United States District Court, M.D. North Carolina
MEMORANDUM OPINION AND ORDER
LORETTA C. BIGGS, District Judge.
Christopher Adam Daughtry ("Daughtry" commenced this declaratory judgment action, pursuant to Rule 57 of the Federal Rules of Civil Procedure and 28 U.S.C. § 2201, to obtain a declaration of copyright ownership in certain musical works based on authorship arising under the Copyright Act, 17 U.S.C. §§ 101 et seq. (ECF. No. 1 at 1, 5-6.) Before the Court is Defendants' Motion to Dismiss or Stay this action pending the outcome of a related state court proceeding. (ECF No. 9.) The Court heard oral argument on April 30, 2015. For the reasons stated below, the Court grants Defendants' Motion to Stay.
Defendants and Daughtry were members of a band called Absent Element from the fall of 2004 to the summer of 2006. (ECF No. 16-1 ¶ 12; ECF No. 1 ¶ 7.) During this time, the parties wrote and recorded an album titled Uprooted.  ( See ECF No. 1 ¶¶ 7-12.) On April 4, 2006, Defendants filed a copyright registration with respect to the songs on the Uprooted album, listing all four members of Absent Element as "co-authors of all lyrics, music and performance on all 7 songs." ( Id. ¶ 8.) Daughtry denies that he had any knowledge of the copyright registrations, contending that the registrations were fraudulent and that he first learned of them in March of 2012. ( Id. ¶¶ 8, 15.)
In April of 2012, Defendants filed a lawsuit in state court in Guilford County, North Carolina, alleging among other things that the band, during its existence, operated under a partnership agreement in which all four members had agreed to share equally in the band's profits and songwriting credits for songs written in furtherance of the band, irrespective of authorship. (ECF No. 16-1 ¶¶ 20, 22.) Defendants further claim that Daughtry has failed to account for profits and provide authorship credit as required by the partnership agreement. (ECF No. 10 at 5-6.) On May 3, 2012, Daughtry removed the case to federal court, alleging that Defendants' claims arise under the Copyright Act. Notice of Removal ¶ 6, Andrews v. Daughtry, No. 1:12-cv-00441, 2013 WL 664564 (M.D. N.C. Feb. 22, 2013) (" Andrews I "), ECF No. 1. On February 22, 2013, the Court remanded the case to state court, explaining that Defendants' claims were based on the alleged partnership agreement and that Defendants had "carefully pleaded their claims to avoid federal question jurisdiction" consistent with the well-pleaded complaint rule. Andrews I, 2013 WL 664564, at *6, *8, *15.
Before filing his answer and counterclaims in the state proceeding on May 17, 2013, (ECF No. 10-2 at 24), Daughtry filed on or about January 31, 2013, a correction with the Copyright Office, notifying the Office that not all of the band members co-authored each song on Uprooted. (ECF No. 1 ¶ 14.) Daughtry also filed a registration with respect to each of the songs on Uprooted, outlining what he contends were the correct ownership and authorship interests in each of the songs on the album. ( Id. ¶ 15.) Daughtry then filed his Answer to the Complaint and Counterclaims Against All Plaintiffs seeking, among other relief, a declaration under the Copyright Act that he was the sole author and original owner of four Uprooted songs and a co-owner and co-author of the remaining three. (ECF No. 10-2 at 20 ¶¶ 15-17.) On May 20, 2013, Daughtry once again removed the action to federal court, premising jurisdiction on his counterclaim arising under the Copyright Act. Notice of Removal ¶¶ 1-12, Andrews v. Daughtry, 994 F.Supp.2d 728 (M.D. N.C. 2014) (" Andrews II "), ECF No. 1. In January of 2014, the Court for a second time remanded the case to state court, holding that Daughtry's removal was untimely and that he failed to show "good cause" for an extension of time pursuant to 28 U.S.C. § 1454(b)(2). Andrews II, 994 F.Supp.2d at 734-36.
Daughtry initiated this action on November 24, 2014, alleging that the copyright registration filed in 2006 was fraudulent in that it does not reflect the correct ownership interests in the songs on Uprooted. (ECF No. 1 ¶¶ 8-12.) Daughtry seeks a declaration, among other things, that he is the sole author and original owner of the copyrights in four Uprooted songs and is a co-owner and co-author in the other three Uprooted songs. ( Id. at 5-6 ¶¶ 2-4.)
A. Federal Declaratory Judgment Act
Defendants urge the Court to either dismiss or stay this action pending the outcome of the state court proceeding because they contend only that proceeding encompasses the entire controversy between the parties. They also argue that if they "are correct in their partnership law theories, which are pending in the state lawsuit, then the question of who authored the songs becomes moot." (ECF No. 10 at 13, 16.) Daughtry counters by arguing that the Court should deny Defendants' request for dismissal or stay because this Court has exclusive jurisdiction over his "narrowly tailored" claims such that "[n]one of the relief he seeks implicates any of the relief that Defendants are seeking in state court." (ECF No. 15 at 6-8.) Daughtry further argues that if the Court dismisses this action as urged by Defendants, it would effectively deny him any forum to have his claims heard.
The Federal Declaratory Judgment Act allows federal courts to "declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201 (2012). The court's power to grant declaratory relief is discretionary and should be invoked for appropriate cases only. Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256-57 (4th Cir. 1996). A court may exercise jurisdiction in a federal declaratory judgment proceeding when (1) the complaint shows that there is an actual controversy between the parties, (2) the claim arises under federal law, and (3) the exercise of jurisdiction is not an abuse of discretion. See Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 592 (4th Cir. 2004).
Neither party has raised any issues related to the first two requirements necessary for this Court to exercise jurisdiction in this declaratory judgment proceeding. Thus, the issue to be decided here is whether the exercise of jurisdiction by this Court, in light of the pending related state court proceeding and the unique procedural posture of the parties' claims, would amount to an abuse of discretion.
It is well settled that district courts enjoy broad discretion in determining whether to entertain a declaratory judgment action. See Wilton v. Seven Falls Co., 515 U.S. 277, 286-87 (1995); Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494 (1942). While such discretion is not limitless, "a district court's discretion is especially crucial when... [a] related proceeding is pending in state court.'" Riley v. Dozier Internet Law, PC, 371 F.Appx. 399, 401 (2010) (quoting New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 297 (4th Cir. 2005)). Within the declaratory judgment context, the United States Supreme Court has explained that "the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and wise judicial administration." Wilton, 515 U.S. at 288; see also Brillhart, 316 U.S. at 494 ("Although the District Court had jurisdiction of the suit under the Federal Declaratory Judgments Act, it was under no compulsion to exercise that jurisdiction."). The Supreme Court in Brillhart stated that it is "uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties." Brillhart, 316 U.S. at 495. The court must therefore determine whether the controversy "can better be settled in the proceeding pending in the state court." Wilton, 515 U.S. at 282. This requires the court to take into account "considerations of federalism, efficiency, and comity." United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493 (4th Cir. 1998).
To assist district courts with balancing the federal and state principles articulated by Brillhart and Wilton, the Fourth Circuit has set forth ...