UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

CURTIS TREY SEASTRUNK,

Plaintiff,

VS.

DARWELL INTEGRATED

TECHNOLOGY, INC., ET AL.,

Defendants.

)

)

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) CIVIL ACTION NO.

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) 3:05-CV-0531-G

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)

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)

MEMORANDUM OPINION AND ORDER

Before the court is the motion of the defendants Darwell Integrated

Technology, Inc. (“DIT”), DTS International, Inc. (“DTS”), and Roger Darisse

(“Darisse”) (collectively, “the defendants”) to dismiss the complaint of the plaintiff

Curtis Trey Seastrunk (“Seastrunk”) for lack of subject matter jurisdiction, for failure

to state a claim upon which relief can be granted, and for failure to plead fraud with

particularity. For the reasons discussed below, the defendants’ motion is granted.

I. BACKGROUND

Daniel Fuhrmann (“Fuhrmann”) authored various works of computer code,

including the Liebert Protocol Convertor. Original Complaint (“Complaint”) ¶¶ 8-10. 

 

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On or about February 11, 1989, DTS agreed to pay Fuhrmann certain royalties, until

December 15, 2008, to use the Liebert Protocol Convertor. Id. ¶ 12; see generally

Royalty Agreement, attached to Complaint as Exhibit C. DTS paid Fuhrmann

royalties under the terms of the Royalty Agreement until sometime in 2001. Id. ¶ 13. 

After this time, DTS continued to use the program without paying royalties. Id. 

In January 2004, Darisse placed DTS into Chapter 7 bankruptcy in the

Bankruptcy Court for the Northern District of Texas but did not list Fuhrmann as a

creditor or otherwise notify him of the bankruptcy action. Id. ¶ 14. Around that

time, Darisse set up DIT, another company, through his wife, Sheila Darisse. Id.

¶ 15. DIT used the Liebert Protocol Convertor without a license. Id.

On or about August 8, 2004, Fuhrmann assigned the copyright to the Liebert

Protocol Convertor, as well as other works, to Seastrunk. Id. ¶ 10; see generally

Agreement for Assignment of Copyright (“Assignment Agreement”), attached to

Complaint as Exhibit A. As set forth in the Assignment Agreement, Fuhrmann

“grant[ed], [sold] and convey[ed] to Seastrunk as Grantee, all rights in the Software,

including all rights of copyright, and also including all rights to assert any claims that

the Software has been infringed by third parties or that they have wrongfully made

derivative works of same.” Assignment Agreement ¶ 1. Seastrunk registered the

copyright for the Liebert Protocol Convertor on or about September 20, 2004. 

Complaint ¶ 11.

 

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1 The defendants seek to dismiss only the copyright infringement claim

against DTS, not the infringement claims against Darisse and DIT. Motion to

Dismiss ¶¶ II(14), (16), and III.

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Seastrunk filed this case on March 16, 2005, alleging copyright infringement,

breach of contract, fraud, and conspiracy. See generally Complaint. The defendants

filed this motion to dismiss on May 9, 2005. See generally Rule 12 Pre-Answer

Motion to Dismiss for Lack of Subject Matter Jurisdiction, Motion to Dismiss for

Failure to State a Claim Upon Which Relief Can be Granted, and Motion to Dismiss

for Failure to Plead Properly (“Motion to Dismiss”).

II. ANALYSIS

The defendants seek dismissal of certain claims raised by Seastrunk on three

grounds: (1) lack of subject matter jurisdiction over the claims for breach of royalty

contract, fraud, civil conspiracy, joint enterprise, and joint and several liability;

(2) failure to state a claim upon which relief can be granted on the claim for copyright

infringement by DTS;1 and (3) failure to plead with particularity on the claim for

fraud. See generally Motion to Dismiss.

A. Subject Matter Jurisdiction

1. The Standing Requirement

Article III of United States Constitution limits federal courts’ jurisdiction to

“cases” and “controversies.” U.S. Const. Art. III § 2. Standing -- i.e., the need to

show that the plaintiff has a direct, personal stake in the outcome of the suit -- is an

 

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“essential and unchanging part” of this case-or-controversy requirement. Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560 (1992). “The federal courts are under an

independent obligation to examine their own jurisdiction, and standing is perhaps the

most important of [the jurisdictional] doctrines.” United States v. Hays, 515 U.S. 737,

742 (1995) (quoting FW/PBS, Inc. v. Dallas, 493 U.S. 215, 230-231 (1990))

(internal quotation marks omitted); see also Sommers Drug Stores Company Employment

Profit Sharing Trust v. Corrigan, 883 F.2d 345, 348 (5th Cir. 1989) (“‘Standing, since

it goes to the very power of the court to act, must exist at all stages of the proceeding,

and not merely when the action is initiated or during an initial appeal.’”) (quoting

Safir v. Dole, 718 F.2d 475, 481 (D.C. Cir. 1983), cert. denied, 476 U.S. 1206 (1984));

University of South Alabama v. American Tobacco Company, 168 F.3d 405, 410 (11th Cir.

1999) (noting that “it is well settled that a federal court is obligated to inquire into

subject matter jurisdiction sua sponte whenever it may be lacking.”). As the Supreme

Court explained in Lujan, the “irreducible constitutional minimum of standing” has

three elements: 

First, the plaintiff[s] must have suffered an “injury in fact”

--an invasion of a legally protected interest which is

(a) concrete and particularized, and (b) “actual or

imminent, not ‘conjectural’ or ‘hypothetical.’” Second,

there must be a causal connection between the injury and

the conduct complained of -- the injury has to be “fairly

. . . trace[able] to the challenged action of the defendant,

and not . . . th[e] result [of] the independent action of

some third party not before the court.” Third, it must be

 

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“likely,” as opposed to merely “speculative,” that the injury

will be “redressed by a favorable decision.” 

504 U.S. at 560 (internal citations and footnote omitted).

Lack of standing is a defect in subject matter jurisdiction. See Haase v. Sessions,

835 F.2d 902, 906 (D.C. Cir. 1987) (citing Bender v. Williamsport Area School District,

475 U.S. 534, 541 (1986)); see also Corrigan, 883 F.2d at 348 (“standing is essential

to the exercise of jurisdiction, and . . . lack of standing can be raised at any time by a

party or by the court.”) (citing United States v. One 18th Century Colombian Monstrance,

797 F.2d 1370, 1374 (5th Cir. 1986), cert. denied, 481 U.S. 1014 (1987)).

Federal district courts have the unique power to make factual findings which

are decisive of subject matter jurisdiction. See Williamson v. Tucker, 645 F.2d 404,

413 (5th Cir. 1981) (citing, among other authorities, Land v. Dollar, 330 U.S. 731,

735 n. 4 (1947)), cert. denied, 454 U.S. 897 (1981). The district court has the power

to dismiss for lack of subject matter jurisdiction -- and thus for lack of standing -- on

any one of three separate bases: “(1) the complaint alone; (2) the complaint

supplemented by undisputed facts evidenced in the record; or (3) the complaint

supplemented by undisputed facts plus the court’s resolution of disputed facts.” 

Williamson, 645 F.2d at 413; Robinson v. TCI/US West Communications Inc., 117 F.3d

900, 904 (5th Cir. 1997); see also Haase, 835 F.2d at 907 (noting that, to the extent

the assessment of a plaintiff’s standing turns on factual evidence, a court may

consider all matters developed in the record at the time of its decision). Consistent

 

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with Williamson’s teaching, the following analysis of the plaintiff’s standing is based

upon the court’s examination of the complaint supplemented by undisputed record

evidence.

2. Standing to Bring Accrued Causes of Action Generally

Seastrunk contends that he has standing to sue on the Royalty Agreement

between Fuhrmann and DTS because Fuhrmann granted him “‘all rights in the

Software, including all rights of copyright,’” and “by necessary implication [the grant]

assigned all claims of Fuhrmann which had accrued from past acts of Defendants.” 

Plaintiff’s Response to Defendants’ Motion to Dismiss at 2-3 (emphasis in original). 

Seastrunk’s contention, however, is incorrect. A review of the federal Copyright Act

and the applicable case law reveals that an assignment of copyright does not per se

include the right to bring accrued claims related to the copyright.

According to the federal Copyright Act, “[t]he legal or beneficial owner of an

exclusive right under a copyright is entitled, subject to the requirements of section

411, to institute an action for any infringement of that particular right committed

while he or she is the owner of it.” 17 U.S.C. § 501(b). The Copyright Act lists the

following exclusive rights of the owner of a copyright:

(1) to reproduce the copyrighted work in copies or

phonorecords;

(2) to prepare derivative works based upon the

copyrighted work;

 

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(3) to distribute copies or phonorecords of the copyrighted

work to the public by sale or other transfer of ownership,

or by rental, lease, or lending;

(4) in the case of literary, musical, dramatic, and

choreographic works, pantomimes, and motion pictures

and other audiovisual works, to perform the copyrighted

work publicly;

(5) in the case of literary, musical, dramatic, and

choreographic works, pantomimes, and pictorial, graphic,

or sculptural works, including the individual images of a

motion picture or other audiovisual work, to display the

copyrighted work publicly; and

(6) in the case of sound recordings, to perform the

copyrighted work publicly by means of a digital audio

transmission.

17 U.S.C. § 106. The right to sue for accrued claims is not an exclusive right. Id.;

Silvers v. Sony Pictures Entertainment, Inc., 402 F.3d 881, 884 (9th Cir. 2005). This

suggests that the right to sue for causes of action that accrued before the assignment

of copyright is not among the rights of copyright.

Such a suggestion is bolstered by case law from other circuits, although the

Fifth Circuit does not appear to have decided this precise issue. For instance, in

ABKCO Music, Inc. v. Harrisongs Music, Ltd., 944 F.2d 971, 980 (2d Cir. 1991), the

Second Circuit considered a copyright case in which the assignee, the plaintiff in the

action, bought claims for both copyright infringement and “‘any and all rights

assertable under copyright against the Infringing Composition in any part of the

world which may have heretofore arisen or which may hereafter arise.’” The court

 

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concluded that “a copyright owner can assign its copyright but, if the accrued causes

of action [for past infringement] are not expressly included in the assignment, the

assignee will not be able to prosecute them,” and if the infringement occurred before

the plaintiff bought the copyright, the plaintiff can sue the infringer “not out of its

ownership of the copyright, but from its ownership of the claims themselves which it

purchased, along with the copyright.” Id. at 981. Other courts that have found

standing to prosecute accrued causes of action do so because such a right was

expressly included in the assignment. See Sabroso Publishing, Inc. v. Caiman Records

America, Inc., 141 F. Supp. 2d 224, 227-28 (D. P.R. 2001) (finding standing for the

assignee when the assignor assigned “all of its copyrights, trademarks and assets,

including, without limitation, all past, present and future actions for copyright

infringement that have accrued to this date, or may accrue in the future . . . ”);

Godinger Silver Art Company, Ltd. v. International Silver Company, No. 95 CIV. 9199

(LMM), 1995 WL 702357, at *4 (S.D. N.Y. Nov. 28, 1995) (finding standing for

the assignee when the assignor assigned “‘whatever right, title or interest [it] may

have . . . including the right to sue for past, present and future infringements

thereof.’”).

Thus, contrary to Seastrunk’s assertion, the assignment of a copyright does not

necessarily imply a grant of accrued claims. Seastrunk may not bring accrued claims

because the Assignment Agreement does not expressly assign him the right to do so. 

 

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The implications for the defendants’ motion to dismiss for lack of subject matter

jurisdiction follow.

3. The Defendants’ Particular Grounds for Dismissal

(a) Breach of Contract

The defendants argue that Seastrunk does not have standing to sue for breach

of contract because he was not a party to the Royalty Agreement, and the Assignment

Agreement “does not even purport to transfer Fuhrmann’s rights to receive royalty

payments from DTS or assign Fuhrmann’s personal service obligations under the

Royalty Agreement.” Defendant’s Motion to Dismiss at 3. Under Texas law, “a

person who is neither a signatory to nor an intended third-party beneficiary of a

contract has no standing to sue for breach of that contract.” Miller v. Schwartz, No.

14-04-00352-CV, 2005 WL 757249, at *2 (Tex. App. -- Houston [14th Dist.]

Apr. 5, 2005) (citing Holloway v. Atlantic Richfield Co., 970 S.W.2d 641, 644 (Tex.

App.--Tyler 1998, no writ)). Accordingly, based on the analysis in the preceding

section, the court grants the defendants’ motion to dismiss Seastrunk’s breach of

contract claim under Rule 12(b)(1). Because Seastrunk was neither a signatory nor a

third-party beneficiary of the Royalty Agreement, and the Assignment Agreement

does not expressly give him the right to bring causes of action that accrued before the

copyright was assigned, Seastrunk lacks standing to sue for breach of the Royalty

Agreement. 

 

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(b) Fraud and Civil Conspiracy

The defendants also argue that because Seastrunk lacks standing to sue for

breach of the Royalty Agreement, he also lacks standing to sue for fraud or civil

conspiracy. First, the defendants argue that because Seastrunk was not a creditor of

DTS, he “could not have relied on or been injured by any alleged misrepresentation

or failure to disclose by DTS in the bankruptcy proceeding,” making his fraud claim

untenable. Motion to Dismiss at 4. Next, they argue that since Seastrunk was not a

party to the Royalty Agreement, “he cannot show that he was injured by any alleged

conspiracy between the Defendants to defraud the U.S. Bankruptcy Court and/or the

creditors of DTS.” Motion to Dismiss at 5. 

Seastrunk’s claims of fraud and civil conspiracy are derived from his contract

claim. He argues that the defendants committed fraud by making misrepresentations

and failing to disclose information about the Royalty Agreement to the Bankruptcy

Court, and that they did so in furtherance of a conspiracy to defraud their creditors. 

Complaint ¶¶ 37-49. However, without standing to sue on the contract, Seastrunk

does not have standing to sue on these claims that derive from it because he was not

injured by relying on the contract. See, e.g., Greater Iowa Corporation v. McLendon, 378

F.2d 783, 792 (8th Cir. 1967) (finding that the only party with standing to attack

the validity of transactions between contracting parties was the party who was

allegedly defrauded, and that the plaintiffs, as strangers to the contract, had no

 

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standing to inject themselves between the contracting parties). Consequently, the

defendants’ motion to dismiss Seastrunk’s claim of fraud under Rule 12(b)(1) is

granted. 

(c) Joint Enterprise & Joint and Several Liability

Finally, the defendants argue that since Seastrunk lacks standing to pursue any

tort claims, he “cannot successfully claim a joint enterprise theory of liability against

Defendants.” Motion to Dismiss at 6. Because all of the claims contested by the

defendants are being dismissed for lack of subject matter jurisdiction, it necessarily

follows that Seastrunk cannot recover on these claims from any of the defendants; it

is therefore unnecessary to decide whether DIT, DTS, and Darisse are jointly and

severally liable on such claims.

B. Failure to State a Claim of Copyright Infringement

Next, the defendants move to dismiss, on two grounds under F.R. CIV. P.

12(b)(6), Seastrunk’s claim that DTS infringed his copyright: (1) Seastrunk cannot

recover against a company that ceased doing business many months before Seastrunk

was assigned and registered the copyright, and (2) Seastrunk cannot claim copyright

infringement because DTS was authorized to use the Liebert Protocol Converter by

virtue of the Royalty Agreement between DTS and Fuhrmann. Motion to Dismiss

¶ 16. The court need not consider these grounds for dismissal because Seastrunk

does not have standing to bring this claim. As discussed above, the Assignment

 

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Agreement did not expressly assign to Seastrunk the right to bring accrued causes of

action related to the copyright. Seastrunk’s claim against DTS for copyright

infringement is dismissed sua sponte under Rule 12(b)(1) for lack of subject matter

jurisdiction. See Bridgmon v. Array Systems Corporation, 325 F.3d 572, 575 (5th Cir.

2003) (explaining that courts have a duty to raise question of subject matter

jurisdiction sua sponte).

C. Failure to Properly Plead the Claim of Fraud

Because Seastrunk’s claim of fraud is being dismissed for lack of subject matter

jurisdiction, it is also unnecessary to determine whether Seastrunk pleaded fraud with

the particularity required by Federal Rule 9(b). See FED. R. CIV. P. 9(b). However,

the court notes that in this circuit, “articulating the elements of fraud with

particularity requires a plaintiff to specify the statements contended to be fraudulent,

identify the speaker, state when and where the statements were made, and explain

why the statements were fraudulent.” Williams v. WMX Technologies, Inc., 112 F.3d

175, 177-78 (5th Cir.) (citing Mills v. Polar Molecular Corporation, 12 F.3d 1170, 1175

(2nd Cir. 1993) (adopting the Second Circuit approach to deciding motions to

dismiss under Federal Rule 9(b)), cert. denied, 522 U.S. 966 (1997).

III. CONCLUSION

For the reasons discussed above, the defendants’ motion to dismiss is

GRANTED, and Seastrunk’s claims for breach of contract, fraud, conspiracy, joint

 

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2 The dismissal is without prejudice because in spite of the rule that an

assignment of copyright must expressly assign the right to bring accrued claims, there

is precedent in other circuits allowing a party to amend an assignment to clarify that

it was intended to convey accrued causes of action. Accordingly, a party may cure a

standing defect with a second assignment that explicitly transfers causes of action

accrued prior to the initial assignment. See Intimo, Inc. v. Briefly Stated, Inc., 948 F.

Supp. 315, 318 (S.D. N.Y. 1996) (giving effect to a “very late” amendment granting

the plaintiff the right to bring accrued causes of action); Godinger, 1995 WL 702357,

at *4 (S.D. N.Y. 1995) (holding that the plaintiff could cure its standing defect after

the action was filed); Infodek, Inc. v. Meredith-Webb Printing Company, Inc., 830 F.

Supp. 614, 620 (N.D. Ga. 1993) (determining that a second assignment cured a

standing defect). Thus, if Seastrunk can obtain an amendment to the Assignment

Agreement that expressly grants him the right to bring accrued causes of action, the

standing deficiency will be cured, and he may seek leave to re-file these claims.

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enterprise, joint and several liability, and copyright infringement by DTS are

DISMISSED without prejudice.2 As a result, the only claims remaining in this action

are those against DIT and Darisse for copyright infringement.

SO ORDERED.

July 15, 2005.

 

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