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Kylin Network (Beijing) Movie & Culture Media Co. Ltd. v. Fidlow

United States District Court, E.D. Virginia, Richmond Division

June 1, 2017

BENNETT J. FIDLOW, et al., Defendants.


          Henry E. Hudson United States District Judge.

         THIS MATTER is before the Court on Counter Defendant Kylin Network (Beijing) Movie & Culture Media Co., LTD's ("Kylin") Motion to Dismiss, filed on April 25, 2017. (ECF No. 29.) For the reasons that follow, the Motion to Dismiss will be granted.

         I. BACKGROUND

         As required by Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court assumes Counter Plaintiffs well-pleaded allegations to be true and views all facts in the light most favorable to it. T.G. Slater & Son v. Donald P. & Patricia A. Brennan, LLC, 385 F.3d 836, 841 (4th Cir. 2004) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). Viewed through this lens, the facts are as follows.

         The relationship between Kylin, a Chinese company, and Counter Plaintiff, Bennett Fidlow, began with Kylin's decision in 2014 to produce a movie about the life of martial arts legend Bruce Lee, entitled "Birth of the Dragon." (Countercl. ¶ 9, ECF No. 27.) Kylin partnered with another company, Bliss Media Limited ("Bliss"), to obtain the movie rights. (Id. ¶¶ 11-12.) Fidlow, in his capacity as Bliss's attorney, drafted the partnership agreement. (Id. ¶ 13.)

         After Kylin partnered with Bliss, Fidlow represented both entities in their attempt to obtain the rights to "Birth of the Dragon." (Id. ¶¶ 19, 24.) He negotiated on behalf of Kylin and Bliss to purchase the movie rights from QED Pictures, LLC ("QED Pictures"). (Id. ¶ 24.) As a result of Fidlow's negotiations, on August 6, 2014, Kylin and Bliss entered into a financing agreement with QED Pictures. (Id. ¶ 27.) Pursuant to that agreement, Kylin paid $1 million to QED Pictures. (Id. ¶ 38.) Kylin also paid an additional $1 million to Bliss for its assistance in obtaining the movie rights. (Id. ¶ 39.) However, in February 2015, Kylin discovered that QED Pictures never held any rights to "Birth of the Dragon, " and, consequently, Kylin's attempt to purchase those rights was ineffectual. (Id.¶41.)

         The rights to Birth of the Dragon were actually owned by a separate entity, QED Holdings. (Id.) Apparently, QED Holdings' CEO, William Block, had independently created QED Pictures and then negotiated with Kylin and Bliss under the QED name. (Id. ¶ 43.) Unbeknownst to Kylin and Bliss, Block had no authority to negotiate the rights to "Birth of the Dragon, " and the $1 million payment was sent to an account controlled by Block. (Id.)

         On April 2, 2015, having learned of the turmoil surrounding QED Holdings and QED Pictures, Fidlow filed UCC-1 Financing Statements with the California and Delaware Secretaries of State. (Id. ¶ 44.) These Financing Statements indicated that Kylin and Bliss had a security interest in "Birth of the Dragon." (Id.) However, at the time the Financing Statements were filed, Kylin had already independently obtained the movie rights from QED Holdings. (Id. ¶ 46.)

         On September 8, 2015, Kylin sued Fidlow in Los Angeles County, California, Superior Court. (Id. ¶ 51.) However, on September 22, 2016, that court determined that Richmond, Virginia was the proper forum and stayed the case so that it could be refiled there. (Id. ¶ 54.) Accordingly, on December 23, 2016, Kylin brought suit in this Court. Kylin alleges that Fidlow committed legal malpractice, breach of fiduciary duty, and fraud by advising Kylin to pay $1 million to QED Pictures for movie rights that it did not own and by filing the Financing Statements, which clouded Kylin's title to "Birth of the Dragon." (See generally Compl., ECF No. 1.)

         On April 6, 2017, Fidlow filed a Counterclaim against Kylin. (See generally Countercl.) He alleges that one of Kylin's managers, James Pang, published defamatory statements about Fidlow to another Kylin manager, Leo Shi Young. (Id. ¶ 65.) Young, in turn, allegedly published those same statements to Yiyu Yule ("Yiyu"), a Chinese media publisher.[1] (Id.) On December 29, 2017, Yiyu allegedly republished the defamatory statements in an online article. (Id. ¶¶ 66-69.)

         The Yiyu article, which Fidlow has attached to his Counterclaim, is essentially a news report detailing the factual background of the dispute and resulting litigation between Kylin, Bliss, QED Pictures, and Fidlow. (See Countercl. Ex. A, ECF No. 27-1.) The article contains three quotes which it credits to an unnamed "person in charge of Kylin." The three quotes attributable to Kylin include:

"Conflicts will occur sooner or later with a company that tries to snatch a 'white wolf with empty hands and just wants to get benefits."
"Wei Han, the person in charge of the overseas-registered Bliss said she was a lineal relative of a founding General of China. In the summer of 2014, she contacted Kylin and said the she had an excellent project at hand, which was about a legendary story of promoting Chinese Kung Fu in San Francisco. She also said that she had an investment of 10 million U.S. dollars, another sum of 10 million U.S. dollars would be raised in China, and then she would also finance 10 million U.S. dollars, for a total of 30 million U.S. dollars."
"It was not until February 2015 (last year) that we found out that the QED was a fake one, not the real copyright holder. ["]

(Countercl. Ex. A, at 3-4.) Fidlow does not allege that any of these quoted statements constitute defamation. Rather, he alleges that six other statements in the Yiyu article defame ...

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