JOE HAND PROMOTIONS, INC. v. HAYES

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

JOE HAND PROMOTIONS, INC., )

)

Plaintiff, )

)

v. ) 1:18CV531

)

DANNY L. HAYES, JR., individually, )

and as an officer, director, shareholder, )

member and/or principal of THE HOUSE )

OF FISH, INC. d/b/a The House of Fish, and )

)

THE HOUSE OF FISH, INC. )

d/b/a The House of Fish, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

LORETTA C. BIGGS, District Judge.

Plaintiff, Joe Hand Promotions, Inc. (“JHP”), brings this action against Defendants,

Danny L. Hayes, Jr. and The House of Fish, Inc. (“Defendants”) for alleged violations of 47

U.S.C. §§ 553 and 605 (cable and satellite piracy), as well as 17 U.S.C. §§ 106 and 501 (copyright

infringement). (ECF No. 12.) Defendants counterclaim for a declaratory judgment that 47

U.S.C. §§ 553 and 605 are unconstitutional. (ECF No. 13 at 4, 6–7.) Before the Court is JHP’s

Motion to Dismiss Defendants’ Counterclaim pursuant to Rules 12(b)(6) and, implicitly,

12(b)(1)1 of the Federal Rules of Civil Procedure. (ECF Nos. 15, 17.) For the reasons that

follow, the Court will grant JHP’s motion.

1 Although JHP does not expressly mention Rule 12(b)(1) in its motion or briefing, it devotes several

paragraphs to a discussion of standing and jurisdiction; concepts which are governed by Rule 12(b)(1).

I. BACKGROUND

As alleged in its Amended Complaint, JHP was “granted the exclusive right to

commercially distribute the audiovisual presentation of the Floyd Mayweather, Jr. vs. Conor

McGregor boxing match” (the “Program”), which was telecast nationwide on August 26, 2017.

(ECF No. 12 ¶¶ 5, 10.) After obtaining distribution rights, JHP sublicensed the Program for

exhibition to thousands of commercial establishments in exchange for licensing fees. (Id. ¶

10.) Even though the Program was available for licensing, JHP alleges that Defendants “chose

not to contract with [JHP] and pay the proper commercial license fee.” (Id. ¶ 11.) Instead,

JHP alleges that Defendants “unlawfully obtained the Program through an unauthorized cable

signal, satellite signal, and/or internet stream” and “charged patrons $15.00 to enter and view

the Program” at their business establishment, The House of Fish. (Id. ¶¶ 11, 16.)

JHP filed suit in June of 2018, alleging violations of the Communications Act of 1934,

as amended, 47 U.S.C. §§ 553 and 605, which prohibit cable and satellite piracy, as well as the

Copyright Act of the United States, 17 U.S.C. § 101, et seq. (ECF No. 12 ¶¶ 19–26.) In

response, Defendants answered and counterclaimed for a declaratory judgment that 47 U.S.C.

§§ 553 and 605 are unconstitutional. (ECF No. 13 at 4, 6–7.) Specifically, Defendants allege

that these provisions violate the “First and Fifth Amendments, in that the statutes are penal

and punitive in nature, are void for vagueness, are overbroad, and violate the fundamentals of

due process, including, but not limited to, the lack of sufficient notice to Defendants and lack

of guidance for enforcement.” (Id. at 6.) Defendants further contend that the statutes are

(See ECF No. 17 at 4, 6–7.) Accordingly, the Court will construe JHP’s motion as invoking both Rules

12(b)(1) and 12(b)(6).

“ambiguous” and, therefore, also seek “a declaration of the exact terms and meaning of the

statutes” so that they may better understand their “rights and duties” and conform their

conduct to the law. (Id. at 7.)

JHP now moves to dismiss Defendants’ counterclaim pursuant to Rules 12(b)(1) and

12(b)(6) of the Federal Rules of Civil Procedure. (See ECF Nos. 15, 17.)

II. STANDARDS OF REVIEW

A. Rule 12(b)(1)

Under Rule 12(b)(1), a party may seek dismissal based on the court’s “lack of subject-

matter jurisdiction.” Fed. R. Civ. P. 12(b)(1). A motion under Rule 12(b)(1) raises the question

of “whether [the claimant] has a right to be in the district court at all and whether the court

has the power to hear and dispose of [the] claim.” Holloway v. Pagan River Dockside Seafood, Inc.,

669 F.3d 448, 452 (4th Cir. 2012). Under Article III of the United States Constitution, the

jurisdiction of a federal court is limited to cases and controversies, which implicates certain

doctrines, including standing. See U.S. Const. art. III, § 2; Susan B. Anthony List v. Driehaus, 573

U.S. 149, 157 n.5 (2014). A court’s jurisdiction is likewise limited to cases and controversies

when considering actions for declaratory relief. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227,

240 (1937).

The burden of establishing subject matter jurisdiction is on the plaintiff. Evans v. B.F.

Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999). However, when evaluating a Rule 12(b)(1)

motion to dismiss, the court should grant the motion “only if the material jurisdictional facts

are not in dispute and the moving party is entitled to prevail as a matter of law.” Richmond,

Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991).

B. Rule 12(b)(6)

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure

“challenges the legal sufficiency of a complaint,” Francis v. Giacomelli, 588 F.3d 186, 192 (4th

Cir. 2009); “it does not resolve contests surrounding the facts, the merits of a claim, or the

applicability of defenses.” Republican Party v. Martin, 980 F.2d 943, 952 (4th Cir. 1992).

“To survive a motion to dismiss, 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)). A complaint

may fail to state a claim upon which relief can be granted in two ways: first, by failing to state

a valid legal cause of action, i.e., a cognizable claim, see Holloway, 669 F.3d at 452; or second, by

failing to allege sufficient facts to support a legal cause of action, see Painter’s Mill Grille, LLC

v. Brown, 716 F.3d 342, 350 (4th Cir. 2013). Finally, in evaluating whether a claim is stated,

“[the] court accepts all well-pled facts as true and construes these facts in the light most

favorable to the plaintiff,” but need not accept “legal conclusions, elements of a cause of

action, . . . bare assertions devoid of further factual enhancement[,] . . . unwarranted inferences,

unreasonable conclusions, or arguments.” Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591

F.3d 250, 255 (4th Cir. 2009) (internal quotation marks omitted).

III. DISCUSSION

In its motion to dismiss, JHP challenges the sufficiency of Defendants’ counterclaim

by (a) disputing jurisdiction, (b) characterizing the counterclaim as redundant to the issues

raised in the complaint, and (c) alleging that the counterclaim fails to state a claim upon which

relief can be granted. (See ECF No. 17.)

A. Jurisdiction

JHP makes two jurisdictional arguments. First, JHP challenges Defendants’ standing

to pursue relief on behalf of third-parties or the general public. (Id. at 6–7.) Defendants

concede this point and have withdrawn any such claims. (ECF No. 18 at 8.) However, because

all federal courts have “an obligation to assure ourselves” of a counterclaimant’s standing

under Article III, this Court will take JHP’s standing challenge as an opportunity to address

Defendants’ individualized standing. See DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 340 (2006).

Second, JHP contends that because “the Declaratory Judgment Act contains no independent

basis for jurisdiction,” federal courts may not entertain counterclaims, like Defendants’, that

exclusively seek declaratory relief. (ECF No. 17 at 4.)

Under Article III of the United States Constitution, the jurisdiction of a federal court

is limited to “Cases” and “Controversies.” U.S. Const. art. III, § 2. The doctrine of standing,

which is rooted in the traditional understanding of those terms, serves to “identify those

disputes which are appropriately resolved through the judicial process.” See Lujan v. Defs. of

Wildlife, 504 U.S. 555, 560 (1992) (quoting Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)).

The question at the heart of any standing analysis is “[w]hether a party has a sufficient stake

in an otherwise justiciable controversy to obtain judicial resolution of that controversy.” Sierra

Club v. Morton, 405 U.S. 727, 731 (1972). Accordingly, to establish Article III standing at the

motion to dismiss stage, claimants must allege that they have: “(1) suffered an injury in fact,

(2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to

be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547

(2016) (citing Lujan, 504 U.S. at 560–61).

The first element of standing—injury-in-fact—“ensures that plaintiffs have a ‘personal

stake in the outcome of the controversy.’” Kenny v. Wilson, 885 F.3d 280, 287 (4th Cir. 2018)

(quoting Warth v. Seldin, 422 U.S. 490, 498 (1975)). Where, as here, claimants seek declaratory

relief, they must “establish an ongoing or future injury in fact.” Id. The threatened injury

must be “concrete and particularized,” Spokeo, 136 S. Ct. at 1548, as well as “certainly

impending”—allegations of possible future injury will not suffice. See Clapper v. Amnesty Int’l

USA, 568 U.S. 398, 409 (2013). The second and third elements—causation and

redressability—require a “causal connection between the injury and the conduct complained

of that is ‘fairly traceable,’” to the opposing party and “a non-speculative likelihood that the

injury would be redressed by a favorable judicial decision.” Cooksey v. Futrell, 721 F.3d 226,

238 (4th Cir. 2013) (quoting Frank Krasner Enters., Ltd. v. Montgomery Cty., 401 F.3d 230, 234

(4th Cir. 2005)).

Defendants face a concrete, particularized, and imminent threat of harm in this case.

Should JHP prevail in its suit, Defendants could face over $100,000 in penalties, costs, and

fees. See 47 U.S.C. §§ 553, 605; 17 U.S.C. §§ 504–05. Further, because JHP’s enforcement

action hinges on the validity of the challenged statutes, a declaration that the statutes are

unconstitutional would redress the imminent threat of civil liability. See J & J Sports Prods., Inc.

v. Patin, 358 F. Supp. 3d 318, 322 (S.D.N.Y. 2019); J & J Sports Prods., Inc. v. Dean, No. 10-

05088 CW, 2011 WL 4080052, at *4 (N.D. Cal. Sep. 12, 2011).

As JHP notes, Defendants’ counterclaim also “seeks resolution of what the Defendants

can and cannot be prosecuted for” criminally under the copyright and piracy statutes. (ECF

No. 17 at 5.) JHP argues that, because criminal prosecution is “beyond the ken of the

Plaintiff,” there is no live controversy before this Court. (Id.) While there appears to be no

evidence that criminal prosecution is likely, Defendants have styled their counterclaim to

address both “civil liability and/or criminal prosecution” under the challenged statutes. (See

ECF No. 13 at 7, 10.) Thus, to the extent Defendants seek an order that the statutes are

unconstitutional as applied to their conduct in this case, the requirements of standing are

satisfied.

The Declaratory Judgment Act permits 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(a). The act, however, “is remedial only and neither

extends federal courts’ jurisdiction nor creates any substantive rights.” CGM, LLC v. BellSouth

Telecomms., Inc., 664 F.3d 46, 55 (4th Cir. 2011) (citing Skelly Oil Co. v. Phillips Petroleum Co., 339

U.S. 667, 671–72 (1950)). Accordingly, in order to hear a declaratory judgment action, a

federal court must possess “an independent basis for jurisdiction over the parties (e.g. federal

question or diversity jurisdiction).” Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386

F.3d 581, 592 (4th Cir. 2004).

Defendants’ counterclaim seeks a declaratory judgment only. (ECF No. 13 at 11.) In

support of jurisdiction, Defendants invoke three separate provisions: 28 U.S.C. §§ 1331

(federal questions), 1337 (commercial and antitrust regulations), and 1343 (deprivations of civil

rights). (Id. at 4.) JHP argues that, because “Defendants are seeking declaratory and no other

form of relief, their reliance upon the provisions of 28 U.S.C. §§ 1331, 1337, and 1343 do not

provide jurisdiction.” (ECF No. 17 at 4–5.) But this is a mistaken understanding. So long as

an independent basis for jurisdiction exists, declaratory judgment actions need not accompany

other claims for relief. 28 U.S.C. § 2201 (enabling courts to declare rights and legal relations

“whether or not further relief is or could be sought”); see also Fed. R. Civ. P. 57 (“The existence

of another adequate remedy does not preclude a declaratory judgment.”).

This Court finds an independent jurisdictional basis for Defendants’ declaratory

counterclaim under 28 U.S.C. § 1331. Section 1331 gives district courts jurisdiction over “all

civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. §

1331. To determine whether federal question jurisdiction exists, courts generally ask whether

“a federal question is presented on the face of the plaintiff’s properly pleaded complaint.”

Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).

On its face, Defendants’ counterclaim is rooted exclusively in federal law: they seek a

declaration that two federal statutes—47 U.S.C. §§ 553 and 605—violate two constitutional

provisions—the First and Fifth Amendments. (ECF No. 13 at 4.) Therefore, this Court has

jurisdiction over Defendants’ counterclaim for declaratory relief.

B. Redundancy

Next, JHP argues that Defendants’ counterclaim is “redundant in light of the claims

raised in [JHP’s] complaint.” (ECF No. 17 at 6). Under Rule 12(f) of the Federal Rules of

Civil Procedure, a court may, in its discretion, strike “any redundant . . . matter” from a

pleading. Fed. R. Civ. P. 12(f). Some courts have exercised this power to dismiss declaratory

counterclaims that are “mirror images” of plaintiffs’ initial claims. See, e.g., Atlantic Recording

Corp. v. Serrano, No. 07-CV-1824 W(JMA), 2007 WL 4612921, at *4 (S.D. Cal. Dec. 28, 2007)

(“Courts often dismiss ‘mirror image’ counterclaims where they merely restate issues already

before the court as part of a plaintiff’s affirmative case.”); Monster Daddy LLC v. Monster Cable

Prods., No. 6:10-1170-HMH, 2010 WL 4853661, at *6 (D.S.C. Nov. 23, 2010) (dismissing three

declaratory counterclaims which raised the “same legal issues” present in the initial complaint).

However, it is equally within a court’s power to decline to dismiss counterclaims that raise

distinct claims. See, e.g., Madison Mech., Inc. v. Twin City Ins. Co., No. GLR-17-1357, 2018 WL

1583519, at *5 (D. Md. Mar. 30, 2018) (declining to dismiss counterclaims requesting

declarations that plaintiff “does not seek”); Biltmore Co. v. NU U, Inc., No. 1:15-cv-00288-MR,

2016 WL 7494474, at *3 (W.D.N.C. Dec. 30, 2016) (declining to dismiss a declaratory

counterclaim that was “not entirely duplicative or redundant” of plaintiff’s claim).

JHP argues that “a determination of the allegations and claims” in its complaint “will

answer all of the Defendants’ questions” raised in the counterclaim. (ECF No. 17 at 6).

However, Defendants’ assertions that 47 U.S.C. §§ 553 and 605 are unconstitutionally vague

or overbroad are inherently different than those raised by JHP, which simply allege an illegal

course of behavior under statutes which are assumed to be valid. (Compare ECF No. 12 ¶¶

10–26, with ECF No. 13 at 5–10.) For example, JHP posits that resolution of the claims in its

complaint will answer “whether [Defendants] ‘willfully violated’ the piracy statutes. (ECF No.

17 at 6.) That may well be true. However, Defendants’ counterclaim requests an answer to a

different question entirely: whether terms like “willfully” render the statutes at hand

unconstitutionally vague or overbroad. (See ECF No. 13 at 7, 10). Thus, this Court concludes

that Defendants’ counterclaim is neither redundant nor duplicative of JHP’s complaint and

will not set it aside on those grounds.

C. Failure to State a Claim

Lastly, JHP asks this Court to dismiss Defendants’ counterclaim for failure to state a

claim upon which relief can be granted. Though JHP does little to develop this attack in its

briefing, it submits, as supplemental authority, a recent case from the Southern District of

New York in which the court dismissed “a counterclaim identical to the one brought in this

case” for failure to state a claim. (ECF No. 19 (calling the Court’s attention to Patin, 358 F.

Supp. 3d at 318).) Defendants respond with a case of their own—also “[b]ased on a nearly-

identical counterclaim and motion to dismiss as those on file herein”—in which the Northern

District of California concluded defendants had stated a claim. (ECF No. 18 at 2–3 (alerting

this Court to Dean, 2011 WL 4080052).) Having considered these cases and thoroughly

examined Defendants’ counterclaim, this Court agrees with JHP that Defendants have failed

to state a claim upon which relief can be granted.

A statute is unconstitutionally vague if people of “common intelligence must

necessarily guess at is meaning and differ as to its application.” Connally v. Gen. Constr. Co., 269

U.S. 385, 391 (1926); United States v. Morison, 844 F.2d 1057, 1070 (4th Cir. 1988). While it is

“a basic principle of due process that an enactment is void for vagueness if its prohibitions are

not clearly defined,” Grayned v. City of Rockford, 408 U.S. 104, 108 (1972), “the fact that Congress

might . . . have chosen clearer and more precise language” does not make a statute

unconstitutionally vague, United States v. Powell, 423 U.S. 87, 94 (1975) (internal alterations and

quotation marks omitted). The clarity required for economic regulations is “less strict” than

for criminal codes because businesses are expected to “plan behavior carefully,” be attentive

to relevant laws, and seek clarification through their own initiative or the administrative

process. See Vill. of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 498 (1982).

Moreover, the Supreme Court has “expressed greater tolerance of enactments with civil rather

than criminal penalties because the consequences of imprecision are qualitatively less severe.”

Id. at 498–99. The hurdle for finding a civil statute vague is, therefore, quite high: “the statute

must be so vague and indefinite as really to be no rule or standard at all.” Boutilier v. INS, 387

U.S. 118, 123 (1967).

“A clear and precise enactment may nevertheless be ‘overbroad’ if in its reach it

prohibits constitutionally protected conduct.” Grayned, 408 U.S. at 114. Although vagueness

and overbreadth are “related constitutional concepts, they are separate and distinct doctrines,

subject in application to different standards and intended to achieve different purposes.”

Morison, 884 F.2d at 1070. Vagueness is rooted in principles of fair notice and due process,

whereas a statute is overbroad if it “infringes on expression to a degree greater than justified”

by legitimate governmental need. Id. Notably, the overbreadth doctrine is “to be applied ‘with

hesitation and then only as a last resort.’” Id. at 1075 (quoting New York v. Ferber, 458 U.S.

747, 769 (1982)).

Defendants ask this Court to declare that 47 U.S.C. §§ 553 and 605 are

unconstitutionally vague and overbroad. (ECF No. 13 at 6.) However, Defendants do little

more to support this claim than recite—repeatedly and in conclusory fashion—that the

statutes “violate the fundamentals of due process,” are “vague and ambiguous,” and infringe

upon “Freedom of Speech under the First Amendment.” (Id. at 6–7.) In the counterclaim

itself, the only “further clarification[s] of [Defendants’] request” that are offered are (a)

reproductions of portions of the challenged statutes with certain terms highlighted in bold

typeface2 and (b) a series of rhetorical questions, which, taken together, seem to say “the thing

speaks for itself.” (Id. at 7–10). However, to survive a motion to dismiss for failure to state a

claim, a complaint must “contain more than ‘labels and conclusions’; it must allege ‘enough

facts to state a claim to relief that is plausible on its face.’” See Painter’s Mill, 716 F.3d at 352

(quoting Twombly, 550 U.S. at 555, 570). Defendants’ counterclaim, which lacks any factual

enhancement, any discussion of why the statutes are difficult to comprehend, or any specific

statement as to how, exactly, §§ 553 and 605 are vague or overbroad, fails this test. (See id.)

In their Brief in Opposition, Defendants produce a list of cases which, they claim,

proves that “plaintiffs, defendants, District Courts, and even Circuit Courts consistently guess

at the statutes’ meanings.” (ECF No. 18 at 6.) What Defendants have described is not

vagueness of an unconstitutional magnitude, but, rather, the ordinary process of clarifying

ambiguity through judicial construction. See Morison, 844 F.2d at 1071 (“[V]agueness may be

corrected by judicial construction which narrows the sweep of the statute within the range of

reasonable certainty.”). That process, familiar to this Court, can involve a substantial amount

of disagreement about the meaning and scope of statutory provisions. Still, “statutes are not

2 The allegedly vague or overbroad portions of §§ 553 and 605 highlighted by Defendants are:

In § 553: “unauthorized interception or receipt”; “No person shall intercept or receive or assist

in intercepting or receiving any communications service offered over a cable system”; and “committed

willfully and for purposes of commercial advantage or private financial gain.”

In § 605: “no person receiving, assisting in receiving”; and “to any person other than the

addressee, . . . No person not being authorized by the sender shall intercept any radio communication

and divulge or publish the existence.” (See ECF No. 13 at 8–9.)

automatically invalidated as vague simply because difficulty is found in determining whether

certain marginal offenses fall within their language.” United States v. Nat’l Dairy Prods. Corp.,

372 U.S. 29, 32 (1963) (citations omitted).

In short, we agree that Defendants have failed to particularize, in any respect, their

claims that 47 U.S.C. §§ 553 and 605 are unconstitutionally vague and overbroad. Accordingly,

JHP’s motion to dismiss Defendants’ counterclaim will be granted.

IV. CONCLUSION

Defendants have satisfied the requirements for jurisdiction and persuaded this Court

that their counterclaim, if properly supported, would raise distinct issues from those addressed

in JHP’s complaint. However, based on the above, this Court concludes that Defendants’

counterclaim fails to adequately state a claim upon which relief can be granted.

For the reasons stated herein, the Court enters the following:

ORDER

IT IS THEREFORE ORDERED that JHP’s Motion to Dismiss, (ECF No. 15), is

GRANTED and Defendants’ counterclaim is hereby DISMISSED.

This, the 6th day of September 2019.

/s/ Loretta C. Biggs

United States District Judge