Krasemann v. Scholastic Inc.

          ORDER

          Dominic W. Lanza, United Slates District Judge.

         Pending before the Court is Defendant Scholastic Incorporated's (“Scholastic”) motion to dismiss. (Doc. 10.) For the following reasons, the Court denies the motion.^[1]

         BACKGROUND

         Plaintiffs Stephen Krasemann, Darrell Gulin, Johnny Johnson, and Daniel R. Krasemann (“Plaintiffs”), on behalf of themselves and others similarly situated, bring this copyright infringement action against Scholastic for the unlicensed use of their photographs. The facts alleged by Plaintiffs in the complaint (Doc. 1), taken as true for the purpose of ruling on Scholastic's motion to dismiss, are as follows.

         Plaintiffs own copyrights in various photographs. (Id. ¶ 12.) Plaintiffs entered into “representation agreements” with DRK Photo-a stock photo agency-granting DRK Photo the right to license their photographs to third parties in exchange for a percentage of the fees they negotiated. (Id. ¶¶ 2, 13.)

         Between 1993 and 2011, DRK Photo provided Scholastic-the world's largest publisher and distributor of children's books-with Plaintiffs' photographs “for the limited purpose of enabling Scholastic to select specific images for subsequent licensing requests.” (Id. ¶¶ 11, 14.) DRK Photo expressly prohibited Scholastic from using the photographs “until submission of and payment of an invoice” indicating that Scholastic was authorized to use the photographs. (Id. ¶ 14.)

         Scholastic requested and secured limited-use licenses for 166 photographs belonging to Plaintiffs. (Id. ¶ 15.) Each license was expressly limited by “publication, number of copies, distribution area, image size, language, duration and/or media (print or electronic).” (Id. ¶ 18.)

         Shortly after obtaining licenses for Plaintiffs' photographs, Scholastic: (1) printed or distributed the photographs without permission after the licenses obtained from DRK Photo were exhausted; (2) distributed the photographs in geographic locations not covered by the licenses; (3) published the photographs in electronic, ancillary, or derivative products not covered by the licenses; (4) printed and distributed the photographs in unlicensed international editions and foreign language products; and (5) printed and/or distributed the photographs after expiration of temporal limits in the licenses obtained from DRK Photo. (Id. ¶ 16.)

         DISCUSSION

         Scholastic moves to dismiss the complaint for three reasons. Each reason applies to a subset of the photographs at issue in this case, but not to each photograph. Specifically, Scholastic argues that: (1) the claims concerning 54 of the photographs are subject to arbitration agreements; (2) the claims concerning 67 of the photographs must be asserted as breach-of-contract claims, not copyright infringement claims; and (3) any claims concerning the remaining photographs are barred by the statute of limitations. (Doc. 10.)^[2]

         I. Legal Standard

         “[T]o survive a motion to dismiss, a party must allege ‘sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” In re Fitness Holdings Int'l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Iqbal, 556 U.S. at 678). “[A]ll well-pleaded allegations of material fact in the complaint are accepted as true and are construed in the light most favorable to the non-moving party.” Id. at 1144-45 (citation omitted). However, the court need not accept legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 679-80. The court also may dismiss due to “a lack of a cognizable legal theory.” Mollett v. Netflix, Inc., 795 F.3d 1062, 1065 (9th Cir. 2015) (citation omitted).

         II. Analysis

         A. Arbitration

         Scholastic argues that the disputes regarding 54 of the photographs (those for which licenses were issued before June 18, 1997) are subject to arbitration agreements, so the Court must dismiss the claims related to those photographs. (Doc. 10 at 4-6.) 1. Scope of Review Scholastic has moved under Rule 12(b)(6) to dismiss the disputes regarding the photographs it claims are subject to arbitration agreements, rather than moving to compel arbitration.^[3] This approach is unusual because “[t]he question of arbitrability usually arises in the context of a motion to compel arbitration.” Nicosia v. Amazon.com, Inc., 834 F.3d 220, 229 (2d Cir. 2016). See also Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 771 (3d Cir. 2013) (“The issue typically arises when one of the parties files a motion to compel arbitration.”).

         This approach also raises questions concerning what evidence the Court may consider when ruling on Scholastic's motion. When considering a motion to compel arbitration, district courts are permitted to consider evidence outside the pleadings. Regents of Univ. of California v. Japan Sci. & Tech. Agency, 2014 WL 12690187, *3 n.24 (C.D. Cal. 2014) (“Although the court normally cannot consider matters outside the pleadings in deciding a Rule 12(b)(6) motion to dismiss . . . it may consider such evidence in deciding a motion to compel arbitration.”); Breckenridge Edison Dev., L.C. v. Sheraton Operating Corp., 2014 WL 4892885, *1 n.2 (S.D.N.Y. 2014) (“Courts may consider documents outside the pleadings when deciding a motion to compel arbitration.”). In contrast, when considering a motion to dismiss under Rule 12(b)(6), district courts normally can't consider matters outside the pleadings without converting the motion into a motion for summary judgment.

         Here, neither party has addressed which standard should apply. The Court also hasn't identified any Ninth Circuit case law addressing this issue. Thus, the Court will follow the approach established by the Second Circuit in Nicosia. There, the defendant “did not move to compel arbitration and instead moved pursuant to Rule 12(b)(6) to dismiss the complaint for failure to state a claim upon which relief may be granted, relying on the arbitration provision in [underlying contract].” 834 F.3d at 229-30. The Second Circuit explained that, because the “motion to dismiss neither sought an order compelling arbitration nor indicated that [the defendant] would seek to force [the plaintiff] to arbitrate in the future, it was proper not to construe the motion to dismiss as a motion to compel arbitration, to which the summary judgment standard would apply.” Id. at 230. The Second Circuit further concluded that, because the district ...