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Quizinsight.com Partnership v. Tabak

United States District Court, District of Columbia

September 4, 2019

QUIZINSIGHT.COM PARTNERSHIP, et al ., Plaintiffs,
v.
ROSS LEE TABAK, Defendant.

          MEMORANDUM OPINION

          DABNEY L. FRIEDRICH, UNITED STATES DISTRICT JUDGE

         Plaintiffs Roy Feinson and two partnerships sue defendant Ross Lee Tabak for, among other things, interfering with the advertising revenue of three websites. See Compl., Dkt. 1. Before the Court is Tabak's Motion to Dismiss, Dkt. 12, for lack of jurisdiction and for failure to state a claim for relief. For the reasons that follow, the Court will grant the motion in part, deny it in part, and stay all surviving claims pending arbitration.

         I. BACKGROUND

         Although Tabak provides his own version of the facts, Def.'s Mot. at 3-6, the Court must accept as true all material allegations in the complaint at this stage of the litigation, see Banneker Ventures, LLC v. Graham, 798 F.3d 1119, 1129 (D.C. Cir. 2015). According to the plaintiffs, the dispute arises from several failed business relationships between Feinson and Tabak. The complaint alleges a number of grievances against Tabak, but the Court considers only those relevant to Tabak's motion to dismiss.

         In the late 1990s and early 2000s, Feinson published two books titled The Animal in You (AIY) and The Secret Universe of Names (SUN), and he created “Animalinyou.com, ” a website associated with the book of the same name. Compl. ¶¶ 26, 30. Feinson holds the copyright for both books. Id. ¶ 30.

         Feinson first began to work with Tabak in 2009, when he employed Tabak to upgrade the AIY website, which was created using Feinson's copyrighted content. Id. ¶¶ 31, 33. Although Feinson and Tabak never committed their agreement to writing, Tabak agreed to receive 50% of all online advertising revenue exceeding $600 per month in exchange for his technical expertise. Id. 32, 33.

         Subsequently, Feinson and Tabak formed two partnerships. In 2015, they formed the SUN partnership. Id. ¶ 34. Under this partnership agreement, Feinson received 60% of the revenue and provided the copyrighted site content, while Tabak received 40% of the revenue for “constructing the website, writing the code, engaging in marketing, and [performing] site management.” Id. ¶ 36; see also Def.'s Mot. Ex. 1, Dkt. 12-1. In 2016, Feinson and Tabak formed another partnership to create free, web-based personality and other quizzes on a variety of websites, including Quizinsight.com (QZI). Compl. ¶¶ 41-42. Under the QZI partnership agreement, Feinson and Tabak retained equal rights in the management of the partnership and shared profits and losses equally. Id. ¶¶ 45, 51; Def.'s Mot. Ex. 2, ¶¶ 5, 7-8, Dkt. 12-2. They also agreed that “[a]ny dispute or controversy herein shall be settled by arbitration in accordance with the Arbitration Act.” Def.'s Mot. Ex. 2, ¶ 15.

         This lawsuit arises from Tabak's actions over the course of several weeks in May and June 2018. In mid-May 2018, Tabak sought sole ownership of Quizoneer.com, one of the websites subject to the QZI partnership agreement. Compl. ¶¶ 59-60; see also Id. ¶ 63. When Feinson refused to permit the ownership transfer, Tabak removed advertising from the SUN and QZI websites, and on May 20, he reinstated the advertising but diverted incoming funds to a bank account fully under his control. Id. ¶¶ 65-66. Following an acrimonious email exchange with Feinson, Tabak disconnected all of the websites except the Quizoneer.com site from the internet, and he allegedly took a series of other actions to harm Feinson's financial interests. Id. ¶ 71. According to the plaintiffs, Tabak diverted approximately $2, 000 to his personal use between the time he began diverting funds and the time he disconnected the websites from the internet. Id. ¶ 72. The plaintiffs also allege, “on information and belief, ” that Tabak “revived” a dormant Facebook account on May 30 and June 6 and “attempted to initiate advertising for then-nonexistent websites . . . to divert money from . . . Feinson's Ally Bank account to Facebook.” Id. ¶ 74; see also Id. ¶¶ 53, 73.

         On August 9, 2018, Feinson, the QZI partnership, and the SUN partnership sued Tabak, alleging nine counts. See Compl. They allege that when Tabak interfered with the operations of the AIY, SUN, and QZI websites in May and June 2018, he violated the Racketeer Influenced and Corrupt Organizations (RICO) Act by committing extortion, wire fraud, bank fraud, and trade secrets theft, as well as by transporting stolen property across state lines. Id. ¶ 109. They further allege that he breached an oral contract for the AIY website and the SUN and QZI partnership agreements, id. ¶ 119, and that he breached his fiduciary duties under the SUN and QZI agreements, id. ¶ 125. They also allege that he infringed the AIY and SUN copyrights, id. ¶¶ 129, 136, fraudulently induced Feinson to enter into the SUN and QZI partnerships, id. ¶ 141, tortiously interfered with the operations of all three websites, id. ¶ 147, and converted Feinson's AIY property and the property of the SUN and QZI partnerships, id. ¶¶ 150, 152. They allege that Tabak either wrongfully dissociated from the SUN and QZI partnerships, or, if not, that they are entitled to an order judicially expelling him from those partnerships. Id. ¶ 162. And the plaintiffs allege that they are entitled to an accounting of the QZI and SUN partnerships' assets. Id. ¶ 168.

         II. LEGAL STANDARDS

         In general, the Federal Rules of Civil Procedure do not require “detailed factual allegations, ” Banneker Ventures, 798 F.3d at 1129 (internal quotation marks omitted), but instead a “short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2). At this stage, the court must “accept all the well-pleaded factual allegations of the complaint as true and draw all reasonable inferences from those allegations in the plaintiff's favor.” Banneker Ventures, 798 F.3d at 1129.

         A. Federal Rule of Civil Procedure 12(b)(1)

         A motion to dismiss under Rule 12(b)(1) “presents a threshold challenge to the court's jurisdiction.” Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987). Federal district courts are courts of limited jurisdiction, and it is “presumed that a cause lies outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994). Thus, the plaintiff bears the burden of establishing jurisdiction. See Spokeo v. Robins, 136 S.Ct. 1540, 1547 (2016). If, at any point, the court determines that it lacks jurisdiction, the court must dismiss the claim or action, whether on the defendant's motion or sua sponte. Fed.R.Civ.P. 12(b)(1), 12(h)(3).

         B. Federal Rule of Civil Procedure 12(b)(6)

         Under Federal Rule of Civil Procedure 12(b)(6), a defendant may seek dismissal on the ground that the plaintiff has failed “to state a claim upon which relief can be granted.” To survive such a motion to dismiss, the plaintiff need only “alleg[e] facts sufficient to state a claim that is plausible on its face.” Abbas v. Foreign Policy Grp., LLC, 783 F.3d 1328, 1334 (D.C. Cir. 2015). “A well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of the facts alleged is improbable.” Id. (internal quotation marks omitted).

         III. ANALYSIS

         Tabak raises both jurisdictional and merits challenges to the plaintiffs' claims. For the reasons that follow, the Court rejects Tabak's jurisdictional argument and concludes that the arbitration clause in the QZI partnership agreement requires arbitration of all claims involving the QZI partnership. The Court will also dismiss the RICO and fraud-in-the-inducement claims relating to the AIY contract and the SUN partnership, and it will stay the remaining claims until the parties have arbitrated the claims involving the QZI partnership.

         A. The Jurisdictional Challenge

         Tabak argues that the Court must dismiss “all” of the plaintiffs' claims because they failed to sufficiently allege that the amount in controversy exceeds $75, 000. Def.'s Mot. at 11. The Court disagrees.

         Under 28 U.S.C. § 1332(a), federal courts have diversity jurisdiction over certain state claims where “the matter in controversy exceeds the sum or value of $75, 000.” The amount-in-controversy requirement applies only when a plaintiff seeks to invoke diversity jurisdiction. Under 28 U.S.C. § 1331, federal courts have federal-question jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.” Congress also has provided that federal courts have exclusive jurisdiction over “any civil action arising under any Act of Congress relating to . . . copyrights, ” 28 U.S.C. § 1338(a), and “supplemental jurisdiction over all . . . claims that are so related to claims in the action within [a court's] original jurisdiction that they form part of the same case or controversy, ” id. § 1367(a).

         Even assuming that the amount in controversy does not satisfy the requirements for the Court's exercise of diversity jurisdiction under § 1332, the Court has federal-question jurisdiction over the copyright infringement claim.[1] That claim arises under the Copyright Act, which is an “Act of Congress relating to . . . copyrights, ” 28 U.S.C. § 1338(a), and the plaintiffs seek statutory damages and other “remed[ies] expressly granted by the [Copyright] Act, ” Scandinavian Satellite Sys., AS v. Prime TV Ltd., 291 F.3d 839, 844 (D.C. Cir. 2002) (internal quotation marks omitted); see also Compl. ¶ 169 (citing 17 U.S.C. §§ 502, 504-05).

         For the remaining state claims, the Court has supplemental jurisdiction because those claims “form part of the same case or controversy.” 28 U.S.C. § 1367(a). “A federal claim and a state law claim form part of the same Article III case or controversy if the two claims derive from a common nucleus of operative fact such that the relationship between the federal claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional case.” Lindsay v. Gov't Employees Ins. Co., 448 F.3d 416, 423-24 (D.C. Cir. 2006) (alteration adopted and internal quotation marks omitted).

         Here, the facts the plaintiffs allege to establish copyright infringement overlap substantially those alleged to establish their state-law claims. Indeed, the same acts taken in May 2018 that allegedly infringed Feinson's AIY and SUN copyrights also gave rise to the breach of contract, breach of fiduciary duty, tortious interference, and conversion claims, among others. Where “the same acts violate parallel federal and state laws, the common nucleus of operative facts is obvious.” Id. at 424 (quoting Lyon v. Whisman, 45 F.3d 758, 761 (3d Cir. 1995)).

         Significantly, Tabak has not argued that the Court should decline to exercise supplemental jurisdiction based on one or more of the statutory factors delineated in 28 U.S.C. § 1367(c), and the Court is independently satisfied that it is appropriate to exercise supplemental jurisdiction here. In addition, even if it were inappropriate to exercise supplemental jurisdiction, the plaintiffs appear to have established diversity jurisdiction. See, e.g., Pls.' Opp'n at 4 & nn. 3, 4, Dkt. 13-1; see also Pietrangelo v. Refresh Club, Inc., No. 18-cv-1943, 2019 WL 2357379, at *6 (D.D.C. June 4, 2019) (“It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction.” (quoting St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289 (1938))). For all these reasons, the Court has jurisdiction to reach the merits of this case.

         B. The ...


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