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Incarcerated Entertainment LLC v. Cox

United States District Court, S.D. Florida

September 27, 2019

Incarcerated Entertainment, LLC, and Efraim Diveroli, Plaintiff,
Matthew Bevan Cox, Defendant/Counter-Plaintiff


          Robert N. Scola, Jr. United States District Judge

         This matter comes before the Court upon Plaintiffs Incarcerated Entertainment, LLC and Efraim Diveroli’s motion for summary judgment. (ECF No. 77.) The Defendant filed a response (ECF No. 87) and the Plaintiffs timely replied. (ECF No. 95.) Upon review of the record, the parties’ briefs, and the relevant legal authorities, the Court grants the Plaintiffs’ motion. (ECF No. 77.)

         I. Background

         Plaintiff Efraim Diveroli was awarded several hundred million dollars in arms and ammunition contracts by the United States government during the war on terror. He was later convicted of fraud and served time in prison. During his time in prison, he met Defendant Cox and executed a work-for-hire co-author agreement (the “Agreement”). (Compl. at 2, ECF No. 1.) According to the Agreement, Cox would assist Diveroli in writing a memoir of Diveroli’s life. (Id. at ¶ 13.) Diveroli agreed to pay Cox 10% of royalties received by Cox for the book or any disposition of the work and 5% of royalties received by Cox from the sale of any derivatives of the work. (Id. at ¶ 15; ECF No. 1-3 at ¶ 11.) Under the terms of the Agreement, “[a]ll copyrights, renewals, and extensions thereof, in and to the material contained in the Work, shall be secured by [Diveroli] and held in his name, as the sole and exclusive author and proprietor thereof, together with all literary property and any other rights in the Work[.]” (ECF No. 1-3 at ¶ 2(a).)

         On February 20, 2014, Diveroli registered his book, Once a Gun Runner, with the United States Copyright Office. He then assigned his rights in the book to Plaintiff Incarcerated Entertainment (“IE”). (ECF No. 1 at ¶ 19.) According to the complaint, IE has attemped to pay Cox his percentage of the gross proceeds for the sale of the book, but he has declined to provide payment instructions because he owes over $5 million in restitution to the government. (Id. at ¶ 22.) In 2016, Warner Bros. released the motion picture War Dogs, loosely based on the story of Diveroli and his associates. (Id. at ¶ 20.)

         Following the release of the movie, IE sued Warner Bros. alleging copyright violations, conspiracy, and unfair competition. See Incarcerated Entm’t, LLC v. Warner Bros. Pictures, No. 16-cv-1302-MSS-AAS (M.D. Fla. April 28, 2016). After the lawsuit had been pending for almost a year, Defendant Cox sought to intervene, claiming that he was the rightful owner of the book and copyright. (Id. at ECF No. 106.) Before the district court could rule on the motion to intervene, IE and Warner Bros. settled the dispute and filed a joint stipulation of dismissal with prejudice. (Id. at ECF No. 143.) Cox filed two separate appeals related to that case. The first was dismissed as moot by the Eleventh Circuit and the second was voluntarily dismissed by Cox.

         On November 14, 2017, IE and Diveroli filed a state court complaint against Cox for declaratory judgment regarding the parties’ rights under the work-for-hire agreement. See Incarcerated Entm’t, et al. v. Cox, No. 2017-026376-CA-01 (11th Jud. Cir. Miami-Dade County). The state court complaint was removed to the Southern District of Florida on January 1, 2018. See Incarcerated Entm’t, et al. v. Cox, No. 18-20023 (S.D. Fla. Jan. 1, 2018) (Moreno, J.). Judge Moreno dismissed the complaint without prejudice as duplicative of two cases pending in the Middle District of Florida. (Id. at ECF No. 8.)

         On December 27, 2017, Cox filed a lawsuit in the Middle District of Florida against IE, Diveroli, and Warner Bros. claiming ownership of IE’s copyright. See Cox v. Incarcerated Entm’t, LLC, et al., No. 17-cv-3108-T-35JSS (M.D. Fla. Dec. 27, 2017). On May 16, 2018, the district court dismissed the lawsuit after Cox failed to timely serve the parties. (Id. at ECF No. 14.) Two days later, IE and Diveroli filed the instant lawsuit against Cox seeking declaratory judgment regarding the Plaintiffs’ rights under the Agreement and their exclusive copyright to the book. (ECF No. 1.) The Plaintiffs now move for summary judgment on their claim for declaratory relief. (ECF No. 77.)

         II. Legal Standard

         Summary judgment is proper if following discovery, the pleadings, depositions, answers to interrogatories, affidavits and admissions on file show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Fed.R.Civ.P. 56. In reviewing a motion for summary judgment, the Court must “view the evidence and all factual inferences therefrom in the light most favorable to the non-moving party, and resolve all reasonable doubts about the facts in favor of the non-movant.” Feliciano v. City of Miami Beach, 707 F.3d 1244, 1247 (11th Cir. 2013) (quoting Skop v. City of Atlanta, Ga., 485 F.3d 1130, 1143 (11th Cir. 2007)). So, when a conflict arises between the facts presented by the parties, the Court must credit the nonmoving party’s version. Id. The moving party bears the burden of proof to demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. “In a case involving contract interpretation, summary judgment is appropriate when the agreement is totally unambiguous[.]” Dew Seven, L.L.C. v. Big Lots Stores, Inc., 354 F. App’x 415, 416 (11th Cir. 2009).

         III. Subject Matter Jurisdiction

         As an initial matter, the Court will address subject matter jurisdiction in this case. The Court raised this issue sua sponte earlier in the case (ECF No. 68) and the Defendant raises it again in his response to the Plaintiffs’ motion for summary judgment. (ECF No. 85 at 4-5.) The Defendant argues that this case involves the interpretation of a contract under Florida law, and therefore does not raise a federal question. (Id.) Upon careful review, the Court disagrees with the Defendant’s analysis.

         This is an action for declaratory judgment. “[T]he Declaratory Judgment Act, does not, of itself, confer jurisdiction upon the federal courts; a suit brought under the Act must state some independent source of jurisdiction, such as the existence of diversity or the presentation of a federal question.” Borden v. Katzman, 881 F.2d 1035, 1037 (11th Cir. 1989). There is no question that the parties are not diverse. Therefore, the question is “whether, absent the availability of declaratory relief, the instant case could nonetheless be brought in federal court.” Anand Vihar LLC v. Evans Group Inc., No. 16-cv-841, 2016 WL 9526560, at *1 (M.D. Fla. July 6, 2016). To help answer this question, the Eleventh Circuit has held that “a federal district court has subject-matter jurisdiction over a declaratory judgment action if . . . plaintiff’s well-pleaded complaint alleges facts demonstrating that defendant could file a coercive action arising under federal law.” Household Bank v. JFS Group, 320 F.3d 1249, 1259 (11th Cir. 2003). “It follows then that district courts have subject matter jurisdiction over a declaratory judgment action that anticipates a copyright counterclaim.” Anand, 2016 WL 9526560 at *2.

         Here, the Defendant claims that he is entitled to the copyright at issue and filed a counterclaim for copyright infringement. (ECF No. 27.) Although the Defendant voluntarily dismissed his counterclaim (ECF No. 72), he recently filed another action in the Southern District of Florida against the Plaintiffs for copyright infringement, among other causes of action. See Matthew Bevan Cox v. Efraim Diveroli, et al., No. 19-cv-23483-BB (S.D. Fla. Aug. 20, 2019). Because the Defendant could file, and has filed, a coercive ...

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