the contract). 17 Moreover, it is inappropriate in the present context to 18 depend solely on the legal labels used by plaintiff to decide if 19 his case arises out of the contract. 20 federal jurisdiction, we recognize the plaintiff is in charge of 21 deciding what law he will rely upon in bringing suit, Bell, 327 22 U.S. at 681; see Bassett, 204 F.3d at 355. 23 causes of action stated by plaintiff afford all the information 24 we need to decide whether "arising under" jurisdiction lies. 25 does not follow that plaintiff is the master to decide the 26 meaning of a disputed contractual provision, which is, in effect, 18 When the question is one of It follows that legal It 1 what appellant suggests in asking us to hold that his claims do 2 not arise out of the recording contract based solely on the laws 3 he cites in his complaint. 4 inconsistent with our refusal in Roby to allow "a party's solemn 5 promise to be defeated by artful pleading." Phillips' proposed approach is 996 F.2d at 1360. 6 Instead, when ascertaining the applicability of a 7 contractual provision to particular claims, we examine the 8 substance of those claims, shorn of their labels. 9 This approach is consistent with the focus on factual allegations Id. at 1361. 10 rather than on the causes of action asserted when deciding 11 whether an arbitration clause applies to particular claims. 12 JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 173 (2d Cir. 13 2004); Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846 (2d 14 Cir. 1987). See 15 Because we cannot presume that the parties intended to 16 exclude all statutory claims, or even all copyright claims, from 17 the forum selection clause, we examine the substance of Phillips' 18 claims as they relate to the precise language of the clause. 19 New Moon, 121 F.3d at 33 ("The scope of the forum selection 20 clause is a contractual question that requires the courts to 21 interpret the clause and, where ambiguous, to consider the intent 22 of the parties."); Wyeth, 119 F.3d at 1075 ("[W]hether or not a 23 forum selection clause applies depends on what the specific 24 clause at issue says."). 19 See 1 2. Meaning of "Arise Out Of" 2 To "arise out of" means "to originate from a specified 3 source," Webster's Third New International Dictionary 117 (1981); 4 see Coregis Ins. Co. v. Am. Health Found., Inc., 241 F.3d 123, 5 128 (2d Cir. 2001), and generally indicates a causal connection, 6 Coregis, 241 F.3d at 128. 7 We do not understand the words "arise out of" as 8 encompassing all claims that have some possible relationship with 9 the contract, including claims that may only "relate to," be 10 "associated with," or "arise in connection with" the contract. 11 See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 12 U.S. 614, 644 (1985) (Stevens, J., dissenting) (distinguishing 13 between scope afforded by phrases "arise" out of and "in relation 14 to"); Coregis, 241 F.3d at 128-29; Wyeth, 119 F.3d at 1074 15 (reasoning that "arising in relation to" is broader than "arising 16 under"); but cf. Roby, 996 F.2d at 1361 (declining to 17 differentiate between phrases "relating to," "in connection 18 with," and "arising from" and holding that broadly worded clause 19 encompassed non-contract claims). 20 In the same vein, we decline to ascribe to these three words 21 the expansive connotations set out in Omron Healthcare, Inc. v. 22 Maclaren Exps. Ltd., 28 F.3d 600 (7th Cir. 1994), where the 23 Seventh Circuit enforced a substantially similar forum selection 24 clause in a comparable factual scenario. 25 Circuit enforced a forum clause covering "all disputes arising 26 out of" a contract against the plaintiff-distributor who had 20 In Omron, the Seventh 1 brought suit alleging that the defendant-manufacturer continued 2 to sell merchandise bearing the plaintiff's trademark after the 3 distribution agreement between the parties had terminated. 4 at 601-04. 5 resolution of which arguably depend on the construction of an 6 agreement 'arise out of' that agreement." Id. The Omron court reasoned that "all disputes the Id. at 603. 7 The scope attributed by the Seventh Circuit to the words 8 "arise out of" was adopted from its interpretation of arbitration 9 clauses. Id. at 603. Like the Seventh Circuit, typically we 10 view phrases similar to "arise out of" in arbitration clauses to 11 cover collateral matters that implicate issues of contract 12 construction. 13 court in Omron, we decline to import whole the interpretive 14 guidelines developed by the federal courts to assess the scope of 15 arbitration clauses into the present context. 16 at 603. See Louis Dreyfus, 252 F.3d at 224-25. Unlike the See Omron, 28 F.3d 17 Our assessment of the scope of arbitration clauses is 18 governed by the Federal Arbitration Act, 9 U.S.C. § 1, et seq., 19 which establishes "as a matter of federal law" that "any doubts 20 concerning the scope of arbitrable issues should be resolved in 21 favor of arbitration," including where "the problem at hand is 22 the construction of the contract itself." 23 at 626. 24 the arbitration clause is not susceptible of an interpretation 25 that covers the asserted dispute," the federal courts are obliged 26 to find a particular claim falls within the scope of an Mitsubishi, 473 U.S. "[U]nless it may be said with positive assurance that 21 1 arbitration clause. Genesco, 815 F.2d at 847 (quoting S.A. 2 Mineracao da Trindade-Samitri v. Utah Int'l, Inc., 745 F.2d 190 3 (2d Cir. 1984)). 4 While we do not overlook the Supreme Court's emphatic 5 endorsement of freely negotiated and reasonable forum selection 6 clauses, see, e.g., M/S Bremen, 407 U.S. at 13-14, or our own 7 commitment to enforcing applicable forum clauses, see, e.g., 8 Roby, 996 F.2d at 1362-63, the absence of a congressional policy 9 on forum clauses prompting us to err on the side of coverage is 10 11 significant. Specifically, we see no reason to presume the parties meant 12 anything other than the dictionary definition of the term: to 13 originate from a specified source. 14 International Dictionary 117 (1981). 15 likely where parties wishing to designate a mandatory forum to 16 hear a broader category of disputes are free to do so. 17 e.g., M/S Bremen, 407 U.S. at 2 ("Any dispute arising must be 18 treated before the London Court of Justice."); Abbott Labs., 476 19 F.3d at 422 (designating a mandatory forum for "a dispute . . . 20 arising from, concerning or in any way related to this 21 Agreement"). Webster's Third New This meaning is especially See, 22 Further, we approve of the approach outlined by the Third 23 Circuit, which highlights the language-specific nature of this 24 inquiry and discounts the precedential weight of cases that deal 25 with dissimilarly worded clauses. 26 ("Drawing analogy to other cases is useful only to the extent 22 Wyeth, 119 F.3d at 1075 1 those other cases address contract language that is the same or 2 substantially similar to that at issue."). 3 3. Phillips' Federal Copyright Claims 4 With the preceding discussion on the scope of the forum 5 selection clause as background, we turn now to ascertain whether 6 Phillips' copyright claims originate from the recording contract. 7 The substance of Phillips' claims for direct and contributory 8 copyright infringement is that the defendants impermissibly 9 manufactured and distributed songs to which Phillips retained a 10 valid copyright. 11 under the Copyright Act, a plaintiff must show that (a) he owned 12 a valid copyright to the songs and (b) defendants copied original 13 constituent elements of these songs. 14 Domenick, 105 F.3d 99, 103 (2d Cir. 1997); see also Gershwin 15 Publ'g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 16 (2d Cir. 1971) (stating that claim for contributory copyright 17 infringement requires additional element that defendants, with 18 knowledge, induce, cause or materially contribute to infringing 19 conduct of another). 20 To succeed on a claim for direct infringement See Fonar Corp. v. To decide whether Phillips' copyright claims arise out of 21 the agreement, we are therefore required to determine if 22 Phillips' rights -- here predicated on valid ownership of the 23 copyrights to the 15 songs -- originate from the recording 24 contract. 25 recording contract to establish his ownership of the relevant 26 copyrights, but on his authorship of the work, a status afforded We hold they do not. Appellant does not rely on the 23 1 him as the composer who translates an idea into a fixed, tangible 2 musical expression entitled to copyright protection. 3 Creative Non-Violence v. Reid, 490 U.S. 730, 737 (1989); see also 4 17 U.S.C. §§ 102(a), 201(a). 5 -- there is no suggestion of bad faith on his part -- that he has 6 been the rightful owner of the copyrights from the moment the 7 songs became entitled to copyright protection. 8 nature of his asserted ownership distinguishes Phillips' case 9 from one in which a plaintiff-creator asserts that the relevant Cmty. for Plaintiff asserts, not implausibly The uninterrupted 10 copyrights reverted to him upon breach of contract by the 11 defendants. 12 § 13:13 (2006) (distinguishing factual scenarios in which 13 plaintiffs' copyright/contract claims may arise). 14 Phillips were to succeed in persuading the trial court of his 15 interpretation of the recording contract, success on the merits 16 of his copyright claims would leave the recording contract 17 undisturbed. See Howard B. Abrams, 2 The Law of Copyright, Indeed, if 18 In reasoning that Phillips' copyright claims do not arise 19 out of the contract because Phillips has asserted no rights or 20 duties under that contract, we find support in our decision in 21 Corcovado. 22 into two contracts, one with a publisher (predecessor of the 23 defendants) assigning original term copyrights to five songs, and 24 another with the plaintiff assigning the renewal term copyrights. 25 Id. at 680-81. 26 alleging infringement of its renewal term copyrights, the 981 F.2d at 681-83. In that case, a musician entered When the plaintiff brought suit in federal court 24 1 defendants moved to dismiss on the basis of the forum selection 2 clause contained in their separate contract with the musician. 3 Id. at 681. 4 the forum clause, contained in a contract that was relevant only 5 as a defense, was without effect. 6 We affirmed the denial of the motion and held that Id. at 682-83. Here too, while the defendants are expected to invoke the 7 contract, Phillips denies that the contract has any role or 8 relevance whatever with respect to his copyright claims. 9 Cheever v. Acad. Chicago Ltd., 685 F. Supp. 914, 916-17 (S.D.N.Y. 10 1988); cf. Hugel v. Corp. of Lloyd's, 999 F.2d 206, 209 (7th Cir. 11 1993) ("Regardless of the duty sought to be enforced in a 12 particular cause of action, if the duty arises from the contract, 13 the forum selection clause governs the action."). 14 recording contract is only relevant as a defense in this suit, we 15 cannot say that Phillips' copyright claims originate from, and 16 therefore "arise out of," the contract. 17 See Because the In Corcovado, neither party had signed the contract 18 containing the forum clause. 19 circumstance facilitated our ruling the plaintiffs' claims were 20 wholly independent of the contract, non-signatory status is not 21 dispositive of the question of applicability of a forum clause to 22 a plaintiff's claims. 23 court decision that held that forum clause had no effect on 24 signatory who asserted no rights under the contract). 25 26 981 F.2d at 682. While this See id. (citing with approval district The recording contract, as already noted, mandates that any legal proceedings that may arise out of it be brought in England. 25 1 We do not construe the reference to proceedings, as opposed to 2 claims, as requiring us to take into consideration the source of 3 rights or duties asserted on defense. 4 1074 (reasoning that reference to dispute in forum clause 5 implicates broader reach than reference to claim); Abbott Labs., 6 476 F.3d at 424 (same). 7 proceeding is brought and thus obligates the party who brings the 8 suit (or other claims, see Karl Koch Erecting Co. v. N.Y. 9 Convention Ctr. Dev., 838 F.2d 656, 659 (2d Cir. 1988)) to decide But see Wyeth, 119 F.3d at The clause speaks only to where a 10 where his suit may be heard. 11 divine, or anticipate, the defenses, or any other legal action, 12 that may be interposed by another party to the suit. 13 In most cases the plaintiff cannot Moreover, the proceedings on the copyright infringement 14 claims here do not originate from the recording contract; the 15 proceedings may begin in court without any reference to the 16 contract. 17 contract arises when the defendants raise their defenses. 18 this sequence of events, one cannot say that the origins of the 19 proceedings were in the recording contract. 20 The only nexus between the proceedings and the Given Our focus on the source of the rights or duties sought to be 21 enforced by the complaining party allows us to distinguish the 22 only precedent cited by defendants where we addressed a similarly 23 worded forum clause. 24 on basis of clause covering "any suits or causes of action 25 arising directly or indirectly from this [agreement]"). 26 Bense, the plaintiff could only show injury by demonstrating that Bense, 683 F.2d at 720 (reviewing dismissal 26 In 1 the defendant had breached the contract by terminating without 2 due cause. 3 source of the right, duty and injury asserted by the plaintiff 4 and we accordingly held the clause to govern his claims. 5 721-22. 6 As a consequence, we conclude Phillips' copyright claims did not 7 originate in the recording contract and are therefore not 8 governed by the forum selection clause. The contract containing the forum clause was the Such reasoning has no application to the case at hand. 9 10 Id. at C. Phillips' State Law Claims Phillips has asserted two alternative causes of action under 11 state law for unjust enrichment and unfair competition. 12 premised on defendants' allegedly improper exploitation of the 15 13 songs. 14 federal copyright claims, his state law claims do not originate 15 from the recording contract and are exempt from operation of the 16 forum selection clause. 17 Both are For the reasons just discussed in relation to appellant's On remand, the district court should determine whether one 18 or both of Phillips state law claims are preempted by the 19 Copyright Act. 20 Pictures, Inc., 373 F.3d 296, 304-06 (2d Cir. 2004) (setting 21 forth preemption doctrine as applied to copyright claims). 22 think it likely, without deciding, that they are. 23 (finding plaintiff's unjust enrichment claim under New York law 24 preempted by Copyright Act); Computer Assocs. Int'l, Inc. v. 25 Altai, Inc., 982 F.2d 693, 716-17 (2d Cir. 1992) (stating that 26 unfair competition claims grounded solely on copying are See generally Briarpatch Ltd. v. Phoenix 27 We See id. at 306 1 preempted); Warner Bros. Inc. v. Am. Broad. Cos., 720 F.2d 231, 2 247 (2d Cir. 1983) (same as Briarpatch). 3 The district court may of course properly exercise 4 supplemental jurisdiction over any state law claim surviving 5 preemption, but the decision to decline such jurisdiction 6 pursuant to 28 U.S.C. § 1367(c) is left to its discretion, see 7 Briarpatch, 373 F.3d at 308. 8 9 10 11 IV Enforcement of the Forum Selection Clause to Dismiss Contract Claim Was Not Unreasonable Under M/S Bremen, dismissal of Phillips' breach of contract 12 claim is proper unless appellant makes a prima facie showing that 13 the clause should be set aside. 14 121 F.3d at 29 (holding at initial stage of litigation plaintiff 15 required to show prima facie that chosen forum is proper). 16 have explained that a forum clause is enforceable unless (1) its 17 incorporation was the result of fraud or overreaching; (2) the 18 law to be applied in the selected forum is fundamentally unfair; 19 (3) enforcement contravenes a strong public policy of the forum 20 state; or (4) trial in the selected forum will be so difficult 21 and inconvenient that the plaintiff effectively will be deprived 22 of his day in court. 23 407 U.S. at 15; see New Moon, We Roby, 996 F.2d at 1363. Phillips does not contend the first three circumstances are 24 present here. His argument, under the fourth factor, is that 25 none of his witnesses, documents, or any parties to the action 26 are located in England, rendering litigation in that country 27 impossible. Appellant also notes that defendants have proffered 28 1 no evidence that their relevant documents or witnesses are 2 located in England. 3 The gap in Phillips' reasoning is that his averments suggest 4 that litigation in England may be more costly or difficult, but 5 not that it is impossible. 6 -- whether affecting him personally or a component of his case or 7 prevailing in England generally -- that would prevent him from 8 bringing suit in England. 9 67 F.3d 7, 10-11 (2d Cir. 1995) (enforcing clause requiring U.S. He has not alleged any circumstances See Effron v. Sun Line Cruises, Inc., 10 citizen to litigate in Greece and noting that the distance 11 between a selected forum and pertinent parties or places did not 12 render a forum inconvenient if readily accessible by air travel). 13 In addition, Phillips has not declared any of his claimed 14 hardships are other than the obvious concomitants of litigation 15 abroad, id. at 10, or were not foreseeable when he agreed to 16 litigate in England. 17 M/S Bremen, 407 U.S. at 16. In light of our holding that only Phillips' breach of 18 contract claim, which is levied against defendant BBE, is subject 19 to the forum clause, we do not address Phillips' contention that 20 the clause is inoperative against the remaining defendants who 21 were not signatories to the recording contract. 22 23 24 25 V Separate Treatment of Separate Claims Is Appropriate Where Some But Not All Claims Are Subject to the Clause Analyzing separately each claim asserted by Phillips, we 26 have held that Phillips' federal copyright claims and state law 27 claims are outside the ambit of the forum clause, while his 29 1 contract claim is subject to it. 2 is proper in these circumstances to dismiss one claim and retain 3 jurisdiction over others. 4 We address finally whether it We are aware that the commencement of separate proceedings 5 in two countries is a likely inconvenience to the parties and 6 that they, in choosing to refer to proceedings instead of claims, 7 may have intended to bundle all claims constituting any 8 proceeding to avoid fractured litigation. 9 that the parties' intent and continued interests may lie in We have considered 10 treating Phillips' five claims uniformly, but our twin 11 commitments to upholding forum selection clauses where these are 12 found to apply and deferring to a plaintiff's proper choice of 13 forum constrain us in the present context to treat Phillips' 14 claims separately. 15 U.S. 213, 221 (1985) (holding that district courts are required 16 to compel arbitration of claims subject to arbitration clause 17 "even if the result is 'piecemeal' litigation"). 18 19 Cf. Dean Witter Reynolds, Inc. v. Byrd, 470 CONCLUSION Accordingly, for the foregoing reasons, we affirm the 20 dismissal of Phillips' breach of contract claim, reverse the 21 dismissal of his remaining claims, and remand the case to the 22 district court for further proceedings consistent with this 23 opinion. 30

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