Tattoo Art, Inc. v. TAT International, LLC

711 F. Supp. 2d 645, 2010 U.S. Dist. LEXIS 50342
CourtDistrict Court, E.D. Virginia
DecidedMay 14, 2010
DocketCivil Action 2:09cv314
StatusPublished
Cited by19 cases

This text of 711 F. Supp. 2d 645 (Tattoo Art, Inc. v. TAT International, LLC) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tattoo Art, Inc. v. TAT International, LLC, 711 F. Supp. 2d 645, 2010 U.S. Dist. LEXIS 50342 (E.D. Va. 2010).

Opinion

OPINION AND ORDER

MARK S. DAVIS, District Judge.

This matter is before the Court on Defendants TAT International, LLC (“TAT”) and Kirk Knapp’s (“Knapp”) (collectively “Defendants”) Motion to Dismiss and Request for Costs and Attorney’s Fees. (Docket Nos. 15 & 16.) The issues have been fully briefed, the parties have presented oral arguments, and the matter is now ripe for decision. For the reasons set forth below, the Court GRANTS Defendants’ Motion to Dismiss and DENIES Defendants’ Request for Costs and Attorney’s Fees.

I. BACKGROUND

Plaintiff Tattoo Art, Inc. (“Tattoo Art” or “Plaintiff’) is a Virginia corporation that is in the business of creating, copyrighting, and selling tattoo flash designs. Defendant TAT is a Michigan-based business, operated and controlled by Defendant Knapp, that creates and sells stencils for use in applying airbrush body art. On December 29, 2005, Tattoo Art and TAT entered into a licensing agreement (“Licensing Agreement” or “the Agreement”) granting TAT the exclusive right to create and sell stencils depicting any of the several hundred Tattoo Art designs subject to the Agreement. (Defs.’ Mot. to Dismiss, Ex. A.)

In May 2009, Tattoo Art sent TAT a letter terminating the Agreement based on TAT’s failure to report sales and pay royalties, and its unauthorized alteration of Tattoo Art’s copyrighted work. The termination letter directed TAT to cease and desist all reproduction and sale of Tattoo Art’s designs, demanded an accounting of sales conducted pursuant to the agreement, and requested that TAT contact Plaintiffs counsel. Defendant Knapp acknowledged receipt of Plaintiffs termination letter.

After receiving the termination letter, Defendants apparently continued to sell the previously licensed tattoo designs. Upon learning of the continued infringement, Plaintiff attempted to contact the Defendants to negotiate a resolution without initiating litigation. However, at that time, Plaintiff never formally requested that the parties submit the dispute to mediation. Because the Defendants were unresponsive to Plaintiffs efforts to negotiate a resolution, the parties were unable to settle the dispute. The instant lawsuit resulted.

On July 7, 2009, Tattoo Art filed a Complaint alleging that TAT breached the *648 terms of the Licensing Agreement and that both TAT and Knapp infringed Plaintiffs copyrights. 1 (Docket No. 1.) Even after filing its Complaint, Plaintiff continued to attempt to communicate with the Defendants in an effort to resolve the dispute. Defendants, however, refused to discuss the matter. On August 3, 2009, Defendants contacted Plaintiff to request an extension on the deadline for filing their answer, ostensibly to facilitate an amicable resolution outside of litigation. Plaintiff obliged. In fact, over the next several weeks, Plaintiff agreed to additional extensions for the filing of responsive pleadings in order to permit the parties to resolve the matter amicably. Although, at this time, neither party had requested mediation, both parties appeared interested in negotiating a resolution and avoiding litigation.

On September 23, 2009, the Defendants, for the first time, requested that the parties submit the dispute to formal mediation proceedings. Although Plaintiff advised counsel for the Defendants that it would agree to mediate the matter, mediation never took place, apparently because Defendants failed to respond. Thereafter, on October 12, 2009, the Defendants filed their Answer to Plaintiffs Complaint. (Docket No. 14.) On October 23, 2009, the parties exchanged emails that once again indicated a shared desire to mediate the matter rather than proceed with litigation. (PL’s Resp., Ex. 2.) Nevertheless, although both sides genuinely appeared to prefer mediation to litigation, Plaintiff and Defendants disagreed as to whether Tattoo Art would be required to dismiss the Complaint prior to the commencement of such mediation proceedings. In an apparent effort to ameliorate the Defendants’ concerns, Plaintiff offered to agree to a consent order staying further discovery or other proceedings pending mediation or a settlement conference. Defendants did not respond to this offer, and mediation ultimately never took place.

Soon thereafter, Defendants filed the instant Motion to Dismiss and Request for Costs and Attorney’s Fees. (Docket Nos. 15 & 16.) Plaintiff subsequently submitted a response, and the Defendants, in turn, filed a reply. (Docket Nos. 19 & 21.) The Court heard oral argument from the parties on the Defendants’ motion, and the matter is now ripe for decision.

II. DISCUSSION

Defendants move for dismissal of Plaintiffs Complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). Defendants argue that the Licensing Agreement expressly requires the parties to request any dispute arising from the Agreement be submitted to mediation prior to initiating litigation. Defendants contend that Plaintiff failed to pursue mediation before filing its Complaint and that the instant lawsuit must therefore be dismissed. Plaintiff disagrees, arguing that Defendants have waived their right to mediation, and, in any event, that Defendant Knapp is not a party to the mediation provision. In addition, Defendants seek an award of costs and attorney’s fees pursuant to a provision in the Agreement entitling the “prevailing party” in any action to enforce the Agreement to recoup costs incurred as a result of such action. For the reasons discussed below, the Court finds that because Plaintiff failed to *649 request mediation of the underlying dispute prior to commencing litigation, the instant action must be dismissed. The Court further finds that Defendants are not entitled to an award of costs and attorney’s fees as “prevailing parties]” in the action because the decision to dismiss is not an adjudication on the merits.

A. Applicable Law

At the threshold, because Defendants’ Motion to Dismiss and Request for Attorney’s Fees requires the Court to construe contractual provisions contained in the Licensing Agreement, the Court must determine which law governs any such interpretation. As the parties included a choice-of-law provision within the Agreement, this question is readily answered. Article XIII of the Licensing Agreement expressly provides that the Agreement “shall be construed in accordance with the laws of the Commonwealth of Virginia.” Defs.’ Mot. to Dismiss, Ex. A. The enforceability of such choice-of-law provisions depends on the applicable choice-of-law rules. Because jurisdiction in the instant lawsuit is based on both the statute conferring exclusive jurisdiction on federal courts in copyright infringement suits (28 U.S.C. § 1338), and the statute conferring jurisdiction on federal courts in cases involving diversity of citizenship (28 U.S.C. § 1332) (breach of contract), the Court turns to the choice-of-law rules of the forum state to examine the Licensing Agreement’s choice-of-law provision. See Klaxon Co. v.

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Bluebook (online)
711 F. Supp. 2d 645, 2010 U.S. Dist. LEXIS 50342, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tattoo-art-inc-v-tat-international-llc-vaed-2010.