MTV Networks v. Curry

Citation
MTV Networks v. Curry, 867 F. Supp. 202 (S.D.N.Y. 1994) (full-text).

Factual Background
Adam Curry (“Curry”) worked as a video disc jockey ("VJ") for MTV Networks (“MTVN”) under a written contract through May 1, 1992. Under “informal” terms, he continued to serve as an MTVN VJ through April 1994.

In approximately June 1993, Curry met with MTVN Vice President Matthew Farber ("Farber") and discussed an Internet service he was developing with the Internet address "mtv.com." Curry alleges that Farber presented no interest on behalf of MTVN in entering a joint venture. However, he states that Farber indicated Curry was free to continue development of the Internet site at his own expense.

By August 1993, Curry had announced the mtv.com address on MTVN broadcasts. Curry claims to have discussed mtv.com in August 1993 with Joel Stillerman ("Stillerman"), a senior MTVN executive, and Stillerman apparently made it clear to Curry that MTVN did not object to “Curry’s use and development of the mtv.com address.”

Curry alleges that between August 1993 and April 1994, he discussed the mtv.com site with other MTVN personnel on many occasions and received encouragement in his continuing development efforts. Curry claims that MTVN programmers placed the graphic letters “mtv.com” on the television screen during a popular program during this period. Relying on his discussions with MTVN executives and personnel, Curry continued to develop mtv.com at his own expense.

In January 1994, MTVN formally requested that Curry stop using the mtv.com address, despite Curry’s involvement with it. Curry alleges that MTVN programming continued to make on-air references to the address, and that Stillerman asked him to continue working on the mtv.com site. By the spring of 1994, millions of Internet users had accessed Curry's mtv.com address; he credits its popularity in part to a service he claims to have discussed with MTVN personnel since August 1993.

Curry argued that MTVN was exploiting his development efforts in order to experiment for their own interactive service. He alleges that MTVN and Viacom sought developing online services – which resulted in an agreement between MTVN and America On-Line ("AOL"). Their agreement would include a bulletin board similar to the one Curry developed at mtv.com.

Trial Court Proceedings
MTVN sued Curry on several grounds, including (1) trademark infringement based on Curry's use of registered MTV marks and (2) breach of Curry's employment contracts. Curry counterclaimed for (1) breach of oral contract, (2) fraud/negligent misrepresentation, and (3) unfair competition.

The Court now considered MTVN's motion to dismiss these counterclaims pursuant to Federal Rules of Civil Procedure, Rules 12(b)(6) and 9(b).

Curry’s Breach of Oral Contract Counterclaim
Curry claimed that MTVN personnel promised him that MTVN would not interfere with his development of mtv.com. But MTVN argued that this oral contract is void because it violates the relevant statute of frauds. The statute states, in part, that a promise is void unless it is in writing. Further, it states that oral agreements violate the statute only if it is possible in fact and law that their terms can be performed within one year. MTVN urges that the agreement outlined in Curry’s pleadings be interpreted in the following manner: That Curry would be free to terminate the development of his Internet site at will, but MTVN would always be obliged not to interfere with Curry's use of the site name mtv.com. Viewing the agreement this way, it would be possible that the terms of the promise be performed within one year, but MTVN's obligations would continue indefinitely, meaning that the agreement violated the statute.

Further, MTVN presents the policy argument that Curry’s alleged oral contract counterclaim must be dismissed because is it a “classic” type of contract that the statute of frauds was intended to prohibit, where the party alleging the contract has already completed its performance but seeks to impose seemingly perpetual obligations on the other side. Many New York cases support MTVN’s position.

For various reasons, the Court was not convinced that the statute of frauds would prohibit Curry’s claim that an oral contract should be enforced. Thus, Curry’s breach of contract counterclaim survives MTVN’s motion to dismiss.

Curry’s Fraud/Negligent Misrepresentation Counterclaim
Curry's fraud claim alleged that MTVN personnel had fraudulent intent at the time that they made the statements at issue. MTVN argues that this second counterclaim must be dismissed because Curry did not present a sufficient factual basis to establish fraudulent intent (scienter) when MTVN executives encouraged Curry to develop his computer service under the mtv.com name. MTVN argued that Curry's pleadings in this regard were lacking because there was no suggestion that Farber or Stillerman intended to break the promises they allegedly made. The Court finds Curry's pleadings sufficient in this regard.

To succeed on his fraud claim, Curry would also had to show that there was reasonable reliance on the purported oral agreement. However, MTVN also argued that Curry failed to plead this. The network stated that Curry, whose previous written employment contracts denied him rights to MTVN's intellectual property, should have known that MTVN would not orally grant him such rights in conjunction with his fledgling service.

The court denied MTVN's motion as to Curry’s fraud and negligent misrepresentation counterclaims.

Curry’s Unfair Competition Counterclaim
Curry claimed that MTVN violated New York's common law tort of unfair competition. A cause of action for unfair competition requires “unfairness and an unjustifiable attempt to profit from another’s expenditure of time, labor, and talent.” Curry claimed that MTVN used his Internet site as a no risk experiment for its own online service and that MTVN “misappropriated the fruits of Curry’s labors and expenditures.” MTVN stated that it could not determine how to interpret this counterclaim, and the Court agreed because Curry has not specified what exactly MTVN has allegedly misappropriated. Thus, the Court concluded that MTVN is entitled to clarification of Curry’s third counterclaim, and grants its motion for a more definite statement. :

Legal Standard for Dismissal of Counterclaims
The Court will only dismiss a complaint when it finds beyond a doubt that the plaintiff "can prove no set of facts" to support the claim that plaintiff was entitled to relief. The standard for dismissing counterclaims are exactly rgw same as those for dismissing claims under a 12(b)(6) motion.

Here, MTVN’s motion to dismiss Curry’s counterclaims was considered under the same standard as one for dismissal for failure to state a claim.

For these reasons, MTVN’s motions to dismiss counterclaims 1 and 2 were denied. However, the network’s motion to dismiss counterclaim 3 is granted.