MATTHEW BENDER & COMPANY, Inc.,
WEST PUBLISHING CO., Defendant.
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
August 5, 1996
For Plaintiff HyperLaw:
Paul J. Ruskin, Douglaston, NY and Carl J. Hartmann, III, New York, NY
For Plaintiff Bender:
Elliot Brown, Morgan Chu, Irell & Manella, Los Angeles, CA
Jeffrey Kessler, Katherine Daniels, Weil, Gotshal & Manges, New York, NY
MEMORANDUM OPINION AND ORDER
JOHN S. MARTIN, JR.
The legal standards and facts relevant to this motion to dismiss are set forth in this Court's May 1, 1996 Memorandum Opinion and Order ("the May 1 Opinion"), familiarity with which is assumed. In the May 1 Opinion, this Court found that a hearing was necessary on defendant West Publishing Company's ("West's") motion to dismiss plaintiff-intervenor HyperLaw Inc.'s ("HyperLaw's") complaint under Federal Rule of Civil Procedure 12(b)(1) for failure to state an actual case or controversy as required by the Declaratory Judgment Act, 28 U.S.C. @ 2201, and Article III of the United States Constitution. Specifically, the Court noted that there was a factual dispute over both prongs of the justiciability [Court's Opinion at 2] test -- HyperLaw's alleged intent and ability to produce the CD-ROM product at issue in this action, and HyperLaw's alleged reasonable apprehension of being sued by West over that same product.
As set forth in more detail in the May 1 Opinion, HyperLaw bore the burden of proving jurisdiction by a preponderance of the evidence at the hearing, see Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, 498 U.S. 854, 111 S.Ct. 150, 112 L.Ed. 2d 116 (1990), which this Court held on June 21, 1996. [Footnote 1]
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Two witnesses testified at the hearing: HyperLaw president
Alan G. Sugarman, and West outside counsel James E. Schatz.
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The Court now finds that, based on the testimony and documentary submissions at the June 21 hearing, there was an actual controversy between HyperLaw and West at the time that HyperLaw filed its complaint in this action.
With respect to the first prong of the justiciability inquiry, the Court finds that HyperLaw intended and was able to add the West features [Court's Opinion at 3] listed in its complaint to its CD-ROM product at the time that it filed the complaint. HyperLaw's intention to add the West features is clear. HyperLaw has indicated that the only thing that stands in its way is fear of being sued over use of the features at issue, and has demonstrated that, should it secure the declaratory judgment that it ultimately seeks in this action, it will add the various features to its product.
HyperLaw has also demonstrated that it has the ability to insert the West features immediately in its CD-ROM product, as those features come out in newly-published West Reporters. For example, HyperLaw president Sugarman testified that a HyperLaw employee can insert star pagination to a West Reporter at the rate of 150 pages an hour. Given the 1,500 - 1,600 pages in a typical West Reporter, and the rate of publication of one Reporter every two weeks relevant to the HyperLaw product, one employee working ten hours over two weeks could insert star pagination to incoming West Reporters on a regular basis. Although Sugarman also testified that it would take several months for a single employee to insert star pagination to previously-published West Reporters for all existing [Court's Opinion at 4] cases in the current HyperLaw product, Sugarman indicated that HyperLaw would have a commercially viable product even without the immediate star pagination of prior cases. This is because a HyperLaw subscriber could immediately cancel its relevant West Reporter subscription and could rely on the HyperLaw product's star pagination to West Reporters and other features necessary for citation from that point forward, if HyperLaw began to add such features to its product on a regular basis as it has shown that it intends and is able to accomplish. Furthermore, the several months that it would take to insert star pagination to prior cases is not an unrealistic timeframe given the small size of HyperLaw and the fact that this calculation assumes the work of only one employee.
Sugarman also testified that HyperLaw had explored the use of optical character recognition ("OCR") scanning equipment for addition of some of the other features at issue in this action, including attorney names, internal corrections and parallel citations. OCR is used to scan documents into the computer so that a person does not have to retype the desired information. HyperLaw has had the ability to scan since 1991, [Court's Opinion at 5] and in 1992 Sugarman contacted outside vendors to explore the possibility of those vendors performing scanning for HyperLaw in connection with HyperLaw's CD-ROM product.
With respect to the second prong of the justiciability inquiry, the Court finds that HyperLaw had a reasonable apprehension of being sued by West over use of the West features at issue here at the time that it filed the complaint. The testimony at the hearing and the documentary submissions show that: HyperLaw was aware of the fact that West had sued a number of small publishers over their use of star pagination and other West features; West had its librarian and then its outside counsel contact HyperLaw numerous times to request a copy of HyperLaw's CD-ROM product, and HyperLaw was aware that West had made similar requests of other legal publishing companies that it later sued. [Footnote 2]
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It is significant that West had its outside counsel contact HyperLaw to obtain HyperLaw's CD-ROM product. Although West outside counsel Schatz testified that West simply wanted the HyperLaw product for marketing purposes, the relevant inquiry here is whether HyperLaw was reasonable in its belief that West would sue it over its use of West features in its product. It is certainly not unreasonable for a company to fear suit by another company when the other company's outside counsel contacts it to obtain its product.
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West did not provide HyperLaw with an answer to its various letter requests for clarification of West's claimed copyrights in its Federal Reporters, but rather suggested that HyperLaw misunderstood applicable caselaw and that it retain copyright counsel; Stephen Haynes, a senior executive and attorney for West, approached Sugarman at a [Court's Opinion at 6] convention and stated that Sugarman was aiding and abetting infringement of West copyrights due to Sugarman's comments on the Internet about West's settlement of another copyright case; and finally, Schatz told Sugarman that his firm wins all of its lawsuits for West. [Footnote 3]
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Although Schatz testified that he made the comment in response to Sugarman's statement that he understood that West had "bludgeoned another fax service," Schatz gave varying versions of the time and place of the conversation in his deposition and hearing testimony, and finally testified at the hearing that he was not certain where the conversation took place. The Court accepts Sugarman's testimony that Schatz made the comment in the context of a discussion about HyperLaw's use of West features.
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While it may be true, as West argues, that certain of these factors standing alone do not support a reasonable apprehension of suit, considered together they are more than sufficient to support HyperLaw's claim that it was reasonable for it to fear suit over the West features at issue in this action.
HyperLaw has met its burden of proving justiciability by a preponderance of the evidence. Accordingly, West's motion to dismiss pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction is denied.
Dated: New York, New York
August 2, 1996
JOHN S. MARTIN, JR., U.S.D.J.
JUDGE MARTIN'S OPINION DENYING WEST MOTION TO DISMISS HYPERLAW - JUSTICIABILITY - AUGUST 5, 1996
This was a key strategic motion. West's strategy had always been to try to initiate litigation in its home courts - the U.S. District Court in Minnesota.
But, if it threatened another publisher, then the publisher as a plaintiff could start litigation in the publisher's home court. But, the plaintiff had to meet the requirements of justiciabilty.
West moved to dismiss HyperLaw - in a May 1, 1996 opinion, the court found there were triable issues, and, a trial was held at which HyperLaw had to prove justiciability.
This decision was a key loss for West. Again, although Matthew Bender counsel are shown in the caption, only HyperLaw's counsel tried and litigated this particular motion.
Note that West chose not to publish in the Federal Supplement this decision showing its loss, as well as the less than truthful testimony of its general counsel. See footnote 3.