Reilly v. Wozniak

Ralph T Reilly, Plaintiff, v. Steve Wozniak, et al., Defendants.

No. CV-18-03775-PHX-MTL

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

March 3, 2020

ORDER

Plaintiff Ralph T. Reilly ("Plaintiff" or "Reilly") filed suit against Steve Wozniak ("Wozniak") and three entities (Doc. 1 at 3). The case arises from Plaintiff's allegations that after he worked for years on—and obtained copyright protection for—his idea of the "Woz Institute of Technology," Wozniak and his co-Defendants formed "Woz U" without compensating Plaintiff. (Id. at 6.) Plaintiff alleges claims of breach of an implied-in-fact-contract, money had and received, copyright infringement, declaratory relief, and accounting.

Before the Court are two motions: Defendants' Motion to Dismiss Counts II, IV and V of Plaintiff's Complaint ("Defendants' Motion") (Doc. 46); and Defendant Steve Wozniak's Motion for Judgment on the Pleadings as to Count I of Plaintiff's Complaint ("Wozniak's Motion") (Doc. 58). Defendants' Motion is granted in part and denied in part; Wozniak's Motion is denied.¹

I. BACKGROUND

Plaintiff is an Assistant Professor of Management Information Systems at the Barney School of Business, University of Hartford. (Doc. 1 ¶ 3.) He alleges that on September 12, 2010, he emailed Wozniak, the co-founder of Apple Computers Inc., stating "I want to start a high tech university." (Id. ¶ 4; at 16.) Wozniak replied, "Great idea." (Id.) Wozniak also provided advice and noted "I'm too busy to do anything more." (Id.) Plaintiff claims that over the next two years, he and Wozniak took steps to develop the idea. For example, Plaintiff claims that he introduced Wozniak and Charter Oak State College, who ultimately executed a Personal Service Agreement for purposes of developing the "Woz School of Technology." (Id. ¶ 5.) Plaintiff also states that he met with Wozniak on March 25, 2011 to discuss the idea, at which time they "agreed to proceed with a 'deal' handshake depicted in a photograph[.]" (Id. ¶ 6.) Plaintiff also claims that Wozniak permitted him to proceed with potential investors in a November 21, 2011 email, stating "I figure it's your idea." (Id. ¶ 6, at 34.) Plaintiff created a website and logo for the project² (Id. ¶ 8; 46-58) and obtained copyright protection for the "graphic images, photographs, and tangible expressions" attached as Exhibit I to the Complaint. (Id. at 4, 59-76.)

Plaintiff alleges that on November 11, 2017, he learned that Wozniak entered into a business arrangement with Defendant Southern Careers Institute, Inc. ("SCI") to form "Woz U." (Id. ¶ 10.) Plaintiff states that Wozniak and SCI formed Woz U Education, LLC ("Woz Arizona") and Woz U Education Holdings, LLC ("Woz Delaware") to formalize Woz U business arrangements. Plaintiff emailed Wozniak to congratulate him on November 21, 2017. Wozniak responded on December 24, 2017, stating, "You are right on the mark. You had the right idea.... I doubt it would have happened without your initial idea." (Id. ¶ 14, at 91.)

Plaintiff filed the Complaint against Wozniak, SCI, Woz Arizona, and Woz Delaware (collectively, "Defendants") on November 3, 2018. It alleges that Defendants"used, applied, and exploited" Plaintiff's work, and infringed on his copyrighted work, in marketing and publicizing Woz U. (Id. ¶¶ 12, 13.) The Complaint alleges claims of breach of an implied-in-fact contract against Wozniak; and claims of money had and received, copyright infringement, declaratory relief, and accounting against all Defendants. (Id. at 7-11.) Plaintiff seeks damages of at least $1,000,000, disgorgement of Defendants' profits, an accounting, declaratory judgment, and attorneys' fees. (Id. at 13.)

Defendants, for their part, characterize the underlying events as follows: "Plaintiff tried, albeit unsuccessfully, t[o] market an online school using Defendant Steve Wozniak's name and likeness. Long after the Plaintiff failed in his attempts to do so, another group that was already operating an online school approached Wozniak with what would ultimately become WOZ U." (Doc. 54 at 2.) Defendants filed an Answer on January 16, 2019.³ (Doc. 19.) Then, on May 13, 2019, Defendants filed the pending Motion to Dismiss Counts II, IV and V of the Complaint. (Doc. 46.) After briefing on Defendants' Motion was complete, Defendant Wozniak filed a Motion for Judgment on the Pleadings as to Count I. (Doc. 58.) Both motions are fully briefed; the Court will address them in turn.

II. LEGAL STANDARDS

A. Rule 12(b)(6)

To survive a motion to dismiss, a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief" such that the defendant is given "fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 545, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2); Conley v. Gibson, 355 U.S. 41, 47 (1957)). Dismissal under Rule 12(b)(6) "can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). The Court must accept Plaintiff's material allegations as true and construe them in the lightmost favorable to Plaintiff. North Star Int'l v. Arizona Corp. Comm'n, 720 F.2d 578, 580 (9th Cir. 1983). A complaint should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle it to relief." Williamson v. Gen. Dynamics Corp., 208 F.3d 1144, 1149 (9th Cir. 2000). Review of a Rule 12(b)(6) motion is "limited to the content of the complaint." North Star Int'l, 720 F.2d at 581. Rule 12(b) states that a motion asserting defenses stated in Rule 12(b)(1)-(7) "must be made before pleading if a responsive pleading is allowed." Fed. R. Civ. P. 12(b).

B. Rule 12(c)

Rule 12(c) of Federal Rules of Civil Procedure 12(c) states, "[a]fter the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." The legal standard for Rule 12(c) is "substantially identical" to the standard for a motion to dismiss under Rule 12(b)(6) because under both rules, "a court must determine whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy."⁴ Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012) (quotation omitted). As with a motion to dismiss, a court must assume that the non-moving party's allegations are true and must draw all reasonable inferences in its favor. See Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989). Although Rule 12(c) does not expressly provide for partial judgment on the pleadings, "neither does it bar them; it is common to apply Rule 12(c) to individual causes of action." Larsen v. Trader Joe's Co., 917 F. Supp. 2d 1019, 1022 (N.D. Cal. 2013). "Courts have discretion to grant leave to amend in conjunction with 12(c) motions, and may dismiss causes of action rather than grant judgment." Moran v. Peralta Cmty. Coll. Dist., 825 F. Supp. 891, 893 (N.D.Cal. 1993).

III. ANALYSIS

A. Motion to Dismiss (Counts II, IV, and V)

Defendants' Motion (Doc. 46) argues that the Copyright Act preempts Plaintiff's claims for money had and received (Count II), declaratory relief (Count IV), and accounting (Count V). The Court will first analyze whether it may consider the motion as one for judgment on the pleadings; it will then address the substantive arguments.

1. Conversion of Motion

Defendants' Motion is styled as a motion to dismiss for failure to state a claim under Rule 12(b)(6). (Doc. 46 at 1.) However, it was filed nearly four months after Defendants' Answer. Rule 12(b) provides that "[e]very defense to a claim for relief in any pleading must be asserted in the responsive pleading if one is required." Fed. R. Civ. P. 12(b). Plaintiff argues that the Court should strike the motion in light of this procedural defect. (Doc. 51 at 8.) Defendants state for the first time in their reply that the motion should be treated as one for judgment on the pleadings under Rule 12(c) or 12(h)(2), as there is "no shortage of case law in the Ninth Circuit" permitting the conversion. (Doc. 54.) The Court agrees with Defendants and, in light of the procedural flaws, will construe Defendants' Motion as a motion for judgment on the pleadings under Rule 12(c).

Rule 12(h)(2) authorizes the use of a Rule 12(c) motion to raise the defense of failure to state a claim. Fed. R. Civ. P. 12(h)(2). The Ninth Circuit has specifically held that a "motion to dismiss" filed after the close of pleadings may be converted to a motion for judgment on the pleadings: "[b]ecause it is only after the pleadings are closed that the motion for judgment on the pleadings is authorized (Rule 12(c)), Rule 12(h)(2) should be read as allowing a motion for judgment on the pleadings, raising the defense of failure to state a claim, even after an answer has been filed." Aldabe v. Aldabe, 616 F.2d 1089, 1093 (9th Cir. 1980). Rules 12(c) and 12(h)(2) therefore constitute a "qualification" of Rule 12(b)(6). Id.; see also 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1367 (3d ed.) ("In this context, Rule 12(c) is merely serving as an auxiliary orsupplementary procedural device to determine the sufficiency of the case before proceeding any further and investing additional resources in it.").

An important consideration in converting the motion is whether the pleadings raised the affirmative defense at issue. As the Aldabe court noted, "[t]he case for adopting such a position is further strengthened where, as here, each of the answers included the defense of failure to state a claim. The motions to dismiss were not based on new arguments for which appellant could claim to have been unprepared." Id. at 1093. See also Wright & Miller § 1367 ("It should be stated again, however, that Rule 12(c) cannot be used to assert Rule 12(b)...