By Joel L. Hecker
On July 24th, United States District Judge Laura Taylor Swain dismissed an action brought in the United States District Court of the Southern District of New York concerning ownership of comic book art on the grounds that the action was commenced after the applicable three-year statute of limitations had run. The case is Wallace Wood Properties, LLC v. Tatjana Wood, docket No. 14-CV-8597-LTS: Decision.pdf
Disclosure: I am counsel to the prevailing defendant, Tatjana Wood, in this action.
Legal Standard on a Motion to Dismiss
On the motion to dismiss, the court is required to accept all allegations in the complaint as true and to draw all reasonable inferences in the plaintiff's favor. Accordingly, the defendant's motion to dismiss must assume that the allegations in the complaint were true, although, if the action continued, the defendant certainly would have contested many of the allegations. Accordingly, in reviewing the actual opinion, the reader should not assume the facts are accurate or truthful, except insofar as they relate to the issue pertaining to the expiration of the statute of limitations.
Wallace Wood ("Wally") was a famous comic book writer and illustrator whose work has been featured in well-known comic books published by Marvel Comics ("Marvel") and EC Comics. The defendant was Wally's first wife. Although the couple divorced in the 1960s, they remained friendly until his death by suicide in 1981. In fact, Wally bequeathed all "bank accounts, whether savings, checking, Certificates of Deposit, or otherwise" to her. Unfortunately for the defendant, there were no assets in the estate to fulfill this bequest.
Wally's will left the rest, residue, and remainder of his estate to a close friend, John Robinson, who also was named executor.
The plaintiff ("WWP") is a not-for-profit limited liability company established in 2011 by J. David Spurlock ("Spurlock"), allegedly to promote Wally's legacy and to manage the latter's tangible properties and intellectual property rights. Spurlock is the sole member and manager of WWP and, as such, is the driving force behind the litigation.
Spurlock, who had written a biography of Wally, claims he first saw a copy of the will in 2009. On February 23, 2012, Robinson assigned to WWP his interest in Wally's property, which was left to Robinson under the terms of the will. The complaint alleges that WWP became the owner of all original artwork created by Wally during his lifetime, which was not subject to a written agreement explicitly providing otherwise. [This allegation was accepted as true for purposes of the motion, but otherwise was contested in that there was a very strong argument that Wally's work consisted of works made for hire for Marvel and that Marvel owned the original artwork and copyrights thereto.]
The 2005 Marvel Transfer to the Defendant
The complaint alleges that in 2005, Marvel transferred 150 to 200 pieces of Wally's original comic book artwork ("the Marvel Artwork") to the defendant. The complaint also alleges that this transaction was not authorized by Wally, his estate, or Robinson, and the defendant knew that Marvel was not the actual owner of the artwork. The complaint further alleges that the defendant admits she did not receive the original artwork until 2005, and subsequently concealed the fact that she possessed it from Robinson and, ultimately, WWP.
The complaint sought return of the original artwork, as well as every other piece of art created by Wally that is or was ever in the possession, custody, or control of the defendant, including, but not limited to, the Marvel Artwork. This contention clearly had no merit in its breadth, since WWP knew that Wally had in fact given some of his artwork during his lifetime to the defendant, but, as stated above, the allegations are assumed to be true for the purposes of this motion.
WWP's Ownership Claims Regarding the Original Artwork
In 2006, well before Spurlock established WWP, he had visited the defendant's home and personally saw Wally's comic book artwork in the defendant's possession. The complaint further alleges that in 2013, Spurlock, "now in the WWP management role," realized for the first time that the artwork he had seen in the defendant's home seven years prior, was WWP's rightful property. As a result, on March 20, 2013, Spurlock, on behalf of WWP, made his first demand for the return of the artwork he had seen in 2006 in the defendant's home.
The defendant obviously refused to comply with such demands, and on October 28, 2014, WWP commenced this action for conversion and replevin, seeking money damages and the return of the Marvel Artwork. The defendant threatened to move to dismiss the complaint as being a frivolous action, which resulted in WWP filing a first and then a second amended complaint. The defendant brought her motion to dismiss the second amended complaint, which is the subject of this blog, on the basis that it was barred by the three-year statute of limitations, the doctrine of laches, and that WWP failed to sufficiently allege specific, identifiable property and ownership of the property in question.
The court accepted the defendant's contention that the three-year statute of limitations expired in 2009 because the limitations period accrued in either 2005 or 2006, when WWP alleges that the defendant wrongfully took possession of the artwork. WWP had also argued that it was entitled to an equitable tolling of the statute of limitations in light of the defendant's alleged fraudulent concealment of the Marvel artwork. The court rejected this contention as well.
The court first addressed the issue, for statute of limitations purposes, as to whether the current possessor was a good-faith purchaser or bad-faith possessor. An action against a good-faith purchaser of stolen property accrues once the true owner makes a demand and is refused. This is the argument made by WWP and rejected by the court. On the other hand, where the property is held in bad faith or unlawfully, the limitations period begins to run immediately from time of possession, without a demand and refusal period. Furthermore, such a demand and refusal is not required when the current possessor deals with contested property openly as his or her own.
In this case, WWP specifically and affirmatively alleged in the complaint that the defendant actually possessed the Marvel Artwork in bad faith. The court found that, based upon WWP's own allegations, no demand and refusal period was required and that the limitations period accrued at the time of the alleged conversion in 2005, when Marvel delivered the Marvel Artwork to the defendant. In a footnote, the court explained that, even if the limitations period did not accrue until 2010 when the defendant sold two of the original illustrations at a public auction, which acts constituted the exercise of ownership rights, WWP's claims nevertheless would have become time-barred in 2013.
To avoid dismissal, WWP contended that the defendant had fraudulently concealed these transactions and therefore WWP was entitled to the benefit of equitable tolling. However, to prevail on these grounds, WWP needed to establish that the defendant's alleged fraudulent conduct actually concealed the cause of action during the period WWP sought to have tolled. Moreover, WWP needed to also establish that it exercised due diligence in pursuing the discovery of the claim.
The court found that WWP made only general allegations, which were not supported with any facts, and the court correctly determined that these conclusory allegations of fraudulent concealment and diligence were insufficient to raise a factual issue as to the potential availability of equitable tolling. In effect, the court determined that WWP's complaint contained no pleadings to indicate that the defendant or Marvel caused it, or Wally, or Robinson, to refrain from taking any action to protect the alleged rights of Wally's estate. This was so, despite the fact that Wally's work had been published extensively by Marvel and that Robinson made no effort whatsoever in the decades after Wally's death to inquire after any possible ownership interest. Furthermore, there was no allegation of any kind in the complaint that Marvel or the defendant made any affirmative misrepresentation upon which WWP or its predecessors relied upon in determining whether or when to sue. In fact, the reverse was the case, as the complaint alleges that the defendant actually displayed the Marvel artwork to Spurlock in 2006, and had been selling some of it at auction.
In light of the court's determination that the action must be dismissed as untimely, the court did not reach any of the work made for hire or other underlying issues involved in the case.
The complaint, on its face, actually alleged sufficient facts to affirmatively prove that the three-year statute of limitations had run, and that the complaint therefore required dismissal. As a result, the court correctly dismissed the second amended complaint as time-barred.