Cepia, LLC v. Universal Pictures Visual Programming Ltd.

177 F.Supp.3d 1129

Cepia, LLC, Plaintiff,

v.Universal Pictures Visual Programming Limited, and Universal Pictures International Entertainment, Defendants.

No. 4:15 CV 1181 JMB

United States District Court, E.D. Missouri, Eastern Division.

Signed April 7, 2016

B. Scott Eidson, Sandra Jane Wunderlich, Stinson And Leonard LLP, St. Louis, MO, Michael A. Clithero, Lathrop and Gage, LLP, Clayton, MO, for Plaintiff.

Mark Sableman, Jonathan G. Musch, Thompson Coburn, LLP, St. Louis, MO, for Defendants.

MEMORANDUM AND ORDER

JOHN M. BODENHAUSEN, United States Magistrate Judge

Currently before the Court is Defendants' Motion to Dismiss Plaintiff's Complaint for Lack of Personal Jurisdiction (“Motion to Dismiss”), pursuant to Fed. R. Civ. P. 12(b)(2).¹ (ECF No. 10) Plaintiff filed a Memorandum in Opposition (ECF No. 14) and Defendants filed a Reply (ECF No. 20). On December 3, 2015, the Court heard oral argument on the Motion to Dismiss. All matters are pending before the undersigned, with the consent of the parties, pursuant to 28 U.S.C. § 636(c). The Court concludes that the Motion to Dismiss may be resolved on the basis of the existing record. For the reasons outlined below, Defendants' Motion to Dismiss will be granted.

PROCEDURAL AND FACTUAL BACKGROUND

I. General Background

Plaintiff Cepia, LLC (“Cepia”) is a limited liability company incorporated under the laws of Missouri, with its principal place of business in St. Louis, Missouri. Cepia is in the business of developing, manufacturing, and selling innovative toys, including the ZhuZhu Pets Toy Line that inspired the movies, Quest for Zhu and Amazing Adventures of Zhu (“the Movies”). (ECF No. 1 at Exh. 1 at ¶¶ 2-3) Defendants in this matter are Universal Pictures Visual Programming Limited (“UPVP”) and Universal Pictures International Entertainment (“UPIE”) (sometimes collectively referred to herein as “Universals”). Defendants UPVP and UPIE are NBCUniversal business entities; both defendants are foreign corporations with their principal place of business in London, England. (Id. at ¶¶ 4-5)

Cepia initiated the instant lawsuit on July 31, 2015. Cepia's Complaint seeks monetary damages and other remedies in connection with a dispute stemming from the marketing and distribution of two animated children's movies produced by Cepia. In particular, Cepia alleges a breach of contract between UPVP and Cepia (Counts I and II), conversion by Defendants (Count III), and a breach of the implied duty of good faith and fair dealing by UPVP (Count IV). (ECF No. 1 at ¶ 1)

Cepia alleges diversity jurisdiction, pursuant to 28 U.S.C. § 1332. Cepia contends that this Court has personal jurisdiction based on Defendants doing business with Cepia in this District and their commission of alleged tortious act(s) that have an effect in this district. (Id. at ¶ 9) Cepia argues that “Missouri is designated as the jurisdiction to administer the Distribution Agreement at issue, and the law of Missouri applies to the Distribution Agreement.” (Id.)

On September 15, 2015, Defendants filed the instant Motion to Dismiss, claiming that this case should be dismissed for lack of personal jurisdiction. (ECF No. 10) In response, Cepia asserts that the Court can exercise personal jurisdiction over Defendant UPVP because UPVP entered into a Distribution Agreement and purposefully availed itself of the privilege of conducting business in Missouri.

The Court notes that Cepia's response and Declaration of Laura Kurzu address only Defendant UPVP and the exercise of personal jurisdiction over UPVP; it is silent as to the exercise of personal jurisdiction over Defendant UPIE. During oral argument, the parties' arguments indicated an agreement that UPIE was only tangentially involved in the matter. The record in this case indicates that the Court would have no independent basis to exercise personal jurisdiction over UPIE apart from that which might exist for UPVP. Inasmuch as the Court concludes that it lacks personal jurisdiction over UPVP, it also concludes that it lacks jurisdiction over UPIE. The remainder of this Memorandum and Order focuses on UPVP.

According to Cepia's Complaint, Cepia conceived, developed, and manufactured a children's Toy Line featuring motorized hamsters under the trademark ZhuZhu Pets. (ECF No. 1 at Exh. 1 at ¶¶ 11-13)

The Toy Line became a marketplace success, and Cepia heavily promoted the ZhuZhu Pets Toy Line throughout the United States and the United Kingdom. In 2010, Cepia extended distribution of the Toy Line beyond the United States to Europe, Asia, Australia, New Zealand, and North and South America. (Id. at ¶ 16) In addition to expanding its geographic distribution, Cepia extended the Toy Line to include additional creatures and combat hamsters, as well as related play sets and accessories under the Kung Zhu trademark. (Id. at ¶¶ 17-18) The ZhuZhu Pets and Kung Zhu toy lines were part of Cepia's “Zhu-niverse” brand of toys. (Id. at ¶ 19) Cepia also developed Zhu-themed games, music, and videos showcasing the Zhu worlds and promoting Zhu products and driving Zhu-niverse toy sales. (Id. at ¶¶ 21-22) In 2011, Cepia financed and produced the Movies—Quest for Zhu and Amazing Adventures of Zhu (previously known as Kung Zhu ). (Id. at ¶ 24; Glassman Aff. at ¶13)

Cepia approached NBCUniversal's Home Entertainment division about marketing and distributing the Movies, and thereafter Cepia's inquiries to UPVP came from agents for Cepia based outside of Missouri including agents located in the United Kingdom. (Glassman Aff. at ¶14) The agents discussed distribution and marketing of the Movies outside the United States and Canada. (Glassman Aff. at ¶¶ 13-14) Cepia and UPVP entered into a Distribution Agreement governing the terms under which UPVP would have the exclusive right to distribute the Movies outside of the United States and Canada. (ECF No. 1 at Exh. A)

UPVP is an NBCUniversal entity. (Glassman Aff. at ¶¶ 4-5) In 2011 and 2012, UPVP's business was primarily media marketing and distribution of films and television shows for home entertainment outside of North America. UPVP does not have any employees or agents in Missouri, does not own any property or bank accounts in Missouri, does not conduct business in Missouri, and is not licensed to do business in Missouri. (Glassman Aff. at ¶¶ 5-7) UPVP does not distribute any media for the home entertainment market in Missouri or order any finished products for distribution. (Id. at ¶¶ 9-10) UPVP did not advertise the Movies in Missouri. (Id. at ¶ 11)

II. Distribution Agreement

A. Summary of Pertinent Terms

The present dispute arises out of the Distribution Agreement (“the Agreement”) between Cepia and UPVP. A copy of the Agreement was filed with the Complaint as Exhibit A. (ECF No. 1-1) The Agreement is one-page in length, signed by representatives of Cepia and UPVP, and dated “4-21-2011.” (Id.) The Agreement is directed only to the distribution of the movies Quest for Zhu and Kung Zhu , but indicates that other titles would be “discussed in good faith.” (Id.) The Agreement grants UPVP certain exclusive distribution rights relative to the two referenced Zhu movies. (Id.) In particular, the Agreement grants UPVP “the exclusive right to distribute both Titles on DVD, Blu-ray, 3D Blu-ray, EST, VOD, and TV.” These exclusive rights, however, were territorial only and expressly excluded any distribution rights in the United States and Canada. (Id.) By its own terms, the Agreement was to be limited in duration—covering from the date of signing to December 31, 2014, with the intention that distribution would begin in September 2011. (Id.) The Agreement contemplated that “[a] longer form agreement will be negotiated in good faith and until such time this agreement shall be legally binding and shall constitute the entire agreement between the parties and supersede all prior communications and agreements.” (Id.)

In the Agreement, UPVP earned a fee based on “a percentage of the gross wholesale revenues received by [UPVP] less all returns (‘the Fee’).” Id. Cepia bore most of the costs of manufacturing, distribution, and marketing. Id.

In the Agreement, Cepia retained most, if not all, approval rights. For example, The Agreement included the following Marketing and Approvals provisions:

Marketing: Cepia intends to spend a minimum of 15%-20% of forecasted revenues on marketing in each territory and for each Title in its first 16 weeks of release. [UPVP] to recommend a marketing plan for each territory and Cepia to have final approval over such marketing plans. [UPVP] to execute such marketing plans, after Cepia's approval.

Approvals: a. In all territories Cepia will have final approval over all dubbing and marketing costs; [UPVP] will propose costs to Cepia in advance and Cepia will give pre-approval per its discretion. b. [UPVP] will advise Cepia on how best to market and package the movies; Cepia will have final approval over all marketing and packaging.

(Id.)

Pursuant to an Accounting and Reporting provision, UPVP was required to “report to Cepia 90 days after the end of each quarter, such report will indicate sales, returns, costs, fees, etc. for the quarter and will be accompanied by payment.” (Id.) The provision did not specifically direct where such payment would be made.

Finally, the Agreement includes a “Jurisdiction” clause stating that the “deal will be administered under the Laws of the State of Missouri.” This provision is a choice of law provision and is sometimes referred to in this matter as the “Laws Clause.” (Id.)

B. Overview of Contract Formation and Alleged Breach

The record before the Court indicates that the Agreement was formed and performed by UPVP outside of Missouri. Cepia's Agents discussed with UPVP the distribution and marketing of the Movies outside of North America. (Glassman Aff. at ¶ 14) In the course of negotiating the terms of the international distribution agreement, the parties exchanged draft revisions, e-mails, and phone calls. (Kurzu...