United States District Court, N.D. Illinois
February 10, 2004.
NANCY LAMBERT, Plaintiff,
PEM-AMERICA, INC. Defendant
The opinion of the court was delivered by: DAVID COAR, District Judge
MEMORANDUM OPINION AND ORDER
This case comes before the Court on Defendant Pem-America Inc.'s
("Pem-America" or "Defendant") motion to dismiss Plaintiff Nancy
Lambert's ("Lambert" or "Plaintiff) Amended Complaint ("Complaint") as an
improper anticipatory filing, or in the alternative, transfer this matter
to the Southern District of New York. Further, if this Court does not
dismiss or transfer Plaintiff's Complaint, Defendant moves to dismiss
Count II of her Complaint. Additionally, Plaintiff requests that this
Court enjoin the Defendant from proceeding with its cause of action filed
in the Southern District of New York. For the reasons set forth below:
(1) Defendant's motion to dismiss Lambert's Complaint as an improper
anticipatory filing, or in the alternative, transfer venue is DENIED; (2)
Plaintiff's motion to enjoin Defendant from proceeding in its cause of
action filed in the Southern District of New York is GRANTED; however,
Defendant is granted leave to file any claims it may have against the
Plaintiff as counterclaims to her Complaint; and (3) Defendant's motion
to dismiss Count II of Plaintiff's Amended Complaint is GRANTED.
FACTUAL AND PROCEDURAL HISTORY
Lambert is a designer of quilts and other home products. Pem-America is
a New York corporation in the business of designing home products for
distribution and sale in the United States. From October 1, 1999 to
February 15, 2003, Lambert designed more than 1,000 home decorating
products, including quilts, throw pillows, window treatments, and bed
skirts for Pem-America. On February 15, 2003, Plaintiff terminated her
business relationship with the Defendants. One of the central disputes
between the Parties is whether Lambert was an independent contractor
(Plaintiff's position) when she designed home products for Pem-America,
or whether she was an actual employee (Defendant's position). This
dispute goes to the heart of the declaratory judgment relief Plaintiff is
seeking, because designating Plaintiff as an independent contractor will
mean she owns the copyrights to the home products she designed, while
designating Lambert as an employee of Pem-America will mean that it owns
the copyrights to Lambert's designs.
On May 19, 2003, Lambert filed suit in this Court, requesting
declaratory judgment relief and alleging breach of contract. On May 22,
2003, three days after Plaintiff filed her action in this Court,
Pem-America filed suit against Lambert in the United States District
Court for the Southern District of New York (captioned PEM-America v.
Nancy Lambert, Civil No. 03 Cv 3706), requesting declaratory relief
related to the home products Lambert designed, and compensation for
furniture in Lambert's possession-essentially a mirror image of the cause
of action Plaintiff filed in this Court.
Because Lambert's cause of action was filed in this Court prior to
Pem-America filing its cause of action in the Southern District of New
York, this Court must decide where these claims should be heard, and
whether the Illinois Action or the New York Action should proceed. See
Asset Allocation and Management Co. v. Western Employers Ins. Co.,
892 F.2d 566, 572 (7th Cir. 1989); MSK Ins., Ltd, v. Employers Reinsurance
Corp., 212 F. Supp.2d 266, 267 (S.D.N.Y. 2002). For the reasons set forth
below, this Court determines that this Court should hear the Parties'
I. Was Lambert's Suit an Improper Anticipatory Filing
Defendant contends that Lambert's suit was filed in anticipation of its
suit against her, and should be deemed an improper anticipatory filing.
Pem-America contends that it is the "natural plaintiff in this suit, and
should have the choice of forum. Defendants are correct when they assert
that, "A suit for declaratory judgment aimed solely at wresting the
choice of forum from the `natural' plaintiff will normally be dismissed
and the case allowed to proceed in the usual way." Allendale Mut. Ins.
Co. v. Bull Data Systems. Inc., 10 F.3d 425, 431 (7th Cir. 1993) (citing
Tempco Elec. Heater Corp. v. Omega Engineering, Inc., 819 F.2d 746, 747
(7th Cir. 1987)). However, Pem-America does not provide sufficient
evidence to demonstrate it was the "natural" plaintiff in this dispute,
and that Lambert's decision to file suit at the moment she did was a race
to the courthouse. Both parties have an interest in determining Lambert's
relationship to Pem-America and who rightfully owns copyrights to the
products she designed. If a declaratory judgment action, "will clarify and
settle the disputed legal relationship and afford relief from the
uncertainty and controversy that created the issues, it is usually
resolved rather than dismissed." Nuccor Corp. v. Aceros Y Marquilas de
Occidente, S.A. de C.V., 28 F.3d 572, 578 (7th Cir. 1994) (citing
Tempco, 819 F.2d at 749). Therefore, this Court will not dismiss
Lambert's Complaint as an improper anticipatory filing.
II. Motion to Transfer Venue
Pem-America contends that even if Lambert's suit is not deemed an
improper anticipatory filing, her suit should be transferred to the
Southern District of New York, pursuant to 28 U.S.C. § 1404(a) (" §
1404(a)"). Under § 1404(a), a court may transfer a civil action, "for the
convenience of the parties and witnesses, in the interest of justice."
Transfer under § 1404(a) is appropriate if: (1) venue is proper in both
the transferor and transferee court; (2) transfer is for the convenience
of parties and witnesses; and (3) transfer is in the interests of
justice. Barnes v. Rollins Dedicated Carriage Services. Inc.,
976 F. Supp. 767, 768 (N.D. Ill. 1997). Whether a transfer is appropriate
pursuant to § 1404(a) is left to the sound discretion of the trial court.
Bryant v. ITT Corp., 48 F. Supp.2d 829, 832 (N.D. Ill. 1999) (citing
Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1293 (7th Cir.
1989); Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219 (7th Cir. 1986)).
Pem-America, the moving party, has the burden of showing that, "the
transferee forum is clearly more convenient." Coffey, 796 F.2d at
219-20. The parties do not dispute that venue is proper in both this
Court (the transferor court) and the Southern District of New York (the
transferee court). Therefore, this Court will address the second and
third prongs of the test to determine whether transfer of this matter to
the Southern District of New York is appropriate.
A. Convenience of Parties and Witnesses
The court considers three factors in order to determine if transfer is
convenient for parties and witnesses: (1) the plaintiff's choice of
forum; (2) the site of material events; (3) the availability of evidence in
each forum; and (4) the convenience of the parties litigating in the
respective forums. Barnes. 976 F. Supp. at 768. Each of these elements
will be addressed in turn.
1. Plaintiff's Choice of Forum
In general, a plaintiff's choice of forum is entitled to substantial
deference, particularly if that choice is also the plaintiff's home
forum. Central States. Southeast and Southwest Area Pension Fund v.
Salasnek Fisheries. Inc., 977 F. Supp. 888, 890 (N.D. Ill. 1997). At
all relevant times, Lambert resided in Illinois. Therefore, this Court is
Plaintiff's home forum, and her choice of forum will be given substantial
2. The Site of Material Events
While engaged in business for Pem-America, Plaintiff worked for
Pem-America from her Illinois home, and her Illinois office. Therefore,
this factor also weighs in favor of the Plaintiff.
3. Availability of Evidence in Each Forum
Defendant argues that because the Plaintiff has submitted much of the
relevant evidence in this case to Defendant's New York offices, this
favors litigating the case in the Southern District of New York.
However, Pem-America must demonstrate that it cannot bring crucial
documents to this district. Arena Football League, Inc. v. Roemer,
947 F. Supp. 337, 341 (N.D. Ill. 1996). Pem-America has not demonstrated
that this relevant evidence could not be returned to
Illinois in an expeditious and economic manner if the cause of action is
litigated here. Because evidence is readily accessible to either Court,
this factor weighs in favor of neither party.
4. The Convenience of the Parties Litigating in the Respective
When determining the convenience of the forum to the litigants, "the
court should consider their respective residences and their ability to
bear the expenses of litigating in a particular forum." Bryant, 48 F.
Supp.2d at 834 (citing Habitat Wallpaper and Blinds, Inc. v. K.T, Scott
Ltd. Partnership, 807 F. Supp. 470, 474 (N.D. Ill. 1992)). Clearly, this
Court is more convenient for Lambert, and the Southern District of New
York is more convenient for Pem-America. Further, transfer is not
appropriate if it, "merely transforms an inconvenience for one party into
an inconvenience for the other party." Chemical Waste, Management, Inc.
v. Sims, 870 F. Supp. 870, 876 (N.D. Ill. 1994) (citing Sage Products.
Inc. v. Devon Industries, Inc., 148 F.R.D. 213, 216 (N.D. Ill. 1993)).
Therefore, convenience of one forum over the other does not weigh in
favor of either the Plaintiff or the Defendant.
The Court must also consider the convenience of the Parties'
witnesses. "The Court must consider not only the number of witnesses
located in each forum but also the nature and importance of their
testimony when weighing the convenience of the transfer to potential
witnesses." Central States. 977 F. Supp. at 891 (citing Rohde v. Central
Railroad of Indiana, 951 F. Supp. 746, 748 (N.D. Ill. 1997)). The moving
party, Pem-America, "has the burden of showing who its witnesses are, the
nature of their testimony and how important that testimony will be to the
Three out of four of the critical witnesses Pem-America intends to call
are employees. The convenience of employee witnesses does not weigh in
favor or against transfer, as there is
presumption that Pem-America can assure the testimony of these witnesses.
Central States. 977 F. Supp. at 891 (citing Roadmaster Corp. v.
Nordictrack, Inc., Case No. 93 C 1260, 1993 WL 625537 at *5 (N.D. Ill.
1993)). In contrast, the Plaintiff lists five non-party witnesses who
reside in Illinois. Therefore, this forum would be more convenient for
witnesses, as the majority of non-employee witnesses reside in Illinois.
B. Interests of Justice
Whether a transfer under § 1404(a) will serve the interests of
justice, "embraces traditional notions of judicial economy rather than
the private interests of the litigants and their witnesses." Bryant, 48
F. Supp.2d at 834 (quoting TIG Ins. Co. v. Brightly Galvanized Prod.,
Inc., 911 F. Supp. 344, 346 (N.D. Ill. 1996)). The court makes
considerations concerning whether litigants are more likely to receive a
speedy trial in one district or the other, if the litigation is related to
other litigation in either forum, and in a diversity action, having a
federal judge try a case who is familiar with the applicable law.
Coffey. 796 F.2d at 221. The interests of justice, "may be determinative
in a particular case, even if the convenience of the parties and
witnesses might call for a different result." Id. at 220.
1. Speed of Trial
The case management statistics comparing the Northern District of
Illinois and the Southern District of New York show that the median time
to case disposition is three months shorter in Illinois (5.5 months in
Illinois compared to 8.3 months in New York). The median time to trial is
three months shorter in New York (26.0 months in Illinois compared to
23.0 months in New York). Therefore, this factor favors neither the
Plaintiff or Defendant.
2. Relation of this Case to Pending Litigation
In April 2003, Lambert was a non-party witness in an action pending in
the Southern District of New York involving Pem-America, captioned
Pem-America, Inc. v. Sunham Home Fashions, LLC, Case No. 03 Cv 1377
("Sunham Action"). In that action, currently pending before Judge John
F. Keenan of the Southern District of New York, Pem-America alleges
infringement of its copyrighted design "Velvet Garden" by Surinam Home
Fashions, LLC ("Sunham"). (PI, Ex, C, p. 2). Pem-America urges that it is
the author and owner of the design of "Velvet Garden" because it was
created as a "work-for-hire." (Id. at 4). Sunham contends that the author
and owner of the Velvet Garden design is Lambert and that designs she
made for Pem-America were in the capacity of an independent contractor.
(Id. at 5). During hearings related to Pem-America's motion for a
preliminary injunction against Sunham, Judge Keenan took testimony and
accepted briefing on the issue of whether Lambert was an employee or
independent contractor. Therefore, Defendant maintains, the Southern
District of New York is familiar with the facts and legal issues
underlying Lambert's cause of action, which should weigh in favor of
transfer to the Southern District of New York.
Plaintiff argues that in the Sunham Action, Pem-America takes the
position that Lambert's status as an employee or independent contractor is
irrelevant because Lambert had nothing to do with the creation of the
"Velvet Garden" design that is the subject of the Sunham Action. (PL Ex.
C, pp. 4-5). Pem-America's Vice President of New Product Development,
Larry Shapow, testified that he created the "Velvet Garden" design based
on work done by Pem-America's China supplier, Best Eastern, (Id., at 6).
Judge Keenan accepted Pem-America's testimony on that point. (Id. at 7).
As a consequence, Judge Keenan determined this finding
obviated the need to resolve the issue of whether Lambert was an
employee of Pem-America or an independent contractor (Id.) Therefore,
Plaintiff urges, the Sunham Action no longer directly addresses Lambert's
Plaintiff is correct when she asserts that the Sunham Action no longer
directly addresses her employment status. However, because testimony was
taken on Lambert's employment status, the Southern District of New York
does have familiarity with the facts surrounding this issue. Therefore,
this factor weighs in the Defendant's favor.
3. Having a Judge Familiar With Applicable State Law
The Parties' state law claims involve: (1) a dispute over the ownership
of property that was purchased and is located in Illinois; and (2) money
Pem-America is alleged to owe Lambert. Both claims are governed by
Illinois law. See American Heavy Trading. Inc. v. General Electric Co.,
No. 93 C 3609, 1996 WL 556742 at * 3 (applying Illinois choice of law
rules, holding that, "whether the defendant committed a conversion will
be determined by the substantive law of the state where the alleged
converter first exercised dominion over the chattel"); Barry Gilberg,
Ltd. v. Craftex Corp., Inc., 665 F. Supp. 585, 591 (N.D.'lll. 1987)
(applying Illinois choice of law, and holding that Illinois substantive
law applied to an Illinois sales representative's action for compensation
due from a New York manufacturer). Therefore, this factor weighs in
After weighing all factors, the Court determines that this case should
not be transferred to the Southern District of New York. Plaintiff has
chosen her home forum in which to litigate this cause of action. This is
the situs of material events leading to this dispute between the Parties.
Crucial evidence will be readily accessible to this Court. The majority
of non-employee witnesses
reside in Illinois. Any state law claims will be governed by Illinois
law. Although there is relevant pending litigation in the Southern
District of New York, that Court determined that it need not decide
whether Lambert was an employee or an independent contractor. Therefore,
this Court does not have to concern itself with the possibility of
conflicting rulings on Lambert's employment status if it does not
transfer the case. This Court determines that the factors it must
consider when determining whether to transfer this litigation to the
Southern District of New York weigh in favor of allowing the Plaintiff to
maintain her cause of action in this forum.
As a consequence of this Court's denial of Defendant's motion to
transfer venue, Pem-America will be allowed to file its claims against
Lambert in this Court as a counterclaim to Lambert's complaint.
Therefore, Defendant is enjoined from proceeding in its suit filed
against Lambert in the Southern District of New York. See Asset
Allocation. 892 F.2d at 572 ("There is overwhelming case authority that
the first court has the power . . . to enjoin the defendant from bringing
a separate suit against the plaintiff in another court, thereby forcing
the defendant either to litigate his claim as a counterclaim or abandon
III. Motion to Dismiss Count II of Lambert's Complaint
Because this Court has determined that it is the proper venue to hear
the Parties' claims, this Court will rule on Pem-America's motion to
dismiss Count II of Lambert's complaint. For the reasons set forth below,
Count II of Plaintiff's Amended Complaint is dismissed for failure to
state a claim upon which relief can be granted.
A. Legal Standard
In ruling on a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), the Court, "must accept all well pleaded allegations as true.
In addition, the Court must view these allegations in the light most
favorable to the plaintiff." Gomez v. Illinois State Board of Education,
811 F.2d 1030, 1039 (7th Cir. 1987). A party's claim should only be
dismissed if it is clear that no set of facts in support of the claim
would entitle the party to relief. Ledford v. Sullivan, 105 F.3d 354, 356
(7th Cir. 1997) (quoting Hishon v. King & Spaulding, 467 U.S. 69, 73
Pem-America contends that Count II of Lambert's amended complaint,
alleging Pem-America's fraud on the Copyright office, should be
dismissed. Pem-America argues: (1) Lambert's allegation that the
copyright office would have rejected the copyright applications at issue
is unsustainable as a matter of law; and (2) Lambert has failed to allege
fraud with the requisite particularity needed to sustain her claim.
A party alleging fraud on the Copyright Office must allege that the
copyright applicant knowingly failed to disclose certain information to
the Copyright Office with the intent to defraud that office and that the
Copyright Office would have probably denied the application if it had
been made aware of the undisclosed information. O.T. Pickell Buildings,
Inc. v. Witowski, Case No. 96 C 4233, 1998 WL 664949 at *5 (citing
Whimsicality, Inc. v. Ruble's Costume Co., Inc., 891 F.2d 452, 456 (2d
Cir. 1989); Santrayall v. Burrell, 993 F. Supp. 173, 175-76 (S.D.N.Y.
1998)). Many courts also have required a party alleging fraud to
demonstrate that it was prejudiced by the alleged fraud. O.T. Pickell
Buildings, 1998 WL 664949 at * 6.
In Count II of her Complaint, Lambert alleges: (1) Pem-America
submitted to the Copyright Office registration forms listing it as the
author of the home products Lambert designed, and designating them "works
made for hire" even though Pem-America knew that Lambert was the owner of
the copyrights, and that she had never transferred ownership to
Pem-America; and (2) If Pem-America had not intentionally defrauded the
Copyright Office, it would not have issued the fraudulent registrations.
Plaintiff's claim fails, as she cannot demonstrate that the Copyright
Office would have denied Pem-America's copyright application if it had
been made aware of allegedly undisclosed information. Lambert and
Pem-America both have competing claims to the copyrights for the home
products that Lambert designed. In a situation such as the one before the
Court, where the Copyright Office is faced with competing applications,
both applications are accepted and ownership becomes an issue to be
decided by the Courts. Cherie Amie, Inc. v. Windstar Apparel Corp.,
191 F. Supp.2d 343, 351 (S.D.N.Y. 2001). See also Community for Creative
Non-Violence v. Reid, 490 U.S. 730 (1989). Therefore, Lambert can allege
no set of facts that demonstrate that had the Copyright Office known that
there were competing copyright claims for the products Lambert designed
for Pem-America, it would not have issued copyrights to Defendant.
Because the Court has determined that Lambert has failed to state a claim
upon which relief can be granted in Count II of her Complaint, it need not
address whether Lambert has plead fraud with the requisite
For the foregoing reasons, Defendant's motion to dismiss Lambert's
Complaint as an improper anticipatory filing, or in the alternative,
transfer venue is DENIED; (2) Plaintiff's motion to enjoin Defendant from
proceeding in its cause of action filed in the Southern District of New
York is GRANTED; however, Defendant is granted leave to file any claims
it may have against the Plaintiff as counterclaims to her Complaint; and
(3) Defendant's motion to dismiss Count II of Plaintiff's Amended
Complaint is GRANTED.
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