Case 1:19-cv-07470-LTS-DCF Document 50 Filed 03/31/21 Page 1 of 11
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`Plaintiff,
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`No. 19-CV-7470-LTS-DCF
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`SKETCHWORKS INDUSTRIAL STRENGTH
`COMEDY, INC.,
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`-v-
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`JAMES H. JACOBS, et al.,
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`Defendants.
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`MEMORANDUM ORDER
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`Sketchworks Industrial Strength Comedy, Inc. (“Plaintiff” or “Sketchworks”),
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`brings this action against James H. Jacobs and Vanguard National Trust Company, N.A.
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`(“Defendants”), seeking a declaratory judgment, pursuant to 28 U.S.C. section 2201, that its
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`theater production, titled Vape, constitutes fair use under the Copyright Act, 17 U.S.C. section
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`107. (Docket Entry no. 1.) Plaintiff alleges that Vape is a parody of the famous musical Grease
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`and seeks a judicial determination that Vape does not infringe on Defendants’ copyright interest
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`in Grease or any derivatives thereof. (Docket Entry no. 13.) Defendants move to dismiss the
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`complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure
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`12(b)(1), and specifically, for lack of a concrete case or controversy. The Court has jurisdiction
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`of this case pursuant to 28 U.S.C. section 1331.
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`The Court has considered carefully the parties’ submissions and arguments and,
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`for the following reasons, denies Defendants’ motion to dismiss the complaint for lack of subject
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`matter jurisdiction.
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`BACKGROUND
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`The following recitation of facts is drawn from the Amended Complaint1 (Docket
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`Entry no. 13, (“AC”)), the factual contents of which are taken as true for the purposes of this
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`decision, as well as from the submissions of the parties as they relate to the issue of subject
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`matter jurisdiction.2
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`Plaintiff operates a sketch comedy company incorporated in Georgia, and owns a
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`copyright in Vape, an alleged parody of the musical play Grease, of which Defendants James H.
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`Jacobs and Warren Casey are co-authors.3 Vape was performed in Atlanta, Georgia in 2018, and
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`was scheduled to be performed at the Improv Asylum NYC Theatre on August 8-10, 2019. (AC,
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`at ¶¶ 56-57.) On July 29, 2019, Lori Thimsen (“Thimsen”), Director of Licensing Compliance
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`for Rogers & Hammerstein Holdings LLC d/b/a Concord Theatricals (“Concord”), licensing
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`agent of Defendants, sent a cease and desist letter to Plaintiff. (Id. at ¶ 58; Taft Decl., Exh. A.)
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`The letter claimed that Vape infringed on Defendants’ copyright in Grease and demanded that
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`Plaintiff “immediately cease and desist from the advertising, promotion, and presentation of any
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`performances of Grease . . . [and stated that] failure to do so will expose Sketchworks . . . to
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`action for willful copyright and trademark infringement.” (Taft Decl., Exh. A.) Defendants
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`allege that this letter was sent without the authority of Ronald Taft, the long-time licensing
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`1
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`2
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`3
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`The Complaint was amended by Plaintiffs as of right on September 3, 2019. (Docket
`Entry no. 13.)
`The filings that the Court has considered and relied upon in determining whether there is
`subject matter jurisdiction are: the Declaration of Ronald S. Taft (Docket Entry no. 24-1,
`(“Taft Decl.”)), the Declaration of Jordan Greenberger (Docket Entry no. 29,
`(“Greenberger Decl.”)), the Declaration of Brian M. Troxell, (Docket Entry no. 30,
`(“Troxell Decl.”)), and the Transcript of Proceedings re: initial pretrial conference
`(Docket Entry no. 42, (“IPTC Transcript”)).
`As listed in the Amended Complaint, Defendants are James H. Jacobs (trustee of James
`H. Jacobs Trust) and Vanguard National Trust Company (trustee under the will of
`Warren Casey). (Docket Entry no. 13, at ¶¶ 3, 4, 5.)
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`attorney for Defendants. (Taft Decl., at ¶¶ 4-8.) On July 31, 2019, Plaintiff responded to the
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`letter and stated that Vape is fair use. (AC, at ¶ 59.) Nevertheless, on Aug. 2, 2019, Improv
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`Asylum NYC cancelled the scheduled performances of Vape. (Id. at ¶ 60.) In an Aug. 5, 2019,
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`email to Plaintiff, Taft rejected the position that Vape is fair use, described Vape as “blatant
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`infringements of my client’s trademark and copyrights,” but offered to “reconsider” if Plaintiff
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`answered his questions and briefed him on how fair use applied. (See AC, at ¶¶ 61, 62.)
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`On Aug. 9, 2019, Plaintiff filed the above-captioned action against Defendants,
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`without responding to Taft’s Aug. 5, 2019, email. (See Taft Decl., at ¶ 17; AC.) After the
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`complaint was filed in this matter and at Taft’s insistence, on August 12, 2019, Concord
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`unconditionally withdrew the cease and desist letter and notified Plaintiff of the withdrawal.
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`(Taft Decl., at ¶ 21; id., Exh. G.) After Defendants filed the instant motion, Plaintiff asked
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`Defendants whether they would provide a covenant not to sue and a release; none was ever
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`provided. (See Greenberger Decl., at ¶¶ 11, 32; id., Exh. 2.) Plaintiff alleges that, while no
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`additional performances of Vape are scheduled, they “desire[] to perform and otherwise exploit
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`Vape in the future, including in Manhattan” and had “refrained from producing or otherwise
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`exploiting the work because of the copyright infringement claims the Defendants have made.”
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`(AC, at ¶ 64; Troxell Decl., at ¶ 9.)
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`After Defendants filed the instant motion, both parties appeared in front of
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`Magistrate Judge Freeman on February 21, 2020, for an initial pre-trial conference, the transcript
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`of which was accepted as a supplemental filing by the Court on March 11, 2020. (IPTC Tr.;
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`Docket Entry no. 44.) During this pre-trial conference, in response to questioning by the Court,
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`the attorney for Defendants stated that “if the case is not dismissed . . . we’ll assert counterclaims
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`and defend vigorously,” and stated that Defendants were “uncertain” whether, if the case was
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`dismissed on the present motion, Defendants would bring a claim for copyright infringement.
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`(IPTC Tr., at 6:10-12.)
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`Plaintiff seeks a declaratory judgment that Vape is fair use and does not infringe
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`on Defendants’ copyright interest in Grease, so that it may perform and otherwise exploit Vape.
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`(AC, at ¶ 64.) Defendants move to dismiss the Amended Complaint, arguing that the case is
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`moot and the Court lacks subject matter jurisdiction because Plaintiff has no standing and no live
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`case or controversy remains after Concord withdrew the cease and desist letter.4 In their
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`memorandum of law, Defendants request, in the alternative, that the Court dismiss the Complaint
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`pursuant to its discretion under the Declaratory Judgment Act. (Docket Entry no. 24, Exh. 3.)
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`DISCUSSION
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`An action must be dismissed for lack of subject matter jurisdiction where the
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`Court lacks the statutory or constitutional power to adjudicate the case. Fed. R. Civ. P. 12(b)(1).
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`The party asserting subject matter jurisdiction has the burden of establishing, by a preponderance
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`of the evidence, that jurisdiction exists. Morrison v. Nat’l Australia Bank Ltd., 547 F.3d 167,
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`4
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`The Defendant argues standing as a separate issue, however, the issue of standing is here
`closely intertwined with the question of whether the withdrawal of the cease and desist
`letter ended any live case or controversy. Here, the Court finds that Plaintiff does have
`standing as Plaintiff sought to mount a production of Vape and suffered an injury in fact
`(cancellation of scheduled shows at Improve Asylum NYC Theater) due to the cease and
`desist letter, which was concrete and actual, and fairly traceable to the challenged action
`of Defendants. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992); see also
`Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167,
`180-81 (2000). Accordingly, the principal question now before the Court is whether the
`withdrawal of the cease and desist letter eliminated Plaintiff’s justiciable personal interest
`in determination of the status of Vape and mooted any case or controversy regarding that
`status. See, e.g., Friends of the Earth, Inc., 528 U.S. at 189-90 (defining mootness as “the
`doctrine of standing set in a time frame: The requisite personal interest that must exist at
`the commencement of the litigation (standing) must continue through its existence
`(mootness)”).
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`170 (2d Cir. 2008). In deciding a Rule 12(b)(1) motion, “the court must take all facts alleged in
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`the complaint as true,” Natural Resources Defense Council v. Johnson, 461 F.3d 164, 171 (2d
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`Cir. 2006), but “[j]urisdiction must be shown affirmatively, and that showing is not made by
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`drawing from the pleadings inferences favorable to the party asserting it.” APWU v. Potter, 343
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`F.3d 619, 623 (2d Cir. 2003) (quoting Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131
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`(2d Cir. 1998)). The Court may refer to evidence outside the pleadings to resolve a Rule
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`12(b)(1) motion. Makarova v. U.S., 201 F.3d 110, 113 (2d Cir. 2000).
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`The Declaratory Judgment Act (“DJA”) provides that, “[i]n a case of actual
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`controversy within its jurisdiction . . . any court of the United States . . . may declare the rights
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`and other legal relations of any interested party seeking such declaration, whether or not further
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`relief is or could be sought.” 28 U.S.C. § 2201(a). The “case of actual controversy” phrase
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`within the DJA refers to the types of “cases and controversies” justiciable under Article III.
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`MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quotation omitted). To
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`determine whether an action presents an actual case or controversy, the Court inquires “whether
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`the facts alleged, under all the circumstances, show that there is a substantial controversy,
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`between parties having adverse legal interests, of sufficient immediacy and reality to warrant the
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`issuance of a declaratory judgment.” Id. at 127 (quotation omitted). To issue a declaratory
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`judgment, the Court must find that the dispute is “real and substantial” such that the Court’s
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`decision can be distinguished from one which “advis[es] what the law would be upon a
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`hypothetical state of facts.” Id. (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41
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`(1937)). The “threat of future litigation remains relevant in determining whether an actual
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`controversy exists.” Saleh v. Sulka Trading Ltd., 957 F.3d 348, 354 (2d Cir. 2020) (quoting
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`Nike, Inc. v. Already, LLC, 663 F.3d 89, 95-96 (2d Cir. 2011)).
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`The Court finds that Sketchworks has met its burden of demonstrating that an
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`actual controversy exists. The undisputed evidence shows that Vape is a theater production that
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`has been created and performed, and was scheduled for additional performances in New York.
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`(AC, at ¶¶ 56-57.) It is also undisputed that the performances scheduled to take place in New
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`York were cancelled after Plaintiff received Defendants’ cease and desist letter. (AC, at ¶¶ 58-
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`60.) Plaintiffs have proffered evidence demonstrating that requests to Defendants for a covenant
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`not to sue and a release have gone unanswered. (See Greenberger Decl., at ¶¶ 11, 32; id., Exh.
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`2.) In their motion papers, Defendants characterize Vape as involving “the unlicensed use of
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`music, digitally copied note for note from 9 copyrighted songs from the play and movie of
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`Grease, [and] the use of the identical names of the characters . . . and locations . . . and other plot,
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`structure, issues, themes and imagery of Grease.” (Docket Entry n. 24, Exh. 3.) Defendants
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`state that they are “uncertain” whether they would bring a claim for copyright infringement
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`based on future performances (IPTC Tr., at 6:10-12), but have not disclaimed or waived any
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`right to make such a claim. Plaintiff has a relationship with a theater in New York (Improve
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`Asylum NYC) and a proffered intention to schedule performances in New York in the future.
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`(AC, at ¶ 64.) Accordingly, Plaintiff is in a position of either abandoning its intention to
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`“perform and otherwise exploit Vape in the future, including in Manhattan” (id.), or risking
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`litigation. That is the “dilemma that it was the very purpose of the Declaratory Judgment Act to
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`ameliorate.” MedImmune, 549 U.S. at 129 (quotation omitted).
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`Plaintiff here “refrained from producing or otherwise exploiting [Vape] because
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`of the copyright infringement claims the Defendants . . . made.” (Troxell Decl., at ¶ 9.)
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`Regardless of whether it was unauthorized, Defendants’ cease and desist letter caused the
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`cancellation of Plaintiff’s scheduled performances, the loss of the opportunity to garner
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`additional performances, and, importantly, Plaintiff’s unwillingness to produce Vape without a
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`favorable declaratory judgment. (See Troxell Decl., at ¶ 9.) As the Supreme Court stated in
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`MedImmune, where “the plaintiff had eliminated the imminent threat of harm by simply not
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`doing what he claimed the right to do . . . [t]hat did not preclude subject matter jurisdiction
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`because the threat-eliminating behavior was effectively coerced.” 549 U.S. at 129. Here,
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`Defendants threatened litigation if Plaintiff did not cease exploiting Vape, and Plaintiff
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`“eliminated the imminent threat of litigation by simply not doing what” Plaintiff now claims they
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`have the right to do: namely, exploit Vape. Id. at 129-130 (noting that courts have “long
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`accepted jurisdiction in such cases” where the coercion was applied by a private party rather than
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`the government). Furthermore, Defendants have not provided assurances that could eliminate
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`Plaintiff’s dilemma, despite requests from Plaintiff; Defendants have not entered into a covenant
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`not to sue, nor have they proffered that they would refrain from litigating future performances of
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`Vape if this matter were dismissed. Plaintiff need not “bet the farm” and actually infringe upon
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`Defendant’s alleged copyright interest in Grease prior to filing suit. Id. at 129. Accordingly,
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`Plaintiff has proffered that an actual controversy exists over whether Vape is fair use.
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`Defendants argue that Plaintiff’s “desire” to schedule more performances of Vape
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`is not enough to create an actual controversy after the withdrawal of the cease and desist letter
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`removed any real threat of litigation. (Docket Entry no. 24, at 19-21; Docket Entry no. 32, at 1-
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`2.) Defendants cite Second Circuit decisions holding that a “desire” to engage in a course of
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`conduct is not enough to establish an actual controversy. (See, e.g., Docket Entry nos. 24, Exh.
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`3; 32.) In the Second Circuit case of Saleh, the plaintiff asserted that he had plans to sell
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`products in the United States, asserting that he “might use his existing shipper, or he might
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`contract with a different shipper . . . or . . . he might contract with unnamed and unspecified
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`‘additional on-line portals’ to sell his wares.” 957 F.3d at 355. The court determined that the
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`Plaintiff did not meet his burden to show a controversy of “sufficient immediacy and reality to
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`warrant the issuance of a declaratory judgment.” MedImmune, 549 U.S. at 127. The Plaintiff’s
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`“hypothetical possibilities, without tangible steps to effectuate [Plaintiff’s] plans, [were] not
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`enough to create a ‘definite and concrete’ dispute between the parties.” Saleh, 957 F.3d at 355
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`(quoting MedImmune, 549 U.S. at 127). Saleh differs materially from the case at hand because
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`Plaintiff has proffered sufficient facts to show that its intentions to exploit Vape are not merely
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`hypothetical. As previously noted, Vape has been created and performed, and was scheduled to
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`be performed in New York. Importantly, Plaintiff took substantial, tangible steps to effectuate
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`its plan of having Vape performed in Manhattan, steps which were thwarted by Defendants’
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`cease and desist letter. Plaintiff still has a relationship with at least one theatre, and therefore,
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`taking into consideration the totality of the circumstances, Plaintiff’s “desire” to schedule
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`additional performances is sufficiently definite and concreate so as to present an actual
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`controversy. See Medimmune, 549 U.S. at 129.
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`Defendants also cite the Federal Circuit case of Prasco, LLC v. Medicis Pharm.
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`Corp., 537 F.3d 1329 (Fed Cir. 2008), in response to Plaintiff’s arguments regarding Defendants’
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`refusal to enter into a covenant not to sue, and Plaintiff’s apprehension of a future claim of
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`infringement. (See Docket Entry no. 32, at 9-10.) The Prasco court found a case or controversy
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`lacking where there had been no claim that a business’ product infringed the patent that was the
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`subject of the declaratory judgment action, and the business claimed a fear of future infringement
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`claims as the basis for jurisdiction. The defendant in that action had “not taken a concrete
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`position adverse to [the plaintiff’s]”, nor had it “taken [any] affirmative actions at all related to
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`[the] . . . product.” Prasco, 537 F.3d at 1340. Prasco’s “subjective fear” of a claim was
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`insufficient to support jurisdiction. Id. at 1339. Defendants’ characterize Sketchworks’ fear of
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`litigation as a “subjective fear of infringement action,” and argue that it should, similarly, be
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`dismissed. (Docket Entry no. 32, at 9). Sketchworks’ “apprehension of litigation” is not,
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`however, merely “subjective.” (See IPTC Tr., at 6:10-12 (Defendants stated that “if the case is
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`not dismissed . . . we’ll assert counterclaims and defend vigorously,” and stated that it was
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`“uncertain” if the case was dismissed on the present motion whether Defendants would not bring
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`a claim for copyright infringement.”)); (see also AC, at ¶ 61 (quoting email from Defendants’
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`transactional attorney describing Vape as “blatant infringements of my clients’ trademark and
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`copyrights”).) As such, particularly in light of the (albeit supposedly unauthorized) cease and
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`desist letter and the Defendant’s withdrawal of the letter without disavowal of the claim of
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`infringement, the Court is persuaded that there is a real prospect of litigation.
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`Defendants also rely on Prasco to counter Plaintiff’s argument regarding
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`Defendants’ failure to enter into a covenant not to sue, stating that “although a defendant’s
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`failure to sign a covenant not to sue is one circumstance to consider in evaluating the totality of
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`the circumstances, it is not sufficient to create an actual controversy – some affirmative actions
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`by the defendant will also generally be necessary.” (See Docket Entry no. 32, at 10 (citing
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`Prasco, 539 F.3d at 1341-42).) Unlike the plaintiff in Prasco, Plaintiff has proffered “some
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`affirmative actions,” namely, the cease and desist letter and its threat of litigation, as well as the
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`present and actual injury that the letter caused (e.g. loss of scheduled performances, loss of
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`advertising, and not being able to schedule additional performances).
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`Finally, even where Plaintiff has demonstrated the existence of an actual
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`controversy, the Court still retains “broad discretion,” and may take into consideration the
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`following two factors when determining whether to hear a case under the DJA: “(1) whether the
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`judgment will serve a useful purpose in clarifying and settling the legal relations involved; and
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`(2) whether a judgment would finalize the controversy and offer relief from uncertainty.” Duane
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`Reade Inc. v. St. Paul Fire and Marine Ins. Co., 411 F.3d 384, 389 (2d Cir. 2005).
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`A judgment in this matter will “serve a useful purpose” by clarifying whether
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`Vape infringes upon Defendants’ copyright interests in Grease, and thus “finalize the
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`controversy and offer relief from uncertainty.” Duane Reade Inc., 411 F.3d at 389. If Plaintiffs
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`receive the relief requested, Plaintiff will be able to advertise the work and seek to schedule
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`performances. Conversely, if the Court determines that Vape is not fair use, the Defendants will
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`gain “relief from uncertainty” and will have certainty regarding their ability to impede Plaintiff’s
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`utilization of the Vape work.
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`For the reasons stated above, Plaintiff has carried its burden of demonstrating that
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`there is an actual controversy in light of Plaintiff’s reasonable apprehension of litigation (and
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`threat by Defendants), Defendant’s refusal to sign a covenant not to sue, and Plaintiff’s injuries
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`from the cease and desist letter (regardless of whether it was unauthorized and subsequently
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`withdrawn). Because exercising jurisdiction will finalize the controversy and offer the parties
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`relief from uncertainty, the Court exercises its discretion to entertain Plaintiff’s declaratory
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`judgment claim.
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`CONCLUSION
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`For the foregoing reasons, Defendant’s motion to dismiss the amended complaint
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`for lack of subject matter jurisdiction is denied. This action remains referred to Magistrate Judge
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`Freeman for general pretrial management.
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`This Memorandum Order resolves Docket Entry no. 24.
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`SO ORDERED.
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`Dated: New York, New York
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`March 31, 2021
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` /s/ Laura Taylor Swain
`LAURA TAYLOR SWAIN
`United States District Judge
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