Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-00784/USCOURTS-azd-2_09-cv-00784-0/pdf.json

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

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

FAIRVIEW DEVELOPMENT

CORPORATION, an Arizona corporation,

Plaintiff, 

vs.

DAVID W. SCHMID and PATRICIA

SCHMID, husband and wife,

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. CV-09-0784-PHX-GMS

ORDER

Pending before the Court is the Motion to Dismiss of Defendants David W. Schmid

and Patricia Schmid. (Dkt. # 7.) For the reasons set forth below, the Court grants

Defendants’ Motion.

BACKGROUND

On February 14, 2007, Plaintiff Fairview Development Corporation (“Fairview”) and

two additional plaintiffs who were subsequently dismissed (Case No. CV-07-0337-PHXSMM, Dkt. # 96 at 6), filed suit against Defendant David W. Schmid and a fictitious

defendant (Jane Doe Schmid) who represented “Mr. Schmid’s spouse, if he [was] married.”

(Case No. CV-07-0337-PHX-SMM, Dkt. # 1 ¶ 4.) After amending the complaint multiple

times, Fairview ultimately asserted a single claim of copyright infringement pursuant to the

Federal Copyright Act, 17 U.S.C. §§ 101 et seq., against the defendants. (Case No. CV-07-

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 1 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

0337-PHX-SMM, Dkt. # 47.) Fairview’s copyright claim was predicated upon the allegation

that Mr. Schmid infringed architectural plans for a custom home that were owned by

Fairview. (See id.) On August 8, 2009, the defendants moved for summary judgment. (Case

No. CV-07-0337-PHX-SMM, Dkt. # 78.) The Court found that Mr. Schmid had not

infringed the subject architectural plans and granted the motion in favor of the defendants.

(Case No. CV-07-0337-PHX-SMM, Dkt. # 96 at 23 (“The Court does not find Defendants

liable to Fairview for copyright infringement because Seidner granted Defendants a license

when he owned the copyright. Therefore, the Court will grant summary judgment in favor

of Defendants.”).) 

In the complaints filed in the former case, Fairview explicitly reserved the right to

“seek leave to amend [the] Complaint and/or to issue a replacement summons as to ‘Jane

Doe’ Schmid when her true name [was] determined.” (Case No. CV-07-0337-PHX-SMM,

Dkt. ## 1 ¶ 4, 47 ¶ 4.) Fairview apparently sought the inclusion of Mrs. Schmid for purposes

of complying with the community property joinder requirements of Arizona Revised Statutes

section 25-215(D). However, Fairview failed to either amend or seek leave to amend its

complaint to join Mrs. Schmid as a defendant prior to the granting of summary judgment and

termination of the former case, even though Fairview had learned her identity. As a

consequence of not amending its complaint to join Mrs. Schmid, the Court also dismissed

the fictitious “Jane Doe Schmid” in the order granting summary judgment, citing the Ninth

Circuit’s “disfavor of fictitious defendants.” (Case No. CV-07-0337-PHX-SMM, Dkt. # 96

at 5.) 

On April 1, 2009, Fairview filed its Notice of Appeal to the Ninth Circuit. (Case No.

CV-07-0337-PHX-SMM, Dkt. # 106.) The issues raised on appeal include the Court’s

finding of no infringement and whether service was properly effectuated on “Jane Doe

Schmid.” (Case No. CV-07-0337-PHX-SMM, Dkt. # 108.) 

Fairview then filed a new complaint against both Mr. and Mrs. Schmid on April 16,

2009, asserting the identical copyright infringement claim previously asserted against Mr.

Schmid in the prior case and asserting a claim for declaratory relief. (Dkt. # 1.) According

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 2 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

17 U.S.C. § 507(b) states that “[n]o civil action shall be maintained under the

provisions of this title unless it is commenced within three years after the claim accrued.”

According to Fairview, the three year statue of limitations expired in late April, 2009. (Dkt.

#10 at 2.) 

- 3 -

to Fairview, the second case was filed because Fairview “believes the District Court’s

Judgment in the [former] Lawsuit dismissing ‘Jane Doe’ Schmid leaves open the question

of whether an ‘action’ has been ‘commenced’ against Patricia Schmid for purposes of tolling

the three-year statute of limitations in 17 U.S.C. § 507(b).”1

 (Dkt. # 1 ¶ 28.) Fairview

therefore admits that it “brings this second action . . . for the sole purpose of preserving the

statute of limitations as to Patricia Schmid should the Subject Appeal result in reversal and

remand.” (Id. ¶ 29.) Defendants now move for dismissal arguing that claim preclusion, issue

preclusion, and Arizona community property joinder rules bar this action. The Court will

address each argument in turn.

DISCUSSION

I. Claim Preclusion

Defendants first argue that the copyright infringement claim asserted against Mr.

Schmid is barred under principles of claim preclusion. (Dkt. # 7 at 1-2.) Under the doctrine

of claim preclusion, “a final judgment on the merits bars further claims by parties or their

privies based on the same cause of action.” Montana v. United States, 440 U.S. 147, 153

(1979); Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001)

(“[C]laim preclusion . . . bars litigation in a subsequent action of any claims that were raised

or could have been raised in the prior action.”). The elements necessary to establish claim

preclusion are: (1) an identity of claims; (2) a final judgment on the merits; and (3) privity

between the parties. Headwaters Inc. v. U.S. Forest Serv., 399 F.3d 1047, 1050-52 (9th Cir.

2005).

Here, Plaintiff does not dispute that each of these requirements is satisfied. (See Dkt.

# 10 at 4-12.) Rather, Plaintiff argues that pursuant to sections 20 and 26 of the Restatement

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 3 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

(Second) of Judgments, exceptions to claim preclusion apply. The exceptions set forth in

those sections, however, are not applicable on the facts of this case.

Section 20(1) of the Restatement (Second) of Judgments states: “A personal judgment

for the defendant, although valid and final, does not bar another action by the plaintiff on the

same claim . . . [w]hen the judgment is one of dismissal for lack of jurisdiction, for improper

venue, or for nonjoinder or misjoinder of parties . . . .” Here, the judgment was not based

on a lack of jurisdiction, improper venue, nonjoinder, or misjoinder, but rather on the

conclusion that Mr. Schmid was not liable for copyright infringement. Therefore, there is

no merit to Plaintiff’s contention that section 20 of the Restatement (Second) of Judgments

would allow it to reassert the claim against Mr. Schmid.

Section 26 of the Restatement (Second) of Judgments states:

(1) When any of the following circumstances exists, the general

rule of § 24 does not apply to extinguish the claim, and part or

all of the claim subsists as a possible basis for a second action

by the plaintiff against the defendant:

 . . .

(c) The Plaintiff was unable to rely on a certain theory of

the case or to seek a certain remedy or form of relief in

the first action because of the limitations on the subject

matter jurisdiction of the courts or restrictions on their

authority to entertain multiple theories or demands for

multiple remedies or forms of relief in a single action,

and the plaintiff desires in the second action to rely on

that theory or to seek that remedy or form of relief [.]

Despite citing this section, Fairview fails to articulate any reason why section 26(1) would

permit a second action against Mr. Schmid. Rather, Fairview argues that it “had no practical

opportunity” to assert a community claim against Mr. and Mrs. Schmid and that this is “akin

to the situation where the first tribunal’s subject matter jurisdiction is limited” as set forth in

section 26(1). Neither contention is correct. First, Plaintiff identifies no limitations on the

subject matter jurisdiction of the federal district court or other restrictions in the former case

that would have prevented Plaintiff from asserting a community theory of infringement or

relief. Plaintiff could have sought leave to amend its complaint to join Mrs. Schmid as a

defendant in the action at any time within the nearly one-year period prior to the Court’s

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 4 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

The Court expresses no opinion on whether Mrs. Schmid was a party in the prior

action and if so, whether she was properly served. To the extent that she may be found to

be a party in the prior action, application of claim and issue preclusion would likewise

preclude the claims asserted against her in this case. 

- 5 -

order granting summary judgment after it had discovered her identity. Fairview learned of

Mrs. Schmid’s identity during discovery as early as May 14, 2008. (See Dkt. # 88 Ex. 2 at

8.) Second, Plaintiff was certainly able, both theoretically and practically, to rely on a

community theory of copyright infringement/relief in the first action. Therefore, Plaintiff’s

contention that section 26 of the Restatement (Second) of Judgments makes claim preclusion

inapplicable against Mr. Schmid has no merit.

Because the elements necessary to establish claim preclusion are satisfied and because

no exceptions to claim preclusion have been established, Plaintiff is precluded from again

asserting the copyright infringement claim against Mr. Schmid.

II. Issue Preclusion

Defendants next argue that any claims asserted against Mrs. Schmid for purposes of

establishing community liability for copyright infringement must be dismissed under

principles of issue preclusion. (Dkt. # 7 at 4.) Assuming that Mrs. Schmid was not a party

in the former action,2

 she seeks to use issue preclusion offensively against Plaintiff. “[T]he

application of offensive nonmutual issue preclusion is appropriate if (1) there was a full and

fair opportunity to litigate the identical issue in the prior action; (2) the issue was actually

litigated in the prior action; (3) the issue was decided in a final judgment; and (4) the party

against whom issue preclusion is asserted was a party or in privity with a party to the prior

action.” Syverson v. Int’l Bus. Mach. Corp., 472 F.3d 1072, 1078 (9th Cir. 2007) (citations

omitted).

Plaintiff argues that issue preclusion does not bar this action because “[a]t issue in the

present suit is the community nature of any copyright infringement liability David Schmid

is found to have.” (Dkt. # 10 at 3.) Plaintiff contends that this issue was not litigated or

decided by the Court in the prior action because “the court in the First Lawsuit expressly

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 5 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

declined to decide the issue that underlies any community property liability, which is whether

David Schmid is personally liable for copyright infringement as a primary or contributory

infringer.” (Id.) Plaintiff, however, does not dispute that it did have a full and fair

opportunity to litigate the issue of Mr. Schmid’s liability, or that Fairview was a party in the

former action. 

Plaintiff’s assertion that Judge McNamee did not determine the issue of David

Schmid’s personal liability is without merit. In its Response brief to the pending motion,

Plaintiff represents multiple times that, in the first lawsuit, the Court granted summary

judgment “without determining David Schmid’s personal liability for infringement.” (Dkt.

# 10 at 4, 11, 12.) Plaintiff’s representation is based on the following statement by the Court:

“As the Court has granted summary judgment in favor of Defendants, the Court does not

address whether Schmid could have been held liable under a theory of primary or

contributory infringement.” (Case No. CV-07-0337-PHX-SMM, Dkt. # 96 at 23.) Plaintiff’s

assertion that this statement indicates that the Court did not determine David Schmid’s

personal liability is disingenuous at best. In its order, Judge McNamee unambiguously found

that Mr. Schmid had not infringed the copyright on the subject architectural plans – either

under a theory of direct infringement or contributory infringement. The Court’s statement

merely indicated that, given its conclusion of no infringement, it was unnecessary for the

Court to resolve the refined question of whether Mr. Schmid would have been liable for

direct infringement or contributory infringement had infringement been found. 

Here, the issue of Mr. Schmid’s liability for copyright infringement is the identical

issue that Defendants argue supports the application of issue preclusion. Indeed, Defendants

argue that “Patricia Schmid has no liability because David Schmid did not infringe Plaintiff’s

copyright.” (Dkt. # 12 at 4.) In the former case, the issue of Mr. Schmid’s liability for

copyright infringement was actually litigated, as both parties conducted substantial discovery

on the issue and ultimately submitted the issue for summary adjudication. The Court made

its ruling on the merits. Therefore, Plaintiff is precluded from asserting that Mrs. Schmid or

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 6 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 -

the Schmid marital community are liable to Plaintiff under a theory of copyright

infringement.

III. Arizona Revised Statutes Section 25-215(D)

In the Complaint and Plaintiff’s Response to the pending motion, Plaintiff makes clear

that “[t]he filing of the present lawsuit is a precautionary measure to ensure Fairview retains

the right to execute any judgment against the Schmid marital community should the Ninth

Circuit reverse the court’s decision in the First Lawsuit.” (Dkt. ## 10 at 3; 1 ¶¶ 28-29.)

Defendants argue that pursuant to Arizona law, Plaintiff “cannot bring a second lawsuit to

cure their failure to properly sue David and Patricia jointly in the First lawsuit.” (Dkt. # 7

at 4.) 

Arizona Revised Statutes section 25-215(D) requires that “[i]n an action on . . . a debt

or obligation the spouses shall be sued jointly.” Assuming that Mrs. Schmid was not a party

in the former lawsuit, an issue that appears to be contested by the parties, the parties dispute

whether Plaintiff may cure that deficiency by asserting a second lawsuit in which the spouses

are sued jointly. Defendants argue that C & J Travel, Inc. v. Shumway, 161 Ariz. 33, 775

P.2d 1097 (Ct. App. 1989), precludes this option. 

In Shumway, the plaintiff, C & J travel, sought to enforce against the marital

community a foreign judgment it had obtained in another state against the husband only,

David Shumway. Id. at 34-35, 775 P.2d at 1098-99. The Arizona Court of Appeals held that

the foreign judgments were final, “and that doctrines of merger and res judicata prevent[ed]

[the plaintiff] from suing David Shumway again.” Id. at 37, 775 P.2d at 1101. The court

concluded that:

The inability to sue David on the original cause of action . . .

prevents the creditors from complying with A.R.S. § 25-215(D)

because both spouses cannot be sued jointly unless and until the

domesticated judgments based on the final New Hampshire

judgment are vacated or set aside pursuant to procedural and

legal rules which might permit that action. 

 

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 7 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

Id. Based upon this holding, Defendants argue that, even had Plaintiff obtained a judgment

against Mr. Schmid in the first lawsuit, it would be precluded from a secondary suit aimed

at curing its failure to join both spouses in the first action. (Dkt. # 7 at 3-4.) 

Plaintiff, however, argues that the Arizona Court of Appeals, in Heinig v. Hudman,

177 Ariz. 66, 865 P.2d 110 (Ct. App. 1993), qualified the applicability of Shumway and

permits a second cause of action in certain circumstances. (Dkt. # 10 at 7-11.) 

In Heinig, George Hudman, a married man, entered into a partnership agreement to

develop raw land owned by Heinig. Heinig, 177 Ariz. at 68, 865 P.2d at 112. Hudman

represented, both orally and in the partnership agreement, that he was a married man dealing

with his sole and separate property. Id. Subsequently, when the real estate market

deteriorated and the partnership project failed, Heinig instituted arbitration proceedings

against Hudman under the arbitration clause of the partnership agreement. Id. During the

course of arbitration, Heinig learned that Hudman had misrepresented the source of his

funding, and that in fact he had acquired his partnership interest with community property.

Id. Consequently, Heinig tried to join Hudman’s wife as a party to the arbitration. Id. The

arbitrator, however, ruled that he had no authority under the agreement to arbitrate claims

against Mrs. Hudman. Id. In so ruling, the arbitrator expressly stated that he did not regard

his ruling as a bar to any subsequent action against the community. Id. at 68-69, 865 P.2d

at 112-13. The arbitration award in Heinig’s favor was subsequently confirmed by the

Arizona superior court. Id. at 69, 865 P.2d at 113.

Heinig then sued both Mr. and Mrs. Hudman in state court, seeking declaratory relief

that the judgment against Mr. Hudman was enforceable against both parties. Id. The

superior court granted summary judgment in favor of the Hudmans, but on review, the court

of appeals reversed in part. Id. The court decided that Heinig’s claims against the Hudmans

were not barred by res judicata because, pursuant to the Restatement (Second) of Judgments,

the rule of preclusion had exceptions that applied under the circumstances of the case. Id.

at 71-73, 865 P.2d at 115-17. Specifically, because the court in the first action expressly

reserved Heinig’s right to maintain the action, and because Heinig had no opportunity to

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 8 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 -

include Mrs. Hudman in the arbitral proceeding, the general rule of preclusion did not apply.

Id. The court therefore distinguished Shumway, noting that “no procedural impediment

prevented joinder of the wife” there. Id. at 72, 865 P.2d at 116.

Here, unlike Heinig, and as previously reviewed, there was no legal impediment

preventing Plaintiff from bringing its original action against both Mr. and Mrs. Schmid.

Additionally, there was no reservation of the right to assert a second action against the

community. Therefore, as in Shumway, where no procedural impediment stands in Plaintiff’s

way, Plaintiff is barred from asserting a second action for copyright infringement to cure its

failure to assert a claim against the marital community in the first action. See, e.g., Nw. Nat’l

Ins. Co. v. Schubach, 93 F.3d 386, 389-90 (7th Cir. 1996) (holding that, under Arizona law,

a creditor who choose not to join the defendant’s wife in a suit in federal court could not later

bring suit naming both spouses to impose the judgment on the marital community). Plaintiff

is barred from seeking to cure, in a second action, a failure to sue the community in the first.

IV. Declaratory Relief

In addition to asserting a claim of copyright infringement against the Schmid

community and Mr. Schmid individually, Plaintiff also asserts a claim for declaratory relief.

(Dkt. # 1 ¶¶ 36-39.) Plaintiff alleges that:

An actual and justiciable controversy exists between and/or

among [Fairview] and David and Patricia Schmid as to whether

David Schmid was acting in furtherance of his marital

community in committing any copyright infringement, whether

an action was ‘commenced’ as against Patricia Schmid in the

[former lawsuit] . . . , whether a subsequent amendment of the

complaint in the [former lawsuit] would relate back to the filing

of the original complaint, whether Patricia Schmid was properly

served with process [in] the [former lawsuit] and/or other

controversies.

(Id. ¶ 37.)

The Declaratory Judgments Act states, “In a case of actual controversy within its

jurisdiction . . . any court of the United States . . . may declare the rights and other legal

relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). Initially

then, “the court must inquire whether there is a case of actual controversy within its

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 9 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 10 -

jurisdiction.” Am. States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994). This

requirement is identical to Article III’s constitutional case or controversy requirement.

Societe de Conditionnement en Aluminum v. Hunter Eng’g Co., 655 F.2d 938, 942 (9th Cir.

1981). “In order for a case to be justiciable under Article III of the Constitution, it must be

ripe for review.” Aydin Corp. v. Union of India, 940 F.2d 527, 528 (9th Cir. 1991). When

asserting a claim under the Declaratory Judgments Act, a plaintiff must establish “that there

is a substantial controversy, between parties having adverse interests, of sufficient immediacy

and reality to warrant issuance of a declaratory judgment.” Scott v. Pasadena Unified Sch.

Dist., 306 F.3d 646, 658 (9th Cir. 2002) (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312

U.S. 270, 273 (1941)). 

Plaintiff argues that, in light of the three-year statute of limitations for commencing

copyright claims, these issues are ripe for review now and Plaintiff “will suffer a hardship

if it is prohibited from asserting its present claims and if such claims are barred in the future

by the statute of limitations.” (Dkt. # 10 at 13-14.) The Court has already concluded,

however, that the nature of the Court’s determination of the previous copyright claim against

Mr. Schmid precludes a similar claim against the Schmid marital community in a second

action. Whatever hardship results from this ruling cannot be alleviated at this point by

granting declaratory relief. Accordingly, dismissal of Plaintiff’s declaratory relief claim is

warranted. 

CONCLUSION

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 10 of 11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 11 -

Claim preclusion bars Plaintiff from asserting the same copyright infringement claim

previously litigated against Defendant David Schmid in this action. Similarly, issue

preclusion and Arizona community property law bars Plaintiff from asserting the copyright

infringement claim against Patricia Schmid or the Schmid marital community in this action.

Finally, Plaintiff is not entitled to declaratory relief.

IT IS THEREFORE ORDERED that the Motion to Dismiss (Dkt. # 7) is

GRANTED.

IT IS FURTHER ORDERED that this matter is DISMISSED. The Clerk of the

Court is directed to TERMINATE this action. 

DATED this 11th day of June, 2009.

Case 2:09-cv-00784-GMS Document 14 Filed 06/11/09 Page 11 of 11