The opinion of the court was delivered by: Bua, District Judge.
Before the Court is defendants' motion to dismiss the complaint
for failure to state a claim and lack of subject matter
jurisdiction. For the reasons stated herein, defendants' motion
In considering a motion to dismiss, the Court must accept all
well-pleaded material facts as true and must make all reasonable
inferences in a light most favorable to the plaintiff. City of
Milwaukee v. Saxbe, 546 F.2d 693, 704 (7th Cir. 1976). The
Court, however, is not required to accept legal conclusions that
may be alleged or that may be drawn from the pleaded facts. Id.
Under these principles, the following facts are assumed as true
for purposes of this motion.
Plaintiff Friedman, Eisenstein, Raemer & Schwartz ("the
Friedman partnership") is a partnership of certified public
accountants doing business in Chicago, Illinois. Plaintiff
Practice Development Institute, Ltd. ("PDI") is an Illinois
corporation engaged in the business of advising accountants on
various areas of the accounting profession. Defendants Allan B.
Afterman ("Afterman") and Donald W. Bernard ("Bernard") are
certified public accountants doing business in Northfield,
Illinois. Defendant CPA Consulting Group, Ltd. ("CCG") is an
organization which, like PDI, is engaged in the business of
advising accountants on various areas of the accounting
profession. Afterman is the principal owner of CCG.
Copyright Infringement Claim
In Count I of their five-count complaint, plaintiffs allege
copyright infringement and invoke the Court's jurisdiction under
28 U.S.C. § 1331 and 1338. Plaintiffs allege that the Friedman
partnership is the owner of a publication entitled "Practitioners
Technical Bulletin," which has been registered with the United
States Copyright Office in compliance with the Copyright Act of
1976. See Complaint, ¶¶ 5, 6 and Exhibit A. Plaintiffs further
allege that defendants have infringed the copyrighted material by
distributing a publication entitled "Accounting & Auditing Update
Service." Id. at ¶ 7.
Plaintiffs invoke the Court's jurisdiction over Counts II
through V under 28 U.S.C. § 1338(b) and the doctrine of pendent
jurisdiction. Counts II, III and V allege that defendant Afterman
breached an employment contract; Count IV charges Afterman with
theft of plaintiffs' client mailing lists.
Under 28 U.S.C. § 1338(b), the Court may exercise jurisdiction
over unfair competition claims which are joined with a
"substantial and related" copyright claim. The Seventh Circuit
has outlined two tests for determining whether an unfair
competition claim is "related" for purposes of § 1338(b). First,
the "more liberal view" holds that two claims are related if they
have the same "factual nucleus" required for pendent jurisdiction
under United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct.
1130, 16 L.Ed.2d 218 (1965). Second, the "more restrictive view"
holds that two claims are related only if they "rest upon
substantially identical facts." Powder Power Tool Corp. v.
Powder Actuated Tool Co., 230 F.2d 409, 413 (7th Cir. 1956). The
Seventh Circuit has twice expressly declined to decide which test
should be applied in this Circuit. See Pate Co. v. RPS Corp.,
685 F.2d 1019, 1026 (7th Cir. 1982); Particle Data Laboratories,
Inc. v. Coulter Electronics, Inc., 420 F.2d 1174 (7th Cir.
1969). This Court, however, predicts that the Seventh Circuit
when faced squarely with the issue, will follow the Second
Circuit and adopt the "more liberal view" of § 1338(b). See
Maternally Yours, Inc. v. Your Maternity Shop, 234 F.2d 538 (2d
Cir. 1956); Thompson Tool Co., Inc. v. Rosenbaum, 443 F. Supp. 559
(D.Conn. 1977). Accordingly, the issue in this case is
whether plaintiffs' state law claims and the copyright claim are
derived from a common nucleus of operative facts.
The facts alleged in Counts II through V are as follows: Counts
II and III allege that on May 1, 1981, plaintiffs entered into an
employment contract with defendant Afterman. The agreement
allegedly provided that Afterman would be employed by plaintiffs
as Director of Professional Development. In December, 1982,
Afterman voluntarily terminated the employment contract.
Paragraph 3 of the employment contract prohibited Afterman from
rendering professional services to plaintiffs' clients for a
period of three years following termination of his employment.
Plaintiffs allege that Afterman breached paragraph 3 by rendering
services to plaintiffs' clients and distributing a newsletter
entitled "Accounting & Auditing Update Service" to plaintiffs'
In Count IV of the Complaint, plaintiffs allege that Afterman
stole plaintiffs' mailing lists of clients during his period of
employment. Count V alleges that Afterman breached another
provision of the employment contract by not submitting certain
royalties to plaintiffs as required by the contract.
It is apparent that the facts alleged in Counts II through V of
the Complaint arise from the employment relationship between
plaintiffs and defendant Afterman. Issues relating to the scope
and terms of the employment relationship between Afterman and
plaintiffs will undoubtedly arise at the trial of these Counts.
Regarding the copyright claim, defendants apparently intend to
contest plaintiffs' ownership rights in the material. The
resolution of the ownership issue may turn on the Court's
interpretation of the employment relationship between Afterman
and plaintiffs. For
these reasons, the breach of contract claims in Counts II, III
and V; the theft claim in Count IV; and the copyright claim in
Count I derive from a common nucleus of operative facts. See
United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130,
1138, 16 L.Ed.2d 218 (1966). Additionally, these claims are such
that plaintiffs would ordinarily expect them to be tried in one
judicial proceeding. Given the important policies of conservation
of judicial energy and the avoidance of multiplicity of
litigation, the Court exercises its discretion, pursuant to
28 U.S.C. § 1338(b) and the doctrine of pendent jurisdiction, to
accept jurisdiction over Counts II through V of plaintiffs'
Complaint. See Rosado v. Wyman, 397 U.S. 397, 405, 90 S.Ct.
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