Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-01815/USCOURTS-azd-2_09-cv-01815-0/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 17:101 Copyright Infringement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Drunvalo Melchizedek, 

Plaintiff, 

vs.

Ronald L. Holt; Lyssa Royal Holt; Flower

of Life Research, LLC, a Nevada

corporation, 

Defendants. 

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No. CV 09-1815-PHX-JAT

ORDER

Pending before the Court is Defendants Ronald L. Holt, Lyssa Royal Holt, and Flower

of Life Research, LLC’s (“FOLR”) Motion to Dismiss Count II of Plaintiff’s First Amended

Complaint (Doc. # 17). For the reasons that follow, the Court grants Defendants’ motion.

I. Background

Plaintiff is an author and speaker on a particular form of meditation. From 1993 to

2000, Plaintiff authored several works pertaining to this form of meditation. Plaintiff alleges

that the holding trusts Clear Light Trust and Pure Heart Trust (collectively “the holding

trusts”) own the federally registered copyrights to these works. In 1995, Plaintiff created

Flower of Life Research, Inc., and served as its president. The holding trusts licensed Flower

of Life Research, Inc. to use the copyrighted materials through December 1998. In

approximately 1996, Plaintiff was replaced by Defendant Holt as president of Flower of Life

Research, Inc., and Flower of Life Research, Inc. was changed to the limited liability

company FOLR.

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In 2001, Defendants Holt and FOLR were granted a license to use Plaintiff’s

copyrighted Flower of Life 2000 Plus. This license was set to expire in February 2013. The

license restricted Defendant Holt to teaching Plaintiff’s copyrighted materials to only FOLR

facilitators. Further, Plaintiff alleges that the license required Defendant Holt to attribute the

copyrighted materials to Plaintiff, and it restricted Defendant Holt from modifying Plaintiff’s

copyrighted work without first obtaining Plaintiff’s authorization. Plaintiff alleges that

Defendants created and copyrighted a number of manuals, including one titled “Seed of

Life,”without Plaintiff’s authorization or knowledge. Plaintiff alleges that these materials

are unauthorized derivative works.

When Plaintiff discovered Defendants using the allegedly unauthorized derivative

works, Plaintiff sent to Defendants a notice terminating the licensing agreement. In

September 2006, Defendants filed suit in state court asserting various claims including

breach of contract. Plaintiff filed counter-claims alleging breach of contract, injunctive

relief, and a declaratory judgment concerning the ownership of the above materials. In

September 2009, the parties agreed to arbitrate all of their claims in the state court action,

with the sole exception being the proper ownership of the copyrights of the above materials.

The parties agreed that the arbitrator’s decision would be binding and non-appealable.

The arbitrator found that Plaintiff breached the licensing agreement because Plaintiff’s

stated reasons for terminating the license did not constitute material breaches such that

Plaintiff was entitled to terminate the agreement. The arbitrator found that Defendants were

entitled to an award of general damages based upon the torts of breach of good faith and fair

dealing and tortious interference with contract.

In August 2009, Plaintiff filed the present action alleging copyright infringement and

breach of contract. Defendants now seek to have Plaintiff’s breach of contract claim

dismissed.

II. Analysis

To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet

the requirements of Rule 8(a)(2). Rule 8(a)(2) requires a “short and plain statement of the

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claim showing that the pleader is entitled to relief,” so that the defendant has “fair notice of

what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550

U.S. 544, 555 (2007)(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). In deciding a

motion to dismiss under Rule 12(b)(6), the Court must construe the facts alleged in the

complaint in the light most favorable to the drafter of the complaint and the Court must

accept all well-pleaded factual allegations as true. See Shwarz v. United States, 234 F.3d

428, 435 (9th Cir. 2000). Nonetheless, the Court does not have to accept as true a legal

conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286 (1986).

Defendants argue that Plaintiff’s breach of contract claim is barred by the doctrine of

claim preclusion. The arbitrator’s award was entered as a judgment in Gila County Superior

Court. Congress, through the Full Faith and Credit Act, 28 U.S.C. § 1738, requires this

Court to give the same preclusive effect to a state court judgment as a court within that state

would give. Int’l Evangelical Church of the Soldiers of the Cross of Christ v. Church of the

Soldiers of Christ, 54 F.3d 587, 590 (9th Cir. 1995). Hence, the Court must look to Arizona

law to determine whether Plaintiff’s breach of contract claim is precluded.

“Under the doctrine of claim preclusion, a final judgment on the merits in a prior suit

involving the same parties or their privies bars a second suit based on the same claim.”

Dressler v. Morrison, 130 P.3d 978, 981 (Ariz. 2006). Hence, in order for claim preclusion

to apply, there must be a: 1) final judgment on the merits; 2) common identity of parties; 3)

common subject matter; and 4) common cause of action Id. See also Matusik v. Arizona

Pub. Serv. Co., 684 P.2d 882, 884 (Ariz. Ct. App. 1984). Claim preclusion binds the parties

in subsequent litigation as to “every issue decided in the prior action as well as on every issue

that could have been decided.” Norriega v. Machado, 878 P.2d 1386, 1389 (Ariz. Ct. App.

1994). Claim preclusion applies even in cases, such as here, where the final judgment in the

first action is entered after the second action is filed. Murphy v. Bd. of Med. Exam’rs, 949

P.2d 530, 538 (Ariz. Ct. App.1997).

In this case, there is no real dispute that there has been a final judgment on the merits,

nor is there a dispute concerning the presence of a common identity of parties and subject

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1

 The Court expressly notes that a review of the arbitration award and the evidence

submitted in the arbitration proceedings, all of which were attached as exhibits to the parties

moving papers, does not convert the motion to dismiss into a motion for summary judgment,

as the authenticity of the arbitration award and the evidence submitted in the arbitration

proceedings cannot be reasonably questioned. In re Stac Elecs. Sec. Litig., 89 F.3d 1399,

1405 n. 4 (9th Cir. 1996). Moreover, review of the evidence submitted in the arbitration

proceedings is required in order for this Court to determine whether claim preclusion applies.

Both parties have had the opportunity to discuss the exhibits, and neither party has raised any

concerns regarding the opposing party’s exhibits, nor with the Court reviewing the evidence

submitted in the arbitration proceedings.

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matter. Whether claim preclusion bars Plaintiff’s breach of contract claim, then, hinges upon

resolution of the fourth element articulated above: whether there is a common identity of the

cause of action.

“Of the various tests commonly employed to determine whether a single ‘cause of

action’ is presented in two lawsuits, Arizona has chosen one which focuses on whether proof

of the claims in the two cases depends upon the same evidentiary facts. Ross v. Int’l Bhd.

of Elec. Workers, 634 F.2d 453, 458 (9th Cir. 1980) (citation omitted). This same evidence

test looks to “whether proof of additional facts will be required with reference to the second

cause of action when comparing the facts required to sustain the complaint in the earlier

action.” Windauer v. O’Connor, 477 P.2d 561, 565 (1970), vacated on other grounds by 485

P.2d 1157 (1971). Such facts may be gleaned from evidence in the two cases as well as from

the pleadings. Pierpont v. Hydro Mfg. Co., 526 P.2d 776, 778 (Ariz. Ct. App.1974). Thus,

Plaintiff’s breach of contract claim is precluded only if no additional evidence is needed to

prevail on this claim beyond what was adduced by Plaintiff in support of his breach of

contract claim in the arbitration proceedings.1

There is no question that Plaintiff urged a breach of contract claim in his counterclaim in state court. Plaintiff, however, argues that his present breach of contract claim is

not precluded because it pertains to the work Seed of Life created by Defendants in violation

of the license; whereas his state breach of contract claim pertained to the work of Octahedron

Mediation created by Defendants in violation of the license. Even assuming Plaintiff’s

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distinction is accurate, in reviewing the evidence submitted in the arbitration proceedings,

the Court finds that Plaintiff’s claim is precluded.

Both breach of contract claims revolve around the same licensing agreement. Both

claims also involve the same alleged copyrighted works that form the basis of the licensing

agreements. Both claims revolve around the same evidentiary facts; namely, that Defendants

breached the licensing agreement by creating derivative works without permission and

without giving proper attribution to Plaintiff. Although Plaintiff attempts to focus this

Court’s attention on the Octahedron Mediation work as being the sole claim for breach of

contract in the state court action, at their core, both claims are legally identical for claim

preclusion purposes.

Plaintiff has failed to show that any additional evidence is actually required to satisfy

the elements of his present breach of contract claim. Plaintiff has not brought any additional

facts to the Court’s attention that differentiate Plaintiff’s current claim from the claim

previously adjudicated in arbitration. In fact, Plaintiff has not pointed to any evidence

supporting his current breach of contract claim that was not previously introduced at

arbitration in support of his then breach of contract claim. Rather, it appears that any

evidence needed to prove Plaintiff’s breach of contract claim in the present action was in fact

entered as evidence in the arbitration proceedings. In Plaintiff’s pre-arbitration statement,

Plaintiff makes repeated reference to the Seed of Life materials as being a basis for breach

of the parties agreement. Moreover, Plaintiff urged the Seed of Life materials to be admitted

as exhibits in the arbitration proceedings, which were in fact included as exhibits. It is clear

under the same evidence test, that Plaintiff’s current breach of contract claim is precluded.

Plaintiff further argues that the arbitrator never decided his breach of contract claims.

However, in his award, the arbitrator, after considering Plaintiff’s submitted breach of

contract claim in addition to the other submitted claims, found that Plaintiff’s unilateral

termination of the parties agreement was a breach of the agreement. Plaintiff was also

seeking damages with respect to his breach of contract claim. However, the arbitrator found

that Plaintiff failed to provide sufficient evidence of such damages.

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In any event, even if the arbitrator wrongfully omitted to consider Plaintiff’s breach

of contract claim, as Plaintiff recognizes, the parties agreed that the arbitrator’s decision

would be binding and non-appealable. Plaintiff submitted his counter-claim for breach of

contract to the arbitrator, yet the arbitrator did not make an award on Plaintiff’s counterclaim. Dissatisfaction with the arbitrator’s award is inherent in the risk Plaintiff took in

agreeing to make the arbitrator’s award binding and non-appealable.

The Court’s conclusion is further supported by the fact that claim preclusion applies

to every issue that could have been decided. Norriega, 878 P.2d at 1389. By submitting his

breach of contract claim before the arbitrator, Plaintiff submitted a claim that could have

been decided within the meaning of the Norriega rule. Plaintiff cannot re-litigate his claim

for breach of contract when an identical claim was litigated and submitted before the

arbitrator.

III. Conclusion

The Court finds that claim preclusion applies to Plaintiff’s breach of contract claim,

as there has been a final judgment on the merits, and the identity of parties, subject matter,

and cause of action are all common within the meaning of the claim preclusion doctrine.

Accordingly,

IT IS ORDERED that Defendants Ronald L. Holt, Lyssa Royal Holt, and Flower of

Life Research, LLC’s Motion to Dismiss Count II of Plaintiff’s First Amended Complaint

(Doc. # 17) is granted.

DATED this 18th day of May, 2010.

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