Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-00045/USCOURTS-cand-3_06-cv-00045-9/pdf.json

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

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

ARTHUR D. SULIT,

 Plaintiff,

 v.

SLEP-TONE ENTERTAINMENT, dba SOUND

CHOICE INC., et al.

Defendants. /

No. C06-00045 MJJ

ORDER DENYING MOTION TO

DISMISS FOR FAILURE TO JOIN A

NECESSARY PARTY

INTRODUCTION

Before the Court is Defendants Slep-Tone Entertainment dba Sound Choice, Inc. (“SlepTone”) and Innovative Media Solutions, LLC’s (“IMS”) (collectively, “Defendants”) Motion to

Dismiss for Failure to Join a Necessary Party. (Docket No. 86.) Plaintiff Arthur Sulit (“Plaintiff” or

“Sulit”) opposes the Motion. For the following reasons, the Court DENIES the motion.

FACTUAL BACKGROUND

This action presents a dispute regarding the technology used, and labor expended, in creating

mobile telephone ring tones. 

Plaintiff Sulit is a Founder, Director, Vice President and Chief Technology Officer of SLS

Technology, Inc. (“SLS”), a non-party entity. (Plf.’s Opp. at 3.) SLS is a Mississippi Corporation 

with its principal place of business in Mississippi. (Plf.’s Supp. Ltr. Brf. at 1.) Sulit has lived in

Palo Alto, California from 2001 to the present. (Id. at 2.) Sulit entered into a “Cross-Release

Covenant” with SLS that limits his ability to assert claims against SLS and the other co-founders of

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SLS. (Plf.’s Opp. at 2-3.) Sulit also assigned his ownership interest in three software codes and

their respective copyrights to SLS. (Plf.’s Opp. at 4; Defs.’ Mem. of P. & A. Exh. 3.) These codes

include the “SnipNMail software code” (“SnipNMail”), “CD Ringbacks software code”

(“Ringbacks”) and”SnipnSend software code” (SnipnSend”). (Plf.’s Opp. at 4.)

Defendant IMS contracted with SLS to develop a software program for use on an internet

website. (Defs.’ Mem. of P. & A. at 2.; Exh. 1.) Sulit provided the programming for IMS under this

contract. (Id. at 3.) Defendants contend that Sulit spent a significant amount of time attempting to

provide the contracted-for services, but did not satisfactorily perform under the contract and IMS

had to hire a third party to complete the project. (Id.) Defendants further contend that IMS and Sulit

never formed a contractual relationship, written or oral. (Id.) Sulit, on the other hand, alleges that

he and Defendants formed an oral contract providing compensation for the services he rendered and

an equitable ownership interest in economic proceeds earned from Sulit’s intellectual property. 

(Complaint at 13.) Sulit maintains that he relied on Defendants and their co-conspirators’ promises

of remuneration both for disclosure of his intellectual property (code and methodology) and for time

spent. (Id. at 6.)

Defendants contend that the third party they hired to complete the software project created a

completely distinct software program written in a completely different computer language than the

language used by SLS. (Defs.’ Mem. of P. & A. at 3.) Sulit, on the other hand, asserts that in

September of 2005 Defendants released a derivative version of Sulit’s software that included

components developed by Sulit. (Complaint at 5-6.)

IMS filed suit against Sulit on September 22, 2005, in the District of South Carolina, alleging

copyright infringement of its website www.easyringtonemaker.com and unfair competition. (Defs.’

Mem. of P. & A. at 2.) That action was dismissed and re-filed in the Western District of North

Carolina, then transferred to the Northern District of California. (Id.) 

Sulit then filed an action against Slep-Tone, IMS and other individual defendants. (Id.) The

Court related the two cases and later, by Defendants’ motion, the Court dismissed the individual

defendants and several of the causes of action asserted by Plaintiff. (Id.) Plaintiff’s remaining

causes of action against Slep-Tone and IMS are for copyright infringement, declaratory relief,

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defamation, breach of contract, and common counts. 

Defendants now seek to join SLS as a party or, if it is not feasible to join SLS, then to

dismiss the action because SLS is an indispensable party.

LEGAL STANDARD

A court may dismiss a complaint pursuant to Federal Rule of Civil Procedure 12(b)(7) for a

party’s failure to join persons whose presence is needed for a just adjudication under Federal Rule of

Civil Procedure 19. Rule 19, “establishes a two-step analysis for determining who should be joined

in a given action.” See Aguilar v. Los Angeles County, 751 F.2d 1089, 1091 (9th Cir. 1985). “The

first step, set forth in subsection (a), determines which persons should be joined, if joinder is

feasible.” Id. at 1091-92. “The second step of the Rule 19 analysis, set forth in subdivision (b),

determines whether the action should be dismissed or proceed without the party if joinder is not

feasible.” Id. at 1092. “The inquiry is a practical one and fact specific, and is designed to avoid the

harsh results of rigid application.” Makah Indian Tribe v. Verity, 910 F.2d 555, 558 (9th Cir. 1990)

(internal citation omitted). The moving party has the burden to demonstrate that the nonparty is a

“person needed for just adjudication” under Rule 19(a) or is indispensable under Rule 19(b). Id.

Rule 19(a) provides, in relevant part, that a party shall be joined in the action if:

(1) in the person’s absence complete relief cannot be accorded among those

already parties, or (2) the person claims an interest relating to the subject of the

action and is so situated that the disposition of the action in the person’s absence

may (i) as a practical matter impair or impede the person’s ability to protect that

interest or (ii) leave any of the persons already parties subject to a substantial risk

of incurring double, multiple, or otherwise inconsistent obligations by reason of

the claimed interest.

Fed. R. Civ. P. 19(a). As a general rule, courts construing contracts require that parties to the

contract be joined to litigation that may impair their rights under that contract. See Wilbur v. Locke,

423 F.3d 1101, 1113 (9th Cir. 2005); Lomayaktewa v. Hathaway, 520 F.2d 1324, 1325 (9th Cir.

1975) (noting that parties to a contract are indispensable in an action to set aside a contract). 

Usually, assignees are also necessary parties. See 4 James Wm. Moore et al., Moore’s Federal

Practice § 19.06[1] (3d ed. 2007).

After the court determines if a party should be joined, the court must also determine if

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joinder is feasible. Fed. R. Civ. P. 19(a) & (b). It is feasible to join a party if the party is subject to

service of process and joinder of the party will not deprive the court of jurisdiction over the subject

matter of the action. See Fed. R. Civ. P. 19(a).

If, however, a necessary party under Rule 19(a) “cannot be made a party, the court shall

determine whether in equity and good conscience the action should proceed among the parties

before it, or should be dismissed, the absent person thus being regarded as indispensable.” See Fed.

R. Civ. P. 19(b). “Indispensable parties under Rule 19(b) are persons who not only have an interest

in the controversy, but an interest of such a nature that a final decree cannot be made without either

affecting that interest, or leaving the controversy in such a condition that its final termination may be

wholly inconsistent with equity and good conscience.” EEOC v. Peabody, 400 F.3d 774, 780 (9th

Cir. 2005). The court should consider the following factors to determine if a party is indispensable:

[1] to what extent a judgment rendered in the person’s absence might be

prejudicial to the person or those already parties; [2] the extent to which, by

protective provisions in the judgment, by the shaping of relief, or other measures,

the prejudice can be lessened or avoided; [3] whether a judgment rendered in the

person’s absence will be adequate; [4] whether the plaintiff will have an adequate

remedy if the action is dismissed for nonjoinder.

Fed. R. Civ. P. 19(b).

ANALYSIS

Defendants assert that SLS is a necessary party which the Court may feasibly join. (Defs.’

Mem. of P. & A. at 7.) Specifically, Defendants contend that the Court cannot award complete

relief to the parties without SLS because Defendants had a contractual relationship with SLS, not

Sulit, and Sulit assigned the software code at issue to SLS. (Defs.’ Mem. of P. & A. at 7-8.) In

addition, resolving this matter without SLS exposes Defendants to multiple liabilities and

inconsistent obligations because SLS may seek to enforce its contractual or intellectual property

rights in a separate action. (Defs.’ Mem. of P. & A. at 8-9.) Defendants further assert that it is

feasible to join SLS in this action. If, however, the Court finds that it is not feasible to join SLS,

Defendants argue that the Court should dismiss the action because SLS is indispensable. (Defs.’

Mem. of P. & A. at 9-10.)

Plaintiff does not object to a finding that SLS should be joined as a third-party defendant. 

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Plaintiff, in an unauthorized sur reply, asserts that the Court cannot consider the contents of the emails because they

were part of compromise negotiations and are thus excluded under Federal Rule of Evidence 408. Defendants, in an

unauthorized response to Plaintiff’s sur reply, contend that the email is offered not to prove the validity, invalidity or amount

of a disputed claim, but is submitted purely in support of Defendants’ argument that, under Rule 19, this case cannot proceed

without SLS as a party. The Court agrees with Defendants that Rule 408 does not prohibit use of settlement evidence that

is not offered to prove liability or invalidity of the claim or its amount. See Cohn v. Petsmart, 281 F.3d 837, 840 n.3 (9th

Cir. 2002) (holding that Rule 408 is inapplicable to settlement evidence that is offered to prove the amount in controversy

and not to prove liability or invalidity of the claim or its amount).

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In these emails, Plaintiff notes, inter alia, that “Michael [SLS co-director] acknowledged that SLS owed me backpay for all of my work on [Defendants’] ERM,” “[t]he entire conflict originated from Michaels’ a) deception/overselling

and b) defrauding me of my pay,” and that “Michael is currently in Breach of Contract with me as follows . . . I have not yet

been paid for my entire time out here.” (See Racine Decl., Exh. A 1:24-25, 2:16-18, Exh. B 1:18-19, 35.)

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(Plf.’s Opp. at 2, 4.) Plaintiff did not previously join SLS in this suit because of the “Cross-Release

Covenant,” which limits his ability to sue SLS directly. (Plf.’s Opp. at 2-3, Exh. B.) Plaintiff does,

however, contend that complete relief can be granted between the existing parties as to all claims

and thus appears to object to a dismissal of the action based on the finding that SLS is an

indispensable party. (Plf.’s Opp. at 4-7.)

1. SLS is a Necessary Party to This Action.

The Court reviews the parties’ assertions as they relate to each of Plaintiff’s claims in the

instant action.

First, the Court considers the breach of contract claim. It is uncontested on the record before

the Court that Defendants contracted with SLS for Plaintiff’s services. While Plaintiff asserts that he

also had an oral contract with Defendants, he does not argue that his alleged oral contract with

Defendants was the only contract at issue or that it precludes a contract between SLS and

Defendants. In their Reply, Defendants submit exhibits that include a chain of emails written by

Plaintiff.1

 Plaintiff, in these exhibits, repeatedly refers to SLS’ involvement in this dispute.2 On the

record before the Court, therefore, it appears that the contract between SLS and Defendants is

implicated in the resolution of the contract dispute between the parties in this action. Defendants,

therefore, may not be accorded complete relief and may be liable for multiple or inconsistent

obligations if SLS is not a party to the action. Thus, Defendants have met their burden of showing

that SLS is needed for the just adjudication of this action.

Next, the Court reviews of the defamation and common counts claims. Plaintiff’s

defamation claim alleges that Defendants made false and defamatory statements concerning

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Plaintiff, including derogatory statements regarding his abilities as a programmer and businessman. 

(Complaint at 12.) Plaintiff’s common counts cause of action covers Plaintiff’s work, labor, services

and materials rendered by Plaintiff at the request of Defendants. (Id. at 14.) While Plaintiff argues

that Defendants have not adequately shown that these causes of action are related to a claim or

interest of SLS, Defendants argue that both causes of action stem from the same relationship

between Defendants and SLS to which Plaintiff’s breach of contract claim pertains. (Defs.’ Reply at

6.) The Court finds Defendants’ argument persuasive. The common counts cause of action stems

from much of the same conduct that is alleged in the breach of contract claim. The defamation claim

is, by Plaintiff’s own admission, related to the actions of both the Defendants and SLS. (See Defs.’

Reply, Exh. B at 2:11-13.) The just adjudication of these claims, therefore, requires the presence of

SLS.

Finally, the parties dispute the relevance of SLS to the copyright claim and related

declaratory relief claim. Defendants contend that Plaintiff assigned the software code at issue to

SLS. Thus, Plaintiff does not own the property at issue and, if SLS is not a party to this action,

Defendants may be subject to later legal actions by SLS. Plaintiff concedes that he assigned his

ownership interest in SnipNMail, Ringbacks and SnipnSend software codes to SLS. (Plf.’s Opp. at

4.) Plaintiff, however, asserts that the copyrights at issue in this action are two other software codes:

“Easy Ringtone Maker Website” and “Desktop Windows CD Ripper Ringtone Snipper - Sender”

(aka “Snip tunes or Ringeroo”). (Id. at 5.) Plaintiff contends that Defendants have not shown that

either of the software codes at issue are incorporated in, or derived from, the code Plaintiff assigned

to SLS. Defendants claim that Plaintiff, in prior communications, admits that SLS has rights

implicated by any resolution or determination of ownership of the disputed software. (Defs.’ Reply

at 7.) In the emails submitted by Defendants, Sulit told Defendants that he “can help [Defendants]

achieve full ERM ownership, incontestably ‘free and clear’, because I guarantee you, that issue is

not ‘clean’ yet between SLS, me and IMS.” (Defs.’ Reply, Exh. A, 3:1-3.) While Defendants

believe this statement supports their arguments, the Court is not convinced of the relevance or

import to assign to this statement. It is not clear that the ownership Plaintiff refers to in this email

relates to the software at issue in this action. The Court, however, need not determine this issue

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because SLS’ involvement in the breach of contract claim, discussed above, is dispositive.

In sum, without SLS in the present action, the parties may not be accorded complete relief

and Defendants may be liable for multiple or inconsistent obligations. Defendants have, therefore,

met their burden of showing that SLS is a necessary party under Rule 19(a).

2. It is Feasible to Join SLS to This Action.

Defendants further assert that it is feasible to join SLS in this action because such joinder

will not defeat the jurisdiction of the Court. (Defs.’ Mem. of P. & A. at 7.) Defendants and Plaintiff

agree that this action, involving copyright and related claims, is before this court on federal question

jurisdiction and the joinder of SLS does not destroy that jurisdiction. In addition, the parties agree

that SLS is a viable entity and is subject to service of process in California. (Defs.’ Mem. of P. &

A., Exh. B.) Personal service on an individual while the person is physically present in a forum

satisfies due process. See Burnham v. Superior Ct., 495 U.S. 604, 619 (1990). In California, a

corporation may be served by delivery of a summons and complaint to, inter alia, a vice president of

the corporation. See Cal. Code Civ. Proc. § 416.10(b). Sulit, who is a Founder, Director, Vice

President and Chief Technology Officer of SLS, lives and works for SLS in Palo Alto, California

and may be served in the forum. The Court therefore finds that, on the record currently before the

Court, Defendants have met their burden of showing that the Court may feasibly join SLS to this

action.

Having found that SLS should be joined under Rule 19(a) for the just adjudication of this

action and that it is feasible to join SLS, the Court need not determine if SLS is an indispensable

party under Rule 19(b).

CONCLUSION

For the foregoing reasons, the Court DENIES Defendants’ Motion to Dismiss for Failure to

Join a Necessary Party. The Court further ORDERS Defendant to join SLS as a party to this action. 

Defendant shall have 30 days from the entry of this order to effect compliance with this Order.

IT IS SO ORDERED.

Dated: November 19, 2007 

MARTIN J. JENKINS

UNITED STATES DISTRICT JUDGE

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