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Siler v. Lejarza

United States District Court, M.D. North Carolina

November 21, 2019

DAVID SILER; DISTINCTIVE HUMAN RESOURCES, INC., Plaintiffs,
v.
ELGA LEJARZA a/k/a ELGA LEJARZA-PENN; MICHAEL PENN; LEJARZA COMPLIANCE TRAININGS LLC, a limited liability company; LEJARZA HR CONSULTING LLC, a limited liability company, Defendants.

          MEMORANDUM OPINION AND ORDER

          THOMAS D. SCHROEDER, Chief District Judge.

         Plaintiffs David Siler and Distinctive Human Resources, Inc. (“Distinctive HR”) bring this action against Defendants Elga Lejarza a/k/a Elga Lejarza-Penn, Michael Penn, Lejarza Compliance Trainings, LLC (“Compliance Trainings”), and Lejarza HR Consulting, LLC (“HR Consulting”) for their allegedly unlawful use of Plaintiffs' copyrighted materials. Before the court is Defendants' motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 11.) The motion is fully briefed (Docs. 17, 18) and is ready for decision. For the reasons set forth below, the motion will be granted in part and denied in part.

         I. BACKGROUND

         The allegations of the complaint, along with the contents of documents of which the court takes judicial notice, [1] viewed in the light most favorable to Plaintiffs, show the following:

         Siler is the controlling shareholder of Distinctive HR. (Doc. 1 ¶ 10.) Together, they produce study courses and materials (“Test Prep Materials”) designed to help individuals pass a variety of human resources certification exams: the Professional in Human Resources (PHR) Certification Exam, the Senior Professional in Human Resources (SPHR) Certification Exam, the Associate Professional in Human Resources (aPHR) Certification Exam, and the Global Professional in Human Resources (GPHR) Certification Exam. (Id. ¶ 11.) The Test Prep Materials consist of print, audio, video, visual, and interactive materials, such as study guides, training games, sample tests, and flashcards. (Id. ¶¶ 11, 16-28.) Included with the Test Prep Materials is access to Plaintiffs' Learning Management System (“LMS”), an online platform with test prep content. (Id. ¶¶ 16, 18, 27-28.) Most of the component parts of the Test Prep Materials are registered with the United States Copyright Office.[2] (Id. ¶ 33; Doc. 1-1.)

         In April of 2011, Lejarza purchased Plaintiffs' PHR/SPHR audio CD and a one-year self-study online subscription. (Id. ¶ 62.) In March of 2016, she purchased the same two audio CDs and another one-year self-study online subscription. (Id. ¶ 63.) In March of 2017, she purchased the 2017 PHR/SPHR self-study course bundle with a one-year self-study online subscription. (Id. ¶ 64.) And despite passing her human resources Certification exams prior to the start of 2018 (id. ¶ 67), in March of 2018 Lejarza purchased the 2018 PHR/SPHR self-study course with a one-year online subscription. (Id. ¶ 65.)

         Lejarza and Penn are business partners and owners of Defendants HR Consulting and Compliance Trainings. (Doc. 1 ¶¶ 81-82, 158-64.) Lejarza, either individually or through Compliance Trainings, “offers training workshops, seminars, webinars, classes, or similar training, educational, or promotional events” to help customers pass their human resources certification exams. (Id. ¶ 91.) These live workshops are taught by Lejarza, but prerecorded materials are also available for purchase. (Id. ¶ 95.)

         On or about July 25, 2018, Distinctive HR received notice that Defendants were using the Test Prep Materials “word-for-word” in the slideshow presentations as part of Defendants' workshops and were including Plaintiffs' materials in their on-demand materials. (Id. ¶ 108-09.) Distinctive HR's software also recorded Lejarza accessing the self-study site thousands of times between May 18, 2017, and August 28, 2018, often with her actions overlapping in time. (Id. ¶¶ 70-76.)

         The purchase page of Plaintiffs' Test Prep Materials provides customers this notice:

[Learning Management System] access is for a single-user and is NOT transferable or to be shared with others. LMS access is valid for 1 year from the date your order is processed. A valid email address and individual's name must be provided for each [name of product ordered] ordered. All materials are copyrighted material and may not, in whole or in part, be copied, shared, or reproduced by any means for any reason without the prior written consent of Distinctive Human Resources, Inc. Any violation of these terms and conditions will result in immediate termination of your access to these materials, with no refund provided.

(Id. ¶ 69.) Plaintiffs allege that Lejarza not only reproduced their copyrighted material in her own workshops and on-demand materials, but that she also provided her login information to staff, volunteers, co-owners, or agents of Compliance Trainings and/or HR Consulting. (Id. ¶ 80.)

         On August 27, 2018, Plaintiffs' counsel sent a cease and desist demand to Lejarza and Compliance Trainings, and Lejarza's self-study subscription was terminated on August 28, 2018, for violations of the user license agreement. (Id. ¶¶ 66, 138.) According to Defendants, Lejarza has continued to infringe on Plaintiffs' copyrights following the cease and desist letter. (Id. ¶ 139.)

         On April 15, 2019, Plaintiffs filed this lawsuit pursuant to 18 U.S.C. §§ 1331 and 1338(a), under the Copyright Act. (Doc. 1.) Based on Defendants' alleged misconduct, Plaintiffs bring five causes of action. Against each Defendant, Plaintiffs claim copyright infringement under the Copyright Act, 17 U.S.C. §§ 106, 501; unfair competition under the Lanham Act, 15 U.S.C. § 1125; and common law copyright infringement and unfair and deceptive trade practices under the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”), N.C. Gen. Stat. §§ 75-1.1 et seq. (Id. at 22-24, 26-27, 28-32.) Against Lejarza individually, Plaintiffs allege breach of contract. (Id. at 24-25.) In lieu of answering, Defendants filed the present motion to dismiss, which is fully briefed and ready for decision.

         II. ANALYSIS

         Plaintiffs assert, and the parties do not dispute, that the court has subject matter jurisdiction under 28 U.S.C. §§ 1331 and 1338(a), under the Copyright Act. (Doc. 1 ¶ 7.) The court also has original jurisdiction over Plaintiffs' claim of unfair competition that is “joined with a substantial and related claim under the copyright . . . laws.” 28 U.S.C. § 1338(b). The court exercises supplemental jurisdiction over all other claims that are “so related to claims in the action within such original jurisdiction that they form part of the same case or controversy.” 28 U.S.C. § 1367.

         A. Standard of Review

         Defendants move to dismiss Plaintiffs' claims under Rule 12(b)(6), arguing that Plaintiffs have failed to state a claim upon which relief can be granted. (Doc. 11.) They assert that Plaintiffs' state law claims for breach of contract, unfair and deceptive trade practices, and common law copyright infringement are preempted by section 301 of the Copyright Act. 17 U.S.C. § 301. (Doc. 13.) They also move to dismiss Plaintiffs' unfair competition claim as duplicative of their copyright infringement claim. (Id.) Defendants Lejarza and Penn also assert that Plaintiffs' copyright infringement claim is not cognizable as to them individually because Plaintiffs have not alleged sufficient facts to pierce the corporate veil. (Id.)

         A motion to dismiss under Rule 12(b)(6) is meant to “test[] the sufficiency of a complaint” and not to “resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). To survive such a motion, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In considering the motion, a court “must accept as true all of the factual allegations contained in the complaint, ” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam), and all reasonable inferences must be drawn in the plaintiff's favor, Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). “Rule 12(b)(6) protects against meritless litigation by requiring sufficient factual allegations ‘to raise a right to relief above the speculative level' so as to ‘nudge[] the[] claims across the line from conceivable to plausible.'” Sauers v. Winston-Salem/Forsyth Cty. Bd. of Educ., 179 F.Supp.3d 544, 550 (M.D. N.C. 2016) (alterations in original) (quoting Twombly, 550 U.S. at 555). Mere legal conclusions are not accepted as true, and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678.

         B. Copyright Infringement

         In their first cause of action, Plaintiffs assert that they own the copyrights for their Test Prep Materials, which are registered with the United States Copyright Office. (Doc. 1 at 22.) Attached to their complaint are the certificates of registration from the Copyright Office. (Doc. 1-1.) Plaintiffs allege that Defendants, without permission or authorization, copied Plaintiffs' Test Prep Materials in a “willful, intentional, and purposeful [way], in disregard of and with indifference to Plaintiffs' rights.” (Doc. 1 at 22-23.) Defendants do not contest that Plaintiffs have sufficiently pleaded a copyright infringement claim but instead move to dismiss the claims against Lejarza and Penn in their individual capacities, claiming that “the dispute is really between the Plaintiffs and the corporate Defendants.” (Doc. 13 at 13.) Defendants argue that the factual allegations do not support piercing the corporate veil as to Compliance Trainings and HR Consulting. (Doc. 18 at 4-5.) Plaintiffs respond that “[p]iercing the LLC or Corporate Veil is not the only way an individual can be liable in a lawsuit” and further argue that they have “made numerous claims” against both Lejarza and Penn individually. (Doc. 17 at 10.)

         “To establish a claim for copyright infringement under the Copyright Act of 1976, 17 U.S.C. § 101 et seq., a plaintiff must prove that it possesses a valid copyright and that the defendant copied elements of its work that are original and protectable.” Copeland v. Bieber, 789 F.3d 484, 488 (4th Cir. 2015). A defendant may infringe a copyright either directly, contributorily, or vicariously. Live Face on Web, LLC v. Absonutrix, LLC, No. 1:17cv937, 2018 WL 2121627, at *2 (M.D. N.C. May 8, 2018). “Direct infringement of a copyright ‘requires conduct by a person who causes in some meaningful way an infringement.'” Id. ...


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