15-1016-cv
Harris-Clemons v. Charly Trademarks, Ltd.

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                        SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

        At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
14th day of March, two thousand sixteen.

Present:
            PIERRE N. LEVAL,
            DEBRA ANN LIVINGSTON,
            SUSAN L. CARNEY,
                   Circuit Judges.
_______________________________________

BETTY HARRIS-CLEMONS,

                         Plaintiff-Appellee,

                v.                                                 15-1016-cv

CHARLY TRADEMARKS, LTD.,

                         Appellant,

CHARLY ACQUISITIONS, LTD., A NEVISIAN LIMITED
LIABILITY COMPANY; SONY MUSIC ENTERTAINMENT,
INC.

                  Defendants.
_______________________________________

For Plaintiff-Appellee:                        KENNETH J. KRAYESKE, Kenneth J. Krayeske Law
                                               Offices, Hartford, Conn.




                                                   1
For Appellant:                             PETER R. AFRASIABI and Nima Kamali, One LLP,
                                           Newport Beach, Cal.

                                           Boutin & Altieri, P.L.L.C., Fairfield, Conn.

       UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, AND

DECREED that the order of the district court is VACATED and the case is REMANDED for

further proceedings consistent with this order.

       Appellant Charly Trademarks Limited (“CTL”) appeals from an order of the United

States District Court for the District of Connecticut (Covello, J.), dated March 4, 2015, and filed

March 5, 2015, denying its motion to intervene and to request relief from a judgment entered

against Charly Acquisitions Limited (“Charly”), which identifies CTL as an “alias” of Charly.

We assume the parties’ familiarity with the underlying facts and procedural history of the case,

which we describe here only as necessary to explain our decision.

I.     Background

       Plaintiff-Appellee Betty Harris-Clemons is a singer who recorded a number of songs in

the 1960s, including the 1967 ballad “Nearer to You.”      On August 11, 2006, Defendant Sony

Music Entertainment’s RCA Records (“Sony”) released the fifth studio album by pop singer

Christina Aguilera.     Titled Back to Basics, the double album included a song called

“Understand,” at issue here.    “Understand” uses a vocal sample from Harris-Clemons’s song,

“Nearer to You.”    A39.   In August 2006, Sony negotiated a license for the rights to “Nearer to

You” with Defendant Charly.       Under that agreement, Sony credited Charly in the booklet

accompanying the Back to Basics album and agreed to pay Charly five cents per use for the

“Nearer to You” sample.      But, according to Harris-Clemons, Charly never had authority to

license “Nearer to You.” Sony, aware of a dispute between Harris-Clemons and Charly, did not




                                                  2
make any royalty payments and instead placed all royalties in an account until resolution of the

dispute.    By June 2012, that account had grown to contain $170,384.99 in royalties.

          On July 6, 2012, Harris-Clemons filed a Complaint against Sony in the United States

District Court for the District of Connecticut. On October 3, 2012, Harris-Clemons filed an

Amended Complaint (dated September 28, 2012), adding Charly as the second defendant.

Under the Amended Complaint, Harris-Clemons brought claims of breach of contract against

Sony, copyright infringement against Sony and Charly, and unfair practices against Sony and

Charly.     In Count 1 against Sony and Charly, she also asserted an interpleader claim and

entitlement to funds held in the account.

          On November 29, 2012, the district court granted a motion by Harris-Clemons for

interlocutory judgment as to the interpleader claim, which Sony had not opposed, and ordered

Sony to transfer the royalty funds to the clerk of the court for deposit into an interest-bearing

account.     On January 3, 2013, Harris-Clemons filed two motions for default judgment against

Charly.     One motion sought a default judgment as to Count 1—interpleader—in accordance

with the interlocutory judgment of interpleader that the district court had entered on

November 29.      Harris-Clemons contended that the clerk of the court should pay her the

interpleaded funds because Charly had not appeared, plead, or otherwise defended the action.

Harris-Clemons’s other motion sought default judgment as to Counts 4 and 6—copyright

infringement and unfair practices. On January 23, 2013, the district court granted both motions.

It entered judgment as to Count 1, ordering the clerk of court to transfer to Harris-Clemons

$170,384.99, along with any interest that had accrued on the account. It also granted judgment

against Charly as to Counts 4 and 6.        The district court scheduled a hearing to determine the

amount of damages for Counts 4 and 6.



                                                   3
         On April 4, 2013, Harris-Clemons filed a second motion to amend or correct the

complaint, attaching the Second Amended Complaint to that motion.                 In the motion,

Harris-Clemons explained that “[t]he main substance of the proposed amendment regarding

Defendant Charly is to add the name[s] of multiple aliases under which Defendant Charly has

done business.”     A88.   Accordingly, “any judgment award after the hearing in damages may

be executed against any of Defendant Charly’s aliases once.” Id.        The motion asserted that

Charly had “spread its assets over a number of aliases” and, in doing so, sought “to fleece

musicians like [Harris-Clemons] out of royalties.”       Id. at 89.   The motion to amend was

unopposed, and on May 29, 2013, the district court granted it.            The Second Amended

Complaint asserted that Charly used an array of “aliases” (Charly Licensing ApS,

Licensemusic.com ApS, Charly Holdings, Inc., Charly International ApS, Charly International

Ltd., Charly Direct Ltd., Charly Trademarks, Ltd., Charly Records International ApS, and Charly

Records, Ltd.).   Charly, Harris-Clemons alleged, conducts business through—and is also known

by—those aliases.     Characterized as a series of fictitious names, the aliases were not added as

parties to the lawsuit.1

         On October 2, 2013, the district court entered judgment against Charly as to Counts 4

and 6.    The district court determined that the amount owed was $42,095.62, exclusive of

prejudgment interest and attorney’s fees.    The next day, the district court entered an Amended

Judgment that specified:

         The plaintiff may recover her damages from the defendant Charly Acquisitions
         Ltd., or any of its following aliases, listed in the second amended complaint, for
         which the judgment shall apply: Charly Licensing ApS, Licensemusic.com ApS,
         Charly Holdings, Inc., Charly International ApS, Charly International Ltd., Charly


1
 The case caption on the Second Amended Complaint lists only Sony as the Defendant in the lawsuit.
This seems to be an inadvertent error as paragraph 4 of the Second Amended Complaint names Charly
Acquisitions Limited as a Defendant, as had the Amended Complaint.

                                                 4
        Direct Ltd., Charly Trademarks, Ltd., Charly Records International ApS, Charly
        Records, Ltd., and Charly Licensing ApS.

A106 n.1.    On December 27, 2013, Harris-Clemons and Sony filed a joint motion stipulating to

the voluntary dismissal of the action as to Sony, which the district court granted.

        According to Harris-Clemons, she proceeded to domesticate the judgment against Charly

in the United States District Court for the Middle District of Pennsylvania.              In doing so, she

garnished property held there, namely, various domain names, including licensemusic.com.

Harris-Clemons then sent a demand letter addressed to Charly for payment, but CTL, the

Appellant here, sent a sua sponte reply asserting that the garnished property in fact belonged to

CTL.    Harris-Clemons had identified CTL as one of Charly’s various aliases in the Second

Amended Complaint. In its letter of March 14, 2014, CTL refused to issue payment for the

domain names because, according to CTL, it is a “lawful independent corporation with its own

charter and registration in Nevis,” and Harris-Clemons “did not plead or prove [CTL] was an

alter ego” of Charly, but had instead garnished its property solely on the basis of “vaguely

alleg[ing] that it and . . . others were ‘aliases’” in the lawsuit. A127.

        On May 3, 2014, CTL entered an appearance in the original case before Judge Covello

and filed a motion to intervene in the action. In the motion, CTL argued that the Second

Amended Complaint had improperly named CTL as an alias of Charly, because CTL is actually

“a distinct legal entity.” A108. To support that argument, CTL submitted as evidence a

“Certificate of Renewal” that purported to be from the Office of the Registrar of Companies of

the Island of Nevis and that affirmed that CTL had paid an annual fee pursuant to the Nevis

Business Corporation Ordinance of 1984 for the period ending January 29, 2014.2                CTL sought


2
  CTL submitted this certificate for CTL only on reply, explaining that it “was somehow accidentally
omitted from filing.” A291. In the first instance, CTL’s counsel’s declaration stated that attached were
“true and correct copies of two certificates of renewal to verify that Charly Trademarks Ltd. . . . and . . .

                                                     5
intervention either as a matter of right under Federal Rule of Civil Procedure 24(a) or by

permission under Federal Rule of Civil Procedure 24(b).                   In the memorandum of law

supporting its motion to intervene, CTL argued that it was entitled to relief from the provision of

the final judgment—identifying it as an alias of Charly and specifying that Harris-Clemons could

recover damages from it—because CTL is a separate legal entity from Charly and was never

served with process or given notice and opportunity to be heard in the litigation.

Harris-Clemons opposed CTL’s motion to intervene.

        On March 4, 2015, the district court denied CTL’s motion.3             It found that CTL had not

made its case for intervention as a matter of right, or for permissive intervention.             Regarding

intervention as a matter of right, the district court found that the motion was not timely, because

CTL had “fail[ed] to specifically articulate when it received notice of the lawsuit.”                 A366

(SPA7).    In any event, even if the motion had been timely filed, the district court determined

that CTL had not shown that “it was a distinct legal entity and, therefore, it d[id] not have an

interest in the litigation that is distinct from [Charly] and that is impaired by the disposition of

this action.” A367 (SPA8). Further, because CTL had “failed to “provide evidence that it

dealt with [Charly] at arms-length, as a separate corporation,” the district court found that Charly

had adequately represented CTL’s interests in the litigation. Id.           Last, the district court found

that the facts in this case did not warrant granting permissive intervention.            The district court

explained that CTL had “failed to prove that it is a distinct legal entity from the existing

defendant,” Charly, and, therefore, CTL did “not have a claim that is separate from those that are

already the subject of the judgment in this case.” A368 (SPA9). This appeal followed.

Charly Acquisitions Ltd. are two separate distinct legal entities,” but in fact attached only the Certificate
of Renewal for Charly and not CTL. A111, A115.
3
  The district court did not address CTL’s request, made in its memorandum of law supporting its motion
to intervene, that the district court void or amend the judgment.

                                                     6
II.      Discussion

         “Intervention is a procedural device that attempts to accommodate two competing

policies: efficiently administrating legal disputes by resolving all related issues in one lawsuit, on

the one hand, and keeping a single lawsuit from becoming unnecessarily complex, unwieldy or

prolonged, on the other hand.”      United States v. Pitney Bowes, Inc., 25 F.3d 66, 69 (2d Cir.

1994).    In weighing a motion to intervene, a district court balances those two concerns and

undertakes a fact-intensive inquiry. See id. We review a district court’s denial of a motion to

intervene for abuse of discretion. See Catanzano by Catanzano v. Wing, 103 F.3d 223, 232 (2d

Cir. 1996).

         CTL challenges the district court’s denial of its motion to intervene both as of right and

by permission.    When evaluating a motion to intervene, a district court “considers substantially

the same factors whether the claim for intervention is ‘of right’ under Fed. R. Civ. P. 24(a)(2), or

‘permissive’ under Fed. R. Civ. P. 24(b)(2).” R Best Produce, Inc. v. Shulman-Rabin Mktg.

Corp., 467 F.3d 238, 240 (2d Cir. 2006).          Those factors include: “(1) timely fil[ing] an

application, (2) show[ing] an interest in the action, (3) demonstrat[ing] that the interest may be

impaired by the disposition of the action, and (4) show[ing] that the interest is not protected

adequately by the parties to the action.” Id. (quoting In re Bank of N.Y. Derivative Litig., 320

F.3d 291, 300 (2d Cir. 2003)). We have explained that “[f]ailure to satisfy any one of these [four]

requirements is a sufficient ground to deny the application.” Id. (second alteration in original)

(quoting In re Bank of N.Y. Derivative Litig., 320 F.3d at 300). In the proceedings below, the

district court based its ruling on timeliness, though it also explained that the motion would not

have satisfied the other three factors.




                                                  7
       We conclude that the district court erred by denying CTL’s motion to intervene without

adequately considering whether Charly and CTL are in fact separate entities.         CTL averred that

it could demonstrate that it is a corporate entity separate and apart from Charly and that it should

be permitted to intervene for the purpose of seeking relief from the default judgment insofar as

that judgment states that Harris-Clemons may recover damages from CTL, on the theory that

CTL is an “alias” of Charly.4     But its motion papers included only the purported certificate of

renewal, which was not properly authenticated, as evidence to make such showing.                  CTL

sought a conference, presumably prepared to present additional evidence in support of its claim.

       The district court concluded that CTL had failed in its motion papers to show when it

received notice of the lawsuit, so as to establish the timeliness of its motion to intervene.      The

district court further determined that CTL had also failed to show that Charly had not adequately

represented CTL’s interests in the litigation, because CTL had provided no evidence that it was

itself a distinct entity from Charly.   In making that finding, however, the district court relied on

an absence of evidence submitted.       In the district court’s view, the one piece of evidence that

CTL provided—the purported certificate of renewal for CTL dated January 20, 2014, without

indication of any date of formation—was “insufficient, in light of the surrounding facts, to

establish CTL as a separate entity from [Charly].”      A367 (SPA8). The district court noted the

following facts in particular: that CTL conducts its business at the same address where

Harris-Clemons served Charly; that it appears to own charlyacquisitions.com; that


4
  CTL asserts that the amended judgment is void as to CTL, because CTL is not an alias, but an
independent corporation. To be clear, the default judgment was against Charly and was amended simply
to include specific “aliases” of Charly. Although the terms “alias” and “alter ego” are sometimes used
synonymously, the pleadings and amended judgment here employ “alias” to represent nothing more than
a fictitious name or pseudonym. If CTL is in fact found to be a separate legal entity, then CTL may seek
amendment of the judgment so as to remove its identification as an alias in the judgment. But such
amendment would not affect the default judgment as to Charly.



                                                   8
charlyrecords.com was registered to CTL at the same address that licensemusic.com, an entity

owned and operated by Charly, was registered; and that the e-mail contact for charlyrecords.com,

owned by CTL, is william.rowley@charly-acquisitions.com and is the same address listed for

licensemusic.com, owned by Charly.

       The district court had a scant record before it as to the alleged independent corporate

existence of CTL.    Nevertheless, we think that CTL presented sufficient evidence—if barely

so—to merit the opportunity to establish that it is a separate legal entity from Charly. On appeal,

counsel for CTL represented that the two companies are separate entities and that he believes

CTL was incorporated in 1999.       On remand, the district court is directed to afford CTL an

opportunity to prove those assertions about its corporate status through valid evidence (such as a

properly authenticated certificate of incorporation) at a hearing.   If CTL fails to show that it is a

separate legal entity, then the district court should deny CTL’s motion.      On the other hand, if

CTL demonstrates that it is a separate legal entity, and not merely an alias sometimes used by

Charly, then there is no basis for the district court’s determination that CTL’s motion to

intervene was untimely.     One corporation, on learning that an affiliated corporation has been

sued, ordinarily has no obligation to intervene in the suit to prevent a judgment being enforced

against it. Nor in such circumstances would the district court be correct in concluding, as it did,

that because CTL had not established that it was a different legal entity from Charly, its interests

in the litigation were adequately represented by Charly.




                                                 9
III.   Conclusion

       For the reasons stated above, we VACATE the district court’s order denying CTL’s

motion to intervene and REMAND for additional proceedings consistent with this order.

                                                  FOR THE COURT:
                                                  Catherine O’Hagan Wolfe, Clerk




                                             10
