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Oliver v. Johanson

United States District Court, W.D. Arkansas, Fayetteville Division

June 29, 2018

DALE OLIVER PLAINTIFF/COUNTER-DEFENDANT
v.
BRUCE JOHANSON; BLAIR JOHANSON; and DB SQUARED, LLC. DEFENDANTS/COUNTER-CLAIMANTS

          MEMORANDUM OPINION AND ORDER

          TIMOTHY L. BROOKS, UNITED STATES DISTRICT JUDGE

         Currently before the Court are two dispositive motions and related filings. The first motion is Plaintiff and Counter-Defendant Dale Oliver's Motion for Partial Summary Judgment (Doc. 29), and a Statement of Facts (Doc. 30) and Brief in Support (Doc. 31). Oliver's Motion seeks, inter alia, a declaration that Oliver is still a one-third owner of DB Squared, LLC, a limited liability company he formed alongside Bruce and Blair Johanson.[1]Defendants Bruce Johanson, Blair Johanson, and DB Squared, LLC (collectively, “DB Squared” or the “Company”) have filed a Response in Opposition (Doc. 45). The second pending motion is DB Squared's Motion for Partial Summary Judgment (Doc. 35), and a Statement of Facts (Doc. 36) and Brief in Support (Doc. 37). DB Squared's Motion seeks, inter alia, a declaration that it is the true owner of the copyright to the software. Oliver has submitted a Response in Opposition (Doc. 47). For the reasons explained below, Oliver's Motion for Partial Summary Judgment is GRANTED, and DB Squared's Motion for Partial Summary Judgment is DENIED.

         I. BACKGROUND

         This case centers around a once-thriving business relationship that soured after more than a decade. Prior to their association with Plaintiff Oliver, brothers Bruce and Blair Johanson (“the Johansons”) operated a firm, Johanson Consulting, Inc. As part of their work, the Johansons employed a methodology related to job valuation and employment compensation. However, as neither brother was an expert in computer code, the need soon arose for the addition of an individual who was an expert in computer programming to make the method commercially viable. Fortunately, Johanson Consulting had worked with just such a computer programmer, Oliver, in the past, and the three ultimately decided to go into business together to develop and commercialize computer software related to compensation management planning and advising.

         To achieve these goals, Oliver and the Johansons formed DB Squared as an Arkansas limited liability company on March 16, 2005, executing an Operating Agreement on the same day. The Operating Agreement provided that each of the three members would own a third of the membership interests in the newly formed LLC. Given their backgrounds, the work of the newly established company would be divided according to the owners' expertise, with the Johansons being primarily responsible for client relationships and Oliver serving as the strategy and product development leader.

         Although the parties dispute the state of the existing program before Oliver began his work, [2] it is undisputed that, by 2008, an improved version of the program, entitled JESAP 2008, had been created. The parties then sought to register the program with the U.S. Copyright Office.

         On March 27, 2008, Oliver filed a registration application with the Copyright Office. (Doc. 35-6). In the application, Oliver identified himself as a principal of DB Squared but also checked the box indicating he was the “Author” of the JESAP software. After receiving an email from Tamika Butler, a Registration Specialist at the Copyright Office, noting the inconsistency between his claim of authorship and his title as an officer of the Company and after communicating with the Johansons, Oliver ultimately requested that Ms. Butler “[m]ake the application a “work made for hire” for the company DB Squared, LLC. (Doc. 35-7, p. 2). The copyright application for the JESAP 2008 software was then approved, and the registration record listed the work as a work made for hire and DB Squared as the author of the copyright (the “JESAP 2008 Copyright”). (Doc. 35-8, p. 2).

         The timeline following the registration of the JESAP 2008 program is disputed, but some of the key dates and facts are clear. Following the registration of the JESAP 2008 Copyright, newer versions of the software were created, and the program was ultimately renamed DBCompensation in 2009 or 2010 as part of the company's rebranding efforts to make the software more commercially viable. As apparent from the record, many iterations of the JESAP and later DBCompensation products prominently displayed a message reading: “© DB Squared, LLC.” As the member with computer programming expertise, Oliver was responsible for changing the computer code so that these copyright registration notices would be displayed when users accessed the software. (Doc. 35-11, p. 4).

         Subsequent to this rebranding effort, newer versions of the DBCompensation software were created and Oliver and the Johansons, on behalf of DB Squared, made considerable efforts to sell, market, or license the software program DBCompensation to potential buyers. Oliver testified that as late as June 2016, he attended the World at Work conference in order to sell the DBCompensation product on behalf of DB Squared. (Doc. 35-4, p. 45).

         Although the reasons are unclear, on October 24, 2016, Oliver submitted an email to the rest of the company announcing that he was resigning from DB Squared effective immediately. (Doc. 35, Ex. 14). At the time of his resignation, Oliver was the Chief Technology Officer (“CTO”) of DB Squared. Blair Johanson responded by email to Oliver's resignation on October 26. His email noted that he understood Oliver's frustration with trying to finalize the newest version of the DBCompensation software, DBComp 10, but would like the opportunity to discuss the resignation with Oliver. He also asked if there was a way to get over this hurdle and move forward with the Company's strategic growth plan. (Doc. 35-14, p. 2). On October 30, 2016, Oliver sent another company-wide email apologizing for his odd behavior the week before. In the email, Oliver noted that he had been trying so hard to bring DBComp 10 to a successful conclusion and that, if desired, “[he] will be pleased to temporarily continue on at DB Squared to see DBC 10 through to a successful conversion, testing, implementation, and conclusion.” (Doc. 35-16, p. 2). Moreover, he noted that “[o]nce the DBC 10 rollout has concluded (provided you decide that it would be helpful to have me back on the team until then) it seems like this presents an excellent opportunity for me [to] let Blair and Bruce take it from here. DB Squared is at a terrific place now with so many excellent things put in place, and with a very bright future ahead. Removing the cost of my services will free up additional financial resources for the company.” Id.

         The extent to which Oliver actually returned to “the team” is unclear to the Court, but sometime in the next four months, Oliver began to assert that he was the sole owner of the DBCompensation software. As a result, he retained attorneys who then sent at least one cease-and-desist letter on his behalf to DB Squared alleging that, in the absence of the Company obtaining a license from Oliver or his wholly owned company, Applied Computer Technology (“ACT”), he would have no choice but to begin litigation to vindicate his ownership interests in the copyright and DB Squared.[3] (Doc. 35-19, p. 2).

         In February 2017, Oliver submitted a new copyright registration to the Copyright Office for the DBCompensation software. In the application, he listed himself as the author of the copyright and indicated that, unlike his application for the JESAP 2008 software, this was not a work made for hire. In support of his application, Oliver submitted a number of pages of source code to the Copyright Office after first inserting “Author” and “Dale Oliver” on the pages. (Doc. 35-4, p. 35). As Oliver stated during his deposition, those insertions were not native to the copy of the program stored at DB Squared. Id. The copyright application was ultimately approved, and copyright TX 8-299-255 was issued on February 21 for the DBCompensation software, listing Oliver as the sole author (the DBCompensation Copyright”).

         Oliver then filed the present lawsuit, seeking, among other relief: (1) a declaration that he is still a member of DB Squared, LLC with a one-third membership interest; (2) judicial dissolution of the Company; (3) a declaration that he is the true author (and resulting owner) of the DBCompensation Copyright; and (4) damages for copyright infringement.

         DB Squared filed a counterclaim seeking, among other things: (1) a declaration that the Company is the rightful owner of the copyrighted software in question, because Oliver's subsequent registration of the DBCompensation Copyright was procured by fraud on the Copyright Office, and thus invalid and/or unenforceable; (2) damages for infringement of the JESAP 2008 Copyright owned by DB Squared; and (3) damages for Oliver's alleged breach of a fiduciary duty.

         II. LEGAL STANDARD

         The legal standard for summary judgment is well established. Under Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” The Court must review the facts in the light most favorable to the opposing party and give that party the benefit of any inferences that can be drawn from those facts. Canada v. Union Elec. Co., 135 F.3d 1211, 1212-13 (8th Cir. 1997). The moving party bears the burden of proving the absence of a genuine dispute of material fact and that it is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Nat'l Bank of Commerce of El Dorado, Ark. v. Dow Chem. Co., 165 F.3d 602 (8th Cir. 1999).

         Even if certain facts are undisputed, the summary judgment standard also requires a demonstration that “‘the movant [be] entitled to judgment as a matter of law.' Thus, the last matter that the court must address in ruling on a summary-judgment motion is whether legal theory or doctrine supports the movant's position that judgment should be entered.” Charles A. Wright & Arthur R. Miller, 10A Federal Practice & Procedure Civil § 2725.3 (Apr. 2018). While novel or complex legal issues should not forestall the grant of summary judgment that is otherwise appropriate under the Rules, “their presence in the action may suggest that a fuller development of the facts would be helpful to their resolution. In those circumstances, the court may deny summary judgment.” Id.

         III. DISCUSSION

         1. Oliver's Motion for Partial Summary Judgment

         Oliver's Motion is premised on the argument that his resignation from DB Squared did not eliminate his one-third ownership interest in the Company. In support of that argument, Oliver cites to Ark. Code Ann. § 4-32-802(c), which provides that:

A member may withdraw from a limited liability company only at the time or upon the happening of an event specified in the articles of organization or an operating agreement. Unless the articles of organization or operating agreement provides otherwise, a member may not withdraw from a limited liability ...

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